building strategy for petrovietnam university in stage 2011-2015

LIST OF TABLES Table 1.1 Industry‟s entry and exit barriers Table 1.2 Bargaining powers of suppliers and buyers Table 1.4 Appropriate strategies selection GREAT model Table 2.1 Estim

VIETNAM NATIONAL UNIVERSITY, HANOI

MASTER OF BUSINESS ADMINISTRATION THESIS

Supervisor: Dr Do Xuan Truong

Hanoi – 2011

TABLE OF CONTENT

ACKNOWLEDGEMENTS i

ABSTRACT ii

TÓM TẮT iv

TABLE OF CONTENT vi

LIST OF ABBREVIATIONS ix

LIST OF TABLES x

LIST OF FIGURES xi

INTRODUCTION xii

1 Necessity of the thesis xii

2 Objectives of the thesis xii

3 Research Questions xii

4 Scope of works xiii

5 Data source xiii

6 Expected Results xiii

7 Structure of the thesis xiii

CHAPTER 1: LITERATURE REVIEW 1

1 Strategy and role of strategy 1

1.1 Definition of strategy 1

1.2 Role of strategy 2

2 Strategic management process 3

3 Strategic vision and business mission 6

4 Setting objectives 6

5 External environment analysis 7

5.1 Macro environment analysis 8

5.2 Industry analysis: Porter‟s Five Forces model 9

6 Internal analysis 15

6.1 Value chain analysis 15

6.2 Process to identify sustainable competitive advantages 17

7 SWOT analysis 18

7.1 What is SWOT? 18

7.2 SWOT matrix 20

8 Strategy selection 20

8.1 Suitability 20

8.2 Acceptability 21

8.3 Feasibility 21

9 Formulating a strategy 22

9.1 Levels of strategy - The Strategy making pyramid 22

9.2 Specific strategy at different levels 23

10 Strategy implementation 29

11 Strategy evaluation 30

CHAPTER 2: ANALYZE THE CASE OF 31

PETROVIETNAM UNIVERSITY - PVU 31

1 PVU Project – The imperative 31

1.1 Overview about PetroVietnam – PVN 32

1.2 Overview about PetroVietnam University – PVU 46

2 External environment analysis 54

2.1 Macro analysis – PEST model 54

2.2 Industry analysis – Five forces model 60

3 SWOT analysis 66

3.1 Strengths 66

3.2 Weeknesses 67

3.3 Oppotunities 69

3.4 Threats 70

CHAPTER 3: STRATEGY FORMULATION AND IMPLEMETATION 72

1 Strategy formulation 72

1.1 SWOT Matrix 72

1.2 Strategy formulation 77

1.3 Strategy slection 82

2 Implementation 85

2.1 Action plan of Organisational management & Policy strategy 86

2.2 Action plan of Marketing strategy 88

CONCLUSION 92

REFERENCES 93

APPENDIX 1 96

APPENDIX 2 97

APPENDIX 3 98

LIST OF ABBREVIATIONS

PVN Vietnam Oil and Gas Group

PVU PetroVietnam University

JVC Join Venture Company

IT Information Technology

ICT Information Communication Technology

JOT On the job training

JOC Join Operation Company

GDP Gross Domestic Product

DPU Danang Polytechnic University

HPU Ho Chi Minh Polytechnic University

HUT Hanoi University of Technology

VPI Vietnam Petroleum Institute

LIST OF TABLES

Table 1.1 Industry‟s entry and exit barriers

Table 1.2 Bargaining powers of suppliers and buyers

Table 1.4 Appropriate strategies selection (GREAT model)

Table 2.1 Estimated number of employees needed in period 2016 – 2025 of PVN

Table 2.2 Vietnam GDP Growth rate 2006 - 2010

Table 2.3 Statistics of Vietnam University Education

Table 2.4 SWOT Analysis

Table 3.1 Strengths – Opportunities Strategies ( S – O strategies)

Table 3.2 Strengths – Threats Strategies (S – T strategies)

Table 3.3 Weaknesses – Opportunities strategies ( W – O strategies)

Table 3.4 Weaknesses – Threats Strategies ( W – T strategies)

Table 3.5 PVU‟s appropriate strategies selection (GREAT model)

Table 3.6 Action plan of Organizational management & Policy strategy

Table 3.7 Action plan of Marketing strategy

LIST OF FIGURES

Figure 1.1 Strategic management Model

Figure 1.2 External environment

Figure 1.3 Five Forces Model

Figure 1.4 Value chain

Figure 1.5 Process to identify sustainable competitive advantages

Figure 1.6 The strategic making pyramid model in a diversified company

Figure 1.7 Model of business strategies

Figure 2.1 Logo Petro Vietnam

Figure 2.2 The Number of employees of PVN in 2010

Figure 2.3 The structure and level of labor PVN in 2010

Figure 2.4 The structure of working age PVN in 2010

Figure 2.5 Logo PetroVietnam University

Figure 2.6 3D model views of PVU‟s Main campus in Vinh Phuc

Figure 2.7 Socialize education model

Figure 2.8 Vietnam GDP Growth rate 2006 – 2010

Figure 2.9 Vietnam Population Pyramid 2010

INTRODUCTION

This part will give an introduction to readers about the thesis Firstly, the necessity

of the thesis is mentioned, next are objectives of the thesis, then researches questions are raised up, followed by scope of work, methodology, thesis„s contributions, expected results, further research directions and limitations of the thesis Finally, the thesis structure is presented in order to help readers have an over-all picture of the whole study

1 Necessity of the thesis

- PVU has just been established in the early of 2011, PVU have the business level strategy very clear is Diffirentiation strategy But they didn‟t have clear functional strategies and “what are most important fields must be focus” is big question for them in this stage

- PVN and PVU‟s managers desire to build PVU as a international university; become one of the best universities in Vietnam and area on 2020s

- Almost international universities have the clear strategy This shows the necessity of building the strategy in order to make differences with other universities as well as designing a development pathlength for the university itself

2 Objectives of the thesis

- Review the theory in strategy and strategic management

- Analyze the case of PetroVietnam University in the first stage

- Propose some recommendations in order to build the strategy of PVN in stage 2011-2015

3 Research Questions

- What is strategy and what is the role of strategy?

- Which factors will affect to build strategy of PVU

- Which strategy will be suitable for PVU in the very first state

4 Scope of works

- Field: Strategy and strategy management

- Space: All activities of PVU

- Time: About 5 years from the establishment 2011 - 2015

5 Data source

- Strategy in new stage of PVN

- Consulting project of PVN with TIEC

- Internet, books and ebooks

- Experts (Manager of PVU, Educational expert…)

6 Expected Results

- Giving out a general picture of the educational field

- Giving out a deep analysis about the case of PVU

- Propose some recommendations for functional level strategy for PVU in the stage 2011 - 2015

7 Structure of the thesis

INTRODUCTION

CHAPTER I: LITERATURE REVIEW

CHAPTER II: ANALYSE THE CASE OF PETROVIETNAM UNIVERSITY CHAPTER III: STRATEGY FORMULATION AND RECOMENDATION

CONCLUSION

REFERENCE

APPENDIX

CHAPTER 1: LITERATURE REVIEW

Literature review is an important chapter of any thesis; it helps readers to remind about strategic theories relating to the thesis‟s topic In this chapter, the theory in strategy and strategic management will be reviewed as a basic for analyses in next chapters

1 Strategy and role of strategy

of the company in the market

Dr Erica Olsen, in her book “Strategic Planning for Dummies”, has given another definition: “Strategy means consciously choosing to be clear about your company‟s direction in relation to what‟s happening in the dynamic environment With this knowledge, you‟re in a much better position to respond proactively to the changing environment”

Professor Michael L.Porter of Harvard University, USA, has stated his own viewpoints in the article “What is strategy?” in Harvard Business Review In his opinion, strategy is performing different activities from rivals‟ or performing similar activities in different ways It is the creation of a unique and valuable

1

Arthur Thompson and Stricklands, Strategic Management: Concepts and Cases,10th edition, McGraw Hill

position, involving a different set of activities Strategy, therefore, is quite different from “Operational Effectiveness (OE) which is only “Performing similar activities better than rivals perform them” Although both operational effectiveness and strategy are necessary for the superior performance of an organization, they operate

in different ways

From the viewpoint, it can be seen that a company can overcome rivals only if it can establish a difference it can preserve and maintain this He also points out some certain core points when mentioning strategy:

Strategy depends on unique activities Competitive strategy is about being different

It means deliberately choosing a different set of activities to deliver a unique mix of value

Strategy creates the fit driving Both Competitive Advantage and Sustainability It is considered as a system Therefore, if a company has a sound and clear strategy, it can create a difference system which is very difficult to imitate, and they can brings both competitive advantage and sustainability

From these definitions, it can be seen that although the description of strategy are different, all authors agreed at a common viewpoint that strategy is a clear and best way (or road map) that a company has to “choose” to go to reach success As there might be different ways, a company can only choose the best way and ignore others

If not, if will go around and never reach the final destination

1.2 Role of strategy

Strategy plays an important role in the overall business activity of the company Firstly, it helps the company go ahead in a clear direction, avoid being mislead in the way ahead or go around in a circle Secondly, a clear and sound strategy helps to clarify and communicate within the organization and to its customers/partners, so that all knows where the company goes and all implement this strategy in a

consistent and coordinated way Thirdly, strategy helps companies to create the competitive advantage and stimulate the sustainable development of the company in the long-term by focus all of its resources to implement which is considered as critical activities and to design an effective business system in order to maintain its chosen positions in the market By doing this way, strategy helps companies to refuse implementing unimportant activities, therefore, save time, efforts and resources and reinforce the strong position It can be said that, without a sound strategy, company hardly can maintain and develop its position in the market in the long-term

2 Strategic management process

The Strategic management process is a problem which is interested by many strategists as well as economists Simply understanding, strategic management is a process of implementing “strategic decisions” to answer 3 main questions: 1- Where is the company now? 2- Where will the company go? 3- How can the company reach there?

As there are many different viewpoints in strategic management process, within the limitation of this thesis, a model of Strategic management is rebuilt up based on 2 models of Thompson and Strickland (which are Five Tasks of Strategic management model and The Strategy making pyramid model), to present the relations among major steps in the process

Figure 1.1: Strategic Management Model

Source: Based on Arthur Thompson and Strickland, Strategic Management: Concepts and Cases, 10th edition, McGraw Hill Companies, the Five Tasks of Strategic management Model and the Strategy Making Pyramid model

It can be seen that there are several steps in that model:

- Firstly, the strategic management process begins with the identification of vision and mission of the company, which is to answer the questions “Where will the company go?”

- Secondly, the strategist should analyze the environment, including external and internal one, this is to answer the question “Where is the company now?” and “What does the company have?”

- Thirdly, the strategists have to set its own objectives, these objectives is in shorter time than the vision and mission, they might be annual or in several years and are very specific They can be illustrated as the milestones in the way that the company would like to go

- Fourthly, after knowing the point of departure and of destination, the strategist has to draw out how the company can reach there, by what means, and what resources it has to prepare for, that is called a strategy

Then, the manager will organize to implement the strategy

During the process of strategy implementation, it needs the evaluation and monitoring to revise if the way it goes is right and the best way and if there is another better way to go, as the environment changes very quickly That is why adjustments might be made in all steps from redefining vision and mission, setting objectives, to formulating strategy and implementation

Therefore, it can be concluded that strategic management is an interrelated process, not a group of single activities; all of the steps have the close relations with one another

Following parts in this chapter will review the theoretical aspects of this model

3 Strategic vision and business mission

As described in the above part, a strategic management process begins with the identification of vision and mission of the company

According to Thompson and Strickland, a strategic vision is a roadmap of a company„s future – the direction it is headed, the business position it intends to stake out, and the capabilities it plans to develop A company‟s mission is what a company is currently seeking to do for its customers From these definitions, it can

be seen that the vision is for the long-term future of the company, while the mission

is for the current business If a company „s mission does not only include the current business but also mention where the company is headed and what it will become in the future, then the mission merge into the vision, or we have both vision and mission in one statement

To become effectively communicate within and outside of the company, a company„s vision and mission should meet ensure following characters: 1- The current business of the company 2- The long-term strategic course that the company will pursue 3- The statement should be clear, exciting, and inspiring Normally, the vision and mission is not to make a profit and therefore, not related to specific figures and numbers

4 Setting objectives

The third step after establishing strategic vision and business mission in the model

is setting objectives Objectives can be defined as specific performance target converted from the vision and mission They represent the commitment of leaders

to achieve specific performance targets within a specific time frame Without objectives, vision and mission are only dreams

Unlike vision and mission, objectives should be very specific and can be illustrated

by numbers and figures In general, objectives are divided into 2 types:

- Financial objectives: They are related to financial performance like growth in revenues and earnings, reduction in cost, higher dividends, better financial ratio (Return on assets, return on equity, earning per share …)

- Strategic objectives: They are related to other non-financial performance like higher product quality and customer service than competitors, a bigger market share, higher brand awareness, more loyalty of customers, more qualified human resource…

5 External environment analysis

External environment is the environment which affects directly or indirectly to the activities of a company but the company hardly impacts or changes this It includes macro environment (economics, politics, socio-cultural and technology) and industry (or competitive) environment, which can be illustrated in the following figure This environment creates opportunities or threats for the company

Figure 1.2: External environment

Source: www.bolender.com

5.1 Macro environment analysis

When mentioning macro environment, the “PEST” analysis technique is often used, that is the analysis of 4 factors “Politics, Economics, Socio-culture and Technology”

5.1.1 Analyze political-legal environment

The goal of the analysis in political-legal environment is to identify impacts of politics and legal system on the stable and sustainable development of the organization Legal environment includes legal system and politic system (like policies of the Government, politic environment in both domestic and international)

A politic stability and an open, convenient legal environment will facilitate investors to start up and develop their organization in the long run

5.1.2 Analyze economic environment

The economic environment is factors and forces which impact the capability of production and supplying (supply factor) as well as and the ability and willing to buy product/services (demand factor) Some most important factors of the economic environment are the economic system, economy condition, interest rate, inflation rate and exchange rate

5.1.3 Analyze socio-cultural environment

Socio-cultural environment includes values and standards accepted and respected

by a society or a specific culture, including viewpoints in lifestyle and consuming; attitude, traditional habits and customs; interests of the society; level of knowledge

To identify and catch up with consuming tendencies will bring competitiveness and success for the company The main goal of analysis the social-cultural environment

is the attitude and behavior of actors and customers who have a direct relationship with the company The social environment also includes factors like population, the growth rate and distribution of the population, structure of age and gender, income

Analysis of these factors will help the company to estimate the market volume and exploit the right characteristics of the market to look for a profit

5.1.4 Analyze technology environment

Technology progress is a basic factor to develop the economy In developing countries with low technology level like Vietnam, the successful transfer and adoption of technology from foreign countries decide the sustainable growth of the economy

The development of technology, especially information and communication technology affect positively to the activity of a company in all activities First, it decreases the cost of transportation and communication Secondly, it promotes the innovation and creativeness, increases productivity and creates new added values Thirdly, information technology and communication combine with other technologies are useful means to enhance the management effectiveness Fourthly,

it can affect to the barrier of entrance into the industry and quickly restructure the competition within the industry

Therefore, one of important things that a company needs to do is usually research

on new technology, development level of technology,… to take opportunities brought by technology progress in order to enhance its competitiveness

5.2 Industry analysis: Porter’s Five Forces model

Porter‟s five forces framework evaluates entry barriers, suppliers, customers, substitute products, and rivalry in the industry

Figure 1.3: Five Forces Model

Source: Michael Porter, 1980

Those five competitive forces appear in every industry and every market They determine the intensity of competition and therefore the profitability and attractiveness of an industry Based on the information derived from the Five Forces analysis, managers can decide how to influence or to exploit particular characteristics of their industry to improve the firm‟s position

market share; the industry is concentrated or less competitive A low concentration ratio indicates that many rivals, none of which has a significant market share, characterize the industry The market is competitive

The intensity of rivalry is commonly based on the firms‟ aggressiveness in order to gain an advantage It is influenced by the industry characteristics such as:

- The number of competitors: A large numbers of competitors increase rivalry because more firms must compete for the same customers and resources The rivalry is more intense if there are many small or equally sized competitors; rivalry is less when an industry has a market leader

- Market growth: In a slow growth market, firms have to compete for market share On the contrary, firms are easy to improve revenues in an expanding market

- High fixed costs: If total costs are mostly fixed costs, the firm must produce near capacity to attain the lowest unit costs The firm must sell a large quantity of product, that lead to a fight for market share and an increase in rivalry

- Level of product differentiation: Low level of product differentiation is associated with higher level of rivalry Industries where products are commodities have greater rivalry, industries where competitors can differentiate their products have less rivalry

- Switching costs: Rivalry is reduced if there is a significant cost associated with the decision to buy a product from an alternative supplier

5.2.2 Threat of New Entrants

It is not only existing rivals that make a threat to firms in an industry, the possibility that new firms may enter the industry also affects competition New entrants to an

industry can raise the level of competition, thereby reducing its attractiveness However, there are barriers to entry

Barriers to entry are unique industry characteristics Barriers maintain the level of profits for those already in the industry because they reduce the rate of new entrants Barriers to entry arise from several sources such as:

- Government regulations: The principal role of the government in a market is

to preserve competition through anti-trust actions Besides, government restricts competition through regulations Industries such as public utilities are considered natural monopolies, as it has been more efficient to have one company rather than to permit many companies to compete in a local market

- Patents and proprietary knowledge: Ideas and knowledge that provide competitive advantages are considered private property, so that, preventing others from using the knowledge and thus creating a barrier to entry

- Asset specificity: Asset specificity is the extent to which the firm‟s assets can

be utilized to produce a different product Potential entrants are reluctant to invest in highly specialized assets that cannot be sold or converted into other uses

- Economies of Scale: The existence of an economy of scale (minimum size requirements for profitable operations) creates a barrier to entry

- Exit barriers: Barriers to exit are similar to barriers to entry Exit barriers limit the ability of a firm to leave the market High barriers to leave an industry increase rivalry High exit barriers cause a firm to remain in an industry, even when the business is not profitable A common exit barrier is asset specificity If the plant and equipment required for manufacturing a product is highly specialized, they cannot easily be sold to other buyers in another industry

Table 1.1: Industry’s entry and exit barriers Easy to Enter if

- Common technology

- Little brand franchise

- Access to distribution channels

- Low scale threshold

Difficult to Enter if

- Patented or proprietary know-how

- Difficulty in brand switching

- Restricted distribution channels

- High scale threshold

5.2.3 Bargaining Power of Buyers

Buyers are the people or organizations who create demand in an industry The power of buyers is the impact that customers have on a producing industry

If buyer power is strong, the relationship to the producing industry is near to a monopoly, a market in which there are many suppliers and one buyer Under such market conditions, the buyer sets the price

5.2.4 Bargaining Power of Suppliers

Suppliers can have a significant impact on a company‟s profitability If suppliers have high bargaining power over a company, then the company‟s industry is less attractive

A producing industry requires raw materials, labor, components… This requirement leads to buyer-supplier relationships between the industry and the firms that provide the materials used to create products Suppliers, if powerful, can influent the producing industry, such as selling at a high price to capture some of the industry‟s profits

The industry often faces a high pressure from their suppliers or buyers This relationship can potentially affect its profitability

Table 1.2: Bargaining powers of suppliers and buyers Buyers are powerful if

- A few buyers with significant

market share and many sellers

- The industry is not a key supplying

Buyers are weak if

- Many different buyers, no buyer has any particular influence on product or price

- Producer can take over own distribution or retailing

- Significant switching costs

- Producers threaten forward integration

Suppliers are weak if

- Many competitive suppliers

- Low switching costs: products are standardized

- Purchase commodity product

- The industry is a key customer

- The industry is not a key

The threat of substitutes is determined by factors like:

- Brand loyalty of customers

- Close customer relationships

- Switching costs for customers

- The relative price for performance of substitutes

- Current trends

6 Internal analysis

6.1 Value chain analysis

Figure 1-4: Value chain

The principle idea of value chain is to identify the relevant activities in business‟s performance The purpose is to analysis each acitivities to find out the role of each activities and its contribution in final products of the business Value chain is defined as a chain of activities The final products pass through all activities in the value chain And at each activity, the products gain some added value The valuable meaning in this concept is that the chain of activities contributes to final products more added value than summing up individually added value of each activities The value chain divides all activities of an organization into 2 categorizese: primary activities and support activities

The primary activities include inbound logistic, operations, outbound logistic, marketing and sales, and service

The support activities include administrative infrastructure management, human resource management, information technology, and procurement

In analyzing each activity of the value chain, managers can determine the organization‟s strength and weakness in each activity in relationship with organization‟s objective and strategy It also helps to compare those acitivities to other organizations to assess the effectiveness in each activities

6.2 Process to identify sustainable competitive advantages

Figure 1-5: Process to identify sustainable competitive advantages

- Resources are all the things that the organization has in order to use in organization‟s business activities Resources can be tangible or intangible

- Tangible resources: such as material, capital, building, machine, etc

- Intangible resources: such as brand name, know-how, R&D, information, etc

- Capabilities are resources when they are used for business activity purposes

- Core competencies found among the capabilities of the organization These are critical key factor leading to success business

- Distinctive competencies: a distinctive competency occurs when an organizational strength cannot be easily matched or imitate by a competitor

Distinctive competency brings the organization moving over the competitors and showing the better performance

- Sustainable competitive advantage: is the ability to do some thing that competitors cannot do or at least cannot do nearly as well

Distinctive competencies in long run become sustainable competitive advantages Typically, the developing a sustainable competitive advantage results from taking advantage of one or more distinctive competencies and building some type of strategic superiority

There are five conditions to determine a distinctive competency to become sustainable competitive advantage There are:

is used in this case and it has become an effective tool for strategists The following part mentions several theoretical reviews in this technique

7.1 What is SWOT?

SWOT analysis can be understood as the analysis of major strengths, weaknesses, opportunities and threats of a company in order to supply useful information for the use and combination of resources and capability of the company under its current competitive environment

An opportunity is major favorable situation in a company„s environment A threat is

a major unfavorable situation in a company„s environment.2

Strength is something a company does well or a characteristic that gives it enhance competitiveness A company„s weakness is something a company lacks or does poorly in comparison to others3

SWOT analysis includes analysis of external environment factors that the company has to cope with (opportunities and threats), as well as internal environment factors within the company (strengths and weakness) The Company should focus on major opportunities and threats and core strengths and basic weakness, which have great impact on the company„s long-term development

The SWOT analysis process must ensure some certain criteria of specificity, accuracy, reality and feasibility, as these results will be used by the company to implement following steps like: plan objectives, strategy, and tactics and build up a strategic control structure Effective strategies are ones which can take benefit of external opportunities and internal strengths, as well as neutralize (or limit) the impacts of external threats and minimize the company„s own weaknesses

This technique is considered as a critical step in the business strategy planning process of the company when the company wants to develop and build up its prestige and brand-name It is widely used in many big corporations all over the world

2

John A Pearce II and Richard B Robison, (University of Phoenix), Strategic management – Formulation,

Implementation and Control, 7 th edition, McGraw Hill Companies, page 202

3

Arthur Thompson and Stricklands, Strategic Management: Concepts and Cases,10th edition, McGraw Hill, page 105,

106

7.2 SWOT matrix

To help strategist have an overview of all major opportunities and threats and core strengths and basic weakness, a SWOT matrix is built to combine logically the 4 factors of strengths, weakness, opportunities and threats of the company as in the following model together with its according strategy:

Table 1.3: Model of SWOT matrix

Own strengths

(S)

Strategies to make use of opportunities through the company„s own strengths (S-O)

Strategies to prevent threats through the company„s own strengths (S-T) Weaknesses

(W)

Strategies to make use of opportunities through the minimize weaknesses (W-O)

Strategies to prevent threats through the minimize weaknesses (W-T)

8 Strategy selection

Choosing an appropriate strategy, basically, involves careful considerations to ensure that the option selected will work in practice Strategic options that may be relevant in different situations need to be weighed up against each other The three most important criteria are suitability, acceptability and feasibility

8.1 Suitability

Having a view of relationships between the internal and external environment, an organization then needs to consider whether a strategy is suitable or not For example, does it build on organization‟s strengths and environmental opportunities? Does it match the organization‟s objectives?

8.2 Acceptability

Acceptability concerns with whether a strategy will be acceptable to an organization and its stakeholders (mainly shareholders, employees and customers) It is related to the expected performance outcomes, returns, risks and stakeholder reactions

Return deals with the benefits expected by the stakeholders For example, shareholders would expect the increase of their wealth, employees would expect improvement in their careers and customers would expect better value for money Stakeholders‟ reactions deal with anticipating reactions of stakeholders Shareholders could oppose the issuing of new shares, employees and unions could oppose outsourcing for fear of losing their jobs, customers could have concerns over a merger about quality and support

8.3 Feasibility

Feasibility is concerned with whether strategic plans can go in practice and whether the organization has sufficient resources to carry out those plans Resources include funds, people, time and information

The most popular approaches to select strategies include the GREAT Model

Those potential strategies should be evaluated and compared to choose the most proper strategy, based on the GREAT model, which stands for Gain, Risk, Expense, Achievable and Time Criteria are weighted according to their importance to the company Strategies are marked form 1 to 5 for each criterion, of which 1 is the worst, 3 is medium and 5 is the best Basically, businesses are suggested to pursue strategies get good marks

Table 1.4: Appropriate strategies selection (GREAT model)

Criteria Weight Strategy 1 Strategy 2 Strategy 3 Strategy 4 Gain

9.1 Levels of strategy - The Strategy making pyramid

The number of levels of strategy depends on whether the company currently is in a single business unit or is diversified In a diversified company, there are four levels

of strategy, which are corporate strategy, Business Strategy, Functional Strategy, and Operation Strategy, as illustrated in the Figure below In a single business company, the corporate strategy and business strategy merge into one, so there are only three levels of strategy, which are Business Strategy, Functional Strategy, and Operation Strategy

Figure 1.6: The strategic making pyramid model in a diversified company

Source: Arthur Thompson and Stricklands, Strategic Management: Concepts and Cases, 10th edition, McGraw Hill, page 45

9.2 Specific strategy at different levels

9.2.1 Corporate strategy

Corporate strategy is the strategy for a diversified company aiming at identifying industries that the company can have long-term and sustainable profit The responsibility of making corporate strategy belongs to corporate-level managers Based on the company„s resources and capabilities, strategists might have different choices: Either concentrate to only one industry, or vertically integrate (backward or forward), or diversify into various ones (related or unrelated)

- Strategy of concentrating to only one industry: This is a strategy in which the company will concentrate all of its resources to only one industry and gain success from that On one hand, this strategy has an advantage that all

resources of the company are centered and exploited at the highest level to reach the highest effectiveness

- Vertical integration strategy: This is the strategy in which a company try to enter into its upstream suppliers and its downstream buyers‟ activities There are three types of vertical integration strategies: backward (upstream) vertical integration, forward (downstream) vertical integration, and balanced (both upstream and downstream) vertical integration

o Backward vertical integration is the vertical integration strategy in which the company enters the activity of producing its current inputs

o Forward vertical integration is the vertical integration strategy in which the company enters the activity of distribution and sells its current products

o Balanced vertical integration is the strategy in which a company runs

in all of activities from raw materials to final delivery to final customers

o Vertical integration helps the company being more active in controlling its overall activities, reduce the transaction cost and reduce the dependant level on external suppliers

- Horizontal integration strategy: Horizontal integration is the strategy in which a company tries to sell a kind of product in different markets This is implemented when a company takes over or merges with another company

in the same industry and produces the same products/services with the current company Horizontal integration allows the economies of scale and economies of scope, which save a lot of money

- Diversification Strategy: Diversification strategy is the strategy in which a company seeks to enter into new products or new market segment There are

three major types of diversification: concentric diversification, congromelat diversification and horizontal diversification:

o Concentric diversification: This is the strategy in which a company acquires or develops new products or services which are closely related to its core business or technology to enter one or more new markets

o Conglomerate diversification: This is the strategy in which a company enters (through acquisition or merger) an entirely different market that has little or no synergy with its core business or technology

o Horizontal diversification: This is the strategy in which a company develops or acquires new products that are different from its core business or technology, but which may appeal to its current customers

The limitation of diversification strategy is that the resources of the company are spread out to so many business units, which leads to the difficulties in management and control the resources So the company has to know which level to diversify and when to stop diversifying One another problem is the combination among different business units to support one another and reach the common goals

- Is the business‟s target market narrow or broad?

- Does the company pursue a competitive advantage based on low cost or differentiation?

From these answers of these 2 questions above, managers will identify 5 ways of approach to compete in the industry as follows:

Figure 1.7: Model of business strategies

Source: Arthur Thompson and Stricklands, Strategic Management: Concepts and Cases, 10th edition, McGraw Hill, page 136

- A low-cost leadership strategy: This strategy aims at being the overall low cost provider of a product or service to serve a broad spectrum of customers According to this strategy, a company competes its competitors by low cost, which can be brought from economics of scale and minimization of differentiation This strategy does not allow the company to pursue various market segments but only a broad spectrum of average customers to cut cost The disadvantage of this strategy is that the competitors can look for other ways of operations with lower expense by applying advanced technology or imitate the way the company does Another disadvantage is that when pursuing the low cost strategy, company might look for cutting cost by all

Overall Low-Cost Leadership Strategy

Broad Differentiation Strategy

Focused Differentiation Strategy

Focused Cost Strategy

Low-Best-Cost Provider Strategy

ways As a result, the image of the company might be affected, and customers will not loyal and might easily move to use other products at higher price but higher quality of new competitors when they have opportunity Therefore, a low cost strategy is only sustainable if the low cost

is from doing differently and operating effectively

- A broad differentiation strategy: This strategy aims at differentiating the company‟s product and service from competitors‟ to serve a broad spectrum

of customers An objective of differentiation strategy is to gain the competitive advantage by designing one (or several) different features of product or service This strategy allows the company to set a higher price than the average price of other competitors

- Differentiation strategy has an advantage of high brand loyalty of customers Buyers are willing to pay a higher price as the product/service satisfies best their demand Also, suppliers are willing to supply as the input price can be set high The limitation of this strategy, however, is the difficulty in long-term and sustainable differentiation

- A best-cost provider strategy: This strategy aims at combining between low cost and upscale differentiation to have the best costs and prices relative to producers of products with comparable quality and features The customers

of this strategies is in general above average (but not the highest) level, who have certain demand and can pay for a reasonable (but not low) price This strategy is not easy to implement, as the company has to allocate it resources

at the same time to low cost and differentiation It can only do this by a consistent process of applying advanced technology and managing/operating

as a whole process

o A focused or market niche strategy based on lower cost: This strategy aims at serving a niche market at a lower cost than competitors

o A focused or market niche strategy based on differentiation: This strategy aims at serving a niche market and outstanding its competitors by customizing its product or service

In summary, when choosing a business strategy at a certain business, strategist has

to decide which market segment the company will focus on, at low cost or higher cost with differentiation Clear viewpoints will help managers design clear and sound strategies to reach success Companies in the mid way will fail to compete, as they will not know how to allocate their resources

9.2.3 Functional strategy

Functional strategy relates to a strategy for running a major functional activity or process within a business It might be a strategy of human resource, finance, R&D, production, marketing, and so on The responsibility of making functional strategy belongs to heads of functional activities within a business unit or division Therefore, the analysis and choosing the functional strategy will depend much on the organizational structure of the business unit

In general, objectives of functional strategies improve and enhance effectiveness of basic functional activities within the business They aim at forming core competencies and capabilities to maintain and enhance its positions in the market and under the eye of customers The most important role of a functional strategy is

to support the company„s overall business strategy Failure in choosing adequate functional strategies results in failure in the whole detailed implementation of the company

9.2.4 Operating strategy

Operating strategy is a strategy relates to managing a key unit like a plant, a distribution centre or a sale district and managing daily operation tasks These operating strategy are normally applied when the company has various unit at

various locations Within the research areas of this thesis, operating strategy will not

be mentioned in details

10 Strategy implementation

After analyzed and selected, a strategy is then translated into organizational action However, the implementation is not easy It requires an organization to establish annual objectives, set policies, motivate employees and allocate resources to execute formulated strategies The implementation consists of developing a supportive culture, creating an effective organizational structure, preparing budgets, utilizing information systems, and also includes determining which strategies should be implemented first

In general, all managers find implementation the most difficult aspect of the strategic management, more difficult than either strategic analysis or strategy formulation Most companies have strategies, but fewer achieve them A Fortune Magazine study suggested that 70% of 10 CEOs who fail do so not because of bad strategy, but because of bad execution.4 In another study of 200 companies in the Times 1000, 80% of directors said they had the right strategies but only 14% thought they were implementing them well.5

Programs, budgets and procedures implement the selected strategy The implementation involves the firm‟s resources and its staffs‟ motivation to achieve objectives The way in which the strategy is implemented can have a significant impact on whether it will be successful

The implementation might not succeed if the strategy is misunderstood or the organization fails to truly motivate people to work with enthusiasm towards its objectives Furthermore, managers must be aware of the effects each new strategy

will have on the human resource For instance, how much change does the strategy call for, how quickly must, they provide for that change… The answers help decide whether to allow time for employees to gain experience, to introduce training or to hire new employees

In addition, organizations need to translate their broad strategy statement into a number of specific work assignments They develop detailed action plans listing action steps and assigning responsibility to a specific individual for accomplishing each of those steps They also set a due date and estimate the resources required to accomplish each step

11 Strategy evaluation

Strategy evaluation involves examining either how the strategy has been implemented or its outcomes The evaluation involves monitoring results, comparing to best practices, evaluating the effectiveness and efficiency of the process and controlling for variances as well Organizations have to adjust the process if necessary, such as changing the schedule, changing the action steps, changing the strategy or finally changing the objective

If it is impossible to achieve the metrics and timetables, the expectations are unrealistic and the strategy will definitely fail If the evaluation determines that processes are not working, or results are not as expected, then the strategy should be modified or reformulated

Both management and employees are involved in strategy evaluation, as they view the implemented strategy from different perspectives For example, a worker can recognize a problem in a specific implementation step that management would not

be able to identify

CHAPTER 2: ANALYZE THE CASE OF PETROVIETNAM UNIVERSITY - PVU

This chapter í based on presented theories in chapter 1 to study the case of Petro Vietnam University Main content of this chapter is the analysis factors affect to the organization Including internal factors, external factors and finally the SWOT model will be used to analyze the strengths, weaknesses, opportunities, and threats

of PVU

1 PVU Project – The imperative

On 09/3/2006 the Prime Minister has approved the "Strategy to develop the Vietnam Oil and Gas Sector toward 2015 and orientation to 2025" which emphasizes the importance and urgency of the training and development of human resource of oil and gas, as well as the development and planning of training and scientific research establishments of the Vietnam Oil and Gas Group (PVN Group) followed up development strategy of the sector

Training and human resource developments were identified as an urgent and strategic task of PVN

Especially in the context of oil and gas industry world flourished both in science and technology as well as increasing levels of international competition, the Group has expanded exploration and exploitation petroleum in many countries on multiple continents with different international partners AS a result the quantity and quality requirements for human resources of oil and gas become increasingly urgent for PVN to be active and enhance the integration and international competitiveness of the Group themselves

With the urgent demand of human resources for the PVN, while the base of higher