Quy hoạch chiến lược kinh doanh của đường sắt việt nam vietnam railway đến năm 2020

MBA THESIS

“PLANNING THE BUSINESS STRATEGY OF VIETNAM
RAILWAY TILL 2020”


TABLE OF CONTENTS
No

Content
1.
2.
3.
4.
5.
6.
7.
8.

INTRODUCTION
The reason for choosing this project
Target and research objective
Object and scope of the research
Research method
Project meaning
Project limitations
1. Expected results of the project
2. Project structure
CHAPTER 1: THEORETICAL

BASIS

AND

Page
1
1
1
1
2
2
2
2
2
4

PLANNING OF BUSINESS STRATEGY
The concepts
Business strategy
Strategic management
Concept of strategic management
Necessity of strategic management in the enterprise
The process of strategic management
Strategy planning
The process of planning the strategy
Vision, mission and strategic objective of the company
Vision
Mission
Determination of strategic objective
Analyzing and forecasting the business environment
International economic environment

National economy environment
Competitive environment of internal sector
Environment of internal enterprise
Collecting results of analysis and forecast of business

4
4
6
6
7
9
9
10
10
10
10
11
13
13
15
17
20
22

environment
1.2.3.1 Summary table of results of analysis and forecast of

22

external and internal business environment

Types of matrices for evaluation of business environment
Setting up strategic options
Choosing strategic options
Strategic decision and institutionalization of strategy
Tools for formation and selection of strategy : SWOT

23
26
26
27
27

1.1
1.1.1
1.1.2
1.1.2.1
1.1.2.2
1.1.2.3
1.1.3
1.2
1.2.1
1.2.1.1
1.2.1.2
1.2.1.3
1.2.2
1.2.2.1
1.2.2.2
1.2.2.3
1.2.2.4
1.2.3

1.2.3.2
1.2.4
1.2.5
1.2.6
1.3

-1-


matrix
CHAPTER II: REAL SITUATION OF BUSINESS

30

TRATEGY PLANNING OF VIETNAM RAILWAYS
2.1 An Overview o f VIETNAM RAILWAYS
2.2 Analysis of VIETNAM RAILWAYS’s business

30
33

2.2.1
2.2.1.1
2.2.1.1.1
2.2.1.1.2
2.2.1.2
2.2.1.3
2.2.1.4
2.2.2

2.2.2.1
2.2.2.2
2.2.2.3
2.2.2.4
2.2.3
2.2.3.1
2.2.3.2
2.2.3.3
2.2.3.4
2.2.4
2.3
2.3.1
2.3.2
2.4
2.4.1
2.4.2
2.4.3

environment
National and International Economic Environment
Development Tendency of World’s Railway
An Overview of World’s Railway
Experience on Railway Development
Features of Railway Transport Market
Governmental Legal Policies
Features of Railway Transport
Sectoral Competitiveness
Suppliers
Main Customers
Existing Competitors

Other Transport Means
Analysis of Vietnam Railways
Labor Features
Financial Features
Features of Technical Facilities
Managing and Operating Structure
Vietnam railways’s Business Environment
Planning Works at Vietnam railways
Basis
Process and Method for Strategy Definition
Assessment of Current Status
Existing Situation of Vietnam Railways
Achievements
Shortcomings and Causes
CHAPTER 3: SOLUTIONS AND

33
34
34
36
36
39
39
45
47
48
48
50
52
52

53
56
60
61
63
63
65
67
67
67
68
71

RECOMMENDATIONS FOR BUSINESS
DEVELOPMENT OF VIETNAM RAILWAYS UNTIL
2015
3.1 Sector

and

Vietnam

railways’s

Development

Orientations
3.1.1 Development Strategy for Vietnam Railway Transport
3.1.1.1 Development Opinions
3.1.1.2 Development Targets

-2-

71
71
71
72


3.1.2 Targets and Orientation of Vietnam Railways Sector and

75

Vietnam railways
Transport
Investment into Infrastructure Development
Investment into Vietnam railways’s Development
Development Policies
Railway Transport Demand Projection
Projection Method and Basis for Data Seclection
Railway Transport Demand from
Key Economic

75
76
78
79
80
80
81

Corridors
Socio-economic Projection until 2020
Existing Transport Quantity in Key Corridors
Projection of Transport Quantity
SWOT matrix in Strategy Definition
Strength
Weaknesses
Opportunities
Threats
Supporting Solutions for Strategic Planning
Organizational and Institution
Solutions for Development Investment
Solution on Finance and Fund Mobilization
Solutions on Human Resource Development
Application of Technology and Science
Co-operation
Recommendation
To the Government
To the Vietnam railways
CONCLUSION
REFERENCE

81
82
82
85
85
86
88

89
92
93
94
95
96
96
97
97
98
100
101
102

3.1.2.1
3.1.2.2
3.1.2.3
3.1.3
3.2
3.2.1
3.2.2
3.2.2.1
3.2.2.2
3.2.2.3
3.3
3.3.1
3.3.2
3.3.3
3.3.4
3.4

3.4.1
3.4.2
3.4.3
3.4.4
3.4.5
3.4.6
3.5
3.5.1
3.5.2

LIST OF TABLES
No
2.1.4 Diagram

2.1:

Content
Vietnam railways’s

Organizational

Page
31

Structure
2.1.5 Table 2.1. Vietnam railways’s Business of Transport

31

Business in the Period of 2003 - 2008

Table 2.2. Business Results of other Vietnam railways’s

32

Sectors (2003 – 2008)

-3-


2.2.1.1.1 Table 2.3: Summary of criteria for railway development

35

of the countries and regions
2.2.1.4 Table 2.4: Quantity of Vietnam railways’s Annual

41

Transported Passengers and Freight
Table 2.5: Transported Passengers and Freights by

42

Railway and Proportion with Transport Sector
2.2.3.1 Table 2.6: Vietnam railways’s Labor and Income until

52

December 31st 2008
2.2.3.2 Table 2.7: Plan for Use of Investment Funds 2003 - 2008

2.2.3.3 Table 2.8: Length – Gauge Dimension – Interval

53
58

Capacity
Table 2.9: Major Technical Standard on National

59

Railway Routes
2.2.4 Table 2.10: Internal Business Environment
Table 2.11: External Business Environment
3.2.2.2 Table 3.1: Current Transport Quantity on Several Routes
3.2.2.3 Figure 3.1: Quantity of Transported Freights and

62
63
82
83

Passengers and Transport Methods
Table 3.2: Projection of Transported Passengers until

83

2020
Table 3.3: Projection of Transported Freights until 2020
Table 3.4: Projection of Transported Passengers after

83
84

2020
Table 3.5: Projection of Transported Freights after 2020

85

LIST OF FIGURES AND DIAGRAMS
No
Content
1.1.2. Diagram 1.1: The process of general strategic management

Page
9

3
1.2 Diagram 1.2: Diagram of the process of planning strategy
1.2.2. Diagram 1.3 Five competitive pressures in the environment

10
18

3 of sector by M. Porter
1.3 Table 1 Model of theory of SWOT

-4-

28

LIST OF ABBREVIATIONS

QD:

Decision

TCCB-LD:

Labor organization officers

TTg:

Prime Minister

VND:

Vietnam dong

V:

Velocity

Km:

Kilometer

ODA:

Official Development Assistance

BOT:

Ministry of Transport of Vietnam

-5-


GDP:

Gross Domestic Product

JICA:

Japan International Cooperation Agency

WTO:

World Trade Organization

AFTA:

ASEAN Free Trade Area

R&D:

Research and Development

-6-

INTRODUCTION
3. The reason for choosing this project
Business development strategy is the very important part for the development of
enterprises. Strategy defines the way and specific objectives that have been reached,
it also helps the enterprises prepare resources and adapt to the business environment
in each specific period to get the best business efficiency.
The condition that our country has been involving deeper and deeper into the world
economy has created many opportunities and challenges for Vietnam enterprises,
especially for transportation in general and railway transportation in particular. One
of the general weak points of the current transportation is that it has not methodical
business development strategies to make the most of opportunities and overcome
challenges to improve the competition power, maximize the operation efficiency.
This study will contribute to provide a picture of transportation environment, since
then, helping to choose and set up the business strategy of the companies to help
Vietnam railways catch the strong points better to promote, take full advantage of
opportunities, overcome weak points, realize challenges to avoid and turn into new
opportunities. At the same time, this study also contributes to reference documents
for transportation sector.
4. Target and research objective
• Analysis of business environment impact of activity on provision of
transportation service of railway sector.
• Realization of opportunities and challenges, strong points and weak points of
Vietnam railways sector.
• Since then, setting up and choosing the suitable development strategies and
at the same time, bringing out necessary solutions to implement these
strategies to improve the ability of competition and business efficiency of
railway sector, helping the sector develop solidly.
5. Object and scope of the research
-7-

Focusing on researching, setting up business strategy of Vietnam railways to the
year 2020 and the Vision to the year 2030.
6. Research method
The methods used in the research of thesis are:
• The methods of qualitative, data analysis, statistics, and comparison to
evaluate the actual situation and bring out complete solutions.
7. Project meaning
• In theory: Researching the basis, the process of setting up the strategies and
the way of choosing applicable strategy for setting up and choosing optimal
strategy for Vietnam railways.
• Clarifying and applying the theory of setting up business strategy to a
specific company of Vietnam Railways.
• Being

the

reference

documents

for

transportation

companies

of

transportation sector to set up their development strategy.
8. Project limitations
• Study scope: Limit to a specific business line.
• The data are incomplete because of limited research framework.
• Changes of State policy.
• Fluctuation of the economy of the country and the world.
9. Expected results of the project
• Choosing, setting up the development strategy in accordance with the
activities of Vietnam railways;
• Bringing out the specific solution, implementation plan of development
strategy of Vietnam railways in transportation sector.
• Being the reference documents for companies of transportation sector.
10. Project structure.
The project includes: Overview, three chapters and conclusion. The main content of
each chapter are presented as follows:

-8-


• Chapter 1: Theoretical basis and planning of strategy
• Chapter 2: Real situation of business strategy planning of Vietnam railways.
• Chapter 3: Solutions and recommendation

-9-


CHAPTER 1
THEORETICAL BASIS AND PLANNING OF BUSINESS STRATEGY
1.1 The concepts
1.1.1. Business strategy

In fact, there are many different viewpoints on strategy. Depending on
different research purposes and different development periods that economists have
different viewpoints on strategy.
According to General Ailleret, strategy is “definition of ways and
applicable means to reach the identified targets through policies”.
F.J.Gouillart thinks that strategy of businessmen is “all decisions aimed at
holding important positions, defending and creating exploitable results and
immediate using”.
“Strategy is the art of coordinating the actions and controlling them in order
to reach the long-term targets” (G. Hissh).
“Strategy of an enterprise is to sketch the trajectory of development that is
enough sustainable and long-term, around that trajectory we can arrange the
decisions and exact actions of company” (Alain Charlec Martinet).
Some economists in over the world added the business strategy to enterprise
development strategy. Represent for this opinion is the economists of BCG, as they
think that “development strategy is the general strategy of a company, including
parts of secondary strategy such as: strategies of marketing, finance, research and
development etc.,”
But for M.Parter and K.Ohmac, the purpose of business strategy is to
bring the most favorable conditions to create competitive advantage for the
enterprise.
As usual approach, strategy is a system of long-term targets, policies and
main measures on manufacture and business, finance and human factor settlement
to lead the enterprise to the new step on quality.

- 10 -


From the different conceptions of strategy, we can draw the most general
concept of strategy as follows:

Strategy is a system of viewpoints, purposes and basic targets and
solutions, policies in order to use the resources, advantages, opportunities of an
enterprise best to reach the proposed targets in a fixed period.
Business strategy has the characteristics:
- Business strategy is the general strategies of an enterprise that determine
the targets and direction of business in a relative long-term period (5; 10 years…)
and is fully aware of all production and business activities of company to ensure the
company to develop solidly.
- Business strategy just outlines the long-term and oriented directions, but in
business practice, we have to implement the combination of strategic and
provisional targets, combination of strategy and tactics, short-term and long-term.
Since then, ensuring the business efficiency and overcoming the errors caused by
the strategy.
- All important decisions in the process of set-up, decision, implementation
organization and check, assessment, adjustment of strategy must focus on the
supreme leader of the company. This ensures the accuracy of long-term decisions,
for the secret of information.
- Business strategy is always built on the basis of comparative advantages.
This requires that in the process of setting-up the strategy, the enterprise has to
assess exactly actual situation of production and business to find out strong points
and weak points and revise regularly internal factors when implementing the
strategy.
- Business strategy firstly and primarily built for the business lines that are
specialized and traditional and strong of the enterprise. This puts the enterprise into
the situation that has to set up, choose and implement the strategy as well as
participate in business on the markets which have been prepared and strong.
In shot, in can be concluded that no matter the strategy is considered in

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which point of view, aspect or at any development period, it has the function of
directing and forecasting for the future development of the enterprise on the basis of
the past analysis as well as the forecasted one of the business environment.
However, through various approaches, we can consider Strategy is the business
orientation to achieve the proposed objectives of an enterprise. One of the features
of the current strategy is the motive and attacking characteristic. It means that we
always have to vary facing to the changes of the business environment in the future.
The variation here is not an adaptation but to be ahead one step because the
tardiness of any enterprise in facing with the change of business environment will
made it to be defeated promptly. CK Prahalad, who is an American professor of
business management, ever said that “The chances are waiting every body outside,
but seizing a new business opportunity is the same as shooting to a herd of flying
wild ducks, you can not catch them with a gun of fixed position”. Therefore, if the
strategy is not close to changes, then the enterprise can not achieve its proposed
targets.
1.1.2. Strategic management
1.1.2.1. Concept of strategic management
“Strategic management” is the new concept, less common as the concept of
“strategy”. And as well as “strategy”, there are many different viewpoints on
strategic management:
“Strategic management is a collection of viewpoints and management actions
that decide the long-term success of the company”.
This viewpoint said that the managers have to determine correctly the target of
the company, and use the resources of the organization more effectively.
“Strategic management is a collection of decisions and action measures
leading to plan and implement the strategy to reach the targets of the
organization”.
From the viewpoints above on strategic management, we can have concepts as
follows:

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- Strategic management is the process of studying current and future
environments, planning the targets of the organization; proposing, implementing
and checking the implementation of decisions to implement those targets in current
environment as well as in the future.
Thus, strategic management analyzes the external conditions and internal
capabilities of the company. As a result, internal strong points and weak points can
be determined to resolve to take advantage of external opportunities and minimize
internal problems.
1.1.2.2. Necessity of strategic management in the enterprise.
Strategic management has been affirmed its role clearly to the existence and
development of enterprise. The enterprise without strategic management often
orients its plans with analysis of resources, prepares the plan with assumption of
stable environment and long-term plan will get much limitations. And like this, in
the condition of competitive environment that is fiercer and fiecer, the enterprise
will be defeated and can’t be adapted flexibly under activities of environment. The
good strategic management will bring to the company more opportunities and
superiority in competition.
Strategic management is special important for the existence of the enterprise.
- The process of strategic management helps enterprise see its objective and
direction. The determination of objective and direction will help the leaders and
employees know, get a good hold of needed things and what to do to be successful.
Having direction, objective, the leaders of enterprise will be easier in setting up and
implementing the short-term plans. Strategic management will help the enterprise
knows its position and how many objectives gained compared to those proposed
initially.
- Every organization operates within its own environment, it is similar to that
of an enterprise. The business environment always change. Such variation will

create new changes and risks, especially sudden opportunities dangers when there

- 13 -


is a fast change in the environment. It is the matter that in an environment with full
of variations, the questions is how to make use of opportunities and minimize as
well as overcome risks. The enterprise managers can define beforehand
opportunities and risks thanks to the control/administration of strategy. The strategy
management process is always focussed on the future. This management forces the
enterprise managers to analyze and forecast the prospective environmenta
conditions. Thanks to this, the enterprise can figure out and predict the future to
grasp and make use of the opportunities on time as well as minimize impacts of
risks. The enterprises which apply the strategy management often have more
chances to obtain active position when facing with the business environment
changes. To the enterprises, on the contrary, those which do not apply the strategy
management, they will often make passive decisions, i.e. they only change their
activities after the change of business environment.
- Strategic management helps an enterprise implement the strategy in
accordance with plan to implement the target most effectively. Strategic
management will coordinate closely and uniformly the parts, the resources of
enterprise to reach the target. Strategic management will decrease the overlap of
work between departments, allocation of resources is more reasonable and check
and control of work is easier.
In short, nowadays, strategic management has become a really important part
of management activities of enterprise. If there is not strategic management and
strategy, the enterprise will have dispersed and overlapped operation, it is not in a
framework of action. Therefore the enterprise is difficult to have a long-term
existence to reach the target.
However, an enterprise will only successes if it has good strategic

management capacity. If the process of strategic management is not reasonable, the
enterprise will be able to go against the target and deviation of requirement of rules.
Nowadays, enterprises almost set up the strategy but have not paid attention to
the implementation of strategy. Strategy planning is the most important stage of
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strategic management, but if the enterprises don’t implement the strategy well, the
strategy will be only the result on paper.
On the other hand, to set up the process of strategic management, the
enterprise needs a lot of time and effort. But with regard to long-term benefit,
enterprise must still apply strategic management.

1.1.2.3. The process of strategic management
We can have the overview of the process of strategic management according to
the following diagram:

Setting up & implementing
more short-term planning

Analyzing and forecasting
external business environment

Researching
business
philosophy,
objectives &
tasks

Reviewing

objectives

Deciding
strategy

Analyzing & forecasting
internal business environment

Forming strategy

Allocating
resources

Checking,
evaluating &
adjusting

Setting up
policies

Organization of
implementing
strategy

Evaluating,
adjusting strategy

Diagram 1.1: The process of general strategic management
1.1.3. Strategy planning
Strategy planning is the process that uses reasonable methods, tools and technic to

determine the business strategy of enterprise and each department of enterprise in
specific strategy period.

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1.2. The process of planning the strategy
We can have the overview of strategy operation of an enterprise according to the
following diagram:

1

3

Analyzing
Analyzing &
&
forecasting
forecasting external
external
environment
environment of
of
enterprise
enterprise

Analyzing
Analyzing &
&
forecasting

forecasting internal
internal
environment
environment of
of
enterprise
enterprise

Collecting
Collecting results
results of
of
analysis
analysis &
& forecast
forecast of
of
external
external environment
environment

2

4

Forming
Forming
strategical
strategical
options

options

Collecting
Collecting results
results of
of
analysis
analysis &
& forecast
forecast
of
of internal
internal
environment
environment

Vision,
Vision, mission
mission of
of
company
company

6

Determi
Determi
ning
ning
tasks

tasks to
to
impleme
impleme
nt
nt the
the
strategy
strategy

Decidin
Decidin
gg to
to
choose
choose
optimal
optimal
strategy
strategy

7

8

5

Diagram 1.2: Diagram of the process of planning strategy
1.2.1 Vision, mission and strategic objective of the company
1.2.1.1 Vision: Vision suggests a direction for the future, a desire of the

organization on the things that the organization wants to reach. Vision is an image,
a vivid picture on things that may happen in the future of the organization.
Determining the vision is important in the success of the organization because it
defines the direction, show the priorities, necessary co-operations and it is the basis
for planning and effective operation.
1.2.1.2 Mission: Each enterprise establishes with a mission. Mission of enterprise
answers to the question: Why is the enterprise established, what is its long-term
target? What does the enterprise do to exist and develop? When the mission of the
enterprise is clear, members of the enterprise will be easier to have the decision of
what to do and how to do to the right direction and implement the mission with their
enterprise. When the staffs understand the mission of enterprise, they will believe

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more in the business direction of them and their enterprise, they will see clearly the
meaning of work that they have made.
It is a paradox that there are many enterprises who have been cooperative for
their development in the beginning difficult time of establishment but such
cooperation are broken up swiftly when they temporarily gain some stability in their
business operation. This matter can only be interpreted as the result of the unclear
determination of long-term mission of enterprise founding members. It is also can
be understood that in the initial time of the enterprise foundation, all members
strived their best because they were afraid of the enterprise bankruptcy, but when
the business is running rather stably, it is very difficult to assemble forces. The
targets/objectives of an enterprise is much more important than money as money is
only a tool. An enterprise can only have the everlasting development when a clear
mission for a long-term and great goal is set out.
Determination of the vision and mission is the first content that is very
important in strategic management, it makes the scientific basis for the analysis and

selection of strategy of the company. Determination of mission statement of the
company is not only for new companies, but also for companies that have long-term
development in the business.
1.2.1.3 Determination of strategic objective
Objectives are the states, specific criteria that enterprise wants to reach in a
fixed period. Determination of objective is a very important step in setting up the
strategy. Because right determination of strategy will allow to direct rightly
strategic activities, it determines next steps of setting up and implementing strategy
stages. Objectives are also the bases for evaluation and adjustment of strategy.
* Strategic objectives system of enterprise are often divided into two types:
long-term and short-term objectives.
- Long-term objectives are expected results that are proposed for relative
long time. Long-term objectives are the concretization of supreme objective
(mission) of enterprise, they are often determined according to following factors:

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Profits
Labor capacity
Competitive position (market share)
Employment for employees
Other responsibilities for society
- Short-term objectives are specific results that enterprise plans to reach in
short period (often one year). Short-term must be specific, target results have to
mention in detail.
* Bases for determination of strategic objective:
- Mission of enterprise: because objective is the concretization of
mission, implementation of objective is implementation of mission step by
step

- Results of the process of research and forecast
- Enterprise issues.
Enterprise issues are contradictions that appear during the operation of
enterprise and they require enterprise to resolve for the existence and development
of itself.
Issues can give threats and opportunities for an enterprise. In the activities of
enterprise, there are many issues that exist together. Thus, enterprise has to
determine the priority issue. Enterprise selects the issue on the basis of importance
and urgency. Selected issue is an important phase of enterprise and the basis for
enterprise to determine objectives, solutions and strategic tools. Because after all,
strategy is to resolve issues for existence and development of organization.
* For determination of right objective, we have to satisfy these following
requirements:
- Strategic objective has oriented to the implementation of supreme objective
(mission) of enterprise.
- Strategic objective that are selected is great, long-term objectives but they
must be specific, ensure the flexibility and quantified.

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- Proposal objective must be ensured by specific material resource of
enterprise.

- Objectives have to be reasonable, united to each other and high feasible.
1.2.2 Analyzing and forecasting the business environment
Business environment is the total of factors, external and internal factors
have interaction to each other, impact directly and indirectly to the production and
business of the enterprise. Business environment fluctuates incessantly because the
factors that form the business environment always fluctuate. Analysis of business

environment is the important mission of enterprise to identify and respond
immediately to those changes, and help the enterprise has positive strategies with
the changes of business environment.
1.2.2.1 International economic environment
International environment includes all factors that are out of national borders
impact on business of enterprise directly and indirectly. Factors of international
environment includes: international politics, national law, international economy,
technical- technological factors and cultural- social factors.
The international politics impacts on the following aspects:
- Political relations form in the world and in regions such as: the problems of
globalization, formation, expansion or break of the treaty of the multipartite and
bipartite alliance, etc., These relations impact on the production and business of
enterprise. Example with the integration, if the impact is positive, it will help to
expand the market, increase the attraction of investment, improve the position in the
world; if the impact is negative, it will create the intense competition between
countries in all over the world.
- The change of political institutions of a country will affect the business
relation between the enterprises of other countries and the ones of that country.
- War occurred to have strong influence on business of enterprises of
relevant countries. The war in Iraq in the past time is a clear evidence of the effect

- 19 -


of war on the economy and business strategy as well as export strategy of relevant
countries.
Regulations of national law, international law and practices.
- The impact of national law. Law of each country is the basis to set up the
business environment of the country. The enterprises have to comply with the law
of the country in which they do the business. Therefore, when the law changes, the

enterprises will be affected. And so, stabilizing the national law will make the
enterprises feel secure to do the business and attract the investment of other
countries in the world.
- The impact of international law and practices. This factor affects the world
and regions. For example, when Vietnam became a member of ASEAN of WTO,
Vietnam has to comply with the regulations of ASEAN of WTO.
The factor of international economy, it is performed by the following factors:
- The level of prosperity of international economy is performed by the norms
of GDP, economic growth pace, per capita national income. When the economy
develops, demand of goods tends to increase, so it stimulates the production, etc.,
- Region and world economic crisis. This crisis is linked so it impacts on the
world economy and thereby it affects each enterprise (investment capital,
consumption of products…). However, the effect more or less depends on the
nature of the crisis.
- Changes in the international business relations create both opportunities
and dangers for enterprises. For example, the tariff after signing the Vietnam –
American commercial agreement gives enterprises the opportunities to participate in
the U.S market but also gives the danger of fierce competition with U.S goods.
The technical – technological factors. The technical – technological factors
play an important role in improvement of ability of competition of enterprise and
the changes of those factors are linked. Advanced technology may affect other
technologies or may contribute to create new products or may improve the ability of
competition of existing products, etc.,

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Cultural – social factors. Cultural – social factors includes national cultural
character, manners and customs, consumption habit, taste, etc., National culture
impacts directly on the formation of taste, consumption habit (such as the

Vietnamese culture is burning votive paper on the fifteenth day and the first day of
the month and it made the product of votive paper). Because each country has a
particular culture so the establishment of business relations between countries must
comply with the culture of each country.
1.2.2.2 National economy environment
National economy environment includes all the factors of national economy
that are out of competitive environment of internal sector impact the business of
enterprise directly or indirectly [9, Page 67]. National economy environment
includes the factors such as: economy, law, state management of economy,
technical – technological factors, cultural – social factors and natural factor.
Economic factor. The factors of economic environment such as: speed of
growth of economy, interest rate, exchange rate and inflation rate affect the market
strategy of enterprise.
- The speed of growth of economy. The speed of growth of economy that has
difference in different periods affects the consumption. The economy in the period
of high growth will give many opportunities for investment, expanse of production
and business of enterprise and the market strategy of enterprise will change in
accordance with reasonable direction. Conversely, when the economy falls down
and degrades, it will make to reduce the consumption cost and increase competitive
forces and market planning will meet difficulties.
- Interest rate. The level of interest rate will decide the consumption, saving
and investment. When the interest rate increases, investment will decrease, people
tend to save and consume less for unnecessary goods, so the market strategy of the
company will change because it can’t expand the market when the consumption
becomes to decrease.

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- Exchange rate. Exchange rate affects the export and import activities of the

company directly and then brings out the adjustment on the market strategy of the
company: the decision of choosing the market for investment when the exchange
rate changes.
- Inflation rate. When the inflation rate is high, the control of prices and
wages can not be done, investment projects become more risky and venturous and
the investment strategy for market is limited.
Law and State management of economy factors
- Law factor. Promulgation of quality legal system creates good conditions
for sound business, compels enterprises have to do the business genuinely and
responsibly. If the legal system is not quality, it will impact on the business
environment negatively.
- State management of economy. Forecast of the market, investment
activities, giving the sound work environment, tax policies, investment policies,
etc., of the State management agencies will impact on the production and business
of enterprise directly. The impact will be good if the quality of activities of the State
management agencies of economy good and vice versa.
Technical – technological factors. The rapid development of all technical –
technological sectors impact on the business activities of relevant enterprises
directly. This impact is according to various aspects as follows:
- This impact creates new business sectors, so the trend of setting up strategy
forms a new business.
- This impact improves the business sectors, products, therefore
establishment of quality orientation strategy, business stability.
- This impact loses many sectors, stagger the sector of production and
business, establishment of the strategy of consolidation and defense.
The development of technology also associates with information technology,
therefore, improvement of the ability of approach and update of information will
contribute to improve the efficiency of management and business.

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Cultural – social factors. Compared with other factors, cultural – social
factors impact on the activities of production and business slowly and deeply. It is
performed as follows:
- Changes of manners and customs, lifestyle: the trend of import of new
lifestyle impacts on the changes of product structure, therefore it impacts on the
demand on the market and impacts on the process of establishment of strategy.
- Religion, belief: impact on traditional businesses.
- Age, sex: impact on consumption taste and habit.
Besides, cultural and social factors also impact on the establishment of
cultural environment of enterprise.
Natural factors. Natural factors impact on the enterprises in both aspects
positive and negative aspects. It is performed as follows:
- Natural resources impact on the input factors of enterprises which use the
natural resources.
- Geographic conditions: topographic, geological, climate conditions, etc.,
impact on the sectors of product and business that base on environment (such as
agriculture, forestry, seafood, etc.,)
The changes of season impact on the production of seasonal products and
since then they impact on setting up the strategy for seasonal enterprises, etc.,
1.2.2.3 Competitive environment of internal sector
Competitive environment of internal sector includes all the factors that
belong to the sector and are out of enterprise impact on business activities of
enterprise directly or indirectly.
An enterprise that participate in production of a sector that has been affected
by 5 competitive pressures according to model of 5 forces of M. Porter.

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New competitors

Suppliers

Enterprises and
competitors of internal
sector

Customers

Replaced products

Diagram 1.3: Five competitive pressures in the environment of sector by M. Porter
* The existing competitors: The competitors of internal sector are other
enterprises that have been done the business the sector and market area (division
market) as ones of enterprise. This is the frequent pressure and threatens directly to
an enterprise. The competition of existing companies of internal sector on market
has a strong influence on the establishment of market strategy of an enterprise.
Therefore, the analysis of existing competitors, particularly the competitive strength
and the analysis of immediate competitors is one of important work that helps an
enterprise set up the strategy successfully.
Competitive strength: Competitive strength often depends on following
factors:
- Quantity and structure of competitors: In internal sector, if there are many
competitors, the competitive strength is high, and as usual, one or several
competitors will have the leader position in the sector among the competitors, it will
control the strategies of smaller competitors. Because it will have great influence to
the strategy of company so the analysis of strategy, direction of internal competitors
will help an enterprise have the direction for itself.

- The difference of competitors: this factor will help the enterprise find out
the difference to competitors and therefore it may have the different strategy to
competitors and will gain initiative in the business.

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