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THESIS BUILDING THE BUSINESS STRATEGY FOR LICOGI CONSULTING JOINT STOCK COMPANYDURING PERIOD 2014 - 2019 NON- PLAGIARY COMMITMENT I undertake that all contents of this thesis are carried out by me individually; data is collected and researched through many different sources such as: direct interview with experienced specialists, officers and books, newspapers, curriculum of P program, magazines, Internet, website, financial statements and internal documents of Licogi Consulting Joint Stock Company Therefore, all data and analysis results in the thesis are true All strategies and solutions are drawn by me during my theoretical and practical research of the operation reality of the Company Hanoi, October 2013 TABLE OF CONTENTS ACKNOWLEDGEMENT .2 NON- PLAGIARY COMMITMENT TABLE OF CONTENTS .4 LIST OF TABLES LIST OF FIGURES AND GRAPHS .7 INTRODUCTION CHAPTER 1: LITERATURE REVIEWS 10 1.1 Concepts and roles of business strategy and strategic management 10 1.1.1 Concepts .10 1.1.2 Roles of business strategy in business corporate activities 13 1.2 Introduction to business strategies 14 1.2.1 Focused growth strategy .14 1.2.2 Porter's competitive strategies 14 1.2.3 Business strategies according to the company's position 16 1.3 Process for crafting strategy 18 1.4 Tools for analyzing and building business strategy 19 1.4.1 Analyzing macro-environment 19 1.4.2 Analyzing business environment 21 1.4.3 Analysis on internal environment of a company 26 1.5 The SWOT matrix 30 1.6 Research method of the topic 32 1.6.1 Preliminary research method 32 1.6.2 Secondary document research method: .34 1.7 Chapter conclusion 34 CHAPTER 2: STATUS QUO OF LICOGI- CC's OPERATIONS AND BUSINESS STRATEGIES 36 2.1 Introduction to Licogi-CC .36 2.1.1 Comapny overview 36 2.1.2 Vision, mission and current targets .38 2.1.3 Products and the company's markets 39 2.1.4 Results of business activities .43 2.2 Analysis of macro and competitive environment of Licogi-CC .43 2.2.1 Analysis of macro-environment 43 2.2.2 Analyzing Licogi's competitive environment .52 2.2.3 SWOT analysis 68 2.3 Chapter conclusion 70 CHAPTER 3: RECOMMENDATIONS ON BUSINESS STRATEGIES FOR LICOGI-CC DURING PERIOD 2014-2019 72 3.1 Revising Licogi's vision, mission and goals .72 3.2 Defining Licogi's business strategies .72 3.2.1 Competencies focused strategy 72 3.2.2 Cost leadership strategy .73 3.2.3 Marketing strategy, a primary functional strategy 73 3.3 Proposed solutions on strategy implementation .75 3.3.1 Customer solutions .75 3.3.2 Solutions on human resource development 76 3.3.3 Marketing solutions 76 3.3.4 Solutions on improving financial capability 77 3.3.5 Building the company’s culture 77 CONCLUSION 78 REFERENCES .80 APPENDICES 82 LIST OF TABLES Table 1.1 Michael E Porter’s competitive strategy matrix: 15 Table 1.2 EFE matrix table 25 Table 1.3 The IFE matrix 29 Table 1.4 SWOT matrix 31 Table 2.1.List of Consultancy contracts which have been and are being conducted by Licogi-CC 40 Table 2.2.Financial indicators of Licogi-CC in recent years (Unit: billion VND) 43 Table2.3.Economic indicators of Vietnam from 2006 to 2012 .46 Table 2.4 Analysis on factors of macro-environment 50 Table 2.5.Survey results on Licogi- CC's external factors .51 Table 2.6.Overview on Licogi-CC's main competitors 55 Table 2.7 Competitiveness evaluation on Licogi-CC's competitors 56 Table 2.8 Suveying internal environment of the company 64 Table 2.9 Survey results on the Licogi- CC's strategy implementation 65 Table 2.10 Matrix for evaluating internal factors of the company 67 Table 2.11 Matrix of external factors (EFE) 68 Table 2.12 SWOT matrix for Licogi-CC 69 Table 3.1 Licogi's current and recommended business strategies 73 LIST OF FIGURES AND GRAPHS Figure 1.1 Strategic levels 11 Figure 1.2 Five tasks of strategic management .13 Figure 1.3 Process for crafting a company's strategy 19 Figure 1.4 Model of competitive forces of Michael E Porter 22 Figure 2.1 Organization chart of Licogi-CC 38 INTRODUCTION Rationale In recent years, together with renovation policies of the state, Vietnam economy has gradually integrated with economy of the World and countries in the region That has created many favorable business opportunities for domestic companies but it has also created many difficulties, challenges and severe competition during their operation In 2012, the real estate market in the country after a hot development period showed signs of freezing, which impacted greatly the economy of the country in general and of construction consultant and investment companies in particular LICOGI Consulting Joint Stock Company (Licogi-CC) – a company operating in construction consultancy was also impacted In this context, how can Licogi-CC build business strategy to exist and develop? From those concerns, as a member of the company's Board of Directors , I decided to choose the topic “Building the business strategy for LICOGI Consulting Joint Stock Company during period 2014-2019” as my graduation thesis I believe that my knowledge gained from teachers under program will help me choose a suitable business strategy for the company Objectives of research Researching the background for strategy building, process of strategy building and analyzing method for an optimal choice of strategies in order to help the company choose its most suitable business strategy; Clarifying and applying the theories of business strategy building into reality in order to build and select an optimal business strategy for LICOGI Consulting Company Limited during period 2014-2019; Proposing recommendations and solutions in order to deploy and implement successfully the chosen business strategy to make LICOGI Consulting Joint Stock Company become strongly developed company in traditional and national markets; Subject and scopes of research - Subject of research is “Business strategy of LICOGI Consulting Joint Stock Company during period 2014-2019” - Scope of research is business operation of Licogi-CC in comparison with business operation of other competitors in the sector CHAPTER 1: LITERATURE REVIEWS 1.1 Concepts and roles of business strategy and strategic management 1.1.1.Concepts 1.1.1.1 Strategy and Business Strategy The term “strategy” was originated from Greek – “Strategos” and firstly used in military field to reflect a great, long-term plan developed based on what we believe opponent can do; people usually understand that strategy is the art of managing the means to win Since the 60th decade of the 20th Century, “strategy” was used in business field and the term “Business strategy” appeared Scholars gave many definitions on business strategy: According to Chandler (1962), the first person taking the initiative on theory of strategic management, Strategy is the determination of the basic and long term goals and objectives and the adoption of courses of action and the allocation of resources necessary for carrying out these goals According to Quinn (1980), strategy is a pattern or plan that integrates major targets, policies and courses of action into a cohesive whole According to Johnson Scholes (1999), strategy is to define operational orientation and scope of an organization in long-term, in which that organization must gain advantage through combining all resources in an environment full of challenges in order to best satisfy market demand and meet the organization's stakeholders to the organization Whatever approach is applied, the nature of business strategy remains a blueprint of the company's image in its field of activities and capacities to exploit them Business strategy is used with most generalobjectives: - Establishing long-term targets of company - Building general action programs - Choosing action plan, deploying resource distribution to carry out given targets While implementing its strategy, each company must continuously cope with strategic decisions depending on each particular context This is strategic management Strategic management is a set of managerial decisions and actions defining longterm performance of a company Strategic management includes continuous actions: examining environment (internal and external), building strategy, executing strategy and evaluating, controlling strategy These decisions or strategies must provide a competitively superior fit between the organization and its environment so as to achieve organizational goals (Daft, 2003, 2012) 1.1.1.2 Strategic levels In building strategy, a company has following levels: - Company or corporate- level strategy - Competitive or business- level strategy - Functional- level strategy Figure 1.1 Strategic levels Company Business unit (SBU1) Production Business unit (SBU2) Marketing Human resource Business unit (SBU3) Finance Source:Daft,2012; Ngô Kim Thanh, 2012 (1) Company or corporate- level strategy: is the strategy of the entire group or company; so as to guide the company's activities and its method of human resource allocation to achieve common targets Corporate strategy has to respond to a question of "What business we are in" meaning to analyze SBUs' attractiveness and to make decisions on a choice of business fields 10 country Strategy of total low cost: Utilizing sources to reduce the price on cost control and satisfactory products, utilizing strengths, diversified tastes of customers - Proposing addtional strategy: - Cost leadership strategy to compete against other companies in the branch This is the main strategy in all activity of LicogiCC - To focus on service segment:in Hanoi, Northern provinces and extend throughout the country - Competencies focused strategy to promote available capacityto become a leading consulting company in infrastructure field - Functional marketing strategy: relationship, personnel, service - Marketing strategy to expand market share and create solid relationship with customers - - Strategy To diversify consulting service in construction sectors.Market share is concentrated in Hanoi and some Northern provinces 3.3.Proposed solutions on strategy implementation Because Licogi-CC selection total low cost strategy (cost leader) is a dominant throughout the activity To carry out this strategy, company should have some solution below 3.3.1.Solutions on human resource development Building consultant services is activities which used the intellectual activity of human, that some people tell that developing quality of human resource is importantly focused solution in the cost leadership strategy.To implement the chosen strategy, the company 75 needs to develop human resources, including trained engineers who specialize in construction To ensure have enough human resources for the growth plan, the company shall take priority over recruiting candidates with practical experience It will prepare job description table and job standard for each job positions Management policies of human resources, salary and remuneration: remuneration and bonus policies not only base on profits, working seniority but also connect with the employee's development The company continues to improve and manage salary in close combination between working results, income of the company and personal income The company ensures salary for employees so that they can settle down and take care of the family In addition, award policies should be timely, appropriate and proportionate to the contribution of employees At the same time, the company needs to strengthen labour discipline, improve skills and sense of responsibility of employees The company should coordinate well in working with departments, promoting creativeness, and enhancing business efficiency 3.3.2.Solutions management and development financial capability To promote capacity of cost management: Licogi-CC needs to closely manage costs which related to productive activities such as the cost of services included production through rate of percentage which was specified in the regulations securities products and financial regulation - To enhance the capacity of financial diversify the funding channels: Establishing and expanding relationships with credit institutions, investors to mobilize more resources and to be able to choose the form of appropriate funding with the low capital usage cost and create competition for Licogi-CC - Strengthening payment, acceptance after completing work Besides, debt collecting work must also be carried out regularly - Efficient usage of capital, cost control: Managing and controlling regular expenditures, development and promulgation of cost norms on the basis of capital efficiency 76 - When bidding for projects that require the proof of large capital, the company implements solutions in partnership with partners with sufficient financial resources in the same sector to deploy 3.3.3.Solution improvement productive and operative activities: -The company check out, review the process, work regulations: the department must implement workflow built by the unit And it avoids the duplication stage or repeatedly in the production process -The investment in the development of information technology applications in manufacturing operations is also an important issue for Licogi-CC The software design and computation support for a lot of consulting work, improving product quality and increasing labor productivity, reducing product cost Besides, the Licogi-CC solutions should implement supportive measures such as: 3.3.4 Customer solutions Retaining current customers, simultaneously attracting customers from the other companies in the same factor, developing new customers  Retaining traditional customers - Building the good relationship with traditional customers - Licogi-CC focuses on providing products for customers with high-quality and long-lasting value - The purpose is to make customers feel satisfied with the care of the company and the value that they get is worthy of the cost they spend The scope of implementing the customer expansion strategy: Researching, analysing the demand of each customer groups in the total potential customer structure, from there orienting and dividing many types of products to meet that demand When defining the demand of each customer groups, the company need to reconsider which demand the company can meet itself on the basis of its resources and which products the company must conduct joint venture and use external resources - In the customer expansion strategy, the company needs to make a continuous connection to develop more In the implementation progress, the company needs to inspect, evaluate and draw a lesson Therefore, the company can supply banking service in accordance with each customer - Using marketing strategies through enhancing advertisement on trademark of the company 77 3.3.5.Marketing solutions - Specifically, Licogi-CC will develop marketing strategy in the following aspects: Relationship marketing: Creating, maintaining and further enhancing the existing group of customers, potential customers, new customers, helping the company build - long-term sustainable relationship with customers Human resources marketing: Consulting services are the mind works of human beings, so the marketing of the role, image, competence, credibility of the experts in the company to customers is very important to ensure trust of customers with the - company Servicemarketing: It is the set of process to advertise the most perfect services which can bring to our customers: quality products, low price, and best service support 3.3.6 Building the company’s culture Licogi-CC builds company organizing culture in the following criteria: - Regarding customers as centre in all its activities, professional operations, handling the job quickly and efficiently to best meet each customer's need - Ensuring consistency of performance culture in the whole of company - Step by step creating the friendly company culture, dynamically working style, rhythmic coordination between the departments with each other, creating a friendly working environment, all employees have opportunity to express their ability - Having the transparent and public working policy from the period of recruitment to the reward in the process of working - Building relationships between staffs and leaders is collaborative relationship for the operation purpose of the company The performance orientation and development strategy for Licogi - CC in the near future: - With oriented business strategy for Licogi - CC -year period ( 2014-2019 ) , with a cost leadership strategy is the core throughout the whole process works , besides, the company shifts the main apprehensive activities into the field of consultancy services for infrastructure projects Supporting for business strategy on the strategic marketing function is to promote corporate image of company, expand market share and strengthen relationships with customers To implement the solution analyzed on the 78 Board of Directors Licogi – CC, it should take the following guidelines into practical deployment: - Restructuring of company human resource departments to production units: towards lightweight functional operating expertise - Establishment of Marketing department which operates under the specific requirements of the company - Restructuring of company human resource departments to production units: towards lightweight functional operating expertise - Establishment of Marketing department which operates under the specific requirements of the company - Reviewing and addition, constructing processes, work regulations that companies are complying with ISO 9001 : 2008 - Developing a roadmap for investment and development of information technology applications is in manufacturing operations for the company CONCLUSION The integration of the world economy is changing rapidly awareness of Vietnam companies Due to Vietnam's joining to the WTO, any government protections for companies in the sector have been removed Therefore, if companies not build their strategy, it is hard to have the position in the market when the competition is getting fiercer and fiercer Facing the opportunities for development but also confronting with many challenges from the outside , so Licogi- CC needs to reconsider the current strategies in order to adjust in accordance with the environment, social movements and the actual situation in the company to help it survive and develop sustainably The author is a manager at Licogi-CC who has an insight into the actual status of the company in conjunction with the application of learned knowledge in the program "Building the business strategy for LICOGI Consulting Joint Stock Company during period 2014-2019" The primary, secondary documents, interviews with 79 company employees, surveys and consultancy of the experts are used by authors to get an overview of Licogi via this summary data In this thesis, the author analyzes specifically the construction market and the impact of the macro environment on it The obtained information about the environmental impact on the Licogi-CC specifies for Licogi opportunities that the company needs to take advantage of, limit challenges, see the core competency and weakness to be improved The author used the tools to analyze the competitive environment of Porter, SWOT tool to analyze and make right business strategy for Licogi - CC in the next years Through the implementation of this thesis, the author has an overview of the environmental impact on small and medium sized companies as Licogi-CC If you know how to take advantage of the opportunities the environment offers, to identify core competency of the company, company leaders will take the company through the difficulties and challenges Combining the internal resources of the company with opportunities will help the company to develop sustainably The author uses the method of sampling in the surveying data and consulting experienced experts The small number of samples can therefore affect the overall results Therefore, the proposed strategy by the author for Licogi-CC needs a real check and a test of the compatibility with the company Due to time constraint and requirement of the program, I have attempted to research so that my thesis will be sufficient in contents and have high practical application However, this is the first synthetic research so it cannot avoid the limits The author expects to receive comments of teachers and friends to apply this topic soon / 80 REFERENCES Miller, A.(1998),"Strategic Management", Irwin McGraw-Hill Almanaey, A.J.(2001), "Strategic Analysis: An Approach to building distinctive competencies" Hill, Charles W.L &Jones, Gareth R., (2002), "Strategic Management: An integrated Approach", Cengage Learning Decenzo, David A., Robbins, Stephen P., (2002), Human Resource Management Porter, M.(1998), "Competitive strategy", Free Press Ngo Kim Thanh, (2012), "Strategic Management", National Economics University Publishing House Le The Gioi, Nguyen Thanh Liem, Tran Huu Hai, (2007), "Strategic Management Textbook", Statistics Publishing House Nguyen Thi Lien Diep &Pham Van Nam, (2003), "Strategy and Business Policy", Statistics Publishing House Peter Wright, Mark J Kroll, John Parnell (1996), "Strategic Management : Concepts and Cases", 3rd Ed Prentice Hall 10 Thomas L Wheelen, J David Hunger, (2004), "Strategic Management and Business Policy", Prentice Hall 11 Thompson, A A., Strickland, A.J.(1998), "Strategic Management", McGraw Hill 12 Daft, R L.(2012), New Era of Management International Edition 10th edition SouthWestern Cengage Learning USA 13 Daft, R L.(2003), Management, 6th edition, South-Western, USA 14 Thompson, Strickland, and Gamble, (2010), "Crafting & Executing Strategy: The Quest for Competitive Advantage, Concepts and Cases", (17th ed.) NY: McGraw-Hill Irwin 15 Johnson, Gerry and Scholes, Kevan, (1999), “Exploring Corporate Strategy”, 5th edition, Prentice Hall 16 Licogi, (2013), "Report on Capacity introduction of Licogi- CC Company", Licogi 81 17 Chinhphu.vn, (2012), "Government Electronic Newspaper, Construction Sector Statistics 2012", website: http://baodientu.chinhphu.vn/Utilities/PrintView.aspx? ID=160780 18 GSO (General Statistics Office), (2013),"Report on the Vietnam's socio-economic situation", website: http://gso.gov.vn/default.aspx?tabid=621&ItemID=13419 19 Tran Viet Thao, (2012), "Lecture on Strategic Management", http://baigiang.violet.vn/present/showprint/entry_id/8084921/cat_id/57942 82 website: APPENDICES APPENDIX 1: SURVEY QUESTIONNAIRE “EVALUATING FACTORS WHICH AFFECT DEVELOPMENT STRATEGY OF LICOGI CONSULTING JOINT STOCK COMPANY” Dear Lady and Gentlemen, Building the business strategy for Licogi-CC in the coming period is extremely essential These questionnaires in research topic are conducted by the author with the purpose of understanding the factors that impact on the strategies used at the company in the competitive environment We would like you to spend a little time participating in this study and fill in the blank questionnaires below We sincerely thank you for helping us to complete this study To know all information, please contact: Vu Duc Chien Email: Chienlicogi@gmail.com; Tel.: 0903293386 General information Working place: ………………………………………………… Current working unit (department): ………………………………………… Number of working experience years: …………years(s) Current main job: Officer □ Other: ……… Position (if any): Leader □ Leader of a department □ Gender: Male Female □ Age: □ 20-30 □ 30-40 □ Please tick the box corresponding to your evaluation 83 40-50 □ > 50 □ Table 1: Survey of strategy of Licogi-CC Note: - Questions for Leader and manager of the company Criteria Fully agreed Agree d Not Unsure agreed Fully not agreed Total Having a strategic vision Ability to plan Increasingly higher position Strategy in accordance with current environment High adaptability Staffs are fully informed about the market change Achieving all the company purposes The company controls and adjusts strategies in accordance with the environment The company always has the specific strategic orientation for the coming years Table Survey of the external factors which affect the company Note: - Interviewing experts - Leader, manager of the company Criteria Fully Fully Agreed Unsure Disagreed agreed disagreed Stable political environment, economic growth, increase in 84 Total people's income, the government supports the construction sector Potential market in northern provinces, Hanoi City Increasing in demands of customers for service quality Equipment technology for construction sector advances increasingly The change of the construction materials requires consultant to Increase in competitiveness in the real estate business as more and more companies join in the sector The worldwide economy crisis In the integration process, the foreign companies will also join in the sector Increase in investment of the State for housing development Real estate market are gradually recovering after the frozen period Table Survey of internal environment of the company Note: - Leader, manager of the company - Staffs have worked at the company for long time Criteria Fully agreed Agreed Effective business strategy Quality products 85 Unsure Disagreed Fully disagreed Active, young human resources Cost management Technology Customer relations Company scale Marketing activities Market share always increases Experience in the sector Small owner capital resource Table Survey of the companies in the same sector Note: - experts - directors of construction companies - Leader and manager of the company Criteria to evaluate LicogiUAC CDH Vina CTEC CC JSC Provide notes from 10 to (10 good to not good) Quality of products Cost management Relations with customers Production capacity Trademark Leadership Human resources Finance capacity Technology Experience in the sector Total 86 APPENDIX 2: INTERVIEW QUESTIONNAIRE (Requirements: – 10 persons in the Board of Directors of Licogi-CC or another company or market researchers in business strategy area) I INTERVIEWEE INFORMATION Age range: 20-29; 30-39; 40-49; over 50:……………………………………………… Gender: Male/Female …………………………………………………………….…… Qualification: ……………………………………………………….…………………… Position:………………………… …………………………………………… Experience years:……………………… …………………………………………… II INTERVIEW CONTENTS Table 1: Collection of company’s experts and managers’ opinions on company’s reaction to external factors No Prospects of construction industry development in the coming period? Summary of answers Construction industry will recover and develop Prospects of real estate industry development in the coming years? Supportive government policieswill helpsreal estate industry recover Are the Government and Ministry of Construction support policies appropriate for the construction market to come back to prosperity? Yes Your view on civil housing demand in the next Demand for civil housing will increase years? State investment in housing development and engineering infrastructurein the next years? State will make a large investment on housing development and engineering infrastructure Signs of recovery of real estate market? Come back to prosperity at a low speed Your evaluation on the Northern area’s construction market? Northern area’s construction is a potential market Your evaluation on the material technology recently? Your evaluation of the competitiveness in the construction consulting industry? Undergo many changes Questions 87 Construction consulting industry is a severe competition environment 10 During economic integration, foreign enterprises will participate in the market, and how this will impact on the construction industry and other domestic companies? Foreign enterprises participation makes a significant effect on price and market share Table 2: Evaluation of company managers and board of directorson current strategy and orientation Topic Business environment, competitive environment (advantages, facts and issues not resolved) Strategies used by the Company in the competitive market environment Question Please evaluate the market responsiveness of the company’s activities recently? Does the demand for the company products remain high in the next 10 years? Company’s revenue growth over years? Is Licogi-CC having more competitive advantage in terms of products than other companies in the market? Is Licogi-CC having good reputation in the market? Are customers’ responses positive with the company products? Does Licogi-CC possess a good relationship with costumers and investors? Is Licogi-CC a reliable company in the market? Does Licogi-CC have good relationship with credit institutes? 10 Does it utilize effectively capital, equipment and assets? 11 Good relationship with regulators? 12 Financial capability and capital mobilization from other sources? Is the current company strategy suitable to expand implementation? The effect of current company strategy? Is the demand for company products still significant in the next years? Following market trends closely to determine suitability of the current company business strategy? Visionary leaders? Control and adjustment activities of the 88 Summary of answers The company promptly react to competition Yes, because the demad for civil housing and infrastructure remains high Company's revenue growth stay weak Yes (human resource, experience and etc) Not yet Yes Yes, but in narrow range Yes Yes, but moderate level 10 Yes 11 Yes 12 Limitative The current company strategynot is not suitable and need an adjustment The company’s strategy implementation is effective but it does not meet the leaders’ expectation Yes strategy? Strategy orientation in the next years? Idea contribution, business orientation in the current Vietnam market Please suggest some ideas for the development of sustainable business development strategy? Oriented to select product focus strategy? What is, in your opinion, most critical to be changed immediately for Licogi-CC to construct a better development strategy? In your opinion, how to attract and maintain talented staff with good professional competencies? Leaders’ visions? Yes Yes Yes The company will adjust effectitively Focus on company’s weaknesses, such as capital, customers relationship and market share The company need to concentrate on engineering infrastructure development The core of a better development strategy construction is human resource and customers relationship In order to attract and maintain talented staff, the company needs to apply training and treatment policies They have strategic and bold vision THANK YOU VERY MUCH FOR YOUR COORPERATION! 89 ... interview  Internal interview Interviewed objects: Select current employees of a company with different roles and positions from Director to Heads of departments; Selected interviewees are the people... increases the competition between companies in the sector This ingredient threats to take market share of current producers, decrease average profit of the sector in the future, which forces companies... ing target target Amend Amend if if necessary necessary Amend Amend if if necessary necessary Building Building strategies strategies to to achieve achieve targets targets Executing Executing