BUILDING BUSINESS DEVELOPMENT STRATEGY OF SONG DA THANG LONG JOINT STOCK COMPANY

THESIS MBA
BUILDING BUSINESS DEVELOPMENT STRATEGY OF SONG DA THANG LONG JOINT STOCK COMPANY

Group No.: 03
Student’s name:

Trinh Thanh Hung
Vu Viet Son
Cao Tung Lam
Le Thi Tuyen

Ha Noi, 2010


Acknowledgement
First of all, the group of authors would like to express our deep gratitude to: The
lecturers of the MBA training program of United State Griggs University - who
provide knowledge; Managers and staff of the Centre for Educational Technology
and Career Development - Hanoi National University(ETC)-who are enthusiastic
and indispensable helpers in the process of learning;
The authors would also like to thank the Managers and staff of Song Da – Thang
Long Joint Stock Company- who are main supporters in the process of studying
about the situation of the enterprise and create the opportunity, finance, provide the
support of time so that members of the group can join and complete the training
course.
Finally, we would like to send the most sincere thanks to families, colleagues and
classmates -who are the solid basis of spirit for members of the group during the
participation of Griggs University MBA program and the process of completing
major assignment Capstone Project "Building business development strategy of
Song Da – Thang Long Joint Stock Company for the period 2010-2015"
We also wish to thank all the Lecturers and Administrative staff of Grigg

University, Global Advanced Master of Business Administration Program for
assistance and kindness throughout the process of MBA program.


TABLE OF CONTENT
No.

Page

1.
2.
3.
4.
Chapter I
1.1

INTRODUCTION
The reason for topic selection
Purposes and scope of the study
Conducted methods
Exercise’s structure
THEORY BASIS
OVERVIEW OF STRATEGY AND STRATEGIC

1
1
2-3
3
3-4
5

5

1.1.1
1.1.2

MANAGEMENT
Concept of strategy and strategic management
Role and significance of strategy and strategic

5-6
6-8

1.2
1.2.1
1.2.2
1.2.2.1
1.2.2.2
1.2.3
1.3

management
CONTENT OF STRATEGIC MANAGEMENT
The enterprise’s vision and mission determination
External environment analysis
Macro-environment analysis
Environmental analysis of industry
Internal environment analysis
STRATEGY CONSTRUCTION, SELECTION AND

IMPLEMENTATION

1.3.1
Information collection and systematization phase
1.3.1.1
EFE matrix
1.3.1.2
Competitive profile matrix
1.3.1.3
IFE matrix
1.3.2
Co-ordination phase
1.3.2.1
SWOT matrix
1.3.2.2
SPACE matrix
1.3.2.3
Grand strategy matrix
1.3.3
Decision phase
1.4
CHAPTER CONCLUSION
CHAPTER ANALYSING CURRENT SITUATION AND
II

8-9
9-10
10
10-12
12-13
14
14-15

15
15
16
16
17
17
17-19
19
19-20
20
21

MAKING BUSINESS DEVELOPMENT STRATEGY
FOR SONG ĐA - THANG LONG JOINT STOCK

2.1

COMPANY IN 2010 – 2015 PERIOD
OVERVIEW OF SONG DA–THANG LONG JOINT
STOCK COMPANY

21


2.1.1
2.1.2
2.1.3

The company’s formation and development history
Major information of the company

The company’s organizational structure and management

21-22
22-23
24-25

2.1.4
2.1.5
2.1.6
2.2
2.2.1
2.2.1.1
2.2.1.2
2.2.1.3
2.2.1.4
2.2.1.5
2.2.2
2.2.2.1
2.2.2.2
2.2.2.3
2.2.2.4
2.2.2.5
2.2.2.6
2.2.3

machinery
The company’s human resource structure
Operating result form 2007 to 2009
Mission and vision confirm
EXTERNAL ENVIRONMENT ANALYSIS

Macro-environmental analysis
Political environment: (P)
Economic environment: (E)
Cultural and social environment: (S)
Technological environment: (T)
Globalization trend
Analysis of industry environment
The potential competitors
The current competitors
The customer’s power
The supplier’s power
Substitution product
The industry’s development prospect
Evaluating opportunities and challenges of Song Da –

25-26
27
27-28
28
28
28-29
29-30
31-32
32
32-33
33
34
34-35
35
36

36
36-39
39

2.2.3.1
2.2.3.2
2.2.3.3

Thang Long
Opportunities and opportunity ranking
Challenges and challenge ranking
External factor evaluation (EFE) matrix of Song Da –

39-41
41-44
44-45

2.2.3.4
2.3
2.3.1
2.3.2
2.3.3
2.3.4
2.3.5
2.3.6
2.3.7
2.3.7.1
2.3.7.2
2.3.8

Thang Long
Competitive profile matrix of Song Da – Thang Long
INTERNAL ENVIRONMENT ANALYSIS
The company’s strengthes
Equipment resource, infrastructure
The company’s position in industry
Technological level
Main material management
Production cost management
The status of product/service quality control
Applying quality control system
Quality control work
The quality of big works which have been constructed by

45-48
49
49-53
53-56
56-57
57-58
58-60
61-63
63
64
65-66
66-68

2.3.9

the company

Trademarks, patent and copyright

69-70


2.3.10

Synthesis of SONG DA - THANG LONG internal

2.3.11

environment analysis
Internal factor evaluation (IFE) matrix of Song Da –

2.4

Thang Long
MAKING PRODUCTION AND BUSINESS

70
70-71
72

STRATEGIES AND SELLECTING THE OPTIMUM
2.4.1
2.4.2

STRATEGY FOR SONG DA – THANG LONG
SWOT synthesis matrix
The optimum strategy selection for Song Da – Thang

Long
CHAPTER CONTENTS OF SELECTED STRATEGIES.

72-75
76-78
79

III

STRATEGIC SOLUTIONS AND PLANS OF

3.1
3.1.1
3.1.1.1
3.1.1.2
3.1.2
3.1.3
3.2

IMPLEMENTATION
COST-LEADERSHIP STRATEGY
The content of strategy
Short-term goals by 2015
Long-term goals
Strategic solution
Plans of implementation
STRATEGY FOCUSING ON EXPLOITING

79

79
79-82
83
83-85
85-87
88

3.2.1
3.2.1.1
3.2.1.2
3.2.2
3.2.3
3.3

STRATEGIC CUSTOMERS
The content of strategy
Short-term goals by 2015
Long-term goals
Strategic solution
Plans of implementation
SOME PETITIONS TO ORGANIZE AND

88
88-90
90-91
91-92
92-94
95-96

3.4

IMPLEMENT STRATEGIES SUCCESSFULLY
SHORTCOMINGS OF THE BIG EXERCISE
CONCLUSION
REFERENCES

96
97-98
99


LIST OF ABBREVIATIONS
In this document, abbreviations are understood as follows:
SONG DA – THANG LONG
HBC

Song Da – Thang Long Joint Stock Company
Hoa Binh Real Estate Construction and Trading Joint

NTL
SJS

Stock Company
Tu Liem Urban Development Joint Stock Company
Song Da Urban and Industrial Zone Investment Joint

IFE
EFE

Stock Company

Internal Factor Evaluation
External Factor Evaluation

LIST OF FIGURES
Figure 1. 1:
Figure 1. 2
Figure 1. 2
Figure 2.1
Figure 2. 2
Figure 2. 3
Figure 2. 3
Figure 2. 4
Figure 2. 5

The strategic management process
Model of five competitive forces created by M. Porter
Diagram of main and support activities
Song Da – Thang Long’s organizational structure chart
The company’s qualification level structure
Model of PETS analysis
Model of five competitive forces by M.Porter
AFAQ Certificantion
SWOT matrix for SONG DA - THANG LONG

Page
6
13
14
24
26

28
33
64
74


LIST OF TABLE
Page
17
18
19
25

Table 1.1:
Table1. 2:
Table 1.3:
Table 2.1:

SWOT Matrix
SPACE Matrix
Grand strategy matrix
Human resource situation in the company by December

Table 2.2:

31st, 2009
Operating result form 2007 to 2009 of SONG DA -

27

Table 2.3:

THANG LONG
Forecasted GDP growth rate of regions and countries in

30

Table 2.4:

2009 and 2010 compared to the one in recent years
Evaluating the impact of opportunities for SONG DA -

40

Table 2.5:

THANG LONG
Impact assessment of challenge to SONG DA - THANG

42

Table 2.6:

LONG
Summary of opportunities and challenges for SONG DA

43

Table 2.7:
Table 2.8:

Table 2.9:

- THANG LONG
Matrix to assess external factors
Competitive profile matrix of Song Da – Thang Long
The company’s capital and asset status from 2008 to

44
47
50

Table 2.10:

2009
The report of business operating result from 2008 to

52

Table 2.11:
Table 2.12:

2009
Song Da – Thang Long’s major equipment resource
Some partners normally selected by the Company to

54
58

Table 2.13:
Table 2.14:

construction the projects
List of some main material suppliers of the Company
Cost structure of the Company in comparison with other

59
61

Table 2.15:

enterprises in the same industry in 2009
Some key works that have been constructed by the

68

Table 2.16:
Table 2.17:

Company
Strengths, weaknesses of SONG DA - THANG LONG
Internal factor evaluation (IFE) matrix of Song Da –

71
72

Table 2.18:

Thang Long
GREAT model selecting optimal strategy SONG DA -

78

THANG LONG


Table 3.1:

The company’s expected operating result in 20010-2015

82

Table 3.2:

period
Implementation plans concerning cost-leadership

87

Table 3.3:
Table 3.4:

strategy
The company’s project and total investment
The plan on implementation of strategy focusing on

89
94

exploiting strategic customers

INSTRODUCTION
1. The reason for topic selection:
In the context of globalization and Vietnam’s access to the World Trade
Organization in particular, the global economy’s changes will directly effect on
Vietnamese economy for sure. That is more confirmed after financial crisis
happenned in the United States. Each case obviously consists of positive and
negative aspects, as a result, from this financial crisis, we have condition to review
the economy’s strengh as well as weakness thereby find out our appropriate way
and create condition for steady development in the future.
With developing countries, construction industry is always considered as one of the
key economic industries playing special important role in economic and social
development career, in particular in national industrialization and modernization
period.
With market economy, competitive laws exist at any sector and business line and
construction industry is not naturally out of such laws, therefore, organizations have
to find out their own way, make detailed and appropriate business strategy to exist
and develop steadily.
The forerunner of Song Da - Thang Long Joint Stock Comany (SONG DA –
THANG LONG) is a branch of Song Da Investment and Development Joint Stock
Company founded in June, 2005 operating in the field of investment, business and
development of housing services, urban areas, medium and small hydroelectric
work, civil and industrial work construction and erection and so on. In September,
2006 Song Da Investment and Development Joint Stock Company sold this branch
to Song Da 1 One Member State-owned Company Limited and became a branch of
Song Da 1 One Member State-owned Company Limited at Hanoi.
On December 5th, 2006 Song Da – Thang Long Joint Stock Company was officially
founded under business license no. 0103014906 dated December 5th, 2006 by

1

Hanoi Department of Planning and Investment with business line of investing and
providing housing services, urban areas; trading medium and small hydroelectric
work, constructing civil, industrial, traffic and hydroelectric ect work with
registered capital of VND 25.000.000.000. The company repurchased total the
brand of Song Da 1 One Member State-owned Company Limited at Hanoi.
On December 6th, 2006, the company carried out general shareholders meeting and
agreed to adopt adjustment on the first registered capital from VND 25 billion to
Vnd 40 billion and finished collecting equity share capital before December 20 th,
2006. On December 20th, 2006, it completed capital contribution for company
foundation with total quantity of 171 shareholders and total equity capital of Vnd 40
billion. As a result, it carried out changing business license of increasing registered
capital to Vnd 40 billion (According to business license changed for the first time
on September 29th, 2006).
With international and national economic changes, the most important matter for
SONG DA - THANG LONG now is to plan overall development strategy for all
production and business activities aiming at competing and dominating market
share against foreign and domestic businesses to meet growth targets in all aspects
in 2010-2015 period, creating condition for steady development in the incoming
years. This is the reason why the group of authors selects the topic “Making
development strategy for Song Da – Thang Long Joint Stock Company for the
period 2010 – 2015”.
2. Purposes and scope of the study:
Purposes: Studying the basis of making strategy, procedure of making strategy and
the way of making the right choice for optimum strategy aiming at helping SONG
DA - THANG LONG to determine its most reasonable production and business
strategy in current condition and situation thereby, presenting proposals and
solutions aiming at improving process of making production and business strategy

2


for SONG DA - THANG LONG in current condition together with planning
implementation schedule for selected strategy from 2010 to 2015.
Scope of study: Getting in close contact with analysis, construction, selection,
solution and implementation schedule of production and business strategy for
SONG DA - THANG LONG for the period 2010 – 2015
3. Conducted methods:
Qualitative method: Studying cases of SONG DA - THANG LONG
Detailed study method: Analysing, comparing and summarizing data based on
figures: Primary and secondary
Data collection method: Basing on data released in public media and capacity
introduction document of SONG DA - THANG LONG.
4. Exercise’s structure:
The exercise consists of introduction part and 03 chapters. The main content of each
chapter is presented as follows:
CHAPTER I : THEORY BASIS
- Overview of strategy and strategic management.
- Content of strategic management.
- Strategic construction, selection and implementation.
- Conclusion.
CHAPTER II: ANALYSING CURRENT SITUATION AND MAKING
DEVELOPMENT STRATEGY FOR THANG LONG - SONG ĐA JOINT
STOCK COMPANY IN 2010 – 2015 PERIOD
- External environment analysis
- Internal environment analysis

3

- Production and Business strategies and optimum strategy selection for SONG DA
- THANG LONG.
CHAPTER III: CONTENTS OF SELECTED STRATEGY, STRATEGIC
SOLUTION AND PLAN OF OPERATION.
- Cost leadership strategy.
- Strategy of concentrating on strategic customers.
- Limitations of big exercise
- Orientation of continuous study.
- Conclusion.

4


CHAPTER I
THEORY BASIS
1.1. OVERVIEW OF STRATEGY AND STRATEGIC MANAGEMENT:
1.1.1. Concept of strategy and strategic management:
Concept of strategy:
1. Strategy is a process of determining long-term basic targets of a business,
selecting method or guidelines for action and distributing essential resources
to achieve such targets. (Alfred Chander)
2. Strategy is a format or a plan of coordinating main targets, policies and
action order into united whole. (James B. Quinn)
3. Strategy is a unified, comprehensive and coordinative plan made to ensure
that the company’s major targets will be reached (William J. Glueck)
4. Strategy, Michael L. Porter, the Father of competitive theory thought that:
• Firstly, strategy is to create valuable and original position consisting of
different operation.
• Secondly, strategy is selection and swap in competition.

• Thirdly, strategy is to create coherence among all activities of a
company.
In conclusion, strategy firstly involves in a business’s targets. Secondly, it is a
method to perform actions and decisions which are closely involved in each other
and select method of coordinating such actions and decisions (Strategy of a
company must make full use of major advantages and capacity as well as foresee
external environment’s opportunities and challenges).

5


Concept of strategic management:
Strategic management is a process of studying, analyzing external and internal
environment of a company at present as well as in the future, determining the
company’s targets, planning, implementing and examining the strategy aiming at
using efficiently resources to achieve expected targets

Strategic
Input

Figure 1.1 The strategic management process
Internal
environment

External
environment

Strategic Intent
Strategic
Mission

Strategy Implement

Strategic
action

Strategy Formulation

Strategic
result

The Strategic
Management
Process

Business-Level
Strategy

Competitve
Dynamics

Corporatelevel Strategy

Corporate
Governance

Structure
and Control

Acquisitions

&
restructuring

International
strategy

Cooperative
strategy

Strategy
Leadership

Enterpreneurs
hip $
Innovation

Feedback

Strategic
Competitiveness
Above average
profit

(Source: Strategic management textbook - Griggs University)
1.1.2. Role and significance of strategy and strategic management:
Strategy helps economic organizations to be keener and more dynamic with the
market’s forecast and changes, thereby they can make reasonable decisions and
control their operation to enhance corporate competitive strength and step by step
ensure the company’s powerful position in the market mechanism.

6


A company’s strategy can be considered as “guiding outlines" in a business’s
operation and the destination of all members to strive for reaching to: That is a
method of optimum coordination of material resource with immaterial resource
aiming at achieving proposed targets.
Strategy is expression of business value concept: All businesses have difference and
their own mark in their strategic operation. That typical style tells value concept,
ambitious spirit and managing role of the leaders to meet targets proposed by the
strategy.
Strategy helps leaders of companies to have clear orientation and vision in the
future: Strategy is the basis for business managers to make decisions which are
proper, timely and even create break-through in their firms. It is an instrument to
make use of and determine the strength to promote and the weakness to overcome,
to take full advantages of opportunities and cope with challenges and threats to
gradually build up the company’s position.
Strategy is creation in business management: Management is a process, strategy is a
period. Basing on targets set by a firm and method and manner of handling
problems which are harmonious and flexibly combined in accordance with reality
of the firm to create competitive advantages for company forward the final target
which is expected value optimization.
Strategy is expression of a company’s competitive position: Thereby an
entrepreneur established a method of coordinating of internal strength with external
opportunity to overcome weakness and avoid hidden risks. They are corporate
competitive ability, ability of dominating market, maintaining market segment
against competitors and ability of creating significant pressure to competitors.
Michael Porter said in "Competitive war" that "competitive strategy lies in
relationship between firm and its market"
Thank to such importance, business circle needs to make long-term business

strategy. This is essential to help company to be well-established in the market and

7


develop in the future. However, business environment always changes, so does
company’s resources in each strategic period, as a result, strategy of company must
be flexible and changeable in accordance with objective reality to ensure existence
and development
The company can select strategy under the rule of applying data analysis method
basing on factors in order arranged as follows:
1/ Resources of company
2/ Diversification of products.
3/ Product life cycle.
4/ Strategy of competitors.
5/ Market demand.
1.2. CONTENT OF STRATEGIC MANAGEMENT
Strategy is made on the basis of company’s mission. It is basis to set goals and what
should be done for customers as well as other involved partners.
Basing on this mission, leaders at all levels will decide to set goals. Such goals are
clear expression of organization’s mission and are used to make action plan and
assess process. They are guided by actual knowledge of both external marketing or
business environment and company’s internal capacity. In common, making
strategy starts with wide investigation and analysis and also making a process which
by it, leadership levels recognize top prioritized problems that organize needs to
deal with for succeeding in the long term.
Departments’ participation in planning strategy plays an important role because
they own plentiful knowledge of competitive environment in which their company
is operating in as well as good ability and can make lucid proposals on what should
be executed by organization. Moreover, departments involved in the process of

planning have more abilities of supporting and implementing proposed plans. The
major department is the strategy implementation centers because they have
hegemony, human resource and required skills to do well.

8


By gathering together to implement the process of planning, leadership level and
managers of departments ensure to make appropriate, coherent and feasible strategy
whether the strategy made by organization or department.
Implementing strategy relates to carrying work in accordance with the process of
the whole company. Leaders and managers at all levels must highly concentrate on
implementing strategy because even a perfect strategy will also become valueless if
it is not executed in the right way by organization managers.

1.2.1. The enterprise’s vision and mission determination:
Vision and mission point out destination in the future and long-term targets which
company aims at. They are basis to make short-term policy, strategy and business
strategy.
Vision determination is to define the position that the company expects to reach to.
Vision statement draws up the company’s future when it meets targets and
purposes. Vision statement must enable to determine the final destination of the
company.
To succeed, Davidson defined 6 essential factors which a vision must contain:
* Providing direction in the future
* Attaching much importance to the consumer’s benefit
* Be practical
* Creating motivation
* Being absolutely fully communicated
* Being always closely followed and assessed

Mission statement determines values and rules dominating company and is essential
part of the process of making strategic plan. The company’s mission is the reason
why it exists in the market and what product and services which the company brings
to customers and community. The decisions in the process of making strategic plan
must always harmonize with mission declaration.

9


Mission statement is the foundation of the company’s vision. Mission declaration or
can be motivator encouraging staff when sending the company’s purposes and value
to customer and community.

1.2.2. External environment analysis:
1.2.2.1 Macro-environmental analysis:
PEST model attaches importance to concentrating on studying factors of external
environment effecting on a company. They are:
+ Political
+ Economics
+ Sociocultural
+ Technological
These are four factors with direct effect on economic industries. They are external
factors of the company and industry and their influence on the company is objective
factor. Businesses rely on impacts to make appropriate business policies.
 Political factors:
These are factors with range of influence on all business line all over the territory.
Political factors can threaten existence and development of any industry. When
doing business under administrative unit, entrepreneur is compelled to abide by
political regulations at that area.
+ Stability: Institution with high stability will create good condition to do business

and vice versa.
+ Tax policy: Import and export tax policies, sales tax, income tax and so on will
impact on revenue, profit of a business.
+ Involved laws: Investment law, business law, labor law, antimonopoly law,
antidumping law and so on.
+ Policy: The state policies will impact on a business, they can produce profit or
challenges for a company such as trade policy, industry development policy,

10


economic development policy, competitive regulation policy, consumer protection
policy and so on.
 Economic factors:
Entrepreneur need to pay attention to both short-term and long-term economic
factors and the government’s interference in economy.
In common, businesses will base on economic factors to make decision on
investment in industries and sectors.
+ Economy situation: Any economy has it own cycle, in each certain period of economic
cycle, a company will make its own reasonable decision.
+ Factors effecting on economy: Interest rate, inflation etc
+ The government’s economic policies: Basic salary law, the government’s
economic development strategies, preferential policies for industries such as tax
reduction, subsidy and so on
+ Economic prospect in the future: The speed of growth, GDP growth, GDP ratio
on investment capital etc
 Sociocultural factors:
Each nation, each territory have their own typical cultural factors and social value.
These factors are characteristics of the consumer at such areas.
Social features also cause firms interested when doing market research Social

factors divides community into groups of customers, each group has different
features, psychology, income and so on:
+Average duration of life, health situation, nutritive regime and fare
+ Average income and distribution of income
+ Life style, knowledge, viewpoint of aesthetics and living psychology
+ Living condition

11


 Technological factors:
The whole world is in the technological revolution, series of new technologies
appear and are applied to products, services, in particular to the field of modern
information technology and communication technology
+ Investment from the government, businesses on R&D work: Combination
between businesses and the government aims at studying to produce new
technologies and material etc which will positively effect on economy.
+ Speed, cycle of technology, the rate of out-of-date technology:
+ Influence of information technology and internet business operation.
 Integrative factors:
No one disagrees that globalization is a trend and this trend induces opportunities as
well as challenges for businesses and nations in developing production and business
operation.
P.E.S.T model is now expanded into S.T.E.E.P.L.E matrix (Social/demographic,
Technological, Economics, Environmental, Policy, Legal, Ethical) and more and
more improved as an indispensable standard to apply research on external
environment of a company.
1.2.2.2. Environmental analysis of industry:
Environmental analysis of industry by the model of Michael Porter built with 5
impacts on a business or called as 5 competitive forces, they are:

 The power of the provider.
 The power of the customer.
 Hidden competitors.
 The threat from substitution product.
 Current competitors.

12


Barrgaining Power of suppliers

Figure 1.2: Model of five competitive forces created by M. Porter

POTENTIAL ENTRANT

Threat of new entrants

SUPPLIERS

Rivalry among
Existing firms

Bargaining Power of Buyers

INDUSTRY COMPETITORS

BUYERS

(Source:
management

textbook - Griggs University)
ThreatStrategic
of substitute
products/services
services
SUBSTITUTES

13


1.2.3. Internal environment analysis:
Internal situation of a business is regularly assessed by functional sectors such as
finance, human resource, management, organizational structure, marketing;
research/development and information technology.
Figure 1.3:Diagram of main and support activities

(Source: Strategic management textbook - Griggs University)
Corporate internal analysis will allow us to realize strenghs (S) and
weaknesses (W) of an entrepreneur. Thereby, selected business strategy need to
promote maximally strengths and deal with weaknesses of the company.
Similar to techniques applied to analyse external factors, aiming at quantification
for analysis of the company’s internal situation, “ internal factor assessment
matrix” (IFE).

1.3. STRATEGY CONSTRUCTION, SELECTION AND IMPLEMENTATION
There are 3 phases to create a business strategy and each phase uses different
instrument .
Phase 1: Information collection and systematization phase
This phase summarizes collected basic information and systematizes to form
business strategy. It use 3 instruments: EFE matrix, competitive image matrix and

14


IFE matrix.
Phase 2: Coordination phase
This phase selects, arrange and coordinates external environmental factors with
internal factors to make feasible strategy. It uses matrix instrument: Strength –
Weakness – Opportunity – Challenge matrix (SWOT); strategic position and
action evaluation matrix (SPACE) and big strategy matrix.
Phase 3: Decision phase
This phase uses the only instrument which is quantitative strategy planning matrix
(QSPM). QSPM matrix uses information in phase 1 and objectively assesses
business strategies that can be chosen in phase 2 aiming at making decision of what
is the optimum strategy for company.
1.3.1 Information collection and systematization phase
1.3.1.1 EFE matrix
EFE matrix is established in the order of 5 following steps:
Step 1: Indexing factors playing a decisive role in the field which company is
doing business in, including both opportunity and challenge.
Step 2: Evaluating significance of each factor according to score band from 0,0 to
1,0 (significance increases score by score) with total score of factors equal to 1.
This significance relies on business industry in which company is operating.
Step 3: Giving mark from 1 to 4 to each factor with score telling the company’s
reaction level with such factor. Mark 4 is good reaction. Mark 3 is above average
reaction. Mark 2 is average reaction and mark 1 is little reaction.
Step 4: Determining total score for each factor (by product achieved in step 1 and
step 2).
Step 5: Determining total score about the company’s significance by total score
achieved in step 3.

15


The highest total score is 4 and the lowest one is 1. The average is the score of
2,5. The higher score, the better reaction from company with external factors.
1.3.1.2 Competitive profile matrix:
This matrix identifies a business’s major competitors. It is an expansion of EFE
matrix with factors’ significance level, score signification of each factor and
important total score at the same meaning.
Competitive profile matrix differs EFE matrix by the fact that: there are a few
internal factors with decisive significance which are also mentioned to compare.
Total score used to assess competitors will be compared with the firm chosen as an
sample.
1.3.1.3 IFE matrix
Establishment of IFE matrix also follows 5 steps:
- Indexing internal factors playing decisive role.
- Assessing significance of each factor according to score band from 0,0 to 1,0
(significance increases score by score) with total score of factors equal to 1. This
significance relies on significance of such factors with a business without
discriminating that this factor is strength or weakness of the business.
- Giving mark from 1 to 4 to each factor with score telling internal features of a
company with such factor. Mark 1 is the biggest weakness, mark 2 is the
shallowest weakness, mark 3 is the shallowest strength and mark 4 is the biggest
strengh.
- Determining total score of importance for each factor (by the product of scores
achieved in step 2 and step 3).
- Determining total score about significance of company (by the total score get
in step 4).
The highest total score is 4 and the lowest one is 1. The average is 2,5. The score of

importance below 2,5 shows that the company is weak inside and the mark over 2,5
shows that the company is strong inside.

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1.3.2 Co-ordination phase
1.3.2.1 SWOT matrix
SWOT matrix is a tool to form four strategies with the combination of Strengths
(S), Weaknesses (W), Opportunities (O), and Threats (T):
- SO Strategy: Using the internal strength of business to explore the opportunities
in the external environment.
- WO Strategy:

Taking advantages of external opportunities to improve the

internal weakness
- ST Strategy: Using the strength of business to avoid or to decrease the threatens
of external environment.
- WT Strategy: This is a defensive strategy to decrease the internal weakness and
external threatens.
SWOT matrix is illustrated by the following diagram:
Table 1.1 SWOT Matrix

S

O
Listing opportunities
T
Listing threatens

W

Listing the strengths

Listing the weaknesses

S-O Strategy

W-O Strategy

S-T Strategy

W-T Strategy

(Source: Strategic management textbook - Griggs University)
1.3.2.2 SPACE Matrix
SPACE matrix includes two internal factors: Finance Strength (FS) and
Competitive Advantages (CA); two external factors: Environmental Stability (ES)
and Industry Strength (IS)..
SPACE Matrix is established through these steps:
- Select a group of representative variables for FS, CA, ES and IS.

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