Building business strategy for one member limited liability company 17 in period 2017 2020 and vision to 2025

Lunghwa Universityof Scienceand Technology Department of Business Administration Thesis for a Master’s Degree Building business strategy for one-member limited liability company 17 in

Lunghwa Universityof Scienceand Technology Department of Business Administration

Thesis for a Master’s Degree

Building business strategy for one-member

limited liability company 17

in period 2017-2020 and vision to 2025

Researcher: Khuong Tat Thang Supervisor: Le Thai Phong Yuan Cheng Kang

November 2018

Lunghwa University of Science and Technology

Approval Certificate of Master's Degree Examination Board

This is to certify that the Master’s Degree Examinations Board has approved the thesis “Building business strategy for one-member limited liability company 17 in period 2017-2020 and vision to 2025”published by

Mr Khuong Tat Thang in the Master Program of Graduate School of Department of Business Administration

Master’s Degree Examination Board

Board Members： Tsan Chia -Chi

Nguyen Van Dinh Doan Thu Trang

Advisors：Le Thai Phong

Yuan, Cheng-Kang

Chair： Tsan Chia -Chi

Date: 24/11/2018

ABSTRACT

Thesis Title：Building business strategy for one-member limited liability company 17

in period 2017-2020 and vision to 2025 University：Lunghwa University of Science and Technology

Graduate School：Department of Business Administration

Date：January, 2018 Degree：Master

Researcher：Khuong Tat Thang Advisor：Le Thai Phong

Keywords: Business strategy

Based on actual requirements, theoretical basis, documents, preceding studies on the issue about the business strategy in general and the business strategy one-member

limited liability company in particular, I have chosen topic for my thesis: “Building

business strategy for one-member limited liability company 17 in period 2017-2020 and vision to 2025” In this thesis, I use secondary data sources from the reports of

Company 17 to analyze

In thesis, the author simultaneously use primary data sources collected from of Company 17 to study At the same time, the author use the data of Truong Son Construction Corporation to compare

Research methods: In the thesis, I use both qualitative quantitative research methods

Documentation Methodology: The studied information and materials include

publications, survey results, research, maps, statistics, summary reports on construction industry and issues related to research topics

Qualitative research methodology: Interview and consultation with some

leaders, managers at all levels of the One Member Limited Company 17 The content of the discussion focused on fundamental issues of business strategy of the company in the construction market

Comparative analysis methodology: PEST analysis, Five forces model M.Porter,

SWOT analysis, IE matrix for analysis of strategic basis for Company 17 This is the main method of research in this topic Through comparative studies, the thesis will clarify the influence of business environment factors on the process of developing and implementing the business strategy of Company 17 Based on the summary of results, the thesis proposes suitable business strategy for One Member Limited Company 17 in the period 2017-2020

ACKNOWLEDGEMENT

I sincerely thank the advior Prof Le Thai Phong, and the senior leader of of Truong Son Construction Corporation as well as the staffs in company 17 devoted to guide and help me complete this thesis

Thank you!

Author

Khuong Tat Thang

Table of contents

ABSTRACT i

ACKNOWLEDGEMENT iii

1 INTRODUCTION 1

1.1 Urgency of the topic 1

1.2 Overview of research projects in the fields of the theme 2

1.3 Objectives of the research 3

1.4 Subjects and scope of research 4

1.5 Research methodology 4

1.6 The expected results of the dissertation 4

1.7 The meaning and contributions of the thesis 5

2 THEORETICAL FRAMEWORK OF STRATEGY FORMULATION APPLIED FOR ENTERPRISES 6

2.1 General view of enterprise’s strategy 6

2.1.1 Some basic terms of enterprise’s strategy 6

2.1.2 Roles of strategy in bussiness activities of enteprises 8

1.1.3 Levels of strategy 8

2.2 Process of strategy formulation of company 10

2.2.1 Identification of mission, vision and objectives 11

2.2.2 Analysis of external impacts 14

2.2.3 Analysis of impacts of enterprise’s internal environment 17

2.3 Analysis techniques and Selection of strategy 21

2.3.1 General introduction 21

2.3.2 External Factors Evaluation (EFE) and Internal Factors Evaluation (IFE) 21

2.3.3 Competitive Profile Matrix (CPM) 23

2.3.4 Determination of feasible strategy with SWOT analysis 24

2.3.5 Selection of optimal strategy with QSPM 26

2.4 Basic competitive (business) strategies 27

2.4.1 Basis of business strategy 27

2.4.2 Basic competitive strategies 29

2.4.3 Seletion of suitable stratery 31

2.5 “Characteristics” affecting to determination of business strategy of military construction enterprise 31

2.5.1 Characteristics of organization structure 31

2.5.2 Characteristics of duties 32

2.5.3 General evaluation 32

3 ANALYSIS OF CONDITIONS FOR FORMULATING STRATEGY OF ONE MEMBER LTD COMPANY 17 34

3.1 Introduction of One-member Ltd Company 17 34

3.1.1 Sketch of establishment and development processes of One-Member Ltd Company 17 34

3.1.2 Structure of organization, management and operation 37

3.1.3 Result of business activity period 2014-2016 39

3.2 Analysis of macroenvironmental impacts on strategy building of One-member Ltd Company 17 41

3.2.1 Analysis of economic factors 41

2.2.2 Analysis of policy-stipulation factors: 44

3.2.2 Analysis of culture-society factors 45

3.2.3 Analysis of technology, infrastructure factors 46

3.2.4 Analysis of international economic integration environment: 48

3.2.5 Matrix of External Factor Evaluation - EFE of one-member Ltd Company 17 49

3.3 Analysis of task environment per model of competitive pressure year 50

3.3.1 Analysis of pressure from customers 50

3.3.2 Analysis of pressure from suppliers 51

3.3.3 Analysis of risk from substantial products 52

3.3.4 Analysis of competitive intensity between present opponents 52

3.3.5 Analysis of risk of new opponents 55

3.4 Analysis of internal environment of One-Member Limited Company 17 56

3.4.1 Capacity of production 56

3.4.2 Quality of manpower resource 57

3.4.3 Capacity of finance 59

3.4.4 Level of marketing 59

3.4.5 Organization and management 60

3.4.6 Matrix of Internal Factors Evaluation of Company 17 60

3.4.7 Building of Competitive Profile Matrix CPM 61

3.5 General evaluation on SWOT of One-member Ltd Company 17 62

3.5.1 General evaluation on opportunities and threats 62

3.5.2 Evaluation on strengths, weaknesses of Company 17 63

4 PROPOSAL AND SELECTION OF BUSINESS STRATEGY FOR ONE MEMBER LTD COMPANY 17 PERIOD 2017-2020 AND BUSINESS VISION TO 2025 65

4.1 Vision, mission and strategic target 65

4.1.1 Business vision 65

4.1.2 Mission 66

4.1.3 Strategic target 66

4.2 Proposal and selection of business strategy 67

4.2.1 Summary of SWOT analysis 67

4.2.2 Strategies under consideration 70

4.2.3 Select strategy based on QSPM matrix 72

4.3 Main solutions for implementation of chosen strategy 77

4.3.1 Solutions on organization and management 77

4.3.2 Solutions on production and technology 78

4.3.3 Solutions on manpower management 78

4.3.4 Solutions on finance 78

4.3.5 Solutions on Marketing and PR 79

4.4 Requirements and conditions of strategy implementation 79

5 CONCLUSION 81

REFERENCES 82

1 INTRODUCTION

1.1 Urgency of the topic

Nowadays, Vietnamese enterprises operate in a constantly changing environment, which requires companies to set up new approaches in managing economic activities in order to keep up with changes The instability of the economic situation, the tightening of competition, the increasing demand of consumers for the product, the reduction in the life cycle of the goods significantly complicate the managerial process, and the prospects for development are becoming less predictable In these conditions, the advancement in the practice of new ideas and technologies in strategic management play an undeniably important role

The main goal of strategy development is to achieve long-term competitive advantages that will ensure the survival, sustainable functioning and development of enterprises However, as the practice of the majority of market participants shows, not all domestic enterprises are ready to form long-term development guidelines Even with

a stable financial position and competitive advantages in the market, many of local businesses are not able to formulate an effective strategic plan due to the lack of methodology and methodological tools of strategic management that are relevant to specific Vietnamese conditions Consequently, principles, methods and tools of strategic development are of great interest to Vietnamese enterprises

Vietnam construction industry is one of the key economic sectors, attracting investment The share of construction sector in GDP of Vietnam is approximated to 5 percent to over 6 percent of GDP However, the construction industry are still facing some difficulties and challenges Therefore, in order to survive and develop sustainably, construction firms must formulate a strategic plan that is not only scientific but also practical

As one member of the Corps 12 (Truong Son Construction Corporation), member limited liability company 17 is also under implementation of comprehensive renovation, reorganization of the security apparatus In operation, the company always persevered with the orientation "Taking basic construction as a core business, in which infrastructure construction, transportation is the center, combined with diversified trading activities" quickly adapting to market conditions, actively investing in modernizing equipment and acquiring, applying advanced science and technology, creating high quality products and always " keep promise" with customers With the right managing direction and the efforts of officers, soldiers and defense workers, company 17 has step by step strived for self-recognition However, with the increasing demand for construction, company 17 is facing strong competition in the market The

One-company still has competitive advantages but is not dominant compared to other competitors Therefore, it is necessary to set up company 17 as well as Truong Son Corporation in front of many challenges in the construction market, especially for competitors from the Ministry of Transportation, the Ministry of Construction

In that context, as a member of the board of directors of the company, I decided

to select the topic "Building business strategy for One-member limited liability company 17, period 2017-2020 and vision to 2025 » as my master's thesis

1.2 Overview of research projects in the fields of the theme

The subject of business strategy is increasingly popular for reseachers to choose

as a topic of master thesis Here are some researches on the topic of business strategy

Ngo Dinh Khoi, 2015: “Building Business Strategy to 2020 by

NATSTEELVINA Ltd Company” (National Economics University - HNU) The thesis aims to build a suitable business strategy for NATSTEELVINA (under the Vietnam Steel Corporation) in order to contribute to raising the competitiveness of steel producers in the period 2015-2020 For the common goal of sustainable brand development, growth and profitability for Vietnam Steel Corporation, the thesis has implemented a number of specific objectives: a) Choosing a theoretical framework; b) Analyzing the external business environment to define opportunities and challenges; c) Analyzing the internal environment of NATSTEELVINA Company to explore the strengths, weaknesses and impacts on steel production; d) developing and selecting strategic options; and e) proposing solutions However, this thesis only makes sense for heavy industry company

Nguyen Thi Cam Tu, 2014, "Building Business Strategies for Vietnam

Prosperity Joint Stock Commercial Bank in Ha Tinh" (National University) The thesis aims at two main objectives Firstly, in the context of globalization and market economy, the development of strategies is an urgent issue for any enterprise The thesis

is meant as an overview of the situation and a suggestion of future business strategies Secondly, the thesis proposes the business strategy for the period 2015-2020 on the basis of internal analysis and external environment to forecast the business development trend for banking system By defining the scope of the dissertation research that only mentions and delves into the operation of a particular branch, the applicability is relatively limited On the other hand, the thesis only provides a comprehensive business strategy, not detailed plans for each specific action of the branch

Hoang Thi Hien, 2016, "Complete solution to build business strategy at Dong

Thai Son Ltd Company" The thesis (FPT University) achieves the following major

objectives: Building the rationale for strategy development for the company in the period 2016-2020; Analyzing the macro environment, micro environment and internal environment of Dong Thai Son Ltd Company to identify opportunities, threats, strengths and weaknesses; determining the company's strategic objectives for 2016-

2020 However, this thesis is focused mainly on the business and supply of construction materials of the company so the scope of application is still limited

Nguyen Dai Loi, 2010, "Business Strategy in Construction Company 3 - 2"

(Hong Bang University) Thesis has achieved certain results Firstly, the analysis and assessment of the impact of external environmental factors as well as internal factors on the operation of Company 3-2 Secondly, this work also proposes appropriate business strategies and some solutions to improve the competitive position and promote business efficiency for the Construction company 3-2 in the period 2010-2020

In the field of business as well as the scale of operation, the Construction Company 3-2 can be considered one of direct competitors of the One-member Limited Company 17 However, with the type of organization as a private joint stock company, the characteristics of the operation also have many differences

1.3 Objectives of the research

Overall objectives

Research and propose business strategy for One-member limited company 17 by

2020 with a vision to 2025

Detailed objectives

• Studying the theoretical framework for building a business strategy

• Analyzing and assessing the impact of business environment factors (external environment, industry environment and internal potentials and potential of the company17) to identify the strengths, weaknesses, opportunities and challenges in order

to determine the company's business strategy in the coming years

• Proposing and selecting suitable business strategies for Company 17 in the period of 2017-2020, with orientation to 2025

• Proposing solutions for the implementation of the selected strategy

1.4 Subjects and scope of research

Research subjects

The subjects of the thesis are the practical and theoretical arguments, the steps to build the business strategy

Research scope

• Content: Building business strategies for construction activities

• Regarding space: At One-member Limited Company 17

• Time frame: Historical data from 2013-2015, survey data for 2016-2017

1.5 Research methodology

Documentation Methodology: The studied information and materials include

publications, survey results, research, maps, statistics, summary reports on construction industry and issues related to research topics

Qualitative research methodology: Interview and consultation with some

leaders, managers at all levels of the One Member Limited Company 17 The content of the discussion focused on fundamental issues of business strategy of the company in the construction market

Comparative analysis methodology: PEST analysis, Five forces model M.Porter,

SWOT analysis, IE matrix for analysis of strategic basis for Company 17 This is the main method of research in this topic Through comparative studies, the thesis will clarify the influence of business environment factors on the process of developing and implementing the business strategy of Company 17 Based on the summary of results, the thesis proposes suitable business strategy for One Member Limited Company 17 in the period 2017-2020

1.6 The expected results of the dissertation

• Awareness of the role and importance of business strategy formulation for Company 17

• Systematizing the theory of business strategies in a market economy

• Analyzing the basis of business strategy formulation for Company 17 with the main contents

• Proposing and selecting business strategies for Company 17 until 2020 as well

as the necessary solutions for the implementation of the selected business strategy

1.7 The meaning and contributions of the thesis

There are many researches on business strategies for enterprises in Vietnam However, there are no work done directly and specifically for One-member Limited Company 17 (under the Truong Son Construction Corporation) in the context of restructuring and developing markets outside the Ministry of Defesnse Research results will bring important contributions as following:

• Firstly: Researching and selecting the rationale for building a business strategy

of a construction enterprise under the Ministry of Defense in the context of new mission

• Secondly: Developing business strategy and propose strategic solutions for Company 17, one of the leading enterprises of Truong Son Construction Corporation

• Thirdly: contributing as research materials, refer to businesses under the Ministry of Defense in the context of restructuring and sustainable market development

• Contributing a journal article on the subject matter of the research

2 THEORETICAL FRAMEWORK OF STRATEGY FORMULATIONAPPLIED FOR ENTERPRISES

2.1 General view of enterprise’s strategy

2.1.1 Some basic terms of enterprise’s strategy

The concept « Strategy » was first created by the Greeks with a military connotation, which meant a general in command of troops or the art of the general or plan to destroy enemies through effective use of resources However, according to Mintzberg and Quinn, the term « Strategy » only entered into the business world after the World War 2 and since then, it has been used widely in the field of management

George Steiner, one of the founders of The California Management Review, notes that strategy entered the management literature as a description to what someone did to counter a competitor’s actual or predicted moves He also points out some definitions on the word « Strategy » as follows:

- Strategy is what top management does, which is greatly important to the organization

- Strategy refers to basic directional decisions, that is, to purposes and missions

- Strategy consists of the important actions necessary to realize these directions

- Strategy answers the question : What should the organization be doing?

- Strategy answers the question : What are the ends we seek and how should we achieve them?

In Top Management Strategy, Benjamin Tregoe and John Zimmerman, of Kepner-Tregoe, Inc., define strategy as « the framework which guides those choices that determine the nature and direction of an organization » Tregoe and Zimmerman urge executives to base these decisions on a single "driving force" of the business Although there are nine possible driving forces, only one can serve as the basis for strategy for a given business The nine possibilities are listed below :Products offered ; Production capability ; Natural resources ; Market needs ; Method of sale ; Size/growth ; Technology ; Method of distribution and Return/profit

Michel Robert takes a similar view of strategy in Strategy Pure & Simple, where

he argues that the real issues are "strategic management" For Robert, this boils down to decisions pertaining to four factors:

1 Products and services

Based on these above definitions of « Strategy », we can summurize that strategy of an economic organization is a set of its main goals and the main ways to achieve them In other words, to establish an enterprise strategy means to form a general direction of its activity, oriented to the future development The strategy should be based on the search for real opportunities for the actions of the enterprise Therefore, strategy is, first of all, the organization's response to the influence of objective and subjective elements of the external and internal environment

Strategic planning is a tool that helps in making managerial decisions Its task is

to ensure innovations and changes in the organization to a sufficient extent Three main types of management activities can be identified within the strategic planning proccess : resource allocation, adaptation to the external environment and internal coordination

 Resource allocation: This process involves the distribution of limited organizational resources: funds, scarce managerial talents and managerial experience For instance, splitting a large company into several smaller ones, in order to reduce the number of managers and company personnel The money saved is reinvested in the branch data

 Adaptation to the external environment : covers all strategic actions that improve the company's relations with its environment Companies need to adapt to external opportunities as well as hazards, identify appropriate options and ensure effective adaptation of the strategy to environmental conditions That is the creation of new favorable conditions through the dismantling of better production systems or interaction with the government and society as a whole, etc

 Internal coordination : Coordination of strategic activities is to reflect the strengths and weaknesses of the firm in order to achieve effective integration of internal operations Ensuring effective internal operations in organizations is an integral part of management activities

2.1.2 Roles of strategy in bussiness activities of enteprises

Helen (2007) made the following statement about the role of strategic planning

to businesses :

 Orientation : Defining the purpose of the organization and setting realistic goals in line with the mission, which can be clearly communicated to the component parts Providing a basis to measure the company's development process and establishing boundaries for effective decision-making;

 Make wise business decisions : How to distinguish between good ideas and great ideas ? Without a clear vision of what the company wants and the task or purpose

of business, it is very difficult to choose the ideas and determine which projects to invest Strategies will help clarify what the company wants, how to achieve it, and how

to effectively allocate limited financial and human resources

 Increase the longevity of the business : The world's markets and industries are changing faster than ever, and those relying on luck or opportunity without a solid foundation are unlikely to survive in the future Marker data reflects that one out of top three companies in a industry will not be able to maintain its position for five years Then, the right and approriate business strategy will increase the survivability of enterprises in the market

 Increase profitability and market share : Centralized planning and strategic thinking will help to discover new customer segments, market conditions, type of products and services which are the most profitable Targeted access and aiming at promising markets will not only increase profit but also improve competitive position and market share

 Increase job satisfaction : Employees need to be motivated to work and feel

as a team member Employees are the greatest source of creativity Determining the purpose and meaning of the work in the company's strategic planning will bring the focus to the work and create a source of daily creative motivation for employees

2.1.3 Levels of strategy

Most companies develop more than one strategic plan, and several are united by

a common goal of strategies for different levels of management, thus forming a hierarchy of strategies All levels are closely related to each other and form a pyramid of strategies within the organization, where each level is like a frame for the next level (Figure 1.1)

Figure 1.1Levels of strategies in an corporate

In a diversified company, which simultaneously focuses on several types of business activities, there are usually four levels of strategy : corporate, business, functional or operational Specialized firms are limited to three levels In this case, the corporate and business strategies coincide, as the strategy is developed for one business area

A corporate strategy is a general management plan for a diversified company The corporate strategy covers all areas of the company's activities The general strategic plan is developed for a period of time, usually up to five years and reflects the position that the company wants to occupy in the coming years In fact, the definition of a corporate strategy is the decision to choose the general direction of the organization's development

The development of a corporate strategy usually involves six basic elements :

- Mission : Defining the scope of the corporate mission is the problem of defining a set of activities In particular, it is determined in which sectors the company will operate, what level of integration it will choose, whether diversification will be limited to several industries or will spread to many, whether the company will be guided

by strategic correspondences between different activities or not

- Corporate tasks : The initial basis for setting objectives is basically the results

of marketing and innovation It is efficiency in these areas that determines the demand for the products or services of the firm The tasks of the company should be focused not

on profit, but on methods of obtaining it

- Determination of strategic business units (SBU) : In the development of corporate strategy, most large diversified companies comprise of many business units, which have a pronounced specialization, a certain range of suppliers, consumers and competitors Each SBU should be a real administrative and economic unit and act as an independent firm

- Resource allocation : Diversified firms in their composition have a set of SBU,

or business economic "portfolio." The members of the SBU structure may differ in their development potential and current financial performance Some SBUs are engaged in bringing new products to the market or developing new markets ; they obviously need additional financial investments Others with a stable share in the mature market are a source of cash To comply with corporate goals, company management must ensure the redistribution of monetary resources between SBUs

- Synergy Each type of activity involves a source of synergism Coordination of efforts in such activities as procurement, introduction of new technologies, R & D, production, marketing, human resources management, allows to reduce costs and improve staff development For example, combining several types of procurement allows the supplier to obtain discounts, and combining research and development - to successfully cope with the development of technologies that will be used in various SBUs

- Corporate development : This is the final stage in the development of the corporate strategy, which, as already mentioned, ends with the development of an integrated plan that includes solving the problems of corporate development The diversity of corporate strategy can be reduced to three main types : offensive (growth), defensive (reduction), compromise (stabilization)

2.2 Process of strategy formulation of company

The process of strategy management will be best performed, in case,

everybody in the Enterprise understand thoroughly that Five stages of this process are : setting up objectives, analysis, formulating strategy, implemeting strategy and

monitoring strategy

Figure 1.2 Process of planning business strategy

2.2.1 Identification of mission, vision and objectives

The mission clarifies the main purpose of the enterprise The vision also

determines the purpose of the organization, but focuses on tasks and aspirations The vision is unlimited: even if the organization rebuilds its strategy, the vision must remain unchanged

A mission is a business concept that reflects the purpose of the business, its

main goal Unlike the vision, the mission characterizes only the "real" organization : the type, scale of activity, differences from competitors, prospects for business development The mission details the status of the enterprise and provides guidance for the development of goals and strategies at various organizational levels

The mission is what the company exists for, and the vision is the future image of

the company Without defining the direction of business development, it is impossible

to explain the essence of the activity The mission explains the essence of the business, the specifics of the business and the development path of the company - all that distinguishes this company from the rest in this industry

The formulation of the mission contributes to the solution of the following management problems :

Firstly, the mission forces managers to systematically engage in a comprehensive analysis of the strengths and weaknesses of the organization and its competitors, opportunities and threats, which increases the validity of strategic decisions

Internal Enviroment Mission

External Enviroment

Feedback & controlling

Secondly, in the case of large companies, the mission contributes to the integration of local organizational units into one, the motivation of staff and more effective interaction of managers and subordinates at different levels

Thirdly, a good mission contributes to the projecting of a rational and positive image of the company on business partners, shareholders, investors, on which the destiny of the enterprise depends in various forms and extent

The mission statement contains three elements:

- Customer needs, i.e that which must be satisfied

- Groups of buyers, i.e who will be the object of product and service

- Actions, technology and knowledge, i.e how the company creates and distributes consummer value and satisfies the needs of its customers

The vision of an organization is a figurative representation of the meaning of the

organization's activities and prospects (future) It explains and demonstrates to all employees and the public what an organization is, what it should become and what it strives for

Forming a vision is one of the tasks of top management The horizon of vision, i.e the period of remoteness in time of the formed image of the enterprise can be different, from several months to several years

The vision refers only to the future : it loses its relevance when the desired state

of the organization is achieved and must be formulated again

The formulation of the vision should be a laconic, dynamic design, easy to understand (often a slogan), and meet the following requirements : to inspire, to be simple, as a memory or image, to deserve trust and provide guidance that can serve as the basis for strategy development

The formation of a strategic vision begins with the creation of its three main components:

- The company's mission, which determines the position and business of the company at the moment

- A long-term course based on the mission and determining the company's strategic path

- Clear formulation of the strategic vision for obtaining broad support for all employees of the company

Goals are the desired result that any organization seeks to achieve Goals should

be realistic and answer the questions : what do we want to achieve ? Who will do this ? When will we get the result ? Why do we need this ?

Goal setting translates the theoretical part - the development of the strategic vision and direction of the company's development - into the plane of practical application

The targets in the company's activity are only goals that are defined in quantitative or measurable indicators and contain specific values that need to be achieved

Long-term goals determine the strategic intention of the enterprise The definition of overall long-term goals is required for each key result that managers consider important for achieving success and creating appropriate competitive advantages for the organization

Objectives of the organization should have a number of characteristics, which are sometimes called the criteria for the quality of the goals set

Main characteristics (criteria) of the goal :

- Concreteness and measurability Expressing goals in clear measurable forms, management creates a basis for decision-making and assessment of the progress of work

- Planning horizon Highlight long-term (planning horizon more than 5 years), medium-term (planning period from 1 year to 5 years) and short-term (usually within a year) goal The narrower the planning horizon, the more specific the goal must be expressed

- Possibility of success Goals are set so that they do not exceed the capacity of the enterprise The establishment of unattainable goals blocks the desire of employees to succeed and reduces the motivation for work

- Consistency The actions and decisions necessary to achieve one goal should not interfere with the achievement of others

Insufficient attention to the process of setting goals or, conversely, the pursuit of unachievable goals causes damage to the organization

2.2.2 Analysis of external impacts

2.2.2.1 Analysis of macro-environment factors

Macroeconomic factors have an impact on any enterprise These include demographic, socio-economic, natural, technological, political and cultural factors

Demographic factorsinclude :

- Population ;

- Age structure ;

- The level of education ;

- The structure of the household ;

- Geographical displacements of the population, etc

Ecomonical-social factor s :One of the most important objects of macroeconomic study is the socio-economic environment, since the events that occur in

it depend on supply and demand in the market The general state of the economy determines the financial possibilities of buyers Economic factors are not less important than demographic factors It's not enough to identify how many potential customers a firm would have It is also important to determine how much and what services they want to purchase The solvent process of the population is influenced by many factors, including the level of the country's economic development, wages, inflation, and unemployment For instance, it is necessary to take into account the high dependence of the demand for tourist services on the level of income

Natural factors: can affect the activities of the enterprise, especially as the

issues of rational use of natural resources and environmental protection are becoming global

Political and legal factors: the study of the political and legal factors of the

macro-environment should be carried out first in order to have a clear idea of the intentions of the state authorities and administration regarding the development of society and the means by which the state intends to implement its policy The analysis

of laws and other normative acts that establish legal norms and the framework of relations, gives the enterprise the opportunity to determine for itself the permissible limits of actions and acceptable methods of defending their interests

The cultural environment : the strongest are the established norms adopted in

society, the system of social rules, spiritual values, the relationship of people to nature, work, to each other and to themselves Knowledge of socio-cultural factors is very

important, because they affect both other elements of the macro environment and the internal environment of the enterprise (for example, the attitude of employees to work)

Scientific and technological environment:the technological factor has an

increasing influence on most enterprises It is, for example, already impossible to imagine booking tickets in hotels, on transport without using a fax PCs, the Internet are

an integral component of the development of the society The changes of scientific and technology not only improve products, service according to customers’ need but also can create new products replacing for current products

2.2.2.2 Analysis of task environment impacts

The analysis of the working environment of the enterprise is carried out at two levels:

- industry analysis;

- specific analysis

Industry analysis is primarily an analysis of proposal In the course of the industry analysis, it is expedient to establish the dominant economic characteristics of the industry: market size, market growth rate, total production capacity, level of use, market saturation level, number of customers

M.Poter pointed out some forces that have the ability to change the situation in the industry:

- entrance or exit of large enterprises ;

- a change in costs and efficiency ;

- distribution of technical and technological achievements ;

- changes in public policy

Competitive analysis of the external environment is carried out through the study of the five main forces of competition, which determine the level of profit in the industry (according to M.Poter)

Porter’s five forces model

Figure 1.3 Model of 5 forces

(1) Competition rivalry: Most is manifested in industries with a large number of

operators with homogeneous products

It is analyzed for such directions :

- the position of competitors in the market (sales volumes, product range, market shares);

- characteristics of competitors' products (technical and operational parameters, price, quality, novelty, trademarks, image of the company and products);

- marketing and promotion of goods on the market;

- scientific and technical potential of firms - competitors (R & D base, availability of patents, licenses);

- production potential of competitors (capacities, loading, dynamics of receipts

of orders);

- financial condition (solvency, profitability, ability to mobilize financial resources to protect market interests)

(2) New entrants : Analysis - the forecast of the emergence of new competitors in

the industry is determined by the barrier of entry, which is an obstacle to the

Threat of new entrants Bargaining

power of supplier

organization of business and successful competition The higher the barrier, the

fewer new competitors Barriers

- brand image;

- economies of scale (maintaining low production costs);

- the effect of experience (especially in industries with high specific gravity of manual labor);

- the need for capital (effective competition requires significant initial costs);

- reorientation costs associated with the change of suppliers, consumers, training

of personnel;

- the need to create sales channels or access to them

(3) The threat of substitutes: tea - coffee, butter - margarine, skin - leatherette,

camera - mobile phone

The effect of substitute goods is carried out in two aspects :

- through the price ;

- through the level of innovation (the manufacturer of the substitute product so increases its quality that producers stop buying new products)

(4) Bargain power of customer, which determine the principles of segmentation

and grouping of customers (age composition, income level, purchasing power), the range of services and goods offered

(5) Bargain power of supliers, which dictate the prices of raw materials, materials

that complete, the condition of supply (shortage of raw materials), the quality of goods and services

2.2.3 Analysis of impacts of enterprise’s internal environment

2.2.3.1 Capacity of manufacture and Research & Development(R&D)

Production capacity is the calculated indicator of the maximum or optimal volume of production for a certain period (decade, month, quarter, year)

The optimal volume of production is calculated to determine the point at which the fact of providing the products with market needs will be achieved, as well as the necessary stock of finished products in case of a change in the market situation

Calculation of the maximum volume of production is necessary for the analysis

of the reserve of production, when the enterprise is working at the limit of its

capabilities In practice, the annual production plan (production program) is used to visualize the production capacity The production capacity of the enterprise is evaluated

in order to analyze the level of technical equipment of production, to identify production reserves for increasing the efficiency of the use of production capacities

intra-If the production capacity of the enterprise is not fully used, this leads to an increase in the share of fixed costs, growth in production costs, and lower profitability Therefore, in the process of analysis it is necessary to establish what changes have occurred in the production capacity of the enterprise, how fully it is used and how it affects the cost, profit, break-even and other indicators

R & D is a systematic activity carried out by a company that combines basic and applied research in an attempt to find solutions to problems or create or update products and services The act of a company conducting its own research and development often leads to the ownership of intellectual property in the form of patents or copyrights

Enterprises conduct research and development for many reasons, primarily, research and development of new products Before any new product is released to the market, it will go through a significant stage of research and development phase Research is conducted on market opportunities, cost and production terms After adequate research, a new product enters the development phase, where it is actually created from the concept outlined at the research stage

An important component of the company's R & D is its expenditure on R & D These costs can be relatively small, or they can easily work in billions of dollars for large corporations R & D expenditures are usually the highest for industrial, technological, medical and pharmaceutical firms Some companies reinvest much of their profits back into R & D, as is the case with technology companies, as they see it as

an investment in their further growth

2.2.3.2 Manpower quality

The quality of the workforce is a combination of human characteristics that are manifested in the labor process and include the qualifications and special qualities of the employee : health status, intellectual and adaptive abilities, innovation, professionalism, morality

Elements of quality of labor :

- Professional knowledge Defined by the level of development of a person, which is based on his mental abilities, experience, education, necessary to perform a specific production task

- Skills Defined by its physical data, necessary for the performance of the production task

- Competence is the level of general and professional training that allows to adequately react to the requirements of a particular workplace or work that is constantly changing

- Responsibility It is determined by the conscientiousness, reliability, which are necessary for the performance of various production tasks without harm to people and material losses, as well as a worldview sufficient to prevent the occurrence of irregularities in the production process

2.2.3.3 Financial capacity

Financial potential : potential financial indicators of production (profitability, liquidity, solvency), potential investment opportunities

The purpose of analyzing and diagnosing the financial potential of an enterprise

is to determine the unused reserves of the efficiency in the conditions of a particular enterprise

The assessment of the financial potential is carried out both according to the data

of external financial statements and internal documents

The composition of the financial statements includes :

- Balance sheet ;

- Profit and Loss Statement ;

- Statement of changes in equity ;

- Statement of cash flows ;

- Supplement to the balance sheet ;

- Report on the targeted use of the funds received ;

- Explanatory note ;

- The final part of the audit report

2.2.3.4 Marketing and Sales

The effectiveness of the marketing activities of an enterprise depends on the quality of the marketing decisions and on the implementation of these And one and the other, in turn, depends on the organization of marketing department in the enterprise

Organizational shortcomings lead to a low quality of marketing activities.Therefore, it is necessary to assess the state of this factor in the enterprise

The methodology for assessing the state of marketing at an enterprise is based

on a survey of the company's management with the use of certain indicators and a system of scores The evaluation of marketing department can be done in three directions :

- Completeness of marketing functions at the enterprise ;

- Marketingfunding ;

- The influence of the marketing service in the enterprise

The analysis of sales helps to identify whether sales will grow or decrease In addition, it is necessary to determine the range that is promising, and also to find out what products should be promoted more actively Specific and targeted decisions on the sale of goods are made by managers on the basis of the results of sales analysis

The objectives of the study of sales are :

- Evaluation of the current activities of the enterprise, as well as the activities of individual units ;

- Obtaining information for strategic and tactical management decisions in the field of product, marketing and marketing communications ;

- Segmentation of consumers ;

- Identify strengths and weaknesses of the organization ;

- Identification of threats and opportunities of the external environment of the enterprise ;

- Definition of perspective directions of activity of the enterprise ;

- Managing the product portfolio of the organization ;

- Sales volume management

2.2.3.5 Organization and management capacity

With the formation of the market environment and business relationships, the analysis of enterprise management becomes especially important The profitability of an enterprise largely depends on how effective the decisions will be, how effective

"management" is

The purpose of the enterprise management analysis is to obtain reliable information about the state of management at the enterprise in order to increase the effectiveness of management decisions

To achieve this goal, it is necessary to solve a number of problems :

- Assess the state and effectiveness of the current management system and its elements ;

- Establish the correspondence of the system to the specifics of the tasks and the features of the control object ;

- Investigate problem zones and causes of non-conformities in the management system ;

- Find out the reasons which cause discrepancy ;

- Carry out a diagnosis of the prospects for the development of the management system and its individual elements, as well as the possibilities for adapting to the projected changes in the external environment ;

- Develop measures aimed at improving the efficiency of the management system

Methodology for management analysis should encompass all of its elements : functions and methods The results of the analysis will be the basis for assessing the significance of managerial influence on the performance of the managed facility

2.3 Analysis techniques and Selection of strategy

2.3.1 General introduction

In the theory and practice of strategic planning, there is no clear classification of methods of strategic analysis In order to choose the right path of development and achieve the best result, it is necessary to conduct an analysis of the internal and external environment of the organization We will consider in detail the widely used methods of strategic analysis used in practice

2.3.2 External Factors Evaluation (EFE) and Internal Factors Evaluation (IFE) External factor evaluation matrix – EFEM

This matrix allows, at development of alternative strategies of the firm, to simultaneously link the information obtained from the analysis on the company's key external factors to the internal strengths and weaknesses of the firm.The process of

formulating an alternative strategy using this matrix is to select for each key external factor such an alternative strategy that would allow the most effective use of the firm's capabilities, its strengths and make its weaknesses less influential

In the EFEM matrix, for each particular external factor under consideration, the weight is determined that corresponds to the nature of its influence on the overall influence of all factors on the activity of similar firms and the rating characterizing the position of the particular firm with respect to each particular factor For the sake of simplicity of calculations, the sum of all factors weights is assumed equal to 1 Factors are the possibilities and threats of the external environment Often, such assessments of factors are used: 1-strong opportunity, 2-small opportunity, 3-small threat, 4-strong threat.The total evaluation of the firm's position in relation to each factor is determined

by the multiplication of weight and the evaluation of factors The overall assessment of the firm's position on external factors is calculated as the sum of the total estimates of individual factors

Below is an example of such a matrix for a hotel in Phillipines (Table 2)

Table 1.1 External factor evaluation matrix - EFEM

External factors

1

Weight index

2

Rating score

3

Translation score 4=2*3

Opportunities

1 Growth speed of hotel industry in Philippine 0.3 2 0.6

2 Proliferation of digital platforms and new forms of

communication to reach a wider audience

Challenges

4 Increasing of competition from hotels of different levels 0.1 2 0.2

1 2.1

Internal factor evaluation matrix – IFEM

The difference of the matrix of internal factors in comparison with the EFE matrix is that when building the IFE matrix, internal factors rather than external factors

are taken into account The key internal factors can be the strengths and weaknesses of

2

Rating score

3

Translation score 4=2*3

Internal strengths

Internal weaknesses

1 3.1

Major weakness (1) ; Minor weakness (2) ; Minor strength (3) ; Major strength (4)

2.3.3 Competitive Profile Matrix (CPM)

Competitive profile matrix compares the firm's position with the competitive positions in the market such as the company's main competitors, their strength and weakness with respect to the strategic position of the firm.The system for determining weights, ratings and weighted estimates is used similarly, as in the case of the construction of IFEM matrices.But the critical success factors used here are broader and

do not include specific indicators There is no grouping of factors into groups of strength and weakness.The factors of competitors are evaluated and compared with the firm's performance, which provides important internal strategic information.The meaning of the weights of factors and their ratings is similar to their meaning in the two previously described matrices, but used for a wider understanding of the factor

The total weighted estimates of the factors of competing firms make it possible

to arrange competing firms in terms of their competitive advantage as a whole and individual components of competition

Table1.3 Competitive profile matrix example Competiteve Profile Matrix (CPM) Example

2.3.4 Determination of feasible strategy with SWOT analysis

The SWOT matrix (strength, weakness, opportunity, threat) is used to determine alternative strategies for the company's strengths and weaknesses and opportunities and threats in the external environment This is an important tool that enables management

to determine the ability to develop four types of strategy: SO, WO, ST, WT

SWOT analysis example (Figure 1.4)

Figure 1.4 SWOT Matrix

SO strategy uses the company's internal advantages to gain the benefit of external opportunities Any manager will be positive about this kind of strategy

WO strategies have the goal of reducing the company's internal weaknesses, using the possible benefits from external opportunities Sometimes key external opportunities exist, but the firm has weaknesses that prevent it from using those opportunities

ST strategy takes advantage of the company to avoid or reduce external threats

An example of an ST strategy is the use by the firm of its excellent legal department (advantage) in order to obtain penalties from companies using an illegally owned patent (threat)

WT strategy is a defensive tactic, aimed at reducing internal weakness and avoiding external threats

Eight Steps to Compile the SWOT Matrix :

- Compilation of key external capabilities of the firm ;

- Compilation of key external threats of the company ;

- Compilation of key internal advantages of the firm ;

- Compilation of key internal weaknesses of the firm ;

- Selection of possible inter-relationships of internal advantages with external capabilities and recording of SO strategies in the corresponding column of the table ;

- Selection of possible interrelationships of internal advantages with external threats and the recording of ST strategies in the corresponding column of the table ;

- Selection of possible interrelationships of internal weaknesses with external capabilities and recording of WO strategies in the corresponding column of the table ;

- Selection of possible interrelations of internal weaknesses with external threats and recording of WO strategies in the corresponding column of the table

2.3.5 Selection of optimal strategy with QSPM

Quantitative Strategic Planning Matrix (QSPM) Used to objectively select a strategy from the list of priority strategies.It uses the previous matrixes : EFE, IFE, CPM of the first stage and SWOT, SPACE, BCG, IE, MacKеnsey, GSM of the second stage

The left column of the matrix consists of key external and internal factors : opportunities, threats, strength and weakness

The upper row consists of alternative strategies obtained in the second stage We can compare only related strategies (for example, diversification, etc.) When we include them, we need an intuitive, serious analysis of specialists of different specialties

The matrix determines the relative attractiveness of the various possible strategies of the firm

Each factor has a rating for the firm For each factor, its attractiveness for each strategy is rated from 1 to 4 in comparison with other factors.The cumulative estimates

of the factors for each strategy and the overall score for each strategy as a whole are calculated

Strategic alternatives example (Table 1.4)

Strong financial capability 0.11 3 0.33 4 0.44

External factors

High discount rates and credit restrictions 0.2 4 0.8 4 0.8

Table 1.4 QSPM Model

With the help of this matrix, different strategies and different firms can be evaluated, but good intuition and good managers are required to make the right decisions and assessments

2.4 Basic competitive (business) strategies

2.4.1 Basis of business strategy

2.4.1.1 Customers’ demands and product differentiation

The strategy of differentiation is a strategy of gaining a competitive advantage, suggesting the orientation of the company's activities to provide greater benefit to consumers (except for a low price) by offering high-quality goods with a high level of related services at justifiably high prices

Product differentiation is the way that manufacturers try to isolate their product from the total mass of similar products in order to draw the attention of other customers

to it; offer products with characteristics that are better than competitors Differentiation requires a certain increase in costs Companies following this strategy should invest more in research and development than leaders do in minimizing costs Companies pursuing a differentiation strategy should have products of the best design They need to provide higher quality and often use more expensive raw materials They need to make big investments in customer service and be ready to give up some market share

2.4.1.2 Customer groups and market segmentation

The segmentation strategy - working on several segments, considering each segment in accordance with its needs - allows company to focus on the needs of customers Segmentation helps stimulate the development of new products, as well as the development of an effective marketing mix Understanding the needs of the segment helps to develop advertising strategies

In the functional market segmentation strategy, there are three distinguished areas:

The basis of product segmentation is the allocation of market segments based

on consumer, product and competitive features

The basis of competitive segmentation is to find a niche market that is not occupied by competitors, in order to gain advantages when using innovations

2.4.1.3 Decisions on unique capacity of enterprise

The attack strategy (offensive) offers an active position of the company in the market and pursues the goal of winning and expanding the market share.However, if the firm's share falls below the optimal level, it faces a dilemma: either take measures to expand it, or withdraw from the market

The use of an attack strategy is advisable in several cases:

- if the market share is below the required minimum, or as a result of competitors' actions it has sharply decreased and does not provide a sufficient level;

- introduction of a new product on the market;

- firms-competitors lose their positions, and there is a real opportunity at a relatively small cost to increase the market share

Defensive, or restraining, strategy assumes preservation by the firm of an available market share and deduction of the positions in the market

It can be used:

- with a satisfactory position of the travel agency;

- in case of lack of funds for carrying out an attack strategy;

- in a situation where the firm is afraid to implement an attack strategy because

of possible strong retaliatory measures on the part of competitors

Defensive strategy is often used by large travel agencies At the same time, this type of strategy is fraught with danger It requires the closest attention on the actions of competing firms

2.4.2 Basic competitive strategies

2.4.2.1 Cost leadership strategy

The strategy of cost leadership is aimed at achieving competitive advantages due

to low costs for some important elements of a product or service and, consequently, a lower cost price compared to competitors This is an effective way to compete in markets where most buyers are price sensitive

The goal of the cost leadership strategy is to maintain advantages over competitors in terms of costs and get more profit At the same time, products can be sold either at lower prices to "beat off" buyers from competitors, or at current market prices, but in this case the firm has the ability to channel more funds to marketing and sales

Price leadership is achieved if the organization exercises control over a significant market share or uses such advantages as access to sources of raw materials, unique equipment, availability of an experimental curve in the industry, etc

The necessary market conditions for cost leadership are as follows:

- Demand for products is highly elastic at a price and fairly homogeneous;

- Price competition prevails;

- Differences in trademarks are not significant for customers;

- There are large buyers who can dictate the terms of the transaction, knocking down the price;

- Industry products are standardized, the buyer can purchase it from different vendors;

- The organization has access to sources of cheap raw materials, labor or other sources of reducing the cost of production

2.4.2.2 Differentiation stratery

The strategy of differentiation is aimed at the production of special products, which are a modification of the standard product Such products are intended for consumers who are dissatisfied with standard products and who are willing to pay for its uniqueness

Characteristics of the strategy:

* strategic goal - oriented to the whole market;

* The main competitive advantages - the ability to offer the buyer something excellent;

* assortment set - many varieties, wide choice;

* production - finding ways to create values for customers;

* marketing - the creation of such qualities of the goods for which the buyer will pay, the establishment of an increased price that covers the additional costs of differentiation;

* support of competitive strategy - concentration on several exceptional features (differences)

Differentiation involves the creation of purchasing value different from competitors (the attractiveness of packaging, the persistence of sellers, the price, the intensity of the advertising company)

Types of differentiation strategies:

1) products : this offers products with characteristics and (or) design is better than that of competitors As part of the product differentiation, the organization can offer a narrow range of products and in this case they talk about focusing on differentiation, or a wide range of products

2) services : this is the offer of a diverse and higher level of services (compared

to competitors) associated with the goods sold (urgency and reliability of supplies, installation of equipment, after-sales service, training and consulting clients)

3) differentiation of staff : this is the recruitment and training of personnel who perform their functions of working with clients more efficiently than the staff of competitors Well-trained staff is distinguished by competence, friendliness, trust

4) image differentiation (image, which distinguishes companies from competitors for the better)

2.4.3 Seletion of suitable stratery

How to choose a strategy? There are various methods of choosing as following :

1 Choice according to goals

This method focuses on the objectives of the organization, depending on which alternative strategies are evaluated Thus, it is possible to obtain different variants of the strategy, quantified with respect to their strengths and weaknesses In this case, the most suitable of the options can be allocated for implementation For example, if one of the most important goals of the organization is to protect the environment, then this will be used to evaluate policy options (for example, the establishment of a network of shops for goods for animal care)

2 Address to the higher level of management

This is also a fairly common method of choosing a specific strategy from a series of alternatives Typically, a series of viable strategy options, together with individual assessments, is passed on to higher management, which should decide on a particular course of action This management unit subsequently will decide on the basis that the concrete strategy corresponds to the general purpose of the organization

3 Hiring of consulting agencies that are not members of the organization

The recruitment of consulting agencies outside the organization is a common method in choosing a strategy Although they are often hired because of any conflicts within the organization, the breadth and depth of the agency staff experienced in various management issues is valuable in itself Consultants often have extensive experience working with various organizations, which can be applied to a specific situation When making a decision in such cases, objectivity is also necessary

2.5 “Characteristics” affecting to determination of business strategy

of military construction enterprise

2.5.1 Characteristics of organization structure

The organizational structure of military construction enterprise is usually a multi-level hierarchical management system Multilevel linear control structure has only vertical links between the elements and is built on the principle of hierarchy This structure is characterized by a clear one-man management Every employee or leader is directly subordinate to only one superior person and through him is associated with