Lunghwa Universityof Scienceand Technology

Department of Business Administration

Thesis for a Master’s Degree

Business strategy for Viet trading Technology

Investment Development Joint – Stock company
2019-2025

Researcher: Mai Van Chinh

Supervisor: Mai Anh, Yuan, Cheng- Kang, Dr.

 November 2018
Lunghwa University of Science and Technology
Approval Certificate of Master's Degree Examination Board

This is to certify that the Master’s Degree Examinations Board has

approved the thesis Business strategy for Viet Trading Technology
Investment Development Joint – Stock companypublished by Mr.Mai Van
Chinh in the Master Program of Graduate School of Department of
Business Administration

Master’s Degree Examination Board

Board Members：

Advisors： XXX

Chair： XXX

Date： 2018／10／ 22 　　
 ABSTRACT

Thesis Title ： Business Strategy for Viet Trading Technology Investment Development
Joint-Stock Company 2019-2025
Pages：52
University：Lunghwa University of Science and Technology
Graduate School：Department of Business Administration
Date：January, 2018 Degree：Master
Researcher：MAI VAN CHINH Advisor：MAI ANH, Dr.

Keywords:Business Strategy

VNTECH is a firm which is now doing business in installation and construction

industry. The purposes of this study are to study basis for building strategies, process of
building strategies and methods of analyzing and selecting the best strategies aiming to help
VNTECH choosing the most suitable strategies, to identify and to apply business strategy
theories to build the best business strategy for VNTECH for the period 2019-2025, and to
provide recommendations solutions in order to implement and successfully perform the
business strategy so that VNTECH becomes a powerful player both in the Vietnamese and
in the world market.
To do that qualitative research method is employed and the researcher evaluates both
external and internal market relevant to the business of VNTECH. The strengths of
VNTECH are the participation into 19 M&E projects, having strategic cooperation with big
partners like Omron, Siemens, LG Vietnam, strong commitment from top management
team in delivering high project quality to the customers, and the employees are young and
enthusiastic. The weaknesses of VNTECH are short time of business because of M&E
services since 2005 while leading firms like REE and SAREFICO have more than 30 years
of doing business, building information modeling (BIM) is not applied, current human
resources is low and cannot handle more M&E projects, too low profitability, portfolio is
not diversified, do not have specification in mission, vision, and business objectives, low

iii
financial capabilities, and do not establish professional human resource management
policies.
The opportunities to VNTECH are political score of Vietnam is increased after
downturn in 2014, strong economic development continuous its trend during 2018 and
2019 with high GDP growth rate and strong FDI inflows, the demand of the installation of
electricity and water for civil projects (seaport, railways, housing for low-income people) is
expected increasing, low price segment in residential market is increasing, prime segment
(villas and townhouse) are not explored by existing players, and Vietnamese people spend
their spare cash into home renovation. The threats are identified as high corruption in
Vietnam’s political system, inflation rate is expected increasing, the market is fragmented
by geographic location with different demands, more than 15,000 contractors in Vietnam’s
M&E market which lead to fierce competition. The customers have many options due to
large construction services providers, and Vietnam’s M&E market is being approached
highly by foreign contractors from developed countries. New legal framework supports
foreign construction contractors.
Based on that, there are some business strategies to be developed. They are strength
focus strategy, low cost strategy, and marketing strategy. Other recommendations to further
improve the effectiveness of business strategy implementation are also proposed to help the
company to achieve better implementation effectiveness.

iv
 ACKNOWLEDGEMENT

I sincerely thank the teacher Mai Anh, and corporate officers of Viet Trading
Technology Investment Development Joint-Stock Company devoted to guide and help me
complete this thesis.

Thank you!
Author
Mai Van Chinh

v
 TABLE OF CONTENTS
ABSTRACT.........................................................................................................................iii
ACKNOWLEDGEMENT...................................................................................................v
LIST OF TABLES...............................................................................................................ix
LIST OF FIGURES..............................................................................................................x
1. INTRODUCTION.............................................................................................................1
1.1 Reason of choosing the research topic.......................................................................1
1.2 Purpose of the study....................................................................................................1
1.3 Research topic and scope of the research..................................................................1
1.4 Structure of the study..................................................................................................2
2. THEORETICAL BACKGROUND FOR BUSINESS STRATEGY............................3
2.1 Concept and role of business strategy and strategic management.........................3
2.1.1 Concepts.................................................................................................................3
2.1.1.1 Strategies and business strategies............................................................................3
2.1.1.2 Strategic levels...........................................................................................................4
2.1.1.3 Corporate strategic management............................................................................5
2.1.2 The role of business strategy in business activities of a company....................6
2.2 Introduction to some business strategies...................................................................6
2.2.1 Focus growth strategy..........................................................................................6
2.2.2 Porter’s competitive strategies............................................................................7
2.2.2.1 Cost leadership strategy...........................................................................................7
2.2.2.2 Product differentiation strategy..............................................................................8
2.2.2.3 Focus strategy............................................................................................................8
2.2.3 Business strategy according to the firm’s position............................................8
2.2.3.1 Market leader strategy.............................................................................................8
2.2.3.2 Marker challenger strategy......................................................................................9
2.2.3.3 Market follower strategy..........................................................................................9
2.2.3.4 Market nicher strategy...........................................................................................10
2.3 Process of developing strategy..................................................................................10
2.3.1 Determining business objectives........................................................................12
2.3.2 Analyzing external environment.......................................................................12
2.3.2.1 Economic environment...........................................................................................12
2.3.2.2 Political and legal environment.............................................................................13
2.3.2.3 Cultural and social environment...........................................................................13
2.3.2.4 Technology environment........................................................................................13
2.3.3 Industry analysis.................................................................................................13
2.3.3.1 Competitive rivalry.................................................................................................14
2.3.3.2 Potential rivalry.......................................................................................................14
2.3.3.3 Customers................................................................................................................14
2.3.3.4 Suppliers..................................................................................................................15

vi
2.3.3.5 Substitute products.................................................................................................15
2.3.4 Analysis of internal environment......................................................................15
2.3.4.1 Analysis of resources...............................................................................................15
2.3.4.2 Analysis of functional department in a company.................................................16
2.3.5 Analyze and identify strategy............................................................................16
2.3.6 Implement strategy.............................................................................................16
2.3.7 Control and review the implementation of strategies.....................................17
2.4 Other tools to analyze and build business strategies..............................................17
2.4.1 Matrix to analyze internal and external environment....................................17
2.4.2 SWOT analysis....................................................................................................18
2.5 Chapter summary......................................................................................................18
3. RESEARCH METHODOLOGY.................................................................................19
3.1 Research method.......................................................................................................19
3.2 Data collection............................................................................................................19
4. ANALYZING VNTECH’S CURRENT OPERATIONS AND BUSINESS
STRATEGY.........................................................................................................................21
4.1 Company overview....................................................................................................21
4.1.1 Company overview.............................................................................................21
4.1.1.1 Establishment and development............................................................................21
4.1.1.2 Organizational structure........................................................................................22
4.1.1.3 Some key business performance............................................................................24
4.1.2 Vision, missions and objectives..........................................................................25
4.1.3 Products and consuming markets.....................................................................25
4.1.3.1 Business sector and main products........................................................................25
4.1.3.2. Consuming market.................................................................................................27
4.2 Analysis of VNTECH business environment and its competition........................30
4.2.1. Macro environment analysis PEST analysis?.................................................30
4.2.1.1. Political – Legal......................................................................................................30
4.2.1.2. Economical..............................................................................................................31
4.2.1.3. Culture and society................................................................................................33
4.2.1.4. Technology..............................................................................................................34
4.2.2 Analysis of competition in the industry............................................................35
4.2.2.1 Porter Matrix of 5 Forces.......................................................................................35
4.2.2.2 Competitive analysis...............................................................................................36
4.2.2.3. Analysis of internal environment..........................................................................39
4.2.3. EFE matrix, IFE matrix, SWOT matrix of VNTECH...................................39
4.3 Visions, mission and objectives................................................................................42
4.3.1. Mission................................................................................................................42
4.3.2. Strategic objectives............................................................................................42
4.4 Identifying business strategy....................................................................................43
4.4.1 Strength focusing strategy.................................................................................43
4.4.2 Low cost strategy................................................................................................43
4.4.3 Marketing strategy.............................................................................................44

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 4.5 Solutions to implement strategies............................................................................44
4.5.1 Expanding customer base..................................................................................44
4.5.2 Enhancing human resource capability.............................................................45
4.5.3 Improving marketing activities.........................................................................46
4.5.4 Diversifying products/services and pricing policies.........................................46
4.5.5 Enhancing financial capacity.............................................................................47
4.5.6 Other solutions....................................................................................................48
4.6 Chapter summary......................................................................................................49
5. CONCLUSION................................................................................................................50
REFERENCES....................................................................................................................52
Appendix I: Projects of VNTECH.....................................................................................57
Appendix II: EFE and IFE Example.................................................................................60
Appendix III: Core competencies of VNTECH and main competitors.........................61
Appendix IV: VNTECH's key partners............................................................................62

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 LIST OF TABLES
Table 4.1: Key VNTECH’s projects..................................................................................22
Table 4.2: Financial Performance in Last 3 Years (VND billion)..................................24
Table 4.3: Vietnam’s construction industry.....................................................................27
Table 4.4: Office market in Hanoi and Ho Chi Minh City.............................................28
Table 4.5: Retail market in Hanoi and Ho Chi Minh City..............................................29
Table 4.6: Residential market in Hanoi and Ho Chi Minh City.....................................29
Table 4.7: Vietnam’s FDI Overview..................................................................................32
Table 4.8: Financial performance of VNTECH and main competitors.........................36
Table 4.9: Experiences of VNTECH and main competitors...........................................37
Table 4.10: SWOT analysis................................................................................................40
Table 4.11: EFE matrix of VNTECH................................................................................41
Table 4.12: IFE matrix of VNTECH.................................................................................42

ix
 LIST OF FIGURES
Figure 2.1: Strategic planning..............................................................................................4
Figure 2.2: Corporate strategic management framework.................................................5
Figure 2.2: Porter’s competitive strategies.........................................................................7
Figure 2.3: Business strategy based on the firm’s position.............................................11
Figure 4.1: Organization structure of VNTECH.............................................................23
Figure 4.2: Vietnam’s Political Stability Index................................................................30
Figure 4.3: Vietnam’s GDP growth rate and inflation rate............................................31
Figure 4.4: FDI inward by country (%)............................................................................32
Figure 4.5: How do Vietnamese consumers spend their spare cash?.............................34

x
 1. INTRODUCTION

1.1 Reason of choosing the research topic

Nowadays the Vietnam economy has been increasingly developing with high requirement of
all sectors in the society, Construction Industry is included in that trend. To exist and develop, it
is necessary that organizations should build clear business strategies and orientations. Being a
business involved in Installation and Construction Industry, Viet trading technology investment
development joint-stock company (VNTECH) recognizes tough competition and need to change
with that trend in this market. To survive and develop, it is fundamental for VNTECH to build a
suitable business strategy. For these reasons, the researcher decides to choose the topic as the
role of Chairman and General Director: “Developing the business strategy for Viet Trading
Technology Investment Development Joint-Stock Company for the period 2019-2025” for the
thesis’s title and with the researcher’s practical experiences and knowledge getting from le-MBA
course, the researcherexpectsproviding accurate adjustment and identifying right business
strategies for VNTECH Company.

1.2 Purpose of the study

This study is conducted with some specific purposes as below:
- Reviewbasis for business strategies, process and methods of analyzing and selecting the
best strategies aiming to help VNTECH choosing the most suitable strategy.
- Identifying and applying business strategy theories to formulate suitable business
strategy for VNTECH for the PERIOD 2019-2025.
- Propose some key solutions to implement and successfully perform the business
strategy.

1.3 Research topic and scope of the research

This study is developed with research topic as “Business strategy for Viet Trading
Technology Investment Development Joint-Stock Company 2019-2025”.
Scope of the research includes the subject, the content, the time, and the location and they
are described as below:
1
 - The subject: Business strategy of VNTECH Company.
- The content: The study is developed with internal and external analyses which are
developed in order to scan internal operation of VNTECH Company and the business
environment in which the company is now doing business. Then, business strategies for the
company during 2019-2025 are proposed accordingly.
- The time: From June 2018 onwards.
- The location: Within VNTECH Company.
-

1.4 Structure of the study

This study is developed with 5 chapters The first chapter is introduction of the study topic as
well as the proposal of research objectives and research scope. Other chapters include
Theoretical Basic of Corporate Business Strategy, Analyzing VNTECH’s Current Operations
and Business Strategy, and Recommendation of Business Strategies for VNTECH during 2019-
2025.Theoretical background for business strategyreviewsfundamental understanding about the
research topic. It covers the examination of theoretical basis about business strategy and how it is
formulated. Some strategic analysis tools are proposed and examined during this chapter. The
third chapter is to analyzing VNTECH’s Current Operations and Business Strategy. It examines
some basic information about VNTECH Company such as its vision, mission, and objectives.
Internal environment is scanned along with external environment scanning. Herein, some
strategic analysis tools are put into practices with the data is collected from both interviews with
the managers of the company and secondary data. The fourth chapter is developed in order to
formulate a suitable business strategy for VNTECH during 2019-2025. It covers the proposal of
new visions, missions, and objectives. Chosen business strategies are described clearly in this
chapter and the solutions to implement chosen business strategies are discussed accordingly.

2
 2. THEORETICAL BACKGROUND FOR BUSINESS
STRATEGY

2.1 Concept and role of business strategy and strategic management

2.1.1 Concepts
2.1.1.1 Strategies and business strategies
Strategy is defined as on-going process which allows a company’s top managers to control
its operations and businesses in order to obtain business goals in long-term perspectives (Lamb,
1994). Mintzberg and Waters (1985) define strategy with structural approach in which a strategy
is either planned strategy or emergent strategy. Planned strategy refers to a strategy which is
prepared and it is generated from pre-analyses of internal and external market while emergent
strategy is determined as the one which is raised when strategic managers perceived that planned
strategy must be revised and changed upon on certain feedbacks (Mintzberg and Waters, 1985).
Another understanding about strategy is provided by Porter (1996) and it is defined as a set of
actions that helps a company to differentiate itself with other competitors. Porter (1996) provides
the differentiation between strategy and non-strategy as non-strategy is standard actions which
are conducted by a company and its competitors to deliver products and services to the
customers or to maintain production flows.
In summary, this study chooses a definition for strategy as a unifying theme in order to
provide coherence and direction for the actions and the decisions to gain business successes. In
addition, strategy is perceived as planning action in long-run perspectives and it helps the firms
to establish and to sustain specific capabilities, to allocate resources, and to clarify goals and
policies to support the firms’ development and business objectives (Johnson and Scholes, 2002).
Finally, strategy brings the directions of the firms and it aims to answer following questions:
Where is the firm now? What the actions will help the firm to achieve business objectives and
goals? What are the movement of the competitors and competitive environment? What the firm
want to achieve in the long-run?

3
 u
f
m
o
v
d
y
S
n
l
p
c
i
g
e
a
r
t Figure 2.1: Strategic management

Source: Nickols (2016)

It is also denoted that a strategy is managed under strategic management. According to
Nickols (2016), strategic management includes 3 components, including strategy formulation,
strategic planning, and strategy deployment. Strategy formulation is the component in which
strategies are formulated after consideration of internal and external environments (Nickols,
2016). Strategic planning is determined as a useful tool which helps strategic managers to deploy
chosen strategies throughout the firms (Nickols, 2016). Strategy deployment refers to the
implementation of chosen strategies along with closed monitoring (Nickols, 2016).

2.1.1.2 Strategic levels

There are 3 strategic levels, including corporate strategy, business strategy, and operational
strategy (Johnson and Scholes, 2002). These strategic levels are illustrated as below:

4
 Figure 2.2: Corporate strategic management framework

Source: Johnson and Scholes (2002)

According to Grunig and Kuhn (2010), corporate strategy covers business strategy and
operational strategy and it is developed under the objective of differentiating a company with
others in the market. Business strategy, however, is developed with the target is business
activities of a company or which business area that a firm need to improve in order to win the
market share (Grunig and Kuhn, 2010). Finally, operational strategy refers to the combination of
each operational part of the firms to be connected with each other in order to form a strategic
architecture (Johnson and Scholes, 2002).

2.1.1.3 Corporate strategic management

Corporate strategic management is a business term and its conceptualization is not very new
since it is introduced in 1970s (Wells, 2000). It is defined as a process in which the top
management of the firms envision about the future and they develop a set of actions that allow
the firms to achieve that future (Wells, 2000). Moreover, corporate strategic management is
defined under a system approach whether it is perceived as a management system that allows the
firms to identify and to measure the corporate performance in order to achieve desired future
(Wells, 2000).

5
 According to Wells (2002), a framework of corporate strategic management is illustrated
with 5 components, including pre-planning, strategic planning, deployment, implementation, and
measurement and evaluation. Pre-planning is conducted with the objective of recognizing which
activities should be carried out and what organizational assessment is. Then, strategic planning is
developed with the exploration of strategic foundation and it includes mission, vision, and
guiding principles. It is denoted that the firms should conduct gap analysis after strategic
foundation is determined in order to define strategic goals, relevant strategies and objectives.
This component outputs measurement plan. Deployment is the third component in corporate
strategic management framework and it consists of the completion of the plan as the first phase
and the communication of the plan as the second phase. After that, the firms move to
implementation stage in which action plans are developed and actions are implemented with
appropriate tracking and communication progress. The last component refers to measurement
and evaluation and it requires the data collection and certain analyses in order to measure the
effectiveness implementation process.

2.1.2 The role of business strategy in business activities of a company

There are 4 roles of a business strategy and it is proposed by Whittington (2000). The first
role refers to classical perspective and it refers to the assumption of which top managers and
strategic managers of a company need to develop business strategies in the way of leveraging
internal strengths and external opportunities while overcoming internal weaknesses and reducing
external threats. The second role refers to the evolutionary perspective in which the perception of
top managers and strategic managers are either wrong or right. While right decision in choosing
business strategies allows a company to obtain business success, wrong decision leads to
business failure. The role refers to the processual perspective of a business strategy whether the
assumption of which business performance is a result of interaction between individuals and
environment and the result of this interaction, generally, is unpredictable or unintended. The last
role of a business strategy refers to systematic perspective of a business strategy and it is
highlighted as the role of cultural or religious effects and educational background on strategy of
a company.

6
2.2 Introduction to some business strategies

2.2.1 Focus growth strategy

Focus growth strategy refers to the context of the firms desire to achieve growth in their
business scale, winning against other competitors, andprosperity (Leminen and Westerlund,
2012). In this context, focus growth strategy can be divided into high growth strategy and low
growth strategy whether high growth strategy is conducted when the firms aim to achieve rapid
growth while slow growth rate refers to safe and steady growth (Brown et al., 2001). It is
denoted that not all firms want to follow high growth strategy due to their top management aims
to avoid business risks (Leminen and Westerlund, 2012).

2.2.2 Porter’s competitive strategies

According to Porter (1980), the firms can choose 3 different strategies in order to gain
competitive advantages against other players in the market. They are cost leadership strategy,
product differentiation strategy, and focus strategy. It is perceived that focus strategy is divided
into cost focus strategy and differentiation focus strategy.
Markets where business competes
Broad Narrow

Cost leadership Cost focus

Costs
Source of competitive advantage

Differentiation

Differentiation Differentiation
leadership focus

Figure 2.3: Porter’s competitive strategies

Source: Porter (1980)

2.2.2.1 Cost leadership strategy
Cost leadership is conducted when the firms want to sell their products and services at lower
cost than other competitors’ prices, according to Porter (1980). It is asserted that cost leadership
7
strategy can be obtained in case of the firms standardize their production process and therefore
they gain the benefit from lower operating cost or it can be obtainable from mass production
process (Porter, 1980).

2.2.2.2 Product differentiation strategy

Product differentiation strategy refers to the action of the firms in which they develop new
products and services with the characteristics and the functions are different to others (Porter,
1980). On the other hand, it means that the firms implement product differentiation strategy
throughout unique characteristics and functions integrated into their products and services and
this action helps distinguishing themselves to other competitors in the market (Hall, 1980).

2.2.2.3 Focus strategy

Focus strategy is implemented under the context of the firms try to deliver and to sell their
products and services on specific market segment or for specific customer segment (Porter,
1980). In this context, the firms apply either cost leadership strategy or product differentiation
strategy but they focus on new market segment or new customer segment and this segment is not
exploited by other competitors (Horsky and Nelson, 1993).

2.2.3 Business strategy according to the firm’s position

According to the firm’s position in the market, business strategy is formulated and the firms
can follow either market leader or market challenger or market follower or market niches/nicher.
A framework which is utilized to illustrate different business strategy upon on the firm’s position
is highlighted below:

2.2.3.1 Market leader strategy

It is asserted that every market has a market leader which has highest market share, intensive
marketing programs, wide distribution network, integrated advance technologies, high rate of
new products and services, and pricing controls (Butler and Collins, 1996). On the other hand,
when the firms conduct market leader strategy, they aim to expand current market share and to
explore new customers through new products and services while still maintaining the
relationship with current customers or protecting current market (Kotler et al., 2010). To expand

8
current market share, a marker leader often invests heavily on advertising programs, improves
the coverage of distribution networks, gives incentives to the distributors, develops new products
and services, expands its businesses to new geographic locations, and conducts mergers and
acquisitions with existing and smaller firms in the market (Gilligan and Wilson, 2003). To
protect current market share, a market leader continuously refines its competitive advantages
against other competitors in the market, invests heavily into advertising, and creates strong
customer relationship as well as strong relationship with its suppliers (Gilligan and Wilson,
2003).

2.2.3.2 Marker challenger strategy

Market challenger is defined as the firms which have slightly smaller market share and they
try to adopt aggressive business strategy in order to attack the market share from other
competitors, including market leader (Tse et al., 2004). According to Gilligan and Wilson
(2003), a firm can conduct chooses either attacking market leader or attacking other firms with
smaller size but under financial problems or attacking smaller firms in other regions. Porter
(1985) indicates that a firm which follows market challenger strategy must be careful of
attacking market leader due to it is dangerous competitive movement and it may destroy market
challenger. Moreover, a market challenger can conduct series of actions to attack, including
discounting product’s price, improving current products, introducing innovative products,
heavily investing on advertising efforts, developing the market, developing higher value added
products, conducting market positioning in more meaningful ways (Gilligan and Wilson, 2003).

2.2.3.3 Market follower strategy

Market follower is considered as the firms which do not have largest market share and they
attempt to conduct business strategies at less aggressive level than market challenger with the
objective of maintaining current market position (Hooley and Greenley, 2005). Generally
speaking, a market follower is a firm which accepts its current market share and it avoids direct
competition with market leader like a maker challenger (Levitt, 1996; Kotler, 1997). According
to Saunders (1987), a market follower has some common business characteristics, including such
firm has smaller market shares and it competes in the market segment where it has competitive
advantage, it has less efficiency in research and development (R&D) activities, it has small

9
business scale and it aims staying with small business scale in the long-run, and its leaders
involve into all aspects of operational activities. When a firm conducts market follower strategy,
it can follow by 3 options, as highlighted by Gilligan and Wilson (2003).The first option is
following closely with market mix programs and market segmentation are the same as a market
leader. The second option refers to following at a distance and it is the combination between
similar and different market mix programs and market segmentation compared to a market
leader. The third option is determined as following selectively or a market follower aims to
follow market mix programs and market segmentation in selective manners and therefore the
likelihood of direct competition is minimized accordingly.

2.2.3.4 Market nicher strategy

Market nicher is perceived as the firms which align their businesses into smaller but
specified markets; thus, by considering themselves as market niches, these firms avoid direct
competition from larger competitors and they build up in-depth understandings about the
customers’ preferences of specialized market (Ho, 2014). According to Gilligan and Wilson
(2003), a market nicher should conduct specialization actions, including specialized by
geography, specialized by products and services, specialized by product and service quality,
specialized by customer’s size, and specialized by unique features of products and services.

2.3 Process of developing strategy

To develop strategy, a following process is proposed with 7 steps, including determining
business objectives, analyzing external environment, analyzing the industry, analyzing internal
environment, analyzing and identifying strategy, implementing strategy, and controlling and
reviewing the implementation of strategy. This process is illustrated as below:

10
 Determining business objectives
1. Definition of business scope: products,
markets, and geographies
2. Identification of unique competencies

Analyzing internal environment Analyzing external environment

1. Identification of internal critical factors to 1. Identification of external factors contributing
achieve competitive advantage to industry attractiveness
2. Overall assessment of competitive advantage 2. Overall assessment of industry attractiveness
Definition of Strengths and Weaknesses Definition of Opportunities and Threats

Analyzing and identifying of the business

strategy
A set of multiyear broad action programs

Implementing strategy
Definition and evaluation of specific action
programs (6-18 months)

Controlling and reviewing the

implementation of strategy
Strategic funds programming and operational
budgets

Figure 2.4: Business strategy based on the firm’s position

Prepared by the researcher (2018)

11
 Then, each step in the process of developing strategy is put into discussion. It is denoted that
each step requires different actions and approaches. The researcher also proposes this process to
develop business strategy for VNTECH.

2.3.1 Determining business objectives

Determining business objectives is the first step in the process of developing business
strategy of the firms. It is denoted that business strategy is developed to support the business
goals of the firms in long-run perspectives (Hax and Widl II, 2003). According to Grunig and
Kuhn (2010), the firms should propose business objectives clearly and they should consist the
statement of the competitive position of the firms in the long-run. Moreover, business objectives
are suitable when it includes key milestones that the firms should achieve after business
strategies are implemented accordingly (Thompson, 2002).

2.3.2 Analyzing external environment

The second step in business strategic planning is to conduct the analysis on external market
and the firms should adopt some strategic analysis tools. To analyze external environment,
strategic managers can utilize PESTEL analysis which is considered as one of famous strategic
analysis toolbox (Kotler, 1998). It helps strategic managers to understand how business of a
company is influenced by economic environment, political and legal environment, cultural and
social environment, and technology environment (Koumparoulis, 2013).

2.3.2.1 Economic environment

The business performance of a company is depended on the health of national economy or
global economy such as interest rate of borrowing loans from commercial banks, the fluctuation
of exchange rate and inflation rate, etc. (Koumparoulis, 2013). For example, when inflation rate
is increased, the cost of purchasing raw materials is increased and it impacts directly to profit of
a company (Thompson, 2002). Another example for the impact of economic environment is
shown through the government’s action in which they tightens the spending and this action
impacts directly on money supply and labor market which cause negative impacts on the
business performance of a company (Thompson, 2002).

12
 2.3.2.2 Political and legal environment
Political and legal environment impacts on business performance of a company (Kotler,
1998). The role of political direction and legal is shown through an example of European area
whether a company which is established within this area gains many benefits from single
currency while another company which is coming from non-European area faces up with the
fluctuation of exchange rate (Koumparoulis, 2013). In addition, if a company is doing business
in an industry with incomplete legal framework, this company is facing up with higher threats
from other competitors (Kotler, 1998).

2.3.2.3 Cultural and social environment

Cultural and social environment decides the customer behavior and therefore it impacts on
the business performance of a company (Thompson, 2002). It is identified that the customers
may follow different cultures or they may have different perception about culture values, leading
to the requirement of studying customer behavior in detail to assure that the products and
services are developed in line with the status of customer behavior (Kolios and Read, 2013).

2.3.2.4 Technology environment

Technology environment impacts on the business performance of a company (Johnson and
Scholes, 1993). According to Koumparoulis (2013), new technologies allow a company to gain
competitive advantage against other competitors, showing through the fact that new technologies
allow a company to reduce operating cost and therefore increasing rate of returns. However, the
application of new technologies requires a company to invest more in term of money to purchase
new technologies and trainings for the employees to operate new technologies (Kotler, 1998).

2.3.3 Industry analysis

To analyze the industry in which a company is now doing business, strategic managers can
apply Porter’s Five Forces as industry analysis toolbox. It is denoted that a company is doing
business within specific industry and this company’s business performance is influenced by the
performance of overall industry (Dalken, 2014). On the other hand, it means an industry’s
performance impacts on the business of every company inside and therefore a company needs to
conduct industry scanning and analysis to understand the impacts (Johnson et al., 2008).

13
According to Porter (1979), an industry performance is depended on 5 factors, including
competitive rivalry, potential rivalry, customers, suppliers, and substitute products. Porter (2008)
revises these factors and identifies that the analyses of these factors help strategic managers to
detect the opportunities and the threats from specific industry.

2.3.3.1 Competitive rivalry

Competitive rivalry is defined as the competition among existing players within an industry
(Porter, 1979). It means that when a company is doing business within an industry, this company
needs to compete with other players in term of the quality products and services, marketing
programs, etc. (Porter, 2008). Competitive rivalry impacts on business performance of a
company through how many players in this industry, overall growth rate of this industry, the
differentiation level of products and services which are provided by different players, etc.
(Hubbard and Beamish, 2011).

2.3.3.2 Potential rivalry

Potential rivalry is defined as the potentials of which new players can enter an industry or it
is determined as the barrier level to enter an industry (Porter, 1979). It is affirmed that new
players are hard to enter an industry when this industry is covered by many existing players
(Johnson et al., 2008). When an industry has many players, the profit sharing for each player is
smaller and therefore it limits new players to enter this industry due to small rate of returns
(Dalken, 2004). Moreover, when an industry consists of intensive competition among existing
players, the barrier level to an industry is very high to new players accordingly (Rothaermel,
2008).

2.3.3.3 Customers
According to Porter (1979), customers play significant role in an industry and it is reflected
through the bargaining power of customers. When the bargaining power of customers is high, the
firms need to improve the quality of products and services continuously, to strengthen innovative
products and services to win the market shares, to frequently conduct promotion programs, and
to widely spread distribution networks (Porter, 2008). Bargaining power of customers is high

14
when an industry is covered by many players but the number of customers is low or when an
industry has many substitute products and services (Slater and Olson, 2002).

2.3.3.4 Suppliers
According to Porter (1979), the supplier impacts on overall performance of an industry due
to a firm requires raw materials which are purchased from the suppliers and it is so-called as
bargaining power of suppliers. The impact of the supplier to the business of a company is shown
through the fact that when the supplier increases the prices of raw materials, this company is
facing up with higher production cost and therefore lowering profits in case of this company
keeps current product’s price or this company can increase product’s price but dealing with
higher possibility of losing its customers (Porter, 2008). It is denoted that bargaining power of
suppliers is high when there are few suppliers in an industry (Slater and Olsen, 2002).

2.3.3.5 Substitute products

Substitute products is considered as the last factor in Porter’s Five Forces model and it
impacts to overall performance of an industry. It is defined as other products and services of
which the customers can find in the industry instead of purchasing products and services from a
company (Porter, 1979). A product and service is considered as alternative when it shares the
same functions with a company’s products and services (Dalken, 2004). The impact of substitute
products on a company is depended on customer loyalty level with this company’s products and
services as well as switching cost to the customers (Hubbard and Beamish, 2011). For instance,
if a company gains high loyalty level from its customers, it is unlikely its customers switch to
substitute products and vice versa (Porter, 2008).

2.3.4 Analysis of internal environment

2.3.4.1 Analysis of resources
According to Porter (1985), a company needs to analyze its resources frequently. The main
objective of conducting resources analysis is to assure that this company has sufficient resources
for the development of products and services as well as distributing products and services to the
customers. The resources of a company is divided into tangible and intangible assets (Dwyer et
al., 1987; Bristow and Mowen, 1998). In addition, the resources can be divided into physical

15
capital resources such as plant and equipment used to produce products and services, human
resources such as employees and their working skills and attitudes, and capital resources such as
organization cultures, policies, and control mechanism (Barney, 1991).

2.3.4.2 Analysis of functional department in a company

To analyze functional department in a company, it is recommended that value chain model
should be utilized and this model is developed and proposed by Porter (2001). It is asserted that
value chain model allows strategic managers to identify all activities within a company as well as
these activities impact on this company in term of cost and benefit (Porter, 2001). A company’s
activities can be characterized by primary activities and secondary activities (Porter, 1980).
Primary activities refer to the activities which are belonged to production process of a company
such as inbound and outbound logistics, production chain activities, marketing and sale
activities, and customer services (Vandenberg et al., 2009). Support activities refer to the
activities which are not directly associated with production process but they still impact on
overall performance of a company such as human resource management, information
technology, etc. (Roduner, 2004). It is denoted that the analysis of primary and support activities
enables the strategic managers to understand current performance of a company and how these
activities contribute to the generation of competitive advantages of this company (Fasse et al.,
2009).

2.3.5 Analyze and identify strategy

The analysis and the identification of business strategies is conducted with the objective of
choosing which business strategies are important to a company (Grunig and Kuhn, 2010).
Strategic managers need to analyze each possible business strategy and then they should identify
which business strategies are important to long-term development (Grunig and Kuhn, 2010).
After business strategies are analyzed and the most important business strategies are chosen,
strategic managers need to develop action plans to implement chosen business strategies (Hax
and Wilde II, 2003).

2.3.6 Implement strategy

16
 The next step in the process of developing new business strategies is implementation
strategy in which strategic managers need to establish a team who take the responsibilities of
rolling chosen new business strategies (Grunig and Kuhn, 2010). The implementation of new
business strategies also require clear communication with all employees in functional
departments of a company and business strategies are documented in well manner (Grunig and
Kuhn, 2010).

2.3.7 Control and review the implementation of strategies

The last but not least step refers to the control and the review of the implementation of new
business strategies. According to Grunig and Kuhn (2010), top managers of a company needs to
participate into implementation process and they should involve in the meeting with the
implementation team to assure that timeline and milestones are fulfilled as well as critical issues
are resolved accordingly.

2.4 Other tools to analyze and build business strategies

2.4.1 Matrix to analyze internal and external environment

Matrix to analyze internal and external environment includes Internal Factor Evaluation
Matrix (IFE Matrix) and External Factor Evaluation Matrix (EFE Matrix), according to
Zulkarnain et al. (2018). Both IFE Matrix and EFA Matrix are prepared with 5 steps. The first
step is to determine key internal and external factors that influence significantly on a company’s
businesses. Then, each factor is given by a weight which is ranged from 0 to 1 as the second step.
It is denoted 0 is not important and 1 is very important and the sum of weight of all factors must
be equal to 1.0. The next step is to provide the score for each factor and the score is ranged from
1 to 4 with 1 is important weakness/threat, 2 is minor weakness/threat, 3 is minor
strength/opportunity, and 4 is important strength/opportunity. The fourth step is to multiple each
score with a factor’s weight. The last step is to sum the score of each factor to gain a total score.
(Refer to appendix 2)
After understanding the process of preparing and generating the results of IFE and EFE
matrix, it is denoted that these matrixes are important to business strategy formulation and
planning of the firms. According to Mumpuni (2013), the purpose of preparing IFE and EFE

17
matrix is to understand how internal and external factors influencing on the firms’ business
conditions and performances and therefore they allow the strategic managers to identify which
the most appropriate strategies for their firms. In addition, David (2010) indicates that IFE and
EFE matrix are reliable tool to strategic managers with easy to use and easy to understand.

2.4.2 SWOT analysis

SWOT analysis is a matrix in which it is combined by 4 factors, namely internal strengths,
internal weaknesses, external opportunities, and external threats (Terrados et al., 2007). On the
other hand, SWOT analysis helps strategic managers to recognize internal strengths and
weaknesses and how to leverage the strengths while to reduce the weaknesses (Ommani, 2011).
In addition, SWOT analysis enables strategic managers to understand how external market
impacts on business activities and business performances of a company and strategic managers
should utilize external opportunities and they should consider action plans to reduce negative
impacts from external threats (Singh, 2010).

2.5 Chapter summary

In this chapter, the researcher examines some theoretical basis about business strategy and
its roles to a company. Moreover, the researcher obtain certain understandings about different
strategic toolboxes, including PESTEL analysis, Porter’s Five Forces model, Internal and
External Matrix, SWOT analysis, etc. and they provide in-depth understandings about internal
and external market. The process of formulating business strategies are examined with 7 steps,
including determining business objectives, analyzing external environment, analyzing the
industry, analyzing internal environment, analyzing and identifying business strategies,
implementing chosen business strategies, and controlling and reviewing the implementation of
chosen business strategies. The researcher also examines two types of data that are collected in
this study, including primary data and secondary data. Then, the choice of direct interview is
made along with the collection of secondary data.In the next chapters, the researcher utilizes
what are obtained from literature examination in order to formulate right business strategies for
VNTECH Company.

18
 CHAPTER 3. RESEARCH METHODOLOGY

3.1 Research method

This study is developed with qualitative research method. The researcher aims to collect
primary data and secondary data for studying the research topic. Primary data is extracted from
the interviews with the managers of the company while secondary data is collected from books
and journals about business strategy as well as from the report about Vietnam’s construction
industry. This study involves several strategic analysis tools such as Porter’s Five Forces model,
PESTEL analysis, SWOT Matrix, etc. to formulate business strategies for VNTECH Company.

3.2 Data collection

Direct interview is the process in which the researchers play the role of interviewers while
the respondents who participate into interview process is interviewees (Saunders et al., 2009).
Direct interview is made up with face-to-face scheme and the researchers put questions to the
interviewees and then the researcher capture the information which is provided by the
interviewees accordingly (Saunders et al., 2009). The main benefit of direct interview is that the
researchers can evaluate the attitude of the interviewees and obtain in-depth findings about social
phenomenon (Saunders et al., 2009). In this study, direct interview is chosen to collect primary
data and it helps the researcher to acquire in-depth understanding about current situation of
internal and external market and what the current and possible future business strategies of
VNTECH Company.
Questionnaire is favorite data collection instrument and it helps the researchers to collect
primary data (Saunders et al., 2009). Questionnaire is developed in standard format and the
respondents choose their answers upon on given statement (Cargan, 2007). The benefit of
questionnaire refers to the fact that it allows the researchers to collect primary data in large
sample and the respondents who participate into questionnaire process are anonymous and they
can answer the questions without issues (Saunders et al., 2009). Since this study’s topic is about
business strategy, questionnaire is not suitable since required primary data requires the
respondents to have intensive knowledge about strategic management as well as having broad

19
knowledge about internal situation of VNTECH and external situation from Vietnam’s
construction market.
Secondary data is defined as the information that is prepared, collected, and presented by
other researchers (Saunders et al., 2009). Collecting secondary data has the benefit of which
secondary data does not require much time and effort to the researcher to obtain this information
(Srivastava and Rego, 2011). However, secondary data has its weakness since the researcher
cannot evaluate how previous researchers process this data (Saunders et al., 2009). In this study,
secondary data is collected from books and journals about business strategy and it is also
collected from internal documents of VNTECH Company.

20
 CHAPTER 4. ANALYZING VNTECH’S CURRENT
OPERATIONS AND BUSINESS STRATEGY

4.1 Company overview

4.1.1 Company overview

4.1.1.1 Establishment and development
Viet Trade Technology Investment Developing Joint Stock Company (VNTECH) is
established under the business license 0101619893 in 2005 with the head office is located in
Hanoi, the capital of Vietnam. The firm is doing business in main areas, including the installation
of electricity, water system, monitoring system, fire protection system, etc. for buildings and
industrial zones; the installation of clean water system and construction works; and providing
electrical and information system for automate production process. Total capital of the firm is2
VND billion at the time of establishment and it is increased to 8.8 VND billion and it is under the
management of 3 founders. The capability of VNTECH is reflected through its experiences of
participating into 19 projects. Some projects have high contractual values. For example, the
contract with Hoa Lac Hi-Tech Park and Dak Nong valued at 63.1 VND billion and 57 VND
billion respectively. Some key projects which are implemented by VNTECH are presented in the
table below:

21
 Table 4.1: Key VNTECH’s projects
Investm Project
N Timel
Investor Project’s Name Scope ent ’s
o ine
sources value
Petrowaco Building 97-99 Lang Ha, Construction of electricity, Enterpri 74.3 2018-
Joint Stock Dong Da, Hanoi lightning protection, grounding; se’s VND 2019
Company ventilation system, water supply funds billion
1 and drainage system.

Vietnam Package 13A: Supply and installation of ODA 43 2017-

Expresswa Construction of traffic electrical systems, light funds VND 2018
y management and electricity, water, and air billion
Corporatio operation center, conditioning
2 n maintenance and charge
administration office;
Construction of Da Nang
- Quang Ngai
expressway
Hanoivid Hanovid high-rise and Design and construction of Enterpri 31.6 2016-
Joint Stock low-rise condominiums electricity within the apartment of se’s VND 2017
Company the commercial center, the tower funds billion
3
T and the construction of the
mechanical and electrical
infrastructure and landscape.
Hoa Lac Infrastructure ODA 63.1 2015-
Hi-Tech development in Hoa Lac Design and construction, funds VND 2017
Park Hi-Tech Park electrical engineering, technology billion
4
Manageme of the pump, sewage pumping
nt station number 7, sewage
pumping station number 12
5 The Bidding package DN3B / Construction of electrical ADB’s 57 2012-
manageme A / 10 / ICB- engineering, technology, water funds VND 2013
nt board of Construction and plant equipment billion
the equipment for water

22
 subproject supply system in Gia
of Nghia Town - DakNong
DakNong’s
urban
technical
infrastructu
re
developme
nt
Source: VNTECH (2018)
4.1.1.2 Organizational structure
Currently, the firm is operated under organization structure as below:

Board of Director

Director

Deputy Director Deputy Director Deputy Director

Financial Management Planning Management Project Management

Technical Department
Admin Department Economic Planning Department
Financial Planning Department Service & Assurance Department
Project Department

Figure 4.1: Organization structure of VNTECH

Source: VNTECH (2018)
The firm is governed by Board of Directors (BOD) and there are 3 deputy directors to
support daily management. The first deputy director takes the responsibility of financial
management, the second deputy director manages planning process while the last deputy director
takes into account project management. Under each deputy director, there are functional

23
departments to be setup. In more detail, the first deputy director manages financial planning
department and admin department, the second deputy director controls economic planning
department and the last deputy director monitors the operations and the efficiency of technical
department, project department, and service and assurance department.
The firm is governed by Board of Directors (BOD) as highest decision hierarchy and there is
a Director under BOD’s management. To support the Direct, there are 3 Deputy Directors who
take the responsibilities for financial management, planning management, and project
management.
In term of financial management, there are 2 functional departments, namely financial
planning department and admin department. Financial planning department takes the
responsibility of managing financial performance of the firms as well as conducting accounting
works. This department also coordinates with other departments in order to ensure that the cost is
managed well. Admin department provides the consultancies to BOD and the Director in term of
developing human resources of the firm as well as administration tasks.
In term of planning management, there is 1 functional department. This department is named
as economic planning and it takes the responsibility of coordinating with other departments to
establish project plan and to provide the construction and material utilization plan. This
department also analyzes new technologies and software that help optimizing workflows.
In term of project management, there are 3 functional departments, including technical
department, project department, and service and assurance department. Technical department
supervises technical requirements and technical fulfillment of each project. Project department
manages overall project plan and project implementation in order to ensure that the activities are
implemented in time and in quality manner. Service and assurance department focuses on service
quality or after-sale services. This department provides the assurance services after construction
is finished accordingly.
4.1.1.3 Some key business performance
In the last 3 years, business performance of the firm is as below:
Table 4.2: Financial Performance in Last 3 Years (VND billion)
Year 2015 2016 2017
Total asset 40.12 62.34 80.17
Total debt 35.62 56.74 71.37
Total equity 4.5 5.6 8.8

24
Revenues from sale activities 36.18 30.88 74.38
Profit after tax 0.034 0.080 1.170
Total labors 36 44 52
Source: VNTECH (2018)
In the last 4 years, financial performance of VNTECH is fluctuated accordingly. The
revenues from sale activities in 2014, 2015, 2016, and 2017 are 46.98 VND billion, 36.18 VND
billion, 30.88 VND billion, and 74.38 VND billion respectively. Profit after tax in 2014, 2015,
2016, and 2017 are 0.345 VND billion, 0.034 VND billion, 0.080 VND billion, and 1.170 VND
billion. It is commented that sale revenues are dropped significantly during 2015 and 2016
before it is increased in 2017. Due to sale revenues are dropped, profit after tax is decreased
during 2015 and 2016.

4.1.2 Vision, missions and objectives

The vision of VNTECH is to provide comprehensive, realistic, and optimized solutions to
the customers. To support this vision, VNTECH proposes some missions, including:
- To update, adopt, apply, and transfer new technologies continuously.
- To frequently update new legal and discretion to ensure of legally activities.
- To research and to identify optimized solutions for construction projects while
maintaining the quality.
- To research and to develop new products which are realistic to the customers. New
products must have the characteristics of friendly to the customers, appropriately for
people with different professional levels, and applicably in different business
environments at appropriate cost.
- To establish widened business network.
- To get more projects.
- To develop human resources which are increasing in term of quality and quantity.
The objectives of VNTECH are:
- To construct the projects at high quality manner, good designation, and they are
integrated with multiple functionalities.
- To contribute to the progress of industrialization and modernization of Vietnam and to
participate into global market.

25
4.1.3 Products and consuming markets
4.1.3.1 Business sector and main products
VNTECH is now doing business in Vietnam’s construction industry. This industry gains
strong growth rate and is being ranked as fastest growing construction market among emerging
countries in Asia, according to BMI Research (2018). Annual growth rate of this industry is
more than 6% per annum in 2017 and it is expected the same in 2018 (HVACR Vietnam, 2018).
The value growth of Vietnam construction industry in 2018, 2019, and 2020 is expected at 11.3
US$ billion, 12.6 US$ billion, and 13.9 US$ billion (HVACR Vietnam, 2018). This industry
contributes to 5.1% of Vietnam’s GDP in 2018 and it is expected at 5.1% and 5.0% in 2019 and
2020 (HVACR Vietnam, 2018).

26
 Table 4.3: Vietnam’s construction industry
Year 2018 2019 2020
Construction industry value growth, US$ billion 11.3 12.6 13.9
Construction industry value growth, % 6.3 6.1 6.1
Construction industry value growth, % of GDP 5.1 5.1 5.0
Source: HVACR Vietnam (2018)
Construction industry has a lot of potentials for further development. This argument is
proven through the plan of Vietnamese Government to invest more into public construction
projects in order to improve living standards and infrastructure in rural areas during 2016-2020
(Rider Levett Bucknall, 2017). In addition, the firms in this industry may gain the benefit from
construction projects for low-income people since the government launches Housing for Poor
Rural Families Program and low renting houses in industrial zones for the labors (Rider Levett
Bucknall, 2017). Moreover, the demand of the installation of electricity and water is expected
increasing since the government aims to increase seaport capacity under a new master plan for
seaport development until 2020 (Rider Levett Bucknall, 2017).

4.1.3.2. Consuming market

In term of consuming market, the market is characterized by property types, including
office, retail, and residential. Moreover, highest consumption is in Hanoi and Ho Chi Minh City
which are considered as the most dynamic cities in Vietnam. The office market is characterized
by grade and there are 2 grades, namely Grade A and Grade B. Total stock by square meter of
office in Hanoi is higher than in Ho Chi Minh City in both of Grade A and Grade B office type
(Jones Lang LaSalle, 2017). However, the occupancy rate in the office of Ho Chi Minh City is
slightly higher than in Hanoi. Jones Lang LaSalle (2017) reports that occupancy rate of office in
Hanoi is 93.6% while this number in Ho Chi Minh City is 94.9%. Moreover, Hanoi market gains
positive outlook due to good economic performance and the rise of newly established firms in
this city. In addition, total supply for office market in Hanoi and Ho Chi Minh City are both
increased during 2018. It is asserted that office market is more attractive in Hanoi and it is
considered as business opportunity to VNTECH.

27
 Table 4.4: Office market in Hanoi and Ho Chi Minh City
Hanoi Grade A Grade B Total
Total stock, square meter 529,000 1,003,197 1,532,000
Occupancy rate, % 93.3 93.7 93.6
Ho Chi Minh City Grade A Grade B Total
Total stock, square meter 249,209 885,254 1,134,463
Occupancy rate, % 92.7 95.5 94.9
Source: Jones Lang LaSalle (2017)
In term of retail market, there are 3 common property types in both 2 cities, namely
shopping center, supermarket/hypermarket, and convenience store. According to Jones Lang
LaSalle (2018), total stock of shopping center is quite equal among 2 cities with 963,000 square
meter in Hanoi and 962,058 square meter in Ho Chi Minh City. However, occupancy rate in
Hanoi (83.1%) is much lower than in Ho Chi Minh City (90.8%). Ho Chi Minh City also has
much higher total stocks in term of 2 other sub-markets as supermarket/hyper market and
convenience store (Jones Lang LaSalle, 2017). Moreover, Hanoi has prime retail space with
8,000 square meter and occupancy rate of 86.5% while Ho Chi Minh City has bazaar with
39,850 square meter and occupancy rate of 91.0% accordingly (Jones Lang LaSalle, 2017). It is
expected that total supply is increased due to new construction projects for retailing in suburban
areas are finished in both 2 cities. However, the demand of retailing construction is different
between Hanoi and Ho Chi Minh City. While Hanoi market witnesses the demand for food and
beverage and entertainment sector, Ho Chi Minh City perceives the trend from lifestyle concept
and co-working space will likely attract interest of experiential retail operators in the market
(Jones Lang LaSalle, 2017). In this context, it is indicated that VNTECH should have different
strategies for 2 markets.

28
 Table 4.5: Retail market in Hanoi and Ho Chi Minh City
Hanoi Shopping Center Prime Retail Supermarket, Convenience
Space Hypermarket Store
Total stock, square 963,000 8,000 170,000 62,000
meter
Occupancy rate, % 83.1 86.5 N/A N/A
Ho Chi Minh City Shopping Center Bazaar Supermarket, Convenience
Hypermarket Store
Total stock, square 962,058 39,850 488,500 272,000
meter
Occupancy rate, % 90.8 91.0 N/A N/A

Source: Jones Lang LaSalle (2017)

In term of residential market, apartment is major sub-market. Completed supply in Hanoi
and Ho Chi Minh City are 151,000 units and 136,000 units respectively while uncompleted
supply in these cities are 59,000 units and 72,000 units (Jones Lang LaSalle, 2017). However, it
is perceived that unsold inventory in Hanoi’s residential market is very high at 17.1% and it is
much higher than in Ho Chi Minh City with 5.7% (Jones Lang LaSalle, 2017). In both 2 cities,
the outlook for low-price segment is highlighted and it is considered as business opportunity.
Table 4.6: Residential market in Hanoi and Ho Chi Minh City
Market Hanoi Ho Chi Minh City
Completed supply, units 151,000 136,000
Uncompleted supply, units 59,000 72,000
Unsold inventory, % 17.1 5.7
Primary market growth, % 2.1 2.8
Secondary market growth, % -9.5 0.2

Source: Jones Lang LaSalle (2017)

Moreover, residential market in Ho Chi Minh City includes prime segment as villas and
townhouse. Current completed supply in this segment is 9,000 units and there are 6,800
uncompleted units with unsold inventory is 7.2% (Jones Lang LaSalle, 2017). In addition, villas
and townhouse market has high year-on-year growth rate in both primary and secondary market.
Jones Lang LaSalle (2017) reports that year-on-year growth rate of primary villas and townhouse
market is 11.6% while year-on-year growth rate of secondary market is 5.4%. In this context,
VNTECH should develop construction services for prime residential segment.

29
4.2 Analysis of VNTECH business environment and its competition

4.2.1. Macro environment analysis PEST analysis?

4.2.1.1. Political – Legal
In order to evaluate the impact of political and legal factor on the business of VNTECH,
political stability is put into the evaluation. It is denoted that Vietnam’s political stability index is
calculated and published by The Global Economy (2018). The higher value of political stability
index, the higher stability in political environment where the firms are doing business within.
The latest political stability index of Vietnam is generated in 2016 and it is stood at 0.17 point
which is increasing from negative score in 2014 at -0.02 (The Global Economy, 2018). However,
this score is still lower than the scores in 2012 and 2013 which are 0.27 and 0.25 respectively. It
is concluded that VNTECH is now doing business in external environment where political
situation is not stable. It is true since Vietnam has high corruption and the country is ranked at
107th position in the list of 180 countries (Transparency International, 2017).

0.48

0.41 0.41 0.40

0.35
0.32
0.27 0.27
0.25 0.25

0.19
0.16 0.17
0.15 0.15
0.13

0.07

1996 1998 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

(0.02)

Figure 4.2: Vietnam’s Political Stability Index

Source: The Global Economy (2018)
Since VNTECH is now doing business in construction services, legal framework for
construction activities in Vietnam is put into consideration. Currently, the firms which are doing
business in construction areas in Vietnam must strictly follow Construction Law. It is denoted

30
that Construction Law is implemented by The National Assembly since 2003 and it provides
fundamental regulations on basic principles in construction activities, types and grades of
construction works, construction rules and construction standards, construction practicing
capability, construction operation capability, supervision of the observance of the construction
legislation, construction planning, etc. During the time, legal framework for construction
activities is upgraded with the implementation of Decree No. 59 on management of construction
investment and Circular No. 14 on licensing construction activities and management of foreign
construction contractors. With the implementation of Decree No. 59 and Circular No. 14, it is
evaluated that the firms which are operating in construction areas in Vietnam face up with higher
competition from foreign construction contractors.

4.2.1.2. Economical
Economic situation of Vietnam is put into the evaluation and it is asserted that Vietnam is
among the countries which have high GDP growth rate. According to Asian Development Bank
(2018), Vietnam’s GDP growth rate is expected improving in 2018, from 6.8% in 2017 to 7.1%
in 2018. It is forecasted that GDP growth rate of the country is increasing continuously for last 3
years. Moreover, Vietnam is expected having highest GDP growth rate compared to other
countries in Southeast Asia (Asian Development Bank, 2018). However, it is denoted that
Vietnam has high inflation rate which is about 3.5% in 2017 and it is expected slightly increasing
to 3.7% in 2018 (Asian Development Bank, 2018).

7.1%
6.7% 6.8% 6.8%
6.2%

4.0%
3.5% 3.7%
2.7%

0.6%

2015 2016 2017 2018 2019

GDP growth rate, % Inflation rate, %

Figure 4.3: Vietnam’s GDP growth rate and inflation rate

Source: Asian Development Bank (2018)

31
 Economic situation of Vietnam is shown through the FDI inflows. United Nations
Conference on Trade and Development – UNCTAD (2018) reports that FDI inward value is
increased from 11,800 US$ million in 2015 to US$ 12,600 million in 2016 and US$ 14,100
million in 2017. FDI outward, however, is fluctuated since it is decreased slightly from 1,150
US$ million in 2014 to US$ 1,100 million in 2015 before increasing to 1,388 US$ million in
2016 and finally dropping to 540 US$ million in 2017. The higher FDI inward value is explained
by the fact that Vietnam receives big investment in power plant projects and textile industry.
Table 4.7: Vietnam’s FDI Overview
FDI Flows 2015 2016 2017
Inward (US$ million) 11,800 12,600 14,100
Inward (% GDP) 53.7 57.3 60.0
Outward (US$ million) 1,100 1,388 540
Outward (% GDP) 4.5 5.0 4.9
Source: UNCTAD (2018)
It is denoted that Vietnam’s FDI inward is come from South Korea, Japan, Singapore,
China, Taiwan, and Hong Kong. Among these countries, South Korea contributes highest FDI
inward values and it consumes 28.9% of total FDI inward to Vietnam (VinaCapital, 2017). The
second and the third place are belonged to Japan and Singapore with the shares of 10.6% and
9.9% respectively (VinaCapital, 2017). South Korea is in the top due to the establishment and the
operation of foreign firms from this country such as Samsung and LG.

28.6% 28.9%

6.7%
10.6%
7.6% 7.7% 9.9%

South Korea Japan Singapore China

Taiwan Hong Kong Others

Figure 4.4: FDI inward by country (%)

Source: VinaCapital (2017)
32
 Moreover, Ministry of Planning and Investment highlights the need for 200 US$ billion for
infrastructure development during the period of 2010-2020 (Vietnam Country Commercial
Guide, 2017). Currently, the source of fund is coming from private investment funds such as The
World Bank, Asian Development Bank, and Official Development Assistance from Japan, U.S.,
etc. Since required investment value is high, it is a major challenge to construction firms in
Vietnam.

4.2.1.3. Culture and society

Culture and society of Vietnam is evaluated after the assessment of political, legal, and
economic factors. It is highlighted that Vietnam is transformed from poor country to medium-
low income country. Asian Development Bank (2018) reports that GDP per capita of Vietnamese
people is increasing from 5.1% in 2016 to 5.8% in 2017 and it is expected growing up to 6.1% in
2018. Vietnam is also ranked at second place in term of GDP per capita growth rate in
comparison with other countries in Southeast Asia (Asian Development Bank, 2018). Moreover,
living quality of Vietnamese people is improving over the time, reflecting through the poverty
rate of the country is decreased from nearly 20% in last decade to 11.5% while urbanization rate
is more than 34% recently (The World Bank, 2018). Vietnam has literacy rate of more than 90%
and there are more than 140 universities and vocational schools in the country. The World Bank
(2018) also reports that almost Vietnamese people have accessibility to electricity and it is much
improved compared to 1990s period when only 79% of total population has electricity
utilization. However, the working condition for Vietnamese people is still low, showing through
the fact that only 56% of the population within working ages receives social insurance (The
World Bank, 2018).
In addition, the number of high-income households is increasing doubly in 2017 and
consumers are getting more matured (CIMIGO, 2017). This argument is validated by the fact
that Vietnamese consumer confidence index is 115 score-points and it is being ranked at 7th
position by The Conference Board (2018). The survey which is implemented by Nielsen (2018)
shows that Vietnamese people are spending their spare cash into holiday and vacations, new
clothes, new technology products, home improvement, out of home entertainment, and paying
medical and insurance premium. It is asserted that Vietnamese people is changing their

33
consumption behavior from food products to non-food products and they are purchasing the
products and services which help to improve their health status (Business Sweden, 2018).

80% 72%
70%
60%
49%
50% 44% 42% 41%
40%
40%
29%
30%
20%
10% 6% 5% 5% 3%
0% 1%
0%
gs s es ts ts t s
-10% in on th uc -4% en en um
a v ati lc o ro
d m in
m i
S ac ve em
/V ew
g yp ro e rta pr
ay N
ol
o
im
p
en
t
nc
e
il d ra
Ho c hn m
e
m
e
s u
te Ho o in
ew ofh a l,
N t i c
Ou ed
y m
Pa
Quarter 4/2017 Quarter 4/2017 vs. Quarter 3/2017
Figure 4.5: How do Vietnamese consumers spend their spare cash?
Source: Nielsen (2018)

4.2.1.4. Technology
Since VNTECH is now doing business in construction services, technology factor is
important due to the firms require high technology application in order to fulfill construction
projects. Currently, construction firms in Vietnam receives highly supports from the Government
in term of technology aids. It is proven through the implementation of Decision No. 418 on the
strategy for science and technology development of Vietnam during the period of 2011-2020.
The objective of this Decision is to improve the application of hi-tech products for about 45% of
GDP of the country. In addition, the technical quality of construction works are set to follow
Vietnamese building standard system at both national and branch level (Nguyen, 2006). At
national level, there are 2 codes namely TCVN and TCXD/TCXDVN which are issued by
Ministry of Science and Technology and Ministry of Construction. At branch level, there are 2
codes namely 22 TCN and 14 TCN which are developed by Ministry of Transportation and
Ministry of Agriculture and Rural Development.
In addition, technology factor is evaluated through recent decision from the Prime Minister
of Vietnam in which the scheme on applying and building information modeling (BIM) for
construction and project management is approved accordingly. It is denoted that BIM is technical

34
solution in construction area and it includes 4 major parts, namely project execution plan,
modeling methodology, level of details, and BIM protocol and information organization. The
plan of applying BIM solution for construction firms in Vietnam is divided into 3 periods. The
first period is from 2017 to 2019 and this process is remarked by the actions of improving the
awareness of BIM in construction firms, formulating legal framework with technical
requirements for BIM, developing the guidelines for BIM application, and preparing the
trainings for different positions in construction works in order to integrate BIM into construction
projects. The second period is from 2018 to 2020 and this period highlights the needs of applying
BIM into at least 20 construction projects. Moreover, it is required that levels of details of BIM
are specified for 10 most important construction projects with State budget. The last stage is
from 2021 towards and this period highlights the role of Ministry of Construction to publish
Circular and Guidelines in order to widely apply BIM in construction activities in Vietnam.

4.2.2 Analysis of competition in the industry

4.2.2.1 Porter Matrix of 5 Forces
As mentioned in early chapter, Porter’s 5 Forces evaluates current situation in specific
industry. It evaluates bargaining power of buyer, bargaining power of supplier, rivalry among
existing players, threat from substitute products, and threats from future players. In this section,
the evaluation of each force in Vietnam’s construction industry is prepared and proposed
accordingly.
Bargaining power of buyer is medium due to the customers are spending their spare cash
into home renovation. In addition, the report from CBRE (2018) shows that the demand for
property transaction of Vietnamese people is in high level. The buyer is characterized by foreign
and domestic buyer and foreign buyer is dominate property transaction.
Rivalry among existing players is high because of the market has many players. There are
thousands firms which are doing businesses in architectural design, general construction,
construction materials, and urban construction. Most of existing players are now located in
Hanoi and Ho Chi Minh City due to high demands from the customers and most dynamic
market. Moreover, VAMI (2018) reports that the number of players in this market is high with
more than 15,000 contractors in which there are 2,000 contractors having business scale from
medium to large size.

35
 Threat from substitute products is high due to the customers can find different products in
each property market. In office market, the customers can choose in between office Grade A,
office Grade B, and Office Grade C. In retail market, there are 5 different products, including
shopping centers, prime retail space, supermarket and hypermarket, convenience store, and
bazaar. Occupancy rate is still high in two primary markets as Hanoi and Ho Chi Minh City
while the supply is expected increasing due to many construction projects are finished in coming
years.
Threats from future players is high since Vietnamese Government provides Circular No. 14
on licensing construction activities and management of foreign construction contractors. In this
context, there are more and more foreign construction contractors make an entry to Vietnam.
According to National Business Registration Portal (2018), there are more than 3,500
construction firms and 1,226 real estate firms which are newly established in the first quarter of
2018.

4.2.2.2 Competitive analysis

In this section, the researcher would like to conduct the evaluation of competitive
environment of VNTECH against key players, specifically in mechanical and electrical (M&E)
market. Currently, VNTECH is competing with 4 main competitors, namely REE, SAREFICO,
HAWEE, and SIGMA. To understand how VNTECH competes with these competitors, the
researcher prepares the analysis which includes the comparison among following items: financial
performance and experiences in M&E market.
Table 4.8: Financial performance of VNTECH and main competitors
Criteria Competitor VNTECH REE SAREFICO
2017 74.38 4,995.17 1,448.71
Revenues, VNDb 2016 30.88 3,659.36 1,316.36
2015 36.18 2,643.38 1,044.28
2017 1.17 1,668.56 84.60
Profit after tax, VNDb 2016 0.08 1,254.08 96.23
2015 0.03 923.09 65.34
Source: Prepared by the researcher (2018)
First, financial performance of VNTECH and main competitors is put into the evaluation. It
is denoted that financial performance is reflected through revenues and profit after tax. Since,

36
only REE and SAREFICO are listed in Vietnam’s stock market index, financial performance of
these 2 firms are easily t approach. In the contrast, financial data of HAWEEE and SIGMA
cannot be obtained from the Internet. Therefore, the researcher only compare finance
performance between VNTECH and REE and SAREFICO. Obtained result is presented as below
and it is showing that sales revenues of VNTECH is much lower than REE and SAREFICO. In
2017, sales revenues of VNTECH is 74.38 VND billion, REE and SAREFICO have sale
revenues of 4,995.17 VND billion and 1,448.71 VND billion. Moreover, VNTECH only gains
1.17 VND billion as profit after tax during 2017 while REE and SAREFICO gain 1,668.56 VND
billion and 84.60 VND billion. It is concluded that VNTECH cannot compete with REE and
SAREFICO in term of financial capabilities. On the other hand, profit after tax of VNTECH is
very small compared to other firms and it leads to the difficulty when competing with bigger
players in M&E market.
Table 4.9: Experiences of VNTECH and main competitors
Competitor VNTECH REE SAREFICO HAWEE SIGMA
Year of establishment 2005 1977 1977 2004 2005
Number of finished
19 55 121 20 62
M&E projects
Number of engineers 26 ~500 N/A ~300 ~250
Number of technicians 26 ~1,000 N/A ~1,000 ~600
Source: Prepared by the researcher (2018)
Second, the experiences of players in Vietnam’s M&E market is explored accordingly. In
term of year of establishment, VNTECH and SIGMA are both established in 2005 which is one
year later compared to the year of establishment of HAWEE. Doan Nhat is youngest firm in the
competitive analysis and this firm is established in 2007. REE and SAREFICO are 2 firms which
have highest time of doing business in M&E market in Vietnam and both of them are established
in 1977. The second indicator to evaluate experiences of these players is throughout number of
projects while the third and the fourth indicator are number of engineers and number of
technicians. It is denoted that VNTECH has lowest number of finished M&E projects. HAWEE
has 20 finished projects in M&E area while SIGMA, REE and SAREFICO have 62, 55 and 121
finished M&E projects accordingly. It is asserted that VNTECH has lowest number of employee
compared to other firms.
(Refer to appendix 3)

37
 REE is a corporation and it is now doing business in many areas, including M&E,
refrigeration, office lease management, real estate development, and utilities infrastructure.
REEE’s project portfolio is characterized by infrastructure types which consist of national
projects, airport projects, hotel projects, apartment building projects, office and complex building
projects, hospital projects, and factory projects. Long term strategies of the firm is to obtain
profitability growth, environmental protection, and social responsibility. The mission of the firm
is to maximize the value to shareholders and investors, customers, business partners, community
and society, and employees. The core competencies of REE refers to the fact that this firm has
strongest financial capability with sales revenues in 2017 up to 5,000 VND billion and this firm
also records more than 14,200 VND billion in total asset. The firm also has strong credit supports
from both local and oversea banks. REE is established since 1977 and it has rich experiences in
Vietnam and it is determined as second core competency. The third core competency of REE is
its mentality with the application of pre-eminent management model which is supported by
Asian Development Bank. It is also addressed that REE is now applying the ISO 9001:2008 in to
its projects. Therefore, the firm can deliver favorable construction plans to its customers. The last
core competency of REE is sourced from strong human resource quality with more than 1,500
employees and it is one of the firms in Vietnam M&E market that has highest number of
employees.
SAREFICO is second largest firm in Vietnam M&E market and it is only after REE. The
mission of SAREFICO is reflected through its continuous efforts to deliver the best services to
its customers. Long term strategies of the firm is to deliver the services with sincerity, excellent,
accountability, respect, education, fairness, innovation, cooperation, and objective perspectives.
The core competencies of SAREFICO are shown through the fact that it has quite strong
financial capability with sales revenues is more than 1,400 VND billion and total asset is more
than 1,700 billion. When comparing financial capability with the leading firm in the market,
SAREFICO is still staying behind but current financial performance of the firm is still stronger
than other competitors in the market like HAWEE, DOAN NHAT, SIGMA, and VNTECH. The
second core competency of SAREFICO is highlighted as it is now providing panel products with
the quality and health assurance. The third core competency of the firm refers to the application
of Building Information Modeling (BIM) into its projects and it helps the firm to compete better
with other players in digital age. It is denoted that BIM includes 2 core components, namely

38
integrated design process and integrated project delivery and it allows the firm to deliver the
products under 3-dimensions and the process is more focused on integrated design process.
HAWEE is another player in Vietnam M&E market. The firm is established in 2004 with
one year before the establishment of VNTECH. It is denoted that the core competency of
HAWEE is shown through the fact that it has strong human resource quality with more than 300
engineers and more than 1,000 technicians. Moreover, core competency of the firm is reflected
through the ability of offering complete M&E solutions to the customers and other core
competency is highlighted as it is sole contractor in Vietnam which owns and operates a factory
producing M&E systems. Moreover, HAWEE also utilizes BIM technology into some projects
like the project with VPBank.
SIGMA is the last player which is put into the competitive evaluation. The firm is now
providing wide range of M&E services, including project management, system design,
supplying, installing and maintenance of infrastructures. Core competencies of SIGMA is shown
through the fact that it obtains the ISO 9001:2008, OHSAS 18001:2007, the application of Total
Internal Audit system, the quality assurance from top management team, and the firm is being in
the top 5 M&E contractors in Vietnam in 2018.

4.2.2.3. Analysis of internal environment

To gain the business success, VNTECH has strategic cooperation with local and foreign
partners. Local partners of the firm are government bodies in the State level and the provincial
level such as Ministry of Education, Ministry of Construction, etc. The firm also cooperates with
other local firms in Vietnam in multiple business areas. After more than 10 years of operations,
the firm establishes strategic cooperation with foreign partners such as LG Vietnam, ABB
Vietnam, INAX, etc.
(Refer to appendix 4)
It is denoted that the firm now has 4 people in BOD, Director, and Deputy Directors, and
there are 48 employees in functional department. The numbers of employees who are working in
Financial Planning Department, Admin Department, Economic Planning Department, Technical
Department, Project Department, and Service and Assurance Department are 3, 2, 6, 18, 12, and
7. With such current number of employees, it is not assure for the firm when it expands business
scale. In addition, the firm does not establish professional human resource management policies

39
to retain talent employees as well as career development for individual one. However, it is
evaluated that the employees of VNTECH is young and enthusiastic and it can guarantee for the
quality of projects.

4.2.3. EFE matrix, IFE matrix, SWOT matrix of VNTECH

From the analyses of internal and external market, SWOT analysis is conducted and
obtained result is presented as below:

Table 4.10: SWOT analysis

Strengths
 Participating into 19 M&E projects.
 Having strategic cooperation with big partners
like Omron, Siemens, LG Vietnam.
 Strong commitment from top management team
in delivering high project quality to the
customers.
 The employees are young and enthusiastic.
Opportunities
 Political score of Vietnam is increased after
downturn in 2014.
 Strong economic development continuous its
trend during 2018 and 2019 with high GDP
growth rate and strong FDI inflows.
 The demand of the installation of electricity and
water for civil projects (seaport, railways,
housing for low-income people) is expected
increasing.
 Low-price segment in residential market is
Weaknesses
 Providing M&E services since 2005 while
leading firms like REE and SAREFICO have
more than 30 years of doing business.
 Building information modeling (BIM) is not
applied.
 Current human resources is low and cannot
handle more M&E projects.
 Too low profitability.
 Portfolio is not diversified.
 Do not have specification in mission, vision,
and business objectives.
 Low financial capabilities.
 Do not establish professional human
resource management policies.
Threats
 High corruption in Vietnam’s political
system.
 Inflation rate is expected increasing.
 The market is fragmented by geographic
location with different demands
 More than 15,000 contractors in Vietnam’s
M&E market which lead to fierce
competition. The customers have many
options due to large construction services
providers

40
 increasing.  Vietnam’s M&E market is being approached
 Prime segment (villas and townhouse) are not highly by foreign contractors from
explored by existing players. developed countries. New legal framework
 Vietnamese people spend their spare cash into supports foreign construction contractors.
home renovation.
Source: Prepared by the researcher (2018)
After the examination of internal and external market, EFE matrix and IFE matrix of
VNTECH is prepared accordingly. At first, EFE matrix of VNTECH is generated upon on key
external factors that lead to the opportunities and the threats in the business of VNTECH. EFA
matrix of VNTECH is presented as below:

Table 4.11: EFE matrix of VNTECH

Weighted
Key External Factors Weight Rating
Score
Opportunities
1. Political score of Vietnam is increased after
0.02 1 0.02
downturn in 2014.
2. Strong economic development continuous its trend
during 2018 and 2019 with high GDP growth rate 0.17 4 0.68
and strong FDI inflows.
3. The demand of the installation of electricity and
water for civil projects (seaport, railways, housing 0.20 4 0.80
for low-income people) is expected increasing.
4. Low-price segment in residential market is
0.12 4 0.48
increasing.
5. Prime segment (villas and townhouse) are not
0.15 0.45
explored by existing players.
6. Vietnamese people spend their spare cash into home
0.02 3 0.06
renovation.
Threats
7. High corruption in Vietnam’s political system. 0.06 2 0.12
8. Inflation rate is expected increasing. 0.04 4 0.16
9. The market is fragmented by geographic location
0.02 2 0.04
with different demands
10. More than 15,000 contractors in Vietnam’s M&E
market which lead to fierce competition. The
0.08 3 0.24
customers have many options due to large
construction services providers
11. Vietnam’s M&E market is being approached highly
by foreign contractors from developed countries.
0.12 4 0.48
New legal framework supports foreign construction
contractors
Total 1.00 - 3.53
Source: Prepared by the researcher (2018)

41
 IFE Matrix of VNTECH is generated upon on key internal factors. It is denoted that key
internal factors bring both strengths and weaknesses to VNTECH. IFE Matrix of VNTECH is
presented as below:

42
 Table 4.12: IFE matrix of VNTECH
Weighted
Key Internal Factors Weight Rating
Score
Strengths
1. Participating into 19 M&E projects. 0.02 4 0.40
2. Having strategic cooperation with big partners like
0.08 2 0.16
Omron, Siemens, LG Vietnam.
3. Strong commitment from top management team in
0.07 1 0.07
delivering high project quality to the customers.
4. The employees are young and enthusiastic. 0.02 3 0.06
Weaknesses
5. Providing M&E services since 2005 while leading
firms like REE and SAREFICO have more than 30 0.10 1 0.10
years of doing business.
6. Building information modeling (BIM) is not applied. 0.10 2 0.26
7. Current human resources is low and cannot handle
0.07 2 0.14
more M&E projects.
8. Too low profitability. 0.10 4 0.40
9. Portfolio is not diversified. 0.10 4 0.04
10. Do not have specification in mission, vision, and
0.07 2 0.14
business objectives.
11. Low financial capabilities. 0.04 3 0.12
12. Do not establish professional human resource
0.15 4 0.60
management policies.
Total 1.00 - 3.03
Source: Prepared by the researcher (2018)

4.3 Visions, mission and objectives

4.3.1. Mission
The vision of VNTECH during 2019-2025 is “to become one of the top leading firms not
only in Vietnam M&E market but also in construction services”
In order to support this vision, VNTECH’s top management team should develop clear
missions. Learning from REE, a current leading firm in the market, VNTECH’s development is
based on 5 core components, including employees, customers, business partners, shareholder and
investor, and community and society. In this context, the mission of VNTECH is to serve the
customers with high service quality and innovative services throughout excellent staff and long-
lasting relationships with business partners

4.3.2. Strategic objectives

43
 After the vision and the missions are clearly defined, VNTECH should develop business
objectives during the next 5 years.
- To strengthen financial capabilities in which total asset is up to 2,000 VND billion and
total equity is up to 500 VND billion. Profit after tax is forecasted up to 100 VND billion
in the end of 2025.
- To implement at least 100 projects during the period from 2019 to 2025 with value up to
500 VND billion.
- To increase the human resources up to 1,000 employees in the end of 2025.

4.4 Identifying business strategy

In this section, the researcher provides which business strategies that should be developed
and implemented by VNTECH in order to achieve both vision and mission above. It is asserted
that VNTECH should follow strength focus strategy, low cost strategy, and marketing strategy.
Each strategy component is discussed as below:

4.4.1 Strength focusing strategy

Focus strategy is conducted as business strategy of VNTECH in next 5 years. Focus strategy
is showing through the fact that prime segment like villa and townhouse are not explored by
many players in the market. Therefore, the firm should develop new products and services to this
segment and the firm commits to deliver high quality of services to the customers with up-to-
date technologies like smart home. It is addressed that VNTECH can avoid the competition from
bigger players by focusing on this market segment.

4.4.2 Low cost strategy

As highlighted in SWOT analysis, low-price segment in residential market is increasing in
both Hanoi and Ho Chi Minh City. In this context, VNTECH should develop low-cost products
which are fit to the customers’ demands in this segment. To do that, the firm should develop its
products and services portfolio with different options and low-price segment is supported by
basic services but quality is still assured accordingly. Another rationale of applying low-cost
strategy is that VNTECH is now competing with more than 15,000 contracts in the market and
some of them are having large business scales like REE and SAREFICO. To compete with these

44
players, VNTECH should adopt low cost strategy and it is done through discount price policy to
the customers. Low cost strategy is also reasonable in the economic environment of which
inflation rate is expected increasing in the next few years.

4.4.3 Marketing strategy

The last business strategy of VNTECH is marketing strategy. Given to the fact that
VNTECH is very small player in the market, the firm should invest more into communication
marketing in order to increase the customers’ awareness about its products and services. It is
recommended that the firm should introduce its solutions in construction fairs. In addition, the
firm should conduct another communication campaign through the letter to the public and it can
be done by using the Internet and social media channels. Marketing strategy is also reflected
through the firm’s product, price, place, and promotion. Product strategy is conducted with more
diversification in products and services portfolio with the introduction of new products and
services like refrigeration, consultant services, etc. Price strategy is done through different price
policies to the customers with flexible payment options such as late payment after specific time
interval or payment is happened periodically. Place strategy is obtained by establishing new
offices in other cities in Vietnam like Ho Chi Minh City and Da Nang. Promotion strategy is
carried out by applying discount price policy to frequent customers or big projects.

4.5 Solutions to implement strategies

4.5.1 Expanding customer base
In term of customer solution, VNTECH should develop high quality of services to the
customers. The major reason is that other competitors are now doing business in different
regions of Vietnam, from the North to the South. Higher region coverage allows the firm to
achieve more business opportunity and therefore increasing number of projects and sale
revenues.To do that, the firm should apply new technologies into its products and services which
are delivered to the customers. There are 2 leading technologies which are being used recently by
top leading firms in Vietnam M&E market are Building Information Modeling (BIM) and
Integrated Project Delivery (IPD). Such technologies allow the firm to deliver products in 3-
dimensions and therefore it helps the customers to choose the best option at the designation
stage. Moreover, the firm should develop quality standard system like ISO 9001:2008 in order to

45
bring highest assurance to the customers. The conduction of this business strategy requires the
firm to have strong investment into BIM system. The firm should purchase this system from the
vendors who have the capabilities in BIM implementation.

4.5.2Enhancing human resource capability

VNTECH is the firm which has lowest human resources compared to other firms in Vietnam
M&E market. The firm now has 52 employees and it does not support wider business scope.
Other firms like REE and SAREFICO has thousand employees and it is generally characterized
by 2 roles as engineering and technical. To ensure that VNTECH can win and implement at least
100 projects until 2025, the firm should increase human resources to at least 500 people. Such
development of human resources comes along with quality standards. It is recommended that at
least 30% of total human resources is engineers and the remaining is technicians. The firm
should attract talent candidates in labor market through good compensation policies. In addition,
the employees who are outstanding at work should be recognized and put into promotion
program.
Recruitment and selection is improved through the recruitment sources. The firm should put
more effort to the cooperation with technical university and college since this recruitment source
is very cheap while the benefit is sufficient. To do that strategic cooperation with the teachers in
technical universities and colleges is conducted and the objective of this cooperation is to
identify talent students. These students are invited to work at VNTECH as part time jobs. The
company pays them salary as extra benefit to these students. VNTECH should cooperate with
private agencies in the market in order to collect the best candidates for each job role. Although
this recruitment source requires the company to pay premium fees but it is worthwhile since the
company has back-up plan in case of the time of project development is limited or the company
deals up with temporary shortfall in human resources.
Recruitment and selection is optimized with the application of information technology.
VNTECH should utilize its IT infrastructure in order to develop a software to manage HR
activities. It is denoted that all activities in HRM process must be captured and quantified by
suitable cost metrics. After that, the data is extracted and HRM team can analyze this data in
order to identify the best way to optimize HR activities and to reduce recruitment and selection
cost. The report must be published in weekly and monthly basis and the result is compared with

46
desired targets so that the managers understand current situations of HRM activities in general
and recruitment and selection activities in specific. Therefore, they can make right decision in
order to further improve recruitment and selection activities at VNTECH.
Suitable trainings must be provided to the employees who are working in recruitment and
selection area at VNTECH. The training’s contents must cover wide range of topics and the
evaluation after trainings must be conducted in order to ensure training effectiveness. Moreover,
the company should invite HR experts who can provide good consultants to recruitment team at
VNTECH. All trainings must be designed with virtual network so that the employees can
participate into the trainings anytime. The quality of the trainers must be revised after the
training is conducted and it is done through the training assessment sheet which is provided to
the trainees after training sessions.

4.5.3 Improving marketing activities

The firm should have clear market solution and it can be done through carrying out market
research periodically. In more detail, VNTECH should develop a team which handles the
identification of customers’ demands or captures new trends in Vietnam M&E market. The firm
may want to purchase special reports from third parties in order to understand deeper about the
market. It is also addressed that current market of VNTECH is now in the North and the firm
should expand the business to the South in order to increase customer-based number as well as to
receive more projects. Different market segment with different M&E services must be put into
consideration and it is recommended that the firm should have different pricing option to the
customers in different market segment. In addition, marketing activities can be improved through
sale forces performances. To improve the sales forces performance, it should be come up with
effective sales execution and coaching. The sales execution and coaching should be conducted
from the sales managers whether they should perceive the decreases in sales revenues as it
occurs and try integrating those problems in scheduled meeting as learning process for their
follower. The sales managers must consider all sales problems in more specific and granular
insights and then providing the solutions with good communication to the followers.

4.5.4 Diversifying products/services and pricing policies

47
 Currently, VNTECH is now doing business in Vietnam M&E market and key services are to
build up electrical system, mechanical system, water processing system, water factory, and fire
prevention system for the buildings. However, current service portfolio is not sufficient when
comparing to REE and SAREFICO. It is denoted that both REE and SAREFICO are not only
delivering M&E system but also delivering additional services to their customers. Currently,
REE has 5 additional services, including shop drawing, supply, installation, testing and
commissioning, and training, maintenance and after sale services while SAREFIC has 4
additional services, including consultant and design, construction, installation, and maintenance.
In this context, VNTECH should develop additional services with several core services like
consultant, installation, testing and commissioning, and maintenance services. In conclusion, the
belief that current pricing strategy in construction is predominantly cost-based is confirmed by
the survey findings; indeed, in setting the markup, most contractors rely on their intuition after
subjectively assessing the competition. The three internal pricing variables that have the largest
statistically significant contingency coefficients with pricing strategy are 'marketing intelligence
capabilities', 'annual contract value', and 'the type of client in most projects'. 'Owner's
characteristics', 'competitors ‘characteristics', and 'market demand' are statistically significant
external variables in making pricing strategy decisions. A change of bidding procedure is
proposed so that all parties in construction can maximize the benefits of market-based pricing
strategies.

4.5.5 Enhancing financial capacity

One of business objectives of VNTECH is to raise total equity up to 500 VND billion. In
order to achieve this number, the firm should cooperate with foreign business partners in which
foreign investors invest into. It is denoted that a new legal framework is implemented and it
allows foreign construction contractors to explore and to do business in Vietnam. The firm
should take this opportunity and to identify potential foreign partners as the best way to increase
its total equity. With the investment of foreign investors, VNTECH can purchase more
equipment and join into more construction projects in order to increase total asset. In addition,
the firm should utilize credit services which are being provided by commercial banks in
Vietnam. It is perceived that credit services is good financial resources for the firm to leverage
its business. Although borrowing money from commercial banks lead to short term or long term

48
debt to the firm, the best practices in Vietnam M&E market is that top leading firms like REE
and SAREFICO now have total debt of more than 50% of total asset and SAREFICO also has
total debt is double compared to total equity. If VNTECH can utilize credit sources from
commercial bank wisely, the firm can earn more profitability.
To ensure the financial management, the problem of checking and controlling finance in
VNTECH is very necessary. The financial inspection and control must be carried out from inside
and outside the firm. The financial inspection and control must be done from within the Institute.
It is important to strengthen the self-examination of finance and accounting at the Institute and
these activities must be regular and detailed. Through the self-inspection and evaluation, the
Institute is allowed to observe the annual budget estimates of the Institute, the observance of the
internal spending regulations, the thrift practice and waste combat at the same time. It also
assesses the quality of operations, the implementation of policy mechanisms and financial
revenues, management and use of assets and capital using the funds of the Institute. Through the
self-inspection, the Institute will soon detect and timely correct errors, apply the handling of
violations according to regulations and organize the drawing of experiences, assess the
shortcomings, causes and orientations, remedial measures to enhance the management of
financial accounting at the Institute. It can be said that this is a way for the Institute to actively to
improve the efficiency of work. Implementing the financial disclosure in the Institute is also one
of the solutions to strengthen the inspection and financial control of the Institute. Also, financial
management in the Institute should be conducted effectively to ensure the rights of staffs and
ensure the motivation to fulfill the tasks assigned.

4.5.6 Other solutions

VNTECH should develop a corporate culture in which every employee’s idea is listened by
the supervisors. To do that the firm should create the common mailbox whether the employees
can send their ideas and independent department is established to receive and to process
submitted employees’ ideas. Moreover, the best ideas are nominated for certain prizes from top
management of the firm. In addition, VNTECH should develop friendly working environment
whether the employees are able to share their thoughts without receiving negative impacts from
others.

49
 The firm should focus on the development and the enhancement of procurement process.
Procurement is a purchasing process that is designed with the objective is to control quantity,
quality to minimize the total cost of operation. It is simply to say procurement is arrangements
between the company and a supplier (or group of suppliers) that involve to a production process.
The stages of procurement include information gathering (i.e. who are potential suppliers),
supplier contacts (i.e. gathering information about the potential suppliers, background reviews
(i.e. vetting, screening, checking references of potential suppliers), negotiations (i.e. setting the
price and terms), fulfillment (i.e. delivery and installation), consumption, maintenance, and
disposal (i.e. monitoring the actual delivery and use of the supplies or equipment), and renewal
(i.e. reorders and continuing relationship with the supplier).
In terms of strategy, a procurement process system ensures the company’s purchasing is
competitive and therefore, increasing both of efficiencies and cost saving. Some problems on a
company's cash flow and balance sheet can be traced to problems with procurement, including
holding supplies and inventory too long and having the terms of payables for supplies not
matched to their respective receivables.

4.6 Chapter summary

In this chapter, the research provides the information about VNTECH, including main
business activities, organization structure, and business performance in last 3 years. This chapter
also explores current situation in political and legal environment, economic environment, culture
and social environment, and technology environment. Moreover, construction industry is put into
analysis with Porter’s Five Forces analysis. Analysis of internal environment is conducted with
the exploration of primary and support activities. Finally, SWOT analysis is prepared in order to
identify strengths and weaknesses of VNTECH as well as opportunities and threats from the
market.

50
 5. CONCLUSION

In this chapter, the researcher provides business strategies for VNTECH in long term.
VNTECH is a firm which is now doing business in installation and construction industry. The
purposes of this study are to study basis for building strategies, process of building strategies and
methods of analyzing and selecting the best strategies aiming to help VNTECH choosing the
most suitable strategies, to identify and to apply business strategy theories to build the best
business strategy for VNTECH for the period 2019-2025, and to provide recommendations
solutions in order to implement and successfully perform the business strategy so that VNTECH
becomes a powerful player both in the Vietnamese and in the world market. To achieve these
research purposes, a qualitative research method is applied. This study involves internal and
external marker analyses such as PEST analysis, Porter’s Five Forces, SWOT analysis, EFE
matrix, IFE matrix. Then, some business strategies in long term is pre-determined. It is denoted
that the firms should continuously improve the process of implementation of chosen business
strategies. VNTECH should build up the system and structure that are supportive to the
functional strategies of the company. For each functional strategy, it is necessary to assign the
responsibility to one or more department in order to make sure they are dedicated to the strategy
implementation.

This study has some limitations. The first limitation is that this study does not acquire
quantitative research method. On the other hand, only secondary data to be involved and to
capture the current situation in the market. It leads to the issue of which obtained result is biased
by the researcher’s point of view. The second limitation refers to the assumption in macro-
economic environment and there are no changes in the management structure of VNTECH. In
case of there are economic shocks or there are changes in management board of the company, it
could lead to the failures of proposed business strategies.

Future studies should be conducted in the way of addressing current issues of this study.
At first, future researchers should conduct quantitative measurement to identify key factors
influencing on the business strategy choices and implementation. By collecting the opinions
from relative large number of the respondents, it allows to collect less biased findings. Moreover,
future studies should be conducted with the participation of some experts in the business areas

51
and it helps the company to improve the business strategy choice and implementation. Finally,
future studies should focus on the assumption of preparing business strategies. The assumption
must be validated by the experts and there are the contingency plan in case of there are
dramatically changes in both external and internal environment.

52
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 Appendix I: Projects of VNTECH
N Investmen Project’s
Investor Project’s Name Scope Timeline
o t sources value
Petrowaco Building 97-99 Lang Ha, Construction of Enterprise’ 74.3 2018-
Joint Stock Dong Da, Hanoi electricity, lightning s funds VND 2019
Company protection, grounding; billion
1 ventilation system, water
supply and drainage
system.

Vietnam Package 13A: Supply and installation of ODA 43 VND 2017-

Expresswa Construction of traffic electrical systems, light funds billion 2018
y management and electricity, water, and air
Corporatio operation center, conditioning
2 n maintenance and charge
administration office;
Construction of Da Nang
- Quang Ngai
expressway
Hanoivid Hanovid high-rise and Design and construction Enterprise’ 31.6 2016-
Joint Stock low-rise condominiums of electricity within the s funds VND 2017
Company apartment of the billion
commercial center, the
3 tower T and the
construction of the
mechanical and electrical
infrastructure and
landscape.
Hoa Lac Infrastructure ODA 63.1 2015-
Hi-Tech development in Hoa Lac Design and construction, funds VND 2017
Park Hi-Tech Park electrical engineering, billion
Manageme technology of the pump,
4
nt sewage pumping station
number 7, sewage
pumping station number
12

58
 INCONES Design and construction Supply and installation of Enterprise’ 19.2 2014-
S Joint of Yen Thang golf club electrical systems, light s funds VND 2015
5 Stock house electricity, fire protection billion
Company system, water supply
system
Constructio Underground parking Supply and installation of Funds 13.69 2014-
n area in the South of electrical system, fire from VND 2015
Manageme Administrative Center of protection system, People billion
6 nt of Da Da Nang City ventilation system, waste Committee
Nang City water drainage system, of Da
parking management Nang City
system and generator
ChangHon Factory of ChangHong Installation of water Enterprise’ 9.59 2014-
g Engineering Company supply and drainage s funds VND 2015
Engineerin Limited Vietnam system, power supply billion
g Company system, water cooling
7
Limited system, gas pipeline,
Vietnam finishing of the first and
second floor office
buildings and other items.
Hai Duong Hai Duong Children Construction of electric State’s 9.38 2011-
Children Hospital lighting, lightning funds VND 2013
8
Hospital collectors, grounding billion
block of 8 floors
Constructio Vinaconex’s office and 24KV underground cable Enterprise’ 8.8 VND 2012-
n Joint residential area 1 and substation s funds billion 2013
Stock
9 Company
No. 1 -
Vinaconex
1
10 The Bidding package DN3B / Construction of electrical ADB’s 57 VND 2012-
manageme A / 10 / ICB- engineering, technology, funds billion 2013
nt board of Construction and water plant equipment
the equipment for water
subproject supply system in Gia
of Nghia Town - DakNong

59
 DakNong’s
urban
technical
infrastructu
re
developme
nt
11 Constructio Vinaconex’s office and Construction of electricity Enterprise’ 30 VND 2011-
n Joint residential area 1 and water systems s funds billion 2012
Stock
Company
No. 1 -
Vinaconex
1
12 Hanoi Raise the capacity of Gia Electromechanical items, ADB’s 43 VND 2010-
Water One Lam water plant to technology, equipment funds billion 2011
Member 60,000 m3 / day
Limited
Liability
Company
13 Bank for Head office of Bank for Constructing the whole Enterprise’ 3.7 VND 2010-
Investment Investment and system of electricity and s funds billion 2012
and Development of Vietnam water
Developme
nt of
Vietnam
14 Department Bac Can Vocational Construction of electrical ODA 7.6 VND 2009
of Labor, School system, telephone, funds billion
War television, network
Invalids equipment, air
and Social conditioning, fire
Affairs of protection, lightning
Bac Can protection
province -
Donor of
the
Republic of

60
 Luxembour
g
15 Vietnam Housing for employees Construction of Enterprise’ 7.6 VND 2009-
Coal and of Duong Huy Company electricity, water, air s funds billion 2012
Mineral - Cam Pha, Quang Ninh conditioning system
Group - Coal Factory
Duong Huy
Coal
Company
16 Ha Anh Bowling Stadium - Dong Construction of Enterprise’ 2.4 VND 2009
Import Anh Town Hall, Hanoi electricity, water, air s funds billion
Export conditioning system
Joint Stock
Company
17 Eason Paint Eason Paint Factory Construction of FDI funds 8.5 VND 2009
Vietnam Vietnam, Noi Bai – electricity, water, fire, air billion
Co., Ltd Hanoi Industrial Zone conditioning, ventilation
throughout the project
18 ANT Construction of animal Construction of outdoor Enterprise’ 1.2 VND 2007
Vietnam feed processing factory storage and installation of s funds billion
Co., Ltd ANT - Hai Duong fire protection system of
the whole building
19 Contrexim Construction of staff Supply and installation of Enterprise’ 4.5 VND 2005
8- housing in C7 - Thanh electricity and water s funds billion
Constructio Xuan system, television system,
n telephone, ventilation, air
Investment conditioning
Joint Stock
Company

Appendix II: EFE and IFE Matrix Example

61
 Key External Factors Weig Ratin Weighted
Criteria
ht g Score
1. New immigration laws abolish the restrictions 0.0 1 0.02
for immigrants to live and work freely in the 2
country.
2. A government increases budget spending for our 0.1 4 0.68
products. 7
3. New product market, worth $1 billion a year, 0.0 4 0.2
Opportuniti could be introduced for the consumers. 5
es 4. Consumers are 20 % more likely to by the 0.1 4 0.48
products that share the same ecosystem. 2
5. We have patented the technology that increases 0.0 3 0.09
the quality of our products and lowers the 3
amount of the materials needed to produce it.
EFE
Matrix 6. Our largest competitor is selling their subsidiary 0.1 2 0.28
Exampl in TV market. 4
e Threats 7. Tax rates will increase by 10% for the polluting 0.0 2 0.12
companies. 6
8. Due to the fast economic growth credit 0.0 4 0.16
availability will tighten. 4
9. Credit rates are growing by 5%. 0.0 2 0.04
2
10.Natural disasters disrupt our suppliers’ or our 0.0 3 0.24
operations. 8
11.Rivalry in the market is intensifying. 0.1 4 0.48
2
12.Competitor is pursuing horizontal integration 0.1 3 0.3
strategy.
13.Inflation has increased to 6%. 0.0 2 0.1
5
Total 1 - 3.19
IFE Strengths 1. Diversified income (5 different brands earning 0.1 4 0.4
Matrix more than $4 billion each)
Exampl 2. Brand reputation valued at $35 billion 0.0 3 0.24
e 8
3. Strong patents portfolio (13,000 patents) 0.0 4 0.28
7
4. Excellent employee management 0.0 3 0.06
2
5. Competency in mergers and acquisitions 0.0 3 0.18
6
6. Extensive distribution channels 0.1 4 0.44
1
7. Strong product ecosystem 0.0 4 0.32
8
Weakness 8. High debt level ($3 billion) 0.1 1 0.1
9. Over-dependence on sales from U.S. 0.1 2 0.26
3
10. Too low net profit margin 0.0 2 0.14
7
11. Competition based on prices 0.0 2 0.18
9

62
 12. Rigid (bureaucratic) organizational culture 0.0 1 0.04
impeding fast introduction of new products 4
13. Negative publicity 0.0 2 0.1
5
Total 1 - 2.74
Appendix III: Core competencies of VNTECH and main competitors
Competi Core competencies
Business segment Long term strategies
tor
 Having 19 projects in different
VNTEC business segment
 M&E services  Not specify
H  Good relationship with few big
partners like LG Vietnam and Siemens
 M&E services  Long time of doing business in
 Profitability
 Refrigeration Vietnam
growth
 Office lease  Diversified project portfolio
 Environment
management  Strong financial capability with credit
REE al protection
 Real estate supports from local and oversea banks
 Social
development  Quality assurance to be applied with
responsibilit
 Utilities the ISO 9001:2008
y
infrastructure  High human resource quality
 Sincerity
 Excellent  Long time of doing business in
 Accountabili Vietnam
 M&E services
ty  Applying Business Information
 Refrigeration
SAREFI  Respect Modeling
 Construction
CO  Education  Quite strong financial capability
and installation
 Fairness  Panel product with quality and health
 Panel
 Innovation assurance
 Cooperation  High human resource quality
 Objective
HAWEE  M&E services  Not specify  High human resource quality
 Provide complete M&E services to the
customers
 The sole contractor owns and operates
a factory producing M&E systems in
Vietnam
 Applying Business Information
Modeling

63
 
 Obtain the ISO 9001:2008, OHSAS
18001:2007
 Conduct Total Internal Audit system
SIGMA  M&E services  Not specify  The assurance from top management
team
 Being in the top 5 M&E contractors in
Vietnam in 2018

64
 Appendix IV: VNTECH’s key partners
No Partner Relationship level
1 Omron, Siemen Suppliers of inverter products, equipment and automation
solutions
2 LG Vietnam Supplier of air conditioning products, electrical equipment,
electrical cables
3 ABB Vietnam Supplier of transformer products, switching equipment
4 Ngoc Khanh Electric Wire and Supplier of electrical cable products for construction works
Cable Company
5 INAX Sanitary Company Suppliers of sanitary ware and accessories used for construction
6 Tam Anh Industrial Electric Supplier of circuit breakers, overload and short circuit protection
Company devices; Main circuit protection circuit breaker after low voltage
transformer, switching device, protection
7 Dong Do Trading and Safety Co., Supplier of fire protection equipment products
Ltd
8 Xuan Loc Tho Co. Ltd Suppliers of electrical wiring supplies, electrical switches,
electrical appliances for construction works
9 Hoang Anh Co. Ltd Supplier of all kinds of cast iron pipes, black steel pipes, stainless
steel pipes, ... supplies of water for construction works
10 Van Giang Investment and Suppliers of valves, pipes of all kinds used for works
Development Company
11 EDH Technology Company Supplier of electrical cabinets, low voltage electrical equipment
used for construction
Source: VNTECH (2018)

65