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Capstone report - Group No.11 – GaMbaX0810 GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT BUSINESS STRATEGY OF SONG HONG CONSTRUCTION JSC FOR THE PERIOD FROM 2012-2017 Group Number: No 11 Student’s name: Nguyen Xuan Tien Nguyen Huu Thang Duong Anh Minh Vo Duy Quang Capstone report - Group No.11 – GaMba.X0810 HA NOI 2011 WORDS OF COMMITMENT We, the group of 11 - Class MBAX0810, would commit the theme: "Building the business strategy of Company Song Hong construction period from 2012 to 2017" is the subject of study by our group The data relating to the company: the company offers, the prospectus filed with the State Securities Commission, the data of public companies registered with the State Securities Commission and other data synthesized from the stock market, real estate market Until now, this is the first topic to be studied The team members have no conflict of interest to any company Hanoi, 12/2011 Team No 11 made: Nguyen Xuan Tien (team leader) Nguyen Huu Thang Duong Anh Minh Vo Duy Quang Capstone report - Group No.11 – GaMba.X0810 ACKNOWLEDGEMENTS We send our most sincere thanks to the professor's Ph.D program MA International Business Administration (MBA) from University Griggs collaboration with ETC have dedicated teaching and guiding them during my training This knowledge is the basis needed to help us build this topic as applied to practical work We especially thank sincerely to the academic council of the University of Griggs has guided us during the study We would like to thank deeply Construction Company Song Hong INCOMEX, allows us to research the company and also enthusiastic to provide data for us to complete the task Hanoi, 12/ 2011 The authors do: Nguyen Xuan Tien (team leader) Nguyen Huu Thang Duong Anh Minh Vo Duy Quang Capstone report - Group No.11 – GaMba.X0810 TABLE OF CONTENTS Trang Sub cover page Commitment Acknowledgements List of symbols and abbreviations List of tables List of Figures, graphs INTRODUCTION Reasons to choose the research thesis Object and scope of the research Purpose of the research thesis Research methodology Contribution of the thesis CHAPTER I THEORETICAL BASIS 1.1 concept of strategy, role and basic characteristics of strategy 1.1.1 Concept of strategy 1.1.2 Role of business strategy 1.1.3 Basic characteristics of business strategy 1.2 Construction process of business strategy 1.2.1 Analysis of external environment and internal environment 1.2.1.1 Analysis of external environment 1.2.1.1.1 Analysis of macro environment 1.2.1.1.2 Analysis of industry environment 1.2.1.1.3 Analysis of competitors 1.2.1.2 Building of external factor evaluation matrix EFE 1.2.1.3 Construction of competitive profile matrix (CPM) 1.2.1.4 Analysis of internal environment: 1.2.1.4.1 Mission, vision, core values 1.2.1.4.2 Analysis of the nature of competitive advantage: 1.2.1.5 Construction of internal factor evaluation matrix IEF 1.2.2 Building and analysis of SWOT matrix 1.2.3 Business strategy option 1.2.3.1 Organization and creation of business strategy 1.2.3.2 Evaluation of strategy efficiency CHAPTER II EXTERNAL ENVIRONMENT ANALYSIS AND 1 1 1 3 3 10 10 10 10 10 11 14 15 16 17 18 20 21 22 22 22 24 CURRENT SITUATION OF BUSINESS PRODUCTION OF SONG 2.1 HONG CONSTRUCTION CORPORATION JSC - INCOMEX Overview on Song Hong Construction JSC – INCOMEX 24 Capstone report - Group No.11 – GaMba.X0810 2.1.1 Process of formation and development, operation organization 24 structure of INCOMEX 2.1.1.1 Process of formation and development 2.1.1.2 Organizational structure 2.1.2 Situation of production and business activities in the three recent 24 25 26 years 2.1.2.1 Indicators on general market and revenue 2.1.2.2 Indicators of the financial situation 2.1.2.3 Indicators of human resources 2.1.2.3 Targets contributing to state budget 2.2 Analysis of business environment factors of INCOMEX 2.2.1 Analysis of external environment 2.2.1.1 Analysis of macro environment - PEST model 2.2.1.2.Industry environment analysis – M Porter’s model of competitive 26 28 29 29 30 30 30 34 forces 2.2.1.3 Analysis of Competitive profile matrix (CPM) 2.2.1.4 Analysis of external factor analysis evaluation matrix (EFE) 2.2.2 Analysis of internal environment of INCOMEX 2.2.2.1 Mission, vision, core values 2.2.2.2 Evaluation of operation situation of Incomex in 2008, 2009, 39 48 49 49 50 2010 2.2.2.3 INCOMEX’s strongs are 2.2.2.4 INCOMEX’s weaknesses are 2.2.2.5 Analysis of internal factor evaluating matrix of INCOMEX 61 62 62 CHAPTER III: 64 BUSINESS STRATEGY SELECTION AND CONSTRUCTION SOLUTION OF INCOMEX IN THE PERIOD OF 2012 - 2017 3.1 Objectives of INCOMEX by 2017 and vision by 2020 3.1.1 Immediate objectives and targets by 2017: 3.1.2 Objectives of the period of 2018 - 2020: 3.1.3 Analysis of nature of sustainable competitive advantage 3.2 Development and recommendations on Incomex’s business 64 64 65 67 69 strategies 3.2.1 SWOT matrix construction to select strategies for Incomex 3.2.2 Construction and analysis of IE matrix to choose strategy for 69 72 Incomex 3.2.4 Business strategy selection of Incomex 3.2.4 Objectives of strategy 3.2.4 Strategic plans 3.3 A number of business strategy solutions of Incomex 72 73 73 75 Capstone report - Group No.11 – GaMba.X0810 3.3.1 Low cost strategy 3.3.2 Focus strategy 3.4 Strategy implementation roadmap of Incomex 3.5 Limitations of the study and risks: CONCLUSIONS AND RECOMMENDATIONS Summary of Incomex business strategy in the period of 2012 - 2017 Lesson Recommendations REFERENCES APPENDIX 75 76 78 79 80 80 80 81 Confirmation of research units LIST OF SYMBOLS AND ABBREVIATIONS GRIGGS Griggs University ……………………… Griggs University, USA VNU-Hanoi ………………………………….National University, Hanoi, Vietnam Incomex Song Hong Construction SJC ICG……………………………………… Stock of Song Hong Construction SJC PVC……………………………………………… PetroViet Nam Construction SJC PVN……………………………………………….……Vietnam Oil and Gas Group SWOT……………………………………………… Model of competitive analysis (Strengths, Weaknesses, Opportunities and threats) Capstone report - Group No.11 – GaMba.X0810 LIST OF TABLES Figure 1-1: Analysis of competitors Figure 1-2: EFE Matrix Figure 1-3: Matrix image analysis competition Figure 1-4: Results from a combination of four sustainable competitive criteria Figure 1-5: IFE Matrix Figure 1-6: SWOT analysis summary table Figure 2-1: Some investment projects and large construction have been implemented by INCOMEX Figure 2-2: Summary table of indicators of financial situation Figure 2-3: Inderect HR of the company over the years 2008-2010 Figure 2-4: Contributions budget and the annual social security Figure 2-5: List of supplyer Figure 2-6: Analysis of competitors Figure 2-7: Incomex’s EFE matrix evaluating response response ability for external conditions Figure 2-8: Evaluation of awareness of the internal environment of INCOMEX Capstone report - Group No.11 – GaMba.X0810 Figure 3-1: Solutions for all types of market Figure 3-2: Sustainable competitiveness Figure 3-3: SWOT analysis synthesis of Incomex Figure 3-4: IE Matrix Figure 3-5: Business strategy selection Figure 3-6: Applied strategy and market Figure 3-7: Roadmap for Strategic LIST OF FIGURES, GRAPHS Figure 1-1: Process of strategic planning Figure 1-2: Business strategy Figure 1-3: Decisive factors of competitiveness in the industry Figure 1-4: The components in the analysis of competitors Figure 2-1: Organizational chart of Incomex Figure 2-2: FDI attracting chart for real estate investment sector Figure 2-3: Supply chart of apartments in Hanoi Capstone report - Group No.11 – GaMba.X0810 INTRODUCTION Reasons to choose the research thesis: Vietnam's economy is gradually integrating into regional and the world economy, environment of enterprises is extended but the competition is becoming tougher This has created business opportunities also contain potential risks that threatening the development of enterprises In volatile market, ignoring the random element, the affecting factor of the success business is strategyfrom time to time On the stock market, one of the stocks that investors have chosen to invest, ICG is a stock code with many waves and high liquidity right from the time of listing in April 2009 It become one of the notable events on the listing market of HNX Moreover, the necessity to study and provide a report on one enterprise through the aspect of "strategy construction"; and also in the research group there are some members as officials who have been working in SONG HONG CONSTRUCTION CORPORATION JSC -– INCOMEX has applied strategy management that brings success since it’s establishment Knowing the important of business strategy and some of we are Incomex’s staff , so our group have agreed to decide to select the thesis: "Business strategy construction of Song Hong Construction Corporation JSC - Incomex in the period of 2011 - 2015" with the hope to apply the learned knowledge to contribute to the sustainable development of the Company in the current situation Content of report has three parts as follow: PART 1: THEORICAL OF STRATEGY MANAGEMENT PART 2: CURRENT SITUATION OF INCOMEX’S BUSINESS PRODUCTION Capstone report - Group No.11 – GaMba.X0810 PART 3: BUSINESS STRATEGY SELECTION AND BUSSINESS STRATEGY SOLUTION OF INCOMEX 2012 2017 Object and scope of the research: - Object: Real estate bBusiness strategy of the company - Scope: Base on research time limitation this report only focus on real estate of Incomex JSC in HanoiWithin the framework of training program and Vietnam market Purpose of the research thesis: - Systematization of the theoretical issues of strategic construction - Analysis and evaluation of business situation at Song Hong Construction Corporate JSC - Incomex - Apply strategy management to real estate business strategy of Incomex JSC from 2012 - 2017 Research methodology: Primary data source, which is used, source which is used is official information of the business, the prospectus, annual report of the Company, of the other companies in the same industry and the data on public company in the market From there, using research methods such as analysis and synthesis of data, logical thinking, deductive to complete the graduation capstone Contribution of the thesis: Recommendations on strategicstrategiic solutions for the Company in real estate field during the period of 2011 - 2015 - Supporting of the company to identify its position in the market and then having plan to develop and implement other strategies for stable, sustainable development 10 Capstone report - Group No.11 – GaMba.X0810 Internal factors Manager level Employee level IT application Trade mark Product diversification Branch effectiveness External factors Competitive ranking Product quality Development of other AS TAS AS TAS 3 4 4 12 12 12 12 3 4 9 12 16 16 3 3 12 9 12 12 fields Total 90 No Criteria Brand Market share Revenue Profit Sustainable development Total Calculation 101 O1 O2 O3 11 11 17 18 1go 10 12 12 18 15 15 18 20 15 17 17 100 72 67 83 point 20 20 20 20 Currently, companies are focusing on real estate that is old apartment building in social policy and an array of commercial real estate is to rebuild the downtown area for rent By the assessment table above, we find low-cost strategy has higher score, but because real estate is entering a recession, can not expand the diversification of products as well as other areas of other real estate According to the data analysis of our competitors can see, the cost structure of the company can continue to cut down on such factors as: the cost of advertising, designed to reduce the cost price which maintaining profitability.After researching and considering carefully, Group 11 decides to select Incomex strategy as "Focus strategy combined with low- cost" With the selected target market in Chapter II; core values have been statistic in Chapter II So, the issue is posed that where is low-cost strategy applied? How to 87 Capstone report - Group No.11 – GaMba.X0810 apply? Where is focus strategy applied? Which target market? And how to apply? If not clarifying clearly, Incomex will be fallen in the situation of jam between the strategies, as well as not take advantage of its existing strengths Strategic assignment table in each market as table 3-6: Table 3-6: Applied strategy and market Type of market No Type of application Advanced Average Low level Focus Focus Low Cost Low Cost Focus Low Cost Low Cost Low Cost Low Cost level Demolition of the old markets and building of business centers on the existing ground Market dismantle old apartment building apartment building for people with average incomes in the former group Apartment investment market for sale and rent in densely populated areas According to the above results, Incomex should form focus strategy So, the question is posed that why must so? If we so, it will have two effects They are: - Strengthening and maintaining more market power in its segment is investing to demolish the old markets into the commercial centers this is work supported by Hanoi People's Committee to build a modern civilization capital as a market that Incomex has built its brand through implementing completing Hang Da market trading center – the work with the name plate of 1000 years of Thang Long Hanoi, the work has been received the award of the Prime Minister " 88 Capstone report - Group No.11 – GaMba.X0810 - For apartment investment market for sale and for rent, INCOMEX has invested sucessfully many projects such as B4, B14 Kim Lien, North Sea this is relatively complex market, but CEO Board has found that this is a potential market - For the rental market, it is a new market but this market is possible because in some major cities of the developed countries, owning an apartment is absolutely difficult for most people so this is a potential market promising success 3.3 A number of business strategy solutions of Incomex 3.3.1 Low cost strategy: - Target market is luxury and average markets as mentioned above - Solutions about the bargaining power of buyers: + Reasonable quality: satisfies the minimum requirements of customers, but also must satisfy legal requirements, standards and operating and maintenance conditions + Completion deadline: handing over of products on time or earlier + Reasonable price product: complying with competitive price in the market - Solutions about the bargaining power of sellers: + Good relations and credibility with the financial investment companies, banks, signing the memorandums, agreements to meet capital for the project based on the principles of equality and mutual benefit + Currently, Incomex is branding firm and has very good relations with suppliers Therefore, suppliers who want to sell, they also have to lower the price In other words, they themselves compete with each other on price, payment conditions For this, they bring advantages for Incomex - Solution on project design, implementation: + Use connection companies to offer typical designs, reasonable with low cost + Use the construction tool, installation at medium level + Use human resources with low or average quality + Strict project management to ensure unwasted quality 89 Capstone report - Group No.11 – GaMba.X0810 + Project implementation process ensures timely synchronization - Solutions on after-sales service: Supply of essential services, the minimum requirements for users with low cost as possible - Solutions on human resources: Human resources for these projects don’t need to be high only need to meet minimum requirements - Financial solutions: Cash flow management for the project is reasonable to ensure the low payment of interest rate - Managerial solution: Enhancement of the inspection and supervision of the implementation process, continuous adjustment to suit the actual situation - Maketing solutions: it’s necessary to have strategies of product promotion to customers and investors 3.3.2: Focus strategy: - Target market is the average market for investment product line to the trading centers and apartments on the old ground The nature of this fous can be based on the forte capacity of Incomex and the support of the state - Implementation solution + Work with local authorities so that the authorities assign Incomex as the investor to implement projects on the demolition of the old apartments and the old markets to build new apartments and trading centers + Work specifically on the work of reasonable clearance and compensation + Construct the planning about reasonable density and height to ensure efficiency + Design logically to ensure flexibility and have the largest commercial area + Efficient project management + Implementation process with the most effective cost - Quality solutions: This market segmentation should have product quality in many ways: Such as technology, art, performance, scalability, reliability and demand of good service, especially to meet to the current Vietnam standards about 90 Capstone report - Group No.11 – GaMba.X0810 investment process and project management and next, must meet the world standards in this area - Solutions on after-sales services: need more time, more staff and specific processes and prevention solutions when the problem occur - Human solutions: With this type of strategy requires high quality human resources, especially human resources in the areas of search, design and project management vvDo, at Incomex will have two parts: senior human resources department and normal human These department requires officers must understand about the market, actively research products of inputs and outputs, in order to meet the time requirements of the market This is also a good internal competition environment for Incomex - Maketing solutions: + Approach of input markets: Understand the policies of the government, the authority about plans to implement the projects in Hanoi + Access of output market: This market approach must be implemented through the investment channels and actively seeking to meet customers, using the maketing skills and technical skills to convince customers, investors so that they may see value in investing in the products of INCOMEX - Investment solutions: Focus on investment in key projects with high liquidity Do not invest spreading because this will greatly affect the organization of management and financing arrangement for the project 3.4 Strategy implementation roadmap of Incomex To ensure the effective inspection, supervision and evaluation of the implementation of strategic solutions should perform in the route as table 3-7: Table 3-7: Roadmap for Strategic No Work Business 91 Time Expected products 1/1/2012 Strategy Implementat Implemen Forms of ion budget tation implementat (billion) 0,1 units Board ion of Hire Capstone report - Group No.11 – GaMba.X0810 strategy department Directors Administra 40% of tion Solutions for Incomex has Organizati human undergraduate on resources, 1/1/2012 qualification scientific and knowing research at least one 50 Departmen Hire t foreign Corporate finance management 1/1/2012 solutions language Construction Finance – and Accountin application of g corporate financial 0,05 Departmen t Hire management efficiently and modernly The Strengthening Maketing solution 1/1/2012 of advertising on mass project 0,5 Organization production of effective management, materials Solution on organization 92 1/1/2012 production sales block Project Manageme 0,05 compact nt Hire Departmen management 1/1/2012 Appropriate, Hire nt units - media Solutions on manageme 0,5 t Administra Hire tionOrgani Capstone report - Group No.11 – GaMba.X0810 structure organizational structure, zation Departmen t (Note: the above funding level in each column is made for the period of 2012 - 2017) According to the above plan, the construction of business strategy on and functional strategies must be built completely and approved before 1/1/2012 Total budget for researching business strategy is 5,7 billion Vietnam dong The process of the strategy implementation will be started from 1/1/2012 to the end of 2017 In the implementation process will have feedback and can lead to correction of some problems in the strategy 3.5 Limitations of the study and risks: The strategy is built on the assumption, forecasts that Vietnam market grows and will avoid subjectively internal and external evaluation Thus, the introduction and effectiveness of the strategy will have low precision Within the limit of the program about limited content, time and references, the evaluation based on logical thinking will lead to many restrictions CONCLUSIONS AND RECOMMENDATIONS Summary of Incomex business strategy in the period of 2012 - 2017 - Recommendation on INCOMEX’s business strategy in the period of 2012 2017: is a strategy which focuses on one key factors - the focus strategy is associated with low-cost strategy The decisive thought of this strategy is not scattered and dispersed resources (human resources, capital, technology, especially the position advantage of INCOMEX) In each stage, should focus on decisive strategies for the business activities of Incomex The implementation roadmap regulation of solutions for each target market - The business strategies and target market are applied specifically for Incomex in the period of 2012 - 2017 including: 93 Capstone report - Group No.11 – GaMba.X0810 + All the dismantle market of old apartment, market into new apartment and commercial center is to apply the focus strategy; + Other real estate market will apply low-cost strategy It is noted here that classification criteria of market is based on using levels of technology and product quality In all markets, INCOMEX always tries to perform well the set solutions System of attached solutions includes: + Solutions on human resources: + Solutions on corporate finance management; + Maketing solution; + Management solutions + Solutions on organizational structure Lesson - Because the environment (including internal and external) always changes, it often re-evaluates strategies to have the most optimal business strategy; - Taking advantage of opportunities (primarily legal environment) and the specific characteristics of existing industry are key for the development of Incomex However, Incomex should focus and take advantage of its opportunities - Always applying the knowledge learned in the Training Program Master in Business Administration - Griggs University (especially Strategic Management - an economic scientific subject is relatively new in Vietnam at present) in practice to improve the competitiveness of Vietnamese and international enterprises - In this thesis, when calculating the weights, the impact level, the comparison factors Etc in models, tables, Group 11 has been based on opinions of Incomex’s key experts Therefore, it can affect the correctness of the strategies Recommendations Because the selection of factors (macro, micro, and internal factors of the business) affects the performance of the business, estimate of the weights and the importance of the factors in the matrices can and should be further researched to 94 Capstone report - Group No.11 – GaMba.X0810 help improve both the theoretical and practical sides According to the group's subjective opinion, should have deeper study work for this problem (can use the weighted average method of obtaining expert opinion and surveys) to be able to increase the accuracy of the models And finally, instead of a conclusion, capstone "Business strategy construction for Incomex in the period of 2012 - 2017" of the group has been selected from the actual condition of the enterprise as well individual condition The analysis is based on data source provided by the enterprise, prospectus, annual report and other sources With the recommendation of strategy for INCOMEX is just for researching, learning, completing tasks and also valuable for INCOMEX for reference so that Incomex will achieve its desire in 2017 REFERENCES I BOOKS: Abell D F (1980), Defining the business: The Starting Point of Strategic Planing, Engglewood Clifs, NJ: Pretice Hall Charles W.L Hill, Gareth R Joines (2002), Strategic Management: An Integrated Approach, 5th, Ed Houghton Mifflin Charles D Schewe – Alexander Watson Hiam The Portable MBA in Marketing David A Secenzo, Stephen P Robbin (2002), Human Resource Management, 7th John Wiley & Son, Inc Fred R.David, cepts of strategic management, Lawrence R Jauch and William F Gluek (1989) Business Policy and Strategic Management Le The Gioi, Associate Professor, PhD., (2007), managemant, Statistical Publishing house Strategy Porter,M.E Competitive Strategy (New York: Free, Press, 1980) Porter,M.E The contribution of Industrial Organization to Strategic Management New York: Wiley (1981) 95 Capstone report - Group No.11 – GaMba.X0810 10 R Lubit, (2001), “Tacut knowledge and knowledge management: The keys to sustainable competitive advantage ”, organizational Dynamics, 29(3) 11 Jack W Calhoun (2004) Fundamentals of financial management, 10th Thomson II OTHER DOCUMENTS: Annual Management Report 2008-2009-2010 of incomex Financial Statement 2008-2009-2010 of Incomex Incomex’s planning report 2008-2010 CBRE report 2011 III THE WEBSITE: http://www.incomex.vn/ ……………………………………………web of Incomex http://www.ssc.gov.vn/ ………………………….The State Securities Commission http://dddn.com.vn/ ……………………………………………….Business Forum http://chungta.com/ .Chung ta http://www.marketingchienluoc.com/ ………………………… Marketing Strategy http://www.songphat.net Song phat APPENDIX I - DUTIES OF THE STUDY GROUP MEMBERS No Name Nguyen Xuan Tien 96 content   Assign, coordinate the joint work of the Group working with companies to gather data and selection contents to made Capstone report - Group No.11 – GaMba.X0810       Nguyen Huu Thang         Join a writing a preliminary outline, outline details Participate in writing Part and Part Conclusion Collect the illustration Participate in finalizing the report    Collection of reference books Join a detailed outline for comments Participate in finalizing the report  Duong Anh Minh Vo Duy Quang 97 Direct write a preliminary outline, outline details Direct write an introduction Direct writing of 2, of the Report Join a writing section and conclusion Check the the contents of the supporting member Direct participation comments, additional editing of posts Participate in finalizing the report on behalf of the group presentation report Participate in finalizing the report Printing, and submitted to the programs Designed for slide presentation Capstone report - Group No.11 – GaMba.X0810 II - LIST OF ORGANIZATIONS AND INDIVIDUALS INVOLVED IN RESEARCH No Name of individual and content organizational Academic Council of the  Provide orientation to the capstone report University of Griggs (United  Guide the form of capstone report States)  Comments on the detailed contents of the  draft of capstone report Suggestions on issues of concern related to Incomex compay Consisting of representatives: business and industry were selected as Deputy Executive Director research subjects for Group Head of departments  Present the overall strategic goals and objectives at each stage, business functions  Provide the documents and related data necessary and to facilitate the working group during the study  Provide comments and suggestions on the the contents related to strategy, performance measures and strategic plans will be implemented in the near future  Review and assessment of group work and GS.TS Vu Thanh Hung -  the value of research for business Advice on choosing topics for group Teachers directly teach  Orientation of research and comment the Strategic Management contents of capstone report in the study of group 98 ...Capstone report - Group No.11 – GaMba.X0810 HA NOI 2011 WORDS OF COMMITMENT We, the group of 11 - Class MBAX0810, would commit the theme: "Building the business strategy... Capstone report - Group No.11 – GaMba.X0810 ACKNOWLEDGEMENTS We send our most sincere thanks to the professor's Ph.D program MA International Business Administration (MBA) from University Griggs collaboration... GaMba.X0810 CHAPTER I THEORETICAL BASIS 1.1 concept of strategy, role and basic characteristics of strategy 1.1.1 Concept of strategy What is strategy? 11 Capstone report - Group No.11 – GaMba.X0810