Tài liệu Building business strategy in vietnam – italy steel joint stock company in period of 2015 2020

MBA THESIS BUILDING BUSINESS STRATEGY IN VIETNAM – ITALY STEEL JOINT STOCK COMPANY IN PERIOD OF 2015 – 2020 1 TABLE OF CONTENTS COMMITMENT...................................................................................................................i ACKNOWLEDGEMENT...................................................................................................ii INTRODUCTION................................................................................................................1 CHAPTER I..........................................................................................................................4 THEORETICAL BASE OF BUILDING BUSINESS STRATEGY OF ENTERPRISE......................................................................................................................4 1.1. Concept and process of building business strategy................................................4 1.1.1. Concept about business strategy of enterprise...................................................4 1.1.2. Typical features of business strategy..................................................................5 1.1.3. The role of business strategy...............................................................................6 1.2.1. Step 1: Planning strategy, defining mission and orientated goals of enterprise.......................................................................................................................8 1.2.2. Step 2: Analyzing environment...........................................................................8 1.2.3. Step 3: Defining long term target and building development strategy for enterprise.....................................................................................................................12 1.2.4 Step 4: Defining action plan and conducting solutions....................................12 1.2.5. Step 5: Supervising and adjusting strategy......................................................13 1.3. Tools used for evaluating and selecting business strategy...........................................13 1.3.1. Internal – external factor evaluation matrix (IE)............................................13 1.3.2. SWOT matrix (Strengths, Weaknesses, Opportunities, Threats):..............14 1.3.3. Quantitative Strategic Planning Matrix (QSPM):...........................................16 CHAPTER 2.......................................................................................................................17 TRADING AND PRODUCTION ACTIVITY AND BUSINESS STRATEGY OF VIETNAM – ITALY STEEL JOINT STOCK COMPANY.........................................17 2.1. Overview about Vietnam – Italy Steel Joint Stock Company.............................17 2.1.1. Foundation and development...........................................................................17 2.1.2. Organization structure of Vietnam – Italy Steel Joint Stock Company..........19 2 2.1.3. The main trading sectors...................................................................................21 2.1.4. Vision and mission............................................................................................21 2.1.5 The situation of steel market............................................................................22 2.2. Analyzing business environment of Vietnam – Italy Steel Joint Stock Company – External environment.................................................................................................23 2.2.1. Analyzing macro-environment of VISCO........................................................23 2.2.2. Analyzing micro-environment of VISCO.........................................................27 2.3. Analyzing internal environment of VISCO..........................................................31 2.3.1. Analyzing basic activities of VISCO.................................................................31 2.3.2. Analyzing supporting activities of VISCO........................................................35 2.4. Forming strategic projects.....................................................................................38 2.4.1. SWOT matrix and combination solutions........................................................38 2.4.2. External Factor Evaluation Matrix – EFE matrix..........................................39 2.4.3. Internal Factor Evaluation Matrix – IFE matrix............................................40 2.4.3. Internal – External Factor Evaluation Matrix (IE) matrix............................42 CHAPTER 3.......................................................................................................................43 SELECTING BUSINESS STRATEGY AND STRATEGIC SOLUTIONS OF VIETNAM - ITALY STEEL JOINT STOCK COMPANY TO 2015...........................43 3.1. Goals and development orientation of Vietnam – Italy Steel Joint Stock Company.........................................................................................................................43 3.2. Foundation for selecting strategy..........................................................................43 3.3. Forecast on market demand...................................................................................44 3.4. Planning business strategy for Vietnam – Italy Steel Joint Stock Company to 2015..................................................................................................................................45 3.4.1. Analyzing the main strategic projects...............................................................45 3.4.2. Selected strategy................................................................................................47 3.5. Strategic solutions for Vietnam – Italy Steel Joint Stock Company to 2015..................48 3.5.1. Solution on marketing.......................................................................................48 3.5.3. Solution on human resource.............................................................................50 3.5.4. Solution on production and operation..............................................................51 3.6. The roadmap for implementing strategy..............................................................54 3.7. Recommendations...............................................................................................54 3 3.7.1. To State..............................................................................................................54 3.7.2. To Sector............................................................................................................55 CONCLUSION...................................................................................................................56 REFERENCES...................................................................................................................57 LIST OF TABLES Table 2.1 GDP growth rate of Vietnam in period of 1998-2010..............................22 Table 2.2 GDP per capital of Vietnam in period of 1998-2010...............................22 Table 2.3 Foreign Direct Investment to Vietnam in period of 2007-2010...............23 Table 2.4 Main competitors of VIS..........................................................................26 Table 2.5. Summary of competitors of VISCO.........................................................28 Table 2.6. Opportunities and threats of VISCO.......................................................31 Table 2.7 Trading and production result from 2007 to 2010 (Prospectus of Vietnam - Italy Steel Joint STock Company - http:// www.vis.com.vn).................................32 Table 2.8. Strengths and weaknesses of VISCO.......................................................37 Table 2.9. SWOT matrix and combination solutions...............................................38 Table 2.10 External Factor Evaluation Matrix – EFE............................................40 Table 2.11 Internal Factor Evaluation Matrix - IFE...............................................41 Table 3.1. Some criteria of Vietnam - Italy Steel Joint Stock Company to 2015......43 LIST OF FIGURES Figure 2.1 : Logo of Vietnam – Italy Steel Joint Stock Company ...........................19 Figure 2.2. Big board of Vietnam – Italy Steel Joint Stock Company.....................19 Figure 2.3: I.E matrix.............................................................................................42 LIST OF CHARTS, DIAGRAMS Diagram 1.1: Process of building startegy ...............................................................7 Diagram 1.2: Michael E.Porter’s value chaine........................................................9 Diagram 1.3: Michael E.Porter’s five force model................................................10 Diagram 1.4 : Michael E. Porter’s Competitive Advantage model........................11 Diagram 1.5: SWOT matrix....................................................................................16 Diagram 2.1: Organization structure of Vietnam – Italy Steel Joint Stock Company ..............................................................................................................................................20 4 Chart 3.1: Growing rate of Vietnam’s steel sector...................................................44 Chart 3.2: Market share of Vietnam’s steel sector....................................................45 INTRODUCTION 1. Preface Over the past years, Vietnam economy always reached the high and stable growth rate. After Vietnam joined the World Trade Organization, Vietnamese enterprises have had opportunities to expand market, production scale and mark their position. Apart from opportunities, they also face many threats. Market fluctuations are quicker and more complicated and sale becomes more difficult. The reason for this condition is that enterprises are supplying more and diversified goods for market. Correspondingly, market requires products with higher and higher quality. As a result, the competition to have customers is more and more violent. Therefore, if enterprises want to have success in business, they are required to process new trading methods and new thinking. Besides, they also must use supporting means to grasp and process information flexibly, apply scientific technology as well as propose suitable projects for each period. If applicable, enterprises will take advantages in competition. Enterprises also must understand the rules of market to be able to produce and sell more products, have quick capital turnover. Besides, production reinvestment helps enterprises expand size widely and deeply. In which, analyzing business environment and defining target market and building business strategy are matters of concern since they are core issues and control all of activities in enterprises. Additionally, these issues are foundation for business administrators to make useful decisions with higher and higher economic efficiency as well as sustainable development. In other words, strategy for trading and production is vital to enterprises. Together with the growth of national economy as well as Song Da Corporation, Vietnam – Italy Steel Joint Stock Company (VISCO) has gained 5 achievements and had significant contribution to Song Da Corporation in the past and Song Da Group at present in new level. Nevertheless, during the process of deep integration to the regional and world economy, business environment will change much with quick speed. If basing on advantages and production – trading experience in the past, VISCO will not survive and develop. With the desire to have contribution in finding out orientation to maintain and enhance position of VISCO in the future; Based on gained knowledge from Global Advanced Master of Business Administration Program and working process in VISCO, our group selects the topic in line with the theme “Building business strategy in Vietnam – Italy Steel Joint Stock Company in period of 2015 - 2020”. 2. Object and target of the study: Based on the analysis of microenvironment, macro environment and production and trading activities in VISCO, the group will find out suitable business strategy to develop market and enhance competitiveness of products in market. From that, VISCO will remain their position and ceaselessly develop to become leading steel production company in Vietnam as well as in the region in the future. 3. Scope of the study: - Studying space: Vietnam – Italy Steel Joint Stock Company and steel construction market in Vietnam. - Studying time: This project focuses on researching production and trading of Vietnam – Italy Steel Joint Stock Company within 4 past years (from 2007 to 2010). 4. Methodology of the study: We mainly use the statistics, survey, methods to collect data, generalization and analysis. 5. Source of data: - Data of Vietnam – Italy Steel Joint Stock Company - Data of Vietnam Steel Association 6 6. Implication: - In theoretical aspect: applying theories of building business strategy and competition theory for specific product in enterprises. - In real aspect: being foundation to develop business, enhance competitiveness of VIS product. - This topic can be used as reference for building business strategy of other industrial – commercial enterprises in the same sector. 7. Limitation: The topic only focuses on VIS product and scope in Vietnam – Italy Steel Joint Stock Company. 8. Expected result: - This project will evaluate strengths, weaknesses of Vietnam – Italy Steel Joint Stock Company as well as VIS product of the company. It also evaluates business environment of steel products including competitiveness. - This capstone project will build business strategy for VIS product in Vietnam – Italy Steel Joint Stock Company in period of 2010 – 2015. 9. Structure of capstone project: Apart from the introduction, conclusion and references, the main content of the capstone project consists of three chapters: Chapter 1: Theoretical base of building business strategy of enterprise Chapter 2: Trading and production activity and business strategy of Vietnam – Italy Steel Joint Stock Company. Chapter 3: Business strategy of Vietnam – Italy Steel Joint Stock Company in period of 2011 - 2015. 7 CHAPTER I THEORETICAL BASE OF BUILDING BUSINESS STRATEGY OF ENTERPRISE 1.1. Concept and process of building business strategy 1.1.1. Concept about business strategy of enterprise The concept of “strategy” has been presented for a long time and it originated from military field. At present, there are many concepts about strategy: According to Pred R. David: “Strategy contains means reach to long-term goals”. According to Haroid Kooniz and authors of the book “The main issues in management”, strategy is defined as an action program reaching specific objectives. Main strategies of an organization contain goals and commitments in resources to reach these goals as well as main based policies when using resources. According to Alfred Chandler: “Business strategy covers definition of long term basic target of enterprise, selection of method or action program and allocation of resources to implement that target”. In general, if an enterprise wants to exist and develop, they have to pay attention to not only short term and mediate operation project but also activities in many incoming years as long term operation project. Furthermore, enterprises need to understand and mitigate influences from external environment, promote strengths, overcome weaknesses and catch up with opportunities to take advantages. Such long term thinking is called as strategic thinking. Strategy is a plan orienting for future, is the spine for administrators to make decisions. In which, business strategy imagines and describes activities of enterprises as well as maps out positive prospect for them. Strategy contains targets, policies and a variety of actions. Strategy solves unprecedented and unknown problems. In the market economy, the existence of each enterprise is connected with many targets to implement mission and mark position in market. In a nut shell, it orients to following basic three targets: 8 - Earnings target - Position and strength target in market - Safety target In order to well implement three above targets, enterprises are required to build and conduct business strategy suitably. Business strategy of enterprises has three levels regarding as corporate level strategy, business unit level strategy and functional level strategy - Corporate level strategy is comprehensive goals of enterprise in all aspects to ensure success in different sectors and areas. - Business unit level strategy is the ones ensuring success for the enterprise (or branch) which that enterprise (or branch) only specializes on one sector or one area. - Functional level strategy: is the one defining each operation area. Function level strategies have functions as solution strategies to implement comprehensively strategic target of enterprises. 1.1.2. Typical features of business strategy Business strategy defines goals and orientation of enterprise in relatively long term from 3 to 5 years. Business strategy only drafts long term orientation, in practice; enterprises have to combine strategic goals with situation goals. Every important decision in process of building, making decision, and organizing, monitoring, evaluating and adjusting strategy is concentrated by the most senior leaders of enterprise. Business strategy is always built, selected and enforced based on comparable advantages of enterprise. This requires enterprise to have accurate evaluation about their trading and production reality before building strategy Business strategy is introduced mainly and firstly for business sectors regarding as specialized, traditional and strong business sectors of enterprises. As a result, enterprises have to build business strategy with thorough preparation. 9 1.1.3. The role of business strategy Business strategy is the foundation to determine specific production and trading criteria and measure trading result. In general, strategy includes three factor groups: - Factor group relates to business environment of enterprise - Factor group relates to reality and solutions of enterprise - Factor group relates to activities of Administration apparatus of enterprise. We can say that, business strategy has particularly important role. It decides failure and success of enterprises such as: - It helps administrators have a long term view - It is foundation for administrators to make accurate and in time decisions - It helps enterprises make use of available strengths, opportunities in the future to face up with, mitigate threats, recover weaknesses, maintain and enhance position of enterprises. 10 1.2. Process of building business strategy Defining vision and mission for organization Analyzing external environment Analyzing internal environment Defining strategic goals Forming strategy: - Corporate level strategy - Business level strategy - Functional level strategy - International business Planning and allocating resources Taking strategy into effect and reaching integration Organization structure Diagram 1.1: Process of building business strategy 11 1.2.1. Step 1: Planning strategy, defining mission and orientated goals of enterprise - Planning strategy: is the cooperation and mutual support between strategists with participants in implementing strategy to: + Participants in strategy planning will understand more clearly about possibilities of built strategies with easy and simple implementation + Strategy implementers will understand more clearly about strategy when conducting strategy + Enhancing feasibility of introduced strategies - Defining mission of enterprise: Mission is understood as the existence reason, meaning of foundation and existence of enterprise. Mission of enterprise is their declaration with respect to society. Normally, mission includes contents as customers, products or services, market, technology, philosophy, interest to community and officials. Furthermore, mission demonstrates general prospect in the future of enterprise. Mission is important base for selecting goals and development strategy for enterprises. - Defining goals of enterprise: goal is the concretizing of content, as the mean to implement declaration about mission of enterprise. 1.2.2. Step 2: Analyzing environment Business environment of enterprise includes internal and external environment with direct or indirect influences to the existence and development of enterprise. Therefore, researching internal and external environment is imperative in planning strategy of enterprise. 1.2.2.1. Analyzing internal environment Internal environment of enterprise includes factors which enterprise can control certainly as: management, production, finance, accounting, material supplying, marketing, public relationship, human resource and information system. Internal environment factor analysis will make enterprise define strengths, weaknesses to introduce suitable strategy with implementation capacity in near future. 12 Value chain – comprehensive strength Firm infrastructure Human resource management Research and development Supplying Purchasing material Production Distribution Marketing Customer serves Diagram 1.2: Michael E.Porter’s Chain value model 1.2.2.2. Analyzing external environment 1.2.2.2.1. Analyzing macro-environment External environment factor analysis helps us recognize opportunities and threats, from that, enterprises will introduce suitable strategies. External environment factor analysis bases on environments relating to existence and development of enterprise, regarding as: - Economic factor: identifies trend of demand for consuming products and supplying capacity of material, human resource for production and management. in which, it mainly identifies economic growth rate as: gross domestic product, GDP per capita, currency policy, tax interest of related products and services, international economic integration policy, increase (decrease) of population. Therefore, enterprises need to understand thoroughly and evaluate socio-economic planning and development of Government and locals. - Political and legal factor: Enterprises must understand political trend, Domestic and foreign affair of Party and law of state which affect to development of enterprises. 13 - Technical and technological factor: There are more and more new technologies creating opportunities as well as threats for enterprises. New technology will help enterprises with lower price, more competitive as well as reduce life cycle of products. - Socio-cultural factor: consuming characteristic, customs, life style or culture of each local and ethnic will affect demand and taste of consumers. - Population factor: Population size, population increasing rate, population structure also affect to enterprises in consuming demand and supplying human resource. 1.2.2.2.2. Analyzing micro-environment New entrants Threats of new entrants Threats of market share reduction as new entrants Competitors Bargaining power of buyers Buyers Suppliers Competitiveness Bargaining power of suppliers \ Price squeeze of suppliers Threats of substitue products Price squeeze of buyers Substitute products Diagram 1.3: Michael E.Porter’s five force model New entrants: when new entrants present in sector, they will reduce market share and earnings of enterprise. To protect competitive advantage, enterprises have 14 to increase penetration barriers as product diversification, making use of available advantages in production scale, market share, geographic location and trade mark. As a result, if competitors want to take part in sector, they have to have big initial investment, slow capital recovery, reduce competitiveness. - Substitute products: Quick development of scientific-technology is the condition of appearance of substitute products. Substitute products will threaten market share and control potential earnings for enterprises. Therefore, enterprises have to ceaselessly apply scientific technology to improve labor productivity, reduce cost price, and improve quality and features of products. - Buyers: The reliability of buyers have important role for enterprises. Nevertheless, when buyers have advantages, they will create pressure for enterprises. - Suppliers: include units supplying input factors as material, machine, and finance and labor source. When suppliers have advantages, they will cause disadvantageous pressure on enterprises as high price with short payment time. - Competitors: This is frequent pressure and has direct threats to enterprises, when competitions among enterprises increase; it threatens position and existence of enterprises. According to Michael E. Porter, there are two basic competitive advantages as: advantages about low cost and advantage about differentiation of products. Resources Advantage about low cost Special capacity Or Product’s value Advantage about differentiation of products Possibilities Diagram 1.4: Competitive advantage model of Michael E. Porter Enterprises use their resources (including: brand name, prestige, technology, 15 customer data base, reputation) and capacity to use resources effectively to create special capacity and improve value for products from competitive advantages on low cost or differentiation of products. 1.2.3. Step 3: Defining long term target and building development strategy for enterprise - Long term target is expected result of enterprises given in relatively long term. The time of implementing long term or strategy implementing lasts more than 2 years. During the process of implementing strategy to obtain long term target, enterprises can divide into many short term targets corresponding with each shorter period. - Defining the main target is consideration process combining with forecast on product demand as well as sold turnover, total cost and resources of enterprises. Demand forecast helps enterprises determine the types of product and amount of products and services which enterprises manufacture and provide in the future. From demand forecast administrators can decide production scale or activities of enterprises as foundation to project finance and human resource. - There are many forecast methods. Normally, enterprises use line based method to forecast demand of market in the future from data in the past. - Besides, in forecast, we should pay attention to another issue as life cycle of product. It is important factor needed considering carefully in forecasting process, especially long term forecast. - When target is built suitably, it will be both motivation and measurement of strategy implementing process. Normally, targets have to ensure feasibility, flexibility, specific, unification and possibly define specific time. 1.2.4 Step 4: Defining action plan and conducting solutions This is a process establishing mechanism, introducing resource allocation plan for enterprises to implement selected key strategic solutions. Basing on that, it will make use of resources and competitive advantages of enterprises create comprehensive strength for enterprises to gain achievements in trading. 16 1.2.5. Step 5: Supervising and adjusting strategy Since the quick changes of environment factors and forecast for the future have difficulties in obtaining absolution. During process of implementation, enterprises must continuously check, evaluate and adjust strategy to gain determined targets. 1.3. Tools used for evaluating and selecting business strategy To plan business strategy, enterprises can apply many different strategy planning methods and tools. This capstone project only selects and uses some tools mentioned below which we consider them possibly help for planning strategy in Vietnam – Italy Steel Joint Stock Company 1.3.1. Internal – external factor evaluation matrix (IE) External factor evaluation matrix (EFE) External factor evaluation matrix is the tool assessing the main influences of external environment factors to enterprises. External factor evaluation matrix is implemented according to five steps: Step 1: Listing main external factors which affect to activities of enterprises. Step 2: Classifying the importance from 0,0 (indirect, least important) to 1,0 (direct, the most important) for each factor. This classification reveals the corresponding importance of factors with respect to success in trading sectors of enterprises. Step 3: Classifying from 1(respond, less influence) to 4 (respond, positive influences) for each factor. It shows the way which current strategies of enterprises respond to these factors. Step 4: Multiplying the importance of each factor with its corresponding classifying score to define important score. Step 5: Adding the important score of factors with respect to trading sector of enterprise. The average score is 2,5. If total important score smaller than 2,5 we see weak response capacity, bigger than 2,5 we see positive and good response of enterprise. 17 Strong points: it forms the general picture about external factors affecting to competitiveness of enterprise. Weak points: marking each factor as well as defining its importance has subjectiveness. Internal factor evaluation matrix (IFE): Similar to steps and score for external factor evaluation matrix, internal factor evaluation matrix is tool to assess strengths, weaknesses and importance of available resources in enterprise. Strong points: it forms the general picture about internal enterprise with strengths, weaknesses which these factors have influences on competitive capacity of enterprise. Weak points: Similar to EFE matrix. Internal – external factor evaluation matrix (IE): Internal – External Matrix puts different SBU (Strategy Business Unit) of an enterprise in to 1 table with 9 cells. This matrix is based on two main aspects: - Total important score of IFE matrix is demonstrated in X axis - Total important score of EFE matrix is demonstrated in Y axis - Each SBU has to establish IFE and EFE matrix as well as IE matrix for the enterprise 1.3.2. SWOT matrix (Strengths, Weaknesses, Opportunities, Threats): - SWOT matrix assesses strengths, weaknesses, opportunities and threats. Objective of researching environment is to consider threats, opportunities as well as strengths and weaknesses which enterprise has been and will facing during the process of their production and trading to make foundation for setting up strategies. SWOT analysis technique is a tool for summarizing environment research result and proposing strategy. - Main opportunities: are factors which product among influences to enterprise when it makes use of and probability enterprise has opportunities is big. - Main threats: are factors which product among influences to enterprise 18 when threats happen to enterprise and probability for threat reaches the maximum value. - Defining core strengths and weaknesses: process of evaluating and analyzing for internal factor of enterprise can conclude many factors. The importance as it can conclude core factors affecting to competitive advantage and strategy enforcement of enterprise. Here, we need to consider factors with the position of activities in system and compare with general standards of sectors and other main competitors. - Combining internal factors and external conditions: after defining basic factors of external and internal condition, we must apply a procedure including below steps to analyze and propose strategies: Step 1: Listing main factors of internal and external condition to cells of SWOT matrix. Step 2: Making logical combination. Setting up S/O, S/T, W/O, W/T combination strategies + S/O: Using strengths to make use of external opportunities the best + S/T: Using strengths to deal with external threats + W/O: Overcoming weaknesses to create favorable conditions for making use of external opportunities and enterprise needs making use of which opportunities to fulfill weaknesses at present + W/T: Recovering weaknesses to mitigate threats Step 3: Combining among four factors S+W+O+T. this creates the resonance among 4 factors to form strategies. From that, enterprise can use strengths to make use of opportunities, fulfill weaknesses and mitigate threats. Step 4: Summarizing and re-considering strategies. Classifying strategies and coordinating strategies into supporting system. 19 Opportunities Opportunities Diversion Diversion strategy strategy Growth Growth strategy strategy WO strategy: Recovering internal weaknesses by making use of advantages from external opportunities SO strategy: Using internal force to create advantages before external opportunities Weaknesses Weaknesses Strengths Strengths WT strategy: defense strategy is used to mitigate internal weaknesses & avoid external threats Defense Defense strategy strategy ST strategy: Using strengths of the company to avoid or mitigate influences of external threats Threats Threats Diversification Diversification strate strate Diagram 1.5: SWOT matrix Strong points: - Pointing out strengths, weaknesses of enterprise as well as defining opportunities and threats from external environment. - Proposing strategies by specific combination from strengths weaknesses, opportunities and threats for enterprise to have solutions Weak points: SWOT matrix introduces possibly feasible strategies; it does not introduce the best option or strategy. Therefore, selection of strategy to develop enterprise is not mentioned here. 1.3.3. Quantitative Strategic Planning Matrix (QSPM): This analyzing technique will show the best alternative strategies objectively. Quantitative Strategic Planning Matrix uses input factors from EFE and IEF analysis, after that, it receives essential information to establish QSPM matrix from SWOT matrix In general, among tools planning strategy mentioned above, each one has strong points and weak points. Therefore, when applying them in to reality, we have to be flexibly select matching to specific situation and condition. 20