CAPSTONE PROJECT REPORT FORMULATING STRATEGY FOR DONGA PAINT JSC., IN THE PERIOD 2012 - 2016 Nguyen Van Thanh Mai Anh Tam Nguyen Thi Thu Luong Vu Trong Khiem Phan Thi Vinh CLASS: GaMBA01.X0409 HANOI, 2011 GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT FORMULATING STRATEGY FOR DONGA PAINT JSC., IN THE PERIOD 2012 - 2016 Group Number: 8 Student’s name: Nguyen Van Thanh Mai Anh Tam Nguyen Thi Thu Luong Vu Trong Khiem Phan Thi Vinh CLASS: GaMBA01.X0409 HANOI, 2011 TABLE OF CONTENT PAGE VERIFICATION AND ASSESSMENT OF DONG A PAINT COMPANY ACKNOWLEDGEMENT LIST OF TABLES LIST OF FIGURES AND GRAPHS INTRODUTION 1 1. The necessity of new strategy 1 2. Objective and scope of the study 1 3. Methodology of the study 2 4.
Structure of the capstone 2 Chapter 1. THEORY OF STRATEGY MANAGEMENT 4 1. CONCEPT AND CLASSIFICATION 4 1. Concept of strategy management 4 1.
Roles of strategy management 4 1. Basic characteristics of strategy management 4 1.4 Superior returns model 5 1.5 Several types of strategy in a company 6 1. FACTORS IMPACT ON BUSINESS STRATEGY 8 1. Analyze external environment 8 1.
Analyze internal environment 11 1. Tangible (fixed assets, finance capital, technology, 11 etc. Intangible (knowhow, competitive advantages, etc. BUILDING MATRIX TO SELECT BUSINESS STRATEGY 11 1.
External Factor Evaluation Matrix (EFE) 11 1. Internal Factor Evaluation Matrix (IFE) 12 1. Competitive Profile Matrix 13 1. IMPLEMENTION OF BUSINESS STRATEGY 15 1.
Organization and implementation 15 1. Evaluate the effectiveness 16 1. Adjust if it is necessary 16 Chapter 2. ANALYZING REAL SITUATION OF DONGA PAINT 17 2.
INTRODUCTION OF DONGA PAINT 17 2. The process of establishment, organization structure and 18 it’s speciality 2. Situation and business performance from 2008 to 2010 19 2. ANALYZING SITUATION AND BUSINESS SITUATION OF 19 DONGA PAINT 2.
Analyze external environment 19 2. Paint Industry environment (five forces model) 25 2. Analyze internal environment 31 2. Human Resources & Human Policy 31 2.
Technology and production management 38 2. Distribution range and marketing policy 40 2. Matrix to select business strategy 42 2. External-Internal factor evaluation matrix 42 2.3 Competitive Profile Matrix 55 Chapter 3.
IMPLEMENTATING STRATEGIES AND SOLUTIONS 57 3. TARGET, STRATRGY AND VISION OF DONGA PAINT 57 3. Targets in 2 years (2011-1013) 60 3.2 Strategy in 5 years (2011-1016) 60 3. Vision in 10 years by 2021 60 3.
PROPOSAL FOR SELECTING STRATEGY IN DONGA PAINT 61 (business strategy and/or corporate strategy) 3. Bases for selecting 61 3. Determination of business strategy 62 3. SEVERAL KEY SOLUTIONS FOR IMPLEMENTATION 65 3.
Solutions on production management 65 (advantages and disadvantages, conditions to apply) 3.1 Input and materials 66 3. Technology and Researching new products 66 3. Solutions on marketing management 68 (advantages and disadvantages, conditions to apply) 3.5 Internal Sales Handbook 71 3. Solutions on human resource management 73 (advantages and disadvantages, conditions to apply) 3.1 Non-Financial Solutions 73 3.3 Salary Regulations and Human Policy 74 3.
Solutions on financial management 74 (advantages and disadvantages, conditions to apply) 3.2 Shareholders Equity Management 75 3.3 Leasing or purchasing 75 3. Solutions to IT Management 76 3. Solutions to firm culture 76 3. RECOMMENDATIONS TO THE PAINT ASSOCIATION 77 3.
RECOMMENDATIONS TO VIETNAMESE GOVERNMENT 77 3.7 EVALUATING AND ADJUSTING STRATEGY 78 CONCLUSION 78 REFERENCES 80 ACKNOWLEDGEMENT We would like to express our sincere thanks to the team of lecturers who have delivered to us valuable knowledge and understanding through 12 main subjects and 3 foundation subjects of the MBA training program, our special thanks to Lecturer Anthony and Lecturer Dr. Vu Thanh Hung, who directly guided and assisted us in approaching a standard method of strategy formulation. In addition, we highly appreciate the enthusiastic assistance of the Management Board and key members of DongA Paint in facilitating us to explore the company’s relevant data. We would like to thank our colleges, friends and relatives for their direct and indirect assistance during our completion of this capstone report.
We wish everybody good health, success and happiness. With our sincere thanks. Group 8, Class X0409, Griggs LIST OF TABLES PAGE Table 1.4 Superior returns model 5 Table 1.4 SWOT Matrix 15 Table 2.1a Industrial production value by economic sectors 20 Table 2.1b Vietnam’s Economic indicators 21 Table 2.1c Vietnam Population and Urban Unemployment 23 Table 2.2a Monthly development index of industrial production 26 Table 2.2b Consumption Index of Processing Industry in each 27 month Table 2.2a BALANCE SHEET 33 Table 2.2b INCOME STATEMENT 35 Table 2.2c A SUMMARY OF KEY FINANCIAL RATIOS 36 Table 2.4 Development of new products and VIP customers 41 Table 2.1a EFE FOR DONGA PAINT 43 Table 2.1b IFE FOR DONGA PAINT 45 Table2.1c IE factors 47 Table2.2 SWOT Matrix 53 Table 2.3 COMPETITIVE PROFILE MATRIX 56 Table 3.1 ESTIMATED INCOME STATEMENT 58 LIST OF GRAPH AND FIGURES Chart 2.1 Organization Chart of DongA Paint 18 Chart 2.2 Growth of DongA Paint until 2010 19 Graph 2.1c Foreign Exchange Rate 22 Graph 2.2 Life Cycle of DongA Paint 28 Diagram 2.3 Production Line 39 Figure 2.1 IE matrix 46 INTRODUCTION 1. The necessity of new strategy Dong A Paint company got the license for establishment in late 2006 but actually started its operation since 2008 when the overall economy of Vietnam was depressed with high inflation and overheated growth of credit Thanks to some advantages, DongA Paint has developed successfully with revenue growth rate of more than 200%/year and its profit in 2010 was 3.3 times higher than it in 2009.
Its relative market share in comparison with the biggest competitor in the market is estimated to expand from 3.3% in 2010 to 6% in 2011. However, currently DongA Paint is operating spontaneously, all staff is working based on their own ideas. Being a new and small-scale company financed by leaders and their close friends and partners, the company is maintaining a very strong internal solidarity. However, when DongA Paint grow to a certain level, a clear, proper and flexible strategy is needed to ensure all staff work and move toward a same direction.
The divergence of directions in the company may lead to the undermining the strength of available resources, failure to take advantage of market opportunities and running into undeserved troubles. Five years is an important time to evaluate the course of establishment and operation of the company, define its position in the market and design a strategy for the next stage. In the Shareholder meeting in May 2011, many shareholders raised the need of an explicit strategy to help them to consider their decision of further investment.Objective and scope of the study The same as many other Vietnamese companies, DongA Paint has never analyzed its resources, internal and external environments to set up a development strategy professionally. Perhaps, to make some important decisions, DongA Paint has based on some special factors but never reach an overview of the company’s position.
Through this capstone, we expect to offer DongA Paint an effective and feasible strategy for its professional development during the next five year and the vision for 10 years and more in condition of changeable world with globalization trend. Methodology of the study To analyze the world economy, Vietnamese economy and the paint industry we use secondary data, published on websites then make the estimation based on statistic methodologies. To analyze the company’s internal environment, we use primary data of DongA Paint including Financial Statement and Management Statements then use statistic mythologies to estimate. Structure of the capstone report Introduction Chapter 1: THEORY OF STRATEGY MANAGEMENT Chapter 1 focuses on basic theories on strategy formulation such as the analysis framework of macro environment (PEST ++), industry environment (five forces model), internal environment.
The Chapter also explains the concept of IF, EF, I_E Competitive Profile, SWOT matrixes to serve as the theoretical background to build strategy in reality. Chapter 2: ANALYZING REAL SITUATION OF DONGA PAINT This is the most important chapter which provides comprehensive and concise description and analysis of the external and internal environments of the company. Many historical and current issues that have strong effects on the existence and development of the company have been illustrated and analyzed by historical data and particular forecast such as economic growth, inflation, exchange rate and interest rate fluctuation, population and income change. Besides, the Chapter also provide time-series industry data such as the industry’s production output, inventory consumption, industry’s entry and growth.The internal factors affecting the business potential of the company have been also comprehensive described and analyzed, ranging from basic and conventional issues such as finance management, production management to sensitive issues such as marketing management, human resource management and corporate culture.The analysis results then were put into relevant matrixes to reflect the overall picture of the company, to position the company in the market and to find out the appropriate direction of the company.
2 Chapter 3: RECOMMENDATIONS AND SOLUTIONS Based on the theoretical background and the practical analysis of the real conditions of the company, the group of authors have worked out the most feasible strategy (in our opinion) accompanied by a series of consistent solutions for strategy implementation, pointing out advantage, disadvantage, estimated cost and applicable conditions of each solution. The matter of time has been also considered, however, the strategy can be implemented effectively only if all relevant departments and units are put together to organize the coordination of implementation, so we will not propose the fixed time line for strategy implementation within the scope of this capstone report. Conclusion 3 CHAPTER 1 THEORY OF STRATEGY MANAGEMENT 1.1 CONCEPT AND CLASSIFICATION 1.1 Concept of strategic management Strategy is "a complex series of actions to mobilize the entire resources of organization / individual to achieve a certain goal." (Lesson 1, slide 1, Strategic management, Griggs) Business strategy is "a series of commitments and actions that a company uses to gain a competitive advantage by exploiting core competencies in a certain market". Management includes Planning, Leading, Organizing and Controlling.2 Role of strategic management Real role of business strategy receives much discussion, which can be generalized in several main points as follow: Defining company’s purpose and orientation.
Forcing managers to analyze and predict conditions in near and distant future. Attaching decisions with terms of business environment. Helping managers effectively use company’s available resources. Helping managers combine organizational functions in the best way aimed at pursuing organization’s general purpose.3 Basic characteristics of strategic management Strategy is the right combinations of factors.
This requires not only the isolation of the components of the situation, but also an evaluation of their relative importance. Strategy relates the business organization to its environment. Strategy decisions are primarily concerned with external, rather than internal, problems of the organization. Strategy is relative.
It is an action to meet a particular conditions, to solve 4 a certain problem or to attain a desired objective. It may take many forms, for almost every situation varies and, therefore, requires a somewhat different approach. Strategy may require contradictory action. A manager may take a course of action today and revises or retraces his steps tomorrow because of changes in situations.
Strategy is forward looking, it has to do orientation towards the future. Strategy is required in a new situation. Nothing new requiring solution can exist in the past, so strategy is relevant only to the future. (Source: Characteristics of Strategy http://www.4 Superior returns model (table 1.4) INDUSTRY ORGANISATION MODEL RESOURCES BASED MODEL External environment Resources Attractive industry Competence Strategy Competitive advantage Assets and skills An attractive industry Strategy implementation Strategy implementation Super profit Super profit (Slide 12, lesson 1, Strategic Management, Griggs) The sector organization model reveals return on average of any enterprises is determined by external factors.
This model mainly focuses on the sector structure or external environment rather than internal features of the company.