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The value chainhelp firms choose the method of creating competitive advantage by answering thetwo basic questions: 1 How to provide customers with a product goods andservices with the va

CONSTRUCTION OF BUSINESS STRATEGY IN PERIOD OF 2010 – 2015

OF SONG DA SOMECO JOINT STOCK COMPANY

-*** -CHAPTER I: BASIC ISSUES OF STRATEGY ADMINISTRATION 6

1.1 Overview of strategy management 6

1.1.1 Definition: 6

1.1.2.Approach 8

1.1.3.Process 8

1.2.Vision, missions and values 13

1.2.1.Vision 13

1.2.2.Missions 13

1.2.3.Values 14

1.3.Strategic analysis 15

1.3.1.Macro environment analysis 15

1.3.2 Industry environment analysis 18

1.3.3 Internal environment analysis 21

1.3.4 Analysis summary - SWOT 25

1 4 General business strategies 28

1.4.1 Product differentiation strategy 29

1.4.2.Strategy of production cost reduction 31

1.4.3 Market concentration strategy 34

1.4.4 Quick response and flexible strategy 34

1.4.5 Strategy creating value and benefit to customers 36

1.5 Organize for strategy implementation and control 37

1.5.1 Organize for strategy implementation 37

1.5.2 Inspection for strategy implementation 38

CHAPTER II: BUSINESS STRATEGY REALITY OF SOMECO SONG DA JOINT STOCK COMPANY IN THE PAST YEARS 42

2.1 General introduction of Someco Song Da 42

2.1.1 Process of foundation and development 42

2.1.2 Business performance: 43

2.1.3 Someco Song Da’s Performance result in recent years: 48

2.2 Analyzation and evaluation of Someco Song Da business strategy 49

2.2.1 Agreement of Someco Song Da Jointstock Company 49

2.2.2 The real situation of the organization to implement and control current strategy of Song Da Someco Joint Stock Company 50

2.2.3 Analyzing the macroscopic environment 57

2.2.4 Analyze sector environment 71

CHAPTER III: SOLUTIONS TO COMPLETE BUSINESS STRATEGY OF SOMECO

SONG DA JSC FOR THE PERIOD 2010 – 2015 83

3.1 Development orientation 83

3.1.1 Vision 83

3.1.2 Mission 83

3.1.3 Core values 83

3.1.4 Production targets in business strategy up to 2015: 84

3.2 Choosing business strategy for the period 2010 – 2015 85

3.3.1 Organizational solutions 89

3.3.2 Technological solutions 90

3.3.3 Human resources solutions 91

3.3.4 Financial solutions 95

3.3.5 Marketing solutions 95

CONCLUSION 101

REFERENCE DOCUMENT 103

1 Reasons to select the theme

Song Da Someco Joint Stock Company is an equitized state ownedenterprise capitalized (Formerly Song Da Mechanical Assembling Joint StockCompany) directly under Song Da Corporation that includes 06 branches, relatedand subsidiary companies

As an enterprise specializing on construction, real estate, and commerce foryears, Song Da Someco Joint Stock Company has carried out so many largeprojects on constructing hydropower and cement plant,…, which contributes to thecause of modernization and industrialization of the country

The official integration into the World Trade Organization (WTO) ofVietnam has brought both new opportunities and challenges for all Vietnameseenterprises, of which the challenges include the pressure in competition, shift ineconomic structure, requirements in human resources,…Therefore, the research toput forth the solutions to business strategy in the period of 2010-2020 and thevision by 2020 of Song Da Someco Joint Stock Company (one of the establishedand prestigious companies in the fields of investment in construction, real estate,

…) in the period of integration is a necessary selection

2 Purposes in theme research

To systematize and generalize the business affairs of Song Da Someco JointStock Company

To analyze and assess the feasibility of Song Da Someco Joint StockCompany in the last time

In order to Complete business strategy of the Song Da Someco Joint-stockCompany between 2010 and 2015

3 Object and scope of Research

Business strategy and business related issues

Scope of applications: Business strategy of the Song Da Someco stock Company in operating field

Joint-In the aspect of time: Estimated five years (from 2010 to 2015)

4 Research method

Some research approaches in this assay as follow:

Document research approach: In this research, information, documentsinclude: publication, research, chart result, analysis data, summary report… aboutbusiness performance and other issues related research topic

Qualitative research approach: Interview and refer opinion of leaders,managers, in Enterprise and foreign specialists who cooperate about Businessmanagement and performance Content focuses on major issues about Companystrategy administration in the past time

Sample selection research approach: is a non entire investigation method.This approach makes use of probability theory for selecting some specific units(called sample overall) in the whole of overall (called general overall) Processedinformation result is used for generalizing for general overall In order to achievetrusted generalizing result, we should select one sample that nearly similar orsimilar to general overall (about structure components, quantity specifications ofresearching objects, specification spread) However, this approach is practiced innarrow scope to practice the design of Strategy Administration subject due to belimited time and human resource In other words, we just use this sample selection

approach with the aim to define participants who investigate interview inside andoutside Enterprise

Matrix research approach: Matrix approach analyzes effect, draws outenvironment causes/elements (inside and outside) that impact on Enterprise’sstrategy performance This approach provides one overall outlook andattractiveness and core capability for Administrator to catch that businessopportunities

Combination of practice, theory, collation and comparison is an approachfor writing, graduation essay relating to research scope and topic application

Use secondary documents, research practice, market investigation, surveyfor primary data via internet, interview with economic specialists, CEO of generalcompanies and large groups…

5 Structure of the Thesis

Includes the introduction, main content, and conclusions and proposals

6 Contribution to the thesis

Base on methodology and practice to give out the solutions to businessstrategy and vision of a company specializing on construction, real estate in thecourse of integration

PART II: CONTENT CHAPTER I: BASIC ISSUES OF STRATEGY ADMINISTRATION

1.1 Overview of strategy management

1.1.1 Definition:

The term “Strategies” were first used and popularized in military affairs

According to American encyclopeodic dictionary, “Strategies are the science and art in military management applied in making schedule and performance in the general scope to win the final victory” whereas Larouse dictionary wrotes that

“Strategies are the art directing all the means to win, which is the fighting art in competitive position”.

To day, the term ‘Strategy” is applied popularly in business The

“Strategies” in business is defined differently, as follows:

“Strategies are the model on objectives, targets and plans to reach them”

(by Kenneth L.Andrew – in 1965)

“Strategies imply the fixation of basic and long-term goals, the selection of the methods or action progress and the distribution of vital natural resources to carry out the objectives”

(by Alfred Chandler)

“Strategies are the ways, means of transportation to win the defined objectives with the polices”

(by General Ailleret)

“A strategy is either the trends or plans to combine the goals, main policies and action programs of an organization into an united entityt”.

(by Quinn, in 1980)

“A strategy is the harmonious combination of actions and distribution of the resources to win the objectives given out by the organization Strategies of one organization are efforts aimed at use its capacity and resoureces at best to respont

to the opportunities and challenges with the outside environment”

(by Bateman và Zeithaml, in 1990)

“Strategies consists of goals, policies and plans”

(by Dess và Miller,in 1993)

Despite of difference in the above concepts, all of them point out theoverall feature of the goals, policies and action plans defined by the organization

in advance Mintzberg gave out the concept of strategy that “Strategies are schemes, tactics, tendencies, positions and visibilities” in 1987

Strategies are schemes:

According to the concept, strategies are goals, policies and programsdefined by the organization in advance

Strategies are tactics:

Those in the intentions of the organization to defeat is competitors

Strategies are tendencies:

They may neither defined prior, nor publicized, however, all actions of anorganization share one trend, which is considered as a strategy

Strategies are positions:

The position of an enterprise in a certain environment, particularly in thecomparison with its competitors, is an important factor in the strategy According

to the concept, a strategy is the fitness between internal factors in the enterpriseand environmental elements The position of an enterprise may be identified anddeveloped via either the action scheme or tendency

Strategies are visibilities:

According to the concept, strategies are ideas at first, they exist in theimagination and creation of the administrators It is so important to share the ideaswith other members in the organization.

Combining the above different concepts on strategies, we may gain theoverall definition of strategies as follows:

“A strategy is the process of stable construction and development of competitive advantages via the identification of the organization in the business world as well as the effective development and use of the resources of the strategy”.

(By Dr Vu Thanh Hung - Chief Editor, Dr Nguyen Van Thang; Strategy Administration Syllabus– Education Publishing House )

1.1.2.Approach

Logic and historic system approach method

Approach method for the practice of argument affairs

Method of new economic thought– Optimal method

1.1.3.Process

Strategies are the range of complex actions to mobilize the availableresources in one organization to win a certain purpose The identification complieswith a process including varied periods but in the strict logic relation

Figure 1.1 – Process of strategy making

1.1.3.1.Period of Strategy Establishment

Strategy establishment is the process of establishing business misions,research inspection to identify internal and external elements, giving out long-term objectives and selecting alternative strategies Sometimes, the period ofstrategy establishment is callsed “making strategy scheme” Strategyestablishment includes 3 basic activities:

Carrying out reserach: relating to the collection and treatment of the

information on market, scopes of business of the enterprise The stage is called

PROCESS OF STRATEGY MAKING

Strategic functions, missions &

objectives of the enterprise (1)

Analysis of

enterprise’s internal

nghiÖp (S,W) (3)

Analysis of business environment (O,T) (2) Strategy selection (4)

Company - level strategies (5) Business & Function Strategies

Strategy development (6) Performance inspection & Evaluation (7)

Feedback

n

“skimming the business enterprise” Naturally, research performance is to identifystrong and important points in functional business The varied types of inspectionare regared as the development and performance to survey the internal elementssuch as labor spirit, effectiveness in production, adverticement and loyalty of theclients

Combinating intuition and analysis harmoniously: some administrators and

owners of the enterprise declare their extraordinary talents in using their intuitions

to give out the excellent strategies Althought few organizations still exist andthrive thanks to the talent intuition in administration, the majority are less lucky.Most of them gain benefit from the strategies on their capital based on theharmonious combination of intuition and analysis to give out resolutions

Giving out resolutions: Because no organization owns endless resources,

the strategists have to give out the resolutions relating to the selection of the mostbenefit one for the Company The resolutions in the period of strategyestablishment are the glue to stick the company to its products, markets, resourcesand certain technologies in long time

1.1.3.2.Period of strategy development

Strategy performance is called the period of actions for strategyadministrators Development means the mobilization of administrators and staffs

to perform the given strategies The basic actions in the period are:

Establishing annual objectives: are the milestones that the organization

reach to approach its long-term objectives The annual objectives must bemeasurable, quantitative, challagable, practical, appropriate and priority Theobjectives are given out in the level of the Company, devisions and funtions in alarge company They should be displayed under the form of achievement onadministration, marketing, finance, accounting, management, information research

and development A range of annual objectives are needed for each long-termobjective The annual objectives are extremely important for strategies, and it isthe basis of resource distribution

Policies: Policies are the method to reach objectives The policies include

instructions, rules and procedures established to support the efforts on gaining thegiven objects Policies are the guidance for giving out decisions, and displayingthe repeated or periodical circumstance Like annual objectives, policies are soimportant to the strategy development because they are the overall thrists andexpectation of the administrators and staffs in the organization Policies allow theinternal cooperation and synchrony among departments and divisions in theorganization

Natural distribution: is one action of the central administration, focusing on

the strategy development Strategy administration allows the resource distributionsubject to priority order established in annual objectives It is worst for the process

of strategy administration and success of an organization to distribute its resources

in inappropriate methods with priorities pointed out in the approved annualobjectives All organizations have to include 4 types of resources at least to reachtheir targets:

Financial resource;

Material resource;

Human resource;

Resource of technologies and techniques

In short, the strategy development period is considered as the most difficult

It requires the good sense of discipline, dedication and and sacricife of eachindividual The strategy development is succcessful due to the capacity to promotestaffs by the administration, which is an art rather than a science A strategy isgiven out without development shall not serve for any useful purposes

1.1.3.3.Strategy assessment period

Almost strategy planners agree that strategy assessment is necessary toreach the prosperity of the organization, timely assessment may alert theadministration of difficulties or potential challanges before they become serious

The sufficient and timely feedback, the basis of strategy assessment, is notfar from current information Too pressure for the senior administrators make thejunior ones find out the appropriate figures

Although one or more than one strategy is right , this methodology may bewrong because strategic assessment always consists of both long- term andshort-term goals Normally, the strategies do not affect short-term actions until it istoo late to change It is impossible to prove that one typical strategy is the best orensure that it is working However, it may be assessed via serious mistakes.Richard Rumel suggests 4 standards to assess strategies, which are theconsistency, appropirateness, advantage, and feasibility

Process of Strategy administration

Include: Commit → Decide → Act

One company may win:

Strategically competive advantages:Are the advantages that a company

wins as constructing and performing one strategy and gaining benefits to it

Stably competive advantages: Are the advantages that a company wins as

constructing and performing one exclusive strategy that are not owned by itsopponents; Creating the advantages that are not owned by both the curent andpotential opponents

Benefit over the average:The benefit exceeds those expected to gain from

other investments with equivalent risks by the investors

1.2.Vision, missions and values

1.2.1.Vision

Strategic vision: "Orientation for future, a thirst for winning the objectives

of an enterprise " Basic values for stable development

The important factor in the construction and selection of strategies is thevision of individual or organization who participate into making strategies, whichdepends on intuition of each or the whole The analysis and intuition are thefoundation to give out the decisions on forming the strategies suitable to businessenvironment Placed in a varied changing business environment, the leader withgood intuition and exact vision may assist the enteprise to analysize the overalapproachment to the busniess environment and to point out actual advantaces anddifficutlties affecting to the business and production of the enteprise Furthermore,they help to form the highly feasible strategies suitable to the environment andmissions given out by the enteprise

1.2.2.Missions

Missions describe the organizations in their business conditions, theirclients, development of necessary skills to meet the perspective Perspective is thedestination of ideas, and purposes of the organization whereas missions describethe perspectives less abstractly and “theoretically” Missions are more particularthan perspectives, of which, they set up significant orientation on the methods thatthe organization would reach or meet any perspective in a certain period Theorganization interprets the perspectives into the reports on its missions, of which

plans on their boundaries and an orientation Mission report describes generally itsclients, main products and services as well as the orientation in a certain period

What you may recognize in the mission declaration is that all of them forcethe company toward the ambitious goals, i.e “To become number one”, “the best”,

“to reach the target of one billion computers connecting the global network” and

“the leading supplier, ” The mission declaration is examples on strategicschemes

Basically, strategy schemes are the concepts so that the administratorsenable to place an ambitious target to challenge one organization Normally,missions or perspective declaration refers to the strategy schemes of the company

1.2.3.Values

The values of a company confirm the methods that the administrators plan

to self control, with which they desire to do business and the characteristics thatthey want to establish for the organization The values control behaviors in theaspect of an organization, which is considered as the cultural basis of organization

in the firm and as a leader with competitive advantages

There are so many definitions on the crucial values of an enterprise such as:

The crucial values are considered as all of the things that are not paid or

changed by t he Company They are the basis to form the Corporate bylaws

The crucial values are a system of trusts affecting the behaviors among

people, or among the groups of people; they are the “spirit” of the organization; asthe effective values rooted so deeply in the organization, the crucial onescontribute into the establishment of the psychology in the organization so that theyenable to support or remove personal psychology

The crucial values are the rules guiding essentially and temporarily: helping

the orientation of decisions and actions of an organization; they are not eithercultural or certain actions; therefore, it is impossible to construct them for the sake

of financial objectives or short-term benefit; the organizations desire to maintaintheir core values, even their missions have changed

The crucial values do not pay attention to the public opinion, but they arevalid and important to the internal of the organization The core values are little,valid and decisive rules, spirit of the organizations; they are the values with themission instructing all actions

The crucial values are so deep and important They rarely change subject tothe change of the market On the other hand, the organizations would change theirmarket if it is necessary to maintain their practically core values

In short, the values of an enterprise are:

Confirmation of methods of administrators:

Self-control,

Doing business,

Desire of establishing characteristics of the organization

Behavior control in the organization,

Being the organizational cultural foundation in the company

As a leader with competitive advantages

1.3.Strategic analysis

1.3.1.Macro environment analysis

Macro environment analysis answers the question: What are businessesdealing with? There are five macro environment’s elements: natural element,

social element, economic element, political-legislative element, and technological element Those ones affect the organizations independently or inassociation with the other elements.

Economic elements

Economic elements have great influence on firms Because these elementsare so extensive, firms should be selective to identify concrete and the most directimpacts, the primary include:

Interest rate: This can impact on demand for the firms’ products Interestrate is so important since consumers usually borrow money to pay for their bills.This also determines the capital cost that brings to investment decision This cost

is an essential factor to decide the strategy feasibility

Exchange rate: exchange rate between two currencies specifies how muchone currency is worth in term of the other Change in exchange rate has directeffect on the competitiveness of the firms’ products on the international market.This change also makes great influence on price of import and exportcommodities

Inflation rate: inflation rate can disorder the economy, slowdown theeconomic growth and make currency fluctuation unestimated Thus, investmentactivities become hazardous, business future is difficult to be forecasted

International exchange relationship: Changes in international environmentbring foreign investors a lot of opportunities as well as increase competition indomestic market.

Political – legislative elements

Elements in political – legislative environment strongly dominate the firms’operation Political stabilization is considered as one of the most importantpremises in the firms’ operation Changes in political environment may beadvantages for these businesses but inhibit the development of the others, andconversely The perfect impartial legislation is one of the out of economicspremises The perfectness, change and legal enforcement in the economy affectwidely firms’ business strategy implement planning and organizing Political –legislative environment has direct effect on the enterprise’s operation efficiencybecause it affects product, career, business method, etc of the company.Furthermore, it has impacts on the cost: production cost, circulation cost,transportation cost, tax level, etc especially import and export enterprises are alsoinfluenced by international trade policy, national quota, and protective law forparticipating enterprises In summary, political – legislative environment has greateffect on improving business efficiency of the enterprise by acting on its operationthrough a system of legislation, macro economy adjustment tool, etc

Technical- technological elements

Advanced technical and technological levels allow enterprises activelyimprove their goods quality, labor productivity These elements affect most of theproduct’s aspects such as product feature, product price, and productcompetitiveness Thanks to this, enterprises can increase competitiveness, mobilecapital circulation, profit that ensures their open reprocessing On the contrary, thelow technological level decreases not only the enterprises’ competitiveness butalso reduces profit, holds back development In brief, technical and technologicalelement helps enterprises increase their labor productivity, product quality so as to

increase competitiveness, capital circulation, and profit as well as businessefficiency

1.3.2 Industry environment analysis

Strategies planned base on the estimated environment conditions, so thegood strategic management is much up to having a thorough knowledge ofenvironmental conditions, which the organization is facing with The generalenvironments, which the organization usually confronts, are divided into threelevels: macro environment, demonstrative environment, and internal environment.Macro environment affects all the industries, but doesn’t follow a specific way.Demonstrative environment are defined with a concrete industry, with all theindustry companies influenced by that industry demonstrative environment, in thiscase macro environment and demonstrative environment co-ordinate with eachother and called external environment or peripheral environment of the enterprise.The peripheral environment analysis help the enterprise partially answer thequestion What the company is confronting with; simultaneously identifyingopportunities and challenges, which threaten the business operation Manyelements of the peripheral environment may affect directly or indirectly thecompany’s operation or the company’s competitors To analyze how peripheralenvironment’s elements influence directly on the company’s operation , the fiveforces model of Micheal Porter is the most useful tool

As we know, business includes companies creating products together(goods and services), which can be replace each other to satisfy the same demand

of the consumers The mission of the strategists is to analyze competitiveinteraction in business environment to define opportunities and challenges facingthe company Theoretically, the selection of five forces model of M.Porter willhelp strategy maker identify that issue There are both advantages anddisadvantages when applying this model to analyze Thus, the important thing

when using this model is to have exact identifications of every component of themodel.

Five forces mode of M.Porter is described at Figure 1.2

Figure 1.2 - Five competitive forces model

Industry competitors One thing rather useful for the company when

analyzing industry competitors is to catch the appraisals of themselves and of theother industry companies However, if these ones are not accurate, there will be

“blind spots”, which are the weaknesses of the competitors Also, the companywill get inaccurate understandings of the industry or of its industry environment.For example, American automobile companies had once reckoned that demand ofcars depends on the economic condition, but this idea was a mistake when theforeign competitors made cars with more luxurious equipment and are acceptedthanks to much higher quality

Potential entrants Potential entrants are industry businesses but they can

influence the industry in the future The number of potential competitors, and thelevel of their pressure on the industry depend on the following factors:

The industry attractiveness: this is shown through categories such as profitrate, the amount of customers, business in the industry

The integration barriers: the elements make the integration into an industrymore difficult and expensive, including: Technique, Capital Commercial factors

as distribution system, branding, customer system or specific resources containinginputs (controlled), qualifications, inventions, human resources, government’sprotection

Customers Customer is a competitive pressure which can affect the whole

business operations of the industry Customer is divided into two groups: retailerand distributor Both the two groups put pressure on enterprises of price, productquality, services concerned, and they are the industry competitiveness controllerthrough purchase decision Especially, when analyzing, it is necessary for thedistributors to mind their importance, because they can directly go further tooverwhelm the internal of enterprise For instance, with the small and medium-sized enterprises of Vietnam, bringing products into the distribution system of thesupermarkets is always facing with difficulty and obstacle because of price andquality pressure Most of Vietnamese products such as textiles, shoes are difficult

to integrate into the large markets of American, EU if not through distributionsystem That’s why there is a story of a pair of shoes made in Vietnam is sold forthe distributor with low price but Vietnamese in that market have to bear anexorbitant price of the same product The advantage of the competitive pressureanalysis from the customer helps us determine the industry’s role and theimportance However, if the customers’ information is not accurate, there will beinexact, even wrong judgment on the industry’s scale

Distributors The number and the scale of the distributors will determine

their competitive pressure, negotiable power with the industry and the enterprises

Substitutes The major competitive pressure is the ability of meeting

demand between the industry products Other factors of price, quality, andenvironmental elements of culture, politics, and technology also affect the threat ofthe substitutes Nonetheless, one flaw of the substitutes is the surprise andpredicting difficulty For example, just in the industry with the development oftechnology, enterprises can create their own substitutes

In brief, according to the author’s point of view, the five forces model has adefect that the analysis is based on the past statistics, but limited future overview

On the other hand, Micheal Porter developed this model supposing that the market

is stable, so in the condition of a fast fluctuating market, this model may be notreally useful Nevertheless, the model is a wonderful tool for analysts to bring outreports on the market’s competitiveness

1.3.3 Internal environment analysis

If the analysis of five forces of M.P helps strategy maker identifyopportunities and hallenges of the company in the angle of action, the value chainmodel help to classify valuable resources to indentify its competitive advantages

In other words, Micheal Porter releases the value chain concept to evaluate thecompetitiveness of the firm, more exactly to let firms self-locate on the market, inthe relationship with the buyer suppliers and other competitors The value chainhelp firms choose the method of creating competitive advantage by answering thetwo basic questions: 1) How to provide customers with a product (goods andservices) with the value equivalent to their competitors’ one but with lower price(low price strategy); or 2) How to produce products which the customers want tobuy at a higher price (differentiating strategy) Like that, the value chain analysis

has a special important meaning, as a key for firms to find out their competitiveadvantage on the value creation

Figure 1.3 – Value chain model

The main operating groups in the value chain are divided into five basic

ones (Inbound Logistics, Production/Operation, Outbound Logistics, Marketingand Sales, Services) However, this division is just relative because according tocareer, and firms’ features, the characteristics, quantity, quality requirement for theoperations will be different Hereinafter, the author describes some of thefundamental features of these groups:

The Inbound logistics: Include the operations relating to transportation,

shipping and receiving, storing, distribution all resources for the processing as:loading and unloading cargo, in-storage transportation, raw materials’ qualitytesting, reserves, transport system coordination, working (settlement) with thesuppliers All of those activities take place in the internal of the surveyed object(firm, industry, economic organization)

Operations: All the activities concern with the transfer from inputs to

outputs This group, which operates abundantly and diversely, depends onproduction form and features Those begin from operations as design, productiontrial, experiment, large scale production, quality testing, packaging, storing to theactivities serving the production solely as machine and equipment repairing andmaintaining, which can happen in workshops, factories, production centers on alocation or be allocated to different places globally

The outbound logisticss: This area consists of activities concerning with

collecting, storing, and transporting the full products to the consumers Forinstance, the order form processing, scheduling, and implement organizing todistribute products to consumers exactly, timely, uncostly

Marketing and sales: Including activities to ensure the goods and services

transactions on the market the most effectively These ones focus on thefundamental steps of marketing mix: market research, product development, pricepolicy making, distribution channel establishment, and selling support promotion.Among them, the selling and selling promotion play an important role

After-sale service: Including the auxiliary activities to boost market outlet

of product and create value added after the product sold to the consumer:Installation, warranty, maintain, repair, instructions for use, replacement,consumption consulting…according to the customer’s requirement Theseactivities are multiform and abundant It is also center, which develops the profitsand establishes the trade name to the enterprise effectively However, manyenterprises, especially the enterprises that are operating in a developing market as

in our country’s market still do not care about this appropriately

Above activities are the basic activity groups, which contribute to developthe general value chain of the enterprise Obviously, this value chain can bechanged and adjusted for agreement basing on type of product, operation area, and

business line As example, the enterprise that operates in the distribution fields,Logistics group (in and out) will be concerned mostly For the local suppliers,connecting closely with a fixed space such as hotel and restaurant services, at thattime the logistics is secondary The most important aspect for these enterprises istheir production process (or service supply) For a bank, the phase that creates thevalue is serving and marketing phase However, operating in any fields with anyproduct’s specific characteristics and nature, it is still necessary to converge fiveworking groups fully as mentioned above to establish the fully worked-out valuechain They play an important role in establishing the competitive advantage forthe enterprise, the branch, as well as the economy of a country

Auxiliary activities group for process of making the value of enterprise is

mentioned frequently with four main working sets: 1) Guarantee ability onmaterial and technique; 2) Development standard of producing technique; 3)Ability of human resources management; 4) infrastructure condition Similar tothe main activities, four auxiliary activity groups also have type, nature, feature,component, and other factors depending on the concrete condition of eachenterprise, business line or the country

Guarantee ability for material and techniques Firstly, these activities aim

at ensuring the material resource for an enterprise throughout process of producingand trading Out of material, it is necessary to mention the production facilitiesand tools such as workshop, machine, equipment, laboratory, office … as well asthe other sources for production The other departments of the enterpriseimplement these activities; however, they also participate in process of making thevalue for the product as well as the operation result of the enterprise actively.Because the input source ensuring connects closely, the using effectivenessimprovement for production expenses and directly influences to product costs

Development standard of producing technique Each product is produced

basing on a fixed technique foundation This technique foundation will contribute

to value increase for the product, plays an important role in value chain of theenterprise The concept of producing techniques is understood in the broad sense

as the set of technique types including the management technique, which haveclosely relation with each other to make the general competitive value for theenterprise Especially, the research and development (R&D) is an outstandingactivity Research and Development will contribute to make the new knowledgeand value, actively contribute to the value chain of the product or the enterprise.Out of R&D, the producing technique standard also has an important role Formany fields, the development standard of producing technique has great meaningfor the final value of the value chain

Human resources management: Including activities as selecting human

resources, training, enhancing professional skill, salary policy, treatment Thehuman is foundation of all value Therefore, the human resources management is

an important activity that is present at all phases in process of making the value.Factually, if an enterprise takes interested in investing into the human resourcesdevelopment and management, that enterprise will create its difference in themarket and attain the long-term competitive advantage

Infrastructure: In here, infrastructure includes activities as follows: general

management, strategy planning, financial management, accounting, law,relationship with civil authority organs, quality management….Similar to thesources, the infrastructure activity directly affects all other activity groups in thevalue chain

1.3.4 Analysis summary - SWOT

SWOT matrix is used to collect the internal and external environment

researches of the economic subjects Analyzing the external environment to detectthe opportunities and threats for the enterprises Analyzing the internalenvironment to define the strong and weak points of the subject

SWOT matrix is established by four factors:

S = Strength (strong point);

W = Weaknesses (weak point);

O = Opportunities;

T = Threats (challenge)

Strong points: Abilities, which help the enterprise or the branch to

implement mostly the points that necessary to be improved

Weak points: Points that necessary to be made good because they hamper

the enterprise or the branch to achieve good effectiveness in the process of workimplementation

Opportunities: tendency, driving force, event, and idea, which the

enterprise or the branch can take advantage

Threats: Events or pressures can happened beyond the control ability that is

necessary for the enterprise or the branch to concern with or decide the limitationway of influence

Four factors are divided into two groups:

Group 1: Strong point (S) and Weak point (W) – are internal factors that

controlled by the enterprise such as the management, finance-accounting, productand production …The enterprise’s objective is taking full advantage of the strongpoint and making good the weak point

Group 2: Opportunities (O) and Threats (T) mention the issues on

economy, politics, society, government, technique, competitive tendencies, and

event, which can bring about the benefit or risk for the enterprise Opportunity andThreat overcome the enterprise’s controlling; therefore, they are called the externalinfluence factors

Like this, with using SWOT, the economy can plan the strategies to grabthe opportunity, avoid or diminish the external threats, take full advantage of thestrong points and make good the internal weak points This is an effectivesolution, which helps us recognizing and analyzing the influence tendencies in thenext time when the quantitative data are unqualified to carry out the quantitativeregression analysis

Basing on analyzing the SWOT factors, the objective, the businessdevelopment direction, and the source, people can expose the forecasts according

to the four combined factors in Table 1.1.

Table 1.1: SWOT analysis model

1 4 General business strategies

According to Michael Porter, the business strategies that the enterprises

applied to compete in the market including:

Product differentiation strategy;

Strategy of production cost reduction;

Market concentration strategy;

In process of establishing the competitive strategy, the enterprises usuallyorient according to one or some strategic orientations in order to create thecompetitive advantage of their product or service in the market

1.4.1 Product differentiation strategy

Product differentiation is a form of the competitive strategy, in which theenterprise tries creating a certain difference of their product or service comparing

to the same products or services of the other competitors in the market Thisstrategy aims at attract the attention and lure the customer’s attention for theirproducts There are some ways to express the difference as follows:

Difference in product:Be differences in specific characteristics and nature

of the product These differences can be expressed in aspects of material or use.…

Service difference in sales:These are the prior-sale service, the in process –

sale service and the after-sale service

Expression form of the product:Be expression form of product according to

the suitable level with the taste, custom, the using habit or the ideas, the symbols

or the cultural criterions in the customer’s consumption

Difference in technique innovation idea: Bringing about the creations in

innovating the structure, stature of the product Applying the technical advantagesimproving and enhancing the effectiveness, the using performance, and the value

of product etc…in order to enhance the quality or the useful aspect of the createdproduct

Reputation and good prestige of the product: Good prestige or reputation of

the enterprise, which is known by many customers are one of the most importantfactors in order to enlarge the relationship and the influence scope of the consumerfor the enterprise’s product

Optimum in manufacturing: To be manufacture and production according to

the Module model from the components in order to assemble into an end - product

or a flexible end - product This will create a utility in process of using theproduct

Value in use of the product: This value i.e the product can include other

values out of the normal consumption values, which the consumer can exploit;Creating product differentiation comparing to the competitors on the market, theenterprise can achieve the great advantages as follows:

Prominence in the market: If the enterprise’s product achieves this

advantage, the other competitors is easy to be “overshadowed” in the consumer’seye, the enterprise’s prestige is raised and kept intact

Competing and keeping the consumer: If the enterprise has its prestige for the consumer on differentiation in its product, the consumer will be “loyal” to the

enterprise even the product’s prices is be changed

Hindering the competitor: The enterprise’s prestige and the customer’s

faithfulness will be barrier and great obstruction for the new competitors or theother products, which participate in competition in the market

Price advantage: Differentiation of the product usually creates the

consumption advantage with lawful high price or monopoly price for theenterprise

Achieving the faithful customers: The value in use and utility by far of the

enterprise’s product brings about the faithful customers

Differentiation in the product or the service that created by the enterprisemake the enterprises are highly appreciated by the market However, in order toimplement this strategy successfully, the enterprise needs to have conditions asfollows:

The enterprise is required to have good ability in researching anddeveloping the products and services It is necessary for the enterprise to havegreat investment in the equipment or the techniques to serve the importantfunction

The enterprise is required to have the labor force with good skill andcompetence, they are leading experts, the excellent technicians with high creationability These demand great investment in developing the human resources

The enterprise is required to have a suitable management apparatus andstructure, encouraging the changes and creation, accepting the adventure andhaving skill and spirit

In order to implement this strategy, the enterprise needs to cope with somechallenges as follows:

Having fixed conditions of technique ability, human resources, marketresearching ability, and its application, required to have great investment

The other competitors also have similar policies and measures forcompeting in the market; therefore, it is necessary to speed up investmentunfailingly for the sources

In case the competitor has ability of special specialization and has favorableposition in the market, the enterprise will be difficult to overcome that competitor

if the enterprise applies this strategy

Speeding up the competitive advantage according to direction ofdifferentiation demands to have the great expenses; this affects the effectiveness ofthe enterprise’s business production

1.4.2.Strategy of production cost reduction

Strategy of production cost reduction is a strategy that the enterprises isrequired to have the most effective operation condition, have the close costcontrolling to achieve the higher operation productivity comparing to the othercompetitors According to this strategy, the enterprise is required to find allmeasures to reduce its production costs in the lowest level

To pursue the strategy of production cost reduction, it is necessary for theenterprise to direct to the great market and take advantage the economicadvantages basing on its scale In many cases, the enterprises are required toreduce a part of necessary costs for the application research, concentrate insimplifying the process, or reduce the production cost

Advantage from cost reduction:

If the enterprise has low cost, it can sell it’s product with the lower pricecomparing to the price of the other enterprises in the branch The enterprise canalso avoid the bad consequences in the price war with the competitors

The low price will attract customers, who have low income or customerswho only care about the price of product It also creates the great advantage forthe enterprise in the market where is delicate with the price

The enterprise is still able to trade favorably and profitably with its low cost

as soon as the cost of input factors increases

It is difficult for new competitors of the enterprise to get enough necessarycondition, business experience and competitiveness to compete prices in themarket

Low price is also one of the “weapons” for the enterprise prevent or againstcompetition of substitute products and potential competitors, etc

Conditions to reduce business expenses:

One of the most important condition is that the enterprise carries out itsbusiness operation in the large market In such condition, mass production in thelarge scale, standardized products will make production and consumptionexpenses, price reduced, stimulate consumption capacity.

Another condition that also creates favorable conditions for reducingproduction expense are experiences in production and business Thanks toexperiences in production, management and consumption, the enterprise can putimprovement and rationalization for production process, increase laborproductivity, reduce products price

Specializing production is then a solution in implementing strategy inreducing production expense because the product can be made in mass,productivity will increase and other expenses can be reduced

Challenges in the expense reduction strategy:

In order to get lower expense than that of competitors, it is likely to get risk

in product or service quality

Cutting down expenses in creating products and services may reduce aportion of their value or can not make qualified products as desired

Solutions to reduce expenses in making products may be known bycompetitors and applied in the same way to self-compete, directly confront to theenterprises, then the competition shall be fierce

When the product consumption market is at saturated period, differences inprice of the products shall be reduced and thus advantages of such strategy shall belost

Getting close in such strategy may weaken other competitions much,especially product quality strategy or strategy of flexibility in the business, etc

1.4.3 Market concentration strategy

Based on product differentiation strategy and business expense reductionstrategy, enterprise can bring out appropriate market concentration strategy tocreate its own competitive advantage The market concentration strategy in thecompetition is a strategy that focus on concentration in a particularly regionalmarket or a defined customer group There are some easily seen features in suchstrategy as follows:

The market concentration strategy may follow expense reduction way in asmall market scope and is obviously and appropriately specified

For the product differentiation: The market concentration strategy meansdirect to some specific market area, customers in order to create and showdifferentiation, domination of the product and service supplied by the enterprise

In selection, the market concentration is an important basis to present,exploit and implement competitive advantages of the enterprises in such selectedmarket

Selecting market concentration is also presented when the enterprisediversifies its products It is likely to see that many enterprises centralized theirbusiness scopes in a small area and a selected market to get horse-trading andquick response to the market as well as customers’ demand

Applying such competition strategy also creates disadvantages or risk to theenterprise because of concentrating in the small market too much so that theenterprise may loose its revolution when the situation changes

1.4.4 Quick response and flexible strategy

Quick response to demand of customers and market is a great importantstrategy in competition situation at present of enterprises in their business andproduction operations The main point of such strategy is how to be quicker,

“ahead” compared to competitors in catching and meeting demand of customers,

in technological renovation, in seeking partners, etc

Enterprise can implement many quick response forms in the marketdepending on effect of different aspects of the market There are some forms asfollows:

Developing new product: That is releasing a products quicker than its

competitor to access customers

Changing products to meet consumption taste of customers: This means

products of the enterprise timely change with consumption taste of the customers

Quickly improving products: That is improvement in order to increase

quality or use of present products or traditional products

Quickly supplying: That is timely and quickly supplying orders upon

customers’ request

Quickly enlarging markets: That is giving methods in marketing to quickly

enlarge the market

Promptly catching customers’ need: Promptly acquiring opinions of

customers on the products and business operation of the enterprise

When implementing quick response strategy, the enterprises shall havesome following advantages:

Because of faster than other competitors so that the enterprises avoid directconfront with other competitors and have many favorable chances to develop

Quickly releasing new and unique products may help the enteprisesconsume their products with high price, especially in the first phase of newproduct development process.

Quick response in the market through creativeness in the product andmarketing shall make competitors dispirited who wish to squeeze into the marketand be discouraged other competitors who want to put replaced products into themarket

In order to pursue the quick response strategy, the enterprise must havespecified conditions, beside such conditions as research and development capacity,especially market research and new product and service development, theenterprises should have other essential conditions like:

Having wide product distribution network to quickly grasp and meetdemand of customers

Having neat and flexible organization structure and management system;sections well coordinate with each other; having quick and right making decisionmechanism

Having employees who have highly creative capacity, are active, flexibleand all-round in implementing business operations

Having large market relation, ability to control or taking initiative insupplying input conditions of the enterprises

1.4.5 Strategy creating value and benefit to customers

The strategy creating value and benefit to customers is a strategy that meetmaximum demand of customers and bring value to customers These are

strategies: leading products strategy; perfect operation process strategy andcustomer close strategy:

Leading product strategy:

Always supplying customers the best products or services, supplying themost optimum solutions based on capacity and creativeness of the enterprises.This helps enterprise get favorable price and this is always challenge for theircompetitors

Perfect operation process strategy:

This strategy focuses on improving operation process, production progress

to ensure stable quality and keep increasing and saving expenses because ofavoiding inappropriate expenses of the whole process

Customer close strategy:

This is strategy that focuses on building belief and faith of customers to theenterprises One of the important direction is always grasping demand and change

in demand of the customers to release the most appropriate products and services,meet demand of traditional customers of the enterprises Such strategy can bearbig expenses but it brings basic and long interest for the enterprises

1.5 Organize for strategy implementation and control

1.5.1 Organize for strategy implementation

To establish managing department (usual as the enterprise’s marketingdepartment)

To declare common objectives need to be achieved, policy methods, humanresources to be used

To establish objectives of department strategies (function)

To establish network diagram (PERT) for work progress

The network model method (PERT - Program Evaluation and ReviewTechnique) is a science to arrange, allocate works in order to find out the mostimportant phase should be known to have method for materials, equipment andstaff allocation ; a working way either master the whole matter or each particularand specific part, the outstanding advangtage of this method compared with otherperformance planning forms is to specify all mutual relations according to workschedules ; the plan carried out by the network diagram can be particularized atany level subject to all work requirements in the system and time sequence forsuch work implementation

1.5.2 Inspection for strategy implementation

The enterprise should have methods for its strategy implementation It is aninspection process, a work which the enterprise can control and instruct whetherwork is in process or has been finished Inspection is to measure and adjust theimplementation in order to guarantee the enterprise’s objectives and strategies toreach, these objectives have been finishing Therefore, inspection is a function ofall managers from the owner of enterprise to persons in charge of department inthe enterprise, actual enterprise’s inspection enable to repair at the maximum thebiggest number of mistakes at the minimum time in the enterprise

To carry out inspection, the enterprise director should propose standards,contents, and objectives of inspection based on the consistent inspectionprinciples Then establish inspection system with appropriate inspection forms andcosts and means, instruments used for this inspection activities The final isappropriate adjustment activities

Inspection principles:

Accurate, objective: This is a basic inspection principle If the inspection

fails to comply with this principle, the inspector may arbitrarily concludeevaluation for status of matter, people, team inspected by them ; therefore, willprovide false response information for the enterprise’s leaders result in division,suspicion in the enterprise, create gap spoiling inspector, disturbing inspectedaddresses

With standard: The inspection duty must be objective, justice, bright,

patient, for the enterprise’s benefits These are marks for inspection have basis tocompare requirement of the mark and result of inspected address has beenimplemented The standards are marks need to achieve of addresses to be carriedout in the enterprise (in respect of period, quality, relation, progress, costs andresult )

Public and respect for inspected person: This principle requires inspection

must be normal activities not inconvenience, challenge, threatening inspectedperson, the inspector is only allowed to implement work in accordance with clearregulations declared to all enterprise, not allowed to add or remove, threaten, askfor, contrive with the inspected person ; that must be implemented withresponsibility and respect for the inspected person as well as others in theenterprise, as each person has its own duty and all duties are indispensable

With proper diversification: This inspection principle requires to combine

many various forms and techniques in order to guarantee accurate and objectiveinspected results Its is necessary to combine inspection according to decidedsample and contigent inspection, periodical inspection and sudden inspection,combine vertical inspection with horizontal inspection and diagonal inspection,combine comprehensive inspection and partial inspection, combine inspection byequipment with inspection by human’s vision, combine inspection with self

inspection The proper diversified inspection principle also show implementationability of inspection activities.

Economic: This principle requires inspection to acquire appropriate effect,

it means the inspection costs must be much smaller than collected results brought

by inspection to the enterprise And to avoid unnecessary wastage of the enterpriseresources during inspection

With focus, emphasis: This principle requires the inspection has focus and

emphasis subject to the enterprise’s operation process

Inspection standard

Inspection standards are of quantity, quality, period of duty that must beimplemented by individuals, team and all enterprises in order to guaranteeeffective operation of the whole enterprise Normally inspection standards haveone allowable backup (or error) if exceed these backup rate, enterprise shallencounter damage, limit development stability of enterprise, even pushingenterprise into impasse or bankruptcy

In the inspection standards, the most fastidious are qualitative ones as theyare too difficult for the inspector coming into conclusions, evaluations Forexample, one team in the system of 10 persons, of which 6 persons have badevaluation to their team leader, that can conclude the team leader has problem,improper, and need to wait more time for seeking for other relating teamopinions

Inspection standards, in one hand, have historicity, it means they canchange according to time with history’s ups and downs For newly-establishedenterprise, the evaluation standards must differ from the developed one Certainly,there are some kinds of activities that their inspection standard can not change,