Professional Documents
Culture Documents
STRATEGIC MANAGEMENT
Students name: Le Tran Nguyen Nhung Students ID: MBA06022 Lecturer: PhD. Truong Quang Duoc
02/05/2013
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CONTENTS
Figures and Tables .......................................................................................................... 3 I. Introduction to the Company ..................................................................................... 4 1.1. The history of the company ................................................................................. 4 1.2. The companys structure...................................................................................... 4 1.3. The companys sales and profit .......................................................................... 5 II. Business Mission and Vision ...................................................................................... 7 2.1. Mission................................................................................................................. 7 2.2. Vision ................................................................................................................... 7 III. External and Internal Assessment........................................................................... 8 3.1. External assessment ............................................................................................. 8 3.2. Internal assessment .............................................................................................. 9 IV. Strategic Analysis and Choice .................................................................................. 11 4.1. Long term objectives ........................................................................................ 11 4.2. Short term objectives ........................................................................................ 11 4.3. Business strategies ............................................................................................... 12 V. Strategic Performance ............................................................................................... 15 5.1. Short term operating plans ................................................................................ 15 5.2. Long term business plans .................................................................................. 16 5.3. Compensation plans ............................................................................................. 17 VI. Conclusion and Recommendation ........................................................................... 18 6.1. Conclusion ........................................................................................................... 18 6.2. Recommendations ................................................................................................ 19 References......................................................................................................................... 21
Deputy Director
Deputy Director
Business Deparment
Technical Deparment
2009 639,844,867
2010 298,926,757
2011 371,534,532
2012 557,749,625
4,420,592,422 10,456,481,438
Regarding the companys profit, it fluctuated over the years. The net income grew from about VND 436 million in 2008 to VND 639 million in 2009, then suddenly declined 53.28% in 2010. In constract, it went up again to over VND 371 million in 2011, and continued increasing substantially 50.12% in 2012.
Sales Profit
2008
2009
2010
2011
2012
According to those figures, the companys profit margin declined dramatically from 9.88% in 2008 to 3.43% in 2012, especially in 2011 the profit margin reached the lowest point which was 2.69%. In the year of 2010, Binh Phat came up against general economic difficulties that made its administrative and interest expenses rise 31.89% and 56.74% respectively. As a result, the net income decreased sharply. From 2011 to 2012, the company accomplished several big contracts, so both sales and profit went up again, but sales rised with a bigger percentage than profit. Because of the inflation of the material prices, the cost of goods sold increased considerably which also caused to the reduction in the profit margin of the company.
2.2. Vision
We aim to build our reputation for excellent value and superior performance as well as play a preeminent leadership role in the mechanical manufacturing industry. Our commitment is to provide cost effective solutions to our customers, which will make us become one of the finest pioneers in the engineering field in the future.
inventory and the shortage of demand make the production meet many difficulties. Moreover, the resources for research and development from consultancy, technology and manufacturing design to leading experts as well as skilled workers are deficient and weak in capabilities. The quality of training courses for mechanical engineers is still low and not satisfy the market demand. The next issue is that if the customer is the government, the manufacturing contracts will be very big so that the project must be divided into several smaller packages. Therfore, the competitiveness could be increasing fiercely.
In a rapidly changing economy, demand for mechanical engineering products will be soaring. There are many chances to learn new technology through cooperating with foreign companies. 3.2.4. Threats: The high level of competition in the mechanical industry, not only domestic enterprises but also big foreign companies. Government policies are too unspecific to support the industry in general and small domestic companies in particular. Table 2: SWOT Analysis Helpful S (Strength) + Experiences and prestige in providing high quality products + Simple and flexible management structure as well as proactive, creative, and dedicated board of director + Close solidarity between managers and workers + Good relationships with customers and suppliers O (Opportunity) + The economy is recovering and the interest is getting lower + Domestic investment has increased, especially in mechanical industry + The demand of mechanical products and services is climbing + Chances to learn new technology through foreign cooperation External Origin Harmful W (Weakness) + The firms own funds and credit capital are still small and limited + Small size, restricted resources in innovation, research and development + Machinery and equipment is in poor condition + Most of the workers have no high professional skills T (Threat) + The high level of competition in mechanical industry + Government policies are too unspecific to support the industry and small domestic companies
Internal Origin
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o Reduce the operating costs by 3% to support a product price decrease of 1% at the end of 2013. o Create good conditions for the employees to buy shares to refine their controlling roles to the company. The expected percentage of total shares that the employees will own is 24% in this year. o Attract working people with high technical knowledge, good capability, professional skills, and promote excellent individuals to management positions. In addition, the company will send 2 or 3 core workers studying abroad with short term traing courses to help them operate new production line with modern technology effectively.
buy a new truck to deliver products for customers instead of hiring outside services. The expense will be rather high at the beginning but transportation costs may reduce a lot in the long run, especially when the company intends to expand its business. On the other hand, because of traditional relationships with the suppliers, the company can have sufficient control over in bound supplies and logistics. The most important thing which needs to be paid attention is effective cost control system. That means we must implement cost cutting technologies, stress reduction in administrative and overhead expenses as well as take full advantage of maximizing economies of scale. Finally, the firm should have positive acitivities to motivate its employees so that they can perform in their full potential to increase productivity and revenue without increasing costs. Speed based strategies: Binh Phat can hold existing market share and build customer loyalty quickly with a rapid response policy either to their needs or to market and technological changes. The company has some merits when applying this strategy including a number of technical people in sales and customer service, flexible manufacturing capabilities, strong cooperation from suppliers of major components of the products, and corporate reputation of closeness to the key customers. The main activities must be done is that providing current products quicker, accelerating product improvement and production processes as well as making decisions quickly. To implement these ones successfully, the firm needs to do several things following: Improve coordition among fuctional departments in research and development, production, marketing, and sales. In other words, an information processing system is necessary to be highly develop automated and integrated so that the communication between the departments would be better than before. Establish self managed operating teams and delegate powers to them to develop decision making at the lowest levels to increase responsiveness. Build one more warehouse and set up customer facilities in the Mekong Delta, which is the vital market of the company, to minimize delivery time and speed up technical services.
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Create a company website and email to receive customers orders and contact with them during delivery time. This website will be considerd as the main effective information channel between the company and its customers, which will save a lot of transaction expenses because it helps the firm shorten the order process and sales cycle.
Concentrated growth and market development strategies: The further strategies for Binh Phat are concentration and market development, which are based on the internal emphasis for growth and profit with a desire to maximize its strengths. On the basis of low cost leadership and quick response policy, the company has an opportunity to increase its market share of the present products in the present market. To hold key customers as well as to attract competitors ones, our firm can establish brand differentiation by giving price incentives for the increasing percentage of purchase size, initiating low prices so as to win government contracts through bidding, building good relationships with start up businesses, advertising more on our new website and applying special promotional programs. In addition to the concentrated growth, Binh Phat is able to develop its business to new markets, especially individual customers. At the present, the company already has big factory and modern technology to manufacture and install civil architectural structures. It is a crucial advantage that helps our firm succeed with this strategy. The first thing we need to do is that restructuring to expand our operations to resolve the demands for individual customers. The business department should be divided into two small units with each will focus on corporate customers and individual ones. The human resources is required to recruit more skillful workers who will perform separate tasks for each division. The technical department plays a supporting part to develop product versions to appeal to new market. Second, the company can add more channels of distribution including buying new truck as mentioned ealier or transporting by motobike with regard to small and light structures. Finally, by changing the content of advertising, our company may put up advertisement in newspapers, posters, and leaflets in local areas. Futhermore, the promotional appeals are very vital with interesting programs like big discounts at the three first times, free distribution, long warranty period, etc.
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STRATEGIC PERFORMANCE
5.1. Short term Operating Plans
Table 3: Operations in the year of 2013 This years Objectives Time Period (2013) Activities Speed up obtaining contracts from The increases of sales and profits are 10.55% and 61.36% respectively 01/07 30/09 01/10 31/12 Product price decrease of 1% due to the reduction in operating costs 02/05 31/12 02/05 31/12 small and start up businesses which will complete in less than or equal one year Increase sales to 3% and profits to 16% for the two last quarters Reduce administrative cost and costs from suppliers as well as transporters by embracing close partnerships Penetrate new market through 02/05 31/07 Sales from individual market cover 1% of total revenue 01/06 31/12 advertising campaigns, website, and product introduction at each house in local areas Plan to restructure the company which will take place in one and a half years Employees total shares are expected to 24% Provide stock options for the 01/06 30/11 employees so that they can buy shares with low prices 02/05 30/06 Workers technical skill enhancement 01/07 31/12 Encourage the employees to
traditional customers. At the same time, strengthen the position in the individual market by increasing public awareness Utilize long term capital employed effectively in manufacturing new
Employeess shareholders
salaries returns
products and extending a variety of investment. After the restructure of the company completes at the end of 2014, the salaries and returns will hopefully go up in the next 3 years
Investment in new modern machinery, and in research and development 2014 2016
Invest about 5% of total capital in new machinery which applies international technological standards and set aside 2% of total sales for technical services
The personel department will select 3 or 5 supervisors per year to take part in managerial development training courses for the next five years Reduce intermediary costs like trading
The
increase
in
and transporting, etc. as well as fulfill most of the contracts within one year to minimize the risks from fluctuating material prices and high inventory
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6.2. Recommendation
6.2.1. Budgeting: In 2012, the company has total debt of VND 5,200 million in which long term debts cover 48.56%. The capital that finances for its operations is about VND 11,500 million with 54.78% of shareholdersequity. Therfore, the ratio between total debt and capital is 45.22%, which is not bad but not so good as well. The purpose is to reduce the borrowings from banks to VND 4,650 million in 2013 that causes to the above ratio will fall to 42.5%. This belongs to grade A scale according to Standard&Poors. The expected short term debts are VND 2,390 million which percentage will be set for each activity is 50% of working capital, 35% of operating and advertising expenses, and 15% of developing the employees skills. With respect to long term financing, the borrowings could be increased to support technology and fixed assets (machinery, truck, etc.) investment, increase in public awareness of the companys products, managerial capability enhancement for managers. However, the ratio between long term debts and total capital should not be exceeded 40%. This ratio can fluctuate from 28% to 35% which would be the best. The company also needs to spend at least 5% of total borrowings for restructuring the business and 10% for incentive compensation funds. Finally, the most important thing to be most focused on is that the capital must be utilized effectively by all levels of managements and functional departments in order to make sure that the company can implement the business strategies and achieve its promising goals. 6.2.2. Controlling: After carrying out the above mentioned strategies, we need to do the performance review process periodically to ensure that timely preventive and corrective actions are taken to keep the company on track. First of all, we should control our activities systematically against some premises about environment and industry factors such as the economy has good signs for recovering, the investment in mechical industry is likely to increase, the interest rate will fall during this year, the traditional suppliers probably maintain relationships with us, or the trend of new local competitors is emerging, etc. Second, an implementation controlling program has to be executed every three months towards short term objectives and every six months or nine
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months for long term goals. This action will help the company determine whether the strategy is continuously progressing as beginning schedule or needs any major adjustments by giving feedbacks from actual performance. Some criteria that need to be managed are budgets, operating costs, product quality, employee evaluation, and customer satisfaction. Finally, the corporate managers must usually reconsider the firms strategies to respond with unexpected events such as spreading bad rumours from competitors, suddenly breaking off relations by suppiers, or rapidly declining demands of customers, etc. Regular forecasts could be very necessary to predict that kind of events as well as to propose corrective actions timely so that the company can thoroughly solve predicted problems. We will perform the strategies successfully if all of the business operations are controlled effectively.
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REFERENCES
1. Binh Phats financial statements from 2009 to 2012, Internal documents. 2. John A. Pearce II, Richard B. Robinson, Strategic Management: Planning for Domestic and Global Competition, 13th Edition, International Edition, 2013. 3. Grigore Ana-Maria, Bagu Constantin, Radu Catalina, The strategic performance management process, JEL Code, 2008. 4. ASME Strategic Issues Committee, 2028 Vision for Mechanical Engineering, The Institute for Alternative Future, Global Summit, July 2008. 5. Industrial Competitiveness Group (ICG), Viet Nam Industrial Competitiveness Report 2011, The Ministry of Industry and Trade of Vietnam and The United Nations Industrial Development Organisation (UNIDO), 2011. 6. The Ministry of Transport of Vietnam, Vietnams mechanical engineering industry development strategy until 2010 and vision to 2020, published online at http://chinhphu.vn, accessed on 8th April, 2013. 7. To Tuan, Vietnams mechanical engineering industry targets industrialization by 2020, published online at http://vovworld.vn, accessed on 8th April, 2013.
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