ADMINISTRATION PROGRAM LUẬN VĂN CHIẾN LƯỢC CẠNH TRANH CỦA CÔNG TY VIGLACERA TIÊN SƠN THESIS “COMPLETING BUSINESS STRATEGY FOR VIGLACERA TIENSON JSC IN PERIOD 2015-2020” MBA Thesis ABSTRACT In the 21st-century competitive landscape, the goals of creating competitive advantage and earn above-average return are challenging the enterprises, no matter how large scale they are Those strategic achievements must resulted by the effectively implementation of a right business-level strategy This business strategy must be formulated on the base of external and internal environmental analyses In another word, the strategy must be formulated from full consideration and evaluation of all available and potential opportunities and threats that might come from the external environment, and of the strengths and weaknesses of the enterprise itself The success of the formulated strategy implementation does not depend on the enterprise leader’s commitment only, but also depends on all its divisions’ operation in all periods of time Viglacera Tien Son Joint Stock Company is a producer of granite tiles, the products that useful for architectural buildings Founded in 2001 as a state-owned company, which was a member of Viglacera Corporation, it was invested of more than 300 billion VND value for a granite tile factory with capacity of million m of product per annual Experiencing many rises and falls, it is now equitilized and reformed as a joint stock company and is running in a way of innovation and development For many reasons, the company’s business effectiveness is still limited and not corresponds to its capabilities and potentials In this capstone project report, we utilize our knowledge of strategic management to analyze and recommend a completion for the company’s business strategy in the period of 2015-2020, in which the most important strategic goal is the company can achieve strategic competitive advantages which source its leading possibility in the markets and earn above average return We believe that this capstone project matches with what the company is looking for 2 MBA Thesis ACKNOWLEDGEMENTS To fulfill the requirements under the Global Advanced Master of Business Administration program, we submit this capstone project to Griggs University We commit this capstone project is result of our real study and practice and it never been submitted to any other organizations In the first words of the capstone project, we would like to express our great thanks to all the professors of Griggs University, who had transferred to us very valuable knowledgement and understandings through the lectures in the past two years We also greatly thank the leaders and managers of Viglacera Tien Son Jsc for their heartily help in giving us good conditions and useful information that made us be easier in researching and completing this capstone project LIST OF ABBREVIATIONS 3 MBA Thesis Ass: Assistant Bill: Billion BOC: Board of Control BOD: Board of Director BOM: Board of Management Dr: Doctor FDI: Foreign Direct Investment GDP: Gross Domestic Product IMF: International Monetary Fund Jsc : Joint Stock Company MBA: Master of Business Management Prf: Professor R & D: Research and Development SBU: Strategic Business Unit USD: United States Dollar VIBCA: Vietnam Building Ceramic Association Viglacera Corp.: Vietnam Glass and Ceramic for Construction Corporation VIT: Viglacera Tien Son Joint Stock Company VND: Vietnamese Dong WTO: World Trade Organization 4 MBA Thesis LIST OF FIGURES 5 MBA Thesis 6 MBA Thesis INTRODUCTION Problems: The Vietnam construction material market competition is increasing and Viglacera Tien Son Jsc (VIT) is facing with the fact of loosing its market share and its brand name preference in customer perception Although the company is trying to increase its competitive ability, but the outcome is still not really significant How VIT can reach leading position and compete with its rivalries? Objectives & Aim Objectives Study on the strategic management with focusing on business-level strategy Competition analysis on ceramic for construction market Analyze the VIT’s competitiveness Recommendations for completion of VIT’s business strategy Aim Give out the applicable and effective competitive strategy and action plan to improve the VIT’s competitive capacity Research questions In order to achieve the objectives of the Capstone Project, the author of this Capstone Project will try to answer the following questions: How is the competition in granite tile sector recently and hereafter? What is the VIT’s competitive capability recently and in period of 2010-1015 ? What are recommendations for completion of VIT's business strategies? Method/Approaches Empirical method Approaches: statistics 7 MBA Thesis Data resources and processing Data Resources Secondary Source: Report and Data of VIT and its competitors Tertiary Source: M A Hitt, R D Ireland, R E Hoskisson - Strategic management, 4th edition Data Processing Data Processing by excel, chart to summary, compare and analyze Significance Theory: Introduce new theory to Vietnam Reality: Bring more competitive advantages to VIT Limitations This research only focus VIT and the data is 2007-2009 It may be changed in future Expected results Knowledge in strategic management and competitive strategy What is VIT’s strengths and weaknesses comparing with its rivals Dissemination This research can be studied further for production sectors 10 Follow-up potential How VIT’s competitive ability is improved if applied these recommendations? The checking and adjusting will be done if needed 11 Capstone Project structure This Capstone Project is divided into three parts included theory foundation, actual VIT’s competitive strategy analysis and recommendations for completion of its business strategy 8 MBA Thesis Chapter 1: Theory foundation The strategic management theory is reviewed in this chapter by some main parts such as: definition, strategy’s levels, strategic analysis, formulating and selecting business strategy, and strategic implementation Chapter 2: Actual VIT’s business strategy recently Applying strategic analysis and look into the actual VIT’s operation and business strategy application recently Giving comments on its current business strategy Chapter 3: Completion of VIT’s business strategy in period of 2015-2020 Based on the analysis and found reasons in theory application, some suggestions will be delivered to VIT in order to complete its business strategy, which is aiming to improve its competitive position 9 MBA Thesis Chapter THEORY FOUNDATION OF BUSINESS STRATEGY I GENERAL ON STRATEGY Definitions The strategy definition was formed long time ago, as a broad definition and contains many complicated connotation Militarily: at Alexander’s time (330 year B.C.), strategy is defined as skills to develop forces and establish world domination system Economically: During the development of the world economy, many definitions of strategy have been formed, for example: + Chandler (1962): “Strategy is the identification of the basic long term goals and objectives, application of a set of actions and the allocation of necessary resources” 10 10 MBA Thesis In doing business, internal factors (strengths – weaknesses) may be found and controlled but influences from external environment (opportunities – threats) are quite difficult to be predicted and controlled Therefore, in order to avoid risks from external environment, some following strategies should be considered and selected: • Strategy 1: Focus based on Differentiation In this strategy, the company focuses on producing differentiated products on the base of new and advanced technology It requires the company to apply new technology for the production line no.1 and re-arrange production labor force to gether with improving staffs’ skill through an additional training program With differentiated products, the company has to strengthen its competition in the high-end market segment and to take advantage of favorable market demand to increase selling price, thus, obtain higher revenue and profit • Strategy 2: Integrated Differentiation and cost leadership Take advantages of equipment and technology to differentiate products in term of in category and quality Simultaneously, improve the corporate management to reduce its products’ cost price - Differentiated products are big-size and modernized designs, which are results of high technologcal application Those products could not be immitated by the competitors 87 87 MBA Thesis - Concentrate to sell products in most effective markets such as Northen and export, which help to reduce transportation cost and less risk of delay payment Take advantage of opportunites as favorable conditions to increase selling price to get higher revenue and profit In case of difficulty (market demand decreases), differentiated products and reputable trademark shall be useful to maintain or reduce not much the price to avoid parity price competition, and recover the weakness of finanacial cost • Strategy 3: Focus based on differentiated of products and low cost This strategy is an integrated combination of both strategies and 2 Selection of strategy based on GREAT model We use GREAT matrix to select an optimal business strategy Figure 3.3 - Quantitative matrix under GREAT model Strategies Multi- Strategy Strategy Strategy Items plier Primary Score Final Score Primary Score Final Score Primary Score Final Score Column 4=2x3 6=2x5 i j=2xi Gain 0,30 0,90 0,60 1,50 Risk 0,20 0,60 0,40 0,60 Expense 0,15 0,60 0,45 0,30 Accessibi- 0,25 1,00 0,75 0,75 lity Time 0,10 0,20 0,20 0,20 Total 3,30 2,40 88 3,35 88 MBA Thesis For primary score: 1- poor; 2- Average; 3- Above average; 4- Good; 5- Excellent Conclusion: The strategy has highest total final score then should be selected IV STRATEGICAL SOLUTIONS Solutions for production: 1.1- Increase productivity and production capacity - Promote maximum capacity of equipment so that to reach and exceed the designed capacity to reduce production cost (decrease fixed cost per product unit) - Increase the specialization in production management in individual production stage to improve labor quality and productivity - Concentrate to product big-size products with high value Develop new products with fine designs to meet high-end customers’ demand Pursue the objective of obtaining at least million m2/ annual of high-ranked products by 2011 Gradually to change production to high-ranked products totally by 2013 - Produce large quantity lots of every product design to stabilize product’s quality, increase productivity and decrease production loss 1.2- Increase products’ quality - Consider quality of product as the most critical value to ensure the existence of the company - Maintain strictly technological descipline, apply solutions to control quality in every individual stage to decrease defective products - Tightening the control of input materials’ quality to minimize the influence of input materials to the products’ quality 1.3- Strictly control the expenses to reduce products’ cost price 89 89 MBA Thesis - Apply the pull system production: the production flow is adjusted so that the finishing stage pulls the beginning stage in the process This is oppositely different from the traditional production That means the prior stage produces the products (or semi-products) upon demand of the following stage This process shall reduce wastes caused by exceeding production and high inventory as recently - Reduce storage and inventory to reduce wastes and losses because high storage and inventory may lead to: + Wastes due to error of control + Breakage and losses due to storage and transportation + Difficult to determine direct responsibility between the next stages - To realize the continuous production flow with equipment coordination In this flow, materials is conveyed continuously through the stages Together with this, the workers should be re-trained to optimize their operation Thus, this solution would help to eliminate wastes caused by waiting time - Apply continuous innovation / Kaizen with participation of all the workers The innovation aims to determine the potential causes of the operations which fail to create value and eliminate them by innovating the production stages with the participation of all the workers, that as all suggestions for improvement are encouraged and rewarded - Improve the application of the ISO 9001-2000: Accordingly, procedures and operation instructions must be all clear, detailed to avoid mistakes occured during production process As the company has been applying the ISO 9001:2000, the main requirement is strict compliance and appropriate innovation 90 90 MBA Thesis - Control quality of inputs from the resources The inputs control procedures have been estabilished in accordance with the ISO 9001:2000 and need more strictly application - Apply the 5S workplace organization methodology: + (Seiri) Sorting: through all materials and tools in all workplaces to keep only essential items, otherwise are removed or stored + (Seiton) Set in order: To arrange the tools, equipment and parts in an order to promote the work flow + (Seiso) Sweeping or Clealiness: To keep the workplace is clean as well as neat Cleanliness must be considered a a part of works and needs to perform in every shift, not occasionally + (Seikesu) Standardizing: Standardize the works, so that everyone knows what is his/her responsibility to ensure the above 3S + (Shitsuke) Sustaining the descipline: maintaining and reviewing the standards - Organize well the maintenance activity for equipment to prevent potential failures - Balancing the production stages in order to stabilize the production flow and products’ category, and to avoid unexpected suddenly changes in volume of works Marketing solutions To exporting market: - Sustaining the relationship with traditional customers, understand the market’s demand through their provision of information Basing on that, gradually increase sale volume upon better adaption to their needs and demands - Seek customers in order to penetrate and stay in high-end markets such as Japan and West-European countries 91 91 MBA Thesis Besides increasing market share in traditional market such as Taiwan, France with almost the existing products, new developed products could be used as shapened weapon to penetrate into new high-end product market such as Japan and West Europe These products with reasonable prices would attract the market demand and help to expand the export market share and sale volume In such markets, VIT’s products might be positioned as high quality and rarely low price and have high competitive characteristics This conclusion might be drawn in comparision with its competitive products from China, India, Malaysia and Thailand - Improve and standardize the sale and after sale logistic services in order to save cost and increase value to the customers - Developing products’ image and brand name through international exhibitions To domestic market: - Sorting the distribution system to choose the essential distributors to enhance sales of high-ranked products - Cooperate with architectural designing and consulting organizations to promote the company’s high-ranked products into high grade buildings - Upgrading the showroom chain in the target markets (big cities) Implementing public promotion campaigns, participating industrial exhibitions and fairs, spreading advertisement programs to enhance ranking of the products and brand name Finacial Solutions - Restructuring the capital in direction of reducing dept and increasing equity capital from retaining profits and additional equitilization - Withdraw ineffetive finacial investments to enhance capital usage efficiency 92 92 MBA Thesis - Restructuring the bank loans in direction of reducing bank interest - Take advantage of products’ differentiation to depress the buyers’ bargaining power and reduce pending receivables to limit deffered payment, focusing on debt withdraw, reducing items receivable from customers Solutions for Human Resource Development - Basing on application of the ISO9001:2000, complete the working procedures and job descriptions to provide clear understanding to every working position - Sorting the labor force to rearrange personnel working position in direction of increasing working effectiveness - Attracting and recruiting high qualified personnels for research & development, production and marketing departments Besides, increase training on technological, sale management - Update and improve the appraising system for upgrading equality in human resource - Detecting and solving the rising internal confliction, if any - Improving compensation system to encourage working behavior of the employees Solutions for Research and Development - Replacing and adding instruments and tools for conducting research and development such as developing advanced experimental devices, updating new research methods - Increasing knowledge and speciality of research and development staffs - Tightening and developing relationship with foreign technological and material suppliers to updating advanced technology 93 93 MBA Thesis - Encourage suggestion of improvement and innovation in whole the organization, especially in developing new products with more advanced features V STRATEGIC IMPLEMENTATION Timing schedule of strategic implementation Figure 3.4 – Timing schedule of strategic implementation Operations Output Divisions in Time Cost 2011 2012 2013 charge 2014 2015 Product ion Increase output of high-ranked products Reduce product’s cost price Sale Export sale High-ranked domestic sale Finance million m2/annual Totally 4.5 million m2/annual bill Vnd Production, bill Sale, Vnd Planning, Financial Lowering 15% 35% of turnover Market-share growth 3.54% annually bill Vnd Sale 15 bill Vnd Equity to 70 bill Vnd Finance Receivable [...]... products are unique over time A firm can create trademark loyalty by continuously promoting (e.g advertising, etc.) its trademarks and brand names; registering and protecting patent of its products; improving products’ quality through research and development programs; strongly focusing on product quality and after sale services The trademark loyalty causes difficulties for new competitors who seek for a... utility industries because of the need to provide quality service to all and the capital requirements necessary to do so 2.2 – Intensity of rivalry among competitors 22 22 MBA Thesis Because an industry’s firms are mutually dependent, actions taken by one firm usually invite competitive retaliation Competition rivalry intensifies when a firm is challenged by a competitor’s actions or when an opportunity... capabilities To be a source of competitive advantage, a resource or capability must allow the firm (1) to perform an activity in a manner that is superior to the way competitors perform it, or (2) to perform a value-creating activity that competitors cannot complete Outsource Outsource is the purchase of a value-creating activity from an external supplier In multiple global industries, the trend toward... large-scale firms The nature and intensity of competitive rivalry are hard to be forecasted as firms are mutually dependent in this industry Strong retaliation from competitors can create a more dangerous competitive spiral Market demand Market demand influences the intensity of competitive rivalry among existing firms Demand growth trends to loose the intensity of the competitive rivalry In contrast,... capacity to the industry Thus, they force the existing firms to be more effective and efficient and to learn how to compete on new dimensions The existing competitors try to develop barriers to market entry, and the potential entrants seek market in which the entry barriers are relatively insignificant There are several kinds of potentially significant entry barriers as below Trademark loyalty It is... formulating process Long-term objectives of a firm are mainly profit, competitive position, business efficiency, human resource development, relationship with employees, ability of leading in terms of technology or social responsibility Annual objectives Annual objectives are intermediate objectives that a firm has to gain annually in order to achieve the long-term objectives Annual objectives are essential... incrementally increases its size It means as the quantity of a product produced during a given period increases, the manufacturing cost of each unit declines New entrants face dilemma when confronting current competitor’s scale economy Small-scale entry places them at a cost disadvantage However, large-scale entry with big manufacturing capacity has to deal with risks of strong competitive retaliation... purchasing new technologies or inventing technology by themselves 1.3 – The socio-cultural segment The socio-cultural segment is concerned with a society’s attitudes and cultural values Because attitudes and cultural values form the cornerstone of a society, they often drive demographic, economic, political - legal, and technological conditions and changes A variation of the socio-cultural segment may... administration’s businessrelated policy and philosophyies, laws against monopoly, tax laws; industries which are selected to enjoy priority or controlled by government; regulations through which state administration policies could affect to operations and profitability of industries or firms At the global scope, firms have to cope with concerned issues of politics and legal as trading policies or national... source of competitive parity Competitive advantage results only when firms develop and exploit capabilities that differ from those they share with competitors • Costly to imitate Those are that other firms cannot develop easily Capabilities that are costly to imitate can occur because of one or a combination of three above reasons First, a firm sometimes is able to develop capacity due to its own unique