Business strategy of hue textile garment joint stock company from 2015 to 2018

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TITLE APPROVAL PAGE FOR GRADUTE THESIS OR PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF REQUIREMENT FOR DEGREE OF MASTER OF BUSINESS ADMINISTRATION AT LINCOLN

UNIVERSITY OAKLAND, CALIFORNIA

CANDIDATE: TAM TRUONG THI BANG

FILED OF CONCENTRATION: BUSINESS STRATEGY THESIS TITLE:

BUSINESS STRATEGY OF HUE TEXTILE GARMENT JOINT STOCK COMPANY FROM 2015 TO 2018

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ABSTRACT

In 2007, Viet Nam joined the WTO with challenge However, time by time Viet Nam affirmed in the world market And textile garment is one of field that attracted

investment from the oversea customer

In economic crisis 2008, the world oil price was increased and lead to material price was increased Especially, cotton price in China was increased and increased and effect to garment field Because the garment price was confirmed some months before and

we could not turn back to ask the customer to increase garment price However,

Huegatex tried to keep its business on this year

As plan, in the middle of 2015 Viet Nam will join TPP with many chances and challenge, The research aims at Huegatex’s plans, strategies to invest and ready for

TPP agreement

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FROM 2015 TO 2018

ACKNOWLEDGEMENT

I would like to say thanks to all people that helped me to complete this assignment Firstly, I would like to says thanks to all leaders of Hutech Institute of International Education- Hutech University of Technology, Lincoln University and Lincoln’s Master of Business Administration program that have best condition for us to participate in studying and discussion during the MBA course

I especially thanks to Dr Khai The Nguyen who has instructed, supported me to

complete this project

I also sincerely thanks to all leaders to Huegatex that helped and gave information of Huegatex to complete this project

Finally, I would like to say thanks to my family and my friends who have encouraged and supported me

Sincerely thanks,

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BUSINESS STRATEGY OF HUE TEXTILE GARMENT JOINT STOCK COMPANY FROM 2015 TO 2018 TABLE OF CONTENTS CHAPTER 1: INTRODUCTION -<s<>s<<es«ses 7 1 TITLE OF RESEARCH: - 5Ặ 2-1101 11011.211.010 7 2 THE IMPORTANT OF RESEARCH: ằeheehee 7 3 AIMOEFRESEARCH: HH HH1 H0 0001011441111 111 1k0 8 4 RESEARCH OBJECTIVES AND SCOPPE: oce em 8 5 RESEARCH METHODOLOGY: - nen H100 8 6 STRUCTURE OF THE REPORT: 27 cĂ nen re 8

CHAPTER 2: STRATEGIC MANAGEMENT cssscsssssessesenssssessncssesssnanseorsenses aD

2.1 OVERALL THE STRATEGIC MANAGEMENT eessee 9 2.1.1 Defining strategic managernen( -ccccscsetieieieerirersee 9 2.1.2 Benefits of strategic managemerI s- ch Hee 9 2.1.3 Stages of strategic mansg€Tm€Ti - c1 see 10 2.1.4 The Strategic Management ModelÌ chien 12 2.2 KEY TERMS IN STRATEGIC MANAGEMENIT series 12 2.2.1 Competitive advan†ag€: - -c ch 121144410011 tr 13 2.2.2 StrategistS: con HH HH ng 10141811212011111110101 1 11 13 2.2.3 Vision and Mission sfaf€erneTifS -.- cs sa nHnhng 2e 13 2.2.4 External Opportunities and ThreafS -:sĂcSa net 14 2.2.5 Internal Strengths and Weaknesss - cu nhe 15 2.2.6 Long— Term obj€CfÏV€S nen 8110311011 10811 1xx 15 2.2.7 Strategies mm 15 2.2.8 Annual/Short ObjectiVes chen 00121011211 16

2.2.0 PỌiCles S- TH HH HỈ HH2 021 1T HH 1 011 010100140111 14 978 16

2.3 SOME TOOLS FOR FORMULATING STRATEGY . : 16 2.3.1 The Extemal Factor Eveluation (EFE) Matrix . c-cce 16 2.3.2 The competitive Profile Matrix (CPM) chai 17 2.3.3 Internal Factor Evaluation(IFE) MatrIx cs‡Ăcsseeseeese 18 2.3.4 The Strengths-Weaknesses-Opportunities-Threats(SWOT) Matrix 19 2.3.5 The quantitative Strategic Planning Matrix(QSPM) c.ee 20 CHAPTER 3: ANALYSIS THE INVESTMENT OF HUE_TEXTILE GARMENT JOINT STOCK COMPANY .esessssesssnssssnsesesne 21

3.1 GENERALTNFORMATION chen re 21 3.2 ORGANIZATION: ĩc nàn ng HH tt ra 23 3.3 ANALYSIS EXTERNAL BUSINESS ENVIRONMENT 24 3.3.1 Marco environment o-ccc¿22c22cxvvetttEEE221Ae 2.22111 tri 24 3.3.1.1 ECOnOTHICS: sàn HH HH HH HH 0101110100101 01.1 198 24

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FROM 2015 TO 2018

3.3.1.2 Technological: ccc secsccsssscsessssessseesencansccsscneeseesesenseseneseseseauasenteesens 26

3.3.1.3 Social ,Cultural, Demiographic, and Natural Environment 26

3.3.1.4 Political, Governmental, and LegaÌ sinh 27

3.3.2 Micro environment ccscsesessecnsesseseeeescenesersnsesessenseseneseetensssesoneseetens 27 3.3.2.1 Hidden CompetifiV© - cành H021 01111111 27 3.3.2.2 Competitors m sarme field - cerseeserirsiereieriie 28 3.3.2.3 Potential development of substitute produCfS -<: 30 3.3.2.4 Bargaining Power of SuppÏiers - ceceieseinineeHiee 30 3.3.2.5 Bargaining Power of ConSUuIm€fS -:s<<< << 1neireerie 31 3.3.3 External Factors Evaluation Matrix -.-«c«eteeeeieiiriiiee 33 3.4 ANALYSIS INTERNAL BUSINESS ENVIRONMENT 35 khằNG ẽ 35 3.4.2 Finance/Accounfing T€SOUTC€: à ch nhe 36 3.4.2.1 FinanC€: Ă song nhì HH HH Hà 11010181101 1001141146 36 KV N,.L Tố 37 3.5 MACHINE, CAPACTTY PRODUCTION: à Hee 39 3.5.1, Producing DTOC€SS: HH H011 tt 001011611 39 3.5.2 Spinning ÍaCOTY: HH HH HH HH 011210 01110 0100101 kree 39 3.5.3 Dyeing and knitting ÍaC(OTV: c SH H0 11111 tk, 40 3.5.4 Garment/sewing ẨaCfOTV: che 1e sekeh 42

3.5.4.1 Technical department: — 43

3.5.4.2, Fabric warehoUSe - càng Hành HH iếp 44 3.5.4.3 Material+ accessories warehOUSG: ceeeiireeeiririe 44

3.5.4.4 Cutting section: sen HH HH HH H1 0 11x68 45

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3.9 INTERNAL FACTORS EVALUATION MATRIX (FE) 51 CHAPTER 4: BUILD UP BUSINESS STRATEGY OF HUEGATEX FROM 2015 TO 2018 .ccsscsscssscssecsesecsossscensosrensacasscecscesenencansesanscerssaranaens 52 4.1 MISSION AND STRATEGIC OF HUEGATEX TO 2018 52 4.1.1 Mission of Huegafex nh HH H10 1 km hàn 52 4.1.2 Long-term of Huegatex to 2018 HH he, 52 4.1.3 Short-term in 20lŠ sen 101 1100811101010101101111 1106 52 4.1.4, Political nh 53 4.2 BUILD UP THE STRATEGICS 75s Sàn 12t 53

4.2.1 Make the strategy planning 53

4.2.2 ST (strengths-threats) Sirategi€s: coi 56 4.2.3 Diversification produc?s straf€gyY ceeằhhheeeesrssee TƯỘ CHAPTER 5: CONCLUSION cscsssssssossscescesscassaracsenessesssenssnessesscerssovenens "— 57 REFERENCE .csssscsssssscsessescsarsoesesesnnsnvassssenscscesacaseceasares “ 58

&

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FROM 2015 TO 2018 TTT

LIST OF TABLES

Table 2-1 The External Factor Evaluation (EFE) Matrix

Table 2-2 The Competitive Profile Matrix (CPM)

Table 2-3 Internal Factor Evaluation (IFE) Matrix

Table 2-4 The Strengths-Weaknesses-Opportunities-Threats(S WOT) Matrix Table 2-5 The quantitative Strategic Planning Matrix (QSPM)

Table 3-1 EFE Matrix for Huegatex

Table 3-2 Human Resources of Huegatex through the years Table 3-3 Accountant balance sheet

Table 3-4 Sales structure as per field

Table 3-5 Report business activity in years 2011-2013 Table 3-6 IFE Matrix for Huegatex

Table 4-1 SWOT Matrix for Huegatex

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CHAPTER 1: INTRODUCTION

1 TITLE OF RESEARCH:

The title of the dissertation is: “Business strategy of HUE Textile Garment Joint Stock Company from 2015 to 2018”

2 THE IMPORTANT OF RESEARCH:

At the meeting Trans — Pacific Strategic Economic Partnership Agreement (TPP), researchers confirmed that Viet Nam has more chances than challenges This is the reason why garment textile is main concern in TPP agreement As Viet Nam Textile, this is a big challenge because most of textile and garment factories have not ready for TPP agreement that will be signed in the middle next year — 2015.In global market, competition between companies is big deal for them So it is very important to analysis and improving the ability and having right strategy at right time

Hue Textile Garment Joint Stock Company is a big company at central of Viet Nam However, it also has difficult with competitors as Thanh Cong (TCM) in Ho Chi Minh and Hanosimex in Ha Noi So the strategy of Hue Textile Garment

Joint Stock Company (HUEGATEX) from 2015 to 2018 is very important

To prepare TPP agreement in next year, all companies in Viet Nam have both chance and challenge So to joint TPP trade, all companies must be proof their ability and can competitive with foreigner companies at China, Bangladesh and even the companies in TPP area And it requires have more wide and long vision

HUEGATEX Company is always trying to have good relationship with partners to have two side benefits and bring for partners the good service, good products in high quality and Just In Time (J-I-T) also is a part in the strategy of

HUEGATEX company Basing on these situations I chose the dissertation:

“Business strategy of HUE Textile Garment Joint Stock Company from 2015 to 2018”

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FROM 2015 TO 2018 7

3 AIM OF RESEARCH:

Base on the compstition, strategy and inside environment of HUEGATEX, I build up the business strategy from 2015 to 2018 and solution to do

this strategy

4 RESEARCH OBJECTIVES AND SCOPE:

The primary aim cf research is concentrate about the impact of environment to business activities of HUEGATEX And look back the business activities last few years to have right plans, right strategies in next few years to 2018

5 RESEARCH METHODOLOGY:

Methodologies in this dissertation: analysis; collect the data and compare; and business researchers

6 STRUCTURE OF THE REPORT:

The entire of report is divided into 5 chapters A brief of description of these chapters is given below:

Chapter 1: Introduction

This chapter gives quick overview about aim and purpose of research,

why there is a need of this research and what would be our analysis

Chapter 2: Literature review

This chapter will give detail information about the research topic Chapter 3: Research methodologies

This chapter will focus on approaches of research methodologies Primary, secondary data types zrd different are analyses in this research

Chapter 4: Finding and analysis

This chapter will portray the actual results and finding of the research Chapter 5: Conclusion

The conclusion of the research is the last chapter of the research report The whole research, its study and finding would be concluded in this chapter And

the recommend would be includzd in the last chapter of the dissertation which is the conclusion chapter

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9

CHAPTER 2: STRATEGIC MANAGEMENT 2.1 | OVERALL THE STRATEGIC MANAGEMENT

2.1.1 Defining strategic management

There is many defining about the strategic management, and each defining is different and it depends on the point of view of author

As Fred R David (2011), the author of ‘Strategic Management Concept and Cases” book, strategic management can be defined as the art and science of formulating, implementing, and evaluating cross —functional decisions that enable an organization to achieve its objectives As this definition implies,

strategic management focuses on integrating management, marketing,

finance/accounting, production/operations, research and development, and information systems to achieve organization success

As Michael Porter (1985): Strategy is choice what we need to do and what not to do, something to ineet a group of customer, not all

I really like the sentence: “Without a strategy, an organization is like a

ship without a rudder, going around in circles It’s like a tramp; it has no

place to go.”

-JOEL ROSS and MICHAEL KAMI - 2.1.2 Benefits of strategic management

As Fred R David (2011), strategic management allows an organization to me more proactive than reactive in shaping its own future; it allows an organization to initiate and influence (rather than just respond to) activities- and thus to exert control over its own destiny

Y Financial benefits

Research indicates that organization using strategic-management concepts are more profitable and successful than those that do not Business using strategic-management concepts show significant improvement in sales, profitability, and productivity compared to firms without systematic planning

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FROM 2015 TO 2018

planning systems more closely resembling strategic-management theory generally exhibit superior long-term financial performance relative to their

industry

¥ Nonfinancial benefits

As Gordon Greenly, strategic management offers the following benefits:

3° It allows for identification, prioritization, and exploitation of opportunities

It provides an objectives view of management problems

It represents a framework for improved coordination and control activities

It minimizes the effects of adverse conditions and changes It allows major decisions to better support established objectives It allows more effective allocation of time and resources to identified opportunities

It allows fewer resources and less time to be devoted to correcting erroneous or ad hoc decisions

It creates a framework for internal communication among

personnel

It helps integrate the behavior of individuals into a total effort It provides a basis for clarifying individual responsibilities It encourages forward thinking

It provides a cooperative, integrated, and enthusiastic approach to tacking problems and opportunities

It encourages a favorable attitude change

It gives a degrec of discipline and formality to the management of

a business

2.1.3 Stages of strategic management

In the competition market, the strategic management process involves analyzing cross-functional business decisions prior to implementing them As

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Fred R David (2011), strategic management process consists of 3 stages:

strategy formulation, strategy implementation, strategy evaluation:

Strategy formulation includes developing a vision and mission, identifying an organization’s external opportunities and thread, determining internal, establishing long term objectives, generating alternative strategies, and choosing particular strategies to pursue Strategy- formulation issues include deciding what new business to enter, what businesses to give up, how to allocate resources, whether to expand operation or diversify, whether to enter international markets, whether merge or form a joint venture, and how to avoid a hostile takeover

Strategy implementation requires a firm to establish annual objectives, devise policies, motivate employees, an allocate resources so that formulated

Strategies can be executed Strategy implementation includes developing a

strategy-supportive culture, creating an effective organizational structure, redirecting marketing efforts, preparing budgets, developing and utilizing information system, and lirking employee compensation to organizational

performance

Interpersonal skills are especially critical for successful strategy implementation Strategy implementation activities affect all employees and

manager in an organization

Strategy evaluation is the final stage in strategic management It is evaluating to what degree action plans have been successful and making changes when desired result are not being produced Three fundamental strategy-evaluation activities are: reviewing external and internal factors that are the bases for current strategies, measuring performance, and taking corrective actions

Nowadays, there is lots of competitors in global market so organizations should continually monitor internal and external events and trends so that timely changes can be made as needed , if not they will not survive

gt

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FROM 2015TO 2018 |

2.1.4 The Strategic Management Model

As Fred R David (2011), the strategic-management process can be studies and applied as a model And each model will be represented some process The framework illustrated in Figure 2-1 is widely accepted, comprehensive model of the strategic-management process FIGURE 2-1

A Comprehensive Strategic-Management Model

( Chapter 10: Business Ethics, Social Responsibility, and Environmental Sustainability )

Perform External Auk

Chapter 3

knplemart

Develop Vision Establish a some eo AWaesre

and Mission tong-Ters and Satect Management Finance, and Svante

Statements Chapter 2 Ctpecioves rapier S Strategies Chapter 6 Cper 2 teues Accounting, 8&0, and MS lan Chapters "Cues ca

L „me internal Audit

Chapter 4

t ‡ ‡ ‡

( Chapter 11: Global/international Issues )

| Strategy † Strategy ——T- Strategy

Formulation Implementation Evaluation

Source: Fred R David “How Companies Defines Their Mission,” Long Range

Planning 22, no.3 (June 1988): 40

2.2 KEY TERMS IN STRATEGIC MANAGEMENT

As Fred R David (2011) there is nine key terms: competitive advantage,

Strategists, vision and mission statements, external opportunities and threads,

internal strengths and weaknesses, long-term objectives, strategies, annual objectives, and policies

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1 BUSINESS STRATEGY OF HUE TEXTILE GARMENT JOINT STOCK COMPANY FROM 2015 TO 2018 aan 7 2.2.1 Competitive advantage:

Normally, a firm can sustain a competitive advantage for only a certain period due to rival firms imitating and undermining that advantage Thus it is not adequate to simply obtain competitive advantage A firm must strive to

achieve sustained competitive advantage by continually adapting to changes in external trends and events and internal capabilities, competencies, and

resources; and by effectively formulating, implementing, and evaluating strategies that capitalize upon those factors

2.2.2 Strategists:

Strategists are the individuals who are most responsible for the success or failure of an organization Strategists have various job titles, such as chief

executive officer, president owner, chair of the board, executive director, chancellor, dean, or entrepreneur

Strategists help an organization gather, analyze, and organize information They track industry and competitive trends, develop forecasting models and scenario analyses, evaluate corporate and divisional performance,

spot emerging market opportunities, identify business threats, and develop

creative action plans |

Strategists differ as much as organizations themselves, and these different must be considered in the formulation, implementation, and evaluation

of strategies Some strategists are differ in their attitudes, values, ethics,

willingness to take risks, concern for social responsibility, concern for profitability, concern for short -run versus long — run aims, and management

style

2.2.3 Vision and Mission statements

Developing a vision statement is often considered the first step in strategic planning, preceding even development of a mission statement Usually, we should answer the question “What do we want to become?”

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FROM 2015 TO 2018

Mission statements are “enduring statement of purpose that distinguish one business from other similar firm A mission statement identifies the scope of a firm’s operations in preduct and market terms” The basic question that faces al strategists: “What’s cur business?” A clear mission statement describes the values and priorities of an organization Developing a mission statement

compel strategists to think about the nature and scope of present operation and

to assess to potential attractiveness of future markets and activities 2.2.4 External Opportunities and Threats

External opportunities and external threats refer to economic, social,

culture, demographic, environmental, political, legal, governmental,

technological, and competitive trends and events that could significantly benefit or harm an organization in the future Some opportunities and threats that face many firms are listed below:

Availability of capital can no longer be taken for granted Consumers expect green operations and products

Commodity focd prices are increasing

Computer acker problems are increasing

Intense price ccmpetition is plaguing most firms

Unemploymert and underemployment rates remain high

Product life circle are becoming shorter

Local government are financially weak Vv VV VV VV WV

Home prices remain exceptionally low

> Global markets offer the highest growth in revenues

Above changes that are creating a different type of consumer and consequently e need for different types of products, services, and strategies

Other opportunities and threats may include the passage of a law, the introduction of a new product by competitor, a national catastrophe, or the declining value of the dollar A competitor’s strength could be a threat

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A basic tenet of strategic management is that firms need to formulate strategies to take advantage of external opportunities and to avoid or reduce the impact of external threats

2.2.5 Internal Strengths and Weaknesses

Internal strengths and weaknesses are an organization’s controllable activities that are performance especially well or poorly

Strengths and weaknesses are determined relative to competitor Relative deficiency or superiority is important information Also, strengths and weaknesses can be determined by elements of being than performance

Internal factors can be determines in a number of ways, including computing ratios, measuring performance, and comparing to past periods and industry average Various types of survey also can be developed and

administered to examine intecnal factors such as employee morale, production

efficiency, advertising effectiveness, and customer loyalty 2.2.6 Long — Term objectives

Objectives can be defined as specific results that an organization seeks to

achieve in pursuing its basic mission Long -term means more than one year Objectives are essential for organizational success because they state direction; aid in evaluation; create synergy; reveal priorities; focus coordination; and

provide a basis for effective planning, organizing, motivating, and controlling

activities Objectives should be challenging, measurable, consistent, reasonable,

and clear, In a multidimensional firm, objectives should be established for the overall company and for each division

2.2.7 Strategies

Strategies are the means by which long-term objectives will be achieves

Business strategies may include geographic expansion, diversification, acquisition, product development, market penetration, retrenchment, divestiture, liquidation, and joint ventures,

Strategies are potential actions that require top management decisions and large amounts of the firm’s resources Strategies have multifunctional or

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FROM 2015 TO 2018

multidivisional consequences and require consideration of both the external and internal factors facing the firm

2.2.8 Annual/Short Objectives

Annual objectives are short-term milestones that organizations must achieve to reach long-term objective Annual objectives should be measurable, quantitative, challenging, realistic, consistence, and prioritized They should be established at the corporate, divisional, and functional level in a large organization Annual objectives should be states in terms of management, marketing, finance/accounting, production/operations, research and

development, and management information systems (MIS) accomplishments

Annual objectives are especially important in strategy implementation, whereas long-term objectives are particularly important in strategy formulation Annual objectives represent the basis for allocating resources

2.2.9 Policies

Policies are the means by which objectives will be achieved Policies include guidelines, rules, and procedures established to support efforts to

achieve stated objectives ,

Policies are most often stated in terms of management, marketing,

finance/accounting, production/operations, research and development and management information systems activities Policies can be established at the corporate level and apply to an entire organization at the divisional level aad apply to a single division, or they can be established at the functional level and apply to particular operational activities or departments Policies, like manual objectives, are especially important in strategy implementation because they outline an organization’s exvectations of its employees and managers Policies allow constancy and coordination within and between organization departments 2.3 SOME TOOLS FOR FORMULATING STRATEGY

2.3.1 The External Factor Evaluation (EFE) Matrix

As Fred R David (20 11), an External Factor Evaluation Matrix allows

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environment, political, governmental, legal, technological, and competitive information, Regardless of the number of the key opportunities and threats included in EFE Matrix, the highest possible total weighted score for an organization is 4.0 and the ‘owest possible total weighted score is 1.0 The average total weighted score is 2.5 A total weighted score of 4.0 indicates that

an organization is responding in an outstanding way to existing opportunities

and threats in its industry In other words, the firm’s strategies effectively take advantage of existing opportunities and minimize the potential adverse effects of external threats A total score of 1.0 indicated that the firm’s strategies are not capitalizing on opportunities or avoiding external threats

Table 2-1 The External Factor Evaluation (EFE) Matrix Key external factors Weight | Rating Weighted score Lists of the external factors Total

2.3.2 The competitive Profile Matrix (CPM)

Ad Fred R David (2011), the Competitive Profile Matrix (CMP)

identifies a firm’s major competitors and its particular strengths and weaknesses in relation to a sample firm’s strategic position The weights and total weighted

scores in both a CPM and an EFE have the same meaning However, critical success factors in a CPM include both internal and external issues; therefore,

the ratings refer to strengths and weaknesses, where 4=major strength, 3=minor

strength, 2=minor weaknesses and 1=major weaknesses The critical success

factors in a CPM are not grouped into opportunities and threats as they are in an EFE In a CPM, the rating and total weighted scores for rival firms can be compared to the sample firms This comparative analysis provides important internal strategic informatior

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2.3.3 Internal Factor Evaluation(IFE) Matrix

As Fred R David (2011), IFE matrix summarizes and evaluates the major strengths and weakness in the functional areas of a business, and it also provides a basis for identifying and evaluating relationships among those areas Intuitive judgments are required in developing an IFE Matrix, so the appearance of a scientific approach should not be interpreted to mean this is an all-powerful technique A thorough understanding of the factors included is more important than the actual numbers

Regardless of how many factors are includes in an IFE Matrix, the total weighted score can range from a low of Lo to a high of 4.0, with the average score being 2.5.Total weighted scores well below 2.5 characterize organization that are weak internally, whereas scores significantly above 2.5 indicate a strong internal position The number of factors has no effect to upon the range of total weight scores because the weights always sum to 1.0

When a key internal factor is both strength and weakness, the factors should be

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2.3.4 The Strengths-Weakresses-Opportunities-Threats(SWOT) Matrix As Fred R David (2011), The Strengths-Weaknesses-Opportunities- Threats (SWOT) Matrix is important matching tool that helps managers develop four types of strategies: SO (Strengths-Opportunities) strategies, WO (Weaknesses-Opportunities) strategies, ST (Strengths-Threats) strategies, and WT(Weakness-Threats) strategies Matching key external and internal factors is most difficult part of developing a SWOT Matrix and requires good judgment-

and there is no one best set of matches

+ SO Strategies use a firm’s internal strengths to make advantage of external opportunities All managers would like their organizations to be in a position in which internal strengths can be used to take advantage of eternal trends and ev2nts Organizations generally will pursue WO, ST, or WT strategies to get into a situation in which they can apply SO Strategies When a firm has major weaknesses, it will strive to overcome them and make them strengths When an organization faces major threats, it will seek to avoid them to concentrate on opportunities

+ WO Strategies aim at improving internal weaknesses by taking

advantage of external opportunities Sometimes key external opportunities exist, but a firm has internal weaknesses that prevent it from exploiting

those opportunities

+ ST Strategies use a firm’s strengths to avoid or reduce the

impact of external threats This does not mean that a strong organization

should always meet threats in the external environment head-on

+ WT Strategies are defensive tactics directed at reducing internal weakness and avoiding external threats

A schematic representation of the SWOT Matrix is provided as table 2-4 And it is composed nine cells: four keys factors cells(S, W, O, T), four strategy cells (SO, WO, ST and WT), and one cell is always in left blank

(the upper-left cell)

a Se A

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FRQM 2015 TO 2018 Table 2-4 The Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix O: external opportunites | T: Threats Empty box - - (3) (4) S: Strengths SO Strateies ST Strategies ũ) 1+3) (+4) W: Weaknesses WO Strategies WT Strategies (2) (2+3) (2+4)

2.3.5 The quantitative Strategic Planning Matrix(QSPM)

As Fred R David (2011), the QSPM determines the relative attractiveness of various strategies based on the extent to which key external an internal critical success factors are capitalized upon or improved The relative attractiveness of each strategy within a set of alternatives is computed by factor Any number of

sets of alternative strategies can be included in the QSPM, and any number of

strategies can make a given set, but only strategies within a given set are evaluated relative to each other The components of the QSPM: Strategic

Alternatives, Key Factors, Weights, Attractiveness Score (AS), Total Attractiveness Scores (TAS), and the Sum Total Attractiveness Score

Table 2-5 The quantitative Strategic Planning Matrix (@SPM)

Strategic Alternatives

Strategy | Strategy | Strategy

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CHAPTER 3: ANALYSIS THE INVESTMENT OF HUE TEXTILE GARMENT JOINT STOCK COMPANY 3.1 GENERAL INFORMATION: ” anon ¬ fe

HUE TEXTILE GARMENT JOINT STOCK COMPANY (HUEGATEX) Add 122 Duong Thieu Tuoc street,

Thuy Duong Ward, Huong Thuy Town, Hue City Tel.: 84-54-386 4337

Fax: 84-54-3864338 Website: huegatex.com.vn

HUEGATEX< is a member of Viet Nam Textile Garment Corporation It

was established in year 1988 as a spinning company with 100 employees

e In 1997 expanded | knitting — dying factory and 1 garment factory

with 2,000 employees

® In 2004, privatized as a joint stock company ® In 2007 expanded more 2 garment factories

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FROM 2015 TO 2018

e Main products are’ now being exported to the USA, EU, Japan,

Taiwan, South Korea market In the USA market, we have big

customers and exported garments to them such as: Perry Ellis, Li & Fung, PVH, Sears, Costco, JC Penny, Kohl’s And exported yarns to Turkey, Egypt, and Portugal and also for domestic

e Huegatex is applying the quality control system under the ISO 9001- 2008 and has beea voting to be the Vietnam high quality goods for several years We are also issued the Worldwide Responsible Accredited Production Certification (WRAP) and The Custom- Trade Partnership Against Terrorism (C-TPAT)

e In the development strategy in 2015, Huegatex will invest another spinning mill with 25 thousand spinning spindles and a garment factory with 16 sewing lines to affirm our position of being one of the garment and textile hubs of the central region and Vietnam

e Huegatex advocates cooperation with all domestic and foreign partners through joint ventures, cooperative business and strive to attract strategic investors for long term cooperation in a spirit of

mutual benefits

TY

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Spinning factory: make the yarn

HR Dept.: includes managing recruiting and hiring employees, coordinating employee benefits and suggesting employee training and development strategies

Engineering and Investment Dept.:

Health Station: take care the health of the labors

Electricity Mechanic Station: take care the electricity of the whole Huegatex

Security Station: watch and protect the assets of company Life Station/Union labor: take care the life of the labors Shop/show room

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FROM 2015 TO 2018

“+ QA Dept.: handle the quality of goods to make sure that the quality is meet customer standard before shipping

¢» Planning, import and export Department: make the production plan, buying

the material and make sure everything is ready as plan before producing

And after finishing the goods, the goods must be ship out on timer for customer as confirmed

“+ Accounting Dept.:

» Money out — making payments and keeping the bills paid » Money in — processing incoming payments

» Payroll — make sure everyone gets paid (including the government)

« Reporting — preparing financial reports, e.g P&L, Balance sheets and budgets

« Financial Controls — to avoid errors, fraud and theft “* Knitting and Dyeing factory : making the fabric

3.3 ANALYSIS EXTERNAL BUSINESS ENVIRONMENT

3.3.1 Marco environment,

3.3.1.1 Economics:

Recent years, the world economic market is changing and changing lead to difficult for firms and the needs for importing from oversea customer in garment is deducted Especiaily, the rising price on cotton fiber was year 2008 and lead to the price of garments were increased while the market is down

In additional, Viet Nam’s economic also is in difficult and have to face in

inflation, tight bank credit, high expenditure, etc These things effected to Huegatex business

Viet Nam joining TPP trade agreement, as the plan TPP agreement will be effected in the middle of this year-2015.Why Viet Nam need to joint TPP?

TPP is a free trade and trade agreement set rules that allow us compete They

stop big countries pushing around little countries Why TPP is important? Free

trade gives consumers more choice and a broader range of goods and services to

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BUSINESS STRATEGY OF HUE TEXTILE GARMENT JOINT STOCK COMPANY ee 2015 TO 2018

choose Free trade helped make possible the lifestyles we have become accustomed to It has helped diversify and deepen our economy But more than this, the links we develop through trade and investment with other countries support people to people cormection They give us a richer and more diverse society

Main chances for Viet Nam after joining TPP agreement:

1* — Viet Nam has more condition for exporting increasing in big

markets with 0%import TAX such as US market Japan And Japan removed import Tax for agricultural products in TPP Besides garment textile, shoes products, wood products and agricultural products will have more benefits Because these goods have high values when exporting to TPP countries

2" _ Join into TPP, it will help Viet Nam to get the balance in trade relationship with other countries For example: total import value in year 2013: China = 36,95 billion USD, Korea=20,7 billion USD, Taiwan = 9,42 billion

USD, Thailand = 6,31 billion USD, Singapore = 5,7 billion USD Total 79,1

billion USD and it takes 59,9% value imported of Viet Nam

Above chance also create more chances for HUEGATEX to export

goods to countries in TPP

However, to get special Tax from 17-32% to 0%, all garment companies

in Viet Nam must finish the'rules in TPP that “products must be produced from

fiber in TPP countries” This is big difficult for most of garment companies Because of most of the materials are imported from oversea And Huegatex is preparing human resources, equipment, material resources for TPP

Viet Nam’s economic is developing lead to the GPD increase These things lead to necessary neecs of human increase This needs created chances for many fields, many companies in whole country While expenditure needs increase clearly especial in garment- medium market and the local market is expanded High need is chance for companies to produce more and sell products

in the market

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FRQM 2015 TO 2018 3.3.1.2 Technological:

To attract the investment from the oversea customer, Viet Nam Textile garment companies must invest new techniques

Recent years, companies with investment in techniques that can be supply the material for its self as Huegatex is an example Especially through the Textile fair every year, it is a chance for Viet Nam Textiles garment companies contact to new techniques and have more new suppliers to server for new strategies in developing

Techniques in Viet Nam garment market is developing strongly However, most of companies are concentrated in sewing so the spinning, knitting/weaving market is very small But, with new strategy and active in supplying materials in next few years, technique in knitting/weaving market will develop and make advantage for oversea suppliers to joint into this market And Viet Nam has more chance to buy new techniques to serve for new changing

3.3.1.3 Social ,Cultural, Demographic, and Natural Environment In Social, Cultural, Demographic and Natural Environment have

changing The government ‘pays more attention in education, especially have more training skill class for students and can get the job after graduating Or have more job center and export worker at oversea

Or opening more work fair, technologies and science fair at some big cities(Can Tho, Da Nang) pushing new market in developing the technology and science

Viet Nam Textile Garment is effected by popular in every area Because

its supplying the labor for garment companies and it also is main factor for garment needing But, the labor resource still do not adapt for garment needing It is shortage the labor with high skill Local garment market still so small and have more chance for oversea company to take it instead of Viet Nam companies taking

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BUSINESS STRATEGY OF HUE TEXTILE GARMENT JOINT STOCK COMPANY

FHQ M 2015 TO 2018 -

3.3.1.4 Political, Governmental, and Legal

Political, Governmental, and Legal are safety and stable So it makes for all companies feel confident to invest in business

And have more improvement in document of the government official in

2a, some of divisions such as: get the certificate for investment, custom service,

Tax official

Especially, the, government has some special policies and benefit for Textile garment éompany such as expand the investment, decrease the import tax, and using import barrier to protect for local company that produce and using locally

However, when TPP agreement is done, companies have to face with

difficult when competence with import goods that have nice look, difference styles, high quality and low price

3.3.2 Micro environment

3.3.2.1 Hidden Competitive

There is difficulty need to improve that is Viet Nam Textile is very limit and lead to 80% material must be imported from oversea Lead to the price is

very high and very difficult to compete with oversea companies And most of

orders are under cut and make: The designs for new styles are not development,

low result Another hand, most of Viet Nam Textile Garment is medium and

small so the ability to attach the investment from oversea is very low and limit in changing new techniques, and limit in PR and advertising its products

Labor shortage happen recently after every Lunar New Year at big cities And the relation between labor-salary does not get balance and let to have more strike in industrial zone that effected to producing and late shipment This also is a weakness that needs to improve to push Viet Nam Textile Garment more and more developing

As the plan from Viet Nam Textile Garment Corp from 2015 to 2020 will produce more than 2,000 million metters greige and knitting fabric and export 1,800million metters fabric So to reach this target the Government

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FR gM 2015 TO 2018

always makes more chance for new textile garment companies such as: low capital, medium technical also can open small factory to attach the investment from oversea

These new companies have more advantage to invest and using new technical and will produce raore products with high quality and new styles, good price, good service and created more competitive for local market Especially, recently there are lots of small companies that produced goods that follow the need and market trend with low expense and low price,

About the export market, the biggest competitive is China and the next is India and Bangladesh The popular of these countries are crowded so they Lave advantage in low expense and low price

3.3.2.2 Competitors in same field

Textile Garment field is very competitive Most of companies have to bear many pressure in production and try to make or flexible to survive, and more grow up as this period: ‘est labor resources, expense for input is very high

Now, there is lots of company make business in garment field from small,

medium to big company anc these companies want to be expanded factory and developed in producing And it makes more local competitors beside oversea competitors such as China, India So we can divide two groups: local competitors and oversea competitors:

= Local competitors:

Knitting products is main items of Huegatex and the big competitor of Huegatex is Thanh Cong Textile Garment Joint Stock Company (TCG), Thang Loi Textile Garment Joint Stock Company(Vigatexco),Phuong Dong Garment Joint Stock

Company, Hanosimex These companies have advantages and disadvantages that made strong position in textile garment field Besides, there is lots of garment company with main and strong

products such as Nha Be company, Viet Tien company, May 10 company (Garco 10) and other private garment companies

ee |

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FRO M 2015 TO 2018

= Oversea competitors:

US market is the biggest market for export of Viet Nam and also is for Huegatex And now, Huegatex is facing with big

competitors as China, India, Korea, and countries in Asean area

Especially, Vizt Nam will join into TPP in near future And it requires the garment must be from fiber And it is a big challenge for Viet Nam Textile Garment Companies and also is a big challenge for Huegatex As you can see, China is a country with high export for textile garment And China Textile Garment is very developing in material from cotton fiber, filament fiber, greige fabric, dying chemical, etc Another hand, mechanical for textile is very developing and can make spinning machine, knitting/weaving machine with hi-technologies from Euro but low price

We also have one strong competitor, it is India Every year, India grows 40-42% for exporting goods from textile garment As you

can see, India »secomes a strong garment exporter because there is

lots of customer from US and Euro move to India because the labor in this country is very low While low labor cost is main decision in final price of the product

And other competitors such as Pakistan, Malaysia, Philippines, Singapore, Bangladesh, these countries have high USD value in export And EU removed the barrier import tax for these countries because of tidal wave in year 2004.With advantages that helped for these competitors stronger

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FRQM 2015 TO 2018

3.3.2.3 Potential development of substitute products

Huegatex is biggest in knitting at central of Viet Nam Talk to Huegatex, we think to products such as polo shirt, T shirts However, nowadays there are lots of products that make frem woven and wool in the local market And these products are in same quality but lower price And local consumer chose these products to replace for Huegatex’s Polo shirt, T-shirt And this is a pressure for Huegatex and it requires non-stop to create products with high competitive to keep the loyalty customers

3.3.2.4 Bargaining Power of Suppliers

Quantity of suppliers for Huegatex is very big And in the future, Huegatex has more and more material suppliers for textile garment And Huegatex will more positive in production However, due to some special of products that Huegatex must be imported from oversea because we could not local source but high expense: 20% material (fiber, yarn) buy in local and 80%

buy from Russia, China, Taiwan, Africa, etc

Beside, Huegatex must import nearly 100% dying chemical, finishing chemical from Japan, China, Singapore Because of above reasons, Huegatex

does not active and subsidiary to the oversea suppliers So when the market

changing, it will be effected to Huegatex production because the price of material increase lead to the final price of products will be high and cannot competitive with other competitors Or importing the materials to much and inventory and lead to the take interest from bank too high

+ Local suppliers:

¢ Material for sewing: such as zipper, button, interlining, labels, hanger, carton box, etc are buying from medium companies And the advantages for buying the material from these local supplier that they can deliver quickly, and can settle the payment

after shipment within 30days.However, also have disadvantage

that these companies are not big and if we need big quantity we have to wait more time that they import from over sea

Re

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e Fiber: about 80% are bought from local These suppliers are big companies and stable and have long relationship with Huegatex However, the delivery time is too long and fiber items are limit, can settle payment within 2 weeks after shipment only

e About gas, spare parts for machine: can buy easily and quickly -However, we have to pay when buying and just temporary and unstable

+ Oversea suppliers:

e Around 20% fiber/yarn and nearly 100% dying chemical, finishing chemical must be imported from oversea These suppliers are big companies However, we have to book in long time and the quantity must be huge and the price is changing as the world market price And the payment term is TT before shipment And it is very difficult to claim when receiving the goods if the goods are in poor quality So now Huegatex is finding new stable suppiiers to replace current suppliers to reduce the tisk,

reduce the cost when the market price changing

3.3.2.5 Bargaining Power of Consumers

It is very difficult for, Viet Nam companies when dealing with chain stores The difficult is on price, quality And most of products such as garment, shoes are very difficult to take part into the USA, EU, Japan market, etc if do

not through distribution channels

About local consumers, when making decision for suitable choosing any goods or service from many sources, it makes more competitive for Huegatex’s

products and Huegatex has to follow rule in competition on price and quality

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FROM 2015 TO 2018

Huegatex should have good quality, best service and best price for Huegatex’s products

About oversea customers: are loyalty, wholesales and the orders are in big quantity so Huegatex must offer low price, nominate suppliers with high price or oversea suppliers(take more transportation cost).If Huegatex cannot deliver on time or poor quatity as confirmed in the contract, it will receive the chargeback, or shipment with open account or off price Viet Nam will join TPP soon and it is chance to have more customers So to keep customers loyalty, Huegatex must have right strategy and know well world market to produce products that customers need with high quality

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FROM 2015 TO 2018 3.3.3 External Factors Evaluation Matrix

Combine analysis external factors and get the advice from researcher to

make the External Factors Evaluation Matrix

Table 3-1 EFE Matrix for Huegatex Key External Factors Weight | Rating Weighted core Opportunities

1 Import Tax to USA market will be reduced 012 4 0.48 from 17% to 0% after Viet Naim joining to TPP ‘ , Government has benefits policy for Viet Nam

2 | garment textile: reduce import tax, low interest 0.11 3 0.33

for machine investment

3 | Young and low labor cost 0.09 2 0.18 |4 | Local market still wide open 0.1 3 0.3

5 Have lots of orders that moving from China , 01 3 03

Bangladesh to Viet Nam ‘

Threats

Has to compete with big competitors as China, India for export the garments to over sea especial

USA market Beside, have much pressure to compete with local companies in same items

7 | Oversea Consumers’ need changing by seasonal 0.09 1 0.09 Most of material for garment textile must be

8 | 1mported 01 | 2 0.2

9 | Labors are lack of professional skill 0.08 2 0.16 10 | Must follow strictly rules of TP? agreement 0.11 2 022 7`

Total: | 1 2.56 Comment:

The total weighted score of 2.56 is above the average (midpoint) of 2.5, so Huegatex business is doing pretty well, taking the advantage of the external opportunities and avoiding the threats facing the firm The strongest of

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FROM 2015 TO 2018

Huegatex is the circle producing chain and can be adapt the requirement of TPP agreement: “products are original from fiber “.This is the 1" condition that Huegatex has benefits from TPP agreement

Opportunities of Huegatex:

e OJ: Import Tax to USA market will be reduced from 17% to 0% after Viet Nam joining to TPP

e ©2: Government has benefits policy for Viet Nam garment textile: reduce import tax, low interest for machine investment

e 03: Young and low labor cost ¢ 04: Local market still wide open

e 05: Have lots of orders that moving from China , Bangladesh to Viet Nam Threats of Huegatex:

e Tl: Has to compete with big competitors as China, India for export the garments to over sea, especial USA market Beside, have much pressure to compete with local companies in same items

e Oversea Consumers’ need changing by seasonal ¢ Most of material for garment textile must be imported e Labors are lack of professional skill

e Must follow strictly rules of TPP agreement

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BUSINESS STRATEGY OF HUE TEXTILE GARMENT JOINT STOCK COMPANY FRQM 2015 TO 2018

3.4 ANALYSIS INTERNAL BUSINESS ENVIRONMENT

3.4.1 Human resources: The total labors are 3,900 labors

Table 3-2 Human Resources of Huegatex through the years Year Educational Level Unit 2010 =| 2011 | 2012 | 2013 | 2014 MBA Person | 2 2 2 2 2 BA Person | 320 340 360 400 420 College Person | 300 315 340 400 410

Technical workers Person | 2858 | 2908 | 2918 | 2861 2928 Other educational level Person | 120 125 |130 137 140

Average quantity labor of Huegatex | Person | 3,600 | 3,690 | 3,750 | 3,800 | 3,900

Source from Human Resource of Huegatex

As above labor chart we can see labor structure had changed through the years

+ The labors with MBA education: have no change through the years

+ The labors with BA, College ec:ication: increasing every year + Technical workers: increasing and changing every year

On 2004 Huegatex changed to join stock company and reduced labor and rearrange the labor structure more suitable to reduce the cost, increase the income for

the labors

Leaders or managers have high skills and have lots of experience in management and production and export the garments Huegatex creating chances for the young labors open training every year to improve their skill and their ability

However, still not meet the demand of the work market At low management are not professional, they are passive and must depend on the higher management

The outputs everyday does not high as request and also have defect that did not check carefully when checking semi products or when sewing

EF

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FROM 2015 TO 2018

3.4.2 Finance/Accounting resource: 3.4.2.1

Capital and asset structure: Total assets= Total capital in Dec.31th 2013 ¡is

509,991,159, 546 billion Viet Nam Dong Finance: Table 3-3 Accountant balance sheet

No | Assets Dec.31°,2013 Dec.312012

A | Short-term assets 314,004,380,171 | 296,064,542,861

1 Cash and cash equivalents 25,771,923 ,408 7,628,772,818

Source from Accountant balance sheet of Huegatex on Dec.31", 2013

Written by Tam Truang Thi Bang

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FROM 2015 TO 2018

Finance structure of Huegatex is suitable with high fixed assets and the fixed assets are in machines, equipment, warehouse, work shop, etc As Garment textile companies, most of the fixed assets is higher than unfixed assets because it needs to investment machines and equipment for production

3.4.2.2 Ability:

Recent years, Viet Narn joint into world market and have chances and difficulty or challenge However, products and turnover is increasing every year This makes sure that the quality and prestige of Huegatex is firmed in local and oversea market

Table 3-4 Sales structure as per field Saies structure Year 2013 Year 2012

Turnover in sales products and

material (yarn, fabric) 21,148,649,794 15,458,006,486 Turnover in sales end of goods 1,282,610,874,458 | 1,152,960,466,358 Turnover in other service 2893800376 2,577,635,059

Total ` | 1,306,653,324,628 1,170,996,107,903_ | VND

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Comment:

As the finance sheet above, we can see the business of Huegatex is so good The revenue is Increasing every year

3.5 MACHINE, CAPACITY PRODUCTION: 3.5.1 Producing process: Producing process of Huegatex is closed process including 4 steps as below: Huegatex is one of garment factory that has close production from KNITTTNG

spinning, knitting, dyeing, sewing at central of Viet Nam So Huegatex have lot of chances and can compete with other companies And the advantage of this close process is reduce the cost for transportation, time and can arrange the good

quality input material and can deliver the goods in time Nowadays, good quality,

deliver on time/ just in time(J-I-T ) is strong points for Huegatex And also this is advantages for Huegatex after joining TPP

3.5.2 Spinning factory:

Has 770 workers, and equipped with comprehensive equipment lines which were imported from Germany, Sweeden, China, Japan

Main products: TCd yarn(65%poly/35%Cotton), 100%polyester, 100%Cotton, CVCd yarn(50%poly/50%Cotto), CVC(60%Cotton/40%poly)

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