Business strategy for viet trading technology investment development joint stock company 2019 2025

THEORETICAL BACKGROUND FOR BUSINESS STRATEGY 2.1 Concept and role of business strategy and strategic management 2.1.1 Concepts 2.1.1.1 Strategies and business strategies Strategy is d

Lunghwa University of Science and Technology Department of Business Administration

Thesis for a Master’s Degree

Business strategy for Viet trading Technology Investment Development Joint – Stock company

2019-2025

Researcher: Mai Van Chinh

Supervisor: Mai Anh&Yuan, Cheng- Kang, Dr

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 Business strategy for Viet Trading Technology Investment Development Joint – Stock company published by Mr.Mai Van Chinh in the Master Program of Graduate School of Department of Business Administration

Master’s Degree Examination Board

Board Members： Chia Chi Tsan

Nguyen Van Dinh

Nguyen Thi Hong Hanh

Advisors：Mai Anh & Yuan, Cheng – Kang, Dr

Date：2018／11／25

ABSTRACT

Thesis Title：Business Strategy for Viet Trading Technology Investment Development

Joint-Stock Company 2019-2025

Pages：50 University：Lunghwa University of Science and Technology

Graduate School：Department of Business Administration

in the world market

To do that qualitative research method is employed and the researcher evaluates both external and internal market relevant to the business of VNTECH The strengths of VNTECH are the participation into 19 M&E projects, having strategic cooperation with big partners like Omron, Siemens, LG Vietnam, strong commitment from top management team in delivering high project quality to the customers, and the employees are young and enthusiastic The weaknesses of VNTECH are short time of business because of M&E services since 2005 while leading firms like REE and SAREFICO have more than 30 years

of doing business, building information modeling (BIM) is not applied, current human

resources is low and cannot handle more M&E projects, too low profitability, portfolio is not diversified, do not have specification in mission, vision, and business objectives, low financial capabilities, and do not establish professional human resource management policies

The opportunities to VNTECH are political score of Vietnam is increased after downturn in 2014, strong economic development continuous its trend during 2018 and

2019 with high GDP growth rate and strong FDI inflows, the demand of the installation of electricity and water for civil projects (seaport, railways, housing for low-income people) is expected increasing, low price segment in residential market is increasing, prime segment (villas and townhouse) are not explored by existing players, and Vietnamese people spend their spare cash into home renovation The threats are identified as high corruption in Vietnam’s political system, inflation rate is expected increasing, the market is fragmented

by geographic location with different demands, more than 15,000 contractors in Vietnam’s M&E market which lead to fierce competition The customers have many options due to large construction services providers, and Vietnam’s M&E market is being approached highly by foreign contractors from developed countries New legal framework supports foreign construction contractors

Based on that, there are some business strategies to be developed They are strength focus strategy, low cost strategy, and marketing strategy Other recommendations to further improve the effectiveness of business strategy implementation are also proposed to help the company to achieve better implementation effectiveness

ACKNOWLEDGEMENT

I sincerely thank the teacher Mai Anh, and corporate officers of Viet Trading Technology Investment Development Joint-Stock Company devoted to guide and help me complete this thesis

Thank you! Author

Mai Van Chinh

TABLE OF CONTENTS

ABSTRACT iii

ACKNOWLEDGEMENT v

LIST OF TABLES ix

LIST OF FIGURES x

1 INTRODUCTION 1

1.1 Reason of choosing the research topic 1

1.2 Purpose of the study 1

1.3 Research topic and scope of the research 1

1.4 Structure of the study 2

2 THEORETICAL BACKGROUND FOR BUSINESS STRATEGY 3

2.1 Concept and role of business strategy and strategic management 3

2.1.1 Concepts 3

2.1.1.1 Strategies and business strategies 3

2.1.1.2 Strategic levels 4

2.1.1.3 Corporate strategic management 5

2.1.2 The role of business strategy in business activities of a company 6

2.2 Introduction to some business strategies 7

2.2.1 Focus growth strategy 7

2.2.2 Porter’s competitive strategies 7

2.2.2.1 Cost leadership strategy 8

2.2.2.2 Product differentiation strategy 8

2.2.2.3 Focus strategy 8

2.2.3 Business strategy according to the firm’s position 8

2.2.3.1 Market leader strategy 8

2.2.3.2 Marker challenger strategy 9

2.2.3.3 Market follower strategy 9

2.2.3.4 Market nicher strategy 10

2.3 Process of developing strategy 10

2.3.1 Determining business objectives 12

2.3.2 Analyzing external environment 12

2.3.2.1 Economic environment 12

2.3.2.2 Political and legal environment 13

2.3.2.3 Cultural and social environment 13

2.3.2.4 Technology environment 13

2.3.3 Industry analysis 13

2.3.3.1 Competitive rivalry 14

2.3.3.2 Potential rivalry 14

2.3.3.3 Customers 14

2.3.3.4 Suppliers 15

2.3.3.5 Substitute products 15

2.3.4 Analysis of internal environment 15

2.3.4.1 Analysis of resources 15

2.3.4.2 Analysis of functional department in a company 16

2.3.5 Analyze and identify strategy 16

2.3.6 Implement strategy 16

2.3.7 Control and review the implementation of strategies 17

2.4 Other tools to analyze and build business strategies 17

2.4.1 Matrix to analyze internal and external environment 17

2.4.2 SWOT analysis 18

2.5 Chapter summary 18

3 RESEARCH METHODOLOGY 19

3.1 Research method 19

3.2 Data collection and analysis 19

4 ANALYZING VNTECH’S CURRENT OPERATIONS AND BUSINESS STRATEGY 21 4.1 Company overview 21

4.1.1 Company overview 21

4.1.1.1 Establishment and development 21

4.1.1.2 Organizational structure 23

4.1.1.3 Some key business performance 24

4.1.2 Vision, missions and objectives 25

4.1.3 Products and consuming markets 25

4.1.3.1 Business sector and main products 25

4.1.3.2 Consuming market 26

4.2 Analysis of VNTECH business environment and its competition 29

4.2.1 Macro environment analysis PEST analysis? 29

4.2.1.1 Political – Legal 29

4.2.1.2 Economical 30

4.2.1.3 Culture and society 32

4.2.1.4 Technology 33

4.2.2 Analysis of competition in the industry 34

4.2.2.1 Porter Matrix of 5 Forces 34

4.2.2.2 Competitive analysis 35

4.2.2.3 Analysis of internal environment 38

4.2.3 EFE matrix, IFE matrix, SWOT matrix of VNTECH 39

4.3 Visions, mission and objectives 42

4.3.1 Mission 42

4.3.2 Strategic objectives 43

4.4 Identifying business strategy 43

4.4.1 Strength focusing strategy 43

4.4.2 Low cost strategy 43

4.4.3 Marketing strategy 44

4.5 Solutions to implement strategies 44

4.5.1 Expanding customer base 44

4.5.2 Enhancing human resource capability 45

4.5.3 Improving marketing activities 46

4.5.4 Diversifying products/services and pricing policies 47

4.5.5 Enhancing financial capacity 47

4.5.6 Other solutions 48

4.6 Chapter summary 49

5 CONCLUSION 50

REFERENCES 52

Appendix I: Projects of VNTECH 57

Appendix II: EFE and IFE Matrix Example 60

Appendix III: Core competencies of VNTECH and main competitors 61

Appendix IV: VNTECH’s key partners 62

LIST OF TABLES

Table 4.1: Key VNTECH’s projects 22

Table 4.2: Financial Performance in Last 3 Years (VND billion) 24

Table 4.3: Vietnam’s construction industry 26

Table 4.4: Office market in Hanoi and Ho Chi Minh City 27

Table 4.5: Retail market in Hanoi and Ho Chi Minh City 28

Table 4.6: Residential market in Hanoi and Ho Chi Minh City 28

Table 4.7: Vietnam’s FDI Overview 31

Table 4.8: Financial performance of VNTECH and main competitors 35

Table 4.9: Experiences of VNTECH and main competitors 36

Table 4.10: SWOT analysis 39

Table 4.11: EFE matrix of VNTECH 40

Table 4.12: IFE matrix of VNTECH 41

LIST OF FIGURES

Figure 2.1: Strategic planning 4

Figure 2.2: Corporate strategic management framework 5

Figure 2.3: Porter’s competitive strategies 7

Figure 2.4: Business strategy based on the firm’s position 11

Figure 4.1: Organization structure of VNTECH 23

Figure 4.2: Vietnam’s Political Stability Index 29

Figure 4.3: Vietnam’s GDP growth rate and inflation rate 30

Figure 4.4: FDI inward by country (%) 31

Figure 4.5: How do Vietnamese consumers spend their spare cash? 33

1 INTRODUCTION

1.1 Reason of choosing the research topic

Nowadays the Vietnam economy has been increasingly developing with high requirement of all sectors in the society, Construction Industry is included in that trend To exist and develop, it

is necessary that organizations should build clear business strategies and orientations Being a business involved in Installation and Construction Industry, Viet trading technology investment development joint-stock company (VNTECH) recognizes tough competition and need to change with that trend in this market To survive and develop, it is fundamental for VNTECH to build a suitable business strategy For these reasons, the researcher decides to choose the topic as the role of Chairman and General Director: “Developing the business strategy for Viet Trading Technology Investment Development Joint-Stock Company for the period 2019-2025” for the thesis’s title and with the researcher’s practical experiences and knowledge getting from le-MBA course, the researcherexpectsproviding accurate adjustment and identifying right business strategies for VNTECH Company

1.2 Purpose of the study

This study is conducted with some specific purposes as below:

- Review basis for business strategies, process and methods of analyzing and selecting the best strategies aiming to help VNTECH choosing the most suitable strategy

- Identifying and applying business strategy theories to formulate suitable business strategy for VNTECH for the PERIOD 2019-2025

- Propose some key solutions to implement and successfully perform the business strategy

1.3 Research topic and scope of the research

This study is developed with research topic as “Business strategy for Viet Trading Technology Investment Development Joint-Stock Company 2019-2025”

Scope of the research includes the subject, the content, the time, and the location and they are described as below:

- The subject: Business strategy of VNTECH Company

- The content: The study is developed with internal and external analyses which are developed in order to scan internal operation of VNTECH Company and the business environment in which the company is now doing business Then, business strategies for the company during 2019-2025 are proposed accordingly

- The time: From June 2018 onwards

- The location: Within VNTECH Company

1.4 Structure of the study

This study is developed with 5 chapters The first chapter is introduction of the study topic as well as the proposal of research objectives and research scope Other chapters include Theoretical Basic of Corporate Business Strategy, Analyzing VNTECH’s Current Operations and Business Strategy, and Recommendation of Business Strategies for VNTECH during 2019-2025.Theoretical background for business strategyreviewsfundamental understanding about the research topic It covers the examination of theoretical basis about business strategy and how it is formulated Some strategic analysis tools are proposed and examined during this chapter The third chapter is to analyzing VNTECH’s Current Operations and Business Strategy It examines some basic information about VNTECH Company such as its vision, mission, and objectives Internal environment is scanned along with external environment scanning Herein, some strategic analysis tools are put into practices with the data is collected from both interviews with the managers of the company and secondary data The fourth chapter is developed in order to formulate a suitable business strategy for VNTECH during 2019-2025 It covers the proposal of new visions, missions, and objectives Chosen business strategies are described clearly in this chapter and the solutions to implement chosen business strategies are discussed accordingly

2 THEORETICAL BACKGROUND FOR BUSINESS

STRATEGY

2.1 Concept and role of business strategy and strategic management

2.1.1 Concepts

2.1.1.1 Strategies and business strategies

Strategy is defined as on-going process which allows a company’s top managers to control its operations and businesses in order to obtain business goals in long-term perspectives (Lamb, 1994) Mintzberg and Waters (1985) define strategy with structural approach in which a strategy

is either planned strategy or emergent strategy Planned strategy refers to a strategy which is prepared and it is generated from pre-analyses of internal and external market while emergent strategy is determined as the one which is raised when strategic managers perceived that planned strategy must be revised and changed upon on certain feedbacks (Mintzberg and Waters, 1985) Another understanding about strategy is provided by Porter (1996) and it is defined as a set of actions that helps a company to differentiate itself with other competitors Porter (1996) provides the differentiation between strategy and non-strategy as non-strategy is standard actions which are conducted by a company and its competitors to deliver products and services to the customers or to maintain production flows

In summary, this study chooses a definition for strategy as a unifying theme in order to provide coherence and direction for the actions and the decisions to gain business successes In addition, strategy is perceived as planning action in long-run perspectives and it helps the firms

to establish and to sustain specific capabilities, to allocate resources, and to clarify goals and policies to support the firms’ development and business objectives (Johnson and Scholes, 2002) Finally, strategy brings the directions of the firms and it aims to answer following questions: Where is the firm now? What the actions will help the firm to achieve business objectives and goals? What are the movement of the competitors and competitive environment? What the firm want to achieve in the long-run?

Figure 2.1: Strategic management

Source: Nickols (2016)

It is also denoted that a strategy is managed under strategic management According to Nickols (2016), strategic management includes 3 components, including strategy formulation, strategic planning, and strategy deployment Strategy formulation is the component in which strategies are formulated after consideration of internal and external environments (Nickols, 2016) Strategic planning is determined as a useful tool which helps strategic managers to deploy chosen strategies throughout the firms (Nickols, 2016) Strategy deployment refers to the implementation of chosen strategies along with closed monitoring (Nickols, 2016)

Figure 2.2: Corporate strategic management framework

Source: Johnson and Scholes (2002) According to Grunig and Kuhn (2010), corporate strategy covers business strategy and operational strategy and it is developed under the objective of differentiating a company with others in the market Business strategy, however, is developed with the target is business activities of a company or which business area that a firm need to improve in order to win the market share (Grunig and Kuhn, 2010) Finally, operational strategy refers to the combination of each operational part of the firms to be connected with each other in order to form a strategic architecture (Johnson and Scholes, 2002)

2.1.1.3 Corporate strategic management

Corporate strategic management is a business term and its conceptualization is not very new since it is introduced in 1970s (Wells, 2000) It is defined as a process in which the top management of the firms envision about the future and they develop a set of actions that allow the firms to achieve that future (Wells, 2000) Moreover, corporate strategic management is defined under a system approach whether it is perceived as a management system that allows the firms to identify and to measure the corporate performance in order to achieve desired future (Wells, 2000)

Corporate level strategy

Is concerned with the

overall purpose and scope

of an organization and

how to add value to

business unit

Business level strategy

Is concerned with the way

a business seeks to compete successfully is its particular market

Operational strategy

Is concerned with how different parts of the organization deliver the strategy in term os managing resources, processes and people

According to Wells (2002), a framework of corporate strategic management is illustrated with 5 components, including pre-planning, strategic planning, deployment, implementation, and measurement and evaluation Pre-planning is conducted with the objective of recognizing which activities should be carried out and what organizational assessment is Then, strategic planning is developed with the exploration of strategic foundation and it includes mission, vision, and guiding principles It is denoted that the firms should conduct gap analysis after strategic foundation is determined in order to define strategic goals, relevant strategies and objectives This component outputs measurement plan Deployment is the third component in corporate strategic management framework and it consists of the completion of the plan as the first phase and the communication of the plan as the second phase After that, the firms move to implementation stage in which action plans are developed and actions are implemented with appropriate tracking and communication progress The last component refers to measurement and evaluation and it requires the data collection and certain analyses in order to measure the effectiveness implementation process

2.1.2 The role of business strategy in business activities of a company

There are 4 roles of a business strategy and it is proposed by Whittington (2000) The first role refers to classical perspective and it refers to the assumption of which top managers and strategic managers of a company need to develop business strategies in the way of leveraging internal strengths and external opportunities while overcoming internal weaknesses and reducing external threats The second role refers to the evolutionary perspective in which the perception of top managers and strategic managers are either wrong or right While right decision in choosing business strategies allows a company to obtain business success, wrong decision leads to business failure The role refers to the processual perspective of a business strategy whether the assumption of which business performance is a result of interaction between individuals and environment and the result of this interaction, generally, is unpredictable or unintended The last role of a business strategy refers to systematic perspective of a business strategy and it is highlighted as the role of cultural or religious effects and educational background on strategy of

a company

2.2 Introduction to some business strategies

2.2.1 Focus growth strategy

Focus growth strategy refers to the context of the firms desire to achieve growth in their business scale, winning against other competitors, andprosperity (Leminen and Westerlund, 2012) In this context, focus growth strategy can be divided into high growth strategy and low growth strategy whether high growth strategy is conducted when the firms aim to achieve rapid growth while slow growth rate refers to safe and steady growth (Brown et al., 2001) It is denoted that not all firms want to follow high growth strategy due to their top management aims

to avoid business risks (Leminen and Westerlund, 2012)

2.2.2 Porter’s competitive strategies

According to Porter (1980), the firms can choose 3 different strategies in order to gain competitive advantages against other players in the market They are cost leadership strategy, product differentiation strategy, and focus strategy It is perceived that focus strategy is divided into cost focus strategy and differentiation focus strategy

Markets where business competes

Differentiation

focus

Figure 2.3: Porter’s competitive strategies

Source: Porter (1980)

2.2.2.1 Cost leadership strategy

Cost leadership is conducted when the firms want to sell their products and services at lower cost than other competitors’ prices, according to Porter (1980) It is asserted that cost leadership strategy can be obtained in case of the firms standardize their production process and therefore they gain the benefit from lower operating cost or it can be obtainable from mass production process (Porter, 1980)

2.2.2.2 Product differentiation strategy

Product differentiation strategy refers to the action of the firms in which they develop new products and services with the characteristics and the functions are different to others (Porter, 1980) On the other hand, it means that the firms implement product differentiation strategy throughout unique characteristics and functions integrated into their products and services and this action helps distinguishing themselves to other competitors in the market (Hall, 1980)

2.2.2.3 Focus strategy

Focus strategy is implemented under the context of the firms try to deliver and to sell their products and services on specific market segment or for specific customer segment (Porter, 1980) In this context, the firms apply either cost leadership strategy or product differentiation strategy but they focus on new market segment or new customer segment and this segment is not exploited by other competitors (Horsky and Nelson, 1993)

2.2.3 Business strategy according to the firm’s position

According to the firm’s position in the market, business strategy is formulated and the firms can follow either market leader or market challenger or market follower or market niches/nicher

A framework which is utilized to illustrate different business strategy upon on the firm’s position

is highlighted below:

2.2.3.1 Market leader strategy

It is asserted that every market has a market leader which has highest market share, intensive marketing programs, wide distribution network, integrated advance technologies, high rate of new products and services, and pricing controls (Butler and Collins, 1996) On the other hand,

when the firms conduct market leader strategy, they aim to expand current market share and to explore new customers through new products and services while still maintaining the relationship with current customers or protecting current market (Kotler et al., 2010) To expand current market share, a marker leader often invests heavily on advertising programs, improves the coverage of distribution networks, gives incentives to the distributors, develops new products and services, expands its businesses to new geographic locations, and conducts mergers and acquisitions with existing and smaller firms in the market (Gilligan and Wilson, 2003) To protect current market share, a market leader continuously refines its competitive advantages against other competitors in the market, invests heavily into advertising, and creates strong customer relationship as well as strong relationship with its suppliers (Gilligan and Wilson, 2003)

2.2.3.2 Marker challenger strategy

Market challenger is defined as the firms which have slightly smaller market share and they try to adopt aggressive business strategy in order to attack the market share from other competitors, including market leader (Tse et al., 2004) According to Gilligan and Wilson (2003), a firm can conduct chooses either attacking market leader or attacking other firms with smaller size but under financial problems or attacking smaller firms in other regions Porter (1985) indicates that a firm which follows market challenger strategy must be careful of attacking market leader due to it is dangerous competitive movement and it may destroy market challenger Moreover, a market challenger can conduct series of actions to attack, including discounting product’s price, improving current products, introducing innovative products, heavily investing on advertising efforts, developing the market, developing higher value added products, conducting market positioning in more meaningful ways (Gilligan and Wilson, 2003)

2.2.3.3 Market follower strategy

Market follower is considered as the firms which do not have largest market share and they attempt to conduct business strategies at less aggressive level than market challenger with the objective of maintaining current market position (Hooley and Greenley, 2005) Generally speaking, a market follower is a firm which accepts its current market share and it avoids direct competition with market leader like a maker challenger (Levitt, 1996; Kotler, 1997) According

to Saunders (1987), a market follower has some common business characteristics, including such firm has smaller market shares and it competes in the market segment where it has competitive advantage, it has less efficiency in research and development (R&D) activities, it has small business scale and it aims staying with small business scale in the long-run, and its leaders involve into all aspects of operational activities When a firm conducts market follower strategy,

it can follow by 3 options, as highlighted by Gilligan and Wilson (2003).The first option is following closely with market mix programs and market segmentation are the same as a market leader The second option refers to following at a distance and it is the combination between similar and different market mix programs and market segmentation compared to a market leader The third option is determined as following selectively or a market follower aims to follow market mix programs and market segmentation in selective manners and therefore the likelihood of direct competition is minimized accordingly

2.2.3.4 Market nicher strategy

Market nicher is perceived as the firms which align their businesses into smaller but specified markets; thus, by considering themselves as market niches, these firms avoid direct competition from larger competitors and they build up in-depth understandings about the customers’ preferences of specialized market (Ho, 2014) According to Gilligan and Wilson (2003), a market nicher should conduct specialization actions, including specialized by geography, specialized by products and services, specialized by product and service quality, specialized by customer’s size, and specialized by unique features of products and services

2.3 Process of developing strategy

To develop strategy, a following process is proposed with 7 steps, including determining business objectives, analyzing external environment, analyzing the industry, analyzing internal environment, analyzing and identifying strategy, implementing strategy, and controlling and reviewing the implementation of strategy This process is illustrated as below:

Figure 2.4: Business strategy based on the firm’s position

Prepared by the researcher (2018)

Determining business objectives

1 Definition of business scope: products, markets, and geographies

2 Identification of unique competencies

Analyzing internal environment

1 Identification of internal critical factors to

achieve competitive advantage

2 Overall assessment of competitive

advantage

Definition of Strengths and Weaknesses

Analyzing external environment

1 Identification of external factors contributing to industry attractiveness

2 Overall assessment of industry attractiveness

Definition of Opportunities and Threats

Analyzing and identifying of the business

Then, each step in the process of developing strategy is put into discussion It is denoted that each step requires different actions and approaches The researcher also proposes this process to develop business strategy for VNTECH

2.3.1 Determining business objectives

Determining business objectives is the first step in the process of developing business strategy of the firms It is denoted that business strategy is developed to support the business goals of the firms in long-run perspectives (Hax and Widl II, 2003) According to Grunig and Kuhn (2010), the firms should propose business objectives clearly and they should consist the statement of the competitive position of the firms in the long-run Moreover, business objectives are suitable when it includes key milestones that the firms should achieve after business strategies are implemented accordingly (Thompson, 2002)

2.3.2 Analyzing external environment

The second step in business strategic planning is to conduct the analysis on external market and the firms should adopt some strategic analysis tools To analyze external environment, strategic managers can utilize PESTEL analysis which is considered as one of famous strategic analysis toolbox (Kotler, 1998) It helps strategic managers to understand how business of a company is influenced by economic environment, political and legal environment, cultural and social environment, and technology environment (Koumparoulis, 2013)

2.3.2.1 Economic environment

The business performance of a company is depended on the health of national economy or global economy such as interest rate of borrowing loans from commercial banks, the fluctuation

of exchange rate and inflation rate, etc (Koumparoulis, 2013) For example, when inflation rate

is increased, the cost of purchasing raw materials is increased and it impacts directly to profit of

a company (Thompson, 2002) Another example for the impact of economic environment is shown through the government’s action in which they tightens the spending and this action impacts directly on money supply and labor market which cause negative impacts on the business performance of a company (Thompson, 2002)

2.3.2.2 Political and legal environment

Political and legal environment impacts on business performance of a company (Kotler, 1998) The role of political direction and legal is shown through an example of European area whether a company which is established within this area gains many benefits from single currency while another company which is coming from non-European area faces up with the fluctuation of exchange rate (Koumparoulis, 2013) In addition, if a company is doing business

in an industry with incomplete legal framework, this company is facing up with higher threats from other competitors (Kotler, 1998)

2.3.2.3 Cultural and social environment

Cultural and social environment decides the customer behavior and therefore it impacts on the business performance of a company (Thompson, 2002) It is identified that the customers may follow different cultures or they may have different perception about culture values, leading

to the requirement of studying customer behavior in detail to assure that the products and services are developed in line with the status of customer behavior (Kolios and Read, 2013)

2.3.2.4 Technology environment

Technology environment impacts on the business performance of a company (Johnson and Scholes, 1993) According to Koumparoulis (2013), new technologies allow a company to gain competitive advantage against other competitors, showing through the fact that new technologies allow a company to reduce operating cost and therefore increasing rate of returns However, the application of new technologies requires a company to invest more in term of money to purchase new technologies and trainings for the employees to operate new technologies (Kotler, 1998)

2.3.3 Industry analysis

To analyze the industry in which a company is now doing business, strategic managers can apply Porter’s Five Forces as industry analysis toolbox It is denoted that a company is doing business within specific industry and this company’s business performance is influenced by the performance of overall industry (Dalken, 2014) On the other hand, it means an industry’s performance impacts on the business of every company inside and therefore a company needs to conduct industry scanning and analysis to understand the impacts (Johnson et al., 2008)

According to Porter (1979), an industry performance is depended on 5 factors, including competitive rivalry, potential rivalry, customers, suppliers, and substitute products Porter (2008) revises these factors and identifies that the analyses of these factors help strategic managers to detect the opportunities and the threats from specific industry

2.3.3.1 Competitive rivalry

Competitive rivalry is defined as the competition among existing players within an industry (Porter, 1979) It means that when a company is doing business within an industry, this company needs to compete with other players in term of the quality products and services, marketing programs, etc (Porter, 2008) Competitive rivalry impacts on business performance of a company through how many players in this industry, overall growth rate of this industry, the differentiation level of products and services which are provided by different players, etc (Hubbard and Beamish, 2011)

2.3.3.2 Potential rivalry

Potential rivalry is defined as the potentials of which new players can enter an industry or it

is determined as the barrier level to enter an industry (Porter, 1979) It is affirmed that new players are hard to enter an industry when this industry is covered by many existing players (Johnson et al., 2008) When an industry has many players, the profit sharing for each player is smaller and therefore it limits new players to enter this industry due to small rate of returns (Dalken, 2004) Moreover, when an industry consists of intensive competition among existing players, the barrier level to an industry is very high to new players accordingly (Rothaermel, 2008)

2.3.3.3 Customers

According to Porter (1979), customers play significant role in an industry and it is reflected through the bargaining power of customers When the bargaining power of customers is high, the firms need to improve the quality of products and services continuously, to strengthen innovative products and services to win the market shares, to frequently conduct promotion programs, and

to widely spread distribution networks (Porter, 2008) Bargaining power of customers is high

when an industry is covered by many players but the number of customers is low or when an industry has many substitute products and services (Slater and Olson, 2002)

2.3.3.4 Suppliers

According to Porter (1979), the supplier impacts on overall performance of an industry due

to a firm requires raw materials which are purchased from the suppliers and it is so-called as bargaining power of suppliers The impact of the supplier to the business of a company is shown through the fact that when the supplier increases the prices of raw materials, this company is facing up with higher production cost and therefore lowering profits in case of this company keeps current product’s price or this company can increase product’s price but dealing with higher possibility of losing its customers (Porter, 2008) It is denoted that bargaining power of suppliers is high when there are few suppliers in an industry (Slater and Olsen, 2002)

2.3.3.5 Substitute products

Substitute products is considered as the last factor in Porter’s Five Forces model and it impacts to overall performance of an industry It is defined as other products and services of which the customers can find in the industry instead of purchasing products and services from a company (Porter, 1979) A product and service is considered as alternative when it shares the same functions with a company’s products and services (Dalken, 2004) The impact of substitute products on a company is depended on customer loyalty level with this company’s products and services as well as switching cost to the customers (Hubbard and Beamish, 2011) For instance,

if a company gains high loyalty level from its customers, it is unlikely its customers switch to substitute products and vice versa (Porter, 2008)

2.3.4 Analysis of internal environment

2.3.4.1 Analysis of resources

According to Porter (1985), a company needs to analyze its resources frequently The main objective of conducting resources analysis is to assure that this company has sufficient resources for the development of products and services as well as distributing products and services to the customers The resources of a company is divided into tangible and intangible assets (Dwyer et al., 1987; Bristow and Mowen, 1998) In addition, the resources can be divided into physical

capital resources such as plant and equipment used to produce products and services, human resources such as employees and their working skills and attitudes, and capital resources such as organization cultures, policies, and control mechanism (Barney, 1991)

2.3.4.2 Analysis of functional department in a company

To analyze functional department in a company, it is recommended that value chain model should be utilized and this model is developed and proposed by Porter (2001) It is asserted that value chain model allows strategic managers to identify all activities within a company as well as these activities impact on this company in term of cost and benefit (Porter, 2001) A company’s activities can be characterized by primary activities and secondary activities (Porter, 1980) Primary activities refer to the activities which are belonged to production process of a company such as inbound and outbound logistics, production chain activities, marketing and sale activities, and customer services (Vandenberg et al., 2009) Support activities refer to the activities which are not directly associated with production process but they still impact on overall performance of a company such as human resource management, information technology, etc (Roduner, 2004) It is denoted that the analysis of primary and support activities enables the strategic managers to understand current performance of a company and how these activities contribute to the generation of competitive advantages of this company (Fasse et al., 2009)

2.3.5 Analyze and identify strategy

The analysis and the identification of business strategies is conducted with the objective of choosing which business strategies are important to a company (Grunig and Kuhn, 2010) Strategic managers need to analyze each possible business strategy and then they should identify which business strategies are important to long-term development (Grunig and Kuhn, 2010) After business strategies are analyzed and the most important business strategies are chosen, strategic managers need to develop action plans to implement chosen business strategies (Hax and Wilde II, 2003)

2.3.6 Implement strategy

The next step in the process of developing new business strategies is implementation strategy in which strategic managers need to establish a team who take the responsibilities of rolling chosen new business strategies (Grunig and Kuhn, 2010) The implementation of new business strategies also require clear communication with all employees in functional departments of a company and business strategies are documented in well manner (Grunig and Kuhn, 2010)

2.3.7 Control and review the implementation of strategies

The last but not least step refers to the control and the review of the implementation of new business strategies According to Grunig and Kuhn (2010), top managers of a company needs to participate into implementation process and they should involve in the meeting with the implementation team to assure that timeline and milestones are fulfilled as well as critical issues are resolved accordingly

2.4 Other tools to analyze and build business strategies

2.4.1 Matrix to analyze internal and external environment

Matrix to analyze internal and external environment includes Internal Factor Evaluation Matrix (IFE Matrix) and External Factor Evaluation Matrix (EFE Matrix), according to Zulkarnain et al (2018) Both IFE Matrix and EFA Matrix are prepared with 5 steps The first step is to determine key internal and external factors that influence significantly on a company’s businesses Then, each factor is given by a weight which is ranged from 0 to 1 as the second step

It is denoted 0 is not important and 1 is very important and the sum of weight of all factors must

be equal to 1.0 The next step is to provide the score for each factor and the score is ranged from

1 to 4 with 1 is important weakness/threat, 2 is minor weakness/threat, 3 is minor strength/opportunity, and 4 is important strength/opportunity The fourth step is to multiple each score with a factor’s weight The last step is to sum the score of each factor to gain a total score (Refer to appendix 2)

After understanding the process of preparing and generating the results of IFE and EFE matrix, it is denoted that these matrixes are important to business strategy formulation and planning of the firms According to Mumpuni (2013), the purpose of preparing IFE and EFE

matrix is to understand how internal and external factors influencing on the firms’ business conditions and performances and therefore they allow the strategic managers to identify which the most appropriate strategies for their firms In addition, David (2010) indicates that IFE and EFE matrix are reliable tool to strategic managers with easy to use and easy to understand

2.4.2 SWOT analysis

SWOT analysis is a matrix in which it is combined by 4 factors, namely internal strengths, internal weaknesses, external opportunities, and external threats (Terrados et al., 2007) On the other hand, SWOT analysis helps strategic managers to recognize internal strengths and weaknesses and how to leverage the strengths while to reduce the weaknesses (Ommani, 2011)

In addition, SWOT analysis enables strategic managers to understand how external market impacts on business activities and business performances of a company and strategic managers should utilize external opportunities and they should consider action plans to reduce negative impacts from external threats (Singh, 2010)

2.5 Chapter summary

In this chapter, the researcher examines some theoretical basis about business strategy and its roles to a company Moreover, the researcher obtain certain understandings about different strategic toolboxes, including PESTEL analysis, Porter’s Five Forces model, Internal and External Matrix, SWOT analysis, etc and they provide in-depth understandings about internal and external market The process of formulating business strategies are examined with 7 steps, including determining business objectives, analyzing external environment, analyzing the industry, analyzing internal environment, analyzing and identifying business strategies, implementing chosen business strategies, and controlling and reviewing the implementation of chosen business strategies The researcher also examines two types of data that are collected in this study, including primary data and secondary data Then, the choice of direct interview is made along with the collection of secondary data.In the next chapters, the researcher utilizes what are obtained from literature examination in order to formulate right business strategies for VNTECH Company

3 RESEARCH METHODOLOGY

3.1 Research method

This study is developed with qualitative research method The researcher aims to collect primary data and secondary data for studying the research topic Primary data is extracted from the interviews with the managers of the company while secondary data is collected from books and journals about business strategy as well as from the report about Vietnam’s construction industry This study involves several strategic analysis tools such as Porter’s Five Forces model, PESTEL analysis, SWOT Matrix, etc to formulate business strategies for VNTECH Company

3.2 Data collection and analysis

Direct interview is the process in which the researchers play the role of interviewers while the respondents who participate into interview process is interviewees (Saunders et al., 2009) Direct interview is made up with face-to-face scheme and the researchers put questions to the interviewees and then the researcher capture the information which is provided by the interviewees accordingly (Saunders et al., 2009) The main benefit of direct interview is that the researchers can evaluate the attitude of the interviewees and obtain in-depth findings about social phenomenon (Saunders et al., 2009) In this study, direct interview is chosen to collect primary data and it helps the researcher to acquire in-depth understanding about current situation of internal and external market and what the current and possible future business strategies of VNTECH Company

Questionnaire is favorite data collection instrument and it helps the researchers to collect primary data (Saunders et al., 2009) Questionnaire is developed in standard format and the respondents choose their answers upon on given statement (Cargan, 2007) The benefit of questionnaire refers to the fact that it allows the researchers to collect primary data in large sample and the respondents who participate into questionnaire process are anonymous and they can answer the questions without issues (Saunders et al., 2009) Since this study’s topic is about business strategy, questionnaire is not suitable since required primary data requires the respondents to have intensive knowledge about strategic management as well as having broad

knowledge about internal situation of VNTECH and external situation from Vietnam’s construction market

Secondary data is defined as the information that is prepared, collected, and presented by other researchers (Saunders et al., 2009) Collecting secondary data has the benefit of which secondary data does not require much time and effort to the researcher to obtain this information (Srivastava and Rego, 2011) However, secondary data has its weakness since the researcher cannot evaluate how previous researchers process this data (Saunders et al., 2009) In this study, secondary data is collected from books and journals about business strategy and it is also collected from internal documents of VNTECH Company

Data statistics, and interview data are analyzed and extracted in the paper in the form of words, numbers All data are meaningful to author for understanding the facts of the company and its industry context

4 ANALYZING VNTECH’S CURRENT OPERATIONS

AND BUSINESS STRATEGY

4.1 Company overview

4.1.1 Company overview

4.1.1.1 Establishment and development

Viet Trade Technology Investment Developing Joint Stock Company (VNTECH) is established under the business license 0101619893 in 2005 with the head office is located in Hanoi, the capital of Vietnam The firm is doing business in main areas, including the installation

of electricity, water system, monitoring system, fire protection system, etc for buildings and industrial zones; the installation of clean water system and construction works; and providing electrical and information system for automate production process Total capital of the firm is2 VND billion at the time of establishment and it is increased to 8.8 VND billion and it is under the management of 3 founders The capability of VNTECH is reflected through its experiences of participating into 19 projects Some projects have high contractual values For example, the contract with Hoa Lac Hi-Tech Park and Dak Nong valued at 63.1 VND billion and 57 VND billion respectively Some key projects which are implemented by VNTECH are presented in the table below:

Table 4.1: Key VNTECH’s projects

sources

Project’s value Timeline

Enterprise’s funds

74.3 VND billion

- Quang Ngai expressway

Supply and installation of electrical systems, light electricity, water, and air conditioning

and landscape

Enterprise’s funds

31.6 VND billion

engineering, technology of the pump, sewage pumping station number 7, sewage pumping station number 12

Construction of electrical engineering, technology, water plant equipment

ADB’s funds

57 VND billion

2012-2013

Source: VNTECH (2018)

4.1.1.2 Organizational structure

Currently, the firm is operated under organization structure as below:

Figure 4.1: Organization structure of VNTECH

Source: VNTECH (2018) The firm is governed by Board of Directors (BOD) and there are 3 deputy directors to support daily management The first deputy director takes the responsibility of financial management, the second deputy director manages planning process while the last deputy director takes into account project management Under each deputy director, there are functional departments to be setup In more detail, the first deputy director manages financial planning department and admin department, the second deputy director controls economic planning department and the last deputy director monitors the operations and the efficiency of technical department, project department, and service and assurance department

The firm is governed by Board of Directors (BOD) as highest decision hierarchy and there is

a Director under BOD’s management To support the Direct, there are 3 Deputy Directors who take the responsibilities for financial management, planning management, and project management

Deputy Director Project Management

Financial

Planning

Department

Admin Department

Economic Planning Department

Technical Department

Project Department

Service & Assurance Department

In term of financial management, there are 2 functional departments, namely financial planning department and admin department Financial planning department takes the responsibility of managing financial performance of the firms as well as conducting accounting works This department also coordinates with other departments in order to ensure that the cost is managed well Admin department provides the consultancies to BOD and the Director in term of developing human resources of the firm as well as administration tasks

In term of planning management, there is 1 functional department This department is named

as economic planning and it takes the responsibility of coordinating with other departments to establish project plan and to provide the construction and material utilization plan This department also analyzes new technologies and software that help optimizing workflows

In term of project management, there are 3 functional departments, including technical department, project department, and service and assurance department Technical department supervises technical requirements and technical fulfillment of each project Project department manages overall project plan and project implementation in order to ensure that the activities are implemented in time and in quality manner Service and assurance department focuses on service quality or after-sale services This department provides the assurance services after construction

is finished accordingly

4.1.1.3 Some key business performance

In the last 3 years, business performance of the firm is as below:

Table 4.2: Financial Performance in Last 3 Years (VND billion)

Source: VNTECH (2018)

In the last 4 years, financial performance of VNTECH is fluctuated accordingly The revenues from sale activities in 2014, 2015, 2016, and 2017 are 46.98 VND billion, 36.18 VND billion, 30.88 VND billion, and 74.38 VND billion respectively Profit after tax in 2014, 2015,

2016, and 2017 are 0.345 VND billion, 0.034 VND billion, 0.080 VND billion, and 1.170 VND billion It is commented that sale revenues are dropped significantly during 2015 and 2016 before it is increased in 2017 Due to sale revenues are dropped, profit after tax is decreased during 2015 and 2016

4.1.2 Vision, missions and objectives

The vision of VNTECH is to provide comprehensive, realistic, and optimized solutions to the customers To support this vision, VNTECH proposes some missions, including:

- To update, adopt, apply, and transfer new technologies continuously

- To frequently update new legal and discretion to ensure of legally activities

- To research and to identify optimized solutions for construction projects while maintaining the quality

- To research and to develop new products which are realistic to the customers New products must have the characteristics of friendly to the customers, appropriately for people with different professional levels, and applicably in different business environments at appropriate cost

- To establish widened business network

- To get more projects

- To develop human resources which are increasing in term of quality and quantity

The objectives of VNTECH are:

- To construct the projects at high quality manner, good designation, and they are integrated with multiple functionalities

- To contribute to the progress of industrialization and modernization of Vietnam and to participate into global market

4.1.3 Products and consuming markets

4.1.3.1 Business sector and main products

VNTECH is now doing business in Vietnam’s construction industry This industry gains strong growth rate and is being ranked as fastest growing construction market among emerging countries in Asia, according to BMI Research (2018) Annual growth rate of this industry is more than 6% per annum in 2017 and it is expected the same in 2018 (HVACR Vietnam, 2018)

The value growth of Vietnam construction industry in 2018, 2019, and 2020 is expected at 11.3 US$ billion, 12.6 US$ billion, and 13.9 US$ billion (HVACR Vietnam, 2018) This industry contributes to 5.1% of Vietnam’s GDP in 2018 and it is expected at 5.1% and 5.0% in 2019 and

2020 (HVACR Vietnam, 2018)

Table 4.3: Vietnam’s construction industry

Source: HVACR Vietnam (2018) Construction industry has a lot of potentials for further development This argument is proven through the plan of Vietnamese Government to invest more into public construction projects in order to improve living standards and infrastructure in rural areas during 2016-2020 (Rider Levett Bucknall, 2017) In addition, the firms in this industry may gain the benefit from construction projects for low-income people since the government launches Housing for Poor Rural Families Program and low renting houses in industrial zones for the labors (Rider Levett Bucknall, 2017) Moreover, the demand of the installation of electricity and water is expected increasing since the government aims to increase seaport capacity under a new master plan for seaport development until 2020 (Rider Levett Bucknall, 2017)

4.1.3.2 Consuming market

In term of consuming market, the market is characterized by property types, including office, retail, and residential Moreover, highest consumption is in Hanoi and Ho Chi Minh City which are considered as the most dynamic cities in Vietnam The office market is characterized

by grade and there are 2 grades, namely Grade A and Grade B Total stock by square meter of office in Hanoi is higher than in Ho Chi Minh City in both of Grade A and Grade B office type (Jones Lang LaSalle, 2017) However, the occupancy rate in the office of Ho Chi Minh City is slightly higher than in Hanoi Jones Lang LaSalle (2017) reports that occupancy rate of office in Hanoi is 93.6% while this number in Ho Chi Minh City is 94.9% Moreover, Hanoi market gains positive outlook due to good economic performance and the rise of newly established firms in this city In addition, total supply for office market in Hanoi and Ho Chi Minh City are both