Improving competitive strategy of viettel mobile during the period of 2015 2020

analyzing the reality of Viettel Mobile competitive strategy building, from that tobuild competitive strategy to create stable and firm position for Viettel Mobileduring the period of 20

Capstone project

IMPROVING COMPETITIVE STRATEGY

OF VIETTEL MOBILE DURING THE PERIOD OF 2010 -2015

For all the support in researching period, we want to express our heartily thanks tofriends in Viettel, MPT All of them gave us good condition and useful informationthat made us easier in research and capstone project completion

LIST OF ABBREVIATIONS

3G: 3 generation

BCC: Bilateral Corporation Contract

BTA: Bilateral Trade Agreement

BTS: Base Transceiver Station

CDMA: Code Division Multiple Access

GSM: Global System for Mobile Communication

GTEL: Global Telecommunication Corporation

FDI: Foreign Direct Investment

HANOI TELECOM: Hanoi Telecom Corporation

MBA: Master of Business Management

MPT: Ministry of Posts and Telecommunication

NGN: Next Generation Network

PR: Public relation

R&D: research and deploy

ROA: Research Group on Asia

SMP: Signified Market Power

SMS: Short Message Service

2SOE: State-Owned Enterprise

SPT: Saigon Post Tel

VIETTEL Mobile: VIETTEL Mobile Corporation

VMS: Vietnam Telecom Mobile Service Company

VNP: Telecommunication Service Company

VNPT: Vietnam Post and Telecom Corporation

VP TELECOM: Vietnam Power Telecom Corporation

WAP: Wireless Application Protocol

WTO: World Trade Organization

Preface:

- Rationale:

Vietnam started applying doimoi policy from 1986, and up to now, Vietnam has

changed from planned and concentrated economy into social – oriented marketeconomy Vietnam situation shows the fiercer and fiercer competitiveness ofmarket economy, especially after Vietnam joined WTO in 2006 Nowadays,Vietnam enterprises, regardless of economics components, management offices arenow facing with the more and more competitive pressure from enterprises homeand abroad, from replaceable products, from suppliers or even from the customers

Telecommunications are a young industry; it was newly shaped and developedfrom Vietnam economic innovation with the orientation of taking a shortcut andwaiting - in – front Getting support from the state, it quickly innovated technologyand modernized; after a short time, Vietnam has become an advanced country oftelecommunications infrastructure in the world, with the growth speed in thegroups of the world leading countries State enterprises in this profession have gotthe rapid growth and development with the growth speed of two or three numbers

However, after joining WTO, facing with fierce competitiveness of enterpriseshome and abroad in market economy, enterprises in telecommunications in general

or mobile services in particular suffer the competitiveness of newly-joinedenterprises Even with Viettel Mobile, the biggest mobile network in Vietnam, thecompetitive pressure is fiercer and fiercer from other competitors, distributors orcustomers, etc

In order to support for one of leading enterprises in telecommunications market inVietnam and Southeast Asia to have competitive ability during the period of 2010 –

2015, our group have made a study about the theory of competitive strategy,

analyzing the reality of Viettel Mobile competitive strategy building, from that tobuild competitive strategy to create stable and firm position for Viettel Mobileduring the period of 2010 -2015

- Objective

The objective of the study is the competitive strategy of mobile network of ViettelMobile – Viettel Telecompany – Viettel Corporation – during the period of 2010-2015

- Methods of study

The capstone project uses quantitative and qualitative methods of study Quantitativemethod is used such as expert method, taking ideas of sellers, etc and qualitativemethod is used when predicting the demand on mobile services or subscriber growthrate, etc

The project also uses the figures given from Ministry of Information andCommunications, of Bureau of Statistics as well as takes some primary studies to getfigures in general and about Viettel Mobile in particular for the project

- Scope of study

Due to time limit, the objective of study and conditions about subscriber figures, thiscapstone project only concentrates on studying Viettel Mobile competitive strategy It

means that the project only focuses on the ways to create competitive advantages and

to maintain those of Viettel Mobile in Vietnam market in a certain period of time as the period of 2010 – 2015

The capstone project does not study the competitive strategy of Homephone, ADSL orPSTN services of Viettel Telecompany, the management company of Viettel Mobile The project only studies the competitive strategy of the profession, not the businessstrategy of Viettel Telecompany or Viettel Corporation

- Structure of the project

Consists of three chapters:

Chapter 1: Basic contents of competitive business strategy

Chapter 2: Competitive strategy situation of Viettel Mobile during 2005-2009

Chapter 3: Building competitive strategy for Viettel Mobile during 2010-2015

LIST OF FIGURES

Figure 1.1: Steps of defining strategy 14

Figure 1.2: PEST model 16

Figure 1.3: Model of 5 competitive forces of M Porter 19

Figure 1.4: Model of value chain of M Porter 22

Figure 1.5: The process of realizing the unshakeable competitive advantage 24

Figure1.6: An irreducible SWOT analysis frame 26

Figure1.7: Comparing features of common strategies 33

Figure 1.8: Dominant quality 36

Figure1.9: Quantitative matrix basing on GREAT criterion 37

Figure 2.1: The Organization structure of Viettel Telecom 41

Figure 2.2: Turnover of Viettel Mobile 42

Figure 2.3: Profit of Viettel Mobile 42

Figure 2.4: Investment of Viettel Mobile 43

Figure 2.5: Human resources of Viettel Mobile 43

Figure2.6: Mobile phone service market share in 2007 - 2008 45

Figure 2.7: Market share in 2006 45

Figure 2.8: Market share of Viettel Mobile 2007 46

Figure 2.8: Market share of Viettel Mobile 2008 46

Figure 2.9: Numbers of BTS at 3rd quarter of 2009 52

Figure 3.1: Home overall products in 2008 basing on comparative price of 1994 56

Figure 3.2: Home total products in 2008 according to factual price 57

Figure 3.3: Home total products in 2008 basing on comparative price in 1994 57

Figure 3.4: Total of retail and turnover of consuming service in 2008 according to factual price 57

Figure 3.5: Index of consuming price, gold price and USD price in December of 2008 58

Figure 3.6: Average population in 2008 divided in gender, rural – urban areas and regions 58

Figure 3.7: Vietnam population tower (2008) 59 Figure 3.8: Mobile market share at the end of 2008 (Unit: subscribers) 61 Figure 3.9: Telecommunication turnover in 2008 (million dong) 62 Figure 3.10: Table of estimated number of subscribers of Viettel Telecom and in the whole market by 2015 70 Figure 3.11: Market share 76

TABLE OF CONTENTS

Chapter I: BASIC CONTENTS OF COMPETITIVE BUSINESS STRATEGY 12

1.1 General view about business strategy 12

1.1.1 Concepts 12

1.1.2 Levels of strategy: 13

1.1.3 Advantage of building strategy 13

1.2 Process of building business strategy 13

1.3 Analyzing strategy 16

1.3.1 Analyzing outer environment 16

1.3.1.1 Analyzing macro-environment 16

1.3.1.2 Analyzing profession environment 18

1.3.1.3 General analysis on outer environment of the enterprise 21

1.3.2 Analysis on internal environment of the enterprise 21

1.3.2.1 Analyzing value chain 22

1.3.2.2 Defining enterprise competitive advantage 24

1.4 SWOT 25

1.4.1 SWOT analysis: 25

1.4.2 SWOT analysis frame: 26

1.5 Building and selecting business strategy 26

1.5.1 General competitive strategies 26

1.5.1.1 Strategy of leading in cost 26

1.5.1.2 Focus strategy 28

1.5.1.3 Concentration strategy: 30

1.5.2 Common strategy in the context of five competitive forces 33

1.5.3 Selecting optimal strategy 36

1.6 Performing strategy 37

1.6.1 Organization structure 37

1.6.2 Control system 38

1.6.3 Strategy evaluation 38

CHAPTER II: VIETTEL MOBILE' S FACTUAL COMPETITIVE STRATEGY OVER THE PAST TIME 40

2.1 General introduction about Viettel Mobile - Viettel Telecom 40

2.1.1 Name of Enterprise 40

2.1.2 Process of establishment and development: 40

2.1.3 Fields of business activity 40

2.1.4 Main services: 40

2.1.5 Business philosophy 41

2.1.6 Organization structure: 41

2.1.7 Some achievements 42

2.2 Analyze Viettel Mobile's competitive strategy: 47

2.2.1 Strategic vision: 47

2.2.2 Mission: 47

2.2.3 Core Values: 47

2.2.4 The strategies being applied by the company: 48

2.2.4.1 Context of the company’s strategy 48

2.2.4.2 The strategies applied by the company previously 49

2.2.4.3 Advantages of the strategy selected by the company: 50

2.2.4.4 Disadvantages of the strategy 51

2.2.5 The company’s current competitive advantages 51

2.2.5.1 Market share 51

2.2.5.2 Coverage area 52

2.2.5.3 Distribution channel 52

2.3 Comment on Viettel Mobile's competitive strategy: 53

Chapter III VIETTEL MOBILE COMPETITTIVE STRATEGY IMPROVEMENT DURING THE PERIOD OF 2010 – 2015 55

3.1 Vision and objective of the strategy 55

3.1.1 Strategic vision of Viettel Mobile – Viettel Telecompany up to 2015 55

3.1.2 Viettel Mobile’s mission: 55

3.1.3 Objective: 55

3.2 Environment analysis 56

3.2.1 Macro - environment 56

3.2.2 Profession environment: 61

3.2.2.1 Evaluating competitors: 62

3.2.2.2 Evaluating customers: 65

3.2.2.3 Evaluating replaceable products: 66

3.2.2.4 Evaluating service suppliers: 66

3.2.3 Forecasting the mobile market until the year 2015 66

3.3 Analyzing internal environment: 74

3.3.2 Infrastructure 75

3.3.3 Market share 75

3.3.4 Distribution channel 76

3.3.5 Viettel staff 76

3.4 SWOT analysis 76

3.5 Analyze on selecting strategy: 78

3.5.1 Possible strategies: 78

3.5.2 Selecting strategy 78

3.5.3 Foundations to select focus strategy 80

3.6 Performing strategy 81

3.6.1 Implementation solutions 83

3.6.2 Route of implementation: 85

3.7 Accomplish the evaluation and inspection task 85

3.7.1 Building processes and KPI index to evaluate and measure 86

3.7.2 Comparing factual index with given KPI 87

3.7.3 Regulation action 87

CONCLUSION 88

REFERENCES 90

Chapter I: BASIC CONTENTS OF COMPETITIVE BUSINESS STRATEGY

1 General view about business strategy

1.1 Concepts

The concept ‘strategy’ originates from military aspect with the meaning ofshowing big and long-term plans, basing on the theory that what competitors can doand cannot do From that, together with the development of goods exchange, the term

‘business strategy’ was born, with the traditional view that strategy is defining basiclong term objective of an organization, from which giving out specific action programsand using suitable resources to attain the given objectives

According to Alfred Chandler, “strategy includes basic long term of one organization

as well as selecting ways or action processes, distributing essential resources to fulfillthose objectives.”

As for William J’ Glueck, “Strategy is a united, comprehensive and co-ordinate planwhich is designed to ensure that basic objectives of the organization will be fulfilled.” Fred R David says that “Strategies are means to reach long term objectives Businessstrategies can include the development about geography, diversification in operation,product development, market penetration, expenditure reducing, liquidation and joint-venture.”

According to Michael E Porter, “strategy is the art of building competitiveadvantages.” Or “strategy is a series of complex actions to mobilize resources that an

organization can have to reach a certain objective.” (GaMBA, 2009, Strategy

administration syllabus, Strategy definition, p.1).

There are many definitions about strategy; however, to make strategy we have

to answer three following questions:

- Where are we?

- Where will/ do we want to go?

- How do we go there?

1.2 Levels of strategy:

* Regarding levels, in any organizations, the strategy exists in several levels –

from the whole enterprise (or a group of enterprises) to individuals in it

+ Enterprise strategy is the strategy at company level towards purpose and general

range of the organization to satisfy demand of contributors

+ Business strategy relates to how an enterprise can competitive successfully in a

certain market

+ Competitive strategy is the way that the enterprise takes advantage in competition in

a certain aspect

+ Functional strategy is the one that supports business and enterprise strategies to

perform effectively owing to parts of resources, processes, human and necessary skills

+ Global strategy (international business) is the one that enterprise chooses to cope

with international business issues when the enterprise diversifies its activities outsideits national frontiers

1.3 Advantage of building strategy

An enterprise which has suitable business strategy will have more success than anenterprise who does not define a clear strategy The advantage of this has been tested

in many different aspects at different scale companies That advantage is summarizedas:

- Clarify more the far sight of company strategy

- Concentrate more precisely limited resources on the objective of the strategy

- Improving about awareness that we need to change when the businessenvironment changes

2 Process of building business strategy

The process of building business strategy is also the process that determiningbusiness strategy, which is summarized in the following diagram

Figure 1.1: Steps of defining strategy

Process of building strategy is done through the following steps:

Step 1: to define the functions and missions of the enterprise, in fact, to definethe mission, vision and strategic objective of the enterprise

- Mission shows the reasons why the enterprise exists and shows what thecompany has to do

- Vision is the message that concretizes mission into general objective,making the trust in the enterprise future Vision is the position that theenterprise wants to achieve in the future

- Strategy objective shows clearly what the enterprises hopes to achieve inmedium and long term scope

Defining vision, mission and strategic objective of the enterprise (1)

Analyzing business environment (Opportunities

Performing strategy (6)

Testing and evaluating the result (7)

Feedback

Step 2: Analyzing business environment

The second unit in the process of building strategy is to analyze the outer environment

of the enterprise The target of this is to realize opportunities and challenges from theoutside It includes the analysis on macroscopic environment and microcosmicenvironment – the profession environment the enterprise join

Step 3: Analysis on internal environment of enterprise

The third unit is the process of building strategy is to analyze the internalenvironment of the enterprise, to realize the strong and weak points of the enterprise.They define the ways the enterprise reaches the competitive advantages, the roles ofdifferent competence, the resources and the ability to build up and maintaincompetitive advantages for the company And from that, it requires the company toprevail over the effectiveness, quality, improvement and responsibilities with thecustomers

Step 4: Selecting strategy

The next one is to define strategy projects that fit with strong points, weakpoints, opportunities and challenges, threats of the enterprise This analysis andselection is done through the analysis on SWOT Through this, the enterprise canrealize its strategies and define the essence of the competitive position basing on theanalysis to find out resources, ability, and core competence to help develop selectedstrategies

Step 5: Performing strategy

Performing strategy is to build suitable solutions with each strategy to reach thegiven objective This performance is to be clear and there needs to assign tasksspecifically as well as the plan to fulfill the tasks

Step 6: Testing and evaluating the result

The company needs to establish a suitable controlling system of all phases such

as input arrangement or output control, etc and from that, realize the suitable andunsuitable things to regulate timely to make the strategy more effective

Changes in macro-environment can directly affect any force in the industry,change relative strength and attractiveness of one profession Macroscopic includes 6stages: economy, technology, social culture, demography, law and global one

In study of macro-environment, we study PEST model

Figure 1.2: PEST model

* Economy environment

Profession environment

Threats of new companies Power of providers

Power of buyers Threats from replaceable products

Competitive environment

Economy

Social Culture

global

Technology

Politics/

Laws Demography

The state of macro-economy environment defines the healthiness and prosperity

of the economy It always causes impacts to enterprise and the profession Economyenvironment shows the nature and orientation of the economy Effects of the economy

to a company can change the ability of creating its value and income Four importantfactors in macroscopic economy are: Economic growth rate, interest rate, foreignexchange rate and inflation rate

* Technology economy

Changes in technology affect many sides of the society mainly through theproducts of technological process These include activities relating to the creation ofnew knowledge, moving the knowledge into the output, the products, the processesand new materials The change in technology environment brings about the enterpriseboth opportunities and threats The opportunities are improving the ability to create thenew products with high competitive capacity; the threats are they can make the lifecircle of a product regress directly or indirectly The most important effect of thetechnological change is to affect the height of the barrier and restructure theprofession

* Social culture environment

They include social attitude and cultural values, which also create opportunitiesand threats One enterprise who wants to live immortally with the time, with itspartners and to be socially accepted has to respect the cultural factor in business.Social and cultural values create basis of the society, thus it often leads changes intechnological conditions, politics, laws, economy and demography

* Demography environment

They include issues relating to population, age structure, geographydistribution, community of peoples and income distribution Points of view aboutconsuming goods and services of people in the areas, and points of view of eachgender, age, profession affect the formation of the markets and also affect economicstrategy Life styles affect the demand on goods and services including kinds, quality,shape, design The speed of population growth positively affects the strategy content

of the enterprise

* Politics – laws environment

The changes in politics – laws environment will affect greatly to the process offulfilling business strategy of the enterprise The reality shows that enterprises whoinvest into an area home or abroad take notice about its political environment, theirinfluence to the government and vice versa When analyzing this environment, it isimportant to take notice to such factors as economic innovation, administrativeinnovation, changes in related policies, tax policy, safety and environment protectionand the promulgation or edition of the regulations

Nowadays, enterprises have to pay attention to government policies aboutresources and natural environment protection Treating the environment well is also avital condition to strong growth

* Global environment

The trend to integrate and globalize in and out Vietnam makes enterprises think

of international factors when they determine long-term strategy with high integrationand ability to develop geographically and politically Global segments include relatingglobal markets, changing markets, important international political issues, basicinstitutional and cultural property in international markets

1.1.1.2 Analyzing profession environment

One profession is a group of enterprises providing products or services whichcan replace each other closely This close replacement means those products orservices satisfy the customers’ demand similarly

Analysis on profession and competition is a series of notions and techniques toverify the following issues:

+ Outstanding properties of the profession

+ Competitive forces in the profession, the nature and strength of each

+ Driving forces that cause changes in the profession and their impacts

+ Who can create the next change in the profession?

+ Key factors in the success/ failure in competition

+ Attractiveness in the ability of profit gain on average

Profession environment is affected mainly by the following issues:

According to M Porter, there are five competitive forces in the profession: (1)risk of the coming of new companies; (2) competitiveness among existing companies;(3) the strength of customer bargain; (4) Strength of seller negotiation; (5) Threats ofreplaceable products

M Porter shows that the stronger those forces are, the more they limit thecompanies in increasing the price and gaining higher profit The task given toadministrators is to realize opportunities and threats which are given by the changes offive forces From that, they build up suitable strategies, changing the strength of one ormore competitive resources into their advantages

Figure 1.3: Model of 5 competitive forces of M Porter

Risk from new comers

Capacity

of supplier

Risk of being replaced

(Source: Lê Thế Giới, …, 2009, Quản trị chiến lược, mô hình 5 lực lượng cạnh tranh của Poter, p 106)

* Threats from new competitors are shown at the factors as followings: they in fact

include companies that are not competitive but they are able to join the professionbecause they own hidden competitive capacity; the attractiveness of the profession andbarriers to join The attractiveness of the profession is expressed through such things

as profitable rate, the number of customers, the quantity of enterprises in theprofession, etc Barriers to join are factors that cause difficulties for competitors whenthey want to join the profession; those factors put them at a disadvantage Theprotection of competitive position for enterprises is to maintain legal barriers andexisting advantages of the enterprises These advantages include:

+ Brand loyalty: the likeness of buyers for existing companies’ products

+ Absolute expenditures advantage: the ability to dominantly operate because ofexperience; the ability of input control, labor, materials, equipments, admin skills, andapproaching cheaper capital sources When the existing companies in the professionhave absolute advantages, the threats from potential competitors decrease

+ The economy of the scale: the effectiveness of the enterprise: it gains experience

when the scale is bigger

+ Change cost appears when the customers want to change their shopping from theproducts of this company to those of another one

+ Governmental protection rules

+ Retaliation of other enterprises in the profession

+ Barriers and another competition

* Negotiation capacity of the suppliers is expressed at such features as the suppliers

are regarded as a threatening pressure when they have ability to increase the sellingprice or reduce the quality of the products/ services they provide, which reducesprofitable capacity of the enterprise The influence level depends on the concentration

of the supplier, the importance of the quantity of the products to the supplier; thedifference among suppliers, the influence of input factors on the cost or the difference

in products, the change cost of the enterprises, the existence of replaceable suppliers,the threat of unity of suppliers; supply cost against total profit of the profession

* Negotiation ability of the customers is expressed at such features as the buyers are

regarded as a competitive threat when they require lower prices or better services Theinfluence level depends on negotiation position, the quantity of buyers, the informationthe buyers get, the special characteristics of the product brand, the sensitiveness to theprice, the difference in products, the concentration of customers in the profession; theavailability of replaceable goods, customer motivation, the integration ability when thebuyers can use threats of supply sources

* The risk of replaceable products is expressed at such features as the products of

the served professions are similar to those of analysis The influence level depends onchanging cost when using products, the trend to use replaceable goods from customers,balance of price and quality of replaceable goods

* Competitive intensify in profession is expressed at such features as business

activities in market economy will lead competitiveness, this appears when theenterprise is challenged by other enterprises’ activities or when the enterprise realizes

an opportunity to improve their position in the market The tools which are usuallyused in the race of value creation include price, quality, the differences in products andservices, distribution, promotion, improvement and customer satisfy The influencelevel depends on profession competitive structure, demand conditions, barriers to leavethe profession, fixed cost rate on value added services, the growth state of theprofession, the redundancy in capacity, the differences among products, change costs,the special characteristics of the brand, the diversify of competitors, the selection state

in the profession

1.1.1.3 General analysis on outer environment of the enterprise

Through the analysis on micro and macro-environment, we can give out generalevaluation on outer factors Synthesis and analysis of problems in the past and inpresent can predict for the future, which helps determine feasible strategy and avoidpotential threats, supporting the enterprise to reach the given tasks

The companies need to know the problems relating to competitors: who are mycompetitors? What are their strategies? What are their objectives? What are theirstrong points and weak points? How do they react? We will take the information indetermining our business strategy

Basing on evaluation and rank of opportunities and threats, we can orient thecompany strategy Opportunities are the conditions in the common environment, if thecompany can exploit it, they can gain advantage in competitiveness Threats are theconditions in the common environment which can obstruct the company in the process

of gaining advantage

3.2 Analysis on internal environment of the enterprise.

Internal environment includes the inner factors that the enterprise can control.The analysis on internal environment is to show strong and weak points of theenterprise to build a system of objectives and suitable strategies that make full use of

strong points This makes them special and reduces the weak points As we know,

inside the enterprise there are many factors that affect the activity of the enterprise

However, to evaluate the factual activities of the enterprise, it is necessary to show

main factors within the enterprise, the existence of which can be representative of

activity situation inside the enterprise They include the manufacturing process,

marketing activity, admin activity, finance and accounting, study and development,

information gathering and treating system

The nature of internal analysis is to consider what ability the enterprise can

compete and what they can do

1.1.1.4 Analyzing value chain

Analyzing factors of internal environment of the enterprise is to define strengths

and weaknesses, from that to give out suitable strategies In value chain, there are

some following important activities:

Analyzing manufacturing activity

This analysis is done to consider whether the process of making products is

suitable with business strategy or not

Figure 1.4: Model of value chain of M Porter

Research and development

Collecting and buying

s

Production

Internallogistics

(Source: Lê Thế Giới, 2009, Quản trị chiến lược, Chuỗi giá trị, tr.184)

- Analysis on manufacturing capacity: manufacturing capacity is the ability to

produce a quantity of products which is suitable for the fixed rules in a certain period

It expresses the ability of such manufacturing factors as equipments, technology

- Analysis on energy and materials provision state: mainly analyze on quality,reliability, the opportunity of supply sources

- Analysis on suitability in manufacturing process: mainly analyze on the forms

of manufacturing process and operation, continuity and adaptive ability of equipmentswhen the company needs to change the products

- Analysis on quality control: mainly analyze the roles of quality control andeffectiveness of quality assurance system

Analyzing marketing and sales activity

Marketing strategy is a functionally partial strategy which plays an important infulfilling the business strategy of the company

Marketing helps enterprise create value for some activities Through brandlocation and advertisement, marketing function can increase the value of the companywhich the customer can realize Moreover, these activities help create goodimpressions from customers, which creates more values Marketing and sales alsocreate value by discovering the customer needs and transmit information back to studyand development activities so that the company can design products suitable for thatkind of need

The roles of customer service in a company are to provide after-sale service orsupport This function can create the awareness about dominant value in customers’mind when they need support after they buy the products

Analyzing services

This is to analyze activities designed to improve or maintain value of a product,including a series of services such as installation, replacement, etc

Internal Logistics: activities such as treating materials, stores, etc to make

output into products

Outer Logistics: activities of collecting, keeping, preserving and transporting

final products to customers

Purchase: necessary activities to buy equipment, input materials for production

activities If this phase is good, the investment is low, and thus low price

R&D (technology research and development): activities to improve product

value, creating difference in products and services to uphold competitive capacity

Human admin: study on employment, labor quality, training, payment and

development of human resources, etc

Infrastructure: Enterprise infrastructure includes hardware and software.

Hardware includes storehouse, buildings, machines, etc Software includes tools formanagement like ERP, etc

1.1.1.5 Defining enterprise competitive advantage

The process of realizing the unshakeable competitive advantage can be summarized inthe following diagram

Figure 1.5 : The process of realizing the unshakeable competitive advantage

Competence The resource are in exploitation

- Invisible: brand, commercial advantage, goodplace, R&D

- Visible: assets, capital Resources Material facilities, human resources, finance,

(4) distance is big enough,

(5) Similar to success factor

In short, analysis on internal enterprise is to realize potential resources and existingones to create competitive advantages of the enterprise (strong points) as well as theobstacles in maintaining competitive advantages (weak points) From those, theenterprise can select suitable business strategy to uphold strong points and overcomeweak points

SWOT is abbreviation of the following English words: Strengths; Weaknesses;Opportunities and Threats This is the very useful tool which helps us find out theproblem or make a decision in organization, management and business

4.1 SWOT analysis:

Albert Humphrey concretizes SWOT into six actions as follows:

1 Products (What will we sell?)

2 Process (How do we sell?)

3 Customers (Who do we sell for?)

4 Distribution (In what way do we approach the customer?)

5 Finance (How much for price, cost and investment?)

6 Management (How do we manage all activities?)

Basing on specific situation, a analysis model of SWOT and be given out one orsome of above six steps In any case, SWOT basically will tell what is good and what

is bad in present business situation or for a new proposal in the future

If the object for SWOT analysis is business activity, the objective for analysis isenterprise improvement, SWOT will be understood as follows:

 S: Strengths (maintain, build and make a lever)

 W: Weaknesses (remedy to repair or to escape from weaknesses)

 O: Opportunities (Evaluate optimistically)

 T: Threats (obstacles)

If SWOT analysis is used to evaluate an idea or a proposal, it can show thatidea or proposal is very weak (especially when comparing with analysis on otherproposals) and the enterprise should not invest in In this case, it is unnecessary to giveout plan for next activities

4.2 SWOT analysis frame:

SWOT analysis frame can be explained as the following diagram:

Figure1.6 : An irreducible SWOT analysis frame

O Opportunities T Threats Internal

environment

S- Strengths S-O: uphold the

strengths to make fulluse of opportunities toorient the business

S-T: uphold the strengths

to limit and avoid risk

5 Building and selecting business strategy

5.1 General competitive strategies

1.1.1.6 Strategy of leading in cost

* Characteristics:

The purpose of the company in pursuing to lead in cost or strategy of low cost

is to operate better than competitors by doing every thing to produce the goods/services at lower cost than them

This strategy has two basic advantages First, because of lower cost, the leader

in cost can put the price lower than his competitors while he can still gain profit thesame as his competitors If the companies in the same profession put same value fortheir products, the leader in cost will gain higher profit because of his lower cost.Second, if the competition in the profession increases, the leader in cost will be able tosustain in competition better than others

* Strategic solution

The leader in cost selects low product Focus and they often ignore marketsegments They often care market in big scale and in fact, the companies often putlower prices than their competitors to attract the customers

When developing special competence, the most important purpose of the leader

in cost is to develop competences that can increase the effectiveness and reduce costlower than competitors

The leader in cost makes all choices of strategies of products/market/ specialcompetence to the only purpose as minimizing cost to create company advantages

Measures to allow the company to reach advantages in cost vary in eachprofession and profession structure It can be advantage from big production scale,exclusive right of technology, special treatment in materials, service level or technicalprocess

* Advantages and disadvantages of applying strategy of leading in cost

Advantage of each basic strategy is best described basing on the model ofPorter’s five forces These five include threats from competitors, strong buyers,replaceable products and new comers The company leading in cost can resist theattack from competitors by its advantage of cost Its low cost means it will be lessaffected than competitors from increasing the input price if there are strong suppliersand from reducing the price that they can fix for their products if there are strongbuyers

Moreover, because of leading in cost often requires the leader about cost to buyinput factors rather greatly, which increases strength of bargain to suppliers If thereplaceable products start to be in the market, the leader in cost can reduce the price tocompete with them and maintain the market share

Finally, leader’s advantage of cost is to create barrier, because other companiescannot join the profession and make suitable the cost of the leader Therefore, theleader is relatively safe when it can maintain its advantage – and cost is the key factor

to buyers

Main threats of the cost-leading strategy hide in the abilities of competitors tofind ways to produce products at lower prices and attack the leader in cost by theirstrong points The ability that competitors can easily imitate the leader’s method isalso a threat to this strategy

Moreover, the cost leading strategy has the threat that the leader in cost onlythinks about reducing cost and it seems not to care the changes in consumers’ taste.Therefore, the company may care a lot about investment and improvement of outerenvironment and forget to maintain the market of its product

The pursuance of low cost strategy does not exclude specialization Theimportant thing is the products must be accepted by the customers when comparison

with competitive products Therefore, low cost has competitive advantage only whenthe company assures a certain level of differentiation in products which the customersrealize and accept

* Strategic solution:

Company applying product Focus strategy chooses big different level to gaincompetitive advantages Product Focus can be complemented in 3 ways: quality,innovation and adaptation to customers Innovation is very important in complicatedtechnology, in which new features are source of differentiation When differentiationdepends on the adaptation to customers, producers and sellers must supply with overallcustomer care service

The attractiveness of products may be something associated to status or importance Differentiation also may be something associated to age groups and socialeconomic groups

self-In fact, product differentiation is limitless A company pursuing product focusstrategy always tries to differentiate as much products as possible The less companycopies competitors, the more competition occurs in the market

A company pursuing product focus strategy usually divides market into varioussegments A company can decide to operate in large scale of the market but only canchoose some segments of the market that are its competitive advantages

When pursuing an advantageous segment, it's better to concentrate in makingadvantageous product differentiation

Product focus strategy requires companies to create competitive advantages bychoosing distinct products/ market/ capacity However, product Focus Companyshould concentrate more in communication activities in order to provide informationabout its distinct products to customers

* Advantages and Disadvantages of product focus strategy

Product focus protects company from other competitors because customers areusually loyal to a brand name Loyalty to some brand names is invisible asset

Product focus and loyalty to a brand name can barrier new companies fromcoming in the industry New company must create differentiation in order to competewith present companies and it costs much

Finally, threat of replacing products can be reduced because of 3 reasons:satisfactory capacity of products, customers' demand, and the capacity of breakingthrough customers' loyalty to a brand name

Product focus strategy also has disadvantages For example, competitors areeasy to copy products of product Focus Company If differentiation relates to design orphysical features, product Focus Company will have higher risks

It's not good if product Focus Company disregards fees Unless price differencemust be greater than additional fee, company will loose competitive advantages.Product Focus Company should try to reach revenue target equivalent to competitors.Therefore, it' better to reduce spending on unimportant phases of production line

Recently, changes in production technology make choosing between expensesstrategy and product focus strategy less clearly According to advanced technology,companies find it easy to gain advantages from these both strategies because newadvanced technology helps company to pursue product focus strategy with low cost

Traditionally, product focus strategy costs much because companies have tocreate many product designs for different stages of market development It means thatperiod of production is short So the cost increases In addition, product focuscompanies cost more for marketing activities because they serve many sections ofmarket

Another way to gain advantages according to the production scale is tostandardize all sections related to finish product

A company can reduce spending on production and marketing if it reduces thenumber of models by selling package products to customers

Timely storage system can reduce spending, increase quality and reliability ofproduct It is very important because quality and reliability mainly contribute toattractive product Many companies make the best of new production technology andmarketing activities to reach the target Because product Focus Company can fixhigher price than company pursuing expenses leading strategy, these companies canget at least the same or higher revenue than that of company pursuing only onestrategy

Pursuing combination strategy is better because company can take advantage ofnew product, material management and marketing

1.1.1.8 Concentration strategy:

* Feature:

Unlike the two above strategies, the third pure competition strategy, the

concentration strategy mainly focuses on serving the demands of a limited group of

consumers or one market segment in order to make use of a small company’scompetitive advantage to compete with prevailing competitors

The company pursues concentration strategy focusing on serving a specific

market segment The target market segment can be determined according to suchcriteria as geography, type of customers, or one branch of a product line

One concentration company has many opportunities to develop its ownactivities and to compete with low-cost enterprises and its differentiation tends to begreater

The concentration strategy creates one chance for the businessman to fill upcustomers’ gap of essential needs The company focuses on competing with others interms of its product focus in only one or a few market segments Companies pursuingthe concentration strategy will surely develop their differentiated product qualitysuccessfully because they have knowledge of a set of small clients or of the region

Furthermore, focusing on series of small products sometimes allows the focusedpeople to create quicker renovation than big product focus companies However, thefocused people do not try to serve all market segments because doing it will lead to a

direct competition with other focus companies Instead, the concentration companyfocuses on setting up its market share in one market segment and if successful, it canstart to serve many market segments and take away other differentiated companies’competitive advantages

* Strategic solution

One concentration company may have different ways to develop its competitiveadvantage One the market segment has been selected, the company can pursue theconcentration strategy through or product focus or low cost In nature, theconcentration company is a product focus one or a leader in terms of cost and productfocus Because of small scale, some concentration firms may lead in terms of cost andsimultaneously to differentiate their product If one concentration firm only uses thelow-cost strategy, it will have to compete with the leader in terms of cost in the marketsegments where they have no advantage of cost If the concentration firm chooses topursue the product focus to compete with the leader in terms of cost, all product focusmeasures are widely open to the focused company

The product focus may be high or low depending on that the companyemphasizes to pursue either low cost or product focus For groups of customers, theconcentration company only seeks to compete in each market segment, not in thewhole market like the leading firm in terms of pure cost, or to satisfy a majority ofsegments like other pure product focus

A concentration company can pursue a separate ability based on a series ofadvantages such as low cost or product focus Therefore, the company can seek for theadvantage of cost and develop higher efficiency in producing low-cost products in theregion Or it can develop better skills in adaptability with customers, basing on theability of serving the regional customers’ needs in the way the focus company operatesnationwide

* Advantages and disadvantages

The concentration company’s competitive advantages stem from its separateability – efficiency, quality, renovation, or adaptability to clients The company stillstands firmly against the attack from its competitors when they can still supply thegoods and services which cannot be produced by these competitors This ability also

creates to the concentration company the strength against buyers because the buyerscannot get the same products in other places

However, for the strong suppliers, the concentration company is indisadvantaged situation because of buying materials in small quantity and therefore,the right belongs to the suppliers When the price increase (price of materials) is stilltransferred to loyal customers (the final selling price) this advantage cannot be a bigproblem

Potential competitors must exceed loyalty of the customers created by theconcentration company, and creation of loyalty toward customers also decreases thethreat from replacement products

The concentration strategy allows the company to approach customers andtimely respond to their changing needs The difficulty of managing a major number ofmarket segments sometimes encountered by other big focus company will not be aproblem to the concentration company Unlike the general product focus company, theconcentration company can move easily to new market segments, with its resourcesand ability focused on one or a few segments

Since the concentration company produces a little quantity, its production cost

is normally higher than the leading companies High costs can also lower profit if theconcentration company is forced to put big investment in developing a separate ability– such as renovation for an expensive product – to compete with other product focuscompany

The second issue is that the company company’s market segment maydisappear suddenly because of a change in technology or in customers’ taste.Disappearance of the market segments is one reason why various small companies fail.Final is the danger that the leading companies in terms of cost and productdifferentiation will enhance their competitiveness to get the market segments of theconcentration company

* Combination of the common strategies

These common strategies are not always compatible with one another If oneenterprise tries to act in order to prevail in all fields, as a result they will not achieveany advantage For instance, one company which has made itself more dominant thancompetitors by launching products of very high quality will have to take the risk of

lowering their product quality if it still wants to try to be a leading unit in terms ofcost Even in the case when the product quality does not decrease, the company stillcreates an inconsistent image in the eyes of customers accidentally Therefore,Michael Porter argues that to get long-term success, each enterprise must choose onlyone among the three above common strategies If one company pursues all of the threeobjectives, it will be in confused situation and cannot achieve the competitiveadvantage

Also according to Porter, enterprises which may succeed in applying manystrategies often have to set up separate business units, in which each unit pursues onestrategy By separating strategies for different units on policies or even culture, oneenterprise may reduce the risk of falling in stagnation and be able to develop

However, there also appears one opinion that pursuing the only one strategy isnot the right choice, because in the same product, customers often seek for satisfaction

in different aspects combing quality, style, convenience and reasonable price In fact,there have been producers who are only loyal to only one strategy and then suffer badloss when another company joins the market with a product of worse quality but theproduct fulfils customers’ needs of other aspects

5.2 Common strategy in the context of five competitive forces

Figure1.7: Comparing features of common strategies

Five

competitive

forces

Common strategies

Threats from new

competitors

Price reducing ability to retaliate against new competitors

Customers’ loyal can discourage new competitors.

Concentration creates company professionalism, which is barrier for new comers

Negotiation ability

of the customers

Ability to offer low prices to big customers

Big customers have less advantage in negotiation because they do not fine replaceable goods

Big customers have less advantage in negotiation because they have few choices

Weak position in negotiation with suppliers because of low output But company can follow concentration – focus

strategy to transfer the part increased in price to the customers

Customers become closer to the differentiation of products, which reduces the risk of being replaced

Highly specialized and dominant products protect company from being replaced

Competitive

intensify in

profession

Ability to compete in price better

Customers’ loyal helps company keep customers from competitors

Competitors cannot follow customers’ demands like company follows the focus strategy

(Source: Nguyễn Thanh Thảo, “Chiến lược thương hiệu theo lý thuyết Micheal

Porter)

These common strategies can be applied to protect the enterprise fromcompetitive forces The above Figure is the comparison of features of the commonstrategies in the context of the environment including 5 competitive forces

We say that the company has a competitive advantage when it has higher profitthan the average level The profit ratio is normally determined by one ratio; forexample, return on sales (ROS) or return/ asset (ROA)

The most important factor which determines the profit ratio is the total returncalculated by total revenue (TR) deducting total cost (TC) and dividing the total cost:

 = (TR-TC)/TC

In other words,  = (product price unit * quantity of consumed products) –(product unit cost * quantity of consumed products) / (product unit cost * quantity ofconsumed products)

The enterprises which want to have a higher profit than the average level of thesector must have one of the following conditions:

- The company’s product unit price must be higher than the price level of the sectorand cost for each product unit must be equivalent to the sector’s average level;

- The product unit cost must be lower than the average level of the sector and theproduct unit price must be equivalent to the sector’s average level;

- The company must have lower product unit costs and higher product unit prices thanthose of the sector;

Therefore, to gain a competitive advantage, the company must have a lowerproduct unit cost than that of its competitors or make its products different from those

of the competitors so that the company can offer high prices or simultaneouslyperform both ways

When one company offers a higher price than the average of the sector, itmeans that the company is participating in setting higher prices To enable customers

to afford this high price, the company has to increase more value to its products in theconsumption aspect which cannot be done by competitors An increase in valuerequires the company’s products to differ from those of its competitors in a certainaspect; for example, quality or design, time of supply, after-sale services, assistance

There are four elements generating competitive advantages: (1) Efficiency; (2)Quality; (3) Renovation; and (4) Sensitive to customers These are the commonelements building up the competitive advantage, indicating 4 basic ways to reducecosts and to create differentiation which can be applied by all companies

Efficiency

Efficiency is measured by the inputs needed to produce a quantity of product.One of the most fundamental factors to achieve high efficiency is to make use of inputcosts and increase labor productivity (normally calculated by output/ labor) Supposingthat other factors are not taken into account, a company with highest labor productivity

is the one with highest efficiency achieved thanks to lowest cost

Quality

Product with quality is the reliable product It is designed to serve customers.Products of high quality have double impact against their competitive advantage.Firstly, supply of high quality products will fulfill different needs and enhance prestigeand fame for the product brand-name Secondly, quality has an impact on productivity.The higher quality is, the more cost and time we save to correct the fault products

Improved

quality

Improved

Improvedreliability Higher price

Lower cost

Higherprofit

Figure 1.8: Dominant quality

(Source: Le The Gioi, 2009, Strategic administration)

Renovation

Renovation covers perfection of the products, production line, managementsystem, organizational structure and strategies Renovation is indeed the most basicelement of the current and future competitive advantage

Successful renovation creates to the company something which is consideredthe only thing unachieved by competitors This “only” feature allows the company todifferentiate its products against the competitors and be able to sell its products athigher prices In other words, it allows the company to reduce the product costs lowerthan its competitors

Satisfy clients

To fulfill the needs of customers, the company must provide the right goods suiting theneeds and time expected by customers The company must, in any way, identify theneeds of customers and to satisfy them Simultaneously, ensuring supply of the goods

at the right time when customers need

5.3 Selecting optimal strategy

Enterprises have to select optimal strategy because they cannot perform all orone after another; which will take a lot of time, material resources, financial resourcesand human resources Therefore, they need to select to give out a series of strategiesthat are regarded as the most optimal ones, and then consider their advantages anddisadvantages the enterprise will get from the strategy

Basing on given strategies by combining factors of Strengths – Opportunities,Strengths – Threats, Weaknesses – Opportunities and Weaknesses – Threats,enterprises use matrix basing on the GREAT criterion to sketch the basic things for theselection of business strategy that the enterprise pursues

Figure1.9 : Quantitative matrix basing on GREAT criterion

Evaluation mark

Convert mark

Evaluation mark

Convert mark

Evaluation mark

Convert mark

Step 1: Realize basic concepts that need to be analyzed or criteria in column 1

Step 2: Evaluate the impact level of the factors (criteria) on general strategies; useimpact index to show importance level and effects of factors on strategy (The index iscalculated by grading from 0 to 1 which all weight equals to 1)

Step 3: Mark for each analysis factor at each strategy Grading mark is from 1 to 5correlatively such levels as weak, average, over average, fair, good

Step 4: Convert coefficient which is the result of product of 2 columns (column 2 andevaluation column of each strategy) and then sum up all results to make final mark atthe end

Finally, Make bold of 1 to 3 highest total figures and they are focus strategies whichneed to be fulfilled

6 Performing strategy

6.1 Organization structure

Performing strategy is the way the company creates organized arrangements toallow them to follow their strategy at the best Designing the organization means toselect the combination of organization structure and control system so that thecompany can pursue the strategy effectively, creating value and solid competitiveadvantage

When the factors of that structure are suitable, they make the strategyperformance more effective There are some structures as follows:

- Widthwise allocated structure

- Lengthwise allocated structure

- Combination structure

Each organization structure has its own good and bad points The importantthing is enterprise must know to select what structure is suitable for it and its strategy

to gain the best effect

6.2 Control system

Strategy control is the process in which the administrators control theimplementation of an organization and its members to evaluate whether the activitiesare valid and effective or not, from that to repair and overcome immediately

Control steps include:

Step 1: Establish standards and objectives that can be evaluated

Step 2: Establish system of control and measurement to warn whether standardsand objectives are achieved or not

Step 3: compare the implementation of present objectives with established ones.Step 4: Regulation activities are started when standards and objectives are not achieved

6.3 Strategy evaluation

- Evaluate strategy success and failure

- Lessons from that, which factors brought the success

- Which reasons make the strategy failed?

- Evaluate payment and praise mode, promotion in career for groups and individualswho contribute to the strategy success

Conclusion of chapter 1

The above things are basic theory and concepts which are regarded as basis forbuilding business strategy of the enterprise Those pieces of theory and methods arethe ways of understanding of strategy, steps of building strategy, methods ofevaluation and analysis and synthesis, methods of strategy proposal, methods ofselecting optimal strategy

Those above theory and methods will be applied in analysis on operation environmentand building business strategy of Viettel Telecom which are concretized in thecapstone project as Viettel Mobile competitive strategy improvement during the period of 2010 – 2015

CHAPTER II: VIETTEL MOBILE' S FACTUAL COMPETITIVE

STRATEGY OVER THE PAST TIME

7 General introduction about Viettel Mobile - Viettel Telecom

7.1 Name of Enterprise

Name of Enterprise: VIETTEL TELECOM

Head Quarter: Number 1, Giang Van Minh Street, Ba Dinh district, Hanoi

Business license No: 0106000082 issued by Department of Planning andInvestment of Hanoi

Tel: 04.2556789 Fax: 04.2996789

Representative person: Mr Hoang Son

7.2 Process of establishment and development:

Viettel Telecom, direct under Viettel Corporation, was established in October, 2004 onthe basis of mergence between the 3 biggest companies in Viettel Corporationincluding Viettel Mobile company, Telephone company and Internet company

7.3 Fields of business activity

 Construct network and trade in telecommunication services (mobile phoneservice, PSTN service, internet service );

 Develop software products;

 Produce, assembly, repair and trade in electric, telecommunication electronic,communication technology;

 Invest in telecommunication infrastructure;

7.4 Main services:

 Mobile phone service;

 Fixed telephone service (wire and wireless);

 Internet service;

 VoIP service (178);

 Valued added services, solutions for mobile phone service, PSTN service,internet service

 Integrate production and business into social and humanitarian activities.

 Be ready to corporate with business partners for together development

 Be sincere to colleagues All together, we will build Viettel our common home

7.6 Organization structure:

Organization structure of Viettel Telecom is established on the basis of main sections:management section, business section and technical section which directly manage theoperation of 63 provinces/ cities

Figure 2.1: The Organization structure of Viettel Telecom

Dpt of Value added services

Technical Section Dpt of Technique Dpt of Scheme Dpt of network design

Dpt of Operation Dpt of

Infrustructure construction Dpt of quality control Dpt of assets management

Centers Technical regional center Billing center Customer service center Enterprise customer center

63 provinces/ cities

63 CN Tỉnh/TP