MBA CAPSTONE PROJECT REPORT REPORT BUILDING STRATEGIES TO DIFFERENTIATE TILE PRODUCTS OF VIGLACERA THANG LONG JOINT STOCK COMPANY MBA CAPSTONE PROJECT REPORT TABLE OF CONTENT Content page TABLE OF CONTENT LIST OF TABLES AND FIGURES INTRODUCTION Chapter THEORETICAL BACKGROUND I OVERVIEW OF BUSINESS STRATEGIES Concepts Strategy classification Factors affecting a company’s strategies 10 II PROCEDURE IN BUILDING STRATEGIES 16 SWOT Analysis 16 Basic business strategies 18 Selection of the optimal strategies 24 Chapter BUSINESS REALITY IN VIGLACERA THANG 25 LONG JOINT STOCK COMPANY I GENERAL INTRODUCTION ABOUT VIGLACERA THANG 25 LONG JOINT STOCK COMPANY Establishment and development 25 Organization structure 26 The main business activities, products and technology process 28 II PRODUCTION AND BUSINESS REALITY 31 Production 31 MBA CAPSTONE PROJECT REPORT Sales Finance 34 Investment and basic construction 38 38 III BUSINESS STRATEGIES BEING APPLIED 39 Chapter BUILDING STRATEGIES TO DIFFERENTIATE TILE PRODUCTS OF VIGLACERA THANG LONG JOINT STOCK COMPANY I BASIC ANALYSIS FOR BUILDING STRATEGIES 40 Macro environment analysis 40 Industrial environment analysis 43 Internal company analysis 48 II DEVELOPMENT ORIENTATION OF THE COMPANY 51 SWOT synthesis 51 Strategic orientation 53 Strategic aims 53 III IDENTIFYING VISIONS, MISSIONS, AND OBJECTIVES 54 IV STRATEGY SELECTION 55 V STRATEGIC SOLUTIONS 57 Maximize the available resources to maintain stable production 59 and reduce production costs, maintain stable revenue and profits Investment in repair, renovation or replacement of some major 59 equipment Marketing, enlisting the customers’ support to promote the 61 MBA CAPSTONE PROJECT REPORT consumption of the products Research and Development 64 Finance 64 Organization of human resources 64 CONCLUSION 66 REFERENCES 67 LIST OF TABLES Tables Page Table 2.1: Production Results in 2010 33 Table 2.2: Revenues by regions 35 Table 2.3: Consumption by regions 35 Table 2.4: Average selling price by regions 35 Table 2.5: Revenue by product lines 36 Table 2.6: Consumption by product lines 36 Table 2.7: Average selling price by product lines 37 Table 2.8: Basic financial expense 38 Table 2.9: Analysis of competitive wall tiles 45 Table 2.10: Analysis of competitive floor tiles 46 MBA CAPSTONE PROJECT REPORT Table 2.11: Analysis of competitors 47 Table 3.1: SWOT analysis 51 Table 3.2: Selecting strategy basing on GREAT model 56 Table 3.3: Prices of products 57 Table 3.4: Lists of investment equipment 61 LIST OF FIGURES Figure 1.1: Simplest SWOT analysis model 17 Figure 2.1: Organization structure 26 Figure 2.2: Technology Flowchart 29 MBA CAPSTONE PROJECT REPORT INTRODUCTION The necessity of the capstone project report In the business world, gaining competitive advantage and successfully competing against competitors is a challenge for any business Therefore, every business must get a business strategy right, and then implement it effectively Business strategy must be built on the basis of accurate assessment, opportunities and challenges delivered by the external environment as well as strengths and weaknesses in the internal business Viglacera Thang Long Joint Stock Company is an enterprise specializing in manufacturing and trading ceramic tile products In the period of 10 years, though there were many good conditions, Viglacera Thang Long could not achieve the desired effects One of the main causes affecting the production efficiency of Viglacera Thang Long is the orientation and development of the product range Through knowledge of strategic business management acquired during the training program, we analyzed and suggested "Building strategies to differentiate tile products of Viglacera Thang Long Joint Stock Company" and selected as the topic of our capstone project report The aims of the capstone project report The aims of the research are synthesizing, analyzing and proposing strategies, as well as offering specific solutions to implement the strategies in Viglacera Thang Long Joint Stock Company The subject and scope of the capstone project report The range of issues affecting directly and indirectly to the business reality of Thang Long Viglacera as well as the influential factors in the process of building strategies to differentiate the product range are discussed MBA CAPSTONE PROJECT REPORT Spacial scope: Viglacera Thang Long Joint Stock Company Time scope: The period from 2009 till the end of 2010 Report structure This capstone project report consists of chapters: Chapter 1: Theoretical background of the building business strategies Chapter 2: Business reality in Viglacera Thang Long Joint Stock Company Chapter 3: Building strategies to differentiate tile products of Viglacera Thang Long Joint Stock Company MBA CAPSTONE PROJECT REPORT Chapter THEORETICAL BACKGROUND I OVERVIEW OF BUSINESS STRATEGIES Concepts We consider some definitions of business strategy by some scholars to draw the fundamental characteristics of business strategy According to Chandler (1962), the strategy identifies goals and objectives of long-term basis, applies a sequence of actions, allocation of necessary resources According to Quinn (1980), strategy is a pattern or plan to integrate the major objectives, policies and action sequences into a cohesive and rigorous whole Johnson and Scholes explained that strategy is the direction and scope of an organization to gain long-term competitive advantage for organizations to adopt the format of its resources in a changing environment, to meet market demand and satisfy the expectations of our stakeholders Through the above definitions, we can draw conclusions that strategy of a business is the combination of decisions and decisions relating to the choice of facilities and the allocation of resources to achieve goals Important goal of a business is to achieve a better strategic position than its competitors Strategy classification Basing on the different views, we should have correct identification of the strategic level However, commonly strategies are divided into three levels as follows: MBA CAPSTONE PROJECT REPORT Group-level strategies (Company-level strategies): Towards a general purpose and scope of the organization, they are statements about long-term goals and the development orientation of that company or corporation Business unit-level strategies: Related to how a company can successfully compete in a market (or a market segment) It reflects the business’s beliefs in where and how they can gain a competitive advantage over its rivals Functional strategies (Action strategies): is the detailed proclamation about the objectives and methods of short-term action that are used by the functional departments (Production, Marketing, Finance, R & D ) to achieve short-term goals of the SBU and long-term goals of the organization Factors affecting a company’s strategies 3.1 External environment This is a group of factors that create opportunities and threats for companies in competitive conditions 3.1.1 Macro environment + Macroeconomic environment It causes impacts on businesses and industries States of the macroeconomic environment determine the health and prosperity of the economy Most of these strategies in a certain degree depend on what is happening in the local, regional or global economy The important factors in the macroeconomic environment include the growth rate of the economy, interest rates, exchange rates and inflation rates, etc + Technology environment Technology includes institutional activities related to the creation of new initiatives and then applying it to meet the output that is products, processes and new materials MBA CAPSTONE PROJECT REPORT The changes and technological developments may affect the height of entry barriers and reshape the industry structure + Socio-cultural environment It is related to social attitudes and cultural values These social changes have created opportunities and challenges for enterprises because the cultural values and social attitudes form the foundation of society, it often leads to changes in the technological, political - legal, economic and demographic conditions + Demographic environment Demographic segments in the macro environment are in relation to population, age structure, geographic distribution, ethnic communities, and income distribution + Politics - law environment Politics and laws factors have a major impact on the level of the opportunities and challenges from the environment Enterprises need to analyze the relevant new policies of the state management, the industry or government sector to adjust the selection or priority of the labor law, antitrust law, tax law, etc In the global scale, the enterprises should also pay attention to political matters, commercial law such as trade policies or protection barriers that are nation-specific + Global environment It concludes relevant global markets such as current changing market, the international important political event, and institutional and cultural characteristics in global market Globalization of business markets creates both opportunities and challenges We need to have an awareness of the different characteristics of social and cultural institutions of the global market 10 MBA CAPSTONE PROJECT REPORT + Develop the two lines of medium and high grade products With high quality products try to improve the quality and value to avoid price competition For normal products, try to push down the price to be ready to compete on price + Take advantages of customers to accelerate the market to consume the products 1.4 W – T Strategy (Weaknesses – Threats) + Concentrate on all available resources to produce only high quality products, high value differences to avoid price competition + Concentrate on higher market prices and export markets to ensure business efficiency in the market for low-level, companies can hardly compete on price due to high production costs + Liquidation of fixed assets less poorly efficient to reduce the financial pressure Strategic orientation Strategic Orientation of Viglacera Thang Long is based on prediction about economic development, manufacturing building materials combined with special resources of the company Company development follows the trend of modernization, constantly innovating, updating and production technology to create product value Strategic aims Success in manufacturing and business will take back the position of suppliers of ceramic tiles in Vietnam, confirm the value of the brand, developing sustainable long-term stability 52 MBA CAPSTONE PROJECT REPORT III IDENTIFYING VISIONS, MISSIONS, AND OBJECTIVES Vision "Strive to become a leading Vietnam ceramic tile manufacturer." Mission Continuously learn and acquire technology, research and innovation to the forefront of creating innovative designs and product value, the market supply of high value products, a quality level commensurate with the beauty and value of modern architecture, to meet consumer expectations Objectives 3.1 Short-term objectives + Master the stable process of producing high-quality tiles; reduce production costs by 10% in 2011 to rationalize the investment capacity of equipment to increase capacity to compete + Ascendant share of advanced ceramic products on the domestic market at an average rate of 5% per year in 2011 + Maintaining proportion of exports in total sales revenue in 2011 + Research and mention plans to develop the product line features that have high distinction, deadline before September 06, 2011 3.2 Long-term objectives + Products of the company's advanced features that highlight how other businesses can not or are difficult to imitate 53 MBA CAPSTONE PROJECT REPORT + Raise premium rates of the company's products to a minimum of 50% Raise export ratio to 40% of total revenue before 2013 + Affirm brand Viglacera Thang Long is a manufacturer of ceramic tiles of a Vietnam + Accumulate and prepare all resources available to expand the size or business sector at the end of the strategy IV STRATEGY SELECTION In business, the elements belonging to the enterprise (strengths-weaknesses) can be controlled Problems predicting or controlling the factors that influence from the external environment are difficult So to avoid risks due to the opportunities and challenges, we can review and a choice of the following strategies: Strategy 1: Pricing The company will exploit the most of existing capacity and equipment, enhanced management and application of management measures aimed at lowering production costs Simultaneously promote both domestic market and exports to consumption of products produced Take advantage of the favorable market; maximize production capacity to increase sales and profits Strategy 2: Differentiating products Exploit the capabilities of their existing equipment, technology and human resources to produce research products are major differences in design, high quality, sophisticated compared with competitors such as products made from the mold 54 MBA CAPSTONE PROJECT REPORT pattern, the uniform product Is accompanied by the planning and implementation of repair / replace some equipment to meet production capacity The company will focus on key markets with high prices in order to improve performance such as the urban markets and export markets Take advantage of favorable market raise product prices to increase sales and profits Strategy 3: Focusing This strategy is a combination of both strategies As difficult market (sentence reduction), using the distinct advantage of the product and the brand is not much to hold or lower prices (competition compete on price) When a favorable market (increased sentence), the leading advantage maximize cost production capacity to increase sales revenue and profits Table 3.2: Selecting strategy basing on GREAT model Strategies Strategy Criteria Weight Strategy Strategy Rating score Mark Rating score Mark Rating score Mark 4=2x3 6=2x5 8=2x7 Benefits 0,30 0,60 1,50 1,20 Risky level 0,20 0,60 0,60 0,80 Costs 0,15 0,45 0,30 0,45 Feasibility 0,25 0,50 1,00 0,75 Time 0,10 0,20 0,30 0,20 Total Column 2,35 3,7 55 3,4 MBA CAPSTONE PROJECT REPORT Rating scale: 1- weak; 2- average; 3- over average; 4- good; 5- excellent Conclusion: Strategy – Strategy to differentiate products has the highest overall score and that need to be focused on to perform V STRATEGIC SOLUTIONS From the result production summary report (already mentioned in chapter II), we synthesized a number of indicators reflect direct cost to business performance of each product, in particular: Table 3.3: Prices of products Products Units Factory price 2010 (1) Ceramic tile KT 20x25 VN D/m2 cm 42577 Ceramic tile KT 25x40 VN D/m2 cm 42137 Ceramic tile KT 25x50 VN D/m2 cm 50767 Ceramic tile KT 30x45 VN D/m2 cm 51272 Ceramic tile KT 30x60 VN D/m2 cm 59691 Average selling price 2010 (2) Difference (2 - 1) - - 49321 7184 60776 10009 70861 19589 77944 18253 - - - - Border ceramic KT 12,5x40 cm VN D/m2 Border ceramic KT 12,5x50 cm VN Đ/m2 Floor tile KT 25x25 cm VN Đ/m2 42917 49934 7017 Floor tile KT 30x30 cm VN Đ/m2 49772 - - 41692 41776 56 MBA CAPSTONE PROJECT REPORT Floor tile KT 40x40 cm VN D /m2 43722 57525 13803 Floor tile KT 60x60 cm VN D /m2 60847 72018 11171 Glazed tiles VN D /m2 64099 76988 12899 Other products VN D/m2 53198 - - Thus, the difference in product prices and costs as factory highest tile is size 30x45cm and 30x60cm (blue color) Other products which have the big difference between selling price and the price difference (yellow color) are not wall tiles (easily replaced) and analyzed in The threats of substitute products - Section 2.4 (Chapter II), it can confirm the focus on the development of advanced products tile size is completely correct and deployed as soon as possible The problem is how to produce and consume products is the major output for this product line It should be emphasized that Viglacera Thang Long has been manufacturing distinctive products, but only for improvisation, has achieved a range of strategies (so consumption is low and prices low) In summary, the production of high-Thang Long Viglacera unsatisfactory shown in the following issues: + The difference, the dominant product is not clear + Overall product quality is not high, unstable + Production of low production costs leading to higher industrial units + The contract sets no (This is also the weak point of most enterprises in Vietnam) So, we need to offer solutions to overcome these problems Maximize the available resources to maintain stable production and reduce production costs, maintain stable revenue and profits 57 MBA CAPSTONE PROJECT REPORT + Strengthen the management, control costs, maximize equipment capacity to maintain the first volume, and then gradually increase the output to minimize production costs, maintain and expand market share market if conditions met It should be noted, while gradually raising the level of output (if possible) to ensure product quality or improve the product quality better Absolutely no loss of quality products to not reduce competition, not reduce the credibility and market share, ensuring that revenue and profits needed to make the foundation for the next plan + Focus on research, search for technological solutions (e.g adjust, replace more efficient use of raw materials), research and application of new technologies to support first and combined with enhanced management and exploitation of existing equipment to make production plans, improving product quality This is also the preparation step of technology for strategic differentiation Investment in repair, renovation or replacement of some major equipment As analysis, product quality often associated with the following characteristics: + The large size (30x45cm, 30x60cm and larger) The product has entered the market, has changed the habits of customers using the product line and will be popular in the near future Currently, in developed countries, small tiles are gradually replaced with larger tiles The production of this product line requires the production level to the next level because large size leads to increased product thickness, both of these two factors led to the firing combustion process more difficult Thickness as well as products for consumption up to 1m2 of materials for products increases + Unique designs 58 MBA CAPSTONE PROJECT REPORT Common products have simple designs and patterns (e.g surface decoration on pure, raw printed pattern ) With superior products, designs can be created from the mold press forming block design, the special enamel coating, texture patterns are essential in smooth, uniform + Quality of size and almost perfectly flatness High quality products must be sharpened to achieve the correct grind size for the nominal size brick usually uneven due to the impact of a number of factors in production technology When sharpening edges and quality of joints between the members better and more uniform Flatness of the product must be checked by automated sorting machine, the member does not meet standards will be rejected + Uniformity and attached services Highlights of uniformity is to create a space as desired by the user Please be described an example of the consistency (to clarify the importance of the consistency and the need to develop care services): A bathroom wall tiles by the high quality products include tiles synchronous primary - Decorative Border Tiles - Ceramic Decorative Painting - Ceramic floor water First, the use of the main tiles and floor tiles of the same patterns and colors is to create a more evenly and gently space Ceramic tiles and decorative borders decorative painting must also have the same color brick and tile floor with water Next is the vertical size equal to combined transplantation (stage sharpening edges solve this problem) to make up the joint system of equal, uniform, square Finally, the emergence of one or two of border tiles and decorative accents of decorative painting tiles to create a luxurious and lively space 59 MBA CAPSTONE PROJECT REPORT Through the above analysis, to meet strategic product differentiation and effective long-term, Viglacera Thang Long should urgently implement the investment plan under the plan the following equipment: Table 3.4: Lists of investment equipment Equipment At pesent Propose investment Explanation/ Reasons Spray drier (a machine press powder) Capacity of 180 tons of powder per day Renovating by replacing the hood fan and pipe system Increase production to 220 tons per day to meet production of large tiles 30x60cm thick Pouch (a rustic brick forming machine) Three 1500 ton machine Buy a new Ensure diversity rendering supplementary machine technologies with large ceramic with capacity of 3020 tiles and draft tile quality tons under the brand nam Sacmi - Italy Gid printing machine (print patterns) Six types of printers crankshaft Buying new printers Đảm bảo in gạch kích thước Hopp's belt - China to lớn, màu sắc đồng replace Ensure tiles in large size, uniformed color Edge grinder A small edge Buy a new edge grinder of Keda grinder China Ensure edge grinding products of large size Marketing, enlisting the customers’ support to promote the consumption of the products 3.1 Domestic market 3.1.1 Cooperation in training (or hiring) with consulting organizations, architecturel design and construction companies to focus on up markets, including: 60 for MBA CAPSTONE PROJECT REPORT + Orientation of product designs that meet the particular aesthetic, modern and outstanding features are difficult to imitate To solve these problems requires the study, market research dimensional depth and incorporate the design and condition of equipment and technology Example: Drawing complex design right in the mold creates the grip, then a series of stage decoration next, etc + Create more consistency of the products in a space: different types of tiles (usually tiles, decorative tile border, ceramic painting, and floor tile water) must have the appropriate colors, in particular own products to meet perspectives + Invest and deploy all the advice and usage guideline 3.1.2 Review of the product distribution system + Select strong markets for high quality products (the major cities such as Hanoi, Ho Chi Minh City, the city developed under central, provincial power) to develop products and services According to market research assessment, now, in these markets, demands for high quality products need to be differentiated more urgently and with increasingly high requirements + Select distributors that have the capacity, experience and especially loyalty to deploy advanced sales The company will make particularly attractive policies for distributors to promote more rapid and more goods, while enhancing the long-term cooperation between distributors and companies Require good coordination between distributors and marketers to best meet the supply of products, services guide, and warranty, as well as build trust with customers and confirm the brand and product class 61 MBA CAPSTONE PROJECT REPORT 3.1.3 Upgrade the display product system, release catalog for customers to easily find unique and luxurious features of the products, the perspective of creation and simple nature, as well as feasibility when applying in building a specific building + Training Cooperation (or lease) with consulting organizations, architectural design and planning to focus on the luxury market (product-oriented design, uniformity, counseling and guidance use ) + Review the distribution system with selected distributors that have the capability and experience to deploy advanced sales + Upgrade system display products, implementation services in the markets of advanced key, big cities + Deploy media campaigns, fairs, client meetings, promotion to introduce and raise our products and brands 3.2 Export market + Tighten the ties with traditional customers; gradually increase product sales to customers with incentives if possible + Currently, the Thang Long Viglacera have certain advantages when there are foreign partners, although they are supplying mostly conventional products because the market is not their inability to sell their products advanced that the main problem is in class products and services at Thang Long Viglacera is basically not meet demand + Expand the market and search for more up markets such as Japan, Korea, and other European countries + Pay attention and improve the quality of after sales service (transportation, quality guarantee, and consultancy) 62 MBA CAPSTONE PROJECT REPORT Research and Development The establishment and assignment of product research and development through advanced training in local or foreign Additional investment or replacing facilities required for research and development (such as: Other equipment modern labs, materials science and technology curriculum ) Maximum exploitation of foreign providers through its relationship to link, support training and update technology, advanced manufacturing Finance Prepare financial plan for investment in equipment (analyzed) Narrow the activities of financial investment are not effective for improving the efficiency of capital use Consider the possibility to restructure loans commercial capital towards reducing future borrowing Consider the possibility of increasing the percentage of equity, reducing debt through measures additional private equity investment profits and shareholders Take full advantage of strong points about high quality products to limit public debt, a strong focus on the collection of debts, reducing receivables from customers Organization of human resources Review all human resources to prepare implementation of strategic solutions Deploy labor recruitment of qualified and skilled technical staff especially the technology and marketing Coordinate and organize training of professional knowledge and skills to update knowledge and improve skills of workers 63 MBA CAPSTONE PROJECT REPORT Improvement and application of salary, reward mechanisms associated with these fine individuals, units in each specific activity 64 MBA CAPSTONE PROJECT REPORT CONCLUSION Creating competitive advantage is the race between businesses in the road that is not determined with the length, it requires not only speed up the initial strength, but also speed endurance On each leg of the race, the location of each enterprise is only temporary, because every business striving to overcome the competitors Thus, the competitive advantage of business may not last forever, but only in a period or a certain time With every business, it is important to select, establish a right strategy and to execute that strategy effectively In manufacturing the business operations of the business may or frequent change and adjustment But the problem arises from the change that needs to be detected and treated promptly Successfully transforming resources into competitive advantage or not and to what extent will be reflected from the test results and evaluation process during the execution of business strategy We hope this thesis can contribute a useful theory and practice in production and business activities of Thang Long Viglacera at the moment and long term in the future We sincerely wish to receive comments, to improve our knowledge more and more Thank you very much! 65 MBA CAPSTONE PROJECT REPORT REFERENCES In Vietnamese Crystal World - Strategic Management, Statistics Publishing House, Hanoi – 2009 GSO, Statistical Yearbook - 2008 Nguyen Huu Lam - Strategic management: competitive position Education Publishing House – 1998 Statistics Publishing House - Strategic Management – 2009 Viglacera Thang Long Joint Stock Company - Review Report in 2010, Business Plan 2011 Website: www.vnceramic.org.vn - Internal Information Ceramics and Construction.Association of Vietnam In English Dess G.G., Picken J.C., (1999), Beyond Productivity, Amacom, New York Ghemawat, (1991), Commitment the Dynamic Strategy, Free Press, New York John C.H.St, Harrison J.S., (1999), Manufacturingbased relatedness, synergy, and coordination, Strategic Management Journal Johnson G., Scholes K (1999), Exploring Corporate Strategy, Prentice Hall Europe Makadok R., (1999), “Interfirm Differences in Scale Economies and The Evoluntion of Market Shares”, Strategic Management Journal Porter M E., (1996), “ What is Strategy?”, Harvard Business Review 66 ... suggested "Building strategies to differentiate tile products of Viglacera Thang Long Joint Stock Company" and selected as the topic of our capstone project report The aims of the capstone project... Chapter 3: Building strategies to differentiate tile products of Viglacera Thang Long Joint Stock Company MBA CAPSTONE PROJECT REPORT Chapter THEORETICAL BACKGROUND I OVERVIEW OF BUSINESS STRATEGIES. .. STRATEGIES BEING APPLIED 39 Chapter BUILDING STRATEGIES TO DIFFERENTIATE TILE PRODUCTS OF VIGLACERA THANG LONG JOINT STOCK COMPANY I BASIC ANALYSIS FOR BUILDING STRATEGIES 40 Macro environment analysis