V0110 13 GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION ***** CAPSTON PROJECT REPORT *** Topic: BUSINESS STRATEGY CONSTRUCTION FOR NGHE AN TOURISM JOINT STOCK COMPANY WITHIN THE PERIOD OF 2011 – 2015 Group 1 – Class: Gamba-V0110 Group members: Nguyễn Đức Hiển – Group leader Phạm Anh Tuấn – Group member Nguyễn Đình Thiện – Group member Võ Văn Ngọc – Group member MBA Group 1 - GRIGGS Gamba.V0110 PREFACE We want to show our gratitude to Nghe An tourism Joint stock Company which has supported us to provide data as well as have meetings to construct business strategy for the company. Besides, we also want to send gratitude to professors, doctors who have provided us skills and knowledge of business administration during the course. Such knowledge is the basis for us to prepare this capston project report as well as apply into working reality. Especially we want to thank theory council of Griggs University to instruct us during study process.
Topic: Business strategy construction for Nghe An Tourism Joint Stock Company within the period of 2011-2015 Preface CHAPTER I: ARGUMENTAL BASIS ON BUSINESS STRATEGY OF THE ENTERPRISE 1. Definition of business strategy.1: Definition of strategy: Definition of strategy has originated from military sector originated from the word of “strategos” which is just like the role of general in military army. Nowadays, strategy is used popularly which is considered as the factor to increase capacity of success and reduce capacity of failure of enterprise. - According to Fred David, trading strategy is medium to reach long term targets; trading strategy can include development of geography, diversification of activities, ownership, development of product, market penetration, cost reduction, liquidation, joint venture (Fred R.
David, definition of strategic administration, translation edition, Statistical Publishing House, 2006). Strategy is the collection of decisions: targets, methods, policy, resource allocation…and action plan to reach long term targets. 2 MBA Group 1 - GRIGGS Gamba. Classification of business strategy.
Business strategy has the important role in the existence and development of enterprise; the role of business strategy is shown by the following aspects: - Business strategy has helped enterprise to realize orientation in the future which is the operational guideline for all activities of the enterprise. - Business strategy will help the enterprise to grasp and make use of business opportunities at the same time have active method to cope with threats and risks within business environment. - Business strategy pays important role to orient long term activitie of the enterprise which is the firm basis for implementing operational activities. The lack of strategy or unclear strategy without firm basis will make the activities of enterprise lose orientation; there are many short term problems without long term targets which cannot show the general role in activities of enterprise.
- Business strategy will raise operational effect of resources, increase competitive position of enterprise to ensure sustainable development for the enterprise. - Business strategy can create firm basis for enterprise to create suitable decisions with the change of market; it will create firm basis for study and implementation activities, invest in development and training, personnel nurture, expand market and develop products. In fact, most of mistakes in investment, technology, market are originated from constructing strategy or mistakes in defining strategic targets. The success or failure of enterprise will depend on important factor which is business strategy.
* Business strategy classification according to strategic level. When classifying strategy according to strategic level we will divide as follows: - Company level strategy (or general strategy): is constructed for the whole company in all terms that the company joins in. - Business level strategy (sector): is constructed for a narrow business sector. 3 MBA Group 1 - GRIGGS Gamba.V0110 - Functional strategy: this is the strategy of each private function in company such as finance, personnel, marketing… then we can consider functional strategy as supporting strategy for business level strategy and company level strategy.
* Business strategy classification according to strategy contents - Commercial strategy - Financial strategy. - Technological and technical strategy. * Business strategy classification according to strategic process. According to this classification business strategy includes: - Orientation strategy - Action strategy 1.
Business strategy construction process 1. External environmental analysis: The purpose of external environmental analysis is to realize opportunities and threats from external environment. External environment includes macro environment (general environment) and sector environment (competitive environment). Macro environment Macro environment can have much influences on many sectors, enterprises and indirectly impact on the enterprise; macro environmental analysis will show that enterprise is coping with which problems? what is the opportunity and threat for business activities of the enterprise in the future.
To analyze, evaluate the influence of external environment on the enterprise, using PEST theory including evaluation of political and legal factors (P), Economic (E), Social (S) and technology (T) to find out opportunities and threats for enterprises in the activities of business environment. 4 MBA Group 1 - GRIGGS Gamba.1- PEST model (Political) Stable politics, labor law, tax policy, legal system and legal environment (Economics) (Social) Change of GDP Population Rate of economic growth Allocation of national rate income Interest, inflate Living style Unemployemnt Culture, people’s qualification Cycle of economy Customs, tradition (Technological) Discover new technology Rate of technological transfer Governmental cost for R&D Market of technological products - Political and legal factors: 5 MBA Group 1 - GRIGGS Gamba.V0110 Enterprise is the cell of economy, all decisions of the enterprise will bear strong influence of political and legal environment; political and legal environmental analysis is an indispensable activity to construct business strategy of the enterprise. Political environment includes State and law as well as management activities of the State. It includes system of State’s policies and viewpoints, current legal system, political trends, Governmental diplomacy as well as political happenings in the nation, region and the world.
- Economic factor: It is the factor to impact on the enterprise which is the factor to operate the most constantly which is difficult to predict in macro factors; its operation bears opportunities and threats for enterprise; economic factor tends to operate as follows: The trend of GDP: can impact on growth rate of the economy, on the growth rate of population’s income which can change demand of consumders, market scale, impact on supply and demand of products. Economic policies show the Governmental viewpoint in sector development. Inflate rate can impact on prediction capacity of investors. Interest rate is the factor to impact on the trend of consumption saving and investment which can increase or decrease consumption, stimulate or limit production expansion.
Payment scale, exchange rate impact on market and economic relation of the enterprise. - Social and cultural factors: Social cultural environment can be understood as the following factors: language, value and attitude, behaviors, customs and traditions, material factors, aesthetic, education, factors of population scale, age, gender, race and professional skill … The change of social and cultural factor is the result of long term impact of other macro factors then it can happen more slowly than other factors. However 6 MBA Group 1 - GRIGGS Gamba.V0110 it can have long term impact rather than other factors. then study of social and cultural environment is an indispensable content in studying macro environment.
- Technological factor: Forces to create new technology, new product and market fortune; technological environment includes: the appearance of new technology, discovery speed and application of new technology, Governmental support and encouragement for research and development; it will allow creating new products of function and outstanding quality in a short time but such changes can make existing products be outdated. Then technological changes will include creation and damage to bring opportunities and threats. - Besides, in the condition of global economy it requires enterprises to study related factors of natural environment and global environment: In the background of exhausted natural resources, environmental pollution, ecological balance loss…business strategy of enterprises must meet the following requirements: sustainable development, make use of natural resources effectively; promote study and development of technology to create clean products to protect environment, reduce impacts from production activities of the enterprise. In the condition of global economic integration it requires to have global environmental study.
Analysis of macro environment Analysis of enterprise can discover strengthes and weaknesses of enterprise to build up target system and suitable strategies to make maximum use of strengths and turn them into special capacity as well as limit weaknesses; The purpose of internal environmental analysis is to realize potential resources to create competitive advantage for the enterprise; we can also realize barriers in maintaining competitive advantage; activities of an enterprise will include activities of financial administration, personnel, business production, marketing study….and it must have a system of information, management, 7 MBA Group 1 - GRIGGS Gamba.V0110 functional divisions in each operationa sector. Each enterprise has its own strengths and weakneses; define strengths and weaknesses to help the enterprise to construct and select suitable business strategy. To analyze sector’s environment then we can use five-force model of Michael Porter. Such model has mentioned 5 forces to bring opportunities or threatens ina sector including (1) providers, (2) current competitive opponents, (3) potential competitive opponents , (4) customers, (5) replaced products.
One of five forces can bear influence from other factors which must be studied to create a full picture of sector’s competition. Mutual impact among 5 forces can create opportunities and threatens for enterprises within the sector which is shown in the following diagram. Newly participated person Threatens of newly participated person Bargain capacity of Competitive Bargain capacity of provider opponents buyer Providers Buyers Competitive intensity Replaced threatens Replaced products 8 MBA Group 1 - GRIGGS Gamba. five-force model of M.Porter Competitive opponents in the sector : When mentioning competition among enterprises, we must consider the level of competition among enterprises in the sector; a sector with high competitive level then capacity to reduce competitive price is very high which can lead to profit reduction threatening to enterprises; factors to decide competitive level of a sector can include sector’s growth rate, quantity of enterprises and their relative scale, the height of sector’s barriers, different products among enterprises.
Threatens of newly participated members: Such threatens are defined by “the height of participation’s barriers”; if participation’s barriers are high then the power to threaten from potential opponents can reduce and more opportunities will be given to enterprises; Decisive factors of participation’s barriers including economic scale, difference of products and faithfulness with label, distribution channels, absolutely advantageous cost. Power of buyers (customers): 9 MBA Group 1 - GRIGGS Gamba.V0110 In the correlation between enterprises and customers, if customers are “weak” then enterprises can increase price to increase profit; on the contrary, customers can be “stronger” than enterprise. Power of providers: Providers have capacity to require price increase or reduction of product quality which is stronger than enterprise; providers can be stronger in cases when providers do not have many replaced product within market of industrial commodity which forces enterprises to choose them; when trading sector of enterprise is not important to providers; when providers have advantage in specializing products which make enterprises difficult to choose a replaced provider; when providers can join in trading sector of enterprise to compete directly with enterprises. Threatens from replaced products According to M.
Porter, replaced products are products of competitive opponents in the trading sectors which can have the same function to meet the similar demand of consumption of customers.