Draft of Major Exercise – Ge MBA 01. V01 – Group 5 MINISTRY OF EDUCATION AND TRAINING HANOI NATIONAL UNIVERSITY ----ھ---- BULDING BUSINESS TRATEGY OF BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM AT NORTH QUANG BINH BRANCH IN THE PERIOD 2010-2015 DRAFT OF MAJOR EXERCISE GeMBA01.V01 - Group 5 Group 5 members: 1. Phan Xuan Khanh 2. Đao Huu Son 3.
Nguyen Thanh Phuong 4. Ho Tan Canh Quang Binh – 2009 Draft of Major Exercise – Ge MBA 01. V01 – Group 5 CHAPTER I THEORETICAL BACKGROUND OF BUSINESS STRATEGY OF COMPANIES 1.1 Business strategy of companies 1.1 D e f i n i t i o n “Business strategy is a general program of action towards the objectives of the company "[1.14] Business strategy does not aim to outline a special plan of how to achieve goals because it is the task of numerous supporting programs, of other functional strategies. It just creates the frame of thinking guide for action.
* Business strategy is normally defined as three levels: + Corporate Strategy: Determine and point out objectives, goals and business activities of the company, develop policies and basic plan to achieve goals of the company. + Business unit strategy: Identify choices of products or particular form of the market for private business in the company; determine the way each business unit will try to achieve their goals to contribute to finish overall goals of the company. + Operational strategy: Determine the solutions, plans for each field of business. * Besides the concept of business strategy, there are concepts, which are closely related to: Task Report: report on long-term objectives to show the company’s business mission with service products which organizations will supply to Draft of Major Exercise – Ge MBA 01.
V01 – Group 5 customers, help to distinguish between organizations and organizations. It describes the values and priorities of organization, identify general developing direction for organization + The long-term objectives: Determined achievements that a company tries to gain when pursuing its task. A long-tem objective is more than one year. It must be challenging, measurable, appropriate and clear.
It is set for the whole company and for each part. Long-term objective is important in the period of working out strategy + Annual objectives: What companies need to achieve to reach long-term objectives? It is identified by the achievements in managing, marketing, financing/accounting, producing/executing, researches of development and information system. Annual objective is important in the period of carrying out strategy + Policies: Means to achieve given objectives, instructions for making decisions and carrying out repetitive or cyclic situations. Policy is important during period of carrying out strategy.
+ Opportunities and challenges: These are the impact of external environmental factors, beyond the control of organization and can benefit or damage organization. + Strengths and weaknesses: These are the impacts of internal elements of organization, under the control of organization. They are identified in the relation to competitors.2 Strategy in business unit 1.1 Concentric growth strategy Each strategy of a company is implemented for business unit. However, at business unit, firstly need to pay attention to focus growth strategy since the main targets of these strategies have been products and markets.
This group of strategies primarily aims to improve the competitive position Draft of Major Exercise – Ge MBA 01. V01 – Group 5 of company with existing products on the basis of increasing marketing activities or change existing market strategy but still not change any products. There are three main types of strategy: +Market penetration: seeking increasing market share for products and services in current markets by taking efforts to do marketing + market development: Launch products and services to new areas. + Increase turnover by improving and innovate existing services.2 Competitive strategies from the view of M.Poter – a professor of Havard University has showed basic competitive strategies in his work: “Competitive Strategy” a.
Cost leadership strategy This strategy creates the competition in two ways: - Lower pricing than the competitors to attract target customers who are sensitive to price to increase total revenue. This strategy is suitable to large-scale business unit, can reduce costs during operational process. - Restrain from not cutting price down entirely, be content with current market share and use lower cost devices to earn more profits per sold product. Differential strategy Differentiation is aimed at the broad market that involves the creation of a product or services in comparison with competitors to get to the first rank.
Since then, setting higher price than other conventional products, increase turnover by attracting customers who are interested in brands with striking features such as: distinctive smell, the ability of provision for distribution to customers anywhere, appliance of science in design and management, optimal services, high quality, prestige and easy of distinction, etc. Focus strategy According to this strategy, business units pay their attention to narrow segments of the whole market. These segments can be defined by geographic Draft of Major Exercise – Ge MBA 01. V01 – Group 5 areas, products, and target customers.
Chosen attractive segments are which there are no competitors in or the competitors have not met the needs and wants of customers yet.3 Competitive strategies for business units according to market share position in the market In spite of being in the same company, each business unit has different market share position in the market. Business units leading market - Strategy of expanding the demand of market: Seeking new geographic areas for sales, seeking new customers, developing new uses and encouraging greater use of the product. - Defensive strategy: Helps leading business units in the market hold their position in the current market. Leading business units are always threatened by other competitors, especially units that hold challenging position in the market.
Therefore, business units have to defend continuously against attacks from competitors. - Strategy of expanding market share: takeover small business units of competitors, attack to take market share of weak competitors. Business units challenging market: Attack leading business units and other competitors to increase market shares or to run parallel with competitors and not rub against competitors behind. To carry out aggressive strategy, business units must follow the following steps: - Clearly identify the competitors to attack and the goals of strategy.
- Select appropriate aggressive strategy: attack forwards, attack sidewards, attack surroundings, etc. Business units following market: These business markets do not want to face leading competitors or challenging market because of their lack of resources, their fear of loss, costs, etc. Therefore, they ward off by closely Draft of Major Exercise – Ge MBA 01. V01 – Group 5 following the leading competitors by imitation strategy: - Imitate accurately all products, methods of distribution, advertising and marketing activities, supplying products for target market, which is sensitive to low price.
- Imitate some core content in the marketing mix of leading competitors and keep some difference of packaging, pricing, adverting, sales network, etc. - Imitate including improvements to adapt to the market by depending on the marketing mix to improve and create specific features for their marketing to meet the needs of target market. Hidden business in the market. Businesses units hidden in market are always seeking one or several segments to hide safely and to be profitable.
To succeed in narrow market segments, they often carry out typical specialize strategies: - Specialize according to the last user: Depending on each types of sector, businesses choose a customer target who has needs of using products or services to serve. - Specialize in phases in production process, product distribution: Business units can choose details, or components of a fully worked-out product, additional products to the main ones, etc. - Specialize according to customers: Choose the customers basing on demographic standard such as customers with high, medium or low income, or clients are children, teenagers, youth, etc. - Specialize according to sales areas: Choose geographical areas to supply such as domestic market, local market, or market according to international areas, etc.
- Specialize according to features of product: high quality, luxury or normal. - Specialize according to products in each sector: according to one or Draft of Major Exercise – Ge MBA 01. V01 – Group 5 several products in big industry. - Specialize according to select business services that competitors do not offer 1.2 Process of planning a strategy.
Planning a business strategy is the beginning period in the process of strategic management. The process of planning a strategy includes four steps; each step will include the following: 1.1 I d e n t i f y business task The idea of reporting business task by Peter Drucker in 1970s is due to his studies at General Motors company and 21 his own books as well as hundreds of his articles. Drucker said: “A report of business task is a statement of “reason for existence” of an organization. It answers for a main question: What is our business? The report of business task clearly is a necessary thing to establish goals and draw up strategies effectively.
Environment of an organization includes factors, forces, regulations… those are outside business affecting the operation and performance of business but the manager cannot control them. Environment of organization can be divided into two levels: macroenvironment and microenvironment Macroenvironment affects all business but not imperatively in a certain way, including: (1) Economics environment (2) Law, Government and Politics environment (3) Culture and Society Environment (4) Nature environment (5) Technology environment. Microenvironment is defined by a particular sector. Businesses in the sectors are affected by the sectors’ microenvironment, including: (1) Competitors (2) Customers (3) Suppliers (4) Implicit rivals (5) Replacing products Analysing the environmental factors will allow businesses to identify what Draft of Major Exercise – Ge MBA 01.
V01 – Group 5 opportunities (O) business can take advantage of, and what challenges (T) business must face Identify and evaluate opportunities and challenges from the external environment which affects business will allow business to set up clear business tasks and propose suitable policies to achieve annual goals. That identifying outer factors is qualitative, intuitional, and unimaginable. In strategic management, researchers have offered two tools, which allow business to mark and quantize influences of environment to operations of the business. They are External Factor Evaluation matrix and competitive profile matrix.3 E v a l u a t e internal situation of business Internal situation of business are often evaluated through functional field such as Finance, Human resource, Management, Organization, Marketing, Research / Development; Information technology.
That analyzing internal situation of business will allow identifying strengths (S) and weakness (W) of business. Since then, chosen business strategies need to maximize strengths and overcome weaknesses of the business Similar to technique to analyse external factor, in order to quantitize analysis of internal situation of business, they use “Internal factor evaluation” (IFE).4 A n a l y z e strategies and choices That analyzing strategies and choices mainly is making subjective decisions based on objective information to identify the operational process, which can be chosen. Since then, the company can finish their responsibilities and objectives. Current strategies, objectives and missions of company with internal and external controlling information will provide the basis for forming and evaluating feasible strategies 1.3 Tools for planning a business strategy Draft of Major Exercise – Ge MBA 01.
V01 – Group 5 According to Fred R.David, there are three periods to form business strategy and each period uses different tools. Stage 1: Collect and systematize information. This period summarizes basic information, which is collected and systematizes to form business strategies. This period uses three tools: EFE matrix, competitive profile matrix and IFE matrix Stage 2: Combining This period chooses, arranges and combines external environmental factors, internal factors to draw up feasible strategies.
This period will use matrix tools: Strengths – weaknesses, opportunities – threats (SWOT) Strategic position and action evaluation matrix (SPACE) and big strategic matrix. Stage 3: Decision The only tool this period uses is Quantitative Strategic Planning Matrix (QSPM).