Concept of business strategy
Business strategy, defined as "the science of planning and monitoring activities" (Webster’s New World Dictionary), has its roots in military terminology As economies have evolved, this concept has transitioned into the business realm While various approaches to understanding strategy exist, they converge on the principle that a successful strategy must be tailored to a specific industry or organization, align with available resources, and be realistically achievable.
In the modern context, strategy is defined as a complex set of activities designed to mobilize an organization's resources towards achieving specific goals (GaMBA, 2009) Alfred Chandler emphasizes that strategy involves setting long-term goals and objectives, along with the necessary actions and resource allocation to accomplish them Additionally, Bruce Henderson highlights that strategy is a deliberate effort to identify a plan of action that enhances a business's competitive advantage, focusing on the distinctions between a company and its competitors as the foundation of that advantage.
It is clear that all definitions about strategy mention five factors, which are Plan,
To achieve operational goals, an enterprise can utilize Ploy, Patter, Position, and Perspective Strategy serves as the optimal approach for an organization to meet its objectives and ensure sustainable development It acts as a master plan for the future, formulated by considering the enterprise's resources, current circumstances, competitive growth trends, and the external environment.
From the viewpoint of Michael Porter, companies may choose to pursue one, two, or even three types of strategies:
A cost leadership strategy involves establishing a competitive advantage by delivering products or services at the lowest possible costs This approach allows a business to either lower its selling prices to capture a larger market share or enhance profitability by maintaining a significant difference between its costs and those of its competitors in the industry.
- Differentiation strategy: compete by creating distinction with which other companies cannot match Differences may include product quality, delivery time, brand awareness, distribution system, etc that satisfy customer demand.
- Focus strategy: Compete by concentrating its resources and strengths on a product, a market niche or a particular group of customers.
Business strategy formulation is one of the indispensable tasks of an enterprise’s manager That task is beneficial to the company in the following ways:
- Clearly identify corporate vision and goals in each stage, helping the company find its way to attain targeted objectives in the future.
To assist top management in identifying external opportunities and threats, as well as internal strengths and weaknesses, it is essential to foresee future changes This proactive approach enables the company to anticipate challenges and implement strategies to effectively adapt to the evolving business environment.
- Assist a business in the full exploitation of its resources, amplifying its strengths in the development process.
- Help administrators make sound, timely decisions; efficiently allocate resources in each development stage; enhance it operation; ensure stable and constantly progressive business values.
- Help increase the integrity and consensus among employees and managers in implementing corporate plans.
- Help enterprise increase productivity, raise sales revenue and improve administrative efficiency, avoid risks, resulting in a more resistant company when keeping away and dealing with problems.
In conclusion, a business strategy supports an enterprise with a clear determination of goals and recognition of core abilities, which are quite helpful in creating a sustainable competitive edge.
1.1.3 Basic characteristics of business strategy
In terms of characteristics, a strategy comprises three main points:
- The proposal and selection of solutions to achieve these goals.
- The implementation and allocation of resources to achieve these goals.
A business strategy serves as a comprehensive framework designed to achieve corporate goals, guiding administrators in their decision-making and actions While it does not detail the specific methods for reaching these objectives, it sets the foundation for various supporting schemes and functional strategies.
In terms of breadth, in any organization, strategies exist at certain differing levels – ranging from the whole enterprise (or a group of enterprises) to each individual working there.
+ Corporate-level strategy is a strategy at the corporate level, aims at the goals and overall scope of the organization, and serves the purpose of meeting shareholders’ expectations.
+ Business unit - level strategy is more involved in the way by which an enterprise can successfully compete on a specific market.
+ Functional strategy - supports business - level strategy and corporate - level strategy so that they are efficiently carried out using components like resources,procedures, human and required skills.
+ Global strategy (international business) - is the choice of confronting international business problems when an enterprise diversify its operations beyond national borders.
1.2 Requirement and contents of stages involved in a business strategy formulation process
To develop a business strategy, a 3-step procedure is described as followed:
Internal Factor Evaluation Matrix (IFE)
Strategic Position and Action Evaluation (SPACE)
Boston Consulting Group Matrix (BCG)
Quantitative Strategic Planning Matrix (QSPM) Figure 1.1 Strategy formulation analysis frame 1.2.1 Input stage
1.2.1.1 External factor evaluation – using External Factor Evaluation
The external environment encompasses all uncontrollable factors outside an enterprise that significantly impact its goals, growth, and profitability Analyzing these external influences is crucial for businesses to understand their position and contemporary characteristics, ultimately facilitating informed decision-making in strategic management.
The general environment, often analyzed through the PEST framework, encompasses key factors that impact specific industries and the companies operating within them This includes economic, technological, demographic, political, legal, and global influences that shape the business landscape.
The political and legal environment plays a crucial role in shaping a nation's economic landscape, as these factors can significantly influence the execution of corporate business strategies Changes in the political or legal landscape can present both opportunities and challenges for companies, potentially leading to risks or failures in their operations.
The economic environment significantly influences a company's value and income potential, with key factors including GDP growth rate, inflation, interest rates, and government macroeconomic policies Understanding these elements is crucial for businesses to navigate future trends effectively.
Socio-cultural environment: is composed of social attitudes and cultural values.
Societal changes present both challenges and opportunities that directly impact corporate operations These factors play a crucial role in determining the effectiveness of advertising, sales, and promotional efforts Companies are more likely to succeed when their activities resonate positively with the customs and production methods of their target audience.
The technological environment significantly influences product quality and pricing, which are crucial for market success Advances in technology can create opportunities for businesses to enhance their ability to develop competitive products, while also posing threats such as a reduced product lifespan Additionally, technological changes can impact entry barriers and lead to industry restructuring, shaping the landscape for enterprises.
The demographic environment encompasses critical factors such as population dynamics, including the population pyramid, distribution, ethnic groups, and income levels It also reflects the consumption attitudes and service preferences across various regions, genders, ages, and occupations, which are essential for market formation and business strategy development Additionally, lifestyles significantly impact the demand for products and services regarding type, quality, design, and packaging Furthermore, a growing population positively affects the activities outlined in corporate business strategies.
The increasing trend of globalization and integration on a global scale, particularly in Vietnam, necessitates that businesses consider international factors in their long-term strategic planning This approach is essential for enhancing their ability to integrate and expand both geographically and politically.
Intensity of Rivalry among Existing Firms (within an industry) Bargaining Power of Suppliers
External analysis aims to identify opportunities and threats that exist outside an organization This process involves examining both the macro and micro environments, focusing on the industry landscape in which the enterprise operates.
The industry environment is a series of factors directly affect an enterprise and its competitive actions and responses
According to Michael Porter, there are 5 competitive forces within an industry, which are:
Figure 1.3: Michael Potter’s Five-Force Model
- Analysis of product life cycle:
Product life cycle describes fluctuations in the number of sold products from the point they are launched to the time they exit the market.
Basic characteristics of business strategy
In terms of characteristics, a strategy comprises three main points:
- The proposal and selection of solutions to achieve these goals.
- The implementation and allocation of resources to achieve these goals.
A business strategy serves as a comprehensive framework designed to achieve corporate goals, guiding administrators in their decision-making processes While it does not detail the specific methods for reaching these objectives, this overarching scheme lays the groundwork for various supporting strategies and functional plans.
In terms of breadth, in any organization, strategies exist at certain differing levels – ranging from the whole enterprise (or a group of enterprises) to each individual working there.
+ Corporate-level strategy is a strategy at the corporate level, aims at the goals and overall scope of the organization, and serves the purpose of meeting shareholders’ expectations.
+ Business unit - level strategy is more involved in the way by which an enterprise can successfully compete on a specific market.
+ Functional strategy - supports business - level strategy and corporate - level strategy so that they are efficiently carried out using components like resources,procedures, human and required skills.
+ Global strategy (international business) - is the choice of confronting international business problems when an enterprise diversify its operations beyond national borders.
Requirement and contents of stages involved in a business strategy formulation process
The Matching stage
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats, and is a valuable tool for analyzing issues and making decisions in business organization and management This matrix is specifically utilized to assess and develop effective business strategies for VIFG.
SWOT analysis frame can be briefly described as followed:
S- Strength S-O: Promoting strength to utilize opportunities, orient the operation
S-T: Promoting strength to limit and avoid threats
W- Weakness W-O: Repair weakness to utilize opportunities
W-T: Overcome internal difficulties and prepare to overcome external threats
Figure 1.5: SWOT Matrix 1.2.2.2 Internal – External Matrix (IE)
The Internal-External Matrix (IE) categorizes various Strategic Business Units (SBUs) of a company within a 9-cell framework, utilizing the total weighted scores derived from Internal Factor Evaluation (IFE) and External Factor Evaluation (EFE) matrices This analytical tool enables businesses to assess their strategic positioning and predict the potential effects of strategic choices on investment portfolios across different divisions.
EFE Matrix High I II III
ANALYZING REAL SITUATION OF VIFG
VIFG – An Over view introduction
Viglacera Float Glass Company (VIFG) is a dependent subsidiary of Viglacera Corporation, being established under the Decision No 1020/QD-BXD dated July
31 st 2002 by the Ministry of Construction.
The Company operates under its own charter, which has been approved by the Board members of Viglacera Corporation It maintains its own seal and account, ensuring a well-organized structure in alignment with the operational guidelines of Viglacera Corporation.
Vietnamese Trade name: Công ty kính nổi Viglacera.
English Trade name: VIGLACERA FLOAT GLASS COMPANY.
Address: Tan Dong Hiep Industrial Park, Di An District, Binh Duong Province Website: www.vifg.com.vn Email: vifg@hcm.vnn.vn
The company operates under the certificate of business registration No 315888 dated October 01 st 2002 by Department of Planning and Investment of Binh Duong province with the main business fields:
- Manufacturing and trading construction glass products, later glass, mirror;
- Improving, interior decorating the civil and industrial projects
After 20 months of construction and installation, on 1 st October 2002, the company officially went into operation with the very first square meter of glass produced on
25 th October 2002 The products went into the stability in terms of quality and technology on 28 th February 2003 and VIFG has operated stably until now.
VIFG utilizes the advanced FLOAT technology, developed by Pilkington Brothers, for its production lines, achieving a remarkable capacity of 350 tons of aquatic crystal daily, which translates to 18 million m² of standardized glass annually This float glass is crafted from high-quality raw materials, meticulously controlled for consistency The manufacturing process involves evenly spreading mixed materials over molten glass at 1600°C in a tank furnace The fluid glass then flows into a tin tank, where it is shaped at 1100°C, floating on the molten tin's surface As it exits the tin tank at 600°C, the glass solidifies and is moved to an annealing furnace to eliminate elongation The final product boasts exceptional flatness and is cut to meet specific orders Due to the unique properties of float technology, VIFG's construction glass products have set the standard for both engineering and aesthetic excellence.
Figure 2.1: Organization Structure of VIFG 2.1.3 2.1.3 Areas of business and available products
+ Manufacturing construction glass products, glass mirror
+ Interior perfecting and decorating civil and industrial projects.
+ Various types of construction plate glass
+ Post-glass products: laminated glass, toughened safety glass, glassware, mirrors, insulated glass, decorative glass.
2.1.4 Evaluation of VIFG’s operating result in recent years
VIFG has successfully entered the production market with an impressive output of 18.6 million m² of diverse glass types, featuring dimensions of 3.5 to 5 meters, thicknesses ranging from 2 to 12 mm, and a variety of colors Utilizing British technology, VIFG's products comply with Japan's JIR3202-1996 standards In its inaugural year, the company achieved a remarkable revenue of 302 billion VND and contributed 14 billion VND to the State budget, showcasing strong market acceptance and performance.
Despite the challenges posed by rising inflation and financial volatility since 2008, VIFG has demonstrated stable operations in recent years In 2010, the company achieved an average growth rate of 10-15% compared to 2009, with a notable 22% increase in business efficiency attributed to strategic price adjustments on low-cost inventory Additionally, production sales rose by 8% over the previous year.
Table 2.1 Some criteria from 2009 to September 2011
Figure 2.2 Profit growth of VIFG over the years 2009 – 2011
Figure 2.3 Revenue growth of VIFG over the years 2009 - 2011
The Table 2.1 and Figures 2.2, 2.3 shows that during the last 3 year, the operation of VIFG has some remarkable achievements:
- Production in 2010 increased 11% over the year 2009
- Consumption in 2010 increased 8% over the year 2009.
- Revenue in 2010 increased 12% over the year 2009
- Net profit in 2010 increased 22% over the year 2009
In 2011, tightened monetary policies led to a near standstill in the real estate market, forcing projects to reduce investments and extend timelines This decline in activity resulted in decreased demand for construction materials, adversely impacting VIFG's consumption during the first nine months of the year Simultaneously, input prices surged, with energy and fuel costs doubling in February and rising significantly in March, alongside a 15.3% average increase in electricity prices Additionally, fluctuations in the VND/USD exchange rate and rising interest rates—ranging from 22.55% to 23% per annum—further escalated production costs, diminishing the company's business efficiency.
In response to challenging market conditions impacting operational activities, the Company has diligently adhered to its 2011 objectives, demonstrating effective production management and financial flexibility By focusing on selling its entire inventory and enhancing financial stability, the Company has achieved profits that exceed initial projections for 2011.
05 billion VND) and completing the repairing plan for cooling glass furnace.
To achieve desired outcomes, the Company must navigate prolonged periods of sudden changes in input prices, interest rates, and fluctuating exchange rates, resulting in increased costs Additionally, the real estate market's stability in 2010 and the first three quarters of 2011 has created challenges for the construction material sector, particularly in the construction glass market, due to government monetary policies aimed at curbing inflation and halting funding for non-production projects.
The glass market faces intense price competition due to insufficient government regulation and oversight of product quality This has led to domestic construction glass products competing against low-quality, less brittle glass smuggled from China in small quantities.
2.1.4.3 Shortcomings: Apart from the gained achievements, VIFG also has some shortcomings, limitations in formulation and implementation of business plan In short run, VIFG still can gain some certain efficiency However, in long run, the VIFG needs to boldly make additional investments in equipment to produce post- glass products in order to meet the increasing demand of safety glass in construction Furthermore, the Company also needs to limit as much as possible the products having short life cycle and not high competitiveness.
2.1.4.4 Causes of these shortcomings: the periodical production and business plan has not been able to cover all the issues in order to create the sustainable competitive advantages for the Company Therefore, the Company has to create a long – term strategy based on analyzing environmental factors affecting the Company’s development; thus, a new and suitable production and business plan can be set out, bringing a sustainable growth for the Company in the future.
External Environment analysis
According to the economic experts, among 10 Southeast Asian countries, Vietnam is regarded as a nation with the most favorable investment environment in terms of political and social stability.
According to the World Bank's "East Asia & Pacific - Doing Business 2010" report released on September 10, 2010, Vietnam ranked 92nd out of 182 economies for ease of doing business Compared to other ASEAN nations, Vietnam experiences fewer issues related to religious and ethnic conflicts as well as terrorism Additionally, Vietnam has actively opened its market to nearly all countries globally, playing a significant role in ASEAN, participating in AFTA and APEC, and signing various bilateral and multilateral trade agreements.
In 2007, the country became an official member of the World Trade Organization (WTO), significantly enhancing its business environment through increased transparency and openness The removal of trade barriers has facilitated the efficient mobilization of both domestic and foreign resources, thereby fostering economic development.
In recent years, the legal system has become more comprehensive and consistent, with the Government implementing various policies to assist enterprises in obtaining licenses, clearances, funding, and human resource training for new investments.
In 2005, the Ministry of Science and Technology established regulations for the use of safety glass group A in various construction applications, including glass wall facades, balcony walls, side walls, partitions, windows, and doors Additionally, the construction sector implemented a comprehensive work quality control system to ensure compliance with these standards.
These policies has created positive impacts, pushing the demand for safety glass in households and other buildings, bringing opportunities for construction glass industry to develop.
The stable and improving political and legal environment in Vietnam presents a valuable opportunity for enterprises to enhance and expand their production activities However, this positive shift also poses a challenge, as the emergence of numerous new businesses will increase competition in the market.
Despite progress, there are significant shortcomings in the enforcement of laws, with many regulations lacking clarity and consistency The slow pace of administrative process improvements continues to pose challenges for businesses.
In 2011, the Ministry of Industry and Trade denied a request from float glass producers for import protection, citing that rising fuel prices posed a greater threat to the domestic industry than imports Following a six-month investigation initiated by the industry's appeal for increased tariffs and restrictive quotas, the ministry found that the float glass sector was more impacted by surging heavy fuel oil prices in Vietnam, which accounted for 30-35% of production costs, rather than international competition The investigation, the first since Vietnam's accession to the World Trade Organization, examined imports from 15 countries, including Malaysia, Indonesia, the Philippines, and Thailand As the economy began to recover, the ministry determined that protective measures were no longer necessary, as both prices and demand for float glass were expected to rise.
In 2010, Vietnam's economy demonstrated a robust recovery from the global economic crisis, achieving a GDP growth rate of 6.7% amid global challenges This growth contributed to an average GDP increase of 7% per year from 2006 to 2010, with GDP per capita estimated at $1,160 The rapid economic expansion spurred a heightened demand for infrastructure and housing investments, leading to a significant rise in the consumption of construction materials, particularly construction glass products.
Figure 2.4 The chart of GDP growth during the period of 2008 - 2010
The domestic glass market in Vietnam is experiencing a balanced supply and demand, driven by the country's GDP growth rate and the positive forecast for the construction glass industry, as reported by ASAHI Corp, a leading global construction glass corporation With the economy's development, the demand for construction glass has significantly increased, presenting a valuable opportunity for businesses in the industry to expand their production capabilities.
The growing customer demand is expected to ease competition among existing rivals and increase the annual export potential of glass This surge in domestic supply presents a significant opportunity for float glass manufacturers utilizing Float technology In contrast, companies employing Sheet technology face challenges due to the high costs associated with FO oil, which constitutes 40% of their production expenses and lacks state subsidies, leading many to exit the industry.
Since 2000, the economic growth of Vietnam has been at the stability of 7% - 8%/ year However, since then , the inflation has continuously increased At the end of
In 2007, Vietnam experienced a resurgence of two-digit inflation at 12.6%, which escalated to 23% in 2008 and reached 19.58% in 2010 This trend indicates that Vietnam's economy is in a recovery phase, creating favorable conditions for the growth of the construction materials sector, particularly the construction glass industry.
In recent years, the State Bank of Vietnam (SBV) has focused on stabilizing the value of the Vietnam Dong against the US dollar, but exchange rate movements have been complex Despite two adjustments to increase the inter-bank rate in February and October 2010, a significant gap of 10% remained between the official and free-market exchange rates The 9.3% increase in the exchange rate in February 2011 created challenges for businesses, leading to declines in exports, remittances, and foreign investment This resulted in a shortage of foreign currency and persistent high fluctuations in the VND/USD exchange rate, negatively impacting the business environment Construction glass enterprises that maintained their exports were less affected compared to those with declining or no exports.
VIFG Company, a member of the reputable Viglacera Corporation, has established a strong position in the construction glass market since its inception While numerous manufacturers utilize Sheet technology for glass production, their reliance on FO oil poses a competitive disadvantage against those employing Float technology, which involves pulling glass over molten tin In Vietnam, four major manufacturers, including VIFG and Vietnam Float Glass Co., Ltd (VFG), dominate the market, with VFG and VIFG together holding over 60% of the national market share Despite Chu Lai Float Glass Company possessing the largest float glass production line in Southeast Asia, its recent market entry in 2010 has limited its share to under 10%, resulting in minimal competition.
With the present growth of construction industry, construction glass market is now almost exclusively by three major manufacturers using the FLOAT technology.
Vietnam's economy has experienced rapid and sustainable growth in recent years, improving the quality of life and intellectual standards for its citizens This economic development has led to shifts in consumption and investment habits, particularly in urban and newly developed residential areas The strong trend of urbanization and migration has resulted in a surge in construction, increasing the demand for construction glass This presents a significant opportunity for the construction glass market as a whole, and specifically for VIFG.
As the quality of human life continues to improve, there is a growing emphasis on living spaces that incorporate natural elements and modern amenities This trend highlights the potential of the glass and post-glass product market, presenting a significant opportunity for VIFG Company to leverage its advanced equipment and expand production in this sector.
VIFG internal environment analysis
VIFG, established in 2003, effectively aligns its human resources with the skills and qualifications of its workforce, ensuring efficient production management and fair labor practices The organization is proud to have a team of qualified and highly professional employees, contributing to its success and operational excellence.
- Finance: as a state own enterprise, VIFG have some advantages in financial support Therefore, the financial situation of the company is always at a stable level, possibly facilitating the production expansion.
VIFG Company leverages advanced FLOAT technology, originally developed in England, to manufacture high-quality float pulling glass By acquiring the complete production line, VIFG ensures that its suppliers are accountable for providing the necessary licenses and safeguarding trade secrets, reinforcing its commitment to innovation and quality in glass production.
- Sources of inputs: mainly provided by the members of Viglacera Corporation, guaranteed in terms of both quality and quantity.
- Equipmemt modernity: the float glass production line in VIFG is invested in sync, using FLOAT - the most modern technology.
- Scale of workshop: Located in Binh Duong industrial zone with the area of about
VIFG has developed a comprehensive facility spanning 14 hectares, which includes an office area for staff, workshops for producing construction glass and post-glass products, and warehouses for storing production materials and finished goods Additionally, the site features a canteen and housing accommodations for employees, ensuring a well-rounded work environment.
+ Reputation to customers: Viglacera construction materials have long been familiar with the customers and had a good reputation in the market
With years of experience and development, the Company has established a strong presence in the construction glass market, recognized for its high product quality As a result, it holds the top market share in the Southern region, representing a significant intangible asset for the Company.
+ Awareness of quality, durability and reliability
- The Company’s competitiveness: ranks at the first place in the market
- Human resource: all the employees are well trained and have full confidence in decisions of Company’s Management Board.
VIFG, as a member of Viglacera Corporation, embraces its corporate culture, fostering an environment where every employee is dedicated to excellence and actively contributes to the company's growth and development.
The Company's Management Board prioritizes research and development, frequently hosting internal idea competitions to identify and implement innovative solutions This approach fosters a strong connection between staff and the Company, ensuring that every team member remains adaptable to the evolving demands of their roles.
Core capabilities form the foundation of a company's development strategy, as they are essential for fostering superior strengths that lead to a sustainable competitive advantage At VIFG Company, this competitive edge is evident through its robust core capabilities and the inherent core values that drive its success.
+ VIFG brand is supporte by reputation of qualified Viglacera construction materials
+ The creative and dynamic staff that have experiences in operating and mastering technology.
+ The quality management system, research and development capabilities to create differentiation and high adaptability.
+ Distribution network and close and organic relationship with customers
The core value is: Product Quality
To evaluate the competitive advantage of VIFG Company, it is essential to identify the unique strengths that set it apart from competitors and earn customer appreciation Group 5-X0410 conducted a comprehensive survey involving 30 distribution agents, 15 key officials from VIFG, and 10 employees from rival companies to ensure an objective analysis The findings from this survey were used to create a comparative table highlighting VIFG's position relative to its competitors.
Competitors surveyed include Vietnam Float Glass Company (VFG), Chu Lai Float Glass Company, Dap Cau Glass Company, Ky Anh Glass Company.
The evaluation comments are based on several key criteria: the quality and capacity of equipment, operational experience and technological expertise, the diversity and quality of products, human resources, leadership and management effectiveness, the sales distribution system, customer service quality, and brand reputation.
Scoring for each criterion as follows:
The evaluation scale ranges from 1 to 10, with higher scores indicating a more favorable assessment of the company After collecting all responses, the scores are averaged arithmetically and then converted back to a scale of 10, reflecting a descending order from high to low.
Experts, particularly distribution agents, evaluate VIFG as superior across six key criteria: (1) Human resources, (2) Product quality and variety, (3) Leadership and management effectiveness, (4) Brand reputation.
(5) Distribution system, (6) Operational experience, technological mastery
Key officials at VIFG highlight the company's superiority across seven essential criteria: (1) a skilled human resources team, (2) high-quality and diverse product offerings, (3) effective leadership and management practices, (4) a strong brand presence, and (5) an efficient distribution system.
(6) Operational experience, technological mastery, (7) The capacity and origin of equipment
Employees from VIFG’s competitors have highlighted the company's superiority in five key areas: human resources, product quality and variety, effective leadership and management, and brand reputation.
Table 2.5 Relative comparisons among existing competitors
# Criteria VIFG Dap Chu Ky VFG
1 Capacity and quality of equipment 8 8 10 7 9
3 Quality and range of products 10 9 7 6 8
The results indicate that VIFG outperforms its direct competitors in seven out of nine criteria, showcasing its strengths, particularly in areas beyond financial capability and customer service.
Group 5 - X0410 assessed the competitive advantages of VIFG Company by gathering insights from leaders and key officials, using five criteria: value, rarity, difficulty of imitation, sufficient gap, and key success factors The findings are summarized in Table 2.6 below.
Table 2.6 Evaluation on competitive advantages of VIFG
Sufficient gap key success factors Results Yes No Yes
Capacity and quality of equipment v V v v v 2/5
Operational experience, technological ma stery v v v v v 5/5
3 Quality and rang e of products v v v v v 5/5
Thus, VIFG’s competitive advantages are: Leadership and management, Human resources, Operational experience, technological mastery, Quality and range of products, Brand, Distribution system
- The company has a system of factories, warehouses, offices equipped with modern facilities and having large scale.
- Company’s offices and factories located in Tan Dong Hiep - Dian - Binh Duong Technical infrastructure of roads, utilities are guaranteed and convenient.
FLOAT GLASS BUSINESS STRATEGY FORMULATION TO THE
Vision and mission of VIFG…
VIFG aims to continuously enhance its position as a leading float glass supplier in Vietnam by focusing on product quality, service excellence, and a sustainable long-term business strategy.
The company's business strategy focuses on leveraging advanced technology to create high-quality products while maintaining competitive pricing Additionally, it emphasizes enhancing product research and expanding exports into new markets.
VIGLACERA Corporation aims to strengthen its domestic market while enhancing exports, aspiring to become a leading regional glass producer The company is committed to delivering high-quality products, exceptional sales service, and competitive pricing to achieve its mission.
To optimize the organizational structure, it is essential to align it with management requirements, functions, and responsibilities, thereby minimizing waste within the company This involves selecting and hiring the right employees for appropriate roles and conducting regular evaluations of employee performance through weekly and monthly assessments of work completion scores Such practices ensure fair and accurate salary payments, fostering a productive work environment.
To effectively reduce inventory costs, businesses should forecast market demand to align production plans, reserve materials strategically, and actively seek qualified suppliers known for quality By assessing suppliers and making competitive offers, companies can stabilize the quality of inputs while simultaneously lowering production costs.
- Emphasis on maximizing production capacity of the float glass, rolled glass production line; stabilizing product quality, minimizing the costs… to increase competitiveness.
- Reforming and reorganizing sales system, promoting production and consumption of float glass which is the best product of VIFG
- Sustain and grow powerful sale turnover, to see to profit and stabilize production.
- Stabilize the Southern market (cover 66.5% total consumption of the company). Continue to develop and expand the market share of the company in the middle and northern area.
The company is committed to ongoing research and technological advancements aimed at boosting production capacity and ensuring consistent product quality As part of its manufacturing strategy, the company plans to invest in new production lines for glass products, thereby enhancing product value and diversifying its offerings to align with the evolving preferences of the market.
Third: Increasing the quick responsiveness
To effectively forecast market demand, it is essential to conduct thorough research on both the market and customer preferences This process involves outlining implementation steps and developing innovative products for future needs By doing so, businesses can strategically address production requirements, ensuring that product availability aligns with consumer demand throughout the business cycle.
- Having an appropriate material reservation plan, especially when there are fluctuations on input prices and sudden changes in weather.
- Preparing a detailed plan to stabilize production in case of regular loss of electricity when the national power network cannot sufficiently meet demand Fourth: Diversifying products and services
- Updating information regularly, having integrated report, analyzing and processing customers’ feedback.
- Updating information on customers’ needs as well as consumer trends,preferences and taste of products
To maximize revenue and efficiency, it is essential to focus on high-quality safety glass products that meet the demand for larger sizes and effective installation techniques Targeting construction bidders within a specific market niche will help leverage existing facilities and optimize resource utilization.
- Expedite procedures to establish joint ventures with foreign partners in the field of processing and installation of large-sized safety glass partitions in tall buildings.
- Based on experimental results, launch low-e glass and decorative glass products step by step, and exploit their markets.
- Increase market shares of its product supply in all 3 domestic regions, thereby making it the leading supplier in Vietnam’s float glass industry.
VIGLACERA has established itself as a leading construction glass producer in Southeast Asia by actively researching and developing its markets The company exports its products both regionally and internationally, enhancing its reputation and reach in the industry.
In Vietnam, the float glass industry features several key players, including Vietnam Float Glass Co., Ltd (VFG), a joint venture between VIGLACERA Corporation and Japan's Nippon Steel Corporation Located in Bac Ninh Province, VFG boasts an impressive production capacity of 28 million m³ per year, making it the largest direct competitor to Vietnam Industrial Float Glass (VIFG), which has a capacity of 19 million m³ annually Despite this competition, VIFG has established a strong market presence, supported by its brand name certified to ISO standards.
9001, VIFG’s market shares have surged significantly, especially in dynamic markets as the South of Vietnam.
3.2 Analysis of business strategy choice
3.2.1 External factors influencing VIFG (EFE Matrix)
The EFE matrix for VIFG, with a total importance score of 2.65, indicates that the company's strategies effectively leverage existing opportunities while minimizing potential external threats By capitalizing on Vietnam's robust economic growth, including high GDP rates and a burgeoning construction sector, VIFG is well-positioned to meet the increasing demand for glass products However, the company must remain vigilant regarding domestic inflation and global economic fluctuations.
The recent increase in lending interest rates has impeded the company's growth and expansion Consequently, VIFG is exploring alternative sources of capital and implementing strategic approaches to enhance its competitive advantage, including potential joint ventures with domestic or international enterprises.
VIFG should collaborate with the Vietnam Construction Glass Association and other industry stakeholders to present proposals to the government aimed at enhancing management practices and supporting the operations of domestic manufacturers.
3.2.2 Internal Environmental Factors influencing VIFG (IFE Matrix)
The IFE matrix presented in Table 2.9 indicates a total score of 2.89 for VIFG, reflecting its awareness of both strengths and weaknesses To enhance its performance, VIFG should focus on leveraging its strengths while also developing strategies to mitigate the effects of its weaknesses, gradually refining their operational impact.
The SWOT matrix consolidates the evaluation of VIFG's internal and external factors, identifying opportunities, threats, strengths, and weaknesses This analysis is essential for formulating a strategic business plan that leverages VIFG's strengths, capitalizes on available opportunities, mitigates potential threats, and addresses weaknesses, ultimately promoting sustainable growth for the company.
On the basis of VIFG’s opportunities, threats, strengths and weaknesses, we have the SWOT matrix in the Table 3.1 – SWOT Matrix of VIFG below:
O1: Stable political and legal environment, economy is rehabilitating O2: Managing policy of Government create good condition for manufacturers recover production and export
O3: Life quality improvement make people want to live close to nature O4: The process of migration, urbanization in Vietnam is going strong.
Target market selection analysis and strategy products
The market development strategy, rated at 6.71, is the most attractive option available This approach focuses on enhancing the company's operational capabilities by adhering to quality policies and leveraging its strengths in finance, human resources, and marketing The goal is to reduce costs and improve product quality while concentrating on dominating the domestic construction glass market.
The development of a new product strategy, scoring 208 points as a strong alternative, focuses on enhancing the company's competitive edge by introducing innovative products that pave the way for future growth and development.
3.3 Analysis of target market and product strategy selection
Glass market is usually segmented by two major criteria such as geographic criteria and product criteria.
The glass market can be categorized based on geographical regions—North Market, Central Market, and South Market—as well as product types, which include construction glass, household glass, and industrial glass Each segment exhibits varying levels of attractiveness, and it is essential to assess and identify the most appealing market segments that align with the company's resources.
The company's three major geographical markets exhibit varying growth rates and sizes, with the southern region being the most attractive, accounting for nearly 60% of the company's revenue This area boasted the largest economy in the country in 2015 and is expected to maintain its status as a high-growth economic zone Consequently, infrastructure development in this region is on the rise, solidifying it as the company's primary focus for the coming years.
The northern market area is also attractive with 32% of the market in the country. Central market area has high potential for development
The company is focusing its market selection strategy on the southern and northern regions, where there is a significant demand for construction glass To meet this demand, the company will enhance its production using float glass technology, which offers distinct advantages.
- Maximize the strengths in product quality
- Variety of types, sizes and color:
- Absolutely flat, excellent optical lenses.
- The technical specifications over the Japanese standard JIS R3202-1996.
VIFG has strategically focused on new product development by testing low-energy glass that regulates outdoor ambient temperature, offering eco-friendliness and cost savings This innovative product line is set to revolutionize the Vietnamese construction glass market in the coming years.
Some Strategy implementation solutions
Quality factors play a crucial role in a company's success, as high-quality products significantly enhance competitive advantage By delivering superior products, businesses can meet consumer demand and bolster their brand reputation Furthermore, investing in quality can lead to increased productivity; higher-quality goods result in reduced costs associated with repairs, rework of defects, warranties, and maintenance.
(Source: Le The Gioi, 2009, Strategic Management)
Proposed solutions for stabilizing and improving product quality:
- Select the product group that serves a number of target markets.
- Improve and enhance the usability of the product to make a difference.
- Standardize semi-finished and finished products for each stage of production.
- Strict quality control of raw – input materials
- Continuous improve quality management systems according to ISO 9000 standards.
To enhance operational efficiency, it is essential to decentralize management while rigorously maintaining and upgrading equipment Implementing strict controls can effectively reduce costs without compromising product quality Additionally, stabilizing production processes to achieve high output and minimizing staging losses are crucial strategies for further cost reduction.
3.4.2.2 Personnel: Proper human resource management: Training for human resources at all levels; reengineering business structure
3.4.2.3 Technology: Innovate streamlining manufacturing technologies: Investing some additional equipment needed to improve the ability to make difference;
- Select the product group that serves a number of target markets.
- Strengthen the relationship with distributors
- Diversify in the mode of distribution
- Maintain a parallels and harmonized development oversea and domestic markets.
- Strengthen the form of communication, advertising and product branding
3.4.2.5 Finance: Healthy and transparency finance, centralize resources for the implementing the chosen optimal strategy.
- To improve and enhance the usability of the product to make difference.
- Invest in improvement chain and rationalize production technology.
- Invest additional production line with new technology.
- Strengthen the relationship with distributors
- Diversity in the mode of distribution
- Strengthen the form of communication, advertising and product branding
- Apply Just-in-time storage system for materials, raw materials and finished products, to better control the quality of goods and increase the working capital cycle.
- Healthy finance through sales charge immediately and withdraw the old debt and reduce inventory, reduce administrative costs and financial costs to reach a reasonable level in each period.
- Look for opportunities to promote cooperation and build strong relationships between the company and suppliers, dealers system, retailers and customers.
- Study the possibility of acquisition / consolidation for a fairer market.
3.4.6 Specific solutions for each strategy
The two primary strategies chosen require managers to adopt unique perspectives and rely on their intuition and experience to make informed decisions, even though the implemented solutions do not align with the five previously outlined options.
If successful, VIFG's strategy will significantly boost its market share in the attractive construction glass sector, positioning the company strongly within the industry This success will not only enable VIFG to expand its manufacturing capabilities but also stabilize its presence in the local market, allowing for greater focus on international markets.
Nevertheless, the implementation of this strategy may incur challenges in enhancing the current management, reorganizing marketing activities, managing human resources, etc.
Recommended solutions to those difficulties:
To enhance overall management, the company must strengthen its oversight across all levels and manufacturing processes Focusing on the quality of its workforce is essential to meet departmental demands for skilled employees Implementing effective policies to attract and recruit competent talent, along with providing ongoing training and retraining opportunities, will further support workforce development and operational efficiency.
To enhance its market presence and increase its production capacity, VIFG should implement effective sales strategies and expand its workforce To achieve a targeted market share of 45%, up from the current 40%, the company needs to recruit an additional 100 employees, including direct laborers, transportation staff, market analysts, and business development analysts.
To enhance its marketing effectiveness, the company should refine its marketing system and develop appropriate strategies aligned with its market domination goals Emphasizing the launch of products that elevate its public image will be crucial in promoting the company's prestige.
To address financial challenges, the company must prioritize significant investments in manufacturing technology and product research, even if it means sacrificing market dominance It is essential to explore various capital mobilization options to mitigate potential obstacles that may arise during this process.
Product development strategy refers to the use of a company’s unique capabilities to produce distinguishing products that its competitors cannot or have yet to offer to the market.
This strategy's success will enable the company to differentiate its product lines and significantly increase revenue By offering unique products, the company can broaden its product range and strategically dominate the market.
To achieve this goal, VIFG should adopt these recommendations:
Technology plays a crucial role in the product development process, and VIFG's assembly line currently utilizes some of the world's most advanced technologies However, there is a need for further enhancements to reduce costs and selling prices Additionally, the creation of unique glass products necessitates innovative designs and a thorough understanding of market demand, highlighting the urgency of timely upgrades to manufacturing technology.
The company is advancing innovative glass manufacturing technology to create green and modern buildings, prioritizing cost efficiency, environmental sustainability, and user safety CEO Nguyen Anh Tuan is accelerating the development of new products designed to replace traditional brick-wall construction with energy-efficient solutions, including energy-saving glass, insulating glass, and glass blocks.
- On terms of financial, technological upgradation is capital-intensive As a result, VIFG has to propose plans to anticipate future problems of capital mobilization and timely technological upgradation
To effectively meet customer demand, companies must ensure their products align with consumer needs, regardless of their uniqueness Conducting market research in specific regions is crucial for identifying varying customer requirements and delivering timely solutions.
Implementation and execution of strategy
3.5.1 Methods, Budget, Timeline and Expected result
Method Budget Time Expected result
Increase production level According to real production cost
Annually Cost and capacity optimization
Develop a market research system N/A Frequentl y
Promote the advantages of high-quality float glass and safety glass for construction bidders targeting upscale villa, office, and luxury mansion projects Highlight the benefits these glass products bring to living spaces, including enhanced convenience and functionality, appealing to affluent customers seeking premium materials for their developments.
Meeting customer demand and satisfying their tastes.
Make VIFG brand become the leading
2 nd strategy: Product development strategy
Research on customer demand N/A Frequentl y
Catch the updated needs of customers Study on social development trends
Forecast the future need and taste of customers Investing in new product research and development
Alternative products that can be invested to produce Cooperating and incorporating with both domestic and international business partners to manufacture safety glass partitions in industrial scale.
Maintain the leading position in the field of rolled glass with patented designs, pattern sharpness, toughness, and little degree of corrosion during manufacturing process.
Produce and sell glass-derived products in the maximum amount and keep the large price gap with its competitors to optimize the success.
Be the leading glass manufacturer
As the company possess a British manufacturing assembly line that meet the demanding standards of
Japan, it should select and use up- to-standard input materials to sustain product quality.
Share measures for both strategies
Introduce new products in VIFG’s and VIGLACERA’s showrooms; cooperate with design companies
N/A Annually Marketing system is improved and sell new products.
Assign a sole sale force for construction projects; offer incentives for them to boost sales of glass-derived products to such projects
To enhance productivity and optimize material accounting, it is essential to standardize manufacturing and cost management procedures, including the bidding process for input materials and the management of warehouse deliveries Additionally, organizing the workforce effectively and closely supervising capital allocation will contribute to improved operational efficiency.
Minimize costs as well as differentiate products in terms of quality and range, increase competitiveness, raise business operation efficiency.
To effectively implement a strategy, it is essential to assess the solutions both during and after their implementation This objective evaluation helps determine the effectiveness of each solution, allowing for necessary adjustments and providing a foundation for developing future strategies.
The inspection must be performed accurately and objectively with the appropriate testing tools; the content, test objectives should be clear, consistent to bring correct result and effectiveness.
Table 3.4 Some objectives of the Company period 2012 - 2015
+ In the year 2011 to 2012: Focus on improving equipment and technology to improve product quality and promote the distinct capacity to reach a reasonable price.
+ In the year 2013 to 2015: To maintain quality, additional investment in equipment and new technologies for product upgrades and increased capacity, lower cost.
It is required that the government propose appropriate policies to stabilize the macro economy through inflation control and interest rate regulation to encourage the development of domestic enterprises.
To foster local business growth and technological advancement, it is essential to establish a supportive legal framework that enhances quality This framework should also limit excessive investments and thoroughly evaluate investment projects for feasibility, alignment with master planning, and market conditions, ensuring that local businesses remain competitive against imported alternatives.
Create and carry out tight regulation to repress smuggled goods and low quality imported products in the field of float glass.
Adopt the campaign “Vietnamese people use Vietnamese products” nationwide.
Reduce tax on imported materials for glass production such as pigments, essential chemicals, etc.
Implement in great scale and intensify measures to support importing and import credit for construction glass products.
Continue to offer favorable borrowing interest rates for exporting companies.
3.6.2 Regarding the business operations of VIFG:
To enhance operational efficiency, the company must strengthen management across all levels and manufacturing processes Focusing on workforce quality is essential to meet departmental staffing needs Implementing effective policies to attract and recruit skilled workers, along with providing ongoing training and development, will ensure a competent labor force.
It is essential for the company to educate its employees about their responsibilities in executing business tasks Additionally, strict enforcement of regulations is necessary, with significant penalties for violations of regulatory, technological, or operational procedures.
To enhance competitiveness in the market, it is essential to streamline manufacturing management and accurately allocate costs to each process By effectively reducing costs, the company can lower selling prices, making its products more attractive to consumers.
Finally, it is recommended that the company proactively observe, keep up with and predict the tendency of market trends, through which devise production plans which can maximize expected results.
Formulating a business strategy is a complex and ongoing process that plays a crucial role in guiding a company's development direction An effective strategy not only provides a clear path but also offers the flexibility to adapt to changes in the business environment, serving as a guiding light for operational decisions VIFG operates in a high-potential industry facing intense competition, making it vital to maintain and enhance its competitive advantage To achieve this, VIFG must identify and implement the most suitable strategies for its growth and development.
Building on prior analyses and strategic formulations, Group 5 - X0410 aims for VIFG to adopt a sustainable development strategy This approach will yield functional strategies and implementation plans tailored to each development stage, ensuring the retention of its reputation while facilitating expansion into new markets in the future.
The company will simultaneously implement proposed solutions to leverage its strengths, ensuring a cohesive integration of functions Throughout the implementation process, it is crucial to objectively evaluate the outcomes at each stage, allowing for timely adjustments that enhance overall business operations.
Finally, Group 5-X0410 are willing to receive suggestions from teachers and managers of VIFG as that makes the research more realistic and applicable
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We invite industry experts to provide valuable insights for our Capstone Project titled "Business Strategy Formulation for VIGLACERA Float Glass Company by 2015." Your feedback through this questionnaire is greatly appreciated, and we hope you will take a moment to share your practical suggestions with us.
Please rank these construction glass producers in respect of provided criteria in a scale of 10 The higher the score, the higher your opinion on the chosen company is.
1st criterion: Capacity and quality of facilities;
2nd criterion: Operating and technological monitoring experience
3rd criterion: Quality and range of products
5th criterion: Managers and management
1 Capacity and quality of facilities
2 Operating and technological monitoring experience
3 Quality and range of products
Note: If you are not sure of evaluation basis for any criterion, please write N/A in each area of all areas on the last column.
Thank you for your precious and objective cooperation.
1 Methodology of research on experts’ opinions
In order to impartially assess VIGLACERA’s strengths in comparison with its competitors, 5-X0410 group carried out interviews with and handed out questionnaires to experts Subjects of the interviews are:
2 Viglacera Float Glass Company’s experts (15 sheets)
- Managers of plants and subsidiaries.
- Former employees for VIFG’s competitors
- Current employees for VIFG’s competitors