Hoa sen group’s competitivestrategy for the period 2011 - 2015

Thus, it is necessary to analyze external factors, operating factors including political factors, economic factors, social factors, technological factors, competitors, suppliers, custome

CAPSTONE PROJECT REPORT

HOA SEN GROUP’S COMPETITIVE STRATEGY FOR

THE PERIOD 2011-2015

GRIGGS UNIVERSITY

GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT

HOA SEN GROUP’S COMPETITIVE STRATEGY

FOR THE PERIOD 2011 - 2015

Group No.: 5 Student’s name:

THOAI QUANG TRAN

HUY NGOC NGUYEN

ACKNOWLEDGEMENTS

After a long time to study in the Master of Business

Administration, learn and research the Hoa Sen Group to write this

topic, our group has received guidance, help and suggestions from

teachers of Griggs University and the Educational Technology and

Career Development Center - Hanoi National University

First, our team would like to thank Griggs University’s

teachers and other universities in Ho Chi Minh City, especially with

teachers who have taught us throughout the studying period We

would like to send our gratitude to Professor - Soren Kirchner who

help us to make our research more appropriate

By the way, our team would like to thank the program’s

leaders have created favorable conditions for us to better learning and

completion of this course

I would like to thank to Mr Vu Phuoc Le , General Director,

Mr Chu Ngoc Tran , Vice General Director, Mr Hung Manh Pham ,

Planning Director for their help, support and co-operation to make

this research in Hoa Sen Group

Sincere thanks!

Group 5

REASSURE WORD

Our group commitment that the entire contents of this topic is because we ourselves have researched, surveyed, collected information

to perform this Capstone Project

Students who made this Capstone Project

1 Thoai Quang Tran

2 Huy Ngoc Nguyen

3 Nhan Le Thi Ai

4 Dung Tri Pham

5 Nghia Trong Ngo

6 Ha Manh Nguyen

COMPETITIVE STRATEGY:

A CAPSTONE PROJECT OF HOA SEN GROUP,

IN BINH DUONG PROVINCE, VIETNAM

by

Thoai Quang Tran Huy Ngoc Nguyen Nhan Le Thi Ai Dung Tri Pham Nghia Trong Ngo

Ha Manh Nguyen

A capstone project submitted in partial fulfillment of the requirements for the degree of Master of Business Administration

Examination Committee Doctor Bay Van Nguyen (Chairman)

Professor Soren Kirchner

MBA Ha Thai Vu

Griggs University

USA Nov 2010

ABSTRACT

Hoa Sen Group, Established on Aug 08th 2001 with the present turnover of $

47 billions Hoa Sen Group basically developed on the mother – subsidiary companies, orienting to the target to become the strong & stable economic group on the fields of iron – steel, building materials, real-estate, financial investment, marine port & logistics

Together economic development, the Vietnamese steel industry has developed and the Vietnamese steel market becomes fiercely competitive The reality has proved that without a right development strategy, a company is most likely to head into unavoidable traps, resulting in stagnant business or even bankruptcy The company is facing the question of how to protect its leading position in the market, to withstand in the market and cope with constant changes in the business environment as well as to increase market share

This research deals with the formulation of competetive strategies for Hoa Sen Group in Viet Nam Thus, it is necessary to analyze external factors, operating factors including political factors, economic factors, social factors, technological factors, competitors, suppliers, customers, Intra-industry competition to identify opportunities and threats in business environment in which the Group operates moreover, the analysis and assessment of hoa sen group’s internal factors such as brand name, distribution channel, technology, production process, price policy, marketing activities., human resource, financial resource, production costs…need to discuss to find out its strengths and weaknesses Following the analysis the opportunities and threats, as well as strengths and weakness, the competetive strategies and solutions also are formulated to achieve Hoa Sen Group’s objectives

TABLE OF CONTENTS P Page

e

PART I: THEORETICAL FRAMEWORK OF COMPETETIVE

1 Identify current tasks, objectives and strategies of the organization 5

1 The formation and development of Hoa Sen Group (HSG) 26

4 Hoa Sen Group Organizational Structure (HGS’s Business Lines) 30

II INTERNAL ENVIRONMENT ANALYSIS – STRENGTHS AND

III EXTERNAL ENVIRONMENT ANALYSIS - OPPORTUNITIES AND

2 World Economy Environment 58

PART III: HOA SEN GROUP’S COMPETITIVE STRATEGY FOR THE

PERIOD 2011-2015

92

1 The orientation towards development of the steel industry 92

2 The overall objective 94

II STRATEGIC SOLUTIONS OF HOA SEN GROUP FOR THE

6 Preliminary selection of Hoa Sen’s the strategic plan 103

APPENDIX Page

Appendix 03: HSG’s galvanizing steel production technology 47

ABBREVIATIONS LIST

Aluzinc Plus : Pre-Painted Aluzinc steel sheet

Aluzinc : Zinc-aluminium alloy coated steel sheet

AS : Attractiveness Scores

ASEAN : Association of Southeast Asian Nations

AVSC : AuViet Seccurities Corporation

BVQI : Bureau Veritas Quality International

CA : Competitive advantage

CPI : Consumer price index

CPM : Competitive Profile Matrix

D/E : Dept/Equity

DWT : Dead weight tonnage

EBIT : Earning Before Interest and Tax

EFE : External factor evaluation

ERP : Enterprise Resource Planning

ES : Environmental stability

FDI : Foreign Direct Investment

FS : Financial strength

GDP : Gross domestic product

HGI : Hot Galvanized Iron (Hot Dip Galvanized Iron & Steel Strip) HLA : The Stock Exchange Symbol of Huu Lien Asia Joint Stock

HSG : The Stock Exchange Symbol of Hoa Sen Group

IFE : Internal factor evaluation

IS : Industry strength

ISO : International Standards Organization

IT : Information technology

JIS : Japanese Industrial Standard

JSC : Joint Stock Company

KKC : The Stock Exchange Symbol of Produce and Trading Metal Join

ODA : Official development assistance

P.E.S.T : Political – Economic – Social – Technological factor

P/B : Price-to-Book ratio

P/E : Price to Earning ratio

PHT : The Stock Exchange Symbol of PhucTien Joint Stock Company QSPM : Quantitative Strategic Planning Matrix

R&D : Reseach & development

ROA : Return On Assets

ROE : Return On Equity

SMC : The Stock Exchange Symbol of SMC Trading- Investment Joint

Stock Company

SO : Strengths – Opportunities

SPACE : Strategic Position & Action Evaluation

SSM : The Stock Exchange Symbol of Steel Structure Manufacture Joint

TAS : Total Attractiveness Scores

TISCO : Thai Nguyen Iron and Steel joint stock Corporation

TKU : The Stock Exchange Symbol of Tung Kuang Industrial Joint

Stock Company

USA : United State American

USD : United State Dollar

VAT : Value Added Tax

VGS : The Stock Exchange Symbol of Vietnam Germany Steel Pipe

Joint Stock Company

VIS : The Stock Exchange Symbol of Vietnam - Itaty Steel Joint Stock

Company

VND : Viet Nam Dong

VRC : VietNam Rubber Corporation

VSC : Vietnam Steel Corporation

WO : Weaknesses – Opportunities

WT : Weaknesses – Threats

WTO : World Trade Organization

Zinc Plus : Pre-Painted Galvanized steel sheet

LIST OF FIGURES Page

Figure 1.3.4 The principal needs analysis on competitors 15

Figure 1.3.7 Price Sensitivity /Perceived Differences 18

Figure 2.1.1 Image of a typical product of Hoa Sen Group 34 Figure 2.2.1 Hoa Sen Group’s galvanizing steel production

technology

47

Figure 2.3.1 Present value chain of Hoa Sen Group 57

Figure 3.2.1 Price Sensitivity of Hoa Sen Group 98

Figure 3.2.3 Grand strategy matrix of Hoa Sen Group 101

Figure 3.3.1 Future value chain of Hoa Sen Group 121

LIST OF TABLES Page

Table 1.3.3 Some factors of industry's entry and exit barriers 14

Table 2.1.3 Structure of human resources under the age of Labor 33

Table 2.2.6 The basic financial ratios of companies in the sector in

Table 2.3.2 Viet Nam GDP growth rate in recent years 68

Table 2.3.4 Foreign direct investment in Viet Nam 70 Table 2.3.5 The amounts of import and export in Viet Nam 70 Table 2.3.6 The impact of Hoa Sen’s external factors 72

Table 2.4.1 : Information on some prominent Steel investment

projects that have been approved

76

Table 2.4.2 : Raw material supply of Hoa Sen Group 78 Table 2.4.3 : Factors that show Hoa Sen Group’s scope of business 81 Table 2.4.4 : Commodity market development plated corrugated 88 Table 2.4.5 : Competitive profile matrix of Hoa Sen Group (CPM

Matrix)

89

Table 3.1.1 : Forecast the needs in use steel to 2025 year 92 Table 3.1.2 : Development plan the manufacture ingot steel to 2010 94 Table 3.2.1 : Analyse SWOT Matrix for Hoa Sen Group 95

Table 3.2.3 : Strateies proposed at each matrix of Hoa Sen Group 103 Table 3.2.4 QSPM – Concentrated Growth Strategies of Hoa Sen 104 Table 3.2.5 QSPM – Integrated growth strategies of Hoa Sen 105 Table 3.2.6 QSPM – Low cost strategies of Hoa Sen 106 Table 3.3.1 Indicators measure the strategic objectives and action

plans

119

LIST OF CHARTS Page

Chart 2.1.2 Hoa Sen Group’s employees through the years 32

Chart 2.2.2 Hoa sen group’s revenue through the years 41 Chart 2.2.3 Hoa sen group’s income through the years 42

Chart 2.3.1 The situation of production and consumption of rolled

INTRODUCTION

Vietnam‟s WTO accession has been a great landmark in the economy A lot

of opportunities have been opened for several potential entrepreneurs who can prove their wisdom in investment and research to take advantage of them However, there are always co-existing threats and risks to bring trouble to enterprises without well considered counter-measures With an increasingly fierce competition in the market, every company should equip itself with effective competitive strategies to assure a sustainable and strong development A company with proper business strategies deploying its own resources to make use of opportunities from outside environment or avoid risks and overcome its weaknesses will totally be able to compete and sustain in the market

Competitive strategy is a special plan that every organization must set out For an enterprise, planning competitive strategy is the first function in the management system to achieve its targets This process must take into consideration several objective factors of the business environment as well as subjective ones of the organization, analyze information to provide a basis for business operations in short term and long term, direct efforts and resources to main targets in the most effective way, respond to certain situations and adapt to changes

After 8 years of developing, from a company with a chartered capital of 30 billions dong, Hoa Sen Group (HSG) has become the leading manufacturer of galvanized steel in Vietnam In 2009, Hoa Sen Group continued to consolidate its top position in the industry with a market share of 29%, a sharp increase in comparison with a figure of 21% in 2008, which is by far above other businesses in the industry

With a nearly closed production process of plated steel, Hoa Sen Group can proactively enhance its value added chain of all stages: material import, production, distribution and retail of galvanized steel sheet, pre-painted galvanized steel sheet,

zinc- aluminium alloy coated steel sheet, pre-painted Aluzinc steel sheet, black steel pipes, purlins… and dominate in low production costs

Hoa Sen Group has been currently searching for a proper way in line with the market economy In the beginning years of the market economy, Hoa Sen Group has gone through a few experiences, with both successes and failures to obtain the achievements as today It is also a typical example of the role of business strategy The reality has proved that without a right developing strategy, a company is most likely to head into unavoidable traps, resulting in stagnant business or even bankruptcy Therefore, in order to withstand in the market and cope with constant changes in the business environment, Hoa Sen Group is required to build a business strategy applicable to different development periods That is the reason why we choose this topic “Hoa Sen Group‟s competitive strategy for the period 2011- 2015” as our final assignment of the module

The member of group 5:

1 Thoai Quang Tran

2 Huy Ngoc Nguyen

3 Nhan Le Thi Ai

4 Dung Tri Pham

5 Nghia Trong Ngo

- Outline a competitive strategy for Hoa Sen Group in the period 2011-2015,

on which basis overcome its disadvantages and promote its advantages to make full use of business opportunities to maintain the sustainable and stable development

1.2 The scope of research

Hoa Sen Group acts in some fields such as cement production and trading, real estate, production of galvanized steel sheet, pre-painted galvanized steel sheet, zinc-aluminium alloy coated steel sheet, pre-painted Aluzinc steel sheet, black steel pipes, purlins, etc… However, Hoa Sen Group has determined galvanized steel as its key product from the beginning In order to develop Hoa Sen Group, a decent concentration on galvanized steel plays an essential role Moreover, every business area of Hoa Sen Group has its own independent elements Within the limited timeframe, the research only focuses on the galvanized steel industry

2 Theoretical framework and method of research

- Theoretical framework: dialectical reasoning

- The method of research: using a combination of different methods like quantitative and qualitative methods, analysis, statistics, modeling, forecast and our knowledge to assess the whole business operations of Hoa Sen Group and set out business strategies for the Company

3 The structure of the essay

In addition to the introduction, conclusion and list of reference sources, the main content consists of 3 parts:

Part 1: THEORETICAL FRAMEWORK OF COMPETETIVE STRATEGY Part 2: ANALYSIS OF HOA SEN GROUP

Part 3: HOA SEN GROUP‟S COMPETITIVE STRATEGY FOR THE PERIOD 2011-2015

PART I: THEORETICAL FRAMEWORK OF COMPETETIVE STRATEGY

1 Strategy concept

Strategy is the process of identifying long-term goals of the enterprise, or how to choose the direction and allocation of necessary resources to implement the objectives

2 Strategic management

Strategic management is the process: scan internal and external environment

of the organization at present and future:

- Establish goals and tasks should pursue

- Plan for implementing and supervising the implementation of strategies to help entrepreneurs to effective resources and their potential to achieve the desired objectives

II THE BUSINESS VISION

The mission statement describes the company's business vision, including the unchanging values and purpose of the firm and forward-looking visionary goals that guide the pursuit of future opportunities

Guided by the business vision, the firm's leaders can define measurable financial and strategic objectives Financial objectives involve measures such as sales targets and earnings growth Strategic objectives are related to the firm's business position, and may include measures such as market share and reputation

Source : Fred R David Figure 1.2.1: Model of Strategic Management

1 Identify current tasks, objectives and strategies of the organization

This is a reasonable starting point in strategic management because the current situation of the company can help eliminate some of the strategies, or even help select specific action Every organization has the tasks, goals and strategies, even when these factors are not set or no formal communication

Review of business tasks

ion of resources

Distribut-Identify tasks,

objectives and

current strategy

Proposed policies

ate and select strategies

Formul-ment and perfor-mance evaluation

Measure-Establish ing long- term goals

Set annual goals

Scan of the external environment to identify opportunities

and threats.

Scan of the internal environment to identify the strengths and weaknesses

Feedback

Feedback

Strategy formation

Strategy implement

Strategy evaluation

2 Business mission

Business mission creates the priority, strategies, plans and assignment This

is a starting point for establish the management especially in management structure

It allows the firm to have outline of direction and set up the targets

3 Research on business environment

Researching the activities of firm concentrate on identify and assess the tendency and events beyond of the sole firm It is divided two types: macrosscopic and demonstrator environment

III STRATEGY FORMULATION AND SELECTION

According to Fred R David, strategic management process includes three

stages: strategy formation, strategy implementation and strategy evaluation

1 Long-term goals establishment

The long term goal expressed the expected results of the pursuit of that strategy The strategy indicates the measures to achieve long-term goal The time frame for objectives and strategies must be consistent each other, usually from 2 to

5 years

Each target is often accompanied by a period and associated with some indicators such as growth of capital, revenue growth rate of consumption, the level

of profit, market share, extent and nature of the combination Longitudinal

2 Strategy formulation and selection

The process of formation and selection strategy consists of four stages:

2.1 Stage 1: Data input

This phase summary of basic information has been entered necessary for the formation of strategies During this period, we will build the matrix: Internal Factor

Evaluation Matrix, External Factor Evaluation Matrix, the matrix evaluation

of external factors and Competitive Profile Matrix, The SWOT Matrix

2.1.1 Micro environment of business

The Value Chain framework of Michael Porter is a model that helps to analyze specific activities through which firms can create value and competitive advantage

- Inbound Logistics: Includes receiving, storing, inventory control, transportation scheduling

- Operations: Includes machining, packaging, assembly, equipment maintenance, testing and all other value-creating activities that transform the inputs into the final product

- Outbound Logistics : The activities required to get the finished product to

the customers: warehousing, order fulfillment, transportation, distribution

management

- Marketing and Sales : The activities associated with getting buyers to

purchase the product including channel selection, advertising, promotion,

selling, pricing, retail management, etc

Firm Infrastructure Human Resource Management Technology Development

Procurement

Service

Marketing and Sales

Outbound Logistics

ions

Source: Michael E.Porter

- Service : The activities that maintain and enhance the product's value,

including customer support, repair services, installation, training, spare parts

management, upgrading, etc

- Procurement : Procurement of raw materials, servicing, spare parts, buildings, machines, etc

- Technology Development : Includes technology development to support the

value chain activities, such as Research and Development, Process

automation, design, redesign

- Value Chain model of Michael Porter: Human Resource Management :

The activities associated with recruiting, development (education), retention

and compensation of employees and managers

- Firm Infrastructure : Includes general management, planning management, legal, finance, accounting, public affairs, quality management, etc

From a Value Based Management point of view, the Value Chain Framework helps to build a relative competitive advantage, together with Porter's Competitive Advantage thinking The Value Chain Framework can be seen as one

of two dimensions in maximizing corporate value creation The other value creation dimension is the Market/Industry Attractiveness for which another model from Porter is often used: the Competitive Forces model

2.1.2 Internal factor evaluation matrix ( IFE Matrix)

IFE matrix is one of the best strategic tool for internal audit of the company IFE is use for internal audit of functional area of business such as finance, marketing, IT, operations,accounts and others depend upon the nature of business and its size

Steps to develop IFE Matrix

1 List key internal factors as identified in the internal audit process Use a total

of from ten to twenty internal factors, including both strengths and weaknesses List

strengths first and then weaknesses Be as specific as possible, using percentages, ratios, and comparative numbers

2 Assign a weight that ranges from 0.0 (not important) to 1.0 (all important) to each factor The weight assigned to a given factor indicates the relative importance

of the factor to being successful in the firm‟s industry Regardless of whether a key factor is an internal strength or weakness, factors considered to have the greatest effect on organizational performance should be assigned the highest weights The sum of all weights must equal 1.0

3 Assign a 1 to 4 rating to each factor to indicate whether that factor represents

a major weakness (rating = 1), a minor weakness (rating = 2), a minor strength (rating = 3), or a major strength (rating = 4) Note that strengths must receive a 4 or

3 rating and weaknesses must receive a 1 or 2 rating Ratings are thus company based, whereas the weights in Step 2 are industry based

4 Multiply each factor‟s weight by its rating to determine a weighted score for each variable

5 Sum the weighted scores for each variable to determine the total weighted score for the organization

Total Weighted Score

The sum of all weighted score is equal to the total weighted score, final value

of total weighted score should be between range 1.0 (low) to 4.0 (high) The average weighted score for IFE matrix is 2.5 any company total weighted score fall below 2.5 consider as weak The company total weighted score higher then 2.5 is consider as strong in position

2.1.3 Macro environment of business

2.1.3.1 Pest analysis

A scan of the external macro-environment in which the firm operates can be expressed in terms of the following factors:

- Political Factors: Political factors include government regulations and legal issues and define both formal and informal rules under which the firm must operate

- Economic Factors : Economic factors affect the purchasing power of

potential customers and the firm's cost of capital

- Social Factors : Social factors include the demographic and cultural aspects

of the external macroenvironment These factors affect customer needs and

the size of potential markets

- Technological Factors : Technological factors can lower barriers to entry,

reduce minimum efficient production levels, and influence outsourcing decisions

A PEST analysis fits into an overall environmental scan as shown in the following diagram:

Source: Michael E.Porter

Figure 1.3.2: Model of Pest analysis

2.1.3.2 External Factor Evaluation matrix ( The EFE matrix )

The EFE matrix is the strategic tool used to evaluate firm existing strategies, EFE matrix can be defined as the strategic tool to evaluate external environment or

macro environment of the firm include economic, social, technological, government, political, legal and competitive information

Steps in developing the EFE matrix

1 Identify a list of KEY external factors (critical success factors)

2 Assign a weight to each factor, ranging from 0 (not important) to 1.0 (very important)

3 Assign a 1-4 rating to each critical success factor to indicate how effectively the firm‟s current strategies respond to the factor (1 = response is poor, 4 = response is extremely good)

4 Multiply each factor‟s weight by its rating to determine a weighted score

5 Sum the weighted scores

Total Weighted Score

The sum of all weighted score is equal to the total weighted score, final value

of total weighted score should be between range 1.0 (low) to 4.0(high) The average weighted score for EFE matrix is 2.5 any company total weighted score fall below 2.5 consider as weak The company total weighted score higher then 2.5 is consider

as strong in position

2.1.4 Operational environment of enterprises

2.1.4.1 Porter‟s Five Porces

To analyze operational environment (or micro-environment and environment sectors) of the enterprise, we apply the model in work force by Michael E Porter (1980) shown in the diagram below:

SUPPLIER POWER

Supplier concentration Importance of volume to supplier Differentiation of inputs Impact of inputs on cost or differentiation Switching costs of firms in the industry Presence of substitute inputs Threat of forward integration Cost relative to total purchases in

industry

BARRIERSTO ENTRY

Absolute cost advantages

Proprietary learning curve

-Switching costs -Buyer inclination to substitute

-Price-performance trade-off of substitutes

Bargaining leverage Buyer volume Buyer information Brand identity Price sensitivity Threat of backward integration Product differentiation Buyer concentration vs industry Substitutes available Buyers' incentives

DEGREE OF RIVALRY

-Exit barriers -Industry concentration -Fixed costs/Value added -Industry growth

-Intermittent overcapacity -Product differences -Switching costs -Brand identity -Diversity of rivals -Corporate stakes

Source: Michael E.Porter

Figure 1.3.3: Porter’s Five Forces

- Rivalry : In the traditional economic model, competition among rival firms

drives profits to zero But competition is not perfect and firms are not unsophisticated passive price takers Rather, firms strive for a competitive advantage over their rivals The intensity of rivalry among firms varies

across industries, and strategic analysts are interested in these differences

- Threat Of Substitutes : Substitute products are different products that can

satisfy customers‟ demand The main feature of substitute products is its

unique specifications Similar substitute products are a competitive force

- Buyer Power : The following tables outline some factors that determine buyer power

Buyers are concentrated - there are a

few buyers with significant market

share

Producers threaten forward integration - producer can take over own distribution/ retailing

Buyers purchase a significant

proportion of output - distribution of

purchases or if the product is

standardized

Significant buyer switching costs - products not standardized and buyer cannot easily switch to another product

Buyers possess a credible backward

integration threat - can threaten to buy

producing firm or rival

Buyers are fragmented (many, different) -

no buyer has any particular influence on product or price

Producers supply critical portions of buyers' input - distribution of purchases

Source:http://www.quickmba.com/strategy/

Table 1.3.1: Some factors of Buyer Power

- Supplier Power: The following tables outline some factors that determine

supplier power

Suppliers are Powerful if: Suppliers are Weak if:

Credible forward integration threat by

suppliers

Many competitive suppliers - product is standardized

Suppliers concentrated Purchase commodity products

Significant cost to switch suppliers Credible backward integration threat by

purchasers

Customers Weak

Source:http://www.quickmba.com/strategy/

Table 1.3.2: Some factors of supplier power

- Barriers to Entry / Threat of Entry: Some of an industry's entry and exit barriers can be summarized as follows:

Easy to Enter if there is:

 Common technology

 Little brand franchise

 Access to distribution

channels

 Low scale threshold

Difficult to Enter if there is:

 Patented or proprietary know-how

 Difficulty in brand switching

 Restricted distribution channels

 High scale threshold

Easy to Exit if there are:

2.1.4.2 Competitive Profile Matrix ( CPM )

CPM is an essential strategic management tool to compare the firm with the major players of the industry Competitive profile matrix show the clear picture to the firm about their strong points and weak points relative to their competitors The CPM score is measured on basis of critical success factors, each factor is measured

in same scale mean the weight remain same for every firm only rating varies The best thing about CPM that it include your firm and also facilitate to add other competitors make easier the comparative analysis

IFE matrix only internal factors are evaluated and in EFE matrix external factors are evaluated but CPM include both internal and external factors to evaluate overall position of the firm with respective to their major competitors

The competitive profile matrix consists of following attributes mentioned

+ Are Competitors satisfied with the current potition?

+ How are The ability of Competitors shift or change their strategy?

+ What are the weaknesses of competitors?

+ What stimulates the competitors react strongly and effectively?

The assumptions

placed on the business

and the industry

The potential

Strengths and weakness

 Rating : Rating in CPM represent the response of firm toward the critical

success factors Highest the rating better the response of the firm towards the critical success factor, rating range from 1.0 to 4.0 and can be applied to any

factor

There are some important point related to rating in CPM Rating is applied to each factor

 The response is poor represented by 1.0

 The response is average is represented by 2.0

 The response is above average represented by 3.0

 The response is superior represented by 4.0

 Total Weighted Score: The sum of all weighted score is equal to the total weighted score, final value of total weighted score should be between range 1.0 (low) to 4.0(high) The average weighted score for CPM matrix is 2.5 any company total weighted score fall below 2.5 consider as weak The company total weighted score higher then 2.5 is consider as strong in position.The other dimension of CPM is the firm with higher total weighted score considered as the winner among the competitors

2.1.4.3 SWOT analysis

A scan of the internal and external environment is an important part of the strategic planning process Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T) Such an analysis of the strategic environment is referred to as a SWOT analysis

The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates As such, it is instrumental in strategy formulation and selection The following diagram shows how a SWOT analysis fits into an environmental scan:

Source: Michael E.Porter

Figure 1.3.5: SWOT Analysis

2.2 Phase 2: General Strategic Planning

The tasks of this stage is the long-term direction for the business The strategy at this stage is oriented to next steps, including proposing specific strategies and selection strategies The technique used in this stage include: The SWOT Matrix, price sensitivity/perceived differences, the Matrix range of activities - competitive advantage; Matrix number of competitive advantage - the value of competitive advantage

2.2.1 The SWOT Matrix

To develop strategies that take into account the SWOT profile, a matrix of these factors can be constructed The SWOT matrix (also known as a TOWS Matrix) is shown below:

Opportunities S-O strategies W-O strategies

Threats S-T strategies W-T strategies

Source: Michael E.Porter

Figure 1.3.6: SWOT / TOWS Matrix

- S-O strategies pursue opportunities that are a good fit to the company's strengths

- W-O strategies overcome weaknesses to pursue opportunities

- S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats

- W-T strategies establish a defensive plan to prevent the firm's weaknesses from making it highly susceptible to external threats

2.2.2 The sensitivity of pricing - the level of interest in Perceived Differences

This is a two-dimensional grid that focuses on the choice between reducing costs or building in more value to the customer Each of the four quadrants has different implications in terms of suggested strategy

TRANSITIONAL STRATEGY

HYBRID STRATEGY

SPECIALITY STRATEGY

Analysis of Enterprise Position

Commodity Transitional Hybrid Specialty

High Price Sensitivily

Few Perceived

Differences

High Price Sensitivily Many Perceived Differences

Low Price Sensitivily Few Perceived Differences

Low Price Sensitivily Many Perceived Differences

A commodity strategy

is recommended

Efforts should be

exerted to increase the

firm's market share

thereby lowering

marginal costs

A transitional strategy

is suggested

Emphasize the quality

of your product, but be ready to respond to competitor product improvements that attract customers

A hybrid strategy is recommended You should avoid price wars and talk quality

A specialty strategy

is recommended You should initiate

or continue efforts

to differentiate your offering

Source: http://www.brs-inc.com/models

Table 1.3.4: Analysis of Enterprise Position

2.3 Phase 3: Formulation of the specific strategy

This phase concentrate on offering the feasible strategy which can have choise by arrange the combination of internal factors and important external factors Technique used in this phase includes strategy matrix, SPACE matrix and matrix of strength – weakness – opportunity – threaten (SWOT matrix)

2.3.1 SPACE matrix

The SPACE matrix is a management tool used to analyze a company It is used to determine what type of a strategy a company should undertake The Strategic Position & ACtion Evaluation matrix or short a SPACE matrix is a strategic management tool that focuses on strategy formulation especially as related

to the competitive position of an organization

 Strategic Position & Action Evaluation Matrix

Source : Fred R David Figure 1.3.8: Space matrix

 Steps to Developing a SPACE Matrix

1 Select a set of variables to define FS, CA, ES, & IS

2 Assign a numerical value: From +1 to +6 to each FS & IS dimension, From

-1 to -6 to each ES & CA dimension

3 Compute an average score for each FS, CA, ES, & IS

4 Plot the average score on the appropriate axis

5 Add the two scores on the x-axis and plot the point Add the two scores on the y-axis and plot the point Plot the intersection of the new xy point