Thesis title: Developing business strategies for Vinh Son – Song Hinh Hydropower Joint stock company 1. Rationale In the recent years, besides new advantages and opportunities, businesses of all economic sectors have had encountered many challenges and difficulties, i. an unstable economic growth rate, an unpredictable market, a restricted market of a number of export goods and services, and especially the global economic recession, etc. Meanwhile, competitions in the global, regional and sectoral markets have become fiercer due to the expansion of the international and regional integration and Vietnam’s gaining the150th membership of the World Trade Organization (WTO).
During our study at the joint program between the National University and the US Griggs University, we approached modern theories and practical knowledge of business administration around the world. Besides, we have been working in the electricity businesses as managers and figured out several existing problems of the sector: the management style has been much influenced by the subsidy system; business administration capacity is poor; goals and contents of the business plans do not meet the demand of the current market, which has a significant effect on the survival and development of the business and poses great difficulties in expanding the market shares. Therefore, with the knowledge gained, we are aware of our responsibility for developing business strategies so that the relevant enterprises can refer to them. Then, the long-term and effective business strategies will be worked out.
Specifically, we would like to develop business strategies for the Vinh Son – Song Hinh Hydro-power Joint-stock Company in the period of 2010-2015 and the following years with a view to identifying targets or solutions for the company to make the best of advantages and opportunities, and to restrict or address the challenges to survive and develop. Those are all the reasons why we came to this thesis. Objectives of the study: - Study and systemize theories of business strategy development, raise the awareness of the company about the important and decisive role of the business strategies in its survival and development. Develop the optimal selection procedures of business strategies, helping the company to choose the most suitable ones.
- Use the system of theoretical backgrounds and models for analysis, assess the internal and external environments; then develop business strategies for the company. - Make recommendations on the development strategies of the company. Scopes of study The Vinh Son – Song Hinh Hydro-power Joint-stock Company whose shares mostly belong to the state performs in the hydro-electricity field. This company was equitized on the basis of the two hydro-power stations Vinh Son and Song Hinh which were built by the EVN.
This study is mainly focused on the business strategies due to limited time and conditions. Methodology: - Qualitative measures: expert and individual interviews. - Data collection and analysis: Conduct direct interviews with experts. Use statistics, specialized information or data.
Gather data from current and previous plans/reports and the Internet. Significance of the study: In the market economy of fierce competitions, if the company wishes to gain success, it should formulate its own development strategies to figure out, foresee trends in the market to identify keys to success. Then it can make best use of its strengths and be well-aware of its weaknesses. It is to understand rivals, customers’ desires, know how to approach the market.
Accordingly, the company can make creative decisions on 2/84 whether to downsize production or reconsider performances at a certain time and market segment. Anticipated outcome of the study: Although some limitations as mentioned above exist, the content of the study is closely related to the reality of production and business performances in the Vinh Son - Song Hinh Hydro-Power Joint-stock Company. It is believed that a realistic and scientific analysis of the key matters prescribed in the thesis will have a certain effect on the fundamental functions of the company during the renewal and global economic integration process in Vietnam. Organization of the study: The study includes the Introduction and three chapters.
The Introduction Chapter I: Theoretical background for developing business strategies for businesses in the market mechanism. Chapter II: The current business situation of the Vinh Son - Song Hinh Hydro-power Joint-stock Company. Chapter III: Business strategy, conclusion and recommendations. References Appendixes 3/84 SUMMARY OF CHAPTER I The contents of this chapter will conduct some theoretical study to provide bases of business competitiveness, strategies of choices and process of strategy formulation.
This process is composed of the analysis, evaluation of external and internal business environment; the determination of strategy objectives, the establishment of strategic plans and the analysis of the most appropriate plan. The applied models are: model PEST (the analysis of macro environment), Five-force model by Michael Porter (the analysis of competitive environment), “value chain” model (the analysis of internal business environment) and model SWOT (general results of strategic analysis to choose the optimal strategy). 4/84 CHAPTER I THE THEORETICAL BASIS OF BUSINESS STRATEGY IN THE MARKET MECHANISM 1. Concepts, requirements and contents of business strategic stages 1.
Concept: Historically, the term “strategy”, which means the long-term plans, is used in the military context. The strategy was established on the basis of the forecast of what the opponents can or cannot do to win a victory. Since the mid-century XX, the term “strategy” has been commonly used in the field of the macro- as well as micro-economy to build the long-term, comprehensive, basic development plans or the main orientation of the industry, sector or territory. Today, the strategy is commonly used and considered as a factor to increase the possibility of success and to minimize failure of the enterprise.
There currently exist a lot of different concepts of business strategy of which the following are the most popular concepts. According to Lajred Chandler, the strategies include the fundamental and long-term business objectives, simultaneously, choosing the methods and process of action, the allocation of necessary resources to implement those objectives (Charles, Hill and Gareth, Jones. 1995 “Strategic management”, Washington, page 21). Business strategy is also seen as a collection of long-term goals, policies and solutions of business production, of finance and human factor to qualitatively promote business 5/84 activities to a higher level (Charles, Hill and Gareth, Jones.
1995 “Strategic management”, Washington, page 23) Through above concepts, we have a general concept of strategy or business strategy as follows: Business strategy of the enterprise is the optimal choice of coordinating measures (using the strengths of the enterprise) with opportunities and challenges, with business production operations and market analysis in the business environment, resources capacity to achieve the basic, long-term and appropriate goals in accordance with the orientation of business development. Requirements of business strategies: In the fiercely competitive economy, a successful enterprise must have the optimal strategy which must be: - oriented and opened. Accordingly, the changes of business environment need to be monitored and forecasted regularly to adjust timely the implementation of strategies or to adjust the strategic goals accordingly in order to help the enterprise promote its competitive advantages, develop its market share and strengthen more business power. - centralized in decision making which enable the Board of Directors or even the head of the enterprise has a right to decide the important problems of the enterprise.
- built on the basis of competitive advantages over the competitors. The strategy should allow the enterprises to actively take advantage of the opportunities, strengths to limit risks and weaknesses to a minimum. It should also created favorable conditions for stable, long-term business production and continuous development. 6/84 Thus, business strategy plays an important role in the development of the enterprise.
It is a basis for building plans of short-term business production, research and development, training and retraining of human resources. Business strategy also creates an enterprise basis for the development of the enterprise as oriented in accordance with the fluctuation of market and production conditions, appropriate for its business strengths. Steps to develop business strategy Strategic management is the process of research and forecasting business environment as well as internal organization, establishing objectives, making decisions, coordinating the functional activities of the enterprises to carry out and inspect the implementation of the decisions to achieve the goals in the present and future (Charles, Hill and Gareth, Jones. 1995 “Strategic management”, Washington, page 24) * The strategic activities of the enterprise In the process of building business strategy, firstly we must conduct appropriate activities of the enterprise to cope with the fluctuation of the market, with the competitors; then identify the targets of the enterprise in each stage of the development.
The establishment of these activities is the indispensable element in the process of the existence and development of the enterprise, especially our country’s economy is in the process of open international economic integration, so it is very important. Those activities are described in the following diagram: 7/84 Figure 1. The strategic activities of the enterprise Penetrate into Increase sales, expand Penetrate into new business and develop market, new market, areas to diversify decrease price, develop new sources of benefit improve models, products and improve product withdraw from quality the market Enhance the Cope with competitiven The activities of the market e-ss and enterprise to achieve changes and overcome external strategic objectives weak points factors of the enterprise thị Merge with Strategical Maintain Orient research ly fields rival management, cooperate threatened enterprises to product with by create development, partners competitors competitive sales. strength * Principles of strategic options for the enterprise - Resources of the enterprise (finance, human resources, technology…) - Diversification of products - Product lifecycle 8/84 - Strategies for competitors - Market demands * Process of building strategies To build the feasible strategy for the enterprise, we must identify competitive advantages, strong and weak points of the enterprise.
Competitive advantage is a key factor to analyze the situation and build the strategy. Competitive advantage is the possibility of strategic vision of business leaders, leading capacity, finance capacity, human resources, product research and development, production line and technology, system of sales network, the relationship with partners, and the adaptability to environmental changes etc. Process of building strategies is implemented through the following steps: Figure 1. Process of building strategies for the enterprise Vision of mission Analyze Analyze internal external - Identify objectives environment environment - Build strategies - Strong points.
- Select strategies - Weak points - Challenge. When building business strategies, depending on the situation of business production, the enterprises can flexibly adopt different steps of building strategies. The targets can be first identified, and then environmental analysis; or environmental analysis before 9/84 making targets; or environmental analysis and strategic objectives can be carried out simultaneously. Depending on the perspective, we can use models of different strategies.
* The construction and selection of strategies Targets of the construction and selection of strategies are the establishment of long- term objectives and replacement strategies, a few of which is selected to pursue. The construction and selection of strategies help the enterprises achieve its mission as well as objectives which it set forth. On the basis of current business strategy, target and mission are combined with external and internal environmental analysis to evaluate and generate support strategies. The enterprises cannot choose each alternative strategy in turn because it takes much time and is not efficient.
Therefore, they need to select a set of strategies supposed as the most optimal to develop. It should also carefully consider advantages, disadvantages, costs and benefits which can be brought from this strategy; simultaneously, to master methods and ways of usage, especially the use of models to choose business strategy appropriate for business activities such as: the analysis of strategy in the matrix SWOT.