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Building the strategy for property business of industrial construction joint stock company (ICJC) duration 2018 – 2022

ĐẠI HỌC QUỐC GIA HÀ NỘI
KHOA QUẢN TRỊ VÀ KINH DOANH
---------------------

TRẦN QUANG HIỂN

BUILDING THE STRATEGY FOR PROPERTY BUSINESS OF
INDUSTRIAL CONSTRUCTION JOINT-STOCK COMPANY
(ICJC) DURATION 2018 – 2022

XÂY DỰNG CHIẾN LƯỢC KINH DOANH BẤT ĐỘNG SẢN
CHO CÔNG TY CỔ PHẦN XÂY DỰNG CÔNG NGHIỆP
GIAI ĐOẠN 2018 ĐẾN 2022

LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

HÀ NỘI - 2018


ĐẠI HỌC QUỐC GIA HÀ NỘI
KHOA QUẢN TRỊ VÀ KINH DOANH

---------------------

TRẦN QUANG HIỂN

BUILDING THE STRATEGY FOR PROPERTY BUSINESS OF
INDUSTRIAL CONSTRUCTION JOINT-STOCK COMPANY
(ICJC) DURATION 2018 – 2022

XÂY DỰNG CHIẾN LƯỢC KINH DOANH BẤT ĐỘNG SẢN
CHO CÔNG TY CỔ PHẦN XÂY DỰNG CÔNG NGHIỆP
GIAI ĐOẠN 2018 ĐẾN 2022
Chuyên ngành: Quản trị kinh doanh
Mã số: 60 34 01 02
LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

NGƯỜI HƯỚNG DẪN KHOA HỌC: PGS.TS. HOÀNG ĐÌNH PHI

Hà Nội - 2018


DECLARATION

The author confirms that the research outcome in the thesis is the result of
author‟s independent work during study and research periodunder the instruction of
Assoc. Prof. Dr Hoang Dinh Phi and it is not yet published in other‟s research and article.
The other‟s research result and documentation (extraction, table, figure,
formula, and other document) used in the thesis are cited properly and the
permission (if required) is given.
The author is responsible in front of the Thesis Assessment Committee,
Hanoi School of Business and Management, and the laws for above-mentioned
declaration.

Student

Tran Quang Hien


ACKNOWLEDGEMENT

I would like to thank all my dedicatedlecturers and the members of the


School of Business & Management – Vietnam National University, Hanoi for
helping and providing me with particularly helpful scientific knowledge and
practical business lessons. Your insights and guidance areindeed a valuable source
of support for my current business and my life.
I sincerely thank Assoc. Prof. Dr Hoang Dinh Phi – Head of Hanoi School
of Business & Management – Vietnam National University, Hanoi. Assoc. Prof.
DrHoang Dinh Phi has spent considerable time and effort assisting me to complete
my Thesis to meet academic standards.. You have been truly inspirational and
haveignited my passion for researching and finishing this Thesis.
I sincerely thank the Management Board and all the Staff of Industrial
Construction Joint-Stock Company-ICJC for helping me during the process of
and providing me with an abundance of crucial information and references to fulfill
my Thesis.
Thank you and Best regards!
Student

Tran Quang Hien


TABLE OF CONTENTS

TABLE OF CONTENTS .................................................................................. 5
ABBREVIATION .............................................................................................. i
LIST OF TABLES ............................................................................................ ii
LIST OF FIGURES.......................................................................................... iii
INTRODUCTION ............................................................................................. 1
CHAPTER 1: FUNDAMENTAL THEORY OF BUSINESS STRATEGIC
PLAN ................................................................................................................ 7
1.1. Fundamental concept of strategy and real-estate business strategic plan ... 7
1.1.1. Concept of strategy ......................................................................... 7
1.1.2. Concept of real-estate and real-estate business strategy ................. 9
1.2. Role of strategy .................................................................................... 11
1.3. Category of strategy ............................................................................. 12
1.3.1. Strategy of management classification grade .............................. 12
1.3.2. Classification of strategies regarding functions ............................ 13
1.4. Strategy building process ..................................................................... 16
1.4.1 Strategic management process and model ..................................... 16
CHAPTER 2. ANALYZE THE CONDITIONS FOR BUILDING A REAL
ESTATE BUSINESS STRATEGY FOR INDUSTRIAL CONSTRUCTION
JOINT STOCK COMPANY – THE PERIOD 2018-2022 ............................. 33
2.1. Overview of Industrial Construction Joint Stock Company-ICJC ...... 33
2.2. Propose and analyze the real estate business strategy of Industrial
Construction Joint Stock Company - the period: 2018 - 2022 ................... 39
2.2.1. Vision - Mission and development orientation for ICJC .............. 39
2.2.2. Macro-environment analysis ......................................................... 40
2.2.3. Micro-environment analysis (business line environment) ............ 49
2.2.4. Internal Business Analysis ............................................................ 63
2.2.5. The Company‟s competence assessment ...................................... 72


2.2.6. Matrix for evaluating the internal factors of the company (IFE
matrix) ..................................................................................................... 74
2.2.7. Analysis of SWOT matrix............................................................. 76
CHAPTER 3: STRATEGY PROPOSE, ANALYZE PROPOSE STRATEGY,
SELECT STRATEGY AND SOLUTIONS FOR IMPLEMENTING THE
BUSINESS STRATEGY ................................................................................ 80
3.1. Strategy proposal .................................................................................. 80
3.1.1. Strategy groups SO ....................................................................... 80
3.1.2. Strategy groups WO: ..................................................................... 83
3.1.3. Strategy groups ST: ....................................................................... 84
3.1.4. Strategy groups WT: ..................................................................... 86
3.2. Analysis of the proposed business strategies for Industrial Construction
Joint Stock Company .................................................................................. 87
3.2.1. Strategy groups(S,O ) .................................................................... 87
3.2.2 Strategy group ( W,O ) ................................................................... 91
3.2.3. Strategy group ( S, T ) ................................................................... 96
3.2.4. Strategy group ( W, T ) ................................................................. 98
3.3. Select a real estate business strategy for ICJC –the period: 2018 - 2022. 99
3.4. Proposal of solutions to implement real estate business strategy of
Industrial Construction Joint-stock Company: the period 2018 – 2022 ... 100
3.4.1. Vision for implementing the business strategy of Industrial
Construction Joint-stock Company: the period 2018 – 2022 ............... 100
3.4.2. Objectives for implementing the business strategy of Industrial
Construction Joint-stock Company: the period 2018 – 2022 ............... 101
3.4.3. Solutions for achieving business strategies................................. 102
3.4.4. Strengthen management in strategy implementation .................. 107
3.4.5. Createa cultural environment that supports the implementation of
strategy .................................................................................................. 108


3.5. Recommendation................................................................................ 108
3.6. Limitations of the thesis ..................................................................... 111
CONCLUSION ............................................................................................. 112
REFERENCES .............................................................................................. 114
Appendix


ABBREVIATION
HĐND:

Hanoi Municipal People‟s Council

HPC:

Hanoi Municipal People‟s Committee

TQM:

Total Quality Management

ICJC:

Industrial Construction Joint-Stock Company

BOD:

Board Of Directors

i


LIST OF TABLES

Table 2.1: Matrix for evaluating the impact of external factors on the company ..... 48
Table 2.2: Equipment capacity of the Company ....................................................... 66
Table 2.3: SWOT MATRIX ..................................................................................... 79
Table 3.1: Strategy groups SO; WO; ST; WT ......................................................... 86

ii


LIST OF FIGURES
Figure1.1: Model of classification of strategies for an organization ........................ 13
Figure 1.2: Strategic management model ................................................................. 17
Figure 1.3: External environmental factors ............................................................... 19
Figure 1.4: External Factor Matrix (EFE) ................................................................. 22
Figure 1.5: Five forces model of Michael Porter ...................................................... 23
Figure 1.6. Internal Factor Evaluation Matrix ( IFE ) ............................................... 26
Figure 1.7: M.Porter‟s Value Chain Model ............................................................. 27
Figure 1.8: SWOT matrix ......................................................................................... 30
Figure 1.9: Table of optional strategies SO, WO, ST, WT ...................................... 31
Figure: 2.1 Organization chart .................................................................................. 35
Figure 2.3: M.Porter‟s Value Chain Model ............................................................. 63
Figure 2.3: The implementation of real estate project .............................................. 71
Figure 2.6: Matrix for evaluating the internal factors (IFE matrix) .......................... 75

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INTRODUCTION
1. Rationale
In today‟s renovation and international integration are the needs of any economy
and every economic sector. In particular, the construction field in Vietnam is
currently coping with many difficult issues such as: a well-organized development
plan for the whole nation as well as every single province;a plan of focusing on
modernization related to a need of scientific cultural preservation; and a plan of
developing new urban areas, new industrial zones along with improving existing
infrastructures in order to create a standard for other sectors of the nation economy
such as transportation, education, public health, and tourism A subsequent benefit
of the planning will be to attract foreign direct investment funds.
Industrial Construction Joint-Stock Company (ICJC) is a member of Urban
Infrastructure Development Investment Corporation (UDIC) which was founded
according to the Decision No 3081/QD-UB of Hanoi Municipal People‟s
Committee, on August, 2nd 2007.
Industrial Construction Joint-Stock Company has always been one of the strongest
members of UDIC and one of the leading companies of the Hanoi construction
market. During the 57 year of experience, ICJC has always satisfied all
requirements in terms of political, business and social issues for the development of
the country and the capital. Moreover, a special task of reinforcing and enhancing
the image of the company during the innovation, industrialization and
modernization era has been to create a solid opportunity to compete successfully in
the South-East Asia market and in the world as well. The rapid development of the
construction market and the hardship of the rules governing competitionare crucial
keys to motivate the company in improving its own production scale, financial
competence, technical issues and management skills. Adapting to the difficult
competitive environment of the past 10 years, these coping strategies have been
small in scale, due to poor financial health, outdated technology and inadequate
management strategy within the local and domestic market. The immediate future
outlook suggests further pressure to perform successfully will be more difficult than

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ever owing tothe challenge of ASEAN and international integration. As a result,
there needs to be a continuousaccumulation of experiences and competences, with
the objective of creatinga competitive advantage, building up and developinga
brand name, and to enter new markets coupled with a solid development plan for
current and new business.
Based on that reality, creating a business strategy for each business entitywithin a
company‟s portfolio is indispensable for its survival and development. A good
business strategy shall help to effectively orient a business, to connect and direct
every individual, every division to a common goal and objective. It is the best way
to reduce fragmentation, which can weaken a business through departments and
divisions operating without coordinated objectives, goals and a clear corporate
vision.
Real estate is a business typically requiring: a strong and reliable financial source,
an ability to secure investment often within a short time frame, thedevelopment and
the maintenance of positive working relationships with those in government office
and a long term vision of a competent and progressive leadership. Compounding
these factors of much needed stability and security is thatthe real-estate market is
very risky. However, in the high risk - high return, real-estate field there is
opportunity for a business to make substantial monetary gains and create jobs for a
company that has established divisions of construction, land development and
contracting. Therefore, this is attracting many businesses to enter the market. As a
key member ICJC‟s personnel, I had a chance to take part in developing a strategic
plan for the company over the past few years.
For a desire of improving my business knowledge and management skills, I enrolled
in a course of Master in Business and Management at Hanoi School of Business &
Management – Vietnam National University.

It is very useful for using and

applying the knowledge that I acquired from my lecturers in analyzing and making
a business strategic plan for ICJC as.it is also my personal duty and responsibility to
take part and contribute to the development and integration of my company. As per
the help and instructions from my lectures, I decided to choose my Thesis topic as:

2


“ Building the strategy for property business of Industrial Construction
Joint-Stock Company (ICJC) duration 2018 – 2022”
2. Overview of related researches
It is very important to build a business strategy for a real estate business. A
business strategysignificantly and decisivelyinfluences on the success of a business.
A business only gains a sustainable development when figure outitself a right
direction and a reasonable measure. In other words,building agood business strategy
and carrying out it well are crucial factors to develop a business solidly.
In order tobuild a good business strategy and implement it proficiently, a
business needs to define their mission and objectives accurately; analyze business
environment particularly; develop a strategy that match features of business.
A number of references regarding real estate business study:
-

"Building the real estate business strategy of BITEXCOLAND" by Nguyen
Thanh Van - University of Economics - Ho Chi Minh City

-

“Building the real estate business strategy of SAVICO to 2015 " by Tran
Minh Cong - University of Economics - Ho Chi Minh City
Based on the researching documents above, I realize that each business has its

own way to build a business strategy in order to meet its typical
characteristics.According to my research, the topic "Building the real estate
business strategy for Industrial Construction Joint Stock Company" has not been
issued until now. Therefore, the topic is very necessary for ICJC for the duration:
2018-2022. By analyzingthe macro, micro and internal environment of the
Company, Author shall build the real estate business strategy in accordance with the
current situation of the Company and provide the solutions to help ICJC overcome
its limitations and achieve business goals for the period: 2018-2022.
3. Aims of researchand Research task
3.1. Aims of research
Building the strategy for property business of Industrial Construction Joint-Stock
Company (ICJC) duration 2018 – 2022

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3.2. Research task
- Systemizing fundamental theory of strategy and business strategic plan in order
to analyze factors that influence the Company activities and to create a strategy for
the Company.
- Analyzing factors that influence real-estate business activities along with the
Company activities. Then, putting those analyzed factors and the goals and
objectives of ICJC together to build up the Real-estate strategic plan for ICJC –
Period: 2018 – 2022.
4. Scope of research
4.1. Researching subjects:
The business activities range of ICJC consists of: real-estate investment and
construction, civil & industrial construction, project management & consultancy,
precast concrete member production, import – export equipment & machine,
warehouse leasing service. This thesis will focus on the related factors that would
be used to build up the Real-estate strategic plan for ICJC – Period: 2018 – 2022.
4.2. Researching scope:
- Location: The location for real estate business of the Company is Hanoi City.
- Period: Study and evaluate secondary data for the period: 2014 to 2016
Collect primary data: May, 2017 to November, 2017
- Applicableduration: 2018 to 2022
5. Research methodology
The quantitative and qualitative research methods shall be used and researching
particular circumstances of each property project of Industrial Construction JointStock Company.
Specific method: Directly interviewing and surveying every division of the
Company. Then, making a summary of interviewing ideas and submitting to the
experts for a total evaluation of how possible and effective they are.
5.1. Researching process:
Step 1: Gather materials related to theories of strategic planning for determiningthe
theoretical basis in order to plan business strategies.

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Step 2: Design questionnaire and survey forms to collect and analyze primary
data;summarize secondary data to identify opportunities, challenges, strengths and
weaknesses in real estate business of Industrial Construction Joint Stock Company.
Step 3: Propose the real estate business strategy for Industrial Construction Joint
Stock Company – the period: 2018 to 2022
5.2. Collecting and processing data
5.2.1. Sources of secondary data:
All figures and information are based on reports and statistics of the Company; as
well as based on all references, newspapers, statistical data of the Ministry of
Planning and Investment, the Ministry of Natural Resources and Environment, and
the office of Hanoi People‟s Committee; The Civil Code Law 2005 of Socialist
Republic Of Vietnam;

Real Estate Business Law

2014;

Land

Law

2014;Government Portal; State Investment Department; Portal of the Ministry of
Construction; Department of Investment - Ministry of Planning and Investment;
Website: www.xdcn.com.vn; information from Internet and magazines.
5.2.2. Sources of primary data:
Primary data sources are obtained through survey and interview method
* Surveying subjects
- Board of directors: 04 persons; 05 department managers và 01 head of project
manement unitof ICJC.
* Design and issue questionnaire and survey form
- The content of the questionare and survey form is to collect information for:
(1) the impact of external environmental factors, opportunities and challenges
in the field of real estate business; (2) The impact of internal environmental
factors, strengths and weaknesses in the field of real estate business.
- Total number of issued paper : 10
Author passed the surveying paper directly to the surveying subjects. In
addition, I also conducted an in-depth interview with managers and senior staff
of the Company to consult their opinions and solutions to implement the
business strategy for the Company.

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- Data processing method: Use MS Excel software.
6. Structure of Thesis
There are 03 chapters (excluding title chapter):
Chapter 1: Fundamental theory of business strategic plan
Chapter 2: Analyze the conditions for building a real estate business strategy
for Industrial Construction Joint Stock Company - the period 2018 – 2022
Chapter 3: Strategy propose, analyze propose strategy, select strategy and
solutions for implementing the business strategy.
Conclusion
References
Appendices

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CHAPTER 1: FUNDAMENTAL THEORY OF BUSINESS STRATEGIC PLAN

1.1. Fundamental concept of strategy and real-estate business strategic plan
1.1.1. Concept of strategy
Historically, the term “strategy” was primarily used in military activities
involving long term plans and based on a belief of what the enemy would and
would not do.
In a society of competition as a dynamic process, the concept of strategy is
no longer

limited to military

applications but also widely applied to every

economic and industrial sector: economic , political, cultural sport, tourism . The
essence of strategy is to summarize all sources to make a distinctive, effective plan
and to create advantages over competitors according to the interests of the
leadership.
Since the 60s of the 20th century, the term strategy has been used for the
business field and the term “business strategy” officially was born. As time passed
by, the concept of business strategy quickly grew and people perceived this concept
in many different ways.And nowadays, the term „business strategy‟ has become
very popular and is considered to be a vital key of a success of business. There are
many definitions of business strategy which have been given and each has its own
viewpoints along with common viewpoints.
+ M. Porter (1996):“Strategy is distinctive value chain based on customer
needs and wants in order to create a competitive advantage”
+Alfred Chandler(1962): “Strategy can be defined as the determination of the
long-term goals and objectives of an enterprise, and the adoption of courses of
action and the allocation of resources necessary for carrying out these goals.”
+ Keneth L.Andrews (1965): “Strategy is a model of goals, objectives and
plans to achieve these goals”
+ Quinn (1980): “Strategy is a model, a plan to integrate primary goals,
guidelines and chains of activities into a cohesive comprehension”.
+ Johnson & Scholes (1999): “Strategy is the direction and scope of an

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organization over the long-term: which achieves advantage for the organization
through its configuration of resources within a challenging environment, to meet
the needs of markets and to fulfill stakeholder expectations"
+ Brace Henderson: Strategy is to search for a prudence, a plan for collecting
and developing competitive advantages of an organization. Distinctions are your
advantage over competitors”
+ Assoc. Prof. Dr Hoang Dinh Phi: “ A corporate strategy is a document,
either written, printed or electronic, in which the responsible people set out
long-term mission, vision, and strategic objectives for 5 years as standard, as
well as the resources to be mobilized and solutions to be implemented in order
to achieve the set objectives”.
As per those quotes above, I would like to highlight some features of a business
strategy.
First:

A business strategy is always the direction, so changes

in the

business environment need to be observed and predicted in order to instantly
adjust primary activities or to somewhat adjust primary goals and objectives. In
other words, an optimal business strategy only suits a specific period of time
and a particular circumstance. Since the business environment changes, a
business strategy needs to be changed too.
Second: Leaders and the management board of an organization always
play an important role in building a business strategy.
Third: A business strategy is always based on recognizing and
understanding the basic competitive advantages that one has over competitors
and actively pursuing this favourable position to hedge risks and weaknesses.
Therefore, it is important to understand boththe pros and cons

related to

competitors when developing the business strategy.
A business strategy plays the main role in business development as every
short-term business plan is supposed to be based on it. It motivates research
and development activities and human resources training courses.

It also

comes to the aid of actively orienting a business toward in the right direction

8


according to the fluctuations in the market atmosphere as well as its strong
points. In practice, we all have witnessed successes and failures of a business.
A success or failure of a business significantly depends on how that business
plans a strategy. As a result, a good business strategy will result in an
organization enhancing its position and competitive advantages in market.
1.1.2. Concept of real-estate and real-estate business strategy
Concept of real-estate
According to the Civil Laws 2005 of Socialist Republic of Vietnam, article
174: “Real estate is property consisting of land and the buildings on it; including
immovable property of the buildings; property on land and other property
stipulated by law”.
Features of real-estate
a. Uniqueness and scarcity
The key features of real-estate are derived from its uniqueness and scarcity of land.
The dimensions of the Earth are unchangeable and result in the land area being
unchangeable. Uniqueness and scarcity of land are restricted to a particular land
slot, local land area, and the national land area. Scarcity and immovability of land
make real-estate very unique. On a short and narrow road, two real-estate properties
which are the same size and design located next to each other offer different
characteristics. It is impossible to locate two real-estate properties at one location in
spite of how much they look alike. Therefore, the only way to satisfy and convince
real-estate buyers is creating the uniqueness for each real-estate and making them
attractive enough for buyers.
b. Durability
Land is gifted by the nature and land is considered as indestructible property
(except in the case of acts of God). Structures on land could last for years and if
well maintained, they could last for centuries. So, the durability of real-estatemay be
defined as the lifetime of structures on land.
We need to distinguish between the “physical life span” and the “economic life
span” An economic life span is limited by market conditions and terminates when

9


the expenses offset any profits realized. A physical life span last much longer than
an economic life span as it only ends from the results of aging, destruction, or a
serious deterioration of reinforcement structures. In that case, if the action of
renovating a building provide more benefits than demolishing a building and
building a new one, it results in a physical life span remarkably longer than the
economic life span. Practically, many countries have proved that economic life span
is about real-estate using process. In general, the economic life spans of structures
such as: high-rise building, hotels, theaters are over 40 years; and those for
industrial factories, houses .etc are more than 45 years. Durability of real-estate is
virtually unlimited can be used for many different purposes, so real-estate products
can be in multiform and plentiful.
c. Reciprocal effect
Real-estate has a magnificent reciprocal relation. Value of property could be
influenced by other properties. In such a case if a government invests money to
improve local infrastructures, this will drive up the value of local real-estate
instantly. Besides, a nice real-estate increase in value will benefit other properties as
well as the whole area.
d. Other features:
- Adaptability:
A real-estate benefits a landlord during its lifetime. We can adjust capacity of
a real-estate without changing its typical feature. Simultaneously, all requirements
of user such as: accommodation demand, business-production demand and other
demand shall be guaranteed and satisfied.
- Management skills dependency
Real-estate products require higher management costs and management skills
compared to common goods and products. It takes a lot of time and money to invest
and build a property. Thus, thereal-estate field always requires high management
skills.
- Factors of local customs, tastes and demands

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Real-estate products used to be greatly affected by these factors compared to
any common goods. Tastes and demands over real-estate products of each area,
each province, and each nation are largely different and mainly depend on local
customs and culture. Further, those factors such as: social issues, religious and
superstitious issues .etc also take a significant part in real-estate consumption.
Basically, a good real-estate business strategic plan of an organization requires
those who are responsible to spend time researching, analyzing and setting goals
for it. A 5-year term strategy need to be clearly verified along with detailed
solutions and plans of personnel mobilization to be able to attain specified goals and
objectives.
1.2. Role of strategy
The role of strategy is to guide a business on the right way in the future and
probably becomes a recipe of success. As long as you find out the right direction
for the business, the success of your business will be assured. And as the right
direction has been determined, it would motivate all managers and staffs to fulfill
their jobs in short-term as well long-term objectives.

No strategy or an unclear

strategy shall mislead a business.
A good strategy shall aid a business to make out and carry out primary goals. In
doing business, the survival and development of a business strongly depend on a
wise strategy and getting missions of that strategy well done.
Strategies shall help to reduce risks. A good job of predicting and analyzing
market conditions in the future offers a business a great chance to move forward
and reduce risks of business environment as much as possible.
Moreover, a good strategy shall help a business actively control over changes
of market conditions. A good strategy shall also aid a business to make wise
decisions and carry out these decisions precisely based on market movements.
There is a solid relationship between personnel, financial sources, and objectives of
a business and marketable chances during the business running process of that
business.
A good business strategy shall enhance the effectiveness of using all available

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and hidden resources; lift up business position in the market and guarantee a
continuous and firm development.
The Strategy shall take a decisive part in decision making such as: investment
decisions, market expansion decisions, decisions about new product development,
human resource training.
1.3. Category of strategy
1.3.1. Strategy of management classification grade
- Company strategy
- Business strategy
- Functional strategy
There are 03 strategies for Corporation strategy as following:
- The strategy for common orientation in order to aim at a particular goal:
development, stabilization or shrinkage.
- The strategy for listing business activities/investments that come with
specified products and services.
- The strategy for a comprehensive management plan which includes human
resources, business activities, improving competence and coordinating
with other economic sectors.
Business strategy is only related to daily business activities within the scope
of corporation in the private sector. This strategy shall help to improve the position
and cooperation of the corporation. The fundamental factors of a business strategy
include:
-

Competition strategy: Making competitive advantages over competitors via
a low expenditure plan or creating distinctive products/services.

-

Cooperation strategy: Making competitive advantages over competitors via
a strategic partnership.

Authority strategy consists of: marketing strategy, financial strategy,
production, human resource and research & development strategy. This strategy
shall help to improve business function activities and maximizing all power
resources of the corporation. Authority strategies aim at enhancing core competences

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of the corporation and result in competitive advantages.
In order to systemizing all scope of business of a corporation, strategic business
units (SBU) should be formed. The SBU shall run business independently but share the
same comprehensive strategy of the corporation.

Company
startegy

Business strategy

Functional strategy
(Growth of authority strategy consists of: unification,
diversification, low cost, distinction, centralization
and cooperation)

Figure1.1: Model of classification of strategies for an organization
(David, Fred R. 2011)

1.3.2. Classification of strategies regarding functions
We can classify functions of strategies as below:
a) Strategic development via unification
A strategic development via unification means merging 02 or more business units
to reinforce corporation strength so as to take the most advantages of chances and solve
challenges more quickly. A development through merging asks for a lot of effort
attempts and other resources of 02 or more partners to push up developments of one
or a few business fields, improve competences and hedge risks. It can be a partly
unified process or a totally unified process.
A corporation following

an unification strategy shall upgrade competitive

advantages of its main career fields such as: First, this strategy shall decrease
competitions within the scope of the corporation private careers and increase profits as

13


it has the right to set up higher prices. Second, the corporation can improve its
products/services quality. Third, a merger is capable of actively planning, coordinating,
and scheduling a chain of procurements, transportations and supply to customers.
b) Diversification strategy
This strategy means using surplus funds to invest in other business fields since a
corporation has predominance in one or few particular marketplaces. There are some
basic forms of diversification: Centric diversification (joining a new business related to
current business as the similarity of features); Combination diversification (joining a
new business which doesn‟t concern current business of organization); Horizontal
diversification (focusing on researching & developing new products/services for
traditional customers)
There are many businesses that take diversification strategy into account
as they have more than enough funds to remain competitive advantages in their
classic markets.

This strategy creates values in 03 respects: First, buying and

reorganizing a business allow it to grow more effectively. Second, a power transferring
shall take place among business units. In some cases, a corporation would keep
continuing after a stable strategy or retreat for safety.
When this strategy is applied, businesses can detail a competitive strategy. This
strategy is built based on customers‟ needs and demands and distinction of products;
market segment and competitive position of these businesses.
c) Low cost strategy
This strategy shall create better prices for products due to low expenditures. When
this strategy is applied, a business often focuses on the average income class and
ignores other market segmentations. The advantages of this strategy include: improving
strength of business as having a large production; making a barrier for competitors that
want to join the market due to low cost production, so creating a solid competitive
position. The disadvantages are: competitors can easily make copies of products;
businesses just pay attention to cutting down production costs and do not care about
changes of market demand. Therefore, companies that apply the low cost strategy need
to be aware of customers‟ satisfaction for products/services over those of competitors.

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d) Strategy of distinction
This strategy shall guide a business to create distinctive and unique products to
satisfy choosy customers. It means that prices of products must be expensive. When
this strategy applied, a business has to design a distinctive and particular plan for each
period according to marketability. The main capabilities that need to be focused on are
research & development and marketing. There are 03 choices for this strategy: Quality,
renovation and satisfying customer‟s wants. This strategy shall create a big barrier for
market participation of competitors and a good control of price in market share of
business; creating a belief and loyalty of customers for excellent quality and uniqueness
of products. The disadvantages are: not easy to remain a high price, high production
costs and short product life cycle, high technology production system and high
marketing expenses.
e) Centralization strategy
This strategy requires a business to concentrate on specialization, be small in scale,
make real unique products and stay on the top for low production cost in its market share.
These businesses totally specialize in serving a particular group of customers or
particular market segmentation. Market segmentation can be divided according to
geography or a branch of product line. When this strategy is applied, a business needs to
find out a core capability as for creating uniqueness or an advantage of production cost.
A business can specialize in only one market segmentation, one product or as per marker
condition. A business sometimes has to specialize in both uniqueness of product and top
rank of low cost production. If just focusing on low cost production, a business has to
fight those leading in low cost production which results in no cost advantage. If focusing
on making a product real distinctive, it leads to the increasing chances of making others
and a business shall have a reasonable protection for distinctively made products. A
loyalty of a group of customers to these distinctive products shall create a big market
barrier for new comers and reduce a chance of alternative products. The disadvantages
are: A small change in technology or a slight decrease in market demand shall virtually
eliminate this market segmentation.

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