Business strategy for vinh tuong industrial corporation in competiting with the big foreigner corporations

VIETNAM NATIONAL UNIVERSITY, HANOI SCHOOL OF BUSINESS Nguyen Thi Mai Lan BUSINESS STRATEGY FOR VINH TUONG INDUSTRIAL CORPORATION IN COMPETITING WITH THE BIG FOREIGNER CORPORATIONS MASTER OF BUSINESS ADMINISTRATION THESIS Hanoi - 2007 VIETNAM NATIONAL UNIVERSITY, HANOI SCHOOL OF BUSINESS Nguyen Thi Mai Lan BUSINESS STRATEGY FOR VINH TUONG INDUSTRIAL CORPORATION IN COMPETING WITH THE BIG FOREIGN CORPORATIONS Major: Business Administration Code: 60 34 05 MASTER OF BUSINESS ADMINISTRATION THESIS Supervisors: Dr Chu Thanh Mr Ha nguyen, MBA Hanoi - 2007 TABLE OF CONTENTS ABSTRACT i TÓM TẮT iii ACKNOWLEDGEMENTS vi TABLE OF CONTENTS vii INTRODUCTION 1 NECESSITY OF THE THESIS PURPOSE KEY RESEARCH AREA METHODOLOGY CONTRIBUTIONS OF THE THESIS OUTLINE CHAPTER 1: THEORY FOUNDATION 1.1 What is strategy? 1.1.1 Definition 1.1.2 Strategy at different levels of a business 1.1.3 How strategy is managed – strategic management 1.2 Analysis tools in building a strategy 1.2.1 Competitive advantages 1.2.2 Competitor analysis 11 1.2.3 Five forces model 16 1.2.4 SWOT analysis 20 1.2.5 Value chain analysis 23 vii 1.3 Strategic planning 26 1.3.1 Value and vision 26 1.3.2 Mission 28 1.3.3 Objectives 31 CHAPTER 2: CASE STUDY OF VINH TUONG INDUSTRIAL CORPORATION 2.1 Overview of grid ceiling and gypsum board marketing in Viet nam 34 2.1.1 Overview 34 2.1.2 Five forces analysis in 2007 36 2.2 Introduction of Vinh Tuong Corporation 39 2.2.1 Particular traits 39 2.2.2 Performance 40 2.2.3 Brand name 41 2.2.4 Organizational structure 42 2.3 Competition situation 47 2.3.1 History story of VTI 47 2.3.2 Introduction of La Farge and BPB 48 2.3.3 Competitors analysis 50 CHAPTER 3: RECOMMENDATIONS 3.1 Strategic planning 56 3.1.1 Vision 56 3.1.2 Mission 56 3.1.3 Objects 56 3.2 Strategic analysis 57 3.2.1 Value chain analysis 57 viii 3.2.2 Competitive advantages 61 3.2.3 SWOT analysis 62 3.2.4 SWOT matrix to form strategies 64 3.3 Strategic choice 68 3.3.1 The strategy of developing new products 67 3.3.2 The strategy of integrating back 68 3.3.3 The strategy of integrating forth 69 3.3.4 The strategy of growing market 69 3.3.5 The strategy of reorganizing the business 70 3.3.6 The strategy of differentiation in competition 70 3.4 Strategic implementation 72 3.4.1 Managerial implementation 72 3.4.2 Marketing 77 3.4.3 Finance 79 3.4.4 Researching and developing 79 3.4.5 Information system management 80 3.4.6 Time table of implementation 81 3.5 Recommendation 81 CONCLUSION 83 REFERENCES 84 ix LIST OF TABLES CHAPTER Page TABLE 1.1 Sources of competitor data 14 1.2 SWOT analysis 22 1.3 SWOT matrix 23 CHAPTER TABLE 2.1 Organizational structure of VTI 44 2.2 Organizational structure of Southern area 45 2.3 Organizational structure of Northern area 45 CHAPTER TABLE 3.1 Competitive position 62 3.2 SWOT matrix 66 x LIST OF FIGURES CHAPTER Page FIGURE 1.1 A thorough strategic management process 1.2 The matrix for strategic choice 1.3 The four strategies 1.4 Michael Porter's Five Forces Model 16 CHAPTER FIGURE 2.1 The consumption of gypsum board in some ASEAN countries 35 2.2 The consumption of gypsum board in Viet Nam (a+b) 35,36 2.3 Turnover of VT2 of the years of 2000 -2005 41 2.4 Quantity and Qualification of Employees of VTI 46 2.5 Qualification of Employees of VTI 47 CHAPTER FIGURE 3.1 Annual objects of VTI for the period of 2007 – 2010 74 xi LIST OF ILLUSTRATIONS CHAPTER Page ILLUSTRATIONS 2.1 Gypsum Division locations of Lafarge in the world 49 2.2 Market share of Gypsum board in Vietnam 52 CHAPTER ILLUSTRATIONS 3.1 Turnover percentage of geographic areas of market 77 xii INTRODUCTION NECESSITY OF THE THESIS Strategic management is a necessary job of all managers In business operation, strategy is a tool to support the corporation gain it objects, mission, and vision Especially in competition, strategic management even keeps an important role in conducting the companies It has a main effect on existence, growing, and developing of an enterprise A company can win lots of success, if it has right strategies for its situation Vinh Tuong Industrial Corporation (VTI) is a Vietnamese business At the time, it is facing to the stressful competition with two big international corporations To keep strongly the position of leader in domestic market as well as to gain the purpose of growing and developing the business, the company must set up the suitable strategies in the new challenge period Through the working time at VTI, I am interested in joining to contribute the business strategies for company Therefore, I decide to the topic: “Business strategy for Vinh Tuong Industrial Corporation in competing with the big foreign Corporations.” PURPOSE - Research the issues about strategic management of business including the analysis tools, the strategic chosen, and the strategic implementation - Research the real situation of the company of VTI at the moment - Apply the issues of strategic management for building up the right effective strategies for the company in practice KEY RESEARCH AREA Research and apply the strategic management in business is the main topic Thesis only concentrates on using the tools to analyze the current situation of VTI By the way, it sets up the strategies chosen Then, it presents the ways to implement the strategies in practice operation METHODOLOGY First, the thesis bases on the real issues of the case study of Vinh Tuong Industrial Corporation in competing with two big foreign groups Second, thesis is used methodology of descriptive analysis, logic reason combination materialistic history The data is drawn from the primary and secondary sources The methods of collecting data are taking researches, and expert advices from theory foundation and personal experience Finally, thesis is also used statistic, formula illustration, interpreting the issues means CONTRIBUTIONS OF THE THESIS - Introduce all process of setting up the strategic management for a business - Apply the issues in the real situation of VTI to analyze the information, bring out the strategic chosen, and present the ways to implement the strategies in practicing conduction of the company OUTLINE Topic: “Business strategy for Vinh Tuong Industrial Corporation in competing with the big foreign Corporations.” VTI to push the products into market quickly to gain more market share The strategy of integrating forth will aim to gain more controlling the distribution or get more affecting into the final market The distribution network of VTI includes two parts: one is belongs to VTI’s ownership, one is independent The strategy will focus to the independent distributors, middlemen The movement of combining or linking many Vietnamese companies in the same industry to compete to big foreign corporations or groups is the great opportunity for the strategy In addition, the advantages of prestigious trade mark with high quality products and effective management will be easier for VTI in negotiation with the partners One more strength can help for the strategy is that VTI have many good relationships in the construction industry and understand well about Vietnam market and culture 3.3.4 The strategy of growing the market The strategy not only solves the threat but also takes the opportunities effectively and maximizes the advantages of VTI The strategy of growing the market is to gain the growing of the business by entering new markets with the current products The strategy will help VTI lessen pressure on competition Besides, VTI can apply the advantages of products with many levels of the production quality to suit to various demands in new markets Moreover, the event of Vietnam joining WTO will make VTI easier to develop the business to oversea Of course, the opportunity of exploiting high quality domestic and foreign material sources with reasonable price (because steel and thermo-electricity industry sharply 70 develop) are opening By the way, the strategy also requires high level of managerial skills 3.3.5 The strategy of reorganizing the business to gain more effective The strategy is formed to improve the weaknesses as well as overcome the threats of VTI This is a short term or temporary strategy It concentrates to the ineffectiveness of organization to improve the current situation better The business improves the quality of management in administration (the connection among departments), cost, sale and distribution, marketing, branding VTI must also invest more in R&D department This is the most important department in future long-term strategies of the business This is the way to face with the threats of counterfeit matter as well as the current and future competition 3.3.6 The strategy of differentiation in competition The strategy is given from the value chain analysis and competitive advantages This is a strategy of differentiation of support services of products on the whole market The strategy bases on some conditions of current market Vietnam is a quickly changing market Demands with many new requirements are increasing The customers specially expect in quality of service, design, and image … There is not a unity on demands, which gives out many divisions of market Moreover, the strategy comes from the competitive advantages of company The large scale can provide products for the whole market VTI can create many support service for products Furthermore, company has a 71 strong finance resource to protect the competitive advantages of products in long time Continuously, the next part will present how to apply the strategies in practice 3.4 STRATEGIC IMPLEMENTATION 3.4.1 Managerial implementation The strategic management includes three stages:  2007: the stage of reforming o Products and Services - Quality of products - Diversify the range of products - Satisfied customer services - Define the unique service support of VTI products - Support technique and project consultant o Resources - Human resource - Materials - Finance o Distribution system 72 - Controlling directly distribution system in the twenty percentage of the top revenue - All distributors are stockholders o Manufacturing - Building a manufactory in Cambodia - Expanding the large scale of manufactory in Vinh Phuc to provide for Northern market o Research and Develop - Establish the department of Research and Develop o Branding - Building the system of VTI’s brand identify - Popularizing the brand VTI  2008: the stage of growing o Research and Develop o Association o Cooperation o Diversify o Customer service  2009 – 2010: the stage of expanding o Expanding market to oversea 73 3.4.1.1 - Objects of VTI in the strategic period The revenue will increase double in four years through the strategies of developing new products and growing the market - The annual net profit always keeps at the rate of to 7.5% per revenue - The return on equity keeps always higher than 20% - The domestic market share of gypsum board keeps always in 55 percentages - The export rate will increase double in four year through the strategies of integrating forth and growing market oversea In year 2008, VTI will joint with VTJ This is the table of annual objectives of VTI in the period No Category 2007 2008* 2009 2010 Revenue (billion VND) 400 500 650 800 Net profit (billion VND) 25 35 46 60 ROE >20% >20% >20% >20% Market share (Viet Nam) 55% 55% 55% 55% Export rate 10% 12% 15% 20% Figure 3.1 – Annual objects of VTI for the period of 2007 - 2010 74 From the annual objects above, each department gives out the own specified annual objects following the functions and responsibilities 3.4.1.2 The policies to gain the objects To gain the objects, the board of directors and the mangers of departments should build up the policies for operation of business strategies a The external policies - The price policy for distribution system is lower than retail system, which is directly under the company - The policy of free trading for distributors They can deal with other brands - The awarding policy for distributors bases on sale amount - The supporting policy for distributors expands the market into oversea - The policy of supporting technique for distributors joining the big projects b The internal policies - The awarding policy for employees with quality improvement or new ideas for products, services; or ideas for decreasing cost, expense - The awarding policy for sale force bases on the quotas of turnover of months, quarter, year… 75 - The policy of encouraging the employees learns and studies to enhance the qualification 3.4.1.3 Allocation of resources for organization The allocation of resources for organization will base on the stages of strategic period and the chosen strategies above The resources will be allocated in order such as: - Research and development, technology - Human resource - Finance - Machines 3.4.1.4 Measuring and appraising the performance The strategic implementation will be measured and appraised during the strategic period It bases on the given objects and the performances quarterly or yearly on the strategic period There are four factors for appraising They are quantity, quality, time, and cost The criteria will be formed on the annual objects The jobs will be done by a strategic board The strategic implementation should be supported by marketing, finance, research and develop, information system management to gain the strategic objects 76 3.4.2 Marketing 3.4.2.1 Market research The strategies of developing new products and growing new markets require some certain market researches to gain the information for making decisions For example, the picture tells about the percentage of total turnover at geography markets The marketing department should take more researches on current markets as well as the new markets It is a base for launching suitable marketing plans, ordering new products from the manufactory The strategies of integrating back and integrating forth heavily require many market researches to choose the best suppliers and distributors, customers to combine 15% 9% Import 8% 68% Total: 100% 77 Illustration 3.1 - Turnover percentage of geographic areas of market (Source: Marketing department of VTI) 3.4.2.2 Managing the distribution network more effective The current distribution network with more than 350 agencies is too crowded to be able to manage well The direct is that VTI will take 20 percentages of agencies (about 60 agencies around the country) owning 80 percentage of turnover to manage with special policies for them The policies of price, discount, credit, customer services, and owning stocks aim to attract the distributors Research and contribute distribution networks at main export markets 3.4.2.3 Dividing and choosing the parts of market VTI has a lot of levels of products for many parts of market In the past, it seems to be a sole supplier in Vietnam market Therefore, the business didn’t have any specific dividing market The current competitive situation asks the company must have the dividing to choose the suitable parts of market to provide Then, it forms the marketing-mix for the business strategies in competition 3.4.2.4 Locating the position of products After dividing market and choosing the target customers, marketing department must make the locating for the position of products This job aims to server the strategy of differentiation 3.4.2.5 Branding One advantage of VTI is well-known brand name Branding is required to develop the core competence for the business The 78 branding strategies include public relations, advertising, organizing events… The branding must unite in characteristics of the brand of VTI It requires the brand should have the branding identified system 3.4.3 Finance The part presents some activities aim to save and collect enough money to the strategies above The activities include: - Concentrating on improving the producing processes in big scale to decrease cost of products In the activities of producing study, the important point lies on the cost price of products - Manufacturing plan, inventory plan, purchasing plan, sale and marketing plan must link together to reduce cost price from saving labor cost, and time - The business raises more equity via calling investments from distributors, employees, customers, and other investors - Finance and account department also contributes the key role on the activities of cost managing, cash flow managing, and balance sheet - Cost managing should base on reducing administration cost This requires conducting on the whole of company 3.4.4 Researching and Developing - The company must set up a department of researching and developing with a force of skillful engineers on build material and chemistry The department will be responsible on researching new 79 products or new functions of products to continuously improve quality - Organizing some contests of finding out new building materials for young construction students, engineers and architectures; the contest of applying new build materials in architecting and interior design - The company should link with universities of architect, building materials and construction to look for and apply the new solutions for the industry - Taking the material and other additives of gypsum to make the product of joint compounds - Keeping the ISO 9000 on quality management Registering the quality standard of ASTM UK, ASTM USA for all products Registering the style, format, name of products 3.4.5 Information system management Strategic implementation asks information system management The company should build up an own IT group, or IT department They are responsible on managing the application softwares or hardwares of all departments, local area network, website, and internet It makes sure that the information must be unique, correct, specially the security data The IT system management is very important for the strategy of reorganizing the business to gain more effective 80 3.4.6 Timeline table for the implementation Tasks Time Cost (mil VND) Responsibility Manage the ASTM and ISO system Build up R&D department annual 400 per year QC department 2/2007 N/A Vice G.Director+ Look for and import hi-tech products 12/07 N/A Im-export department Find out the strategic alliance (Knauf) 12/07 N/A General director Classify and organize the distribution system 1/2007 N/A Sale & Mar Department Invite agents become key stockholders annual N/A Finance + Acc Dep Building the favor policy for the key agents 1/2007 N/A Marketing department Customer service department, CRM 2/2007 N/A HRM Dep +sale Dep Build up the performance appraisal 6/2007 system and salary system N/A HRM Dep Training and developing human resource 2000 per year HRM Dep Annual The strategic implementation is often the hardest and most complex part in the strategic management It requires a general coordination of all departments of the company of VTI Departments have to give out their own specific strategies and policies to support the business strategies above 3.5 RECOMMENDATIONS The part talks about the other recommendations to support the strategic management more effective - VTI’s board of directors must translate the business objects to the gained goals of employees During the strategic management, the discussions 81 and united actions must be always happened By the way, the measuring and appraising the performances is necessary to make or change the strategies more suitable in practice basing on the time and the place - VTI should define that the most important point in applying the strategies is human resource Therefore, the organization must develop the business culture focusing on promoting ability, creation, and united spirit of all workforces The company should let them understand that they are owners of the business; encourage the eager members to service the benefits of corporation In addition, it introduces many training courses and programs to help them develop their knowledge and skill - The last ten years achievements of growing and developing continuously of VTI is the strong belief on success of the strategies chosen However, the company should be always in dynamic, innovated managing to catch the current competitive situation 82 CONCLUSION Nowadays, the economic of Viet Nam integrated on the global economic through becoming an official member of WTO When the process happens, the international competition is an obvious impact for the Vietnamese businesses To keep the position as well as develop the business, Vietnamese corporations must set up the suitable and effective strategies in the new opening challenges All activities of companies should be in professional of the international market economy Understanding, many Vietnamese enterprises are serious in building up and applying the strategic management in doing business By the way, VTI that was just established on one year, but having a fifteen years history of business with many great achievements is contributing the own business strategies in the new period with many new difficulties challenges The strategies chosen are not only focusing on the current competitive situation, but also keeping the growing and developing rate of the business Somehow, the strategies should base on analysis tools of the corporation Then, VTI’s strategies chosen will be formed on the analysis data The strategic management requires highly the responsibility of all departments of VTI The business strategies must be support by many function strategies and policies of all departments The process of implementation, measuring, appraising the performances, and changing the strategies are a continuous circle to make the company gain the objects, missions, and vision In general, the business strategy is the key direct of the company Especially in international competition situation, the strategic management has a key role on existence as well as contributing the success of the business organization 83 REFERENCE Charles W.L Hill, and Gareth R Jones, 1998, Strategic management, Thomson Publishing Asia Gordon E Greenley, 1990, Strategic management, Prentice Hall Nguyễn Thị Liên Diệp, and Phạm Văn Nam, 1999, Chiến lược sách kinh doanh (Business strategy and policies), HCM city, NXB Thống Kê Kế hoạch kinh doanh 2006 (Business plan 2006), Công ty cổ phần công nghiệp Vĩnh Tường Kế hoạch kinh doanh 2007 (Business plan 2007), Công ty cổ phần công nghiệp Vĩnh Tường http://www.tutor2u.net/revision_notes_strategy.asp www.vinhtuong.com www.bpb.com www.lafarge.com 84 ... BUSINESS Nguyen Thi Mai Lan BUSINESS STRATEGY FOR VINH TUONG INDUSTRIAL CORPORATION IN COMPETING WITH THE BIG FOREIGN CORPORATIONS Major: Business Administration Code: 60 34 05 MASTER OF BUSINESS. .. present the ways to implement the strategies in practicing conduction of the company OUTLINE Topic: ? ?Business strategy for Vinh Tuong Industrial Corporation in competing with the big foreign Corporations. ”... Through the working time at VTI, I am interested in joining to contribute the business strategies for company Therefore, I decide to the topic: ? ?Business strategy for Vinh Tuong Industrial Corporation