Acknowledgements

I am very grateful to my supervisor Dr. Truong Quang, for his helpful advice throughout the period of the research. He encouraged my progress and provided valuable feedback in the early drafts until the completion of this report

DEVELOPING A CHANGE STRATEGY FOR A MEDIUM - SCALE FIRM: A CASE STUDY OF VINH PHU TEXTILE COMPANY IN VIETNAM by Le van Hoa A research study submitted in partial fulfillment of the requirements for the degree of Master of Business Administration Examination Committee Dr. Truong Quang (Chairman) Dr. Fredric William Swierczek Dr. Hans Stoessel Nationality Vietnamese Previous Degree Bachelor of Economics Engineering Hanoi University of Technology Hanoi, Vietnam Scholarship Donor Government of Switzerland Asian Institute of Technology School of Management Bangkok, Thailand April 1999 i Acknowledgements I am very grateful to my supervisor Dr. Truong Quang, for his helpful advice throughout the period of the research. He encouraged my progress and provided valuable feedback in the early drafts until the completion of this report. I would like to extend my sincere thanks to my committee members, Dr. Fredric William Swierczek and Dr. Hans Stoessel who, in spite of their busy schedule, spent a lot of time to help me in making my research more appropriate. Specially, the author would like to thank the Swiss-AIT-Vietnam Management Development Program and the Government of Switzerland for granting him a scholarship to study at School of Management, AIT. I wish to express my thanks also to Economics and Management Department, Hanoi University of Technology, which provided me a brilliant chance to pursue my study as I had dreamed. The author is very grateful to his friends, employees, staff, and managers of all functions of the Vinh Phu Textile Company for their helps and support during the time of data collection for this research. The author would like to thank all faculty, staff and his friends at SOM and in AIT for their assistance and support during the time of his study at AIT. I would like to express my deep gratitude to my parents, my wife, my brothers and sisters, without their best wishes I would not have been so successful. ii Abstract In late 1986, Vietnam started a comprehensive economic reform called “doi moi” (renovation) to change its centrally planned economy to a market economy. Since then, the business environment has been changing very fast. These changes have created opportunities as well as threats to local companies, especially in the textile industry. Due to inferior operation conditions, many of these companies do not perform well. According to the government’s own estimates, about 28 % of the state-owned companies are losing money. Many depend heavily on government subsidies for survival. Vinh Phu Textile Company, like many other state-owned companies has undergone drastic changes. In the face of government’s withdrawal of capital financial support, to survive and develop further in a competitive business environment, the company needs to build up its own comprehensive and achievable business strategy. This study focuses on developing a change strategy for the Vinh Phu Textile Company. Subsequently, a change strategy is developed and recommended to the company. iii Table of Contents Chapter Title Pages Tile Page………………………………………………………….….……………i Acknowledgement……………………………………………….…….…………ii Abstract…………………………………………………………… ……………iii Table of Contents………………………………………………….….…….……iv List of Figures………………… .……………………………….….……… .vi List of Tables… .……………………………………………… …………… .vii 1. Introduction 1 1.1 Rationale of the Research Study .2 1.2 Problem Statement .2 1.3 Research Objectives 2 1.4 Scope and Limitations 2 1.5 Research Framework (Figure 1) .3 1.6 Research Methodology 3 1.7 Organization of the Report 4 2. Literature Review 5 2.1 Change Strategy 5 2.2 Organizational Change .6 2.3 Concept of Corporate Strategy 6 2.4 Strategic Management .6 2.5 Mission Statement .7 2.6 Strategy Formulation 7 3. External Analysis and Discussion 12 3.1 Macroenvironment Overview 12 iv 3.2 Industry Analysis .13 3.3 Summary of the External Factors 16 4. Internal analysis of the company 19 4.1 Company’s Mission .19 4.2 Company History .19 4.3 Company Objectives and Policy 20 4.4 Management of the Company 21 4.5 Human Resources Management 23 4.6 The Marketing Mix 26 4.7 Manufacturing .27 4.8 Finance 30 4.9 Contingency Strategies 33 4.10 Summary of the Internal Factors .35 5. Developing a change strategy 37 5.1 Strategic Choice 37 5.2 Mission of the Company 39 5.3 A Change Strategy for Vinh Phu Textile Company 39 5.4 Organizational Structure .41 5.5 Organizational Culture .43 5.6 People 43 5.7 Integrated Strategy 44 6. Conclusions and Recommendations 48 6.1 Conclusions .49 6.2 Recommendations for Strategy Implementation 49 v List of Figures Figure 1. Research Framework 4 Figure 2. A Conceptual Framework for Change Strategy .5 Figure 3. Organizational Targets for Planned Change 6 Figure 4. Demand and Supply for Fabrics 15 Figure 5. Overall Assessment of Industry Attractiveness Based on External Factors Analysis 18 Figure 6. Organization Chart of Vinh Phu Textile Co 22 Figure 7. Leverage Ratios 31 Figure 8. Liquidity Ratios 32 Figure 9. Strategic Competence Framework 37 Figure 10. Strategic Choice 39 Figure 11. Conditions for a Change Strategy of a Company 41 Figure 12. Proposed Organization Chart 42 Figure 13. The Proposed Distribution Channels 48 Figure 14. A Proposed Change Strategy for Vinh Phu Textile Company 51 vi List of Tables Table 1. Key Environmental Variables 8 Table 2. Demand and Supply 14 Table 3. Vinh Phu Textile Co.’s Workforce 23 Table 4. Educational Degree of Employees (in 1998) 24 Table 5. Experience and Skill Levels of Employees 25 Table 6. Market Penetration of the Company 27 Table 7. Actual Production and Capacity of the Company .28 Table 8. Leverage Capital Structure Ratios of Vinh Phu Textile Co. (in %) 30 Table 9. Liquidity Ratios for Vinh Phu Textile Company 31 Table 10. Profitability Ratios for Vinh Phu Textile Company .32 vii Table 11. Sources of Fund and its Weigh 34 Table 12. Strategic Choices for Vinh Phu Textile Co 45 viii Chapter 1 1. Introduction 1 1.1 Rationale of the Research Study Since late 1986, Vietnam has been gradually modifying its economic and development policies in order to liberalize and internationalize its economy. As a result, the business landscape in Vietnam has been changing very fast. Along with the opening of its economy to the world, international relationships and trade have been established. Government policies and regulations related to business operations have also been improved to facilitate business operations of state-owned companies and to attract local and foreign investments. As a result, companies have been facing new opportunities and threats. The response of the companies towards these changes has been mixed. There were many companies which maintained the status quo, struggled with the new reality or disappeared. By the government’s own estimates, about 28% of state-owned companies are losing money. Many are heavily depended on the government subsidies for survival. Only few of them have survived the test by adapting new technologies, entering into new industries and markets, launching new products, changing company culture and reengineering organizational structure. Like many other state-owned companies, the challenges faced by the Vinh Phu Textile Company are very difficult. In order to adapt to the new market situation and to grow further, the company needs to develop a sustainable competitiveness strategy for change. 1.2 Problem Statement Like any other SOEs in the textile industry, Vinh Phu Textile Company has been struggling very hard to survive as a result of current changes in the business environment. To overcome the survival test, it should come out with a comprehensive change strategy. 1.3 Research Objectives The main objective of this research is to analyze business environment and the strengths and weaknesses of the company under study and then formulate a comprehensive and achievable strategy for its survival and growth in the future. The specific objectives of this research are:  To analyse the challenges faced by the company  To analyse the strategic choices made by the company  To formulate an appropriate change strategy for the company  To make recommendations for strategy implementation. 1.4 Scope and Limitations 2 . Institute of Technology School of Management Bangkok, Thailand April 1999 i Acknowledgements I am very grateful to my supervisor Dr. Truong Quang, for his