GRIGGS UNIVERSITY
GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM
CAPSTONE PROJECT REPORT
TITLE OF CAPSTONE PROJECT REPORT
Group No 74
Student's name: Kieu Xuan Nghi Nguyen Quang Huy Nguyen Van Thanh Nguyen Xuan Luyen
HANOI, 2009
Trang 2LIST OF CHARTS, DIAGRAMS AND TABLES
Chart 1.1: Strategic management model
Table 1.1.: Macroeconomic environment factors Figure 1.2: Strategic group map
Table 1.2: Organizational technical human, physical financial resources
Table 1.3: Summary of choices suitable for each strategy among the three mentioned
strategies
Chart 1.3: Stakeholders
Diagram 2.1: Organizational structure of Vinaconex - Alphanam Corporation Table 2.1: Balance sheet of VINA — ALPHA year 2008
Table 2.2: Completed projects of VINA — ALPHA Company
Table 2.3: Business operation result of VINA — AIPHA Company in the 2006-2008 period
Diagram 2.2: Revenue and profit growth diagram of VINA — ALPHA Company
Table 2.4: The internal factor assessment matrix
Table 2.5: Revenue and profit of construction enterprises
Diagram 2.3: Comparison of revenue of 4 companies in 2006- 2008 Table 2.6: Comparison of profit per revenue of enterprises
Diagram 2.4: Comparison of profit per revenue of 4 companies in 2006-2008
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Table 2.7: Competitive analysis of 4 construction enterprises
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Chart 2.5: The role of the Board of Execution in project Chart 2.6: Two level Board of Management
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Table 3.1: SWOT analysis
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GRATITUDE
Period of time researching and reality studying at Vinaconex — Alphanam JSC is helping us to understand a part of company’s business activity, especially business planning It also help us to have chance to apply school’s knowledge to
reality We hope that our solutions might help increasing the effective of company’s business planning in the near future
Our team would like to express our gratitude to the Board of Directors, staff of Sales Dept, Administration, Finance and Accounting, and other departments at Vinaconex — Alphanam JSC., who were helping us to complete
our thesis
We also thank teachers, who were providing us valuable knowledge, skills and experiences with their whole-hearted Thank to Center for Educational Technology and Career Development (ETC Center) who give us a chance to
working together, sharing our job experience
However, due to shortage of studying time and reality knowledge, mistake
and shortcoming is unavoidable We are looking for our teacher and classmate’s advise and suggestions to improve our performance
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REFERENCE
Master of Business Adminitration Programe )/ (NI, 1g
Number Content _ Page |
— Gratitude - mm
cóc _ Introduction SỐ CS ¬¬
—_— Chapter Ï: Theoretical hackground on strategic managemenr | 10
Lo The definition of strategic management _ cóc 10 |
R Definition 107
2 / al Approaches t to strategic management _ 10
241 | The first stage: Internal development 10
242 _L The middle stage: Focus on the organization of the industry 12
cs Strategy formulation a 13)
2v ly Mission and main objectives ee 14
32 IE External environment analysis 15
3.2.1 | Macro environment analysis SỐ l6
3.2.2 Industry a and competition analysis 18
3.2/21 71 The model of 5 competitive forces - 18
3.2.2.2 | & Strategic g groups in an industry - 22
33: Enterprises’ internal analysis - 23
3.3.1 | Analyzing company’s current strategy 24
nhu TẾ Potential resources and capacities 24
3.4 | Selecting business strategy 7 | 26
34, l {c Cost leadership strategy - 26
3.4.2 | Differentiation strategy _ ad
3.4.3 | Focus strategy _ _ 28
i H | Vision, mission, and \ values of strategic management s CƠ IH Implementation, monitoring and evaluation 30 - Chapter II: The situation of bisuniess strategy management of 33 -Vinaconex — Alphanam Infrastructure Development and |
_ Investment Joint stock Company a |
IL s~ General Information 33
1 _Major businesses 33 |
2 Organizational structure of Vinaconex - Alphanam Company 34 ~Company Structure —
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Dt, | Products ˆ _ L 35 | 32 Marke m¬
| 3.3 Quality of Human r resources | 37
=4 Business operation results ee 37
- - Balanee sheet - Cố 3
| 4.2 Cc ‘ompleted and ongoing projects 38
L 43 | "Assessment on n business activities SỐ —_ 38
te | Sector environment assessment and analysis — 40
mw For mulating and managing strategy 40
1.1 | Business Strategy oo | 40
1.2 Strategy formulating 4]
Lids Strategic management SỐ 4]
2 External environment analysis - 4]
2.1 International environment 4]
2.2 National | economic market (Macro- -economic market) 43
2.2.1 Impacts of Various Economic factors 43
2.2.2 | Legal factors and state economic management 44
Zed Industry environment analysis _ 45
R 3 - _Analysis ( on inner industry environment (5 competitive forces) 50
asl | Threats from new entries 50
3.2 | The power of the suppliers - 51 |
3.3 | Buyers’ bargaining power | 52
3.4 | Threats from Substitutes _ oo ˆ 53
3.5 T Intensity of the rivalry ‘in the industry 7 oO _ _ 54 mi |The business strategy of Vinaconex — Alphanam Company on | 56
the stagr 2010-2015
ol The strategy foundation | 56
, 1.2 | Brand: - Sa S 7 157 |
| 12 | Ability to control and coordinate input resources for the | 57 ˆ | S | enterprise's main business and production process ˆ DĐ |
| TẢ, Financial strength | 58
| 2 Building business strategy for VINA-AL PHA: | 59
2.1 Long term strategy: - | 59
22 Short-term strateg tegy period 2010-2015: 62
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j | | + | Sstution | capacity Improve wl a 5.2 | 6 _} 6
CHAPTER III: Solutions to improve the business stratrgy of 72
_Vinaconex - Alphanam 7 |
cL Development orientation of the ‘company |} 727 |
A, Completation of Company’s commitment a and strategy [77 |
Vina — Alpha company’s strategic solutions - 78 Ị “Complete administration system give prominence to the role of | 78
functional departments, train and improve the quality of human |
resource Management, - ee
[F oundation ofthe solution 78
a ạguHaa 79
Implementation approach _ 80
Training and improving the quality of human resources 80
Foundation of the solution 80
Content of the solution —_ SỐ 80
"Implementation approaches 81
Investing in equipment, improving production and construction | 8l
_ Foundation 1 of the solution ee 81
Content of the solution 82
the quality monitoring and control system 82
E oundation of the solution- CS 82
_Content of the solution _ 83 -
-Further inv esting In research and applyi ing science c and technology | 83
into practical construction \ W vorks ¬ _
Foundation of the solution 7 - 83 -
2 Content of the solution - | 83 `|
Solutions for the market - | 84, |
Actively integrating into the process of international business, | 84 |
secking for suitable partners jo
"Found: ition of the solution | 84
Content of the solution — 84
Investing in equipment Improving management skills 85
Foundation of the solution 85
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7, Building corporate culture | 86
8 ị Brand marketing có / | 87
IV _Impletmentation process _ 88
| s Conclusion sss | 89
Charts diagrams 0
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INTRODUCTION
The globalization and international economic integration process has opened up considerable opportunities for member countries, including Vietnam This also brings
about significant chances for Vietnamese enterprises However, this trend also poses challenges for Vietnamese enterprises
Integration is an irreversible trend for development: however, in order to achieve sustainable development, enterprises need to assess the situation, prevent from
potential risks and threats arising from a rapidly changing business environment A specific, practical short-term and long-term strategy is an effective measure for an
enterprise to define its orientation in order to achieve sustainable development First, business strategy enables enterprises to define its objectives and orientation, and is considered the basis guiding all activities of the enterprise In a rapidly changing
business environment, business strategy helps enterprises to grasp and fully utilize
business opportunities, actively seek measures to overcome potential risks and threats In addition, a specific, clear and practical set of strategies is considered the basis for
enterprises to improve effectiveness in resource usage, strengthen its competitiveness
to ensure sustainable and continuous development Building and implementing
strategies are also solid background for enterprises to make proper and effective
decisions during business operation
The construction field in recent years has witnessed rapid growth in order to meet the increasing demand of infrastructure for the national socio-economic
development Therefore, competition in this sector is relatively harsh In this context,
strategic planning and management activities play a very important role in the
development of enterprises and are considered decisive factor to improve the competitiveness of an enterprise The most important task of civil construction and
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** Research purpose:
The research has the following research puposes:
Asses and analyze strengths and weaknesses of the enterprise
Analyze the impacts of business environment on the business operation
of the enterprise analyzing opportunities and threats for the enterprise
Analyse the current situation of developing and managing strategies at
the enterprise
2 Propose solutions and recommendations to enhance the effectiveness
of developing and managing strategies at the enterprise
** Objects and scope of study:
Y Objects:
The strategic development and management activities of the enterprise Strengths, weaknesses, opportunities and threats of the enterprise
Y Scope of study:
Vinaconex — Alphanam Infrastructure Development and Investment JSC (Vina — Alpha., JSC)
Address: No 02 Dai Co Viet, Hai Ba Trung Dist., Hanoi
** Research methodology:
Y Collecting data:
Data from Vina — Alpha Company
Sectoral data and data from enterprises of the same sector Data from newspapers and the internet
Y Analysing data:
Applying data compilation and comparison method for mid-term data
planned data and actual implementation data to draw conclusions
Inductive method: Compiling and drawing conclusions from issues and
phenomena arisen
SWOT analysis
“* Structure of the study:
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Chapter |: Theoretical background on strategic management
Chapter 2: The situation of business strategic management at Vinaconex — Alphanam Infrastructure Development and Investment JSC
Chapter 3: Measures to improve business strategies of Vina — Alpha Infrastructure
Development and Investment JSC
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CHAPTER I
THEORETICAL BACKGROUND ON STRATEGIC MANAGEMENT
I The definition of strategic management 1 Definition
In the competitive business world each enterprise has its own way to survive
and develop All enterprises do not necessarily compete with other businesses in the
same manner or act in the same way to react to changes
Therefore, each company needs to develop its own strategy The development of a competitive advantage is required in order for a successful competition Strategies can be seen as relevant ideas, plans and supports for an enterprise to successfully compete against its competitors
Competitive advantage, in a broader sense, allows a business to outstrip its competitors It is the “capacity to differentiate” which includes the capacities, skills, technologies and special resources for businesses to make a difference among the competitors and create competitive advantages
Strategic management is an integrated combination of management decisions and
actions, which determines the long-term efficiency of a company by the continuous revision
of environmental issues, strategy formulation, implementation, assessment and
management
Research on strategic management is focused on the monitoring and assessment
of the opportunities and external threats in the context of internal strengths and
weaknesses
2 Approaches to strategic management
The development of strategic management ts divided into three stages: - The first stage: Research on the internal development of strategic management - The middle state: Focus on the organization of the industry
- The current stage: Focus on the enterprises” resources 2.1 The first stage: Internal development
The concept of strategic management started in the 1960s with the such publications as “Strategy and structure” by Chandler in 1962: “Strategy” by Ansoff in 1965 and curriculum “The business policy: lessons and situations" by Harvard Business School im 1985 Those works had an influence on the development of
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strategic management concept Primary concepts emphasized the integration of
business activities within the functions of the business The publications in this period gave birth to various basic concepts, terminologies and structures which paved the way for the development of future concepts
Two schools of thought of the mentioned strategy development were structures and planning
Chandler and Ansoff's studies mainly discussed the way in which large companies develop new administrative structures to deal with the growth as a result of
changes in strategy If the structure does not fit the strategy, the outcome will be
inefficient Chandler thinks of strategy as the identification of long-term goals of a
business, the acceptance of a series of actions and the allocation of resources needed to
achieve these goals
Ansoff also focus on planning, transforming the strategy from basic principles
applied in a business to highly formalized theory His main approach is deviation analysis Firstly, he set up a set of objectives, then measured or estimated the deviation between the current position and desired goals and recommended a series of potential
actions (strategies) Finally, he verified the features to reduce the deviation then selected the most effective strategy
During this period, there was also research by Andrews and his associates at the
Harvard Business School published in the curriculum on business policy Business
policy is the study of functions and responsibilities of management along with general
issues influencing the characteristics and success of an enterprise In their opinion, business policy has two separate but related aspects They include formulation and implementation Strategy formulation identifies and regulates four components: market opportunities: enterprise’s competence and resources: manager’s aspirations and values; responsibilities for other social groups beside shareholders
However, the approach using case study methods lacks the generalization which is the foundation for the development of strategic management Next We are going to consider two important schools: informal design and planning
a School of informal design
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model begins with a scanning about internal and external In the external assessment, the thoroughly studied of the opportunities an threats pointed out the significant
factors In the internal evaluation, the strengths and weaknesses of the organization
were considered Then, the ability to create differences and the strategies to be formed
were discovered on the basis of this platform The strategy was then evaluated and the best one was selected Finally, the strategy was implemented
As a template tor many ideas, SWOT model (S: Strengths; W: Weaknesses; O: Opportunities: T: Threats) was primarily used with various techniques and questionnaires Schools of informal design considerably impacted many other schools of thought and became very important in the field of strategy
b Schools of planning
Schools of planning was seen as being initiated by Ansoff Strategic planning was popular in the 1960s and 70s but no longer in use in the early 1980s Hundreds of
models were developed accordingly this schools of thought, including the following
stages:
- Goals set up stage:
- External assessment stage:
- Internal assessment stage:
- Strategy assessment stage ;
- Strategy concretization stage:
- Planning for the entire process
The first phase in the model focused more on the quantitative targets In the internal and external assessment, SWOT model was used The strategy assessment
stage was very formal and techniques such as return on investment, risk analysis and
other financial analysis methods were utilized to choose the strategy that created the
gles were
=
maximum value In the strategy coneretization stage objectives and strate
divided into subsections Finally, all the actions were closely programmed The whole
planning process would be closely monitored through the — monitoring and
implementation tool including: SWOT matrix: market share growth matrix: attractive sectors matrix
2.2 The middle stage: Focus on the organization of the industry
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In the 1970s there was a popular shift in the focus of the nature of strategic
management theory [Theoretically and methodologically, the shift towards economics occurred What caused a change in the vision from internal to external and in the whole industry? Schools of thought initiated by Porter was prominent during this stage
Schools of positioning believed that only a few main strategies could be used in
the industry The use of this strategy in an attempt to position an enterprise in the market allowed the enterprise to easily compete and gain higher profit
Tools in the middle stage were fairly common, including: the model of 5
competitive forces, the general strategy and value chain An important tool was the general strategy Businesses could form its range to gain competitive advantages and have strategies such as cost leadership strategy, differentiation strategy, focus strategy
During this stage, there were many other environmental factors which led to a series of technical and technological breakthrough Porter provided the 5 competitive forces for analysis, which was a very useful tool With a more demanding market, value chain is an important tool to improve the competitiveness of each enterprise Globalization and free economy brought about instability that strategic planning did not take effective in this period
3 Strategy formulation
Strategy formulation can be divided into five steps: Selecting a mission and main objectives of the business
Analyzing external environment to identify opportunities and threats
Analyzing internal environment to identify the strengths and weaknesses of the business Selecting the strategies based on the search for resources, capacities and core
competencies and develop them to avoid the risks take advantage of opportunities
from external environment
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External analysis Strategy selection Internal analysis
(opportunities & and formulation (resources,
threats) capacities and core
competencies) Function strategy Business strategy Global strategy Corporate strategy y Ỳ
Organizational Strategy, structure +—| Design & monitor
structure and monitoring
revision Change strategy 4
Chart 1.1: Strategic management model
3.1 Mission and main objectives
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Mission provides the reasons for the existence of business and what a business
should do The main objectives determine what business must realize in the medium
and long term such as profit achievement in remarkable capacity ete 3.2 External environment analysis
External environment analysis of the enterprise is aimed at figuring out the opportunities and external risks, particularly in the sector environment, the national environment and macro environment External environment analysis studies:
- Macro environment analysis: economic environment, technology environment, socio
- cultural environment, demographic environment law and political environment, and
globalization environment
- Industry and industry competition analysis
- Competition changes in the cycle of industry analysis, movement of competitors etc
- Study the key factors for success
The sector environment analysis needs competitive structure assessment in the
industry, including the competitive position of the centers and main competitors, as
well as the development stages of the industry The real estate construction and investment sector has a distinctive feature that their market depends on a large extent
on government policies and the situation of the financial market Currently, a number
of market sectors have turned into the global markets As a result, sector environment
analysis also means evaluating the impact of globalization on the industry competition National environment analysis studies the context of a country which creates conditions for enterprises to operate The enterprise should consider moving part of its
activities to a nation which has more preferential conditions to achieve competitive
advantage The macro-environment analysis includes the study of macroeconomic
factors society government legal and technology which may or may not affect the operation of the business
The techniques for external environment analysis of the business including
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- Scanning environment plays an essential role in competition In addition
scanning environment needs appropriately to be oriented as a system designed
for an environment changes will undoubtedly not suit the business activities in a stable environment Scanning environment required general study of all external
elements through which companies recognize latent changes in the environment The biggest challenge for scanning is the ambiguous, discrete, incomplete data and information collected
- Monitoring means observing the changes of the environment to identify
important trends arising from the scanning process Enterprises should be aware of the relations among the stakeholders because they can alter the life cycle of
the business The key to the success of monitoring is the ability to interpret the meaning of events and trends of different changes through which business can be better prepared for timely launching a new product or service, then gain competitive advantage from the possible opportunities
- Forecasting means developing prediction about latent events, and its frequencies
as a result of detected changes and trends from scanning and monitoring
- The objective of assessment is to identify the time and the importance of impacts, which may cause changes in environmental trends on the strategic
management Through scanning, monitoring and forecasting, analysts can have an understanding about environment and continue to assess and_ identify
working ideas for their organization
At present, Vietnamese real estate and construction markets are bustling,
opportunities as Well as threats are abound for enterprises participating in the market The number of enterprises in this market significantly improves as a result of increased attraction of this market Reviewing and assessing the market carefully, monitoring changes in the market to make forecasts on changes in the market, the participation or
movement of other enterprises will enable enterprises to adopt proper policies: to define short-term and long-term objectives
3.2.1 Macro environment analysis
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In fact changes in the macro environment can directly affect any forces in an
industry so it transfers the relative strength from one force to another and finally change the attractiveness of an industry The status of a macroeconomic environment
determines an economy’s healthiness and prosperity which in turn has an effect on the business and industry Economic environment indicates the nature and orientation of
the economy The impacts which an economy can exercise on an enterprise may alter its ability to create values and income include four important factors such as the
growth rate of the economy, interest rate, exchange rate and inflation rate In addition, change in the technology factor influences the entry barrier and reform the industry structure The change in technology includes creation and destruction, both opportunities and threats Political factors and law also affect the level of opportunities
and threats from the environment, mainly in the way business can respond to the
government and vice versa
Table 1.1: Macroeconomic environment factors | Demography | Population | Ethnics
Age structure | Income allocation
| |
| | Geographical distribution |
_ Economy _ Inflation rate | Savings rate
| Interest _ Enterprise savings rate
| Trade balance GDP
|
| Budget balance
+
-Polities-law — Antitrustlaws - kabor law
Tax laws Educational policy and philosophy Regulatory philosophy
Socio - culture | Female labor force Environment protection
Labor diversity Work shift and passion
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service concept
Technology Innovation The enterprises investment — and | Application government support for research and
development
Globalization — Important political events NICs |
Basic global market Variations in cultures and institutions |
=—= ee eel gnc = — eS
3.2.2 Industry and competition analysis
Each industry varies in its economic features, competitive situations and prospects for future profitability Features of each economic sector change depending on factors such as size and market growth, the pace of technology change, number of buyers and sellers etc Competitiveness differs in sectors which show various focus of
competition such as price, quality or features and efficiency
Current competitive conditions as well as predictions of the industry form an
important basis for forecasting future profit Differences in industry conditions and
competition status may perplex some business activities in specific difficulties Industry and competition analysis clarifies key issues as follows:
The prominent economic features of the industry
Competitive forces in the industry, the nature and strength of each force The driving forces causing the change in the industry and their impact
The strongest and weakest business positioned in the industry
Which makes the next move in the industry
The key factors for the success or failure in competition
The industry attractiveness in term of potential above average profits 3.2.21 The model of 5 competitive forces
To figure out competitive orientation in an industry, Michael E: Porter — a
Harvard professor — created the model of 5 competitive forces According to him there are 5 forces orienting competition in an industry including:
- Threats of potential new entrants
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: Rivalry among existing competitors - Buyer's bargaining power
: Supplier's bargaining power
- Threats of Substitutes
a Potential new entrants
This force includes companies who now, are not competitors in the industry but are able to participate in the industry in the future if they want Companies always appreciate identifying new competitors who are able to enter the market, for they are
threats to market share of existing companies Competitors entering the market always
equip themselves with new productive capacities to achieve large market share Therefore, existing companies have certain pressures in their operation to compete and
maintain their market share in the industry market
Existing companies always try to hinder potential competitors from entering the market by creating entry barriers Market entry of potential competitors is threats to profitability of existing companies If threats from market entry is small, existing companies will take advantage of this opportunity to add value, enlarge their scale and therefore, enjoy higher income
Entry barriers are factors that cause difficulties and increase costs for
competitors when they want to enter the market Higher cost for market entry will keep potential competitors out even when the income of the industry is high The main entry barriers include: brand loyalty; absolute cost advantage: and economies of scale Besides there are such factors as: switch cost, governmental regulations and retaliation
- Brand loyalty: Uniqueness competitive prices, good after-sale services etc are
elements creating products’ attractiveness to customers
- Absolute cost advantage: is gained from prominent productive capacity created by experiences in the past ability to control inputs for production and management: access to cheaper financial resources ete
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- kconomies of scale: is marginal efficiency improvement thanks to enterprises’ gaining after the expansion of their scales Factors relevant to the advantages and disadvantages of entering a large or small scale include flexibility in pricing and market share: costs relevant to entry and producing economies of scale: competitors” responding
actions
- Switch cost: is cost incurred once customers want to switch their purchasing to another supplier including: cost for purchasing accessories, cost for training staff, intangible cost of a relationship etc
- Governmental regulations: By issuing permits, gradually removing special regulations or requirements, the government can control the entry to an industry
- Retaliation: Reactions of existing competitors depend on the present position in the industry of the company (the available business choices)
The construction sector is distinctive in that it requires large capital, the period for capital recovery is slow compared to other sectors but the number of enterprises in the sector is considerably large thanks to the attractiveness of the sector For small- scale enterprises participating in this sector, stretgic management is a very important task Therefore, such enterprises should investigate procedures, thoroughly assessing their potentials and capacity to fully utilize opportunities
b Rivalry among existing competitors
Enterprises in an industry are interdependent Therefore, actions of one
companies are often followed by responding actions of other companies Rarely is
there a consistency among enterprises in an industry since they have different
resources, different capacities and they try to differentiate themselves from their rivals If the competition in an industry is weak companies will have opportunity to push up prices as Well as earn more profit If the competition is strong, price competition can take place intensely, which will lead to price wars reducing profitability
Main factors of competition in an industry include: Structure of competition in an industry: demand conditions: high exit barriers
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focus structure and is relevant to competition Dispersal structure creates a threat rather than an opportunity because it only includes some small or medium companies Focus industry is dominated by several large companies or by only one company in extreme circumstance (In this case, the industry is considered oligopoly or monopoly)
- Demand conditions: The increase in customers’ demand tends to ease competition, as all companies can sell more goods without scrambling for other companies’ market while their profit is maintained When demand decreases, competition 1s pushed up to earn market share
- Exit barriers: are emotional, strategic and economic factors which can prevent a company from exiting an industry even when income is low High exit barriers will lead to the situation in which companies are held in an unprofitable industry This can
lead to a redundancy in productive capacity and make price competition more intense Through reviewing the activities and analyzing the capacity of enterprise, enterprises can realize their potentials and define proper strategies In the construction
field, a large number of small-scale enterprises participate in the market c Buyer’s bargaining power
Buyer of a company can be either consumer or another company who plays the
role of a distributor of that product to the final consumer Buyers can be regarded as a threat to competition when they are at an advantageous position to require lower prices
or better services In addition, when buyers are at a disadvantageous position, companies can raise prices and gain more profit Whether buyers can make a request to companies or not depends on the comparative power they have towards companies:
power gained when there are many suppliers of the same products; when buyers
purchase product in great quantity; when switch cost is low ete d Supplier’s bargaining power
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situations as: the suppliers” products are difficult to be substituted: products of suppliers are so differentiated that it will be costly if companies switch from a supplier
to another one ete
e Substitutes
Substitutes are products of industries which serve customers” demands similar to which of studied industry The existence of these close substitutes represents a threat
to competition reduces high-pricing capacity limitation as well as_ profitability Hlowever, if a company’s products has few substitutes and other factors are normal, this company will have a chance to raise prices and earn more profit As a result, its strategy will be designed to gain competitive advantage
Studying 5 competitive forces helps enterprises understand thoroughly an
industry to identify its attractiveness The stronger the competitive forces are, the lower
the potential profitability of the industry's enterprises is In an industry lacking attractiveness, entry barriers are low, suppliers as well as buyer have stronger bargaining power, threats from substitutes is bigger, and high competitive intensity in the industry will cause great difficulty to enterprises’ creating values and earning over- medium income
3.2.2.2 Strategic groups in an industry
Strategic group includes competitors having same conditions and access to competition in the market One industry has one strategic group only when companies pursue strategies alike in general and have similar position
Companies in one strategic group all pursue similar strategies, customers tend to regard products of such companies as direct substitutes So the main threat to a
company’s profitability can come from other companies in its group Different
strategic groups can have different positions, which depend on each force among competitive forces Buyer's bargaining power supplier's bargaining power and competitive force of substitutes etc can change the intensity of strategic groups in an industry
Mapping strategic groups ts a technique used to represent competitive positions belonging to competitors in an industry This technique is considered a linkage
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between an industry as a whole and individually judging the position of each enterprise Steps of building strategic group map include:
- Identifying characteristics distinguishing an industry's enterprises bases on pivotal variables including: price/quality geographical boundary within which an
enterprise is operating vertical integration level ete
- Positioning enterprises on coordinate axes with each pair of differentiation characteristics
- Circling strategic groups provided that each circle goes with revenue proportion
of every group
> >
Cost
Figure 1.2: Strategicgroup map
3.3 Enterprises’ internal analysis
External environment analysis to identify the attractiveness of an industry
through the structure of that industry has clearly pointed out the reasons making an
industry more profitable than another However, structure of an industry is not the only force affecting a company’s profit Therefore, a problem to be confronted with 1s why in a specific industry a company operates better than another
Internal environment analysis is used to figure out strengths weaknesses
identify potential as well as existing resources creating sustainable competitive advantage for every enterprise It also points out the way to gain competitive advantage
of an enterprise and the role of different forces resources and ability to build and
maintain sustainable competitive advantage for that enterprise
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3.3.1 Analyzing company’s current strategy
Appraising how a company ts carrying out its strategy must begin with the strategy the company is pursuing It is required to know which specific strategy the company is pursuing: cost leadership differentiation or focus on best serving a segmentation etc Evaluating efficiency of strategy operation or strategy management
is implemented through such signals as:
- Whether a company’s market share is higher, constant or lower
- Whether a company’s marginal profit increases or decreases and its comparative
size compared with its competitors
- Tendencies of net profit, return on equity, increased economic values etc and correlation with competitors
- Whether company’s current financial strength and credit assessment improve or reduce
- Whether company’s revenue growth is faster or slower than that of the market
- Whether company is considered the leader in technology, product improvement, product quality or satisfying customers’ demand or not
After taking the current strategy of company into account, managers will
consider, assess strengths, weaknesses of their company to propose a specific project and strategy to achieve the target company is pursuing
- Identifying company’s strong points existing in the forms of: skills, experiences in
production, management, and customer serving: valuable physical assets, human resource:
valuable organizational assets: valuable intangible and tangible assets: competitive
capacity; achievements or cooperation and association with other partners etc
- Identifying company’s weaknesses existing in the forms of: the lack of important skills and competitive experiences: competitive capacity in critical fields:
shortages in resources ete
3.3.2 Potential resources and capacities
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a Core competencies of an enterprise is created through two sources including: its potential resources and capacities
Table 1.2: Organizational, technical, human, physical, financial resources Tangible resources Resource Financial resources F— ———————————————— | Organizational resources Content - Borrowing capacity - Repayment of debt Physical resources
Report structure, planning, coordinating controlling system |
- Access to inputs
— - _¬
- Complexity and distribution of apparatus, machinery
|
Technical resources
patent, business secret
- Technical provision such as copyright, commercial brand,
Intangible resources Human resource Innovative resources Reputation resources - Knowledge - Reliability - Management capacities - Organizational style - Ideas - Scientific capacity - Improvement capacity
- Reputation in the eyes of customers
- Brand
eves of suppliers ete - Reputation for effectiveness, efficiency, support in the
In creating core competences intangible resources in comparison with tangible resources, are more efficient and dominant since value of tangible resources is limited due to its poor applicability while intangible resources are little noticeable and difficult
for competitors to discover, acquire and duplicate ete b Potential capacity
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As sources of producing capacity intangible and tangible resources are
tindamental parts creating the development of competitive advantage Potential capacity is capacity that allows companies to use purportedly integral resources to
reach a desirable target situation
Company's potential capacities are produced from organization structure and
controlling system How are they defined and what is their position in the crganization? Being the bottom line creating competitive advantage, capacities often
tase on information as well as knowledge development, transmission and exchange tirough human resource Knowledge of human resource is the most crucial capacities
cf a company as well as the root of all competitive advantages Value of a company is nade not from physical materials but knowledge, expertise, intellectual property,
competence — which all stay inside human
Distinguishing between resource and potential capacity is to figure out what ceates differentiating competence A company can have unique and valuable resources bit if it does not have potential capacities to operate these resources efficiently, it still
cinnot produce and maintain differentiating competence
In summary, to possess differentiating competence, a company has to own at
Icast a unique and valuable resource and necessary potential capacities to utilize this
resource
34 Selecting business strategy
After taking external environment into consideration as well as analyzing srengths and weaknesses of a company, it is necessary to identify a strategic solution in accordance with a company’s strengths weaknesses, opportunity and_ threats
(SWOT) The purpose of SWOT analysis is to identify strategies oriented by this
alalysIs to create a harmony or correspondence between resources as well as the
eompany’s capacities and demands of the environment in which it is operating 34.1 Cost leadership strategy
Cost leadership strategy is series of actions to provide products or services
ovning characteristics accepted by customers with minimum cost in comparison with
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[he goal of cost leadership strategy is to surpass competitors by producing and providing all products and services with lower cost than competitors
Success in pursuing this strategy will bring companies two following competitive advantages:
- First cost leader can require lower price compared with competitors while profit
is maintained
- Second, cost leader can stay firmer than competitors when there is an increase in
number of competitors in the industry and cause others fall into a price war since it has lower cost
Choosing cost leadership strategy also means choosing a low level of product differentiation, paying little attention to different segmentation, positioning product to attract normal customers since development of a product line meeting all demands of
different segmentation is very costly 3.4.2 Differentiation strategy
Differentiation strategy aims at obtaining company’s competitive advantages in an attempt to raise a company’s product values by developing products having unique features that the company’s rivals cannot produce
Product differentiation can be created by quality, innovation and customer satisfaction
When differentiating by customer satisfaction, company provides such services as after-sale service and comprehensive maintenance service, making them distinguished by
various available methods The more these services are not similar to its rival’s ones, the
more competitiveness the company can preserve and the more market attraction it can get Differentiation and brand loyalty also create barrier to new entrants The threat
of substitute products depends on the abilities of competitors” products to meet the
demands of customers and to break customers” brand loyalty
[he disadvantage of differentiation strategy is that company’s rivals can gain a
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Ilowever it is not easy to duplicate a company’s intangible factors therefore differentiators still can gain long-term benefits from their products
3.4.3 Focus strategy
Focus strategy is the third competitive strategy It concentrates on meeting the needs of specific customer groups or a niche Selecting a focus strategy means to pay one’ attention to the gap of particular market which can be identified by geographically, customer types or product segments
Once selected a market segment, the company pursuing focus strategy may use
either differentiation approach or low-cost approach Moreover, focus on a narrow
range of product sometimes allows a focuser to have improvement faster than a wider market differentiator does A focuser can seize any differentiation opportunity because it is able to figure out cost advantage and outstanding efficiency in low-cost
manufacture of the industry Building brand loyalty 1 has been taken into consideration
by most companies in order to lessen the threat of substitute products
Advantages of a focus company emits from sources of differentiation:
efficiency, quality, improvement and customer satisfaction While the company can
protect itself against its rivals to be able to continue supplying products, its rivals
cannot
However, a focus company is at a disadvantage compared to powerful suppliers because when trading volume is small, power belongs to the suppliers Even so, there
sull have loyal customers who are ready to pay at the company’s price
Table 1.3: Summary of choices suitable for each strategy among the three above mentioned strategies
| Cost leadership | | —+ —— - Differentiation - Focus —t
Product ~Low (mainly by) High (mainly by From low to high (from |
wo | } | |
differentiation — price) uniqueness ) price to uniqueness )
Market segment Low (mass) High (a number of Low (one or a_ few
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Differentiating § Manufacture and Research and Any ability to create
manage inputs development Sales | differences | |
|
Capacity |
| - and marketing
II Vision, mission, and values of strategic management
Once operating in environments full of fluctuation, each enterprise should have an ability to adapt, and a preserved unshakably nuclear preservation to survive
[-nterprIses are interested not only in making the benefits for themselves but also in their stakeholders in the process of cooperation That is the very important beginning
for the existence of a business
Vision statement of an enterprise is like the first key indicator on how enterprise recognized its obligations to its stakeholders The purpose of mission statement is to set guidelines for making strategic decisions
Stakeholders of an enterprise is understood as individuals or groups affect and are affected by the results of strategy They have the right to require a business to
succeed Specifically, they have the right to keep an eye on a company’s achievement, the existence, competitiveness and sharing induced profitability
Stakeholders of an enterprise are divided into internal stakeholders and external
stakeholders
Trang 31Cra IBA 0)T\10T-Croup 3 Vaster of Business Adminitration Programe External Contribution | stakeholders: Company - Customers: - SupplIers; Encouragement S - Trade unions; - Public Etc — Contribution | - Government; Internal stakeholders: - Shareholders; - Staff; - Administrators; - Members of board of directors Chart 1.3: Stakeholders
Stakeholders is binding in the relationship with the company but not equally
dependent on relevant parties
III Implementation, monitoring and evaluation
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The organization structure and the control system for strategic implementation must ensure 2 factors:
- First cooperation among different staffs enables staffs to perform their tasks most effectively in implementing strategies
- Second enterprises should provide motivation and motives for staffs to excel in quality of work, improvement and customer satisfaction
The organization structure designed needs to be suitable with other factors in
order to improve the effectiveness of strategy implementation Organization structure is
a decisive factor in strategy implementation as it creates stability necessary for enterprises to successfully achieve its objectives sustain current competitiveness, and ensure flexibility in developing the competitiveness of future strategies
In strategy implementation process, enterprises also need to develop measures to
control, monitor and evaluation to make sure that strategies are implemented
effectively and efficiently, that interventions and adjustments are in place whenever
needed
To control strategy implementation, enterprises need to:
- Formulate standards and objectives based on which strategy implementation is
evaluated
- Formulate monitoring and measurement system to report whether standards and objects can be achieved
- Comparing actual implementation with the defined objectives
- Make reasonable adjustments whenever standards and objectives are not achieved
- Develop different levels of strategic control: Managers at company level managers at unit level, managers at functional level
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individual objectives): objective-based management (defining concrete objectives):
controlling behaviours (budget standardization rules and procedures) and corporate
culture
Each enterprise in its implementation of strategy develops a strict control
system to ensure effectiveness of strategy implementation Therefore the evaluation of
strategy implementation of different enterprises are different, subject to the objectives
that they pursue Besides defining rewarding policies is also an important factor,
enabling enterprises to motivate staffs to implement strategies most effectively
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CHAPTER II
PHE SEPUATION OF BUSINESS STRATEGY MANAGEMENT OF VINACONEX — ALPHANAM INFRASTRUCTURE DEVELOPMENT
AND INVESTMENT JOINT STOCK COMPANY
I General Information
- Company name: VINACONEX — ALPHANAM Infrastructure Development and Investment Joint Stock Company
- Abbreviated name: VINACONEX-ALPHANAM JSC
- Head office: No 2 Dai Co Viet, Le Dai Hanh ward, Hai Ba Trung district, Hanoi
- Telephone: 04 35578547 Fax: 04 34478548
1 Major businesses
- Consulting, designing, providing and installing electronic and automatic equipment for industrial buildings, infrastructure, transportation and civil engineering;
- Consulting, designing, providing and installing and maintaining bridge crane, elevators, air conditioners, water-processing equipment, environmental hygiene
equipment, lighting equipment for fire prevention and extinguishing, camera and
monitoring and protection equipment;
- Providing, manufacturing and installing training equipment and scientific and
technical materials:
- Manufacturing, buying and selling building materials and consumer goods: - Leasing transportation, bridge crane and specialized machines:
- Building technical urban infrastructure, industrial zones construction works
and plumbing and drainage construction works:
- Designing general layout, interior architecture for civil engineering and industrial buildings:
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- Real estate brokerage: ©
- Real estate exchange management services
Master of Business Adminitration Programe
2 Organizational structure of Vinaconex - Aiphanam Company Company
Structure Shareholder General ————
Board of Management + | Board of Control
Human resources À
an General Director
Administration
\
y y
Financial Deputy Director Deputy General Director
\ 1 \
Market Finance- Sales Economics Project Designing and
Investment [] Accounting [|] Department [~]| and Planning [| Management Consulting
Department Department Department Unit Department
Note: — + _ Directive relation —— : Coordinating relation
Diagram 2.1: Organizational structure of Vinaconex - Alphanam Corporation
(Source: Human resource and Administration Unit
Vina-Alpha Company)
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departments receive upper level’s directions and cooperate with other departments to fulfill their tasks
With the above model the Shareholder General Assembly has supreme
authority in making decisions on the company’s activities The Board of Director has the duty to concretize the decisions made by shareholders and lead the execution
process It is supervised by the Board of Control which is set up by the Shareholder National Assembly The General Director possesses the largest share in the company
He has the duty to operate the company and implement decisions made by the
Shareholder National Assembly and the Board of Management General Director is
assisted by two Deputy Directors in charge of business aspect and technical aspect of
the company These Deputy Directors are responsible for managing related departments and reporting to the General Director and the Board of Management
The company has 7 departments as follow: - Human Resources and Admin Department;
- Finance — Accounting Department; - Sales Department;
- Economics and Planning Department: - Designing and Consulting Department;
- Project Management Department: - Investment and Marketing Department
Each department has the duty to implement decisions made by the Board of
Management and to support other departments during the operation process
3 Characteristics of the company
3.1 Products
VINACONEX — ALPHANAM Corporation is a multi-sector, multi-business company with the key activities such as designing consulting, managing and
implementing construction investment project in urban areas and industrial zones real estate Investment Therefore the main products of the company are construction
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Construction works have a common feature It requires large capital is used for
a long time and serves the benefits of many people However, managing building projects and ensuring construction quality are difficult tasks This requires the company to adopt strategies to consolidate the management structure improve
workforce management capacity, prevent material loss and apply scientific and
technological applications The development viewpoints of the Board of Management
are: Prestige and effectiveness for investors, customer satisfaction, professional management system and ensuring the quality and timeline
3.2 Market
In recent years, the basic infrastructure in Hanoi in particular and in Vietnam has strongly developed Investment projects involving construction for many sectors have been implemented in timely manner to make use of available opportunities and
resources At the same time, opportunities and challenges in the construction
investment, consulting and designing sector have been opened The country is aiming to achieve the target of becoming an advanced industrial country by 2020, which is concretized into specific roadmaps The potential opportunity for foreign investors in Vietnam is abound Therefore, building and building investment consulting sector have
been pushed to a new height: higher quality, more thorough research, combination of
such factors as appearance, culture-oriented, flexible in space, application of
technology and reasonable cost The consulting and designing services are required to meet not only the requirement of appearance and long use but also the symbols of
success, educational level and new thinking These products will increase the benefits for investors, improve relationship with the public and enhance urban view
It can be said that the building market will proper in the following years However, competition is intense This open market attracts the entry of large companies with high technology and professional working style from advanced countries such as Japan Korea and Malaysia [his creates competitive challenges for Vietnamese companies in general and Vina-Alpha Corporation in particular Since its foundation Vina-Alpha Corporation has step by step developed its business network to actively develop its prestige in the market through large number of ongoing and
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3.3 Quality of Human resources
Vlaster of Business Adminitration Programe
With any company or organization, human resource quality is always a big competitive advantage With Vina-Alpha Corporation human resource quality always plays an important role and is considered a valuable asset and strength of Vina-Alpha
Corporation Human resource quality of a company reflects its development potentials,
scientific and technological application capacity, management and operational capacity This is an important factor for development of Vina-Alpha Corporation
4 Business operation results
4.1 Balance sheet
Table 2.1: Balance sheet of VINA — ALPHA year 2008
No | Item 2006 2007 2008
A _Short- term assets 10,496,048,724 34,712,845,397 | 75,764,320,859
1 | Operating Cash and 225,581,854 84.165.876 424,101,618
cash equiv alents
2 | Short- term financial — fp ;
investment 1.310,300,000
“3 Short-term Account | — ;
receivables 4.791.660.893 ' 26,818,212,827| 67.934.560.380
4 | Inventory — 5315.388.085 5.298.280.680 5.852.568.238
5 | | Other short-term assets 163,417,892 | 2.512.186.014 242,790,623
B Long-term assets 10,669,298,373 31,983,747,495 | 44,077,322,575
ãw ong-term receivables, a 1.991.332 74S 7
2 Fixed asset I56261.980 99356241 2.143.028.389
3 'Inv ested real estate | | / |
c4 Other long-term receivables | 8,367.903.648 - 31.722.140.000 41.710.200,000
© Other long-term assets 153,800,000 163251, 2254) 224/094.186
TOTAL ASSETS 21165347097 66.696,592892 119/841643,434
—C PAYABLES — 8,750.22/153 20,126,835,365 — 19.747.244.789
| Short- term loan
Trang 39(MBA OLMOL-Group 4 Master of Business Adminitration Programe D EQUITIES | 12,415,024,944 46,569,757,527 100,094.398,645 =1 Curentequiy — 12412980390 46.569.757 S27 | _100.000.000 000 2 Other financial | 2.044.554 | 94.398.645 | resources | ¬ | | TOTAL CAPITAL ———_.21,165,347,097 66,696,592,892 | 119,841,643,434,
(Source: Finance -Accounting Department - VINA — ALPHA Company)
In the balance sheet of Vina-Alpha Corporation during 2006 — 2008 period tke value of assets has increased Short-term loan payment capacity in the following year has improved compared to that of last year
42 Completed and ongoing projects
Table 2.2: Completed projects of VINA — ALPHA Company
No Name of project Year | Value Venue
1 Premises of Da Nang | 2006 11.000.000.000 | Da Nang industrial zone Alphanam Joint Stock |
Company |
2 Sakura Tower 2007 69,000,000,000 | No 47 Vu Trong Phung Str,
7 Thanh Xuan Dist, Ha Noi
3 Sakura Hotel 2008 328.000.000.000 LNo 73 To Hien Thanh Str,
_ | Hai Ba Trung Dist, Ha Noi
4 Sakura Office 2009 112.000.000.000 | No 2 Dai Co Viet St, Hai
Ba Trung Dist, HN
§ Sakura Palace 2009 mà 000 000 000 No 108 Nguyen Trai Road
| _ Thanh Xuan Dist Ha Noi
(Source: VINA - ALPHA C ompany Pr ofile)
4.3 Assessment on business activities
Vira — Alpha Company is a young company which is on its way of development and grovth
Table 2.3: Business operation result of VINA — AIPHA Company in the 2006-2008 period
Trang 40Ca\/.1 0I\101-Group + Vaster of Business Adminitration Programe | Revenue | Thousand VND | 2(0.646.900 | 68.064.387 | [18.935.600 | 3 ÌReVefuegrowHh | — % | l6 3380) 175, S Profit, ThowsandVND 164,680 285870 549314, 4 Proftgrowth | a =| % | — 68TH 9D |} 5 Ratio | % 04 0.42 0.46
(Source: Finance -Accounting Department - Vina-Alpha Company
600 500 400 BRevenue @ Profit 300 200 100 2006 2007 2008