VIET NAM NATIONAL UNIVERS1TY, HANOỈ
SCHOOL OF BUSINESS
— H s B —
I ĩ f\ n I - f •
Nguycn Thi Hong Hue
BUILDING BUSINESS STRATEGY -
THE CASK OF VIET LONG COMPANY LIMITED
M AS I i:li OK BUSINKSS ADMINISTRATION IHKSIS
A -1 0 / 3 5
Ha Noi -2010
TABLE OF CONTKNT
AC K NO WL K DGE M ENTS i i i
ABSTRACT iv
I ỎM TẤT vi
TABLE OF CONTKNT vii
LIST OF CHART, TABLE AND KIGUKK
xi
INTKODUCTION xiv
1 Problcm statcmcnt
xiv
2 Ai 111 and obịcctivcs xiv
3 Scopc of work XV
4 M cthodology XV
5 Research qucstions
XV
6 Data collccũon XV
7 Signiíícance xvi
8 Lim italion xvi
9 Kindings xvi
10 Thcsis structurc
xvi


23
1.2.5 Entry into nevv business through inlcrnal developnicnt

25
CHAPTKR 2: EXTERNAL AND INTKRNAL ANALYS1S 26
2.1 Ovcrvicw of Viel Nam bicyclc induslry

26
2.2 Extcmal analysis 29
2.2.1 Environmcntal scanning and (orccasting - Pest analysis

29
2.2.1.1 Polilical Taclors
29
2.2.1.2 Economic íactors 34
2.2.1.3 Social Taclors 38
2.2.1.4 Technology lactors 42
2.2.1.5 PKST conclusion 45
2.2.2 Industry analysis l;ivc Forces Model 45
2.3 Intcmal analysis
57
2.3.1 Ovcrvicvv o f Vict Long Company
57
2.3.2 Valuc Chain analysis 59
2.3.2.1 Primary activitics 29
2.3.2.2 Supporting activilies 65
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CHAPTER3: STRATECỈY KORMl I.ATION AND 69
IMPLEMENTATION

Appendix B: List of intcrvicvvccs
X
LIST OF FIGURE
Kigurel.l: Strategic management process 2
Figurcl.2: Typical business stratcgies 4
Figure 1.3: Strategy íbnnulation process 7
Kigure 1.4: Relationship between environmental, competitive and internal
8
organizational analysis
Pigure 1.5: PEST Modeỉ 9
Pigure 1.6: Five forces Modcl 11
Pigure 1.7: Value Chain 14
Pigure 1.8: SWOT Matrix 16
Figure 2.1: Viet Nam bicycle industry Iifecycle 26
Pigure 2.2: Highlight of Viet Nam bicycle industry 28
Figurc 2.3: Strategic group in Vict Nam bicycle industry 47
Pigure 2.4: Viet Long bike production process 60
Figure2.5: Organi/ation structure of Viel Long Company 66
F-'igurc 3.1: Custoincr group analysis 84
xi
Tablc 2.2: Impact ofPEST íactors on Viet Nam hicycle industry 44
Table 2.3: The numbcr of bicycle manuĩactured and assembled enterprises 45
Table 2.4: Strategic group vvithin Viet Nam bicyclc industry 46
Table 2.5: Product category of industry main players 50
Table 2.6: Comparison oTlransport modes’ bcncfits 53
Table 2.7: Five forces assessment 56
Tablc 2.8: Time consume of bikc assembling proccsscs 61
Tablc 3.1: Estimatcd demand on bicycle in 2009-2014 69
Table 3.2: Opportunities and threats ofViet Long Company 73
Table 3.3: Competitive strength assessmenl for Vict Long Co. Ltd 74

ovcrall picture of thc paper.
ỉ. Problem statemcnt
Viet Long Company Limited (Viet Long Co. Ltd) is a private-ovvncd entcrprise
which manufacturcs bike parts, including axlc-tree, pcdal and tnayor. The
company has just dcvcloped a nevv product, which is bicycle, since 2008. It’s
necessary to build busincss strategy for Viet Long Company to find the way of
surviving and growing in Vicl Nam bicycle industry.
2. Aims and objectives
The aim o f the thesis is lo build an appropriate busincss slrategy for Viet Long
Co. Ltd, íocusing just only one new product thai is bicyclc in the next five years,
from 2010 to 2014.
The objectives o f thc thesis are as belovv:
s Firstly, providing bctter understanding of thcorctical íbundation in
building business slrategy for enterprises.
s Secondly, applying theorics into Viet Long Company to fígure ouí thc
company opportunities, threats, strengths and wcaknesses. Then Viet
Long business stratcgy are built, íbcusing on product of bicycle.
s Thirdly, drawing out overall implications for strategy implementation in
Vict Long Co. Ltd
xiv
3. Scope of \vork
The study íbcuses only on Vict Long Co. Ltd, Hnding thc company’s business
contexl, opportunities, threats, strengths and vveaknesses. Business strategy for
Vict Long Company in the Corning fíve ycars, from 2010 to 2014, vvill be
íbrmulatcd, focusing on bicyclc. Finally, the research draws out implications for
stratcgy implementation in Vict Long Co., Ltd.
4. Methodology
The sludy íocuses on only Viet Long Co., Ltd, investigate a contcmporary
phenomenon within its real-life context and usc multiple sources of information.
Thcrclore, case study is choscn as research methodology to makc an in-dcpth

In addilion, available data of mechanics industry, bicyclc industry and íoreign
competitors is iimitcd. ỉn some cases the author collects information froin most
rclevant sources as cxpcrt ideas to solve thc issuc.
Due to íragmentation of the bicycle industry, indưstry analysis will focus only
on main playcrs who covcr noticeable market share.
9. Findings
The study finds out appropriate busincss and íunctional strategies lbr Viet Long
Company. In addition, the study intends to draw out implications for strategy
implementation in Viet Long Company.
10. Thesis structure
Due to topic and research methodology, the thesis is divided into threc main
chapters: theorctical íbundation, extemal and intcrnal analysis, and strategy
íbrrnulation and strategy implementation íor Viet Long Co. Ltd. In addition,
xvi
research introduction and conclusion arc prcscntcd at thc beginning and the cnd
of the papcr.
The íĩrst chapter, thcorctical íoundation, indicates theories that have been
applied to analyze and build business and íunctional strategies for Viet Long Co.
Ltd.
Extemal and internal analysis via models of PEST, five forccs, SWOT and value
chain are indicates in thc second chapter of thc thesis.
And íìnally, thc formulation and choice of busincss and íunctional strategies for
Vict Long bicyclc is presented at thc third chapter. Moreovcr, implications to
strategy implcmentation for Viet Long Company are dravvn out.
The figurc below visuali/.cs the main chaptcrs of thesis:
Introdaítion
Tlttorctical
rovadatlon
ExttrMlasd
Xo»»nwl âMtyih

evaluation involvcs in activilies of establishing standards of performance for the
organization and its units or ĩunctional areas; assessing and measuring the
implementaíion of strategy; initiating right actions to ensure continued
1
commitment to thc implcmcntation of strategy(Lloyud Byars at et., 1996). The
following Hgurc visualizcs strategic management proccss.
Pigurc 1.1: Strategic managcment process
Stratogy
Stratcg}' Stratcp
íonnulalỉoit im p lm ta tio n
evaliiâtion
Source: Adcipteđ from Lìoyd L. Byars, Leslie w. Rue, and Shaker A. Zahra,
Strơtegìc Management, ỉrvvin Press USA, 1996.
Strategy exists at different lcvcl in an organization base on the scope that the
firm accomplishes. In gencral, strategy is considcrcd at corporate, business and
íunctional lcvels. Sírategies lliat address what businesses a multiplc-business-
unit organization will be in and how rcsourccs will bc allocated among those
businesses are referrcđ to as corporatc stratcgy (Lloyud Byars at ct., 1996).
Business strategics focus on how to compete in a given business (Lloyud Byars
at et., 1996). Functional stratcgies deal with how to iinprove or combine
organizational rcsourccs, such as prođuction, ílnance, personnel, etc in order to
gain compctitive advantagcs.
1.1.2. Rolc of stratcgic managcmcnt to enterprises
Strategic management is necessary and valuable to not only largc but also small
organization. Many empirical studics have bccn done in order to evaluate the
relationship betxveen strategic management and the períormance of
organizations. For cxample, Robinson (1982) found that small businesses that
employed consultant to hclp with strategic planning lcnded to pcríorm better
2
than íìrms lliat did not (Karhad, 2003). Several othcr studies have reportcd

consensus.
1.1.3. Typical business strategies
There are three generic strategies to outperibrm other firms in an industry:
overall cost lcadership, differentiation and íbcus.
Overall cost ỉeadership
An ovcrall cost lcadcrship strategy involvcs producing and dclivering the
producl or Service at a lovvcr cost than compctitors (Lloiy Byars et al., 1996).
Cost leadership stratcgy is attractive because it crcatcs íìrm’s competitive
advantage to compctitors by low price, prolcct firm from potcntial ncw entrants.
In somc case, thc stratcgy also helps fírm avoid shaving pricc prcssurc of buyers.
Figure 1.2: Typical business sirategies
ITniquent*$ perceived
by customers
Low cost positlon
Industry
wide
Parttcular
segment
©5
o
H
0
ú
Source: Adapted Farhad Analoui and Azhdar Karami,
Sírategic Management in Smaỉỉ and Medium Enterprises, Thomson, 2003
4
In ordcr to implement successĩully cost leadership síratcgy, the enterprise has to
pursue cost rcduction from cxperience, marginal customers, overhead and cost
minimization in sale, research and dcvelopmcnt, advertising and Service. In
addition, the firm has to achieve a high markct share, favorable asscss to

image o f differentiated firms for large saving cost. As customers becomc
sophisticated, thcir nccd for differentiation reduces. Another risk can be
imitation and fake products rcducing customers’ avvarc of differentiation, niostly
in maturity industry.
Focus
A focus strategy involves targeting a particular buycr group, a geographic
market segmcnt or a ccrtain part of the product line and serving this well-defined
but narrow markct better than competitors who serve a broadcr market (Lloiy
Byars et al., 1996). Focus strategy takes many forms: locus cost leadership,
focus differentiation or both. It meatis that the company can achieve
diffcrentiation or/ and lowcr cost to better scrvc a particular target. Focus
strategy involves in anothcr sct of risks. The lcvel of diffcrentiation betwecn
products or Services of thc who!e market and Pocus one is narrow down by timc.
Another risk, compctitors can íìnd out submarkets in targct market make the
focuser to bc out-focused.
1.1.4. Process to build business strategy to cntcrprisc
Building business strategy is the most important phrase in stratcgic managcment
process. The process includcs three main stcps. Firstly, cnterprise philosophy,
purpose and mission arc dcíìned. After that, the stagc of objectives setting is
conducted via extcmal, intcmal and SWOT analysis. Finally it is the process of
strategy selection. The iìgurc below visualizcs the process of building business
stratcgy to entcrprise in ordcr to draw out clearer picturc about this topic.
6
Step I: Defming the guiding philosophy, purpose and the mission o/enterprise
An organi?;ation’s guiding philosophy indicates Ihe values and belicfs of the
organization. It points out what is important in life and business, how business
should be conducted, thc vievv of humanity and organization’s role in society.
Organizational purpose dcílnes the íunđamental rcasons for the organization’s
existence (Collin and Porras). Ít can be expressed in a clcar statemcnt of how the
company niỉs human necd or how the business impacts thc world.

Chain and PEST (political, cconomic, social and technological ĩactors) models.
Then SWOT analysis is donc in order to draw out conclusion about the
enterprise current situation and thc need for stratcgic action. Finally, long-range
objcctives which speciĩy the results desircd in pursuing Ihc enterprise’s mission
is cstablishcd. Long - rangc objcctives directly are impactcd by SWOT analysis,
because these objcctivcs should help the organization catch opportunities,
exploit strengths, minimize Ihrcats and eliminate weaknesscs.
Figure 1.4: Relationship between environmental, competitive, and intemal
organi/ational analysis
Step 2: Obịective setting process
Source: Lloyd L. Byars, Lesỉie
w.
Rue, and Shaker
A. Zahra, Sírategic Management, Irwin Press, USA, 1996
8
There are many distinct strategies at corporate, business and functional levels
that an cnterprise can choose to follow. The managers can find out thc most
appropriate strategies after deíĩning clearly the guiding philosophy, Vision and
the mission o f organization; compleling organizational extcrnal and intemal
analysis and setting objectives. The most appropriate strategy has to basc on
speciíìc situation of the firm. The organizational strategy may change from timc
to time.
1.1.5. Applied models to built business strategy to enterprisc
1.1.5.1. PEST Model
PEST Model is a widely used framework in organizationaỉ cxtemal analysis,
1'ocusing on macro environment. The model analyzes íour main factors:
Step 3: Sírategy seỉection process
Figurc 1.5: PEST Modcl
Source: Lloyd L. Bvars, Lesỉie w. Rite, and Shaker
A. Zahra, Strategic Management, lrwin Press, USA, 1996

Supplicrs havc most povver whcn (Lloyd et al 1996):
(!) Few suppliers are availablc. (2) requircd inputs are unique making it costly
to switch suppliers, (3) thc input of the company purchases do not represcnt a
signiíìcant of the business of thc suppliers, (4) thcre are very few substitute
products, (5) suppliers can integrate forward, (6) suppliers can sell directly to
customers by passing thc nccd for the company business, (7) it is difficull to
switch to another supplier, (8) and the company do not have a full understanding
of markct of its supplicr.
Figurc 1.6: Five íorces Model
T h rr a ls o r nr\v
cn íra IIỈS
D argaln lng
Com pctlitvc
B argclnlng
p o w e ro f rtv alry 'Vlttiln
p o tv c ro í
n up p lte n an tn đustry
cu sto m r n
T h rea ts
O T
tn b itltu tc
P r o d u c t s
Source: Lìoyd L. Byars, Leslie w. Rue, and Shaker
A. Zahra, Strategic Management, Irwin Press, USA, 1996
In ordcr to rcducc povver of suppliers, the company might consider íorming a
partncrship with supplicrs, such as reduce inventory cost by providing just-in-
time đeliveries, infonn to suppliers information about custoincr nccds and
prcferences or spced the adoption of new technologies. Another option to
increase the company powcr is íbrming a buying group of small producers. The
company can choose to inlcgrate back and produce its own inputs by purchasing

Both cntry and exit barriers also influence on compctitivcness in the industry
and preventing new comers to jump inlo the industry.
Threaí o f substitutes
Substitutes are Products served the same purpose and needs of customers. The
thrcat of substitutes appears as alternatives product have lower price or better
períbrmance or both. Substitules can reduce demand for your product and create
pressure for lower price. Substitutes are greater threat as: (1) your product do not
have any real beneíìt in comparison to other Products, (2) the product is easily to
svvitch, (3) high customer elasticity by price. The company can reduce threat of
substitutes by satisfy customers prcferences and đifferentiating company’s
product by branding.
Rivalry among competitors
Rivalry among competitors is most intense vvhen: (1) there are numerous
companies, (2) companies arc similar to each other in size, (3) companies are
difFerent in national culturcs, goal, or origin, (4) industry growth ratc is low, (5)
one fírm or some firms would like ío be markel leader, (5) high fixed costs of
production prcssure companies to produce near capacity, (6) Products arc
pcrishablc and need to be sold quickly, (7) products are not unique , (8)
customers can easily to switch bctvveen product. In order to reduce rivalry
among compctitors vvithin industry, the company can invest in research and
dcvelopmcnl to innovativc or improve products’ featurcs. In addition, the
company can focus on a unique markct segmcnt, distribute product via a novcl
channel and form a tied relationship to customers.
1.1.5.3. Value Chain
Valuc chain analysis is vvidely useíul tool to providc manager the overall picturc
of the enterprise. It helps to understand firm’s strengths and vveaknesses; find
out phases that manager should focus to crcate competitive advantagcs and
create value-addcd to Products or reduce cost price. Valuc Chain divides firm
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activỉties into tvvo groups: primary and supporting activities (Farhad el al 2003).

1
Services / ị
1
1

1

1
Priniacy activíties
Source: Adapt from Parhad Analous and Azhar Karami,
Strategic Management in Smaỉl and Međium Enterprise, Thomson 2003
Primary activities:
[nbound logistic refers to material control and warehousing activities. In vice
vcrsa, outbound logistic considers timeliness and effìciency of warehousing, and
delivery íĩnished goods and services to customers. Operation is a processes
thosc tums inpuls inlo outputs. The fírm should consider about productivity of
equipment against competitors, automation of production process, effectiveness
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