Building the competitive strategy for ATS law firm Co., in the period of 2018-2022 = Xây dựng chiến lược cạnh tranh của Công ty Luật ATS trong giai đoạn 2018 - 2022

ĐẠI HỌC QUỐC GIA HÀ NỘI
KHOA QUẢN TRỊ VÀ KINH DOANH
---------------------

BÙI HỒNG HẠNH

BUILDING THE COMPETITIVE STRATEGY
FOR ATS LAW FIRM CO., LTD IN THE PERIOD OF 2018- 2022

XÂY DỰNG CHIẾN LƯỢC CẠNH TRANH
CỦA CÔNG TY LUẬT ATS TRONG GIAI ĐOẠN 2018-2022

LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

Hà Nội - 2017


ĐẠI HỌC QUỐC GIA HÀ NỘI
KHOA QUẢN TRỊ VÀ KINH DOANH
---------------------

BÙI HỒNG HẠNH

BUILDING THE COMPETITIVE STRATEGY
FOR ATS LAW FIRM CO., LTD IN THE PERIOD OF 2018- 2022

XÂY DỰNG CHIẾN LƯỢC CẠNH TRANH
CỦA CÔNG TY LUẬT ATS TRONG GIAI ĐOẠN 2018-2022

Chuyên ngành: Quản trị kinh doanh
Mã số: 60 34 01 02

LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

NGƯỜI HƯỚNG DẪN KHOA HỌC: PGS.TS. HOÀNG ĐÌNH PHI

Hà Nội - 2017


DECLARATION
The author confirms that the research outcome in the thesis is the result of
author‟s independent work during study and research period and it is not yet published in
other‟s research and article.
The other‟s research result and documentation (extraction, table, figure, formula,
and other document) used in the thesis are cited properly and the permission (if required) is
given.
The author is responsible in front of the Thesis Assessment Committee, Hanoi
School of Business, and the laws for above-mentioned declaration.
Date…………………………..

i


ACKNOWLEDGEMENT
Foremost, I would like to express my sincere gratitude to my advisor Assoc. Prof. Dr.
Hoang Dinh Phi for the continuous support of my master study and research, for his
patience, motivation, enthusiasm, and immense knowledge. His guidance helped me in all
the time of research and writing of this thesis.
Besides my advisor, I would like to thank to MBA studying course, and the team of HSB‟s
lecturers and supporting staff. Without partcipating the course, as well as the caring and
responsibility of them, I could not have opportunity to access and absorb the useful

knowdlege for framing my comprehensive understanding about business administration.
My sincere thanks also goes to Ms. Vu Thi Thu Ha, director and Mr. Tran Gia The,
managing partner of ATS law firm, for offering me the opportunities to access, interview
and discover the necessary information of the firm, for completing the thesis.
Hanoi, date_____

ii


TABLE OF CONTENTS
DECLARATION .................................................................................................................... i
ACKNOWLEDGEMENT ..................................................................................................... ii
LIST OF TABLES ................................................................................................................. v
LIST OF FIGURES .............................................................................................................. vi
THESIS STATEMENT ......................................................................................................... 1
CHAPTER 1: BASIC THEORIES ON BUILDING THE BUSINESS COMPETITIVE
STRATEGY........................................................................................................................... 5
1.1. Basic definitions ............................................................................................................. 5
1.1.1. Competitive strategy and its classification ............................................................... 5
Competitive strategy can be classified as follows :............................................................ 6
1.1.2. Roles of competitive strategy .................................................................................. 7
1.1.3. Competitive strategy of the business unit ................................................................ 8
1.1.4. Comprehensice competitive strategy of the business unit ....................................... 8
1.1.5. Growth strategies of business units ........................................................................ 11
1.2. Competitive strategy building process .......................................................................... 16
1.2.1. Diagram of competitive strategy building process................................................. 16
1.2.2. Competitive strategy building process ................................................................... 18
CHAPTER 2: ASSESSING THE CURRENT SITUATION AND

THE PRESENT

COMPETITIVE STRATEGY OF ATS LAW FIRM CO., LTD ........................................ 25
2.1. Introduction of ATS law firm ....................................................................................... 25
2.1.1. General introduction of ATS law firm ................................................................... 25
2.1.2. Vision and mission ................................................................................................. 26
2.1.3. ATS‟s business activities ....................................................................................... 26
2.1.4. Organizational structure ......................................................................................... 28
2.1.5. Current business operation ..................................................................................... 29
2.2 Analyzation of the external factors affecting the business operation of ATS law firm . 30
2.2.1. Macro environment factors .................................................................................... 30
2.2.2. Micro environment ................................................................................................. 33
2.3. Identification of opportunity and threat ........................................................................ 38
2.4. Matrix evaluation of the external factors (EFE) ........................................................... 38

iii


2.5. Analyzation of the internal factors (IFE) ...................................................................... 40
2.5.1. Executive capability ............................................................................................... 40
2.5.2. Human resources .................................................................................................... 41
2.5.3. Marketing activities ................................................................................................ 43
2.5.4. Financial situation of ATS ..................................................................................... 44
2.6. Identification of ATS‟s strengths and weakness........................................................... 44
2.7. Matrix of the internal factor analyzation (IFE) ............................................................. 45
2.8. SWOT matrix of ATS law firm .................................................................................... 46
2.9. The current business strategy of ATS ........................................................................... 48
CHAPTER 3: PROPOSAL OF SOME SOLUTIONS TO IMPLEMENT THE
COMPETIVE STRATEGY IN THE PERIOD 2018-2022 ................................................. 49
3.1 Orientation of the Government on the economic development by 2025 and expectation
of changes on environment and market, and the development of the lawyer profession .... 49

3.2. Development orientation and operation target of ATS law firm in the period of 20182022 ..................................................................................................................................... 50
3.3. Competitive strategy of ATS in the period of 2018-2022 and the action plan. ............ 50
3.3.1. Building the competitive strategy of ATS in the period of 2018-2022.................. 50
3.3.2. Competitive strategy of ATS in the period of 2018-2022 and action plan ............ 55
3.4. Appraisal of the supervision and result of the action plan ............................................ 59
3.5. Suggestion to ATS ........................................................................................................ 59
3.6. Disadvantage of the thesis and the possible next coming research .............................. 59
CONCLUSION .................................................................................................................... 60
LIMITATION ...................................................................................................................... 61
IMPLICATION ................................................................................................................... 62
REFERENCE....................................................................................................................... 63
ANNEX 1 ............................................................................................................................ 65

iv


LIST OF TABLES

Table 2.1 Revenue in period 2014-2016 ............................................................................. 29
Table 2.2 Matrix evaluation of the external factors of ATS law firm ................................. 39
Table 2.3: Partners/Consultants/lawyers qualification analyzation sheet ............................ 41
Table 2.4: Partners/Consultants/Lawyers professional analyzation sheet ........................... 42
Table 2.5: Partners/Consultants/Lawyers hospitality analyzation sheet .............................. 42
Table 2.6. Financial situation of ATS ................................................................................. 44
Table 2.7: Internal factor analyzation matrix ....................................................................... 45

v


LIST OF FIGURES

Figure 1.1. Traditional process of providing values to customers ...... Error! Bookmark not
defined.
Figure 1.2. Modern process of providing values to customers ........... Error! Bookmark not
defined.
Figure 1.3 Strategy management model of F.David ............ Error! Bookmark not defined.
Figure 1.4 Five-competitive pressure model of M.Porter .... Error! Bookmark not defined.
Figure 2.1 Organizational structure of ATS law firm .......... Error! Bookmark not defined.
Figure 2.2 : Vietnamese GDP over the recent years ............ Error! Bookmark not defined.

vi


THESIS STATEMENT
1. Necessity of the thesis:
The thesis is necessary, because the competition in the legal industry is very hard.
The barrier entry of the industry is very low. Due to the low investment cost for such
an intangible service industry, it is very easy for the new competitor to join the
industry.
Besides, there are many law firms who have the similar strategy and market share.
They focus on the foreign direct investment, commercial and enterprise law
consultancy, and providing such services to the foreign invested companies, and the
large or medium Vietnamese companies.
Meanwhile, the demand for the legal service has not developed significantly over the
recent years.The acknowledgement of the public in general and the enterprise
community about the importance of law compliance and role of lawyers is not high.
The enterprise community, sometimes, dare to violate the laws, and when they have to
face with the penalties from the government authorities, they are ready to pay the under
the table lobby fee to the government officers, rather than fully comply with the laws,
or hiring the lawyers to protect themselves. Due to the Vietnamese old fashion culture
of respecting the “friendly and emotional relationship, and avoiding solving the dispute

or conflict through legal proceeding or lawyers”, they see the lawyer fee is an
unnecessary They just find lawyers after already facing with the troubles or dispute,
instead of seeking the assistance from lawyers in advance, for avoiding any possible
risk in the future.
Due to the economic crisis which has been happening over nearly ten years, both the
foreign investment volume into Vietnam, and the domestic economic investment or
commercial activities reduced or standstill, resulting in the significant reduction of
demand for lawyer services.
Otherwise, the legal consultancy industry is saturated, after nearly sixteen years of
development.
Therefore, for surviving and developing in such hardship situation is the critical target,
for not only the long term established law firms, with the large market share, but also
the young and medium- size law firm like ATS.
From the above reasons, the writer decides to choose the topic “Building the
1


competitive strategy for ATS law firm in the period 2018-2022” with aims to find
out the effective strategy for the stronger stability of the law firm in the current
situation, and its development in the future.
2.

Objective of the research

Purpose of the research: Basing on the theories on the business strategy management
on designing the practical business strategy, and analyzing the actual impact of the
business environment on the company business operation, as well as basing the future
business operation of ATS law fim in the period of 2018-2022, with aims to enhance
its competitive advantages and development in the situation of harder competition and
international economic integration.

Research duties: The specified duties that the thesis aims to is as of follows:
1) Why is it necessary to research the business strategy design in ATS law firm ?
The answer of this question serves the identification of the necessity and meaning of
the research purpose, research situation, the approaching method, as well as using of
research methodology for achieving the planned target.
2) What is the theoretical bases of the business strategy design? Which theretical
models are used for analyzing and defining the business strategy of ATS law firm?
The answer of the research aims to identify the theoretical bases for defining ATS law
firm‟s business strategy by using models such as five forces, value chain, SWOT
matrix, etc..
3)Which factors that can impact the actual business operation of ATS law firm in the
period 2014-2017? Strenghth, weakness, opportunities and threats that ATS has and
faces with?
The question is answered by developing the theoretical bases in Question 2 above for
collecting information, analyzing data for identifying the business strategy of ATS.
4) What is the competitive strategy of ATS in the future? What are the solutions for
implementing the future competitive strategy?
This part will solved by suggesting the optional competitive strategies for ATS, as well
as its action plan in the next coming time.
3.

Subject of the research

Subject of the research include the following factors:
(a)

Analyzing the current internal and external factors impacting to ATS law firm.
2

(b)

Analyzing the current strategy applying in ATS law firm, finding out its
advantages and disadvantages.

(c)

Suggesting the solution for improving the disadvantages of the current strategy
of ATS law firm.

(d)

Overseeing the future socio-economic development in the period of 2018-2022.

(e)

Building the future strategy for ATS law firm in the period of 2018-2022.

4. Scope of the research
The scope of the research is within ATS law firm, its external and internal aspects in
the period of 2014-2017, and suggestion for the period 2018-2022.
5.

Research methodology

The methodology of the thesis is based on the view of dialectical materialism,
historical materialism to link theory to reality.
5.1 Data collecting methods
Collecting and researching the primary information throughconducting the survey
through circulating the questionnaires to the targeted groups such as the researched

object (ATS law firm), the direct competitor group, the indirect competitor group (the
replacing service), the targeted client group, and the management government
authority.
The planned survey questionnaires to be circulated shall be about 20-30 interviewees.
The survey shall be done as follows:
Direct interview: with ATS law firm. It is the face to face interview with the directors
of ATS, for collecting the necessary information.
Indirect interview through sending the questionaires to emails of the interviewees.
Location: Hanoi, Vietnam
Time for conducting the survey: October 2016-January 2017
Targeted interviewees: ATS‟s clients, including main groups of clients such as
Japanese, Korean enterprises, Vietnamese giant corporations and state owned
companies.
Collect the secondary information resources such as annual comprehensive data
report of law firms and transactions issued by Ministry of Justice, annual report on
socio- economic development of Vietnam in period 2014, 2015 of General Statistic
Bureau, Vietnam economic situation in 2015 reported by World Bank, online articles
3


on business development strategies and marketing tips for law firms.
5.2

Data analyzation methods

The writer uses 2 data analyzation methods:

quantitative methods using excel

software for evaluation through the statistical survey questionnaire; qualitative

methods such as analysis of rules, synthesis, interpretation, inductive, comparative.
6. Thesis structure
The thesis structure is as following:
Chapter 1: Theories on building the competitive strategy
Chapter 2: Assessing the current situation and current competitive strategy of ATS
law Firm Co., Ltd
Chapter 3: Proposal of some solutions to implement the compettive strategy of ATS
law firm in 2018-2022

4


CHAPTER 1
BASIC THEORIES ON BUILDING THE BUSINESS COMPETITIVE STRATEGY
1.1. Basic definitions
1.1.1. Competitive strategy and its classification
It is easily to see the appearance and establishment of new business in many industry every
day, as well as the hard competition between the competitors. Some of them exceed
comparing with the other players, but many of them are left behind and many others
disappear from the market.
So what is the difference between the winner, the existing one, and the loser in a market, or
an industry? The answer could be the talent of the leaders of the company, their cabilities,
the unluckiness that the companies may face with, etc… However, one of them, the most
important factor is the business strategy that the company applies.
The reason why having an effective strategy is so important is because it gives business
time to get some sense of how they are performing, what their capabilities are, and if these
capabilities are able to help them grow.
A business strategy, in a simple term, is a documented plan on how an organization is
setting out to achieve their goal. A business strategy contains a number of key principles
that outlines how a company will go about attaining these goals. For example, it will

explain, how to deal with your competitors, look at the needs and expectations of
customers, and will examine the long term growth and sustainability of their organization.
The business strategy is an interesting topic and paid much attention by different scholars
and researchers, along with the historical development of business administration.
The definition of strategy are also paid much attention by the famous business strategist,
Micheal Porter, in his book “Competitive strategy” “competitive strategy is a
combination of the ends (goals) for which the firm is striving and the means (policies) by
which it is seeking to get there”
Developing the definition, as well as connecting the strategy with the competitive
advantages, Brace Henderson, the strategist, as well as the founder of Boston Consulting
Group, stated that “Strategy is the prudent seeking of an action plan for developing and
combining the competitive advantages of an organization”.
Analyzing the above mentioned definitions, we can see the main common features as
5


follows:
-

Identifying the long term target of the enterprise/organization.

-

Setting up the comprehensive action plan.

-

Choosing the performance policies, mobilizing the resources for implementing the
target.

Competitive strategy can be classified as follows :
(a)

Managing classification:

Basing on the managing level, strategies are classified into 3 following groups:
(i)

Corporate level

The corporate level strategy has the below contents:
-

Identifies the target and core business activities of a corporation.

-

Creates the important policies and plans for achieving the corporation‟s target,
mobilizing the resources among different business activities.

(ii)

Corporate level strategies apply to the whole corporation.
Divisional level
The divisional level has the below contents:

-

Idenfies the specified products/services or markets within the internal of the
corporation.

-

The participation that each division of the corporation has to fulfill for
contributing the corporate level strategy.

(iii)

Functional level

The functional level has the below contents:
-

Focusing on assisting the corporate level strategy.

-

Focusing on specified operating activities.

(b)

Development orientation classification

Basing on the functions, the strategies could be classified as follows:
(i)

Combination strategy group

Combination strategy group includes the forward strategy, the backward strategy, and
the horizontal strategy.

Forward strategy: The enterprise increases expands or increase its ownership to the
distributors or retailed sale agencies, with aims to get better profit margin.
Backward strategy: the enterprise expands or increase its ownership to the supplier,
6


with aims to control the input expenditures.
Horizontal strategy: the enterprise has its own ambition to merger & acquisition with
the other competitors in the same industry, for focusing the resources; expanding the
scope of business activities and increasing the competitiveness of the enterprise.
(ii)

Intensive strategies

There are following intensieve strategies:
Market penetration strategies: A market penetration strategy involves focusing on
selling the existing products or services into the existing markets to gain a
higher market share.
Market development strategies: Market development is a growth strategy that identifies
and develops new market segments for current products. A market development strategy
targets non-buying customers in currently targeted segments. It also targets new
customers in new segments.
Product development strategies:

This strategy is employed when a company's existing

market is saturated, and revenues and profits are stagnant or falling. A product
developmentdiversification strategy takes a company outside its existing business and a
new product is developed for a new market.
(iii)

Diversification strategies

Diversification strategies include the following:
Concentric

diversification

strategy:

Concentric

diversification is

a

type

ofbusiness strategy where a company acquires or creates new products or services to
reach more consumers. These new products and services usually are closely related to the
company's existing products and services.
Horizontal diversification: The horizontal diversification is a type of business strategy
where the company provides the new products and/or services which are not related to the
current products/services to the current targeted customers
Mixed activity diversification: the mixed activities diversification is a type of business
strategy where the company provides the new products, services without any relation to the
current products or services to the current market share.
1.1.2. Roles of competitive strategy
(a) Role of targeting and orientation:

7


Competitive strategy plays an important role in mapping out the target and development
orientation of the enterprise. It helps the executives to identify the roadmap the
enterprise should go, as well as its expected outcome.
(b) Role of forecasting:
The enterprise exists and operates in an evolving environment, and is impacted
significantly by many economic, political, social, technology factors, etc. Therefore, it
is necessary to forecast the change of such factors, with aims to find the possible
solutions for preventing risks arising from such change, as well as amending the
strategy of the enterprise, for take advantage effectively from the change.
(c) Role of management:
Apart from setting up the orientation and roadmap for achieving it, it is necessary for the
executive of the enterprise to mobilize, arrange and use the necessary resources
effectively for implementing the action plan and obtaining the expected result.
1.1.3. Competitive strategy of the business unit
Competitive strategy of the enterprise includes two following groups: the
comprehensive competitive strategy, and the grow strategy.
1.1.4. Comprehensice competitive strategy of the business unit
According to Micheal Porter, there are four types of comprehensive competitive
strategies: low cost; diversification; focusing; and fast reaction)
(a)

Low cost strategy:

The purpose of the enterprise that follows the low cost strategy is to compete by
providing the products or services with lower cost compared with the same one of the
similar competitors.

(i)

The low cost strategy has the following features:

-

Focuses on renovating the technology and management process for reducing cost.

-

Do not focus on the diversification or differentiation.

-

Do not focus on R&D activities for creating the new functions of the products
and/or services.

-

The targeted customers shall be the low- end or mid- end level who concern very
much on their expenditures for buying products or services.

(ii)
-

Advantages of the low cost strategy:
Strong competitiveness with the replacing products and/or services.
8

-

Good negotiation position with the suppliers.

-

Create the barrier to market entry.

(iii) Risks of the low cost strategy:
-

Huge investment in technology for manufacturing mass production with low cost
per unit

-

It is possible to be copied or imitated.

-

Just focusing on the basic demands of the customer, and does not take care of the
added value of the products and/or services to be provided to the customer.

(b)

Differentiation

The purpose of the enterprise that follows the differentiation strategy is to compete by
creating the unique and different features of the products, services, and satisfying the
customer‟s demands exceeding what the other competitors cannot provide.

(i)
-

Features:
The enterprise can charge higher price of the products and/or services, compared
with other competitors.

-

Focusing on the differentiation.

-

Classifying the market into different segments.

(ii)

Advantages:

-

Creating brand loyalty.

-

Strong negotiation force with the suppliers and customers.

-

Create significant market entry.

-

High competitiveness with the replacing products.

(iii) Risks:
-

It is very challenging to remain the unique features of the products and/or services.

-

Face with the imitation of the competitors.

-

The customers may not be always faithful to the products and/or services.

-

Too unique more than what the customers want.

(iv) The relation between the differentiation and the customer’s demands
-

The differentiation must satisfy the specified demands of the customers, and
may be modified for the particular customer segments. Beside, it must create
better or more interesting features of the products and/or services, compared
9

with the (similar) products and/or services of the competitors.

-

The differentiation must create the unique features of the products and/or
services that the competitors cannot imitate.

(c)

The differentiation must be based on the particular advantages of the enterprise.
Focusing strategy

Focus strategy is only to meet specific needs of a particular market segment by
geographic feature, customer or product characteristics that specifically meet these
specific needs.

(i)

Features:

-

Can explore special capabilities of the company.

-

Can pursue product differentiation strategy.

-

Focus on the target segment.

(ii)

Advantages:

-

Can provide unique, special products or services that other competitors cannot.

-

Understand clearly the target segment.

(iii) Risks:
-

No advantages in the company‟s relationship with the suppliers.

-

High production cost.

-

Changes in technology or customer taste.

(d)

Quick response strategy

In the competition, companies often start with low cost strategy, and then turn into
differentiation strategy, and later on, the combination of these two strategies. Today,
many companies gain competitive advantages by focusing on timely delivery. This is
reflected in the following aspects:

-

New product development.

-

Product personalization.

-

Existing product improvement.

-

Purchase order based product distribution.

-

Adjustment of marketing activities.

-

Taking care of customer‟s requirements.

10


1.1.5. Growth strategies of business units
There are three growth strategies, including intensity strategy (market penetration,
product development, market development), integration strategy (forward integration,
backward integration and horizontal integration); diversification strategy (concentric
diversification, horizontal diversification, and conglomerate diversification)
(a)

Intensity strategy

(i)

Market penetration

Market penetration strategy is a strategy of increasing sales and profits by striving to sell
more existing products on current markets through marketing activities.
With this strategy the company can increase its market share by strategic solutions:
Increase the purchasing power of customer
The purchasing power of customer is expressed in the relation between the purchasing
frequency and the purchasing volume. In order to increase the purchasing power of
customer, the company can select suitable solutions such as product differentiation,
packaging improvement, marketing & promotion, and other solutions to minimize
production cost in order to have a reasonable pricing, etc.
Attract competitor’s customers
The company can attract customers from competitors if it can enhance its special
capabilities and especially focus on marketing activities such as product improvement,

packaging, pricing, distribution system, etc.
The company may consider seeking to retain greater control by acquiring one or more
competitors.
Under the regulation of the law on free competition protection, caution must be given
when choosing this strategy to avoid violation against antitrust laws. However, as
mentioned above, companies rarely choose this strategy to maintain corporate culture.
On the other hand, market penetration may also include the increase in the overall
market size by making new customers (in the existing market) be familiar with the
company‟s products.

(ii)

Product development

Product development strategy is a strategy to increase sales and profits by developing
new products for sale in the current markets of the company. New products that can be
selected under this strategy are improved products and brand-new products (designed by
11


R&D department of the company or the patent is bought from a research institution),
new products emulated from leading companies in the national or international market
(socialized copyrights).
In fact, the strategy of improved products is the first priority of most companies in the
world and becomes a driver of the competitive advantage in the market.
It is necessary to diversify products and services in order to make use of strong capital
and available human resources along with a distribution network throughout the
provinces and cities. Better care and services are required to satisfy the customers‟
demand. Market opportunities are growing. Therefore, the company has launched many
service packages appropriate with customer demands as well as expanded many business

areas to take advantage of all capacity of the company to occupy the market and become
the leading supplier in several advantageous areas.

(iii) Market development strategy
Market development strategy is a strategy to increase sales and profits by selling existing
products in new markets. Under this strategy, when the demand of the current market
decreases, the company needs to find new markets to sell products with the following
solutions:

-

Find new markets in new area, including other territories and countries

This solution is selected by many companies in developed countries all over the world to
boost their sales and profits. However, when deciding to develop new markets, it is
important to consider the opportunities and threats as well as strengths and weaknesses of
the company against its competitors. Also, income, expense and market development
opportunities are worth considering. On the other hand, the company needs to pay
attention to the marketing strategy to develop new market successfully. Nowadays, many
enterprises in our countries have various opportunities to develop new markets in this
direction, thanks to the Government‟s diplomatic activities and the enterprise‟s efforts to
find new customers.

-

Look for new target customers.
This solution includes looking for new target customer groups in the existing
markets. When designing its original products, many companies only targeted one
or several target customers. During its development, marketing executives and
salesmen found out that other audiences might also have demand for these

12


products through intentional or accidental market surveys.

-

Identify new product values
A product has many potential uses, which researchers as well as manufacturers did
not discover right from the very beginning. From time to time, more information
about new uses can be found by product designers. Then, product designers,
existing users, sellers, and managers may find out new potential values. Each new
value can create a completely new market for the company and help the company
extend the life cycle of the product.

(b)

Diversification strategy:

Diversification strategies are strategies to increase sales and profits by engaging in other
industries that are or are not related to the current business lines of the company. An
enterprise can apply diversification strategy by investing in the development of
completely new business units, acquiring all or a part of an enterprise facing financial
difficulties, joint venturing with other enterprises, buying shares, etc.
Concentric diversification strategy: a strategy to increase sales and profits by
developing new products that are related to the company's existing products and relevant
with the existing technology or under new technology to supply to new markets.
Conglomerate diversification strategy: a strategy to increase sales and profits by
developing new products that are not related to the company's existing products under
the new technology to supply to new markets.

Horizontal diversification strategy: a strategy to increase sales and profits by
developing new products that are not related to the company's existing products under
the new technology to satisfy additional demand of existing markets.
(c)

Integration strategy

Forward integration strategy: a strategy in which a company increases sales and
profits by engaging in the distribution of its products and services.
Forward integration is suitable with the following situation: Product distributors are
growing rapidly with high potential profit; the company has not made full use of its
available resources. The company has difficulty in consuming its existing products.
Backward integration strategy: a strategy to increase sales and profits by engaging in
the input supply (mainly the supply of raw materials and goods) to the current business
units of an enterprise.
13


Backward integration is suitable with the following situation: Suppliers are growing
rapidly with high profit margin, and the enterprise has unused potential resources. The
enterprise faces difficulties in input sourcing such as unstable supply, high cost, pressure
on price or delivery conditions, unreliable delivery term.
Horizontal integration strategy: to seek ownership or increase control over competitors
through M&A, cooperation, alliance, etc., allowing enterprises to scale up their
businesses and improve the transfer of resources and symbiotic capacity.
This strategy is applied when:

-

The enterprise has monopolistic characteristics that are not influenced by the

government on competition reduction;

-

The enterprise operating in developing industries;

-

The economies of scale provide major advantages;

-

The enterprise has sufficient capital and manpower to manage the new business;

-

When a competitor is weakened due to poor management capacity or requires
resources that are exclusively owned by the enterprise.

Market competition structure theory (M.Porter)
According to Michael Porter: Competition is to gain market share. The essence of
competition is to seek profit, which is higher than the average profit that an enterprise
has. The result of competition process is profit equilibrium in the industries, which may
lead to price reduction.
According to Michael Porter, an enterprise‟s competitiveness consists of four factors:
(a)

Internal factors of the enterprise: Human (quality, skills); qualification
(science and technology, market experience); capital, etc.

These factors fall into two categories:

-

Category 1: Basic factors, such as natural environment, geography, labor;

-

Category 2: Advanced factors, such as information, high level labor, etc.

In particular, the latter is critical to the competitiveness of an enterprise. They decide
competitive advantage at high level and with proprietary technologies. In the long term,
this is a decisive factor that must be invested adequately and properly.
(b)

Customer’s needs

This has a great impact on the development of the enterprise. In fact, no enterprise can
satisfy all the requirements of customers. Normally, when it has advantages in one
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aspect, it also has limitations on the others. The basic point is that the enterprise must be
aware of this problem and try to optimize its strengths to satisfy the requirements of
customers to the best extent. By trying to satisfy the needs of customers, an enterprise
can take advantage of its scale, thereby improving its business and services. Customer
demands can also suggest the enterprises to develop many types of new products and
services. These new products and services can be developed extensively on the market
and then the enterprise is the first to gain competitive advantage.
(c)

Relevant and auxiliary fields

The development of the enterprise cannot be separated from the development of relevant
and auxiliary fields such as: financial market, the development of information
technology, etc. Today, together with the development of information technology, banks
can track and participate in financial market 24 hours a day.
(d)

Company’s strategy, sectorial structure and competitors

The development of an enterprise will be successful if it is managed and organized in a
suitable environment and stimulates its competitiveness. Competition among enterprises
will be the driving force for improvement and change in order to reduce costs and
improve service quality.
Among the four factors mentioned above, factors 1 and 4 are considered internal factors
of the enterprise, meanwhile factors 2 and 3 are factors that influence and promote its
development.
In addition, two factors that an enterprise needs to consider are opportunities and the role
of the Government. The role of the Government has a significant impact on the
competitiveness of the enterprise, particularly in defining technology, training and
subsidy policies.
According to Ph.Kotler, the goal of any enterprise is to provide values to customers to
satisfy their needs and gain profit. There are two points-of-view related to customer
satisfaction value. In a traditional point of view, an enterprise must first have a product
in order to provide value to customers. Then, the enterprise calculates the price, informs
customers, and consumes products. This view is only successful in scarce market
conditions.

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Product
creation

Pricing

Customer
informing

Product
consumption

Figure 1.1. Traditional process of providing values to customers
According to modern perspectives (Ph. Kotler), the process of value provision consists of
3 steps:

-

Step 1: Select the values. In this step you need to segment the market, select the
appropriate target market, and locate the product (i.e. differentiate the product from
competing products).

-

Step 2: Create the values. In this step the company must develop products and any
attached services, calculate the prices, and organize distribution network.

-

Step 3: Inform customers and provide values to customers. In this step, the company
conducts communication activities such as advertisement, promotion and sales.

Value selection

Informing and price provision

Value creation

Figure 1.2. Modern process of providing values to customers
1.2. Competitive strategy building process
The process of building a business strategy can be based on the company‟s strategic
development process and direct the company‟s business strategy to make plans for
growth strategy only.
1.2.1. Diagram of competitive strategy building process
Strategy building process is studied and applied through many models. Each model
represents a different process. Among these models, strategic management model of
F.David is the most popular. This model does not guarantee success but provides a clear
and basic approach for strategy formulation, implementation and evaluation.
According to F.David, a strategy management process consists of three main phases,
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namely strategy planning, strategy implementation, and strategy evaluation.

Carry out external
evaluation,
identify
opportunities and
challenges

Define
current
tasks, goals
and
strategies

Establish
long-term
goals

Set
annual
goals

Review
current
tasks of
the
company

Perform internal
evaluations, point
out strengths and
weaknesses

Allocate
resources

Meas

ure
and
evaluate
the
performan
ce

Department
policy

Select
strategy to
pursue

Strategy

Strategy
Strategy

formulation

implementation
evaluation

Figure 1.3 Strategy management model of F.David
Strategy management is a complex and continuous process. A small change at one of the
key steps in the model also requires changes in several or all other steps. In fact, strategy
management process cannot be clearly separated and implemented in a rigorous manner
as indicated in the model. Depending on the factors, such as the scale of the enterprise;
management style; the complexity of the environment; the complexity of the product; the

nature of the problems and the purpose of the enterprise‟s planning system, every
enterprise has the most appropriate strategies to achieve its goals.
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