XÂY DỰNG CHIẾN lược PHÁT TRIỂN bền VỮNG KINH DOANH NHÀ GIÁ rẻ của CÔNG TY MINH TRANG eng

BUILDING BUSINESS STRATEGY FOR SUSTAINABLE DEVELOPMENT AT MINH TRANG COMPANY: THE CASE OF LOW- PRICED HOUSING... LIST OF TABLESTable 1.1 External Factor Evaluation matrix...21 Table 1.2

BUILDING BUSINESS STRATEGY FOR SUSTAINABLE DEVELOPMENT AT MINH TRANG COMPANY: THE CASE OF LOW-

PRICED HOUSING

STATEMENT OF AUTHORSHIP

The author commits that the thesis “Building business strategy for

sustainable development at Minh Trang: the case of low-priced housing” is the

individual work of the author

All of the data, results, analyses and evaluations in this research are collected

by the author; the author applies learnt knowledge and communicates withsupervisor to accomplish the research

ACKNOWLEDGEMENT TABLE OF CONTENTS

ACKNOWLEDGEMENT ii

TABLE OF CONTENTS iii

LIST OF ABBREVIATIONS vi

LIST OF TABLES vii

LIST OF FIGURES viii

INTRODUCTION 1

CHAPTER 1: THEORETICAL BASES OF BUSINESS STRATEGY 4

1.1 Overview of business strategy and strategic management 4

1.1.1 Definitions 4

1.1.2 Role of strategy and strategic management 6

1.2 Business strategy for sustainable competition and development 7

1.3 Introduction of some business strategies 9

1.3.1 Low-cost strategy 10

1.3.2 Differentiated strategy 10

1.3.3 Centralized strategy 11

1.3.4 Competitive strategies based on competitive position 11

1.3.4.1 Market leading strategy 11

1.3.4.2 Market challenger strategy 12

1.3.4.3 Market follower strategy 12

1.3.4.4 Nestle strategy 13

1.4 Process of creating strategies 13

1.4.1 Analysis of bussiness environment 13

1.4.2 Creation of strategies 14

1.4.3 Implementation of strategies 15

1.4.4 Evaluation of strategies 15

1.5 Tools used in analyzing and creating business strategies 15

1.5.1 Analysis of external and internal business environment 15

1.5.1.1 Analysis of external environment 15

1.5.1.2 Internal environment analysis 22

1.5.2 Strategy planning tools 23

1.6 Research methodology 24

1.6.1 Qualitative analysis for primary data 24

1.6.2 Object selection of survey and interview 24

1.6.3 Secondary data analysis 26

1.7 Conclusion 26

CHAPTER 2 : CURRENT BUSINESS SITUATION AND STRATEGY OF

MINH TRANG COMPANY 28

2.1 Business situation of Minh Trang Company 28

2.1.1 Introduction 28

2.1.2 Vision, mission and objective 30

2.1.3 Housing products and consumption market 31

2.1.4 Business Performance 33

2.2 Macro and micro environment analysis of Minh Trang Company 35

2.2.1 Macro environment analysis 35

2.2.1.1 Economic environment 35

2.2.1.2 Politic and legal environment 36

2.2.1.3 Cultural and Social Environment 37

2.2.1.4 Technological Environment 39

2.2.1.5 External Factor Evaluation 40

2.2.2 Micro environment analysis 42

2.2.1.1 Competition in the industry 42

2.2.2.2 The threats of new entrants 46

2.2.2.3 Customers 47

2.2.2.4 Suppliers 47

2.2.2.5 Internal Factor Evaluation 48

CHAPTER 3: BUSINESS STRATEGY OF MINH TRANG COMPANY IN THE PERIOD 2013-2018 50

3.1 Vision, mission and objective 50

3.1.1 Vision 50

3.1.2 Mission 50

3.1.3 Objectives 50

3.2 Business strategy for sustainable development 51

3.3 Solutions for strategy implementation 55

3.3.1 Searching, developing constructional land resources 55

3.3.2 Seeking construction units with high capacity and quality 56

3.3.3 Optimization in management and production process 57

3.3.4 Assuring capital mobilization and optimizing capital structure 58

3.3.5 Policies of price adjustment and marketing 58

REFERENCES 62

APPENDIX 64

LIST OF ABBREVIATIONS

PEST Political Economic Social Technological EFE External Factor Evaluation

IFE Internal Factor Evaluation

LIST OF TABLES

Table 1.1 External Factor Evaluation matrix 21

Table 1.2 Internal Factor Evaluation matrix 22

Table 1.3 SWOT matrix 23

Table 2.1 Basic Information about Minh Trang Company 29

Table 2.2 Low-priced housing products of Minh Trang Company 31

Table 2.3 Income statement of Minh Trang Company in period 2010-2012 34

Table 2.4 Summary of macro environment factors 40

Table 2.5 EFE matrix of Minh Trang Company 41

Table 2.6 Business performance of Minh Trang compared to other competitors 44

Table 2.7 Comparison of important criteria of Minh Trang with competitors 45 Table 2.8 IFE matrix of Minh Trang Company 48

Table 3.1 Changes in objectives of Minh Trang Company 51

Table 3.2 SWOT analysis of Minh Trang Company 54

LIST OF FIGURES Figure 1.1 Michael E Porter’s five competitive forces model 19

Figure 3.2 Strategy creation process of Minh Trang Company in 2013-2018 52

1 Necessity of research

In Vietnam, real estate now is one of markets which attract many individualsand businesses participation This is also the field which has received many caresfrom the government and policymakers due to its importance and influence to thepolitical and economic situation of society Vietnam real estate market is potentialbut also risky Thrive development of this market in the early years of the 21stcentury has demonstrated its attractiveness However, the current global financialcrisis in 2008 has negatively impact the real estate market as well as otherbusinesses operating in this field

Nevertheless, the reality has proved that even when there is crisis, customers do not disappear, the only thing that changes is the customer's needs Business that identifies this at the very early days will get the opportunities more easily and possess the advantages of being first mover The lack of low- priced housing supply to meet the customers’ demand is a major defect Great

difference between the redundant of high-level housing and the lack of low-pricedhousing leads to the imbalance of real estate market Therefore, low-priced housingwill become a very attractive market in the upcoming period

Based on the reality of the above situation, the author decided to choose the

topic "Building business strategy for sustainable development at Minh Trang

company: The case of low-priced housing" and hope to find out the appropriate

business development strategies for company

1 Objectives of research

Research for sustainable development strategies, creation of strategydevelopment process and analysis to obtain the optimal strategy help companychoose the most appropriate business strategies

Clarifying and applying the theories into practice help Minh Trang Companycreate and select the optimal business strategy in the period from 2013 to 2018.

Proposing development and application solutions for the chosen sustainabledevelopment strategies help Minh Trang Company strongly develop and thrive inthe market

2 Subjects and scope of research

Subjects of the research topic: Based on the theory of strategic businessplanning, the thesis focuses on research and situation analysis of real estate market

in Vietnam considering the impacts of macro and micro factors on business

activities, particularly "Building business strategy for sustainable development

at Minh Trang Company: The case of low-priced housing" in the period from

2013 to 2018

Scope of the research is business strategies model used at Minh TrangInternational Commercial Company Ltd in real estate market - low-priced housing.There will be comparison between the company business activities and othercompetitors in same industry to the year 2018 and solutions to conduct thosestrategies

3 Research methodology

The thesis uses methods of analysis, synthesis and matrix tools like: strategicmanagement, human resource management, marketing management and decision-making management etc in doing research and creating business developmentstrategies for the company

Besides, the thesis also uses qualitative research method in which primaryresearch data was collected based on questionnaires, interviews and expert methods.Authors selected the ones who work at the company and in various positionsranging from Director to Head the department The candidates chosen for interview

are the ones who create strategic planning and monitor the implementation ofstrategy can clearly understand the strategy of Minh Trang.

In addition, the authors also used secondary analysis methods to gatherinformation for the theoretical basis The secondary data collected also helps authorget assessment and evaluation basis for the impact of the macro and industrialenvironmenst as well as Minh Trang company’s capabilities in planning strategies

CHAPTER 1: THEORETICAL BASES OF BUSINESS STRATEGY

1.1 Overview of business strategy and strategic management

1.1.1 Definitions

 Strategy and business strategy

The term “strategy” has Greek origin and is firstly used in millitary,

referering to big plans which play pivotal roles in taking certain advantages for aparty (Nguyen Ngoc Huyen, 2009)

Since the 1960s of 20th century, the term strategy is widely used in businessand economic fields, regarding to the ways companies cooperare and compete in themarket

Todays, there are many different definitions of strategy The underlyingcause is the differences in perspectives as well as ways of approach The authormentions some definitions of strategy as follows:

 Alain Charles Martinet, the author of “Strategy”, on the other hand, supposesthat strategy is determination of the basic long-term goals and objectives of

an enterprise, and the adoption of courses of action and the allocation of

resources necessary for carrying out these goals (Martinet,1983).

 Johnson and Scholes defines strategy as the long term orientation and scope

of organization in order to gain competitive advantage by identifyingresources in changing environment so that it can meet the marketrequirements and satisfy the expectations of stakeholders (Johnson, Scholes,1999)

Some people consider strategy as a plan because strategy represents sequences of continuous actions Other people consider strategy as a model

because a strategy reflects structures and trends that companies will follow in thefuture Among these definitions, the author supposes that definition of Johnson andScholes is the most complete definition

 Level of strategy:

After selecting a definition of strategy, the author continues to mentionanother important concept, “level of strategy” Normally, a strategy is divided into 3levels:

 Corporate level strategy: is concerned with the overall purpose and scope of

the business to meet shareholder expectations This is a crucial level because

it is significantly affected by investors in the business and acts to guidestrategic decision making throughout the business Corporate strategy isoften stated explicitly in a mission statement

 Business unit strategy: implement all specific business activities as well as

contribute to accomplish the corporate level strategy Normally, in a

company, this strategy contains price, product, distribution and salespromotion strategies

 Functional strategy: implement all the functional activities; for example,

human resource strategy, marketing strategy, financial strategy, technologystrategy These are strategies relating to individual operation of the company

with purpose to the corporate level strategy and business unit strategy.

Those 3 levels of strategies closely link together into a complete andconsistent business strategy No separate strategy can exist without the othersbecause they complement to each other to solve important and survival objectives

of the company

 Strategic management in business

Strategic management is a process of studying current as well as futureenvironment, setting business goals, implementing and evaluating the strategyimplementation in order to achieve business goals (Nguyen Van Nghien, 2006)

Strategic management including 3 stages:

 Stage 1: strategy planning is the process of analyzing the situation,identifying opportunities, threats, strengths and weaknesses and settingsuitable plans with current conditions of companies;

 Stage 2: strategy implementation is a process of taking strategies intopractical operation of business In this stage, business plans will be broughtinto reality

 Stage 3: evaluating and adjusting strategy is the final step Afterimplementing the strategy, the company will test and evaluate the efficiency

of strategy implementation Afterwards, basing on the results, the companywill propose strategy adjustments to adapt with the changes in internal andexternal environments

1.1.2 Role of strategy and strategic management

Strategy plays an important role in the survival and development of acompany This is reflected in the following aspects:

 By analyzing and forecasting business environment, development strategyhelps businesses orient their operation in the future Business activities arealways affected by internal and external factors Strategy helps business haveflexibility and proactivity to adapt with changes in market, at the same time,ensures that business is operating and developing in the right direction Thiscan help business to strive to improve its position in the market

 Appropriate strategy is an effective competitive tool of a company Theprocess of globalization and economic integration has created mutualinfluence and interdependence between companies Because of this process,fierce competition among companies is created, which require companiesmust have strategy to survive

Furthermore, strategic management is also very important:

 Strategy management helps managers aware of opportunities and threats inthe future Thus strategy management requires manager to analyze, forecastthe environmental conditions in the near future As a result, managers canmake use of opportunities and avoid threats coming from businessenvironments.

 The process of strategic management helps business to have a clear view ofits goals and direction Recognizing expected outcomes also helps manager

as well as employees know exactly what they should do to success

 Thanks to the strategic management process, businesses associate proposeddecisions with relevant environment conditions Due to the volatility andcomplexity of the environment, companies must strive to gain active position

in the market Proactive decisions are attached with predicting environmentand quickly adapting with those conditions so that companies can achievetheir objectives (Nguyen Van Nghien, 2006)

1.2 Business strategy for sustainable competition and development

According to definition of Brundtland Committee of the United Nations,sustainable development is the development which meets the needs of currentgenerations without compromising the ability of future generations to meet theirown needs” [19] Sustainable development is a common term in economics,especially enviromental economics However, recently, this term has been usedwidely in business

Researches have found out that almost all companies which can manage wellsustainable aspect will manage well financial aspect Through Sustainabledevelopment report, companies and organizations not only strengthen theconfidence of stakeholders, investors and communities but also help companies tomanage risks in an effective way Thus, there are more and more companies whopublish sustainable development reports annually

Strategy for sustainable development is sthe trategy that create values notonly in business development process but also associate with activities in social andenvironmental aspects These 3 factors together play a fundermental role in thelong-term success of a company Sustainable is the key factor in business strategysince it can ensure for the next success of companies.

The concept of sustainable development associated with social andenvironmental activities is very broad and is an relatively significant role for largebusinesses Within the scope of this research and the object of study is Minh Trang

company - a medium sized company, the author will only define “sustainable” in the business aspect and will focus more on “sustained competition” concept.

A company considered to have a competitive advantage when that company

is conducting a strategy which cannot be simultaneously implemented by existingand potential competitors (Barney, 1991) According to Barney, sustainablecompetitive advantage of a company cannot bei mmediatly executed and imitated

by other competitors Refering to sustainable competitive advantage concept, manypeople might instantly think about how to maintain a competitive advantage for along period Sustainable competitive advantage simply is an advantage that can lastfor a long time (Jacobsen,1988;Porter,1985) In fact, companies cannot maintaincompetitive advantages in the long term as those advantages might be loss under theinfluence of many factors such as technology development

Therefore, defining sustainable competitive advantage basing on timeindicator cannot actually reflect the concept According to Barney, sustainablecompetitive is not based on length of periods in which a company sustain itscompetitive advantages but based on the ability to immitate competition; and theterm “sustainable” does not means that competitive advantages can be maintainedfor a long term

According to Porter, factors creating competitive advantages are decisivefactors that can affect to costs or the unique features of a product This is

fundamental base for the formation of low-cost strategy and differentiated strategy

in Porter model Porter considering factors that influencing competition byapproaching from company side

However, Philip Kotler considers competitive factors of a business byapproaching from customer side Philip Kotler also provides a concept of “customervalue” Customer values are the difference between benefits perceived by customersand the actual costs they have to pay (Phillip Kotler, 2011) Customers wouldpurchase products that they think they can get the highest value The total valuecustomers receive when they actually consume the product is the total valuecustomer can obtain from the product itself, augmented service and employeeresponsibilities or business images

By this approaching method, Phillip Kotler has given 4 fundamental criteria

a company can create distinct values against its rivals, which are: human resourceservices and business images In this research, the author will combine 2 approaches

of Porter and Phillip Kotler to consider and assess factors creating competitivestrengths of Minh Trang company However, the author will base more on PhillipKotler approach when the cost criteria in low-priced housing product cannot be asustainable competitive advantage

1.3 Introduction of some business strategies

After giving relevent definitions to strategy and role of strategicmanagement, in this part, the author will introduce some popular business strategies

in the market The first one is M Porter competitive strategy

1.3.1 Low-cost strategy

This is the strategy that companies put all efforts to lower the costs inproduction of goods and services compare to other competitors To have a low-costpolicy, companies must build effective production facilities, cut costs byexperienced employees and tightly cost control

This strategy can help companies withstand competition better than thecompetition while still maintaining profitability at or above the opponent Applyingthis strategy, companies need to meet certain requirements such as production scaleand market share, with input supply stability, control and minimize costs in thedepartment, have large customer base and stable Therefore, low-cost strategy isoften used by large enterprises or market position.

The downside of this strategy is to focus on reducing costs that companiescan gradually lose the recognition of the changing tastes of customers In addition,competitors may imitate or invest in advanced equipment to reduce costs and attackbusiness (Nguyen Ngoc Huyen, 2009)

1.3.2 Differentiated strategy

Strategy characterize product development strategy is a competitiveadvantage by creating products differ markedly from products of competitors tomeet the specific needs of the group different goods Companies pursuing thisstrategy often must divide the market into smaller markets and deliver products thatare designed specifically for each market Applying this strategy requires firms toinvest in research and development, advertising and marketing

The risk of adopting this strategy is the maintenance of productdifferentiation when competitors can imitate and as the industry becomes saturated

In other words, the stability of the characterization strategy will only exist in acertain area price differences When the difference in cost between the low-costcompetitors and businesses pursue characterization becomes too large, characterizestrategy will not be maintained when the client is ready to abandon the use of thefeatures of product characterization in order to save costs

1.3.3 Centralized strategy

These strategies focus on market or market segment that companies havedominance over rivals such as specific customer group, department or specialtygoods market certain areas

As can be seen, if the low-cost strategy and characterization aims and scope

of the industry, the focus of the strategies towards good service targets a marketwith scope choice is much narrower By adopting this strategy, enterprises cansucceed with limited resources conditions, can also responsive to changes in themarket

However, pursuing this strategy, enterprises can also see a number of risks.First, due to the small amount of production, production costs will generally higherthan competitors pursue low-cost strategy Also, if the enterprise marketdisappeared due to changes in consumer tastes, businesses will be hard to move toanother market due to limited resources Another risk is that when the competitorsalso apply strategic focus to find ways of providing products to satisfy the needs ofenterprise customers

1.3.4 Competitive strategies based on competitive position

Besides M.Porter competitive strategy, the author also mentions anothercompetitive strategy which based on competitive position Strategies in this sectionare the market-leading strategic, strategic challenges to the market, followed by themarket strategy and market strategy nestled in the corner

1.3.4.1 Market leading strategy

 Strategic expansion of market demand: Search for new geographical area forsales, looking for new customers, developing new uses and encouragegreater use of the product

 Defense Strategy: Helping business leading the market and retain its position

in the current market The business which is market leader always threatened

by the other competitors, especially one whose is in strategic position in themarket For that, business has to constantly defense against the attacks fromother competitors

 Strategy to expand market share: By purchasing or acquiring the smallercompetitors and attacking the market share of weak competitors

1.3.4.2 Market challenger strategy

 Attack of the business unit leader and other competitors to increase marketshare or business can be parallel to the competitor and not touching thecompetitors behind To implement offensive strategies, business units need

to perform two steps:

 Step 1: Determine your competitors to attack and goal attack strategies

 Step 2: Choose the appropriate attack strategy: attack forward, attacking side,siege attack

1.3.4.3 Market follower strategy

This is the business unit does not want to deal with the opponents or lead tomarket challenges because of insufficient resources, fear of loss, depreciationcostly should seek to avoid by sticking in following rival market leader throughstrategic simulation:

 Full Simulation products, how distribution, advertising and marketingactivities, providing products for sensitive target market with low price…

 Simulations have improved to adapt to market by relying on the marketingmix of market-leading rivals to make specific improvements for theirmarketing mix in order to adapt to the needs and desires of the market fieldgoal

1.3.4.4 Nestle strategy

Companies using nestle strategy always look for a safe and profitable smallmarket segment To be successful in narrow market segments, they often performtypical specialization strategies:

 Specialization by stages in the process of production and distribution.Companies can choose components or parts of a complete product to produceand distribute

 Specialization by customers: companies can select specific customers toserve such as high-income customers, medium and low-income customers, orcustomers who are children, adolescents, youth

 Specialization by regions: companies can also choose certain geographicareas to serve such as domestic market, local market, regional market

 Specialization in product characteristics: high quality, luxury or averagequality

 Specialization in selected business services that competitors do not offer

1.4 Process of creating strategies

After identifying the general competitive strategies, a business will have tocreate more specific strategies Process of creating strategies including thefollowing steps: analysis of business development, creation of strategies,implementation of strategies and evaluation of strategies

1.4.1 Analysis of bussiness environment

Analysis of business environment is used to find out opportunities, threats,strengths and weaknesses of a company Strategic Bussiness Management is toutilize the strengths, improve the weaknesses, take advantages of the opportunitiesand avoid threats from the environment The business environment of a company isdivided into the external environment and internal environment

Analysis of external environment is the analysis of the influences of externalfactors on companies By doing so, company can avoid threats and captureopportunities

Analysis of the internal environment is the analysis of strengths andweaknesses of the company in comparison to other competitors to set outreasonable competitive strategies.

Information is an important factor in creating and implementing businessstrategies If the information is plentiful, well processed and bring feasibility inimplementing and planning strategies

1.4.2 Creation of strategies

Creating strategies includes planning and selecting appropriate strategies for

a business In order to do this, it is necessary to take many differences businesslevels into consideration and create the following strategies:

 Business strategies: Strategies for big and long -term issues like types of

business activities, how to operate and what to do in that business

 Functional strategies: All the decision and result-oriented activities for

short-term goals of different functional departments such as: Production,marketing, research and development, human resources, finance andbanking, information technology etc

 Competitive strategies: The study of competitive strategies are about

advantages that the organization currently has or wants, and consider how toconduct such competition in a business sector or specific industry

When creating development strategies, a business has to base on 3 followingprinciples:

 1 st Principle: Development strategies must ensure the overall business’

objectives The tentative development strategies may be different in qualityand level of objectives, but not be different in overall objectives which arefinal goals need to be obtained

 2 nd Principle: Development strategies have to be feasible This principle

prevents the selected strategies from mistakes and being far from realistic

 3 rd Principle: Development strategies have to ensure the beneficial

relationship between business and market The strategies created have toprotect the benefit of 2 parties Business could not create a strategy basedonly on its individual benefit without satisfying the customers’ demand

1.4.3 Implementation of strategies

Strategies implementation is a process of applying all the strategies ofcompany into practice The implementation of different level of strategies is alwaysaccompanied with the creation of those strategies

1.4.4 Evaluation of strategies

The last stage of Strategy Management is evaluating strategies Due to thatfact that external and internal factors are changing regularly, all the strategies aredepended on the changes of future environment 3 main activities of this stage are:consider all the basics factors of current strategies, measure and evaluate the resultbefore carrying out the adjustment of those strategies

1.5 Tools used in analyzing and creating business strategies

In this part, it will be the introduction of tools which are used in making aresearch These tools play a crucial role in identity the opportunities, threats,strengths and weaknesses of business environment Evaluation of these factors will

be used by business to create a new business strategy or adjust the current strategy

1.5.1 Analysis of external and internal business environment

1.5.1.1 Analysis of external environment

External business environment is divided into 2 parts: macro and microenvironment In this thesis, the author will use PEST (Political, Economic, Socialand Technological) model to analyze macro environment and five competitiveforces model of Michael E.Porter to analyze micro economic and matrix theexternal effect EFE to evaluate and analyze the operational situation and strategies

of Minh Trang Company

PEST model includes analysis of 4 macro factors including: Politic, economic, society and technology

Economic factor: Status of the macroeconomic environment determines the

strength and prosperity of economic and creates impact on businesses Therefore,business must study the economic environment to realize the changes, the tendency

to take the appropriate strategies in the future The economic environment is thesocial and economic situation and the policy of that country in which business existsand develops Macroeconomic environment includes social and economic structure,economic development level, the economic system and macroeconomic policy

 Analysis of economic and social structure: Social and economic structure isalso called national economy structure, including: Career categories,distribution, exchange, consumption, technology, property structure in whichcareer categories structures is the most important factor Therefore, whenconstructing economic structures for a business, it is necessary to make aresearch in the development situation of that enterprise business sector

 Analysis of economic development level: The level of economicdevelopment is the scale and speed of a country and region economicdevelopment The indicators of the level of economic development are totalnational products, national income, national income per capita and theeconomic growth rate The analysis of the level of economic developmentcan help a business understand the development trend of the economy

 Economic institution analysis: Economic institution is the organization ofone country’s economy It defines the relationship between the governmentand businesses, among businesses, and between businesses and economicsectors Through certain management means and methods, economicinstitution has effects on scope, form and procedure of social – economicactivities It formulates basic and systematic principles, conditions aboutform, nature, existence and development path for businesses Managementhas to thoroughly understand the basic direction of economic institutionrevolution to promptly adjust to conceptual and behavioral patterns whichare suitable for the new institution.

 Government’s economic policy analysis: Economic policy is the economicdevelopment goal over a certain period and set by the government along withstrategy and tactic to accomplish that goal Economic policy of a nationincludes national economic development strategy, industry policy,distribution policy, price policy, commercial policy, wage policy, financepolicy and monetary policy

Political and legal factors: Political and legal policy also has big impacts on

the level of opportunities and threats from market Corporations have to analyzecarefully all policies related to the government Antitrust law, tax law, industriesselected to modify or prioritize, labor code are sections where the government’smanagement policy influences the operation and profit generation of corporations.Political environment is political factors and conditions whose movements affectbusinesses These factors include political regime, political party system andpolicies of the government and the ruling party Legal environment is the law

system relating to companies including legislation of the government, organs of

justice, executive bodies and businesses

The effects that political and legal environment has on business operation of

a company are wide and deep, even play deciding role In general, if a country has

stable political system, clear and consistent policies, good political climate and strictlegal system, businesses can develop soundly and stably.

Social and cultural factors: Social environment comprises the formation

and change of social classes, population composition, population movements, socialauthority composition, living and working manner of people The current state andchanges in these factors all can leave effects on the operation of businesses Culturalenvironment: includes philosophical, religious factors, languages, literature and art.Impacts of these factors are usually indirect impacts but we cannot ignore them.Social and cultural factors are linked to social attitude and cultural value.Movements in social and cultural environment lead to opportunities as well asthreats for businesses However, these movements often happen slowly, difficult torealize and thus, causing hurdles in forecasting and determining their consequences

on business operation

Technological factors: Technological environment consists of 4

components: technological level, technological force, technological institution ofthe government, and technological policy and legal documents about technology.Technological level is the most important factor in technological environment.Technological institution of a country determines the composition and form oftechnological system operation and its relationship with other sectors in the nationaleconomy Currently, the world witness a rapid advancement in technology anddeveloped countries are already in knowledge economy Knowledge is continuouslyinnovated with many new techniques born and quickly applied, which transformedthe economy of developed countries Businesses have to be aware of those changes

to seize new opportunities Technological advancement has impacts on manydimensions of the society These impacts are primarily through new products,technological process and new materials

In order to analyze the micro environment, or industrial environment, the 5competitive forces model of Michael E Porter is often used These 5 forces are newentrants, competitors, customers, suppliers and substitutes

New entrants: new entrants are companies that do not take part in the

competition at the moment but might enter the industry in the future The presence

of new entrants will increase the level of competition among the industry Thecompetitiveness of new entrants is evaluated by the barrier to enter the market.Barrier here refers to the amount of capital a company has to invest to enter acertain industry The more this capital is, the higher the barrier is and vice versa

Competitors: Quantity, scale and strength of each current competitor has

certain impacts on a company’s operation and strategy as well The higher the level

of competition, the lower the average price it can charge its customers, which leads

to a decreased profit Thus, price competition is a threat to a company’s profit

Figure 1.1 Michael E Porter’s five competitive forces model

Source: Michael E Porter, 2009

Customers: are individuals or organizations that have demand for products

or services of a company Customers have a considerable effect on businessstrategy, deciding the on-going and sustainable development of a company In theprocess of market research to draft strategy, information about customers are alwayscollected and analyzed first Based on the analysis, management chooses targetcustomers, develops policies and action plans so that they can satisfy customers’needs, wants in each period Customers are considered a source of competitionwhen they force businesses to lower the price or demand high quality and perfect

CUSTOMERSSUPPLIERS

Bargaining power of

suppliers

Threat of substitute products

Threat of new entrants

Bargaining power of customers

service This causes increase in operating expense, creating threats on competitiveprice.

Suppliers: are individuals or organizations which are able to produce and

supply inputs to a company Quantity, quality, categories, price and supplyconditions of inputs directly affect business goals, operating process of departmentswithin a company, production costs and operation efficiency Suppliers are seen ascompetitive force as they want to increase the input price or lower the quality ofsupplied materials Consequently, the profit margin for the company declines

Substitutes: In a broader view, a business in one industry has to compete

with businesses in the industries that provide substitute products or services Thesesubstitutes set a limit on the price an industry can charge its customers and hence,limit the profit margin accordingly It is represented by the cross price elasticity

As goods are substitutes to each other, there is competition across industries Whenthe price of a product rises, it encourages customers to use substitute products andvice versa The price of substitutes determines the limit on the price charge withinthe main industry

After PEST and Porter’s five forces model have been utilized, externalfactors affecting a business will be summarized in External Factor Evaluation (EFE)matrix

EFE matrix is used to summarize and evaluate the impacts of environmentalfactors to a company The process of creating the matrix has 5 steps:

 Step 1: List all factors that have deciding roles to a business’s success

 Step 2: Determine the significance of those factors from 0.0 (not important)

to 1.0 (extremely important) The sum of this classification is 1.0

 Step 3: Classify factors into one of 4 categories according to the response ofcurrent strategy to a specific factor in which: 4 is good response, 3 is above-average response, 2 is average response and 1 is little response

 Step 4: Multiply the importance of each factor by its classification in thescale to figure out the importance points

 Step 5: Add results in step 4 for each factor to derive the total importance points

Table 1.1 External Factor Evaluation matrix

1 = little response2= average response

3 = above-average response

4 = good response

(4) = (2) x (3)

Source: Nguyen Ngoc Huyen, 2009

The maximum importance point for a business is 4.0, and the minimum is1.0 A 4.0 indicates that the business well responses to opportunities and threats inthe current environment In contrast, a 1.0 suggests that the current strategy does nottake advantage of opportunities or minimize threats from external environment

1.5.1.2 Internal environment analysis

Internal environment consists of all tangible and intangible factors within theoperation of a business or organization and directly affect the strategic managementprocess Each business has a distinct internal environment containing both strengthsand weaknesses and this environment changes over time In this paper, the internalfactor evaluation matrix (IFE) will be used to analyze and assess the internal environment

Table 1.2 Internal Factor Evaluation matrix

1 = the most important weakness

2 = weakness

3 = strength

4 = the most important strength

(4) = (2) x (3)

Source: Nguyen Ngoc Huyen, 2009

In IFE matrix, the total importance point is at least 1.0 and at most 4.0 withthe average point of 2.5 If the importance point is lower than 2.5, the business isweak at internal management Otherwise, it is good at internal management

1.5.2 Strategy planning tool

The analysis results of macro environment, competitive environment and thecapacity of a business will be summarized into a SWOT analysis to give anoverview about strategies that are suitable for internal factors (strengths,weaknesses) and external factors (opportunities, threats)

Table 1.3 SWOT matrix

Weaknesses (W)

List the most importantweaknesses from InternalEnvironment Evaluationmatrix

Strategic combination

WO

Make use of externalopportunities to overcomeinternal weaknesses

Threats (T)

List the most important

threats from External

Strategic combination

WT

combination, trying toovercome weaknesses andminimize or avoid threats

Source: Nguyen Ngoc Huyen, 2009 SWOT matrix is utilized to draft a strategic plan following below steps:

 Synthesize analysis results from External Factor Evaluation EFE matrix –Opportunities and threats

 Synthesize analysis results from Internal Factor Evaluation IFE matrix –Strengths and weaknesses

 Incorporate those 2 results to create SWOT

There are 4 strategic combinations from the established SWOT:

 Strategic combination S-O uses strengths to exploit opportunities in externalbusiness environment

 Strategic combination W-O makes use of external opportunities to overcomeinternal weaknesses

 Strategic combination S-T makes use of internal strengths to minimizeexternal threats

 Strategic combination W-T tries to overcome weaknesses in order tominimize or avoid threats

A business does not necessarily follow the best opportunity Instead, itshould develop competitive advantage by studying the suitability between strengthsand coming opportunities In some cases, it can overcome its weaknesses to seizebetter opportunities In order to develop a strategy by using SWOT analysis, wehave to incorporate assessment results of opportunity, threat, strengths andweaknesses to form strategic combination for a business

1.6 Research methodology

1.6.1 Qualitative analysis for primary data

In this research, the author selected the qualitative analysis of primary data to solvemajor problems Primary data is obtained by carrying out surveys and interviews

1.6.2 Object selection of survey and interview

For survey

Objects of survey: The targeted objects of survey are Chairmen, Board of

Directors, Heads of Departments and experienced employees The number ofattendants is 15 people

Content of survey: the author constructed criteria and consulted experts

Table 1: Survey on impacts of external factors (Appendix 1)

Table 2: Survey on other companies in the same industry (Appendix 1)

Table 3: Survey on internal environment (Appendix 1)

Table 4: Survey on the strategy of the company (Appendix 1)

After constructing the survey, the author handed out the survey whichincluded multiple choice questions so that attendants can choose from selectedfactors Survey then were collected and summarized to give out assessments

Table 1: Summarize opinions and assess opportunities and threats for Minh TrangTable 2: Summarize opinions and assess competitiveness of the company compared

to others in the same industry

Table 3: Summarize opinions and evaluate strengths and weaknesses of Minh TrangTable 4: Summarize opinions and evaluate current strategy

By collecting advices of experts and then using analysis tools, the authorpointed out the suitable strategy for Minh Trang

For interview:

Objects of Interview: the author selected people working at different

departments in the company, from the Director to Heads of Departments Thosepeople are in charge of planning strategy or supervising the strategyimplementation; thus, they thoroughly understand the strategy of Minh Trang Thenumber of interview object is 5 people and the name of attendants is listed in theappendix 1

Content of Interview: the author constructed the content of interview and

then consulted the opinions of experts All questions were related to the current situation of strategy implementation of Minh Trang and the external impacts to that implementation process

1.6.3 Secondary data analysis

Besides primary data analysis via surveys and interviews, secondary dataanalysis is also carried out to collect relevant documents and materials Thecollected secondary data helps the author to evaluate the impacts of macro

environment, industrial environment as well as the internal capacity of Minh Trang

on strategy planning In details, the author studied internal rules and regulations,documents and annual financial statements of Minh Trang Additionally, the authoralso examined legal documents, references, and specialized magazines in real estate

in order to understand orientation and policy of the Government Moreover, theauthor studied strengths, weaknesses and directions of competitors to set out morereasonable strategies for Minh Trang

1.7 Conclusion

In this chapter, the author introduces theoretical bases of business strategy andmentions tools which will be used in this research Chapter 1 consists of somedefinitions that are used in this research:

 Definition of strategy and strategic management; the role of strategicmanagement

 By analyzing macro environment, a company can identify opportunities andthreats created by the changes of economic, financial, political, social, legalenvironments

 By analyzing internal environment, a company can figure out strengths(outstanding technology, famous brand name, financial resources, etc.) andweaknesses (inefficient distribution network, not having good relationshipwith employees, inexperienced management, outdated products, etc.); thenthe company can evaluate its current competitiveness

 Study strategies which can be suitable with current conditions of companies.Study techniques used to analyze and determine strategies: PEST analysis,IFE matrix, EFE matrix and SWOT model Construct research methodology

to do the research on current strategies of companies

In conclusion, Chapter 1 is the important theoretical bases which help theauthor direct the research and analyze the current business performance of thecompany in the next chapter.

CHAPTER 2 : CURRENT BUSINESS SITUATION AND STRATEGY OF

MINH TRANG COMPANY

In this Chapter, the author will focus on analyzing and assessing the currentstrategy of Minh Trang, considering factors affecting the company and based onthat to redirect the strategy and give suggestions in chapter 3

2.1 Business situation of Minh Trang Company

2.1.1 Introduction

Minh Trang international trade limited liability Company was established in

2003 by three shareholders Initially, Minh Trang was a retail store sellinginformation technology equipment The targeted customers were students ofNorthern universities The mission of the company was to provide students withgood quality products at the most competitive prices in the market Also, thecompany provided fast and convenient after-sale services Therefore, many studentshave chosen products of Minh Trang

The business field of Minh Trang was quite diverse: ranging from export activities, IT equipment distribution to bottled water production After threetimes of changing the business registration, the company expanded into real estateand construction industry in 2006 with registered capital of 9.5 billion VND.Founders of Minh Trang had little experience in real estate and constructionindustry At the beginning, the company encountered many difficulties but it hasovercome and achieved optimistic results

import-From 2008 to present, though the construction and real estate market hasbeen very quiet and existing companies have been facing up with many difficulties,Minh Trang has been developing stably Steadily increasing revenues and profitsare clear evidences for the development of Minh Trang over the last years Thebrand name has been recognized through projects constructed by the company Inorder to achieve long-term objectives, all employees in different departments have

to try their best to sustain the development of the company Minh Trang is planning

to concentrate on real estate in the coming period

In this thesis, the author has chosen real estate market to study Real estatemarket, especially low-priced housing segment, is the market the company desire toinvest to According to the evaluation of the company, low-priced segment has beenvery potential

Table 2.1 Basic Information about Minh Trang Company

Limited Liability Company

Head Office 183 Linh Nam street, Vinh Hung ward, Hoang

Mai district, Hanoi

Business Field Real estate, Import and Export, IT equipment

distribution, bottled water production

low-priced housing segment

at reasonable prices

Estimated revenue of 150 billion VND in 2018

Source: Annual business reports of Minh Trang

Regarding to human resources, technical supervisors are the core forces whoare in charge of directing activities at construction sites And seasonal workers arehired directly around the construction sites to save costs With seasonal workers, thecompany signs seasonal contracts and pay according to the actual working time

Minh Trang pays direct workers ‘wages by cash basing on the number of actualworking days.

Regarding to the supply of construction materials, Minh Trang usuallypurchases directly from companies like Nhung Anh Limited Liability Company(cement, brick, steel and stone), Lan Anh Private Company (brick), Hoan MinhPrivate Company (leasing the machinery) The materials are delivered to theconstruction sites Because these suppliers are long term partners of Minh Trang,the company usually delays the payments in 15-20 days from the date of gooddelivery (even 20-30 days depending on the suppliers)

2.1.2 Vision, mission and objective

Vision, mission and object of Minh Trang are clearly set out when the companyenters the real estate market Vision, mission and objective are bases of makinglong-term business strategies of the company

 Vision: the current vision of Minh Trang is to become one of the best realestate companies in Hanoi real estate market, especially in low-pricedhousing segment; In the future, the company desire to expand the businessactivities to the whole Northern area

 Mission: Minh Trang always tries to provide customers good constructionservice and housing products Good quality, reasonable price and fastconstruction progress are always the criteria that Minh Trang always focuseson

 Objective: Minh Trang sets the objective of average growth rate of 10%-20%per annum for the next 5 years The expected revenue is at 150 billion VND

in 2018

2.1.3 Housing products and consumption market

The company’s strategy is to supply the low-priced housing products.According to the author, there are two criteria to define low-priced housing