Business development strategies of Phu My thermal power production division belonging to powe generation corporation 3 for the period of 2013 - 2018

Business development of PMTP - EVNGENCO 3
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GLOBAL ADVANCED MASTER OF
BUSINESS ADMINISTRATION




STRATEGIC MANAGEMENT


TOPIC: BUSINESS DEVELOPMENT STRATEGIES OF PHU MY
THERMAL POWER PRODUCTION DIVISION BELONGING TO
POWER GENERATION CORPORATION 3
FOR THE PERIOD OF 2013 - 2018



Class GaMBA01.D0111

Group 03

1. Phan Thanh Xuan
2. Truong Quoc Phuc
3. Truong Van Phuong
4. Nguyen Thi Thanh Hien








Ho Chi Minh City - 2013




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TABLE OF CONTENT

ABBREVIATIONS 5
ACKNOWLEDGEMENT 6
LITERATURE REVIEW OF BUSINESS STRATEGY 12
1.1 Concept of strategy and strategic management 12
1.1.1 The benefit of strategic management 13
1.1.2 The model of comprehensive strategic management 13
1.3.1 Vision, mission and objectives 14
1.3.2 External factor evaluation 15
1.3.2.1 Macro-condition 15

1.3.2.2 Industry condition. 18
1.3.3 Internal factor evaluation 20
1.3.3.2 Marketing 21
1.3.3.3 Finance/Accounting 22
1.3.3.4 Production/Operations 22
1.3.3.5 Research & Development (R&D) 23
1.3.3.6 Information system 23
1.3.4 Process to implement strategies 23
1.3.4.1 Stage 1: Input stage 24
1.3.4.2 Stage 2: Combination stage 24
1.3.4.3. Stage 3: Decision - making stage 24
1.3.5 Tools for establishing and selecting strategies: 24
1.3.5.1 EFE matrix 24
1.3.5.2 Competitive Profile Matrix 25
1.3.5.3 IFE matrix 26
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1.3.5.4 SPACE matrix 27
1.3.5.5 SWOT matrix 28
1.3.5.6 QSPM matrix 29
CHAPTER 2 31
2.1. Overview of electricity industry 31
2.2 Analysis of PMTP situation 34
2.2.1 History of establishment and development 34
2.2.2 Business sectors 34
2.2.3 Technology and production scale 35
2.3 Analysis the external environment. 40
2.3.1 Macro environment. 40
2.3.1.1 Economic environment. 40
2.3.1.2 Political and legal environment. 41

2.3.1.3 Cultural and social environment 41
2.3.1.4 Technological - scientific environment 42
2.3.1.5 Natural environment 42
2.3.1.6 Global environment 43
2.3.2 Analysis of industry environment 44
2.3.2.1 The power of buyers (customers) 44
2.3.2.2 The power of suppliers 45
2.3.2.3 The current competitors 46
2.3.2.4 The potential competitors. 47
2.3.2.5 The threats alternative products 48
2.3.3 External factors evaluation (Matrix EFE) 48
2.4 Developing strategies for Phu My Thermal Power Production
Division 60
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2.4.1 Vision and mission 60
2.4.2 Analyzing the SPACE matrix of Phu My Thermal Power Production
Division 61
2.4.4 Selection of strategies 64
CHAPTER 3 68
SOLUTIONS TO IMPLEMENT THE STRATEGIES OF PMTP DIVISION 68
3.1 The business strategy for power production 68
3.1.1 Short-term objectives 68
3.1.2 Long-term objectives 68
3.1.3 Solutions to implement the strategy 70
3.1.4 Plans for implementating the strategy 72
3.2.1 The human resource strategy 73
3.2.1.4. Plans for implementating the strategy 76
3.2 .2 The cost reduction strategy 77
3.2.2.1 Short - term objectives 77

3.3.2.2 Long - term objectives 77
3.3 Recommendations 80
3.3.1 To the State 80
3.3.2 To Electricity of Vietnam 81
3.3.3 To EVNGENCO 3 81
CONCLUSION 83
REFERENCES 85

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ABBREVIATIONS

EVNGENCO 3: Power Generation Corporation 3 - One Member Limited Liability
Company
EVN: Electricity of Vietnam
PMTP: Phu My Thermal Power Production Division
A0: National Power Load Dispatching Center
OEM: Original Equipment Manufacturer
Non-OEM: Non- original equipment manufacturer
BOT: Built-Operation-Transfer
GT: Gas Turbine
HRSG: Heat Recovery Steam Generator
ST: Steam Turbine

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ACKNOWLEDGEMENT

First of all, we respectfully show my gratitude towards the Leadership of Phu
My Thermal Power Company/Power Generation Corporation 3 for creating
conditions for us to have the opportunities to learn and absorb the knowledge of
business administration, and helping us to have opportunities to approach the
valuable knowledge from the program.
We respectfully thank the leadership, the lecturers and assistants of program
for transmitting us the valuable knowledge and experience and helping us to open
my awareness as the mean for us to develop, implement our objectives and serve
for Power Generation Corporation 3 in specific and Electricity of Vietnam (EVN)
in general.
We respectfully thank our classmates for attracting, supporting and sharing
with us so that we can get over the difficulties during our learning process.
Finally, we would like to send my gratitude towards HCMC Electricity
College, the lecturers and the assistants of GAMBA, and the management board of
class D0111 for assisting us to complete the course and accomplish the topic.
Best regards!
Ho Chi Minh City, - March , 2013

Group members









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GENERAL INTRODUCTION
1. Topic name
Business Development Strategies of Phu My Thermal Power Production
Division belonging to Power Generation Corporation 3 for the period of 2013 -
2018
2. Abstract
In the present age, one of the most important fundamental factors for
stabilizing and developing the economy of the country and improving the quality of
people’ lives is that it must have the sufficient energy resources in order to provide
for all operating areas of the economy and civil activity. In addition to the primary
source of energy such as oil, fuel, the electricity is an integral supply power for the
modern economic and social life.
Our country is a developing country. Therefore, the demand for the growth
of electricity is very large in order to meet the increasing demand in the operation of
economics, industry, service and activity.
During the past time, there were many electricity business units of many
types of enterprises (state-owned enterprises, joint-stock companies, BOT)
participating in providing electricity. Particularly, EVN is the state-owned group

that its duty is to play the key roles in the fields of production, transmission and
distribution. With such mission, during the past time, despite of difficult finance, it
not only does business, but serves for the public, contributes and supports for the
implementation of mode and policy of the State; EVN also implemented the
mission of providing the electricity for the national economy and securing the
national power well.
However, the apparatus and the economic - financial mechanism of EVN in
specific and the electricity industry in general are not consistent with the market
economy to continue the powerful and stable growth and meet the general demand
for growth of the country.
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For above reasons, according to the guidelines of the Government and
Ministry of Industry and Commerce, EVN is in the process of restructuring the
organization to form and develop the electricity market: firstly, establish 5
electricity distribution corporations and then 3 power generation corporations (3
power generation corporations are based on upgrading 3 one member limited
liability companies: Uong Bi Thermal Power, Can Tho Thermal Power and Phu My
Thermal Power).
Our group includes members who previously work for Phu My Thermal
Power Company and are working at Power Generator Corporations 3 (EVNGENCO
3) as one of three corporations which are new and entered into from January 1
st
,
2013.
With a new organizational structure, thermal power companies: Phu My 1,
Phu My 2.1, Phu My 2.1 and Phu My 4 are located in the parent company
EVNGENCO 3, although the operating scope almost does not change, it is mainly
the operation and maintenance, and repair of combined cycle gas turbine power
generators. However, in the new situation, the internal and external factors of these

plants have much change than before.
Therefore, the issue is that Phu My thermal plants in the parent company
EVNGENCO 3 need to understand the operating environment in order to take
advantage of the opportunities and limit the weaknesses and reduce the threats in
business of the plants and EVNGENCO 3 in the competitive power generation
market- the market that the degree of competition is expected that it will be more
difficult, complicated and severe in the near future. Phu My Thermal Power
Company took part in the official order on the power generation market from July
1
st
, 2012, but it was jut in the stage of learning and drawing the experience in order
to construct more effective order strategy in the coming period. With the mission as
becoming one of the stable and quality power generation corporations in the
Southeast Asia, EVNGENCO 3 must understand the environmental factors of Phu
My power plants - the power plants are accounting for a large proportion of
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capacity in the power output of EVNGENCO 3, as well as the national power
system, so that it can propose appropriate business strategies.
With above reasons and urgent requirements, our group decides to choose the
topic “Business Development Strategies of Phu My Thermal Power Production
Division belonging to Power Generation Corporation 3 for the period of 2013 -
2018”, the topic focuses on Phu My power plants, to do a dissertation of the
business administration course, aiming to apply the knowledge to the practice of the
parent company of EVNGENCO 3, where our group is working. From that, we will
continue to consider and deploy the implementation in the future
3. Purpose of research
The purpose of topic is to analyze the operations as well as the effect of
business environment on the operations of Phu My power plants aiming to identify
the strengths as well as the weaknesses, and opportunities as well as threats of the

these plants On such basis, business strategy of Phu My power plants, as well as
offer some solutions in order to overcome the weaknesses and improve the
operations of Phu My power plants, in the first stage of construction and
development of EVNGENCO 3.
4. Scope
Object:
Although our group has an ambition that we will research all power
generation units directly under EVNGENCO 3 in order to construct the business
strategy got these units, we are concentrating on the direct management and
operation and obtaining the comprehensive operating process as well as the present
working aspects of member units because EVNGENCO 3 is new and it was entered
into from the beginning of 2013 - the basis needs to construct the business strategy.
Therefore, the objects of these dissertations are: the research of business
environment of electricity industry nationwide, the operation of SBU of Phu My
power plants, the activities of domestic and foreign competitors that cause a strong
impact on the operations of these plants.
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Scope: Nationwide.
5. Research method
5.1. Research methodology
Approach the macro-environment: How do economics, culture-society,
politic-law, technology and global factors affect the operations of PMTP. Approach
the electricity industry: Threats from the entry of potential competitors, the degree
of competition between the power generation companies, the bargaining power of
the power purchasing company, the bargaining power of fuel suppliers, technology,
and the threat of alternative products.
Approach the internal environment: Analyze the existing resources of
PMTPin order to find out the strengths and weaknesses.
5.2. Practical research method

This dissertation uses the research method: historical method, statistical
method, descriptive method and analytical method. The data is the financial
statement and internal report of Phu My Thermal Power Company from 2008 to
2012.
6. Scientific and practical significance of research topic
The topic of our group starts from the use of knowledge of scientific subjects
obtained from the Global Master Advance of Business Administration of Griggs
University and the practical and specific conditions of Phu My power plants where
we are working with the hope to find out the internal strengths and weaknesses, as
well as identify the external opportunities and threats in order to advise the leaders
the direction for these plants to the long-term strategic objectives. During the
process of constructing and using the strategy, our group hopes that it will continue
to comprehend the basis of analysis, new theory, and accumulate the practical
experience, gather the data, so that we can gradually complete and construct the
intensive strategy in the scope of the entire Corporations, in all fields (power
production, sales, power market and construction investment) aiming make
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EVNGENCO 3 sustainable in the new and young state, and help it gradually
develop and reach out the global market in the future.
7. Main summary of topic
The dissertation is divided into three chapters as follows:
Chapter 1: Literature review of business strategy.
Chapter 2: Analysis of business production situation and strategy of PMTP
for the period 2013 – 2018.
Chapter 3: Solutions to implement the strategies of PMTP

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CHAPTER 1
LITERATURE REVIEW OF BUSINESS STRATEGY

1.1 Concept of strategy and strategic management
Concept of strategy.
There are many definitions of strategy, each definition is more or less
different subjecting to the point of view of each author:
- According to Fred R. David (2003): the strategy is the means to reach the
long-term objectives.
- According to Alfred Chandler: the strategy os the determinaiton of basic
and long-term objectives for an enterprise, the selection of mehod and direction of

action and allocation of necessary resources to implement such objectives.
- According to Rudolf Grunig và Richard Kuhn (2003): the strategy is the
long-term; it orients the management and guarantee the long-term completion of
objectives and main purpose of company.
In summary, the business strategy of a company is the plans established, or
actions implemented in the efforts of reaching the purpose of an organization. From
that, the company will gain the victory in the competition and obtain the proposed
objectives.
Concept of strategic management
- The strategic management is to direct the efforts of organizations to plan
the strategies and focus on the implementation of proposed strategies.
- The strategic management includes the complete actions of four functions:
planning, organization, control and evaluation of strategic control. Therefore, the
strategic management will track and assess the external opportunities and threats in
the context of internal strengths and weaknesses of the company.
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1.1.1 The benefit of strategic management
- Obtain the stable competitive advantage. This is an advantage that a
company can get when it constructs a strategy that no other competitors can have.
Create the advantages that the current and potential competitors cannot obtain.
- Companies use the concept of strategic management will get more
benefits than those which do not use.
- Therefore, the main benefit of the strategic management is that it helps the
company create the better strategies by using the approach of system systematically,
appropriately and logically, to the best strategic option.
1.1.2 The model of comprehensive strategic management

Fig 1.1: Comprehensive strategic management
Feedback
Determine
the mission
and
objectives
and current
strategy
Implement the
external control to
identify the
opportunities and
threats
Set up
the long-
term

objective
Set up annual
objectives
Review the
objectives
Implement the
internal control
to identify the
strengths and
weaknesses
Select the
strategies to
check
Propose
the
policies
Distribute
the
resources
Measure and
assess the
achievement
Feedback
Establish the
strategy
Implement
the strategy
Assess the
strategy
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1.2 The levels of business strategy
The strategy definition also depends on the level of strategy. There are three
strategy levels have been identified:
1.2.1 Corporate - level strategy
Corporate-level strategy determines the orientation of the organization in the
long term in order to complete the mission, achieve the growth target. On the basis
of corporate-level strategy, the organization will implement its own strategy.
1.2.2 Strategic Busniss Unit: in relation to how the competition on a
specific market
Strategic Business Unit (SBU) within a company can be a business industry
or a sort of product, etc. This strategy aims at development orientation of each
industry or each sort of product contributing to the completion of corporate-level
strategy, to define clearly the advantages of each industry in comparison with its
competitors to devise strategies suited to corporate-level strategy.
Functional - level strategy
A company would have the functional divisions such as: marketing, human
resources, finance, manufacturing, research and development, etc. These functional
divisions should support to implement the strategic business unit and corporate-
level strategy.
1.3 Content of strategic management
1.3.1 Vision, mission and objectives
- Vision: offer an orientation to the future, a desire of an organization for
what it wishes to reach. The vision is a lively image and picture of what can happen
to an organization in the future. Describe what an organization should reach by the
sign or i ni. The vision creates the endless source of inspiration of all members of
organization in order to gain the higher level of the ordinary activity and create the
new thinking.
- Mission: presented by the declaration of mission of an organization. It
makes clear the trust and guidance of identified visions. The mission of the

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company is the bn tuyên ngôn of company towards the society. It often mentions
the products, market, customer, technology and the philosophy that the company
pursues.
- Objectives: the main objectives of a company identifies the state,
milestones and specific targets that the company wishes to obtain in a certain
period. The company always ensures that the implementation of mission and short-
term, objectives must be placed on the context of the strategy and general objectives
aiming to reach the long-term objectives, mission and vision of an organization.
1.3.2 External factor evaluation
External factor evaluation is the focus on identifying and assessing the
tendencies and the events beyond the control of the company. For the managers
who can offer the strategy aiming to take use of the opportunities and avoid or
reduce the threats that company is or will encounter during the operating process
that is an important basis for the strategic management process.
Tecniques of external factors environment
Technique
Purpose
Check
Identify the signs of environmental changes and its trends early.
Track
Discover the meanings by the regular observations of
environmental changes and its trend.
Forecast
Develop the prediction of the forecasted ending based on the
changes and trends that are tracked and monitored.
Evaluation
Identify the time and importance of the environmental changes and
trends for the strategies of company and the management.

1.3.2.1 Macro-condition
(1) Economics
This is a very important factor that attracts the concern of all managers. The
impact of these environmental factors is direct. The development of the economic
Business development of PMTP - EVNGENCO 3
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condition always contains different risks and threats towards each company in
different industries, and causes the potential effect on the strategy of company.
The main effect of the economic factors includes: the economic growth arte,
the banking interest, the payment balance, the exchange rate, the actual income, the
inflation rate, the tax system and tax rate.
(2) Politic and law
It includes the system of opinions, the guideline and policy of the
government, the current law system, main tendency of foreign affair of the
government and the political development in domestic, regional and the global
country. It can affect the political and legal conditions towards the enterprises as
follows:
- Politic: the political institution and the complicated changes in the
political environment will create the opportunities and threats for the enterprises.
- Law: offer the provisions that allow or do not allow, or give the
constraints that request the enterprises to observe. The problem is that the
enterprises need to obtain and observe the law well aiming to take use of the
opportunities as well as cope up with the threats of business.
- Government: plays a big role in regulating the macro conditions by the
policy on economics, finance, currency and spending programs. The enterprises
must obtain the opinions, stipulation and spending programs of the State and set up
good relationship aiming to create the favorable condition for the operation of the
company if it wishes to take advantage of opportunities and cut down on the threats.
(3) Culture and society
The change in cultural and social factors is a part of consequence of the long-

term impact of other macro factors. The impact of the cultural and social factors is
longer and more elegant than other ones. On the other hand, its scope of impact is
very large: “it determines how the people live, work, produce and consume products
and services”.
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The aspects formed in the cultural and social conditions cause the strong
impact on the business activities as follows:
- Moral and aesthetic conceptions, life-style and career;
- Custom, practice and tradition;
- Concern and priority of society;
- Level of intelligence and general level of education of the society.
(4) Technology
This is one of very important factors that include many opportunities and
threats towards the enterprise. The pressures and threats from the technological
conditions are:
- The birth of new technologies increases the competitive advantage of
products;
- Make the existing technology old-fashioned and create the pressure that
forces the enterprises to change the technology in order to enhance the competitive
competence;
- New technology create favorable conditions for entrants and increase the
pressure for the existing enterprises;
- The boom of new technology makes the life circle of technology
shortened. This increases the pressure on reducing the depreciation.
(5) Natural condition
It can be said that the natural condition is always an important factors in the
people’s lives. In many cases, it becomes the important factors that form the
competitive advantage of the product and service.
In the present context, the business strategy of enterprise must meet the

following requirements:
- Take priority for developing the production and sale or services aiming to
exploit the conditions and advantage of natural conditions on basis of ensuring the
maintenance and renovation. Especially, it enhances the natural conditions
Business development of PMTP - EVNGENCO 3
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- Have the saving method and effective use of natural resources.
Particularly, it can be gradually transferred from the use of resources that are not
renewable in the nature to the use of artificial materials.
(6) Global conditions
In the global and integration trend, no enterprises have direct or indirect
relationship with the world economy. In contrast, the relationship between the
company and the world economy is stronger. Thus, the change in economic
conditions will affect the business environment of the domestic countries.
In conclusion, the main objectives of the macro factor evaluation are to
identify the change of expected tendencies from the external environmental factors.
If the enterprise wishes to look for the opportunities and threats, it must include the
all factors and forces that affect the operation and implementation of enterprise.
1.3.2.2 Industry condition.
(1) The necessity of industry analysis
Industry factor evaluaiton is a necessary factor for planning the strategy for
the managers, especially the decision making in business.
Objectives of the industry factor evaluation towards the company is to find
out a position in an industry that the company is able to have the best defense before
these competitive factors or they can change them in the useful way. Understand the
fundamental origin of the competitive pressure will clarify the strengths and
weaknesses of company, bring the life for the company of the same industry,
identify the areas that the startegic change can bring the most benefits and point out
the regions that the tendency in the promising industry will be the most important,
whether the opportunities or threat.

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Internal competition


Competition between the
entrants


Potential competitors


Supplier
Sn phẩm thay thế

Customer
dealer

Threats of entrants
Threats of alternative
products and services
Bargaining
power
Bargaining
power
(2) Five competitve forces model

Fig 1.2: Model of 5 competitive forces
Michael Porter, a famous professor of business startegy of the Harvard School,
offered the model with 5 competitive pressures, they are:
- Power of customer:
The contents that need to be noticed when analyzing the customer:
+ Customer segment.
+ Assess the bargaining power of customer: price and quality.
- Power of supplier:
Consider factors:
+ The quantity of suppliers
+ Nature, specific characteristics of products and services
Alternative products
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+ Price, quality and consumption of products and services
+ Ability and cost when the supplier is changed Current competitors:
Identify the competitor.
Necessary content when analyzing the competitor:
+ Current strategy
+ Potentials
+ Assumption of effect of competitors
- Potential competitors:
The competitors can participate in the industry market in the future to form
entrants.
According to Michael Porter, there are six barriers to entry:
+ Economy advanatge by the scale
+ Feature of products
+ Requirement on capital
+ Transfer cost
+ Approach of dealer
+ Disadvantage of cost that is not related to the scale
- Threats of alternative products:
The alternative products are other products, but bring for the consumers the
similar features and interests with products of the industry. The alternative products
are often the result of an improvement or boom of new technology.
1.3.3 Internal factor evaluation
Internal factor evaluation is to find out the strengths and weaknesses of the
company, and then identify the differential capacity and the competitive advantage
of the company.
According to Fred R. David, the internal factor evaluaiton aims to identify
and assess teh sstrengths and weaknessess in the business of the company including
the management, marketing, finance / accounting, produciton / operations, research
& development and imformaiton system.
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1.3.3.1 Management
The management has 5 basic functions: planning, organization, promotion,
personnel and control:
- Planning: include all managerial operations related to the preparation for
the future. The specific missions are: prediction, set up the objectives, propose the
strategy, develop the policies, and establish the purposes.
- Organization: includes all managerial operations that create the structure
of relationship between the rights and responsibility. The specific tasks: design the
organization, describe the job, expand the control, design the job and analyze the
job.
- Promotion: includes the efforts aiming to orient the operations for people
including the leadership, contact, group work, and change of operation,
authorization, and improvement of job quality, satisfaction of the work and needs,
change of organization, spirit of staff and spirit of management.
- Personnel: the personnel focuses on managing the individuals or human
resources including the management of salary and wage, benefit of staff, interview,
recruitment, unemployment, training, development, management, safety for the
staff, development of qualification, policy of discipline, the public work.
- Control: relates to the management aiming to ensure that the actual result
is appropriate and consistent with the planned result. The main operations:
inspection of finance, inspection of quality, sale, inventory, cost, reward.
1.3.3.2 Marketing
Marketing is described as the process of determination, forecast,
establishment and satisfaction of needs and wishes of onsumers towards the
products and services.
Joel Evans and Barry Berman suppose that Marketing consists of 9 basic
funcitons:
- Analysis of customer
- Purchase

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- Sale
- Planning of service and products
- Pricing
- Dealer
- Market research
- Analysis of opportunity
- Social responsibility
1.3.3.3 Finance/Accounting
- The financial condition is considered as the evaluaiton method for
assessing the best competitive position of company and the most attractive
conditions for the investors. Based on the financial strengths and weaknesses, we
construct the strategies for enterprises and make the strategies more feasible.
The important financial ratios can be classified into 5 types as follows:
- Solvency ratios assesses the solvency of maturity short-term debts of
company.
- Debt balance ratios shows the scope taht is financed by the liabilities of
company.
- Operating ratios measures the efficiency of resources utilization
- Fianancial ratios show the common performance of management, and the
profit from teh revenue and investment
- Growth ratios show the ability to maintain the economic position of the
company in the growth rate of teh economy and industry.
1.3.3.4 Production/Operations
The funciton of production/ operations in the business activity includes all
activities aiming to turn the input into the goods and services.
Roger Schrocder supposes that the produciton/ operations management
process includes 5 types of decision and function:
- Process

- Capacity
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- Inventory
- Labor force
- Quality
Strengths and weaknesses in 5 functions are similar to the success or failure
of an organization.
1.3.3.5 Research & Development (R&D)
The R&D aims to develop new products before the competitors, improve the
product quality or renovate the produciton process in order to cut down on the cost.
There are 2 forms of R&D: self - perform/or rent the researchers or
independent organizations in order to develop the seperate products.
1.3.3.6 Information system
The information connects all business functions to each other and provides
the basis for all decisions on management. It is fundamental for all organizations.
Assess the strengths and weaknesses of the internal informaiton system as an
important aspect for implementing the internal control.
According to Porter and Miller, if we wish to establish the effecient
information system and exploit the competitve advanatge of information, we need
to implement the following steps:
- Assess the information intensity: the level of potential and current
informaiton on the process and products of company.
- Identify how the technique of informaiton ystem can establish the
competitve advantage.
- Develop the plan to take use of the technique of informaiton system.
1.3.4 Process to implement strategies
To implement the strategy, we need to have a decision making process
including 3 stages:
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1.3.4.1 Stage 1: Input stage
This stage summarizes the basic information that was entered and necessary
for establishing the strategies.
This stage uses the tools: external factor evaluation (EFE), internal factor
evaluation (IFE).
1.3.4.2 Stage 2: Combination stage
This stage focuses on offering the feasible strategies that can be selected by
the arrangement and combination of internal and external important factors.
This stage uses the tools: strengths - weaknesses, opportunities - threats
(SWOT), Strategic Positioning and Action Evaluation (SPACE).
1.3.4.3. Stage 3: Decision - making stage
This stage only use one tool, quantitive strategy planning matrix (QSPM).
The QSPM matrix will use the input information drawn from stage 1 in order to
assess the feasible strategies objectively that can be chosen in stage 2.
Note: Tools such as SWOT, SPACE and QSPM can increase the quality of
decision making on strategy, but it is not used to control the strategy. The aspects of
forming and choosing the strategies such as the behavior, culture and politic are
always the important issues that need to be considered and managed. Under the
pressure of external factors, the leadership must take over the active role in
analyzing and choosing the strategy.
1.3.5 Tools for establishing and selecting strategies:
In the scope of this dissertation, and the practical situation of the production
and sales of EVNGENCO 3, the appropriate tools for planning the strategies as
follows:
1.3.5.1 EFE matrix
External Factor Evaluation (EFE) matrix helps the strategies to assess the
impact of external factors on the company.
EFE matrix is established by 5 steps:
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- Step 1: Establsih the factors that plays a decisive roles in the business that
the company is doing including the opportunities and threats of company and line of
business of company.
- Step 2: Assess the level of importance of each factor according to the
range from 0.0 to 1.0 (the gradual increase in level of importance) with total score
of each factor is 1. The appropriate classification is compared between by the
sucessful enterpises and unsucessful ones.
- Step 3: the range from 1 to 4 for each factor with the score showing the
degree of response of enterprise to such factor. 4 is good response. 3 is over average
response. 2 is average response and 1 is less response. These levels are based on the
efefctiveness of the startegy of company. Therefore, this classification is based on
the company while the classification in the step 2 is based on the industry.
- Step 4: Multipy the importance of each variable with its classification to
get the score of importance (step 4 = step 2 x step 3).
- Step 5: Identify teh total score of importance of enterprise by total score
that we got in the step 3.
Total highest score is 4 and the lowest score is 1, the average is 2.5. The
higher score show that the company has a good response to external factors.
1.3.5.2 Competitive Profile Matrix
In order to build a competitive profile matrix (CPM) should be made via 5
steps:
- Step 1: Make a list of the main elements to have an important influence to
the competitiveness of companies in the industry.
- Step 2: Classify the importance from 0.0 (not important) to 1.0 (very
important) for each factors.The total score of the importance of these factors must
be equal to 1.0.
- Step 3: Determine the weight from 1 to 4 for each factors, the weight of
each factors depending on the ability of the company to the factors, of which 4 are
good, 3 is over average, 2 is average , 1 is weak.