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STRATEGY OF HOANG ANH GIA LAI TO FACE THE CURRENT ECONOMIC PROBLEMS

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TABLE OF CONTENTS
Chapter 1. Introduction 1. Background 1.1. The downturn of Vietnam economy 1.2. The collapse of real estate market 2. Research Problem 3. Purpose 4. Objectives Chapter 2. Literature Review 1. Concept of Strategy 2. Business Strategy versus Corporate Strategy 2.1. Comperative Strategy 2.2. Corporate Strategy 3. Key strategic competitive factor 3.1. Technology 3.2. Capable Manpower 3.3. Market and Product Developments 3.4. Customer 3.5. Competitor 3.6. Supplier 3.7. Enviroment trend Chapter 3. Research Problem 1. Research Discussion 2. Research Questions Chapter 4. Methodology 1. Research Method 1.1. Research Purpose 1.2. Research Design 2. Research Approach 2.1. Qualitative vs. Quantitative 2.2. Inductive vs. Deductive 2.3. Case study Approach 3. Data collection Method 4. Data Analysis 5. Reliability and Validity 5.1. Reliability 5.2. Validity Chapter 5. Empirical Results Chapter 6. Data Analysis Chapter 7. Conclusion and Discussion Reference

Chapter I. Introduction
Vietnamese economy currently is going through one of toughest time since joining the World Trade Organization (WTO) in 2007. In 2011, despite of the efforts of the Government to revive the economy through series of measures and policies, the economy has still shown signs of instability such as: the slow of GDP growth rate, high inflation, uncertainty of the local currency and deteriorate banking system and the collapse of real estate industry. According to the data from the Government Statistic Office, the inflation rate for 2011 was at 18.15%, the second highest since 2007 and was among the highest in the world. The GDP growth rate was only at 5.89%, significantly lower than the governments initial plan of 7.50% (GSO 2011). Recent publication by the Economic Committee of National Assembly (ECNA) titled FromMacro-Economic Instability to Restructuring argues that the issues of Vietnam economy also lie in the high level of budget deficit of 4.90% GDP; the public debts and foreign debts are reaching alarming level of 52.9% and 41.1% of GDP respectively (ECNA 2012). The financial market is vulnerable with shock in interest rate and exchange rate. Companies are facing a challenge environment more than ever with decrease of demand, higher input cost, and cost of capital rising. In order to perform in such difficult period and become more competitive, strategy is critical for companies. Competitiveness, innovation and flexibility are all needed to be strengthened in order to survive. Background The downturn of Vietnam economy After two decades of transforming from closed economy during the 80s to market-oriented economy under the Reform (Doi Moi) policy, Vietnam had enjoyed as one of the success stories in economic development in the early of 21st century. Research by McKinsey Global Institute points out that since 2000, the growth rate of Vietnam economy has been only surpassed by its giant neighbor, China (McKinsey 2012). From 2005 2010, despite suffering from the global financial crisis in 2008, the Vietnamese economy still posted an impressive growth of average 7.00%. With the development of economy, Vietnam has made impressive improved in term of poverty reduction. The household survey complied by World Bank showed that the poverty headcount ratio has been reduced continuously as well as other indicators. However, recent headwind of global economy has challenged the growth model of Vietnam which relied much on investment to spur growth (ECNA 2012). Mid-year report of World Bank states that Vietnam entered 2011 in a phase of heightening macro economic vulnerability (World Bank 2012). This period was characterized of high and rising inflation rate which reached as high as 23.1% in August, 2011 (GSO 2011). Vietnam is the country with highest inflation rate among East Asia countries for four consecutive years since 2007 (ECNA 2012). The exchange rate was high volatility and the foreign reserve was diminished that lead to the Government to devaluate the local current nearly 10% in February, 2012. The countries risk was rising to the highest level after the default of one of the largest state owned enterprise, Vinashin, the ship building group. Budget and trade deficit also reached alarming points; weaknesses in banking and corporate sector are also heightening. The World Bank report concludes that these vulnerabilities and the lack of measures to address them led to the diminishing of growth prospects of the economy (World Bank 2012). Facing the instability of the economy, the Government introduced series of measures through Resolution 11 in order to put the economy back to the track and ensure the social stability. Main theme of the Resolution 11 is tightening through monetary and fiscal policies to reduce the skyrocket inflation 3

rate such as cap the growth credit under 20% and reduce government spending by 10%. According to the Annual Report of Credit Rating of Vietnam Index 2012, the enacted policies has succeeded in taming inflation, stabilizing foreign exchange rate and reducing trade deficit (CRV 2012). However, the measures also brought in expected and unexpected side effects. With tightening measures filtering through the economy, one of the first indicators that suffered was the growth rate. In 2011, the the economy only grew at 5.89%, significantly lower than 7.50% level which was the initial plan of the Government submitted to the National Assembly at beginning of the year. Into 2012, the economy continued to dip further with first half of 2012 GDP growth rate only at 4.5%, second lowest level since 2010 and only higher than the level in 2009 when the economy hit by the global credit crunch crisis (GSO 2012). The tightening policies also had weakened the consumption demand and hurt credit growth on which corporate was suffered the most. On one hand, firms could not sell products due to weak consumption which indicates by highest level of inventories. According to HSBC Report Vietnam at the glance issued in May 2012, Vietnams processing industrys inventory was estimated increased by 32.1 percent yearon-year by April. On the other hand, input cost and cost of debt was raised that drained out firms resources. Input cost such as gasoline and electricity was shot up due to the increase of global price. Furthermore, tightening monetary policies prevent firms from acquire capital at reasonable rate. Interest payment has eaten into profit as borrowing rate is as high as 25% (HSBC 2012) and many companies has not been able to tap into the credit line due hard line credit restriction from the banks. The collapse of property sector Vietnam real estate market is a relatively young industry as most of the land previously used for agricultural purposes. According to data from the General Statistics Office, until 1986, when Reform (Doi Moi) policy was introduced, ninety percent of land was belonged to cooperatives leaving no room for properties market to develop. In the period 19861992, however, there were some first movements that try to transfer the utility rights of land to households in order to encourage household farming (Jehan 2008). With the liberalization of economy, the property rights was reformed by the introduction of Real Estate Law in 1993 and modified in 2003 by which land owners now have basic rights to exchange, transfer, lease, inherit and mortgage real estate properties. Decree 26-NQ/TW which passed during the 9th meeting session of the 11th National Assembly pointed out that land was not only a precious national resource and special manufacturing material, but also the countrys internal strength and key capital. Under the decree, real estate pricing was shifted from the dual-price mechanism to the oneprice mechanism, market price being utilized (Jehan 2008). The The Vietnam real estate market experienced its first boom in late 2006 and 2007 which was coincidence with the joining WTO of Vietnam and sky rocketing of stock market. Based on CBRE report, strong grow in demand of four main real estate sub sectors of residential properties, hotel, office and retail, drove the price to be triple in 2007 (CBRE 2008). S.N. Jehan and Nga Thanh Luong, in their paper Vietnam Real Estate Market: Can it sail through capital puzzle?, states the main cause of real estate boom in 2007 was the young and wealthier population, massive inflow of foreign capital and supportive governmental policies.

During 2007 2008 period, when market was at the peak of the boom, virtually, suppliers of residential properties did not have to introduced any marketing measure to sell their products due to several reasons (i) Low competition due to small number of real estate developers in the market (ii) Demand was fueled by easy credit and speculation. As such during that period, buyers hardly could buy from primary market but had to go for secondary market and paid at least 50% premium compare with the original price. After the high time, the real estate market was cooled off in 2011 and comes into recession in 2012 with price lower in every segment and in every major city of Vietnam such as Hanoi, Ho Chi Minh City and Da Nang. According to CBRE Quarterly Report IV 2011, the price dropped on average 10% - 20% in Hanoi market in 2011 compare with 2010 (CBRE 2010). In Ho Chi Minh City price was plunged by larger percentage. Knight Frank pointed out in its 2011 Annual Report that the down turn of properties market, in particular, the residential market is the resulted of (i) Oversupply as there was wave of developers joined the business during 2008 2010 period (ii) Tightening policies of the government to curbs inflation which cut off financing for real estate sector (iii) Policies to prevent speculation in the properties market As the market become more competitive and selling become more difficult due to economic slowdown, the situation now is reversed with buyers are with the upper hand. Properties developers now cannot sell at premium by have to offer discount. Marketing strategies are employed by real estate developers to attract customers. This paper shall analyze the marketing strategies of real estate developers during current trend. Based on the classification of notable real estate agents such as CBRE or Savills, the real estate sector is divided into four categories of residential (including apartment and house), hotel, office for rent and retail (shopping malls). The largest and most valuable segment is residential market. Under the residential segment, it also can be classified into sub categories such as luxury, affordable, low income housing (based on price), for rent or for leisure (based of purpose of using). This paper shall put the detail examination on the residential market where trading and marketing activities are mostly concentrated. Research Problems The current condition of Vietnamese economy and the situation of Vietnamese real estate sector were generally weakening. As described above, the Vietnamese economy might facing a hard landing where by the growth is sluggish due to restrictive measures introduced by the Government both in term of monetary policies. During this hard time, the sector that is most suffered is real estate. Properties developers are facing serious issues including: weakening demand, credit restriction by bank, inflation of input price such as cement, steel In this context, it is important to understand which strategies may help the real estate companies to survive the crisis and improve their performances. Purpose The purpose of this research thesis is to examine successful strategies that Hoang Anh Gia Lai, the real estate company chosen as case study, could adopt to compete in this economic situation. Objectives

The objectives of this research thesis is by using single case study of Hoang Anh Gia Lai, to understand wide range of strategies adopted by the company to face the economic difficulties and deteriorate real estate industry. The focus of this research is on Strategy, trying to understand all its aspects, in particular the linkages between business problems and strategies adopted so solve them.

Chapter II. Literature Review


The purpose of this thesis is to develop a robust understanding of strategy of firm and the application into a specific case. As such, the role of this chapter is to review the literature theories and points of view on the business and corporate strategy. There are three main parts within this chapter. First section outlines on the foundation concept of strategy by looking into the historical development of the notion. Second parts of this chapter aimed to discuss the different between corporate and competitive strategy. The third section describes the theoretical framework of the major business strategic factors which behind the competitive advantages of each individual firm. The concept of strategy The term of strategy rooted from ancient Greece and derived from the word strategia, which is a war council of 10 elected generals, strategos (Rodrigues 2002). In the early days, the strategy concept was mostly associated with military context and Sun Tzu, the ancient Chinese philosopher (490 BC) was among the first person to thoroughly develop different strategies based on patterned behaviors. In his famous book, the Art of War, Sun Tzu pointed out some key principles of strategy to serve the purpose of winning a war including: setting up clear objectives, assessing the strength and weakness of their own and their opponents, obtaining a special advantage over opponents, preparing detail plan of action The principles of military is clearly can be applied into the business context and understanding military strategy can be valuable when analyzing business strategy which has been viewed from different angle over time. There are different approaches have been developed to understand the strategy concept in business context with the first study dated back in 1960s. Chandler in his book, Strategy and Structure: Chapters in the History of the Industrial Enterprise, defines strategy as the determination of the basic long term goals and objectives of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals (Chandler, 1990). This can be seen synonymous to the concept of corporate strategy (Rodrigues 2002). Another approach to define strategy based on how firm could achieve and maintain competitiveness through product market positioning was developed by Michael Porter. Under Potters view, strategy isthe process of creating a unique and valuable position with means of another set of activities. Taking this perspective, strategy can be seen as a combination of activities and the creation of a connection between the activities form the strategy of a company. By strategic positioning Porter means thechoice for activities that are different than those of the competitors with the objective to achieve a competitive advantage (Porter 1985) The context of strategy in business is analyzed not only on the external factors such as market environment or industry structure but also further studied as consequence of internal factors. Pralahad and Hamel points out those sustainable competitive advantages can be rooted from the internal organization abilities such as skills and resources (Pralahad and Hamel 1990).

Recent study has aligned strategy with knowledge management which is considered as the capability of a company to create knowledge to support the development of new products. Knowledge management involves with strategy in the term that flexibility and ability to adapt to new environment context resulted from knowledge management are the keys to a sustainable competitive advantage. Business Strategy versus Corporate Strategy One of the important issues when addressing strategy of a company is to differentiate between competitive business strategy and corporate strategy. Govindarajianstates that at business level, strategy related to the competitive modalities in the industry chosen while at corporate level, strategy concern with the operations of entire corporation (Govindarajian 1989). Competitive Strategies Competitive strategy is about how firm gain and retain competitive advantages to compete in its sector. The theory of competitive strategies is developed by Michael Porter as previously described. According to Porter, there are three generic competitive strategies: cost leadership, product differentiation and focus (Porter 1985) Cost leadership is when firm compete with its competitors by lowering the selling price and the winner of the competition is the one offers the lowest price. In order to be the winner on price aspect, firm need to produce products or provide services more efficiently than competitors to gain cost advantages. There are three main way to achieve cost leadership with the first approach is based on the economies scales. High asset turnover means fixed cost is spread to many products and as such, the unit cost is reduced. The second approach is to lower operating cost by introduce standardized products that require limit of customization or personalization. The third approach is lowering cost through procurement process: buying in large quantities to enjoy discount is one of the action under this approach. Product differentiation is a strategy based on the satisfaction customers needs by changing the product characteristics and giving to them unique or superior products value (Porter 1985). This value can be real of perceived and customers are willing to pay a higher price to have it. A differentiation strategy is appropriate where the target customer segment is not price-sensitive. Govindarajan argues that to be able to pursue the differentiation, key policies to enacted are: strong innovation environment and good R&D division. Focus is defined as the strategy that pays attention to a narrow segment of market (niche market) whereby the competition is not fierce and not many firms interested in the segment. The strategy is most suitable for relatively small firms and a focused strategy should target market segments that are less vulnerable to substitutes. Based Porter theories, each company has to follow only one type of strategy and focus on that one. He argues that these three generic strategies are mismatched with each other and if a company cannot decides which strategy to follow or wants to follow all strategies then it might be in the situation called as stuck in the middle. The stuck in the middle leads the firm to failed strategy and lost in competition with its competitors (Porter 1985). There are, however, other scholars who argue that mixing strategies is possible as those three generic strategies might not be incompatible as stated by Porter. Pertusal-Ortega et al in their research paper 7

points out that differentiation and cost leader should be considered as two dimensions among which firm can choose its strategy by mixing them. The authors of the paper argue that by drawing customers through differentiation strategy, the market share will be increased and as such it could lead to the economies of scale. On the other hand, being cost leadership could help firm save money and allocated fund to innovation and R&D activities as well as marketing to differentiate products (Pertusal-Ortega et al 2009). According to Pertusal-Ortegal et al, it should categorize stuck-in-the-middle from companies that combine generic strategies in the hybrid one. A hybrid model also has advantage of flexibility and more difficult to copy whereby it is quite easier to imitate pure strategy (Pertusal-Ortega et al 2009). Corporate Strategy Corporate strategy is the strategy that, according to Govindarajan, decides which market to sell products (Govindarajan 1989). In other word, while business (competitive) strategy is about how to compete, the corporate strategy is where to compete.One of the definitions of corporate strategy was introduced by Pralahad and Hamel that related to the term of corporate competence. Corporate strategy can be defined through portfolio of business and portfolio of coporate competence. According to the authors, corporate competence has three significant aspects: firstly, core competence provides potential access to various market segments. Secondly, core competence plays important role that contributes to the benefits of customers. The final aspect is core competence is hard for competitor to copy and follow (Pralahad and Hamel 1990). The corporate strategy then can be viewed as the matching between firms competence and industry opportunities (Govindarajan 1989). Michael Porter also attempted to define the notion of corporate strategy. According to him, corporate strategy can be consists of portfolio management, restructuring, transfer of skills and activity sharing (Porter 1987). In the view of Ansoff, there are four main types of strategies that applied at corporate level which are market penetration, market development, product development and diversification. He defined those four strategies in the Product Market Growth Matrix (Ansoff 1957). According to Ansoff, market penetration isto increase the firms revenue without changing the current products and market segment. The first way is to capture the competitors customers and increase the market share. Other ways to increase turnover is to attractnew customers of your product or persuading current clients to use more of product (Ansoff 1957). Market development is strategy when firm use its current services or products to either lure more customers in current market or attempt to entry new markets. New markets can be demographic, geographic or psychographic based. Product development is about developing new products for the market segment that the firm is already operating. Example of product development is how Vinamilk, a leading Vietnamese diary company, continuous introduces new milk, ice cream, you gout products. Finally, diversification is the strategy that based on the change of both dimension: market and product. Ansoff states that in order to implement this type of strategy firm need to have new skills, new techniques and new facilities. He argues that the reason the firm might need to pursue diversification strategy is to utilize excess resources and reduce the risk of concentrating into single products or market (Ansoff 1957). Within the diversification strategy, it is can be categorized into three approaches concentric diversification, horizontal diversification and conglomerate diversification. The notion of 8

diversification is alo related to what Anthony and Govindarajan described of generic corporate strategy. They states that corporates strategies can be considered as an axis with single industry firm in one end and the other end is unrelated diversified firm. The related diversified firm should be somewhere in the middle of the spectrum. It is explained by the author that a company might not need to be well fit into any of the three approaches mentioned above but normally it can be classified along the axis line. Ansoff also points out that in order to well execute corporate strategies, firm need to look carefully into both internal and external factors such as: political environment, the current movement and outlook of macroeconomic, the dynamics of sectors, its own the strength and weakness in comparison with competitors, alternatives of strategy. It is also important to note that coporate strategies and competitive strategies are strongly linked with each other. For example, the creation of new products can be considered as the result of the innovation process. Since advantage of new products is oftenly short lived and quickly go away, hance it is critial that innovation is made continually. If firm is continously success in introducing new products, it can retain the competitive advantages. Furthermore, having wide range of products can help firm to better serve the needs and attract more customers. According to Rothaermel et al, one of important issues is to coordinate all activities related to different products. If the coordination process is not well taken care of then there might be an issue of poor product quality and lack of nessessary differentiation (Rothaermel et al 2006). The authors also points out another aspect of new product development is to balance between the demand of market and the variety of products offered to that market (Rothaermel et al 2006). In the same manner as product development, it is argued that market development also contributes to the improvement of competitiveness and achievement of advantages (Ansoff 1957). When company enter new market segment, where geographically or demographically, it has to carefully assess its core competenece. In order to decide which market to entry, firm need to consider all aspects of tentative target market segment. The main topics that needed for carefully analyzing are: market size, growth rate of market, competition and rivalry, cost analysis, barrier to entry. Key strategic competitive factors Having understood the concept of strategy as well as the different between competitive strategy and corporate strategy, this section looks into and identifies key factors that contributed to the creating and retaining firms competitive advantages. The development of strategy is always the interation between internal and external factors. For competitive advantages, internal factors are technology, skilled workforce while the external factor associated with customers, competitors, structure of industry, suppliers, and economic trend. Technology One of the key for firm sustanaiable competitiveness is its innovation capacity. The process of innovation might be related to new management process, new manufacturing line, or new service provided. However, innovation is mostly associated with the acquiring and developing new techonologies. Michael Porter states that managers chase every new technology for their own sake (Porter 1996). Companies which have a history of investing in technology were proven to be more competitive and able to sustain that competitiveness. On the other hand, many firms failed due to the reason that they not apply or were too late in applying new technologies. Technologies seen by Larsen

and Joynt as important mean to cut time that needed to transform idea for a product to implementation in real life (Larsen and Joynt 1991). Integrated system as it called integrates the whole organization in order to improve the alignment of activities. Wiseman asserts that information system is essential to support or shape the competitive strategy of the organization (Wiseman 1985). Integrated system can provide all information and data within the organization. Technology is the base to develop and implement the integrated information system. With the application of technology, the process of development and exchange knowledge is sped up. Integrated systems allow communication of customers, suppliers, and employees linked with each other and the entire organization. Advanced technologies to collect, store and analyze data and thus assist the in process of making decision more quickly and precisely. As Quinn et al put in their paper, technology captures and distributes to professional all the knowledge that the company has built up overtime. Knowledge includes information about customers, professional databases, analytical models, successful solutions to problems and access to specialised source of knowledge (Quinn et al 1996). Three significant issues are addressed by the technological development are: increase quality of product and services, shortening delivery times and increase the price competitiveness. Time: In a competitive environment, competitiveness has a strong correlation with time. The quicker the firm offers products or services into the market, the more customers it can attract. Technology advancement assists firms in shortnening the time to develop new products and helps them to introduce to the market faster than competitors. Quality: Quality is important because poor quality is expensive for the firm because it involves extra time, rework, warranties, legal fees and most importantly, loss of customers. Nowadays, higher quality is often associated with technologya advancement. Price: Reducing cost or cost leadership is one of the most popular methods to gain competitive advantages. The process of cost reduction can be accomplished through technological development. With technology, processes are well controlled and systems are carefully monitoredand thus cost is cut. While the benefits brought in by technology are understandable, it is also noted that technology, alone, will not be an easy solution to serious problems and it will not gurantee competitive advantage (Applegate et al 1988). There are two main reasons that technology is not synonymous with competitiveness. The first one is technology is accessible for anyone who wishes to acquire; secondly, firm need a capable workforce that can use the technology effectively. Capable Manpower From the previous section, it is understood that technology alone is not enough to gain competitive advantage. Having a capable workforce to deal with the technology is critical to create value.It has been argued by Sanderson in his paper that intellectual power is more important than resource in term of adding competitive advantages to an organization (Sanderson 1998). The execution of any strategy is only feasible if there are people and the application of their knowledge, and thus knowledgable workforce is a key factor to accomplish competitiveness. Training is one of the solutions to improve the organization manpowers knowledge and is the main factor for the strategy development of each firm. Knowledge can be considered as the capability to learn. For an organization, continuous exchange knowledge between employees and with customers, suppliers and draw lessons from that is crucial to 10

enhance competitiveness. Unlike technology which is virtually available for anyone who wishes to acquire, knowledge cannot be easily copied by competitors. Knowledge is hard to imitate since it is come from the entire organization level that connected and linked in complex system (Porter 1996). In order to copy, competitors then have to copy the entire firms which can be very costly. Quinn et al states that the knowledge-based competitiveness is sustainable as it is very difficult for competiors to catch up (Quinn et al 1996). Firm with strong knowledgable workforce are better prepared for challeges and thus are in better position compare with competitors. Market and Products Development From previous section, it is known that developing new products or introducing new services is crucial to achieve organizational competitiveness. Products/or services are seen as the result of combination of resources within the organization. According to Dougherty, the combination of technology and knowledge defines the configuration, market position, price of products (Dougherty 1992). So we can understand how importance of the process of synergy between knowledge and technology. Under Porters view, in order to gain competitive advantage, firm should focus on a limit number of products. Not only focusing on products, firm should also choose and concentrate on a specific market segment. Porter argues that competing in a narrow segment of market will improve and refine expertise through learning and thus gain competitiveness. Porter also emphasis that firm should only compete in market whereby they can do better than other and leave the market that they are unable to surpass competitor (Porter 1996). Key takeaway from Porters idea is firm must create products that are different in order to be set aside from competitors. Gaining sustainable competitive advantages through differentiation can be achieved by several approaches. One of the methods which frequently mentioned is product augumentation. Quinn and Humble state that services that offered along with products is viewes as important to gain and maintain customers. They argue thatwhile products might be easier to be imiated, supporting services might require high level of knowledge which is hard to copy as mentioned in section above (Quinn and Humble 1993). Blois studies further on the topic of product augumentation and conclude that the strategy works on if several conditions satisfied. Firstly, customers perceive and prefer your products to competitors. Secondly, organization could charge more by adding value to the product, and lastly, product augmentatation should be difficult to be copied (Blois 1991). The above discussions are to explore the key internal factors that are essential for gaining and sustaining comperative advantages. The firm, however, also interact with outside and thus, analyzing external environment is equally important. The role of next section is to assess the literature on major external factors that create or sustain competitive advantages. Customers The ultimate purpose of any firm is to attract customers to their products or services, so any strategy to implement must be customer oriented. Ohmae in his book, The Mind of the Strategist, suggests that customer-based strategies are the core for all type of strategy (Ohmae 1982). Strategy is all about serving customer needs and adding value to them. Valua creation should be benefitial for customers and should be difficult to copy by competitors. Kanter has introduces the idea of customer driven in 1989 in which she states that in order to better serve customers, firm should learn to think like customers (Kanter 1989). Creating value for customer, firm must understand thoroughly the need to customers and what features they want to have in 11

products. And setting up a close and cooperative relationship between firm and customers is the key to assess and understand customer wants and needs (Shapiro 1988). Since customers are different wants, needs or perception of value, there is virtually no firm that can satisfy all types of customers. Therefore, choosing which type of customer to serve is one of critital strategic decision. According to Porter, choosing customers should be done through assessing all elemenents that have impact on the purchase decision of customer (Porter 1980). Selection of customer should be based on firms objectives and abilities. Matching firms capabilities and customers needs is the key to improve competitiveness and win customers from competitors. Creating customer value would help firm to secure the loyalty of customer. It is argued that old customer is more valuable the new one because old customer does not associated with new cost. Reichheld asserts that customer is worth more if they are loyal because loyal customers buy more, take less of a companys time, are less sensitive to price, and bring in new customers. Best of all, they have no acquisition or start-up cost (Reichheld 1996). Competitor Another key external enviroment element that is essential for the sustainability of competitiveness is competition. Mathur and Keyon argue that selecting a business strategy is essesstially to choose the type of customer to serve and the type of competitor to compete (Mathur and Keyon 1997). Porter suggests that analyzing competition enviroment is crucial to develop business strategy (Porter 1980). Understanding of the competitors strategic behavior allows the firm to formulate strategy, avoiding conflict with competitor strategy. Competitor analysis helps firms to better understand the basis for differentiation. Competitors may differentiate themselves through technology, quality, design, service. Porter also discusses on the difficulties faced when analysis competitors strategic behavior and forecasting competitor strategic movement. One of the major obstacles is how to obtain data about competitors. According to Porter, information of competitors generally found in public reports, press, market reasearch firms. Data also can be obtained from mutual customers and suppliers, ex-staff of competitors, or from observation of competitor strategic movement (Porter 1980). Supplier Suppliers in another major aspect in the creation and sustanability of firms competitive advantages. Value can be created through a close and collaborative relationship between firm and its suppliers. According to Burt, firms now prefer fewer, smaller, and smarter supplier and they would like to enjoy a long-term relationship (Burt 1989). Companies tend to keep supplier with proven track record and have a history dealing with them since it is expensive to change supplier (Porter 1980). The trend of choosing supplier also changed with focusing on suppliers that are committed in creating value for organization rather than cost and quality based. The commitment of supplier is important for a mutual benefit. Organization and suppliers relationships are all about creation of new value together. Learning is key element for this collaborative advantage. Firm become more competitive because they learn from each others. Environment trend From top down approach, analysis of external conditions is the first thing firm need to do when forming strategy. The analysis of economical, political, technological, sociological and ecological would have

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impacts on firms current and future strategic direction. The external conditions shape firms competitive advantages and competition (Sanderson 1998). In conclusion, developing strategy and acquiring competitiveness is resulted from all elements discussed above. Successful strategies are those that combine all these elements in an interactive and interrelated system. The ability to develop and sustain collaborative relationship amongst all the parts with which the firm interacts gives firms a competitive edge.

Chapter III. Research Problem


In the first chapter of this thesis paper, the current condition of Vietnamese economy and the situation of Vietnamese real estate sector were generally described. The key issues facing Vietnamese real estate firms were discussed the analysis of this first chapter. Second chapter takes a look at literature review of different aspects of strategy concept. Different theoretical basis are analyzed from various material including books and academic article. Research Discussion A first analysis of the issues that facing real esate company in the current economic and industry situation led to the following starting points: - The real estate market was hit the hardest when the economy deteriorated as price was sky rocketed in previous years. - Weakening of customer demand and policy to curb speculation significantly reduced real estate transaction. - Banking credit restriction has severely affect real esate developer, and furthermore, firms relied on customer financingf hit the most. - Strategies applied by real esate firm to increase competitiveness and capture customer including: cost leadership, product augmentation, differentiation Research Questions - Which strategies are used by real estate company to face the current situation of the economy and industry? - Why company adopted that kind of strategy? - Which type of strategies can be considered as successful?

Chapter IV. Methodology


Research Method Research Purpose According to Yin, in his book Case study research: design and methods, the goal of any research assignment can be categorized into three main purposes. First objective can be exploratory with the goal to analyze deep a subject by developing hypothesis and propositions and trying to learn new aspects . The purpose of these types of research is to answer the question what?. The second purpose is descriptive, this kind of research wants to define an event or a specific subject by describing its characteristics that are already noted. The final purpose of research project is explanatory, the researcher wants to investigate operational links related to phenomena analyzed (Yin 2009) With this thesis, the reasearch purpose is exploratory. Therefore, the research questions are focused to examine the various strategies could be adopted by Hoang Anh Gia Lai to face the current economic 13

difficuilties and in particular the down turn of properties market. Futher step of this research is to evaluate wherether those strategies are able to solve the problems. Investigating the strategies used by Hoang Anh Gia Lao, it might necessary to explain the reasons why Hoang Anh Gia Lai adopts those strategies (the explanatory purpose). However, note above, the main purpose of this research is exploratory. Research Design Research design, by definition, is the blueprint for research. It is the plan to link data collected with the operational research to the initial questions of study (Yin 2009). The reseach design deal with four major issues: question to study, data relevant, data collected, and analyzing results. The purpose of this thesis is to study the area of strategy. The perspective used wants to understand strategies that can be adopted by the case-studied company, Hoang Ang Gia Lai, especially during the current economic difficulties and weakening of real estate market. For this purpose, the research questions are mainly use to investigate those strategies, to find out why Hoang Anh Gia Lai choose to adopt those strategies. The next step was to understand which kind of data is possible to collect to investigate the purpose of this paper. It is necessary to search information related to strategies of Hoang Ang Gia Lai, the strategic decisions it made and how the company would like to solve competitive problems. A part of the data can be found from the State Secutirities Commision and company annual report since Hoang Anh Gia Lai is already listed on the stock exchange. However, it should be noted that while financial data is plenty and data on strategies of Hoang Anh Gia Lai is scare as it is not required to reveal it detail strategic descion. It is also very difficult to lead this research by using secondary data as there are virtually no article analyzing strategies or strategic choices of real estate companies in the literature and in particular about Hoang Anh Gia Lai. Consequently, the author believes that the best approach to examine this subject is to make interviews directly to person in Strategy Department of Hoang Anh Gia Lai, analysts of invesment banks that covered Hoang Anh Gia Lai tickers. By this it is possible to understand the type of problems that Hoang Anh Gia Lai is currently facing and also the strategies applied to solve these issues and improve performances. After the data collecting through interviews, a complete view of Hoang Anh Gia Lai strategy will be developed. It is possible to interpret data collected by linking these with the literature review at the beginning of this thesis paper. In fact, in the literature chapter, there are many facets of companies in a strategic perspective and it will be possible to link the theories with the practical decisions of companies analyzed. Finally, it is necessary to determine criteria for interpreting final results. Since that the analysis will have a qualitative approach, the criteria chosen is to compare the different results as different perspective to make strategy, having in this way a good range of alternatives. Research Approach Qualitative versus Quantitative Based on Bryman and Bell definition, there are two types of research associated with the kind of data to be collected and the method to be used, namely qualitative approach and quantitative approach 14

(Bryman and Bell 2011). Shank defines qualitative research as a form of systematic empirical inquiry into meaning (Shank 2002). On the other hand, quantitative approach prefers the collection of numerical data, analyzing usually a few variables but about a large number of units. The process of measurement is critical to quantitative research since it provides the fundamental links between empirical data and expression of quantitative relationships. This paper is led by using only qualitative data. Although at the beginning some statistics and numerical data have been used during the introduction discussion such as marco economic indicators, this is only to define the context of the current situation analyzed. This research did not want to lead to quantitative results about strategies but conversely the aim is to study deeper the case study selected and to understand qualitative aspects of strategy. The key tool used for this research project is the interview and it is typical of the qualitative research. Additionally, secondary data might be used if they can really improve the understanding of strategic decisions. Ospina 2004): outlines in her paper of the advantages of doing qualitative advantages as follows (Ospina Flexibility to follow unexpected ideas during research and explore processes effectively; Sensitivity to contextual factors; Ability to study symbolic dimensions and social meaning; Increased opportunities o to develop empirically supported new ideas and theories; o for in-depth and longitudinal explorations of leadership phenomena; and o for more relevance and interest for practitioners.

On the other hand, it is also pointed out by Bryman and Bell that there are several drawbacks of qualitative approach (Bryman and Bell 2011). Subjectivity: the impressions of the researcher and the selection of the case studied Replication: the difficulty in replicating the research Generalization: the impossibility to generalize from a single results to all cases Transparency: the process of data collection or data analysis might be unclear, hard to apprehend.

When applying qualitative approach in this research paper, I will try to minimize the disadvatages of qualitative method. Regarding the replication, the research is developed by trying to connect every strategy with the relative problem and context. By this, it will be easier to reproduce the research. In term of generalization problem, this paper does not try to generalize the findings to all companies operating in real estate sector. This research only examines the different features of strategy. Therefore there is not problem related to generalization. As of transparency issue, a good way to prevent is to detail of every action and reason during the research. Inductive versus Deductive According to Bryman and Bell, there are two possible ways can be used to applied theories into empirical findings: inductive and deductive. Inductive is the way research and consequent findings will use to formulate and develop the theory. Deductive approach the researcher starts from theories and create hypothesis which will be tested by findings (Bryman and Bell 2011). This research thesis will use a deductive approach. Starting from the analyzing of books and articles to understand different 15

theoretical base of competitive strategy with the aid of some statistical data, it is made the data collection and the consequent analysis with the aim to explore and understand deeper the subject. Case study approach This research thesis employed single case study as the strategy for the research. Case study by definition is an intensive analysis of an individual unit (as a person or community) stressing developmental factors in relation to environment (Merriam-Webster Online Dictionary2009). Direct interview with knowledgable persons and observation is the most suitable way in case study approaches (Yin 2009). Yin also describes when case study approach should be employed (Yin 2009): - The purpose is to answer how and why questions - The case study research can be ultilized to pilot further research or test theories - The researcher is not able to manipulate and control the behaviour of the individuals. - Contextual factors are highly relevant to the phenomena under study. - The boundaries between the phenomena and context are blurred There are multiple case study and single case study and this thesis paper adopts single case study. The reason for choosing single case study is becase: - Allow deep understanding of the strategy of just one target, Hoang Anh Gia Lai - Limited resource prevent author from examining multiple cases. As of the unit of analysis, Yin states that there are two types of design: embedded design and holistic design. Holistic designs include a single unit of analysis and its role is to analyze the global nature of the phenomenon with no logical sub-units can be pointed. Embedded designs include multiple units of analysis. Study may involve main and smaller units on different levels (Yin 2009). This research thesis adopts a single case holistic design. Data Collection Method Researchers usually employs on of the four methods to collecting data for qualitative research. These four methods are: - Individual interviews - Focus groups - Observations - Action Research In this research thesis, the author chooses to use the semi structured interview as the method of data collection. Interview is one of the most popular data collection methods in qualitative research and is a flexible method of asking people. One of the advantages is that a huge amount of data can be made from an interview. Qualitative interviews can be categorized into semi structured or in-depth interview. According to Moriarty, the semi structured interviews are based on open-ended questions about issues that the researcher thinks are relevant to the topic. The latter may only include one or two topics but in much greater detail. Both types of interview allow for the discovery of information on issues that the researcher may not have considered (Moriarty 2011). In this research project, interviews are made directly face to face to officers with key role Strategy Department of Hoang Anh Gia Lai. Interview also made with several stock analysts at investment banks that cover the company in depth. Interview is in Vietnamese and should be last about less than one hour. Before interviews, the author gather as much as possible information of Hoang Anh Gia Lai from 16

various source such as the SSC, equity research reports and annual reports. This step is essential as the interviewer needs to understand in general the business of Hoang Anh Gia, the history development of the company as well as the lacked information that he wants to extract more from the interview. A first investigation of the business context has lead to some problems for companies discussed in. Starting from the current difficulties of the macroeconomy and the problems of real estate market described in the introduction chapter, the interview questions are raised to discuss following three main topics: - Which strategies are adopted by Hoang Anh Gia Lai to face the current problems? - Why does Hoang Anh Gia Lai choose these strategies? - How is Hoang Anh Gia Lai implementing these strategies and what the possible outcome?

Data Analysis Data analysis stage is come after data is collected from interview with Hoang Anh Gia Lai officers and analysts from investment banks. According to Yin, there are four approaches of case study analysis (Yin 2009): - Relying on theoretical propositions; - Developing a case description; - Using both qualitative and quantitative data; - Examining rival explanations. Furthermore, using these approaches, it is also necessary to choose the best techniques to conduct the final analysis of data. There are five main analytic practices (i) Pattern matching, (ii) Explanation building, (iii) Time-series Analysis, (iv) Logic models and (v) Cross-case synthesis. The analysis approach used in this research paper is case description. This strategy develops a descriptive structure of each case studied and it is useful when there is not an initial set of propositions (Yin 2009). This choice depends on the kind of research, the single case study, and the absence of theoretical propositions and quantitative data. Since that there is only one unit of study, the best strategy seems to be describing the case in terms of problems faced and strategies adopted, perspective on general situation and context, business dynamics. Validity and Reliability The quality of research can be investigated through the view point of reliability and validity Validity According to Yin, the validity of research design is often classified into three elements: construct validity; internal validity and external validity (Yin 2009). The construct validity is associated with the specific concepts of the subject studied and identifies measures to match them. Internal validity deals the logical system of researchs propositions. The external validity considers whether the studys results can be generalized. In this research paper, only the construct validity is used since the research purpose is exploratory and the research strategy used is qualitative approach. The purpose of this research is to investigate single cases study and explore many aspects of strategy of Hoang Anh Gia Lai. Consequently, there is not a system of propositions that is going to be verified in this research and the results are clearly 17

not generalizable because only one case are studied. Since the aim of this paper is not to verify something or generalize results. As such, internal and external validity are not problems of this paper. Reliability The reliability of this paper is formed by using mostly qualitys sources. In the the literature review section, materials used are published by well known institutions in economic and business fields. The reliability related to interviews is made by discussing concepts directly with the respondent during the interview itself. The interviewer can establish a clear point of view of the interviewed directly with him or her, without having any misunderstanding or concept distortions.

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