Xây dựng chiến lược kinh doanh cho công ty cổ phần thương mại vận tải sông đà

LUẬN VĂN THẠC SĨ Xây dựng chiến lược kinh doanh cho công ty cổ phần thương mại vận tải Sông Đà THESIS MBA FORMULATING BUSINESS STRATEGY FOR SONG DA TRADING AND TRANSPORT JOINT STOCK COMPANY FROM 2015 TO 2020 TABLE OF CONTENTS TABLE OF CONTENTS ACKNOWLEDGEMENT ABBREVIATION LIST OF FIGURES .6 LIST OF TABLES LIST OF APPENDIX EXECUTIVE SUMMARY INTRODUCTION .11 CHAPTER 1: THEORICAL FRAMEWORK 15 1.1 Definitions: 15 1.1.1 Strategy definition: .15 1.1.2 Vision statement: 15 1.1.3 Mission statement 16 1.1.4 Strategic objectives 16 1.2 Strategic levels: 17 1.2.1 Corporate - level strategy: 17 1.2.2 Business - level strategy: 18 1.2.3 Functional - level strategy: 18 1.2.4 Operation strategy: .18 1.3 Business strategies: 20 1.3.1 Cost leadership strategies: 20 1.3.2 Differentiation strategies: 20 1.3.3 Focus strategies: 20 1.4 Formulating strategy and business strategy: .21 1.4.1 Formulating model: 21 1.4.2 External environment audit model 22 1.4.3 Internal environment audit model 28 1.4.4 Strategic choices 31 1.4.5 Strategic implementation: 33 CHAPTER 2: STRATEGIC ANALYSIS FOR SOTRACO 35 2.1 Introducing the SOTRACO’s background 35 2.2 Actual performance of SOTRACO 2007-2009 36 2.3 Strategic analysis .38 2.3.1 PEST analysis: 38 2.3.2 Five Forces analysis: 42 2.3.3 Internal analysis 47 2.4 Current business strategies 52 2.4.1 Diversification at corporate level .52 2.4.2 Low cost provider at business level 53 CHAPTER 3: SUGGESTED SOLUTIONS TO IMPLEMENT STRATEGIES FOR SOTRACO 2010- 2015 .54 3.1 Development orientation 54 3.1.1 SWOT analysis 54 3.1.2 Mission,vision and objectives 55 3.2 Suggested strategies 56 3.2.1 Continue pursuing diversification strategy at corporate level 56 3.2.2 Pursuing differentiation strategy .57 3.3 Strategic implementation 60 3.3.1 Road map for strategy implementation .61 3.3.2 Controlling and evaluating strategy implementation 62 CONCLUSION 63 REFERRENCES 64 APPENDIX 75 ACKNOWLEDGEMENT This is a valuable chance for us to have an insight into method of forming strategy for one company This is also scare opportunity for us to apply knowledge and basic skills which we have learnt from MBA program to solve a practical problem of a company We would like to thanks all teachers and lecturers in the Griggs University who spent so much time ands efforts to instruct us to complete the project and the MBA course And we would like to extend my special thanks to SOTRACO’s management board, for facilitating our MBA pursuit both in encouragement and working supports We are also grateful to our friends, the staffs and managers of SOTRACO for their help during the time of data collection and interview for this project Finally, we would like to take this opportunity to thank our family, especially for their constant support and encouragement so that we can complete this course successfully ABBREVIATION WTO World Trade Organization APEC Asia –Pacific Economic Co-operation ASEM Asia – Europe Meeting SBU Strategic Business Unit PEST Political, Economic, Society, Technology SWOT Strength, Weakness, Opportunity, Threat IT Information System R&D Research & Development SOTRACO: Song Da Trading and Transport Joint Stock Company RBV Resource-Base View VCA Value Chain Analyze EFE External factors evaluation LIST OF FIGURES Figure 1.1: The strategy-Making hierarchy 19 Figure 1.2: Comparison of strategic choices .21 Figure 1.3: Formulating business strategy model 22 Figure 1.4: A company’s external environment 23 Figure 1.5: The five forces model of competition 26 Figure 1.6: The value chain activities 30 Figure 1.7: The SWOT matrix 32 Figure 1.8: The Strategic Balanced Scorecard Framework 34 Figure 2.1: VND/USD exchange rate history 41 Figure 2.2: IE matrix 51 Figure 2.3: Comparative position of transportation industry 52 Figure 3.1: Business structure of SOTRACO 2015 56 LIST OF TABLES Table 2.1 Comparative statistics of competitors of construction and building area (2008) 36 Table 2.2 Some comparative financial figures of SOTRACO 2007-2009 37 Table 2.3: Actual financial status in the years 2007-2009 37 Table 2.4 – Financial coefficients of the company 2008 38 Table 2.5 EFE matrix of SOTRACO 47 Table 2.6: IFE matrix of SOTRACO 50 Table 3.1: SWOT analysis of SOTRACO .54 Table 3.2.Road map for strategic implementation .61 LIST OF APPENDIX Appendix 1: The balance sheet of SOTRACO 2008 EXECUTIVE SUMMARY Established in 2003 as one subsidiary of Song Da Corporation, one of the big and reputable companies operating in Vietnam, SOTRACO would take advantages of a good foundation from its mother to develop After over years of operation, it has accomplished quite a lot achievement during its operation period, however, still bears some mistakes to be improved Like any other companies, SOTRACO is impacted by various factors including both external and internal ones Briefly, SOTRACO should enjoy stable politics of Vietnam with almost no threat of war in accordance with looser policies of the Vietnamese Government in the efforts of attracting FDI and ODA from foreign investment In addition, a sustainment and increasing economy also creates favorable condition for SOTRACO to operate in This enables company to take part in more projects and have chances to upgrade its technologies and enhance its management and production skills Nevertheless, an open economy of Vietnam also indicates fierce competition from not only domestic companies but also different competitors and potential rivals from other countries In addition, a lot threats come from external environment such as high inflation rate, increasing fast of material price, the substitution of product, etc To some extent, these rivals would outcompete SOTRACO in terms of both price and quality of products if it does not know how to promote and improve itself Regard to internal factors, reputation of Song Da corporation brand name is considered valuable intangible asset SOTRACO was listed in the stock exchange of Vietnam, therefore, it can be easier for the company to raise capital but in fact, this capital source has been utilized In addition, although SOTRACO has good basis in some production areas such as transportation of goods, this is cooperated with the fact that SOTRACO has limited management and working skills due to the characteristics of a company originated-state-owned model Moreover, SOTRACO diversified its business in various areas, which makes SOTRACO encounter difficulties in finding appropriate solutions to help the company exploit opportunities better and overcome challenges to continue the sustainable development Base on SWOT model which match external – internal environment, diversification is suggested for corporate level strategy It helps company improve competitive ability by the way to develop strengths, limit weaknesses, exploit well opportunities and overcome threats In business strategy level, differentiation strategy is recommended so that SOTRACO can focus its resources and capabilities in specific areas in order to increase its competitiveness over its rivals In the last part, the group has proposed some main solutions to implement strategies with the hope that these solutions can be applied to the reality and become useful INTRODUCTION 10 CHAPTER 3: SUGGESTED SOLUTIONS TO IMPLEMENT SOTRACO’S BUSINESS STRATEGIES FROM 2010 TO 2015 3.1 Development orientation of SOTRACO 3.1.1 SWOT analysis From all the above analysis, we evaluate strengths, weaknesses, opportunities and threats of SOTRACO in the following table: Opportunities Threats - Stable politiques - Increasingly intense competition -Applications of advanced technology - High requirement about quality and - Modernized infrastructure - High economic growth rate high bargaining power of investors - Unstable exchange rate and interest rate - Global integration - Financial crisis - Governement’s subsidiaries - Increasing number of substitute product Strengths Weaknesses - Large capital, experienced and capable - Lack of management skills workforce - Not paying enough attention on - Well-known brand name and first-rate marketing actitivities prestige - Lack of up-to-date technologies - Alliances with other subsidiaries of Song Da Table 3.1: SWOT analysis of SOTRACO 54 3.1.2 SOTRACO’s mission, vision and objectives 3.1.2.1 Vision • SOTRACO desires to become one strong company with a large variety of products with substantial competitive advantage to satisfy customers • Converge a large number of experienced and skilled workforces • Improve living standard for work staff and maximize profitability of the company and the shareholders 3.1.2.2 Mission • Inherit and develop 50 years of establishment and development of Song Da Corporation • Modernize management style; build up a staff with high capability and qualification to meet the demand of competitive market in current years and next few years • Increase the development growth of the enterprise in every operating area in order to utilize company’s resources and existing competitive advantage 3.1.2.3 Objectives 2010-2015: • Outputs (average) VND 2,752.33 billion • Growth rate (average): 105 % per year • Charter capital (average): VND 175 billion • Business structure: 55 • Source: Figure 3.1: Business structure of SOTRACO 2015 It can be seen from the above chart that in 2015, the commercial services will account for highest proportion in business structure of SOTRACO (45%), following by building and construction, financial services, industrial production and other services (15%) Transportation ranks at the bottom with 10% Traditionally, the top priority of SOTRACO was transportation, building and construction However, up to 2015, these business areas longer keep the primary role in the company’s business structure Commercial services gain the top priority of business structure One possible reason may be lies in the high profitability, short capital turnover and less risks of failure exposed in case of financial crisis This can be illustrated by the fact that the company is making great efforts to become the first-rate subsidiaries of some construction materials 3.2 Suggested strategies for SOTRACO From SOTRACO’s SWOT analysis shown in the previous section, we would recommend some strategies for SOTRACO to exploit the golden opportunities and bring into play and develop its strengths as well as make good its shortcoming and reduce impacts of threats 56 3.2.1 Continue pursuing diversification strategy at corporate level However, the company can consider whether to diversify into related or unrelated businesses In the scope of this paper, we suggest company to diversify into related business in order to: • Transferring competitively valuable expertise, technological know-how from one business to another, especially in the business areas that the company holds competitive advantage such as construction or transportation • Combining the related value chain activities such as marketing, supply chain of separate businesses, for instance selling construction materials and construction and building industry, into a single operation to achieve lower costs • Exploiting common use of a well-known brand name of Song Da Corporation in general and SOTRACO in particular This diversification strategy should be confirmed to be fit with value chain activities of the company in terms of • R& D and technology activities fits • Supply chain activities fits • Manufacturing related strategic fits • Distribution related strategic fits • Strategic fits in sales and marketing activities This is one important point that SOTRACO should pay more attention since in some last few years, marketing activities was not treated as an important value chain activity 3.2.2 Pursuing differentiation strategy At the business level, we would recommend SOTRACO to pursue differentiation strategy in some following aspects: • Supply chain activities: Strictly specifying the quality of imported materials from suppliers • Improve product designs and performance features, wider product variety and selection, added user safety or enhanced environmental protection since 57 the environmental protection is now concerned by many organizations but not many companies are willing to trade off between their profits and costs of protecting environment To some extent, this action can be treated as an additional cost of the company but can bring many benefits to the company in the future, especially enhance its reputation • Manufacturing activities that reduce product defects, result in more end-user convenience or enhance product appearance • Distribution and shipping activities that allows fewer warehouse or quicker delivery to customers This can be performed well if the company has good selection of the warehouse or exploiting the means of transport services of SOTRACO itself Specifically, some suggested solutions for SOTRACO to implement its strategies are illustrated as below 3.2.2.1 Human resources development Human is now the key success factor of every organization Microsoft is a good example of an enterprise that can be successful thanks to attracting the best workforce who would produce innovative IT products It is the fact that SOTRACO can benefit from a capable and young workforce who are good at improving learning curve However, in order to apply modern technologies in production, and then produce high-quality products and satisfying customers’ demand, SOTRACO still needs to develop reasonable human resources policies • Recruitment: The applicants of SOTRACO should meet the some requirements of the company such as high-qualified, capable and may have good access to team work It can pay more attention to professors specializing in building and construction, industrial production, financial and business administration areas to help company strengthen its core competency and overcome its weaknesses 58 • Training: Training should be provided for both new and existing employees of the company to improve their learning curves, knowledge and skill Note that administration and foreign language should be treated as a priority so that the company can have better cooperation with suppliers, investors or customer of other nations outside Vietnam • Compensating: Besides ensuring a reasonable salary level, SOTRACO should offer employees, especially administrative staff more fringe benefits such as health care service, children caring, holidays and so forth A good compensation system, in fact, can result in higher retention rate of employees, in other words, reduce turnover rate 3.2.2.2 Upgrading technologies and improving applications of technologies in production As mentioned above in the previous section, one of the weaknesses of SOTRACO lies in technology problems Old-fashioned technologies as well as poor applications of technologies in production may cause reduction of competitive advantage of SOTRACO compared with some other competitors who pay more attention on this issue One possible reason can be used as an excuse for this shortcoming is that modern technology often costs a large of fixed cost which is beyond the payment capability of the company and may require a long time to be recovered In addition, technology is being developed with remarkable speed, making SOTRACO find it difficult to upgrade this technology regularly It cannot be denied that foreign investors and even domestic companies with strong financial resources are apparent to outcompete SOTRACO in this aspect of concerns In addition, the company should promote alliances with experienced and first-rate prestige contractors such as Song Da Thang Long Joint Stock company, Vinaconex Company, Song Da Urban Investment Construction And Development Joint Stock Company, etc to be more confident of joining big projects of industrial zones or urban areas 59 3.2.2.3 Solutions to financial department: • Raising funds: The main source of funds is still credit institutions such as preferential credit or commercial credit Another method of raising funds is issuing shares in stock exchange This source of funds is rather available for SOTRACO once it has good credit rating, reputation and good financial ratios The estimated charter capital of SOTRACO in 2015 is VND 17.5 billion • Controlling and utilizing sources of capital: Setting up detailed plans for utilizing capital and controlling it External financial audit can be a smart choice of many companies nowadays, including SOTRACO It is remarkable for the company to put great efforts in controlling bad debts and increasing working capital, consequently, ensuring capital for various investment projects For one company that pursues diversification strategy, this note should be treated as a special requirement 3.2.2.4 Exploiting and strengthening well-known brand name Song Da Corporation is a name, symbol, or other feature that distinguishes the company's goods or services in the marketplace Consumers often rely upon brands to guide their purchase decisions The positive feelings consumers accumulate about a particular brand are what makes the brand a valuable asset for the company that owns it SOTRACO may structure its marketing programs around building and preserving its brand equity as one competitive advantage over rivals The basis of brand equity lies in the relationship that develops between a consumer and SOTRACO through gaining recognition for its product, get the consumers to actually try its brand, and then convince the buyer stat the brand is acceptable and vice versa, a well-known brand name would promote more purchase from the customers (1) 3.3 Strategic implementation 60 3.3.1 Road map for strategy implementation Time scale Operations 1.Production (Increase total outputs) Output VND 2,752.33 billion 2010-2011 2011- 2012- 2013- 2014- Finish 2012 Finish 2013 2014 2015 Finish Finish Finish target of target of target target target of 2011 of of 2014 2012 2013 2010 /annual Totally VND 16,513.97 Finish target of million period Divisions in charge Production, Sale, Planning, Financial Charter capital 2.Finance to VND 17.5 3.Human billion Complete resources 4.Technology upgrade Done Finance Done Personnel improvement Invest in new Step 1of Step machines, technology of reprair and improveme technolo upgrade nt gy existing improve machines & ment equipment Signing Done contracts with 5.Business plan planned investors, contractors, suppliers Table 3.2.Road map for strategic implementation 3.3.2 Controlling and evaluating strategy implementation 61 Technology departmen During the process of implementing strategies, SOTRACO should have strict controlling and evaluation to ensure the time scale of the implementation These plans should be revised regularly by supervisors and administrative staff, for instance, quarterly or semi-annually In addition, the evaluation should meet some established criteria These criteria are set up based on database of previous years which can fit well with company’s resources and capabilities CONCLUSION 62 In short, during years of operation, SOTRACO has accomplished certain achievements that need maintaining and developed in the coming years Nevertheless, it cannot be denied that the volatile and up-to-minute-changing environment has great impacts on the operation and development of the enterprise, especially the threat of another financial crisis should always be taken into account It can be said that creating competitive advantage is likd a race in a road with undefined length and requires not only speed but also endurance, thereore, requires patience and good resources The positions of individual enterprises in this competition are relatively and temporary only because all enterprises try to overtake their competitors It means that competitive advantage achieved does not exist permanent, it remains only in certain period of time It is believed that SOTRACO can exploit its strengths and resources to catch up golden opportunities and develop and minimize the impacts of threats on the interprises To conclude, we expect that this capstone project woud be useful for SOTRACO in crafting and executing business strategies We sinceraly hope to receive constructive feedbacks from our teachers and professors in order to complete and optimize the business-level strategy REFERENCES English 63 Niven, P., R (2002) Balanced Scorecard step by step Thompson, Strickland, Gamble (2007) Crafting and executing strategy-the quest for competitive advantage, concepts and cases, 15th edition ISBN-13: 978-0-07-110757-0 Brand positioning from http://media3.bournemouth.ac.uk/marketing/10branding/05position.html Decline of Dollar, Beginning of End from http://lws.vox.com/library/posts/tags/economy/ PEST analysis from http://www.quicmba.com/strategy/pest/.V3 Porters Force from http://www.themanager.org/Models/p5f.htm SMART criteria”, http://en.wikipedia.org/wiki/SMART_criteria The EFE Matrix (External Factor Evaluation Matrix) from http://www.mbatutorials.com/strategy/76-the-efe-matrix-external-factor-evaluationmatrix.html Vietnamese Ha Phuong (2006), "G7 Mart: An Ambitious Project", Vietnam Economic News, No.9 Vol 10 Le The Gioi; Nguyen Thanh Liem;Nguyen Huu Ai (2007) Quan tri chien luoc (Nha xuat ban Thong Ke) 11 Chien luoc phat trien cong ty SOTRACO from http://www.sotraco.vn/ (S(y2vi12vdks5juxbkegzwjpiv))/Introduce.aspx?ID=37&MenuID=49 APPENDIX Appendix 1: Balance sheet of SOTRACO 2008 64 BALANCE SHEET Date: 31/12/2008 A ASSET CURENT ASSET I Equivalent Money 110 Cash Short term asset 111 112 II Short - term investments 120 130 Account receivable 131 Prepayment to suppliers 132 Other receivable 135 Provision for doubtful debts 139 IV Inventories 140 141 Inventories Provision for decline in inventory 01/01/2008 425.011.178.5 53 8.114.88 3.161 8.114.883 161 144.076.617.5 53 14.427.485.2 69 14.427.485 269 125.911.089.5 48 88.894.296 675 29.608.695 174 8.058.156 877 (650.059 178) 74.635.757.1 99 50.075.232 517 21.061.887 217 3.498.637 465 259.808.202.5 67 259.808.202 567 49.214.377.2 59 49.214.377 259 5.798.997.8 26 100 (100=110+120+130+140+150) III Account receivable 31/12/2008 149 V Other short- term assets 150 Short-term prepaid expenses 151 VAT are deducted Taxes and payable to state budget Other short-term assets 152 31.177.003.2 77 1.794.041 700 21.710.921 814 154 158 7.672.039 65 629.011 893 978.601 382 4.191.384 763 B LONG TERM ASSETS (200=210+220+240+250+260) 200 I Long term receivable 210 Other long -term receivable 218 II Fixed assets 220 Tangible fixed assets 221 - The original price 222 - Accumulated depreciation 223 Intangible fixed assets 227 - The original price 228 Accumulated depreciation Unfinished capital construction 229 230 III Invested immovable 240 IV Long- term investments 250 258 Other long -term investments Provision for decline in longterm investments 259 V Other long term assets 260 Long term prepaid Other long term assets 261 268 TOTAL ASSETS (270=100+200) 270 66 551 141.992.270.3 66 11.354.0 00 11.354 000 33.205.585.5 78 24.949.357 469 34.256.985.7 34 (9.307.628.2 65) 8.256.228.109 18.478.816.0 06 13.916.316 006 21.830.039 994 (7.913.723.9 88) 562.500 000 750.000 000 (187.500.0 00) 4.000.000.000 107.699.860.0 00 108.856.500 000 (1.156.640 000) 83.163.200.0 00 83.163.200 000 1.075.470.7 88 1.075.470 788 4.904.881.0 07 4.904.881 007 567.003.448.9 19 250.623.514.5 66 CAPITAL Code 31/12/2008 01/01/2008 493.847.309 176 177.763.677.0 28 418.458.586.0 28 72.154.029 875 123.256.661 895 218.126.874 929 1.219.963 006 436.070 907 2.440.218 802 - 177.266.042.6 63 46.745.869 570 24.915.594 820 38.192.734 829 1.563.717 407 124.172 202 130.952 667 - 824.766 614 65.593.001 168 A LIABILITIES (300=310+330) 300 I Current liabilities 310 Short -term borrowing 311 Accounts payable- trade 312 313 Customer prepaid Taxes and payable to state budget Payables to employees 315 Others expense Intercompany payables Payables by scheduled progress of const contract 316 317 Other payable 10 Provision for short-term debts 314 318 319 320 - - II Long- term liabilities Long- term payables Long- term internal payables Other long -term payable 330 331 332 333 Long -term borrowing 334 Provision for long- term debts 336 75.388.723.1 48 75.363.757 842 24.965 306 B OWNER'S EQUITY (400=410+430) 400 73.156.139.7 43 72.859.837.5 38 410 411 73.156.139 743 50.000.000 72.859.837 538 50.000.000 I Owner's equity Owner's capital 67 497.634.3 65 472.669 059 24.965 306 Holding Budget 412 Other capital 413 Business development funds 417 Reserved funds 418 10 Undistributed earnings 420 11 Owner's other funds 421 II 430 Budget resources TOTAL RESOURCES (440=300+400) 440 68 000 16.422.729 000 213.538 854 1.709.552 020 229.720 664 4.580.599 205 - 567.003.448.9 19 000 16.422.729 000 213.538 854 760.255 698 94.423 664 5.368.890 322 - [...]... charge of managing different strategy levels Corporate strategy is responsibility of corporate-level managers, business strategy is responsibility of business level-general managers, functional strategy is responsibility of heads of major functional activities within a business unit or division and operating strategy is responsibility of plant managers, geographic unit managers, and managers of front line... treats providing low cost as one tool to gain competitive advantage and market share over user’s rivals The firm can chose this strategy when its ability to make differentiation of product is low; market segment which they follow is low with high quantity In addition, they have to ability to make differentiation about manufacture and management material [11] 1.3.2 Differentiation strategies: Differentiation... vision, mission and long term–objective environment strategic choice which can choose the most suitable business strategies to apply for the company; (5) the last is strategicSetting implementation, in this step will show how up Vision/Mission/Objectives strategies chosen will be implemented The figure 1.3 presents model of this process Strategic choices Business A’s strategy Business B’s strategy Business... [1] Three above strategic choices can be compared based on different criteria, shown in the following figure: 20 Cost Differentiation Focus Differentiation leadership Low (mainly High (mainly by Low to high of product by price) unique) (unique price) Low (market High (many Low (one or with high market segment) some market Market segment quantity) segment) Manufacture Ability to make and differentiation... Quality, improvement, and meeting customer demand [11] 1.3.3 Focus strategies: The main distinctive feature of this strategy is focusing directly to meet demand of limited group or market segment Exploiting market niche strategy allows company to focus its resources on making high quality products, meeting their customers’ high requirements In addition, they can develop new products faster than choosing... assist each other with reasonable prices, improved quality, development of new services, just-in-time deliveries, and reduce inventory cost, thus enhancing long term profitability for all concerned [6] • The Bargaining Power of Buyer: 27 When customers are concentrated or large, their bargaining power represents a major force affecting the intensity competition in an industry Rival firms may offer extended... and compensation of all type of personnel It supports both individual primary and support activities and entire value chain [2] • General administration: General administration includes supports such as general management, planning, finance, accounting, legal, government affair, quality management, and information system Administration (unlike the other support activities) typically supports the entire... Second, a strategy-focused enterprise is more likely to be a strong bottom-line performer than a company whose management views strategy as secondary and puts its priority elsewhere In other words, there’s no escaping the fact that the quality of managerial strategy making and strategy execution has a highly positive impact on revenue growth, earnings and return on investment [2] Established as a subsidiary... high market segment) some market Market segment quantity) segment) Manufacture Ability to make and differentiation management material Research & Any ability to development, make sale & differentiation marketing Figure 1.2: Comparison of strategic choices [2, pp.95] 1.4 Strategic formulation and management process 1.4.1 Formulating model: IDENTIFYING PROBLEM In order to formulate a business strategy... hierarch [2,pp.39] 1.3 Business strategies: 19 One organization can take into account different external and internal factors to choose which generic competitive strategies to employ: low cost provider strategies, differentiation strategies, focus (market niche) Each strategic choice bears its own strengths and shortcomings 1.3.1 Cost leadership strategies: Cost leadership focuses on providing products