Luận văn thạc sĩ xây dựng chiến lược kinh doanh thẻ tại ngân hàng vietncombank

Luận văn thạc sĩ Xây dựng chiến lược kinh doanh Thẻ tại ngân hàng
Vietncombank

THESIS Topic:
“Build a card business strategy of Vietnam Joint Stock
Commercial Bank for Foreign Trade of Vietnam (Vietcombank) in
the period of 2011 – 2015”

ACKNOWLEDGEMENT

We would like to commit this is the research project of our group. The published
data of the organizations and individuals are referred and used under regulation. The
results in the topic are honest and have not been showed in any other projects yet.
Our group would like to thank Griggs University, representative of the University
in Vietnam, ETC Center, teachers are considerate to teach us; thank people in the Center
who have helped us during the studying process in the Center.


Group would like also to thank Vietnam Commercial Joint Stock Company
(VCB); Vietcombank card Center which have supported us in the process of working
and provided the data creating conditions for us to complete the research.

Hanoi, February 25th 2011
WRITERS’ GROUP

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TABLE OF CONTENTS

ACKNOWLEDGEMENT

Page
1

TABLE OF CONTENTS

2

LIST OF WORDS IN SHORT

5

LIST OF TABLES

6

LIST OF FIGURES

7

PREFACE

8

CHARTER I: THEORETICAL BASE

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1
1.1

1.2
1.2.1
1.2.2
1.2.3
1.3
2
2.1
2.2
2.3
2.3.1
2.3.2
2.4
2.5
2.5.1
2.5.2
2.6
2.6.1
2.6.1.1
2.6.1.2
2.6.1.3
2.6.2

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CONTEN

Basic issues about strategy and business strategy
Some concepts about strategy
Business strategy and strategic choices
The definition of business strategy
Characteristics of business strategy
Types of business strategy
The role of business strategy
The process of building up strategy
Mission and strategic vision
The strategic goal
Analyzing outside environment
Macro analyzing

Analysis of micro environment (model of five competitive forces)
Analysis of internal environment
General Matrix SWOT
General theory about SWOT
SWOT Matrix
Strategic selection
Common competitive strategy
Strategy as leading in expenses
Strategy as difference in products
Concentration strategy
Model of analysis and selection of strategic alternatives according to
weight method
CHARTER II: THE REAL SITUATION OF CARD BUSINESS OF JOINT
STOCK COMMERCIAL BANK FOR FOREIGN TRADE OF VIETNAM
(VIETCOMBANK)
1 General introduction about Vietcombank
1.1 General information about Vietcombank
1.2 Business scope
1.3 History of Establishment and Development

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1.4
1.5

2
2.1
2.2
2.3
2.4
2.5
3
3.1
3.2
3.2.1
3.2.1.1
3.2.1.2
3.2.1.3
3.2.2
3.2.2.1
3.2.2.2
3.2.2.3
3.2.3
3.2.4
3.2.4.1
3.2.4.2
3.2.4.3
3.3
4
4.1
4.2
4.2.1
4.2.2
4.2.2.1
4.2.2.2

4.2.2.3
4.2.2.4
4.2.2.5
4.2.3
4.2.3.1
4.2.3.2
4.3
4.3.1
4.3.2
4.4
4.5

Organizational structure
Income Statement of Vietcombank in the period of 2008 – 2010
Business strategy of Vietcombank in the period of 2011 – 2015
Strategic vision
Objectives
Business strategy
Solutions for implementing
Plan on implementation of main targets in the period of 2010-2015
Card business of Vietcombank
The formation and development Vietcombank card
Card business of Vietcombank in the period of 2006 – 2010
Issuance
Issuance of international credit cards
Issuance of international debit card
Issue domestic debit card
Payment operations
Revenue on credit card payment
Revenue on international debit card usage that Vietcombank issued

Revenue on domestic debit card usage
Network development
Conclusion: Assess card business results by 2010
The results achieved by the end of 2010
Restrictions
Reasons
Competitive business card
Card business strategy of Vietcombank period 2010 - 2015
Specific goals by 2015
Analysis of external factors affecting business operation of Vietcombank
Analysis of macro environment according PESTLE model
Analysis of micro environment (sector environment): 5-competitive
force model of Michael E.Porter
Potential opponents
Opponents in the same sector
Customers
Suppliers
Alternative products
Summary of analysis results of external environment
Opportunities
Challenges
Analysis of internal factors in the enterprise
Strengths
Weaknesses
SWOT matrix
Select card business strategies of Vietcombank under QSPM Matrix:

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CHAPTER III: SOLUTIONS AND PROPOSALS FOR ESTABLISHING CARD
STRATEGIES OF VIETCOMBANK PERDIOD 2011 – 2015
1 Some solutions to successfully implement selected strategy
1.1 Complete and rationalize card issuance process
1.2 Improve quality of credit verification
1.3 Intensify investment in technical equipments
1.4 Intensify risk management and prevention
1.5 Boost payment via card
1.6 Implement Marketing strategy
1.7 Human resources management
2 Some proposals to develop card service in VCB
2.1 Proposals to the Government
2.2 Proposals with State Bank of Vietnam (SBV)
CONCLUSION
REFERENCES

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LIST OF WORDS
No.
1
2
3
4
5
6
7

Words in short
CJSB

VIETCOMBANK
VSB
Vietcombank
BIDV
Techcombank
ACB
HSBC, ANZ

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ATM

Explanation
Commercial Joint Stock Bank
Vietnam Commercial Joint Stock Bank
Vietnam State Bank
Vietnfam Commercial Joint Stock Bank
Bank for investment and development of Vietnam
Vietnam Technical Commercial Joint Stock Company
A Chau Commercial Joint Stock Company
02 foreign Banks operating in Vietnam’s market
Automated Teller Machine or Automatic Teller
Machine is a equipment of Bank for automatic
transaction with the customers, implementing the

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EDC

identification of the customers through ATM card

Electronic data capture
Is a high-level type of money counting machine used

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POS (point of sale)

for payment in the shop and used to manage in the

ICO

retail business and even in service business.
International Card Organization

11

6


LIST OF TABLES

Table 1.1
Table 1.2
Table 1.3
Table 2.1
Table 2.2
Table 2.3
Table 2.4
Table 2.5
Table 2.6

Table 2.7
Table 2.8
Table 2.9
Table 2.10

Analyzing the macro environment
SWOT matrix
Choose strategic alternatives according to weight
method
Table of business results of Vietcombank in 2008 - 2010
Implementation plan of business targets in the period of
2010 – 2015
Activity of issuing international credit cards within
years of Vietcombank
Table 2.4: MasterCard and Visa Debit issuance of
Vietcombank in the period of 2006-2010
Quantity of debit card issued of VCB in the period of
2006-2010
Revenue on credit card payment in the period of 20062010
Revenue on international card usage of VCB during
2006-2010
Revenue on domestic debit card usage of VCB during
2006-2010
GDP growth rate of Vietnam for the period 2005 to
2010
Position of Vietcombank in the market (until
31/12/2010)

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68

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LIST OF FIGURES

Page

Figure 1.1
Figure 1.2
Figure 1.3
Figure 1.4
Figure 2.1
Figure 2.2
Figure 2.3
Figure 2.4
Figure 2.5

Figure 2.6
Figure 2.7
Figure 2.8
Figure 2.9
Figure 2.10
Figure 2.11
Figure 2.12
Figure 2.13
Figure 2.14
Figure 2.15
Figure 2.16

Term “strategy”
Process of developing business strategy
The outside environment
5-force model of Michel Porter
Model of VIETCOMBANK and subsidiary
companies
Total assets of Vietcombank in the period of 2008 2010
Pre-tax profit of Vietcombank in the period of 2008 2010
Diagram of credit cards issued by Vietcombank
Chart on international debit card issuance of
Vietcombank
in the period of 2006-2010
Chart on domestic debit card issuance of VCB in the
period of 2006-2010
Chart on international card payment of VCB during
2006-2010
Chart on revenue on credit card usage of VCB
GDP growth in the period 2005 - 2010

GDP growth and GDP per capita from 1998 to 2007
(1)
Exchange rate movement of USD / VND from 2006
to 2010
Market share of domestic card issuance
Market share of international cards issued
ATM sharemarket
POS machine sharemarket
Card sharemarket of Vietcombank in years

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38

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42
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60
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PREFACE
1. The urgency of this topic
Storing money at home has become dangerous and no longer preferred by people
as before, but instead people look to the banks. The explosion of the banking system and
the introduction of a range of utility services make the demand for using banking
services increase. Of which card service is an advanced way of payment and a
particularly important product for banks and customers.
For customers-users, cards provide the flexibility, safety, convenience, saving
time. This has helped to draw customers to use more cards and cards have become a
vital part of life.
For banks, card business plays a very important role in the payment system and
brings about large profits in retail operation.
Vietcombank is the bank which holds the forefront of cards in Vietnam, with a
leading position in the cards market during years, Vietcombank has actively diversified
products and credit cards services, invested in technology system, expanding network of
using cards and implementing marketing programs, etc. to enhance competitiveness and
promote the development of card. However, the boom of the banks makes the
competitive pressure increase in the market, requiring VCB to have the right
development strategy in order to mobilize resources for maintaining its leading position.
With the desire to apply the knowledge learned into practice, the group 4 decided
to choose topic: “Card business strategy of Bank for Foreign Trade of Vietnam period
from 2011 to 2015”. Through this subject, we want to systematize the theoretical issues
of making and selecting business strategy, analyze the current status of business
activities and strategic orientation to develop the Vietcombank card, then choose
business strategy and propose solutions and recommendations to improve the

competitiveness of Vietcombank card in 2015.
2. Reason for research
- Systematization of the theoretical issues of business strategy, selecting the
effective analytical models for the establishment of business strategy
- Applying the system of practical and theoretical basis to analyze and assess the
inside and outside environment, advantages and disadvantages, thereby building
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business strategy for VCB card
- To propose solutions and recommendations for completing the business strategy of
VCB card
3. Object and scope of study
- Study object is credit card business at VCB Bank
- Scope of the Study: Credit card service, status and analysis of the status and proposals
of strategy for VCB credit card development
. 4. Study method
Methods of secondary data collection, data were extracted and compiled from
statistical yearbooks, reports from the Bank's Website and annual Report of the Bank. In
addition, this assignment uses some references, books, magazines and other specialized
teaching materials.
Comparative method, synthesis method, the methods involved
In the process of analysis, the authors have used the method of comparing and
synthesizing the data from the VCB in the past and present, as well as compare
indicators and data of business results between VCB and some other commercial banks,
and also consulted experts on the evaluation of points when analyzing the matrix.
5. Structure
Besides the introduction, conclusion, reference materials, the research consists of three
chapters:
Chapter I: Theoretical base

Chapter II: Current situation of the card issued by Bank for Foreign Trade of Vietnam
Chapter III: Solutions and recommendations for the development of Vietcombank card
business strategy period 2011 – 2015
Hanoi, dated February 25th 2011
WRITER’S GROUP

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CHAPTETR I: THEORITICAL BASE
Building up the business strategy is a leading task of enterprises. In a
fluctuating and fiercely competitive business environment like nowadays, in order to
exist and develop sustainably, each enterprise has to be very dynamic and creative to
build up its suitable business strategies.
There are many ways to approach and analyze to build up and choose business
strategies accordance with each enterprise’s characteristics. In the following part, we
will introduce our methodology to build up and choose business strategy for one product
(service), process to build up strategy and experience in building up and choosing
strategy in some countries in the world.
1. Basic issues about strategy and business strategy.
1.1. Some concepts about strategy
The term strategy is commonly used and considered to be the foundation of the
operation of business enterprises. There are many strategy definitions such as Strategy is
model of targets, purpose and plans to achieve those targets. (Kenneth, 1965) or
Strategy is a key factor influencing all operations of the organization (Ansoff, 1965).
Strategy is the plan of controlling and using resources of organizations like human,
property and finance… in order to improve and ensure its own essential interests.
Kenneth Andrews is the first man to give these outstanding ideas in the classic book
named The Concept of Corporate Strategy. According to him, strategy is what the
organization has to do base on its strong points and weak points in the context of

opportunities and challenges.
Exchanges and fighting among the above approaching views gradually converge
to create concepts of strategy quite united. No matter what ways we approach, through
the above views and definitions, we recognize that the strategy of enterprise contains
three most common characteristics:
-

Define an general action program toward the future of enterprise’s long – term
basic business goals;

-

Important policies, methods of the enterprise are made decision by the
enterprise owner;

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-

Establish the sequence of action, the manner of processing and disposing
resources in order to perform targets of the enterprise.

1.2 Business strategy and strategic choices.
1.2.1. The definition of business strategy.
Business strategy which is orientation of business operation, have goal in a long
time as well as policy system, methods and ways of distributing resources to perform the
goals of enterprise in respectively time duration.
The business strategy has no intention to work out in details how to achieve goals
because it is the duty of supporting programs, different strategies. The business strategy

only creates frameworks to guideline the logic of way of business and to perform.
According to the above views of business strategy, we can realize their common
feature, that is the business strategy of enterprise must have objective orientation, long –
term and strategic offensive nature, especially they have to be performed as
systematically calculating process.
1.2.2. Characteristics of business strategy
The overall nature: Business strategy is the general map of the development of
enterprise, it determine the relationship between enterprise and objective environment.
The overall nature of the business strategy inflects on 3 aspects: Suitable for the
development trend of enterprise, suitable for developing trend of country on economic,
technological in certain period; suitable for the world economic integration trend, social
field
The overall nature of business strategy requires to examine all parts of enterprise,
analyze the condition of the whole enterprise, national situation. Without overall view,
there could not be good business strategy and international.
The vision: In the previous time, many enterprises did not work efficiently
because they did not have strategic project, solved the permanent issues, do

as

movement so although hard, it is not efficient. One of reason is that enterprise did not
grasp development trend of enterprise. So enterprise want to build up business strategy,
they have to perfect forecasting task of economic, technological, social development
trend. A successful strategy is often based on rightly forecasting basis.

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The competitive: Without competitiveness, there is no need to build up and
perform business strategy. So the competitiveness is the most basic feature of business

strategy. Nowadays, every enterprise operates in competitive environment. Hence,
business strategy has to research how the enterprise has more competitive advantage and
after that get success in competing.
The risk: The business strategy is future development project but existence
environment is not certain and changeable. The duration of strategy is longer, uncertain
factors of objective situation is more, the level of uncertain is more, and the risk of
strategy is great. The risk of business strategy requires enterprise to stand high, to have
far vision, observe carefully and objectively so that it can make the right strategy
The professional and creation: Enterprises can base on their own ability to
choose the business fields which are suitable for their own strong points, avoid fields
which big enterprises are exclusive. The majority enterprises do this, are successful,
develop and gain prosperity. However there is no limit to technological advance and
market competition. Thus, enterprises have to continuously import or develop advanced
technology. Specialization and suitable technology creation are important methods to
ensure the existence and development of small and medium – sized enterprises.
The relative stability: The business strategy of enterprise must have the relative
stability in the certain period of time. Otherwise, it does not have the meanings of
leading in practical operation of enterprise. Objective environment and practical
operation of enterprise is a continuously moving process. The business strategy also has
the ability of controlling to fit with objective situation. The business strategy cannot
have one – sided stability but cannot change quickly, is relatively stable.
1.2.3. Types of business strategy.
There are many ways of classify business strategy which create diversity of the
manner of implementing business strategy. When classifying business strategy based on
the strategic level, we have 3 types of strategy such as enterprise - level strategy (general
strategy), business – level strategy (field) and function – level strategy. French managers
thought that business strategy contains trade strategy, technological and technical
strategy, financial strategy and human strategy. Classifying strategy based on the process
of strategy, we have orientation strategy and action strategy.

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Figure 1.1 The term “Strategy”

Source: Teaching document of strategy administration – Griggs.
1.3. The role of business strategy
In the business operation of enterprise, the existence and the success in business
depends firstly on the correctness of the strategy which has been identified and good
performance of those strategies.
Firstly, having business strategy helps enterprise to recognize their goals and
orientations in the business operation. Hence, enterprise can realize what way to
organize its business system and how to do to get success in business and know when
the enterprise achieves its goals.
Secondly, the business environment varies quickly; it creates thousands of
chances to find interests and make profit, however there are also full of risky traps.
Some kinds of strategy will help enterprise to actively make good use of business
opportunities and at the same time reduce risks in the market.
Thirdly, thanks to applying business strategies, enterprises will attach given
decisions to the conditions of environment, helps to balance resource as well as goals of
enterprise and market opportunities to complete the set goals;
Fourthly, in fiercely competitive environment, by analyzing the factors of macro
environment comprehensively, the operating environment helps enterprise to identify
opponents. Based on it, enterprise can find out the comprehensive solution to improve
the competitive capability of enterprise in the market.
2. The process of building up strategy
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Building up a strategy requires to have strategic logic and to find out the answer

of three questions “Where are we, in present? Where do we need to go?, How to get
there?”
1. Evaluating the present: missions, targets, strategies
2. Analyzing business environment, the structure of

“Where

environment, development situation, analyzing thee

are now?

we

competitiveness and define enterprise.
3.Analyzing the macro environment: demographic
environment, economy, society, technology and politics.

Where do we
need to go?

4. Analyzing the inner of enterprise: structure, resources,
process, human resources and enterprise culture.

How to get
there?”

5.Analyzing the strengths, weaknesses, opportunities
and challenges.(SWOT)
6. Analyzing and choosing strategy : Common or based on field
7. Evaluating and perform: requirements of resources, risk and interests.

We realize that the process of defining business strategy is related to adhesive of
customer’s need (what satisfy), the group of customer ( who is satisfactory) and the
separate chances or How the customer’s need satisfied. Those three decisions are the
focuses of selecting strategy of enterprise because they create the origin of competitive
advantage and define the enterprise’s method of perform in business.
The process of administration strategy includes: analyzing outside to define
opportunities and risk. In addition to, analyzing the inner environment to find out strong
points, and weak points. According to mission, vision, strong points and weak points,
chances and risk to draw up the strategy and choose the suitable strategy. Start to
perform and adjust strategy, monitor and evaluate the strategy implement. After that
making enterprise and organization. The process of strategy administration is described
in the below map 1-1: suitable for strategy.

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Figure 1.2: The process of building up business strategy

Mission, Vision
Inner analysis
+ Model
Value series,
Competitive advantage
+ Conclusion:
Strong point
Weak point

Build up & choose
the strategy (SWOT)

Strategy selection
Leading in expenditure
Specification product
Focusing on

Make organization and
structure of enterprise

Perform and adjust the
Strategy

Outside analysis
+ Macro analysis: The
outside environment
+ Micro analysis:
Model of 5
competitive resources
+ Conclusion:
Opportunities
Challenges

Monitor and evaluate
the implement strategy

match strategy

Source: Teaching document of strategy administration – Griggs.
2.1. Mission and strategic vision
Mission is the concept used to define the most important purpose, meaning of
establishment and existence of enterprise. It is the declaration to express the usefulness

of enterprise to society. The terminology: “mission” of enterprise can be similar to
common terminologies such as “principle, purpose’ of enterprise. Mission document of
enterprise is value during the operation time of enterprise if no chances and adjustment
is made. However, in each period, that strategy has to be made strategic goals in details
which are suitable for each period.
Vision is known as a report telling the position enterprise wants to get. The
vision declaration draws up the future of enterprise, its own goals and purposes. Vision
declaration can be different in length, can be a brief sentence, also a long paragraph but
it has to define the last target of enterprise. Vision is a target which enterprise want to
achieve and it need to have the factors such as (1) the time duration enterprise towards

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and complete. (2) Determining the scale and the size of enterprise in enterprise
community and society. (3) Build up vision towards the quality of product and ensure
the best quality with the cheapest price. (4) Enterprise need to toward the customer’s
interests.
2.2. The strategic goal
The strategic goal is pillars, situation which enterprise want to achieve in strategic
stage. Defining strategic goals is very meaningful to enterprise, because:
- Strategic goal is a means for enterprise to complete its own mission;
- Strategic goal is foundation of establishing the bias order in disposing resources.
- Strategic goal is the foundation of building up strategy, policy and business plans.
- Strategic goal of enterprise is the basis to gather, quantify concerned object such as
customers, shareholders, employees of enterprise.
It can be seen that the business strategy of enterprise is formed by the balance
among 3 factors including: Strategic goal (expressing the desires of enterprise), business
environment (expressing outside ties of enterprise) and the competence of enterprise
(the inner ties of enterprise)

Saying that does not mean that we can put the business strategy at any levels of
importance when defining the strategic goal of enterprise. We have to restrict it to
situation, environment, and the general competence of enterprise. The good goal is both
offensive and feasible. To ensure that requirement, defining the strategic goal has to base
on the following factors:
- The general business duty of enterprise and in specific strategic period. - Business
philosophy (expressed in mission declaration of enterprise)
- General evaluation of business environment and the competence of enterprise
2.3. Analyzing outside environment
The objective of analyzing outside environment is to define opportunities and
challenges, find out the ways of implementing and grasp chances from outside environment,
to avoid essential challenges as well.

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Scale and content of analyzing environment contains: analyzing the macro
environment( general environment) and analyzing the micro.
2.3.1. Macro analyzing
With a view to analyze, synthesize the outside existing factors of enterprise,
which have decisively influenced the existence, development of enterprise, it have to
realize opportunities and challenges given by objective environment. Enterprise has to
not only adapt but also stimulate the changes of business environment. The factors of
macro environment were expressed in the next model:
Figure 1.3: The outside environment

Economy

Demography

Sector environment

Culture - Society

Threats from new enterprises
Power of suppliers
Power of buyers
Threats from alternative products
Competitive intensity

Competitive market

Politics/Legislati
on

Globalization

Technology

Source: Teaching document of strategy administration – Griggs


Analyzing demographic environment
Population size: observing the change of demography in population aspect

outstands the importance of this section. The expectation of population show global
challenges of population issue in 21th century and chances for business people.
The age structure show chances in the service of taking care the old, insurance
services. But it also implicits a threat to enterprise in the human resources problem.

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Geographic disposal: Be able to create advantages in telecommunication field.
By computer, people can connect to others through telecommunication network when
they are at home.


Analyzing the political and legal environment
The political environment: is political factors and situation whose operation

influences business operation of enterprise. These factors includes: The political regime,
political party regime, guidelines and policies of Party and State, political situation.
Legal environment: is the legal system related to enterprise, including in the legal
norm of the State, legal awareness of organs of justice, executive bodies and enterprises.
The influence of political and legal environment on the business operation of enterprise
is very wide and deep, even sometimes it has decisive meanings. In general, if one
country has stable politics, transparent and consistent policies, good political
atmosphere, strict law, enterprise can develop healthily and stably


Analyzing the economic environment
The economic environment is social, economic situation and economic policy of

one country. The macroeconomic environment contains: the social economic structure,
the standard of economic development, economic policies and macroeconomic policy.


Analyzing the environment of science, technology, and technique.
The environment of science, technology, and technique is factor of science,

technology and gather social phenomena relating directly to science and technology in
the enterprise’s area. It contains 4 factors: the level of science and technology in the
society; human resources in science and technology, state institutions of science and
technology, scientific and technological policies, legal text of science and technology.


Analyzing the environment of culture and society.
Social environment: contains the foundation and changes of social classes,

population structure, the moving situation of residence, the social power structure, the
manner of living and working.
Cultural environment: contains philosophy factors, religious factors, language factor,
and literature and art factors. These factors mainly influence the business of enterprise
indirectly but we can not underestimate them.
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

Global environment
The global environment includes the relating global market, the present markets

which have been changing, the important international events, basic institutional features
and cultural features on the global market.
Macro analysis allows enterprise to evaluate the macro economic factor which has
big influence in the business operation of enterprise and basic changes in the competitive
environment. Macro analyzing can be illustrated in the following table:
Table 1.1. Analyzing the macro environment
Demographic

Population size

The diversity of races

segment

Age structure

Income distribution

Geographic distribution
Economic

Inflation rate

Personal saving rate

segment

Interest

Business saving rate

Trade deficit or profit

General national product

Budget deficit or profit
Political/ legal

Tax law

Labour Training Law

segment

Level -arranged principles

Policies and educational trends

Social and

Women in human resources

Environmental worries

cultural

The variety of human resources The change in choosing career and

segment

The

behavior

toward

the service

quality of work

The change in priority relating to
the characteristics of product and
service

Technological

Innovating product

The

level

of

investment

of

segment

Applying knowledge

expenditure for R& D of the
government
The

new

technologies

of

communication
Global segment

The important political events

The new industrialized countries

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The main global markets

The difference among cultural and
institutional features

Source: The lecture of strategy management – The statistic publishing house 2007.
2.3.2. Analysis of micro environment (Model of competitive force)
In any sector, each enterprise must suffer from competitive pressure from 5
sources, namely, competitive pressure for an enterprise which has just participated in the
sector, competitive pressure from other enterprises operating in the same sector,
competitive pressure of alternative products and services, influence of suppliers,
influence of consumers or customers.
Analysis of 5-force model of Michel Porter helps strategy-makers to analyze
above forces – competitiveness structure of the sector is as follow:
Figure 1.4: 5-force model of Michel Porter

Threats from
alternative products

Negotiation
strength of
suppliers

Competitiveness
intensity in the
sector

Negotiation
strength of
buyers

Threats from new
penetration

Source: Lecture document for strategy management - Griggs
- Risk from potential opponents: An enterprise which has just participated in
the sector can be a newly established enterprise or an enterprise which in the past
traded in other products. Those enterprises bring to that sector with new
manufacturing capability; at the same time require a specific market proportion.
Whether this competitive pressure is great or small will depend on how much that
enterprise had to spend and reaction of other enterprises when that enterprise
participates in the sector, or on whether the participation barrier is high or low.
- Threats from alternative products: Alternative products are products that have
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similar uses. If profit of the alternative products is high, the competitive pressure is great
(in terms of prime cost and selling price), making the enterprise be passive. If the
manufacturer of alternative products quickly develops its production, then that sector
will be strongly threatened. If consumer accepts alternative products conveniently in
terms of economy and psychology, then that threat become greater.
- Negotiation capability of buyers: Customers of enterprise can be direct
consumer, consumption goods, when consumers require goods’ price to be cheaper,
better quality and better after sales service, those can become pressure for that sector.
But customers can be distributors or agents. The problem is that who will be main
customer having negotiation power for which enterprise must specially care for; typical
goods serving for the whole society (set up wire system and transformer station,
construction…), the pressure on enterprise is “orderers” – Investors, they give criteria in
terms of pattern, quality, construction technique, completion time, “ceiling price”…
requires enterprises to have capability to be ready to meet those requirements during
competition for “procurement” and “tender selection”.
- Competitive pressure from existing companies: Competitiveness among
enterprises operating in the same sector is shown through competitive form and properties.
Competitiveness relates to typical features of the sector, structure and scale of enterprise in
the sector, quantity of enterprise in the sector and market structure in the sector.
- Negotiation capability of suppliers: Suppliers of materials can increase price
or reduce product’s quality or increase price and reduce product’s quality at the same
time. Enterprises care about negotiation capability with suppliers to solve to reach
main requirements: patterns, quality, supply in terms of quantity; price; ability for
capital advancement and capital turnover.
However, for goods of which price is controlled by the State, price change is really a
problem which need to be negotiated with Investors during construction and final
settlement of construction work.
In conclusion, analysis of business environment is extremely important with
enterprise. Business environment includes macro environment and micro environment or
sector environment. Objective of the analysis is to identify opportunities and threats in

order to make suitable management decisions.

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The study of 5 competitive forces according to model of M.Porter helps enterprises
to be fully aware of operation sides, being aware of supply and demand is also the same
with being ourselves and opponents so that enterprises will have base to make the most
reasonable decision in their business activities.
Some main conclusions:
(1)

If an enterprise can meet demand of the environment, its strategies will be more
efficient.

(2)

Main reasons for recession are often outside factors but not internal factors.

(3)

If an enterprise becomes more independent in outside environment, it needs to
focus more and more on analysis and judgment that environment.

(4)

A changing and unstable environment needs to be analyzed and judged more and
more.

(5)

An efficient strategy maker must fully know himself (internal analysis) and fully
know his opponents (analysis of environment)

2.4. Analysis of internal environment
To have and overview and comprehensive view, beside analysis of outside
environment to help enterprise be aware of opportunities and threats from outside,
strategy makers need to study internal environment to be fully aware of himself, which
means that he will be aware of strengths and weaknesses in his organization. This is
significant as that enterprise will find out strengths and weaknesses of itself when
making business strategies.
2.5. General matrix SWOT
2.5.1. General theory about SWOT
While PEST is an analysis tool relating to outside factors, SWOT focuses on
internal changes relating to outside factors.
SWOT is an extremely useful tool helps us to study about problems or make
decision in organization, management as well as business. In other words, SWOT is
theoretical frame based on which we can review strategies, define positions as well as
orientation of a company, analyze business proposals or any ideas relating to rights of an

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enterprise. Analysis of SWOT is a key for strategic development, clarification of
internal strengths of organization, weaknesses, opportunities and risks from outside.
2.5.2. SWOT matrix
SWOT matrix is used to study internal and outside environment of an enterprise
(or of a sector). Analysis of outside environment is to discover opportunities and threats
to the enterprise. Analysis of internal environment is to define strength and weaknesses
of an enterprise.

Base on analyzing factors in matrix, base on goals, business development
orientations and its resources, an enterprise can make combination. Principally, there are
4 combination ways:
- Opportunities with strength (OS);
- Opportunities with weaknesses (OW);
- Threat with strength (TS);
- Threat with weakness (TW)
A company does not necessarily pursue best opportunities; instead it can
establish competitive advantage development by studying about parallelism between its
strength and up coming opportunities. In some cases, the company can overcome its
weaknesses to get attractive opportunities.
To develop strategy base on SWOT analysis table, companies need to design a
matrix of factors which is called SWOT matrix (or TOWS matrix) as follows:
Table 1.2. SWOT matrix
SWOT matrix

Opportunity (O)

Threat (T)

1...

1...

2...

2...

3...

3...

Strength (S)

Strategy SO

Strategy ST

1...

Strategy using strengths of an Strategy using strengths of an

2...

enterprise to make good use of enterprise to respond, avoid
outside opportunities.

outside threats (challenges)
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3...

Weakness (W)

Strategy WO

Strategy WT

1...

Strategy

2...

weaknesses of an enterprise to weaknesses of an enterprise to

overcoming Strategy

make good use of outside reduce

3...

opportunities.

overcoming
threat

from

outside

environment (challenges).

In which:
 Strategy S-O to pursue opportunities which are suitable with strengths of company.
 Strategy W-O to overcome weaknesses to pursue and seize opportunities.
 Strategy S-T to define ways in which the company can use its strengths to reduce
risks of loss and outside threats.
 Strategy W-T to establish a defensive plan to prevent its weaknesses from

making the company itself to be vulnerable due to outside threats.
In the context of globalization, opening and economic – cultural exchange with
other countries is unavoidable and risks for enterprises in the market are also great.
SWOT analysis will help enterprises to “weigh – measure – count” accurately before
making decisions in penetrating to international market.
2. 6. Strategy selection.
2.6.1. Common competitive strategy.
Enterprises pursue strategies at company level to gain competitive advantage, to
better operate than its opponents in order to gain higher revenue than average level.
Enterprises often choose 3 basic strategies: leading in expenses, difference in products
and concentration strategy.
2.6.1.1. Strategy as leading in expenses
Company’s goal of pursuing low expense strategy is to create competitive
advantage by manufacturing products at the lowest expenses.

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