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CAPSTONE PROJECT REPORT SITUATION AND SOLUTIONS FOR NHUNG CERAMICS JSC TO IMPROVE BUSINESS STRATEGIES GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT SITUATION AND SOLUTIONS FOR NHUNG CERAMICS JSC TO IMPROVE BUSINESS STRATEGIES Group No.4: Dang Van Tuan Pham Thi Nhung Pham Thi Mai Ly Nguyen Dinh Nhuan TABLE OF CONTENTS Acknowledgements Table of content Introduction Chapter 1: BASICAL ARGUMENT OF BUSINESS STRATEGY .9 1.1 Basical concepts 1.2 Vision, Mission and core competencies 10 1.3 Strategic management 11 1.4 Strategy formulation 14 1.5 Selecting and implementing strategy 23 Chapter 2: SITUATION OF BUSINESS STRATEGY OF NHUNG CERAMICS JOINT STOCK COMPANY INCLUDE LAST TIME 29 2.1 Introduction 29 2.2 Commitment to business strategies in the last few years .34 2.3 Analysis of macro-environment 34 2.4 The assessment of competitive ability of the Company 45 2.4.1 Analyzing industry environment 45 2.4.2 Evaluation of company’s strong and weak points 50 2.4.3 Evaluation of the business outstanding competence .55 2.4.4 Analysis of value range 56 2.4.5 SWOT matrix 59 2.5 The current business strategy .61 2.6 The current organization and controlling mechanism 61 2.7 Nhung Ceramics's position in the market .63 Chapter 3: SOLUTIONS FOR NHUNG CERAMICS JSC TO IMPROVE BUSINESS STRATEGIES THE PERIOD 2010 – 2015 65 3.1 Some orientation in formulating the Company’s strategy 65 3.2 The Company’s development directions .68 3.3 Targets and strategy for the period 2010-2015 69 3.3.1 External environment analysis 70 3.3.2 Internal environment analysis 71 3.3.3 SWOT matrix 72 3.3.4 Business strategy for the period 2010 – 2015 78 3.3.4.1 Organizational structure 78 3.3.4.2 Competition and investment strategy 79 3.3.4.3 Business strategy 81 3.4 Strategic solutions .84 3.4.1 Strategic solutions in production and technology 84 3.4.2 Strategic solutions in finance 85 3.4.3 Strategic solutions in HR and organizational structure 85 3.4.4 Strategic solution in marketing .86 3.5 Implementation 87 3.5.1 GANTT chart .87 3.5.2 Organization for implementation 89 CONCLUSION AND RECOMMENDDATION 90 REFERENCES 91 APPENDICES .92 List of tables Table 1.1 – SWOT matrix Table 1.2 – Strategy implementation Table 2.1 – Table of general analysis on macro-economic environment Table 2.2 – Result summary of five competitive forces model analysis Table 2.3 – Evaluation of company’s strong and weak points Table 2.4 – Evaluation of the company’s outstanding competences Table 3.1 – Table of assessment of business environment factors Table 3.2 – The table of assessing key internal factors Table 3.3 – Sum up table of assessments under SWOT matrix Table 3.4 – Table of results under the GREAT model Table 3.5 – the Company’s targets for 2010 - 2015 Table 3.6 – Gantt chart List of figures, graphs… Figure 1.1 – The strategic management process Figure 1.2 – Step in planning strategy Figure 1.3 – The external environment analysis model Figure 1.4 – Industry environment analysis model Figure 2.1 – The company’s organizational structure and Board of management Figure 2.2 – the Company’s revenue from 2002 to 2008 Figure 2.3 – Vietnam export ceramics market Figure 2.4 - Market of company Figure 3.1 – Organizational structure Figure 3.2 – GE matrix model Figure 3.3 – Types of potential competitive advantages INTRODUCTION Urgency of the subject The first thing we mention the importance of business strategy Indeed, an organization in general or in particular business to succeed needs to be able to cope with any situation, be completely autonomous, decide and take responsibility for all their activities Therefore, requires organizations to understand the trends are changing, that exploit the strengths and reduce the weakness to create innovative step for you, in other words to build them a suitable strategy Can say the role of business strategy is becoming especially important for business especially in terms of economic integration, production level and increasing competitiveness in the increasingly fierce market In fact, many enterprises in Vietnam has not really interested in the formulation of strategies for them In recent years, when Vietnam opens its economy, promote the export of thousands of businesses are established and take a new look for the economy, businesses of diverse industries enough, enough fields in which traditional industries, handicrafts, especially pottery manufacturing enterprises contributed an important role in national economic structure From ancient pottery to date are associated with living art, pottery has become a witness to the lives of people; it changes in sign of economic social cultural and religious history at each stage country In many ceramic kilns across the country, Phu Lang pottery kiln is still a familiar name to people our country with several hundred pottery kilns of which Nhung Phu Lang pottery known and famous both at home and abroad Production units Nhung Phu Lang pottery has established a joint stock company Nhung Pottery, started its operations in 2002 with initial membership of 40 members of the village of ceramic artisans, Director is Nhung Vu Huu, now the basis of the number has grown up to 800 workers, skilled workers so that more and more sophisticated products, profits yearly rise Vu Huu Nhung, 33 years old born and grew up in Phu Lang village, he graduated from the University of Industrial Arts in 1997 Unlike other students who stay in Hanoi, after his graduation, he returned home Nhung has returned homeland to start his career by the crafts of traditional handicraft village Nhung ceramics joint stock company located 20km north of Hanoi, where we will be witnessed the process of making pottery, and we understand why he choose this profession He is a talented artisan pottery, he had the idea of making ceramic products in its traditional beauty of the Vietnamese soul Over many generations, Phu Lang village only make simple products such as: vases, peace, jar, coffin and other common households He is a pioneer in creating ceramic art products, brings the brand name for Phu Lang pottery village In Phu Lang today,there are many small pottery kilns with small business, Nhung is only kiln which make valuable artproducts.There were vases, the bottle contained creactivity and unique style and design, and they have been exhibited in many galleries in Hanoi and Ho Chi Minh These products have brought many valuable not only known in the country but also attract attention, favorite friends all over the world (The USA and EU) Since its establishment (2002) Nhung Ceramics Joint stock company tends to make use of methods of strategic management in business management and in fact, has brought good results With awareness of the importance of planning business strategies in the business we boldly choose project "Perfect the business strategy of Nhung Ceramics Joint Stock Company stage 2010 - 2015" in order to put knowledge to Business Reality Research problems - Factors in the external environment impact the construction business strategy - The elements of internal enterprise impact on the construction business strategy - Analysis and assessment of general state construction business strategy of Nhung Ceramics Joint Stock Company - Orientation business strategy for 2015 includes joint stock company based on a combination of theoretical and practical analysis Objective study Perfect strategic fit of business enterprises in the period from now to 2015 Scope of research Analyze the business environment and consider the factors to the success of the company in recent years for business-oriented strategy on the domestic market and abroad in 2015 Methodological Major exercises using secondary sources and primary as follows: - Collecting data through secondary sources such as newspapers, internet, distribution channels, internal documents - Collecting primary data: Using the method of quantitative and qualitative data collection to record levels - Using a statistical analysis method to analyze the primary data collected - Interview with the members of the company's leadership as Chairman, members of the Board, Director, the development orientation of the company in the future The contribution of major exercises - Systematize a number of theoretical basics of business strategy; - Analysis and assessment of general state construction business strategy of Nhung Ceramics company - Propose a complete solution to build business strategy at Nhung JSC Structure of great exercises - Chapter 1: Basical arguments of business strategy - Chapter 2: Situation of business strategy of Nhung ceramics joint stock company includes the last time - Chapter 3: Solutions for Nhung ceramics JSC to improve business strategies the period 2010 - 2015 CHAPTER BASICAL ARGUMENT OF BUSINESS STRATEGY 1.1 Basical concepts 1.1.1 Concept of strategy The word "strategy" has military connotations, because it derives from the Greek word for general According to American Encarta, a strategy is the art and science of military management It is a plan of action designed to achieve a particular goal According to Larousse Dictionary, strategy is the mean or the tool by which objectives are consciously and systematically pursued and obtained over time The strategy definition most commonly known today as in business environment – business strategy The word "strategy" has been used implicitly in different ways even if it has traditionally been defined in only one Explicit recognition of multiple definitions can help people to manoeuvre through this difficult field Mintzberg provides five definitions of strategy: Plan Strategy is a plan - some sort of consciously intended series of action Ploy Strategy is a ploy, really just a specific manoeuvre intended to outwit competitor Pattern Strategy is a pattern - Show the firms and behaviour of the company till time Position Strategy is a position - means the match betweem company and its environment Perspective Strategy is a perspective Show the awareness of the leaders Match the different definitions about business strategy, we can see that “a coordinated series of actions which involve the deployment of resources to which one has access for the achievement of a given purpose.” (a lecture of Griggs University) Assessment of Achievability: Also in the same view, the achievability is selected based on the minimization of expenses, avoidance of both financial risks and competition Then the strategy of using strengths taking opportunities (SO) and the strategy of taking opportunities minimizing weaknesses are most achievable Assessment of Time: The estimated time for the SO strategy is very long (more than 10 years) because the company’s strengths are not strong enough In contrast, the time to minimize weaknesses and avoiding threats (WT) is very short because of the waste of time when selecting and implementing the strategy; this waste is too big and does not match with the company’s vision Under those assessments, the Company selects the WO strategy This strategy is also the company’s former business strategy This shows that the limitations from the economic crisis make the risk in international market expansion bigger and business decisions are more difficult and more costly Therefore, the Company cannot use the achievements it has reached in the past years to riskily take the opportunities that the State and the local government have offered The investment in internal strengths is selected as a safer option for the company’s development 3.3.4 Business strategy for the period 2010 – 2015 Nhung Ceramics JSC is a mono-industry company Therefore, the company’s strategy is also the business strategy From this business strategy, functional departments shall implement their functional strategies 3.3.4.1 Organizational structure The company’s scope is quite small, this is both an advantage and disadvantage of the company When the market development of the company has not yet been strong in correlation with bigger scope, then the existing scope of the company brings about positive advantages due to good combination of the company’s resources and its control of activities to follow targets An organizational structure of a company is of either one of two types, high structure or low structure With a small scope and limited financial capacity like Nhung Ceramics JSC, low structure is more appropriate: Figure 3.2: Organizational structure Chapter - Associated professor, Doctor Le The Gioi and Doctor Nguyen Thanh Liem a course book on “Strategy Management” – Statistical Publishing House The company opts for a simple, lean and mono-level organizational structure The company combines full time staffs and part-time, seasonal staffs Full time staffs take up 2/3 compared with seasonal staffs to ensure the quality and qualifications of products Seasonal staffs wil be hired at hot time of orders, immediately meeting with market demands, supporting simple work for full time staffs to reach better productivity Besides, the company also has contracts with the system of existing shops to introduce, PR the products and access new markets This will avoid unnecessary network management costs, saving financial resources for investment and development 3.3.4.2 Competition and Investment Strategy With the characteristics of artistic ceramics, ceramic industry is known with different products and considered as of monopoly structure The characteristic of this kind of market structure is that short-term profits of the industry will attract new entries in the market, which increases possible variety of options for customers, atracting customers of existing companies, decreasing their market shares and leading to losses in the industry The entry to and exit from the industry is quite free, which makes economic benefits at zero In theory, in this competition structure, goods price is higher than marginal costs and Figure equals3.3 to -total average costs Price is stressed on and impacts many decisions GE Matrix Model of the company However, in general assessments, the diversification of products and marketing costs are also key success factors in this kind of industry structure (Accoding to The lecture on the strategy management - Griggs University) After comparing the attractiveness of the market and the company’s competition position under the above GE matrix model, after seeing the limitation in information collection to assess domestic and global market factors in this industry, with the achievements that Nhung Ceramics has obtained and wishes to obtain, we can assess the atractiveness of this market at strong level and the competition position of Nhung Ceramics is also at strong level Therefore, Nhung Ceramics selects “Invest to develop in the market” The characteristics of macro and industry environment (analysed in Chapter 2) show market challenges and key sucess factors in the industry are mainly based on the differentiation of products; the appropriate pricing and marketing strategies are supplementary factors for the company to penetrate the market In order to grab the opportunities that the market brings about to the company, based on its strengths, weaknesses, opportunities and threats under the SWOT analysis, Nhung Ceramics JSC opts to follow the former WO strategy due to the following reasons: - The company is still benefiting from advantages of the industry compared to other industries in terms of political, legal and cultural conditions Therefore, the company needs to take those opportunities to PR its brand name, attract workers, especially high skilled workers, atract the attention of international organizations who support Vietnam in conserving and developing traditional cultures and non physicall culture, to set up new relationships and obtain information on international market - The company is still in the process of and has not yet compeletely overcome its weaknesses in distribution network and technology 3.3.4.3 Business strategy The company’s short-term objectives: to develop traditional ceramic crafts, to become a leading exporter of this product in Vietnam - Tatics and code of ethics: conserving and developing traditional cultures, developing local economy and international trade, ensuring clean environment and craft village civilization - The company’s culture and core values: conserving traditional artisticity - Commitments to the society and the community: to develop local economy, ensuring clean environment and craft village civilizaion Under this strategy, the objectives of the company in the period 2010 – 2015 include: Continue the WO strategy: using the internal strengths to avoid external threats, the company has defined for itself the following actions: - The company defines that the company’s customers are those who have the needs for interior decoration for homes, conference rooms/halls or big space, which needs artisticity and formalization arts to create a living space which is warm, close to the nature, relaxing and of special angles of views meaningfull to the viewers - The products of the company are artistic and high quality products such as: ceramic decoration lights, ceramic pictures, ceramic relievo, ceramic decoration jars, Those products are diversified in terms of looks and carry many abstract and formalized features - The company prioritizes to use the typical characteristics of Phu Lang ceramic materials to bring in Nhung ceramic products with new and strange features, which are different from other high quality ceramic products and attract customers’ attnetion Specifically, the enemend is golden, different from the thin enemend of the porcelain; the decoration traits are scored cubics which make different feelings when touching the products and of practical use in interior decoration … - Taking the opportunities of stable business environment, support of the local government to craft village cultures, the company will continue its PR and branding activities such as: participation in Viet Star Award – an award which praises Vietnamese traditional industries, other awards organized by cultural development support funds of such countries as Denmark, Germany ; participating in big exhibitions/trade fairs nation-wide in Hanoi, Danang, and Ho Chi Minh City; organizing by itself product display shops - Learning the experience from other craft villages, in the next years, Nhung Ceramics will invest more in improvement of the ceramic buring technology in order to have better quality products, more consistent products, avoiding environment pollution - Through analysis in Chapter 2, the company defines its competitive advantages are diferentiation in products compared with same product lines in the market With the limited financial strength, the company’s competition strategy is to differentiate in each targeted market That means the company continues to follow the differentiation strategy in certain markets Figure 3.4 - Types of potential competitive advantages According to: The lecture on the strategy management - Griggs University - First of all, those are the EU and Japan markets, the two biggest import market of Vietnamese cremaics and geographically closers than the USA and Latin Amercian markets The revenues from exports are the main source of re-investment for expansion The company expects the following develpment objectives: - The company defines a nitch market The domestic market is considered as the strategic market with the target of being No in the product line of construction decoration ceramics, interior decor ceramics, ceramic pictures on the porcelain materials With the expectation of reaching 20-:-30% of the market share of this ceramic line consumption in the North In order to realize this, besides technology, the company should define the quality of skilled workers, their stability at work, distribution network and product development: Table 3.5 – The company’s targets for 2010 – 2015 Targets Number of skilled Unit % of total workers Number of workforce showroom to introduce products 2009 2010 2011 2012 2013 2014 2015 60% 60% 65% 70% 80% 90% 100% room 2 5 7 room 2 7 9 in the North Number of showroom to introduce products nation-wide (Accoding to: Nhung ceramic JSC) Besides, the company decides that every two years, the company will select most responsible and loyal staffs for training to manage the product sales and introduction 3.4 Strategic solutions In order to reach the above strategic targets and objectives, the company needs to implement the following strategic solutions: 3.4.1 Strategic solutions in production and technology At present, the competition in new technology not only allows companies to win globally but also changes the nature of competition, because it significantly affects costs of production and productivity The Company needs to increase its product quality, product diversification to both meet with domestic demand and compete with imported products and being able to export Actively apply new technologies, mordern production techniques, applying advanced technology; step by step decreasing product costs and prices, trying to reach same price as regional countries by 2015; mordern technology application will be the hub Investing in research, selecting materials to increase product quality, accesssing high technology to produce new products which save energy and protect the environment Currently Bat Trang and Binh Duong ceramics are using technology and machines to produce ceramics, which replace completely human labor by machines; therefore they can meet higher market demand, which Nhung Ceramics has not yet been able to due to its human hand-based production and limited quantities of products because human cannot be as fast as machines Specifically: Nhung Ceramics needs to study and invest in automatic technology in the landing/soiling process to reduce human labor, applying the gas kiln burning technology to reduce the time for the product completion process and production of large quantity, but still ensuring the requirements of artisticity after burning in terms of quality, color, styles; applying the modern art and sculpture knowledge on the traditional porcelain material Keeping the strategy of product diversification 3.4.2 Strategic solutions in finance The company will increase capital for investment and development in the new stage: Mobilizing capital by borrowing from other economic entities, atracting idle capital/funds of its staffs Taking the opportunities from the demand stimulus package of the Government to expand production and distribution network in big urban areas, selectively investing in technology to increase the economy of scope, product diversification to reduce production costs The company needs to accelerate the speed of working capital turnover to bring capital in more efficient activities 3.4.3 Strategic solutions in HR and organizational structure In order to serve the strategies of differentiation, low cost, and future development, the company needs to pay attention to HR, including both the management and technical workers Using skilled workers from the local areas to ensure both the trust in their skills, and to establish a close family and village relationship, and to hand down their pride in traditional crafts and development of traditional ceramics Maintaining and developing the HR in style creation and market research and development Developing atractive tourism places to offer buying opportunities for retail customers and opportunities of product studies for foreign customers Training marketing staffs and the saleforce to be able to atract customers Frequently organizing courses for workers to learn about working methodology, working principles, paying cares to their working environment, ensuring working time schedule and stable income and clear mechanism of reward and punishment Arranging appropriate jobs for appropriate people Arranging clear workload, avoiding overlapping of responsibilities which may cause difficulties in implementation Selecting staffs who have high professional expertise and knowledge of the company, of the market to formulate strategies so that the strategies can be feasible 3.4.4 Strategic solutions in marketing: Increasing product introduction, PR the image of the company through strong branding, advertising on mass media The Company needs to understand that PR is an integral part of the market economy and at the present time people are trying to find ways to PR their products and develop their brand names The company needs to branding, designing the brand name, logo, product packaging, and brand name protection The Company needs to have policies to establish and advertise its brand name, in order to develop and confirm the brand name of Nhung ceramics in the domestic and international markets At present, Nhung Ceramics’ PR activities have not yet paid appropriate attention to, mainly inefficient PR activities such as advertisements on news papers, which is quite cheap but the information cannot be conveyed in details, the selection of readers is not high; although the cost for one publication is not high, one publication cannot carve any images on the readers In order to carve an image, it is necessary to many advertisement publications, therefore the cost of a whole program will be very high for such a small company as Nhung Ceramics, which is very significant to consider Therefore, the company needs to direct advertising to customers, by directly introducing the products to the customers This is a good advertisement type which enables to set up good relationships with customers The company needs to increase various and direct advertisement tools to POS to advise and the decoration for high class restaurants and hotels… actively participate in exhibitions/trade fairs 3.5 Implementation 3.5.1 GANTT Chart Summing up all the development objectives is presented in the below GANTT chart: In order to implement to year strategy for the period 2010-2015, Nhung Ceramics JSC needs to have a specific timetible with key milestones such as: development of skillful workers, expansion of rep offices, investment in the gas burning kiln, investment in the dust filter for the wood burning kiln, upgrading the company’s website Table 3.6 –Gantt Chart No Year Development of skilled workers Expansion of rep office in Hanoi Expansion of rep office in Da Nang Expansion of rep office in TP.HCM Investment in two more gas burning kilns Investment in one new wood burning kiln with dust filter Website upgrading 2009 2010 2011 2012 2013 2014 2015 2008 and 2009 are the two difficult years for the company, especially in terms of consumption markets Due to economic crisis, the decrease in export is expected to be at 26% (according to GSO’s statistics) The company is also greatly affected, the number of orders and the possibilities to sign new contract become more difficult 2010 will be a begining year of the new development stage, but the impact of the economic crisis still lingers on and cannot recover the market demand as it was in two years ago Therefore, the company focuses on its internal strengths thanks to private sector encouragement and traditional craft village encouragement from the State of Vietnam The company will pay more attention to develop craft villages, upgrade website, PR and penetrating nitch markets in EU, Japan When the economy recovers, it will expand domestic distribution network and invest in technology to increase productivity 3.5.2 Organization for Implementation After selection of strategies, the managers need to one thing, that is to move from the strategy formulation stage to the strategy implementation stage, in practice that means to hand over the responsibility from strategy formulators to managers in accordance with their own functions and departments If the strategy formulation stage is an intellectual stage, which requires good analysis and cooperation of few advisors, then the implementation stage is a more flexible stage, which requires the cooperation of the managers with their leadership skills and the abilities to encourange and get people involved In the strategy implementation, the company’s different departments and factories set out their specific weekly and monthly tasks/plans The difficulties during strategy implementation shall be reflected in accordance with management levels and proposed with timeply setlement recomendations CONCLUSION AND RECOMMENDDATION Today, business strategy formulation and implementation is very necessary for any firm to operate and develop in competitive business environment What we have learnt from the textbooks and our own experience has been applied to collect, analyze, and assess the business environment and industry internal environment to have an appropriate business strategy for the company’s development in next period The following conclusions can be drawn on by studying our big exercise are: - Business strategy is needed by any firm to operate and develop in the more competitive business environment - Business environment analysis has created competitive advantages and challenges for Nhung Ceramics JSC - By analyzing industry internal environment, the company identify what it can to develop strengths and restrict weaknesses to create competitive advantages in the market - Orientating the company’s business strategies to affirm its position in the market and to become a famous trade mark in Vietnam In the context of the large exercise and our group’s knowledge limitation, although we have tried our best to collect and analyze business strategies also to apply these strategies in business activities of the company However, it is impossible to avoid our limitations and mistakes and some problems not analyzed in details We highly appriciate your feedback to supplement and complete our business model to be applied in the company’s business environment Thank you! References: Associated professor, Doctor Le The Gioi and Doctor Nguyen Thanh Liem a course book on “Strategy Management” – Statistical Publishing House The lecture on the strategy management - Griggs University The lecture on the marketing management - Griggs University The lecture on the business activity management - Griggs University The lecture on the corporation finance - Griggs University Website: http://www.caccongtyvietnam.vn/home/detail.php?module=company&iData=365 http://www.ecsme.com.vn/default.aspx?tabid=292&ID=643&CateID=257 http://phulang.bacninh.com/? page=news_detail&category_id=1365&id=1554&portal=phulang http://cungbandulich.com/van-hoa/lang-gom-thu-cong-phu-lang-t478.html http://www.cpv.org.vn/cpv/Modules/News/NewsDetail.aspx? co_id=30470&cn_id=349008 http://phulang.bacninh.com/?page=introduction&portal=phulang http://vtc.vn/13-197374/van-hoa/nhung-tac-pham-gom-duoc-nan-tu-trai-tim.htm http://www.hanoi.gov.vn/hnportal/tag.idempotent.render.userLayoutRootNode.targ et.n65.uP?uP_root=me&cmd=item&ID=21989 http://baoninhbinh.org.vn/news/43/2DAF84/Bat-Trang-xua-va-nay http://www.vietnamtourism-info.com/tindulich/luuniem/article_3280.shtml Appendices: Introduce some picture of Nhung ceramics JSC students The idea Fine art pottery Pottery before baking ... Council and Swedish-Danish Culture Supporting Fund, French Civilization Language Centre and German Embassy - In 2000, he was awarded the incentive prize at the Vietnam National Fine Arts Exhibition