Building business strategy in real estate for company 59, the ministry of defense

ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH ---NGUYỄN VĂN ANH BUILDING BUSINESS STRATEGY IN REAL ESTATE FOR COMPANY 59, THE MINISTRY OF DEFENCE XÂY DỰNG CHIẾN LƯỢC KINH DOANH BẤT

ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH

-NGUYỄN VĂN ANH

BUILDING BUSINESS STRATEGY IN REAL ESTATE FOR COMPANY 59, THE MINISTRY OF DEFENCE

XÂY DỰNG CHIẾN LƯỢC KINH DOANH

BẤT ĐỘNG SẢN CÔNG TY 59, BỘ QUỐC PHÒNG

LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

HÀ NỘI - 2018

ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH

-NGUYỄN VĂN ANH

BUILDING BUSINESS STRATEGY IN REAL ESTATE FOR COMPANY 59, THE MINISTRY OF DEFENCE

XÂY DỰNG CHIẾN LƯỢC KINH DOANH

BẤT ĐỘNG SẢN CÔNG TY 59, BỘ QUỐC PHÒNG

Chuyên ngành: Quản trị kinh doanh

Mã số: 60 34 01 02 LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

NGƯỜI HƯỚNG DẪN KHOA HỌC: TS TRẦN HUY PHƯƠNG

Hà Nội - 2018

The author undertakes that the results of the study in the dissertation are theresults of the author's own work primarily obtained during study and research andnot yet published in any other research by others

Research results and other people's materials (quotations, tables, formulas,graphs and other materials) used in this dissertation have been approved by theauthors and cited in detail

I am fully responsible to the scientific council on thesis defence, HanoiSchool of Business and Management and the law for the above commitments

Student

Nguyen Van Anh

During my study and thesis writing process, I received valuable guidancefrom lecturers at the Hanoi School of Business and Management – VietnamNational University, Hanoi

First of all, I would like to thank the leaders and lecturerer for their hardwork I would like to thank for the heartedness of Ph.D Tran Huy Phuong toinstruct me in the preparation of graduation thesis

I also sincerely thank the staff of Company 59 to support, provideinformation and facilitate me for completion of my research

I give my thanks to my wife and two lovely children for their spiritualsupport motivating me to complete the dissertation at the time of busy and pressurefrom many factors

With the supports from many sides, I also made great efforts to complete thethesis in the best way but due to certain limitations on knowledge, time andinformation, the work has certainly existed shortcomings I hope to receive thesympathy, contributions and supports of lecturers and readers to complete the topic

Thanks and best regards

TABLE OF CONTENTS

LIST OF TABLES i

LIST OF FIGURES ii

INTRODUCTION 1

2 Overview of the research status 2

3 Objectives of the research 4

3.1 General objectives 4

3.2 Specific objectives 4

4 Subjects of the research 5

5 Scope of the reseach 5

6 Methods of the research 5

CHAPTER 1: THEORETICAL BASIS OF BUSINESS STRATEGY IN REAL ESTATE 7

1.1 The general theories of business strategy 7

1.1.1 Concept of strategy and business strategy 7

1.1.2 Characteristics of business strategy 8

1.1.3 The role of business strategy 9

1.1.4 The levels of strategy 9

1.2 The process of building business strategy of enterprises 12

1.2.1 Identification of the mission, the current business objectives of the business 13 1.2.2 Assessment on the external environment of the business 15

1.2.3 Analysis on the internal business environment 20

1.2.4 Development of strategic options 23

1.2.5 Analysis and selection of strategy 24

1.2.6 Strategy implementation 25

1.3 The concept of real estate and property characteristics 29

1.3.1 Real estate concept 29

1.3.2 Characteristics of real estate business 30

1.3.3 Impact of real estate business characteristics on building business strategy .30

CHAPTER 2 CURRENT SITUATION OF THE COMPANY'S REAL ESTATE BUSINESS STRATEGY AT COMPANY 59 OF MINISTRY OF DEFENSE 32

2.1 About the Company 59 of Ministry of Defense 32

2.1.1 Introduction of Company 59 of Ministry of Defense 32

2.1.2 Organizational structure of company 59, Ministry of Defense 34

2.1.3 Functions and missions of the Company 59 under Ministry of Defense 35

2.1.4 Objectives and core values of the company 59 under Ministry of Defense36 2.1.5 Business results of the company 59 under Ministry of Defense 36

2,2 Analysis of the external business environment of company 59, Ministry of Defense 37

2.2.1 Macro-environmental analysis 37

2.2.2 Micro-environment analysis (sectoral environment) 47

2.2.3 Identification of opportunities - challenges 55

2.3 Analysis of internal environment of company 59, Ministry of Defense 56

2.3.1 Human resources of company 59 56

2.3.2 Physical resources 59

2.3.3 Other intangible resources 62

2.3.4 Determining of strengths and weaknesses 64

CHAPTER 3 BUILDING BUSINESS STRATEGY IN REAL ESTATE FOR COMPANY 59, THE MINISTRY OF DEFENSE AT THE STAGE OF 2018-2022

AND RECOMMENDATIONS. 65

3.1 Defining of the mission, goals, vision of the business 65

3.2 Development of strategic options 65

3.3 Analysis and selection of strategic options 67

3.4 Recommendations of implementation of the strategy 71

3.4.1 Marketing mix solution 72

3.4.2 Human resource solutions 74

3.4.3 Solutions on raw materials 75

3.4.4 Financial solution 75

3.5 Some recommendations to the management level 76

CONCLUSION 78

REFERENCES 79

LIST OF TABLES

Table 1.1 SWOT matrix - Strengths - Weaknesses - Opportunities - Risks 24

Table 1.2 Quantitative Strategic Planning Matrix - QSPM 25

Table 1.3 Matrix of Strategic Business Review 28

Table 2.1 Major business lines of the company 59 32

Table 2.2 List of typical works have been implemented 34

Table 2.3 List of capacity of technical workers 35

Table 2.4 Summary of financial data 36

Table 2.6 Comparison table between units 53

Table 2.7 Comparision of revenue between company 59 and CC1 54

Table 2.8 Opportunities and challenges 55

Table 2.9 Statistics of the land fund allocated for management use 60

Table 2.10 Strengths and weaknesses 64

Table 3.1 SWOT matrix proposed business strategy for Company 59 65

Table 3.2 Matrix quantitative strategic planning 68

i

LIST OF FIGURES

Figure 1.1 The process of building business strategy of enterprises 13

Figure 1.2 Model of external environment analysis (business environment) 15

Figure 1.3 PESTEL model of macro environment analysis 16

Figure 1.4 Model 5 Competitive Force M Porter 18

Figure: 1.5 Business Strategy Evaluation Matrix 27

Figure 2.1 Organization chart 59 34

Figure 2.2 Vietnam's GDP over the years 37

Figure 2.3 Total state budget revenue 2017 38

Figure 2.4 Total budget of 2017 38

Figure 2.5 CPI Index 2017 39

Figure 2.6 Speed of urbanization in Vietnam 41

Figure 2.7 Real estate market in Vietnam 2016 41

Figure 2.8 Survey the sales team through survey questionnaire form 1 57

Figure 2.9 Survey the sales team through survey questionnaire form 2 57

Figure 2.10 Survey qualifaction of management and leadership through survey questionnaire form 1 58

Figure 2.11 Survey of technological capacity in group 1 59

1 Overview

Vietnam's economy has developed with high growth rate strongly andsustainably A series of outstanding events taking place in the world and in domesticstrongly impact on our economy as Vietnam joined the WTO in late December 2006

to be in tune with the world and take many advantages, which have made Vietnambecome an attractive investment destination in the region for domestic and foreigninvestors Or the fact that Vietnam has been voted by non-permanent members ofthe United Nations has shown the trust of its friends in the world with Vietnam, itsbelief in Vietnam's economy and the political stability of our country And in themost recent, Vietnam became an official member of the Trans-Pacific PartnershipAgreement - TPP in February 2016

With the potential economy, there has already been many real estateinvestment projects in Vietnam The types of investment are very diverse such ashigh-end apartment buildings, office buildings for rent, shopping centers, etc.,creating a tremendous impetus for social and economic development and changingthe face of urban in Vietnam

However, real estate has been a very specific business area that requiresspecial conditions such as strong financial resources, ability to raise capital, goodrelationships with specialized regulatory authorities, orientation as well as long-termvision of business leaders In addition, the real estate business is cyclical, thus therisk is very large so in the recent years, a series of businesses operating in this fieldwent bankrupt owing to bank debt, lack of capital, no output and others

Company 59 of the Ministry of Defense is a state-owned enterprise under theMinistry of General Staff has many years of implementation and trading real estateprojects Like other real estate businesses, the company is facing many challengesthat affect the company's business The real estate sector is the spearhead anddominates almost all activities of other fields such as construction consultancy,construction and installation and others Therefore, the difficulty of this scetor shallpull a series of other business areas of the affected company The management of

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the company has assessed and seen the demand for housing, buildings, offices andtypes of vacation resort is still high, especially in developed cities such as Hanoi, DaNang, Ho Chi Minh City and new urban areas such as Phu Quoc, Nha Trang andothers also urgently review their internal capabilities to build a complete real estatebusiness strategy - in line with the current situation Starting from that demand, the

research topic: “Building business strategy in real estate for Company 59, the

Ministry of Defense” is very necessary for the development of the company.

2 Overview of the research status

Real estate business has only grown since the early 1990s, but the business isnow an important economic sector in the country Because real estate business isdirectly related to a tremendous amount of assets in terms of scale, nature and value

of the aspects of the national economy Real estate shares account for about 40% ofthe country's wealth, while real estate-related activities account for 30% of totaleconomic activity In developed countries, the amount of money that a bank lendsthrough mortgages through real estate accounts for over 80% of the total loanportfolio Therefore, real estate investment and development plays an important role

in transforming assets into abundant financial sources for socio-economicdevelopment, especially development investment the infrastructure of the economy.Due to the above reasons, many researches related to this field have been published.Below, I would like to mention some case studies:

 Competitive environment of real estate sector - strategy of Binh Chanh Construction Investment Shareholding (BCCI) for the period of 2010 - 2015; Author’s group of the University of Economics Ho Chi Minh City (2010).

In this study, the authors focus on the real estate market in Vietnam whenVietnam becomes an official member of the World Trade Organization The realestate market gradually followed the trajectory, the real estate market of Vietnamfrom the non-ranked transparency index has risen in the top of the transparentmarket Commitment to WTO accession has helped real estate developers such asSavills, Collier, CBRE and others develop In addition, the author analyzes

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competency and, more importantly, analyzes the SWOT matrices of Binh ChanhConstruction Investment Shareholding to point out strengths, weaknesses, risks andexternal challenge This will help the company to discover and gain a competitiveedge in the real estate market However, the authors have not evaluated theconstruction of real estate business strategies in the company so the solutions thatthe authors have not put into practice the situation of the company.

 Preparation of a real estate investment strategy at Vinapol Joint Stock Company; Cao Xuan Cuong (2010)

In the implementation of the research, the author has achieved the followingobjectives: systematizing the theoretical basis of real estate investment strategy andassessing the current ability of the business, explore the investment opportunities onreal estate market and conduct analysis of the opportunities for challenge Based onthe theory of the author applied the strategy of real estate investment of VinapolJoint Stock Company in the next 10 years The author then proposed to developsolutions to effectively implement the established strategies In addition to theabove mentioned objectives, the research still has limitations, including the authorhas not conducted external matrix analysis and internal matrix analysis, so theopportunities and challenges as well as strengths and weaknesses that the authoranalyzes in the SWOT matrix is sketchy and undetailed

 Real estate business in Vietnam, current situation and solutions; Nguyen

Manh Hung (2013)

In his study, the author mentions the following main contents such as generalinformation on real estate and real estate business, rules of real estate market,relationship of real estate business with real estate other business, experience in realestate business in a number of countries in the world from which to draw lessons forVietnam At the end of the study, the author proposed solutions to promote realestate business However, due to the author's research on the macro level, the authorhas not built a real estate business development strategy based on the strengths,weaknesses, opportunities and challenges of each application The author of thisbook is just learning about the experience of countries in the world to apply andbusiness strategy in Vietnam

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 Establishment of a strategy for the development of the Company 59 of Ministry of Defense by 2015; Ngo Vinh Tu (2007), master thesis, University of

Economics Ho Chi Minh City

In this essay, the author has codified the rationale for business strategy ingeneral and has come up with strategies:

• Strategy to maintain and increase market share

• Marketing strategy

• Strategy for enhancement of competitiveness

• Strategy for development of new product

In this study, the author focuses on developing a joint development strategyfor the Company 59 of Ministry of Defense, not to delve into the real estate businessstrategy In addition, the 2007 context when research is outdated and needs moreadjustment to suit the current context

Accordingly, after studying the previous works, the author will synthesizethe success of the works that continue to study the “gaps” to complete the subject inhis research

3 Objectives of the research

(2) Analyze internal and external factors affecting the real estate business of the Company 59 of Ministry of Defense

(3) Make proposal of strategy for real estate business development atCompany 59 of Ministry of Defense and propose several conditions to implement thestrategy

4 Subjects of the research

Business strategy in real estate for Company 59, the Ministry of Defense

5 Scope of the reseach

For space: The study was conducted at the Company of Ministry of DefenseFor time: Data was collected over the last five years (2014, 2015, 2016,2017); The given strategy is valid until 2022

Focus on real estate business strategy Real estate business activities areunderstood to include the activities of buying and selling land and assets on land,investment activities for lease, basic construction activities

6 Methods of the research

Use the case study method at the Company 59 of Ministry of Defense; thesismostly uses qualitative methods In addition, use the method of comparison andsynthesis

Data collected includes:

 Secondary data collection: collect from books, newspapers, magazines,statistical reports of the industry Books on strategic management This is the basis forthe author to build the theoretical framework in Chapter 1 Data from the company, fromdepartments and reports on the performance of the Company 59 under Ministry ofDefense and others

 Primary data collection: The author combines a variety of methods including in-depth interviews with experts and sociological survey methods

In-depth interview methodology: Expert method is used to interviewexperienced professionals in the field of real estate and management of Company 59

- Ministry of Defense The purpose of the expert interview is to get expert opinion

on the real estate business environment today: the internal environment, the externalenvironment, the competition and others In addition, the interview with themanagement of Company 59 - Ministry of Defense to see the real status of thewhole picture of the company's activities in the field of real estate In addition,specialists in strategic management are instructors, strategic consultants and others

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Sociological survey method (questionnaire) with experts and board ofcompany, customers The number of votes is 100, the number of votes is 87 votes.Questionnaires were divided into 2 groups:

 Group 1: Company leaders and experts: 33 questionaire forms

 Group 2: Corporate customers: 54 questionaire forms

7 Thesis structure

The thesis is structured into three chapters, namely:

INTRODUCTION

Chapter 1: Theoretical basis of Business Strategy in Real estate

Chapter 2: Current Situation of the Company's Real Estate Business Strategy at Company 59 of Ministry of Defense

Chapter 3: Building Business Strategy in Real estate for Company 59 of the

Ministry of Defense at the stage of 2018-2022 and recommendations

CONCLUSION

CHAPTER 1 THEORETICAL BASIS OF BUSINESS STRATEGY IN REAL ESTATE

1.1 The general theories of business strategy

1.1.1 Concept of strategy and business strategy

The term of strategy is derived from ancient military art Borrowing frommilitary terms, the term “strategy” has been used quite commonly in the economiclife of the macro as nation, government and others as well as micro as economicorganizations Actually there are many different views on strategy Depending onthe purpose of research and in different periods of economic development,economists have different views on strategies However, in terms of businessresearch, most economists agree on the concept of strategy with business strategy

With a traditional approach, as illustrated by Alfred Chandler (1962): “The strategy involves setting the basic long-term goals of the business and applying a series of actions as well as the division Necessary resources are needed to achieve these goals” Under this approach, the strategy is defined as a system of long-term goals,

key policies and measures on business production, finance and human factor-basedsolutions to help businesses grow Take a new step on the substance However,along with the development process, today's strategic concept has also changed

With a modern approach, according to McKinsey (1978): “Strategy is a series of activities designed to create sustainable competitive advantage”, or Johnson & Scholes (1999): “Strategy is the direction and the scope of an organization in the long run to gain competitive advantage for the organization by formatting its resources in a changing environment to meet market demand and meet the expectations of the parties” With the new approach, the strategy is a system of

perspectives, goals and basic objectives and solutions, policies for the best use ofresources, the advantages and opportunities of enterprises not only aim to achievethe objectives but also bring favorable conditions such as competitiveness, differentpositions in order to create competitive advantage and sustainable development forbusinesses

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Theoretically, most economists in the world have unified business strategieswith business development strategies Accordingly, business strategy ordevelopment is a part of the overall strategy of the business, including thecomponents of the secondary strategy: marketing strategy, financial strategy,research strategy and development and others Through business strategy willestablish the most favorable conditions to create competitive advantage for

businesses So it can be easy to understand, Business strategy is to synthesize term goals, policies and solutions of business production, finance and people to bring the business operations of a business state higher in quality Can understand business strategy is a general program of action that the business outlined to achieve the objectives in a certain period.

long-1.1.2 Characteristics of business strategy

- Business strategy is the overall strategy of the business thatdetermines the objectives and business direction in a relatively long, five-year or ten-yearperiod and is fully understood in all production activities to create favorable conditionsand contribute to creating a competitive advantage, ensuring the sustainable development

of enterprises

- A business strategy is an outline of a business's future, including goalsthat the business must achieve as well as the means needed to accomplish those goals;meanwhile, in reality, the business shall combine strategic and situational objectives,strategy and tactics, short-term and long-term This will ensure the business efficiencyand overcome the deviations caused by the strategy

- Any decision that is important in the process of formulating, deciding,implementing, and evaluating, adjusting the strategy must focus on the highest leader ofthe business This ensures the accuracy of long-term decisions, for confidentiality ofinformation

- Business strategy is always built on the basis of comparativeadvantages This requires that in the process of developing the strategy, enterprises mustproperly assess their production and business situation in order to find

strengths and weaknesses and regularly review the internal factors when

implementing the strategy

- Business strategy is primarily and primarily built for business lines,specialized business areas, traditions, strengths of enterprises This puts the business inthe right place, must choose and implement strategies as well as engage in business in themarket has prepared and strength

1.1.3 The role of business strategy

The formation and implementation of business strategy is extremelyimportant to the existence and development of the business The role of businessstrategy for enterprises is shown by Ngo Kim Thanh (2011) with four main roles:

- Business strategies help businesses clearly see their goals and direction inthe development of their business It shows business executives how to look at anddetermine where the organization goes and when it will achieve the desired results

- The analysis and planning for business strategy not only helps businesses clearlysee their strengths and weaknesses, but also identifies the opportunities and challenges that occur

in the present and in the future From there, businesses can take advantage of the opportunities tograsp the opportunities, while preventing and reducing risks for businesses, helping businesseshave the competitive strength to win the market

- The business strategy helps administrators use and allocate existingresources in an optimal way as well as effectively coordinate organizational functions toachieve common objectives

- The business strategy creates strong bases to help businesses proactively work out solutions to market fluctuations, as the basis for their R & D activities

1.1.4 The levels of strategy

According to Johnson, Scholes and Whittington (2008), the organization hasdifferent levels of strategy It is possible to distinguish at least three levels ofstrategy as follows:

The highest level is the company level strategy, which relates to the overall scope of an organization and how it creates added value for different parts of the

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organization (business units) This strategy may include issues such as thegeographic scope of the business, the diversity of the product or service, and thedistribution of resources between the different parts of the organization Company-level strategies may include mergers, acquisitions, and sales of businesses, decisions

to join or withdraw from the market In general, business-level strategies areconcerned with the expectations of owners - shareholders and the stock market Theform of a company-level strategy is reflected in a clear or implicit statement aboutthe 'mission' that reflects that expectation Understanding the company levelstrategy is important, as specific, defining the scope of business as the basis forother strategic decisions At the company level there are strategies that include:

Growth strategy:

By pursuing this strategy, businesses are trying to exploit every opportunitythey have for existing, currently market-driven products or services, provided bybetter performing companies what they are doing Growth strategies include:

+ Centralized Growth Strategy: A strategy that seeks to increase marketshare of existing products or services in existing markets through strong marketingefforts Specifically:

 Market entry strategy: It is a strategy to find ways to grow bypenetrating into new markets to sell products and services currently being produced orsupplied by enterprises

 Market development strategy: It is a strategy to find ways togrow by penetrating into new markets to consume products and services currently beingproduced or supplied by enterprises

 Product development strategy: A strategy to find ways to growthrough the development of new products and services for consumption in markets wherethe business is operating

 Vertical integration: A strategy of self-sufficiency inproduction and supply of inputs to the production process or the self-consumption ofproducts

 Horizontal integration: A strategy to find ways to grow throughmergers, acquisitions or joint ventures with competitors.

+ Growth strategy through diversification

 Diversification: is the diversification into new business that isrelated to current operations or business activities by analogy of production, marketing,technology and others

 Diversification is to seek the methods to grow by targeting newmarkets with new products that are technologically unrelated to the products thatbusinesses are producing

Stability strategy

Stability strategy is the strategy of maintaining business scale as well as stability in the strategic period

 Expenses for market expansion are too high to be effective

 Enterprises go deep into specialization serving narrow markets

Strategy of decline

 Cost-cutting strategy: This is a temporary short-term strategyaimed at reducing ineffective parts or temporary problems related to environmentalconditions

 Strategic return on investment: This strategy applies when theenterprise sells or closes one of its businesses to fundamentally change its activities,recover investment capital The resulting return on investment leads to the reallocation ofresources to revitalize businesses or create new business opportunities

 Harvest strategy is a strategy that seeks to maximize the flow

of money, without further investment

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 The exit strategy is based on the idea that an enterprise canmaximize the return on its business by selling it off before the industry falls intorecession.

The second is a Strategic Business Unit (SBU) strategy, which deals with theway in which different businesses in the company compete in their markets in theirown way Thus, business unit strategy is sometimes referred to as “competitivestrategy” A strategic business unit is part of an organization that has a distinctexternal market for goods or services the other SBU

The third level of strategy is at the operating part of an organization Thereare functional level strategies that relate to how the components and parts of theorganization implement well the company level strategies and the business unitlevel in terms of resources, process and child people In fact, in most businesses,successful business strategies depend heavily on decisions made, or activitiesoccurring, at the functional unit level

1.2 The process of building business strategy of enterprises

As described in section 1.1.1, business strategy plays a very important role inthe existence and sustainable development of all enterprises in the medium and longterm Building a business strategy, therefore, is not just a sketch of a business'sfuture image based on the feelings of the business leader but requires a completelyrational approach , scientific and technical According to Ngo Kim Thanh, theprocess of building business strategy of business is divided into 7 steps, this process

is closed and continuous

Identification of missions and objectives

Review of external environment

Analysis on enterprise

Establishment of strategic methods

Analysis and selection of strategy

Implementation of strategy

Inspection and evaluation of the

implementation

Figure 1.1 The process of building business strategy of enterprises

Source: Ngo Kim Thanh (2011); Strategic Management Course - National

Economics University

1.2.1 Identification of the mission, the current business objectives of the business

The determining of the mission, the current business objectives of thebusiness is an important step in the process of business strategy development ofenterprises The formation of the mission of the enterprise not only ensures theconsensus of common goals within the enterprise, but also helps the managementhave the basis to formulate appropriate goals, mobilize resources of business toachieve that goal At the same time, the mission statement will help managers have

a basis for planning the most appropriate business strategy

According to Philip Kotler (2003): “The mission of a company is itsmanifesto for society, which proves usefulness and meaning in the existence of the

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company to society” Thus, the mission represents the business purpose, the reasonand meaning of the birth and survival, as well as the corporate social responsibility.

It expresses important things, business contributions in terms of business and life;Show the business motto of the business, the position of the business in the marketand what the company committed to comply When building a mission, it isimportant not only to look at the desires of the owner or the leader, but also to look

at the internal factors of the company's products and services and outside thecompany (customer needs, competitors and others)

If the mission is a corporate statement to society, then in order to pursue itsmission, businesses must set business goals to identify the accomplishments that thebusiness needs to achieve in the period Operation is relatively long (over a year).Long-term goals are essential to the success of your business because they representthe results your business must achieve when pursuing its business mission Whendefining goals, businesses need to answer the question of what is the business of thebusiness? In the goal we have to identify the business area of the business, the type

of product or service that the business wants to provide to the market, identify thebasic customer group, market demand The goal must contain the desires of thebusiness to be externalized Establishing business objectives requires the following:specificity, consistency, measureablity, feasibility, challenging, and flexiblity

1.2.2 Assessment on the external environment of the business

External environment of business, region and worldwide

Figure 1.2 Model of external environment analysis (business environment)

Business environment analysis is a process in which analysis and testing ofvarious environmental factors An analysis of the external business environmenthelps an organization see the significant opportunities and threats an organizationfaces Managers can then develop strategies to take advantage of opportunities andavoid or reduce the impact of threats posed by the business environment The scope

and content of the business environment analysis include: macro-environmentalanalysis, micro-environment (also called sectoral or operational environment) andinternal environment is the enterprise internal environment).

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a Analysis on the macro environment of the business

The macro environment consists of various factors that indirectly affect the

operation of an enterprise through its influence on the factors of the industry In

fact, there are many different models that support macro-economic analysis of the

business, the most widely used of which is the PESTEL model This is an effective

and simple tool used in situational analysis to determine the forces that impact

primarily from external environmental factors (macro environments) that may affect

the organization These forces can create both opportunities and challenges for the

organization The macroeconomic factors that the PESTEL Model mentions

include: Political Factors (P), Economic Factors (E), Social Cultural Elements (S),

Public Factors Technology (T), Elements of Ecology (E), Legal Elements (L)

Political factors (P)

Law factors (L)

Figure 1.3 PESTEL model of macro environment analysis

- Economic Factors: In fact, economic environment factors have a great

influence on businesses and are most often unpredictable, among the macroeconomic

factors The movement of economic factors always contains both opportunities and

challenges for businesses Therefore, companies often pay attention to this economic

factor through economic variables such as the growth

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trend of GDP, economic development, interest rates, exchange rates, inflation, Balance of payments, monetary and financial policies and others.

- Political and legal factors: In fact, the elements of the political andlegal environment can have an impact on the business performance of the business inmany different directions They can create opportunities or obstacles, or even threats tothe business Therefore, in the process of developing the strategy, companies oftenevaluate the direction and stability of the political system, the law in the area where thecompany is operating These include political stability, a system of views, policies,regulations, rules, procedures, business procedures, import/export, taxation, labor, on theenvironment, on social order and others

- Cultural and Social Factors: In fact, in the medium and long term, thefactors of the cultural and social environment have a direct impact on the consumptiontrend of the society The cultural and social environment includes elements such aspopulation structure, customs, beliefs, values, attitudes, views on consumption andlifestyle of the people in society work

- Technological factors: In fact, this is a direct, immediate and largeimpact on the business strategy of many enterprises, especially business enterprises inhigh technology fields The introduction of new technologies will increase the superiority

of the replacement product, the product is more complete, the product price becomescheaper and more competitive Therefore, the strategic planning process should take intoconsideration the rapid changes in the technological environment and invest heavily inresearch and development to take advantage of the advantages that technology brings forenhancing the competitiveness of enterprises

- Ecological factors or natural environment: one of the important factors

in human life, as well as an input source for many industries In fact, the elements in thenatural environment are considered less volatile However, negative trends in the naturalenvironment, such as global warming, loss of biodiversity, depletion of renewableresources, increased environmental pollution, post and others has become a challengethreatening the movement of enterprises Therefore,

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in the process of strategic planning, enterprises must properly analyze and evaluate

the opportunities and challenges that the natural environment affects the production

and business activities of enterprises

b Analysis on the micro environment of the business

The micro-environment or sectoral environment is an environment that is

closely linked to the performance of the business, and determines the investment

environment, competitive strength, and profitability of the industry According to

Michael Porter's (1979) Competitive Force model, the context of a business

environment is influenced by forces:

Threats from replaced products and services

Figure 1.4 Model 5 Competitive Force M Porter

Source: M Porter’s Five Forces (1979) Harvard Business Review

- Competition among competitors in the industry: The first force that

M Porter mentions in the model is the competition among competitors in the industry

Competitors are constant pressure and direct threats to the company The increasing

competition of existing companies in the industry threatens the company's profitability,

survival and development Because of this competition, the company has to increase its

investment costs in order to differentiate its product or service from accessing the market

or reducing its cost Therefore, the process of

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business strategy requires enterprises to not be able to ignore the analysis ofcompetition among competitors in the industry When analyzing competition amongcompetitors in the industry, we need to consider factors such as: Number ofcompetitors in the industry, growth of the industry, diversity of competitors,characteristics of products and services, fixed costs and inventory, barriers to entryand exit from the industry.

- Potential competitors: This is the second force mentioned by M.Porter Potential competitors are companies that are not currently competing in theindustry but are likely to enter the industry The emergence of these competitors willreduce market share, reduce the profitability of existing firms in the industry, andincrease competition in the industry However, whether potential competitors enter theindustry depends largely on barriers to entry, particularly, economies of scale, productdifferentiation, capital requirements initial investment, conversion costs, access todistribution channels, government policies Therefore, the business strategy planningprocess of the business also needs to fully consider the factors of this potentialcompetitors

- Supplier negotiation rights: In practice, suppliers can pressure thecompany through increased demand or a reduction in the quality of its inputs It directlyaffects the cost and quality of products and services of the company; Therefore, it willaffect the reaction of customers, affecting the market share, revenue and profit of thebusiness Supplier pressures often appear in contexts such as the market for only one or afew suppliers, no substitutes or no alternative suppliers, purchasing from suppliers is animportant input of the business, high supplier conversion costs and others

- Buyer's negotiating rights: Buyers here are understood to be users, intermediaries, and industrial buyers The pressure from buyers comes from theirability to negotiate in two forms: the ability to demand discounts and the ability todemand better quality products and services As the ability of the buyer to negotiateincreases, it will force the business to meet their needs, reducing the price of the product

end-or investing mend-ore in related costs to improve the quality of the

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product As a result, corporate profits decline Pressure from customers often appear

in the scene such as customers buy a large number, the business depends on a fewcustomers, customers have full information about the price, quality of the home andothers

- Threats from alternative products and services: Alternative productsand services are different service products but meet the same consumer demand Theemergence of alternative products and services will create the risk of competition, reducemarket share, reduce revenue and profit of the business In addition, changes in consumertrends are also an important factor contributing to the formation of threats fromalternative products and services Therefore, in the process of strategic planning,managers also need to look at the risks and challenges of alternative products andservices in a holistic way

1.2.3 Analysis on the internal business environment

Analysis on the internal environment of an enterprise – Analysis andevaluation of the resources: An enterprise's resources include: human resources,material assets, intangible resources (Hamel & Prahalad 2006) This is the decisivefactor in the ability of the business, deciding the success of the market; in which themost important resource is human In each period, each resource has its ownstrengths and weaknesses compared to its competitors in the industry Therefore,managers at all levels, top executives must always have information on the currentresources in and the potential for analysis and evaluation to make full use ofresources available to create a competitive advantage in the long run

Human beings are the core element in all kinds of business activities,deciding the success or failure of businesses and organizations in each country Inenterprises this factor is extremely important because all decisions related tostrategic management are human-made, the ability to compete in the market isstrong or weak, the organization is good or not all come from humans Humanresources are therefore the first element in the resources that managers of long-term

business enterprises need to consider and analyze in order to determine the tasks, objectives and solutions to be implemented .

Physical resources include such factors as production capital, machinery andequipment stock, material reserves, business environment information, etc Eachenterprise has the characteristics of material resources It has both strengths andweaknesses compared to its competitors in the industry

Therefore, proper analysis and evaluation of material resources is animportant basis to help business executives understand the potential materialresources, constraints, and so on for management decisions This is to adapt to therealities such as maximizing the available cash and capital resources, selecting andmobilizing external funds when needed, to increase the size of the materialresources, reserve a ratio necessary to ensure the ability to cope (defend or attack)with competitors on the domestic and foreign markets In practice, the managerconducts the analysis of resources through key activities such as:

 First: Classification of existing material resources of the

enterprise: cash capital, machinery, equipment, workshops, warehouses, land, supplies

 Second: Define the size, structure, quality and characteristics ofeach material resource

 Third: Evaluate the ability to meet the actual needs of each resource in the program of action of each department within the enterprise

 Fourth: Assess and identify the strengths and weaknesses ofeach material resource relative to the major competitors in the industry and the market bygeographical area

Depending on the type of resources, this analysis should be conductedperiodically or extraordinarily to serve the decision makers' needs For example,marketing executives need to formulate or adjust competitive strategies that mustalways have a source of information about customers and competitors in the market;financial regulators often need information on the scale of demand for fixed capital,

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working capital in their internal parts and cash or in kind, credit sources, etc., can bemobilized to meet the needs of operational processes, projects, etc.; or, every year,business executives need to evaluate resources to prepare action plans for thecoming year, etc.

of factors and managers at all levels need to have the basic knowledge to be aware

of the presence and know the importance of this resource

Depending on the available resources, the size and value of these resourcesvaries from time to time Without identifying and properly evaluating intangibleresources, business executives lose sight of their available advantages in theproduction and business process

In order to achieve long-term success in the domestic and foreign markets,business executives need to see the importance of intangible resources in thestrategic management process of identifying and properly assessing resources.Hospitalization and proper assessment of intangible resources available, knowledge

of intangible resources not available to build and develop them in the future

The analysis of invisible resources proceeds through the following steps:Step 1: Identify and categorize the invisible resources of the business Themanager needs to ask questions and make self-answers to identify the business ororganization that has intangible resources to evaluate and Compared to competitors

Step 2: Compare and evaluate intangible resources with your competitors.After answering the questions, the administrator can list the existing intangibleresources in sequence, compare them with the main competitors and assess thestrengths and weaknesses of the system level on a composite table Depending onthe fact that the analyst will form a rating system from + or-1 to + or -5 to determine

strengths or weaknesses for each competitor, this order may vary time due to thedevelopment or decline of each business.

Step 3: Identify intangible resources that need to be built and developed

In fact, an enterprise with this intangible resource may lack other invisibleresources or invisible resources but the invisible resources are weaker thancompeting companies So when analyzing and evaluating intangible resources of anenterprise, managers need to identify relevant issues, identify the causes of theseresources and propose measures Construction and development in the future

In a nutshell, the resources of each business are varied Depending on thecharacteristics, activities, scale, structure and characteristics of these resources inthe business varies A comparative analysis and proper assessment of existing andpotential resources in each period will help the corporate executives see theirprogress in the development process At the same time, identify a strong correlation

of resources with competitors to provide a basis for material competitive strategies,decide on opportunities or limit risk in a timely business environment

1.2.4 Development of strategic options

On the basis of defining the mission, objectives of the enterprise, analyzingthe internal and external environment of the enterprise, the next step is to presentpossible strategies for the organization This phase will use the SWOT matrix toolfor analysis

A Matrix of Strengths, Weaknesses, Opportunities, and Challenges, alsoknown as SWOT Matrix, provides a tool for analyzing, shaping, selecting andreviewing strategic, Position and strategic orientation of the business In fact, theSWOT Analysis Matrix is a combination of strengths, Weaknesses, Opportunitiesand Threats to form four types of strategies, namely:

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Table 1.1 SWOT matrix - Strengths - Weaknesses - Opportunities - Risks

List the most important List the most importantstrengths from the corporate weaknesses from theinternal integration table internal corporate

environment

List the most important strengths to exploit the advantage of outsideopportunities fromthe opportunities of the external opportunities to improve

outside the enterprise

List the most important strengths of your business to defensive strategy torisks from the side-tables avoid or reduce threats from reduce internal

external threats

Source: Humphrey, Albert (2005)

1.2.5 Analysis and selection of strategy

After the combined phase there will be available feasible strategies Thisphase uses a single tool, the Quantitative Strategic Planning Matrix (QSPM) TheQSPM matrix uses information in the first phase, evaluating objectively thebusiness strategies that can be selected in the second phase to determine whichstrategy is optimal for the enterprise

This is a powerful quantitative tool that demonstrates the attractiveness ofselective strategies and thus provides an objective basis for selecting specificstrategies The QSPM matrix uses the information derived from the SWOT matrix,which evaluates objectively the alternative strategies The QSPM matrixdevelopment process includes the following steps:

Table 1.2 Quantitative Strategic Planning Matrix - QSPM

Source: David, Fred (1986, 2009)

The QSPM matrix development process includes the following steps:

 Determine the Attractiveness Score (AS), which represents therelative attractiveness of the strategy to the other strategies, in each case: scores are ratedfrom 1 to 4, where point 1 Points are not attractive, point 2 means less attractive, point 3 isquite attractive and point 4 is very attractive

 Determine the Total Attractiveness Score (TAS) by row by

multiplying the score in column (2) by the number of AS scores

 Calculate the total gravity of each strategy This is the sum ofthe total points of interest (TAS) in the strategic column of the QSPM matrix The higherthe gravity of a strategy, the more likely it is that the strategy is appropriate and desirable

1.2.6 Strategy implementation

This is an important step, turning the strategies on paper into concreteactions Based on the objective, analyze the competitive advantage, identifyopportunities, challenges and weaknesses, enterprises will find solutions on humanresources, financial resources, business management organization, productionmanagement and others to achieve the established business strategies In otherwords, it is the arrangement and arrangement of the resources of the business tosuccessfully implement the chosen business strategy, such as:

 Mix marketing solutions: product, price, distribution, and

promotion mix

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 Human resources solutions

1.2.7 Strategic inspection and evaluation

Should the strategy be implemented regularly, should the strategy beimplemented as planned? There are many reasons why strategies fail to achievetheir goals These are caused by changes in the environment or by the lack of humanresources Therefore, it is necessary to adopt feedback systems and measures tomonitor, monitor and evaluate implementation

To answer the question of business strategy of the business still relevant tothe business environment? There may also be many different methods One methodthat can be used is to measure business strategy by matrix According to the matrixevaluation method, first and foremost, questions and answers related to the keyelements of the business environment (external environment and internalenvironment) must be set up and answered The answers to each type of questioncan be grouped into a comprehensive business strategy review matrix as shown inthe table below:

Are there any differences to adjust?

No

Inspect and implement

Are there any differences to adjust?

Inspection of operational plan Adjustment of operational plan

Are there any differences to adjust?

Yes

No

Continue to deploy in currect direction

Model of assessment and adjustment of business strategy

Figure: 1.5 Business Strategy Evaluation Matrix

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Simultaneously respond to the following questionnaires:

Table 1.3 Matrix of Strategic Business Review

changes that objectives of

took place the enterprise

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