Formulation of business development strategies for song da 10 joint stock company in 2015 2020

THESIS MBA TITLE
Formulation of Business Development
Strategies for Song Da 10 Joint Stock
Company in 2015 - 2020

1


TABLES OF CONTENTS
LIST OF ABBREVIATIONS.........................................................................7
LIST OF FIGURE chart AND TABLE........................................................8
ASSERTION..................................................................................................10
ACKNOWLEDGEMENT............................................................................11
ABOUT THE AUTHORS............................................................................11
INTRODUCTION.........................................................................................12
I. Justification of the necessity of the capstone project........................................................12
II. Research objectives and applicability..............................................................................14
III. Scope of the research work............................................................................................14
IV. Approaches.....................................................................................................................15
V. Research methodology....................................................................................................15
VI. Structure.........................................................................................................................16

CHAPTER I - THEORETICAL BACKGROUND...................................17
I. Fundamental issues of strategy and modern business strategy.........................................17
1. Viewpoints about strategy.......................................................................................17
1.1.1. Typical features of a strategy............................................................................18
1.1.2. Types of business strategy.................................................................................19
1.1.2.1. Classification of business strategy by levels.........................................19
1.1.2.2. Classification of business strategies by content....................................20
1.1.2.3. Classification of business strategies by process....................................20
I. The role of business strategies in modern business environment.....................................21

1. Description of the formulation process of a strategy..............................................21
1.1.3. Identification of corporate mission and objectives...........................................22
1.1.3.1. Identification of corporate mission.......................................................22
1.1.3.2. Identification of strategic objectives.....................................................23
1.1.4. Analysis of business environment of a firm (external environment)................24

2


1.1.4.1. Impacts of external environment on business strategy..........................24
1.1.4.2. Evaluation of the environmental impacts..............................................28
1.1.5. Internal analysis of an enterprise.......................................................................28
1.1.5.1. Analysis of the value chain of an organization.....................................29
1.1.5.2. Analyses of financial situation..............................................................30
1.1.6. Strategy formulation and selection....................................................................31
1.1.7. Formulation of strategy by level.......................................................................33
1.1.7.1. Business strategy...................................................................................33
1.1.7.2. International business strategy..............................................................33

CHAPTER II – BUSINESS DEVELOPMENT STRATEGIC
PLANNING FOR SONG DA 10 JSC..........................................................35
I. An overview of Song Da 10 Joint Stock Company (SDT)...............................................35
1. History and development........................................................................................35
2. Development and achievements..............................................................................36
1.1.8. Organizational and management structure of the company..............................37
I. Analysis of corporate strategy and governance................................................................38
1. External environment analysis................................................................................38
1.1.8.1. Macro environment...............................................................................38

1.1.8.1.1. The economic environment.................................................38

1.1.8.1.2. Technological environment.................................................41
1.1.8.1.3. Social and cultural environment..........................................41
1.1.8.1.4. Political and legal environment...........................................42
1.1.8.1.5. Global environment.............................................................45
1.1.8.2. Analysis of sector environment ............................................................46

1.1.8.2.1. Overview of the construction sector in 2009......................46
1.1.8.2.2. Some issues regarding current underground construction in
Vietnam........................................................................................49
1.1.8.2.3. Summaries of opportunities and challenges for business
environment of tunnel construction............................................51
1.1.8.3. Five competitive forces.........................................................................53

1.1.8.3.1. Threat of current competitors..............................................53
1.1.8.3.2. Threat of new market entrants.............................................55
1.1.8.3.3. Company’s clients................................................................55

3


1.1.8.3.4. The company’s suppliers.....................................................59
1.1.8.3.5. Substitute products...............................................................59
1.1.8.4. External Factor Evaluation....................................................................60
1.1.9. Internal environment analysis...........................................................................62
1.1.9.1. Vision, mission statement, business principles and objectives of Song
Da 10 Joint Stock Company......................................................................62
1.1.9.2. Business performance results of the most recent three years................64

1

64

2

64

3

64

4

64

5

64

6

64

7

64

8

64

9

64

10 64
11 64
12 64
13 64
14 64
15 64
16 64
17 64
1.1.9.3. Analysis on some financial criteria.......................................................65
1.1.9.4. Key product and service analysis..........................................................68

1.1.9.4.1. Tunnel construction activities..............................................68

4


1.1.9.4.2. Dynamite drillings...............................................................71
1.1.9.4.3. Other activities.....................................................................73
1.1.9.5. The SDT stock price..............................................................................75
1.1.9.6. Labor policies........................................................................................79

1.1.9.6.1. Situation of human resource................................................79
1.1.9.6.2. Salary, bonus and allowance policy....................................80
1.1.9.6.3. Recruitment and human resources attraction policies........80
1.1.9.6.4. Training policy.....................................................................81
1.1.9.7. PR and Marketing activities..................................................................81

1.1.9.8. Technological equipment......................................................................82
1.1.9.9. Analyses of sustainable comparative advantages..................................82
1.1.9.10. Resources and potential competences.................................................83
1.1.9.11. Internal Factor Evaluation...................................................................89
1.1.10. SDT’s key business strategies using SWOT matrix........................................92

CHAPTER
III.
STRATEGIC
SOLUTIONS
AND
RECOMMENDATIONS..............................................................................98
I. Strategic solutions.............................................................................................................98
1. Strategic solutions...................................................................................................98
1.1.10.1. On the one hand, the mixed strategy is suitable with the company’s
current situation.......................................................................................100
1.1.10.2. On the other hand, this strategy well serves the new plan................100
1.1.10.3. Thirdly, this strategy is suitable with Song Da Corporation.............101
1. Objectives of the strategy......................................................................................101
1.1.11. Strategic solution implementation.................................................................102
1.1.11.1. Product restructuring strategy...........................................................102

1.1.11.1.1. Product restructuring.......................................................102
1.1.11.1.2. Main estimated criteria for 2010 – 2015.........................103
1.1.11.1.3. Background of profit generation.....................................104
1.1.11.2. Capital balancing strategy.................................................................105
1.1.11.3. Research and training strategy..........................................................106
1.1.11.4. Competition strategies.......................................................................107
1.1.11.5. International business strategy..........................................................110
1.1.11.6. Marketing Strategy............................................................................112

5


1.1.11.6.1. Marketing intelligence (MI)............................................112
1.1.11.6.2. Formulation of market dossiers and sales projection......112
1.1.11.6.3. Studies of customers’ behaviors......................................113
1.1.11.6.4. Market segmentation and location goal..........................113
1.1.11.6.5. Follow-up steps................................................................113
II. RECOMMENDATIONS...............................................................................................115
1. Improvement of the company structure................................................................115
1.1.12. Proper assessment and allocation of resources.............................................116
1.1.13. Improvement of the steering information system for the implementation of the
strategy......................................................................................................................116
1.1.13.1. Management information channel:....................................................116
1.1.13.2. Feedback channels:...........................................................................117
1.1.14. Strict inspection.............................................................................................117
1.1.15. Human resources attraction, staff training, recruitment and appointment of
quality personnel.......................................................................................................118
1.1.16. Technology renovation and investment........................................................118
1.1.17. Establish the company’s peculiarities...........................................................119
II. Obstacles in the course of the studies and future orientation........................................119
1. Measurements........................................................................................................119
1.1.18. Time for studies.............................................................................................120

CONCLUSION............................................................................................121
BIBLIOGRAPHY.......................................................................................122
I. Books..............................................................................................................................122
I. Other publications...........................................................................................................122
II. Websites.........................................................................................................................123

Appendix......................................................................................................123
I. Names and Responsibilities of Group's Members..........................................................123
I. List of other organizations and individuals, who joined in the research process ..........125
II. Organization structure of SDT......................................................................................128

6


LIST OF ABBREVIATIONS
SDT
SWOT
HASTC
HosE
US
BM
IT
GDP
SBU

Song Da 10 Joint Stock Company
Strengths, Weakness, Opportunities, Threats
Ha No Securities trading center
Ho Chi Minh Stock exchange
The United States
Board of Management
Information Technology
Gross Domestic Product
Strategic Business Unit

7


LIST OF FIGURE CHART AND TABLE
1. FIGURE
Figure 1.1 – Business strategy formulation procedure

23

Figure 1.2 – Michael Porter's model of five competitive forces

27

Figure 1.3 – Value chain of an organization

30

2. TABLE
Table 2.1 – Analysis of SWOT matrix

32

Table 2.2 – Changes in concentrated growth strategy

33

Table 2.3 – Changes in integrated growth strategy

33

Table 2.4 – Some major indicators in 2009 as against 2008

39

Table 2.5 –List of capital and market share of underground
construction companies in Vietnam as at 3/2010

55

Table 2.6– List of finished and under-construction works of SDT

57

Table 2.7- External Factor Evaluation (EFE)

62

Table 2.8 –Asset and financial statement of three most recent years

65

Table 2.9 – Key financial indicators of the most recent three years

67

Table 2.10– Finished hydroelectric works

70

Table 2.11 –Finished traffic works

73

Table 2.12– Finished hydraulic works

73

Table 2.13–Tangible resources

83

Table 2.14– Intangible resources

84

Table 2.15– Criteria to define core competencies

86

8


Table 2.16– Outcome of combination of SDT’s sustainable criteria

87

Table 2.17- Internal Factor Evaluation matrix

89

Table 2.18- Image competitive matrix

90

Table 2.19– SWOT matrix application for SDT

92

Table 2.20– Product structure in 2010 - 2015

101

Table 2.21–Main estimated criteria for 2010 - 2015

103

3. CHART
Chart 3.1 –Structure of SDT’s groups of activities

75

Chart 3.2–The illustration of price and trading volume of SDT shares in 3

76

recent years
Chart 3.3– The fluctuation of SDT stock price as compared with

77

MCV price in recent 3 years
Chart 3.4– The fluctuation of SDT stock price as compared with
HNX-index in recent 3 years

77

Chart 3.5–Number of employees by qualification level as at 12/2009

79

9


ASSERTION
We affirm that we reserve the sole ownership of the topic “Business development
strategic planning for Song Da 10 Joint Stock Company in 2010 – 2015”. Data of
the thesis was provided by Song Da 10.
Up to present, this is the first time this topic is studied. The members of the group
are not in any conflicts with company’s interest.
Hanoi, March 4th 2010

THE AUTHORS
Vũ Tuấn Hùng (Team Leader)
Phan Thị Quế
Lê Xuân Hải
Nguyễn Thị Cẩm Thơ

10

ACKNOWLEDGEMENT
We would like to thank Song Da 10 Joint Stock Company for your enthusiastic
support providing us data as well as arranging meetings with regard to the
company’s business strategy. Besides, we would like to sincerely thank professors
and PhDs who equipped us with corporate governance skills and knowledge
throughout the course. These are essential background for this study as well as
applicable experience for practical uses. We would also like to express our special
thanks to the Academic Board of Griggs University for your supervision during the
course of our research.
Finally, we are particularly thankful to the valuable tutoring from Madam Nguyen
Thi Tuyet Mai – PhD, Sir Pham Ngoc Thang- MA and Sir Sean Mc Gough – PhD
in our completion of this research work.

ABOUT THE AUTHORS

11


INTRODUCTION
I.

Justification of the necessity of the capstone project

2008 is a remarkable year of the post economic crisis period in Vietnam and all
over the world.

As part of the economic panorama, Vietnamese and world

construction industries have slowed down significantly due to tightened investment
flows and slumped material price that hinder and slacken many projects.

As 2009 comes to its end, total business transactions attained 123,437 billion VND,
which is 14.6% higher than the same period in 20081; there has been many ongoing
large projects and they are in the finishing phase since materials price has been on
the fall, interest rates has started to take effect and public investment and ODA
disbursement has been strengthened.
Nevertheless, many construction companies, especially those in basic construction,
have faced a number of difficulties in their operation as a result of the world
economic crisis. In particular, it is not as easy to approach and mobilize capital
sources for investment as before. Lack in capital has prevented many projects from
starting off and slacked off construction process. Moreover, operation in some
companies is inefficient and has not been able to fulfill management requirements
in new conditions when business areas are enlarged. Many key activities in the
industry like urban construction have yet been paid appropriate attention. At the
same time, investment attraction and project implementation are not carried out in a
professional manner. This has major impact on companies’ profit and other
economic objectives.

1

Ministry of Construction. (2010). Report on the implementation of 2009 plans; direction and key
tasks of the construction industry in 2010. Hanoi: Ministry of Construction gateway.

12


Song Da 10 Joint Stock Company which specializes in subterranean constructions
of Song Da Corporation has more than 30 years of developing and growing 2. The
company has run many underground construction projects and now has leading
market share in the industry. However, on investigating the company’s activities, it
has been found out that behind successful projects and positive profits in recent

years, there still exists insufficiency in the company’s activities which also occur in
other companies during post global economic crisis period. Moreover, the company
has not taken its full advantages to surpass other companies in the industry.
Financial results do not reflect the company’s existing potentials as well as key
business activities.
Following WTO membership and the integration and corporation trend with
regional and world organizations, construction companies have access to a variety
of modern modes and technologies. These modes have energized construction
companies’ developments. However, at the same time, they are disadvantages for
domestic companies in competing with foreign ones as barriers to competitive
advantages in such key industries like subterranean construction have gradually
shaken.
Under such circumstances, it is essential to seek and establish stable solutions and
business development strategies for underground construction companies. Effective
business development strategies not only trigger stable and sustainable development
as well as many other benefits for the company but they are also significant
contributions to the development of the industry and the country’s economy.
Keeping in mind the above rationales, the topic “Formulation of Business

Development Strategies for Song Da 10 Joint Stock Company in 2010 -

2

Song Da 10 Board of Management. (2010). Annual Report 2009. Hanoi.

13


2015” is selected for its significance to the company in particular and to the
construction industry in general.

II.

Research objectives and applicability

The research objective of the topic is practically meaningful. The research provides
an overview of activities and development direction of Song Da 10 Joint Stock
Company in the post financial crisis period as well as in the fierce competition
condition among construction companies. Particularly, significant attention is paid
on tunnel construction, an essential area in transportation and hydroelectric
infrastructure which are considered the locomotives of the country’s economy.
Therefore, the primary objects of this study are subterranean construction
companies, as well as individuals and organizations operating in this field.
The study will set out a panorama of the operations in Song Da 10 Joint Stock
Company in recent years, analyzes operational strategies, recommends some
solutions that help reorganize management structure, strengthen business strategy
and boost other operation strategies, aiming at strengthening the company in terms
of entrance barrier and the company’s value in the condition of post financial crisis
and growing fierce competition.
Besides, the topic is used as a reference for projects and other research on
management in construction industry and on operation efficiency of construction
companies over the last periods. The study also has theoretical value which is a new
sight into the company’s strategies and business management methods.
III.

Scope of the research work

Despite the many lessons on business performance of construction companies
drawn from the post financial crisis period, our research work, due to certain
constraints and obstacles, concentrates only on SDT’s business development

14


strategies, which are in central interest of its Board of Management and other
subterranean construction companies. Subsequently, the capstone project content is
adhered to studying the factors that affect SDT's sustainable growth from strategic
points of view and given the post financial crisis period.
IV.

Approaches

•

Conduct surveys and collect information for summary and analysis, using
logical approaches;

•

Hold field visits for assessment and comparative studies;

•

Conduct consultation with international experts on management of
construction companies and subterranean construction companies;

•

Organize interviews with domestic and foreign specialists, and the
Management construction companies to get their consultation ideas for
improvement of the capstone project's recommendations;

V.

Research methodology

In elaborating the whole capstone project, the dialectical and historical materialism
is utilized in combination with other approaches such as analysis, statistical work,
group survey, scientific abstractionism and illustrative models.
In analyzing the company's financial performance, cross-sectional and time-series
techniques, trend analysis, common-size statements and financial ratio analysis are
tapped.
In other analyses, five forces, SWOT models, and several other theoretical models
are to be presented in Chapter I and used.

15


VI.

Structure

This research includes three chapters. Chapter one presents the theoretical
background and new approaches of the capstone project. Chapter two is the core of
the whole paper. It provides an analysis and assessment of current performance of
SDT in view of the operations of the entire construction service. It also looks into
some issues of SDT's business strategies and governance, through which constraints
and the roots of such constraints can be identified. The last Chapter gives an overall
briefing of the research work, puts forth measures and recommendations, and points
out arising problems and obstacles that prevent the authors from fulfilling their
capstone project to the desired quality.

16


CHAPTER I - THEORETICAL BACKGROUND
I.
1.

Fundamental issues of strategy and modern business strategy
Viewpoints about strategy

From the traditional viewpoint of Michael Porter 3, a strategy can be defined as “the
study to identify the most suitable competitive position for an industry, and major
scope of activities where competition is present”. Strategy, according to him,
emphasizes the point of competition.
Alfred Chandler – a professor from Harvard University 4 has another idea.
“Strategy", in his view, "is to define long-term key goals of a company, action
programs and allocation of necessary resources to achieve those goals”. James
Quinn5 from Dartmouth University defines “Strategy as the model or plan of an
organization to integrate steering goals, corporate policies and priority order of
actions in a unified entity”.
William F. Gluek6 is of the view that “Strategy is a unified, comprehensive and
integrated plan designed to ensure a firm's achievement of its business targets”.
Planning-based strategy development approach is no longer in fashion. Practice
shows that detailed plans that are formulated formally sometimes fail, and
contingency plans, therefore, are needed in the business operations of a company. In
this regards, traditional viewpoints show certain weaknesses. Strategy, in its nature,

3

Porter,M.E. (1981). The contribution of Industrial Organization to Strategic Management. New York:
Wiley.
4

(June, 10,

2009)
5
6

Quinn, J., B. (1980). Strategy for change: Logical Inscrementalism; Homewood, Illinois, Irwin
Lawrence R. Jauch and William F. Gluek(1989) Business Policy and Strategic Management

17


is a science and a tactic in achieving targets. Such nature, however, is not
emphasized in the above viewpoints.
In such context, newer concepts of a strategy gradually replace the traditional ones.
Endeavors have been made to reflect the nature of the term "strategy" in these
concepts while ensuring its compatibility with the changing business environment.
With this approach, the modern concepts do not emphasize the projection and
planning aspects but rather the selection of strategies that respond to the targets set
out by an organization.
It is obviously uneasy to give a clear definition of a strategy. Yet this problem can
be solved if attention is paid to each strategy’s factors, which are meaningful for
any organization. In any circumstance, these factors depend strictly on the current
situation of each enterprise, member organization as well as organization structure.
It is necessary to separate the definition of a strategy and the strategy formulation
process in order to have a unified definition with the assumption that we had a

consistent strategy with goal, orientation and could face with changes in a
fluctuating environment.
1.1.1.

Typical features of a strategy

It can be seen that the concepts of a strategy are varied. Yet, a strategy, from any
angles and at any time, has some most typical features that reflect the nature of the
business strategies of an enterprise specified below:
•

A business strategy must clearly define the key goals to be achieved in
specified periods and must grasp at all aspects and levels of the production
and business activities of an enterprise.

•

Business strategies must be reflected in a continued process from
development to achievement, assessment and review, and adjustment of the
set goals.

18


•

A business strategy must ensure optimal mobilization and full exploitation of
the firm’s resources like manpower, capital, technique and technology; and
ensure that the firm's advantages are promoted and opportunities are grasped
to gain comparative advantages in the market.

•

A strategy is an instrument that sets out long-term objectives of an
enterprise; and

•

A business strategy defines the clear scope of competition of an enterprise.

The essence of this characteristic is to identify clearly the business scope of an
enterprise. This is an important step of an enterprise in reflecting business
environment, positioning strategies, allocating resources and administering its
investment portfolio. Two basic questions raised are:
What are we trading in? and What should we trade in?
This is a relatively complex problem since the market segmentation has a great
impact on identification of organizational structure of a company.
•

A business strategy creates interaction between opportunities and threats of a
company, and between its strengths and weaknesses, from which its
competitiveness is built.

This feature highlights a key aspect of strategy – the long-term sustainable
competitive advantage of a firm over its major competitors in the involving
business sector. It is a modern approach to make a research on competition status of
an enterprise.
1.1.2.

Types of business strategy

1.1.2.1.

Classification of business strategy by levels

The common level-based classification of a strategy is:

19


Company (overall) strategies are the strategies formulated for the whole
company in all the sectors that it deals in. The objectives of the strategies of
this type demonstrate the ultimate goal that the company is pursuing from its
overall performance, directions and measures to achieve the goal.
Business (sectoral) strategies are designed for a niche specialized business
sector. When a company deals in one business sector, its business-level
strategy is identical with its company-level strategy.
Functional strategies are the strategies of specific service of a company such
as financial, marketing, and personnel, etc. Functional strategies are
supportive in achieving the success of business and company strategies.
1.1.2.2.

Classification of business strategies by content

Based on contents of strategies, French administrators divided business strategies
into the following types:
Commercial strategies are strategies applied in all trading activities of a
company from purchase of supplies to distribution and consumption of its
outputs.
Technological and technical strategies
Financial strategies

Human strategies describe directions and ways to mobilize and use human
resources for successful implementation of the above strategies.
1.1.2.3.

Classification of business strategies by process

Business strategies include
Orientation strategies that indicate major orientations on a firm's targets, its
directions and ways to achieve such targets. The strategies are built upon the

20


analysis of the internal and external environment of an enterprise. They steer
the key strategic options of a firm.
Action strategies that comprises of action alternatives of an enterprise in a
specific situation and expected adjustments of the strategies. Action
strategies can be selected from the ones formulated in the development of
orientation strategies, or from the strategies established during the
performance of orientation strategy.
I.

The role of business strategies in modern business environment

In modern business environment, strategies play an increasingly important role in
the existence and growth of an enterprise.
Strategies are a tool to reflect collectively all the long-term goals of an enterprise.
These goals are the ultimate targets that the firm wishes to achieve in its business
performance. Specification and documentation of such targets in the form of
strategies helps every member of the enterprise be fully aware of where they want

to go, and what they need to do. Consequently, this contributes to the
accomplishment of the firm's targets.
1.

Description of the formulation process of a strategy

Although there are various viewpoints of the various formulation approaches of a
strategy, a normal process is composed of the following steps:

21


Formulation
Formulation

Implementation
Implementation

(Decision
(Decision on
on what
what to
to do)
do)

(Achieved
(Achieved results)
results)

Identification

Identification of
of opportunities
opportunities
and
and threats
threats

Identification
Identification of
of material,
material,
technical,
technical, financial
financial &
&
managerial
resources
of
the
managerial resources of the firm
firm

STRATEGIES
STRATEGIES
OF
OF THE
THE
COMPANY:
COMPANY:

Structure
Structure of
of the
the enterprise
enterprise and
and
relations:
relations:
Assignment
Assignment of
of labors,
labors, cooperation
cooperation
between
between sections,
sections, information
information system
system

Organizational
Organizational and
and behavioral
behavioral
Types
Types of
of
procedures
procedures
objectives
objectives and

and
policies
policies to
to
Measurement
Measurement standards
standards and
and methods,
methods,
the
identify
the formulation procedure
Human
values
HumanFigure
values and
and
dynamic
1.1 – Businessidentify
strategy
dynamic system
system
Company
Company and
and
determination
determination of
of the
the leadership
leadership

the
the business
business
Inspection
Inspection system
system
fields
fields of
of the
theand objectives
1.1.3. Identification of corporate mission
The
leader
Screening
and
The highest
highest
leader of
of the
the Company
Company
Screening
and Promotion
Promotion
Company
Company
Affirmation
of
non-economic
Affirmation

of
non-economic
1.1.3.1.
Identification of corporate mission StrategicStrategic- Organizational
Organizational
responsibilities
responsibilities to
to the
the society
society
Characteristics
Characteristics

Before looking into this issue, a question raised is whatHuman
are the
objectives and
Resources
mission of an organization?
Corporate objectives of an organization are considered as reasons for its existence.
The approaches of strategists, therefore, to target issues will steer the formulation of
a strategy and influence its content.
The regular formulation of a mission statement is a continuous process that has six
steps:
Step 1: Initiate initial idea of a business mission
Step 2: Assess external environment and review internal conditions
Step 3: Re-define the idea of a business mission
Step 4: Rewrite the mission statement of the company

22

Step 5: Organize the implementation of the mission statement
Step 6: Review and revise the mission statement
In writing the mission statement, it is necessary to take into account not only the
wishes of the owner, the leaders, but also the internal and external factors of the
company.
1.1.3.2.

Identification of strategic objectives

A company's objectives present clear orientations that it pursues, and influences its
business performance. For example, the increase of 15% in the company’s market
share requires various actions to enhance its productivity. Corporate objectives are
also good incentives. For instance, to achieve the revenue of one billion in the next
year can be a challenge to an enterprise. Finally, a company's objectives are used as
an instrument for assessment and control. It allows the company to check whether
the planned business outcome is consistent with its requirements like whether the
delivery of the commodity can be contracted within two weeks. This allows the firm
to take rational actions to get the desired outcome such as improved production and
storage and reduced order and delivery time, and raised sense responsibilities at
work.
Target has also central role that is the result of comparison. For each enterprise,
target can be long-term, medium or short-term. Economists assumed that an
enterprise fixes its targets in eight main sectors as follows:
Market position; Renovation; Capacity; Financial and logistics source; Profits;
Personnel development and efficiencies; Employee attitudes and efficiencies; Social
responsibilities;
The absence of one of the eight foregoing sectors shall lead to serious consequences
to the whole enterprise. In order to fix short-term targets and not to harm long-term

23


ones, a balance between these targets is required.
1.1.4.

Analysis of business environment of a firm (external environment)
1.1.4.1.

Impacts of external environment on business strategy

External environment includes factors that may affect the performance of targets of
an enterprise. The analysis of the external environment comprises of macro
environment and sector environment (micro). The analysis of such factors shall help
an enterprise identify its position and environmental properties, the existence age,
determine influences of the external environment and its targets, then be able to
make decisions in planning of strategy.
Macro environment:
Macro environment includes various factors that have indirect impacts on activities
of an enterprise through its influences on factors of the sector environment, of
which there are 5 factors considered by administrators as those that influence most
strongly, that is: economic, institutional, legal, technological, social and natural
factors.
•

Economic factors: have great influences on enterprises and the most
frequently movable factor, the most difficult factor to forecast among macro
ones. Its movement always contains both opportunities and challenges for
enterprises, of which the following moving trends are the most prominent:

-

GDP and GNP trend: directly affects the growth rate of the economy, the
growth of disposable income of the population. It shall make changes in
consumers’ needs, consumption market scale, affecting demand-supply
balance of products.

-

Interest: is a factor that has impacts on consumption saving and investment
trends; make consumption needs rise up or slide down, stipulate or limit
investment in production expansion.

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-

Inflation rate: affects prediction possibilities of investors, high inflation rate
shall make prediction more difficult, investment more risky, bringing about
reduced investment, production and having impacts on sector competition.
Balance of payment, exchange rate: affect the market and external economic
relations of an enterprise; sometimes result in the change in economic state
in general.

•

Economic policies present opinions of the Government in the sector
development.

•

Institutation and legal factors

•

Technological factor

•

Social, population, custom, preference factors, etc directly affect
consumption needs of the society.

•

Natural factor: is an important factor in human life; at the same time is an
input supply for many production sectors. Natural factor is considered as the
least variable factor. However, in the past decade, the natural environment
has been seriously deteriorated. This may have great impacts on movement
trend of enterprises.
Sectoral environment:
Sector environment closely attaches activities of an enterprise; factors of the

operation environment shall decide the investment environment, competition
strength and profits in the sector. According to Professor Michael Porter, the
context of the operation environment is subject to influences of five competitive
forces: risk of penetration of potential competitors, competition strength of
companies in the sector, power of buyers, power of sellers and threats of alternative
products.

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