AN ANALYSIS OF DISTINCTIVE COMPETENCIES IN COMPETITIVE ADVANTAGES ACHIEVEMENT AT ABROAD DISCOVERY ENGLISH CENTER

FOREIGN TRADE UNIVERSITY FACULTY OF BUSINESS ADMINISTRATION ---***--- INTERNSHIP REPORT AN ANALYSIS OF DISTINCTIVE COMPETENCIES IN COMPETITIVE ADVANTAGES ACHIEVEMENT AT ABROAD DISCOV

FOREIGN TRADE UNIVERSITY

FACULTY OF BUSINESS ADMINISTRATION

-*** -

INTERNSHIP REPORT

AN ANALYSIS OF DISTINCTIVE COMPETENCIES IN COMPETITIVE ADVANTAGES ACHIEVEMENT AT

ABROAD DISCOVERY ENGLISH CENTER

Full name: Trinh Thi Quynh Van

Student ID: 111 225 0002

Class: A13 CLC QTKD K50

Supervisor: Ms Dao Minh Anh, MBA

Hanoi, July 2014

Table of Contents

Chapter 1: Literature review 1

1 Competitive advantage within an organization 1

1.1 Definition of competitive advantage 1

1.2 The process of achieving competitive advantage 2

2 The role of resources and capabilities in forming distinctive competencies 3

2.1 The role of resources and capabilities 3

2.2 Distinctive competencies 5

3 Three main types of business-level strategies with different value creation in achieving competitive advantage 6

Chapter 2: Analyzing distinctive competencies in competitive advantage achievement at Abroad Discovery English Center (A.D Center) 9

1 Overview about A.D Center: 9

1.1 History of development 9

1.2 Organizational Structure 9

1.3 Field of business 10

1.4 Business performance 11

2 Analysis of distinctive competencies at A.D Center 14

2.1 Resources and capabilities of A.D Center 14

2.2 Distinctive competencies at A.D Center 17

3 Evaluation 20

Chapter 3: Recommendation for competitive advantage achievement at A.D Center 22

1 The fundamentals of Balanced Scorecard and why using Balanced Scorecard at A.D Center 22

1.1 The fundamentals of Balanced Scorecard 22

1.2 Why using Balanced Scorecard at A.D Center 22

2 The application of Balanced Scorecard at A.D Center 22

2.1 Strategy map at A.D Center 22

2.2 Action plans in accordance with the four perspectives of Balanced Scorecard 24

Conclusion 27

List of tables

Table 1: Tangible resources within an organization 3

Table 2: Intangible resources within an organization 4

Table 3: Capabilities in different functional areas 5

Table 4: Four factors of distinctive competencies 6

Table 5: Classes’ schedules at A.D Center 10

Table 6: Balance Sheet (For the first half of fiscal year 2014) 12

Table 7: Income Statement (For the first half of fiscal year 2014) 13

Table 8: Capabilities at each Functional Area at A.D Center 16

Table 9: Tuition fees at other English Centers in Hanoi region 20

Table 10: Suggested quality measurement at A.D Center 25

List of figures Figure 1: The process of strategic management 1

Figure 2: Competitive advantage achievement 2

Figure 3: Value creation in Differentiation strategy 7

Figure 4: Value creation in Cost leadership strategy 7

Figure 5: An example of value creation in the three main types of strategy 8

Figure 6: Organizational Structure at Abroad Discovery Center 10

Figure 7: Teaching process at A.D Center 19

Figure 8: Value creation at A.D Center 21

Figure 9: Strategy map at A.D Center 23

Acknowledgement

I would like to give my sincere thanks and appreciation to Ms Dao Minh Anh, MBA., Lecturer at Foreign Trade University for her thorough instruction in the last one-month period Her comments and suggestions, as well as many useful knowledge that she provided, were of paramount importance for me to learn and accomplish my report

I am deeply indebted to Mr Nam Nguyen and Ms Bich Nguyen, managers at Abroad Discovery English Center for all their help during my internship I did learn a lot and gain many practical experiences relating to my major thanks to their due care and attention Lastly, I would like to express my gratitude to every staffs and colleagues for their great support when I worked at A.D Center

Hanoi, 28th July 2014

Trinh Thi Quynh Van

Chapter 1: Literature review

1 Competitive advantage within an organization

1.1 Definition of competitive advantage

Competitive advantage, firstly, is a decisive category in strategic management The chart below depicts the strategic management process including four main steps, namely Situational Analysis, Strategy Formulation, Strategy Implementation and Strategy Evaluation Competitive advantage is the ultimate finding of the first step in which managers are required to analyze both internal and external situation of the firm before going any further

Source: Mintzberg, Henry and, Quinn, James Brian (1996)

Figure 1: The process of strategic management Competitive advantage is academically defined as a firm’s ability to gain profitability that is greater than the average profitability of the industry Accordingly, sustainable competitive advantage is a firm’s ability to maintain profitability and good profit growth that is higher than average level of the industry for many years

•Strategy

Fomulation

Putting Strategies in Action

•Strategy

Implementa tion

Evaluating and Changing Strategies

•Strategy

Evaluation

1.2 The process of achieving competitive advantage

Source: Michael E Porter (1996)

Figure 2: Competitive advantage achievement The chart shows how competitive advantage is achieved through the act of analyzing internal situation within an organization The two questions promptly emerging in managers’ mind when looking at his firm’s current state are about ‘what does the firm possess?’ and ‘how can it make those things work for the company?’ These two queries are respectively understood as resources and capabilities of an organization They are key components contributing to the formation of distinctive competencies which then help shape the strategy a company may follow Specifically, strategy is directly derived from distinctive competencies, an outcome of thorough internal analysis

Accordingly, there are four types of strategy a firm may pursue: cost leadership, differentiation, integrated and focus strategy; and different strategies have different ways of creating value for customers Cost leadership and differentiation strategy offer consumers a

low price and outstanding quality products, respectively Meanwhile, integrated cost leadership/differentiation strategy strikes a balance between the two and the focus one only target in a specific market segment If a company succeeds in value creation then, in the long term, it gains competitive advantage with which other firms can hardly compete

2 The role of resources and capabilities in forming distinctive competencies

2.1 The role of resources and capabilities

2.1.1 Resources

Resources are vital contributors allowing company to create value for customers They can

be visible (physical) and invisible (non-physical) ones The former includes financial, physical, technological and organizational resources And the latter involves human resources, innovation and reputation of the company Resources are inherent assets of each firms, however, they could become waste if they are not utilized properly Hence, a firm must possess certain skills and knowledge in order to effectively make use of these resources In addition, owned and inimitable resources as well as valuable ones that create large demand for the company’s products form distinctive competencies, the root of competitive advantage

As the four types of tangible resources have already been mentioned, the detailed information on each type is provided in the table below

Financial Resources  The firm’s borrowing capacity

 The firm’s ability to generate internal fund

Organizational Resources  The firm’s formal reporting structure and formal

planning, controlling and coordinating systems

Physical Resources  Sophistication and location of a firm’s plant and

equipment

 Access to raw materials

Technological Resources  Stock of technology, patents, trademarks, copyrights

or trade secret

Source: Barney, J (1991)

Table 1: Tangible resources within an organization

In contrast, intangible resources are organization’s assets that can hardly be quantified, hence, it is virtually related to human, innovation and reputation aspects of a company

Human resources  Knowledge

 Reputation with customers and suppliers

 Perceptions of product quality, durability and reliability

of staff in companies However, each function within an organization has its own

characteristics and skills at coordinating the resources and putting them into productive use The table below goes on to further elaboration

Functional Areas Capabilities

Supply Chain

Distribution

 Effective procurement techniques

 Effective logistics management techniques

Marketing  Effective promo of brand - name product

 Effective customer services

Management  Ability to envision

 Effective organizational structure

 Effective culture

Manufacturing  Design and product skills yielding reliable product

 Product and design quality

 Production of technologically sophisticated product

 Product and component miniaturization

Research and

Development

 Exceptional technological capability

 Rapid transformation of technology into new products and processes

Source: Barney, J (1991)

Table 3: Capabilities in different Functional Areas 2.2 Distinctive competencies

If a company succeeds in coordinating its resources and putting them in efficient use, then it

is able to form distinctive competencies Distinctive competency is a company’s specific

strengths allowing them to create product differentiation and/or low cost (strategies) than competitors in order to gain competitive advantage It includes four main factors, namely Value, Rare, Costly to Inimitable and Organized to be exploited

 Valuable Allows a firm to neutralize threats or exploit

opportunities in its external environment

 Rare Possessed by few, if any, current and potential

competitors

 Costly to Inimitable When other firms either cannot obtain them or must

obtain them at a much higher cost

 Organized to be exploited The firm must organize appropriately to obtain full

benefits of the resources in order to realize a competitive advantage

Source: Barney, J (1991)

Table 4: Four factors of distinctive competencies

3 Three main types of business-level strategies with different value creation in

achieving competitive advantage

After coordinating its resources and capabilities, a company bases on the distinctive competencies in order to set out proper strategies it can follow And different strategy has different way to create value for customers

In Cost leadership strategy, a firm performs an integrated set of actions taken to produce products or services with features that are acceptable to customers at the lowest cost Meanwhile, in differentiation strategy, a company aims at producing goods and services at

an acceptable cost that customers perceive as being different in ways that are important to them Accordingly, a firm’s focus is on non-standardized products And the strategy is appropriate when customer value differentiated features more than they value low cost The two charts below give information about value created in cost leadership and differentiation strategy In comparison with other firms that do not follow any particular strategy,

differentiator satisfies customers’ need by focusing on products’ quality, which may incur higher cost but create out-standing products’ features, or in other words, greater value for consumers In contrast, firms following Cost leadership strategy create value through offering customers acceptable-quality products at the lowest cost compared to that of other competitors in the market

Source: Frank T Rothaermel (1996)

Figure 3: Value creation in Differentiation strategy

Source: Frank T Rothaermel (1996)

Figure 4: Value creation in Cost leadership strategy

Lastly, Integrated Cost leadership/differentiation strategy allows a firm to simultaneously pursue low cost and differentiation This is considered to be a hard strategy to follow Since

a firm can easily become ‘stuck in the middle’, it cannot achieve the benefits of premium pricing from differentiation nor cost saving from cost leadership Below is an example of three cosmetic firms using different strategy, thus, having different ways of creating value for consumers In the middle is Avon, applying Integrated Cost leadership/Differentiated strategy, which positions itself to be neither the lowest cost nor the most differentiated firm

Source: Frank T Rothaermel (1996)

Figure 5: An example of value creation in the three main types of strategy

Chapter 2: Analyzing distinctive competencies in competitive advantage achievement at Abroad Discovery English Center (A.D Center)

1 Overview about A.D Center:

1.1 History of development

Name: Abroad Discovery English Center

Address: 115 G2, Thanh Cong, Nguyen Hong street, Ba Dinh

district, Hanoi

Telephone: (04) 2211 1278

Abroad Discovery English Center (A.D Center) established in November 2011 offers affordable English courses for all age groups, with a focus on young learners A.D Center chooses Incredible English published by Oxford University Express as its main Course book for all levels Choosing Incredible English to be a backbone for its programs, A.D Center aims at using English as a vehicle to teach other subjects where children develop skills needed as a part of their general education whilst improving their use of English

During more than 2 years in operation, A.D Center has experienced many big changes in infrastructure, from a small flat with only 1 classroom in 2011 to a center with 2 larger classrooms, a playroom, a library and a small playground in 2013 Moreover, the Center now has 9 classes with up to 12 students per class and 10 teachers, including 5 Vietnamese and 5 foreign teachers

1.2 Organizational Structure

There are 2 departments at A.D Center, namely Technical and Finance & Marketing department The former includes Teacher and Research & Development team In A.D Center, all of the teachers do not work individually but in a team, hence, they are able to

share a consistent methodology of teaching, learn from each other and receive regular feedback Besides teaching, the 5 Vietnamese teachers take charge of the Research and Development process They have weekly meeting in order to work out the best teaching materials and methods Turning to Finance & Marketing Department, there are 2 sub-teams

in charge of the 2 according functions in the company, finance and marketing

Figure 6: Organizational Structure at Abroad Discovery Center 1.3 Field of business

Abroad Discovery Center is a service company offering English courses for all age groups, especially young learners At the present, there are 9 classes en route in accordance with 9 levels of Incredible English program

Levels Classes’ names Classes’ schedules Vietnamese

teachers

Foreign teachers Incredible Starter

(4-6 years old)

Mango (4 years old)

Sales &

Marketing

Finance

Pumpkin (5-6 years old)

Mon: 10:15 – 11:45 Ms Bich Ms

Brooke Incredible English 1

ending)

Mon: 17:45 – 19:15 Fri: 17:45 – 19:15

be a negative signal However, Accounts receivable here means the tuition fee has not been submitted by new students They are those having a month of trial studying and not completing the fee yet Hence, it appears that the number of students in A.D Center is positively changing Salary & wages payable goes up to more than 100 million VND at the end of June 2014 dues to the salaries paid for 3 new foreign teachers In addition, there is

also a rise in Equipment and Teaching materials, which indicates considerable investment of A.D Center in terms of services quality enhancement

Consolidated Results (VND) Change from start of fiscal year

Books & Teaching materials 34,000,000 2,400,000

Long term business loan 45,000,000 -15,000,000

Table 6: Balance Sheet (For the first half of fiscal year 2014)