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2011 | GLOBAL ADVANCED MBA PROGRAM (X0510) | Group No11 CAPSTONE PROJECT FORMULATION OF BUSINESS STRATEGY FOR MAYHAI JOINT-STOCK COMPANY BUSINESS STRATEGY 2011 - 2015 Group 11 - GaMBA X0510 Nguyen Thi Huong Giang To Thi Giang Nguyen Van Ha Nguyen Hoang Long HANOI 2011 GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CONTENT CHAPTER BASIC THEORIES ABOUT STRATEGIC MANAGEMENT Concept and role of strategic management 1.1Concept 1.1.2.Fundamental characteristics of business strategy 1.1.3 The role of strategic management 6 6 1.1.4 Strategic managerial hierarchy in the enterprise Figure 1.1- Level of strategies Figure1 – Strategic Management Process 1.2 Strategic management process 1.3.Applying the matrixsmatrixes to analyze Figure 1.3 – PEST Model 1.3.2Porter’s Five – Forces Model: Competitive Analysis Figure 1.4 – Michel Porter Five-Forces Model 1.3.3The Competitive Profile Matrix (CPM) 1.3.4The Internal Factor Evaluation (IFE) Matrix 1.3.5The Boston Consulting Group (BCG) Matrix 1.3.6 The Strengths – Weaknesses – Opportunities – Threats (SWOT) Matrix 8 10 10 11 1.3.7The Quantitative Strategy Planning Matrix (QSPM) 12 12 12 12 14 CHAPTER 2.ANALYZE THE BUSINESS AND PRODUCTION SITUATION 17 OF MAYHAI JOINT-STOCK COMPANY 2.1 Introduction about Mayhai joint-stock company 2.1.1 Fact and history 17 17 2.1.2 Products & capacity 18 2.1.3Market and customer 2.1.4 QA system 19 2.1.5Vision and mission 20 2.1.6 FinacialFinancial 2.2 Business environment analysis 2.2.1 External environment analysis 21 22 22 2.2.2Industrial environment Figure 2-1(EFE)External factor evaluation matrix of MAYHAI Figure 2-2 (CPM) Competitive Profile Matrix 2.3 MAYHAI internal environment 2.3.1 Management 2.3.2 Personnel factor 26 30 30 31 31 32 2.3.3 Production process 2.3.4 Research and development Figure 2-3 Internal Factor Evaluation Matrix (IFE matrix) 2.4 SWOT matrix of MAYHAI Figure 2-4 SWOT matrix 2.4.1 Market development strategy 2.4.2 Product development strategy 2.4.3 Strategy to diversify MAIHAI’s activities CHAPTER RECOMMENDATION AND SOLUTION 3.1Foundations to build the strategies: 3.1.1Mission and goals 3.1.2Key values: 2Building and selecting the strategies Figure 3-1 Quantitative Strategy Planning Matrix QSPM 3.3 Solutions to implement the strategies 3.3.1 Personnel solutions 3.3.2 Marketing solutions 3.3.3 Financial and accounting solutions 33 34 35 37 38 38 39 39 41 41 41 41 42 42 43 44 47 1.Foreword Garment and textile industry plays an important role in the development of the national economy aiming at ensuring domestic consumption need and export, extend international trading, bring back source of revenue for the country with the growth rate of 21% compared with the same period last year, making up 15% of the total turnover Vietnam ranks in top ten of garment and textile export countries in the world However, that Vietnam entered more and more deeply into the regional economy and the world economy (Vietnam is now official member of WTO, ACFTA) has many advantages On the other hand, Vietnam has to face up with great threats and cutthroat competition from other processing countries such as Bangladesh, the Laos, Myanmar, and China MAYHAI JSC is known as the leading enterprise in garment and textile outward processing industry with over 20 years of experiences; also one of 6% of the enterprises in the whole industry with the number of laborers more than 2000 Together with the speedy changes caused by the globalization trend and the incessant movements of the market, the Company re-structures, and re-builds its business strategies in this new development period Within the scale of this Individual Assignment, we focus on studying, analyzing and building “strategies to develop MAYHAI JSC in the period of 2011-2015” on the basis of applying studied knowledge in the Global Advance Master of Business Administrative Program – Griggs University, the US in association with Hanoi National University Research target Set up MAYHAI JSC’s development strategy in the period of 2011-2015 on the basis of analyzing and applying theoretical foundation about strategic management The subject and the scope of the study The topic is analyze the strategic planning operations of MAYHAI JSC in garment and textile processing market in Vietnam and in the world with the target to propose strategic solutions in the coming periods Data have been collected during the past years, mainly in recent years 20082010 At the same time, this topic also puts forward some forecasts about the development of garment and textile industry in coming time Approach method The topic is based on knowledge withdrawn from the subject Strategic Management and other subjects in Global Advanced Master of Business Administration Program, which helps evaluate the overall business operation process of MAYHAI JSC Some qualitative and quantitative methods are combined together; for example, general, comparative and statistical analysis methods and economic analysis method Outline - Chapter I Theoretical basis of strategic management - Chapter II Analyze business operations of MAYHAI JSC - Chapter III Proposed strategy and Solutions solutions CHAPTER BASIC THEORIES ABOUT STRATEGIC MANAGEMENT 1 Concept and role of strategic management “Without a straterystrategy, an organization is like a ship without a rudder, going around in circles It’s like a tramp, it has no place to go” So “what is strategy?” and “Why has to manage the strategy”? Benefits of strategic management toward an organization in today’s fluctuant competitive environment and more and more obvious globalization trend How does strategic management process happen? In addition, what is called “strategic thinking”? 1.1.1Concept Strategy is a range of complex actions to mobilize the whole human resources that an individual/organization can for the purpose of obtaining a certain goal According to the opinion believing that business strategy is an art, Alain Threlart said that “strategy is an art which the enterprise uses to fight against competition and win” According to the opinion about managerial category, business strategy is a type of comprehensive and general plan that is designed to ensure the achievements of organization’s objectives Via above viewpoints, “business strategy is an art of designing and organizing means in order to reach long term objectives of the enterprises, ensuring the adaptation to the change of business environment and competition.” 1.1.2.Fundamental characteristics of business strategy Business strategy determines clearly basic goals and business trends of the enterprise in each period to ensure the continual and sustainable development of the enterprise in fluctuant business environment Business strategy ensures the maximum mobilization and optimal combination of exploiting and using resources of the enterprise at present and in the future, making the most of advantages, and grasping chances to gain priority in competition; business strategy must be reflected during a continual process and built in a long period of time: years, years or 10 years 1.1.3 The role of strategic management Strategic management helps the enterprises understand clearly their purposes, and directions; from then on, the enterprises take these things as the foundation and the guideline for all business and production activities of the enterprises with the target to grasp and make use of business chances as well as have proactive solutions to overcome risks and threats in the competitive market Strategic management helps make contribution to increase the efficiency of resources, strengthen competitive position, ensure the sustainable development of the enterprises Corporate management is the foundation of proposing policies and decisions about business and production that are suitable with the fluctuations of the market 1.1.4 Strategic managerial hierarchy in the enterprise Strategies exist at several levels in any organization - ranging from the overall business (or group of businesses) through to individuals working in it In the large firms, there are actually four levels of strategies: corporate, divisional, functional and operational In the small firms, there are three levels of strategies: company, functional and operational May be in some firms, there are two levels of strategies: company and functional Corporate Strategy (Company strategy) - is concerned with the overall purpose and scope of the business to meet stakeholder expectations This is a crucial level since it is heavily influenced by investors in the business and acts to guide strategic decision-making throughout the business Corporate strategy is often stated explicitly in a "mission statement" BusinesBusiness level strategy - is concerned with the overall purpose and scope of the divisional business Functional Strategy - is concerned more with how a business competes successfully in a particular market It concerns strategic decisions about choice of products, meeting needs of customers, gaining advantage over competitors, exploiting or creating new opportunities etc It is important to note that all persons responsible for strategies planning at the various levels particupateparticipate ideally and understand the strategies at the other levels to organizational help ensure coordination, facilitation and commitment (Source: Page 170 – Strategic Management - Fred.David) Figure 1.1- Level of strategies 1.2 Strategic management process 1.2.1 Stages of strategic management process The strategic management process consists of commitments, decisions, actions that the enterprise needs to obtain strategic competitive advantages, sustainable competitive advantages and return on average The strategic management process consist of three stages: strategy formulation, strategy implementation and strategy evaluation It shows by following diagram: Figure1 – Strategic Management Process Strategy formulation includes developing a vision and mission, indentifying an organization’s external opportunities and threats, determining internal strengths and weaknesses, establishing long-term objectives, generating alternative strategies, and choosing particular strategies to pursue Strategy implementation requires a firm to establish annual objectives, devise, motivate employees, and allocate resources so that formulated strategies can be executed Strategy implementation includes developing a strategy supportive culture, creating an effective organizational structure, redirecting marketing efforts, preparing budgets, developing and utilizing information systems, and linking employee compensation to organization performance Strategy evaluation is the final stage in strategic management Managers desperately need to know when particular strategies are not working well; strategy evaluation is the primary means for obtaining this information All strategies are subject to future modification because external and internal factors are constantly changing Strategy evaluation is needed because success today is no guarantee of success tomorrow 1.3 Applying the matrixsmatrixes to analyze In this project, we base on the Strategy- Formulation Analytical Framework to choose best strategies It is showed by below diagram: STAGE 1: THE INPUT STAGE External Factor Evaluation (PEST) Internal Factor Competitive Profile Matrix Evaluation (IFE) Matrix (CPM) STAGE2: THE MATCHING STAGE StrengthdStren Matrix gths - Weaknesses - Opportunities Threats (SWOT) Strategic Position Action Matrix Evaluation (SPACE) Matrix STAGE3: THE DECISION STAGE Boston Consulting Group (BCG) Matrix QuatitativeQuantitative Strategic Planning Matrix (QSPM) 1.3.1 The Macro Environment–PEST Model The PEST model is decision making model used to measure a market, including competitors from the standpoint of a particular proposition or a business When used as a tool, is works well to understand market growth or decline, such as potential and direction for a business It is a model used to measure business, in terms of 10 Figure 1.3 – PEST Model As a leading enterprise in garment and textile export field, MAYHAI has great reputation in such market as the US, EU and even a fastidious market as Japan and has many traditional customers With the advantage of high industrial growth rate, and maintaining at this growth rate in coming period, and due to China’s market transfer and the development of new market, the increase in export market share, MAYHAI has set up its development strategies by investing and building more factories, increasing production scale that can meets the demands for great orders Beside orienting toward develop export market, MAIHAY also provides domestic garment and textile products with the target to make use of redundant inputs sources, highly qualified workers; the international fashion trends always precede the domestic ones, which can be seen in export orders 2.4.2 :Product development strategy Most of garment and textile products are outward processing and ordered by the customers so the value-added is not high, the profits are low… However, together with the cutthroat competition and high inflation rate and the increase in production cost, the decrease in profits, MAYHAI needs to implement product development strategy, sell FOB goods to the customers If successfully implementing this strategy, the Company has to make its great efforts to look for new supply sources, increase sample design phase, increase the products’ quality The cost and risks of selling FOB products is also a matter of concern 2.4.3 Strategy to diversify MAIHAI’s activities The garment and textile industry experiences many phases For example, it needs other subordinate phases to produce its complete products such as: Supplying inputs: cloth, button, thread, mex, package, plastic bags… Subordinate phase to produce complete products: embroidering, printing, abrasive cleaning… Services: delivery, transports, storage… 47 In order to take initiative in business, and meet the development demands of the Company and other neighboring companies in Hai Duong, Hung Yen, Quang Ninh, Thai Binh, MAYHAi has set up a strategy to diversify its activities by establishing Embroider Design Company and Industrial Embroider Company, increasing the productivity of the existing laundry factory, setting up garment and textile inputs supply company, developing delivery services, transports services and storage services 48 CHAPTER RECOMMENDATION PROPOSED STRATEGIES AND SOLUTIONS 3.1Foundations to build the strategies: The strategy to develop garment and textile industry up to 2015 and orientation toward 2020 are approved by the Prime Ministry MAYHAI development strategy during the period of 2005 to 2010 The trends to develop domestic garment and textile market are happening strongly 3.1.1Mission and goals Mission: increase the beauty and the confidence of the people by new ideas which are originated from creative minds and high responsible spirits toward the society Vision: MAYHAI is planning to develop into a garment and textile suppliers with modern and active sales methods ranking in top list in Vietnam; grasp opportunities and advantages to continue developing its more convenient services to better human beings’ life 3.1.2Key values: Harmony: orient toward the harmony in interests among human beings and between human beings and the environment Trust: Have responsibility with its commitments Activeness: recognize fluctuations by proactive and flexible spirits in behaviors Friendliness: create the friendliness among human beings, between human beings and the environment 3.2Building and selecting the strategies Using Quantitative Strategy Planning Matrix QSPM will show us which alternative strategies are the best compared with selected strategies from SWOT matrix, basing on main successful internal and external factors that have been determined (in EFE and IFE matrix) Figure 3-1 Quantitative Strategy Planning Matrix QSPM Important factor Market development 49 Selected Strategies Products Activities development Concentric diversification External factors 0.1 Economic growth target 48 0.1 Inflation 0.1 39 48 0.2 88 0.1 Technological factor 39 Capital scale 0.48 39 0.26 36 0.24 0.66 0.39 88 412 0.45 0.15 612 459 3 2 052 Global competition 0 Inputs supply capacity 48 0 Skilled workers Government’s policies 156 0.1 14 412 0.14 39 0.26 Internal factor Clear target strategy 4 0.2 Export trademark 3 resources Technological skills human 0.1 0.05 3 1512 50 0.69 0.46 39 412 3 69 39 69 812 0.1 StablehumanStable 812 0.2 Skilled workers 0 0.26 39 212 0.39 0.15 Inputs supply ability 0.05 Marketing performance 3 3 0.1 Total 3 0.39 39 0.15 412 39 3 159 39 0.1 Financial ability 212 0.1 Information exchange efficiency 0.26 39 39 0.26 6.916 6.215 4.95 121 From the matrix, we can see that Market development strategy has got 168 6.9 points, on which the Company will focus; next the Company continues to select products development strategy for the coming period; these two strategies are implemented step by step, and parallel Ignore the products diversification strategy because of its inefficiency; solutions when ignoring this strategy will be replaced by hiring outsource workers As a result of US market analysis earlier, it is suggested that the Company will implement Market Development Strategy in the US market, trying to reach a number of very potential segments in the US garment market After analyzing and choosing the strategies for the period 2010-2015, I would like to propose some concrete strategic goals so that MAYHAI can make accurate decisions to implement its strategies and make the evaluation, observation and adjustment in the future more accurate and effective as below: Financial targets Increase the profits with 10% increase rate much higher in comparison with the last year Increase the income with 20% increase rate annually Increase dividend share rate for the shareholders with 5% increase rate per year 51 Reduce managerial cost, inputs cost with 5% decrease rate per year Customers targets Choose good customers: customers/year Increase the proportion of FOB goods with customers/year Increase domestic market share and increase the domestic consumption revenue with 100% per year in first years Increase the satisfaction of the customers by the rate of recycle accounting for only 1% of the total orders Punctual goods delivery with the rate of 95% of the total orders Training and developing goals Creating the qualified human resources by staff evaluation program that is done every one year Ensure social responsibility by social programs per year Increase the Company’s cultural values by 80% of the total employees understanding about the Company’s missions, visions and values 3.3Solutions to implement the strategies 3.3.1Personnel solutions Human beings are the most important factor in all activities; especially with the specific characteristic of garment and textile industry, this factor can be seen as the leading one Some following solutions about personnel will help MAYHAI implement well its strategies: - Planning the demands for human resources of the Company; the personnel department has to predict concretely Determine training plans including trainee objects, forms and means - Increase the quality of managerial cadres of all levels, and production staff - To workers who directly take part in the production process: increase the number of 4th level skilled workers and above must make up 20% - Increase the living standards of the workers to ensure the stability of the human resources to meet the demands of the production - Standardize the staff in every position by completing job title standards This will be the decisive factor of effective usage, labor savings, and ensuring the targets of increasing labor productivity 52 - Set up remuneration policies and labor productivity that are competitive with other enterprises in order to impulse and encourage the laborers 3.3.2 Marketing solutions - Strengthen customers care services, evaluate the satisfaction level of the customers through evaluation sheet following each order - Proactively study the market to grasp the demands for changes of the customers - Impulse promotion activities by setting up MAYHAI trademark development strategies methodically - Electronic commerce more and more becomes very important; effective promotion tools is the company’s website www.mayhai.com; besides, taking part in some specialized websites about garment and textile field of Vietnam textile association www.vietnamtextile.com , and Ministry of Industry and Trade www.importer.com , www.textileserver.com , Vietnam trade promotion agency www.viettrade.gov.vn - Take part in trade fairs about garment and textile Marketing domestic market - Set up domestic market plans in penetrating strategy and extend domestic market - Proposed marketing strategy is Marketing mix 3.3.3 Financial and accounting solutions - Ensure the resources about “capital” to implement the strategies on schedule - Build financial statement, capital and budget estimates; help management committee make timely and accurate decisions during the strategy implementation process 3.3.4.Managerial solution The prerequisite factor of MAYHAI’s success is the leadership and the thorough understanding of the importance of planning and implementation of business strategies of the directorate The directorate should pay attention to professional managerial methods in order to increase the responsibilities of the 53 staffs; besides, the directorate should provide enough resources so that the staff can implement their responsibilities; encourage and remunerate timely Furthermore, the directorate directs other people to take part in actions in order to obtain highest efficiency in planned strategies To gain victory in business while the global economy requires strongly competition and the technologies change speedily, the Company should implement neat production management methods The implementation of “Lean Manufacturing” method helps: - Reduce waste products and visible unnecessary wastes: Stop the over-usage of input materials, costs relating to waste recycles, and costs relating to characteristics of the products that are not demanded by the customers - Reduce the production time, production process and production cycle by minimizing standby time among phases; as well as time to prepare a process and time to transfer the designs or product specification - Minimize the inventory in all production phases; especially unfinished products among phases The low rate of inventory is similar to the less requirement of mobile capital - Improve labor productivity by reducing spare time of the workers; at the same time, ensure that the workers work at highest capacity during their working hours (do not implement unnecessary jobs or acts) - Use devices and production premises more effectively by removing jamming cases and maximize the production efficiency on existing devices; at the same time, reducing standby times of the machines - Have ability to produce many different types of products more flexibly with the lowest cost and time convert - Reduce the production cycle, increase labor productivity, minimize jamming and standby times of the machines, the Company can increase its productivity dramatically by making use of its existing facilities and commodities Most of the above mentioned profits lead to the reduction in production cost; for example, the 54 effective usage of devices and premises will result in lower discount cost per each unit and lower level of waste products will reduce the selling-goods cost prices In lean, there are Kaizen, 5S, Pull, ISO…; Kaizen itself is the philosophy of “change for the better”, the matter of “manage the changes” to exist and develop, which can be solved when MAYHAI implements this managerial methods 55 References Chankim W., Mauborgne R (1997), “Value Innovation: The Strategic Logic of High Growth”, Havard Business Review Dess G.G., Picken J.C., (1999), Beyond Productivity, Amacom, New York Fahey L., Narayanan V.K., (1986), Macro environmental Analysis for Strategic Ghemawat, (1991), Commitment the Dynamic Strategy, Free Press, New York John C.H.St, Harrison J.S., (1999), “ Manufacturing based relatedness, synergy, and coordination”, Strategic Management Journal Johnson G., Scholes K.(1999), Exploring Corporate Strategy, Prentice Hall Europe Makadok R., (1999), “Interfirm Differences in Scale Economies and The Evolution of Market Shares”, Strategic Management Journal Michael A Hitt, R Duane Ireland, Robert E Hoskisson, “Strategic Management – Competitive and Globalization”, fourth edition Porter M.E., (1980), Competitive Strategy, Free Press, New York 10 Porter M E., (1985), Competitive Advantage: Creating and Sustainabling Superior Performance, Free Press, New York 11 Porter M E., (1996), “ What is Strategy?”, Harvard Business Review 56