Business strategy for viet trading technology investment development joint stock company 2019 2025

Lunghwa University of Science and Technology Department of Business Administration Thesis for a Master’s Degree Business strategy for Viet trading Technology Investment Development Joint – Stock company 2019-2025 Researcher: Mai Van Chinh Supervisor: Mai Anh&Yuan, Cheng- Kang, Dr November 2018 i Lunghwa University of Science and Technology Approval Certificate of Master's Degree Examination Board This is to certify that the Master’s Degree Examinations Board has approved the thesis Business strategy for Viet Trading Technology Investment Development Joint – Stock company published by Mr.Mai Van Chinh in the Master Program of Graduate School of Department Administration Master’s Degree Examination Board Board Members： Chia Chi Tsan Nguyen Van Dinh Nguyen Thi Hong Hanh Advisors：Mai Anh & Yuan, Cheng – Kang, Dr Date：2018／11／25 ii of Business ABSTRACT Thesis Title：Business Strategy for Viet Trading Technology Investment Development Joint-Stock Company 2019-2025 Pages：50 University：Lunghwa University of Science and Technology Graduate School：Department of Business Administration Date：January, 2018 Degree：Master Researcher：MAI VAN CHINH Advisor:MAI ANH& YUAN, CHENG-KANG, Dr Keywords:Business Strategy VNTECH is a firm which is now doing business in installation and construction industry The purposes of this study are to study basis for building strategies, process of building strategies and methods of analyzing and selecting the best strategies aiming to help VNTECH choosing the most suitable strategies, to identify and to apply business strategy theories to build the best business strategy for VNTECH for the period 2019-2025, and to provide recommendations solutions in order to implement and successfully perform the business strategy so that VNTECH becomes a powerful player both in the Vietnamese and in the world market To that qualitative research method is employed and the researcher evaluates both external and internal market relevant to the business of VNTECH The strengths of VNTECH are the participation into 19 M&E projects, having strategic cooperation with big partners like Omron, Siemens, LG Vietnam, strong commitment from top management team in delivering high project quality to the customers, and the employees are young and enthusiastic The weaknesses of VNTECH are short time of business because of M&E services since 2005 while leading firms like REE and SAREFICO have more than 30 years of doing business, building information modeling (BIM) is not applied, current human iii resources is low and cannot handle more M&E projects, too low profitability, portfolio is not diversified, not have specification in mission, vision, and business objectives, low financial capabilities, and not establish professional human resource management policies The opportunities to VNTECH are political score of Vietnam is increased after downturn in 2014, strong economic development continuous its trend during 2018 and 2019 with high GDP growth rate and strong FDI inflows, the demand of the installation of electricity and water for civil projects (seaport, railways, housing for low-income people) is expected increasing, low price segment in residential market is increasing, prime segment (villas and townhouse) are not explored by existing players, and Vietnamese people spend their spare cash into home renovation The threats are identified as high corruption in Vietnam’s political system, inflation rate is expected increasing, the market is fragmented by geographic location with different demands, more than 15,000 contractors in Vietnam’s M&E market which lead to fierce competition The customers have many options due to large construction services providers, and Vietnam’s M&E market is being approached highly by foreign contractors from developed countries New legal framework supports foreign construction contractors Based on that, there are some business strategies to be developed They are strength focus strategy, low cost strategy, and marketing strategy Other recommendations to further improve the effectiveness of business strategy implementation are also proposed to help the company to achieve better implementation effectiveness iv ACKNOWLEDGEMENT I sincerely thank the teacher Mai Anh, and corporate officers of Viet Trading Technology Investment Development Joint-Stock Company devoted to guide and help me complete this thesis Thank you! Author Mai Van Chinh v TABLE OF CONTENTS ABSTRACT iii ACKNOWLEDGEMENT v LIST OF TABLES ix LIST OF FIGURES x INTRODUCTION 1.1 Reason of choosing the research topic 1.2 Purpose of the study 1.3 Research topic and scope of the research 1.4 Structure of the study 2 THEORETICAL BACKGROUND FOR BUSINESS STRATEGY 2.1 Concept and role of business strategy and strategic management 2.1.1 Concepts 2.1.1.1 Strategies and business strategies 2.1.1.2 Strategic levels 2.1.1.3 Corporate strategic management 2.1.2 The role of business strategy in business activities of a company 2.2 Introduction to some business strategies 2.2.1 Focus growth strategy 2.2.2 Porter’s competitive strategies 2.2.2.1 Cost leadership strategy 2.2.2.2 Product differentiation strategy 2.2.2.3 Focus strategy 2.2.3 Business strategy according to the firm’s position 2.2.3.1 Market leader strategy 2.2.3.2 Marker challenger strategy 2.2.3.3 Market follower strategy 2.2.3.4 Market nicher strategy 10 2.3 Process of developing strategy 10 2.3.1 Determining business objectives 12 2.3.2 Analyzing external environment 12 2.3.2.1 Economic environment 12 2.3.2.2 Political and legal environment 13 2.3.2.3 Cultural and social environment 13 vi 2.3.2.4 Technology environment 13 2.3.3 Industry analysis 13 2.3.3.1 Competitive rivalry 14 2.3.3.2 Potential rivalry 14 2.3.3.3 Customers 14 2.3.3.4 Suppliers 15 2.3.3.5 Substitute products 15 2.3.4 Analysis of internal environment .15 2.3.4.1 Analysis of resources 15 2.3.4.2 Analysis of functional department in a company 16 2.3.5 Analyze and identify strategy .16 2.3.6 Implement strategy .16 2.3.7 Control and review the implementation of strategies 17 2.4 Other tools to analyze and build business strategies 17 2.4.1 Matrix to analyze internal and external environment .17 2.4.2 SWOT analysis 18 2.5 Chapter summary .18 RESEARCH METHODOLOGY 19 3.1 Research method .19 3.2 Data collection and analysis 19 ANALYZING VNTECH’S CURRENT OPERATIONS AND BUSINESS STRATEGY 21 4.1 Company overview 21 4.1.1 Company overview .21 4.1.1.1 Establishment and development 21 4.1.1.2 Organizational structure 23 4.1.1.3 Some key business performance 24 4.1.2 Vision, missions and objectives 25 4.1.3 Products and consuming markets 25 4.1.3.1 Business sector and main products 25 4.1.3.2 Consuming market 26 4.2 Analysis of VNTECH business environment and its competition 29 4.2.1 Macro environment analysis PEST analysis? 29 4.2.1.1 Political – Legal 29 4.2.1.2 Economical 30 vii 4.2.1.3 Culture and society 32 4.2.1.4 Technology 33 4.2.2 Analysis of competition in the industry 34 4.2.2.1 Porter Matrix of Forces 34 4.2.2.2 Competitive analysis 35 4.2.2.3 Analysis of internal environment 38 4.2.3 EFE matrix, IFE matrix, SWOT matrix of VNTECH .39 4.3 Visions, mission and objectives 42 4.3.1 Mission .42 4.3.2 Strategic objectives 43 4.4 Identifying business strategy .43 4.4.1 Strength focusing strategy 43 4.4.2 Low cost strategy 43 4.4.3 Marketing strategy .44 4.5 Solutions to implement strategies .44 4.5.1 Expanding customer base 44 4.5.2 Enhancing human resource capability .45 4.5.3 Improving marketing activities 46 4.5.4 Diversifying products/services and pricing policies 47 4.5.5 Enhancing financial capacity .47 4.5.6 Other solutions 48 4.6 Chapter summary .49 CONCLUSION 50 REFERENCES 52 Appendix I: Projects of VNTECH 57 Appendix II: EFE and IFE Matrix Example 60 Appendix III: Core competencies of VNTECH and main competitors 61 Appendix IV: VNTECH’s key partners 62 viii LIST OF TABLES Table 4.1: Key VNTECH’s projects 22 Table 4.2: Financial Performance in Last Years (VND billion) 24 Table 4.3: Vietnam’s construction industry 26 Table 4.4: Office market in Hanoi and Ho Chi Minh City 27 Table 4.5: Retail market in Hanoi and Ho Chi Minh City 28 Table 4.6: Residential market in Hanoi and Ho Chi Minh City 28 Table 4.7: Vietnam’s FDI Overview 31 Table 4.8: Financial performance of VNTECH and main competitors 35 Table 4.9: Experiences of VNTECH and main competitors 36 Table 4.10: SWOT analysis 39 Table 4.11: EFE matrix of VNTECH 40 Table 4.12: IFE matrix of VNTECH 41 ix LIST OF FIGURES Figure 2.1: Strategic planning Figure 2.2: Corporate strategic management framework Figure 2.3: Porter’s competitive strategies Figure 2.4: Business strategy based on the firm’s position 11 Figure 4.1: Organization structure of VNTECH 23 Figure 4.2: Vietnam’s Political Stability Index 29 Figure 4.3: Vietnam’s GDP growth rate and inflation rate 30 Figure 4.4: FDI inward by country (%) 31 Figure 4.5: How Vietnamese consumers spend their spare cash? 33 x its business Although borrowing money from commercial banks lead to short term or long term debt to the firm, the best practices in Vietnam M&E market is that top leading firms like REE and SAREFICO now have total debt of more than 50% of total asset and SAREFICO also has total debt is double compared to total equity If VNTECH can utilize credit sources from commercial bank wisely, the firm can earn more profitability To ensure the financial management, the problem of checking and controlling finance in VNTECH is very necessary The financial inspection and control must be carried out from inside and outside the firm The financial inspection and control must be done from within the Institute It is important to strengthen the self-examination of finance and accounting at the Institute and these activities must be regular and detailed Through the self-inspection and evaluation, the Institute is allowed to observe the annual budget estimates of the Institute, the observance of the internal spending regulations, the thrift practice and waste combat at the same time It also assesses the quality of operations, the implementation of policy mechanisms and financial revenues, management and use of assets and capital using the funds of the Institute Through the self-inspection, the Institute will soon detect and timely correct errors, apply the handling of violations according to regulations and organize the drawing of experiences, assess the shortcomings, causes and orientations, remedial measures to enhance the management of financial accounting at the Institute It can be said that this is a way for the Institute to actively to improve the efficiency of work Implementing the financial disclosure in the Institute is also one of the solutions to strengthen the inspection and financial control of the Institute Also, financial management in the Institute should be conducted effectively to ensure the rights of staffs and ensure the motivation to fulfill the tasks assigned 4.5.6 Other solutions VNTECH should develop a corporate culture in which every employee’s idea is listened by the supervisors To that the firm should create the common mailbox whether the employees can send their ideas and independent department is established to receive and to process submitted employees’ ideas Moreover, the best ideas are nominated for certain prizes from top management of the firm In addition, VNTECH should develop friendly working environment whether the employees are able to share their thoughts without receiving negative impacts from others 48 The firm should focus on the development and the enhancement of procurement process Procurement is a purchasing process that is designed with the objective is to control quantity, quality to minimize the total cost of operation It is simply to say procurement is arrangements between the company and a supplier (or group of suppliers) that involve to a production process The stages of procurement include information gathering (i.e who are potential suppliers), supplier contacts (i.e gathering information about the potential suppliers, background reviews (i.e vetting, screening, checking references of potential suppliers), negotiations (i.e setting the price and terms), fulfillment (i.e delivery and installation), consumption, maintenance, and disposal (i.e monitoring the actual delivery and use of the supplies or equipment), and renewal (i.e reorders and continuing relationship with the supplier) In terms of strategy, a procurement process system ensures the company’s purchasing is competitive and therefore, increasing both of efficiencies and cost saving Some problems on a company's cash flow and balance sheet can be traced to problems with procurement, including holding supplies and inventory too long and having the terms of payables for supplies not matched to their respective receivables 4.6 Chapter summary In this chapter, the research provides the information about VNTECH, including main business activities, organization structure, and business performance in last years This chapter also explores current situation in political and legal environment, economic environment, culture and social environment, and technology environment Moreover, construction industry is put into analysis with Porter’s Five Forces analysis Analysis of internal environment is conducted with the exploration of primary and support activities Finally, SWOT analysis is prepared in order to identify strengths and weaknesses of VNTECH as well as opportunities and threats from the market 49 CONCLUSION In this chapter, the researcher provides business strategies for VNTECH in long term VNTECH is a firm which is now doing business in installation and construction industry The purposes of this study are to study basis for building strategies, process of building strategies and methods of analyzing and selecting the best strategies aiming to help VNTECH choosing the most suitable strategies, to identify and to apply business strategy theories to build the best business strategy for VNTECH for the period 2019-2025, and to provide recommendations solutions in order to implement and successfully perform the business strategy so that VNTECH becomes a powerful player both in the Vietnamese and in the world market To achieve these research purposes, a qualitative research method is applied This study involves internal and external marker analyses such as PEST analysis, Porter’s Five Forces, SWOT analysis, EFE matrix, IFE matrix Then, some business strategies in long term is pre-determined It is denoted that the firms should continuously improve the process of implementation of chosen business strategies VNTECH should build up the system and structure that are supportive to the functional strategies of the company For each functional strategy, it is necessary to assign the responsibility to one or more department in order to make sure they are dedicated to the strategy implementation This study has some limitations The first limitation is that this study does not acquire quantitative research method On the other hand, only secondary data to be involved and to capture the current situation in the market It leads to the issue of which obtained result is biased by the researcher’s point of view The second limitation refers to the assumption in macroeconomic environment and there are no changes in the management structure of VNTECH In case of there are economic shocks or there are changes in management board of the company, it could lead to the failures of proposed business strategies Future studies should be conducted in the way of addressing current issues of this study At first, future researchers should conduct quantitative measurement to identify key factors influencing on the business strategy choices and implementation By collecting the opinions from relative large number of the respondents, it allows to collect less biased findings Moreover, future studies should be conducted with the participation of some experts in the business areas 50 and it helps the company to improve the business strategy choice and implementation Finally, future studies should focus on the assumption of preparing business strategies The assumption must be validated by the experts and there are the contingency plan in case of there are dramatically changes in both external and internal environment 51 REFERENCES Asian Development Bank 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Quang Ngai expressway Hanoivid Joint Hanovid high-rise and low-rise Design and construction of Stock Company condominiums electricity within the apartment of Enterprise’s 31.6 VND funds billion ODA funds 63.1 VND 2016-2017 the commercial center, the tower T and the construction of the mechanical and electrical infrastructure and landscape Hoa Lac Hi- Infrastructure development in Tech Park Hoa Lac Hi-Tech Park Management Design and construction, 2015-2017 billion electrical engineering, technology of the pump, sewage pumping station number 7, sewage pumping station number 12 INCONESS Design and construction of Yen Supply and installation of Joint Stock Thang golf club house electrical systems, light Company Enterprise’s 19.2 VND funds billion Funds from 13.69 VND billion 2014-2015 electricity, fire protection system, water supply system Construction Underground parking area in the Supply and installation of Management of South of Administrative Center electrical system, fire protection People Da Nang City of Da Nang City system, ventilation system, waste Committee of water drainage system, parking Da Nang City management system and 57 2014-2015 generator ChangHong Factory of ChangHong Installation of water supply and Enterprise’s 9.59 VND Engineering Engineering Company Limited drainage system, power supply funds billion Company Vietnam system, water cooling system, gas State’s funds 9.38 VND Limited pipeline, finishing of the first and Vietnam second floor office buildings and 2014-2015 other items Hai Duong Hai Duong Children Hospital Construction of electric lighting, Children lightning collectors, grounding Hospital block of floors Construction Vinaconex’s office and 24KV underground cable and Joint Stock residential area substation The Bidding package DN3B / A / 10 Construction of electrical management / ICB- Construction and engineering, technology, water board of the equipment for water supply plant equipment subproject of system in Gia Nghia Town - DakNong’s DakNong 2011-2013 billion Enterprise’s 8.8 VND funds billion ADB’s funds 57 VND 2012-2013 Company No - Vinaconex 10 2012-2013 billion urban technical infrastructure development 11 Construction Vinaconex’s office and Construction of electricity and Joint Stock residential area water systems Hanoi Water Raise the capacity of Gia Lam Electromechanical items, One Member water plant to 60,000 m3 / day technology, equipment Bank for Head office of Bank for Constructing the whole system of Investment and Investment and Development of electricity and water Development Vietnam Enterprise’s 30 VND funds billion ADB’s funds 43 VND 2011-2012 Company No - Vinaconex 12 2010-2011 billion Limited Liability Company 13 Enterprise’s 3.7 VND funds billion ODA funds 7.6 VND 2010-2012 of Vietnam 14 Department of Labor, War Bac Can Vocational School Construction of electrical system, telephone, television, network 58 billion 2009 Invalids and equipment, air conditioning, fire Social Affairs protection, lightning protection of Bac Can province Donor of the Republic of Luxembourg 15 Vietnam Coal Housing for employees of Construction of electricity, water, and Mineral Duong Huy Company - Cam air conditioning system Group - Duong Pha, Quang Ninh Coal Factory Enterprise’s 7.6 VND funds billion Enterprise’s 2.4 VND funds billion FDI funds 8.5 VND 2009-2012 Huy Coal Company 16 Ha Anh Import Bowling Stadium - Dong Anh Construction of electricity, water, Export Joint Town Hall, Hanoi air conditioning system Eason Paint Eason Paint Factory Vietnam, Construction of electricity, water, Vietnam Co., Noi Bai – Hanoi Industrial Zone fire, air conditioning, ventilation 2009 Stock Company 17 Ltd 18 19 2009 billion throughout the project ANT Vietnam Construction of animal feed Construction of outdoor storage Enterprise’s 1.2 VND Co., Ltd processing factory ANT - Hai and installation of fire protection funds billion Duong system of the whole building Contrexim - Construction of staff housing in Supply and installation of Enterprise’s 4.5 VND Construction C7 - Thanh Xuan electricity and water system, funds billion Investment television system, telephone, Joint Stock ventilation, air conditioning Company 59 2007 2005 Appendix II: EFE and IFE Matrix Example Criteria Opportunities EFE Matrix Example Threats Key External Factors New immigration laws abolish the restrictions for immigrants to live and work freely in the country Weight 0.02 Rating Weighted Score 0.02 A government increases budget spending for our products 0.17 0.68 New product market, worth $1 billion a year, could be introduced for the consumers 0.05 0.2 Consumers are 20 % more likely to by the products that share the same ecosystem We have patented the technology that increases the quality of our products and lowers the amount of the materials needed to produce it 0.12 0.48 0.03 0.09 Our largest competitor is selling their subsidiary in TV market Tax rates will increase by 10% for the polluting companies 0.14 0.28 0.06 0.12 Due to the fast economic growth credit availability will tighten 0.04 0.16 Credit rates are growing by 5% 0.02 0.04 10 Natural disasters disrupt our suppliers’ or our operations 0.08 0.24 11 Rivalry in the market is intensifying 0.12 0.48 0.1 0.3 0.05 0.1 3.19 0.4 12 Competitor is pursuing horizontal integration strategy 13 Inflation has increased to 6% Strengths IFE Matrix Example Weakness Total Diversified income (5 different brands earning more than $4 billion each) Brand reputation valued at $35 billion 0.08 0.24 Strong patents portfolio (13,000 patents) 0.07 0.28 Excellent employee management 0.02 0.06 Competency in mergers and acquisitions 0.06 0.18 Extensive distribution channels 0.11 0.44 Strong product ecosystem 0.08 0.32 High debt level ($3 billion) Over-dependence on sales from U.S 0.1 0.13 0.1 0.26 10 Too low net profit margin 0.07 0.14 11 Competition based on prices 0.09 0.18 12 Rigid (bureaucratic) organizational culture impeding fast introduction of new products 13 Negative publicity 0.04 0.04 0.05 0.1 Total 60 0.1 - - 2.74 Appendix III: Core competencies of VNTECH and main competitors Competitor VNTECH Business segment  M&E services Long term strategies  Not specify Core competencies  Having 19 projects in different business segment  Good relationship with few big partners like LG Vietnam and Siemens  M&E services  Refrigeration  Office lease REE management  Real estate development  SAREFICO Profitability growth  Environmental protection  Social responsibility Utilities infrastructure  Sincerity  Excellent  Long time of doing business in Vietnam  Diversified project portfolio  Strong financial capability with credit supports from local and oversea banks  Quality assurance to be applied with the ISO 9001:2008  High human resource quality  M&E services  Accountability  Long time of doing business in Vietnam  Refrigeration  Respect  Applying Business Information Modeling  Construction and  Education  Quite strong financial capability installation  Fairness  Panel product with quality and health assurance Panel  Innovation  High human resource quality  Cooperation  Objective  High human resource quality  Provide complete M&E services to the customers  The sole contractor owns and operates a factory  HAWEE   M&E services  Not specify producing M&E systems in Vietnam  Applying Business Information Modeling  SIGMA  M&E services  Not specify  Obtain the ISO 9001:2008, OHSAS 18001:2007  Conduct Total Internal Audit system  The assurance from top management team  Being in the top M&E contractors in Vietnam in 2018 61 Appendix IV: VNTECH’s key partners No Partner Relationship level Omron, Siemen Suppliers of inverter products, equipment and automation solutions LG Vietnam Supplier of air conditioning products, electrical equipment, electrical cables ABB Vietnam Supplier of transformer products, switching equipment Ngoc Khanh Electric Wire and Cable Supplier of electrical cable products for construction works Company INAX Sanitary Company Suppliers of sanitary ware and accessories used for construction Tam Anh Industrial Electric Supplier of circuit breakers, overload and short circuit protection Company devices; Main circuit protection circuit breaker after low voltage transformer, switching device, protection Dong Do Trading and Safety Co., Ltd Supplier of fire protection equipment products Xuan Loc Tho Co Ltd Suppliers of electrical wiring supplies, electrical switches, electrical appliances for construction works Hoang Anh Co Ltd Supplier of all kinds of cast iron pipes, black steel pipes, stainless steel pipes, supplies of water for construction works 10 Van Giang Investment and Suppliers of valves, pipes of all kinds used for works Development Company 11 EDH Technology Company Supplier of electrical cabinets, low voltage electrical equipment used for construction Source: VNTECH (2018) 62 ... of Business ABSTRACT Thesis Title? ?Business Strategy for Viet Trading Technology Investment Development Joint- Stock Company 2019- 2025 Pages：50 University：Lunghwa University of Science and Technology. .. General Director: “Developing the business strategy for Viet Trading Technology Investment Development Joint- Stock Company for the period 2019- 2025? ?? for the thesis’s title and with the researcher’s... perform the business strategy 1.3 Research topic and scope of the research This study is developed with research topic as ? ?Business strategy for Viet Trading Technology Investment Development Joint- Stock