Finding critical success factors for thuong long join stock company in the period 2018 2022

Lunghwa University of Science and Technology Department of Business Administration Thesis for a Master’s Degree Finding critical success factors for Thuong Long Join stock company in th

Lunghwa University of Science and Technology Department of Business Administration

Thesis for a Master’s Degree

Finding critical success factors for Thuong Long Join stock company in the period 2018-2022.

Researcher: Le Hai Nam

Supervisor 1: Chia-chi Tsan

Supervisor 2:Nguyen Thi Hong Hanh

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 Finding critical success factors for Thuong Long Join stock company in the period 2018-2022 published by Mr Le Hai Nam in the Master Program of Graduate School of Department of Business Administration

Master’s Degree Examination Board

Board Members：TSAN CHIA-CHI

Doan Thu Trang

Advisors： Nguyen Thi Hong Hanh

TSAN CHIA-CHI

Date：2018/11/25

Graduate School：Department of Business Administration

Date：November, 2018 Degree：Master

Researcher：Le Hai Nam Advisor：Chia-chi Tsan; Nguyen Thi Hong Hanh

This study researches about the company Thuong Long join stock company What aspect the company should focus to compete with other competitors? There is lack of research about critical success factors for this industry in Vietnam This study use mix research method which including case study and t test analysis There are 22 cases was analyzed The result showed that seven critical factors influencing the success of the company Those factors are: Transportation management, Relationship marketing, Overall product quality, Upgrading staff competencies, New Product development, Reaction to customer needs, Manufacturing

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ACKNOWNLEDGEMENT

To teachers and staffs at International School, Vietnam National University, Hanoi Initially, I would like to express my gratitude to all teachers in International School, Vietnam National University for giving a great opportunity to work as an intern before my graduation During my study process, I applied knowledge studied in school

as well as learnt other skills that helped so much for my future career This is such a precious experience to my period of student

Besides that, I would like to show my deepest gratitude to my supervisor –Supervisor 1: Chia-chi Tsan and Supervisor 2: Nguyen Thi Hong Hanh my enthusiastic and considerate teachers who always supported and helped me in my thesis Actually, without your guidance, my thesis could not be completed

I would like to thank my family for all your support when i spent much of my time with study and business

Thank you so much for your kind cooperation during my master study time

Yours sincerrely,

Le Hai Nam

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TABLE OF CONTENTS

ABSTRACT i

ACKNOWNLEDGEMENT ii

TABLE OF CONTENTS iii

LIST OF TABLES vi

LIST OF FIGURES vii

1 INTRODUCTION 1

1.1 Reasons for choosing the research topic 1

1.2 Research objectives: 1

1.3 Scope of research: 1

1.4 Research method: 2

1.5 Content of thesis: 2

1.6 Proposed timetable for completion of the thesis 2

2 LITERATURE REVIEW 3

2.1 Strategy: 3

2.1.1 Strategy definition 3

2.1.2 Levels of strategy 3

2.1.2.1 Corporate-level strategy 3

2.1.2.2 Business-level strategy 3

2.1.2.3 Functional level strategy 4

2.2 Strategy and advantage competiveness 4

2.3 Balance score card 4

2.4 formulate business strategy 6

2.5 Critical success factors 7

2.6 Determination of factor importance 11

3 THUONG LONG JOIN STOCK COMPANY 13

3.1 General information 13

3.2 Establishment and the milestones 14

3.3 Mission, vision and core value: 14

3.3.1 Visions: 14

3.3.2 Objectives: 3.3.3 Mission 15

3.4 Organizational structure 16

3.5 Products and facilities of Thuong Long join stock company 19

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3.5.1 Concrete batching plant 19

3.5.2 Abode brick: 21

3.5.3 Enameled brick 22

3.5.4 Terrazzo Brick 23

3.6 Analyzing the current strategy of Thuong Long Joint Stock Company 24

a/ Strategy on product diversification 24

b/ The strategy focuses on the market trend 24

3.7 Assessing the current strategy of Thuong Long Joint Stock Company 24

a/ Advantages 24

b/ Disadvantages 24

3.8 Pestel analysis 25

3.8.1 Political 25

3.8.2 Economics 26

3.8.3 Social and cultural 27

3.8.4 Environment 27

3.8.5 Technologies 28

3.8.6 Legal 28

3.9 Five Forces’ Analysis 28

3.9.1 Power of buyer 28

3.9.2 Power of supplier 29

3.9.3 Threat of substitute 29

3.9.4 Rivalry among competitors 29

3.9.5 Thread of new entry 29

4 RESEARCH METHOD 31

4.1 Case study methodology 31

4.2 Sample 31

4.3 Research processes 32

4.4 Deep interview 33

4.4.1 Research objectives: 33

4.4.2 Methods, questions interview, interview information, summary result (attached file) 33

4.4.3 Sample information 33

4.4.4 Result: 33

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4.5 Questionnaire 33

5 DATA ANALYSIS 35

5.1 Reliability 35

5.2 Rank of the importance 35

5.2.1 Calculate sum 35

5.2.2 T test 36

5.3 EFA test 38

6 APPLICATION OF THE BALANCE SCORE CARD 40

6.1 Competitor analysis 40

6.1.1 Competitors 40

6.1.1.1 Duc Anh Construction Joint Stock Company 40

6.1.1.2 Viet Lam construction and concrete joint stock Company 40

6.1.1.3 Tuoi Tre Building materials co-Operative 40

6.1.1.4 Tự Lập Co., Ltd 41

6.2 Benchmarking with competitors 42

7 CONCLUSIONS 44

7.1 Conclusions 44

7.2 Management implication 44

7.3 Limitation and Future research 45

REFERENCES 46

APPENDIX A: BẢNG HỎI 48

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LIST OF TABLES

Table 1: Thesis progress 2

Table 2: Critical success factors: industries example (Leidecker and Bruno, 1984) 7

Table 3: Literature review critical factors 8

Table 4: The Company’s assets over the years 17

Table 5: Company’s capital over the years 17

Table 6: Investment at current prices by types of ownership (Ministry of Investment and Planning) 26

Table 7: Proposed factors 1 34

Table 8: Reliability Statistics 35

Table 9: Ranking the importance of items 36

Table 10: One sample test for major activities of business 37

Table 11:One sample test for activity require large dollars involved 37

Table 12: One sample test for activity has major profit impact 38

Table 13: One sample test for activity has major changes in performance 38

Table 14: Principal Component Analysis 39

Table 15: KMO and Bartlett's Test 39

Table 16: Competitors analysis 42

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LIST OF FIGURES

Figure 1: Balance score card framework (Kaplan and Norton, 2006) 5

Figure 2: Andrew’s model of the strategy formulation process (Hofer and Schendel, 1978) 6

Figure 3: Competence in Roadstone (O'Driscoll, 2006), 11

Figure 4: The organization chart 16

Figure 5: Sale 18

Figure 6: Revenue 18

Figure 7: Cao Xá Concrete batching plant 19

Figure 8: Phượng Lâu Concrete batching plant 19

Figure 9: Manufactor in Vĩnh Phúc 20

Figure 10: Manufactor in Vĩnh Phúc 20

Figure 11: Tremie lorries, ready-mix concrete lorries 20

Figure 12: Adobe brick 21

Figure 13: Enameled brick 22

Figure 14: Terrazzo brick 23

Figure 15: Gross domestic product at constant 2010 prices by types of ownership and by kinds of economic activity (Ministry of Investment and Planning) 26

Figure 16: GDP growth (annual %) (World bank data) 27

Figure 17: Five Forces’ 30

Figure 18: Research process 32

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1 INTRODUCTION

1.1 Reasons for choosing the research topic

Thuong Long join stock company is a pioneer in producing building materials in large scale The company focuses on producing new building materials that reducing environment impacts such as un-burnt blocks The company provides fulltime jobs for local people Company also faces intensive competition Other competitors enter the market, try to gain market share Thuong Long join stock company is following the diversify products strategy, entering new market The company faces a lot of challenges

to achieve its goals

How to build a right strategy for the company is very important for a CEO Making the right strategy is very important for the success of the company When “Build business strategy for Thuong Long join stock company in the period 2018-2022”, the company need to analysis its competitors Lack of research point out: what are the critical success factors for a construction material company in Vietnam? Lack of research discuss about this topic Which aspects of business should the company focus

to keep its leading position in the region?

1.2 Research objectives:

- understand building strategy processes, and literature review about strategy

- understand the current situation of Thuong Long joint stocks company

- Formulate strategy for Thuong Long join Stocks Company

1.3 Scope of research:

Content: literature review about current issues and formulate strategy for Thuong

Long join stocks company in the period 2018-2022

Location: Thuong Long’s market, and its future market

Time: understand the company’s activities from 2009-2017, and build strategy for

the period 2018-2022

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1.4 Research method:

This thesis will use qualitative research, by asking each staffs of Thuong Long join stock company This study also use balance score card to justify the important of each factor

1.5 Content of thesis:

This thesis includes six chapters:

Chapter 1: Introduction

Chapter 2: Literature review

Chapter 3: Thuong Long join stocks company

Chapter 4: Research method

Chapter 5: Data analysis

Chapter 6: Application of balance score card

Chapter 7: Conclusions

References

1.6 Proposed timetable for completion of the thesis

Table 1: Thesis progress

10/2017 Thesis title

11/2017 Revise thesis’ topic

12/2017 Submit thesis proposal

2/2018 Report thesis’s progress 1 3/2018 Report thesis’s progress 2 4/2018 Full thesis submision 6/2018 Refine thesis 1 7/2018 Refine thesis 2 8/2018 Submit slides of thesis defend 11/2018 Thesis defend

long-Thompson, Strickland and Gamble (2007) identify the role of strategy such as: improving financial performance, positive impact on revenue growth, earnings, and return on investment

2.1.2.2 Business-level strategy

Beard and Dess (1981) defined Business-level strategy as “in terms of variation in firm characteristics relevant to competitive success or failure within a given industry In this paper, a firm’s competitively relevant, business-level characteristics are conceived exclusively in relative terms That is, a firm would have a separate business-level strategy for each industry in which it competed, and the relevant characteristics of the firm’s business-level strategy would be measured relative to the range and norms on each characteristic in each of its industries”

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2.1.2.3 Functional level strategy

“At the functional area level, the principal focus of strategy is on the maximization

of resource productivity” “Synergy involves the coordination and integration of activities within a single function” (Porter 1980)

2.2 Strategy and advantage competiveness

Porter (1980) defined different strategies to gain advantage competiveness

* Cost leadership strategy

“In it, a firm sets out to become the low-cost producer in its industry” “The sources

of cost advantage are varied and depend on the structure of the industry They may include the pursuit of economies of scale, proprietary technology, preferential access to raw materials, and other factors” (Porter 1987)

* Differentiation strategy

“In a differentiation strategy, a firm seeks to be unique in its industry along some dimensions

that are widely valued by buyers It selects one or more attributes that many buyers in

an industry perceive as important, and uniquely positions itself to meet those needs It is rewarded for its uniqueness with a premium price” (Porter 1987)

* Focus strategy

Porter defined focus strategy as “selects a segment or group of segments in the industry and tailors its strategy to serving them to the exclusion of others” (Porter, 1980)

2.3 Balance score card

The idea of balanced score card started during industrial age (1850-1975) During this time, financial control systems were developed to measure the efficient allocation

of financial and physical capital (Kaplan and Norton, 1996) Alignment is a source of economics value There are four perspectives in the balanced score card framework:

Financial What are our shareholder expectations for financial performance? Customer To reach our financial objectives, how do we create value for our

customers?

Figure 1: Balance score card framework (Kaplan and Norton, 2006)

Balanced scorecard support manager implements his strategy Balanced scorecard

is based on critical success factors This thesis try to develop balanced scorecard based

on critical success factors

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2.4 formulate business strategy

Hofer and Schendel (1978) described the strategy formulation process has seven steps as: “

1 Strategy identification, that is the assessment of the organization’s current strategy and strategic components

2 Environmental analysis, that is, the assessment of the organization’s specific competitive and more general environments to identify the major opportunities and threats facing the organization

3 Resource analysis, that is, the assessment of the principal skills and resources avaiables to clse the strategic gaps identified in the step 4

4 Gap analysis, that is, a comparison of the organization’s objectives, strategy, and resources against the opportunities and threats in its environments to determine the extent of change required in the current strategy (in many models, this step is implicit rather than explicit)

Figure 2: Andrew’s model of the strategy formulation process (Hofer and

Schendel, 1978)

7 Strategic choice, that is, the selection of one or more of the strategic options for implementation ”

2.5 Critical success factors

What is a critical success factor? Rockart (1999) observes: “Critical success factors thus are, for any business the limited number of areas in which results, if they are satisfactory, will insure successful competitive performance for the organization They are the few key areas where things must go right for the business to flourish If results in these areas are not adequate, the organization’s efforts for the period will be less than defined (p 85).”

Table 2: Critical success factors: industries example (Leidecker and Bruno, 1984)

Different industries have different critical success factors (Leidecker and Bruno, 1984) Leidecker and Bruno (1984) proposed eight (8) methods of identifying critical success factors Those are:

- Environmental analysis

- Analysis of industry structure

- Industry/business experts

This study will assess the company to identify the critical factors

Different authors proposed different factors for different industries Leidecker and Bruno (1984) proposed factors: Basic R&D, New Product development, Manufacturing, Distribution, customer service, Advertising, Post sales services Kaplan and Norton (2006) proposed internal business process, customer value, learning and growth Alexander and others authors proposed customer satisfaction, service quality, customer complaints range of service offered, reaction to customer needs, service excellent, technology capability, understand the customers employee and coordination, staff development, technology leadership continuous service improvement, upgrading staff competencies, management expectations, financial growth, cost reduction, productivity improvement, asset utilization, management of working capital (Alexander, Atkin, and Brochner, 2004) Ahadzie, Proverbs, and Olomolaiye (2008) proposed critical success factors such as: overall product quality, customer satisfaction, service quality, customer complaints range of service offered reaction to customer needs O’Driscoll (2006) proposed critical success factors such as: transportation management

Table 3: Literature review critical factors

Basic R&D Basic R&D Leidecker and

Bruno (1984) New Product development Leidecker and

Bruno (1984) Technology transfer/ Technical

capability

Alexander,Atkin, and Brochner, 2004

Bruno (1984) Process efficiency teamwork

and coordination

Alexander,Atkin, and Brochner, 2004 Cost reduction, productivity

improvement

Alexander,Atkin, and Brochner, 2004 Overall product quality Ahadzie, Proverbs,

and Olomolaiye,

2008 Transportation management Aidan O’Driscoll

(2006) Internal business process Kaplan and Norton,

2006 customer service Customer service Leidecker and

Bruno (1984)

Bruno (1984) Post sales services Leidecker and

Bruno (1984) Customer value Kaplan and Norton,

2006 customer satisfaction Mukelas et al.,

2012 service quality Mukelas et al.,

2012 customer complaints range of

service offered

Mukelas et al.,

2012

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reaction to customer needs, Mukelas et al.,

2012 Relationship marketing Aidan O’Driscoll

2006 Learning and Growth Learning and Growth Kaplan and Norton,

2006 Upgrading staff competencies Alexander,Atkin,

and Brochner, 2004 Financial perspective Financial perspective Kaplan and Norton,

2006 Financial growth

(balance income and expenditure)

Alexander,Atkin, and Brochner, 2004

Asset utilization (cost reduction rates, cost per unit of output)

Mukelas et al.,

2012

O'Driscoll (2006) proposed framework for competence in Roadstone business In the framework shows fifteen important factors for a roadstone business Factors appear

in the framework for competence in Roadstone and building material are:

 Manufacture and marketing of stone based building materials

Figure 3: Competence in Roadstone (O'Driscoll, 2006),

2.6 Determination of factor importance

“The profit impact of an activity or condition is usually the most significant factor for Critical success factor identification as well as determination of factor importance”(Leidecker and Bruno, 1984) This study utilizes five criteria for justifying the importance of each factor (Leidecker and Bruno, 1984) Each question will be grade follow Likert’ 9 scales

There are four criteria to justify the importance of different success factors (Leidecker and Bruno, 1984) Those are:

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 This is major activities of business

 This activity require large dollars involved

 This activity has major profit impact

 This activity has major changes in performance

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3 THUONG LONG JOIN STOCK COMPANY

3.1 General information

Vietnamese name: Công ty cổ phần Thượng Long

English name: Thuong Long Join stock company

Business Certificate No 2600636915

Headquarters office: Phong Vân B, Cao Xá commune, Lâm Thao District, Phú

in Phu Tho, Vinh Phuc and neighboring areas The company main product lines are:

- Production of concrete and products from cement and gypsum

- Production of unbaked brick (Block), color tile

- Harbor loading and unloading, trading building materials

- Production of prefabricated concrete components

- Design consultancy for traffic construction

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- Building civil and industrial projects

- Drilling pile, foundation treatment, construction works

Thuong Long Joint Stock Company with the trademark “SONG HONG RIVER CONCRETE” - “SONG HONG RIVER UNBURNED BRICK” has a foothold on the market in the field of manufacturing and supplying commercial concrete, unburned brick, supply of building materials

We have been supplying construction materials products for the construction of key projects such as:

- Road works: Dau Lau Road - Viet Tri - Phu Tho; Dike road beside Thao river

- Bridge works: Hac Tri Bridge; Viet Tri - Ba Vi Bridge; Railroad crossing

- Technical infrastructure: Vinh Phuc Square; Swimming Pool Zone 2; 49m Buddha statue - Tay Thien Truc Lam Monastery; General Hospital of Phu Tho Province; Square of Vinh Phuc province

- Civil and industrial projects: Vinh Phuc Square; Vinh Phuc Province Theater; People's Credit Fund in Hung Lo commune- Viet Tri; Cat Tuong Pagoda; Bai noi Beach Resort (La Phu - Thanh Thuy); Vincom Viet Tri Business Center; Phu Tho College; Tax Department of Phu Tho province; Sai Gon Hotel

3.2 Establishment and the milestones

Change the business certificate (third time)

3.3 Mission, vision and core value:

3.3.1 Visions:

By pioneering aspirations with being the leader in the field Thuong Long strives to become a specialized unit of concrete and unbaked brick with prestige and leading position in the Vietnamese market and towards the world; successfully build a professional level service chain Thuong Long is a reliable partner of all investors, and

is where customers place their trust Taking advantage of existing strengths and brands,

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bringing new products such as Terrazzo tiles, unburned color tiles, unburned bricks, artificial sand, centrifugal power poles, and successful penetration to market the Northern provinces

Specific objective:

- Average annual turnover is 300 billion VND / year

- Profit margin is over 7%

- Investment in upgrading technology equipment

- Investment in expanding production scale and diversifying construction materials products

- Strengthening the human resources, the process of managing production and business

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3.4 Organizational structure

Board of directors

Chairman of the Board

Financial

Accounting

Department

Department of Economics- Planning- Engineering

Oganization

al Department

Trading Department

Cao Xa Concrete Factory

Vinh Yen

Concrete Factory

Phuong Lau Concrete Factory

Unburned brick factory

- Financial resources of the company

The financial capacity and capital of the Company are shown in Table 2.1 and 2.2

Table 4: The Company’s assets over the years

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* Technological line:

In the process of business operation, in the increasing demand of customers with the continuous growth of competitors, Thuong Long Joint Stock Company has

continuously invested in new equipment lines, increase Productivity

* Business results of the company in recent years:

The performance indicators of Thuong Long Joint Stock Company include: Consumption output, turnover, profit, local budget, market share are shown in chart and analyzed and commented clearly in the full text

Figure 6: Revenue Figure 5: Sale

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* Submit to local budgets:

Thuong Long Joint Stock Company is always one of the leading companies in contributing to the local budget

* Market share:

In the five years from 2012 to 2016, the market share of commercial concrete of Thuong Long Joint Stock Company in Phu Tho and Vinh Phuc is about 65% This is not the desired number of company, so in the next five years, the company will strive to increase their market share, and at the same time, expanding the market in neighboring provinces such as Tuyen Quang, Yen Bai, Ha Tay

3.5 Products and facilities of Thuong Long join stock company

3.5.1 Concrete batching plant

Figure 7: Cao Xá Concrete batching

plant

(Cao Xá - Lâm Thao)

Figure 8: Phượng Lâu Concrete

batching plant

(Phượng Lâu – Việt Trì)

Figure 11: Tremie lorries, ready-mix concrete lorries