This thesis is designed to evaluate and formulate business technique for FedEx Express in Vietnam to further promote the business's competitive advantages. Fred R. David's In depth tactical management Model is employed for this tactical formulation.
At the first stage of this process, FedEx Vietnam quantitative evaluations of internal, external environments and its own Competitive Ability Profile are manufactured. A strategic group of five professionals and specialists who are educated in air express transport industry is developed up to find out factors of every matrix and weight/ rating of each characteristics of these components.
Data out of this input stage shows the business's Internal Factor report shows company's weakest items are functioning under agency agreement.
FedEx External Factor score unveils the business is attentive to external environment. However the level of responsiveness to competitors and administration style in Vietnam is not high.
In Competitive Profile Matrix, FedEx rates the next position on the list of four market leaders. The areas that company must look into for improvement is customer service and marketing.
With the info from input stage, SWOT matrix and Grand strategy matrix are used to formulate all suitable strategies.
At final stage of the formulation process, all choice strategies which were selected in matching stage are placed in Qualitative Strategic Planning Matrix (QSPM) to determine which strategies out of given solution strategies are more appealing.
With the effect, the thesis goes to some recommended methods for a few key functions to put into action the two determined approaches for FedEx in Vietnam.
RATIONALE THE RESEARCH
As an infrastructure service, air express transportation playing increasingly more important role in the global current economic climate. In Vietnam, the financial booming and remarkable progress of international trade bring very high requirements for air exhibit travelling. This demand is crucial in both conditions of travelling capacity and quality of service.
Gap between customer needs and the power of the operation team
Various customer demand for value added service versus the current core products
Harder competition from main competitors
This situation requires FedEx VN to examine its strategy for necessary adjustment in order to maintain the good growth and gradually expand its market show. Which is my goal to choose this issue for my thesis.
Review strategy formulation models and theories that are applicable to the sensible business.
Evaluate FedEx's competition capacity in the context of Vietnam air communicate industry.
The research will propose suggestions for FedEx business strategy in Vietnam from now to the year 2018.
Why FedEx need to change its business strategy in Viet Nam?
What is of interest strategy for FedEx Vietnam to 2018?
Fred R. David's strategy formulation platform can be used for the strategy evaluation and selection.
The model includes three levels: input stage, matching stage and decision stage.
In the input level, a team of strategists with participation of fifteen people from regional and FedEx Express Vietnam sales, marketing, customer service and procedure management was developed up.
The team mentioned and decided on list for internal factors (for Internal Factor Analysis - IFE Matrix), external factors (for External Factor Analysis - EFE matrix) and key success factors (for Competitiveness Account Matrix).
After the three matrices created, customers of the team score weight and rate of every component factor separately. The collective IFE, EFE and CPM are made by average the score from each team member. These matrices then are brought to team discourse for final review and comment.
Secondary data from FedEx profiles, industry research/reports and related information from Internet was used for the team evaluation and evaluation.
In the corresponding stage, end result of the input stage can be used to generate possible alternate strategies. SWOT matrix and Grand Strategy Matrix will be the two techniques in this level. Result of matching stage is a consolidated work sheet with all different strategies. The strategies which are applicable in both matrices are picked up for evaluation in Quantitative Strategic Planning Matrix (QSPM).
In QSPM strategist can determine which strategy is most attractive to the firm basic on attractive rating. This is the last level of the process.
SCOPE AND LIMITATIONS
The research is for business strategy of FedEx Exhibit in Vietnam from now to 2018. However proper management is a continuing process including of strategy formulation, implementation and evaluation. However in the scope of the research, the thesis will concentrate on some business strategies advice for FedEx Exhibit Vietnam only.
Given the opportunity of the thesis, depth implementation plan and analysis/feedback for continuous improvement which are similarly important to ensure an effective strategy were not deeply talked about in the study. Without analysis and responses, management cannot get all employees mixed up in tactical management process and therefore cannot take full advantage of the process.
CHAPTER I: THEORICAL FRAMEWORK
Strategy and Business Strategy
Strategy is not really a new idea. In modern economy, when discussing business, strategy is usually the first thing to be talked about. It is considered as cornerstone of business which determines failure or success of a firm. There've been a lot of definitions by scholars and research workers around the world.
In articles "What is strategy?" on Havard Business Review in 1996, Micheal E. Porter described strategy as "creating fit among a company's activities. The success of a technique depends on doing a lot of things well - not just a few - and integrating included in this. If there is no fit among activities, there is no distinctive strategy and little sustainability. "
Regarding commercial strategy, a explanation by Kenneth R. Andrews in 1998 intended "Corporate strategy is the routine of decisions in an organization that determines and unveils its aims, purposes and goals" and it "produces the process policies and ideas for attaining those goals, and identifies the range of business the company is to pursue". Strategy also identifies the kind of economic and real human contribution it intends to make to shareholders, employees, customers and communities.
Another definition by John A. Pearce in 2000, a technique "reflects company's awareness of how, when and where it will remain competitive, against whom it will compete and then for what purpose it will compete".
In all described meanings, strategy and business strategy are almost the same in a corporate or entrepreneur opportunity.
So, in general, a small business strategy defines what sort of business/firm goes to achieve its industry and market against its competitors. So, it will represent the techniques the management can make to define and secure the future of that business. Specifically, a company strategy defines the scope of business, goals, offering worth, competitive benefits to meet customer needs as well as succeed now and in the future.
Furthermore, a business strategy should include both objectives to be achieved and the actions must be achieved to check out that route.
Business Strategy Management
Figure 1: Strategy management process
Source: Strategic Management, Statistic Publishing House 2007
The formulation step includes analysis of current situation, forecast of future status to choose and set up a proper strategy.
Implementation is an activity to achieve proper focus on(s) by using strategy formulation that lay out in earlier step.
To make the strategy working well, an important step is evaluate and adjustment. At this stage, the implementation is analyzed to see if there is any area that organizations need to change to help make the strategy more adjustable.
Business strategy management helps business clearly decides its objectives and how to archive it. It is instrumental in archiving high performance, affordable and action oriented.
With setting up of short-term objectives in aiding for long-term ones, the process involves all customers of the company, from front series employee to mature management level. This in exchange will enhance the firm to prevent troubles. Manager are certain to get support from subordinates in forecasting of the tactical planning and in monitoring of the implementation stage.
The engagement of employees in proper formulation also improves their understanding of the productivity praise relationship in every strategic programs hence, it heightens their motivation.
The strategy management also helps the company better adapt to changes of environment. The motion of environment, especially for those fast paced factors, common creates opportunities as well as risks to the firm. Continuous proper management which requires managers to analyze and forecast of the near and far future surroundings, helps manager to raised manage and make the best of opportunities while minimize the risk that firm may need to face with.
However, business strategy management process usually requires a lot of time and effort from managers. This might has a poor impact to operational responsibilities. Manager must learn to reduce this impact by arranging their duties to permit necessary time for strategic activities.
Business Strategy Formulation Process:
To hand out strategic decision, it requires a comprehensive study on inside and external environments of a company in regards to the firm aims.
Figure 2: Strategy formulation process
Source: Strategic management theory and circumstance, Fred R. David 2007
In this level, firm must gather all basic suggestions information that is required to formulate strategy. They include External Factor Evaluation Matrix (EFE), Internal Factor Analysis Matrix (IFE) and Competitive Account Matrix (CPM).
External Factor Evaluation:
EFE summaries and evaluates both macro and industry (micro) environments. Bottom on that evaluation, strategist can determine opportunities and risks to have appropriate solution. The aim is to promote opportunities and avoid or reduce impact of the threats.
Political: The way and stability of the politics factors are major factor of managers in formulation strategy. Political factors define legal and regulatory shape where the firm functions in. It includes law and regulation on reasonable trade, minimum income, air pollution, patent, trade tag and many other actions.
Economics: This about the character, environment and path the country's current economic climate in which a company operates. The factors to be assessed include interest, inflation rate, fund coverage, unemployment, risk level of investment, degree of integration of the current economic climate to world market or even to international organization that it is person in, trade balance, GDP expansion rate and fads in growth of each economic sector.
Social: demography, interpersonal structure, life-style, education, religion, etc are cultural factors that affect a company.
Technology: Technological change can have a large impact on the industry a firm runs. Creative technical adaptations can result in possibilities for services, for improvement of existing product.
Industry environment: Michael Porter's Five Push Model is the tool for this analysis.
This is the major determinant of competitiveness of the industry. Factors to be examined are variety of competitor, rate of industry development, economic of scale, sustainable competitive advantages and set cost allocation per value added etc.
The bargaining ability of suppliers is measured by determining dealer switching cost versus the firm switching cost, amount of differentiation of inputs, present of substitute inputs.
Bargaining electric power of customers is the ability of customer to power prices down, ask for more higher quality service and play competitors off one another. The level of this power depends on customer volume, transitioning cost, option of alternative products and differentiation of products.
The new entrants bring threat of higher level of competition. This risk is measured through obstacles to entry, switching cost, economics of level, product differentiation, capital necessity etc.
The lifestyle of alternative product earns risk of customer to change to other alternatives. The identified factors are comparative price of swap, customer propensity to substitute, buyer switching cost, product differentiation.
Figure 3: Industry environment (Porter Five Pushes Model)
Porter's Five Forces
Source: Mindtool. com
After gathering information, all exterior factors are quantitatively evaluated with weight and ranking report. Weight of one factor would indicate the relative importance of the factor to be successful in the firm's industry. A weight assign to a factor can be from 0 to 1 1 with condition that total weight of most factors is 1.
Rating score actions responsive level of the firm to individual factor. It varies from 1 to 4 with 1 = poor response, 2= substandard response, 3 = above average response and 4 = superior response.
Figure 4: Steps to build up EFE matrix
Select key external factors.
Weigh importance of the factors from 0 to 1 1. Total weight of most factors must be add up to 1
Rate the level of response of the organization to each exterior factor from 1 to 4 with 4 is the highest rate
Calculate weighted credit score for each factor (TAS).
TAS = factor weight * rate
Total weighted report for the firm
The total weighted report (TAS) is add up to weighing rating time rating score. The firm's EFE TAS is amount of all exterior factors. This TAS shows the responsiveness of the company to the external environment. When the rating is 2. 5 up, this means firm reaction to the environment well.
Internal Factor Evaluation
The areas to be evaluated are potential to formulate and put into action the firm's strategy from it management in any way level, readiness of the work force to put into action that strategy, capacity of the organization structure in adapting with the changes of business environment.
Finance resource, center, vehicle, raw material, etc. These things are normally mirrored on company balance sheet
These aren't assets that people can touch and see, nonetheless they are incredibly often critical in creating the firm's competitive advantages like brand, company reputation, complex knowledge, patent and trade symbol.
Capacity and performance of each function of the organization like marketing, sales, money, R&D, operation, quality management
Similarly to EFE matrix, the IFE matrix is developed via 5 steps
Figure 5: Steps to develop IFE matrix
Select key inside factors.
Weigh the importance of the factors from 0 to 1 1. Total weight of most factors must be equal to 1
Rate the amount of response of the organization to each inside factor from 1 to 4 with 4 is the best rate
Calculate weighted rating for every single factor (TAS).
TAS = factor weight * rate
Total weighted report for the firm
The total IFE TAS of the firm shows how strong the company is. If it is from 2, 5 upwards, this means the firm is within strong position.
Competitive account Matrix
CPM identifies a firm major competition and their unique advantages and weaknesses with regards to a sample firm's strategic position (David, 2007). Different from EFE, critical success element in a CPM are broader. They don't really include specific or simple fact data and even just concentrate on inner issues. The critical success factors in a Competitive Profile Matrix also are not grouped into opportunities and risks as they are in EFE. This gives internal strategic information that is also very important to the company.
By matching and aligning key exterior and interior factors, this stage will generate all feasible option strategies. The approach use in this level includes Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix, Grand strategy Matrix. Other matrices like Strategic Position and Action Analysis (SPACE) Matrix, Internal-External (IE) Matrix, Boston Consulting Group (BCG) Matrix can be viewed as to use in this matching stage.
The SWOT examination was made popular by Andrew (1965). Through evaluating of the different parts of a firm's internal and external surroundings, this analysis permit the organization to tackle its most possible and applicable strategy to get its tactical objectives.
By answer the question the way the company makes the the majority of its talents, circumvent its weaknesses, capitalize on its opportunities and manage its threats, SWOT model has an successful tool for the company long range planning platform on qualitative evaluation rather than just foundation on quantitative forecast (Edmund P. Learned, 1965).
SWOT matrix presents a system for facilitating the linkage among company talents - weaknesses - dangers and opportunities on the market place. In addition, it provide construction for strategy formulation with its 4 types of strategies: SO (Strengths-Opportunities) strategy, WO (Weaknesses-Opportunities) strategy, ST (Strength-Threats) strategy and WT (Weaknesses-Threats) strategy (Number6).
Figure 6: SWOT/TOWS Strategic Alternatives Matrix
External Opportunities (O)
External Risks (T)
Internal Advantages (S)
Strategies that use advantages to increase opportunities.
Strategies that use advantages to minimize hazards.
Internal Weaknesses (W)
Strategies that minimize weaknesses by taking advantage of opportunities.
Strategies that minimize weaknesses and prevent threats.
Source: Mindtools. com
SO - How can his company use its strengths to take good thing about the opportunities?
ST - How can his firm take good thing about its talents to avoid real and potential dangers?
WO - How do his company use its opportunities to defeat the weaknesses you are experienced?
WT - How can his firm decrease its weaknesses and steer clear of threats?
Grand Strategy Matrix
Grand Strategy Matrix can be employed by firm to choose applicable strategies from all 15 principal grand strategies platform on evaluating of two dimensions: competitive position and market expansion.
The two proportions of Grand Strategy Matrix make up a 4 quadrant axis.
Quadrant I is designed for firms that have strong competition position and operate in speedy growth industry. Ambitious strategies like market penetration, market development, and product development strategies work choice for the organization to further promote its competitiveness. The firm can also choose vertical integration to acquire business of its distributor or customer if it has excessive resources. In case the company in this Quadrant is too closely committed to an individual product, it can reduce the risk by using concentric diversification to broaden its business through acquiring or creating related business in term of technology, market or product.
Quadrant II signifies for firms which may have a vulnerable competitive position in a rapid expansion industry. These organizations must examine its present position to the marketplace and determine what make sure they are to be inadequate in competing in the market. The businesses should firstly apply extensive strategies like market penetration, market development, product development to boost it competitiveness. Using horizontal integration to obtain similar company(s) operating at the same stage of the product-marketing chain is also a suitable alternative in case the firm insufficient a unique competence or competitive advantage. In the most detrimental case when there is absolutely no chance for competitiveness improvement, divestiture or liquidation is highly recommended.
Quadrant III is good for organizations operate in slow-growth establishments and have weakened competitive position. In order to avoid of further lost or even personal bankruptcy, the firm must take major changes. Retrenchment ought to be the first strategy that the company considers to minimize cost or reduce asset. Other choices for firms on this quadrant are divestiture or liquidation.
Quadrant IV is ideal for firms who have a solid competitive position but are in a slow-moving expansion industry. Diversification to more promising development areas is the effective strategy in cases like this. The firms can follow concentric diversification strategy to broaden its business to related areas or conglomerate diversification strategy to acquire business that not synergic to its current one but have high profit percentage.
Figure 7: Grand strategy Matrix
Rapid Market growth
Slow market growth
Source: Formulation, Implementation and Control of Competitive Strategy, Pearce/Robinson, 2000
At this final stage of strategy formulation, Quantitative Strategic Planning Matrix (QSPM) is employed to evaluate feasible alternative strategies discovered in Stage 2 with suggestions information from Stage 1. Analysis through QSPM unveils the relative elegance of substitute strategies and thus it is basic for selecting specific strategies. This system allows top managers to assess alternate strategies objectively predicated on a firm's internal talents/weaknesses and exterior opportunities/risks (David, 1986).
In QSPM, left column involves key inner and exterior factors from Level 1, and the very best row includes possible option strategies from Level 2. Information of key internal/external factors and weight of each factors are extracted straight from the EFE Matrix and IFE Matrix. The top row of any QSPM includes choice strategies produced from matrixes that used in Stage 2. These coordinating tools usually create similar feasible alternatives (David, 2007).
QSPM determines best technique to the companies by calculating total attractiveness results (Multiply Attractiveness Score with Weight of each factor for every single alternative strategy) and amount Total Attractiveness Ratings of each option strategy in the QSPM stand. As stated above, weights of the internal and exterior factors are straight moved from IFE and EFE matrix in Level 2 and Elegance Ratings (AS) are defined as quantitative values with 1 for not attractive, 2 for relatively attractive, 3 for fairly attractive, and 4 for highly attractive.
Figure 8: Qualitative Strategic Planning Management (QSPM) model
Total attractive core
Total Attractiveness Ratings will show the comparative attractiveness of every optional strategy, taking into consideration the impact of the adjacent external or internal critical success factor. The higher the Total Elegance Score, the more appealing the strategic alternative is. The Sum Total Attractiveness Scores reveal most attractive strategy in each group of alternatives (Shape 8).
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