Luận văn Chiến lược phát triển công ty Cổ phần Vật liệu SECOIN

LUẬN VĂN CHIẾN LƯỢC PHÁT TRIỂN CÔNG TY CỔ PHẦN VẬT LIỆU SECOINChapter 1: Fundamental theories of management strategyChapter 2: Actual situation of business management in Secoin Building Material Corporation during recent timeChapter 3: Solutions to strategic management of Secoin Building Material Corporation during the period 20102020

LUẬN VĂN CHIẾN LƯỢC PHÁT TRIỂN CÔNG TY CỔ PHẦN VẬT LIỆU

SECOIN

DEVELOPMENT STRATEGIES OF SECOIN BUILDING MATERIAL CORPORATION DURING THE PERIOD

OF 2010-2020

PREFACE GENERAL INTRODUCTION

A The importance of making Development Strategies

The modern business environment is changing day by day Vietnam by far hasbeen considered one of the fastest growing economy, not just in Asia but theentire world Opening the economy in 1986, Vietnam has undergone almost 30years toward a real market economy An important milestone in the way ofglobal integration for Vietnam was marked when Vietnam joined WTO A lot

of changes have been made and are expected to be made in the years to come,especially the period of 2010-2020

The question is: Will those fast changes have any influence Vietnamese companies? Of course the answer is YES All leaders of Vietnamese companies

can easily answer YES without need to think But it will be a much harder

question for them to answer: How will their companies cope with those changes? Will they be able to grow sustainably in the road ahead? How they expect their companies to become in ten years time?

So, we have come to the point of strategic thinking! The German people has a

proverb: “What's the use of running if you are not on the right road?” Strategic

thinking will help leader of a company decide where his organization has to go,and whether they are going on the right road or not A leader with a goodstrategy will make the company grow by grasping the opportunities that theoutside world bringing to them By all these thoughts, our team can see theimportance of strategic thinking in the mind of leaders of companies who areoperating in a fast changing business environment

A strategic thinking in the mind of leader shouldn’t be confidential information.Strategy defines the future goals of a company and they should be known by allcompany members The whole staff should have a clear understanding of the

direction of further development of the company, otherwise the company isdoomed to failure

We are now in the second half of 2009 The year 2008 and the first half of 2009has witnessed so much turbulence in the global economy It is expected that therecovery will start from early 2010 Then, the period of 2010 to 2020 may be thetime for economic growth Vietnam will be in that growing trend, and

Vietnamese companies are driving force of an economic booming Start making a business strategy for 2010-2020 right from today - it is the first

thing a company leader needs to do if he has not done it yet

Realizing the importance of working out a development strategy for the coming

10 years, the leader of Secoin Building Material Corporation can draw a picture

of the future prospect for his company What to be put in the picture? It should

be a panorama showing in details the environment Secoin is in, how Secoinlooks like, and where Secoin needs to go Developing an extensive andcomprehensive development strategy is therefore the most important task forSecoin

Now, let’s us go together into more details and help Secoin Building Material

Corporation work out a perfect “DEVELOPMENT STRATEGIES OF SECOIN BUILDING MATERIAL CORPORATION DURING THE PERIOD OF 2010-2020".

B The purpose of researched topic

The purpose of conducting this research is to identify strategy and businessdevelopment to the year 2020 for Secoin Building Material Corporation Fromthere, Secoin can take appropriate action to expand the scale, reduce businesscosts, use capital effectively, bring profits to enterprise as well as increaseefficiency in competition for business

In this research, we also suggested some solutions to Secoin in order toimplement the corporate strategy and business strategy during the period of2010-2020

D Capstone project structure:

Our project includes three chapters as follows:

Chapter 1: Fundamental theories of management strategy

Chapter 2: Actual situation of business management in Secoin Building MaterialCorporation during recent time

Chapter 3: Solutions to strategic management of Secoin Building MaterialCorporation during the period 2010-2020

CHAPTER 1 FUNDAMENTAL THEORIES OF MANAGEMENT STRATEGY

1.1 Overall management strategy:

1.1.1 The concept of strategy and management strategy:

The concept of strategy:

Strategies are means to ends All organizations, large and small, seeking and not-for- profit, private and public sector, have a purpose,which may or may not be articulated in the form of a mission and/or visionstatement

profit-“The flame of competition has changed from smoky yellow to intense white heat For companies to survive and prosper they will have to have a vision, a mission and strategy They will pursue the action arising from that strategy with entrepreneurial skill and total dedication and commitment to win.”

(Peter B Ellwood, Chief Executive, Lloyds TSB Group )

“Far too many companies either have no goals at all, other than cost reduction, or their boss hides them in his head There’s no hope for companies in Britain unless more top managements accept the need for a widely communicated set of clear objectives.”

Peter Beck, ex-Chairman, The Strategic Planning Society, 1987

At their simplest, strategies help to explain the things that managers andorganizations do These actions or activities are designed and carried out

in order to fulfill certain designated purposes, some of them short term innature, others longer term The organization has a direction and broadpurpose, which should always be clear, articulated and understood, andwhich sometimes will be summarized in the form of a mission statement.More specific milestones and targets (objectives) can help to guidespecific actions and measure progress

Strategies, then, are means to ends

They are relevant for the organization as a whole, and for the individualbusinesses and/or functions that comprise the organization They arecreated and changed in a variety of ways They have, however, onecommon feature: they all have life cycles and need changing, eithermarginally or dramatically, at certain times

While strategic management incorporates major changes of direction forthe whole business, such as diversification and growth overseas, it alsoinvolves smaller changes in strategies for individual products and servicesand in particular functions such as marketing and operations Decisions bymanagers in relation to their particular areas of product or functionalresponsibility have a strategic impact and contribute to strategic change

To some extent, all managers are strategy-makers

Strategic management is a complex and fascinating subject withstraightforward underlying principles but no ‘right answers’ Strategy isabout issues and perspectives on problems - there is no single, prescriptivedoctrine which satisfies everyone’s views

Companies succeed if their strategies are appropriate for the circumstancesthey face, feasible in respect of their resources, skills and capabilities, anddesirable to their important stakeholders - those individuals and groups,both internal and external, who have a stake in and an influence over thebusiness Simply, strategy is fundamentally about a fit between theorganization’s resources and the markets it targets - plus, of course, theability to sustain fit over time and in changing circumstances

Morrison and Lee (1979) concluded that successful companies seem to bedistinguished from their less successful competitors by a common pattern

of management practices:

■ First, they identify more effectively than their competitors the keysuccess factors inherent in the economics of each business For example in

the airline industry, with its high fixed costs and relatively inflexible routeallocations, a high load factor is critical to success It is important, though,that high load factors are not at the expense of healthy sales of moreexpensive seats, and this requires skilful marketing

■ Second, they segment their markets so as to gain decisive competitiveadvantage, basing the segmentation on competitive analysis and oftenseparating segments according to the strengths and weaknesses ofdifferent competitors This enables them to concentrate on segments wherethey can both maximize their competitive advantage and avoid head-oncompetition with stronger competitors

■ Third, they carefully measure and analyze any competitive advantage.This requires a sound basis for assessing a company’s advantages relative

to its competitors

■ Fourth, they anticipate their competitors’ responses Good strategicthinking also implies an understanding of how situations will change overtime Business strategy, like military strategy, is a matter of maneuveringfor superior position and anticipating how competitors will respond, andwith what measure of success

■ Fifth, they exploit more, or different, degrees of freedom than theircompetitors Specifically, they seek to stay ahead of their rivals by lookingfor new competitive opportunities Whilst innovation and constantimprovement are essential, there are also potentially huge rewards fororganizations which are first to reach the new competitive high ground bychanging the currently practiced rules of competition

■ Finally, they give investment priority to businesses or areas that promise

a competitive advantage Because there are many views on strategy andstrategic management and no single, universally accepted, approach, astudy of strategic changes in a variety of different organizations isvaluable An examination of outcomes, followed by an analysis of the

decisions which led to these relative successes and failures, is rich inlearning potential Examples should not be confined to just one sector.Manufacturing and service businesses, the private and public sectors andnot-for-profit organizations are all relevant Everyone who can make orinfluence decisions which impact on the strategic effectiveness of thebusiness should have at least a basic understanding of the concepts andprocesses of strategy The processes will often be informal, and theoutcomes not documented clearly, but they still exist, and managing theprocesses effectively determines the organization’s future Without thisunderstanding people often fail to appreciate the impact of their decisionsand actions for other people within the business They are less likely to beable to learn from observing and reflecting upon the actions of others.They are also more likely to miss or misjudge new opportunities andgrowing threats in the organization’s environment.

Overall Definition:

Johnson and Scholes (Exploring Corporate Strategy) define strategy asfollows:

"Strategy is the direction and scope of an organization over the

long-term: which achieves advantage for the organization through its

configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations".

In other words, strategy is about:

* Where is the business trying to get to in the long-term (direction)

* Which markets should a business compete in and what kind of activities

are involved in such markets? (markets; scope)

* How can the business perform better than the competition in those

markets? (advantage)?

* What resources (skills, assets, finance, relationships, technicalcompetence, facilities) are required in order to be able to compete?

(resources)?

* What external, environmental factors affect the businesses' ability to

compete? (environment)?

* What are the values and expectations of those who have power in and

around the business? (stakeholders)

Strategy at Different Levels of a Business

Strategies exist at several levels in any organization - ranging from theoverall business (or group of businesses) through to individuals working

in it

Corporate Strategy - is concerned with the overall purpose and scope of

the business to meet stakeholder expectations This is a crucial level since

it is heavily influenced by investors in the business and acts to guidestrategic decision-making throughout the business Corporate strategy isoften stated explicitly in a "mission statement"

Business Unit Strategy - is concerned more with how a business competes

successfully in a particular market It concerns strategic decisions aboutchoice of products, meeting needs of customers, gaining advantage overcompetitors, exploiting or creating new opportunities etc

Operational Strategy - is concerned with how each part of the business is

organized to deliver the corporate and business-unit level strategicdirection Operational strategy therefore focuses on issues of resources,processes, people etc

The concept of management strategy

There are a number of aspects to strategic management

First, the strategy itself This is concerned with the establishment of a cleardirection for the organization and for every business, product and service,and a means for getting there which requires the creation of strong

competitive positions

The second requirement is excellence in the implementation of strategies

in order to yield effective performance

Third, creativity and innovation are needed to ensure that the organization

is responsive to pressures for change and that strategies are improved andrenewed

Fourth is the ability to manage strategic change, both continuous, gradual,incremental changes and more dramatic, discontinuous changes.Innovation and change concern the strategy process in an organization Sound implementation and innovation should enable an organization tothrive and prosper in a dynamic, global environment, but in turn theydepend on competencies in strategic awareness and learning.Organizations must understand the strategic value of the resources thatthey employ and deploy, and how they can be used to satisfy the needsand expectations of customers and other stakeholders while outperformingcompetitors

Strategy is about actions, not plans - specifically the commitment of resources to achieving strategic ends … concrete steps that immediately affect people’s lives, not abstract intentions

Andrew S Grove, CEO, Intel

In its broadest sense, strategic management is about taking "strategicdecisions" - decisions that answer the questions above

In practice, a thorough strategic management process has three maincomponents, shown in the figure below:

Figure 1.1 – Strategy

Strategic Analysis

This is all about analyzing the strength of businesses' position andunderstanding the important external factors that may influence thatposition The process of Strategic Analysis can be assisted by a number oftools, including:

PEST Analysis - a technique for understanding the "environment" in

which a business operates

Scenario Planning - a technique that builds various plausible views of

possible futures for a business

Five Forces Analysis - a technique for identifying the forces which affect

the level of competition in an industry

Market Segmentation - a technique which seeks to identify similarities

and differences between groups of customers or users

Directional Policy Matrix - a technique which summarizes the

competitive strength of a business operations in specific markets

Competitor Analysis - a wide range of techniques and analysis that seeks

to summarize a businesses' overall competitive position

Critical Success Factor Analysis - a technique to identify those areas in

which a business must outperform the competition in order to succeed

SWOT Analysis - a useful summary technique for summarizing the key

issues arising from an assessment of a business "internal" position and

"external" environmental influences

Strategic Choice

This process involves understanding the nature of stakeholder expectations(the "ground rules"), identifying strategic options, and then evaluating andselecting strategic options

1.1.2 Tasks of management strategies:

Management strategy includes five tasks inter-communicating with each other:Create a strategic scenario describes the future image of the company, ifthe companies want to first become a company like? Government toprovide long-term orientation, specify the image the company to become,for media companies feel about the actions of purpose

Setting goals - to transform scenario strategy into the implementation ofthat company must achieve

Develop strategies to achieve the desired goals

Implementation and administration of the strategy has been selected in aneffective and efficient

Rating of the implementation and conduct of the scenario, long-termdirection, goals, strategies or implementation on the basis of experience,the conditions change, ideas and opportunities new.

1.1.3 Benefits of management strategy

Studies show that if applied management strategies organizations will performbetter than organizations do not perform this process Achieved if appropriatebetween environmental organization's strategy, structure and process willgenerate positive effects on the performance of the organization Benefits ofmanagement strategy has been tested in many different fields, can be shortwith the three most basic are:

Develop clear strategic scenario for the company

Focusing more precisely on the important strategy

Improve awareness of the rapidly changing environment

However, to achieve effective management strategies always need a formalprocess, and it can start with questions:

Where is the organization?

If no changes are be made after 1 year, 2 years, 3 years, 5 years, 10 years,will it be acceptable or not ?

If the answer is not acceptable, is it necessary to implement specificmanagement actions? What should be considered as risks and interests?

1.2 Process of development strategy formation

1.2.1 Vision

Statement to open a mission for the plan and strategy is the foundation for avision of the company Statement of mission or may be a motivatingemployees when transmit the purpose and value of the company to customersand communities

A statement of vision is a report about a company where you hope to achieve.Universal Declaration vision needed for strategic planning because it outlines

the future of your company as you achieve goals and your goals The statement

of vision may be different between different length, can be a short, can be aparagraph long, but must identify the final destination of you

Vision of your company is an important statement to guide the process ofplanning strategies A statement of vision will determine the best results forthe current initiatives and your potential

A strategic plan starts with a clearly defined business mission Mintzberg

defines a mission as follows: “A mission describes the organization’s basic function in society, in terms of the products and services it produces for its customers”.

A clear business mission should have each of the following elements

Figure 1.2 – Element of MissionTaking each element of the above diagram in turn, what should a good missioncontain?

A Purpose:

Why does the business exist? Is it to create wealth for shareholders? Does

it exist to satisfy the needs of all stakeholders (including employees, andsociety at large?)

A Strategy and Strategic Scope:

A mission statement provides the commercial logic for the business and sodefines two things:

- The products or services it offers (and therefore its competitiveposition)

- The competences through which it tries to succeed and its method ofcompeting

A business’ strategic scope defines the boundaries of its operations Theseare set by management

For example, these boundaries may be set in terms of geography, market,business method, product etc The decisions management make aboutstrategic scope define the nature of the business

Policies and Standards of Behavior

A mission needs to be translated into everyday actions For example, if thebusiness mission includes delivering “outstanding customer service”, thenpolicies and standards should be created and monitored that test delivery These might include monitoring the speed with which telephone calls areanswered in the sales call centre, the number of complaints received fromcustomers, or the extent of positive customer feedback via questionnaires.

Values and Culture:

The values of a business are the basic, often un-stated, beliefs of thepeople who work in the business These would include:

- Business principles (e.g social policy, commitments to customers)

- Loyalty and commitment (e.g are employees inspired to sacrifice theirpersonal goals for the good of the business as a whole? And does thebusiness demonstrate a high level of commitment and loyalty to itsstaff?)

- Guidance on expected behavior – a strong sense of mission helps create

a work environment where there is a common purpose

What role does the mission statement play in marketing planning?

In practice, a strong mission statement can help in three main ways:

- It provides an outline of how the marketing plan should seek to fulfillthe mission

- It provides a means of evaluating and screening the marketing plan; aremarketing decisions consistent with the mission?

- It provides an incentive to implement the marketing plan

1.2.3 Objective:

Objective is specific, clear, feasible, in a shorter time Objective is regarded as

a specific vision of the enterprise

Main goal is the future status of the company trying to implement or finalresults of the actions planned

To that, the objective must have four characteristics:

- First, a target is considered to be well established if it accurate and canmeasure

- Second, a target is set to be the critical issues

- Third, a goal was set up well to the challenges and can make

- Fourth, a goal is built so well identified with a period of time can beachieved

- Finally, the objectives to provide good tools to evaluate theimplementation of management

Objectives can be set at two levels:

- Corporate level: These are objectives that concern the business or

organization as a whole

- Functional level

Both corporate and functional objectives need to conform to the commonly

used SMART criteria.

The SMART criteria (an important concept which you should try to rememberand apply in exams) are summarized below:

- Specific - the objective should state exactly what is to be achieved.

- Measurable - an objective should be capable of measurement – so that it

is possible to determine whether (or how far) it has been achieved

- Achievable - the objective should be realistic given the circumstances in

which it is set and the resources available to the business

- Relevant - objectives should be relevant to the people responsible for

achieving them

- Time Bound - objectives should be set with a time-frame in mind These

deadlines also need to be realistic

1.3 Strategy Analysis:

We found that, how the organization is typically one of a number ofcompetitors in an industry; and to a greater or lesser degree these competitorswill be affected by the decisions, competitive strategies and innovation of the

others These interdependencies are crucial, and consequently strategicdecisions should always involve some assessment of their impact on othercompanies, and their likely reaction Equally, a company should seek to befully aware of what competitors are doing at any time

Furthermore, this industry will be linked to, and dependent on, otherindustries: industries from which it buys supplies, and industries to which itmarkets products and services Essentially this relates to Porter’s model of theforces that determine industry profitability, the subject of the next section inthis chapter

The relationships between a firm and its buyers and suppliers are again crucialfor a number of reasons Suppliers might be performing badly and as a resultfuture supplies might be threatened; equally they might be working oninnovations that will impact on organizations to which they supply Buyersmight be under pressure from competitors to switch suppliers It is important

to be strategically aware, and to seek to exert influence over organizationswhere there are dependencies

These industries and the firms that comprise them are additionally part of awider environment This environment is composed of forces that influence theorganizations, and which in turn can be influenced by them Particular forceswill be more or less important for individual organizations and in certaincircumstances It is important that managers appreciate the existence of theseforces, how they might influence the organization, and how they might beinfluenced

Mintzberg (1987) has used the term ‘crafting strategy’ to explain howmanagers learn by experience and by doing and adapting strategies toenvironmental needs He sees the process as being analogous to a pottermolding clay and creating a finished object If an organization embarks upon adetermined change of strategy, certain aspects of implementation will bechanged as it becomes increasingly clear with experience how best to manage

the environmental forces Equally, managers adapt existing competitive andfunctional strategies as they see opportunities and threats and gradually changethings In each case the aim is to ensure that the organization’s resources andvalues are matched with the changing environment

1.3.1 Macro Environment (PEST model)

A PEST analysis is merely a framework that categorizes environmentalinfluences as political, economic, social and technological forces Sometimestwo additional factors, environmental and legal, will be added to make aPESTEL analysis, but these themes can easily be subsumed in the others PEST analysis is concerned with the environmental influences on a business.The acronym stands for the Political, Economic, Social and Technologicalissues that could affect the strategic development of a business

Figure 1.3 – PEST model

Identifying PEST influences is a useful way of summarizing the externalenvironment in which a business operates However, it must be followed up byconsideration of how a business should respond to these influences

The table below lists some possible factors that could indicate importantenvironmental influences for a business under the PEST headings:

distribution of disposable income;

Government spending on research

family size and composition;

changing nature of occupations)

Government and industry focus on technological effort

International

trade

regulation

Government spending (overall level; specific spending priorities)

Labor / social mobility

New discoveries and development

Consumer

protection

Policy towards unemployment (minimum wage, unemployment benefits, grants)

Lifestyle changes (e.g Home working, single households)

Speed of technology transfer

Employment

law

Taxation (impact on consumer disposable income, incentives to invest in capital equipment, corporation taxrates)

Attitudes to work and leisure

Rates of technological obsolescence

Political /

regulation and selling prices)

Stage of the business cycle(effect on short-term business performance)Economic "mood" - consumer confidence

Health & welfare Living conditions (housing, amenities, pollution)

material sciences Impact of changes

in Information technologyInternet!

1.3.2 Michael Porter's Five Forces Model

Porter (1980) argues that five forces determine the profitability of an industry.They are featured in Figure 1.4 At the heart of the industry are rivals and theircompetitive strategies linked to, say, pricing or advertising; but, he contends, it

is important to look beyond one’s immediate competitors as there are otherdeterminants of profitability Specifically there might be competition fromsubstitute products or services These alternatives may be perceived assubstitutes by buyers even though they are part of a different industry Theremay also be a potential threat of new entrants, although some competitors willsee this as an opportunity to strengthen their position in the market byensuring, as far as they can, customer loyalty Finally it is important toappreciate that companies purchase from suppliers and sell to buyers If theyare powerful they are in a position to bargain profits away through reducedmargins, by forcing either cost increases or price decreases This relates to thestrategic option of vertical integration which will be considered in detail later

in the book Vertical integration occurs where a company acquires, or mergeswith, a supplier or customer and thereby gains greater control over the chain ofactivities which leads from basic materials through to final consumption Any company must seek to understand the nature of its competitiveenvironment if it is to be successful in achieving its objectives and inestablishing appropriate strategies If a company fully understands the nature

of the five forces, and particularly appreciates which one is the most important,

it will be in a stronger position to defend itself against any threats and toinfluence the forces with its strategy The situation, of course, is fluid, and thenature and relative power of the forces will change Consequently, the need tomonitor and stay aware is continuous

An industry is a group of firms that market products which are closesubstitutes for each other (e.g the car industry, the travel industry)

Some industries are more profitable than others Why? The answer lies inunderstanding the dynamics of competitive structure in an industry

The most influential analytical model for assessing the nature of competition

in an industry is Michael Porter's Five Forces Model, which is describedbelow:

Figure 1.4 - Michael Porter's Five Forces Model

Porter explains that there are five forces that determine industry attractivenessand long-run industry profitability These five "competitive forces" are:

- The threat of entry of new competitors (new entrants)

- The threat of substitutes

- The bargaining power of buyers

- The bargaining power of suppliers

- The degree of rivalry between existing competitors

Threat of New Entrants

New entrants to an industry can raise the level of competition, therebyreducing its attractiveness The threat of new entrants largely depends on thebarriers to entry High entry barriers exist in some industries (e.g.shipbuilding) whereas other industries are very easy to enter (e.g estateagency, restaurants) Key barriers to entry include

- Economies of scale

- Capital / investment requirements

- Customer switching costs

- Access to industry distribution channels

- The likelihood of retaliation from existing industry players

Threat of Substitutes

The presence of substitute products can lower industry attractiveness andprofitability because they limit price levels The threat of substitute productsdepends on:

- Buyers' willingness to substitute

- The relative price and performance of substitutes

- The costs of switching to substitutes

Bargaining Power of Suppliers

Suppliers are the businesses that supply materials & other products into theindustry

The cost of items bought from suppliers (e.g raw materials, components) canhave a significant impact on a company's profitability If suppliers have highbargaining power over a company, then in theory the company's industry isless attractive The bargaining power of suppliers will be high when:

- There are many buyers and few dominant suppliers

- There are undifferentiated, highly valued products

- Suppliers threaten to integrate forward into the industry (e.g brandmanufacturers threatening to set up their own retail outlets)

- Buyers do not threaten to integrate backwards into supply

- The industry is not a key customer group to the suppliers

Bargaining Power of Buyers

Buyers are the people / organizations who create demand in an industry

The bargaining power of buyers is greater when

- There are few dominant buyers and many sellers in the industry

- Products are standardized

- Buyers threaten to integrate backward into the industry

- Suppliers do not threaten to integrate forward into the buyer's industry

- The industry is not a key supplying group for buyers

Intensity of Rivalry

The intensity of rivalry between competitors in an industry will depend on:

- The structure of competition - for example, rivalry is more intense

where there are many small or equally sized competitors; rivalry is lesswhen an industry has a clear market leader

- The structure of industry costs - for example, industries with high fixed costs encourage competitors to fill unused capacity by price cutting

- Degree of differentiation - industries where products are commodities

(e.g steel, coal) have greater rivalry; industries where competitors candifferentiate their products have less rivalry

- Switching costs - rivalry is reduced where buyers have high switching

costs - i.e there is a significant cost associated with the decision to buy aproduct from an alternative supplier

- Strategic objectives - when competitors are pursuing aggressive growth

strategies, rivalry is more intense Where competitors are "milking" profits

in a mature industry, the degree of rivalry is less

- Exit barriers - when barriers to leaving an industry are high (e.g the cost

of closing down factories) - then competitors tend to exhibit greaterrivalry

1.3.3 Value chain:

The value chain is a systematic approach to examining the development ofcompetitive advantage It was created by M E Porter in his book, CompetitiveAdvantage (1980) The chain consists of a series of activities that create andbuild value They culminate in the total value delivered by an organization.The 'margin' depicted in the diagram is the same as added value Theorganization is split into 'primary activities' and 'support activities.'

Figure 1.5 – Value Chain Model

Primary Activities.

Inbound Logistics.

Here goods are received from a company's suppliers They are stored until theyare needed on the production/assembly line Goods are moved around theorganization

Operations.

This is where goods are manufactured or assembled Individual operationscould include room service in an hotel, packing of books/videos/games by anonline retailer, or the final tune for a new car's engine

Outbound Logistics.

The goods are now finished, and they need to be sent along the supply chain towholesalers, retailers or the final consumer

Marketing and Sales.

In true customer orientated fashion, at this stage the organization prepares theoffering to meet the needs of targeted customers This area focuses stronglyupon marketing communications and the promotions mix

Technology Development.

Technology is an important source of competitive advantage Companies need

to innovate to reduce costs and to protect and sustain competitive advantage.This could include production technology, Internet marketing activities, leanmanufacturing, Customer Relationship Management (CRM), and many othertechnological developments

Human Resource Management (HRM).

Employees are an expensive and vital resource An organization wouldmanage recruitment and s election, training and development, and rewards andremuneration The mission and objectives of the organization would be drivingforce behind the HRM strategy

Firm Infrastructure.

This activity includes and is driven by corporate or strategic planning Itincludes the Management Information System (MIS), and other mechanismsfor planning and control such as the accounting department.

Value Chain Analysis

Value chain is sometimes used as a synonym for "Value chain analysis" and is

a description of the activities an organization performs whilst linking theseactivities to the organizations competitive position

For full analysis of the value chain, you need to include business partneractivities in your business supply chain

Put simply, you want to maximize your value chain by increasing your profitmargin whilst making sure the activities performed by your organization andbusiness supply chain partners (upstream suppliers or downstream wholesalersand retailers) are optimized

Value chain analysis is often used with other initiatives such as Six Sigma todeliver optimal business processes resulting in increased business profitmargins, increased quality and an increase in business process speed

In other words, these types of analysis processes are concerned with producing

Better - Faster - Cheaper

Products and services resulting in more profit for an organization

Steps in Value Chain Analysis

Value chain analysis can be broken down into a three sequential steps:

(1) Break down a market/organization into its key activities under each of themajor headings in the model;

(2) Assess the potential for adding value via cost advantage or differentiation,

or identify current activities where a business appears to be at acompetitive disadvantage;

(3) Determine strategies built around focusing on activities where competitiveadvantage can be sustained

1.3.4 SWOT Analysis

Environmental opportunities are only potential opportunities unless theorganization can utilize resources to take advantage of them and until thestrategic leader decides that it is appropriate to pursue the opportunity It istherefore important to evaluate environmental opportunities in relation to thestrengths and weaknesses of the organization’s resources, and in relation to theorganizational culture Real opportunities exist when there is a close fitbetween environment, values and resources Similarly, the resources andculture will determine the extent to which any potential threat becomes a realthreat

SWOT is an abbreviation for Strengths, Weaknesses, Opportunities and Threats

SWOT analysis is an important tool for auditing the overall strategic position

of a business and its environment

Once key strategic issues have been identified, they feed into businessobjectives, particularly marketing objectives SWOT analysis can be used inconjunction with other tools for audit and analysis, such as PEST analysis andPorter's Five-Forces analysis It is also a very popular tool with business andmarketing because it is quick and easy to learn

The Key Distinction - Internal and External Issues

Strengths and weaknesses are internal factors For example, a strength could

be your specialist marketing expertise A weakness could be the lack of a newproduct

Opportunities and threats are external factors For example, an opportunity

could be a developing distribution channel such as the Internet, or changingconsumer lifestyles that potentially increase demand for a company's products

A threat could be a new competitor in an important existing market or atechnological change that makes existing products potentially obsolete

it is worth pointing out that SWOT analysis can be very subjective - twopeople rarely come-up with the same version of a SWOT analysis even when

given the same information about the same business and its environment.Accordingly, SWOT analysis is best used as a guide and not a prescription.Adding and weighting criteria to each factor increases the validity of theanalysis

Areas to Consider

Some of the key areas to consider when identifying and evaluating Strengths,Weaknesses, Opportunities and Threats are listed in the example SWOTanalysis below:

All of the resources at the disposal of the organization can be deployedstrategically, including strategic leadership It is therefore useful to considerthe resources in terms of where they are strong and where they are weak as thiswill provide an indication of their strategic value However, this should not beseen as a list of absolute strengths and weaknesses seen from an internalperspective; rather, the evaluation should consider the strengths andweaknesses in relation to the needs of the environment and in relation tocompetition The views of external stakeholders may differ from those ofinternal managers (who in turn may disagree among themselves) whenevaluating the relative strength of a particular product, resource or skill.Resources should be evaluated for their relative strengths and weaknesses inthe light of key success factors

Even though an organization may be strong or weak in a particular function,

the corresponding position of its major competitors must also be taken intoaccount For example, it might have sophisticated computer-controlledmachine tools in its factory, but if its competitors have the same or even betterequipment, the plant should not be seen as a relative strength This issue refers

to distinctive competencies - relative strengths which can be used to createcompetitive advantage As any resource can be deployed strategically,competitive advantage can be gained from any area of the total business

An evaluation of an organization’s strengths and weaknesses in relation toenvironmental opportunities and threats is generally referred to as a SWOTanalysis

Once all of the important strategic issues have been teased out from a long list

of strengths, weaknesses, opportunities and threats, the following questionsshould be asked

- How can we either neutralize critical weaknesses or convert them into strengths?

- Similarly, can we neutralize critical threats or even build them into new opportunities?

- How can we best exploit our strengths in relation to our opportunities?

- What new markets and market segments might be suitable for our existing strengths and capabilities?

- Given the (changing) demands of our existing markets, what changes do

we need to make to our products, processes and services?

Finally, alongside a general SWOT analysis, it is essential to evaluate therelative strengths and weaknesses of the company’s leading competitors

1.4 Construction and selection strategy development in building materials: 1.4.1 Facility construction development strategy:

The first step and important process of building development strategy is toidentify business activities of the organization This is to answer the questions:

- Activities of business as we do?

- What is It?

- It should be what?

Main answers will guide the development strategy of the company To answerthe first question - "Activities of business as we do? "- Dereck F Abell statedthat the company should determine the activities of its business in three ways:

- Who will be satisfied (any client group)?

- They will be satisfied about what (customers need - demand)?

- How to meet customer needs (with the skills or capacity any difference?)

Figure 1.6- illustrates three aspects of this.

This approach should be emphasized that orientation to customers, not productoriented Abell said that define a business-oriented products sold and themarket that a company server will open the functions of the company meetcustomer needs The company so will bind the business's needs by a specificgroup for a specific customer In fact, the demand may be served in variousways Define a business orientation to customers will broadly identify ways toprotect companies from the backward to recognize when a change needs Infact, with the help of a move by demand, by Abell pattern can help takeadvantage of the changes in the environment It can help answer the second

DEFINITION

OF BUSINESS

What is being satisfied?

(Customer needs)

Who is being satisfied?

(Customer groups)

How are customer needs being satisfied?

(Distinctive Competencies)

"Business as we do? And third question - "Business is should we do? "- Can

be answered by the model of Abell

1.4.2 Strategy Choice:

This process involves understanding the nature of stakeholder expectations(the "ground rules"), identifying strategic options, and then evaluating andselecting strategic options

The choice of strategy:

- The strategy of the company The strength of a company depends on 3factors control strategies, human resources, operations and organizationstructure The advantage of a company depends on quality and effectivecombination of factors controlling this strategy together

- Competitive strategy To be able to operate a business effectively, createmore value for employees and shareholders, companies should havecompetitive advantages compared to competitors How to createcompetitive advantage and how to maintain competitive advantage thatyou are?

- Strategy by location Depending on their position in the market,companies need a strategy appropriate to protect, maintain or challenge ahigher position

- Strategy-oriented In the goods sector that the company business, fromtime to time, each branch can have different orientations: Maleopportunities for development, protection of temporary positions or exit?Companies need a strategy for each direction

1.5 Implementation and test strategy development:

In our introduction of business strategy, we used Johnson & Scholes'

definition stating that "Strategy is the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations".

So, what are these "resources" that a business needs to put in place to pursueits chosen strategy?

Business resources can usefully be grouped under several categories:

1.5.1 Organization structure and control system:

Implementation strategy is how a company creates a placement organizationthat allows them to pursue their strategy is most effective Organization designthat is to choose the combination of organization and system to control thecompany can pursue its strategy as effectively - create value and competitiveadvantage sustainable Structure identification of reporting relationships,procedures, guidelines, systems of power and decision-making

Organizational structure and control system offers two main roles:

- Firstly, coordinating activities of staff so that they work effectively toimplement strategies to increase the competitive advantage

- Secondly, members of staff, they provide the engine to achieve theexceptional performance, quality, innovation and meeting customers.Organizational structure and control-oriented ways of handling and identifyinghow they will act in setting up organizations

The role of organization structure:

Strategy can only be implemented through organizations, so, after buildingstrategy for the company, the managers must implement immediately thenext step is designing organizational structure

Organization means that managers can coordinate the activities betweenfunctions or other parts together to exploit fully the skills and capacity oftheir

Control strategies:

Control strategy is the process in which the administrators monitor theimplementation of the organization and its members to evaluate theactivities they see is an implementation of effective and efficient or not ,

thus perform repair actions to improve the implementation if it is notreally effective and efficient.

First, the managers select strategies and organizational structure that theyhope will allow organizations to use resources efficiently to create valuefor customers

Second, the management strategy and create control systems formonitoring, evaluation on the actual strategy and structure of theorganization is working as scheduled or not, how they improve, change if

it does not work as expected

1.5.2 Human resources:

1.5.2.1 The ‘people contribution’:

Successful organizations meet the needs and expectations of their customersmore effectively than their competitors; at the same time, they generateacceptable financial returns Achieving these outcomes requires competent andcommitted people People, then, are critically important strategic resources.Successful companies will be able to attract, motivate, develop, reward andkeep skilled and competent managers and other employees They will be able

to create and implement strategic changes in a supportive culture People need

to be used and stretched to get the best out of them but, correspondingly, theyneed to be looked after and rewarded However, even successful companieshave lean periods, and when these occur, they will again be able to retain theirmost important people There is no one best way of achieving this

Everything that an organization does, in the end, depends on people Althoughtechnology and IT can make a major strategic impact, it is people who exploittheir potential Managers and employees are needed to implement strategiesand to this end they must understand and share the values of the organization.They must be committed to the organization and they must work together well

At the same time, where an organization is decentralized and operating in a

turbulent environment, the strategic leader will rely on people to spotopportunities and threats, to adapt and create new strategies

Consequently, it is people who ultimately determine whether or notcompetitive advantage is created and sustained Adding new values withinnovation, they can be an opportunity and a source of competitive advantage;equally, unenthusiastic, uncommitted, untrained employees can act as aconstraint People’s capabilities are infinite and resourceful in the appropriateorganizational climate The basic test of their value concerns how much they -and their contribution - would be missed if they left or, possibly worse, left andjoined a competitor They could take customers with them and not be easilyreplaced

Achieving the highest level of outcomes that people are capable of producingwill therefore depend upon the human resource practices adopted by theorganization While the issues are clear and straightforward - they involveselection, training, rewards and work organization - there is no single bestapproach to the challenge A relatively formal, ‘hard’ approach can prove verysuccessful in certain circumstances; other organizations will derive significantbenefits from a ‘softer’, more empowered style One issue here is whether thebusiness is being driven by a small number of identifiable, key decision-makers or by the employees collectively

To bring out the best in people, they have to be managed well, and thisrequires leadership A useful metaphor is that of an orchestra Every member(manager/employee) is a specialist, with some making a unique contributionwhich, on occasions, can take the form of a solo performance Nevertheless, allthe contributions must be synthesized to create harmony (synergy), which isthe role of the conductor (strategic leader) A single musician (weak link) candestroy a performance; a chain is only as strong as its weakest link

A successful organization, therefore, needs people with appropriate skills andcompetencies who can work together effectively People must be:

committed (commitment can be improved)

competent (competencies can be developed, and can bring improved product quality and productivity)

cost-effective (ideally costs should be low and performance high, although this does not imply low rewards for success)

in sympathy with the aims of the organization (are the values and expectations of all parties in agreement?)

“Where people grow, profits grow”.

Dr Alex Krauer, when Chairman and Managing Director, Ciba-Geigy

1.5.2.2 Involving and empowering people

There are two recognized approaches to human resource management: the

‘hard’ approach and the ‘soft’ approach The key tension or dilemma that isbeing addressed is the balance between centralization for control anddecentralization for greater empowerment The two approaches implycontrasting styles, but they can both be appropriate in certain circumstances.Moreover, companies can be hard on certain aspects and soft on others Inaddition, the style may alter with the strategic demands placed on anorganization When times are difficult and a company must rationalize anddownsize, a hard approach may prove to be appropriate for driving through thechanges quickly However, a softer, more empowered style may be required torejuvenate the company and bring new sources of competitive advantage Hard human resource management assumes that:

people are viewed as a resource and, like all resources, companies gain competitive advantage by using them efficiently and effectively

the deployment and development of employees - who are essentially there

to implement corporate and competitive strategies - is delegated to line managers who are responsible for groups of people

scientific management principles and systems can be useful but should be used cautiously

Soft human resource management assumes that:

workers are most productive if they are committed to the company, informed about its mission, strategies and current levels of success, and involved in teams which collectively decide how things are to be done employees have to be trusted to take the right decisions rather than controlled at every stage by managers above them

Soft human resource management argues that people are different from otherresources (and often more costly) but they can create added value andsustainable competitive advantage from the other resources Therefore, softhuman resource management places greater emphasis on control throughreview and evaluation of outcomes, such that employees are led rather thanmanaged

Many organizations, however, still prefer more rigid controls from the centre,even though they may have reduced the number of layers in the organizationalhierarchy and widened managers’ spans of control This, they believe, is theway to achieve efficiency and managed costs Tighter systems inevitablyconstrain innovation and employee development; but, they assume, new ideasand people can be bought in or recruited

1.5.2.3 Manager competency:

Simply, some companies will seek to develop their employees and managers,invariably promoting from within A strong culture and vision should fosterboth commitment and continuous, emergent change Necessary newcompetencies are learned In such organizations, team-working andnetworking are likely to be prominent Other organizations prefer to search forthe best people who might be available; they willingly recruit outsiders Theyare seeking to buy in the new competencies that they require People may feel

less committed to such organizations in the long term, and consequently therewill be a greater reliance on individualism and individual contributions

The challenge for companies growing from within is that they need to becomeand stay very aware strategically if they are to remain ahead of their rivals;they will actively benchmark and look for new ideas that might be helpful.Companies securing new skills and competencies from outside face a differentdilemma If the competencies are available, and can be bought by anycompetitor, how can they ensure that they find the best ideas and people, andhow can they generate some unique competency and competitive advantage? Some companies will look to do both, finding, in the process, an appropriatebalance An analogy would be a leading football club which buys expensive,talented players in the transfer market while, at the same time, nurturing youngplayers There are many instances where highly skilled, experienced players donot fit in at a new club, certainly not at first; and when several arrive at once, itcan be very disruptive until they are moulded into an effective team

Capelli and Crocker-Hefter (1995) further distinguish between companies thatseek to compete by moving quickly, perhaps by necessity, responding speedily

to new opportunities, and those that have developed a more sustainableadvantage in a long-standing market They conclude that organizationscompeting on flexibility will typically find it more appropriate to recruit fromoutside A reliance on developing new competencies internally may mean thatthey are too slow to gain early advantage from new opportunities By contrast,organizations competing in established markets with long-standingrelationships are more likely to rely on internally developed, organization-specific skills and strong internal and external architecture

There are, inevitably, implications In general, industries and markets arebecoming more dynamic and turbulent, demanding that companies developnew product and market niche opportunities This appears to imply anincreasing reliance on recruiting strong, competent people from outside In

turn, this means that internal relationships and the culture may be underconstant pressure to change Companies are recruiting and rewardingindividual experts; at the same time, synergistic opportunities demand stronginternal architecture and co-operation This is another organizational dilemma.Companies that succeed in establishing a strong, cohesive and motivatingculture while developing new competencies flexibly and quickly are likely to

be the future high performers

Reinforcing points from earlier chapters, this demands effective strategicleadership and a shared, understood vision for the organization The extent towhich an organization can become a ‘learning organization’, discussed later inthis chapter, is of great significance

Repackages the notion of manager competency in the form of five distinctmindsets Managers, in different degrees, will and must possess all of theseabilities The issues concern the balance and the opportunity Some managerswill be extremely competent in certain areas, but their profile, approach andstyle may not be appropriate for the demands placed on them In addition, andgiven the way in which managers work with constant interruptions, andperforming a series of short, pragmatic tasks, it can be difficult for them to findtime to think, reflect and challenge Short-termism and ‘more-of-the-same’ canall too readily be the result

Many books have been written, and continue to be written, describing thebehavior patterns and practices of successful organizations While there isinevitably some element of idiosyncrasy and uniqueness, this approach isinteresting and valuable It can be a rich source of ideas However, it is not thesame as identifying those competencies which have been shown empirically to

be associated with the creation of superior performance

“A real manager has to be a good leader in the sense that he has to embody an open-minded attitude of leadership in himself, in his fellow managers and even in the heads of each employee of his organization.

Leadership, therefore, means to enable and help people to act as individual entrepreneurs within the frame of a commonly born vision of the business A bad manager, on the other hand, is more an administrator who follows severe rules and customs within a stiff bureaucratical hierarchy.”

Dr Hugo M Sekyra, CEO and Chairman, Austrian Industries

It is because these questions are complex that some organizations will adoptand build human resource practices that help to create and sustain competitiveadvantage

They are peculiar to that organization’s environmental matching challenge.Such organizations enjoy strong E-V-R (environment-values-resources)congruence The competitive value of their competencies lies in the fact thatwhile the general approach may be transferable, the specifics are not

1.5.3 Marketing:

Businesses that succeed do so by creating and keeping customers They do this

by providing better value for the customer than the competition

Marketing management constantly have to assess which customers they aretrying to reach and how they can design products and services that providebetter value (“competitive advantage”)

The main problem with this process is that the “environment” in whichbusinesses operate is constantly changing So a business must adapt to reflectchanges in the environment and make decisions about how to change themarketing mix in order to succeed This process of adapting and decision-making is known as marketing planning

Where does marketing planning fit in with the overall strategic planning

of a business?

Strategic planning is concerned about the overall direction of the business It

is concerned with marketing, of course But it also involves decision-making