THE RATIONALE OF BUILDING THE STRATEGY
Theory of building the strategy
"Strategy is a series of complex activities to mobilize resources of an organization in order to achieve a given purpose (Curriculum of Strategy Management of Griggs University)
Strategy is a multifaceted concept with various interpretations from different authors A D Chandler, in his 1962 work "Strategy and Structure," defined strategy as the determination of fundamental long-term objectives and the allocation of essential human resources to achieve these goals By 1980, J B Quinn expanded on this idea in "Strategic for Change: Logical Incrementalism," offering a broader definition that describes strategy as an integrated pattern or plan encompassing main objectives, policies, and a series of closely structured activities.
After that Mr Johnson, G., Scholes, K in Exploring Corporate Strategy
In 1999, the concept of strategy was redefined to emphasize the importance of adaptability in a rapidly changing environment Strategy is described as the long-term orientation and scope of an organization aimed at achieving a competitive advantage This involves effectively managing human resources to respond to shifting market demands and meet customer desires.
In five -Ps strategy definition, Mr Mintzberg generalized the aspects of management strategy as follows:
Plan: a series of activities were intended consistency
Pattern: Consistency of behavior according to the time, intended or not Position: Harmony between organization and its environment
Perspective: The way to aware deeply about the world
Ploy: a concrete way to cheat rivalries
1.1.2 The role of business strategy to an organization
- To assist enterprises to identify any competition in the market and what types of business activities conducted on the market (market, scope)
- To show how the organization can operate better to compare with rivalries in markets (Competitive advantage)
- To help to plan the appropriate resources (skills, assets, financial, relationships, technical competence, facilities) need to be able to compete (the resources).
- To analyze factors from external environment that affects the competitive ability of the organization (Environment)
- To realize values and expectations that the authorities inside and outside the organization need (Investors)
Analysis of business strategy categories
In any organization, strategies are present in several different levels - extending from the entire enterprise (or a business group) to every employee.
Corporate strategy defines the overarching goals and scope of an enterprise, aligning with the expectations of stakeholders This crucial level is shaped by investor interests and directs strategic decision-making across the organization Typically articulated in a "mission statement," business strategy serves as a clear framework for guiding the company's direction and objectives.
A business unit strategy focuses on how a company can effectively compete in a specific market by making strategic decisions regarding product selection that aligns with customer needs This approach aims to achieve a competitive advantage over rivals while also identifying and leveraging new opportunities for growth.
A functional strategy outlines how each department will execute the overall company strategy, emphasizing the management of resources, processes, and personnel This approach ensures that operational issues are addressed effectively at both the company and departmental levels.
An effective implementation strategy is structured at three key levels: Group, business unit, and departments Notably, the business unit level serves as a critical battleground for competition within the industry.
Michael Porter has outlined three key strategies that businesses can implement at the unit level to gain a competitive advantage By adopting an appropriate strategy, companies can leverage their strengths while safeguarding themselves against the impact of the five market forces.
The profitability of an enterprise largely depends on the attractiveness of its sector, but equally important is the business's standing within that sector Even in industries with below-average profitability, a business that holds a strong competitive position can achieve significant profits.
Businesses establish their market position by leveraging their unique strengths, as highlighted by Michael Porter, who identifies two primary advantages: cost leadership and product differentiation By utilizing these advantages, companies can adopt one of three overarching strategies: cost leadership, product differentiation, or a focused approach.
Generic strategies are implemented at the business unit level and are not reliant on a specific business or sector The table below demonstrates Porter's generic strategies.
Overall Market Cost Leadership Strategy Differentiation strategy Focused market Focus strategy
Table 1: Generic strategies in the five competitive forces model of Michael Porter
This strategy focuses on establishing the company as the low-cost producer within the industry while maintaining specific quality standards By pricing products at the industry average, the company aims to achieve higher profits compared to competitors, or alternatively, by offering lower prices, it seeks to capture a larger market share.
In a competitive market characterized by a "price war," companies can sustain interest while competitors incur losses Even in the absence of pricing conflicts, the industry continues to evolve, allowing firms to reduce costs and maintain profitability over time Strategic cost management is particularly crucial for larger markets, enabling companies to optimize production expenses while remaining competitive.
To enhance cost efficiency and gain a competitive edge, companies can implement various strategies such as sourcing affordable raw materials, optimizing the transition of business operations overseas, and considering mergers or expense reductions By effectively managing these aspects, businesses can maintain a cost leadership advantage over competitors who may struggle to reduce their costs similarly.
The successful companies in the application of leading strategic costs usually have the following characteristics:
• a good ability to access the capital to invest in better production equipments. Many other companies cannot overcome this barrier.
• a product design capability to increase production efficiency, for example, creating a small detail to shorten the assembly process.
• There are effective channels of distribution.
A low-cost strategy, like any general strategy, carries inherent risks, particularly when competitors lower their production costs Even with advancements in modern technology, unforeseen disruptions in pen production can diminish the competitive edge of businesses that lead in cost efficiency.
Some companies have adopted strategies that target niche markets, allowing them to reduce costs more effectively than in traditional market segments These companies often collaborate to create larger market control.
This product development strategy creates unique product characteristics that earn customer respect and appreciation The added value from this uniqueness enables businesses to set higher prices without risking buyer backlash Companies anticipate that these higher prices will not only cover increased supply costs but also allow them to pass on price differences to customers, who find it challenging to locate similar products elsewhere.
The businesses are successful in differentiation strategy often have strengths as followings:
• Ability to research and access to leading scientific achievements.
• Group research and product development (R & D) have the skills and creativity.
• Sales teams are able to communicate the strength of the products to customers successfully.
• Having reputations for quality and innovation capability.
Product differentiation strategies carry risks, including the potential for competitors to imitate successful products and shifts in consumer preferences Furthermore, companies that adopt a focus strategy can often achieve greater product differentiation within their specific market segments, enhancing their competitive edge.
Introduction of Phuong dong Petroleum Tourism Joint-stock company
Phuong Dong Petroleum Tourism Joint-stock Company (PTC) originated as Phuong Hoang Hotel, a state enterprise, which was later renamed Phuong Dong Hotel by Decision No 2057 QD/UB on December 26, 1994, by Nghe An province On February 4, 2007, with approval from the Nghe An People’s Committee, PetroVietnam took over Phuong Dong Hotel Company, rebranding it as Phuong Dong Petroleum Tourism Company The company held its inaugural shareholders meeting on January 21, 2008, officially becoming Phuong Dong Petroleum Tourism Joint-stock Company.
Upon its establishment, the company began with nearly $1 billion in capital and inherited a severely degraded infrastructure, including motels and public restaurants affected by the war The workforce consisted of approximately 70 individuals, none of whom held a university degree Despite these challenges, the company achieved annual sales close to $1 billion.
In 1996, the company was renamed Phuong dong Hotel Tourism Company and the company had carried out the construction of Phuong dong hotel with 180 bedrooms of three star standard.
On 19/05/2000, Phuong dong hotel was brought into operation of phase 1 with
86 rooms This was a milestone for the development of the company.
From 2001 to 2007, the company experienced significant growth, with sales soaring from 9.3 billion to 68 billion Capacity utilization improved from 53% in 2001 to 73% in 2007, while the average room rate nearly doubled, increasing from VND 180,000 to VND 340,000 Despite achieving a high annual growth rate and enhancing staff livelihoods, the company faced financial challenges, resulting in ongoing losses due to both subjective and objective factors.
BUILDING BUSINESS STRATEGY FOR PERIOD OF 2010-2015 AND SOLUTIONS
Strategic options for Phuong Dong Petroleum Tourism Company for period of 2010-2015
Using QSPM matrix (quantitative strategy planning matrix) to assess and compare the efficiency of the strategy:
STRATEGIES Leading the cost Differentiation Focusing
Weight Attractiveness Total Attractiveness Total Attractiveness Total
The rapid growth on economy of Nghe An and the Central Region
Advantageous cultural and natural conditions of Nghe An and
The major economic projects in the central region
Transportation system development in Nghe
An and the central region
Climate changes and environmental pollutions are becoming more serious
Central Region are upcoming birth
Lack of experience in marketing to foreigners 0.1 2 0.2 2 0.2 1 0.1
Lack of experience in advanced management 0.2 3 0.6 4 0.8 2 0.4
Judging directly the matrix, we can see that: ( we only consider factors having significant weights)
External factors play a crucial role in shaping business strategies, with opportunities carrying a significant weight of 0.55 The rapid economic development in Nghe An and the Central regions enhances investment attractiveness, influenced by cultural conditions and infrastructure Among various strategic approaches, the focusing strategy stands out with a total weight of 1.95, surpassing the leading cost strategy at 1.7 and the differentiation strategy at 1.55.
Internal factors: Weakness of focusing strategy has lower value than other strategies Therefore, we should consider about using focusing strategy for the company.
The QSPM matrix indicates that the focusing strategy achieved the highest score of 6.5 points, prompting PTC to adopt this approach to enhance its competitiveness To effectively implement the focus strategy within the hotel business sector, it is essential to identify target customers while integrating the model of five competitive forces.
PTC targets premium market segments, focusing on high-income individuals, organizations, and companies with substantial financial resources, particularly those based in Nghe An province or visiting from both domestic and international locations Their clientele includes traditional customers as well as officials and leaders from major corporations such as Vietnam Petroleum Corporation, Vietnam Electricity, Coal Mining Corporation, Vinashin, Song Da, Truong Son, Tan Tao, AIG, and Prudential, among others The company emphasizes professionalization to enhance its service offerings and meet the needs of this diverse customer base.
To achieve a high level of professionalism in product development and effectively meet customer demands, the company must establish a well-structured organization and employ a highly trained professional team Additionally, fostering seamless collaboration among departments is essential to ensure synchronized services, enhance system flexibility, and minimize incidents.
Building a strong business culture is essential for fostering a healthy, respectful, and civilized work environment Despite its importance, many companies still overlook this critical aspect A well-defined business culture not only drives organizational growth but also enhances employee satisfaction and productivity.
Professionalizing staff and cultivating a strong business culture are essential for the sustainable growth of a company, particularly in the tourism sector These elements serve as intangible assets, creating a competitive edge that is challenging for rivals to replicate Additionally, they enhance the overall customer experience, which influences the bargaining power of clients.
Companies often offer packages at higher prices than market rates, sometimes exceeding those of competitors To alleviate customer concerns, it's essential for businesses to present their packages in a menu format that clearly outlines the services offered along with their respective prices By providing transparent and detailed information, customers will feel more confident and informed about their choices.
Enjoy our exclusive 1-day stay package, which includes a warm welcome, luggage assistance, and a seamless check-in process Guests will receive a breakfast ticket, along with tickets for aerobic classes, swimming, and tennis Additionally, the package includes one laundry ticket and a 10% discount on auxiliary services such as massage and spa treatments, plus complimentary parking for your convenience.
- Package tour: tour contract (departure, destination), top hats, drinks, cold towels, insurance for tourists and tour guiders.
Efficiently serving packaged food involves attentive waitstaff who promptly open and pour drinks, ensuring that meals are served quickly to minimize customer wait times It is essential to swiftly clean up any leftover items while maintaining a beautifully decorated and tidy table Additionally, offering tea, fruits, and desserts after the meal enhances the overall dining experience.
All orders are tailored to the records and information provided with the forms Customers have the flexibility to utilize the entire package or select individual services, but the initial pricing remains constant Consequently, when customers access the PTC service system, they are aware that it is designed to cater to their specific needs Additionally, the bargaining power of suppliers plays a crucial role in this dynamic.
PTC has identified that high-end clothing shops often sell a limited number of high-priced products, focusing on maximizing profit To achieve this, PTC purchases products in small quantities, which inversely affects the unit price due to low productivity For instance, when buying cold towels, they may purchase 5,000 units at 1,200 dong each, totaling 6,000,000 dong, which will last three months Suppliers offer discounts for larger orders, but PTC prefers to buy at higher prices to maintain flexibility and ensure product quality and safety Additionally, PTC plans to negotiate with distributors to lower raw material costs by leveraging its reputation and collaborating with other industry units for bulk orders, thus minimizing expenses while maintaining quality.
To safeguard its specialized products from substitutes, PTC must adhere to four-star standards and ISO 9001-2008 quality management principles As competitors increasingly replicate successful business models, PTC should focus on continuous competitor analysis and enhancing product packaging Meanwhile, the International Travel Center offers an enticing package called "One Day, Three Countries," attracting numerous tourists This unique journey begins at 5 AM in Vinh and includes a lunch stop at 11:30 AM in Vientiane, the capital of Laos.
Laos offers a unique one or two-day tour package that allows customers to explore tourism sites until 3 PM before heading to Bangkok for dinner at 6 PM This innovative product has prompted various travel agents to create similar offerings, leading to a fragmented market To stand out, PTC should establish representative travel offices in Laos and Thailand, facilitating customer engagement through cultural exchange programs, forums, and local events By creating memorable experiences, PTC can enhance its market presence and foster deeper connections with travelers.
To create a certain distance to the competitors in the optimization and product differentiation strategies centralized, requiring companies with concrete plans as follows:
To strengthen its brand, PTC must develop unique and competitive tourism products This can be achieved by creating an attractive package that includes Phuong Dong Hotel, an international travel agency, Truong Thi restaurant, and Quynh Luu Plaza, alongside world-class marine ecology attractions, luxury accommodations like Bai Lu Resort and Daewoo Hotel, and modern amenities such as Big C Supermarket This strategic approach aims to enhance visitor stay duration and boost customer spending.
To enhance the visibility of cultural and historical relics in the province, the company will focus on professionalizing its promotional activities This initiative will target key markets for tourism services at the PTC travel center, with a particular emphasis on promoting tourism products and the Petroleum trademark.
Propose of functional strategies
1.Restrict to access and after sales services.
5 Property of the company. international markets;
2 The increasing complexity of logistics (airlines, hotels, buses, restaurants, etc);
3 Natural environment and potential local markets of Vietnam;
Use strengths to take advantages of opportunities
Overcoming weaknesses by taking advantage of opportunities
-Ability to provide high quality travel services.
Use strengths to avoid threats
Minimize weaknesses and avoid threats organizations in the world.
The analysis of the QSPM matrix indicates that PTC should implement centralized strategies focusing on Strengths-Opportunities (SO) and Weaknesses-Opportunities (WO) In alignment with the company’s vision and objectives, it is essential to develop detailed plans for these strategies to ensure effective execution and optimal results.
3.2.2.1 Strategies to build business culture.
Business culture is inseparable from social culture because members of business are also members of family and society.
Business culture serves as a vital intangible asset for clients engaging with PTC, emphasizing the need for the company to modernize its working style and adopt innovative management practices Key components that define a company's uniqueness and value include knowledge, ethics, and internal regulations Furthermore, an appreciation for aesthetic elements such as logos, commercial slogans, and customer interaction reflects the essence of PTC's business culture.
To foster a distinctive cultural environment within the company that aligns with societal norms, it is essential to train and support leaders in effectively addressing cultural issues This orientation will empower them to cultivate a workplace culture that reflects the organization's values while remaining relatable and inclusive to the broader community.
- To issue, modify and notice the rules and regulations throughout the company.
- Control input quality of staffs on ethics, behavior and virtue.
- Organize conferences, sports, game shows, travel, picnic for employers to create attachment and empathy in the company.
PTC should quickly build the overall marketing strategy through functional marketing strategies of each unit In which they should give the following items:
- Survey plan consists of market, tastes, culture, economy and weather in the tourism places.
- Making progress and period of the implementation (month, quarter, year)
- Selecting means of media (Internet, TV, newspaper, leaflet )
- Assessing the feasibility and having plans of regular inspection and supervision
Our group suggest PTC cooperating with Accor Corporation to gradually build MICE professional product package Accor Corporation currently has been investing throughout Vietnam through the advice of AsiaInvest Investment
Nghe An currently lacks any companies affiliated with Accor, presenting a unique opportunity for PTC to leverage its advantages and establish renowned hotel brands such as Sofitel, Novotel, Mercure, Pullman, and MGallery in the region.
Travel services are increasingly expanding into domestic markets and neighboring countries by establishing fixed tours on a weekly, monthly, and quarterly basis This approach enables PTC to effectively manage customer participation based on distribution from various units Additionally, the consistent organization of these tours helps the travel center maintain and enhance its brand identity.
The Company should limit its trading activities, as trade is not its core business It is advisable to focus on high-value products with low capital requirements, such as Phu My Fertilizer from Phu My Petroleum Fertilizer Company, along with oil, fuel, and resins from Vietnam.
Petroleum Co They should remove products having more risks and no manpowers to meet the requirements of business such as cattle foods, agricultural products.
PTC should prioritize recruitment and professional training initiatives for its employees, focusing on in-depth training opportunities across all departments By ensuring that every employee has access to specialized training in their respective areas, the company can enhance skill development Additionally, PTC should incentivize skilled workers through salary increases and promotional opportunities, fostering a motivated and capable workforce.
To retain employees for the long term, the company must consistently enhance their income and establish competitive remuneration for skilled workers Additionally, implementing training programs will create a flexible system that motivates employees to develop their skills and aspire to become key contributors within the organization.
Restructuring is vital for maintaining an active and innovative company, enabling the development of flexible business plans while minimizing paperwork and reducing costs The parent company plays a crucial role in overseeing its units, providing necessary guidelines and support to facilitate effective decision-making.
PTC should develop a link system to facilitate the distribution of products and services within its mutual assistance plan, creating a network of hotels, restaurants, and travel options For instance, tourists staying at the budget-friendly Phuong Dong hotel can enjoy meals at Truong Thi restaurant, which offers lower prices compared to Sao Mai restaurant located within the hotel.
Next, PTC should bring the processes and regulations of ISO 9001 - 2008 applied to business activities that helps the company reduce risk, errors in handling works and situations.
To enhance the efficiency of software applications for document management, record keeping, and personnel systems, PTC must adopt modern technologies and update its outdated systems Strengthening partnerships with innovative companies globally will facilitate the acquisition of new technologies Additionally, the swift implementation of management software across various domains, including planning, finance, human resources, and website management, is essential for improved operational effectiveness.
PTC leaders should motivate employers to foster creativity in their work processes and leverage scientific advancements in production This approach aims to minimize risk levels for employees operating in hazardous environments, including laundry rooms, electrical transformer rooms, water pumping stations, and generator facilities.
PTC needs to actively pursue the collection of bad debts totaling 47 billion VN dongs to reinvest in its operations Additionally, it should focus on reducing unnecessary expenses and promoting economic efficiency while combating wastefulness The company’s loan strategy should include securing preferential loans from the Vietnam Petroleum Group and enhancing internal capital through employer loans in the form of internal bonds Furthermore, PTC must ensure transparency by disclosing its financial revenue and expenditures, thereby fostering trust in its capital utilization.
In business processes, it is essential to allocate 1% to 2% of profits for warranty and infrastructure maintenance to ensure operational capacity and mitigate degradation risks Additionally, the company must strategize new, effective, and feasible investment projects, including the upgrades of Truong Thi Restaurants, restoration of Quynh Luu Plaza, and the construction of the Cua Dong Hotel Efforts should also focus on completing construction documentation for hotels and restaurants in Nghi Son Peninsula and Vung Ang Economic Zone Furthermore, PTC should explore plans for a five-star hotel adjacent to the existing Phuong Dong 4-star hotel.
Solutions to implement basis strategies by differentiation concentration method from 2010 to 2015
To implement the above mentioned strategies in 2010-2015 period, Group 6 with the assistance from PTC's departments and leaders propose solutions as follows:
Table 14: Allocation table to implement detail strategy
Strategy 1: Strategy for building business culture
Full implementation of the policy, the
Constitution and laws of the State
Emphasizing criteria of production and business activities and criteria of supplying products
Building regulations of cultural life at office.
Strategy 2: Develop and penetrate market
Solutions Establishing a representative office in Hanoi, Da Nang,
Directors, Departme nt of Planning and
Upgrading an office for selling airlines ticket
The establishment of business and manufacturing units into subsidiaries that operate independently.
Implementation of the projects in Nghi
Departme nt of Planning and Investme nt
The Phuong Dong Hotel - Internatio nal Travel
Expanding outside customers who will use the MICE tours.
Departme nt of Planning and
Planning Marketing X X 0.3 plans close to the business strategy and overall business strategy of each month, quarter, year
Investme nt coordinat es with Strategy 3: Develop products and services
Improve the quality of products and services
Board of Directors and Chiefs of departme nts
- Maintaining PTC's trademark and image X X X X X X The whole company
Diversific ation of products and services
- Promoting research and development to design new products and services such as food tourism, adventure tourism, tourism associated with major events
Applying new technologies in providing services to customers.
Departme nt of Planning and Investme nt;
Departme nt of Organizat ion - Administ ration
Proposing plans for merged hotels directly under
Group to form connections on a network of hotels, services and travel across the country.
Departme nt of Planning and Investme nt
Promoting cooperation programs with The Accor group to build a network of deluxe hotels
Departme nt of Planning and Investme nt;
Directors of the units Strategy 4: Developing human resources
Recruiting a trading representative staff for the company.
Departme nt of Organizat ion - Administ ration
Strengthening staffs for marketing activities both in and outside the country.
Representative Office in Hanoi, Da Nang,
Recruiting Deputy director of tourism X
Recruiting guiders who can speak Thai,
Training staff with the goal of at least
10% are fluent in foreign languages,
Departme nt of Organizat ion - Administ ration
Encourage staff to participate in training programs and
Maintain and develop the cultural environm ent
1.2 Holding festivals, conferences and seminars.
- Encourage staffs to have the initiatives X X X X X X 0.3
Changing company structure under the plan of parent company and its subsidiaries.
Board of Directors, Chief of Organizat ion - Administ ration Departme nt
Changing human organization appropriate to the new situation.
Solutions Basic renewal of management and training of human resources in tourism;
Renewal of programs, content and training
Organizat ion - Administ ration Departme
0.2 methods complies with national standards for the tourism industry; associate theory with practice and training with research.
To promote basic research and research of scientist application of advanced technologies, creating new and effective development nt
Applying of Smile software for hotel management; upgrading accounting
Increasing the charter capital according to the plan in which assets of
Quynh Luu Plaza are contributed from
Powerland from 150 billions dong to 175 billions dong.
Coordinate with agencies to enhance collecting of bad debts.
Borrowing capital by mobilizing loans from officers and employees with preferential interest rates.
Group through business assistance programs with preferential interest rates.
Open a representative office for the International
Complete the lease and plans to attract investments in two industrial projects in
Proposals to Government, General Directorate of Tourism and other related units
- The legal system in tourism needs to be standardized to ensure the development of business tourism;
- Vietnamese tourism needs to receive sufficient supports of international acceptance and international experiences, learn from lessons of developed countries to shorten time and to avoid damage and unfortunately mistakes.
- To actively promote Vietnam's image in new era, reduce form of advertising on heroism in Vietnam, led to misunderstanding of foreign guests was still the country of Vietnam war.
- To actively monitor the activities of hotels and travel centers in the market, prevent dumping and using criteria indiscriminately.
- Support businesses in the construction of their culture.
Proposal to Vietnam Petroleum Group
- Pay close attention to each member.
- It had better to constitute Tourism Corporation, which helps tourism system to increase cohesion and competitiveness.
1 Tourism is an attractive business sector so competitive pressure in doing tourism business is very high
2 Integration into the world economy will bring both opportunities and threats to businesses Competitive challenges are always the first challenges that businesses have to confront and overcome to survive
3 In fact, tourism businesses in Viet Nam have not enough profession and management skills while the market requires highly qualified products and services
4 PTC has more than 10 years of experience in businessing tourism They also have remarkable results that have created backgrounds of development and sustainable development In the future, PTC surely will develop faster and stronger With theCapstone project report “ Building business strategies for PTC in period of 2010-2015”, we hope that this project will bring useful values for company, improve the company’s economic effectiveness, create more jobs for employees and contribute toNghe An tourism development.