THEORETICAL BACKGROUND ON STRATEGIC MANAGEMENT
CHAPTER II: ANALYSIS OF CURRENT SITUATION OFSON HA
CHAPTER III: SOLUTIONS, PETITIONS AND CONCLUSION LIST OF
CHAPTER 1: THEORETICAL BACKGROUND ON STRATEGIC
1.1 Theories about strategy and strategic management
Strategy can be defined as a coordinated series of actions that utilize available resources to achieve a specific goal, as described by David in "Exploring Corporate Strategy."
Strategy defines an organization's long-term direction and scope, enabling it to gain a competitive advantage by effectively utilizing its resources in a challenging environment This approach aims to meet market demands and fulfill stakeholder expectations.
Strategy is defined as the actions taken by managers to achieve the organization’s goals, serving as a general direction for the company and its components to reach a desired future state This definition emphasizes the importance of a detailed strategic planning process in shaping effective strategies.
In general, strategy is about:
•Where is the business trying to get to in the long-term (direction)
•Which markets should a business compete in and what kind of activities are involved in such markets? (markets; scope)
•How can the business perform better than the competition in those markets? (advantage) ?
•How can the business perform better than the competition in those markets? (advantage) ?
•What resources (skills, assets, finance, relationships, technical competence, facilities) are required in order to be able to compete? (resources) ?
•What external, environmental factors affect the businesses' ability to compete?(environment)?
•What are the values and expectations of those who have power in and around the business? (stakeholders)
Strategies exist at several levels in any organization - ranging from the overall business (or group of businesses) through to individuals working in it.
Corporate strategy defines the overarching purpose and scope of a business, aligning with stakeholder expectations This essential level is significantly shaped by investors and serves as a guiding framework for strategic decision-making across the organization Typically, corporate strategy is articulated in a clear "mission statement."
Business strategy focuses on how a company effectively competes in its specific market It involves strategic decisions regarding product selection, fulfilling customer needs, gaining a competitive edge, and identifying or creating new opportunities for growth.
Function strategy focuses on the organization of each business component to align with corporate and business-unit level strategic goals Consequently, operational strategy addresses key aspects such as resource allocation, process optimization, and workforce management to ensure effective implementation of these strategies.
A mission statement is essential for establishing a company's vision and serves as a motivational tool for employees by clearly communicating the organization's purpose and values to customers and the community.
A vision statement is a crucial document that articulates a company's aspirations and future objectives It serves as a guiding framework for strategic planning, helping to define the long-term goals and desired outcomes of the organization While vision statements can vary in length—from concise phrases to detailed paragraphs—they must clearly convey the ultimate destination the company aims to reach.
A company's vision statement is crucial for guiding strategic planning, as it helps identify the best outcomes for ongoing initiatives and unlocks future potential.
Mission is to answer the question why? Mission will be the business and will lose the business no longer exists or switch to a business other.
A mission statement serves as a crucial document that outlines a company's existence, values, and guiding principles It plays a vital role in strategic planning by articulating the business's purpose and the benefits it brings to customers and communities through its products and services The mission statement can vary in length but should effectively communicate the essence of the company and its objectives Ensuring that all planning and decision-making processes align with the mission statement is essential for maintaining organizational harmony and direction.
A fundamental aspect of any strategic statement is the establishment of long-term organizational objectives While objectives focus on the desired end state, strategy emphasizes the processes and methods required to achieve those goals Essentially, strategy encompasses both the identification of objectives and the resources needed to realize them, highlighting the importance of effective resource deployment in reaching organizational aims.
Policies are the means by which anuual objecties will be achieved Policies includes guidelines, rules, and procedure to support effort to achieve objecties
The firm’s formal reporting relationships, procedures, controls, and authority and decision-making processes
The work to be done and how to do it, given the firm’s strategy or strategies
It is critical to match organizational structure to the firm’s strategy.
The plan of action in implementing strategies selected
General environment analysis – PEST Model
The external environment in which an organization operates presents both threat and opportunities This environment influences the organization directly.
The PEST model is a crucial tool for analyzing the macro-environmental factors that can significantly impact a firm's strategy It focuses on four key segments: Political, Economic, Social, and Technological While companies often struggle to predict or control these external trends and events, understanding the PEST framework can help them navigate potential challenges and opportunities in their business environment.
The Political/Legal segment involves analyzing government policies and legal factors that impact a firm's business operations Key elements include tax policies, trade tariffs, environmental regulations, and socioeconomic development policies, all of which can significantly influence business strategies and outcomes.
The economy influences every industry, affecting suppliers of raw materials, manufacturers of finished goods, and organizations across service, wholesale, retail, government, and nonprofit sectors Important economic indicators such as interest rates, unemployment rates, the consumer price index (CPI), gross domestic product (GDP), and net disposable income play a crucial role in shaping market dynamics.
- The Social – cultural segment: Socio-culture forces influence the value, beliefs and lifestyle of a society They have major impact on customer need, product, service and market.
Technological advancements drive the creation of innovative products and services while enhancing production and delivery methods for consumers These innovations can establish new industries and redefine existing ones, presenting both opportunities and challenges that are crucial for strategic planning.
Figure 1.2: The Five Competitive Forces
CURRENT SITUATION OF SONHA INTERNATIONAL JOINT
2.1 Overview of Sonha International Joint Stocks Company
Son Ha International Corporation – formerly known as Son Ha Mechanical Metal Company Limited established and operated under the business license number
Founded on November 23, 1998, by the Hanoi Planning and Investment Department, Son Ha transitioned to a joint-stock company on October 30, 2007, receiving business license number 0103020425 Through relentless dedication, Son Ha evolved from a manufacturer of inox water tanks to a prominent stainless steel producer in Vietnam The company's products have garnered widespread consumer loyalty, establishing Son Ha as a trusted partner for both domestic and international enterprises.
Formerly, it was called Son Ha Metal and Mechanical Engineering Company Limited,
Business license of company has been amended 4 times by Hanoi Planning and Investment Department aimed to adapt with company operational circumstances, whereas the 4th amendment on Jan 05, 2011.
Charter capital based on business license certificate: VND 250 billions
Address: Lot 2 CN1 Tu Liem Small and Medium Industrial Zone, Minh Khai Commune, Tu Liem Dist., Hanoi city
Email: sonhaco@netnam.vn Tax code: 01 00 77 6445 - 1
“To provide internationally recognised stainless steel products for civil and industrial purposes, diversifying investment activities for a comfort life of our clients”
“To become the leading stainless steel manufacturer in Vietnam, diversifying investment activities on the basis of sustainable development”
To clients: to provide stainless steel products and services as well as other company’s investments serving for the best of our clients.
To shareholders: to be a reliable and effective business entity bringing in good benefit to shareholders on a regular and permanent basis.
To employees: to build up a common house for each and every company’s employees securing them and their families a better life both materially and mentally.
To community and society: to be a responsible business organization actively participating in public activities.
Son Ha Sai Gon Joint Stock Company:
Formerly known as Son Ha Industry One Member Limited Liability Company, the organization has transitioned to Son Ha Sai Gon JSC to enhance its operational efficiency and autonomy, with the goal of preparing for a future stock market listing.
Address: 210 Block B, Apartment Son Ky, CC2 street, Son Ky ward, Tan Phu district
Son Ha’s equity ownership: 51% of charter capital, equivalent to VND40.800.000.000
Business operations: Manufacture metal components; barrels, storage tanks and container equipment made from metals (not manufactured at branch) Forged, pressed, forced and rolled metals.
In 2010, Son Ha Sai Gon Joint Stock Company achieved a revenue of VND 262 billion, with a gross profit of VND 43 billion By the end of the year, the company's total assets amounted to VND 192 billion.
Financial statements of Son Ha Sai Gon Joint Stock Company were consolidated into the parent company Son Ha’s financial statements using the aggregate method.
Kien Hung Urban Investment and Development Joint Stock Company
Address: B14-TT18, Van Quan New Urban Area, Phuc La ward, Ha Dong district, Hanoi, Vietnam
Son Ha’s equity ownership: 15% of charter capital, equivalent to VND 7.500.000.000
Business operations: Develop and market real estate projects
Financial statements of Kien Hung Urban Investment and Development JSC were consolidated into parent company Son Ha’s financial statements as minority interest.
Son Ha's stainless-steel product range includes three main categories: water tanks, industrial-grade steel tubes, and stainless sinks The water tank segment targets medium and high-end markets, holding a 35% market share In the steel tube category, Son Ha boasts an impressive 85% market share for industrial-grade tubes and 30% for construction tubes, with 70% of their steel tubes being exported and only 30% sold domestically Additionally, their stainless sinks, aimed at the low to medium market segments, command a 40% market share.
Solar-energy products, such as solar water boilers from Thai Duong Nang, are environmentally friendly and hold significant growth potential These products contribute to the National Energy Saving program and currently dominate the market in Northern regions.
The urban waste treatment initiative, a collaboration with INSUN ENT from Korea, encompasses three key phases: first, the establishment of a 20-hectare waste disposal site on the outskirts of Hanoi; second, the construction of a waste treatment and recycling facility spanning 100 hectares in Quang Ninh Province; and third, the development of modern waste treatment centers across the country.
Kien Hung Urban Area, Ha Dong, Hanoi: Total area: 47 ha Initial investment is
VND 1,600 billion of which Son Ha contributed 30% equity (in which 15% entrusted) The project’s development plan balances the development of technical and social infrastructure.
Paradise Garden in Da Lat city, Lam Dong, spans an impressive area of 31.6 hectares and features a blend of modern residential houses and luxurious villas, complemented by high-end tourism offerings The total investment for this project amounts to VND 434 billion, with Son Ha contributing 25% of the equity.
For their efforts, they have gained outstanding achievements in stainless steel business and won prestigious awards.
Son Ha has been recognized as one of the Top 500 private businesses in Vietnam for the third consecutive time The brand has also received the prestigious "GoldStar" award multiple times, specifically in the years 2003, 2005, 2007, 2008, and 2010.
The “Vietnam’s High Quality Products” award from 2002 to 2008;
The National Famous Brand in 2007, 2008;
Among the Top 100 Vietnamese brands in a survey conducted by the VCCI and
Here is some of the company’s main financial item:
Figure 2.1: The company’s main financial items
Figure 2.1.: The company’s main financial items
Source: Son Ha Company’s yearly financial Report
The company's total assets, sales, and earnings before tax are consistently rising each year, indicating a robust growth rate This growth reflects the organization's expanding business operations and increasing market share Additionally, these trends highlight Sonha's strong financial capabilities and stable competitive position in the market.
2.2.1 Analysis of external environment factor
2.2.1.1 PEST analysis of macro-environment
Vietnam is recognized for its political and social stability, distinguishing itself from other ASEAN nations like Indonesia, the Philippines, and China, which often experience religious restrictions and racial conflicts The country boasts a robust annual GDP growth rate and a stable macroeconomic environment, thanks to its effective renovation policies For over thirty years, the Vietnamese Communist Party has successfully maintained governance and stability, with strong support for its renewal policies driving the ongoing development of a market economy In light of recent global terrorism and violence, Vietnam is increasingly viewed as one of the safest investment destinations.
However, the thesis will use PEST analysis for showing the Vietnamese economic environment clearly
Vietnam stands out in the region due to its stable political environment, robust security, and strong defense system, all of which significantly enhance its attractiveness for investment and contribute to sustained economic growth.
The political landscape of a country significantly impacts its economy, and in Vietnam, a pivotal moment occurred on November 7, 2006, when the nation officially joined the World Trade Organization This membership has had profound implications for Vietnam's economic development and integration into the global market.
Joining the WTO has significantly boosted Vietnam's trade and attracted foreign direct investment Legal reforms have a profound effect on the operations of businesses, while a legal framework ensures minimal administrative interference in market activities The stability in politics, workforce, and development strategies over recent years is fostering a conducive environment for the overall growth of Vietnam's economy, particularly benefiting the construction sector.
In recent years, the development of Vietnam's legal system has gained significant attention, particularly with the introduction of laws that directly impact enterprises Key legislation includes the Law on Enterprises No 60/2005/QH11 and the Law on Investment No 59/2005/QH11, both dated November 29, 2005, along with the Vietnam Commercial Law No 36/2005/QH11, enacted on June 14, 2005 These laws are supported by timely decrees and circulars issued by various ministries and departments to guide their implementation effectively.
In 2005, the Vietnamese government enacted a new Investment Law and a Law on the Promotion of Domestic Investment, aimed at consolidating legal investment documents and curbing illegal activities among local and foreign investors This legislation streamlines investment procedures and enhances conditions for attracting capital, addressing previous complaints from foreign investors about complex processes and bureaucratic management Additionally, the government facilitates access to investment credit by allowing various types of assets, including movable, intangible, and tangible assets, to be used as collateral for mortgage loans, thereby encouraging corporate investment.
CORPORATE STRATEGY OF SONHA INTERNATIONAL JOINT STOCKS COMPANY TILL 2020 AND SOLUTIONS FOR IMPLEMENTATION
3.1 Business target of Sonha International Joint Stocks Company till 2020
Son Ha's business strategy emphasizes the expansion of high-revenue, high-profit margin products, particularly stainless steel tubes and water tanks To promote sustainable growth, the company is diversifying into new sectors, including real estate, retail, and waste treatment.
By 2020, the company aims to sustain its leadership in the stainless steel industry while establishing a robust foundation for new business initiatives in waste treatment and a modern supermarket chain, all designed to enhance people's living standards To achieve this vision, the company has pinpointed four core values.
• Principle: Son Ha upholds ethical business practice and commits to bring the highest quality products
• Attention: We believe that the colleagues’ attention given to each other is the key to improve the attention to details when dealing with customers
• Unity: Son Ha’s collective work force today is built on the foundations of solidarity between the employees
Son Ha values respect by actively acknowledging the perspectives of employees, partners, and clients Our commitment to quality, profitability, and growth serves as the three foundational pillars for achieving success and ensuring sustainable development.
• Maintain strong growth and solidify the No.1 position in Vietnam’s stainless steel industry, with core products including tank, sink, steel tube and solar- energy product.
• Prepare for the future by developing new business lines: waste treatment, retail, real estate development, and expand to new markets (export to the U.S and Latin American markets).
• For consumer products, namely tank, sink, and solar-energy product: develop the market and increase market share.
• For industrial goods: expand to new markets such as Latin America and Middle East in addition to the U.S and European markets.
• For trading and fabrication services: emphasize business efficiency and divest in case of poor performance.
Through a comprehensive analysis of the macro environment, the construction industry landscape, and Son Ha Company's internal dynamics, we can pinpoint external opportunities and threats, as well as internal strengths and weaknesses Utilizing SWOT analysis, we can assess Son Ha's overall position and develop strategies that leverage strengths, capitalize on opportunities, mitigate weaknesses, and avert threats.
5 The integration into the world economy
6 The shifting in structure economy
1 Conflict between law and under-law decision.
2 High price of fuel and energy
4 The trend of increasing exchange rate
1 Professal managing Combination S+O Combination S+T ability
Strategy for differentiation in product features
Strategy for differentiation in customer service
Strategy for focus into key clients:
Strategy for brand building and development
2 Young staff, lack of experience
3 Low rate of undergraduate and post graduate rate
5 Limited access to international market
Strategy for financial capability development
Strategy 1: Strategy for differentiation in product features :
Leveraging extensive industry experience allows for the differentiation of product features, enhancing their appearance and utility This approach ensures that products are tailored to meet the diverse needs and preferences of clients and the market.
The company's products must undergo regular updates to enhance their features and quality Key considerations include ensuring high-quality performance, incorporating additional operational functions, and prioritizing user-friendliness and environmental sustainability Given Vietnam's frequent electricity shortages, customers are particularly inclined towards energy-saving products and those that effectively utilize natural energy sources.
To create differency, the Company can concentrate in R & D activities that supply the Company information about what the customer need, which features of product need to be improved
Strategy 2 : Strategy for cost leadership.
To well implement the cost leadership strategy, Son Ha has to concentrate in the following tasks:
Technical standards: Clearly determining the process of production, using reasonably the capacity of equipment, avoiding waste of equipment capacity.
To improve management effectiveness, it is essential to implement a supervisory system that incorporates rewards and penalties, particularly regarding the storage and utilization of raw materials Establishing clear regulations for working hours and creating balanced shift schedules will ensure employees have adequate work and rest periods Additionally, fostering an environment that encourages innovation and creative solutions in construction can lead to significant cost savings and reduced production expenses.
To enhance profitability, Son Ha must address its high sales expenses by streamlining costs associated with sales, research and development, and service Focusing on optimizing the efficiency of sales personnel, delivery, and distribution systems will be crucial in reducing these expenses and improving overall financial performance.
Investing in large-scale production facilities is essential for the Company to significantly reduce costs and enhance the competitiveness of its products By focusing on building efficient manufacturing plants, the Company can achieve economies of scale that will ultimately lead to improved market positioning.
Strategy 3 : Strategy for focus into key clients :
Concentrate and develop large customer as contractors and supply products for them in their construction works.
To develop and focus on vital customers, the Compay need to have a private policies for these customers with more favorable condition
Collaborating with local communities to address environmental pollution issues is essential Implementing a strategic plan to assist businesses operating in the area will facilitate effective waste management solutions in the initial phase.
Concentrating in big cities, industrial zones, trade villages where have high population density and large amount of waste.
Develop and expand market to remote or smaller market, creating favorable competitive pioneer.
Strategy 4: Strategy for brand building and development
Son Ha is dedicated to enhancing lives through exceptional production and business outcomes, high-quality products, and outstanding customer service By continuously improving technical capabilities, Son Ha effectively meets the diverse needs of its customers This commitment reinforces the brand's position in the stainless steel sink market and symbolizes its success.
To building brand, the Company also use some tools as below:
- Usually have advertising or promotional campaigns.
Participating in social activities allows companies to address pressing issues like pollution and renewable energy By collaborating with government and local authorities, businesses can launch campaigns that enhance community awareness about environmental concerns.
Strategy 5: Strategy for differentiation in customer service
Implementing post-investment management with Son Ha’s own style, creating favorable conditions for customers to use product manufactured by Son Ha.
To use this strategy, Son ha need to pay attention to below issues:
Usually training its staffs about communication with customers such as skills of answering telephone, skills of solving problems, skills of taking care customers, etc.
Usually improving the Company’s abilily and knowledge Encouraging its employees attending training course or higher study.
Ensure to contact regularly with customers.
Strategy 6: Strategy for financial capability development
Finance is crucial for the operation of any company, often likened to the "blood" that sustains the enterprise To enhance its financial capacity, Son Ha can tap into various capital sources.
The company leverages its attractive capital resources by being listed on the stock market, allowing it to issue new shares With a solid reputation and a viable business plan, the company can effectively sell its shares to investors, enhancing its financial growth and stability.
Collaborating with partners is an effective strategy for organizations, as it encourages participation in projects and alleviates financial stress This approach allows companies to leverage the management and operational skills of their partners, optimizing resources and enhancing overall project success.
3.2 Selecting the best strategy for Son Ha:
- Based on the standards and principles, we can carry out a comparison for different strategies, then select the best strategy for Son Ha to implement.
- We can use QSPM model to choose the optimum business strategy for Son Ha from the basic strategies analyzed above:
Figure 3.2/ QSPM model for choosing the Optimum Sstrategy for Son Ha
Key factors ST1 ST2 ST3 ST4 ST5 ST6
The integration into the 2 world economy 9 4 0.36 3 0.27 4 0.36 3 0.27 3 0.27 3 0.2
The shifting in structure 7 economy 8 3 0.24 2 0.16 3 0.24 2 0.16 2 0.16 1 0.0
Conflict between law and under-law decision 7 1 0.07 1 0.07 1 0.07 1 0.07 1 0.07 3 0.2
High price of fuel and 1 energy 10 1 0.1 3 0.3 1 0.10 1 0.1 1 0.1 2 0.2
The trend of increasing 6 exchange rate 8 2 0.16 2 0.16 1 0.08 1 0.08 1 0.08 4 0.3
Young staff, lack of 8 experience 5 1 0.05 1 0.05 1 0.05 2 0.1 4 0.2 2 0.1
Low rate of undergraduate and post 5 1 0.05 1 0.05 1 0.05 1 0.05 4 0.2 2 0.1 Not competive discount policy 10 2 0.2 2 0.2 4 0.4 1 0.1 2 0.2 2 0.2
Limited access to international market 8 3 0.24 3 0.24 3 0.24 4 0.32 1 0.08 3 0.2
Step 3: Identifying the total score of strategies based on criteria
According to the analysis of weight ratio, we can see that the most suitable strategy for Son Ha’s current situation is Strategy 2 and Strategy 3.
Strategy 4: Strategy for brand buiding and development
Strategy 6: Strategy for financial capability development
These strategies can be selected as they show the achievability and they are decisive in the success of Son Ha in the future.