FORMULATING POSSIBLE STRATEGIES AND CHOOSING

2.2.4.1. MISSION:

To build possible strategies and choose them properly, at first, we have to identify missions based on information from environment. Mission is seen as general

Macro environment 1. Economic factors

2. Political and legal factors 3. Social factors

4. Natural factors

5. Technical and technological factors Microenvironment 1. Current competitors

2. Suppliers 3. Customers

4. Potential competitors 5. Alternative products

Internal environment 1. Human resources

2. Working capital

3. Environment information 4. Organizational structure

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orientation, the way to take to get desired results through strategic measures, policies and action programs. When identifying missions, it should be noted of aspects that have close relations in strategic management, such as:

• Current situation and potency of one sector or one specific organization

• Fields of action

• Service targets

• Main working means (human, research and application of advanced science – technology, mobilization and capital uses)…

• Attitude towards (internal and external) relations

• Desires and other concerns of organization during working process 2.2.4.2. OBJECTIVES:

After detecting missions, we have to set up objectives; they are results that enterprises want to achieve in short time or long time. The works of setting up targets are:

• Rechecking strategic targets to evaluate environmental factor from drafts to deployment in reality to see whether it is appropriate or not, if not then we have to make amendments

• Setting up annual targets: they are milestones we have to take to reach long-term targets

• Besides, we have to understand that policies are leading principles, methods of procedure, rules and administrative tasks… All help to establish guidance to carry out strategies.

In brief, requirements of this definition are specific, measurable, possible, flexible, unified and reasonable (because targets are taken by time).

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2.2.4.3. LIST OF PREMISES

- When we identify missions and establish targets, one important thing to do is to list premises; they are specific forecasts about external environment, basic policies to be applied, processing plans…

- Listed premises are factors and required conditions that can combine in action programs and forecasts play an important role in this period (for example, forecasts about target market, rates at which kinds and number of goods sold, how much technology and money needed to make this product, taxes and suppliers…)

The requirement of listing premises is the consistency thoroughly and therefore it should be informed clearly, so that everyone understands and deploys exactly.

2.2.4.4. ADAPTION STRATEGY:

When missions are determined, targets are set up and premises are listed, enterprises should focus on building and selecting adaption strategies to achieve targets. Strategy consists of long-term action programs so they must be broad and fundamental, from there an enterprise can deploy and process targets. Kinds of strategies can be selected such as:

- Concentrated growth strategy: this is the main strategy group focusing on renovation of current products to be sold in current or new markets.

There are 03 methods of concentrated growth:

• Market penetration strategy: is the measure to increase revenue and profit for an enterprise by selling goods being produced in current market through marketing efforts (price adaption, expansion of selling network, increase of advertisements, promotions, media)

• Market development strategy: is the measure to increase revenue and profit for an enterprise by selling goods being produced in new markets (maybe new geographical locations, new target customers or new uses of products…)

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• Product development strategy: is the measure to increase revenue and profit for an enterprise by developing new products to be sold in current market, new products can be improved from current products or simulated from other sources…

- Integrative growth strategy (links): This strategy group is appropriate to enterprises operating in strong economic sectors and they still have chances to develop more if they connect or integrate to sectors that have appropriate targets and long-term strategies. Basic integration strategies are:

• Backward integration strategy: is a growth solution by participating in supplier sectors with input factors for enterprises (providing materials for enterprises) through the kinds of new investment or buying shares and all suppliers, joint-stock companies…

• Horizontal integration strategy: is a growth solution by cooperating with enterprises in the same sector, combining their strengths to develop together

• Forward integration strategy: is a growth solution by joining current distribution sector of an enterprise. This strategy is applied when distribution sector has strong growth rate and gains much profit or goods of an enterprise having difficulties in consumption (high value inventory, regularly stop producing…) with new kinds of investment, buy out (part or whole) other enterprises or joint-stock companies…

- Diversification growth strategy: is a growth solution by attending to related sectors with being processed sector or other sectors. This strategy is appropriate to an enterprise that cannot achieve growth targets in current sector with products being sold (maturation or crisis periods) or to an enterprise, which has abundant capital and want to increase the ability to penetrate international markets and quickly grasp new technology. There are three plans for diversification growth:

• Concentric diversification strategy: is a growth solution by developing new products to be sold on new markets that such products are related to current production technology and to marketing activities of an enterprise. This strategy

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is effective only when its brand name being produced are well-known and when existing target customers have needs to buy other goods in life, thereby saving fixed costs for an enterprise with kinds of strategy as investment, buy out whole or part of other enterprises, joint-stock companies…

• Horizontal diversification growth strategy: is a growth solution by developing new products, which are not related to current production technology but support existing needs of target customers and such new products are sold in the same distribution channel; they meet current needs, this strategy is applied by buying out, newly investing, joint-stock and it is only effective when economic, cultural and social environments fluctuate in the positive ways, needs of people are satisfied by other different products and well-known companies.

• Mixed diversification growth strategy: is a growth solution by developing new products in new markets, which are not related to current production technology and markets. This strategy is deployed to limit risks in existing business such as seasonality in goods production and distribution, business environment which has several threats, an enterprise which has many weaknesses or has abundant capital…

- Retrenchment strategy: an enterprise actively decreases its growth rate compared to competitors in the sector in accordance to adaption level of each period (applied to each product separately), aiming at consolidating organizational structure of business sectors after one quick growth period or current sector does not have any chances to develop in the long time or business environment has more attractive chances… There are four retrenchment strategies such as fees reduction, payback, harvesting strategy and dissolution strategy.

- Externally-oriented strategy: this is the strategy supporting growth strategies selected by enterprises. There are some externally oriented strategies such as unification strategy, strategy to buy out other enterprises…

- Joint-ventures strategy: it is applied when one separate enterprise cannot manage their business well and they need unified power from two or more enterprises. In this strategy, the ownership of partners does not change with three

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kinds of joint ventures: international joint ventures, joint ventures to implement mutually beneficial strategies, joint ventures to combine strong sources of separate enterprises to reach common goals.

Besides, there are some other strategies such as modification strategy to increase economic efficiency, strategy to attract good labors…

2.2.4.5. STAGES OF STRATEGY FORMATION

The two missions, formulating strategies and deploying strategies, are expressed through three periods, which create a close cycle:

- Foundation stage and analysis of business strategy: is the process to analyze current situation, forecast the future, select and build strategies in line with enterprises conditions.

- Strategy deployment period: is the deployment process to bring strategic targets into corporation works; moreover, this is a complicated and hard period, so it requires high level of management arts.

- Strategic inspection and adaption period: is the process to evaluate and control results, find out measures to adapt strategy in accordance to enterprises environment.

For sectors which are in saturation period (maturity stage), the strategy implementation to increase strength is not reasonable, especially when market has small scale; so common measures in this situation are to transfer sources out of the sector by diversification or retrenchment strategies.

The strategic choices of an enterprise can be summarized as Figure 2.3

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Choice of strategies that retain an enterprise to stay with the sector change an enterprise to other sector

Concentric diversification Horizontal diversification Unrelated diversification Joint-venture

Figure 2.3: Strategic choices for an enterprise

(Source: PHD. Chiachi Tsan, Study materials of Strategic management, Assoc.

Prof. Dr. Le The Gioi – Dr. Nguyen Thanh Liem – M.S. Tran Huu Hai, Strategic management, Statistical Publishing House, Mark saunders-Philip Lewis-Adrian Thornhilll, author. MBA-Nguyen Van Dung, translator. Research methods for business. Printed in 2010. Finance Publishing House and Phan Thi Ngoc Thuan

High market growth rate

(2005), Business strategy and internal corporation planning, Science and Technics Publishing House, Hanoi)

2.3. STRATEGIES – MEASURES FOR HUMAN RESOURCE DEVELOPMENT