LUẬN văn THẠC sĩ xây DỰNG CHIẾN lược PHÁT TRIỂN CÔNG TY TNHH THÀNH LINH e

BUILDING A DEVELOPMENT STRATEGY
FOR THANH LINH CO., LTD. FOR 2013 – 2018 STAGE


TABLE OF CONTENTS
FIGURE 1.1: MATRIX OF OVERALL COMPETITIVE STRATEGY
11
ACCORDING TO THE AUTHORS D.SMITH GARRY, DANNY R.ARNOLD, BOPBY G.BIZZELL IN "STRATEGY AND
BUSINESS STRATEGY" THAT THE BUSINESS ENVIRONMENT INCLUDES: INTERNAL AND EXTERNAL BUSINESS
ENVIRONMENTS.
18
2.2. Efficient of business..............................................................................................................................42

LIST OF ACRONYMS
Acronyms
DN

:

Meaning
Enterprise

TNHH

:

Limited liability

KD

:

Business

TM

:

Trade

WTO

:

World Trade Organization

-2-


LIST OF TABLES

FIGURE 1.1: MATRIX OF OVERALL COMPETITIVE STRATEGY
11
ACCORDING TO THE AUTHORS D.SMITH GARRY, DANNY R.ARNOLD, BOPBY G.BIZZELL IN "STRATEGY AND
BUSINESS STRATEGY" THAT THE BUSINESS ENVIRONMENT INCLUDES: INTERNAL AND EXTERNAL BUSINESS
ENVIRONMENTS.
18

-3-

CATALOGUE OF CHART

FIGURE 1.1: MATRIX OF OVERALL COMPETITIVE STRATEGY
11
ACCORDING TO THE AUTHORS D.SMITH GARRY, DANNY R.ARNOLD, BOPBY G.BIZZELL IN "STRATEGY AND
BUSINESS STRATEGY" THAT THE BUSINESS ENVIRONMENT INCLUDES: INTERNAL AND EXTERNAL BUSINESS
ENVIRONMENTS.
18

ABSTRACT
1. Necessity of the topic
Today, in the context of fierce competition taking place in all areas of business,
if an enterprise wants to survive and develop on the market, the most important and
necessary thing for them is to direct the enterprise to a right way and in accordance
with frequent and sudden changes of the environment to achieve high adaptability and

-4-


sustainability. To achieve these, enterprises must identify and build a proper
development strategy for their your own business.
In 2007, the event that Vietnam formally joined World Trade Organization
(WTO) marked a major turning-point for the economy of Vietnam. The opportunities
offered by economic integration have been welcoming dynamic enterprises who know
to seek and take advantage of investment opportunities. However, besides
opportunities, there are always threats and potential risks that can come at any time
and enterprises will get stuck into difficulties without good preparation and suitable
measures to cope with. In addition, the continued advance of science and technology
also helps to shorten the development cycle of products and services, the market
globalization helps to increase significantly existing and potential competitors ... This

means that the business world gives customers more and more freedom to choice, but
also helps to increase competitive pressure and promptness in responding to new
demand.
In this context, success does not depend on the position of an enterprise at a
certain time, it is just the ability to interact with competitors in the long term.
Therefore, each enterprise needs to plan and implement appropriate and effective
strategies to be able to survive and develop in a sustainable manner. A strategy that
has ability to promote internal power and take advantage of opportunities coming
from external environment or to avoid, limit risks and weaknesses will surely help the
enterprise to have enough competitiveness and stand steadily on the market.
Therefore, an enterprise to be successful and profitable in business must have a good
strategy with optimal solutions.
As an young enterprise in the field of petroleum, automotive and
manufacturing of biological products, Thanh Linh Co., Ltd. has had right direction to
overcome challenges from economic integration and effectively take advantages of
opportunities to develop the company.

However, in recent years, and in the future,

the changes and instability of the economy in the general and difficulties on the
markets of the company create lots of complicated and unpredictable challenges to the

-5-


company. To implement strategic objectives, it's necessary to determine specific
development strategies to accomplish that objectives as well as to determine the
priorities of business activities, capacity and mobilizing resources; target customers;
products and services objectives will provide to customer; from this background to
create competitive position in the sector and long-term performance goals. Therefore,

the author decided to choose the topic "BUILDING A DEVELOPMENT
STRATEGY FOR THANH LINH CO., LTD. FOR 2013 – 2018 STAGE" for
master thesis.
2. Purposes and applicability of the thesis
a- Systematize knowledges of building strategy for an enterprise.
b- Analyze factors from external environment and internal business to indicate
opportunities, challenges, strengths and weaknesses of the company.
c - Propose orientation and strategic strategy for Thanh Linh Co., Ltd, period of
2013-2018.
3. Researching methods
The topic uses methods of description, information gathering, synthesis,
analysis.
About information gathering, the topic mainly uses secondary information such
as financial reports, market analyzing reports and other types of reports of the
company ...
About information analysis, it includes information processing, aggregating,
calculating, comparing, evaluating and making conclusion. The information gathered
from the sources mentioned above is analyzed and classified to groups of important
information, statistical information will be handled according to the principles of
statistical analysis. Conclusion is based on the analysis and evaluation of data.
4. Structure and layout of the thesis
a- Chapter I: Theoretical background for building development strategy
b- Chapter II: Analyze business situation of Thanh Linh Co., Ltd
c- Chapter III: Conclusion and recommendations .

-6-


CHAPTER I: THEORETICAL BACKGROUND FOR BUILDING
DEVELOPMENT STRATEGY

1.1. Overview of business development strategy
1.1.1 Concept of "Strategy" of the company
1.1.1.1. Concept of "strategy"
The term "strategy" is derived from Greek and were first used in the field of
military to indicate large and long-term plans given on the basic of certainty that the
subjects can implement and in an common manner, strategy is understood as plan and
art of military commanders.

-7-


There are a lot of definitions of "strategy". According to Fred R. David, strategy
is considered as means to achieve long-term goals. Alfred Chadler defines strategy as
defining basic and long-term goals of enterprises and means outlining a course of
action and allocation of necessary resources to carry out that goals. In general,
although there is difference in strategy definitions, they still covers the content of:
being the study of current and future market, planning of business goals, establishing,
implementing and supervising the implementation of decisions in order to achieve
that goals in current and future environment.
1.1.1.2. Concept of development strategy
Today, many enterprises also apply the same concept of strategy in the military.
Strategy as plan of controlling and using resources of the organization such as
manpower, assets, finance ... aiming to enhance and ensure its essential interests. And
currently, there are more and more perspectives and approaches to development
strategy as follows:
In Kenneth's opinion, Kenneth Andrews was the first to offer these outstanding
ideas in the classic book "The Concept of Corporate Strategy". According to him,
strategy means things that an organization must implement relying on their own
strengths and weaknesses as well as opportunities and threats in the context.
In Bruce Henderson's opinion, a strategist and founder of Boston Consulting

Group had strategic connections concept with a competitive advantage.. Competitive
advantage is to put a company in a better position to create rival economic value to
the customer. Henderson wrote that "the search strategy is a prudent action plan to
develop and incorporate competitive advantage of the organization. The difference
between you and the competition is the basis for your advantage. " Henderson
believes that it can not coexist 2 competitors if their business practices are same. Need
to create new differences may exist. Michael Porter also agreed with the endorsement
of Henderson: "Competitive strategy related to differences. It is the careful selection
of a different chain activities to create a set of unique values. "

-8-


Under the traditional approach, the strategy is to develop long-term view of
the overall as an organization to achieve long-term goals.. The researcher of history of
management , Alfred D. Chandler said that "strategy is the determination of the basic
long-term goals of the business and operations of the program along with the
allocation of resources necessary to achieve that goal." As such, his ideas reflected a
strategic planning process with lucidity, in which businesses choose their goals, define
action plans to accomplish the goals that best and find ways to allocate resources
accordingly. Traditional approach has the advantage that helps businesses easily
imagine the work that needs doing to strategic planning and see the benefits of a
comprehensive strategy for the long-term plan. However, in the business environment
with fluctuating shows the limitations of traditional approaches because it does not
have the ability to flexibly adapt to the change of business environment.
Under the modern approach, the strategy can what the broader that business
plans to implement.. According to Mintzberg's conception, he said that strategy is a
pattern in the flow of decisions and action plans. The pattern can be any type of
strategy: strategies designed in advance or mutation strategies. He provided models:
Modern approach to help businesses easily respond flexibly to changes in the business

environment and promote the creativity of the members of the enterprise. However, it
requires leadership, managers must have the qualifications, the ability to predict the
conditions for the implementation of strategies and assess the value of the mutation
strategy.
Through the above approach, we can understand that: Development strategy of
a business is the art of building a long-term goal and the implementation of policies
to guide and create competitive advantage of enterprises..
1.1.2 Role of developing strategy for business
Development Strategy plays an important role for the existence and
development of every business. Proper development strategy will create a good
direction for enterprise, development strategy can be regarded as a guide to lead the
way in the right direction. In fact, there are many small businesses have developed the

-9-


right strategy to achieve this success, surpassing competitors and make their position
in the market. Development strategy brings many benefits to the enterprise, its
importance is reflected in the following aspects:
- Development strategy helps business to guide its activities in the future by
analyzing and forecasting the business environment.. Business as activity is always
under the influence of external and internal factors. Development strategy helps
businesses both proactive flexibility to adapt to the fluctuations of the market, while
also ensuring that business operations and development in the right direction. That
can help businesses to strive to achieve the objective of improving its position in the
market.
- Development strategy helps businesses to seize the opportunities as well as a
full range of risk for the development of resources. It helps business to operate and use
resources, promote the strength of the business.
- Strategy to create a trajectory for business operations, business help link

individuals with different interests together towards a common goal, and business
development.. It creates a close bond between employees and between managers and
staff. Thereby strengthening and further enhance the enterprise's internal resources.
- Development Strategy is a tool of effective competitive business.. In the

conditions of globalization and economic integration now makes the influence and
mutual interdependence between enterprises. That process has created fierce
competition between enterprises in the market. In addition to competitive factors such
as: price, quality, advertising, marketing, business strategy also used as a tool to
develop effective competition.
1.1.3 Level of business strategy
The strategy is divided into 3 main categories:
i) Business strategy is the strategy of the corporation or enterprise to guide
business's activity and how to allocate resources to achieve common goals. Businesslevel strategy is a statement of the long-term goal, the development orientation of the
organization.

- 10 -


(ii) Development strategy to implement a strategic business areas, specific
business activities, the overall commitment and action to help businesses to gain a
competitive advantage by harnessing their core in specific markets, only businesses
constantly upgrade their competitive ad vantage then can be used to achieve longterm success of Business-level strategy.
(iii) Functional strategy is the implementation of operational functions of the
business such as HR strategy, marketing strategy. These are strategies related to the
operation of individual businesses to support the development strategy of enterprise
and business strategy. Functional strategy as a detailed statement of the goals and
methods of short-term actions are the functional areas used to achieve short-term
goals and long term goals of the organization. Functional strategy solve two problems
related to the functional area.

o The first is the response of functional areas for operational environment.
o The second, is to coordinate with the various policy functions.
1.1.4. Some important strategies in business
1.1.4.1. Overall competitive strategy
Definition: Overall competitive strategy reflects a fundamental way which
businesses compete in the market based on two basic characteristics are low cost and
differentiation, combined with the range of activities with two factors created Overall
competitive strategy:
Source of Competitive Advantage
Low Cost
Focus on low cost

Differentiation
Focus on

Differentiation
SCOPE OF COMPETITION
(Fred R. David (2006), "Explanatory of Strategic Management", Vietnamese
version, Statistical Publishing House)
Figure 1.1: Matrix of overall competitive strategy
(i) Low-cost strategy:: By all means, companies will produce products or
services at lower cost.

- 11 -


Advantages:
- Maybe sell product with the lower price than competitors while maintaining
profitability.
- If there is any price war, business will cost more resistant.

- Easy to withstand pressure when rising prices from suppliers.
- Creating barriers to entry.
Disadvantages:
- Opponents can provide a lower price;
- Easy to be imitated by competitors;
- The ability to find production methods with lower cost to competitors
- Due to target for low cost, businesses can ignore, fail to meet the changing
tastes of customers.
(Ii) Differentiation strategy: Businesses will create products and services that
consumers are only considered in their evaluation
Advantages:
- Maybe sell "outstanding" price compared to competitors, to increase sales
and profit margins achieved over average value.
- Creating customer's loyalty to the brand.
- There may be an increase in raw material's prices better than the low-cost business.
- Creating barriers to entry.
Disadvantages:
- Easy to be imitated by competitors.
- The loyal for trademarks prone to lose as information is more and product
quality is constantly improving.
- Businesses to take costly features that customers do not need on the product
- The change in the needs and tastes of customers very quickly that business is
difficult to meet.
- Needing to communication ability to promote business

- 12 -


(iii) Focus strategy (based on low cost or differentiation): Enterprise will
orient satisfy of customer groups or market segments defined by pursuing a certain

goal or difference, cost.
Advantages:
- Generating power for customer because corporate as unique provider of
products and services .
- Creating barriers to entry for potential competitors.
- Allows closer to customers and react to the changing needs ...
Disadvantages:
- Due to the small-scale production or to strengthen the competitive position caused a
high cost.
- Competitive position may unexpectedly lost due to changes in technology or
customer's tastes.
- Risk of changing focus market segment.
- Competition from differentiation or low cost businesses on a large scale.
(iv) Competitive strategy relies on other factors in the matrix of basis of basic
factors:
Leading on
the costs
Create product
differentiation
Market
Segmentation
Capacity to make
a difference

Low (mainly
by price)
Low (high
volume market)
Manufacturin
g and Materials

Management

Make a
difference
High
(primarily by the
uniqueness)
High (more
maket
segmentation)
R&D, sales
and Marketing

Figure 1.2: Matrix of basic factors

- 13 -

Focus
Low to high,
or the unique value
Low (one or
several segments)
Any ability to
make a difference


1.1.4.2. Typical strategy of enterprises
Definition: Typical strategy is a comprehensive approach, in order to achieve
the overall objectives of the business. The typical strategy of the enterprise:
• The diversification strategy.

• The integration of strategy.
• The strategic strength.
• The other strategy
(i) The diversification strategy based on changes in the scope of activities;
Search capability of symbiotic; Technology & Markets.
-

Concentric Diversification: Enterprise adds new products and services but

are related. This strategy is used in cases such as: A competition Business in the sector
is not developed or developed slowly; When adding new products but are related to
business products will enhance the sales of existing products; When the new product
will be sold with a highly competitive price; When new products related and sales in
season show balance of businesses; When current products are being in a recession,
when business has a strong management team.
- Horizontal diversification: Business adds new products, services for their
existing customers. Horizontal diversification is used in the following cases:
Revenues from current products will be affected if adding non-related and new
products, businesses have high competitive in the same sector or without growth;
existing distribution channels to be used to launch new products to existing
customers; When new product with sales model is not cyclical than the current
product.
- Vertical Diversification (combined): Enterprise adds new business activities
not related to their current operations. Vertical Diversification used for cases of:
Building competitive advantage (Front: market / back: suppliers); Differentiation
compared with competitors, control of complementary technologies (in the same
sector but one related to the different stages of the production process); Cutting
production cost.

- 14 -

-

(ii) Integrated strategy: Integrated strategy is enable businesses to gain

new resources, strengthen competitive capabilities. The integrated strategy is enable
businesses to gain control for distributors, and suppliers or competitors. The
integrated strategy includes:
- Front integration:: Enterprises applying this strategy to win the right to
ownership or increased control over distributors or retailers. This strategy is
appropriate if: The current distribution is expensive, unreliable, or do not meet the
requirements of the enterprise is no more proficient distributors, can create a
competitive advantage for those front-integrated businesses, in the sector is predicted
to develop highly; sufficient capital and manpower to manage the distribution of its
own products; When distributors and retailers have high profit margins.
- Back integration: Enterprises are seeking ownership or increased control
over suppliers. Back-Integrated strategy are appropriate if: The current supply is
expensive, unreliable, insufficient capacity to meet the needs of businesses, less
number of suppliers, the number of major competitors; number of companies in fast
growing sectors quickly; enough capital and manpower to manage the supply of raw
materials, product price is stability and crucial; suppliers have high profit margins;
enterprise needs to achieve the necessary resources quickly.
- Horizontal integration strategy: To seeking ownership or increased control
over the competition through M&A, partnership, alliance, ... enables enterprises to
increase the economies under scale and improve the transfer of resources and
symbiotic capacity. Horizontal integration strategy is appropriate when: Enterprises
owns exclusive features that are not affected by the reduced by the government;
enterprises in the sector developing; Economy under scale are added to create the
main advantages; sufficient capital and human resources to manage a new business;

When competitors weakened by the lack of management capacity or demand for
resources that only owns businesses.
- (iii) Intensity strategy:: As the strategy requires intensive efforts to
improve the competitive position of businesses with current products / services. There
are three types of intensity strategies as follows: Market penetration, market
development, product development.

- 15 -


-

Market penetration strategy: To increase the market share of products and

services through existing marketing efforts, increase the number of sales, increase
advertising costs, enhance PR, ... Market penetration strategy is applied when:
Market of products and services in the enterprise is not saturated; rate of consumption
of customer maybe increase, when the market share of competitors fell by the sector
sales are increasing; There are correlations between sales and marketing costs;
Increasing economies of scale bring the key competitive advantage.
- Market Development Strategy: to introduce products and services to
existing businesses to new markets (geographic). This strategy applies when: business
are available new reliable distribution channels with high quality, affordable,
enterprise gained success in existing markets, other markets are untapped or
unsaturated; There are enough resources extended enterprise management, when
enterprise is free capacity; When the product of business is fastest-growing with a
global scale.
- Strategy of product development: Enterprises looks to increase sales
through improving or modifying present products and services, however many costs
for research and development. This strategy is applies when: Products and services of

the business was on the "Ripen" stage of the life cycle, sector with rapidly-changing
business technology, competitors provide dominant product at the same price,
enterprises must compete in the sector with a high-speed of development, enterprise
can research and strong development.
(iv) Other strategies:
-

Consolidation strategy: As a strategy is gathered through cutting cost and

asset to impact sales and profits declining. Consolidation can lead to sell their land
and homes in order to create the necessary amount of cash, closing product lines,
closing the business line, closing obsolete factories, automating process, closing job
and establish a system of rational spending control.
- Cutting strategy: As strategic to sale a part of business. Stripping is often
used to create capital for the purchase of land or investment strategy. Stripping can be
a part of a strategy to consolidate the entire help business to go out from the

- 16 -


unprofitable sector, or require too much capital, or inconsistent with the other
activities of the business
- Liquidation strategy:: Strategy about sale all assets of a business, or part,
by its tangible value.
- Collaboration Strategy: Business to pursue a combination of two or more
strategies simultaneously.
1.2. Planning business development strategy
1.2.1 The process of strategic planning for business development
1.2.1.1. Identify tasks or mission of business
A strategic plan starts with a business mission was clearly defined. Mintzberg defines

mission as follows: "A mission to know the basic functions of an organization in social under
aspects of goods and services produced that organization to serve their customers."
The mission is a message expressed the core values of the business. It
expresses the important things, contribution of the Contribution of the business
and life, says the motto of the business, the position of enterprises in the market
and the business is committed to compliance. Mission statement should be concise
but meaningful include background, should be highly motivated and the long-term
stability.
1.2.1.2. Define business objectives
The goal in each period can be changed, but the vision, principles and
business-oriented to long-term, and must be disseminated throughout the enterprise to
each member to understand, full of pride and heart, full implementation. It was this
contributes to spirit of business what we called as corporate culture
We can imagine, guiding vision and core values of a business is a pyramid with
a square bottom, the position of the vision is at the top of the pyramid, and four
bottom sides of the pyramid are four core values that business must to direct or must
satisfy. Four bottom sides of the pyramid are: Customers, workers in the enterprises,
the shareholders and the communities in businesses operation. This means that the
direction by that strategic vision, the business activity to bring value for all four
groups above. If you see a thing as light, direction vision will lack the solidity of a

- 17 -


cylindrical pyramid - symbolizes the sustainable development of enterprises.
1.2.1.3. Analysis of the business environment
According to the authors D.Smith Garry, Danny R.Arnold, Bopby G.Bizzell in
"strategy and business strategy" that the business environment includes: Internal and
External business environments.

Macro Environment
The economic factor
The political factor
The social factors
Natural factors:
The technological factors
Microenvironment (sector)
The competitors
Customer
The supply
Potential rivals
Spread effects
The internal environment
Marketing
Production Technology
Manpower
Finance and Accounting
Management

(KD strategy and tactics - Garry D.Smith, Danny R.Arnold, Bobby G.Bizzell)

- 18 -


Figure 1.3: These factors of the business environment
a) Macro Environment
Economic Environment
This is a very important factor to attract the attention of all managers. The
evolution of the economic environment always contains opportunities and threats in
different industries and has the potential influence to strategy of business.

Several factors affect the business operations of the business such as: The
growth rate of the economy, interest rates;
Political Environment
- Politics:
Politics is the first factor that investors, business and managers are interested o
analysis to predict the level of safety in operation in the country, the region where the
relationship is having purchase or investment. Institutional factors such as political stability
or political changes in the country or a region is the original signal helps managers identify
opportunities or the risk of business to set out the investment decisions, production in these
areas.
- Legislation:
The issue of suitable legal system is the first condition to ensure fair business
environment for enterprises. The problem for businesses is to understand the spirit of the
law and in good standing rules of law, to take advantage of opportunities from the legal
terms and the timely against risks may result from the laws and regulations, avoiding
damage due to the lack of understanding of the legal.
Social and cultural environment
Social and cultural environment including norms and values that they are accepted
and respected by a society or a particular culture. Aspects of the socio-cultural
environment has a strong influence to the business such as: conceptions of ethics,
aesthetics, lifestyle, occupation, customs, practices, traditions, the level of awareness,
education of society, ...
Natural environment

- 19 -


Natural conditions, including geographic location, climate, natural scenery, land,
rivers and sea, the mineral resources in the ground, maritime forest, purity of the
environment, water and gas, ...

In many cases, the policy conditions become a very important factor to form the
competitive advantage of products and services. We can say that, the natural
conditions are always a key factor in human life (especially the factors of the
ecological environment), on the other hand, it also is a very input factors key
economic sectors such as: agriculture, sector, mining, tourism, transport, ...
Environmental technology
New technology can create conditions for the production of cheaper products with
higher quality, making the product with better competitiveness. The introduction of new
technology can make products with more features and can generate new markets for
products and services of the business.
However, the explosion of new technology makes technology cycles tend to
shorten, this further increases the pressure to shorten the depreciation period and
create pressure for businesses to technological innovation to increase their
competitiveness.
Impact pressure of technological development and expenditure for the development
of different technologies in the sector. For those industries affected by rapid technological
change, the process of evaluating opportunities and threats brought the technology
became a particularly important problem of the control of external factors.
b) Environment sector (micro environment)
New potential
competitors
The ability of
the price
squeeze
suppliers

Supplier

The risk of new
competitors The ability of

the customer price
The
pressure

competitors in
the sector

The intensity of
- competition
20 -

Customers


Risk by replacement product /
service

Replacement product

(Strategy and tactics D.Smith KD-Garry, Danny R.Arnold, Bobby G.Bizzell)
Figure 1.4. Model 5 - pressure of competitiveness of Michael Porter
The analysis of the micro-environment (competitive environment) to be
aware of 5 competitive pressures in the present and the future threatening to
the business.
Existing Pressure of competitors
One of 5 competitive forces by Michael Porter's model as competitive
companies already have strong positions in the market in the same line of business..
The number, size and strength of each competitor will have an impact on business
operations as well as business strategy . The higher level of competition, lower price
led to profits decrease.

The current competition is the organization running in the same business
sector, creating the competitive structure in the region, the constant pressure direct
threat to the enterprise.
The competitors are looking ways to increase sales, increase profits by
policies and measures to create disadvantages for businesses.
Because of limited market size, "competitive" business fight for market share by
means of discounts, promotional, promotions, persuade customers, improving the
product quality, create focus difference in providing products and services, creating
value for customers.
There are 3 important factors forming the level of competition between the
companies operating the same business sector, that is: Competitive structure,
sector growth; barrier preventing businesses out of business.
The power of customer

- 21 -


Customers are entitled to service by enterprises, as survival factor, not customers
then no business. Buyers can be viewed as a competitive threat when they force down
prices or businesses in need of high quality and better service.
While purchasing, customers often use their power to make adverse claims to the
seller of the purchase price, terms of delivery, product quality, payment terms ...,
creating pressure to reduced profitability of the business.
Thus, customers have a god just as competitors of the business, customers bring
business opportunities to enterprises, but also can take away the profits of the
enterprise.
Therefore, when developing strategies for business needing to be aware of the
opportunities and risks that may occur due to customers bring to the specific plan
to take advantage of opportunities and minimize these risks.
The power of suppliers

Business activities and inputs required by the supplier. Each advantage in trade
belongs based on the number of participants in this market, in other words, based on
the supply-demand relationship of inputs on the market.
The business provides production factor for businesses such as machinery,
equipment, spare parts, design consultancy services, transport services ... in business
negotiations can also create pressure the price of the offer and method of payment will
threaten to the interests of the business. But sometimes also create good business
opportunities for the company. Creating competitive advantage in the supply process,
strategic alliances, the solution is to reduce the pressure of environmental factors.
In strategy development, supplier analysis to help businesses recognize the
advantages and disadvantages of supply of inputs to the production process in the current
and in the future, which set out solutions, the appropriate functional strategies to achieve
business goals. When the supplier has an advantage, they can create pressure strong and
detrimental to business.
Pressure of potential competitors
Potential competitors include companies that currently do not face

- 22 -


competition, but still be able to compete in the future. The presence of potential
competitors as well as increased competition for business in the sector.
Threat of this component is likely to account for the market share of the current
production, reducing the average profit of the sector in the future, which forced
businesses to judgment and response.
Normally, these companies have competitive advantages in product quality,
after-sales services or the possibility of product specialization. The brand loyalty is
preventing new participating businesses from grabbing market share in the market.
It’s costly for potential businesses to break the favor that has been strengthened for
previous prestige brands of customers.

Potential rivals may be a factor in reducing the profitability of the company as
they put into operation new production capacity, with the desire to gain market share and
the necessary resources. When the analysis of threat level of the potential entrants, people
often come to analyze the factors that create barriers to entry, which is a combination of
the factors preventing new entrants into the business of a certain sector. If barriers is high,
its threat is low and vice versa.
Pressure of substitute products
Final threaten Forces of M.Porter is the threat of substitute products.
The appearance of substitute products is very diverse and complex creating risks
of price competition for old products, reducing the profitability of the business.
Alternative products limit potential profit of an industry by placing a maximum price
level that all companies in the industry can be profitable. This is reflected by the
elasticity of demand by cross price.
Due to interchangeable products, it leads to a competitive market. When the
price product increases, the trend of using alternative products is higher and vice
versa. The more attractive the ability to choose the price of alternative products is, the
stronger the threshold for the profitability is.
So, alternative products can brings opportunities for businesses to expand
production catalogs, looking for new markets, but also brings significant challenges for

- 23 -


businesses if their products now do not compete with it.
c) Analysis of enterprise internal environment
Internal environment includes the system of visible and invisible factors
existing in the normal business course of enterprises or organizations and directly
influences the strategic management process.
Therefore, analyzing the internal environment is essential for all types of
economical organizations; this is the basis to help businesses know the strengths and

weaknesses compared to its competitors’ at the same time, help managers learn the
ability to grasp opportunities in the market for each period. Internal environment
analysis helps administrators clearly identify their position and give proposals of
solutions to leverage existing strengths and limit weaknesses in order to reduce risks
from external environment .
Analysis and assessment of resources
Workforce
Personnel is the core factor in all activities of the business, determines the
success or not of the businesses, organizations in each country.
In businesses, this factor is extremely important because all decisions relating to
the strategic management process are made by human beings, the strong or weak
ability to compete in the market; good or bad organizational culture ... comes from
humans being.
Regular workforce analysis is the basis to help businesses and organizations to
promptly assess the strengths and weaknesses of staff compared to personnel
standards required for each stage of the job and compared to competitors’ human
resources so that the company can arrange plans of using existing human resources.
At the same time, objective assessment will help businesses be proactive in
training and re-training their staff from top executives to officers to implement the
strategy successfully, long-term and adaptively to the requirements of improving
continuously the quality of human resources.
Material resources

- 24 -


Physical resources include such factors as: production capital, plant equipment,
storage of materials, information, business environment etc. .. Every business has
characteristics about own physical resources, including both strengths and
weaknesses compared to competitors in the sector.

Adequate analysis and evaluation of material resources is an important basis to
help business managers understand potential material resources, limitations etc. .. to
make management decisions to adapt to the practical situation such as: maximum
exploitation of capital resources and existing facilities, selection and mobilization of
external funds, selection of partners to increase the scale of material resources,
reserve a necessary proportion to ensure the ability to cope (defensive or offensive)
with competitors on domestic or foreign markets …
Intangible resources
In addition to the resources mentioned above, every business or organization has
other resources that are identified only through perception, it is intangible resources.
This resource may be the overall success of all members in the organization or a
particular individual that affects the organization’s operation.
Depending on available resources, the size and value of this resource are
different among enterprises and change from time to time. If intangible resources are
not recognized and appreciated properly, managers are easy to loose their companies’
existing advantages in the production and business process.
In fact that many businesses have not only recognized the importance of
available intangible resources yet, not taken advantage of, just looked down or wasted
them, but also fueling to competitors by selling their intangible resources to them at
cheap price.
In summary, the resources of every business are diverse. The characteristics,
activities, size, structure of these resources are different among enterprises.
Adequate analysis and assessment of existing and potential resources in each
period will help business executives clearly determine their progress in the
development process. At the same time, it helps identify their strengths and

- 25 -