Building business strategy in the shrimp farming industry the case of IC Company

V1ETNAM NATIONAL UNIVERSITY, HANOI
SCHOOL OF BUSINESS
Nguven Thi Hiìi Ninh
B llIL D IN G BU SIN ESS S T R A T EG Y
IN T H E SH R IM P FAR M IN G IN DU STRY
T H E C A S E O F IC C O M PA N Y
Major: Business Administration
Code: 60 34 05
M A ST E R O F B U SIN ESS A D M IN ISTR A T IO N T H E S IS
Supervisor: Dr. Vu Xuan Quang
-DẠI HỌC QUOC G tÃhẦ nÕ7 '
ip ư N G TẨM t h õ n g tim Thư Viền
A z .
Hanoi - 2009
A C K N O W L E D G M E N TS i
A B S T R A C T ii
TÓ M T Ắ T iv
T A B L E OF C O N T E N T S vi
L IS T OF F IG U R ES AN D T A B L E S viii
1N TRO D U C TIO N 1
1. The thesis title 1
2. The thesis necessity 1
3. O bjectives 1
4. M ethod 1
5. Data sources 2
6. Signiíìcance 2
7. Lim itations 2
8. Expected results 2
9. The thesis structure 2
10. Suggestion for future research 3
C H A P T ER 1: L IT E R A T U R E R E V IE W 4

1.1. Strategy 4
1.2. Business strategy 5
1.2.1. D eíìnitio n 5
1.2.2. Competitive strategy 6
1.3. Strategic management 7
1.3.1 Vision and M issio n 8
1.3.2. Strategy form ulation 8
1.3.3. Strategy implementation 24
1.3.4. Strategy evaluation 25
C H A P T E R 2: SH RIM P FA RM IN G IN D Ư STR Y IN V IE T N A M

27
2.1. An overview o f shrimp tầnning 27
TA B LE OF CONTENTS
2.2. The development of shrimp íầrming industry in Vietnam 30
2.3. Pactors effecting shrimp íarm ing 33
C H A P T E R 3: BU 1LD IN G BU SIN ES S S T R A T E G Y
36
3.1. Company p ro íìle 36
3.2. Sírategy íormulation 38
3.2.1. External environment analysis 38
3.2.2. Industry environment an alysis 47
3.2.3. Internal environment a nalysis 51
3.2.4 SW OT analysis 55
3.2.5. Strategy selection 57
3.2.5.1 Production expanding
57
3.2.5.2 Black tiger shrimp íarm ing
57
3.2.5.3 Post larvae and íeed producing

57
3.2.5.4 Food Processing
58
3.2.5.5 lnírastructure improving
58
3.3. Implementing the growth strategy 59
3.3.1. O bjectives 59
3.3.2. Solutions 59
3.3.3. Action p lan 61
3.3.4. Recommendations to 1C Com pany

62
3.3.5. Recommendations to the Government 63
C O N C L U S IO N 65
R E F E R E N C E S 66
A P P E N D IC E S 69
Appendix A : Shrimp production by the major producer nations 69
Appendix B: Vietnam production of tầrmed aquatic products
70
Appendix C : 1C Company’s tìnancial períormance
71
Appendix D: IC shrimp farm in Quang N in h
73
Appendix E: IC Company’s intensive shrimp íarming method

76
LIST OF FIGURES AND TABLES
hiaure 1.1 Porter“s generic strategies

6
ỉ iaure 1.2 A simplitìed view ol'the strategic management process 8
Figure 1.3 Fiv e Porces M o d e l 10
Fiau re 1.4 Strategic analysis p ro cess 18
Pigure 1.5 S W O T M a trix 19
Figure 1.6 G E -M cK in sey M a t rix 21
Figure 1.7 Recommended strategies for G E-M cKin se v M a tr ix

22
Figure 2 .1 World production of sh rim p 29
Figure 2.2 Shrim p volum e for consume and e xp o rt 31
Figure 2.3 Vietnam export value by shrimp and com m odity group 32
Pigure 2.4 Vietnam iìshery and shrimp export v a lu e

32
Figure 3.1 Vietnam G D P per capịta g ro w th

41
Figure 3.2 V N D /Ư SD exchange ra te 42
Figure 3.3 Vietnam population p y ram id 42
Fieure 3.4 Impacts o f sea level r is e 46
Figu re 3.5 IC Com pany’ s revenue and net p ro ĩit 52
Fisure 3.6 IC Company’s organizational structu rc

53
Pigure 3.7 IC C ompany's SW OT M atrix 56
Fieure 3.8 IC C om pany’s position in GE-M cK insey M a trix
57
Pigure 3.9 IC Company’s strategies implementation p ro c e ss 63
.9

13
14
18
24
31
40
46
50
54
54
55
55
58
61
Exam ple o f possible íầctors in a P E S T analysis
Industry's entry and exit b a rrie rs

Bargaininạ pcnver o f suppliers and b u y e rs
The completed SW OT p ro íìle

Appropriate strategies selection (G R E A T M odel)
Vietnam shrimp tầrming a r e a s
Vietnam quarterlv GDP g ro w th

Extem al environment analysis co n clu s io n
Industry analysis conclu sio n
Internal environment analysis conclu sio n

Competitive streníỊth assessm en t
Sustainahlc com petitive advantage

IC C ompany's SW O T p ro iìle

IC Com pany’s appropriate strategies selection
(G R E A T M o d e l)
IC Com pany's action p la n

INTRODUCTION
1. The thesis title
B u i l d i n g b u s i n e s s s t r a t e g y i n ( h e s h r i m p j ' ơ r m i n g i n đ n s t r y - T h e c a s e o f I C
C o m p ơ n y .
2. The thesis necessity
The rapid expansion of shrimp íarm ing in Vietnam has created a range of
developm ent opportunities and challenges to investors. The research found out that
IC C om pany’s current production is only one third o f its capability, resulted in an
irrelative market share. The higher m arket position requires the company
im plementing o f growth strategy by intensively invest in expansion.
This thesis is to build appropriate business strategies for IC C om pany’s
development. The research has also added value to the strategy íormulation, by
giving recom m endations and proposing an action plan, which can be applied in
im plementing strategies.
3. O bjectives
The obịectives o f this thesis are to (a) review the theory of building business
sữategies, (b) provide an overvievv o f shrimp farm ing industry in V ietnam and the
shrimp market in Quang Ninh, (c) present IC C om pany and analyze its business
environment, and (d) build an appropriate business strategy for com pany’s further
development. The study also gives a num ber o f insights into com pany’s cuưent
strengths and weaknesses, and identifies an action plan for production expansion.
4. M ethod
This thesis applies the case study to build business strategy for IC Company. The

research has been prepared mainly through desk study reviews o f available
literature and data through three basic steps:
1
The ĩirst step is to revievv theories of strategy and strategic management. The study
íocuses on the literature view of existing approaches to business strategy
íormulation, and indentifíes a common process to build business strategies.
The second step is based on the research of shrimp íarming industry in Vietnam and
íìnds out speciĩic íactors that iníluent the business success.
After that, the case study of IC Company is analyzed, which includes some
intervievvs with company’s managers responsible for its strategic planning. This
analysis allovvs building business strategies and providing some recommendations
concemed with the strategy implementation.
5. Data sources
The theoretical revievv and collection of secondary data has been períormed by
research of books, reports, newspapers and internet sources. The primary data was
collected through intervievvs with IC Company’s managers and key employees. An
important part o f the research is my personal experience in the company, allovved a
careful unđerstanding of particular issues in the industry.
6. Signiíicance
By reviewing the theory of strategy and strategic management and understanding
the impacts of business environment, the thesis beneíĩts IC Company in building
appropriate business strategies. This theoretical approach can be applied in cases of
other companies in shrimp ĩanning industry.
7. Lỉmitations
The study is limited in the sense that just a smalỉ number o f competitors in the local
market is considered, moreover, those competitors could not be analyzed with detail
iníbrmation and data, which may not entirely reílect the inđustry’s competitive
environment.
2
8. Expected results

The result of this thesis is to build appropriate business strategies for further
development o f IC Company. The methodology is expected to be effectively
applied in the case study of other companies in shrimp farming industry.
9. The thesis structure
The thesis is started with the introduction part, following by three chapters and the
conclusion part.
Chapter 1 provides a fundamental review of strategy and strategic management
theory. It focuses especially on the business strategy íormulation process.
Chapter 2 discusses the shrimp farming in Vietnam, highlighting its latest
development and key successful íactors.
Chapter 3 presents IC Company and analyzes its environment to identiíy extemal
opportunities and threats as well as interaal strengths and weaknesses that are based
to build com pany’s business strategy. The chapter also suggests recommendations
on the strategy implementation.
10. Suggestion for future research
The rapid change of environment íactors, like technological advances, climate, and
customer’s lifestyle, creates both opportunities and challenges to the industry and
IC Company. Therefore, it could be interesting if further research with larger
sample size could be undertaken to conĩirm fully the finding of this study.
3
CHAPTER 1
LITERATƯRE REVIEW
The importance of strategy and strategic m anagement for organizational success is
now recognized in both the literature and practice. Strategy and strategic
management are necessary for an organization to achieve its objectives, enhance
competitive advantages and improve its value.
Today’s highly competitive business vvorld pressures on managers and employees
across ĩunctional areas at all organizational levels to be taken on strategic
responsibilities. It is important that they understand both the strategic management
concept and process.

This chapter provides the basic understanding of strategy, business strategy and
strategic management. The chapter íbcuses on strategy íormulation as a part of the
strategic management.
1.1. Strategy
Strategy is a plan designed to achieve a particular long-term goal.1 The word derives
from the ancient Greek word sưatẽgos, which is combined from two words: stratos
(for army) and ago (for leading).2 The concept of strategy has been boưow ed ữoiĩì
the military and adapted for use in business.
There is very little agreement about the meaning of strategy in the world of
business. Although strategists and practitioners understand strategy in different
\vays and in various contexts, there are some most com mon concepts:3
s Strategy is perspective, which is Vision and direction
s Strategy is position, it reílects decisions to offer particular products and
services in particular markets
1 Oxpord English Dictionarv
2hltp://en.\vikipedia.org/\viki/Stratcgy
3 Henry M int/bcrg (1994), "The R ise and Fall o fS trateg ic Planning "
4
s Strategy is a plan, a “how”, a means of getting from here to there
s Strategy is a pattem in actions over time
Strơtegy is the art o f the general.ự Strategy refers to how an objective will be
achieved, thereby, it is broad, long term and far reaching. Strategy is more
concerned with deploying the resources vvhereas tactics is concemed with
employing them. In business, as in military, strategy bridges the gap between policy
and tactics. Together, sưategy and tactics bridge the gap between ends and means.
Sirơ teg y is evetyw h ere. Strategy can be found in all size and types of organizations,
including small or large corporations, political organizations and social
organizations. Strategies appear in different levels in an organization. Corporate
strategy, established at the highest level of management, concems with the selection
of businesses in vvhich the company should compete and how resources will be

allocateđ among those. Business strategy focuses on how to compete in a given
business. Functional strategy is related to the activities o f functional areas.
1.2. Business strategy
1.2.1. Deíìnition
Most businesses have strategies which may not be íbrmally written but still exist.
Business strategy is a plan fo r how a firm w ill compele, whal its goals shouỉd

be and \vhat policies W’ilỉ be need to achieve goals.5
The business strategy is a combination of the investment decision and the
development of a sustainable competitive advantage. The investment decision of a
business strategy covers the product and market, its investment intensity and the
resource allocation. The development of a sustainable competitive advantage is
based on advantages of a business such as assets, technology, human resource,
management.
4 Fred Nickols (20(X)). "Strategv: Definilions andM eaning". w w w .n ickols.us
5 Oxford English Dictioiiar>
5
Since publication, Michael E. Porter’s “C om petitive S trơte gy ” has inừoduced the
theory and practice of business strategy throughout the vvorld.
He <íefines competitive strategy as:
C om petitive stra teg y is ihe search f o r a jà vora b le com p etitive positio n in an
industry, the j\'undamental arena in which com petitio n occurs. C om petitive
slrategy aim s to establish a p rofitabỉe a n d sustainable positio n ag aim i the
Ịorces that determ ine industry c om petitio n6
C om petiíive síra teg y is a com bination o f the ends (goals) fo r which the firm
is slrivin g a n d the m eans (policies) by which ií is seekin g to g eí there. 7
After analyzing the complexity of industry competition, Michael Porter presents the
threí generic strategies: cost leadership, differentiatio n and fo c us, vvhich can be
imp.emented at the business unit level to create a competitive advantage and defend
against the effects o f the fíve factors. The four basic altemative competitive

straiegies are: c.ost Leatỉership, D iffereníiation, Cost Focus a nd Differen{ialion
Focus.
Figure 1.1 Porter’s Generic Strategies
1.2.1. Competitive strategy
Competitive Advantage
LowCost
High Cost
-o
ẻ
ữ:
Overall Cost
Leadership
Differentiation
Ị Narrovv
Cost
Focus
Diffèrentiation
Focus
Source: M icha eỉ Porter, ỉ 980
6 Michael Portcr (1985). ‘Competitive Ad\’antage: Creating and Sustaining Superior Per/orm ance "
7 Michacl Porter (1998). “Competitive strategy”
6
1.2.2.1 Cost Leadership: Producing the same product or Service at a lower cost
than competitors. Creating a more efficient production or Service delivery process
than that of competitors allows the company to sell at a lovver price and be
proíítable.
1.2.2.2 Differentiation: Producing the same product or Service at a higher quality
than competitors do.
1.2.2.3 Focus: Focusing exclusively on a nairow segment of the market.
A focus (or niche) strategy is most suitable for small fĩrms but can be used by any

company, especially those can afford neither a wide scope cost leadership nor a
wide scope differentiation strategy. Companies coulđ use a cost íbcus or a
differentiation focus. With a cost focus a íìrm aims at being the lowest cost
producer in that segment. With a differentiation focus a fìrm creates competitive
advantage through diííerentiation within the segment.
The appropriate generic strategy will help the firm to leverage its sừengths and
deíend against the five forces’ effects. Othenvise, Michael Porter speciĩically
emphasized that only one of the generic strategy altematives should be pursued for
a given product, rather than implementing a combination of these strategies. So,
organizations should take their competencies and strengths into consideration to
choose the most suitable generic strategy.
1.3. Strategic management
Sừategic managemení is the process by which top-management determines the
long-term direction and períormance of the organization by ensuring that careful
formulation, eííective implementation and continuous evaluation of the strategy
take place.8 The strategic management, hence, is an objective, logical and
systematic approach for decision making in an organization.
8 Lloyd L . Byars. Le slic w. Rue, Shakcr A . Zahra (1996), "Strategic m anagem ent"
7
Figure 1.2 A simplitìed vievv of the strategic managemenl process
1.3.1. Vision and Mission
Vision describes aspirations for the íuture \vithout speciíying the means to achieve
desired ends.9 The most ctTective Vision must be inspirational, which requires for
the best, the most or the greatest. A Vision becomes more visible \vhen ít is
expressed in the íbrm o f a mission statement.
A companv‘s mission is its reason tor beina. The mission statement describes the
eom pany's business Vision, including the unchanging values and purpose of the
íìrm and íbrvvard-looking visionary soals that guide the pursuit o f future
opportunities.
1.3.2. Strategy formulation

Strategy íormulation includes identiíying an organization’s extemal opportunities
and threats, analyzing internal streneths and weakness, generating altematives
strategies, and choosing the most appropriate strategies to pursue.
1.3.2.1 External environment analysis
The extemal environment has tvvo aspects: the macro-environment that affects all
íìrms and the micro-environment that aííects only tlrms in a particular industrv. A
PEST analysis is a technique for ưnđerstanding the macro-environinent in which a
íinn operates. PEST analysis includes Political, Economic, Social and
Technological íầctors.
The industry in vvhich the firm operates (or is considerinR operating) is an important
aspect o f the micro-environmental analysis. In the book “Competitive Strategy:
Techniques for Analyzing Industries and Competitors” (1980). Michael Porter
5 A lex M iller. Grcuorx G . Dess (1996). "Sim iegic nuinagem ent"
8
presents the model of the Five Competitivc Porces. The model has become a useful
tool for industry analysis. The tìve torces include Barriers to entry, Customers,
Suppliers. Substitute products, and Rivalry.
a. P E S T A naly sis
Many macro-environmental tầctors are country-speciíìc and a PEST analysis needs
to be perlbrmed tor all related countries. The number ot' macro-environmental
íactors is unlimited.
Table 1.1 Example of possible factors in a PEST anaỉysis
Poỉitical Analysis
~ —
-

-

1
Econoniic Anaỉysis

Political stability
Government intervention in the market
Environmental regulation and protection Economic grovvth
Consumer protection
Comparative advantages o f the cơuntry
Legal framework
ỉníìastructure quality
ỉntellectual property protection
Skill level oí'workforce
Trade regulations and tariíĩs
Labor costs
Anti-trust laws Business cycle stage
r
Taxation
Income
Wage legislation
Unemployment rate
Working hours
Inílation rate
Mandatory employee benefits Monetary policy
Industrial saíetv regulations
-


-

Social Analysis
Government spending
Technological Analysis
Demographics

Nevv discoveries and development
9
Culture
Attitudes to health, environmental
consciousness, work and leisure
Education
Living conditions
Lifestyle changes
Government spending on research
Energy use and costs
Impact o f changes in Iníormation
Technology
Speed o f technology transfer
b. Industry analysis: Poríer ’s Five Forces model
Porter's five tbrccs tramcvvork evaluates entrv barriers, suppliers, customers,
substitute Products, and rivalrv in the industry.
Figure 1.3 Five Forces Model
Substitutes
I
Source: M icha el Porter, ỉ 980
Those íìve competitive íbrces appear in every industry and every market. They
determine the intensity o f competition and thereíbre the protltability and
attractiveness o fan industry. Based on the iníbrmation derived from the Five Forces
analysis. manaeers can decide how to iníluence or to exploit particular
characteristics of their industry to improve the iìrm‘s position.
10
This Ibrce describes the intensity o f competition betvveen existing players in an
industry in \vhich firms strive for a competitive advantage over their rivals.
Economists measure rivalry by indicators ofindustry concentration. A high
concentration ratio indicates that a hich concentration of market share is held by the

lareest tìrms. the industry is concentrated or less competitive. A lo\v concentration
ratio indicates that the inđustry is characterized by many rivals, none of \vhich has a
signitìcant market share. The market is competitive.
The inlensity of rivalrv is commonly based on the tìrms' aggressiveness in order to
gain an advantage. It is iníìuenced by the industry characteristics such as:
y The num ber o f com p etitors
A large numbers o f competitors increase rivalry because more fírms must compete
for the same customers and resources. The rivalry is more intense if there are many
small or equally sized competitors, rivalry is less when an industry has a market
leader.
s M arket groxvth
In a slow grovvth market. íìrms have to compete for market share. On the contrary,
tìrms are easy to improve revenues in an expanding market.
s H igh Ịìxed cosís
If total costs are mostly tìxed costs, the firm must produce near capacity to attain
the lovvest unit costs. The firm must sell a laree quantity o f product, that lead to a
iìght for market share and an increase in rivalry.
s Le ve ì o fp r odu c t diJferentiation
Lcnv level of product diflerentiation is associated with higher level o f rivalry.
Industries where products are commodities have greater rivalry, Industries where
competitors can diíTerentiate their products have less rivalry.
> Intensity of Rivalry
11
Rivalry is reduced ii therc is a signifícanl cost associated with the decision to buy a
product from an alternative supplier.
> Threat of New Entrants
It is not onlỵ existing rivals that make a threat to íìrms in an industry, the possibility
that ne\v íìrms may enter the industry also aíĩects competition. New entrants to an
industry can raise the lcvel o f competition, thereby reducing its attractiveness.
Hovvcver, there are barriers to entry.

Barriers to entrv are uniquc industry characteristics. Barriers maintain the level of
proíits for those already in the industry because they reduce the rate o f new entrants.
Barriers to entry arise from several sources such as:
s G overnm ent regulations
The principal role o f the govermnent in a inarket is to preserve competition through
anti-trust actions. Besiđes, government restricts competition through reguỉations.
Industries such as public Utilities are considered natural monopolies as it has been
more eỉĩicient to have one company rather than to permit many companies to
compete in a local market.
s Patents a n d p ro p rie ta r y know ledge
Ideas and knoxvledge that provide competitive advantages are considered private
property, so that, preventing others from using the knovvledge and thus creating a
barrier to entry.
v' A sset sp ecự ìcity
Asset specitìcity is the extent to \vhich the íìnrTs assets can be utilized to produce a
diíTerent product. Potential entrants are reluctant to invest in highly specialized
assets that cannot be sold or converted into other uses.
s Switching cosỉs
12
The existence o f an economv oi' scale (mininium size requirements for profitable
operations) creates a barrier to entry.
s E xit bcirriers
Barriers to exit are similar to barriers to entry. Exit barriers limit the ability of a firm
to leave the market. High barriers to ỉeave an industry increase rivalry. High exit
barriers cause a firm to remain in an industry, even when the business is not
proíĩtable. A com mon exit barrier is asset speciíicity. ỉf the plant and equipment
required íor manufacturing a product is highly specialized, they cannot easily be
sold to other buyers in another industry.
Table 1.2 Industry’s entry and exit barriers
^ Economies of Seale

Easy to Enter if
Common technology
Little brand ữanchise
Access to distribution channels
Low scale threshold
DiíTicult to Enter if
Patented or proprietary know-how
Diữiculty in brand svvitching
Restricted distribution channels
High scale threshold
Easy to Exit if
Salable assets
Low exit costs
Independent businesses
Difficult to Exit if
specialized assets
High exit costs
Interrelated businesses
> Bargaining Power of Buyers
Buyers are the people or organizations who create demand in an industry. The
power of buyers is Ihe impact thai customers have on a prođucing industry.
13
If buyer povver is strong, the relationship to the producing industry is near to a
monopsonv. a market in vvhich there are manv suppliers and one huycr. Under such
market conditions, the buyer sets the price.
> Bargaining Power of Suppliers
Suppliers can have a signiíìcant impact on a company's protltability. If suppliers
have high bargainine power over a companv. then the com pany's industry is less
attractive.
A producing industry requires raw materials. labor, components This requireinent

leads to buyer-supplier relationships betvveen the industrv and the íìrms that provide
the materials used to create Products. Suppliers, if powerful, can iníluent the
producing industry, such as selling at a high price to capture some oí'the industry's
proíìts.
The industry often tầces a high pressure íroin their suppliers or buyers. This
relationship can potentially aíTect its profítability.
Table 1.3 Bargaining power of suppliers and buyers
Buyers are powerful if Buyers are weak if
A few buyers vvith significant market Many diíTerent buyers, no buyer has
share and many sellers any particular iníluence on product or
The industry is not a kev supplvine, price
uroup Producer can take over own
Low switching costs: Products are distribution or retailing
standardized Signifícant svvitching costs
Buyers threaten backxvard integration Producers threaten forward integration
Supplier is powerful if Suppliers are weak if
M any buyers and few dominant Many competitive suppliers
14
supphers J^0W s^vitching costs: products are
No substitutes for the particular input standardized
High switching costs from one supplier Purchase commodity product
to another j n ( j u s t r y js a key customer
The industry 1S not a key customer Buyers threaten backward integration
Suppliers threaten forward integration
> Threat of Substitutes
In the Five Forces model' substitute Products refer to products in other industries. A
threat o f substitutes exists vvhen a product's demand is affected by the price change
of a substitute product (product's price elasticity). The more substitutes are
available. the more elastic the demand becomes. Not only constrains the íìrms'
ability to raise prices, the substitute Products also lovver industry attractiveness and

proiìtability.
The threat of substitutes is determined by tầctors like:
s Brcrnd loya ỉty o f custum ers
•/ C ỉose custo m er relationships
y Sw itching costs fo r custom ers
* The relative price fo r per/orm a nce o f sub stituíes
s C urrení (rends
1.3.2.2 Internal environment analysis
All areas of the oreanization can signitìcantly iníluent its long-term success.
Internal analvsis evaluates relevant tầctors from those areas to determine
organization's strengths and vveaknesses. The specitlc areas to be analyzed vary
from organization to organization. Factors that are commonly evaluated across the
organization's areas include the t'ollowing:
15
a . F i n a n c i a ỉ p e r f o r m a n c e
The íìnancc plays an important role in determinina \vhat the organization can do in
the ỉuture. Financial analvsis uses available data to cvaluate the ílnancial position o f
an organization by many tools and techniques. Among these, income statements,
cash flow statements and balance sheets are basic information sources.
This analysis, which is to understand cause-and-effect relationships in the
organization. helps managers to identiíV company and industry changes and trends
vvhich may explain com pany‘s performance, allow comparisons with compctitors
and give iníòrmation to its tliture^s períomiance.
b . P r o d u c t
No business can be successtul in today's competitive environment vvithout the
awareness of its product in the marketplace. The product can survive and grcnv only
when it is providing liigh quality relative to its price. Peedback from customers and
customer acceptance are potential data sources reílecting the product quality. In
ađdition. the company needs to assess product position by evaluating the market
share o f its major Products and the trends in the market share as well.

c . M a r k e t i n g
Closely to thc product position, marketins capability is the ability to deliver the
right product at the rieht place at the riaht time and at the right price. Areas that
should be considered include distribution channels. types o f advertising and
promotions as well as targeted markets.
( ỉ . R e s e a r c h a n d D e v e ỉ o p m e n t
Organizations, whether they have research and development (R&D) đepartment or
not. must coneern about their abilitv to develop new Products. Nowadays, R&D
becomes one o f the key successiìil tầctors of any organizations.
16
e . O r g a n ỉ i a t i o n a ỉ s t r u c t u r e
All organizations operate through an organizational structure. Directly impacting on
an organizatiorf s períbrmance. the structure must be evaluated to assess its intcrnal
strengths and vveaknesses.
f . H u m a n r e s o u r c e
The human resources have a signiíìcant iníluence on every organization's activities.
Theretore. organizations need to make an evaluation on their human resources to
accurately assess strengths and weaknesses. Eíĩective human resources give an
organization a competitive advantage in attracting or retaining high quality people.
Inđuding operative employees and ali levels of managers, the evaluation will
determine not only the quantity and quality of current employees but also that of
expected employees in the future.
g . T e c h n o l o g y a n d i n f r a s t r u c t u r e
The conđition oí'organization’s íầcilities and equipment can enhance or hindcr its
competitiveness. Organi/ations should evaluate their production process, for
example, whether it is modern and up to date or not.
1.3.2.3 SWOT Analysis
The external analysis identitìes opportunities and threats vvhereas the internal
analysis deíìnes the iìrnr s strengths and weaknesses. By understanding that
inlbrmation. a íìrni can better leveratìe its strengths, correct its vveaknesses,

capitali/e on opportunities. and deter potentially threats.
SW OT analysis is a usetul technique for summarizing the extemaỉ environmental
tầctors. SW OT stands for Strengths, Weaknesses. Opportunities and Threats. The
lrainework was described in 1969 by Edmunđ p. Learned, c. Roland Christiansen,
Kcnneth Andrews, and William D. Guth in “Business Policy, Text a nd C a se s”.
SWOT is a simple tramevvork for generatine stratceic alternatives from a situation
analysis. The internal and external environment analysis can provide a large amount
OAI HỌC QUOC G IA UM
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Tf?UNG ĨÀ M THÒNG TIM THƯ VIÉN
A i L ơ / ? Ì _
ot iníònnation. much oi' vvhich may not be highly relevant. Thereby, SW OT
ccncentrates only on the issues that potcntiallv have the most impact.
Figure 1.4 Strategic analysis process
CEEEEEP
"tirMỉỉi: T r .r ti :;
c iỂĩ )
When the analysis has been completed, a SWOT protĩle can be generated and used
as the basis o f goal setting, strategy tbrmulation, and implementation.
Table 1.4 The conipleted SWOT proíìle
1 .
-
-

.
Strcngths
VVeaknesses
1.
2.
1.

2.
3.
3.
Opportunities Threats
1.
2
1.
2.
3.
3.
ln addition to identiíyine mạịor strengths. vveaknesses. opportunities and threats, the
SWOT matrix incorporates potential strategies for improvine the com pany’s
competitive position. For example, the strengths can be leveraged to pursue
opportunities and to avoid threats, and managers can be alerted to weaknesses that
iniííht need to bc overcom e in order to successfully pursue opportunities.
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Figure 1.5 SWOT Matrix
Internal Strengths
Internal W eaknesses
External S - 0 Stra tegies pursu e
W -0 Stra tegies overcom e
O pportunities opportutùties w hich are
w eaknesses to pu rsue
suitable to the com pany ’s
opportu nitỉes
strengths.
______
.—
______
External S -T S trate gies identịỊỳ w ays

W- T Stra teg ies establish a
T hreats thai the fìrm can use its
defensive pỉa n to pre vent the
strengths to reduce its
fir m 's w eaknesses from
vulnerabìỉity to external
m akìn ẹ it high ly susceptìble to
threats.
external threats.
1.3.2.4 Strategy selection
Choosing an appropriate strategy, basically, involves careíul considerations to
ensure that the option selected \vill work in practice. Strategic options that may be
relevant in dilTerent situations need to be vveiehed up against each other. The three
most important criteria are suitability, acceptability and íeasibility.
> S uita b iỉity
Having a view of relationships between the internal and external environment, an
organization then needs to consider whether a strategy is suitable or not. For
example. does it build on oreanization's streneths and environmental opportunities?
Does it match the organization's objectives?
r AcceptabiHty
Acceptability concerns with whether a strateay vvill be acceptabỉe to an organization
and its stakcholders (mainly shareholders, employees and customers). It is related to
the expected pertormance outcomes, rcturns. risks and stakeholder reactions.
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Return deals \vith the beneíìis expected by the stakeholders. For example.
shareholders vvould expect the increase o f their vvealth, employees would expect
improvement in their careers and customers would expect better value for money.
Stakeholders' reactions deal with anticipating reactions of stakeholders.
Shareholders could oppose the issuing of new shares, employees and unions could
oppose outsourcing for 1'ear of losing their jobs, customers could have concerns over

a merger with regards to quality and support.
> Feasibiliíy
l easibility is concemed vvith \vhether stratesic plans can go in practice and \vhether
the organization has suíTicient resources to carry out those plans. Resources include
funds. pcople, timc and iníormation.
The most popular approaches to select strategies include the GE-M cKinsey Matrix
and GREAT Model.
a. GE-McKinsey Matrix
The GE-McKinsey Matrix is a nine-cell (3 by 3) matrix used to perfonn business
portíolio analysis as a step in the strategic planning process.
The GE-McKinsey Matrix (also known as the GE Business Screen or GE Strategic
Planning Grid) was developed in 1971 by the management Consulting finn
McKinsey & Company. McKinsey aỉumnus Kevin Coyne describes the GE-
McKinsev matrix as a framework to screen G E's laree portỉolio o f 43 strategic
business units. Basically. this matrix improves on thc BCG approach by using more
comprehensive axes and allowing for greater precision.
The industry attractiveness consists of such factors like market size, market growth,
industry proíĩt margin. amount of competition. the đeeree o f seasonal and cyclical
lluctuations in dcmancỉ, and industry cost structure. Business streneth evaluates the
ability to compete in the market and is a function o f the size and growth rate of the
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