Concept and the role of business strategy
Concept
Business strategy and strategic management encompass a variety of perspectives To gain a clearer understanding of these concepts, it is essential to explore the viewpoints of economists.
According to that viewpoint, business strategy is an art.
- Alain Threlart thinks that “Strategy is the art used by the enterprise to confront with the competition and get the victory”.
- M.Porter thinks that “Strategy is the art building the firm competitive advantages for defense”.
Therefore, these authors consider the strategy as the art to compete on the market and develop the enterprises.
According to viewpoint of the management, business strategy is a form of special plan.
- G.Arlleret: “Strategy is definition of the roads and means to obtain the defined targets through the policies”.
D Bizrell and co-authors define strategy as the overarching plan that directs enterprises towards their anticipated goals, serving as the basis for establishing policies and methods of implementation.
- Gluecl: “Strategy is a type of plan with the united, comprehensive and general properties designed to ensure that targets of the enterprises will be implemented”.
According to viewpoint of combination, the strategy is both planning and art.
- “Business strategy is the art of combining the activities and controlling them to reach the long-term target of the enterprises”.
Chandler emphasized that business strategy involves defining long-term objectives and determining the necessary methods and resource allocation to achieve these goals He articulated that it is an art of designing and organizing efforts to meet the enterprises' long-term targets while adapting to changes in the business environment.
Building an effective business strategy requires more than just defining targets; it necessitates the implementation of specific actions within a set timeframe and allocated resources An enterprise's strategy encompasses not only its objectives but also the methods for organizing and executing these plans A single action does not constitute a strategy; rather, it is a cohesive series of interrelated actions and decisions aimed at achieving the organization's goals Strategies are developed based on an analysis of internal resources, including strengths and weaknesses, as well as external factors such as opportunities and challenges.
Effective business strategies aligned with an enterprise's objectives are crucial for achieving set targets These strategies focus on how a business can successfully compete in its market by making strategic decisions regarding product selection, meeting customer demands, gaining a competitive edge over rivals, and identifying new opportunities for growth.
Therefore, in short, we can define business strategy and strategic management as followed:
A business strategy encompasses long-term goals, policies, and comprehensive solutions related to production, finance, and human resources Its primary aim is to elevate the quality and effectiveness of business operations, enabling enterprises to achieve higher levels of growth and development.
"Business strategy is a series of commitments and actions used by an enterprise to win a competitive advantage by exploiting core capacities in a specific market".
Strategic administration involves analyzing both current and future environments to set organizational goals, as well as developing, executing, and evaluating decisions to achieve these objectives Many researchers view strategic administration as a blend of art and science.
Role of business strategy in enterprise’s development
The primary role of a business strategy is to establish a cohesive direction for various plans within an organization It clarifies the enterprise's purpose and orientation, serving as a guiding star for all business activities While a single plan may not guarantee success, a well-defined strategy provides the essential foundation for all plans and policies, making it a priority for early resolution.
In a rapidly evolving business environment, opportunities and threats continually emerge in the market Effective business strategies empower enterprises to identify and capitalize on these opportunities while proactively addressing challenges and navigating potential pitfalls.
Thirdly, business strategy makes the contribution to improving the effectiveness of using enterprise’s resources, strengthening competitive position,ensuring the continuous and sustainable development of enterprises in the long term.
Fourthly, building, implementing business strategies create the firm foundation so that the enterprises introduce suitable policies and decisions with the fluctuation of the market.
Build business strategies
Bases for building business strategies
To enhance enterprise strength and secure a competitive advantage in the market, businesses must develop strategies that fully leverage their comparative advantages This involves implementing targeted measures that capitalize on their strengths effectively.
- Define the target market; then define safe area in business and define clearly the scope of business, allowed risk level.
- Define exactly the key targets and the basic conditions to implement those targets.
- Know the information and build information system on the market, customers, suppliers, competitors.
- Predict business environment in the future, the more the prediction is exact, and the higher the feasibility of business strategies is.
Develop flexible strategies and alternative approaches to address challenges effectively Avoid a defensive stance that could hinder system performance when existing strategies encounter obstacles due to external factors.
- Catch opportunities and take maximum advantage of opportunities and need to have the strong decisiveness.
- In business, there are many risky factors, thus it is necessary to how to minimize the risks at the lowest level, ensuring safety in business.
2.1.2 Bases to build the business strategies.
To maximize profits, enterprises must develop products that meet customer needs while utilizing optimal input factors and technology to minimize costs However, they face competition from other businesses offering similar goods and services To stand out in the market and attract more customers, it is essential for enterprises to deliver superior quality and innovative models that surpass those of their competitors.
Therefore, important bases for building the business strategies include:
Businesses are significantly influenced by various external factors, including the macroscopic environment, sector-specific conditions, and operational dynamics These influences encompass opportunities and challenges that enterprises must navigate, such as competitor analysis and understanding customer needs By effectively analyzing these external environments, businesses can better position themselves for success in a competitive marketplace.
- Internal capability of the enterprises or strength and weakness of the enterprises comparing with the competitors.
- Predict the demand for products and services on the market.
- Set targets of enterprises in business.
Economists think that customers, competitors, internal forces of the enterprises are a set of three strategies that enterprises have to rely on to develop their own business strategies.
ANALYZE REAL SITUATION OF BUSINESS STRATEGY AT
General introduction of the Company
1.1 Process of formation and development of the Company
MB Capital Management Joint Stock Company, established in September 2006, is one of the first fund management companies in Vietnam and operates as a wholly-owned subsidiary of Vietnam Military Bank (MB) Its inception aligns with MB's strategic goal of enhancing investment banking services and diversifying its range of products and services.
MB Capital, licensed by the State Securities Commission of Vietnam, specializes in two key areas: the establishment and management of investment funds and portfolio management services Since its inception, MB Capital has experienced continuous growth, expanding its business operations and establishing itself as a prominent fund management company with significant assets under management in Vietnam's financial sector.
As of June 2010, MB Capital manages four investment funds: the Hanoi Investment Fund, Vietnam Tiger Fund, Vietnam Dream Investment Fund, and MB Japan Asia Fund, alongside a diverse investment portfolio for various domestic and international clients The company's total managed assets exceed 20,000 billion VND, with a primary focus on investment activities in the stock and monetary markets.
Milestones of formation and development:
- In November 2006, Hanoi Fund Management company (former name of
MB Capital has officially commenced operations with a chartered capital of 10 billion VND, establishing its headquarters at the Hanoi Toserco Building, located at 273 Kim Ma, Hanoi Additionally, the company has introduced the Hanoi Investment Fund, which also features a chartered capital.
200 billions VND established and managed by capital MB.
- In September 2007, MB Capital established Vietnam Tiger Fund with chartered capital of 500 billions VND.
On November 15, 2007, Hanoi Fund Management Company transitioned from a one-member limited liability company under Military Bank to Hanoi Fund Management Joint Stock Company, as per establishment certificate No 21/UBCK-GP issued by the State Committee of Securities Following this change, the chartered capital of MB Capital was established.
- On March 3rd 2008, MB Capitalestablished the representative office in Ho Chi Minh City under License No.155/QĐ-UBCK of the State Committee of Securities.
On September 23, 2008, MB Capital officially partnered with Saigon Asset Management Corporation (SAM), a foreign fund management firm based in the Cayman Islands This collaboration established MB Capital as the portfolio manager for the Vietnam Equity Holding Fund, an $80 million investment fund listed on the Frankfurt Stock Exchange This milestone marked MB Capital as the first fund management company in Vietnam to oversee the investment portfolio for a foreign investment fund.
- On November 6 th 2009, Hanoi Fund Management Joint Stock Company officially changed its name into MB Capital Management Joint Stock Company -
On April 19, 2010, MB Capital Management Joint Stock Company raised its chartered capital from 40 billion VND to 100 billion VND, as authorized by License No 68/UBCK-GP from the State Securities Commission This significant increase in financial capacity positioned MB Capital as one of the leading fund management companies in Vietnam in terms of chartered capital.
On May 25, 2010, MB Capital, Thanglong Securities Company, Japan Asia Group, Aizawa Securities, and Japan Securities entered into cooperative agreements to enhance the capital market development in Japan and Vietnam They collaborated to establish the Vietnam Dream Fund, with a capital scale of USD 100 million, and the MB Japan Asia Fund, which has a capital scale of 1,000 billion VND, both aimed at investing in Vietnam The management of these funds is handled by MB Capital.
1.2 Business activities of the Company
MB Capital operates as a fund management company regulated by Vietnam's Securities Law, under the oversight of the State Securities Commission of the Ministry of Finance As an intermediary financial institution, MB Capital mobilizes capital from both domestic and international investors to establish investment funds Acting as the fund manager, MB Capital focuses on executing investment activities that aim to deliver optimal returns for its clients The company earns service fees for investment management and may receive additional bonuses when investment performance surpasses the expected returns of investors.
In addition to managing investment funds, MB Capital offers tailored asset management services for individual clients, primarily catering to high-net-worth individuals and affluent organizations.
MB Capital is a service-oriented organization that charges fees for its offerings The success of MB Capital, like any fund management company, hinges on two key factors: the ability to effectively mobilize capital resources and deliver strong results for its clients.
(2) implement investment in mobilized capital resource effectively In order to do this, the essentially decisive factors are the human beings, the products/services, technology and finance.
People are key factor to create the success for a fund management company.
In recent years, MB Capital has focused on developing its human resources, growing from just 8 employees at its inception to a stable team of highly skilled professionals As of June 30th, the company has successfully built a strong workforce dedicated to excellence.
2010, MB Capital has 24 officials with professional qualification as followed:
- 10 people with practical certificate of asset management;
- 01 person with CFA certificate; 02 people have ACCA certificate;
- 100% graduated professional official from the university;
- 08 people are the masters of economics and business administration, including 05 people graduated from universities in foreign countries;
Table 1.2-2 Number of the employees of MB Capital through years (MB
MB Capital boasts a distinguished Board of Directors, featuring prominent figures with extensive expertise in Vietnam's financial banking and investment sectors Notable members include Mr Le Van Be, the Standing Vice Chairman of Military Bank, Mr Le Dinh Ngoc, the General Director of Thang Long Securities Company, and Dr Quach Manh Hao, a specialist in securities.
However, the human resource of MB Capital still has some following restrictions:
- There have not been many experienced specialist in fund management experience in fund, development experience for products about investment;
- Number of employees still is relatively low to ensure development demand;
- Degree of foreign language (English) of back office division is still limited.
1.2.3 Products and services o Products for fund raising
MB Capital is actively seeking to raise primary capital from both domestic and international institutional investors, including financial institutions and corporate partners of MB Bank, to create member-based investment funds (private funds) Additionally, MB Capital offers asset management services tailored for high-net-worth individual investors in the country, although this segment represents a modest share of their overall business, accounting for less than 5% of total managed assets.
MB Capital MB Capital has not implemented the capital mobilization yet from retails investors through the establishment of public funds.
In the initial years of operation, fund management companies heavily rely on capital mobilization from organizational investors However, as time progresses, attracting funds from these entities will become increasingly challenging, especially since Vietnam has prohibited state-owned enterprises from investing in investment funds since 2008 Consequently, focusing on capital mobilization from individual investors is essential for the long-term growth and development of fund management companies.
BUILD BUSINESS STRATEGY OF THE MB
Business strategy of MB Capital in the period of 2010 - 2015
MB Capital will become one of three leading fund management companies in Vietnam with field of multi-sector investment, serving various investment demands of institutional and retailed investors.
MB Capital will develop professional human resources in order for the company to provide its clients with effective financial solutions at optimal costs.
MB Capital is committed to achieving its goals through excellence in execution and ongoing enhancement of its products and services, ultimately delivering optimal results and profits for investors.
MB Capital makes the commitment to follow absolutely standards of professional ethics, regulations of law and the internal management processes with honesty and high sense of responsibility.
MB Capital highly appreciates seriousness and carefulness in research, selection as well as when making investment decisions.
Solidarity and mutual support among company members, along with a cooperative spirit between MB Capital and its external partners, are essential for the company's continued strength and growth.
Business Strategy of MB Capital:
MB Capital is set to prioritize the stock and money markets over the next three years, aiming to introduce innovative investment products for both retail and institutional investors in Vietnam The company will enhance the performance of its funds and portfolios by employing modern, flexible investment techniques and bolstering its investment team Additionally, from 2013 to 2015, MB Capital plans to diversify its business by venturing into alternative investments, including Private Equity, REITs, and Commodities.
Strategic targets of MB Capital in the period of 2010 - 2015
Potential and tendency for development of Vietnam’s fund management sector
Vietnam's fund management sector is still in its early stages of development, characterized by a relatively small operational scale and limited product diversity Nevertheless, the sector holds significant growth potential, with predictions indicating that total managed assets could increase at a rate of 30% per year from 2010 to 2015, highlighting the promising future of fund management in Vietnam.
In the near future, the fund management sector will see a diverse range of products and services, including open funds, corporate funds, real estate funds, index funds, pension funds, and investment connection products Among these, open funds are expected to dominate the market due to their unique advantages in attracting capital from investors, particularly individual investors.
Investment through funds is expected to grow significantly due to the distinct advantages they offer over individual investments, particularly as the stock market becomes more complex with numerous listed companies Individual investors are poised to become a crucial driving force in mobilizing capital for these investment funds.
Since 2012, the entry of foreign-invested fund management companies has intensified competitive pressures in the sector Companies backed by financial institutions like banks, insurance firms, and securities companies will have significant advantages, positioning them as key players in the fund management industry.
Strategic targets of MB Capital in the period of 2010 - 2015
Target of total assets under management
By 2015, Vietnam's investment fund management sector is projected to reach a total market value of $15 billion, with an impressive average growth rate of 30% per year To position itself among the top three fund management companies in the sector, MB Capital aims to capture at least 10% of the market share, targeting total managed assets of $1.5 billion by the same year.
Target of the market and market share
Domestic clients play a crucial role in the financial landscape, representing 70% of the total value of mobilized assets, predominantly driven by capital from individual investors MB Capital is positioned as one of the top three fund management companies, securing at least 10% market share in domestic capital mobilization.
- Foreign clients: account for 30% of total value of mobilized assets
- MB Capital defines its main investment market which is Vietnam’s market basing on its advantage of local knowledge.
Class: GaMBA01.X01 Final exercise-MBA
- Expanding investment activities to Laos and Cambodia - where Vietnam in general and MB Group and in particular have the advantages in terms of economic - political relation.
- MB Capital will have to be one of three most powerful fund management companies in the field of investment in securities, monetary market and real estates.
MB Capital will be a pioneered fund management company in the research and development of new products of investment fund management sector of
Vietnam, to serve variously the demand of Vietnam’s investors
Targets of effectiveness of business activities
MB Capital is committed to maximizing shareholder benefits by consistently increasing profits each year, with a target of achieving 100 billion VND in pre-tax profit by 2015 The company aims to rank among the top three fund management firms with the highest return on equity (ROE).
Solutions and processes of implementing strategy
2.1 Solutions about the products for capital mobilization
Figure 2.1-4: Solution about products for capital mobilization
MB Capital aims to lead in the development and diversification of investment products, with a strong emphasis on researching and creating innovative offerings such as open funds and real estate investments.
C o m p l e t e i n v e s t m e n t p r o d u c t s funds (REITs), listed closed-end public fund, the investment-linked products towards the retailed investors.
Figure 2.1-5 Chart: Prediction of development speed of types of products of MB Capital
MB Capital is exploring a partnership with United Investments Fund Management Company from Japan to leverage their extensive experience in establishing open investment funds in Vietnam This collaboration is currently under consideration and evaluation, with plans to launch the fund in 2011.
- Develop products of investment linked products associated with MB.
Invest in MB Land, a member of MB Group specializing in real estate development, to capitalize on lucrative real estate investment products (REITs) Currently, MB Land is executing several promising real estate projects, with opportunities for collaboration on real estate investment product development anticipated to commence by the end of 2010.
We are committed to developing investment products in the money market and bonds, including the establishment of money market funds and bond funds These offerings are ideal for investors seeking stable and secure returns Our company is currently conducting research and anticipates launching these products within the next 1-2 years.
- Research to establish the additional pension investment funds.
The company aims to develop an investment management product tailored for high-net-worth individuals (HNWIs) and large organizations, tapping into a lucrative market segment prevalent in developed countries and showcasing significant potential in Vietnam Research and product development are expected to culminate in a market launch within the next two years.
Implementing a Private Equity Investment Fund is essential for MB Bank, particularly during the later stages, to effectively cater to its SME customer base and meet the investment needs of institutional investors.
2.2 Solutions for development of human resource
As Vietnam's economy rapidly develops and integrates into the global market, competition in the labor market, particularly in finance and economics, has intensified Consequently, attracting and retaining employees has emerged as a critical challenge for businesses in Vietnam.
MB Capital is actively participating in a competitive landscape, prompting its leadership board to develop effective policies aimed at attracting and retaining staff.
2.2.1 Recruitment policy of MB Capital
MB Capital prioritizes high-quality human resources, ensuring that recruitment is a meticulous process The company establishes clear standards for each position, ranging from senior to professional staff, to maintain its commitment to excellence.
- For professional staff, the Company recruits directly or contacts with some teachers at the universities to recruit newly graduated students with good academic performance and solid foundation of knowledge.
For management and leadership roles, companies typically engage reputable headhunters or rely on partner referrals, as qualified candidates in these areas are often scarce in the market.
2.2.2 Policy of training the human resource.
The fund management sector is relatively new, facing challenges due to a limited pool of qualified human resources As a result, companies struggle to recruit employees who can contribute immediately To address this issue, frequent training programs are implemented to develop the necessary skills and ensure the workforce meets operational and developmental demands.
The investment analysis department encourages all employees to pursue the CFA certification, while those in the accounting department are motivated to enroll in ACCA courses or short-term skill enhancement programs To support their professional development, the Company provides not only financial assistance but also allows each employee two weeks off for exam preparation, during which they continue to receive their salary.
- The Company must regularly invite domestic and foreign specialists to teach the staff of administration and leadership.
2.2.3 Priority policy of MB Capital
The company is committed to establishing a salary and bonus system that transparently reflects each employee's contributions to its growth Salaries are reviewed biannually to ensure fair compensation, while employee dedication is acknowledged in the payroll This approach fosters a motivated workforce, encouraging staff to perform at their best.
- The Company is ready to pay competitive level of the salary for skilled employees with experience in investment management from domestic and foreign market.
The company enhances employee engagement and commitment by implementing competitive salary and bonus policies, offering share purchase priority, and facilitating low-interest loans through MB Bank for its staff.
Forms of distribution are developed with the groups of target customers of
Indirect distribution through the system of 2-level sales:
MB Capital relies on distributors to sell its investment products, specifically fund certificates, to investors while also managing investor relationships To enhance its distribution network, MB Capital plans to leverage its existing connections with MB Bank and Thang Long Securities.
Build and complete the organizational structure and controlling system
MB Capital has intention to build the organizational structure under the followed model:
Figure 3.1-6: MB Capital organizational structure
The Company continues to operate under a professional departmental structure while planning to introduce a new activity model in the near future For the business development and support department, the changes will be minimal, primarily involving staff reorganization and the establishment of more specialized roles.
Significant changes are underway in investment management, as employees will be reorganized into specialized divisions focusing on areas such as listed securities, real estate, fixed income, and private equity This strategic arrangement is designed to enhance specialization in investment activities across these fields, ultimately leading to improved performance in investment management.
The Board of General Director
TI Fi nanc e -Ac coun ting minAd atioistr n
Effective control activities enable leadership to assess the status of strategy implementation and its outcomes over time This allows leaders to compare actual results against expectations and identify any emerging issues, facilitating the development of targeted solutions to address challenges encountered during the strategy execution process.
The company is establishing a new department dedicated to overseeing the implementation of its strategic initiatives This unit will support various departments in executing these strategies and will generate statistics and reports to track the results achieved during the implementation process for company leadership.
In today's market economy, having a solid business strategy is essential for every company, including MB Capital This strategy is crucial for the company's development, as it establishes clear directions and targets while outlining the necessary solutions and measures to achieve these goals in the future.
In today's fast-paced world, the swift advancement of science and technology, coupled with significant shifts in the global economy post-crisis, underscores the critical importance of effective business strategies for MB Capital By implementing the right strategies, MB Capital can navigate substantial financial sector risks while seizing emerging opportunities.
Due to lack of time and limited knowledge, information, the capstone definitely has lots of things to improve Our Group 4 really appreciates comments and feedback from teachers, professors.
We extend our heartfelt gratitude to our teachers, professors, and MB Capital Management Company for their invaluable support throughout our MBA journey and in the completion of this capstone project.
Table 1.3-9: Appendix 01 - ACCOUNTING BALANCE SHEET ( MB Capital resource)
122 2 Business securities of investment principal 29,476,000 14,976,000 - -
123 3 Short-term investment of investment principal - 515,292,000 4,931,539,000 800,000,000
128 4 Provision for decreasing the investment price of banking securities (2,489,721) (1,441,238) (9,916,804) (838,049)
2 Receivables from activities of fund management 991,245 1,186,800 651,933 29,342,431
5 Provision for bad short-term receivables (568,750) (568,750) (341,250) -
II Securities investments and other long-term investment
232 2 Investment in joint venture companies 480,000 496,776 - -
233 3 Long-term investment of investment principal 450,000,000 445,000,000 - -
238 4 Provision for price decrease of long-term securities investment (7,666,164) (5,853,530) (2,293,000) -
260 III Other long-term assets 262,025 279,483 181,007 3,369
262 2 Other amounts of payment as a security 25,000 25,000 25,000 -
313 3 Tax & payables for the State 658,664 50,525 776,804 178,753
341 1 Provisional fund for unemployment benefit 72,702 72,702 27,480 -
415 2 Re-evaluation difference of foreign currency (9,670) (9,670) - - at the end of the period
416 3 Additional reserved fund of chartered capital 3,565,298 2,228,727 2,096,129 -
Table 1.3-10 - Appendix 02 - REPORT ON THE RESULTS OF BUSINESS PRODUCTION ACTIVITIES ( MB Capital resource)
Revenue from fund management activities 10,530,741 10,877,422 41,019,614
Revenue from asset management activities 22,150,148 10,173,033 48,611
Accumulated revenue from business activity 24,459,286 15,491,417 36,592,937
16 Net profit from business activity 29,052,864 2,644,859 41,922,582
Total pre-tax accounting profit 28,679,064 2,651,953 41,922,582
22 Corporate income post-tax profit 26,748,206 2,651,953 41,922,582