Business strategy of VASC company in MYTV service development

CAPSTONE PROJECT REPORT
BUSINESS STRATEGY OF VASC
COMPANY IN MYTV SERVICE
DEVELOPMENT

Hà Thu Thủy
Đặng Thế Long
Đinh Thế Tuyên
Nguyễn Thị Thu Hương


Class: GaMBA.M0110



HA NOI 2012




GRIGGS UNIVERSITY
GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION
PROGRAM

CAPSTONE PROJECT REPORT

BUSINESS STRATEGY OF VASC
COMPANY IN MyTV SERVICE
DEVELOPMENT


Group number: 03
Student’s names:
Hà Thu Thủy
Đặng Thế Long
Đinh Thế Tuyên
Nguyễn Thị Thu Hương





HA NOI 2012



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ASTRACT
In the recent years, information and television industry has been

experiencing a relentless, rapidly changing environment. With the presence of
internet and advanced technology of telecommunication, there has been a new trend
in convergence of telecommunication and televisions, whose impact has provoked
many enterprises to adopt a more strategic approach. This capstone project
examines the strategy process in VASC Media and Software Company – a member
of Vietnam Post and Telecommunication Group during 2009 – 2011. The process is
driven by the need to response more effectively to the external and internal
exigencies facing the enterprise. As a case study, it explores the way the
management board selected business strategy towards a more corporate-oriented
way of work and management style. The capstone project traces the perception,
speculations, and behaviors of management board in choosing business strategies.


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ACKNOWLEDGEMENT
We would like to acknowledge the support and encouragement of our M0110
class’s lecturer for his excellent supervision and support. We also would like to
thank our classmates for their sharing in the research. We are indebted to the leaders
of VASC Software and Media Company who made this research possible to our
case study site. Their kind willingness to participate in this research has brought
much to our enjoyment and enthusiasm.


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TABLE OF CONTENTS
Page

ASTRACT 1

ACKNOWLEDGEMENT 2
TABLE OF CONTENTS 3
LIST OF TABLES 5
LIST OF CHARTS 6
PREFACE 7
1. General context, the necessity and implication of the project 7
2. Objective and scope of the study 8
3. Methodology 8
4. Structure of the study 8
CHAPTER 1 – BASIC RATIONALE OF THE BUSINESS STRATEGY 10
1.1. Concepts of business strategy 10
1.1.1 Concept of business strategy 10
1.1.2 Role of business strategy 10
1.1.3 Basic characteristics of business strategy 10
1.2 Process of building business strategy 11
1.2.1. External and Internal Analysis 11
1.2.2 Methods to evaluate appropriate business strategy 18
CHAPTER 2 – ANALYZING VASC BUSINESS AND MyTV SERVICE
DEVELOPMENT 23
2.1. Introduction of VASC 23
2.1.1 The process of establishment and apparatus 23
2.1.2 The establishment and development of the Company 24
2.1.3 Review of Market and VASC MyTV(2011-2012) 28
2.1.4 VASC business performance between 2009 and 2012 30


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2.2 VASC business goals for 2015 and vision to 2020 35
2.2.1 Business targets by 2015 35

2.2.2 Business vision toward 2020 37
2.3 Analyzing real situation of VASC in MyTV service development 37
2.3.1 Analyze macro environment 37
2.3.2. Industrial and competitive environment 44
2.3.3 External environment analysis 52
2.3.4 Analyze internal environment 54
2.4 Selecting appropriate strategy 60
CHAPTER 3 – SOLUTION AND RECOMMENDATIONS 65
3.1 Selecting business strategy 65
3.1.1 Building business strategy 65
3.1.2 Selecting business strategy 65
3.2. Recommendations for implementation 67
3.2.1 Recommendations to production management 67
3.2.2 Recommendations to marketing management 68
3.2.3 Recommendations to HR management 68
3.2.4 Recommendations to finance management 69
3.3 Recommendations to the state 69
CONCLUSION 79
REFERENCES 71


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LIST OF TABLES
Page

Table 1-1.: SWOT matrix 16
Table 1-2 : The quantitative strategic planning matrix Error! Bookmark not
defined.
Table 2-1 : Table of price list 29

Table 2-2 : Business performance from 2009 to 2011 33
Table 2-3 : Planning business performance in 2012 – 2015 35
Table 2-4 : Summary of macro environment analysis 43
Table 2-5 : Indirect competitor’s overview 48
Table 2-6 : Porter’s five forces analysis of VASC 51
Table 2-7 : EFE matrix of VASC 52
Table 2-8 : IFE matrix of VASC …………………………………………………………53

Table 2-9 : Company profile matrix of VASC 53
Table 2-10 : QSPM of VASC 62














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LIST OF CHARTS
Page

Chart 1.1: External forces of company Error! Bookmark not defined.

Chart 1.2: SWOT matrix 22
Chart 2.1: Organization chart of VASC Error! Bookmark not defined.
Chart 2.2: Average Revenue per Unit from 2009 – 2011………………… 34

Chart 2.3: SWOT matrix of VASC 61



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PREFACE
1. General context, the necessity and implication of the project
In the recent years, Vietnam has been known as one of the fastest growing
entertainment and media markets in the world. Over the next five years, digital
technologies will become increasingly widespread across all segments of
entertainment & media (E&M) as digital migration continues to expand according
to the 10th annual PricewaterhouseCoopers Global Entertainment & Media Outlook
now covering the years 2009-2013. Though the current economic downturn has,
without doubt, impacted virtually every sector of the E&M marketplace, it has also
accelerated and intensified the digital migration in both providers and consumers of
content. Economic expansion is helping drive the large increases expected in many
high-growth countries including Vietnam. Infrastructure improvements, particularly
in the areas of broadband, multichannel television and mobile telephony, will also
be the principal drivers. Vietnam still has substantial room for growth as the
penetration in many categories of E&M remains low. In line with the global trends,
the growth of Internet access spending, TV advertising and subscriptions is
expected to lead the industry’s expansion in Vietnam.
VASC Media and Software Company, a member of VNPT Group, has started
in Vietnam since 2000 to provide value added products, solutions and services in
E&M, and begun to develop MyTV services since 2009. VASC must have made

tremendous effort to deal with the challenges of an emerging market such as
complex and ineffective government policy, underdeveloped supporting-industries
and stiff competition to successfully establish its stable foundation in the market
today. This paper, however, is an attempt to uncover the secret in VASC’s business
strategy and examine whether the company is capable and ready to compete
effectively with its rivals in the future. As a result, we will provide suggestions that


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we believe would help strengthen the company’s market position and maintain
growth in the media industry in Vietnam.
2. Objective and scope of the study
The objective of this study is to develop analyses and recommendations on how
to combine simple business administration tools with the traditional project
management methods to achieve better business management result. In this case,
SWOT, BCG models can use some easy techniques to maximize the benefits.
3. Methodology
In order to achieve the objectives above, the following methodologies are
implemented:
(1) literature review to identify relative factors including environments, core
competence etc… to find out what are the problems of MyTV service project
management;
(2) empirical studies to develop models and methods that help integrate business
strategies into the project management in VASC.
4. Structure of the study
In this study, based on the empirical research of the case company of VASC, we
are going to suggest some business strategic models that cab potentially be
integrated into project management. The steps are:
(1) Understand the business to be researched.

(2) Analyze the business (product) operations and performance in comparison to
business operations and management concepts.
(3) Present recommendations (suggestions) that help achieve the business goals
and objectives.


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We believe the analysis and recommendations in this study, once testified as
feasible and fit MyTV project management process, can be amplified and spread to
many more business areas.


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CHAPTER 1 – BASIC RATIONALE OF THE BUSINESS
STRATEGY
1.1. Concepts of business strategy
1.1.1 Concept of business strategy
The common elements in many success stories in business are the presence of
soundly formulated and effectively implemented strategies. Whereas tactics are
concerned with the maneuvers necessary to win battles, strategy is concerned with
winning the war (Grant, 2002). Therefore, strategies are long-term orientated, while
tactics focus on short-term reactions to the environment.
Strategic management is an important movement in management concepts, as it
is easy to implement. It is also consist of three important points: (1) strategic
analysis, (2) strategic choice and (3) implementation of strategy.
1.1.2 Role of business strategy
According to the Collins English Dictionary, strategy is ―a particular long-term
plan for success". For our purposes, we will consider the essence of strategy as a

formula for coping with the competition. Competitive strategy is about being
different and the goal for a corporate strategy is to find a position in the industry
where the company is unique and can defend itself against market forces. To do this
the company must choose a set of activities that can deliver a unique mix of value.
1.1.3 Basic characteristics of business strategy
To achieve an objective, managers must develop a suitable strategy. A strategy
is a long term plan setting out how an objective will be reached. For example, if the
objective is to reduce costs, the strategy could involve relocating or reducing the
labour force. If the objective is to boost revenue, the strategy may be to launch new
products or to invest in a big promotional campaign.
A strategy usually will:


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 Involve relatively large sums of money
 Be relatively difficult to reverse. Once you have started to pursue a particular
strategy it may not be easy switch resources in another direction
 Be relatively high risk. If you get the strategy wrong this could be costly in
many ways for the business
 Set out the markets the firm wants to compete in, the products it wants to
offer and how it wants to compete (e.g. by focusing on low cost or by
differentiating its offering)
1.2 Process of building business strategy
1.2.1. External and Internal Analysis
1.2.1.1. The External Assessment
Duncan (1972) defined business external environment as all the factors outside
an organization that are taken into consideration by the organization in its decision
making. There are many factors in the macro-environment that will affect the
decisions of the managers of any organization. Tax changes, new laws, trade

barriers, demographic change and government policy changes are all examples of
macro change. To help analyze these factors managers can categorize them using
the PESTEL model. This classification distinguishes between:
 Political factors. These refer to government policy such as the degree of
intervention in the economy. What goods and services does a government
want to provide? To what extent does it believe in subsidising firms? What
are its priorities in terms of business support? Political decisions can impact
on many vital areas for business such as the education of the workforce, the
health of the nation and the quality of the infrastructure of the economy such
as the road and rail system.


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 Economic factors. These include interest rates, taxation changes, economic
growth, inflation and exchange rates. As you will see throughout the
"Foundations of Economics" book economic change can have a major impact
on a firm's behaviour.
 Social factors. Changes in social trends can impact on the demand for a
firm's products and the availability and willingness of individuals to work.
 Technological factors: new technologies create new products and new
processes. MP3 players, computer games, online gambling and high
definition TVs are all new markets created by technological advances.
Online shopping, bar coding and computer aided design are all
improvements to the way we do business as a result of better technology.
Technology can reduce costs, improve quality and lead to innovation. These
developments can benefit consumers as well as the organisations providing
the products.
 Environmental factors: environmental factors include the weather and
climate change. With major climate changes occurring due to global

warming and with greater environmental awareness this external factor is
becoming a significant issue for firms to consider. The growing desire to
protect the environment is having an impact on many industries such as the
travel and transportation industries (for example, more taxes being placed on
air travel and the success of hybrid cars) and the general move towards more
environmentally friendly products and processes is affecting demand patterns
and creating business opportunities.
 Legal factors: these are related to the legal environment in which firms
operate Legal changes can affect a firm's costs (e.g. if new systems and
procedures have to be developed) and demand (e.g. if the law affects the
likelihood of customers buying the good or using the service)


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Typical PESTEL factors to consider:
Factor
might include
Political
international trade, taxation policy
Economic
interest rates, exchange rates, national income, inflation,
unemployment, Stock Market
Social
ageing population, attitudes to work, income distribution
Technological
innovation, new product development, rate of technological
obsolescence
Environmental
global warming, environmental issues

Legal
competition law, health and safety, employment law

Chart 1-1 External forces of company





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The determination of a strategy is rooted in determining how a company stacks up
against basic market forces, how it can defend itself against these forces and how it
can influence these forces. Fortunately, Michael E. Porter in his article How
Competitive Forces Shape Strategy defined these market forces for us. Known as
Porter’s 5 forces they consist of:
1. The industry – this is the jockeying for position among current competitors,
this can consists of price competition, new product introduction or
advertising slugfests.
2. The threat of new entrants - the seriousness of the threat of entry depends on
the barriers to entry and reaction from existing companies. There are 6 major
barriers to entry: 1) economies of scale 2) product differentiation 3) capital
requirements 4) cost disadvantages independent of size 5) access to
distribution channels 6) government policy. A new company will generally
have second thoughts about entering an industry if the incumbent has
substantial resources to fight back, the incumbent seems likely to cut prices
or industry growth is slow.
3. The threat of substitute products/services - substitutes can place a ceiling on
prices that are charged and limit the potential of an industry.
4. The bargaining power of suppliers - suppliers can squeeze profitability by

increasing prices or lowering the quality of the goods.
5. The bargaining power of buyers (customers) - customers can force down
prices, demand better quality, more service or play competitors off on each
other.
1.2.1.2. The Internal Assessment
An organization's internal environment is composed of the elements within the
organization, including current employees, management, and especially corporate
culture, which defines employee behavior. Although some elements affect the


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organization as a whole, others affect only the manager. A manager's philosophical
or leadership style directly impacts employees. Traditional managers give explicit
instructions to employees, while progressive managers empower employees to make
many of their own decisions. Changes in philosophy and/or leadership style are
under the control of the manager. The following sections describe some of the
elements that make up the internal environment.
* Resources and Capabilities
a. Resources : Profitability, sales, product quality brand associations, existing
overall brand, relative cost of this new product, employee capability, product
portfolio analysis. A good starting point to identify company resources is to look
at tangible, intangible and human resources.
Tangible resources are the easiest to identify and evaluate: financial resources
and physical assets are identifies and valued in the firm’s financial statements.
Intangible resources are largely invisible, but over time become more important
to the firm than tangible assets because they can be a main source for a
competitive advantage. Such intangible recourses include repute assets (brands,
image, etc.) and technological assets (proprietary technology and know-how).
Human resources or human capital are the productive services human beings

offer the firm in terms of their skills, knowledge, reasoning, and decision-
making abilities.
b. Capabilities: To identify internal strategic strengths, weaknesses, problems,
constraints and uncertainties. Resources are not productive on their own. The
most productive tasks require that resources collaborate closely together within
teams. The term organizational capabilities are used to refer to a firm’s capacity
for undertaking a particular productive activity. Our interest is not in capabilities
per se, but in capabilities relative to other firms. To identify the firm’s


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capabilities we will use the functional classification approach. A functional
classification identifies organizational capabilities in relation to each of the
principal functional areas.
* Analysis of strength and weaknesses
a. Strengths are a company's capabilities and resources that allow it to engage in
activities to generate economic value and perhaps competitive advantage. A
company's strengths may be in its ability to create unique products, to provide
high level customer service, or to have a presence in multiple retail markets.
Strengths may also be things such as the company's culture, its staffing and
training, or the quality of its managers. Whatever capability a company has can
be regarded as strength.
b. Weaknesses are a lack of resources or capabilities that can prevent it from
generating economic value or gaining a competitive advantage if used to enact
the company's strategy. There are many examples of organizational weaknesses.
For example, a firm may have a large, bureaucratic structure that limits its
ability to compete with smaller, more dynamic companies. Another weakness
may occur if a company has higher labor costs than a competitor who can have
similar productivity from a lower labor cost. The characteristics of an

organization that can be strength, as listed above, can also be a weakness if the
company does not do them well.
Table 1-1 Porter's Generic Value Chain

Porter's Generic Value Chain

Inbound
Logistics
>
Operations
>
Outbound
Logistics
>
Marketing
&
Sales
>
Service
>
M
A
R
G


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I
N

Firm Infrastructure

HR Management

Technology Development

Procurement



The goal of these activities is to offer the customer a level of value that exceeds the
cost of the activities, thereby resulting in a profit margin.
The primary value chain activities are:
 Inbound Logistics: the receiving and warehousing of raw materials, and their
distribution to manufacturing as they are required.
 Operations: the processes of transforming inputs into finished products and
services.
 Outbound Logistics: the warehousing and distribution of finished goods.
 Marketing & Sales: the identification of customer needs and the generation
of sales.
 Service: the support of customers after the products and services are sold to
them.
These primary activities are supported by:
 The infrastructure of the firm: organizational structure, control systems,
company culture, etc.
 Human resource management: employee recruiting, hiring, training,
development, and compensation.

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 Technology development: technologies to support value-creating activities.
 Procurement: purchasing inputs such as materials, supplies, and equipment.
The firm's margin or profit then depends on its effectiveness in performing these
activities efficiently, so that the amount that the customer is willing to pay for the
products exceeds the cost of the activities in the value chain. It is in these activities
that a firm has the opportunity to generate superior value. A competitive advantage
may be achieved by reconfiguring the value chain to provide lower cost or better
differentiation.

1.2.2 Methods to evaluate appropriate business strategy
1.2.2.1. External Factor Evaluation Matrix
External Factor Evaluation (EFE) matrix method is a strategic-management
tool often used for assessment of current business conditions. The EFE matrix is a
good tool to visualize and prioritize the opportunities and threats that a business is
facing.
The External Factor Evaluation (EFE Matrix): An external factor evaluation
matrix allows strategists to summarize and evaluate economic, social, cultural,
demographic, environmental, political, governmental, legal, technological, competitive
information. The EFE matrix can be developed in five steps:
1. List key external factors including both opportunities and threats that affect
the firms and its industry. List the opportunities first and then the threats.
2. Assign to each factor a weight that ranges from 0.0- not important to 1.0-
very important. The weigh indicates the relative importance of that factor to
being successful in the firm’s industry. Opportunities often receive higher
weights than threats, but threats can receive high weights if they are

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especially severe or threatening. The sum of all weights assigned to the
factors must equal 1.0.
3. Assign a rating between 1 and 4 to each key external factor to indicate how
effectively the firm’s current strategies respond to the factor (4: the response
is superior, 3: the response is above average, 2: the response is average, 1:
the response is poor). Ratings are based on effectiveness of firm’s strategies.
4. Multiply each factor’s weight by its rating to determine a weighted score.
5. Sum the weighted scores for each variable to determine the total weighted
score for a firm. The average total weighted score is 2.5. A total weighted
score of 4.0 indicates that a firm is responding in an outstanding way to
existing opportunities and threats in its industry. In other words, the firm’s
strategies effectively take advantage of existing opportunities and minimize
the potential adverse effects of external threats. A total score of 1.0 indicates
that the firm’s strategies are not capitalizing on opportunities or avoiding
external threats.
1.2.2.2. Internal Factor Evaluation Matrix
Internal Factor Evaluation (IFE) matrix is a strategic management tool for
auditing or evaluating major strengths and weaknesses in functional areas of a
business. IFE matrix also provides a basis for identifying and evaluating
relationships among those areas. The Internal Factor Evaluation matrix or short IFE
matrix is used in strategy formulation.
The IFE Matrix together with the EFE matrix is a strategy-formulation tool that
can be utilized to evaluate how a company is performing in regards to identified
internal strengths and weaknesses of a company.
The Internal Factor Evaluation (IFE Matrix)
A summary step in conducting an internal strategy management audit is to
construct an IFE matrix. This strategy formulation tool summarizes and evaluates

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the major strengths and weaknesses in the functional areas of business, and it also
provides a basic for identifying and evaluating relationships among those areas.
Similar to EFE matrix, an IFE matrix can be developed in five steps:
1. List key internal factor as identified in the internal audit process.
2. Assign a weight that ranges from 0.0 to 1.0
3. Assign a 1 to 4 rating to each factor
4. Multiply each factor’s weight by its rating to determine a weighted score for
each variable.
5. Sum the weighted scores for each variable to determine the total weighted
score for the firm.
Total weighted score well below 2.5 characterizes firms that are weak internally,
whereas score significantly above 2.5 indicates a strong internal position. The IFE
matrix provides important information for strategy formulation. In multidivisional
firms, each autonomous division or strategy business unit should construct an IFE
matrix.
1.2.2.3 Competitive Profile Matrix
The competitive profile matrix identifies a firm’s major competitors and its
particular strengths and weaknesses in relation to s sample firm’s strategic position.
The weights and total weighted scores in both a CPM and an EFE have the same
meaning. However critical success factors in a CPM include both internal and
external issues. In a CPM, the ratings and total weighted scores for rival firms can
be compared to the same firm. This comparative analysis provides important
internal strategic information.
The competitive profile matrix consists of the attributes mentioned below.
a. Critical Success Factors:

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Critical success factors are extracted after deep analysis of external and internal
environment of the firm. Obviously there are some good and some bad for the
company in the external environment and internal environment. The higher rating
show that firm strategy is doing well to support this critical success factors and
lower rating means firm strategy is lacking to support the factor.
b. Rating
Rating in CPM represents the response of firm toward the critical success
factors. Highest the rating better the response of the firm towards the critical success
factor, rating range from 1.0 to 4.0 and can be applied to any factor.
There is some important point related to rating in CPM.
 Rating is applied to each factor.
 The response is poor represented by 1.0
 The response is average is represented by 2.0
 The response is above average represented by 3.0
 The response is superior represented by 4.0
c. Weight
Weight attribute in CPM indicates the relative importance of factor to being
successful in the firm’s industry. The weight range from 0.0 means not important
and 1.0 means important, sum of all assigned weight to factors must be equal to 1.0
otherwise the calculation would not be consider correct.
d. Weighted Score
Weighted score value is the result achieved after multiplying each factor
rating with the weight.
e. Total Weighted Score


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The sum of all weighted score is equal to the total weighted score; final value of
total weighted score should be between ranges 1.0 (low) to 4.0(high). The average
weighted score for CPM matrix is 2.5 any company total weighted score fall below
2.5 consider as weak. The company total weighted score higher than 2.5 is consider
as strong in position. The other dimension of CPM is the firm with higher total
weighted score considered as the winner among the competitors.
1.2.2.4. SWOT matrix
The concept of determining strengths, weaknesses, threats, and opportunities is
the fundamental idea behind the SWOT model. To present the model in a more
understandable way, scholars came up with so-called SWOT matrix. SWOT matrix
is only a graphical representation of the SWOT framework.
Chart 1-1 SWOT matrix


The above is a schema of how SWOT works. You start at the top level and
go down to details. When this is filled with content, it gets the shape of a matrix,
such as the example below:
Table 1-2 SWOT matrix

Strengths
Weaknesses
 Unique product
 Location of your business
 Location of your business
 Lack of quality and customer service


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 Worker’s unique skill set

 Quality of your product
 Poor marketing and sales
 Products or services are not
differentiated
Opportunities
Threats
 A new emerging or developing
market (niche product, place –
new country, less competition)
 Merger, joint venture, or
strategic alliance
 New competition in the market,
possibly with new products or services
 Price wars
 Competitor oligopoly or monopoly
 Taxation
CHAPTER 2 – ANALYZING VASC BUSINESS AND MyTV
SERVICE DEVELOPMENT
2.1. Introduction of VASC
2.1.1 The process of establishment and apparatus
Company Name
Company Address
 Abbreviation of Vietnamese name:
VASC
 English name: VASC Software and
Media Company.
 Abbreviation of English name:
VASC.
 33 Thai Ha, Dong Da, Ha Noi.
 Tel:0437722728; Fax: 0437722835

 Email:

Company Mission
 Adopt IT application and value added services as a key to shift quickly and
strongly VASC’s business strategy to communications, multimedia,
television, e-information and digital contents.