Business strategy for GATEXCO 20, period 2013 - 2018 = Xây dựng chiến lược kinh doanh cho công ty cổ phần X20 giai đoạn 2013-2018. Luận văn ThS. Kinh doanh và quản lý: 60 34 05

VIETNAM NATIONAL UNIVERSITY, HANOI SCHOOL OF BUSINESS NGUYEN DINH DUY BUSINESS STRATEGY FOR GATEXCO 20, PERIOD 2013 - 2018 Major: Business Administration Code: 60 34 05 MASTER OF BUSINESS ADMINISTRATION THESIS Supervisors: Dr Nguyen Thi Phi Nga Hanoi - 2012 ABSTRACT BUSINESS STRATEGY FOR GATEXCO 20, PERIOD 2013 - 2018 Nguyen Dinh Duy MBA candidate, 2008-2010 Viet Nam National University, Ha Noi School of Business Supervisors: Dr Nguyen Thi Phi Nga December, 2012, 102 pages The strategies of the company show the future of the company on doing its businesses They analyze the industry segment of which the company is operating; determine the target market and customers segment for medium and long term; and the competitive advantages must build up and maintain The development of business strategies, however, is a complex task that requires a lot of attentions from BOD and the company‟s resources The research begins with a brief introduction on business strategy management definition and the process of strategic planning To develop a strategic planning complied with sustainability, the company needs to apply fundamental analysis or namely tool box of strategic planning such as industry segment analysis, value chain analysis, generic business strategies, and network success factors and resources analysis To make all theories above to be practical, the author will use the case of GATEXCO20 and assess the current business strategy of the company The assessment bases on the ii results achieved during the interview with managers of GATEXCO20 Then, I will conduct some conclusions and recommendation The author has been working in GATEXCO20 for more than six years and it is an interesting field that the author loves to work for With significant knowledge and experience after the years working as well as the author‟s role in company, the author does believe that this research would also be a valuable fundament for the author‟s career development in the years coming iii TABLE OF CONTENTS ACKNOWLEDGEMENT i ABSTRACT ii TÓM TẮT iv TABLE OF CONTENTS vi LIST OF FIGURES ix LIST OF TABLE x INTRODUCTION A Background and Rational B Objectives C Scope and Limitation CHAPTER 1: FOUNDATION THEORY FOR STRATEGIC MANAGEMENT 1.1 The definition of business strategy 1.2 The definition of business strategic planning 1.3 The business strategic planning process 1.4 Tools used in business strategic planning 1.4.1 SWOT matrix 1.4.2 Porter‟s Five Forces Model 1.4.3 PEST analysis 11 vi 1.4.4 Value chain analysis 13 CHAPTER 2: EXTERNAL AND INTERNAL ANALYSIS 16 2.1 EXTERNAL ANALYSIS 16 2.1.1 PEST Analysis 16 2.1.2 Industry analysis 32 2.1.3 Summary external analysis 38 2.2 INTERNAL ANALYSIS 41 2.2.1 Primary activities 44 2.2.2 Support activities 55 2.2.3 Summary internal analysis 60 CHAPTER 3: SELECTED STRATEGIES FOR GATEXCO 20 AND INPLEMENTATION PLAN 64 3.1 Choosing functional strategies 64 3.1.1 SWOT analysis 64 3.1.2 GREAT analysis 74 3.2 Performing components of strategy implementation 76 3.2.1 Strategy 77 3.2.2 Systems and structure 77 3.2.3 Style 77 3.2.4 Staff 78 3.2.5 Skills 80 3.3 Action Plans 82 3.3.1 Activities functional strategy - Product quality management 82 vii 3.3.2 Activities functional strategy – Build-up the raw material system 87 3.3.3 Activities functional strategy – Product diversification 88 3.3.4 Action plans for five years strategies 91 3.4 Recommendations to GATEXCO20 for strategies implementation 95 3.5 Recommendations to the Government 97 CONCLUSIONS 98 REFERENCES 100 viii LIST OF FIGURES Figure 1: Business strategic planning process – sample Figure 2: Business strategic planning process - sample Figure 3: Business strategic planning process - sample Figure 4: SWOT Matrix Figure 5: Porter's Five Forces Model Figure 6: Value chain analysis model of Porter (1980) 14 Figure 7: Porter‟s five forces model 32 Figure 8: Value chain analysis model 43 Figure 9: The process of receiving input materials 45 Figure 10: The operation process of GATEXCO20 46 Figure 11: Images of some major products of GATEXCO20 48 Figure 12: The distribution system of Viet Tien Garments Company and Nha Be Garments Company 51 Figure 13: Organization structure of GATEXCO20 54 Figure 14: Five stage of building-up the raw material system 68 Figure 15: key successful factors for TQM 69 Figure 16: Seven-S Framework 76 Figure 17: The business strategy process 96 ix LIST OF TABLE Table 1: World internet usage and population statistics 2011 30 Table 2: Opportunities and Threats to Gatexco20 39 Table 3: Import and Tariff on Fuels (%) 49 Table 4: GATEXCO20 employees in 2010 and 2011 55 Table 5: Production capacity in 2011 of some garment and textile companies in the domestic market 58 Table 6: Strengths and Weaknesses of GATEXCO20 60 Table 7: SWOT matrix for functional strategies 64 Table 8: Ranking order of functional strategies 75 Table 9: Trait models by John Gardner (1989) and Zaccaro (2004) 82 Table 10: Six Sigma system 84 Table 11: International trade shows 88 Table 12: Action plans for five years strategies 91 x INTRODUCTION A Background and Rational Garment and Textile is one of the traditional industries in Vietnam and plays an important role of the economy development and reducing the unemployment rate in poverty area In recent years, Vietnam‟s economic development has evolved rapidly and has been changing to integrate with regional and world economies and garment and textile industry is determined as one of the focused industry of Vietnamese Government that helps the country to reduce the trade deficits The evidence for the important of garment and textile can be found lot of public resources (i.e newspaper, television, talk-show, etc) of which these resources stated that garment and textile industry has contributed a lot in the total GDP as well as creating more jobs in the economy However, the author identifies that the garment and textile industry is facing many challenges from both of internal and external environment The internal problem is rising due to the low skills of major labors and low technology applied in manufacturing while the external problem is coming from the rush competition with strong competitors such as China, India, Indonesia, Pakistan, Korea Furthermore, most of the enterprises operating in garment and textile industry not take into account the business strategic planning and view it as one of the vital part on the continuous development The fact is that every enterprise needs to apply business strategy that is help to respond quickly to changes in the market In each period, the company can adopt one or many strategies which are based on analyzing and predicting the company‟s strength or weakness and the market‟s opportunities or threats The business strategy is built on the basis of analyzing and predicting the opportunities, risks, strengths and weaknesses of enterprises that help the enterprise obtaining the general information on external business environment as well as internal resources of the enterprise Based on the mentioned problems, they plan the strategic objectives, select the best strategy and formulate policies to achieve those objectives and simultaneously inspect and adjust the strategy to face with the change of business environment The business strategy helps enterprises not to fall into a defensive situation, but to always stand on the offensive side to be ready to face all changes of the business environment GATEXCO20 is not the exceptional case in terms of issues related to the business strategic planning Currently, GATEXCO20‟s business strategy is limited to the short term planning without a long term vision The company sometimes deals passively with the change in the market and adjusts planning Therefore, the need to plan and implement long-term business strategy is very important and urgent for the survival and development of the company Therefore, in the respect of the important role of business strategic planning for the orientation development of Vietnam‟s garment and textile industry and the long-term development of GATEXCO20, the author decides to choose “Business Strategy for GATEXCO20, period 2013 - 2018” as the name of the research By driving concentration to the macro-economic factors and the tools of business strategy formulation, the research will help the top managers of GATEXCO20 to understand and to adopt comprehensive long term business strategies to ensure the sustainability in development B Objectives The objectives of the research are stated as follows: 3.3.3 Activities functional strategy – Product diversification 3.3.3.1 Create partnership with foreign garment and textile enterprises The first activity for functional strategy is to create the long term partnership with foreign garment and textile enterprises The reason of this action can be found in the case of VINATEX This company now has the relationship with more than 400 corporations and companies from 65 countries and territorial regions Its export value has accounted for over 20% of the total export turnover of the company (http://en.www.info.vn) Thus, long term relationship with foreign garment and textiles enterprises will bring the higher turnover for GATEXCO20 However, finding the suitable foreign enterprise to make partnership is not the easy task Generally, this partnership can be achieved through the supportive programmes from the Vietnamese Government Other way is GATEXCO20 should participate in international trade shows to meet all authenticated foreign garment and textile enterprises in the world The author lists out some internal trade shows that GATEXCO20 can be participate in: Table 11: International trade shows No Venue Organizer Bangkok Reed Products Tradex Fashion dress materials, International Trade Company Embroidered, & range Exhibition Centre (BITEC) Trimmings in A wide denims, & embellishments, All types of buttons Miami Beach Global sources Convention Centre Ready-to-wear garments, Outerwear, Sweaters & knitwear, Sportswear & 88 active wear, Bridal wear, Fabrics & textiles, Fibers & yarns, Trimming materials & accessories, Underwear, Swimwear, beachwear & accessories, Sleepwear & loungewear Bangabandhu Bangabandhu Textile apparel International International technology, Machinery & Conference Centre Conference Centre related service Imigrantes Global sources Ready-to-wear garments, Exhibition Center, Underwear & Swimwear, Sao Paulo Sweaters & knitwear, Fabrics, lace & trimmings, Causal & Fashion Handbags, Fashion Jewelry, Scarves, Headwear Expo Lahore Centre FAKT Accessories for EXHIBITIONS machinery looms PVT LTD knitwear, Embroidery, cutting & machines, textile & laying Garment accessories, Yarn dyeing, Sewing, Spinning machinery, All kinds of Textile machinery (Source: http://tradeshowcalendar.globalsources.com) 89 & Garment 3.3.3.2 Invest capital in research and development Other way to improve the diversification or GATEXCO‟s products is to invest capital in research and development (R&D) In addition to establish the R&D department, the company should allocate the employees to join in external R&D enhancement programmes For example, GATEXCO20‟s employees can participate in the “Textile Research Institute‟s capacity of conducting research, training and experimental development of textile techniques” which is known as the funding project between Belgium and Vietnam with the value of € 1,200,000 The objective of this course is to provide improved services to the textile and garment enterprises through research and development, transfer of technology, testing, and training and information dissemination This should strengthen the textile and garment industry to be a spearhead economic sector with a key role in export GATEXCO20 should also cooperate with the domestic university in R&D The author suggest GATEXCO20 should work with Ho Chi Minh City University of Technology, the faculty of mechanical engineering, in order to make the in-depth research on computerization, automation and consolidation of production management systems to improve quality, productivity 3.3.3.3 Conduct the annual market research To ensure the products of GATEXCO20 is diversified in the right way, GATEXCO20 should self-conduct the annual market research, in order to update the demand of the customers and to identify the new opportunities for the future development Alternatively, if the company cannot self-conduct the annual market research, the company should buy the market research from third parties such as Business Monitor Intelligent (BMI), European Intelligent Unit (EIU) or the report from Vietnam Garment and Textile Association 90 3.3.4 Action plans for five years strategies Table 12: Action plans for five years strategies Functional Strategy 1- Product quality management Activities Resources Responsibil Expected Time ity Objectives Schedule Evaluation Improve Existing Top Enhance the Jan 2013 The market the TQM TQM managemen product to July report on system system t, quality 2013, customer Quality through Monthly satisfaction managemen customer monitori and t satisfaction ng and employee department, and revision satisfaction Customer employee service participatio center, n Reduce the Aug The report deflect rate 2013 to on the t, Mar number of Quality 2014, deflect rate managemen Monthly in the t monitori manufacturi department, ng and ng units Customer revision Sale team, Manufacturi ng unit Adopt the IT Top Six Sigma infrastructu managemen system re 91 service center, Sale team, Manufacturi ng unit Invest Technology Top Increase the Jan 2013 The report capital on department manageme productivity to of the higher nt, IT, and product Decemb number of technolog Finance quality er 2013, product y and high parallel made by skilled running new labor or pilot technology test for system and at least compare to months, the current Monthly system monitori ng and revision Establish Top Monitoring the quality employees managemen the problem to Mar weekly, or managem in the t, timely monthly ent unit in manufacturi Quality report from each ng units managemen quality t managemen department, t unit in factory Existing 92 Jan 2013 The daily, 2013 each factory: the report frequency, detail of the report, the trustfulness of the reports Functional strategy – Build-up the raw material system Activities Resources Responsibil Expected Time ity Objectives Schedule Evaluation Build-up Local Top Ensure the Jan 2013 The number the supplier manageme raw to Dec of raw purchasin nt, sale material 2013 material g centers team, need for the from each finance manufacturi purchasing ng center, Operating cost of each purchasing unit compare with the profit return Build-up Local Top Ensure the Jan 2013 The number the areas supplier manageme raw to Dec 93 of square of for self- nt, sale material 2015 cultivation, cultivation team, need for the the finance manufacturi productivit ng y per square in cultivation area Functional strategy – Product diversification Activities Resources Responsibil Expected Time ity Objectives Schedule Evaluation Create Top Increase the On- Number of partnershi manageme annual going partnership, p with nt turnover, process the quality foreign increase the assessment garment expertise for the and textile partnership enterprise per year s Invest Top Finding the On- Number of capital in manageme new way to going new research nt, Finance, improve the process innovation and Human efficiency ideas developm resource and cost ent manageme saving in nt manufacturi ng process Conduct Secondary Marketing Understandi On94 Number of the annual data from department ng the going market process research market the market market research (TV, trend and was internet, the conducted third parties competitive reports) level against other rivals 3.4 Recommendations to GATEXCO20 for strategies implementation In term of business strategy implementation, GATEXCO20 should follow up the pre-determined process The author suggests using the process which is provided by R Grunig (2011) To make the process is simple, R Grunig (2011) considers the business strategy implementation as a project which has 07 steps, as described in the figure below 95 Figure 17: The business strategy process (Source: R Grunig, 2011) The first step is to make the plans for the business strategy project at high level or kick-off meeting The second step is to conduct the strategic analyses such as M Porter‟s Five Forces Model, SWOT analyses, in-bound and outbound logistics The third and the fourth step is to develop the corporate strategy and business strategies The fifth step is to make the detailed plan of implementation which is clearly defined the objectives, scope of work, responsibility of each stakeholder and key deliverables with time line The sixth step is to assess frequently the implementation, to highlight the key issues and to propose solutions The last step is to document all relevant documents and these documents have to be approved by the chairman or the director of GATEXCO20 96 3.5 Recommendations to the Government The Vietnamese Government should play the important role in establishing the general policies for the development of raw material cultivation Recently, the Prime Minister has approved a program to develop Vietnam‟s cotton cultivation by 2015, increasing the cotton cultivation areas to 30,000 in 2015 and 76,000 in 2020 In the long run, the Vietnamese Government should establish more programmes to increase the cultivation for other raw materials to make sure the local garment and textile manufacturers have the adequate materials for exporting and local requirements In more detail, the Government has approved, textile proposed strategy to build more cultivations, waste water treatment system standards in cultivation areas such as Thai Binh, Nghe An, Tra Vinh, etc Additionally, the construction industry also conducted an ecological laboratory at the Institute of Textiles is responsible for assessing and approving the safety certificates for export and commodity inspection, to ensure the safety of the users in Vietnam, as well as in the import market The laboratory is responsible for building and managing product safety standards and technical barriers needed to protect consumers in the domestic market In addition to the supportive programmes for raw material cultivation, the author suggests that the Vietnamese Government should establish the supportive financial programmes that help the local manufacturers having the necessary capitals for financing their activities The last recommendation to the Government is to establish the business laws in order to create the healthy competitive environments between local manufacturers and the foreign enterprises 97 CONCLUSIONS In this research, the author has examined the theory of formulating business strategies through the case study of GATEXCO20 in the garment and textile industry During three chapters, the author has gone through the analyses on the Vietnam macro economy (Chapter I) in order to identify the new trend of politics, economic, social and technology into the business activities of GATEXCO20 These analyses will help the author to formulate the opportunities and threats to GATEXCO20 The main opportunities are (i) the Vietnamese Government has implemented the policies of which supporting the local suppliers to grow up the raw materials; (ii) the Vietnamese Government has the favorable policies in order to encourage the Vietnamese people to use the local-made products, (iii) the customers are more focusing on the local-made products, (iv) the opportunitiy of adopting new technology, (v) people are more taking care to their clothes However, the author has seen that there are alot of threats of which GATEXCO20 has to face such as (i) inadequate raw material, (ii) alot of competitor in the market, (iii) WTO accession with trade liberalization brings more powerful competiors to the market, (iv) economic downturn affecting to Europe and reduce the exporting volume to this market, (v) unpredictive the future need of the customers The author also examines the internal activities of GATEXCO20 (Chapter II) that brings the information of strenghts and weakness of the company to the author The major strengths of the company are (i) TQM system, (ii) high production capacity, (iii) quite fast exchange service The major weaknesses are (i) high lag time or idle time in procurment process, (ii) insufficient distribution system, etc 98 Then, base on the SWOT of GATEXCO20, the author has provided 09 functional strategies, of which the author foucses 03 strategies namely (i) product quality management, (ii) build-up the raw material system, (iii) product diversification In each functional strategies, the author provides the action plans with the resource needs, responsible department, expected objectives, and evaluation to make sure the implementation will be right on track However, 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