Tài liệu Building business strategy of ben jsc cpmpany

GaMBA01.M0709 Graduation Test CAPSTONE PROJECT REPORT BUILDING BUSINESS STRATEGY PERIOD OF 2011 - 2015 – BEN JOINT STOCK COMPANY Subject: Strategy Administration Group: 13_ Class M0709 Full name: Nguyen Thi Kim Anh Phung Thi Thu Ha Vu Danh Hiep Do Thi Hoa 1 GaMBA01.M0709 Graduation Test TABLE OF CONTENTS PREAMBLE 1.1. General context, necessity and importance of theme research 1. 2. Research purposes and application capacity 1. 3. Research method CHAPTER I: THEORETICAL BASIS 1.1. FUNDAMENTAL PROBLEMS OF STRATEGY 1.1.1 The concepts of strategy 1.1.2 Strategic Management 1.1.3 Benefits and the role of strategic management for the development of the business. 1.2. CONTENT AND STEPS IN BUILDING STRATEGY 1.2.1 Environmental analysis 1.2.1.1 Macro environment 1.2.1.1.1 Economic factors 1.2.1.1.2. Factors of law, government and politics 1.2.1.1.3. Social factors 1.2.1.1.4. Natural factors 1.2.1.1.5 Technological factors 1.2.1.1.6 Worldwide 1.2.1.2 Micro environment 1.2.1.2.1 Competitor 1.2.1.2.2 Customers (Buyers) 1.2.1.2.3 Suppliers: 1.2.1.2.4 Potential rivals: 1.2.1.2.5 Substitution product 1.2.2. Internal conditions of the Enterprise 1.2.2.1. Human resources 1.2.2.2. Research and Development (R&D) 1.2.2.3. Administration: 1.2.2.4. Production - Operation 1.2.2.5. Marketing 1.2.2.6. Information system 1.2.2.7. Corporate culture: 1.2.3. Analyze labor forces to determine essential capacities. 1.2.4. Sep up long-term objectives 1.2.5. Select strategy: 1.2.6. Steps to establish strategy 1.2.7. Tools to establish and select strategy. 1.2.7.1. Tool supplying information to establish strategy 1.2.7.2. Tools to build optional strategy 1.2.7.3. Tool to select strategy - Quantitative Strategic Planning Matrix (QSPM) CHAPTER II: ANALYZING ACTUAL STATE OF ENTERPRISE 2.1. Overview of Enterprise 2.2 Analysis of factors impacting on business environment of Ben joint stock company 5 5 6 7 8 8 8 9 10 10 10 10 10 10 10 10 10 11 11 11 11 11 11 12 12 12 12 12 13 13 13 13 15 15 16 17 18 18 19 21 23 23 23 2 GaMBA01.M0709 Graduation Test 2.2.1. Macro environment. 2.2.2. Industry environment of BEN 2.2.3. Evaluating the opportunities and threats of BEN. 2.3. Operation analysis of Ben company 2.3.1. Human Resources 2.3.2 Research and Development 2.3.3. Management 2.3.4. Marketing. 2.3.5. Finance 2.3.6. Information system 2.3.7. The company’s culture: 2.3.8. General evaluation of BEN’s internal conditions CHAPTER III: CONSTRUCTION DEVELOPMENT STRATEGY OF SUSTAINABLE CORPORATION 3.1. Perceptions of strategic objectives and strategy 3.1.1. BEN strategic perspective 3.1.2. The goal of the BEN to 2015 3.1.3. Prospects and market forecast 3.2. Construction development strategy of the company 3.2.1. SWOT analysis matrix to suggest strategies 3.2.2. The proposed strategy 3.2.3. Strategic choices CHAPTER IV: SOLUTIONS, CONCLUSIONS AND RECOMMENDATIONS 4.1. Solution to implement strategy 23 28 30 35 35 37 37 38 39 41 41 42 45 46 46 46 47 48 48 54 56 63 63 63 64 4.1.1. Solution to implement the strategy of market development. 4.1.2. Solution to implement strategies on quality improvement and product differentiation 4.13.Solution on implementation of human resource strategy 4.1.4. Solution on implementation of organizational re-structure strategy 4.1.5. Solution on implementation of other function strategies 4.2. Conclusion 4.3. Recommendations REFERENCES 65 66 66 68 69 71 3 GaMBA01.M0709 Graduation Test ABBREVIATIONS BEN Ben company EFF External Factor Evaluation Matrix IFE Internal Factors Evaluation Matrix SWOT Matrix Strengths - Weaknesses - Opportunities - Threats QSPM Quantitative Strategic Planning Matrix CNTT Information Technology ERP SYSTEM SOFTWARE CORPORATE GOVERNANCE GDP Gross domestic product WTO World Trade Organization LIST NUMBER OF DATA TABLE Table 1: External Factor Evaluation Matrix (EFE) Table 2: Competitive Profile Matrix of BEN Table 3 : Human Resources Structure basing on Business structure of BEN Table 4: Human resources Structure basing on Age: Table 5: Qualification of the Human Resources Table 6: Report of business activity results in 03 years Table 7: Internal Factor Evaluation (IFE) Matrix of BEN Table 8: SWOT Matrix BEN Company Table 9: Strategic Analysis Group S -O Table 10: Strategic Analysis Group S-T Table 11: Strategic Analysis Group W-O Table 12: Summary of strategic options 32 34 35 36 36 40 44 49 57 58 60 61 PREAMBLE: 1. 1. General context, necessity and importance of research Vietnam joined the WTO organization and is now attracting investment from big technological companies such as Intel and Microsoft. In 2006, Intel Corporation invested 1 billion USD to build the largest Chip production and testing plant in Asia and it went into operation in October 29, 2010. 4 GaMBA01.M0709 Graduation Test In 2008, IDG, reputable International Data Group of USA decided to invest 500 million USD into Vietnam's IT market, and disbursed to the end of 2010. Therefore, along with the $ 100-million fund of Vietnam Venture Capital Fund IDG operated from 2004 to now, capital of the IDG in Vietnam will reach the figure of $ 600 million. IT services will grow fastest with the second growth rank in Asia - Pacific region, after India. According to data announced by GFK Market Research Company (Germany), the market size of information technology (IT), Electronics and Telecommunications of Vietnam in 2008 was $ 3.9 billion and was expected to reach $ 4.9 billion in 2009. In 2008, despite the world economic downturn, the information technology industry (IT) of Vietnam achieved the growth of 20%. Since 2007, Vietnam entered Top 30 of the most attractive nations in the world of software outsourcing. Vietnam now ranks 18th in the world with the number of 21 million Internet users, 6th in Asia on internet development speed. The Government, together with IT enterprises and training units set a target by the year 2015: it is estimated that Vietnam will have 600 thousand professionals in IT and increase to one million in 2020. The government also approved funding to support the development of software industry and IT in Vietnam. The goal is that by 2020, Vietnam will become a powerful nation in IT. Vietnam has 75% of young and highly educated population and more importantly, they always have a positive attitude and really look forward to application of information technology to life. These are good conditions for further development of Internet in Vietnam and also a big opportunity for companies trading in hardware and software in Vietnam. Computer is considered a powerful and useful tool in life of a modern society. The development of used computer generations can also show that a part of growth of a nation. Year 2009 is the year that Vietnam Computer market witnessed a truly domination of the notebook computer (laptop) compared to desktop computer (Desktop). Many experts predicted this trend would continue in 2010. According to Mr. Thieu Phuong Nam, Sale Manager of Intel in Vietnam and Indochina, the growth of the computer in the Vietnam market in 2009 has exceeded previously predicted expectations and forecast of Intel. In particular, the laptop is a product group with the highest growth rate, about 70% in 2009. There are three reasons for this result. First, in 2009, despite the impact of global crisis, Vietnam's GDP growth was still positive. The second reason is the demand stimulation program of the Government has had a direct impact to the expenditure of Vietnam people, such as, tax reduction program from 10% to 5% for computer products. 5 GaMBA01.M0709 Graduation Test Another reason leading thriving of Vietnam Computer market in 2009 is thanks to great demand for purchase of computers by pupils and students in the country. Computer now almost become an indispensable learning tool of pupils and students. In the condition of the growth and the average need of 20-25% annually for the information technology sector, averagely and annually, dozens of large and small companies are formed. BEN Computer Company was formed in 2001 with a very small scale from a computer retail store with an area of 30 m2 and total staff of about 50 people. From that it developed to BEN joint stock Company with its head office area up to nearly 1000 m2 with total staff of up to 200 people. In an open economy and perfect competition environment, although Company has had a certain place and a certain market share for customers and partners, the board of Directors of company see that Company should have a clear business strategy planned through the qualified experts in business to build the sustainable development competition of the company. For this reason, in 2009, the Board of Directors of company assigned managers to study MBA program of Master of International Business Administration (GaMBA) linked to organize by Griggs University (USA) and the Center of Technology Training and Employment System of the Hanoi National University with very clear objectives to acquire knowledge in school and build business strategy for the company in five years from 2011 - 2015. The field selected by the Group 13 as the topic for graduation test is to build business strategies for Ben Joint Stock Company to trade Notebook, set of computer, computer assembly with Ben brand name and distribute IT products as a member of the group is Vice Sale Manager of the Company. 1.2. Research purposes and application capacity According to research by IDC, the PC market in Vietnam has faced many challenges in the first half of 2010 due to falling demand. However, the laptop market continues to grow despite the inventory and fierce competition on the retail price. Demand on desktop decrease due to less demand of consumer, as well as budget cuts for government projects on education. IT Products business segment in 2011 is predicted 20% growth by IDC. Based on the above predictions, Ben Joint Stock Company has also built a business strategy orienting to 2015 with the following specific objectives: + To transform business form from distribution and retail to fully retail + To expand the scale by opening more shops of utility at new residential area: it is estimated to open 03 Ben Store + Market share of about 10 - 15% retail market share in the North; to rank No. 1 on sales of information technology products in the North 6 GaMBA01.M0709 Graduation Test + Average revenue growth of 20-25% per year + To expand products: mobile phone, LCD TV + To coordinate with Intel manufacturers to produce computer with BEN 10 brand with the average number of 5,000 products per year + To coordinate with other computer Corporate such as Acer, Toshiba, HP to build link stores such as Hp Store; Toshiba store, Acer Store to continue success of two Stores in 2009 and 2010 namely Dell Store and Lenovo Store + To build a complete ERP system administration * Applicability of theme The Company has prepared the infrastructure and investment for long-term strategy by hiring more spaces in 2010 According to the overall growth trend of the industry Orientation of leaders about the possibility of sustainable and long term development of enterprise 1.3. Research method To complete the requirements and meet the objectives of the research process, the group conducted concurrently the following methods: Method of investigation, field surveys in the enterprise Analysis of the overall strategy based on planning tools according to BCG Matrix, SWOT and the theory of competitive strategy by Michael E. Porter Comparison of evidence and from which to make comments, reviews, effectively and feasible recommendations and solutions CHAPTER I THEORETICAL BASIS Focusing on intensive research of business strategy (as a scheduled index) and concurrently, add knowledge in the fields studied in other universities: + Marketing Administration + Corporate Finance 7 GaMBA01.M0709 Graduation Test + Human Resource Administration + Development of leadership skills Define the business strategy of the company: Different and low cost 1.1. FUNDAMENTAL PROBLEMS OF STRATEGY 1.1.1. The concepts of strategy There are many different definitions of strategy; each definition is more or less varied depending on the different views of each author. In 1962, Chandler defined strategy as “The determination of the basic long-term goals and objectives of an enterprise and the adoption of the courses of action and the allocation of resources necessary for carrying out these goals.”1 In 1980, Quinn defined a more general strategy as "a strategy is the pattern or plan that integrates an organization's major goals, policies, and action sequences into a cohesive whole”2. Then, Johnson and Scholes have redefined the strategy in the changeable environment as: "Strategy is the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations”3 According to Mintzberg, definition of strategy can be summarized with the 5 Ps Plan: Sequence of actions planned in a consistent manner. Pattern: consistency in behavior, whether or not intended Position: "match" between organization and environment Perspective: A way of perceiving the world. Ploy: a specific manoeuvre intended to outwit an opponent or competitor In essence, the definition of strategy depends on standpoint, however, in the most common, the strategic levels include: Company-level strategy, Business Unit level strategy and functional strategy. According to Charles W.L.Hill and Gareth R. Jones: "Strategy is a process of determining the basic and long term objectives of an enterprise, choosing the method or the direction of operation and allocation of resources necessary to implement that goal" Fred David: "Strategy is the means to achieve long-term goals." William J. Glueck: "Strategy is a unified, comprehensive and integrated plan designed to assure that the basic objectives of the enterprise are achieved”. Business strategy of an enterprise is a general action program towards the implementation of the optimal objective of the enterprise. However, the strategy is not Chandler, A (1962) Statregy and Structure.Cambrige Massacchusettes.MIT Press. Quinn, J,B (1980)Statregies for change; Logical Incrementalism. Homewood. 3 Johnson, G, Scholes, K (19990 Exploring Corporate Statregy, 5th Ed.Prentice Hall. 1 2 8 GaMBA01.M0709 Graduation Test aimed to specifically outline how to achieve those goals but only to frame to guide thinking and action. The important feature of all business strategies when are formed and paid attention to is the "competitive advantage" because it is used to distinguish them from other business plans. In fact, any competitor develops their own strategies because strategy is the only purpose and ensures for enterprise to search and gain their sustainable advantages before their competitors. Through access to the above definition, whether expressed, but we can generalize the Strategy as “A complex series of actions to mobilize the resources possible of an organization to achieve a certain goal" 1.1.2. Strategic Management According to Garry D. Smith, "Strategic Management is defined as the process of studying the current environment as well as in the future, planning objectives of the organization: propose, implement and supervise the implementation of decisions designed to achieve the objectives in current environment as well as in the future” According to Fred R.David, “Strategic Management can be defined as the art and science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve its objective. Strategic Management focuses on fusion of the management, financial and accounting marketing, manufacture, research and development of information systems and business sectors to achieve success. " There are many different concepts of strategic management, but according to the document "Strategy & business policies" of the doctor Nguyen Thi Lien Diep, we can set the following three approaches: •Environmental approach: "Strategic Management is a decisive process aimed at connecting the internal ability of the organization with the opportunities and threats of the outside environment." Characteristics of this approach are to make company-oriented environment, exploit opportunities and deal with risk. •Approach of the objectives and measures: "Strategic Management is a part of decisions and administrative actions set long-term performance of a company." This approach allows administrators to define precisely the objectives of the organization, which is the foundation of management as well as to use efficiently the resources of the organization. •Approach of action: "Strategic management is carried out considering the present and future circumstances, create goals of the organization, make decisions and control decisions, focus on implementing objectives in the current and future situations. " 9 GaMBA01.M0709 Graduation Test Strategic Management is defined as the process of studying the current environment as well as in the future, planning objectives of the organization: propose, implement and supervise the implementation of decisions designed to achieve the objectives in current environment as well as in the future as well as to enhance the competitiveness and position of the business. 1.1.3 Benefits and the role of strategic management for the development of the business. Strategic management process helps the business recognize its purpose and direction. The knowing of desired results and objectives in the future allows leaders and employees to understand what they need to do to achieve success. Environmental conditions that organizations face is rapidly changing and often makes surprises, Strategic Management helps administrators see clearly the future environment, there they can better hold and take advantage of good opportunities, and can avoid or reduce risks. Strategic Management helps managers use effectively the existing resources of enterprises and allocating them appropriately. It allows the company to associate the decisions with the environmental conditions involved. In addition, strategic management also brings harmony between needs of the organization, through which, inducing managers at all levels and creates resonance to achieve the overall objectives of the Company. The actual researches show that the companies applying strategic management often achieve better results than the former results and compared with results of the Companies that do not apply strategic management. 1.2. CONTENT AND STEPS IN BUILDING STRATEGY 1.2.1. Environmental analysis To build business strategies, the study of environmental factors is important, it can help businesses identify opportunities to hold and realize the risks and challenges for a precaution. Environment is factors, forces; institutions existing effecting the operation and performance of the business. Business environment includes the macro environment, the micro-environment (sector) and conditions of the enterprise. The combination of strong points and weak points with the opportunities and risks allows to form SWOT matrix and the strategies enable to select. Research on operation environment of the company is focused on identifying and evaluating trends and events beyond the control of the Company. The evaluation of external factors shows opportunities, challenges that the company meets, so the manager can plan out strategies, take advantages of opportunities and minimize risks. We turn to analyze the operating environment of the enterprise including micro environment and macro environment (Sector environment). 10 GaMBA01.M0709 Graduation Test 1.2.1.1. Macro environment 1.2.1.1.1. Economic factors Referring to external factors, they not only orient and affect directly management activities but also affect the micro environment of business. These factors are also the main reason to create opportunities and threats to each business in different sectors. Research on macroeconomic factors plays an important role for management activities of an enterprise, including the following factors: economic growth, inflation, exchange rates, interest rates, wages and income. 1.2.1.1.2. Factors of law, government and politics Factors of law, government and politics include systems of perspectives and policies of the Government, the current legal system, political and diplomatic trends with other countries, the political happenings in the country, region and world. Political and legal factors can create opportunities or threats for enterprises. To take advantage of opportunities and minimize risk, the companies must capture the perspectives, regulations, priority programs of the Government and establish a good relationship, even perform the lobby when necessary, in order to create a favorable environment for business activities. 1.2.1.1.3. Social factors The social factors involve recreation interests, ethics, aesthetics, lifestyle, occupation, customs, traditions, concerns and priorities of society, level of awareness and education of society ... The social factors often change too slowly to recognize. 1.2.1.1.4. Natural factors Natural conditions consist of geographic location, climate, landscape, land, rivers and sea; minerals in the earth, resources of sea forest, water and air ... The natural conditions are important input factors for many economic sectors. In many cases, the natural conditions become important factors to create competitive advantage of products and services. 1.2.1.1.5. Technological factors This is a dynamic factor containing many opportunities and challenges for the businesses, the pressures and threats derived from the technological environment are that: The new technologies lead to appear and increase competitive advantages of substitute products, threaten the traditional products, make pressure and require the businesses to renew technology to increase competitiveness. In addition of the above threats, technological environment also creates certain opportunities for some businesses, such as: new technology creates conditions to manufacture products of higher quality, cheaper price and competitiveness. Usually, the following businesses have many advantages to make use of this opportunity rather than existing enterprises in the sector. 11 GaMBA01.M0709 Graduation Test 1.2.1.1.6. Worldwide In the trend of globalization today, the participation in associations, in international economic organizations such as WTO, APTA... has considerable influence on the enterprise. They need to identify orientation of economic integration with the world economy in development strategy of the enterprise. The businesses will stay backward and undeveloped if the growth of enterprises is not located in the trend of globalization and integration. 1.2.1.2. Micro environment: Macro environment includes interior and external factors for the Company, deciding features and competitive levels in the business production. There are five basic factors: Competitor, Supplier, Customer, replacement product and potential rivals. Besides, Distributor and Creditor are factors affecting business environment of the Company. To give a successful strategy, the Company should carefully analyze each factor. Understanding on these factors helps the Company realize its strengths, weaknesses related to opportunities and threats faced by the business services. 1.2.1.2.1. Competitor: It is important to understand competitors for a Company because of many reasons. Competitors go against, deciding features and competitive levels or trick for advantages in the industry depends on competitors. 1.2.1.2.2. Customers (Buyers):: Customer is an integrated part of the Company; faithful customer is a big advantage of the Company. Faithfulness of the customer is built by satisfaction of customers and desires for better. 1.2.1.2.3. Suppliers: Companies must link with suppliers for different necessary resources for their own business production such as materials, equipment, human resources, capital and so on. Research for understanding suppliers, human resources for the enterprise can not ignore during environment research. 1.2.1.2.4. Potential rivals: Potential rivals joining business in the industry is also a profitable factor of the enterprise because they exploit new production capacities for market shares and necessary resources. Therefore, on building strategy and protect the competitive status, the enterprise should maintain legal barrier from outside. 1.2.1.2.5. Substitution product: Substitution product is result of technological- technical explosion. Pressure of substitution product limits high price for Companies in the industry. If potential substitution 12 GaMBA01.M0709 Graduation Test products are not paid attention to, the enterprise can be backward against small markets. Thus, the enterprises should pay attention and take human resources for development or operate new technologies in their strategy for success. 1.2.2. Internal conditions of the Enterprise Each Company has strong and weak points in its business. No Company is strong or weak in all aspects. Internal strong and weak points together with external opportunities and threats and clear tasks are basic points concerned when objectives and strategies of the Company are established. Companies should analyze internal factors to clearly define their strengths and weaknesses. Base on this, they give methods to reduce weaknesses, mobilize strengths for maximum advantages. Key internal factors include functional areas as follows: o Human resources o Research and Development o Administration o Production o Finance – Accounting o Marketing. o Information System 1.2.2.1. Human resources Human resources play an important role for success or loss of the Company. Although the strategy is right without excellent persons for enthusiastic and active working, that strategy does not bring any effect. Thus, the Company should prepare human resources to carry out the given strategy, including recruitment, training, rewards and punishment as appropriate. 1.2.2.2. Research and Development (R&D) Research and development are to create new products prior to competitors, raise quality of the product, control or improve production process to minimize costs. Research and development can help the Company keep the vanguard position or be backward against rivals in the industry. 1.2.2.3. Administration: Administration includes: * Planning: all activities related to preparation for the future: estimate, build objectives, give strategy, develop policies and form plans. (5) – Textbook of strategic Administration- Griggs University * Organization: activities creating structure of relationships between rights and responsibilities. Concrete works are: to design organization, specialize job, describe job, detail job, expand the control, unify the order, coordinate, arrange, design and analyze job. 13 GaMBA01.M0709 Graduation Test * Leadership: includes attempts to orientate activities of human beings, specified: lead, contact working groups, change method of operation, mandate, raise work quality, satisfy job, satisfy demand and change organization. * Control: management activities to ensure real result suitable to the given one. Key activities: check quality, finance, sale, inventory, costs, analyze changes, reward and punish and so on 1.2.2.4. Production - Operation Production and operations include all activities to transform inputs into goods or services. Administration of production - operations requires five following requirements: Firstly, the process: design the physical production system. Second, capacity: determines the best output. Third, the inventory: management of raw materials level, work in process and finished products. Fourth, the labor force: the management of administrative staff, skilled workers and unskilled workers. Fifth, quality: producing high quality products. 1.2.2.5. Finance - Accounting Factors are concerned by administrators, weaknesses in this work often causes difficulties for the implementation of objectives of the enterprise. Contents to be considered: the ability of capital compared with the performance requirements of plans of the enterprise; the ability to raise capital from outside; the situation of distribution and use of funds; the control of costs, the revenue - expenditure and financial relations internally and with other units. 1.2.2.6. Marketing Marketing is described as the process of identifying, forecasting, setting and meeting the needs, desires of consumers for products and services. According to Philips Kotler, marketing activities include four basic tasks: First, analyze the ability of the market; second, choose target market; thirdly, draft program marketing mix (product, price, distribution and promotion); fourth, conduct marketing activities. 1.2.2.7. Information system Good information system will receive raw data from the external environment and inside the enterprise, help us keep track of environmental changes, identify threats as well as support the implementation and evaluate and control strategies. Besides, an efficient information system will create other competitive advantages for the enterprise. Diagram 1 – Internal conditions of the Enterprise 14 GaMBA01.M0709 Graduation Test 1.2.2.8. Corporate culture: Labor forces Corporate culture plays an important role in strategic Research management in the company. and Corporate culture Development Corporate culture effectively creates differences in values, norms, rituals and festivals for (orderly routine) (R&D) the development of companies and in guiding the behavior of workers. Image 4 – Conditional diagram inside the Enterprise Internal conditions of 1.2.3. Analyze labor forces to determinethe essential capacities. Information system Enterprise Administration Every business has its strengths, weaknesses and unique environmental characteristics. Therefore a strategy can help this business succeed, but not be effective in other enterprises, situations. Development places the enterprise in front of the choice of Productionbusiness domains and Marketing markets. Companies can only focus on one business area, develop Operation under the direction of vertical integration, or diversify new business areas. Finance structure is to choose a set of appropriate The objective of the analysis of business products (services) through the review of future prospects of each business area. To determine the structure of business, managers need to find probable strategic alternatives, from which to choose strategies from the set of strategies according to different approaches. If the company diversifies businesses, it can choose a set of relevant business areas possibly achieved by using one or more the analytical tools of business structure. Businesses can use the analytical tools of business structure or can define positions of businesses in two criteria: highly or lowly tangible and intangible assets. There is also able to identify businesses in three, four or more different parameters. 1.2.4. Sep up long-term objectives Each objective typically requires a period of time and associates with a certain criteria such as growth of revenue, capital or market share. So the timeframe for objectives and strategies should be suitable together. 15 GaMBA01.M0709 Graduation Test It should be noted that in an era of integration and globalization trends, identifying long-term goals should not be too ambitious for a too long period, usually from 2 to 5 years is most appropriate. 1.2.5. Select strategy: 1.2.5.1. Viewpoints and standards to select strategy: The choice of strategy is based on following options:  First, the advantages of the Company, through analyzing the following aspects: - The strength or relative position of the company compared to competitors. - Based on the profit / high investment capital in the future of the industry. - Analyze the value chain of customers, the Company and its competitors.  Second, goals: Strategies selected for achieving goals  Third, resources, financial conditions.  Fourth, qualifications, abilities of the Company: depending on the quality and level of ability, different capacities of the company to choose strategies  Fifth, the legal basis and the reaction of stakeholders: suppliers, alliance partners, customers.  Sixth, to identify investment opportunities. 1.2.5.2. Select strategy: The strategy is long-term mode of operation. Thus the basic characteristics are rooted in the economic nature and technology of the industry should be particularly paid attention, much different to short-term factors which temporarily affect competition and short-term profit of the business. The choice of strategy depends on cultural aspects, political factors and the role of the strategic management board which is most dominant in the selection of strategy. Through the process of environmental analysis, the strategic makers have subjective judgments based on objective information about politics, culture, morals and social responsibility; they set out the strategy combination and analysis of feasible capabilities and select process of particular action. Under organizational structure of enterprises, the extent and coverage scope of the strategy can be divided into three levels: * Company-level strategy: Focus on solving problems: o How to allocate resources o Which areas should be developed o Which new areas should be maintained 16 GaMBA01.M0709 Graduation Test o Which areas should be involved in o Which areas should be removed * Monophyletic business unit level strategy: focus on defining mode of operation for each business area of a multicompany or a SBU (strategic business unit) or an enterprise. This strategy focuses on the problems: how to overcome the competitive forces? Defensive or offensive? Based on low cost or product differentiation, main-point concentration? This is also the focus of competitive strategy. According to Michael E. Porter [6]: "The purpose of the competitive strategy of a business unit in the industry is to find a position in the industry, where companies could succumb to the competitive forces in best way or they may impact them to his advantage” * Functional strategy: Determine mode of actions of each functional component: Marketing, research and development of product, production, personnel, finance, information and so on to support, ensuring the implementation of strategy of the company, competitive strategy of the unit. Support for the implementation of strategy of the SBU and company includes: o Marketing Strategy o Administrative Strategy o R & D Strategy (technology strategy) o Production strategy (services) / Activities o Financial strategy o Human resources strategy The majority of small and medium-sized enterprises and even some large businesses has no strategic business divisions, strategic business tasks is also considered and settled by the company. 1.2.6. Steps to establish strategy Process to build strategy is carried out through following steps: 1.2.6.1. Phase 1: Input This phase summarizes basic information entered necessary to form strategies. The formation consists of analyzing the external and internal environment. The strategic management techniques such as matrix evaluating external factors EFE, matrix valuating elements inside the IFE, competitive image matrix and so on often used during this period. 1.2.6.2. Phase 2: Combination This is the time to focus on making feasible strategies possibly selected by arrangement, combination of important factors inside and outside. The techniques which can be used in this phase include: SWOT Matrix, strategic location Matrix and action analysis (SPACE), BCG Matrix, internal and external elements Matrix (IE), key strategic Matrix. 17 GaMBA01.M0709 Graduation Test In the framework of the subject and with the characteristics of the enterprise, SWOT should be used, because it suits to the actual situation as well as the data can be met. On the other hand, it is a method commonly used, easy to implement, fairly completed and somewhat less time-consuming. 1.2.6.3. Phase 3: Decision This is the final stage to choose strategies for businesses to pursue. The strategy chosen must be arranged in order of priority. To pick out the strategies, managers can use quantified strategic planning matrix (QSPM). The decision to choose the strategy falls under the jurisdiction of the best managers in each company. In this thread, only preliminarily selecting appropriate strategies to suggest business to pursue based on the analysis and evaluation of the business environment of the business such as finance, human resources, marketing, competitor, and the law and so on. Criteria to choose strategy: • Ensure to achieve the objectives of the Company. • The effectiveness of enforcement of strategies. • Feasibility (feasibility on finance, staffing, level of technology, government regulations and so on) All the techniques in strategy formulation processes require a combination of intuition and analysis process. The use of these techniques allows the analysis and synthesis of many factors that impact and evaluate them objectively, interpret successfully by the method of system thinking. 1.2.7. Tools to establish and select strategy. 1.2.7.1. Tool supplying information to establish strategy 1.2.7.1.1. External Factor Evaluation Matrix (EFE) EFE Matrix helps summarize and quantify the influence of environmental factors for the Company. According to Fred R. David, the EFE matrix is established through five steps: Step 1: Make a list from 5 to 10 external factors which have a decisive role for the success of the Company, including the opportunities and both the threats affecting the Company and its business industry. Step 2: Determine the importance from 0.0 (not important) to 1.0 (very important) for each element. This classification shows the corresponding importance of the elements for success in the business of the Company. Appropriate level of classification can be determined by comparing successful and unsuccessful companies in the industry. Total levels of importance must be equal to1.0. Step 3: Classify from 1 to 4 for each element to see the company's response to these factors. These levels are based on the effectiveness of strategies in the Company. In which: 4 is good, 3 is above- average; 2 is average, 1 is weak. 18 GaMBA01.M0709 Graduation Test Step 4: Multiply each of the importance of each factor to its kinds to get some important points. Step 5: Plus all important points of each factor to determine the total important points of the company. Regardless of EFE matrix has how many opportunities and threats, total scores of the highest important points that a company can have is 4.0, average is 2.5 and the lowest is 1.0. If the total important points is 4, indicating that the Company reacts very well to the existing challenges and opportunities in its environment. But total important one is 1, showing that strategies given by the Company does not take advantage of opportunities and avoid the external challenges. 1.2.7.1.2. Competitive image matrix In the events that affect a company's strategy, the impact of competition is considered the most important. Competitive image matrix identifies the major competitors as well as their particular strengths and weaknesses. This matrix is an extension of the external factor evaluation matrix (EFE) in the case of important levels, classification and total important points have the same meaning. How to build competitive image matrix is similar to how to build the external factor evaluation. Classification level shows the Company's strategies response to each factor: 4 is good, 3 is above average, 2 averages and 1 is poor. 1.2.7.1.3. Internal Factors Evaluation Matrix (IFE) (IFE) Matrix summarizes and evaluates the strengths, weaknesses of functional business divisions and it provides the basis for determining and assessing the relationship between these divisions. IFE matrix is established through five steps: Step 1: List from 10 to 20 key internal elements, including strengths and weaknesses. Step 2: define important levels from 0.0 (not important) to 1.0 (very important) for each factor (based on industry). This classification shows the relative importance of factors for the success of the company in the industry. Total important levels must be 1.0. Step 3: Classification from 1 to 4 for each factor (based on the Company), in which: 1is the biggest weakness; 2 is the smallest weaknesses; 3 is the smallest strengths; 4 is the biggest strengths. Step 4: Multiply each of the importance of each factor to its kinds to get some important points of each element. Step 5: Plus all important points of each factor to determine the total important points of the company. Regardless of IFE matrix has how many elements, the total score of the highest important points that a company can have is 4.0, the average is 2.5 and the lowest is 1.0. If 19 GaMBA01.M0709 Graduation Test the total score is greater than 2.5, indicating that the company has strong interior, and less than 2.5, meaning its interior is weak. 1.2.7.2. Tools to build optional strategy 1.2.7.2.1. Strengths - Weaknesses - Opportunities - Threats Matrix (SWOT) The purpose of the SWOT matrix is to give optionally feasible strategies but not to decide which strategy is best. Therefore, in the strategy to set out SWOT matrix, only a few best strategies are selected for implementation. Model of SWOT analysis is a useful tool for understanding and deciding in any situation for any business organization. 4 abbreviated letters are S (strengths), W (weaknesses), O (opportunities) and T (threats). Strengths and Weaknesses are the internal factors of the company, Opportunities and threats are external factors of SWOT to help analyze different factors which have relative influence on the competitiveness of the company. SWOT is often associated with PEST (Political, Economic, Social, Technological analysis), model of market analysis and evaluation of potential through external factors in terms of political, economic, social and technological . SWOT analysis is the evaluation of the data arranged in the form of SWOT in a logical order to help you understand as well as present and discuss to reach the decision-making easier. SWOT analysis is a subjective evaluation of the data arranged in a SWOT format in logical order and easy to understand and present, discuss and make decisions, which can be used in all decision-making process. SWOT samples enable to stimulate thinking rather than based on the reactions of habit or instinct. SWOT analysis sample is presented as a matrix of 2 rows 2 columns, divided into four sections: Strengths, Weaknesses, Opportunities, and threats. Therefore it is necessary to clarify the subject of analysis because SWOT evaluates the prospects of a certain issue or subject, such as: SWOT matrix is an important combination tool to help managers develop four types of the following strategies: - Strengths - Opportunities Strategy (SO): The strategies use the strengths within the enterprise to take use of external opportunities. - Weaknesses - Opportunities Strategy (WO): The strategies are to improve internal weaknesses to the business to take advantage of external opportunities. - Strengths - Threats Strategy (ST): The strategies use the strengths within the business to avoid or reduce the impact of external threats. - Weaknesses - Threats Strategy (WO): The strategies are to improve internal weaknesses to avoid or reduce the external threats. The combination of internal and external important elements is the most difficult task of establishing a SWOT matrix. It requires a good sense, appropriate and optimal 20