Phát triển chiến lược kinh doanh cho các khách sạn thương mại tị hà nội giai đoạn 2011 2020

Characteristics of Hotel industry...18 CHAPTER II: ANALYSIS AND EVALUATION OF BUSINESS NVIRONMENT AND ACTIVITIES OF VIETNAM TRADE UNION HOTEL IN HANOI 2.1.. Developing IE Matrix for Viet

Phát triển chiến lược kinh doanh cho các khách sạn thương mại tị Hà Nội giai đoạn

TABLE OF CONTENT

INTRODUCTION

1 Rationale of the study 01

2 Research objectives 01

3 Research methodology 02

4 Research scope and limitation 03

5 Structure of the thesis 03

CONTENT CHAPTER I:BASIC THEORY ON BUSINESS STRATEGY 04

1.1 Business Strategy 04

1.1.1 Concepts 04

1.1.2 Types of strategies 05

1.1.2.1 Integration strategies 05

1.1.2.2 Intensive strategies 05

1.1.2.3 Diversification Strategies 06

1.1.2.4 Defensive strategies 06

1.1.2.5 Michael Porter’s Generic Strategies 06

1.2 Strategy building process 07

1.2.1 Setting business mission 08

1.2.2 External Assessment 08

1.2.2.1 Key external Forces 08

1.2.2.2 The process of performing external assessment 10

1.2.3 Internal Assessment 10

1.2.3.1 Keys internal forces 10

1.2.3.2 The process of performing internal assessment 11

1.2.4 Strategy Analysis and Choice 11

1.2.4.1 The input stage 11

1.2.4.2 The matching stage 11

1.2.4.3 The decision stage 12

1.3 Tools to build business strategies 12

1.3.1 Collecting and systemize information 12

1.3.1.1 EFE Matrix 12

1.3.1.2 IFE Matrix 13

1.3.1.3 Competitive profile matrix 14

1.3.2 Matching stage 15

1.3.2.1 SWOT Matrix 15

1.3.2.2 SPACE Matrix 15

1.3.2.3 The Internal-External (IE) Matrix 16

1.3.3 Decision stage 17

1.4 Characteristics of Hotel industry 18

CHAPTER II: ANALYSIS AND EVALUATION OF BUSINESS NVIRONMENT AND ACTIVITIES OF VIETNAM TRADE UNION HOTEL IN HANOI 2.1 Introduction about Vietnam Trade Union hotel 20

2.1.1 The foundation and development 20

2.1.2 Facilities and services 21

2.1.3 Hotel organization chart: 22

2.1.4 Business results 23

2.2 Vietnam Trade Union Hotel External Assessment 24

2.2.1 Macro Environment 24

2.2.1.1 Economic Environment 24

2.2.1.2 Socio-cultural Environment 27

2.2.1.3 Politic Environment 28

2.2.1.4 Natural Environment 29

2.2.1.5 Technological Environment 30

2.2.2 Micro Environment 31

2.2.2.1 Competitors 31

2.2.2.2 Customers 36

2.2.2.3 Suppliers 37

2.2.2.4 Potential Entry of new competitors 38

2.2.2.5 Potential development of Substitute products 38

2.2.3 Evaluation of Opportunities and Threats 39

2.2.3.1 Threats 39

2.2.3.2 Opportunities 40

2.2.4 EFE Matrix for Vietnam Trade Union Hotel in Hanoi 41

2.3 Vietnam Trade Union Hotel Internal Assessment 42

2.3.1 Organization Structure 42

2.3.2 Human Resources 42

2.3.3 Marketing 44

2.3.4 Management 44

2.3.5 Financial and accounting 45

2.3.6 Research and Development 46

2.3.7 Information Technology and Information System 47

2.3.8 Evaluation of Strengths and Weaknesses 47

2.3.8.1 Strengths 48

2.3.8.2 Weaknesses 48

2.3.9 IFE Matrix 49

2.4 Developing SWOT matrix for Vietnam Trade Union Hotel in Hanoi 50

2.5 Developing IE Matrix for Vietnam Trade Union Hotel in Hanoi 52

CHAPTER III: BUSINESS STRATEGIES FOR VIETNAM TRADE UNION HOTEL IN HANOI FOR THE PERIOD FROM 2011 – 2020 3.1 Analysis of possibly feasible strategies 54

3.1.1 General analysis 54

3.1.2 QSPM Matrix analysis 55

3.2 Strategies for Vietnam Trade Union Hotel from 2011 – 2020 57

3.3 Solutions for applying strategies 58

3.3.1 Developing facilities 58

3.3.2 Turning the hotel into a green hotel 58

3.3.3 Marketing Solutions 60

3.3.3.1 Market segmentation: 60

3.3.3.2 Building Positioning statement 60

3.3.3.3 Advertising 61

3.3.3.3 Distribution and Yield Management 61

3.3.4 Developing Human resources 65

3.3.4.1 Setup job description and performance standard 66

3.3.4.2 Calculating number of employees for the hotel 66

3.3.4.3 Establishing source of labor 67

3.3.4.4 Staff training 68

3.3.5 Restructure the organization 68

3.4 Timeline for implementing solutions 69

3.4.1 Time line 69

3.4.2 Provision for unexpected situations: 71

CONCLUSION 72

REFERENCE: 73

APPENDIX: 75

LIST OF TABLES, CHARTS AND FIGURES

Table 1.1 Example of a blank EEF Matrix 13

Table 1.2 Example of a blank IEF Matrix 14

Table 1.3 Example of a blank CPM Matrix 15

Table 1.4 Example of a blank QSPM Matrix 18

Table 2.1 Vietnam Trade Union Hotel in Hanoi Room Tariff 21

Table 2.2 Vietnam Trade Union Company Business results from 2006 to 2010 23

Table 2.3 Vietnam Trade Union Hotel in Hanoi Business results from 2006 - 2010 24

Table 2.4 Hotel market in Hanoi in 2010 31

Table 2.5 The development of tourists to Hanoi from 2005 – 2010 36

Table 2.6 EFE Matrix for Vietnam Trade Union Hotel in Hanoi 41

Table 2.7 The increase in Revenue and Income before tax of Vietnam Trade Union Hotel in Hanoi .46

Table 2.8 IFE Matrix for Vietnam Trade Union Hotel in Hanoi 50

Table 3.1 QSPM Matrix for Vietnam Trade Union Hotel in Hanoi 56

Table 3.2 Timeline for solutions 70

Chart 2.1 Organization chart of Vietnam Trade Union Company 22

Chart 2.2 Organization chart of Vietnam Trade Union Hotel in Hanoi 23

Chart 2.3 The increase of tourists to Hanoi from 2005 - 2010 37

Figure 1.1 Example of a blank IE Matrix 17

Figure 2.1 SWOT Matrix for Vietnam Trade Union Hotel in Hanoi 51

Figure 2.2 IE Matrix for Vietnam Trade Union Hotel in Hanoi 52

1 Rationale of the study

Tourism is an economic, environmental and social force of globalproportions Developing a strong and sustainable tourism industry has become apriority of great importance of many countries

In Vietnam tourism has been recognized as a leading industry providing ahuge source of income and job creation for the country Along with thedevelopment of tourism industry in Vietnam, tourism in Hanoi has also beendeveloping very fast creating huge demand for hotels and hotel rooms However,this fast development is very tempting to new entry to this industry and thus cancreate very fierce competitions In addition, the fluctuation of tourism and hotelindustry can create problems for development of hotels For that reasons each hotelneeds clear strategies for development

The hotel is also the main financial and revenue source as well as the headquarter of Vietnam Trade Union Company The health and development of the hotelwill greatly affects the health and development of the company and thus a goodstrategy for the hotel is vital Vietnam Trade Union Hotel in Hanoi is working withpositive business results and having great potential for development However, theperiod form 2011 to 2020 is posing a lot of changes and challenges for tourismindustry in Vietnam in general and in Hanoi in particular while the hotel has not aspecific strategy for the new period To prepare for this, the hotel should havematching strategies For all these reasons, it is urgent that there is a study to developbusiness strategies for Vietnam Trade Union Hotel for the period from 2011 to 2020

2. Research objectives

This research project aims to achieve the following objectives:

 To provide an overall picture of Vietnam Trade Union Hotel’s businessactivities with regard to strategy development

 To analyze and evaluate the internal and external factors affecting VietnamTrade Union Hotel

 To identify possibly feasible strategies for the hotel for the period from 2011 2020

- To propose some solutions for applying strategies for the hotel

3 Research methodology

The method of studying is using internal and external audits along with EFEand IFE matrixes with the 5-force model The results of the analysis of the matrixesand the model will then be matched with SWOT and IE matrixes to identifypossible strategies to apply The QSPM matrix is then used to identify the suitablestrategies to apply When the strategies are identified, a set of solutions to realizestrategies are proposed

In terms of data collection and analysis, in this project qualitative researchmethod was used intensively The data were collected from secondary and primarysources Qualitative method will be applied to analyze and evaluation aboutbusiness activities and strategies at Vietnam Trade Union Hotel along with otherinternal and external factors The following sections present in details the methods

to gather and to analyze the data sources used in this project

Secondary data sources

For theory framework, textbooks on Tourism, Hotel Management, StrategyManagement and Hotel Marketing are selected as sources of reference

For external evaluation, reports, articles and other data will be collected fromVNAT, ITDR, Hanoi Administration of tourism, Vietnam Trade Union Hotel andother sources The data from secondary sources provide information regarding to anoverall picture of tourism in Vietnam and Hanoi; the demand for and supply ofhotel room; the business results of Vietnam Trade Union Hotel

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Primary data sources

Primary data source were collected using qualitative method as follow:

 In-depth interviews will be conducted with General Manager of the hotel andother heads of department

 Besides interviews, observation will be applied to evaluate the other relatedfields of business and operation of the hotel

4 Research scope and limitation

The research focuses on the business activities and results in Vietnam TradeUnion Hotel and tourism and hotel industry in Hanoi in the period from 2005 to

2010 Other supporting research, data collections are limited to Hanoi area

5 Structure of the project

This project includes 3 main chapters:

Chapter 1: Basic theory on business strategy

Chapter 2: Analysis and evaluation of Business environment and activities of

Vietnam Trade Union Hotel in Hanoi

Chapter 3: Business strategies for Vietnam Trade Union Hotel in Hanoi for the

period from 2011 – 2020

CHAPTER I:

BASIC THEORY ON BUSINESS STRATEGY

1.1 Business Strategy

1.1.1 Concepts

In order to develop business strategy it is necessary to have a clear definition

on strategy to serve as guidance for study and analysis There are several definitions

of strategy such as the definition by Chandler “the determination of the basic term goals and the objectives of an enterprise, and the adoption of courses of actionand the allocation of resources necessary for carrying out these goals." [5] and theone by Quinn “a strategy is the pattern or plan that integrates an organization'smajor goals, policies, and action sequences into a cohesive whole” [10] or the one

long-by Johnson and Scholes “Strategy is the direction and scope of an organization overthe long-term: which achieves advantage for the organization through itsconfiguration of resources within a challenging environment, to meet the needs ofmarkets and to fulfill stakeholder expectations” [8] From all the definition it can beseen that strategy aims at identifying how a business or organization reach its goalsand objectives

In application, there are 3 levels of strategies The first one is Corporate Strategy which is concerned with the overall purpose and scope of the business to meet stakeholder expectations The second one is Business Unit Strategy with more

regard on how a business competes successfully in a particular market This type ofstrategy puts more emphasis on choice of products, meeting needs of customers,gaining advantage over competitors, exploiting or creating new opportunities etc

The last one is the Operational Strategy with the concern on organization of each

part of a business to deliverthe corporate and business-unit level strategic direction

In this study, more emphasis is placed on the strategies at strategic businesslevel than other levels However, other types of strategies are also paid attention to

as they are very closely related and interacted

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1.1.2 Types of strategies

It is necessary to have a pool of choices of strategies to see which one or onescould be suitable of a business For that reason the different types of strategies arebriefly described here They are integration strategies, intensive strategies,diversification strategies, defensive strategies and lastly Michael Porter’s GenericStrategies

1.1.2.1 Integration strategies

A company can use integration strategies to improve the efficiency andeffectiveness of its business activities and to save cost and to be independent fromits suppliers or distribution channel or to change its competitors into parts of itsoperation to increase strength and reduce competition A company can apply

Forward integration by gaining ownership or control over distribution channels In

the opposite way, the company can gain the ownership or control of its suppliers

This is called Backward integration The company can also apply Horizontal integration by getting ownership or control over competitors by mergers,

acquisitions, and takeovers

These strategies can be applied when it is more profitable to do and thecompany has enough resources and ability to do

1.1.2.2 Intensive strategies

When a company wants to improve its competitive position with existingproducts, intensive strategies are to be applied Intensive strategies includestrategies like market penetration, market development, and product development

A company can do Market penetration to increase market share for its

products or services in present market by intensive marketing effort like increasingnumber of sale staff, advertising expenditures, sale promotion etc The companycan also introduce its present product or service into new geographic area This is

called Market development Finally, the company can increase sale by improving or

modifying its present products or service This action is called Product development.

which is adding new but unrelated products or services because the company is veryfamiliar with the customers and so are the customers

1.1.2.4 Defensive strategies

At time, a business may face difficulties or want to change business focus ordirection etc and thus it may think of defensive strategies

When a business regroups though cost and asset reduction or reverse

declining sales and profits it can apply retrenchment by selling land and properties,

closing factories, reducing number of employees… It can also sell a division or part

of it which are not profitable or requiring too much capital or not well fitted with its

other activities This action is called divestiture which can be part of retrenchment The company can chose liquidation which is selling all of company assets, in parts,

for their tangible worth

1.1.2.5 Michael Porter’s Generic Strategies

According to Michael Porter a firm's strengths ultimately fall into one of twokinds: cost advantage and differentiation Applying these strengths results in threegeneric strategies: cost leadership, differentiation, and focus These strategies areapplied at the business unit level

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a Cost Leadership Strategy

The main reason for applying integration strategies is to gain cost leadershipbenefits Being the low cost producer in an industry for a given level of quality, acompany can sell its products or services either at average industry prices to earn aprofit higher than that of competitors, or below the average industry prices to gainmarket share In the case of a price war, the company can still have someprofitability while the competitors suffers losses Even when not in a price war, asthe industry matures and prices decline, the company still remains profitable for alonger period of time The company can gain cost advantages by improving processefficiencies, gaining unique access to a large source of lower cost materials, makingoptimal outsourcing and vertical integration decisions, or avoiding some costsaltogether etc

1.2 Strategy building process

Strategy management process includes 3 stages of strategy formulation,strategy implementation and strategy evaluation For the purpose of this study the

strategy formulation or building will be discussed at length Other stages will bementioned as supporting processes.

Strategy formulation includes setting business mission, identifying externalopportunities and threats, identifying internal strengths and weaknesses, generatingpool of strategies for choice

1.2.1 Setting business mission

Developing business mission is considered the first step in strategy buildingprocess For this study the definition of business mission by Mintzberg is used

According to Mintzberg “A mission describes the organization’s basic function in society, in terms of the products and services it produces for its customers” [9]

With this definition a business mission should have a purpose telling why a company exists; a strategy and strategic scope defining range of products and services and method of competing; policies and standards of behavior; values and culture

The outcome of the business mission setting is the vision statement andmission statement These statements should cover all elements mentioned above

1.2.2.1 Key external Forces

According to Fred R David, external forces can be divided into five broadcategories of Economic forces; Social, cultural, demographic, and environmentalforces; Political, governmental, and legal forces; Technological forces; andCompetitive forces [7] However, for the shake of this study they can be groupedinto two main levels: Macro environment level and industry level

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a Macro environment factors

This level include the first 4 factors of Political, governmental, and legalforces; Economic forces; Social, cultural, demographic, and environmental forces;Technological forces They are abbreviated as PEST for the easy of remembering

b Industry environment factors

These factors are another form of competitive forces and they can beanalyzed under the Michael Porter’s five forces model This model is a frameworkfor the industry analysis and business strategy development This model identifiesand analyzes five forces that determine the competitive intensity and thereforeattractiveness of an industry or a market Attractiveness in this context refers to theoverall industry profitability An "unattractive" industry is one in which thecombination of these five forces acts to drive down overall profitability

These five forces include: the threat of the entry of new competitors, theintensity of competitive rivalry, the threat of substitute products or services, thebargaining power of customers (buyers), the bargaining power of suppliers

 The entry of new competitors will eventually decrease profitability for allcompanies in the industry

 The intensity of competitive rivalry is the major determinant of thecompetitiveness in most of the industry

 Substitute products or services are the one outside of the realm of thecommon product boundaries increases the propensity of customers toswitch to alternatives and thus can threat the revenue and profit of anindustry

 The bargaining power of customers is the ability of customers to put thecompany under pressure, which also affects the customer's sensitivity toprice changes.

 The bargaining power of suppliers is another pressure over the company.When there are few substitutes, suppliers may refuse to work with thecompany, or, e.g., charge excessively high prices for unique resourcesand thus put the company in a difficult situation

1.2.2.2 The process of performing external assessment

This process starts with the collection of competitive intelligence andinformation about social, cultural, demographic, environmental, economic, political,legal, governmental, and technological trends

The second step in this process is to assimilate and evaluate informationcollected In this step, factors collected should be prioritized by numbered themfrom 1 for the most important opportunity/threat to 20 for the least importantopportunity/threat The list should then be communicated and distributed widely in the company

1.2.3 Internal Assessment

All organizations have strengths and weaknesses in the functional areas ofbusiness No enterprise is equally strong or weak in all areas Therefore internalassessment is necessary to identify strengths and weaknesses This assessment goeshand in hand with external assessment to provide a basis for establishing objectivesand strategies Just like doing external assessment, keys internal forces and processshould be established

1.2.3.1 Keys internal forces

There are many forces and indicators that internal assessment needs to look

at in all fields of management, marketing, finance/accounting,production/operations, research & development, management information systems

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Other resources are also needed to be looked at They are: physical resources,human resources, organizational resources.

While assessing the key internal forces the distinctive competencies, whichare the strengths that competitors cannot easily match or imitate, should beidentified and be taken advantage of to build competitive advantages

1.2.3.2 The process of performing internal assessment

The process of performing an internal assessment process is very similar tothat of performing an external assessment This internal assessment starts withgathering information on the company operations and then assimilating andevaluating the information In the assimilating and evaluating process, factorscollected should be prioritized by numbered them from 1 for the most importantstrengths/weaknesses to 20 for the least important strengths/weaknesses The listshould then be communicated and distributed widely in the company

The process of performing an internal assessment provides more opportunityfor doers to understand how their jobs, departments, and divisions fit into the wholeorganization or company

1.2.4 Strategy Analysis and Choice

In order to come to a final strategy or strategies to achieve mission andobjectives a company must complete internal and external assessments and matchthem with objectives and mission to achieve to generate and evaluate feasiblealternative strategies This process includes 3 stages from input to matching andfinally decision stage

1.2.4.1 The input stage

In this stage EFE Matrix, IFE Matrix and CPM are developed to providebasic input information for the matching and decision stages The methods fordeveloping these matrixes will be discussed later in this study

1.2.4.2 The matching stage

In this stage, different tools are used to match external and internal criticalsuccess factors to generate feasible alternative strategies These tools are SWOTmatrix, SPACE matrix, BCG matrix, and the IE matrix Again, the methods fordeveloping these matrixes will be discussed later in this chapter.

1.2.4.3 The decision stage

After completing matching stage, there are several feasible alternativestrategies revealed These strategies should then be prioritized to identify the beststrategy or strategies The other way to identify the best one or ones is usingQuantitative strategic planning matrix

1.3 Tools to build business strategies

As mentioned, for each stage of strategy analysis and choice there are severaltools to be used and they will be discussed in more detail in this part They are alsogrouped in the corresponding stage as in the part of strategy analysis and choice

1.3.1 Collecting and systemize information

1.3.1.1 EFE Matrix

External Factor Evaluation (EFE) matrix is a tool often used for assessment

of current business conditions The EFE matrix is a good tool to visualize andprioritize the opportunities and threats that a business is facing

EFE matrix can be developed with the following steps:

 First, gather a list of external factors and divide them into two groups:opportunities and threats

 Second, assign a weight to each factor The value of each weight should

be between 0 and 1 Zero means the factor is not important One meansthat the factor is the most influential and critical one The total value

of all weights together should equal 1

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 Third, assign a rating to each factor Rating should be between 1 and 4.Rating indicates how effective the firm’s current strategies respond to thefactor 1 = the response is poor 2 = the response is below average 3 =above average 4 = superior.

 Fourth, multiply each factor weight with its rating This will calculate theweighted score for each factor

 Finally, total all weighted scores by adding up all weighted scores foreach factor This will calculate the total weighted score for the company

Table 1.1 Example of a blank EEF Matrix

Threats

Poor (1), below average (2), above average (3), superior (4)

Source: Adapted from Fred R David, Strategic Management Concepts & Cases [7, p111]

1.3.1.2 IFE Matrix

Internal Factor Evaluation (IFE) matrix is tool for evaluating major strengthsand weaknesses in functional areas of a business

EFE matrix can be developed with the following steps:

 First, gather a list of about 20 internal factors and divide them into twogroups: strengths and weaknesses

 Second, assign a weight to each factor The value of each weight should

be between 0 and 1 Zero means the factor is not important One meansthat the factor is the most influential and critical one The total value

of all weights together should equal 1

 Third, assign a rating to each factor Rating should be between 1 and 4.Rating indicates how effective the company’s current strategies respond

to the factor 1 = major weakness 2 = minor weakness 3 = minorstrength 4 = major strength.

 Fourth, multiply each factor weight with its rating This will calculate theweighted score for each factor

 Finally, total all weighted scores by adding up all weighted scores foreach factor This will calculate the total weighted score for the company

Table 1.2 Example of a blank IEF Matrix

…

Weaknesses

…

Source: Adapted from Fred R David, Strategic Management Concepts & Cases [7, p151]

1.3.1.3 Competitive profile matrix

Competitive profile matrix is tool to compare the firm with the majorcompetitors of the industry Competitive profile matrix compares a company’sstrengths and weaknesses relatively to its competitors The CPM score is measured

on basis of critical success factors CPM includes both internal and external factors

to evaluate overall position of the company with their major competitors

The process of constructing CPM matrix is much the same that of Internaland External Evaluation Matrixes Rating in CPM represents the response of acompany toward the critical success factors The highest the rating of 4.0 meansbetter the response of the company towards the critical success factor, while thelowest rating of 1.0 means the poor response of the company towards criticalsuccess factor

Table 1.3 Example of a blank CPM Matrix

1.3.2.2 SPACE Matrix

The Strategic Position & Action Evaluation matrix is a strategic managementtool that focuses on strategy formulation especially as related to the competitiveposition of an organization

The SPACE matrix is broken down to four quadrants presenting differenttype or a nature of a strategy: Aggressive, Conservative, Defensive, andCompetitive

The SPACE matrix is constructed by plotting calculated values forthe competitive advantage (CA) and industry strength (IS) dimensions on the Xaxis The Y axis is based on the environmental stability (ES) and financial strength(FS) dimensions The SPACE matrix can be created using the following steps:

 Choose a set of variables to be used to gauge the competitive advantage(CA), industry strength (IS), environmental stability (ES), and financialstrength (FS)

 Rate individual factors using rating system specific to each dimension Ratecompetitive advantage (CA) and environmental stability (ES) using ratingscale from -6 (worst) to -1 (best) Rate industry strength (IS) and financialstrength (FS) using rating scale from +1 (worst) to +6 (best).

 Find the average scores for competitive advantage (CA), industry strength(IS), environmental stability (ES), and financial strength (FS)

 Add the average score for the competitive advantage (CA) and industry strength(IS) dimensions to come to final point on axis X on the SPACE matrix

 Add the average score for the SPACE matrix environmental stability (ES)and financial strength (FS) dimensions to come to final point on the axis Y

 Find intersection of your X and Y points Draw a line from the center of theSPACE matrix to your point This line reveals the type of strategy thecompany should pursue

1.3.2.3 The Internal-External (IE) Maxtrix

The Internal-External (IE) matrix is a strategic management tool used toanalyze working conditions and strategic position of a business This matrix isbased on analysis of internal and external business factors This matrix is developedthrough the following steps:

 Take score from the EFE matrix and plot it on the y-axis

 Take score from the IFE matrix and plot it on the x-axis

 Draw a vertical line across the plane

The point where the horizontal line meets the vertical line is the determinant

of suggested strategy that a company should follow

Figure 1.1 Example of a blank IE Matrix

IFE Total weighted score

Strong3.00 to 4.00 2.00 to 2.99Average 1.00 to 1.99Weak

Source: Adapted from Fred R David, Strategic Management Concepts & Cases [7, p213]

The IE Matrix is divided into 3 main divisions that have different strategyimplication

 Division 1 which includes cells I, II, and III suggests the “grow and build”strategy The suitable strategies should be market penetration, marketdevelopment, and product development, backward integration, forwardintegration, and horizontal integration

 Division 2 which includes cells IV, V, and VI suggests the “holdand maintain” strategy The suitable strategies should be market penetrationand product development

 Division 3 which includes cells VII, VIII, and IX suggests the “harvest orexit” strategy

1.3.3 Decision stage

As mentioned in the earlier part, in this stage the Qualitative strategicplanning matrix (QSPM) is used The QSPM aims to objectively select thebest strategy using input from other management techniques and some easycomputations The QSPM method uses inputs from input stage and matches themwith results from matching stage and then decides objectively among alternativestrategies

The QSPM can be constructed with the following steps:

4.0 3.0 2.0 1.03.0

2.01.0

 Create a list of key internal factors and external factors and place them in theleft column of the QSPM These factors can be taken from the EFE matrixand the IFE matrix.

 Identify strategy alternatives that will be further evaluated and place them atthe top of the table

 Weight each key external and internal factor Again, weighted scores can betaken from the IFE and EFE matrixes

 Determine attractiveness scores by examining each key external and internalfactor separately with the regards to the difference it can make to thedecision of selecting strategy to pursue The bigger the difference the more

attractive the factor The range for Attractiveness Scores is 1 = not attractive, 2 = somewhat attractive, 3 = reasonably attractive, and 4 = highly attractive

 Calculate the Total Attractiveness Scores (TAS) in the QSPM TotalAttractiveness Scores are defined as the product of multiplying the weights

by the Attractiveness Scores in each row The higher the Total AttractivenessScore, the more attractive the strategic alternative or critical factor

 Calculate the Sum Total Attractiveness Score by adding all TotalAttractiveness Scores in each strategy column of the QSPM Higherscores point at a more attractive strategy

Table 1.4 Example of a blank QSPM Matrix

Sum Total Attractiveness Score

Source: Adapted from Fred R David, Strategic Management Concepts & Cases [7, p217]

1.4 Characteristics of Hotel industry

The service industry in general and the hotel industry in particular hasdifferent characteristics to other goods and products industries Some of the basicdifferent characteristics are: the products are intangible and perishable (forexamples, if a room is not sold today the revenue of the room for the day is lostforever as if the room is sold the next day like that of the other normal products thenthe revenue is the one of the next day), the consumption and production of theproduct happens at the same time

For the normal products, selling is about bringing products to the customers.Selling hotel rooms and service is, however, opposite That is bringing customers toproducts This is simply because hotel rooms or a theme park cannot be brought tocustomers while producers of normal products can bring them to customers For thatreason, two identical hotels but located in different location like one hotel in Hanoiand the other in Hai Phong cannot be competitors In contrast, a medical company

in Hai Phong can be a competitor of a medical company in Hanoi if they sell thesame product to the same market

Talking about competition, the big hotel chains or corporations usuallycompete in different product brands for example the competitions between Sofitel(by D’accor) with Sheraton (by Sherwood) In the context of Vietnam Hotelindustry there is no all-faced competitors for a hotel due to the variety of businessand the location of business

All of those things create unique characteristics for developing strategiescompared to other production industries For example, if a hotel chooses the marketdevelopment strategy it cannot bring the hotel rooms to the new geographic areas.What it should do is to put more effort of promotion, advertising… However, these

efforts do not guarantee success as before coming to the hotel the guests or themarket need to decide if they want to come to the destination where the hotellocates

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CHAPTER II:

ANALYSIS AND EVALUATION OF BUSINESS ENVIRONMENT AND ACTIVITIES OF VIETNAM TRADE UNION HOTEL IN HANOI

2.1 Introduction about Vietnam Trade Union hotel

2.1.1 The foundation and development

Established in 1989 - Vietnam Trade Union Company (Directly belongs toViet Nam General Confederation of Labor) is a leading company of Viet Nam intravel Hotel Business with many active functions as follow:

 Holding international and domestic tour

 Hotel and restaurant business

 Transportation and other services

 Real estate business and commercial import and export

As a member of the Confederation of Labor, the company has to carry two

main responsibilities Firstly, it operates like a commercial business entity.

Secondly, it conducts the political task of providing service, accommodationarrangement for members of trade unions in Vietnam and conducts other not-for-profit tasks, given by the Confederation of Labor For the second duty, the company

is much like a non-commercial institution Therefore the company and its business

units is a mixture of commercial and no-commercial entities in a singleorganization Currently, the company owns and operates a chain of hotels in HàNội, Đồ Sơn, Hạ Long, Kim Bôi, Sa Pa under the same name of Viet Nam TradeUnion However the level of service and facilities are slightly different In addition,each hotel in the chain is financially independent

The Company is based at 14 Tran Binh Trong street, Hanoi It started withViet Nam Trade Union Hotel in Hanoi in 2001 in the same location The hotel wasthen the main financial source of the company that maintained the operation anddevelopment of the company This fact has remained unchanged till now It wasuntil 2007 that the company was assigned to manage the second hotel in Đồ Sơn

The expansion into the later properties in Ha Long, Kim Boi, Sa Pa, Hoa Binh,which are also under Viet Nam General Confederation of Labor, is an assignment

by the Viet Nam General Confederation of Labor for Vietnam Trade UnionCompany to help improve the poor performances of these properties Theassignment came under the form of leasing these properties for the company to dobusiness on a financially independent basis The company was turned from anindependent hotel to a chain of hotels with the head quarter is the Vietnam TradeUnion hotel in Hanoi The hotel then had to share expertise, skillful and experiencedstaff and other resources to help other hotel in the chain For that reason, VietnamTrade Union Hotel in Hanoi plays a very important role in operation anddevelopment of the company Until now, the Vietnam Trade Union Hotel in Hanoi

is still the head quarter of the company and the main revenue center of thecompany

2.1.2 Facilities and services

Viet Nam Trade Union in Hanoi is a 3-star hotel with total number of room

of 180 which are then classified into 3 kinds of: Executive Suite, Deluxe room, Superior, Standard Twin, and Triple

Table 2.1 Vietnam Trade Union Hotel in Hanoi Room Tariff

(Source: Vietnam Trade Union Hotel[2])

The hotel has a restaurant offering Viet Nam, Chinese and European cuisine.This restaurant is on the ground floor and is separated into 2 dinning rooms with thetotal capacity of 500 seats

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There are 5 meeting rooms in the hotel with the largest one having thecapacity of 300 seats and the smallest one which can hold up to 40 people All the

meeting rooms are fully equipped with modern facilities for meetings

The hotel also operates 2 tennis courts in the premises There is also asouvenir shop on the ground floor proving miscellaneous items for in-house guests

For those who are on business there is free wi-fi internet service through out the

hotel If guests do not have computers with them there is a small business center

with 2 computers connected to internet available for free use

Like other standard 3-star hotel in Hanoi, the hotel has a wide range ofservices such as laundry service, room service, money exchange service, air ticket

booking, tour and travel arrangement, porter service…

2.1.3 Hotel organization chart:

Vietnam Trade Union hotel in Hanoi operates under the Vietnam TradeUnion company Before expansion the company had only the hotel and thus the

management board and other departments like accounting, administration and

personnel, sales and marketing etc are the ones who directly operate and support

the hotel

Since the expansion, the hotel become an unofficially headquarter of thecompany and the functional departments above operate and support not only the

hotel but also other hotels while other hotels have their own functional department

Chart 2.1 Organization chart of Vietnam Trade Union Company

Travel center

Hotel in Halong

Hotel in Hai Phong

Hotel in Hoa Binh

Hotel in Sapa

Accountingdepartment

Chart 2.2 Organization chart of Vietnam Trade Union Hotel in Hanoi

In this chart we cannot see the other functional departments as they belong tothe company not to the hotel The disadvantage of this organization will bediscussed later

2.1.4 Business results

In the last five years the revenue of the hotel was always the biggest oneamong all the property and business activities carried by the company It once againconfirms the importance of the hotel to the company business and financial health

Table 2.2 Vietnam Trade Union Company Business results from 2006 to 2010

(the amount is in billion VND)

* = estimated figure (Source: Vietnam Trade Union Company [2])

24Manager

(of the company & hotel)

Front Office + Bell Food & Beverage

Department Housekeeping

In the last 5 years the hotel has operated with a fairly good business resultsand strong development through the years The following table shows the businessresults of the hotel from 2006 to 2010.

Table 2.3 Vietnam Trade Union Hotel in Hanoi Business results from 2006 - 2010

(the amount is in billion VND)

Average daily rate (USD) 30.26 32.12 35.75 38.87 55.89

* = estimated figure (Source: Vietnam Trade Union Hotel[2])

In terms of structure of guests or market segments that come to the hotel,56% of guests are foreign travelers, 44% are Vietnamese The guests of the hotelcome from different sources The main source of guest is from tour operators andtravel agencies which accounts for 50% of the total amount of guests Next in therank is from Viet Nam General Confederation of Labor with the proportion of 10%.These are the guests who come to Hanoi for business, meetings related to Viet NamGeneral Confederation of Labor work or on vacation organized under the system ofprogram carried by this organization The rest 40% of guests are Free IndependentTravelers who come to the hotel either for business or for leisure

2.2 Vietnam Trade Union Hotel External Assessment

2.2.1 Macro Environment

2.2.1.1 Economic Environment

Both domestic tourists and international tourists are the main sources ofmoney for the hotel and tourism industry Therefore, the health of hotel and tourism

industry is greatly affected by the economic environment both in the country and inthe global environment.

In recent years the world economy has suffered from crisis that slowed downthe development of tourism industry as people had to consider their budgets fortraveling In 2008, there were over 922 million international tourist arrivals,reaching a growth of 1.9% compared to 2007 International tourism receipts reachedUS$944 billion in 2008 However, due to the recession, international travel demandsuffered a strong slowdown beginning in June 2008, with growth in internationaltourism arrivals worldwide dropping to 2% The year 2009 continued with this badtrend when the world tourism declined 4% with only 880 million internationaltourist arrivals [11]

After a year of recovery, the global economy started to grow slowly and thisslow growth is expected to continue into 2011 and 2012 The United Nationsbaseline forecast for the growth of world gross product (WGP) is 3.1 per cent for

2011 and 3.5 per cent for 2012, which is below the 3.6 per cent estimated for 2010

and the pre-crisis pace of global growth [12] With the recovery of the world

economy the world tourism has also gained benefit According to World TourismOrganization, International tourism recovered strongly in 2010 with the increase up

to 7% of 935 million, following the 4% decline in 2009 – the year suffered from theglobal economic crisis The majority of destinations worldwide posted positivefigures, sufficient to offset recent losses or bring them close to this target Asia, thearea reaching the growth rate of +13% was the first region to recover and thestrongest growing region in 2010 International tourist arrivals into Asia reached anew record at 204 million in 2010, up from 181 million in 2009 Following a year

of global recovery in 2010, growth is expected to continue for the tourism sector in

2011 but at a slower pace UNWTO forecasts international tourist arrivals to grow

at between 4% to 5% in 2011, a rate slightly above the long-term average [11]

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This fact poses a great opportunity for tourism industry in Vietnam ingeneral and for the hotel industry in Vietnam in particular to get more guests andincrease the revenue.

Going with the recovery of the global economy, Vietnam’s economy hasgain a good recovery in 2010 with the GDP of US $104.6 billion reaching thegrowth rate of 6.78% compared to 2009 and 0.3% higher than forecasted However,

2010 was also the year the Vietnam’s economy was hit by some other remarkableevents of:

 The interest rate race started by commercial banks which reached 18% at itspeak This event negatively influenced the goods market

 The gold and foreign currency market chaos putting the gold price reachingthe record high of 38 million dong per tael and pushing the exchange rate to21,000 VND to 1 USD

 The high inflation rate of 11.75%

 Real estate prices followed gold prices and urban planning This event madethe real estate prices increased sharply in 2010 by 30-100 percent

These events are forecasted to continue in the future and thus pose bothopportunities and threats for hotel industry in general and for Trade Union hotel inparticular

On the bright side, the recovery of the economy is a positive factor toincrease the need and budget for traveling for domestic tourists who are a veryimportant source of revenue for hotel and tourism industry In addition, the highexchange rate between VND and USD is the one that can help the hotel look lessexpensive to foreign tourists as most of the expenses are paid in Vietnam Dong.Further more, the expensive real estate price could be a factor that prevents futurecompetitors in hotel industry

On the dark side, the slow recovery of the economy, the high inflation rate,the attractive interest rate, the gold and foreign currency market chaos may makepeople practice economy and cut down their budget for luxury or invest money tobank, dollar, gold rather than traveling.

2.2.1.2 Socio-cultural Environment

Vietnam has an agricultural civilization based on the cultivation of wet riceand Vietnam culture is one of the oldest in East Asia Due to the long-term Chineseinfluence on its civilization, in terms of politics, government and Confucian socialand moral ethics, Vietnam is considered to be part of the East Asian CulturalSphere

After the Chinese domination, Vietnam was then under the French colonialperiod and thus Vietnamese culture received merchant influences from theEuropeans, including the spread of Catholicism and the adoption of Latin alphabet.Before the 1990s tourism and hotel were perceived as luxury and something againsttraditional moral value Hotels and restaurants were sometimes associated withsocial evils and thus opening or working in these kinds of property were notculturally and socially easy Since the 1990s, Vietnam has exposed greatly to Asian,European and American culture and media The new generation graduallyconsidered hotel and tourism a normal business The association between hotels,restaurants, tourism and social evils has been getting weaker

Nowadays, Vietnam is very open in every aspect of life while still maintainits core characteristics It means that there are, now, almost no barriers in terms ofculture or social norms for running hotel and tourism business In addition,Vietnamese people have been long known for their hospitality and hard working.Vietnam also has young population that is a great potential source of labor for hoteland tourism industry For that reason the socio-cultural environment is veryfavorable for doing tourism and hotel business

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However, as influenced by the Confucianism, Vietnamese are moreuniversity degree oriented and thus look down on vocational training They alsolook for job in offices or at management level rather than at entry level This facthas created the lack of skillful workers which are very necessary for very industryespecially labor-intensive ones like hotel and tourism It is also the reality that thetourism and hotel industry in Vietnam is facing.

2.2.1.3 Politic Environment

The Constitution in general establishes the mastery of the people under theleadership of the Communist Party The power of the people is presented throughthe National Assembly at the central level and the People's Councils at local levels

The National Assembly is the supreme representative and legislative body.The National Assembly is elected by universal suffrage The National Assemblyelects and the President, Vice-President, Chairman of the National Assembly, Vice-chairman of National Assembly, members of the Standing Committee of theNational Assembly, the Prime Minister

With this system and structure, Vietnam has been political stable There havenot been any major political crises, chaos or unrests that impact the doing ofbusiness in Vietnam Though some international organization issues report showingthe doubt on transparence and corruption in Vietnam, Vietnam is till considered areliable place to do business and Vietnam government is trying to make thathappen

In Vietnam, tourism was determined as an important economic sector instrategy for the social and economic development of the nation and as an importantstrategic direction in the social and economic development line of the government.That requires each sector, each branch, and each level of government as well astourism itself have to adopt a renewed way of thinking to totally mobilize everyresource of the nation to “develop tourism, establish the tourism with the scopecorrelative to the great potential of the nation as adopted by the seventh resolution

of the Executive Committee of the Vietnamese Central Communist Party, the eighthoffice term [13] This orientation has been maintain till now and would not possiblychange in the future

In addition, Vietnam is considered a safe country for traveling and tourism.Hanoi was also recognized as “the city for peace” This is very important in thesituation where there is terrorism, political unrest and conflicts in other neighboringcountries in the area who are competing in tourism with Vietnam like: Thailand,Indonesia, Cambodia…

What can be concluded from the above analysis is that the politicenvironment is also favorable for tourism and hotel business

2.2.1.4 Natural Environment

Vietnam has idea natural environment for tourism development Vietnam hasbeautiful long coastline spreading out in 3,200 km with many various anddiversified landscapes, islands and beaches, which are in the original state and arerelatively unpolluted Vietnam also has the strong forest coverage increase Theforest coverage of Vietnam increased from 37% in 2005 to 39.5% in 2010 and planned

to be 47% in 2015

There are several natural environment issues that can impact the business ofhotel in Vietnam They are pollution in big cities, floods and storms, drought whichcan cause the electric power shortage Luckily floods and storms normally happen

in the summer only and Hanoi, where Vietnam Trade Union Hotel locates, is notseverely hit by storms and rarely hit by flood

Though pollution in big cities in Vietnam is a matter of great concern forboth government and Vietnamese people, Vietnam is still considered less pollutedthan other developed countries

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2.2.1.5 Technological Environment

In the recent decades, human has witnessed the strong and fast developments

of technology Among these developments, the development of internet is the mostimportant one to hotel and tourism business

Internet is now very familiar with the world population Through a studyabout online population Jupiter Research Corporation forecasted that by 2011, 22percent of the Earth's population will surf the Internet regularly They also said 1.1billion people would have regular Web access For the study, Jupiter Researchdefined online users as people who regularly access the Internet from dedicatedInternet-access devices, which exclude cellular telephones With the development ofWireless Application Protocol, 3G technologies there are many more peopleaccessing internet each day from cell phones Internet has been a very powerfulforce in every industry and aspect of life

In terms of hotel and tourism, with internet tourist can search for informationabout destination, hotels, flights and make reservations online The internetintermediaries like agoda.com, booking.com, expedia.com etc are now veryfamiliar with travelers Internet makes traveling easier and cheaper It also changesthe way tourism businesses do marketing Hotels now must keep up with thedevelopment of internet to stay competitive

The other technology that hotels now have to rely on is the PersonalComputer and hotel management system which is also known in the hotel industry

as Property Management System (PMS) Some of the well known and popular PMSare Fidelio, Opera, Smiles, Folio… Most of hotels now rely on PMS for fast, easyand effective operation and management PMS and Internet make up a verypowerful tool for Yield Management which is a necessary part that makes a hotelfinancially successful

2.2.2 Micro Environment

2.2.2.1 Competitors

At present, the business environment for hotel industry in general for 3-starhotel segment in particular is very favorable According to CBRE Việt Nam (aconsultant and real estate management firm), the supplies of hotel rooms in 2010was 6,618 rooms in which the 3-star hotel segment was 1,978

Table 2.4 Hotel market in Hanoi in 2010

( Source: CBRE’s Quaterly report – January 2011[6].)

Going in detail for each segment, the statistics show that the 5-star segmentstill maintained a slight increase in ADR (0.98%) to 126.22 USD while the decrease

of the 4-star segment was 9.97% to 67.57 USD The decrease of the 3-star segment,was 6.88%, down to 38.55 USD As also seen from the above table all of the segmentsenjoyed an increase in occupancy with the lowest is in the 3-star segment with 2.3%

In another research Savills (a world leading company providing real estateservices) predicted that the average occupancy rate of the 4 and 5 star hotels inHanoi will suffer from strong competition in the next years due to the openings of

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new hotels In long term there is no sign of competition among 3-star hotels.According to an official source of information from Hanoi Administration ofCulture – Sport and Tourism there are 24 3-star hotels with the total number ofrooms of 2,025.

What can be seen from the above analysis is that the competition in the 3-starsegment where Vietnam Trade Union hotel is in is not so hard

Regarding direct competition in the 3-star segment, there are 24 3-star hotels

in Hanoi but not all of them are considered direct competitors to Viet Nam TradeUnion hotel in Hanoi Due to the unique characteristics of the hotel industry asanalyzed above there are several other criteria to identify competitors beside thetraditional ones of target market segments, price, product range (quality of hotelfacilities, level of hotel and its services, other supporting services) They include thelocation of hotel and the access to other important places Basing on the above thecriteria used to identify competitors of Viet Nam Trade Union hotel in Hanoi are asfollow:

 It must be a 3-star hotel

 The Average Daily Rate must be about 30 to 60 usd

 The main target market is the Vietnamese businessmen

 It must provide other facilities and services of: restaurant, banquet,meeting service, air-ticket booking service, travel arrangement,massage

 It must be located within a radius of 10 km with Hoàn Kiếm lake – thecenter of Hà Nội – is the center

According to the criteria set above the followings hotels are qualified to bethe competitors of Viet Nam Trade Union hotel in Hanoi:

 Hòa Bình Hotel – 27 Lý Thường Kiệt – Hà Nội

 Kim Liên Hotel – 7 Đào Duy Anh – Hà Nội

 La Thành Hotel – 218 Đội Cấn - Hà Nội

These current competitors are analyzed in the 4 aspects of product, price,promotion and places which are more or less the same as 4 Ps in marketing mix

a Product:

All the 3 competing hotels do not have any products that can out stand to bemore competitive Their main products are hotel rooms, banquet service, conventionservice and other supporting services like travel arrangement, massage…

In terms of the quality of service, Hòa Bình hotel have better room qualitythan the other two and it also enjoys the advantage of having traditional Frencharchitecture which is very attractive to foreign visitors especially the Frenchtourists Generally, guest rooms at Viet Nam Trade Union hotel in Hanoi are newerand more beautiful than that of the 3 competing hotels However, Viet Nam TradeUnion hotel in Hanoi does not have the unique architecture like Hòa Bình For thatreason, quality of facilities and guest rooms at Viet Nam Trade Union hotel inHanoi are equal to that of the 4-star hotel

Regarding the scope hotel, Kim Liên hotel is the biggest one in both ofnumber of rooms and restaurants among the 3 competing hotel and bigger than VietNam Trade Union hotel in Hanoi However, the quality of both service and facilities

at Kim Liên are not high and it is only ranked at higher place than La Thành hotelfor quality In short, Kim Liên just dominates the quantity not quality

Talking about the Program and Packaging, all the 3 hotels do not have anyproducts that are programmed or packaged to serve as a competitive advantage Thepopular package that the 3 hotel offer is wedding party + 1 room night for thosewho book wedding party at the hotels With this kind of package, Viet Nam TradeUnion hotel in Hanoi has more advantage than the other 3 because guests canchoose to spend the night at any hotel in the chain in Hạ Long, Đồ Sơn, Sa Pa, or

Hà Nội This is a great choice for a honey moon

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