Chương 1: General theoretical foundations of building business strategy Chapter 2: Analysis of environment factor and selection of business strategy for MB Dien Bien Phu Branch Chapter 3: Solutions for implementation of business strategy of MB Dien Bien Phu Branch by 2015 3 CHAPTER 1: GENERAL THEORETICAL FOUNDATIONS OF BUILDING BUSINESS STRATEGY 1.1 Theories of strategy and strategic management 1. Concept of strategy The origin of concept of strategy: Concept of strategy began with ancient Greek. This term has a deep root from the military, comes from “strategos” which means the role of the general in the military. Later, it evolved into “Art of the generals” – means behaving skills and psychology of the generals.
By 330 BC, Alexander the Great used management skills to exploit all forces to crush the enemy and create a global system of domination. Internal External Special abilities Compatibility Battlefield conditions Figure 1.1: Simulation of military strategy The competitive strategy of an organization is similar to military strategy, both tend to achieve the compatibility between abilities in order to create a difference and external environment which the organization participates in competition. However, compared to military strategy, business strategy is more complex. Unlike military conflicts, competition in business hasn’t always caused the outcome including winners and losers.
The competition in the same sector sometimes gives them an opportunity to improve their strengths and skills like competitive seeds. 4 Strengths Opportunities Internal Strategy External Weaknesses Threats Figure 1.2: Simulation of business strategy Concepts of strategy in the field of business: Because the society has developed a great idea and the strategic thinking is no longer exclusively designed for the military field. Therefore, the similarity of business activities are also used with strategic and leadership factors. However, in the business world, it’s not simple like that.
In order to analyze strategies, we should define what strategy is. There are a lot of good definitions of strategy; the difference among these definitions is often caused by the viewpoints of each author. In 1962, Chandler is the person who initiated and developed the theory of strategic management: strategy is the determination of long-term purposes and objectives of enterprise and the acceptance of chains of actions as well as distribution of necessary resources for implementing these objectives. In 1980, Quinn defined: strategy is an integrated pattern or plan of basic objectives, policies and chains of actions of organization into a coherent population.
Lately, Johnson and Schole defined: Strategy is the orientation and scope of an organization in the long term, in order to gain advantage for the organization through its structure of resources in the context of a changeable environment, in order to satisfy the needs of the market and satisfy the expectation of stakeholders. 5 Concept of strategic management: People often regard strategy as a product of reasonable planning process led by senior executives, but it’s not all. In many cases, valuable strategies may arise from the internal organization without a prior planning. Strategic management is a set of strategic decisions and determination of long-term performance of a company.
Strategic management consists of continuous actions: review the environment (both internal and external); build strategy, evaluate and control strategy. Thus, strategy research emphasizes on supervising and evaluating external opportunities and threats in the contex of internal strengths and weaknesses. Strategic management origins from business policies, strategic management combines long-term planning topics with strategy. However, contrary to strategic management, business policy has a general management orientation, mainly focusing on the internal, paying attention to the integration of the organization’s functions.
Meanwhile, strategic management not only pays attention the integration of the internal functions like business policy but also emphasizes more on the environment and strategy. Therefore, people use the term strategy in stead of business policy.2 Bases of strategy Strategy is the direction and scope of action of an organization in the long term in order to gain business advantage through determining existing resources which can be used in a certain business environment to meet the market’s needs and ensure benefits for all involved agents. More specifically, strategy aims at: - Sustainably achieving long-term objectives of enterprise (business & social responsibility). - Market or market segments which the company will trade in, business tactics will be apply.
6 - How does the enterprise hold the upper hand compared with its competitors in the markets for specific customers? - Which resources should be used (human, skills, assets, finance, technological secrets, etc…) to achieve the given objectives? - The external potential threats may influence the implementation of strategy: environment, competition, politics, resources, etc…and plans of risk prevention? - Values that the enterprise brings to the Owner and Society in which it’s a Member. In terms of process, strategic management is regarded as management process including: form a strategic vision, set objectives, draft a strategy, implement the strategy, and adjust the strategy in accordance with the specific circumstances over time.3 Basic steps of strategic management According to the diagram (Figure 1.3), the basic contents of strategic management are divided into 3 main stages: plan strategy, implement strategy and evaluate strategy. However, the actual operation of companies show that the level of emphasis on each stage of strategic management is different, and there is a relative difference among companies in the same sector, companies running in various fields, and there is another difference among different companies of different countries. 7 STAGE OPERATION Organize Combine Make a Plan strategy research intuition with decision analysis Set annual Policy for each Distribute Implement objectives section strategy resources Review internal Evaluate and Make Evaluate & external implement adjustments strategy factors Figure 1.3: Process of strategic management 1.1 Stage of planning strategy Plan strategy is a process of setting works needed to perform of the company, organize researches to specify main factors of the internal and external environment, build long-term objectives, select among replaceable strategies.
Sometimes, the stage of planning strategy of strategic management is also called “strategy planning”. The difference between strategic management and strategy planning is that strategic management consists of strategy implementation and strategy evaluation. Research activities include collecting information on the current field and environment of the company. This process is also called “Environmental control”.
For enterprises, researches are organized to indicate main strengths and weaknesses in the fields of the company. There are many ways to determine the internal factors of the enterprise like targets evaluating the internal average. Many forms of survey have been developed and applied to evaluate internal factors such as: working 8 attitude of workers, effectiveness of production process, effectiveness of advertisement activities and loyalty of customers. There are many skills in strategic management enabling strategists to combine intuition with analysis in order to produce and select the most suitable strategy among set of workable strategies A fact is that all enterprises have a restriction; i.
Strategists have to select which strategy brings the biggest benefit to the enterprise. Decisions in the stage of planning strategy put forth a concentration on specific products to the enterprise. Markets, resources and technology during a period of time must be specified. Strategies indicate long-term competitive advantages.
It also contains long-term objectives having good effects on the company. Strategists have a thorough grasp of the future prospects of the company, so they may understand analytic decisions during the process of planning and they are authorized to transfer necessary resources during the process of implementation. During the process of planning strategy, determination of tasks of the enterprise is paid attention by not only senior planners but also executives. A clear objective is very useful for setting objectives as well as planning strategy.
The stage of planning strategy is performed through the following steps: 9 PROCESS STEPS CONTENTS FOR IMPLEMENTATION Specify the role, nature and 1. Functions, basic contents of the enterprise. tasks Specify the role, nature of external 2. Evaluate external environment evaluation, contents environment and contents for evaluation.
Planning strategy Nature of internal evaluation, 3. Evaluate internal evaluation on main operations of environment the company Use models, combine qualitative 4. Analyze and evaluation with quantitative one, select strategy select a suitable strategic model for the company.4: Model of steps in the stage of planning strategy 1.2 Stage of implementing and inspecting strategy Stage of implementing strategy: Implement strategy is commonly called action stage of strategic management. Implementation means encouraging employees and Board of Directors, in order to make successfully planned strategies become specific actions.
Three main works of implementing strategy include establishing annual objectives, policies, policies for sections and distributing resources. This stage is the most difficult stage during the process of strategic management, because it requires not only sensitiveness, determination but also devotion of administrators. The key of successfully implementing a strategy is the ability to encourage employees, this is not merely science, but it puts emphasis on art. Art inspires and motivates people’s heart.
If a strategy is planned without being implemented, no matter how good it is, it still has no value. Implement strategy has a deep and broad influence on the whole enterprise, it affects all departments and functions. For implementing strategy, skills of each individual are extremely essential. Implement strategy include strategy 10 development, like assistance budget, programs, culture of the company, in connection with the system of annual encouragement and reward.
PROCESS STEPS CONTENTS Set annual objectives, policies, Make management distribute resources, adjust structure, decisions build corporate culture Implement strategy 2. Implement Implement regulations under strategy for accounting standards. Apply marketing, finance marketing strategy in relation to 4p & accounting, R & or 7p.5: Model of steps in the stage of implementing strategy Inspect and evaluate: The final stage of strategic management is strategy evaluation. Because the factors of internal and external environment are always variable, all strategies may be changed in the future.
There are three main operations in evaluating strateggy: (1) review internal and external factors which are used as a basis for planning the current strategy, (2) evaluate the level of implementation (3) carry out necessary amendments. 11 PROCESS STEPS CONTENTS Review strategy Review foundations used for building strategy. Evaluate strategy Re-evaluate strategy Evaluate the level of implementation of the organization in practice. Based on the result of the above Make necessary two steps, make necessary adjustments adjustments.6: Model of steps in the stage of evaluating strategy 1.2 Analysis of environmental factors 1.
Analysis of macro environment – PEST Model While M-Porter’s Five Forces Model goes into analyzing the internal factors in business environment, PEST studies the impacts of the interanl factors in macro environment. Factors include: Political Economics Sociocultrural Technological They are four factors directly affecting economic sectors, these factors are the external ones of the enterprise and sector, and the sector must suffer their impacts as an objective factor. Enterprises depend on impacts and then put forth suitable policies and business activities. 12 MAIN MACRO FACTORS * Economics: * Politics and Government: - Stage of economic cycle - Regulations on consumer loans - Financing - Anti-trust regulations - National income trends - Environment Protection Acts - Inflation ratio - Tax regulations - Interest - Special stimulation - Monetary policy - International services regulations - Level of unemployment - Hiring and promotion regulations - Tax policies - The Government’s stability - Salary/ price control - Balance of payments.
* Soceity: *Nature: - Attitudes for the life quality. - A variety of resources - Lifestyles - Pollution - Women in labor force. - Lack of energy - Occupation - Waste of natural resources - Flexibility of consumers * Technology: * Population: - The State’s targets on R & D. Targets of - Population growth rate industry and R & D.
Focus on engineering - Population changes efforts. - Population density - Patent protection - Religion - New products - New technologies transfer - Automation - Robot 1.1 Politics This is the factor affecting all business sectors in a territory, political factors can threat the ability of existence and development of any sector. When trading in an administrative unit, enterprises must comply with political factors in that region.