Developing the business strategy for Viettel Mobile in Vietnam for the years 2011-2015

2011 │ADVANCED MBA PROGRAM – GAMBA.X0510 │ Group No.09 CAPSTONE PROJECT REPORT DEVELOPING THE BUSINESS STRATEGY FOR VIETTEL MOBILE IN VIETNAM FOR THE YEARS 2011-2015 Do Anh Minh Nguyen Vinh Thu Pham Thanh Cong Truong Trung Nghia Class: GaMBA.X0510 HA NOI - 2011 GRIGGS UNIVERSITY GOLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT DEVELOPING THE BUSINESS STRATEGY FOR VIETTEL MOBILE IN VIETNAM FOR THE YEARS 2011-2015 Group Number: 09 1. Do Anh Minh 2. Nguyen Vinh Thu 3. Pham Thanh Cong 4. Truong Trung Nghia HA NOI - 2011 TABLE OF CONTENTS LIST OF FIGURES Figure 1.1 Levels of strategic management 10 Figure 1.2 The process of strategic management 11 Figure 1.3 The PEST and Five Forces models 14 Figure 1.4 The matrixes used in analyzing 15 Figure 2.1 Revenue and profit of Viettel from 2005 to 2010 19 Figure 2.2 Revenue of Viettel Mobile from 2005 to 2010 20 Figure 2.3 Manpower of Viettel Group from 2005 to 2010 37 Figure 2.4 Market-share of mobile phone subscribers in Vietnam (12/2010) 40 Figure 3.1 Hierarchy of competition in Vietnam mobile market 64 Figure 3.2 Levels of competition in Vietnam mobile market 64 LIST OF TABLES Table 2.1 Some data on Vietnam's economy in the recent 05 years (GSO) 23 Table 2.2 Viettel’s external factor evaluation matrix (EFE) 32 Table 2.3 CPM matrix compares the competition with a number of companies 32 Table 2.4 Some financial data of Viettel from 2005 to 2010 34 Table 2.5 Number of mobile phone subscribers in Vietnam (12/2010) 39 Table 2.6 Internal factor evaluation matrix of Viettel (IFE) 42 Table 3.1 Table of SWOT Matrix for Viettel Group 48 Table 3.2 QSPM Matrix for Viettel 54 INTRODUCTION 1. Necessity In Vietnam, after the conversion from the command economy to market economy, the local enterprises faced many difficulties in strategic management. Businesses need to research, develop a strategic tool to have enough flexibility to respond to market changes. A business strategy must be formulated on the basis of analysis and forecast opportunities, threats, strengths and weaknesses of the enterprise, helping businesses obtain general information about the external and internal business environment. Viettel Group is one successful model of change to the market economy. From a small company, facing many difficulties, unknown brand in the market, now Viettel is one of the leading service providers in the Vietnamese telecommunication market and expanding to neighboring countries. The brand positioning parts the crucial part in this achievement of Viettel. The planning and implementation of business strategy is very important to decide the existence and development of a company. Within the limits of the subject, our group offers the research and analysis to introduce “Developing the business strategy for Viettel Mobile in Vietnam for the years 2011-2015”. The research and analysis apply the theories from the Master of Business Administration program (MBA) offered by the Hanoi National University of Vietnam and Griggs University - Andrews University, the United States. 2. Objective The objective of this study is to conduct the complete top-down and competitive analyses, develop alternative strategies and select a prioritized set of strategies that will ensure a competitive advantage for Viettel and above normal returns (strategy to expand the market of Viettel Group in Vietnam during 2011 to 2015). This study based on the analysis and application of the theories of strategic management. 3. Subject and scope of the study  Subject of this topic is in-depth analysis, evaluation and provides the direction to formulate a business strategy based on the theory of business strategic management. The scope of this study based on specific statistics on the macro environment, industry and organizational environment of the Viettel Group from 2005 to 2010 and orientation until 2015. 4. Approaches Topics of study based on the methodology of dialectical materialism combined with the knowledge of strategic management subject and other subjects in the MBA program to assess overall the business operations of telecommunications services Viettel Group. In addition, the research also uses methods such as statistical analysis, analytical modeling to evaluate and develop business strategy for Viettel Telecom Group in the field of mobile telecommunications. 5. Outline The main contents of the analysis and strategic planning for Viettel Telecom Group in the period of 2011 to 2015 are presented in three chapters as the following: Chapter I. The theoretical foundation of strategic management Chapter II. Analysis of business activities of Viettel Group. Chapter III. Strategy selection and implementation solutions. CHAPTER I. THEORETICAL FOUNDATION OF STRAGIC MANAGEMENT 1.1. Concept and role of strategic management. 1.1.1. Concept. In the early stages of the development of strategic management theory, people have seen the strategic long term plan, are an integral part of the planning system of the organization and thus just press strong strategic planning function. Although there are many authors and researchers presented different ways of strategic management, strategic management but is now both a scientific definition, and is an art and science of planning, organization implementation and evaluation strategies. Therefore, during the development, the concept of strategic management has been expanded greatly. At the first phase, strategic decisions are made once for a long period of time and it is the job of senior executives. However, the process of strategic management is made regularly and continuously and requires the participation of all members of the organization. 1.1.2. The role of strategic management In the current business environment, there are opportunities and threats. Strategic management helps us to identify opportunities and threats. The perception of desired results and goals in the future can help managers and employees to understand what needs to be done to achieve success. This will encourage both the above groups to achieve short-term achievements, in order to better improve the long term welfare of the business. Strategic management process enables enterprises to match the proposed plan with the external environment. The greater the volatility is, the more effort the business has to take the initiative. To be able to survive and grow, businesses must develop their own strategic management systems that can adapt with the market fluctuations. Therefore, strategic management is in the direction of future action. It does not follow the market but change the business environment instead. In short, strategic management is a product of modern management science-based practices, accumulating experiences from many companies. However, the success of every business depends on the capacity of implementation and control of the internal system and is seen as the state of art in business administration. 1.1.3. Types of strategy Operational Strategy Corporate Strategy Functional Strategy Figure 1.1 Levels of strategic management According to Red R.David the strategy includes only corporate and business strategy. However, the strategy can be divided into three main categories: (i) corporate strategy is the strategy of the corporation or company; (ii) functional strategy is to implement a strategic business areas, business specifically; (iii) operational strategy is the implementation strategy of the operational functions of the company's HR strategy, marketing strategy ... (Figure 1.1). 1.2. Stages of strategic management In the process of strategic management business, the administrator must perform a series of sequential activities from strategic planning, strategy implementation and evaluation strategy (Figure 1.2). Feedback External Environment Strategic Intent Strategic Mission Internal Environment Strategy Implementation Business Level Strategy Competitive Dynamics Corporate Level Strategy Acquisition & Restructure Internation. Strategy Corporative Strategies Strategy Formulation Corporate Governance Strategic Leadership Structure & Control Entrepre. & Innovation Strategic Competitiveness Above Average Returns Input Figure 1.2 The process of strategic management 1.2.1. Strategy Planning Strategic Planning is the process of identifying tasks and business objectives in order to discover the internal strengths - weakness, external opportunities - threats to choose an optimal strategy instead. Developing strategies includes the design and selection of appropriate strategy for the organization. In order to do this, it should be considered from many different organizations and levels out the types of strategies. Thus, strategy planning includes some processes as the following: Vision, Mission, Objectives Top-down analysis: PEST (Macro) Stage 1: Industry (Micro, 5 forces), Business CPM/IFE/EFE Stage 2: SWOT matrix Stage 3: Strategy selection to reach objectives (QSPM) 1.2.1.1. Identify tasks and objectives The first stage of strategic management is identifying tasks and objectives of the organization. Tasks and objectives are the foundation to build up strategies. The main objectives determine what the organization expects to meet in the medium and long term. Most organizations pursues profit, achieve goals of excellence leading position. The second target is the targets that the company deems necessary if they want to achieve superior capabilities. Goals should be challenging, measurable, consistent, logical and clear. 1.2.1.2. Analysis of external environment The second part of the strategy is to analyze the operating environment outside the organization. The goal of the analysis is the awareness of opportunities from which the business environment should capture, at the same time as the threats from the environment also provides, that can cause challenges for the company that it needs to avoid. 1.2.1.3. Analysis of internal environment This analysis is to find the internal strengths and weaknesses of the organization. The organization attempts to pursue strategies to take advantage of the strengths and improve weaknesses. 1.2.1.4. Choosing the optimal strategy This was the stage to select strategies which associate with the strengths, weaknesses, opportunities and threats identified by the company. A comparison of the four factors is commonly known as SWOT analysis. The purpose of SWOT analysis is to identify strategies that direction, creating a fit or mismatch between the resources and capabilities of the company with the needs of the environment in which companies operate. Planning stage is an important stage that is meant to decide the entire strategic management process. It requires the strategy to combine intuitive judgments with systematic analysis of data in making plans and choose the alternative strategy. 1.2.2. Strategy Implementation This was the action phase of strategic management. To implement the selected strategy, the business should have specific plan for the organization, staffing and appropriate funding for the mobilization and maximum use of all resources inside and outside the organization, creating synergy and synchronization towards agreed goals. 1.2.3. Strategy Assessment This is the final stage of strategic management. The results of implemented strategies depend on the fluctuation of the environmental factors. Assessment focuses on strategic issues such as review of the factors is the basis for the current strategy; performance measurement and results achieved. 1.3. Models and matrixes 1.3.1. Models PEST model: Analysis helps to identify the external factors that are capable of being an opportunity or challenge for companies such as political, economic, social and technological factors… Five-Forces model: Analyze, forecast the competitive forces to identify opportunities and threats. According to Michael Porter, the five forces are existing competitors, new entrants, suppliers, buyers and substitutes. Figure 1.3 The PEST model (left) and Five Forces model (right) 1.3.2. Matrixes EFE (External Factor Evaluation): Allow the company to summary and evaluate economic, social, culture, political and other information and compete through the grading external factors. IFE (Internal Factor Evaluation): Summary and evaluate strengths and weaknesses of the company. This matrix shows the strengths that the company needs to maintain and the weaknesses they needs to improve to increase their competitive position. STAGE 1: THE INPUT STAGE External Factor Evaluation (EFE) Matrix Competitive Profile Matrix (CPM) Internal Factor Evaluation (IFE) Matrix STAGE 2: THE MATCHING STAGE Strengths - Weaknesses - Opportunities - Threats (SWOT) Matrix STAGE 3: THE DECISION STAGE Quantitative Strategic Planning Matrix (QSPM) Figure 1.4 The matrixes used in analyzing CPM (Competitive Profile Matrix): The main study subject is mentioned in this study specializes in the field of telecommunication that is highly competitive nowadays in Vietnam market. Some aspects of competition will be analyzed basing on the theory of D’Avenil’s 7S framework that is a key approach, can also be used widespread in the telecommunication industry and can be applied direct in a hypercompetitive markets. Thus, this theory is designed to enable companies sustain the momentum of their competitiveness through a series of initiatives that are poised to give temporary advantages rather than structuring the company to achieve internal/external fit aimed at maintaining equilibrium that are designed to sustain unsustainable competitive advantages. The mentioned factors include: (i) Stakeholder satisfaction; (ii) Strategic soothsaying; (iii) Positioning for speed; (iv) Positioning for surprise; (v) Shifting the rule of the game; (vi) Signaling the strategic intent; and (vii) Simultaneous and sequential strategic thrust. Competitive profile matrix is used to compare the company with competitors bases on factors that can affect the competitiveness of the companies within the industry. This matrix helps administrators to identify their major competitors together with their own strengths and weaknesses. SWOT (Strengths-Weaknesses-Opportunities-Threats): This is a combination of the four factors that help managers to develop alternative strategies as identified in the IFE (SW), and the EFE (OT): Strengths and Opportunities (SO): to promote the strengths and capture the opportunities. Weaknesses and Opportunities (WO): to improve the weaknesses and seize the opportunities. Strengths and Threats (ST): to utilize the strengths and avoid or minimize the threats. Weaknesses and Threats (WT): defensive strategy, to improve on the weaknesses and avoid threats. QSPM (Quantitative Strategy Planning Matrix): QSPM is analytical tool to evaluate, prioritize, and select the best strategies to reach the business objectives. This matrix requires sharp and accurate anticipation of an expert. QSPM determines the attractiveness of different strategies by utilizing or improving external and internal environment factors of the company. The number of strategies to be compared in a QSPM matrix is unlimited and more matrixes can be used to compare more strategic groups. CHAPTER II. BUSINESS SITUATION ANALYSIS OF VIETTEL GROUP 2.1. Introduction of Viettel Group. In 1989, Information Equipment Electronics Corporation was found, after more than five years of its operation was renamed Military Telecommunications Electronics Company, specializing in the telecommunications services in Vietnam market. According to Decision No. 2097/2009/QD-TTg dated 14/12/2009 by the Prime Minister, it was converted into Viettel Telecom Group. This is economic defense business with 100% state capital, legal status, private seal, logo and organizational charter. Head office: No1, Giang Van Minh St., Ba Dinh Dist., Hanoi. Phone: 84.04. 6255.6789, Fax: 84.04. 6299.6789 Email: gopy@viettel.com.vn, Website: www.viettel.com.vn Scope of business of Viettel Group includes: Supply of telecommunications services; Telecommunications, Transmission; Post Office; Terminal distribution; Finance investment; Media; Real Estate Investment; Export and Import, and Foreign Investment ... The membership units of the group include: Viettel Import Export and Trading Company Viettel Telecom Company Viettel Construction Joint Stock Company Viettel Network Company Viettel International Investment Joint Stock Company Viettel Estate Investment & Trading Company Viettel Design Consultant Company Viettel Post Company Viettel New Services Development Company Viettel Technology Company IDC Company Viettel Football Club M1 Information Plant M3 Information Factory Viettel’s Branches at 64 provinces/ cities in the country. 2.2. Business situation of Viettel from 2005 to 2010. Since it was renamed into Viettel Telecom Group so far, Viettel constantly evolves and expands in both size and quality of services. Although Viettel mobile network developed after the networks of Vinaphone, Mobifone, S-fone…, Viettel has made progress by leaps and bounds, the number of market share has been increased, and sales of products, services over the years constantly increase and gradually penetrate in the foreign market. The subscribers of telecommunications services, mobile subscribers, mobile phone subscribers in the International markets of Laos and Cambodia have continuously grown with spectacular moves in the telecommunications industry. In the five years from 2005 to 2009, Viettel continuously grew its revenues by 200% year-over-year. In particular, the revenue in 2005 only gained 2,500 billion, but in 2007, it was 16,300 billion. In the context of the world economy which was deteriorated severely, still affected by the financial crisis and economic recession, Viettel continued to maintain the high growth in consecutive years: in 2008, it was 33,000; in 2009, it was 60,600 and in 2010, it was VND91,134 billion. Viettel's profits, therefore, also continuously grew nearly VND16,000 billion in 2010 (Figure 2.1). In 2010, Viettel completed comprehensively the criteria of production and business plan set out, leading the telecommunications industry in the country. Total revenue reached VND91.000 billion, increased 52% compared to in 2009. Payment to the State budget was VND 7,628 billion, increased 45% and payment to the national defense budget was VND215 billion. Percentage of return on average equity reached 48.3%. Figure 2.1 Revenue and profit of Viettel from 2005 to 2010 (billion VND) In the area of mobile telecom business, its revenues has continuously increased year over year equivalent to the growth of the comprehensive sales. The revenues accounted for the mobile market in 2005 only gained 1,764 billion, but in 2007 was 11,317 billion, in 2008 stopped 22,643 billion, and especially in 2009 it was greater 47,000 billion although there were facing a lot of difficulties in this time (degradation economy, very high inflation and jobless). In the figure 2.2 hereinafter shows more details and clear-cut about the revenues of Viettel mobile market in Vietnam since 2005. Apart from business situation, Viettel currently is a unit which has the largest telecommunications network infrastructure in Vietnam and it will continue to be invested in expanding strongly with a large scale. Number of new transmission stations in 2010 increased more 16,300 2G and 3G stations, and raised total stations up to 42,200, accounting for 45% of total existing stations of the enterprises providing Vietnam’s mobile information services. With this station amount, Viettel has ensured that each commune in the country has at least one transmission station of Viettel. At the same time, more than 32,000 km are pulled new and increasing to