M0809 – Group 03, Capstone Project Report ACKNOWLEDGEMENTS To finish this capstone project, we received much support from lectures, members in class and all officials of Global Advanced Master of Business Administration Program co-organized by Hanoi National University and Griggs University – America. First of all, we thank to Doctor Mc Gough and Doctor Ngo Kim Thanh who directly communicated us important knowledge and precious experience in Strategy Management. We also express our gratitude to Directorate, officials in Tu Liem Urban Development Joint Stock Company – LIDECO, created favorable conditions to approach documents, shared experience, knowledge and viewpoint in area of real estate business. Especially, we are thankful to Mr.
Nguyen Van Kha – Chairman of Board of the company spent much time in making us understand goals, missions of the company as well as contributing ideas for our proposal. We believe that it is wonderful since this report may be useful for LIDECO. We are thankful to relatives in our families. With their attention and encouragement, we finish the course without any difficulties and barriers.
Finally, we guarantee that this project was programmed by us with gained knowledge, hand on experience and collected information without copying from other projects excluding quotation. Furthermore, content of this report has been not provided for any organizations excluding this training program. 1 M0809 – Group 03, Capstone Project Report TABLE OF CONTENTS Page Acknowledgements __________________________________________________ 1 Table of contents _____________________________________________________2 List of tables ________________________________________________________ 5 List of figures, graphs _________________________________________________5 INTRODUCTION____________________________________________________6 Chapter 1: THEORETICAL BASE OF STRATEGY ________________________9 1. Concept of strategy _______________________________________________9 1.
Role of strategy _________________________________________________11 1. Classification of strategy __________________________________________12 1. Classification by management level ____________________________12 1. Classification by function ____________________________________12 1.
Process of building strategy ________________________________________14 1. Vision and mission of organization ____________________________15 1. Analyze and assess external environment _______________________16 1. Analyze and assess internal environment ________________________22 1.
SWOT matrix _____________________________________________24 2 M0809 – Group 03, Capstone Project Report Chapter 2: ANALYZE REAL SITUATION OF LIDECO’S BUSINESS ENVIRONMENT _27 2. Overview about LIDECO Company _________________________________27 2. Introduction to the company __________________________________27 2. Reality of real estate trading in LIDECO ________________________30 2.
Analyze external environment ______________________________________32 2. Political and legal environment _________________________38 2. Analyze new entrants _________________________________41 2. Competitiveness within industry ________________________42 2.
Evaluate external environment ________________________________52 2. External Factor Evaluation Matrix of LIDECO _____________54 2. Analyze internal environment ______________________________________55 2. Human resource management ________________________________60 2.
Product quality ____________________________________________61 3 M0809 – Group 03, Capstone Project Report 2. Production and operation ____________________________________62 2. Internal Factor Evaluation Matrix of LIDECO ___________________63 Chapter 3: BUILDING REAL ESTATE BUSINESS STRATEGY OF LIDECO ___________66 3. Vision, mission and development orientation of the company _____________66 3.
Goals of LIDECO _______________________________________________68 3. Forecast on Vietnam real estate market _______________________________68 3. Product differentiation strategy _______________________________74 3. Market development strategy _________________________________76 3.
Competitiveness enhancement strategy _________________________77 3. Vertical integration strategy __________________________________77 3. Business diversification strategy ______________________________77 3. Joint venture strategy _______________________________________78 3.
Solutions for implementation _______________________________________78 3. Solution on organization and structure __________________________78 3. Solution on Marketing ______________________________________79 3. Solution on brand development _______________________________79 3.
Solution on human resource __________________________________80 3. Solution on finance _________________________________________81 3. Solutions on completing strategy ______________________________81 3. Solutions on completing the supervision of building strategy ________82 3.
Recommendation ________________________________________________83 CONCLUSION _____________________________________________________84 REFERENCES _____________________________________________________85 4 M0809 – Group 03, Capstone Project Report LIST OF TABLES Table 2.1: EFE matrix Table 2.2: Trading result of the company (2006 – 2009) Table 2.3: Trading result of the company in 2009 Table 2.4: Internal Factor Evaluation matrix of LIDECO LIST OF FIGURES, GRAPHS Figure 1. 1: Process of building business strategy Figure 1. Porter’s five force model Figure 1. 3: Process of building EFE Figure 1.
4: Process of building IFE Figure 1.5: SWOT matrix analysis Figure 2.1: Organization structure of LIDECO Figure 2.2: GDP/capita from 1975 – 2009 Figure 3.1: Quality policy of the company 5 M0809 – Group 03, Capstone Project Report PREFACE 1. The necessity of the research project Tu Liem Urban Development Joint Stock Company is state-owned enterprise converted to Joint Stock Company from 2004 according to decision No.3755/QD- UB dated on16/06/2004 of Hanoi People’s Committee. The main business orientations of the company are investing and trading urban area, accommodation and industrial park projects. Besides, the company also has activities relating to sectors as civil and industrial construction, exterior and interior decoration.
They have participated in real estate from 2004. At present, Tu Liem Urban Development Joint Stock Company has prestige and solid position in Vietnam’s real estate market with charter capital of more than 300 billion VND. Vietnam integrated the World Trade Organization. In the context of globalization, enterprises are having big opportunities to reach new level as well as facing up with potential threats.
To survive and develop, enterprises have to set up suitable business strategy and orientation basing on external and internal factor evaluation. As a result, they can make use of opportunities, mitigate threats from business environment as well as promote strengths as minimize weaknesses. Coming from the reality, it is particularly imperative for enterprise to build business strategy. It helps enterprise have obvious business orientation and goals.
Departments in enterprises will direct the general goals. Furthermore, current business environment changes quickly. It requires enterprises to be active and creative to adapt to those changes. Real estate is a typical business sector requiring special conditions as solid financial source, capital mobilizing capacity, good relationship with authorities, orientation as well as long term vision of leaders.
Real estate business has cycle with big threats. Nevertheless, it has attractive earnings with more and more participants. 6 M0809 – Group 03, Capstone Project Report Vietnam in general and Hanoi in particular is in quick development routine. As a result, demand on real estate products regarding as house, office, trading center, hotel is quite much considered as opportunities and threats of real estate enterprise.
Research objective Systematizing theoretical foundation about strategy to analyze factors affecting to the company and set up strategy. Analyzing factors affecting to real estate business environment as well as production and business; from that, combining orientations and goals of LIDECO to set up real estate business strategy for the company. Research object and scope Research object of this capstone project is business strategy planning in Tu Liem Urban Development Joint Stock Company. Research scope: the capstone project concentrates on researching real estate business activity of the company in period of 2011 - 2030.
Research methodology This project bases on following methods: a. Comparison, analysis and summary: Analyzing data from financial statements over years, summarizing to conclude. SWOT matrix: Is the method to analyze and treat results of environment research as well as helps enterprises introduce strategy scientifically. Statistics method: Statistics from charts to analyze business activity of sector and enterprise 5.
Structure of the capstone project 7 M0809 – Group 03, Capstone Project Report This capstone project has following structure: Preface Chapter 1: Theoretical base of strategy Chapter 2: Analyze real situation of LIDECO’s business environment Chapter 3: Build real estate business strategy for LIDECO Conclusion 8 M0809 – Group 03, Capstone Project Report CHAPTER I: THEORETICAL BASE OF STRATEGY 1. Concept of strategy: Strategy is a general action program to gain specific goals. Mentioning to strategy of any organization, people usually think about their goals, methods for implementing and resources. Fared Chandler defined: Strategy includes fixing long term basic goal of an organization, the selection of method or implementation as well as essential resources’ allocation to perform that strategy.
According to James B. Quinh: Strategy is a form or a plan combining the main objectives, policies and actions to comprehensive action. Ferd R, David in the book of “Theory about startegy management”: Strategy contains means reaching long term goals. Business strategy can include geographic development, activity diversification, and product development, market penetration, cutting down expenditure, liquidation and joint venture.
“Strategy is direction and scale of an organization in long term: strategy will bring advantages for organization by means of optimal arrangement for resources in competitive environment to meet demand of market and expectation of investors”. In other words, strategy is: - Place which enterprises are trying their best to reach in long term (orientation); 9 M0809 – Group 03, Capstone Project Report - Which kind of market enterprise has to compete in and activities of enterprise in that market (market, scale)? - How does enterprise have to do to better implement in comparison with competitors in market (advantages)? - Which kinds or resources (skill, asset, finance, relationship, technical capacity, equipments) enterprise needs to have to be able to compete (resources)? - External environment factors affect to competitive capacity of enterprise (environment)? - Internal and external managers have which kind of value and expectation (capital contributors)? How is strategy controlled? – Strategy management. In the furthest meaning, strategy management is the process of implementing “strategic decisions” – these decisions answer to the questions mentioned above. In fact, perfect strategy management process includes 3 parts described in following chart: Analyzing Strategy Selecting Implementing Strategy strategy Strategy analysis 10 M0809 – Group 03, Capstone Project Report Strategy analysis is analysis of strengths, position of enterprise and understanding important external factors affecting to that position.
The process of strategy analysis can be supported by some tools as: PEST analysis – method to understand sector environment. Planning includes many selection options – method to map out different possible prospects in the future for enterprise. Analyzing five forces – method to determine force affecting to competitiveness in sector. Market segment – method to find out the similarity and difference among customer groups or users; orientation policy matrix – method to summarize competitive advantages of enterprise in specific markets; analyzing competitors - a variety of methods and analysises to find out general competitive position of enterprise.
Analyzing the key successful factor – is method to define areas which enterprise has to better implement to have successful competition. SWOT analysis- useful method to summarize key problems happening from internal environment analysis, and influences of external environment with respect to enterprise. Strategy selection This process relates to understanding expectations of capital contributors to define strategic options and evaluate and select strategy. Strategy implementation This is the most difficult part.
When a strategy is analyzed and selected, the following task is to move it to action in organization. 11 M0809 – Group 03, Capstone Project Report 1. Role of strategy: Planning function: business strategy helps enterprises indentify their purpose and orientation. It also shows the ways for administrators to consider and determine the time of gaining expected result.
Predicting function: In a fluctuated environment, opportunities as well as threats always happen. Strategy planning process helps administrators analyze environment and propose forecast for suitable strategies. Thanks for that, administrators have capacity to better catch up with opportunities, make use of opportunities and mitigate threats relating to environment. Managing function: business strategy helps administrators use and allocate available resources optimally as well as combine functions in organization effectively to gain given targets.
Classification of strategy 1. Classification by management level: Basing on the strategy management level, strategy is classified into following three groups: Company level strategy Company level strategy defines and describes objectives and targets of the company. It also defines business activities which the company is pursuing, creates basic plan to gain general objectives of the company as well as distributes resources among business activities. Company level strategy is applied for all systems in business.
Business unit level strategy 12 M0809 – Group 03, Capstone Project Report Business unit level strategy is planned to determine the selection of products or specific market for business activities in internal company. In business unit level strategy, people have to define the ways of each business unit completes to contribute to the completion of company level strategy Functional level strategy In functional level strategy, people concentrate on supporting company level strategy and other sectors as operating and trading ones.