Luận văn Phát triển chiến lược kinh doanh tại công ty Vinaconex ALPHANAM

DEVELOPING BUSINESS STRATEGY OF VINACONEX – ALPHANAM INFRASTRUCTURE DEVELOPMENT AND INVESTMENT JSCThe situation of bisuniess strategy management of Vinaconex Vision, mission, and values of strategic managementApproaches to strategic managementThe first stage: Internal development The middle stage: Focus on the organization of the industryStrategy formulation Mission and main objectivesExternal environment analysisMacro environment analysisIndustry and competition analysisThe model of 5 competitive forcesStrategic groups in an industry

LUẬN VĂN PHÁT TRIỂN CHIẾN LƯỢC KINH DOANH CỦA CÔNG

LIST OF CHARTS, DIAGRAMS AND TABLES

Chart 1.1: Strategic management model

Table 1.1.: Macroeconomic environment factors

Figure 1.2: Strategic group map

Table 1.2: Organizational, technical, human, physical, financial resources

Table 1.3: Summary of choices suitable for each strategy among the three mentionedstrategies

Chart 1.3: Stakeholders

Diagram 2.1: Organizational structure of Vinaconex - Alphanam Corporation

Table 2.1: Balance sheet of VINA – ALPHA year 2008

Table 2.2: Completed projects of VINA – ALPHA Company

Table 2.3: Business operation result of VINA – AlPHA Company in the 2006-2008period

Diagram 2.2: Revenue and profit growth diagram of VINA – ALPHA Company

Table 2.4: The internal factor assessment matrix

Table 2.5: Revenue and profit of construction enterprises

Diagram 2.3: Comparison of revenue of 4 companies in 2006- 2008

Table 2.6: Comparison of profit per revenue of enterprises

Diagram 2.4: Comparison of profit per revenue of 4 companies in 2006-2008

Table 2.7: Competitive analysis of 4 construction enterprises

Chart 2.5: The role of the Board of Execution in project

Chart 2.6: Two level Board of Management

Table 3.1: SWOT analysis

Table 3.2: Classification of priority strategies in SWOT matrix

Period of time researching and reality studying at Vinaconex – Alphanam JSC is helping us to understand a part of company’s business activity, especially business planning It also help us to have chance to apply school’s knowledge to reality We hope that our solutions might help increasing the effective of company’s business planning in the near future.

Our team would like to express our gratitude to the Board of Directors, staff of Sales Dept, Administration, Finance and Accounting, and other departments at Vinaconex – Alphanam JSC., who were helping us to complete our thesis.

We also thank teachers, who were providing us valuable knowledge, skills and experiences with their whole-hearted Thank to Center for Educational Technology and Career Development (ETC Center) who give us a chance to working together, sharing our job experience.

However, due to shortage of studying time and reality knowledge, mistake and shortcoming is unavoidable We are looking for our teacher and classmate’s advise and suggestions to improve our performance.

Thank you very much.

Gratitude

Chapter I: Theoretical background on strategic managemenr 10

I The definition of strategic management 10

2.2 The middle stage: Focus on the organization of the industry 12

II Vision, mission, and values of strategic management. 29

III Implementation, monitoring and evaluation 30

Chapter II: The situation of bisuniess strategy management of

Vinaconex – Alphanam Infrastructure Development and

Investment Joint stock Company

33

2 Organizational structure of Vinaconex - Alphanam Company

II Sector environment assessment and analysis 40

2.2 National economic market (Macro-economic market) 43

2.2.2 Legal factors and state economic management 44

3 Analysis on inner industry environment (5 competitive forces) 50

III The business strategy of Vinaconex – Alphanam Company on

1.2 Ability to control and coordinate input resources for the

enterprise’s main business and production process 57

2.1 Long term strategy: 59

CHAPTER III: Solutions to improve the business stratrgy of

I I Development orientation of the company 72

II II, Completation of Company’s commitment and strategy 77

III Vina – Alpha company’s strategic solutions 78

1 Complete administration system, give prominence to the role of

functional departments, train and improve the quality of human

2 Training and improving the quality of human resources 80

3 Investing in equipment, improving production and construction

capacity

81

4 Improve the quality monitoring and control system 82

5 Further investing in research and applying science and technology

6.1 Actively integrating into the process of international business,

6.2 Investing in equipment, improving management skills 85

The globalization and international economic integration process has opened upconsiderable opportunities for member countries, including Vietnam This also bringsabout significant chances for Vietnamese enterprises However, this trend also poseschallenges for Vietnamese enterprises

Integration is an irreversible trend for development; however, in order toachieve sustainable development, enterprises need to assess the situation, prevent frompotential risks and threats arising from a rapidly changing business environment Aspecific, practical short-term and long-term strategy is an effective measure for anenterprise to define its orientation in order to achieve sustainable development First,business strategy enables enterprises to define its objectives and orientation, and isconsidered the basis guiding all activities of the enterprise In a rapidly changingbusiness environment, business strategy helps enterprises to grasp and fully utilizebusiness opportunities, actively seek measures to overcome potential risks and threats

In addition, a specific, clear and practical set of strategies is considered the basis forenterprises to improve effectiveness in resource usage, strengthen its competitiveness

to ensure sustainable and continuous development Building and implementingstrategies are also solid background for enterprises to make proper and effectivedecisions during business operation

The construction field in recent years has witnessed rapid growth in order tomeet the increasing demand of infrastructure for the national socio-economicdevelopment Therefore, competition in this sector is relatively harsh In this context,strategic planning and management activities play a very important role in thedevelopment of enterprises and are considered decisive factor to improve thecompetitiveness of an enterprise The most important task of civil construction andtransportation construction enterprises is to define a long-term development orientationthrough a strategy that is proper and suitable with the external environment as well asthe capacity and position of enterprises in its specific business environment This is thereason why I choose the topic “Developing business strategy for the 5-year period(2010-2015) of Vinaconex – Alphanam Infrastructure Development and InvestmentJSC”

 Research purpose:

The research has the following research puposes:

- Asses and analyze strengths and weaknesses of the enterprise

- Analyze the impacts of business environment on the business operation

of the enterprise, analyzing opportunities and threats for the enterprise

- Analyse the current situation of developing and managing strategies atthe enterprise

 Propose solutions and recommendations to enhance the effectiveness

of developing and managing strategies at the enterprise

 Objects and scope of study:

 Objects:

- The strategic development and management activities of the enterprise

- Strengths, weaknesses, opportunities and threats of the enterprise

- Data from Vina – Alpha Company

- Sectoral data and data from enterprises of the same sector

- Data from newspapers and the internet

 Structure of the study:

The thesis includes three chapters as follows:

Chapter 1: Theoretical background on strategic management

Chapter 2: The situation of business strategic management at Vinaconex – AlphanamInfrastructure Development and Investment JSC

Chapter 3: Measures to improve business strategies of Vina – Alpha InfrastructureDevelopment and Investment JSC

CHAPTER I THEORETICAL BACKGROUND ON STRATEGIC MANAGEMENT

I The definition of strategic management

1 Definition

In the competitive business world, each enterprise has its own way to surviveand develop All enterprises do not necessarily compete with other businesses in thesame manner or act in the same way to react to changes

Therefore, each company needs to develop its own strategy The development of

a competitive advantage is required in order for a successful competition Strategiescan be seen as relevant ideas, plans and supports for an enterprise to successfullycompete against its competitors

Competitive advantage, in a broader sense, allows a business to outstrip itscompetitors It is the “capacity to differentiate” which includes the capacities, skills,technologies and special resources for businesses to make a difference among thecompetitors and create competitive advantages

Strategic management is an integrated combination of management decisions andactions, which determines the long-term efficiency of a company by the continuous revision

of environmental issues, strategy formulation, implementation, assessment andmanagement

Research on strategic management is focused on the monitoring and assessment

of the opportunities and external threats in the context of internal strengths andweaknesses

2 Approaches to strategic management

The development of strategic management is divided into three stages:

- The first stage: Research on the internal development of strategic management

- The middle state: Focus on the organization of the industry

- The current stage: Focus on the enterprises’ resources

2.1 The first stage: Internal development

The concept of strategic management started in the 1960s with the suchpublications as “Strategy and structure” by Chandler in 1962; “Strategy” by Ansoff in

1965 and curriculum “The business policy: lessons and situations" by HarvardBusiness School in 1985 Those works had an influence on the development of

strategic management concept Primary concepts emphasized the integration ofbusiness activities within the functions of the business The publications in this periodgave birth to various basic concepts, terminologies and structures which paved theway for the development of future concepts

Two schools of thought of the mentioned strategy development were structuresand planning

Chandler and Ansoff’s studies mainly discussed the way in which largecompanies develop new administrative structures to deal with the growth as a result ofchanges in strategy If the structure does not fit the strategy, the outcome will beinefficient Chandler thinks of strategy as the identification of long-term goals of abusiness, the acceptance of a series of actions, and the allocation of resources needed toachieve these goals

Ansoff also focus on planning, transforming the strategy from basic principlesapplied in a business to highly formalized theory His main approach is deviationanalysis Firstly, he set up a set of objectives, then measured or estimated the deviationbetween the current position and desired goals and recommended a series of potentialactions (strategies) Finally, he verified the features to reduce the deviation thenselected the most effective strategy

During this period, there was also research by Andrews and his associates at theHarvard Business School published in the curriculum on business policy Businesspolicy is the study of functions and responsibilities of management along with generalissues influencing the characteristics and success of an enterprise In their opinion,business policy has two separate but related aspects They include formulation andimplementation Strategy formulation identifies and regulates four components:market opportunities; enterprise’s competence and resources; manager’s aspirationsand values; responsibilities for other social groups beside shareholders

However, the approach using case study methods lacks the generalization which

is the foundation for the development of strategic management Next, we are going toconsider two important schools: informal design and planning

a School of informal design

Schools of design by Andrews and his peers started from the important premise

on the “ability to create differences” and the needs to associate “internal situation” with

“external expectations” as well as the relationship between strategy and structure This

model begins with a scanning about internal and external In the external assessment,the thoroughly studied of the opportunities an threats pointed out the significantfactors In the internal evaluation, the strengths and weaknesses of the organizationwere considered Then, the ability to create differences and the strategies to be formedwere discovered on the basis of this platform The strategy was then evaluated and thebest one was selected Finally, the strategy was implemented

As a template for many ideas, SWOT model (S: Strengths; W: Weaknesses; O:Opportunities; T: Threats) was primarily used with various techniques andquestionnaires Schools of informal design considerably impacted many other schools

of thought and became very important in the field of strategy

b Schools of planning

Schools of planning was seen as being initiated by Ansoff Strategic planningwas popular in the 1960s and 70s but no longer in use in the early 1980s Hundreds ofmodels were developed accordingly this schools of thought, including the followingstages:

- Goals set up stage;

- External assessment stage;

- Internal assessment stage;

- Strategy assessment stage ;

- Strategy concretization stage;

- Planning for the entire process

The first phase in the model focused more on the quantitative targets In theinternal and external assessment, SWOT model was used The strategy assessmentstage was very formal and techniques such as return on investment, risk analysis andother financial analysis methods were utilized to choose the strategy that created themaximum value In the strategy concretization stage, objectives and strategies weredivided into subsections Finally, all the actions were closely programmed The wholeplanning process would be closely monitored through the monitoring andimplementation tool including: SWOT matrix; market share growth matrix; attractivesectors matrix

2.2 The middle stage: Focus on the organization of the industry

In the 1970s, there was a popular shift in the focus of the nature of strategicmanagement theory Theoretically and methodologically, the shift towards economicsoccurred What caused a change in the vision from internal to external and in the wholeindustry? Schools of thought initiated by Porter was prominent during this stage.

Schools of positioning believed that only a few main strategies could be used inthe industry The use of this strategy in an attempt to position an enterprise in themarket allowed the enterprise to easily compete and gain higher profit

Tools in the middle stage were fairly common, including: the model of 5competitive forces, the general strategy and value chain An important tool was thegeneral strategy Businesses could form its range to gain competitive advantages andhave strategies such as cost leadership strategy, differentiation strategy, focus strategy

During this stage, there were many other environmental factors which led to aseries of technical and technological breakthrough Porter provided the 5 competitiveforces for analysis, which was a very useful tool With a more demanding market,value chain is an important tool to improve the competitiveness of each enterprise.Globalization and free economy brought about instability that strategic planning didnot take effective in this period

3 Strategy formulation

Strategy formulation can be divided into five steps:

- Selecting a mission and main objectives of the business

- Analyzing external environment to identify opportunities and threats

- Analyzing internal environment to identify the strengths and weaknesses of the business

- Selecting the strategies based on the search for resources, capacities and corecompetencies and develop them to avoid the risks, take advantage of opportunitiesfrom external environment

- Implementing the strategy

3.1 Mission and main objectives

This is the first step in the process of strategic management Mission and mainobjectives of the organization are provided in a context for building strategies

Mission and Objectives

External analysis

(opportunities &

threats)

Internal analysis (resources, capacities and core competencies) ( khả năng và năng lực cốt lõi) Strategy selection

and formulation Function strategy Business strategy Global strategy Corporate strategy

Organizational

structure

Strategy, structure and monitoring revision

Design & monitor

Change strategy

Chart 1.1: Strategic management model

Mission provides the reasons for the existence of business and what a businessshould do The main objectives determine what business must realize in the mediumand long term such as profit, achievement in remarkable capacity etc.

3.2 External environment analysis

External environment analysis of the enterprise is aimed at figuring out theopportunities and external risks, particularly in the sector environment, the nationalenvironment and macro environment External environment analysis studies:

- Macro environment analysis: economic environment, technology environment, socio

- cultural environment, demographic environment, law and political environment, andglobalization environment

- Industry and industry competition analysis

- Competition changes in the cycle of industry analysis, movement of competitors etc

- Study the key factors for success

The sector environment analysis needs competitive structure assessment in theindustry, including the competitive position of the centers and main competitors, aswell as the development stages of the industry The real estate construction andinvestment sector has a distinctive feature that their market depends on a large extent

on government policies and the situation of the financial market Currently, a number

of market sectors have turned into the global markets As a result, sector environmentanalysis also means evaluating the impact of globalization on the industry competition.National environment analysis studies the context of a country which createsconditions for enterprises to operate The enterprise should consider moving part of itsactivities to a nation which has more preferential conditions to achieve competitiveadvantage The macro-environment analysis includes the study of macroeconomicfactors, society, government, legal and technology which may or may not affect theoperation of the business

The techniques for external environment analysis of the business includingscanning, monitoring, forecasting, and assessing

- Scanning environment plays an essential role in competition In addition,scanning environment needs appropriately to be oriented as a system designedfor an environment changes will undoubtedly not suit the business activities in astable environment Scanning environment required general study of all externalelements through which companies recognize latent changes in the environment.The biggest challenge for scanning is the ambiguous, discrete, incomplete dataand information collected.

- Monitoring means observing the changes of the environment to identifyimportant trends arising from the scanning process Enterprises should be aware

of the relations among the stakeholders because they can alter the life cycle ofthe business The key to the success of monitoring is the ability to interpret themeaning of events and trends of different changes through which business can

be better prepared for timely launching a new product or service, then gaincompetitive advantage from the possible opportunities

- Forecasting means developing prediction about latent events, and its frequencies

as a result of detected changes and trends from scanning and monitoring

- The objective of assessment is to identify the time and the importance ofimpacts, which may cause changes in environmental trends on the strategicmanagement Through scanning, monitoring and forecasting, analysts can have

an understanding about environment and continue to assess and identifyworking ideas for their organization

At present, Vietnamese real estate and construction markets are bustling,opportunities as well as threats are abound for enterprises participating in the market.The number of enterprises in this market significantly improves as a result of increasedattraction of this market Reviewing and assessing the market carefully, monitoringchanges in the market to make forecasts on changes in the market, the participation ormovement of other enterprises will enable enterprises to adopt proper policies; todefine short-term and long-term objectives

3.2.1 Macro environment analysis

In fact, changes in the macro environment can directly affect any forces in anindustry, so it transfers the relative strength from one force to another and finallychange the attractiveness of an industry The status of a macroeconomic environmentdetermines an economy’s healthiness and prosperity, which in turn has an effect on thebusiness and industry Economic environment indicates the nature and orientation ofthe economy The impacts, which an economy can exercise on an enterprise may alterits ability to create values and income, include four important factors such as thegrowth rate of the economy, interest rate, exchange rate and inflation rate In addition,change in the technology factor influences the entry barrier and reform the industrystructure The change in technology includes creation and destruction, bothopportunities and threats Political factors and law also affect the level of opportunitiesand threats from the environment, mainly in the way business can respond to thegovernment and vice versa.

Table 1.1: Macroeconomic environment factors

Demography Population

Age structureGeographical distribution

EthnicsIncome allocation

Economy Inflation rate

InterestTrade balanceBudget balance

Savings rateEnterprise savings rateGDP

Politics - law Antitrust laws

Tax lawsRegulatory philosophy

Labor lawEducational policy and philosophy

Socio - culture Female labor force

Labor diversityWorking quality attitudes

Environment protectionWork shift and passion Change in attitude about product andservice concept

Technology Innovation The enterprise’s investment and

Application government support for research and

development

Globalization Important political events

Basic global market

NICsVariations in cultures and institutions

3.2.2 Industry and competition analysis

Each industry varies in its economic features, competitive situations andprospects for future profitability Features of each economic sector change depending

on factors such as size and market growth, the pace of technology change, number ofbuyers and sellers etc Competitiveness differs in sectors which show various focus ofcompetition such as price, quality or features and efficiency

Current competitive conditions as well as predictions of the industry form animportant basis for forecasting future profit Differences in industry conditions andcompetition status may perplex some business activities in specific difficulties.Industry and competition analysis clarifies key issues as follows:

- The prominent economic features of the industry

- Competitive forces in the industry, the nature and strength of each force

- The driving forces causing the change in the industry and their impact

- The strongest and weakest business positioned in the industry

- Which makes the next move in the industry

- The key factors for the success or failure in competition

- The industry attractiveness in term of potential above average profits

3.2.2.1 The model of 5 competitive forces

To figure out competitive orientation in an industry, Michael E Porter – aHarvard professor – created the model of 5 competitive forces According to him, thereare 5 forces orienting competition in an industry, including:

- Threats of potential new entrants

- Rivalry among existing competitors

- Buyer’s bargaining power

- Supplier’s bargaining power

- Threats of Substitutes

a Potential new entrants

This force includes companies who now, are not competitors in the industry butare able to participate in the industry in the future if they want Companies alwaysappreciate identifying new competitors who are able to enter the market, for they arethreats to market share of existing companies Competitors entering the market alwaysequip themselves with new productive capacities to achieve large market share.Therefore, existing companies have certain pressures in their operation to compete andmaintain their market share in the industry market

Existing companies always try to hinder potential competitors from entering themarket by creating entry barriers Market entry of potential competitors is threats toprofitability of existing companies If threats from market entry is small, existingcompanies will take advantage of this opportunity to add value, enlarge their scale andtherefore, enjoy higher income

Entry barriers are factors that cause difficulties and increase costs forcompetitors when they want to enter the market Higher cost for market entry will keeppotential competitors out even when the income of the industry is high The main entrybarriers include: brand loyalty; absolute cost advantage; and economies of scale.Besides, there are such factors as: switch cost, governmental regulations andretaliation

- Brand loyalty: Uniqueness, competitive prices, good after-sale services etc areelements creating products’ attractiveness to customers

- Absolute cost advantage: is gained from prominent productive capacity created

by experiences in the past, ability to control inputs for production and management;access to cheaper financial resources etc

- Economies of scale: is marginal efficiency improvement thanks to enterprises’gaining after the expansion of their scales Factors relevant to the advantages anddisadvantages of entering a large or small scale include flexibility in pricing and market

share; costs relevant to entry and producing economies of scale; competitors’ respondingactions.

- Switch cost: is cost incurred once customers want to switch their purchasing toanother supplier including: cost for purchasing accessories, cost for training staff,intangible cost of a relationship etc

- Governmental regulations: By issuing permits, gradually removing specialregulations or requirements, the government can control the entry to an industry

- Retaliation: Reactions of existing competitors depend on the present position inthe industry of the company (the available business choices)

The construction sector is distinctive in that it requires large capital, the periodfor capital recovery is slow compared to other sectors but the number of enterprises inthe sector is considerably large thanks to the attractiveness of the sector For small-scale enterprises participating in this sector, stretgic management is a very importanttask Therefore, such enterprises should investigate procedures, thoroughly assessingtheir potentials and capacity to fully utilize opportunities

b Rivalry among existing competitors

Enterprises in an industry are interdependent Therefore, actions of onecompanies are often followed by responding actions of other companies Rarely isthere a consistency among enterprises in an industry since they have differentresources, different capacities and they try to differentiate themselves from their rivals

If the competition in an industry is weak, companies will have opportunity to push upprices as well as earn more profit If the competition is strong, price competition cantake place intensely, which will lead to price wars, reducing profitability

Main factors of competition in an industry include: Structure of competition in anindustry; demand conditions; high exit barriers

- Structure of competition in an industry represents quantity and scale allocation

of companies in that industry Structure of an industry varies from dispersal structure tofocus structure and is relevant to competition Dispersal structure creates a threat ratherthan an opportunity because it only includes some small or medium companies Focus

industry is dominated by several large companies or by only one company in extremecircumstance (In this case, the industry is considered oligopoly or monopoly).

- Demand conditions: The increase in customers’ demand tends to easecompetition, as all companies can sell more goods without scrambling for othercompanies’ market while their profit is maintained When demand decreases,competition is pushed up to earn market share

- Exit barriers: are emotional, strategic and economic factors which can prevent acompany from exiting an industry even when income is low High exit barriers willlead to the situation in which companies are held in an unprofitable industry This canlead to a redundancy in productive capacity and make price competition more intense

Through reviewing the activities and analyzing the capacity of enterprise,enterprises can realize their potentials and define proper strategies In the constructionfield, a large number of small-scale enterprises participate in the market

c Buyer’s bargaining power

Buyer of a company can be either consumer or another company who plays therole of a distributor of that product to the final consumer Buyers can be regarded as athreat to competition when they are at an advantageous position to require lower prices

or better services In addition, when buyers are at a disadvantageous position,companies can raise prices and gain more profit Whether buyers can make a request tocompanies or not depends on the comparative power they have towards companies:power gained when there are many suppliers of the same products; when buyerspurchase product in great quantity; when switch cost is low etc

d Supplier’s bargaining power

Suppliers can be considered a threat when they push up the price or reducequality of the input they provide to companies, so companies’ profitability decreases

In contrast, if the suppliers’ power is weak, companies have opportunity to squeezeprice and require better quality Similar to buyer’s bargaining power, supplier’sbargaining power depends on comparative power between them and companies in suchsituations as: the suppliers’ products are difficult to be substituted; products of

suppliers are so differentiated that it will be costly if companies switch from a supplier

to another one etc

e Substitutes

Substitutes are products of industries which serve customers’ demands similar

to which of studied industry The existence of these close substitutes represents a threat

to competition, reduces high-pricing capacity limitation as well as profitability.However, if a company’s products has few substitutes and other factors are normal, thiscompany will have a chance to raise prices and earn more profit As a result, itsstrategy will be designed to gain competitive advantage

Studying 5 competitive forces helps enterprises understand thoroughly anindustry to identify its attractiveness The stronger the competitive forces are, the lowerthe potential profitability of the industry’s enterprises is In an industry lackingattractiveness, entry barriers are low, suppliers as well as buyer have strongerbargaining power, threats from substitutes is bigger, and high competitive intensity inthe industry will cause great difficulty to enterprises’ creating values and earning over-medium income

3.2.2.2 Strategic groups in an industry

Strategic group includes competitors having same conditions and access tocompetition in the market One industry has one strategic group only when companiespursue strategies alike in general and have similar position

Companies in one strategic group all pursue similar strategies, customers tend toregard products of such companies as direct substitutes So the main threat to acompany’s profitability can come from other companies in its group Differentstrategic groups can have different positions, which depend on each force amongcompetitive forces Buyer’s bargaining power, supplier’s bargaining power andcompetitive force of substitutes etc can change the intensity of strategic groups in anindustry

Mapping strategic groups is a technique used to represent competitive positionsbelonging to competitors in an industry This technique is considered a linkagebetween an industry as a whole and individually judging the position of eachenterprise Steps of building strategic group map include:

- Identifying characteristics distinguishing an industry’s enterprises bases onpivotal variables, including: price/quality, geographical boundary within which anenterprise is operating, vertical integration level etc.

- Positioning enterprises on coordinate axes with each pair of differentiationcharacteristics

- Circling strategic groups provided that each circle goes with revenue proportion

of every group

3.3 Enterprises’ internal analysis

External environment analysis to identify the attractiveness of an industrythrough the structure of that industry has clearly pointed out the reasons making anindustry more profitable than another However, structure of an industry is not the onlyforce affecting a company’s profit Therefore, a problem to be confronted with is why

in a specific industry a company operates better than another

Internal environment analysis is used to figure out strengths, weaknesses,identify potential as well as existing resources creating sustainable competitiveadvantage for every enterprise It also points out the way to gain competitive advantage

of an enterprise, and the role of different forces, resources and ability to build andmaintain sustainable competitive advantage for that enterprise

3.3.1 Analyzing company’s current strategy

General group

Copyright groupP

Cost

Figure 1.2: Strategicgroup map

Appraising how a company is carrying out its strategy must begin with thestrategy the company is pursuing It is required to know which specific strategy thecompany is pursuing: cost leadership, differentiation, or focus on best serving asegmentation etc Evaluating efficiency of strategy operation or strategy management

is implemented through such signals as:

- Whether a company’s market share is higher, constant or lower

- Whether a company’s marginal profit increases or decreases and its comparativesize compared with its competitors

- Tendencies of net profit, return on equity, increased economic values etc andcorrelation with competitors

- Whether company’s current financial strength and credit assessment improve orreduce

- Whether company’s revenue growth is faster or slower than that of the market

- Whether company is considered the leader in technology, product improvement,product quality or satisfying customers’ demand or not

After taking the current strategy of company into account, managers willconsider, assess strengths, weaknesses of their company to propose a specific projectand strategy to achieve the target company is pursuing

- Identifying company’s strong points existing in the forms of: skills, experiences inproduction, management, and customer serving; valuable physical assets, human resource;valuable organizational assets; valuable intangible and tangible assets; competitivecapacity; achievements or cooperation and association with other partners etc

- Identifying company’s weaknesses existing in the forms of: the lack ofimportant skills and competitive experiences; competitive capacity in critical fields;shortages in resources etc

3.3.2 Potential resources and capacities

A core competence (differentiating competence) is a unique strength allowing acompany to enjoy preponderance in efficiency, quality, improvement and customers’serving, so that company can create preponderant value and competitive advantage, aswell as more value than its competitors and gain a higher profit proportion

a Core competencies of an enterprise is created through two sources including: itspotential resources and capacities

Table 1.2: Organizational, technical, human, physical, financial resources

Report structure, planning, coordinating, controlling system

Physical resources - Complexity and distribution of apparatus, machinery

- Access to inputs

Technical resources - Technical provision such as copyright, commercial brand,

patent, business secret

b Potential capacity

As sources of producing capacity, intangible and tangible resources arefundamental parts creating the development of competitive advantage Potential

capacity is capacity that allows companies to use purportedly integral resources toreach a desirable target situation.

Company’s potential capacities are produced from organization structure andcontrolling system How are they defined and what is their position in theorganization? Being the bottom line creating competitive advantage, capacities oftenbase on information as well as knowledge development, transmission and exchangethrough human resource Knowledge of human resource is the most crucial capacities

of a company as well as the root of all competitive advantages Value of a company ismade not from physical materials but knowledge, expertise, intellectual property,competence – which all stay inside human

Distinguishing between resource and potential capacity is to figure out whatcreates differentiating competence A company can have unique and valuable resourcesbut if it does not have potential capacities to operate these resources efficiently, it stillcannot produce and maintain differentiating competence

In summary, to possess differentiating competence, a company has to own atleast a unique and valuable resource and necessary potential capacities to utilize thisresource

3.4 Selecting business strategy

After taking external environment into consideration as well as analyzingstrengths and weaknesses of a company, it is necessary to identify a strategic solution

in accordance with a company’s strengths, weaknesses, opportunity and threats(SWOT) The purpose of SWOT analysis is to identify strategies oriented by thisanalysis, to create a harmony or correspondence between resources as well as thecompany’s capacities and demands of the environment in which it is operating

3.4.1 Cost leadership strategy

Cost leadership strategy is series of actions to provide products or servicesowning characteristics accepted by customers with minimum cost in comparison withall of its competitors

The goal of cost leadership strategy is to surpass competitors by producing andproviding all products and services with lower cost than competitors

Success in pursuing this strategy will bring companies two following competitiveadvantages:

- First, cost leader can require lower price compared with competitors while profit

is maintained

- Second, cost leader can stay firmer than competitors when there is an increase innumber of competitors in the industry and cause others fall into a price war since it haslower cost

Choosing cost leadership strategy also means choosing a low level of productdifferentiation, paying little attention to different segmentation, positioning product toattract normal customers since development of a product line meeting all demands ofdifferent segmentation is very costly

3.4.2 Differentiation strategy

Differentiation strategy aims at obtaining company’s competitive advantages in

an attempt to raise a company’s product values by developing products having uniquefeatures that the company’s rivals cannot produce

Product differentiation can be created by quality, innovation and customersatisfaction

When differentiating by customer satisfaction, company provides such services asafter-sale service and comprehensive maintenance service, making them distinguished byvarious available methods The more these services are not similar to its rival’s ones, themore competitiveness the company can preserve, and the more market attraction it can get

Differentiation and brand loyalty also create barrier to new entrants The threat

of substitute products depends on the abilities of competitors’ products to meet thedemands of customers and to break customers’ brand loyalty

The disadvantage of differentiation strategy is that company’s rivals can gain asimilar competitive advantage if they have no difficulty in imitating products.However, it is not easy to duplicate a company’s intangible factors, therefore,differentiators still can gain long-term benefits from their products

3.4.3 Focus strategy

Focus strategy is the third competitive strategy It concentrates on meeting theneeds of specific customer groups or a niche Selecting a focus strategy means to payone’ attention to the gap of particular market, which can be identified bygeographically, customer types or product segments

Once selected a market segment, the company pursuing focus strategy may useeither differentiation approach or low-cost approach Moreover, focus on a narrowrange of product sometimes allows a focuser to have improvement faster than a widermarket differentiator does A focuser can seize any differentiation opportunity because

it is able to figure out cost advantage and outstanding efficiency in low-costmanufacture of the industry Building brand loyalty i has been taken into consideration

by most companies in order to lessen the threat of substitute products

Advantages of a focus company emits from sources of differentiation:efficiency, quality, improvement and customer satisfaction While the company canprotect itself against its rivals to be able to continue supplying products, its rivalscannot

However, a focus company is at a disadvantage compared to powerful suppliersbecause when trading volume is small, power belongs to the suppliers Even so, therestill have loyal customers who are ready to pay at the company’s price

Table 1.3: Summary of choices suitable for each strategy among the three

above mentioned strategies

Cost leadership Differentiation Focus Product

differentiation

Low (mainly byprice)

High (mainly byuniqueness)

From low to high (fromprice to uniqueness)

Market segment Low (mass

market)

High (a number ofmarket segments)

Low (one or a fewmarket segments)

Differentiating

Capacity

Manufacture andmanage inputs

development, Salesand marketing

Any ability to createdifferences

II Vision, mission, and values of strategic management.

Once operating in environments full of fluctuation, each enterprise should have

an ability to adapt, and a preserved unshakably nuclear preservation to survive.Enterprises are interested not only in making the benefits for themselves but also intheir stakeholders in the process of cooperation That is the very important beginningfor the existence of a business

Vision statement of an enterprise is like the first key indicator on howenterprise recognized its obligations to its stakeholders The purpose of missionstatement is to set guidelines for making strategic decisions

Stakeholders of an enterprise is understood as individuals or groups affect andare affected by the results of strategy They have the right to require a business tosucceed Specifically, they have the right to keep an eye on a company’s achievement,the existence, competitiveness and sharing induced profitability

Stakeholders of an enterprise are divided into internal stakeholders and externalstakeholders

Stakeholders is binding in the relationship with the company but not equallydependent on relevant parties

III Implementation, monitoring and evaluation

Implementing strategies refer to the methods used by enterprises to createorganizational arrangements in order to pursue their strategies in the most effectiveway Enterprises should choose suitable organization structure and control system sothat they can pursue their strategies and create sustainable competitiveness For eachstrategy adopted, enterprises need to develop cooperation among different units anddivisions; as well as defining the reporting relationship between staff, tasks andfunctions at different levels of the enterprise in order to ensure the effectiveimplementation of strategy Only in this way can enterprises implement their strategieseffectively

Chart 1.3: Stakeholders

The organization structure and the control system for strategic implementationmust ensure 2 factors:

- First, cooperation among different staffs enables staffs to perform their tasksmost effectively in implementing strategies

- Second, enterprises should provide motivation and motives for staffs to excel

in quality of work, improvement and customer satisfaction

The organization structure designed needs to be suitable with other factors inorder to improve the effectiveness of strategy implementation Organization structure is

a decisive factor in strategy implementation as it creates stability necessary forenterprises to successfully achieve its objectives, sustain current competitiveness, andensure flexibility in developing the competitiveness of future strategies

In strategy implementation process, enterprises also need to develop measures tocontrol, monitor and evaluation to make sure that strategies are implementedeffectively and efficiently, that interventions and adjustments are in place wheneverneeded

To control strategy implementation, enterprises need to:

- Formulate standards and objectives based on which strategy implementation isevaluated

- Formulate monitoring and measurement system to report whether standardsand objects can be achieved

- Comparing actual implementation with the defined objectives

- Make reasonable adjustments whenever standards and objectives are notachieved

- Develop different levels of strategic control: Managers at company level,managers at unit level, managers at functional level

By using the strategic control system at different levels, enterprises can ansure thatstandards and objectives used at one level will not create difficulty at another level.Controlling strategies include: Controlling the financial resource for strategyimplementation, controlling output (objectives of each unit, functional objectives and

individual objectives); objective-based management (defining concrete objectives);controlling behaviours (budget, standardization, rules and procedures) and corporateculture.

Each enterprise, in its implementation of strategy, develops a strict controlsystem to ensure effectiveness of strategy implementation Therefore, the evaluation ofstrategy implementation of different enterprises are different, subject to the objectivesthat they pursue Besides, defining rewarding policies is also an important factor,enabling enterprises to motivate staffs to implement strategies most effectively

CHAPTER II

THE SITUATION OF BUSINESS STRATEGY MANAGEMENT OF

VINACONEX – ALPHANAM INFRASTRUCTURE DEVELOPMENT

AND INVESTMENT JOINT STOCK COMPANY

I General Information

- Company name: VINACONEX – ALPHANAM Infrastructure

Development and Investment Joint Stock Company

- Abbreviated name: VINACONEX-ALPHANAM JSC

- Head office: No 2 Dai Co Viet, Le Dai Hanh ward, Hai Ba Trung district, Hanoi

- Manufacturing, buying and selling building materials and consumer goods;

- Leasing transportation, bridge crane and specialized machines;

- Building technical urban infrastructure, industrial zones construction works and plumbing and drainage construction works;

- Designing general layout, interior architecture for civil engineering and industrial buildings;

- Real estate business;

- Real estate brokerage;

- Real estate exchange management services

2 Organizational structure of Vinaconex - Alphanam Company Company Structure

Shareholder General Assembly

Project Management Unit

Economics and Planning Department Sales

Department Finance-

Accounting Department Market

Diagram 2.1: Organizational structure of Vinaconex - Alphanam Corporation

(Source: Human resource and Administration Unit

Vina-Alpha Company)

With the above model, the Shareholder General Assembly has supremeauthority in making decisions on the company’s activities The Board of Director hasthe duty to concretize the decisions made by shareholders and lead the executionprocess It is supervised by the Board of Control which is set up by the ShareholderNational Assembly The General Director possesses the largest share in the company.

He has the duty to operate the company and implement decisions made by theShareholder National Assembly and the Board of Management General Director isassisted by two Deputy Directors in charge of business aspect and technical aspect ofthe company These Deputy Directors are responsible for managing relateddepartments and reporting to the General Director and the Board of Management

The company has 7 departments as follow:

- Human Resources and Admin Department;

- Finance – Accounting Department;

- Sales Department;

- Economics and Planning Department;

- Designing and Consulting Department;

- Project Management Department;

- Investment and Marketing Department

Each department has the duty to implement decisions made by the Board of Management and to support other departments during the operation process

3 Characteristics of the company

Construction works have a common feature It requires large capital, is used for

a long time and serves the benefits of many people However, managing building projects and ensuring construction quality are difficult tasks This requires the

company to adopt strategies to consolidate the management structure, improve

workforce management capacity, prevent material loss and apply scientific and

technological applications The development viewpoints of the Board of Management are: Prestige and effectiveness for investors, customer satisfaction, professional

management system and ensuring the quality and timeline

3.2 Market

In recent years, the basic infrastructure in Hanoi in particular and in Vietnam has strongly developed Investment projects involving construction for many sectors have been implemented in timely manner to make use of available opportunities and resources At the same time, opportunities and challenges in the construction

investment, consulting and designing sector have been opened The country is aiming

to achieve the target of becoming an advanced industrial country by 2020, which is concretized into specific roadmaps The potential opportunity for foreign investors in Vietnam is abound Therefore, building and building investment consulting sector havebeen pushed to a new height: higher quality, more thorough research, combination of such factors as appearance, culture-oriented, flexible in space, application of

technology and reasonable cost The consulting and designing services are required to meet not only the requirement of appearance and long use but also the symbols of success, educational level and new thinking These products will increase the benefits for investors, improve relationship with the public and enhance urban view

It can be said that the building market will proper in the following years

However, competition is intense This open market attracts the entry of large

companies with high technology and professional working style from advanced

countries such as Japan, Korea, and Malaysia This creates competitive challenges for Vietnamese companies in general and Vina-Alpha Corporation in particular Since its foundation, Vina-Alpha Corporation has step by step developed its business network toactively develop its prestige in the market through large number of ongoing and

completed projects

3.3 Quality of Human resources

With any company or organization, human resource quality is always a bigcompetitive advantage With Vina-Alpha Corporation, human resource quality alwaysplays an important role and is considered a valuable asset and strength of Vina-AlphaCorporation Human resource quality of a company reflects its development potentials,scientific and technological application capacity, management and operationalcapacity This is an important factor for development of Vina-Alpha Corporation.

4 Business operation results

3 Invested real estate

4 Other long-term receivables 8,367,903,648 31,722,140,000 41,710,200,000

5 Other long-term assets 153,800,000 162,251,254 224,094,186

2 Other financial

TOTAL CAPITAL 21,165,347,097 66,696,592,892 119,841,643,434

(Source: Finance-Accounting Department - VINA – ALPHA Company)

In the balance sheet of Vina-Alpha Corporation during 2006 – 2008 period, the value of assets has increased Short-term loan payment capacity in the following year has improved compared to that of last year

4.2 Completed and ongoing projects

Table 2.2: Completed projects of VINA – ALPHA Company

1 Premises of Da Nang

Alphanam Joint Stock

Company

2006 11,000,000,000 Da Nang industrial zone

2 Sakura Tower 2007 69,000,000,000 No 47 Vu Trong Phung Str,

Thanh Xuan Dist, Ha Noi

3 Sakura Hotel 2008 328,000,000,000 No 73 To Hien Thanh Str,

Hai Ba Trung Dist, Ha Noi

4 Sakura Office 2009 112,000,000,000 No 2 Dai Co Viet St, Hai

Ba Trung Dist, HN

5 Sakura Palace 2009 450,000,000,000 No 108 Nguyen Trai Road,

Thanh Xuan Dist, Ha Noi

(Source: VINA - ALPHA Company Profile)

4.3 Assessment on business activities

Vina – Alpha Company is a young company, which is on its way of development and

3 Profit Thousand VND 164,680 285,870 549,314

(Source: Finance -Accounting Department - Vina-Alpha Company

Diagram 2.2: Revenue and profit growth diagram of VINA – ALPHA Company

By analyzing the internal environment, we can summarize and assess the internal factors of the company as follow:

Table 2.4: The internal factor assessment matrix

20.647

68.064

118.936165