Establishing the business strategy in the period 2011 2015 of ninh binh construction consultant joint stock company

DISSERTATION MBA
ESTABLISHING THE BUSINESS STRATEGY IN THE PERIOD 2011-2015 OF
NINH BINH CONSTRUCTION CONSULTANT JOINT STOCK COMPANY

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1


TABLE OF CONTENTS
Contents
UNDERTAKING.

Page
1

ACKNOWLEDGEMENT.

2

TABLE OF CONTENTS.

3

ABBREVIATIONS

7

FOREWORD

8

1. Rationale:

8

2. Object and scope of research:

10

3. Purpose of research:

10

4. Method of research:

10

5. Main structure of the assignment:

11

CHAPTER I:
BASIC THEORIES ABOUT STRATEGY ESTABLISHMENT
APPLIED IN THE RESEARCH TOPIC.

12

1.1. Concept and process of strategy establishment:

12

1.1.1. Concept of strategy:

12

1.1.2. Business strategy establishment process:

14

1.1.3. Some specificities of construction Consultant:

15

1.2. Sequence of business strategy establishment.
1.2.1. Determination of functions and duties (determination of

16
16

business mission) and objective of business strategy.
1.2.2. Analysis of external environment:

16

1.2.2.1. Macro environment with construction Consultant (PEST

16

model).
1.2.2.2. Micro environment.

19

1.2.2.2.1. Competitive pressure from suppliers

20

1.2.2.2.2. Competitive pressure from buyers.

20

1.2.2.2.3. Competitive pressure from potential entrants.

21

2


1.2.2.2.4. Competitive pressure from substitute products.

21

1.2.2.2.5. Competitive pressure from industry competitors..

22

1.2.3. Analysis of internal environment.

23

1.2.4. Analysis of SWOT matrix.

23

1.2.5. Selection of business strategy.

26

CHAPTER II:
ANALYSIS OF BUSINESS ENVIRONMENT OF NINH BINH
CONSTRUCTION CONSULTANT JOINT STOCK COMPANY

29

2.1. Overview of Ninh Binh Construction Consultant Joint Stock
Company

29

2.1.1. Formation and development.

29

2.1.2. Vision, mission, core value, main business lines:

30

2.1.3. Organizational structure of the Company.

31

2.1.4. Some main targets of business result.

33

2.2. Analysis of external environment:

33

2.2.1. Analysis of macro environment:

33

2.2.1.1. Institutional environment:

33

2.2.1.2. Economic factor:

34

2.2.1.3. Cultural and social factor:

35

2.2.1.4. Technological factor:

36

2.2.1.5. Some other factors in macro environment:

37

2.2.2. Analysis of environment in construction Consultant.

37

2.2.2.1. Competitive pressure from suppliers.

38

2.2.2.2. Competitive pressure from buyers.

38

2.2.2.3. Competitive pressure from potential entrants.

39

2.2.2.4. Competitive pressure from substitute products.

40

2.2.2.5. Competitive pressure from industry competitors.

40

2.2.2.6. Competitive pressure from closely related parties.

44

2.2.3. Evaluation on opportunity and threat for the enterprise.

45

3


2.3. Analysis of internal environment.

45

2.3.1. Analysis of resources.

45

2.3.1.1. Material - technical facilities.

45

2.3.1.2. Human resources.

47

2.3.1.3. Finance.

48

2.3.1.4. Production capacity:

51

2.3.2. Analysis of management function and management field.

52

2.3.2.1. Management function.

52

2.3.2.2. Management field.

55

2.3.3. Evaluation on strength and weakness.

63

2.4. Analysis of SWOT and formulation of strategic scheme groups:

64

2.4.1. Strength (S):

64

2.4.2. Weakness (W):

64

2.4.3. Opportunity (O):

64

2.4.4. Threat (T):

65

CHAPTER III
SELECTION OF STRATEGIES AND SOLUTIONS FOR
STRATEGY IMPLEMENTATION IN THE PHASE (2011-2015)
FOR NINH BINH CONSTRUCTION CONSULTANT JOINT

67

STOCK Co.

67

3.1. Business objective of the company to 2015:

67

3.1.1 General objective:

67

3.1.2 Specific objective to 2015.

69

3.2. Determination of business strategy:

69

3.2.1. Summary of strategy groups.:

69

3.2.2. Selection of business strategies for period 2011 – 2015

70

3.3. Solutions to performing strategy:

70

3.3.1 Solution to developing human resources:

71

3.3.2 Solution to product:

71
4


3.3.3 Solution to Marketing:

72

3.3.4 Solution to technology and equipment:

72

3.3.5 Solution to restructuring the organizational apparatus.

74

3.3.6. Solution to finance.

74

3.4. Performance schedule.

76

3.5. Estimated contingent situations and remedy.

76

3.5.1. Situation 1.

77

3.5.2. Situation 2.

78

CONCLUSION

79

APPENDIX

79

Appendix No. 1

79

FY 2008

83

FY 2009

87

FY 2010

91

Appendix No.2

99

Appendix No.3

99

1. Ninh Binh Construction Planning Institute

101

2. Nhat Minh Company Limited

102

3. Dong Duong Consultant and testing Company Limited

104

REFERENCE

5


ABBREVIATIONS

- ADB:

Asian Development Bank.

- LAS:

Laboratory Automation System.

- ODA:

Official Development Assistance.

- VND:

Vietnamess Đồng.

- WB:

World Bank.
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6


FOREWORD
1. Rationale:
From the early 1990s, Vietnam was aware of and took initiative in
renovating its economy and started to change its thought to regional and
international integration. Since then, Vietnam has gradually entered into bilateral
and multilateral trade agreements with the countries, trade blocks in the region and
become a member of trade economic blocks in the world. Starting from the Frame
Agreement with European Union (EU), participating in the Association of
Southeast Asia Nations (ASEAN), carrying out ASEAN free trade area (AFTA),
member of Asia - Pacific Economic Cooperation Block (APEC), signing Bilateral
trade agreement with the USA, especially officially joining WTO in November
2006.
For nearly 20 years, Vietnam has led its independent and separated economy
to gradually integrate into the region and the world. This is an opportunity and
challenge as well for the government, for Vietnamese enterprises to join the global
trade ground.

To meet the demand for integration and development, over the past years,
Vietnam has worked out appropriate socioeconomic development policies including
policy for enhancing investment in infrastructure, building and developing urban
infrastructure, rural infrastructure. Most recently, the 11 th Resolution adopted by the
Party Congress on the country development objective in 5 years from 2011 to 2015
pointed out main tasks, including: “mobilize and optimize resources; gradually
build modern infrastructure” concurrently putting forth the main targets: “Average
economic growth rate in 5 years from 2011 to 2015: 7.0 - 7.5%/year. Average
added value of industry and construction increases 7.8 - 8%; average added value
of agriculture increases 2.6 - 3%/year. GDP structure: agriculture 17 - 18%,
industry and construction 41 - 42%, service 41 - 42%”.
Ninh Binh is a province in the Northern Delta covering 1,400km 2 and having
nearly 900,000 people. Over the past years, Ninh Binh economy has kept increasing
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at 2-digit level. In 2010, provincial competition index ranked 11/63. Ninh Binh is
continuously included in the group of leading provinces in the North Vietnam. Ninh
Binh is one of the provinces that attract great foreign investment in Vietnam; In
2010, the provincial budget income achieved 3,100 billion VND whereas its area
and population rank 56/63 and 43/63 respectively. Over the past years, the Ninh
Binh province Committee of the Party, the People’s Council and the People's
Committee have paid attention to socioeconomic development, enhancing
investment in infrastructure, including the approved infrastructure construction
investment projects amounting to nearly 9,000 billion VND.
As such, macro environment of the construction in general and construction
Consultant in particular for the enterprises has many opportunities for development.
Over the past years, because the demand for building urban and rural infrastructure
is developed strongly, the construction Consultant has developed vigorously. In
2005, Ninh Binh construction Consultant market had only two enterprises together

with several Consultant enterprises of the Ministries and sectors. So far, there are 10
units of the province and about 5 Consultant units of the Ministries and sectors
involved in construction Consultant in Ninh Binh province.
However, apart from the above opportunities and advantages, Ninh Binh
construction Consultant has a lot of difficulties. When joining the global economy,
competitive pressure comes from the enterprises from the countries with advance
science, technology and management. Besides, in the present context of Vietnam,
slowly developed economy and high inflation have led to many other macro
policies in order to adjust the economy including the Resolution No. 11/NQ-CP on
main solutions to controlling inflation, stabilizing macroeconomics, ensuring social
security with focus on the strict and prudent monetary policy and tight fiscal policy,
public investment reduction, State budget deficit reduction. All of these things have
great influence on the construction investment in general and competitiveness of the
construction Consultant enterprises in particular.

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To maintain and develop in the present context, each construction Consultant
enterprise is required to bring into full play its core capacity in order to enhance
competitiveness in the market, minimize risks, thereby establishing an appropriate
business strategy for them.
On that basis, we have discussed and unanimously chosen the topic:
“Establishment the business strategy in the period 2011-2015 of Ninh Binh
Construction Consultant Joint Stock Company” with a view to establishing,
analyzing and choosing business strategy, concurrently putting forth practical
solutions to carry out strategies for Ninh Binh Construction Consultant Joint Stock
Company in the period 2010 - 2015 in order to enhance competitiveness and
business efficiency to help sustainable development of the Company.
2. Object and scope of research:

Object of research is the production and business strategy of Ninh Binh
Construction Consultant Joint Stock Company.
Scope of research: Establishment of business strategy of Ninh Binh
Construction Consultant Joint Stock Company in 5 years from 2011 to 2015 in the
construction Consultant market of Ninh Binh province.
3. Purpose of research:
Research and analyze to know clearly about key capacity, strength,
weakness, opportunity and threat of Ninh Binh Construction Consultant Joint Stock
Company in the present period, thereby establishing, analyzing and choosing
business strategy, concurrently putting forth necessary solutions to carrying out
such strategies in the period 2010 - 2015 in order to enhance competitiveness and
business efficiency, help Ninh Binh Construction Consultant Joint Stock Company
to maintain and develop in a sustainable and efficient manner and become one of
the leading enterprises in the construction Consultant market of Ninh Binh.
4. Method of research:
The assignment of the group uses three methods of research:
+ Researching documents from secondary information sources such as
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newspapers, magazines, reports, production and business plans on design survey
Consultant, supervision Consultant, inspection Consultant and verification
Consultant for construction works.
+ Conducting qualitative research.
+ Surveying and investigating: conducting survey on main buyers of Ninh
Binh Construction Consultant Joint Stock Company through questionnaires and
direct interviews; However, due to limited time, at the time of reporting the
assignment, the group fails to collect full questionnaires to analyze. Therefore,
method of document research and qualitative research is primary.
5. Main structure of the assignment:

Apart from the foreword and conclusion, our assignment is comprised of 3
chapters:
Chapter I: Basic theories about business establishment applied in the
research topic.
Chapter II: Analysis of business environment of Ninh Binh Construction
Consultant Join Stock Company.
Chapter

III:

Selection

of

strategies

and

solutions

for

strategy

implementation in the phase (2011-2015) for Ninh Binh Construction Consultant
Join Stock Company.
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10

CHAPTER I
BASIC THEORIES ABOUT BUSINESS ESTABLISHMENT
APPLIED IN THE RESEARCH TOPIC.
1.1. Concept and process of business establishment:
1.1.1. Concept of strategy:
The concept “Strategy” dates back to ancient Greek period, starting from
military field with basic argument in which one party can crush rivals, including
more crowded, stronger rivals if they can lead the battle position and take the rivals
to the battlefield inure to their advantage deployment.
At present, there are various definitions about strategy for which the main
reason is there are different viewpoints about the organization in general and
different approaches in strategy of the organization in particular.
Ontologically, depending on viewpoint of positivism or constructivism, the
nature of strategy is determined under natural law or significant impact of the
subject. In fact, strategy is often defined in practical direction to make it easy for
practice processes in the organization.
In the present competitive business environment, the concept of strategy
keeps being researched and developed but focuses on four main categories: plan,
model, position and vision.
As such, it is possible to introduce some concepts of strategy as follows:
According to Quinn, J.B. (1980) (Strategy for Change: Logical
incrementalism. Homewood Illinois. Irwin): Strategy is a model or plan of a
organization to coordinate key objectives, action policies and orders in a unified
generality.
According to Lawrence R. Jauch & William F. Gluek (1989) (Business
Policy and Strategic Management): Strategy is a unified, comprehensive and
coordinated plan designed to ensure that basic objectives of the enterprise are
carried out successfully.
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According to Johnson, G. and Scholes, K. (1999) (Exploring Corporation
Strategy, 5th Ed. Prentice Hall Europe): Strategy is the determination of orientation
and scope of activity of an organization in the long term where the organization
must gain advantage by combining resources in a challenging environment in order
to best satisfy the market demand and meet the expectation by the factors related to
the organization.
According to Porter, M.E (1981) (The contribution of Industrial
Organization to Strategic Management. New York): Strategy is to research and find
out a suitable competitive position in an industry, a main scope of activity where
competitive activities occur.
As such, it can be understood that strategy “is a wide range of long-term
activities designed to make an organization from the present position achieve to a
desired position in the future through establishing competitiveness compared with
advantage of other organizations in the market” (Porter, M.E. (1996) What is
strategy?, Harvard Business Review). The long-term operation of an organization is
aimed at achieving business advantage through determining available resources to
use in the defined business environment, in order to meet the market demand and
ensure interests for all related factors.
Depending on level, there are at least three levels of strategy: Strategy at
company level, strategy at business unit level and functional strategy.
- Strategy at company level: dealing with general objective and scope of the
organization. Company strategy must show the correlation between general
objective and scope of the enterprise to meet the expectations of the capital
contributor. It is greatly affected by the investors in the company and responsible
for guiding the strategic decision making process throughout the company.
Company strategy is often presented clearly in the “mission statement”.
- Strategy at business unit level: mainly interested in competition ways in a
specific market. Strategy at business unit level indicates what should be done for a

business unit to compete successfully in a specific market. It is related to strategic
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decisions on choosing products, meeting the buyer’s demand, gaining competition
advantage compared with competitors, exploiting and creating new opportunities.
- Functional strategy: Shifting company strategy and strategy at business
unit to the divisions of the organization in respect of resources, processes, people
and their skills. Functional strategy shows how each division of the enterprise will
be organized to carry out strategic directions at company level and each division in
the enterprise. Therefore, functional strategy focuses on resources, processing and
people.
1.1.2. Process of business strategy establishment:
Business strategy is outlined based on the statement of vision of the
enterprise, directional for all activities of the enterprise and thereby strategic in the
long term. It includes the following steps: Mission and Vision Statement.
- Mission: Mission is the message showing the core value of the enterprise. It
expresses important things, contributions by the enterprise in terms of business and
life. It indicates business motto of the enterprise, position of the enterprise in the
world and commitments by the enterprise. Mission should be concise but inclusive
of background, encouraging and stable in the long term.
- Vision: Vision is a message of concretizing Mission Statement into an
encouraging objective. It points out the necessity for vital improvements for the
enterprise. It creates the confidence in the future of the enterprise and it is aimed at
making impossible things possible.
- Business objective: Business objective of the company is often financial
objective of the enterprise. It is specific objective in cash companied by a specific
timeline. For example, “achieving how much profit in 2010”, or “starting to make
profit before the end of 2011”…
- Situation analysis: Situation analysis table with general researches and

evaluations on business environment. Including:
+ External environment of the enterprise: Micro environment (political,
social, economic, cultural, scientific and technological).
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+ Micro environment: competitive pressure in the industry market
(competitive pressure from suppliers, from buyers, from potential entrants, from
substitute products, from existing competing enterprises and closely related parties).
+ Internal environment of the enterprise: analyze resources and management
function of the enterprise.
Then, find out strengths, weaknesses, opportunities and threats of the
enterprise to establish and choose business strategy.
- Business strategy: Business strategy of the enterprise is to orientate
development and establishment of competitive advantage of the enterprise based on
knowledge and evaluations as above. The enterprise may have a lot of strategic
choices such as:
Most creative technology.
Lowest price.
Focus on only one market.
Focus on only one group of products.
- Implementation schedule: Defined as action plan for the activities to be
carried out by such enterprise enclosed with achievements by milestones needed by
such enterprise to achieve the general objective.
1.1.3. Some specificities of the construction Consultant:
Business in construction Consultant products is a service business. Apart
from similar characteristics to other kinds of business in general and service
business in particular, there are some specificities that we want to clarify before
analyzing and establishing the strategy.
- Because of service business, product value is formed mainly from scientific

knowledge of technicians in the industry. Therefore, the enterprises don’t have to
suffer too great pressure in capital.
- Product of service business has no goods in stock.
- Product price is regulated as percent of total estimate of the approved
project and works under the laws (the preparation of bid for packages is sometimes
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affected by product offering price but often not deciding on the bid winning;
priority of the buyers is technical solutions).
- The use of construction Consultant products is compulsory (by law), thus
substitute products for construction Consultant product are unavailable. At the same
time, this market only has goods with poor quality other than counterfeits.
- Some construction Consultant products have high risk, even it is impossible
to collect money although the product has been delivered to the buyers.
- In construction consultant business, as stipulated in Decree No.
85/2009/ND-CP dated 15/10/2009 of the Government guiding the implementation
of the Procurement Law and Construction Law, the construction consultant
packagages that cost less than 3 billion or urgent and works related to national
security and other special cases regulated by the Prime Minister, are subjected to be
in bidding. In actual construction activities in Ninh Binh, most packages are
subjected to be in bidding, therefore, in this thesis, we only mention the research on
the performance of construction consultant bidding.
1.2. Sequence of business strategy establishment.
1.2.1. Determination of functions and duties (determination of business
mission) and objective of business strategy.
- Business mission: The first step of strategy management is to determine
mission and main objectives of the organization. Mission and main objectives of the
organization provide a background for establishing strategies.
Mission presents the existence reason of the organization and points out what

will be done. For example, the mission of Ninh Binh Construction Consultant Joint
Stock Company is: “Providing full construction Consultant services with high
quality, best meet the diversified demands of the buyers”.
- Strategic objective: Main objectives determine what the organization
expects to meet in the medium term and long term. Most of the organizations
pursuing profit and objective to achieve outstanding capacity take the leading
15


position. Second objectives are those deemed necessary by the company if they
want to achieve outstanding capacity.
1.2.2. Analysis of external environment:
1.2.2.1. Macro environment with construction Consultant (PEST model).
PEST is the model of researching impacts of four main factors in the macro
environment. These factors include:
- Political: This factor exerts great influence on all business lines in a
territory, a locality with political factors, law, regulations that may threat existence
and development of any industry. For construction industry, when doing business
on an administrative unit, construction consultants must comply with political and
legal factors in such areas.
+ Stability: Let’s consider stability in the conflicts of politics, diplomacy of
legal institution. Institution with high stability may create good conditions for
operation and vice versa, unstable institutions with conflicts will have bad influence
on the operation in its territory.
+ Tax policy: Import duty, export duty, consumption tax and income tax
policies will affect revenue and profit of the enterprise.
+

Related laws:

Investment Law, Corporate

Law,

Labor

Code,

Antimonopoly Law, Antidumping Law.
+ Policy: State policies will affect the enterprise. They may create profit or
challenges for the enterprise. For example, trade policies, industry development
policies, economic development policies, tax policies, competition regulation
policies and consumer protection policies.
- Economics: The enterprises should pay attention to short-term and longterm economic factors and the interference by the Government, local authorities
with the economy. Normally, construction Consultant enterprises will base on
economic factor to decide investment in specific Consultant products.
+ Economic situation: Any economy has cycle. In each certain period of the
economic cycle, the enterprise will make appropriate decisions for them.
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+ Factors affecting the economy: Interest rate, inflation
+ Economic policies of the government: Basic salary law, economic
development strategies of the government, incentives for industries: Tax reduction,
allowance, etc.
+ Economic prospect in the future: Growth rate, GDP growth rate, GDP to
investment ratio.
- Socio-cultural: Each locality has specific cultural values and social factors.
These factors are the characteristics of the consumers in such areas and create
diversity with design Consultant products for each area.

Apart from culture, social features also attract the attention from the
enterprises when studying market. Social features will divide the community into
groups of buyers, each group has different characteristics, psychologies and
incomes.
+ Average life expectancy, health state, nutrition and dietary.
+ Average income, income distribution.
+ Lifestyle, knowledge, aesthetic viewpoints, life psychology.
+ Living condition.
- Technological: In the technological revolution, a wide range of new
technologies are introduced. The application of modern equipments and advanced
technologies will create impressive breakthrough for most enterprises specialized in
construction Consultant, especially in survey Consultant and quality inspection
Consultant.
+ Investment by the government, enterprise in research and development:
The combination between the enterprises and the government aimed at researching
new technologies and new materials will exert positive influence on the economy.
+ Technological speed, cycle, backward technological rate.
+ Influence of information technology and internet on business.

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Figure 1.1. PEST model (Source: />Foregoing are four factors directly affecting economic sectors in general and
construction Consultant industry in particular. These factors are external factors of
the enterprise and the industry and the industry must bear its influences as an
objective factor. The enterprises will base on such influences to work out
appropriate business policies and activities.
The present PEST model has been expanded into matrixes such as PEST
(Including Legal factors) and STEEPLE (Social/Demographic Factors,
Technological, Economics, Environmental, Policy, Legal, Ethical Factors) and

increasingly perfect to become an indispensable standard when studying external
environment of the enterprise.
1.2.2.2. Micro environment.
This analysis model is targeted at perceiving opportunities and threats from
external environment of the organization. To carry out this research model, Michael
Porter, a famous strategic manager of Harvard University in the work "Competitive
Strategy: Techniques Analyzing Industries and Competitors" has put forth his
judgment on the competitive forces in all fields of production and business.
According to Michael Porter, competitive strength in the market in a certain
production industry is affected by 5 competitive forces as follows:

POTENTIAL
ENTRANTS

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Threat of new entrants
Bargaining power
of suppliers
SUPPLIERS

INDUSTRY
COMPETITOR
S

Bargaining power
of buyers
BUYERS

Rivalry among
Threat of substitute products
Substitut
es

“Five forces of Michael Porter” are regarded as a useful and effective tool to
find out profit origin. More importantly, this model provides competitive strategies
for the enterprise to maintain or increase profit.
1.2.2.2.1. Competitive pressure from suppliers: The number of suppliers will
decide on competitive pressure, their negotiation power over the industry and
enterprises. If in the market there are several suppliers with large scale, there will be
competitive pressure, affecting the entire production and business of the industry.
Supplier’s ability to substitute products: In this regard, let’s research ability
to substitute input materials due to suppliers and switching costs.
Information about suppliers: In the present period, information is always the
factor that promotes the trade development, information about suppliers exerts great
influence on choosing input suppliers for the enterprise.
For all industries, suppliers always cause certain pressures if they have scale,
collection and ownership of rare and precious resources. For this very reason,
suppliers of single input products (Farmers, artisans) will have little negotiation
power over the enterprises. Although they have great quantity, they lack
organization.
In short, strength of the suppliers is shown in the following characteristics:
+ Level of concentration of suppliers.
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+ Importance of quantity of products for suppliers.
+ Difference of suppliers.
+ Influence of input factors on cost or product differentiation.

+ Switching cost of the industry competitors.
+ Existence of substitute suppliers.
+ Threat of enhanced consolidation of suppliers.
+ Supply cost compared with total revenue of the industry.
1.2.2.2.2. Competitive pressure from buyers:
Buyers are a competitive pressure that may directly affect all production and
business activities of the industry. Buyers are one of the factors that cause pressure
to the enterprises in terms of price, quality of product, attached service and they are
those who control competition in the industry through buying decision.
Like the pressure from suppliers, the impacts on competitive pressure from
buyers for the industry are viewed from the following factors:
+ Scale.
+ Importance.
+ Switching cost.
+ Buyer information.
1.2.2.2.3. Competitive pressure from potential entrants:
According to Porter, potential entrants are the enterprises that are not yet
available in the industry but may affect the industry in the future. Quantity of
potential entrants and their pressure on the industry will depend on the following
factors:
+ Attraction of the industry: This factor is shown in such targets as
profitability ratio, quantity of buyers and quantity of enterprises in the industry.
+ Barriers for industry joining: These are the factors that make joining an
industry more difficult and expensive such as technique, capital and trade factors
(Distribution system, trademark and buyer system), Typical resources (Input
materials, Qualifications, inventions, Human resources, protection by the
government).
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1.2.2.2.4. Competitive pressure from substitute products:
Substitute products and services are those that can meet demands equivalent
to the products and services in the industry.
Availability of substitute products is shown in:
+ Switching costs in using products
+ Trend of using substitute goods by the buyers
+ Correlation between price and quality of substitute goods.
1.2.2.2.5. Competitive pressure from industry competitors.
The enterprises operating in the industry will compete directly with each
other to create pressure to the industry and thus giving rise to competitive strength.
In one industry, the following factors will increase competitive pressure on
competitors.
+ Barriers if desired to “escape from” the industry.
+ Concentration of the industry.
+ Fixed cost/added value.
+ Growth state of the industry.
+ Redundant capacity.
+ Difference among products.
+ Switching costs.
+ Specificity of goods brand.
+ Diversity of competitors.
+ Industry screening.
* Pressure from closely related parties.
This pressure is not mentioned directly in the matrix but in the book titled
"Strategic Management & Business Policy" by Thomas L. Wheelen and J. David
Hunger, there are remarks on the pressure from closely related parties.
+ Government.
+ Community.
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+ Associations.
+ Creditors, sponsors.
+ Shareholders.
+ Complemented (Temporarily understood as the complementary product
supplier for one or more other industries: Microsoft writes software for the
companies to sell computers, other enterprises can prepare documents to sell
goods).
1.2.3. Analysis of internal environment
Analysis of internal environment is aimed at finding out strength and
weakness of the organization. Let’s find out the way the company achieve
competitive advantage and role of distinct capabilities (unique strength of the
company), resources and ability to create and sustain competitive advantage for the
company. We can reach a conclusion that in order to create and maintain
competitive advantage, the company is required to achieve prominent efficiency,
quality, improvement and responsibility to the buyers. Strengths of the company
lead it to the prominence in this field. On the contrary, weaknesses can bring about
worse efficiency.
There are various approaches to analysis internal environment of the
enterprise. However, due to limited time, we only use the approach to analysis by
resources and by functions and fields of management of the enterprise to find out
core resources of the enterprise:
- Analysis of resources of the enterprise:
+ Material and technical infrastructure.
+ Human resources.
+ Finance.
+ Production capacity.
- Analysis by functions of management and fields of management:
+ Functions of management: Planning, organization, control, coordination,
inspection.

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+ Fields of management: Logistics, production, marketing, human resources,
finance.
1.2.4. Analysis of SWOT matrix:
SWOT analysis model is the result of a survey over 500 companies with
highest revenue elected by Fortune Magazine and conducted at Standford Research
Institute in the 1960s and 1970s in order to find out the reason why many
companies fail to carry out their plan. The research group includes Marion Dosher,
Ts. Otis Benepe, Albert Humphrey, Robert Stewart and Birger Lie.
After a period of testing and completion, so far, SWOT model has been used
successfully for many times in many enterprises and organizations in different
fields. In 2004, this system was developed fully and proved its ability to solve a
wide range of problems in establishing and agreeing practical objectives every year
of the enterprises without recourse to outside consultants.
SWOT analysis is objective evaluation on the data arranged in the form of
SWOT in a logic, easy-to-understand, easy-to-present, easy-to-discuss and easy-todecide logic order that may be used in all decision-making processes. SWOT
samples allow stimulating thinking other than basing on habitual or intrinsic
reactions.
SWOT analysis sample is presented in the form of a matrix, divided into 4
parts: Strengths, Weaknesses, Opportunities, and Threats. SWOT model often puts
forth 4 basic strategies: (1) SO (Strengths - Opportunities): strategies based on the
strengths of the company to take advantage of market opportunities. (2) WO
(Weaknesses - Opportunities): strategies based on the ability to surpass weaknesses
of the company to take advantage of market opportunities. (3) ST (Strengths Threats): strategies based on the strengths of the company to avoid market threats.
(4) WT (Weaknesses - Threats): strategies based on the ability to overcome or
minimize inside weaknesses of the company to avoid market threats.
SWOT analysis model is shown in the following matrix: (Figure 1.2.)

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SWOT analysis is one of five steps forming business strategy of an
enterprise including: establishing vision of the enterprise, analyze SWOT, defining
strategic objective, formulating strategic objectives and plans, identifying strategy
control mechanism. It is not only important to the enterprise in formulating
domestic business strategy but also quite significant in formulating international
business strategy to meet the demand of development of the enterprise. Once the
enterprise wants to develop, gradually establishes prestige and trademark in a stable
and sustainable manner, SWOT analysis is an indispensable step in the business
strategy planning of the enterprise.

SWOT
OPPORTUNITIES – O

STRENGTHS - S

WEAKNESSES - W

SO strategies

WO strategies

Use strengths to exploit
opportunities

Overcome the inside
weaknesses to take
advantage of

opportunities

ST strategies
THREATS - T

Use strengths to avoid
threats

WT strategies

Minimize weaknesses
and avoid threats

Figure 1.2. SWOT analysis model
- Strengths: Strengths of an enterprise include resources and their availability
such as infrastructure and background to develop competitive advantage, for
example:
+ Patent.
+ Famous brand name.
+ Good standing as evaluated by the buyers.
+ Low cost advantage due to own production secret.
+ Easy access to high grade natural resources.
+ Easy access to distribution networks.
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- Weaknesses: Absence of strengths is regarded as a weakness. The following
characteristics may be regarded as weaknesses:
+ No patent.
+ Unknown brand name.

+ Bad standing as evaluated by the buyers.
+ Costly operation structure.
+ Little access to natural resources.
+ Little access to main distribution channels.
- Opportunities: The analysis of external environment may suggest new
opportunities to create profit and development, for example:
+ Buyer’s demand not fully met.
+ New technology.
+ Loose regulations.
+ Removal of international trade barriers.
- Threats: Changes of the circumstance and external environment may create
threats for the enterprise, for example:
+ Buyer’s taste changed from the company’s product to other product.
+ Appearance of substitute products.
+ New legal regulations.
+ Stricter international trade barrier.
Analysis quality of SWOT model depends on the quality of collected
information. The information should avoid one-sided subjective view but seek from
various sides. In fact, it is not totally necessary to pursue the best opportunities but
create ability to develop competitive advantage by studying the relevance between
their strengths and potential opportunities. In some cases, the company may
overcome its weaknesses to seize attractive opportunities.
1.2.5. Selection of business strategy.
Strategy selection is an important content in the strategy establishment of
each enterprise. Although the world has had a lot of experiences in planning and
selecting strategy, research and creative application into Vietnam enterprises,
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