AN ANALYSIS OF DISTINCTIVE COMPETENCIES IN COMPETITIVE ADVANTAGES ACHIEVEMENT AT ABROAD DISCOVERY ENGLISH CENTER

FOREIGN TRADE UNIVERSITY FACULTY OF BUSINESS ADMINISTRATION -*** INTERNSHIP REPORT AN ANALYSIS OF DISTINCTIVE COMPETENCIES IN COMPETITIVE ADVANTAGES ACHIEVEMENT AT ABROAD DISCOVERY ENGLISH CENTER Full name: Trinh Thi Quynh Van Student ID: 111 225 0002 Class: A13 CLC QTKD K50 Supervisor: Ms Dao Minh Anh, MBA Hanoi, July 2014 Table of Contents Chapter 1: Literature review 1 Competitive advantage within an organization 1.1 Definition of competitive advantage 1.2 The process of achieving competitive advantage 2 The role of resources and capabilities in forming distinctive competencies 2.1 The role of resources and capabilities 2.2 Distinctive competencies Three main types of business-level strategies with different value creation in achieving competitive advantage Chapter 2: Analyzing distinctive competencies in competitive advantage achievement at Abroad Discovery English Center (A.D Center) Overview about A.D Center: 1.1 History of development 1.2 Organizational Structure 1.3 Field of business 10 1.4 Business performance 11 Analysis of distinctive competencies at A.D Center 14 2.1 Resources and capabilities of A.D Center 14 2.2 Distinctive competencies at A.D Center 17 Evaluation 20 Chapter 3: Recommendation for competitive advantage achievement at A.D Center 22 The fundamentals of Balanced Scorecard and why using Balanced Scorecard at A.D Center 22 1.1 The fundamentals of Balanced Scorecard 22 1.2 Why using Balanced Scorecard at A.D Center 22 The application of Balanced Scorecard at A.D Center 22 2.1 Strategy map at A.D Center 22 2.2 Action plans in accordance with the four perspectives of Balanced Scorecard 24 Conclusion 27 List of tables Table 1: Tangible resources within an organization .3 Table 2: Intangible resources within an organization .4 Table 3: Capabilities in different functional areas Table 4: Four factors of distinctive competencies Table 5: Classes’ schedules at A.D Center 10 Table 6: Balance Sheet (For the first half of fiscal year 2014) 12 Table 7: Income Statement (For the first half of fiscal year 2014) 13 Table 8: Capabilities at each Functional Area at A.D Center 16 Table 9: Tuition fees at other English Centers in Hanoi region 20 Table 10: Suggested quality measurement at A.D Center 25 List of figures Figure 1: The process of strategic management Figure 2: Competitive advantage achievement .2 Figure 3: Value creation in Differentiation strategy .7 Figure 4: Value creation in Cost leadership strategy Figure 5: An example of value creation in the three main types of strategy Figure 6: Organizational Structure at Abroad Discovery Center 10 Figure 7: Teaching process at A.D Center 19 Figure 8: Value creation at A.D Center 21 Figure 9: Strategy map at A.D Center 23 Acknowledgement I would like to give my sincere thanks and appreciation to Ms Dao Minh Anh, MBA., Lecturer at Foreign Trade University for her thorough instruction in the last one-month period Her comments and suggestions, as well as many useful knowledge that she provided, were of paramount importance for me to learn and accomplish my report I am deeply indebted to Mr Nam Nguyen and Ms Bich Nguyen, managers at Abroad Discovery English Center for all their help during my internship I did learn a lot and gain many practical experiences relating to my major thanks to their due care and attention Lastly, I would like to express my gratitude to every staffs and colleagues for their great support when I worked at A.D Center Hanoi, 28th July 2014 Trinh Thi Quynh Van Chapter 1: Literature review Competitive advantage within an organization 1.1 Definition of competitive advantage Competitive advantage, firstly, is a decisive category in strategic management The chart below depicts the strategic management process including four main steps, namely Situational Analysis, Strategy Formulation, Strategy Implementation and Strategy Evaluation Competitive advantage is the ultimate finding of the first step in which managers are required to analyze both internal and external situation of the firm before going any further Analyzing Current Situation •Situational Analysis Deciding on Strategies Putting Strategies in Action •Strategy Fomulation •Strategy Implementa tion Evaluating and Changing Strategies •Strategy Evaluation Source: Mintzberg, Henry and, Quinn, James Brian (1996) Figure 1: The process of strategic management Competitive advantage is academically defined as a firm’s ability to gain profitability that is greater than the average profitability of the industry Accordingly, sustainable competitive advantage is a firm’s ability to maintain profitability and good profit growth that is higher than average level of the industry for many years 1.2 The process of achieving competitive advantage Source: Michael E Porter (1996) Figure 2: Competitive advantage achievement The chart shows how competitive advantage is achieved through the act of analyzing internal situation within an organization The two questions promptly emerging in managers’ mind when looking at his firm’s current state are about ‘what does the firm possess?’ and ‘how can it make those things work for the company?’ These two queries are respectively understood as resources and capabilities of an organization They are key components contributing to the formation of distinctive competencies which then help shape the strategy a company may follow Specifically, strategy is directly derived from distinctive competencies, an outcome of thorough internal analysis Accordingly, there are four types of strategy a firm may pursue: cost leadership, differentiation, integrated and focus strategy; and different strategies have different ways of creating value for customers Cost leadership and differentiation strategy offer consumers a low price and outstanding quality products, respectively Meanwhile, integrated cost leadership/differentiation strategy strikes a balance between the two and the focus one only target in a specific market segment If a company succeeds in value creation then, in the long term, it gains competitive advantage with which other firms can hardly compete The role of resources and capabilities in forming distinctive competencies 2.1 The role of resources and capabilities 2.1.1 Resources Resources are vital contributors allowing company to create value for customers They can be visible (physical) and invisible (non-physical) ones The former includes financial, physical, technological and organizational resources And the latter involves human resources, innovation and reputation of the company Resources are inherent assets of each firms, however, they could become waste if they are not utilized properly Hence, a firm must possess certain skills and knowledge in order to effectively make use of these resources In addition, owned and inimitable resources as well as valuable ones that create large demand for the company’s products form distinctive competencies, the root of competitive advantage As the four types of tangible resources have already been mentioned, the detailed information on each type is provided in the table below Financial Resources  The firm’s borrowing capacity  The firm’s ability to generate internal fund Organizational Resources  The firm’s formal reporting structure and formal planning, controlling and coordinating systems Physical Resources  Sophistication and location of a firm’s plant and equipment  Access to raw materials Technological Resources  Stock of technology, patents, trademarks, copyrights or trade secret Source: Barney, J (1991) Table 1: Tangible resources within an organization In contrast, intangible resources are organization’s assets that can hardly be quantified, hence, it is virtually related to human, innovation and reputation aspects of a company  Knowledge Human resources  Trust  Managerial capabilities  Organizational routines Innovation resources  Ideas  Scientific capabilities  Capacity to innovate Reputation resources  Brand name  Reputation with customers and suppliers  Perceptions of product quality, durability and reliability Source: Barney, J (1991) Table 2: Intangible resources within an organization 2.1.2 Capabilities Capability of a company is its ability to coordinate and efficiently utilize the resources Human, together with the help of technology, is the major force for any changes within an organization Hence, the capacity for coordination and efficient use of resources usually bases on the development, transfer, and exchange information and knowledge through human resources in enterprises And capacity foundation is the knowledge and unique skills of staff in companies However, each function within an organization has its own characteristics and skills at coordinating the resources and putting them into productive use The table below goes on to further elaboration Functional Areas Supply Chain Capabilities  Effective procurement techniques Distribution  Effective logistics management techniques Human Resources  Motivate, empower, retain employees Management  Effective/ efficient inventory control via point - of – Information Systems purchase data collection  Effective promo of brand - name product Marketing  Effective customer services  Ability to envision Management  Effective organizational structure  Effective culture  Design and product skills yielding reliable product Manufacturing  Product and design quality  Production of technologically sophisticated product  Product and component miniaturization Research and Development  Exceptional technological capability  Rapid transformation of technology into new products and processes Source: Barney, J (1991) Table 3: Capabilities in different Functional Areas 2.2 Distinctive competencies If a company succeeds in coordinating its resources and putting them in efficient use, then it is able to form distinctive competencies Distinctive competency is a company’s specific 2.1.2 Capabilities The table below gives information on how each function at A.D Center coordinates the resources and putting them into productive use Technical Department, including subteams namely Research & Development and Teacher team, needs human and innovation resources most to operate effectively and efficiently Meanwhile, Marketing and Finance function need to utilize tangible resources rather than intangible ones Thus, different functions in the company have different capabilities so as not to waste its valuable resources Functional Areas Technical Capabilities Teacher team Empowerment At A.D Center, 10 teachers work together in a team, as a Department result, the team leader is able to observe every single individual and figure out the best way to achieve team performance and satisfaction Since human resources are of vital importance in the success of A.D Center, the team leader has to come up with the proper way to keep members motivated The teachers are able and willing to work, hence, they are empowered or given autonomy to accomplish their jobs Research & Knowledge of English-teaching materials Development Research & Development team at A.D Center has a good knowledge of teaching materials, including reference books, flashcards, posters and educational games kits, etc Together with a good technological capability, the team is able to get access to a wide range of materials at a lower cost Finance & Marketing Effective Customer Service Marketing Marketing function at A.D Center is good at Customers 16 Relation Management Many of them are its very first Department customers from the beginning, which is a critical attribution to the success of every single business Since Word of Mouth channel (references) is reliable in this field, these customers are the major force contributing to new arrivals Finance Costs-Saving Finance at A.D Center takes costs-saving as the first priority in financial management It is hard to reduce costs while striving for the higher standards As a result, finance team in A.D Center needs to work closely with the other functions to make any recommendation on costs-saving or teaching materials investment In addition, understanding its internal process is the best way to keep everything in control Table 8: Capabilities at each Functional Area at A.D Center 2.2 Distinctive competencies at A.D Center The above analysis proves that A.D Center’s ultimate strength lies in its human resources Again, the Vietnamese teachers at A.D., who are also members of sub-team Research & Development, not work like employees They are willing to work and innovate as if A.D Center was their own start-up firm Moreover, A.D Center has capabilities to utilize it in order to improve teaching quality, the essence of every educational business Hence, it can be concluded that human resource is A.D Center’s distinctive competency, which is inimitable and valuable, and it allows the firm to form a proper strategy so as to gain competitive advantage A.D Center offers affordable English courses (Tuition fee at about 100,000 VND/class) while keeping service quality enhancement It always strives to go beyond the so-called ‘acceptable quality’ but still offers affordable price for customers In strategic term, A.D 17 Center follows Integrated Cost leadership/Differentiated strategy, accordingly, it simultaneously pursues low-cost and differentiation However, a firm’s strategy is not only formed by its distinctive competencies but also affected by market conditions Firstly, A.D Center entered the market when other competitors had positioned themselves as reliable English schools for children Apollo English, British Council and Language Link were all members of multinational groups entering Vietnam market in the early 1990s The teachers were 100% native speakers, thus, the tuition fee was relatively high and not everyone can afford From 1996 to 1999, there emerged several English centers (May School, Sunvale School, etc.) established by Vietnamese, tuition fee of which was much lower than that of the three above-mentioned centers May school was one of the most successful centers at that time After 18 years in operation, it now has different locations at Bui Thi Xuan, Ngo Thi Nham and Hoang Dao Thuy street, being perceived as the most reliable English school for children From 2000 to 2009, more than 20 other English centers for children were established in Hanoi region Secondly, A.D Center starts with small capital, hence, its infrastructure appears to be not as attractive as that of other centers Each classroom at A.D has a television and an airconditioner And the center has a library and a playroom also However, on the outside it is just a simple one-floor house Regardless of how good the quality could be, customers’ observation strongly affects their perception of the service as well as the amount of money they are willing to pay Therefore, A.D Center cannot charge a higher price than those rivals with the same scale A.D Center chooses to follow Integrated Cost leadership/Differentiated strategy so it needs to simultaneously differentiate its service and offer customers an acceptable price In terms of service quality, A.D Center tries to strike a balance between grammar and communication in English In other word, there is no special focus on any particular skill, say Speaking, Listening, Reading or Writing There are units in one level of Course book Incredible English, which is supposed to be finished in about months Each unit is divided 18 into 6-8 lessons and the content of every lesson must base on the book as well as teaching process that the teachers all agree on A consistent process helps reduce uncertainties causing inferior quality in service delivery The figure below depicts how a unit is sequentially delivered, taking unit from Incredible English level (Page 37 to 44) for instance Lesson & Lesson 2: Introducing the topic and learning vocabulary •Topic: At the aquarium •Vocabulary: sand, shark, dolphin, octopus, starfish, jellyfish, seahorse, boat, fish, shell, crab, water Lesson & Lesson 4: Learning grammar •Grammar: Irregular verbs Lesson & Lesson 6: Learning through English •Learn about fresh water and salt water fish •Extra vocabulary: shallow, deep, surface, bottom, trout, pike, cod, sardineds, ray, anglerfish, lanternfish Lesson & Lesson 8: Revision and Test •Revise grammar and all of the vocabulary Figure 7: Teaching process at A.D Center However, this process can be flexible since learning capability and characteristics of each class are very different It may take a class days to revise a unit while another needs only day to so But every single unit in any level always contains games, videos and activities using posters or flashcards And the result does satisfy parents With regard to pricing, A.D Center’s tuition fee is virtually the same as that of other centers with the same scale The table below compares service pricing in A.D with three other centers Like A.D Center, Merry English Center and Dream English Center appear not to have any really special feature in teaching method They all use games and try to make visual impact through pictures or videos Amslink Education Center charges customers at a 19 higher price, however, its scale is larger so its infrastructure is much better than that of the other three centers Moreover, it provides customers with a plethora of benefits, say English Club for kids or Junior Presenter Hunts contest, etc Thus, it is perceived that Amslink creates more value added for customers Hence, pricing at A.D Center is acceptable but not really competitive English Center Address Abroad Discovery English 115 G2 Thanh Tuition Fee (VND/class) Cong, 100,000 Nguyen Hong, Ba Dinh, Center Hanoi Merry English Center No.9 Thi Sach, Hai Ba 100,000 Trung, Hanoi Dream English Center No.182 Tay Son, Dan 110,000 Phuong, Hanoi Amslink Education Center 8/59 Lang Ha, Ba Dinh, 100,000 – 115,000 Hanoi Table 9: Tuition fees at other English Centers in Hanoi region Evaluation In a nutshell, A.D Center does satisfy customers with good service quality and reasonable pricing That it is able to simultaneously keep the service this good and set up an affordable price can help it enjoy a period of stability On the other hand, this is not enough to be called ‘competitive advantage’ since there are a myriad of similar centers out there whose service and tuition fee are virtually the same as A.D Center’s Hence, in longer term, if A.D Center wants to boost the business up and position itself as an expert in the field, it does need to make its service quality outstanding among its rivals, firstly with those of the same scale then the whole market 20 Figure 8: Value creation at A.D Center (Based on Source: Frank T Rothaermel (1996)) 21 Chapter 3: Recommendation for competitive advantage achievement at A.D Center The fundamentals of Balanced Scorecard and why using Balanced Scorecard at A.D Center 1.1 The fundamentals of Balanced Scorecard Balanced Scorecard is a management system that enables an organization to set, track and achieve its key business strategies and objectives Once the business strategies are developed, they are tracked through the four perspectives of the Balanced Scorecard, namely Financial, Customer, Internal Processes and Learning & Development Specifically, the financial scorecard tracks a company’s financial requirements and performance The customer one refers to customers’ satisfaction and their performance requirements for a firm’s products or services delivery Lastly, the internal processes scorecard relates to the efficiency and effectiveness of an organization’s internal processes, while the learning & growth one focuses on how to use and maintain a competitive edge relating to human resources’ capabilities within the market 1.2 Why using Balanced Scorecard at A.D Center A.D Center knows its distinctive competencies and which strategy to follow, however, it needs a completed action plan to monitor organizational performance against strategic goals Moreover, since its resources are limited it needs to know what to focus on in a specific period of time, say what is the proper time to put great effort in saving costs or enhancing service quality Hence, it is better to be able to balance between short-term & long-term objectives and financial & nonfinancial ones Balanced Scorecard takes every single aspect of an organization into a comprehensive action plan, which perfectly fits in A.D.’s situation The application of Balanced Scorecard at A.D Center 2.1 Strategy map at A.D Center Since successfully implementing a strategy requires the achievement of many subobjectives, all Balanced Scorecard projects build a strategy map of strategic goals first and 22 only afterwards select the proper metrics All the objectives are linked in cause-effectrelationships, starting with employees, continuing through processes and customers, and culminating in higher financial performance Figure 9: Strategy map at A.D Center (Based on Source: Robert S Kaplan (2010)) At A.D Center, teachers’ knowledge and skills is the fundamental of service quality, besides organizational culture and interaction among functions These are the most important attributes to the effectiveness and efficiency of internal processes operation, including process quality, process measurement management system and operational efficiency It is crucial to have a standardized measurement system since the extent to which the service is of high quality depends on an effective assessment tool These two objectives, 23 together with operational efficiency, help the company attain high service quality while maintain a competitive price Accordingly, it leads to customer loyalty and a higher return on investment ratio 2.2 Action plans in accordance with the four perspectives of Balanced Scorecard 2.2.1 Finance The financial performance measures define the long-run objectives of the business unit Businesses with product or service in the early stage of their life cycle can stress rapid growth objectives, and mature businesses may emphasize maximizing cash flow Accordingly, it can be simplified somewhat by identifying just three different stages: rapid growth, sustain and harvest A.D Center is in rapid growth stage since the business is at the early stage of its life cycle It may have to make considerable investments to develop and enhance its service, to improve teaching facilities, to expand infrastructure and to nurture and develop customer relationships 2.2.2 Customer Since A.D Center is in rapid growth stage, it does need to attract as many customers as possible and build up customer loyalty As a result, it needs to offer them superior service quality while maintaining an acceptable price, which is also the strategy it chooses to follow in accordance with its own capability and market condition At the present, pricing at A.D Center is relatively competitive Moreover, the scale of the center is still small, thus, it is much easier to control the costs and expenses emerging during operating processes Hence, depending on the center’s current capability as well as the essence of educational businesses, it is service quality that A.D needs to prioritize right now In short, if the long-term objective of A.D Center is to create value for customers through Integrated Cost leadership/Differentiated strategy then first and foremost it needs to polish its service quality The following recommendations on internal processes and organizational learning are mostly about service quality 24 2.2.3 Internal processes Firstly, in order to maintain a competitive price, every single company should know how to operate efficiently A.D Center is doing well since, as already mentioned, the finance team sets cost-saving as the highest priority They know to make use of resources and any investments made are utilized to the fullest A teaching materials pack of Incredible English level 3&4 including 70 flashcards, posters and a photocopy master book, for instance, can also be applied for level 5&6 and used as materials in a myriad of activities Secondly, process quality is the ultimate objective of weekly-held meeting of A.D.’s teachers They meet to work out a consistent teaching process, which helps reduce uncertainties in service delivery However, there isn’t any process measurement tool at A.D Center while it does need a thorough system to assess and improve its service quality There are aspects that need to be measured, cost and quality, but measuring quality is more in need at the moment Beside customers’ feedback, the best criteria must be students’ test result The table below is a suggestion on the act of using test result to assess teaching quality However, this is not applicable to every situation since the learning capabilities of students in particular and classes in general are very different Moreover, a teacher cannot be considered as being good at teaching if he/she just knows to focus on test result Levels Quality measurement Starter  After each unit 100% students Level remember all of the vocabulary Level (meaning, Level spelling) and grammar provided  Level in the book confidently in English with virtually Level pronunciation  Students are able to speak confidently in English and  The lowest result of unit test is 22 Students are able to speak correct grammar and good 25 Level right answers per 25 questions; pronunciation and 30 right answers per 35 questions for test after each level Table 10: Suggested quality measurement at A.D Center 2.2.4 Learning and development As the essence of every single service company is not only the service itself but people delivering it, employees’ skills and knowledge is of critical It is more than just the current ability of employees It is about how the company continually improves the capabilities for delivering value to stakeholders in an intensely competitive market Businesses are unlikely to be able to meet their long-term targets for customers and internal processes using today’s technologies and capabilities Hence, looking at the strategy map while simultaneously addressing the long-term and short-term objectives of A.D Center, there is a large gap between existing capabilities of people, systems and procedures and what will be required to achieve targets for breakthrough performance Accordingly, teachers at A.D should be encouraged to make a non-stop learning progress and innovation Moreover, some of the current teachers, as a result of their personal plans, will no longer work here in the next years And the new teachers should be more well-qualified and innovative than the current ones in order to help A.D catch up with the whole market Turning to the interaction among functions at A.D Center, there is a lack of synergy between Technical department and Marketing one While the Technical department strives so hard to enhance the teaching quality, the Marketing team is unable to a thing about it It is high time to show-case all what A.D does to create more value to customers so externals can be aware of it At the moment the one and only communication channel at A.D is Facebook page In longer term, it can develop a website instead since not everyone uses Facebook, especially parents 26 Conclusion A.D Center entered the market when other competitors had positioned themselves as experienced and reliable English schools for children Throughout the 2-year period of development, A.D Center did enjoy drastic changes in infrastructure and an increase in the number of customers Depending on the current capabilities and market condition, A.D Center chose to follow Integrated Cost leadership/Differentiated strategy, together with its distinctive competency in human resources, to create value for customers and achieve competitive advantage However, this is not enough if it wants a breakthrough service in longer term Hence, the ultimate objective of A.D Center now is to focus on enhancing the teaching quality so that it can be standout among its rivals Integration is the hardest strategy to follow since it can lead to the situation in which a company is stuck in the middle That A.D Center is able to strike a balance between shortterm and long-term objectives, financial and non-financial ones can help it a lot in achieving competitive advantage Lastly, from the perspective of a business student, I hope this report could be a good suggestion for better management at Abroad Discovery English Center 27 References Barney, J (1991) Firm resources and sustained competitive advantage Journal of management Chuck Hanabarger, Rick Buchman and Peter Economy (2007) Balanced Scorecard Strategy for Dummies, Wiley Publishing, Inc., 78-92 Frank T Rothaermel (1996) Strategic Management, Concepts & Cases, Prentice Hall, 5563 Mintzberg, Henry and Quinn, James Brian (1996) The Strategy Process: Concepts, Contexts, Cases, Prentice Hal, 34-51 Michael E Porter and M R Kramer (1999) Philanthropy's New Agenda: Creating Value Harvard Business Review 77, no (November-December) Michael E Porter (1996) What is Strategy?, Harvard Business Review (November– December 1996), 81-97 M Jensen (2001) Value Maximization, Stakeholder Theory, and the Corporate Objective Function, Journal of Applied Corporate Finance, (Fall): 8-21 Robert S Kaplan (2010) Conceptual Foundations of the Balanced Scorecard, Harvard Business School, 132-140 Robert S Kaplan and David P Norton (2006b) How to Implement a New Strategy Without Disrupting Your Organization, Harvard Business Review (March): 100-109 Robert S Kaplan and David P Norton (1996) Linking The Balanced Scorecard to Strategy, California Management Review, 93-107 28 Internship Evaluation Written by Nguyen Ngoc Bich _ General Manager at Abroad Discovery English Center For Trinh Thi Quynh Van A13 High Quality Program of Business Administration Internship duration: From June 1st to August 4th, 2014 To whom it may concern, My name is Nguyen Ngoc Bich, General Manager at Abroad Discovery English Center and also the one directly working with Trinh Thi Quynh Van in most of her internship duration I am very glad to write her this Internship Evaluation in order to recognize her accomplishment Van started her internship when the Center was about to experience drastic changes in service quality enhancement I witnessed her eagerness to learn and the passion she had for the job, which was proved through the last two-month period of intense work towards a thorough teaching process We had weekly meetings and she worked with us to work out the best solutions on teaching quality improvement and how to show-case and attract more customers Moreover, Van always accomplished the tasks she was given She was willing to receive feedbacks and learn from mistakes From the perspective of a colleague and a team leader, I reckon that Van did a good job as an intern at Abroad Discovery English Center Sincerely yours, Nguyen Ngoc Bich General Manager at Abroad Discovery English Center 115 G2, Thanh Cong, Nguyen Hong street, Ba Dinh district, Hanoi 29 30 ... including four main steps, namely Situational Analysis, Strategy Formulation, Strategy Implementation and Strategy Evaluation Competitive advantage is the ultimate finding of the first step in. .. within an organization In contrast, intangible resources are organization’s assets that can hardly be quantified, hence, it is virtually related to human, innovation and reputation aspects of. .. teaching materials and methods Turning to Finance & Marketing Department, there are sub-teams in charge of the according functions in the company, finance and marketing President Finance & Marketing