Strategy business of PV OIL Tay Ninh in period 2011 - 2020

STRATEGY BUSINESS OF PV OIL
TAY NINH IN PERIOD
2011 – 2020
CAPSTONE PROJECT REPORT
Ho Chi Minh City


Group No.: 2
1. HOANG THI DUYEN
2. NGO VAN NHIEM
3. TRAN VAN DUONG
4. NONG HUU DUC
5. HOANG SONG TUY DIEM

Class: GaMBA01.C0509

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ACKNOWLEDGEMENTS

With the accomplishment of this capstone project report, first of all, We
would like to say may thanks to all teachers at ETC who had allowed me to attend
their classes so that We could get valuable knowledge used as a good background in
our capstone project report. Moreover, they also gave an enthusiastic performance
during our attention, a good symbol for teaching career and source of
encouragement for ours to fulfil our report in time.
Secondly, We would like to send our deep gratitude to Mr Trinh Kim Nhac,
Chairman; Mr Nguyen Ngoc Anh, General Director and all of our other superiors
and colleagues at PV OIL Tay Ninh have instructed ours everything related to
distributing petroleum both in marketplace and in the company and have also shared
with ours much of knowledge and experience during our research time, for which
We are greatly indebted.
Finally, We would particularly like to acknowledge with grateful thanks the
generous helps from our considerate classmates as well as our other closed friends.
Ho Chi Minh City, Juny 5
th
, 2011
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TABLE OF CONTENTS

INTRODUCTION 06
1. Problem statement 06
2. Research objectives 06
3. Related studies and researches 07

4. The relevance of research 08
5. Research methodology 09
Chapter I LITERATURE REVIEW 15
1.1 Understanding „strategy‟ 15
1.1.1 Definition of Strategy and Business strategy 15
1.1.2 Corporate strategy, business strategy and functional strategy 16
1.2 Understanding „competitive advantage‟ 17
1.2.1Definition of Competitive advantage 17
1.2.2 The important of Competitive advantage 17
1.2.3 How companies achieve competitive advantage 18
1.3 Understanding several major business model 19
1.3.1 SWOT analysis 19
1.3.2 Michael Porter‟s five forces 20
1.3.2 Construction tools and option strategy. 22
Chapter2 SITUATION ANALYSIS 24
2.1 External analysis 24
2.1.1 Macro external analysis 24
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2.1.2 Micro external analysis 30
2.1.3 Michael Porter‟s five forces 43
2.2 Internal analysis 45
2.2.1 Company History 45
2.2.2 Company Mission 45
2.2.3 Business activities 45
2.2.4 Infrastructure 46
2.2.5 Personnel 46
2.2.6 Company structure 47
2.2.7 Business results 47

2.3 Survey results analysis 51
2.3.1 Interview results from the Board of Management 51
2.3.2 Survey results from clients 52
2.3.3 Interview with petroleum experts 56
2.3.4 Summary 56
2.4 Some forecasts 57
2.4.1 Forecast of petroleum demand in Viet Nam and the region to 2020 57
2.4.2 Forecast of petroleum products consumed in Tay Ninh province to 2015 58
2.4.3 Plan 2011-2015 consumption of PV Oil 59
2.4.4 Business result expected in 2011 - 2015 60
Chapter 3 CONSTRUCTION AND SELECTION STRATEGY 62
3.1 Strategy Formulation 62
3.1.1 Vision 62
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3.1.2 Objective 62
3.1.3 Core values 62
3.2 General strategy planning 63
3.3 Specific strategy planning 64
3.3.1 SWOT matrix 64
3.3.2 SPACE Matrix 68
3.4 Option strategy 70
RECOMMENDATION AND CONCLUSION 73
1. Recommendation for marketing activities 73
2 Recommendation for Claim settlement 74
3 Recommendation for Human Resource management 74
4 Other recommendation 75
CONCLUSION 76
BILIOGRAPHY 78

APPENDIX 80

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LIST OF TABLE, FIGURES
Figure 1-1: Research Framework 13
Figure 1-2: The Strategy Hierarchy 16
Figure 1-3: Porter‟s Five Forces 20
Figure 2-1: GDP Growth of Vietnam 25
Figure 2-2: Petroleum used in Vietnam (thousand CBM) 26
Figure 2-3: Inflation of Vietnam 27
Figure 2-4: Petroleum distribution channe 31
Figure 2-5 - Vietnamese petroleum market share 32
Figure 2-6: Market share of PV OIL Tay Ninh in TayNinh market 42
Figure 2-7: PV OIL Tay Ninh organizational chart 47
Figure 2-8: Sales in volume in 2002-2009 periods 48
Figure 2-9: Sales in value in 2002-2009 periods 48
Figure 2-10: Forecast of petroleum demand in Viet Nam to 2020 58
Figure 2-11: Forecast of petroleum demand of the region to 2020 58
Figure 3-1 . Đồ thị hình thành từ ma trận SPACE
Table 1: External Factor Evaluation Matrix 30
Table 2 – PV OIL storage system 35
Table 3 : PV OIL sharing or renting storage system 37
Table 4 : PV OIL market share 38
Table 5: GDP Growth of Tay Ninh province 40
Table 6: Picture compete matrix of PV Oil Tay Ninh 44
Table 7: Internal Factor Evaluation Matrix of PV Oil Tây Ninh 50
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Table 8: Forecast of petroleum products consumed in Tay Ninh province to
2015 59
Table 9: Kế hoa
̣
ch sa
̉
n lươ
̣
ng tiêu thu
̣
ca
́
c năm 60
Table 10: Dư
̣
kiến doanh thu giai đoa
̣
n 2011-2015 61
Table 11: Internal – External Matrix (IE) 63
Table 12:. SWOT Matrix 64
Table 13: Space Matrix 68
Table 14: QSPM Matrix 70
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GLOSSARY
CBM
The cubic metre (US spelling: cubic meter, symbol: m3) is the international system
of units derived unit of volume. It is the volume of a cube with edges one metre in

length. An alternative name, which allowed a different usage with metric prefixes,
was the steres. Another alternative name, not widely used any more, is the kilolitre.
PETROLEUM PRODUCTS
Petroleum products are useful materials derived from crude oil (petroleum) as it is
processed in oil refineries. Major products of oil refinery are diesel, fuel oil,
gasoline and kerosene.
DIESEL
Diesel fuel in general is any liquid fuel used in diesel engines
FUEL OIL
Fuel oil is a fraction obtained from petroleum distillation, either as a distillate or a
residue. Broadly speaking, fuel oil is any liquid petroleum product that is burned in
a furnace or boiler for the generation of heat or used in an engine for the generation
of power.
GASOLINE
Gasoline is a petroleum-derived liquid mixture which is primarily used as a fuel in
internal combustion engines. It is also used as a solvent, mainly known for its ability
to dilute paints.
OCTANE RATING
The octane rating is a measure of the resistance of gasoline and other fuels to auto-
ignition in spark-ignition internal combustion engines.
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The octane number of a fuel is measured in a test engine, and is defined by
comparison with the mixture of 2,2,4-trimethylpentane (iso-octane) and heptanes
which would have the same anti-knocking capacity as the fuel under test: the
percentage, by volume, of 2,2,4-trimethylpentane in that mixture is the octane
number of the fuel. For example, gasoline with the same knocking characteristics as
a mixture of 92% iso-octane and 8% heptanes would have an octane rating of 92.
This does not mean that the petrol contains just iso-octane and heptanes in these

proportions, but that it has the same detonation resistance properties. Because some
fuels are more knock-resistant than iso-octane, the definition has been extended to
allow for octane numbers higher than 100.
Octane rating does not relate to the energy content of the fuel. It is only a measure of
the fuel's tendency to burn in a controlled manner, rather than exploding in an
uncontrolled manner. Where octane is raised by blending in ethanol, energy content
per volume is reduced.
RESEARCH OCTANE NUMBER (RON)
The most common type of octane rating worldwide is the Research Octane Number
(RON). RON is determined by running the fuel in a test engine with a variable
compression ratio under controlled conditions, and comparing the results with those
for mixtures of iso-octane and n-heptanes.
KEROSENE
Kerosene, sometimes spelled kerosine in scientific and industrial usage. Kerosene is
widely used to power jet-engine aircraft (jet fuel) and some rockets, but is also
commonly used as a heating fuel and for fire toys. In parts of Asia, where the price
of kerosene is subsidized, it fuels outboard motors rigged on small fishing craft.


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INTRODUCTION
1. Problem statement
Gasoline is a strategic commodity, It meets an economy sectors requirements
from industry, agriculture, forestry, fishery to transportation. Nowadays there is no
alternative fuels for this one so that Vietnam State and consumers also have had an
hourly watch on this market.
Vietnam gasoline systems currently has 11 enterprise hubs. There are 9 state
companies allowed to import and export gasoline. Consumers get it over via general

agents or distributor system consisting of about 10,000 dealers and retail filling
stations.
Tay Ninh is a Southeast province of Vietnam. It has the frontier with Kingdom
of Cambodia in the West and the North, Binh Duong and Binh Phuoc provinces in
the Est, Ho Chi Minh City and Long An province in the South. It has an important
and strategic position also with a long border with Cambodia, extensive forests, high
mountains, conveniently sea transportation. And it is the gateway to Ho Chi Minh
city and other provinces.
Gasoline market in Tay Ninh is growing well. Till March 2011, it had 329
gasoline retailers in which PV Oil has 8 stores under, 3 outlets and 71 agents.
In 2009, sales in volume of PV OIL Tay Ninh were 72,000 CBM that increased
11 percent in comparison with the implementation of 2008. However, deeply
analysis that figure, there were 65,000 CBM distributed in Tay Ninh market and
7,000 CBM distributed in Ho Chi Minh City. Thus, in Tay Ninh market, PV OIL
Tay Ninh ranked the second position with 39 percent of market share after
Petrolimex Tay Ninh who sold 69,000 CBM accounting for 42 percent of market
share.
From 2010, PV OIL Tay Ninh have transformed to a join stock company from a
dependent accounting branch of PV OIL Corporation. Moreover, in 2010, PV OIL
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Tay Ninh have finished upgrading capacity of petroleum storage to 8,500 CBM
increasing 5,000 CBM, more than twice times in comparison with old capacity.
These changes have given PV OIL Tay Ninh more opportunities in positively
managing business and managing inventory. On the other hand, PV OIL Tay Ninh
has the requirement of increasing sales and market share and becoming the best
petroleum distributor in Tay Ninh and vicinity to effectively operate new storage
and meet the expectation of PV OIL Corporation.
With the above issues and our team members are working at Tay Ninh PV Oil,

group 2 decided to select PV Oil Tay Ninh to be our research topics for assignments
as “business strategy of Tay Ninh PV Oil from 2011 to 2020”. Having limited
experience and business strategy understanding, we have a strong disire to receive
comments from lectures and other groups to order to improve our research.
2. Research objective
The main objectives of this study are as follow:
- Systematic of the theoretical basis of the stragety, business stragety.
- To process as SWOT analysis (Strength – Weakness – Opportunity –
Threat) of PV OIL Tay Ninh with special reference to petroleum trading
activity based on the consideration to external and internal environment.
- To identify the key success factors of trading petroleum activity in Tay
Ninh and vicinity market and find out PV OIL Tay Ninh‟s core
competences
- To test the client‟s satisfaction with the PV OIL Tay Ninh‟s service to have
better understanding about the company‟s competences and weaknesses.
- To propose suitable strategies in an effort to improve PV OIL Tay Ninh‟s
competitive advantages.
3. Related studies and researchs
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The company was newly created, and there was no research on development
strategy formerly.
4. The relevance of the research
This research mainly discusses how Tay Ninh Petrovietnam Oil Company could
have its competitive advantages to develop market share in Tay Ninh province and
vicinity. Thus, the author shall aim to help the company‟s Board of Directors to
make strategic decisions, by analyzing its internal and external forces, in different
phases and to propose detailed and practical recommendations in order that the
company gets its objectives.

5. Research Methodology
The purpose of this chapter is to give readers a better understanding of major
means, tools and techniques used in this research to help the author obtain
applicable data, gain valuable knowledge and reach useful conclusions related
directly to the problem investigated. Basically, these resources include:
5.1 Theoretical framework
This capstone project report shall begin with a brief literature review with the
examination of some business models of Michael Porter in line with SWOT
analysis. The purpose of these studies is to better understand the enterprise business
environment and competition capability as well as development pathways. On the
basis of comprehensive knowledge of these theories, the author will further explore
the company‟s inner forces and flaws and outer opportunities and challenges so as to
propose effective recommendations to the management board.
5.2 Primary data
Primary data are collected through in-depth and open-ended interviews with the
company management and discussions with major business partners being
customers and market experts. The results are deemed an integral part of the paper
as it gives a guideline on to which extent the research should aim at, i.e. short-term
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or long-term strategies; which fields of business focus should rest on, etc
Basically, there are three questionnaires designed, implemented, analyzed and
followed up as follows:
Questionnaire No. 1:
Interviewing PV OIL Tay Ninh‟s board of management is necessary to learn
about the followings:
- The external environment of the company
- The background of company from the establishment up to now
- The SWOT of the company

- The situation of the company, especially sales and market share in recent
years
- The strategic development fields of company
- The core competences and competitive advantages of company
In general, the face to face interview is carried out with the aim of gaining
essential information on the petroleum market in Vietnam and also on the internal
environment of PV OIL Tay Ninh. All the interviewees were asked the same
questions, which covered both the external and internal environments in order to
obtain their views and evaluation on the current business.
A qualitative and exploratory analysis was done with a view to discovering the
strengths and weaknesses of PV OIL Tay Ninh in relation to the opportunities and
threats the company is facing. In general, comments from the interviewees were
complied and categorized to deepen all important information related to the
company.
The interviewees are five key persons at PV OIL Tay ninh who have major
impacts on the company‟s development pathways. These include: Chairman,
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General Director, Director of Trading Department, Director of Operation
Department and Chief Accountant.
Questionnaire No. 2:
Face to face interview with some experts in trading petroleum will be held to
clearly point out external environment of the company and the key success factor of
the industry in Tay Ninh and vicinities market. These experts are five people who
have long time experience and knowledge in trading petroleum in South of Vietnam.
They are Petroleum Director of PV OIL Corporation, Former Deputy Director of
Petrolimex Sai gon, Trading Manager of Petrolimex Tay ninh, Trading Director of
Petec Company and Trading Director of Saigon Petro Company.
Questionnaire No. 3:

In line with the above questionnaire, this similar survey seeks responses from
the company‟s key groups of clients who are wholesalers, retailers Below are all
aspects the author is trying to seek an answer from the questionnaire:
 Customer satisfaction in each service criteria
 Service quality of PV OIL Tay Ninh in comparison with that of the current
competitors
Upon designing this questionnaire, the author essentially lays a crucial focus on
larger customers of the company only and expects to obtain feedbacks from key
persons of:
 05 wholesalers
 60 retailers
After that, appropriate strategies and recommendations are proposed in line with
PV OIL Tay Ninh business objectives.
5.3 Secondary data
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With secondary data, the author shall utilize different sources, internal and
external, of PV OIL TAY NINH such as the company‟s annual and periodical
reports and business plans, brochure and other publications; the Internet; reference
books; newspapers and magazines, etc…
5.4 Research framework
Figure 1-1: Research Framework
(Source: Strategy management, Alex Miller)

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CHAPTER I LITERATURE REVIEW
1.1 Understanding „strategy‟

1.1.1 Definition of „strategy‟ and „business strategy‟
To begin with, it is essential to understand the term „strategy‟ alone. Along
with history, it seems that people had practiced strategy since the beginning of time.
The term was well recognized by the great Chinese strategist and military theorist
Sun Tzu who described his principles of war as early as 500 BCE. From Sun Tzu‟s
work, many businessmen learned the tactical side of military strategy and specific
tactical prescriptions. Later on, many authors have developed new strategy concepts
in relation to business performance and until now there is no unique and universal
definition for the term. Below could be one of the most useful:
“A strategy is the pattern or plan that integrates an organization‟s major
goals, policies, and action sequences into a cohesive whole. A well-formulated
strategy helps to marshal and allocate an organization‟s resources into a unique and
viable posture based on its relative internal competencies and shortcomings,
anticipated changes in the environment, and contingent moves by intelligent
opponents.” (The strategy process, Henry Mintzberg & James Brian Quinn, p. 5)
In simple term, „strategy‟ refers to how a given objective will be achieved
and is the art of outperforming competitors without necessarily having superior
resources.
Business strategy is a long-term approach to implementing a firm's business
plans to achieve its business objectives. Business Strategy is a term used in business
planning that implies a careful selection and application of resources to obtain a
competitive advantage in anticipation of future events or trends. Business strategy
relates to making strategic decisions about products, price, meeting customer needs,
gaining advantage over competitors that help a business competing successfully in a
particular market.
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According to Henry Mintzberg, in his 1994 book namely “The Rise and Fall
of Strategic Planning”, the term generally falls into one of the four categories as

follows:
 A plan, a "how," a means of getting from here to there.
 A pattern in actions over time; for example, a company that regularly
markets very expensive products is using a "high end" strategy.
 A position; that is, it reflects decisions to offer particular products or
services in particular markets.
 A perspective, that is, vision and direction.
In conclusion, “strategy” is all of a plan, a pattern, a position and a
perspective that define the markets and the businesses in which a company will
operate and thus, is crucial to the firm‟s survival and success.
1.1.2 „Corporate strategy‟, „business strategy‟ and „functional strategy‟
As discussed earlier, a strategy can be considered as a comprehensive master
plan to indicate how the firm will achieve its mission and objectives. It helps the
firm to become successful and stay successful even under severe competition. But
the question is whether a unique corporate strategy can be applicable to all levels in
the firm. The answer is certainly „No‟ now that almost all business firms, especially
large ones, usually adopt three types of strategy simultaneously which include:
Corporate strategy (or companywide strategy): a description of the firm‟s
overall direction in terms of its general attitude toward growth and the management
of its various businesses and product lines or services. Corporate strategy concerns
two different questions: What businesses the firm should be in and how the
corporate office should manage the array of business units.
Business strategy (or competitive strategy): a strategy occurring at the
business unit or product level which focuses on the enhancement of the competitive
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position of a firm‟s products or services in the specific industry or market segment
by that business unit. Business strategy concerns how to create competitive
advantage in each of the businesses in which a firm competes.

Functional strategy: a strategy implemented by a functional area to achieve
corporate and business unit objectives and strategies by maximizing resource
productivity. Functional strategy has to do with developing and nurturing a
distinctive competence to provide a firm and business unit with a competitive
advantage.
With regard to this issue, one usually recognizes the „hierarchy of strategy‟
or the grouping of all the said strategy types by level in the firm. More or less, this
hierarchy is a nesting of one strategy within another so that they complement and
support one another. Functional strategies support business strategies, which then
support the corporate strategies. This capstone project report, as the title suggests,
shall the firm‟s internal and external conditions so as to develop important strategies
at corporate level.









Figure 1-2: The Strategy Hierarchy
(Source: Strategy management, Alex Miller)

Corporate
Strategy
Business
Strategy
Functional Strategy
R&D HR FINANCE PRODUCTION

SALES & MARKETING
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1.2 Understanding „competitive advantages‟
1.2.1 Definition of „competitive advantages‟
History has proved that successful companies – small, medium or large –
tend to one thing in common: they all have specific significant competitive
advantage. For long, „competitive advantage‟ has been the focal point of strategy
and can be described, in simple terms, as a position a firm occupies against its
competitors.
Another well-known „competitive advantage‟ theory has to do with resources
and capabilities. The resource-based view states that in order to develop a
competitive advantage, the firm must have resources and capabilities that are
superior to those of its competitors. Resources are the firm-specific assets useful for
creating a cost or differentiation advantage and that few competitors can acquire
easily. Some examples of such resources are:
 Patents and trademarks
 Proprietary know-how
 Installed customer base
 Company reputation
Capabilities are the abilities of the company to effectively utilize its
resources. Such capabilities are not easily presented as documents. They are the
routines of the company. Thus, the competitors have difficulties to imitate.
Resources and capabilities of the company together form its distinctive
competencies. These competencies enable efficiency, quality, and customer
responsiveness, which can be leveraged to create a cost advantage or a
differentiation advantage. The firm then will position itself in its industry by
choosing either the differentiation or cost leadership strategy to create value.
1.2.2 The importance of „competitive advantages‟

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Competitive advantage is believed to play a central role fostering sustainable
growth of an organization by ensuring that a company earns excess returns for a
longer period of time. Competitive advantage is proven, through researches, to be an
effective tool in achieving higher-than-normal levels of profitability.
1.2.3 How companies achieve competitive advantage
In this section, let us take a look at the financial aspects of a firm to
comprehend why they contribute to its economic success.
Miller states that one of the most central goals that any business firm has is to
maximize shareholders‟ returns, the ultimate objective which pulls the rest of other
elements in the framework. Under this heading, four elements are discussed as a
mean to measure financial capability of the firm which are Economic Value Added
(EVA), profitability, growth and financial risks. To be financially healthy, a firm
then needs to build a competitive advantage among differentiation, low cost, and/or
quick response as mentioned above. What constitutes a firm‟s competitive
environment and position within it are two important elements being structural
position (the firm‟s position with regard to rivalry, entrants, substitutes, customers
and suppliers) and process execution (how well the firm executes certain core
processes). Competitive advantage, in this connection, can be considered as the
product of both the industry‟s structure and the firm‟s ability to operate within that
structure.
To this extent, all the concepts have been examined in view of a single
business unit, i.e. a particular product/service and market that a firm focuses on.
However, Miller explains that a firm, usually multinational, operates under many
different business units to seek benefits or synergies. Therefore he proposes five
types of „enterprise synergies‟ which a firm pursues to strengthen competitive
advantage across the international operations either through an enhanced structural
position or through improved process execution. These include core competencies,

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market power, shared infrastructure, balanced cash flows and transnational
advantages.
Organizational capacity is the last but not least element in the framework
which refers to the so-called soft issues such as leadership, levers for organizational
change, and organizational learning. Resting on the bottom of the framework yet
this important element, however, needs to be enhanced to allow managers to take
advantage of enterprise synergies and develop more favorable structural position
and/or to improve process execution.
In conclusion, the Architecture of Strategy is “a framework for linking a
series of means and ends to support superior financial performance through
building strong competitive advantages”. The analysis of this framework is
important to understand what elements should focus rest on in order that a firm
succeeds in building winning strategies.
1.3 Understanding several major business models
So far, we have discussed „business strategy‟ and „competitive advantage‟,
basic concepts in this research. This section shall continue with the examination of
several business models the author tends to utilize to attain this capstone purposes.
1.3.1 SWOT analysis
Of all the four instruments, SWOT analysis (or SWOT matrix) is probably
the most common to access a firm‟s situation. This technique was developed by
Albert Humphrey who led a research project at Stanford University in the 1960s and
1970s using data from Fortune 500 companies.
SWOT is an acronym used to describe particular Strengths, Weaknesses,
Opportunities, and Threats that are strategic factors for a project or a specific
business venture. SWOT analysis is deemed a strategic planning method which
typically starts with the definition of a desirable end state or objective. Once such
end state or objective is clearly defined, the analysis shall be implemented to help a

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firm identify the key internal factors (strengths and weaknesses) and external factors
(opportunities and threats) that are important to achieving the goal.
1.3.2 Michael Porter‟s five forces
Michael Eugene Porter (born 1947) is a University Professor at Harvard
Business School who pays academic interests in management and economics. So
far, Porter has proposed many useful economic concepts such as competitive
advantage (of a firm), diamond model (of a nation), value chain, generic strategies,
cluster development, etc… but „the five-force competition model‟ is probably one of
the most important notions.

Figure 1-3: Porter‟s Five Forces
(Source: Strategy management, Alex Miller)
Porter's five-force model is a framework for the industry analysis and
business strategy development. The model provides a simple perspective for
assessing and analyzing the competitive strength and position of a corporation or
business organization. In other words, the model is used to analyze the attractiveness
and likely-profitability of an industry. Porter suggests that five main forces create
competition at the level of strategic business units and that a systematic analysis of
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each force shall help managers identify the keys to competitiveness within their
particular industry. These five forces include:
Threat of new entrants: When a new player enters an industry, it can raise
the level of competition, which consequently reduces its attractiveness. Such threat
of new entrants, Porter explains, depends very much on the barriers to entry. In
many countries, high entry barriers exist in some industries (ex: shipbuilding), while

it is contrary to some other industries (ex: hotel and restaurant). Some sources of
major entry barriers include economies of scale, capital/investment requirements,
incumbent resistance, customer switching costs, geographical factors, etc.
Threat of substitutes: Most industries all have substitutes. The presence of
such substitute products/services tend to lower industry attractiveness and
profitability since they compete with existing ones, mostly in terms of price. The
threat of such substitutes should depend on buyers‟ loyalty (or willing toward
substitutes), relative price and performance of substitutes, costs of switching to
substitutes…
Bargaining Power of Suppliers: This is to indicate that a supplier may have
power over a company because it supplies materials and other products into the
industry. Therefore, a company's profitability can be significantly affected by the
cost of items bought from suppliers (e.g. raw materials, components). The suppliers
will have high bargaining power when:
 There are not differentiated but highly valued products.
 The industry is threatened to integrate forward by the suppliers.
 There are few dominant suppliers and many buyers.
 The company does not threaten to integrate backwards into supply.
 The industry is not a key customer group.
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Bargaining Power of Buyers: At the other end of the rope, companies create
demand in an industry and thus, can possibly exert some type of power over the
suppliers. Basically the buyers will have greater bargaining power when:
 There are standardized products.
 There are many sellers in the industry while few dominant buyers.
 The industry is threatened to integrate backward by the Buyers.
 The buyer‟s industry is not threatened to integrate forward by
supplier.

 The industry is not a key supplying group.
Competitive rivalry within an industry: What is important here is the
number and capability of a firm‟s competitors. If the firm has many competitors
who offer equally attractive products and services, then it is likely that the firm has
more competition and less power in the situation. Therefore, suppliers and buyers
are supposed to have a good deal from the firm or otherwise they will go to your
competitors‟. On the other hand, if the firm provides such products or services that
no other firm does, it often has tremendous strength. Porter believes that the
intensity of rivalry between these competitors within an industry depend on several
factors such as the structure of competition, the structure of industry costs,
degree of differentiation, etc.
Porter‟s five-force model is not only used for commercial organizations but
also for public organizations and non-profit sectors to better understand their
customers, suppliers and other relevant organization with whom they may be
competing for support.
1.3.3 Construction tools and option strategy.
As mentioned above, construction tools and option strategy used in the article
include:
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- Internal Factor Evaluation Matrix (IFE)
- External Factor Evaluation Matrix (EFE)
- Internal - External Matrix ( IE)
- SPACE Matrix
- QSPM Matrix