BUSINESS MANAGEMENT

Lecturer: M.A Nguyen Linh Phuong

Mail: nguyenlinhphuong@hvtc.edu.vn
Tel: 0948380189
CHAPTER 1: INTRODUCTION TO BUSINESS MANAGEMENT AND HISTORY
OF MANAGEMENT THEORIES

I, INTRODUCTION TO BUSINESS MANAGEMENT AND HISTORY OF

MANAGEMENT THEORIES
1 Nature of Business Management

What is Business Management?

Business management is a function that
operates all activities to be completed with
high efficiency and best use of all
potentials and opportunities to achieve the
goals of the business in accordance with
the law and social norms and practices.
Why do we have to carry out business
management?
2 IMPORTANCE OF BUSINESS MANAGEMENT

- Determine goals and targets of all levels.

- Utilizes resources at the optimal level.
- Create and maintain an environment conductive
to highest productivity.
- Involves all major functions in a business.
- Aanalyze the business environment.
CHARACTERISTICS OF BUSINESS MANAGEMENT
II MANAGEMENT FUNCTIONS
Management functions are basic operations in the work of the
manager. They describe what managers do.
1 Planning
- The function of management that involves setting goals in short-term and
long-term, and determining a course of action for achieving those goals.
- Planners: identify alternative courses of action for achieving objectives.
 Formulate necessary steps and ensure effective implementation of plans.
- Different types of plans and planning: strategic planning, tactical planning,
and operational planning.
2 Organizing
The function of management that involves allocating and coordinating
human resources to ensure the accomplishment of organizational goals.
- Organizing at the level of the organization (organizational : deciding how
best to departmentalize, to coordinate effort effectively.
- Organizing at the personnel level: define the roles, responsibilities, and
rights of each person.
- Organizing at the level of a particular job (job design): how best to design
individual jobs to most effectively use human resources.
3 Leading
Leading: formal and informal influence that managers use to motivate and direct the
others
- “Leading decision”: implies instruction, motivating, communicating, and
understanding people.
4 Controlling
Controlling: the process of actively monitoring and supervising activities to ensure
that performance is effective and does not deviate from standards.
- Managers: establish performance standards, assess actual performance
- Purposes of controlling: to detect and prevent errors and problems, to understand
the situation, ensure that the work-related activities of subordinates are consistent
and find out opportunities
Purpose of management functions:
- Best means of describing the manager’s job.
- Best way to classify accumulated knowledge about the study of
management.
III Managers in Business
1 Level of management
- Top management: made up of senior-level executives of an enterprise.
- Middle-level management: report to top management and serve as the
head of major departments and their specialized units.
- First-level managers: in contact with non-management employees, often
serving as supervisors or retail manager
2 Managerial skills
a Technical skill
- Manager’s knowledge and ability to use different methods and technique.
- Technical skills of the manager usually came from learning, training, and
experience.
b Interpersonal skill
- Represent a manager’s knowledge and ability to work with people
- Enable managers to become leaders and motivate employees for better
accomplishments.
- Make more effective use of human potential.
c Conceptual skill
- The ability to think in abstract, to see the whole through analysis and
diagnosis of different states  set appropriate goals
 the degree of importance of each set differs among each management
level.
3 Role of managers
- Interpersonal roles
- Informational role
- Decisional role
CHAPTER 2: BUSINESS AND BUSINESS ENVIRONMENT

1, Definition
- An organization entity involved in the provision of goods and
services to consumers.
- According to Article 4 of the 2014 Enterprise Law: “"An
enterprise is an economic organization which has its own name,
assets, a stable transaction office and has registered its business in
accordance with the law for the purpose of conducting business
operations”
Conditions to be an enterprise:
- Must have a legal entity, having its own name, having a stable transaction
office.
- Having assets as prescribed by law.
- Being entitled to register business in accordance with the provision of law
- Record continuously process of business operations, and annually prepare
accounting reports and financial reports according to the State’s regulations.
- Must comply with the provision of law.
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II Types of enterprises in Vietnam
1 State-owned enterprise
A legal entity where the state has significant control through full or majority ownership, engaging in business
activities mainly for public policy objectives.
Characteristics:
- A legal entity established, owned, and/or managed by the State.
- Operate equally other types of enterprise and take responsibility for their business activities within the
enterprise’s capital.
- Play an important role in the national economy.
- Primary objectives of state-owned enterprises: to supply public products and services such as infrastructure;
to perform the tasks of national defence and security.
- The management of state-owned enterprises consists: board of directors, control committee, general director,
deputy general directors, chief accountant and lower level managers.
2 Private enterprise
An enterprise owned by one individual who shall be liable for all activities of the enterprise to the extent of all
his/her assets.
Characteristics of private enterprise:
- Established and owned by one individual.
- The owner of private enterprise: liable personally for all activities of the enterprise.
- The owner of a private enterprise: has total discretion in making all business decisions of the enterprise.
- The owner of a private enterprise: manage and administer the business operations or employ other
persons to do so.
- Private enterprises may not issue any type of securities.
- Each individual may only establish one private enterprise.
3 Limited liability company
An enterprise whose members may be organizations, individuals, or a combination of both.
- A member: liable for the debts and other property obligations of the enterprise within the amount of
capital.
- Have legal entity status from the date of issuance of the business registration certificate.
a Limited liability company with two or more members
Characteristics:
- More than one but no more than fifty members,
- A member: has the right to assign a part or all of its share of capital contribution to other persons.
- Not issue shares.
- Management of a limited liability company of two or more members: has a Members' Council, a
chairman of the Members' Council and a director or general director.
b One member limited liability company 
An enterprise owned by one organization or one individual (hereinafter to as company owner.
- Company owner : be liable for all debts and other property obligations of the enterprise within
the amount of the enterprise’s charter capital.
Characteristics:
- Has legal entity status.
- May not issue shares.
- May not reduce its charter capital.
4 Partnership
- At least two members being co-owners of the company jointly conducting business under one common
name (hereinafter referred to as unlimited liability partners); in addition to unlimited liability partners is
limited liability partners.
- Unlimited liability partners: individuals who shall be liable for the obligations of the company to the extent
of all of their assets.
- Limited liability partners : be liable for the debts of the company to the extent of the amount of capital they
have contributed to the company.
- A partnership: enjoy legal entity status as from the date of issuance of the business registration certificate.
- May not issue any type of securities.
- All partners: constitute the Partners' Council.
5 Joint-stock company
An enterprise whose charter capital is divided into shares held by three or more organizations or individuals.
Shareholders are responsible for the debts and liabilities of the enterprise to the extent of the amount of their contributed
capital.
Characteristics of a joint-stock company:
- The charter capital: divided into equal portions called shares.
- Shareholders: be liable for the enterprise’s debts and other property obligations within the amount of capital contributed
to the enterprise.
- Shareholders: freely assign their shares to other persons.
- Shareholders: organizations or individuals. The minimum number is three, no restriction on the maximum number.
6 Foreign invested business organization
A business whose members or shareholders are foreign investors.
- Foreign investors: establish new business organizations, contributing capital, buying shares or capital contributions
of business organizations in Vietnam in accordance with Law on investment 2014.
- Before establishing a business organization, the foreign investor must have an investment project and apply for a
Certificate of investment registration
Foreign investors may contribute capital to business organizations in the following manners:
- Buy shares of joint-stock companies through IPOs or additional issuance;
- Contribute capitals to limited liability companies and partnerships;
- Contribute capital to other business organizations
Foreign investors shall buy shares or capital contributions of business organization in the
following manners:
- Buy shares of joint-stock companies from the companies or their shareholders;
- Buy capital contributions to limited liability companies by their members and become
members of limited liability companies;
- Buy capital contributions to partnerships by partners and become partners;
- Buy capital contributions to other business organizations.
7 Cooperatives
A collective economic organization, co-ownership with legal entity, is established
voluntarily by at least 07 members and mutually cooperate and assist in the
production, sales and job creation
- The state: has policies of support and preferential policies for cooperatives in
various aspects
- Many types of cooperatives: agriculture cooperative, credit unions, etc.
III Organizational structure
1 Definition
refers to the division of labour as well as the patterns of coordination,
communication, workflow, and formal power that direct organizational
activities.
Characteristics:
- Includes reporting relationships, job design, information flow, work
standards and rules, team dynamics, and power relationships.
-Need to divide, coordinate labours into distinct tasks.
2 Factors affecting organizational structure
a Production structure
- Physical layout and interdependence relations of different stages in process of making products or services.
- Helps define how organization is divided into departments.
- Larger organizations with more complicated production structure: different structures from smaller
organizations.
b Organizational strategy
- Represents the decisions and actions applied to achieve the organization’s goals, given the organization’s
resources, capabilities, and mission.
- Structure follows strategy.
- Influences both the other factors affecting the structure and the structure itself.
c Technology
- Firms: build structures suitable with its internal and the level of technology
development in the industry.
- Firms need to more focus on technical training.
d External environment
- External environment: includes anything outside the organization.
- The dynamism, complexity, diversity, and hostility of external environments:
influence the type of organizational structure
e Management philosophy of organizational leaders
Leaders following traditional management philosophy: prefer hierarchical structures
with high level of formalization.
3 Types of organization structure
a Simple structure
The first organizational structure implemented by a newly created entrepreneurial firm.
Characteristics:
- The owner-manager: makes all major decisions and monitors all activities.
- Staffs: serve as an extension of the manager’s authority.
Advantages:
- Flexible, less costly, minimizes barriers between employees in other structures.
Disadvantages:
- Apply for only small-scale companies.
- Managers: have overall knowledge
- Limits in using experts with high professional capabilities.
b Functional structure
Using functional structures group jobs based on similarity in functions.
Advantages:
- Specialization  operational efficiency.
- Members in the same function; train and share knowledge with each other
Disadvantages:
- Creates separation of different functions within an organization.
- Produces higher disfunctional conflict and poorer coordination
c Divisional structure
Departments represent the unique products, services, customers, or geographic locations the company is serving.
Advantages:
- Uses delegated authority.
- More efficient in coordinating work between different divisions.
- More flexibility.
- Have a simpler process.
Disadvantages:
- Support unhealthy rivalries among divisions.
- Increase costs.
- Lack of collaboration between departments.
- Over-emphasis on divisional more than organizational goals.
Product structure
- Each unique product or service: has its own division.
- Product structure: more efficient.
Advantages:
- Employees: gain specialized knowledge.
- Employee’s creativeness and autonomy: more encouraged.
Disadvantages:
- Replication of functions
Client structure
- Organizes employees around specific customer groups.
- Exploiting the effectiveness of client divisional structure
Advantages:
- Better execution in meeting demands of each customer group.
Disadvantages:
- Replication of functions
- Create competition in product resources.
Geographic structure
- Organizes employees around distinct regions of the country or world.
- All activities related to the business in a region: managed in one division.
Matrix structure
- Combines a traditional functional structure with a product structure.
- Created in response to uncertainty and dynamism of the environment.
Advantages:
- Improves communication efficiency, project flexibility, and innovation
- High flexibility.
- Knowledge sharing improves.
- Resources: used more efficiently.
Disadvantages:
- Conflict among managers
IV Business environment
1 Definition and characteristics of business environment
a Definition
The sum of all the external and internal factors that influence functioning of the
business.
 the total surroundings, which have a direct or indirect influence on the
functioning of business
b Business environment’s characteristics
- Being objective.
- Consists of a number of factors, events, conditions and influences, arising from
different sources  closely related to and affect each other.
- Dynamic in nature.
- Constitute an open system.
2 Macro environment
- Includes factors outside firms.
- Affect all business areas.
a Economic forces
- Four most important economic forces: growth rate of the economy, interest rates, currency exchange rates, and
inflation (or deflation) rates.
- Fluctuations in economic factors: create opportunities and challenges for businesses.
When analysing economic forces, firms can rely on some important sources of information:
- Historical data of previous periods.
- Current status data.
- Forecasts by major economists
b Political and legal forces
Outcomes of changes in government policy, laws and regulations.
- Stability of politics, the consistency of government views and policies  attracting investments.
- Laws and regulations: influence on companies’ behaviours.
- Investment and economic development policies directly affect business activities.
Some factors to be based on for making political forecasts:
- Changes in patent laws, antitrust legislation, tax rates, and lobbying activities.
- The international integration and globalization expand the scope of political and legal forces.
- Consciousness of managers.
c Technology forces
- Technological changes: both an opportunity and a threat.
- Technology related to production: new products, production methods,
machines and equipment, materials competitive advantage.
- Technology in administrative functions: information system, data
management system, management software increase efficiency and
productivity.
- Decisions on new technology also depend on: consistency of production
technology and management technology, infrastructure to use the technology,
employee training needed, etc.
d Socio-cultural forces
- Capture a society’s cultures, norms, and values.
- Fixed factors: traditions and social conventions  difficult to change.
- Flexible factors: trends habits, tastes  flexible to change
- Changes in sociocultural factors opportunities as well as threats
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e Natural forces
- Concern broad environmental issues.
- Natural events and phenomena: stronger impact on industries
- Natural factors (weather, humidity, temperature, etc): affect the
features of almost products.
- Changes in sociocultural factors both opportunities and threats.
3 Micro environment (the five forces model)
a Buyer
- Individual and organizational customers: ultimately consume products (end
users).
- Buyers’ power: bargain down prices charged by companies.
- Consumers: the group of buyers having most impact on the performance of
companies.
- Distribution intermediaries: buy products to sell for profit.
- Organizational customers (companies, social organizations, state agencies):
buy products as input of the operations.
Buyers are most powerful in the following circumstances:
- The supplying industry: composed of many small companies; buyers: large and
few in number.
- Buyers: purchase in large quantities.
- Supply industry: depends on buyers.
- Switching costs: low buyers: play off the supplying companies against each
other to force down prices.
- Feasible to purchase an input from several companies at once buyers can play
off one company in the industry against another.
- Buyers: threaten to enter the industry and produce the product themselves force
down industry prices
- Identify and evaluate both existing and potential needs of customers identify
solutions to satisfy these needs, find new customers; and maintain existing buyers.
b Suppliers
- Organizations: provide inputs into the industry.
Suppliers are most powerful in the following situations:
- The product that suppliers sell has few substitutes.
- The product of suppliers is vital.
- The company: not an important customer to the suppliers.
- Companies in an industry: experience significant switching costs
- Suppliers can threaten to enter their customers’ industry, use their
inputs to produce products
c Existing competitors
Existing competitors: consist of all companies operating in same
industry and same market.
The intensity of rivalry among established companies within an
industry is largely a function of three factors:
- Industry competitive structure;
- Level of industry demand
- The height of exit barriers in the industry: Investments in assets, high
fixed costs of exit, strategic interdependence among different business
units, the close-knit between a business unit and its industry or local
community
d Potential competitors
- Companies: not currently competing in an industry but have the capability to do so if they choose.
Barriers to entry:
- Economies of scale: unit costs fall as a firm expands its output.
- Cost disadvantages independent of size.
- Added- value products.
- Capital requirements.
- Access to distribution channels.
- Switching costs.
- Government regulation
e Substitute products
Products of different businesses or industries satisfy similar customer needs.
Substitute products: threat incumbent firms in the industry because of:
- Lower price
- Lower usage cost
- Unique advantages
In order to reduce the threat of substitute products:
- Stay focused on technology advancement.
- Investment on technology renewal.
- Create added-value products.
- Select appropriate distribution channels and market segments.
Chapter 3 Management of decision making
I Introduction to decision making in business
1 Decision making in business
Management decision making is defined as a chosen way of conducting business
among several alternatives
- How will managers choose the best one?
- How to conduct selection and narrow down the best alternatives
2 Requirements for effective decision making
* Objective and evidence-based
- Involves multiple types and sources of inputs
- Facts, evidence and data analysis  greater objectivity and confidence in
decision making.
* Optimal
- Management decision: satisfy organization objectives, gain support from all
* Concise and easy to understand
- To deliver messages in easier and cheaper ways.
- To not mispresent the message and misleading the decision
implementers.
* Legal
-Must be subject to the law
* Flexible
-Adapted to changes in the environment
-Decisions: result from the analysis of all environment conditions
and factors.
* Consistent:
- All decisions: consistent with each other and the common
organizational goals.
- Decisions issued at different point of times: not be contradictory.
- Expired decisions removed.
* Specified timetable:
- A good decision: include the date of issuance, date of validity, and an
implementation timetable.
3 Bases of management decision-making
* Organization preset goals:
-Align with goals.
-Organizationalgoals: set in different levels decisions made by lower levels: support
department goals.
* Law and social norms
-Decisions; not in violation of state legal regulations.
-Norms: a cultural value.
* Limiting factors
-Restricts a company or an organization's activities.
-Including time, raw material, machine hours or space
* Effectiveness:
- Contributes to the achievement of organizational goals
- Described from economic (revenue, sales, profit, company size)
and social perspective (employee commitment, employee
satisfaction, customer satisfaction)
* Competencies of decision makers
- Knowledge, experience, skills, and personality of the decision-
makers influence decisions
II Factors that influence the decision making process
1 Objective factors
Not controllable to the decision makers (e.g. political, social, and economic changes).
- Objective factors: decision makers have sufficient information.
- Objective factors: have ambiguous fluctuation.
- Objective factors: contain contingent elements
2 Subjective factors
Competencies of the decision makers
- Experience: enhance the effectiveness of decisions. Previous successes or failures
experience  good information for making future decisions.
- Judgment: ability to analyze and conclude based on facts Solid
bond with knowledge, maturity, and experience of the managers.
- Creativeness: ability to use imagination or original ideas to create
something, see the relation among seemingly unrelated phenomenon,
understand and support innovative ideas.
- Quantitative ability: interpret the meaning in numbers and
mathematics provides evidence and information for decision making.
I

V Decision making and implementation process

1 Decision making process
a Problem identification
- Identify problems.
- Task: businesses have to address a problem by a decision
- Expression of a problem: easily recognizable, nature of problem is not.
- Decision makers: discover the cause of a problem.
- Consideration: given to limiting factors.
b Determine criteria to evaluate alternatives
- To compare alternatives with each other determine evaluation
criteria.
- Criteria: expressed by quantitative and qualitative indicators.
- Requirements for evaluation criteria:
+ Reflect the contribution of an alternative to the goal of decision.
+ Measure the criteria used for the evaluation.
+Too many criteria will complicate the evaluation
- Importance of each criterion: differs from each other
c Alternatives identification
- Decision problem; solved in many different ways.
- Managers: find all possible alternatives.
- Managers: rely on their experience and knowledge as well as the consultancy of
experts, colleagues, and peers.
d Alternatives evaluation
- Determine their effectiveness in addressing the concerns, taking advantage of
opportunities, and meeting organizational objectives.
- Careful consideration : given to social, economic, and ecological factors.
- Managers: examine the benefits and drawbacks.
- Technical advisors and expert: help the decision makers to evaluate the effects of each
alternative and describe the impacts.
e Making decisions on best alternatives
- Ideas and opinions from different views of different people: help
managers gain a more comprehensive view on the solution.
- Managers – the decision makers: takes responsibility for what they
decided on.
2 Decision implementation process
a Documenting the decision
- After agreeing on a decision option, the decision: made in writing for
administrative use.
b Setting up an implementation plan
- The plan for implementation: must be detailed and specific.
- Who are in charge? When to start? When to complete? Means and funds to
implement? Who are responsible for each job or the whole work?
- Requirements for selecting who are responsible for the implementation of decisions:
+ Be prestige on the issue they are dealing with.
+ Be given authority for directing and controlling the implementation.
+ Must not have personal favors or interests.
c Communicating the decision
Managers: communicate decisions within the timeframes and in the manner required.
People affected by the decision: understands the decision.
d Implementing the decision
Decisions: implemented in reality mobilize resources, conduct jobs.
e Checking the implementation
- Helps to shape behavior, motivate people's responsibility.
- Well-organized checking: identify early problems  solutions: made timely.
f Adjusting the decision
Reasons for adjusting decisions:
- Sudden changes caused by external causes
- Decisions contain serious errors
- Other causes
g Decision implementation review
- Review implementation process provides experience for future
decisions.
- Managers: Consider all stages of work, analyze successes and
shortcomings, mistakes and detect unused potential.
-Identify causes of success or failure Decision implementation.
CHAPTER 4 STRATEGIC MANAGEMENT IN BUSINESS

I Overview of strategic management

1 Strategy and level of stratey
a Strategy
- “A strategy is a pattern in a stream of decisions and actions” Michael E Porter
(1996)
- “A strategy is a set of related actions that managers take to increase their
company’s performance.” Hill (2011)
- Strategy as a picture of future, including a set of organizational goals and the
course of action to accomplish them based on enterprise’s competitive
b Level of strategy

- Corporate strategy: choice of direction for an enterprise as a whole and the management of its
business or product portfolio
+ includes decisions regarding the flow of financial and other resources to and from a
company’s product lines and business units.
+ Business strategy: occurs at the business unit or product level. A business unit or strategic
business unit (SBU): a self-contained division (with its own functions; emphasizes improvement
of the competitive position of a corporation’s products or services in the specific industry.
+ Functional strategy: approach taken by a functional area to achieve corporate and business
unit objectives and strategies by maximizing resource productivity; concerned with developing
and nurturing a distinctive competence
2 Strategic management
a Definition
- The art and science of formulating, implementing, and
evaluating cross-functional decisions that enable an
organization to achieve its objectives.
- Understood as a set of decisions and actions.
b Benefits of strategic management
- Allow organizations to be more proactive, initiate and
influence
- Show significant improvements of companies (sales,
profitability, and productivity).
- Gains the understanding of and commitment from all
managers and employees.
- Understands more about changes in environment, using
resources effectively..
3 Strategic management process
a Strategic planning
The process of using appropriate methods, tools, and techniques to
determine the corporate and business strategy of an enterprise for a
strategic period.
* Typical formal strategic planning model for making strategy.
- Select the corporate mission and major corporate goals.
- Analyse the organization’s external competitive environment
- Analyse the organization’s internal operating environment
- Select strategies
b Strategy implementation
- Involves taking actions at the functional, business, and corporate levels to execute a
strategic plan.
- Entails designing the best organizational structure and the best culture and control
systems to put a chosen strategy into action.
- Senior managers: put a governance system in place.
c Strategy evaluation
- Evaluation: corporate activities and performance results are monitored  actual
performance can be compared with desired performance.
- Managers: take corrective action and resolve problems from resulting information.
- Strategic planning: on going.
II Strategic Planning Tools
1 SWOT Matrix - Strengths, Weaknesses,
Opportunities, Threats Analysis
Composed of nine cells:
- Four strategy cells.
- Four key factor cells
Strategy choices:
- SO Strategies: use a firm’s internal strengths to take
advantage of external opportunities.
- WO Strategies: aim at improving internal weaknesses by
taking advantage of external opportunities.
- ST Strategies: use a firm’s strengths to avoid or reduce the
impact of external threats.
- WT Strategies: defensive tactics directed at reducing
internal weakness and avoiding external threats.
2 BCG matrix
Recommended strategies:
- Reinvest the profits of business units in “Cash Cows” to
“Stars” and "Question Marks" that are profitable. When profit
from Cash Cows is weakened apply retrenchment
strategies.
- Divest strategic business units in the "Question mark" box
that brings in no profit in long term.
- “Dog” strategic business units : divested.
- Strategic business units located in the "Star" box: heavily
invested.
II Types of Strategy
1 Growth Strategy
a Concentrated growth strategies
- Centre on improving current products and/or markets without changing any other
factors.
- Continues to pursue its core business and seeks to achieve growth goals.
Strategies
Market Penetration
- Seeks to increase market share for present products or services in present markets
- Gaining competitors' customers.
- Attracting non-users of a product or convincing current clients to use more of a
product/service.
Market development
- Introducing present products or services into new markets.
- Targeting on new population
- A product: used in a different way new market
Product development
Seeks increased sales in the present markets by creating new or improving present products or services
- Develop new and added-value products:
+ Improve product features.
+ Improve quality: reliability, speed, durability, taste, or other features of the product
+ Change product design: shape, texture, colour, packaging…
- Product line expansion: the use of an established product brand
name for a new item in the same product category
Ways to expand product line:
- Down market stretch
- Up market stretch
- Two-way stretch
b Vertical Integration Strategies
- Expands its operations either backward into an industry or forward into an
industry.
- Establish its own operations, build the value chain.
- Purpose: strengthen the business model of its original or core business,
improve its competitive position.
- Backward vertical integration: seeking ownership or increased control of a
firm’s suppliers.
- Forward vertical integration: gaining ownership or increased control over
distributors or retailers.
c Diversification Strategies
- Process of entering new industries, distinct from a company’s core or original industry.
- Methods: acquisition, merger, or green-field development.
- Reasons to apply the strategy:
+ When an organization has successful products that are in the maturity stage of the
product life cycle and about to move to the decline stage.
+ When companies are generating free cash flow
+ To share resources and capabilities between business units to realize economies of scope.
+ To spread business risk across different industries.
+ There are attractive business opportunities in the market.
+ Create opportunity to enter international markets.
- Drawbacks:
+ Complicated management
+ Have to achieve the synergy among different business units.
+ High cost to penetrate industries reduce the shareholders’ returns
new
+ Can not help to solve the difficulties resulting from economic
recession and seasonality must have financial capability.
- Methods/Types
+ Related Diversification
+ Unrelated Diversification
2 Stability strategy
Continuing its current activities without any significant change in direction
Reasons:
- When the market growth is slowing down or even going down.
- When core business is at mature stage in the industry's life cycle and
company is satisfied with its current income.
- Small and specialized business who has found a niche and is happy with
current success and the manageable size of firm.
- Cost of market development/expansion is too expensive.
- The market environment is too uncertain and unpredictable.
3 Retrenchment Strategy
- Reduce the size of companies’ current businesses.
Applied in several cases:
- When companies need to regroup themselves to increase efficiency after a
period of rapid growth,
- When the business sector has no chance of growth in long term
- When the economy falls into crisis and uncertainty
- When the business losses is not likely to overcome,
-When there are more attractive business opportunities in the market.
Methods:
- Cost reduction
- Divestment Strategy
- Harvest Strategy
- Dissolution
4 Generic Competitive Strategies
a Cost Leadership
Lower cost structure  make and sell goods or services at a lower cost than competitors.
Advantages:
- More profitable than closest competitors.
- Cost leader gains a competitive advantage.
- Cost leaders: less affected when suppliers increase input’s price
Solutions:
- Cost leader: chooses a low level of product differentiation relative to its competitors.
- Positions products to appeal “average” customers.
- Choose strategies to increase i efficiency and lower cost structure
b Differentiation

Create a unique product that customers perceive as different or distinct in some

important way  gains a competitive advantage
Solutions:
- Choose a high level of product differentiation .
- Implement its business model, develop distinctive competencies
 CHAPTER 5 HUMAN RESOURCE MANAGEMENT

I Overview of human resource management

1 Human resource management
The process of planning, analyzing, evaluating, managing, effectively and efficiently utilizing human resources to accomplish organizational
goals.
- Main contents of human resource management: recruiting, maintaining, developing, using, and motivating human resources in an
organization.
- Purposes:
+ Attract high-skilled labours to the company
+ Use the human resource effectively and efficiently
+ Encourage employees to develop their potentials, dedicate their efforts and commit to the organization.
2 Human resource management functions
a Staffing
- Ensures organizations: have the right number of human resources, with the right
capabilities, at the right times, and in the right places attain organizational objectives
- involves job analysis, human resource planning, recruitment, and selection.
b Training and development
A process of helping employees adapt to their organizations and work responsibilities.
- Help employees fully understand what working is about in the organization and help
them become fully productive as soon as possible.
- Involves socializing and orientation for new employees  ensure a supply of highly
skilled employees.
C

c Maintenance
- Involves activities aimed at maintaining employee high performance and commitment motivating and retaining
employee.
- Includes performance appraisal, compensation, and employee relations.
- Performance appraisal: a formal system of review and evaluation of individual or team task performance.
- A compensation system: provides employees with adequate and equitable rewards for their contributions.
- Employee relations: companies’ legal responsibilities for ensuring healthy and safety work environment, employee
rights and responsibilities.
 Performance appraisal, compensation, and employee relations: influence an employee’s attitudes.
3 Human resource planning
The process of analysing and identifying the need for and
availability of human resources, setting policies and programs so
that the organization has the right number of human resources, with
the right capabilities, at the right times, and in the right places.
 should be implemented from open system approach, takes place
within the enterprise and is connected to the external environment.
a Human resource planning process
Step 1. Forecast HR supply and demand
determined by the current HR and other factors that may influence it in
the future results from assessing current HR and environmental factors
such as staff turnover.
Step 2. Formulate HR strategies and plans
Organizations: match the available supply of labour with the demand
- Case 1: demand = supply
- Case 2: HR surplus (supply > demand)
- Case 3: HR shortage (supply < demand)
Step 3. Implement strategies and plans
Strategies and plans  delivered to all departments and individuals involved.
Organization: need more detailed programs and activities related to compensation, training and
development, performance appraisal.
Step 4. Control and evaluate
Purpose: check whether the plans and programs are aligned with the HR strategies and objectives;
to evaluate the progress, and to adjust the plan if necessary.
b Forecasting human resource demand
Human resource demand are determined by many factors:
- Future workload
- Technology of the firm and technological changes
- Organizational changes
- Job structure in the firm
- Requirements to improve the quality of labour
- Staff turnover/ laid off
- Requirements to improve the quality of products and services
- Finance of the firm
c Assessing current human resource
- Employee profile
- Job analysis
- Job description
- Job specification
d Managing a human resources surplus
- Dismissal: focusing on trimming underperforming units or
employees, applied when human resource demand decreases
- Layoffs: occur when employees are put on unpaid leaves of
absence; applied to employees who have no financial hardship and
need time to settle their own works.
- Employee leasing: A company signs a contract with another to
arrange their employees work for the other company for a period of
time; applied to high-skilled labous for specialized areas in difficult
time.
- Reduce working hours or work together: to prevents
employees from leaving their jobs when the workload drops
managers and employees in the business: agree to reduce
working hours or two employees will work in shifts for the
same job.
- Early retirement buyouts: to encourage more senior workers
to leave organizations early
- Attrition and Hiring Freezes: occurs when individuals quit,
die, or retire and are not replaced.
II Recruiting and selection
1 Recruiting
the process of generating a pool of qualified applicants for organizational jobs.
2 Alternatives of recruiting
a Overtime
When the workload increases a company request employees to work
reasonable overtime.
Advantages:
- Save time and cost for recruiting
- Increase employee income
- No change in organizational structure and payroll list
Disadvantages:
- Have negative impact on health and psychology of staffs.
- Employees may pace themselves to ensure overtime
b Outsourcing
An agreement in which one company contracts-out a part of their existing internal
activity to another company.
- Involves the contracting out of a business process and/or non-core functions.
- Independent contractors: used in a number of areas.
c Temporary employees
The use of temporary workers: organization’s works are subject to seasonal or other fluctuations.
Advantages: save cost
Disadvantages: mainly provides clerical workers.
d Employee leasing
Leased employees: remain with an organization for longer periods than temporary employees
Advantages: cost saving
Disadvantages: quality of leased labors which includes professional skills, experience, age,
morality, etc.
3 Factors affecting recruiting process
a External factors
- Labor market: unemployment rate, demand and supply in the labor market, etc.
- Employment regulations: regulations related to physical appearance, sex, or
religious background.
- Organization image: desirable employers are better able to attract more qualified
applicants
b Internal factors
- Financial position: impact on recruiting., and recruiting budget.
- Internal human resource policy
- Management philosophy: reflects in the recruiting methods, techniques, and
procedures
4 Recruiting sources
a External recruiting sources
- Schools, college and universities
- Employee referrals
Advantages:
- Low cost
- Employee referrals: receive more accurate information about their potential jobs.
- Employee referrals: excellent means of locating potential employees in those
hard-to-fill positions
- Companies: know more about their candidates
Disadvantages: violate equal employment regulations
- Re-Recruiting of Former Employees
Advantages: time saving
-Recruiting employees from other firms
Advantages: Take full advantage of high qualified applicants from
competitors companies greater development resource
- Unemployed people
Firms: downsize their operations, go out of business, or merge with other
firms, leaving qualified workers without jobs.
- Free-lancers: self-employed workers, hired to work for different
companies on particular assignments (writers, artists, dentists, architects,
etc) and possess creativity or in-depth professional expertise
b Recruiting methods
Advertisements: most common methods of attracting applicants.
Advertising methods: websites, newspapers, trade journals, radio,
television, billboards posters, and email, etc
- Advantages: reaching a large audience of possible applicants
-Disadvantage: expensive
Employment agencies
- Advantages: bring in fast and high quality recruiting services
- Disadvantages: required certain commission
Internship: placing a student in a temporary job with no obligation
either by firms or by students
- Advantages: low cost, applicants understand more about employers
and firm can make a better judgement regarding the person’s
qualifications.
Employee referrals: involve an employee of the firm recommending a
friend or associate as a potential member of the company
Professional Associations: offer a placement service to members as
one of their benefits
- Placement centre: established at national meeting for the mutual
benefit of employers and job seekers.
5 Selection process
a Preparation for selection process
- Decides on who are in charge of a selection and its objectives
- HR department staff and managers of departments that have job vacancies:
involved in selection
b Job posting
Choose the appropriate means to post job announcement  helps employers
provide notices of job opening
c Application submission and screening
- Applicants: submit application designated to the company’s requirements
- Employers: select qualified candidates and screen out ones whose
qualifications do not match with requirements
d The first interview
- Lasts from 5 to 10 minutes
- Applicants: fill in missing information and discuss about information related to
applicants’ profile (qualifications, experience, health, and family status)
e Testing
Literacy tests, skill-based tests, psychological measurement tests, and honesty tests:
being utilized to assess various individual factors
f Comprehensive interview
- Refers to meeting between two parties through questions and answer to reach
mutual understanding.
- Applicants can ask interviewer for more details about the job and the company
g Background Investigation
- Verify that information on the application form is correct and accurate
- Firms: check all references and former employers
h Medical/Physical examination
screen out individuals who are unable to physically comply with the requirements of a job
i Job offers
- Managers: decide who are eligible to receive the job offers
- Promptly notify the rejection to applicants who are not hired.
j Job arrangement
New employees: placed in appropriate job positions, introduced to their supervisors and
other colleagues, listen to the introduction of the company’s formation and development
process, the company’s rules, and career path, etc.
IV Compensation
1 Theories of motivation

Maslow’s hierarchy of needs

2 Concept of compensation
- Measures the total remuneration, in cash or in kind, that accrues to
employees in return for their work during a period of time attract, retain
and motivate employees.
- Includes base pay, variable pay, benefits, and nonfinancial compensation.
a Base pay
- Basic compensation that an employee receives, usually as a wage or a
salary.
- Hourly pay: based on time, payments directly calculated on the amount of
time worked.
- Overtime: be paid to certain salaried employees as defined by laws.
b Variable pay
- Compensation: linked directly to individual, team, or organizational performance.
- Most common types of variable pay: bonuses and incentive program payments.
-Main purpose: influence on employees’ behaviour, improve the performance of
employees improve productivity and quality of work.
c Benefits
- Benefit: an indirect reward (health insurance, vacation pay, birthday gifts, home leaves,
travel allowance, or a retirement pension)
- Purpose: encourage employees’ contribution to organization, performance, and
commitment.
d Non financial compensation
- Personal satisfaction that a person receives from the job itself-
motivate workers.
- Some factors related to job: job security, job freedom,
responsibility, opportunities for personal growth, participate in
decision making, interesting work, flexible time, etc.
- Some factors related to working environment: Corporate culture,
relationship among colleagues, offices, and uniform.
3 Factors affecting compensation
a External factors
-Labor supply
-Popular pay level in the industry and local area
-Laws and regulations
-Economic status
-Labour union
-Cost of Living.
b Factors related to the organization
- The industry where the company is operating
- Labour union in the organization
- Profitability and ability to pay.
- Company’s size
- Technology
- Compensation strategy
c Job- related factors
- Skills requirements: decision making, management skills, social skills, creativity, flexibility.
- Responsibility for financial performance of a unit, property, decision making.
- Other requirements: work under pressure, physical health.
- Working conditions: tools and equipment, light, noise, dust, risk
d Employee-related factors
- Level of performance.
- Work experiences and length of service
- Loyalty.
- Potentials.
CHAPTER 6. QUALITY MANAGEMENT

I Nature and role of quality management

1 Quality
According to the International Organization for Standardization (ISO):
“Quality is the totality of features and characteristics of a product, service, or a process that bears
on its ability to meet the needs of customers and involved parties.”
2 Dimension of quality
- Performance: involves measurable attributes.
- Features: basic functions
- Reliability:
- Conformance: degree to which a product meets pre-established standards.
- Durability: tells how long a product lasts
- Serviceability: the ease of getting repairs, the speed of repairs, and the courtesy and
competence of the repairperson.
- Aesthetics: how a product looks, feels, sounds, tastes, or smells.
- Perceived quality: Reputation, brand name, etc- indirect factors defining quality to the
consumers.
3 Quality management
Quality management is a set of management functions that defines quality goals, policy,
responsibilities and implement them by planning, controlling, adjusting and enhancing quality.
- Quality management: a set of management functions i.e. planning,
organizing, controlling, and adjusting all activities and processes.
- Goal of quality management: ensure the quality of products and
services in accordance with customer demand at an optimal cost.
- How do the products and services of the business meet the
requirements of customers? How effective are the production of
products and services?
- Quality management: be implemented through a certain mechanism
and a policy that promotes quality development and responsibilities.
4 Quality management principles
- Customer focus: meet customer requirements and strive to exceed
customer expectations.
- Leadership: establish unity of purpose and direction.
- Engagement of people: enhance capability to create and deliver value
to the products.
- Process approach: Consistent and predictable results are achieved more
effectively from optimizing the system.
- Systematic approach: ensure the synchronism and consistency in all
activities
5 Role of quality and quality management

Why do managers have to increase products’ quality?

- One of important factors determining the competitive competency of enterprises.
- Improving the quality of products better satisfy customers.
- Improving product quality increasing productivity.
-Improving quality  increased use and socio-economic benefits per unit of input,
saving material consumption, labour, and capital.
II Quality Management Functions
1 Quality planning
- Define objectives, policies, methods, resources and tools to achieve product quality
goals.
- Good quality planning helps businesses orient the quality management to a unified
system, to utilize resources more efficiently reduce the cost of quality.
The “Plan" phase of PDCA for quality management covers:
- Market research to understand customer needs for products and services,
- Set quality goals and policies.
- Develop specific plan to achieve quality goals.
- Transfer the plan to those who are involved.
2 Implementation
The process of implementing quality policies, strategies and plans through specific activities,
techniques, and methods to ensure the quality of products according to the requirements.
This phase covers:
- Ensure full awareness of the goals, needs and benefits of achieving quality objectives for
those involved.
- Explain exactly how and what specific tasks need to be done and.
- Organize necessary training and education programs for those who implement the plan.
- Develop a motivation program encouraging people to actively participate in quality
management.
3 Checking and controlling
- The activity of monitoring, detecting and evaluating defects of the process, products
and services.
- Purpose: find out the defects in processes and products at all stages, identify causes
of such problems
Main tasks in “Check” phase involve:
- Evaluate and determine the level of actual quality achieved by the enterprise.
- Compare the actual with the planned quality to detect deviations.
- Analyse data to find improvement.
- Carry out necessary activities to control errors, ensuring compliance with quality
requirements.
Two basic issues need to be assessed: the level of compliance with quality goals and
plans; and the accuracy of the plan itself
4 Adjusting and enhancing
- Purpose: to help the quality system meet recognized quality standards set and make better
products.
Main directions:
- Develop new products, diversify products.
- Adjust and improve processes to reduce defects.
- Innovate technology.
Main steps of adjustment and enhancement:
- Identify specific requirements for quality enhancement, develop quality enhancement plans.
- Prepare and provide necessary resources: fund, technology, labour, etc.
- Training, encouraging employees get more involved in the implementation of quality
enhancement plans.
III Quality control tools
 CHAPTER 7 RISK MANAGEMENT
I Risk and risk management
1 Concept and classification of risk
a Risk
Traditional approach
"Risk is the uncertainty of loss" (Allan Wilet, 1951)
* Two attributes:
- Uncertainty: occur in the future and no one can assert it with certainty.
- Loss and damage
Modern approach
Risk is an objective situation in which there is likelihood of a deviation from the
expected result
Attributes of risk
- An objective event
- Associated with uncertainty.
- Deviation from expected results fundamental to determining risk
- Bring about positive results or losses and damages
Attributes of risk in business:
- Not to avoid
- Enterprise risk-taking culture
- Indispensable and associated with every business activity
b Types of risk
- Scope of impact:
+ Fundamental risk
+ Particular risk
- Nature of risk:
+ Speculation risk
+ Pure risk
- Cause of risk:
+ Risks due to objective factors
+ Risks due to subjective factors
c Types of risk in enterprises
- Hazard Risks
- Financial Risks
- Operational risks
- Strategic Risks
2 Risk management
a Definition
Enterprise risk management is a systematic, comprehensive
management process that prevents and minimizes the loss of risks
Process of risk management
- Risk identification
- Risk analysis
- Risk assessment
- Risk treatment
- Risk financing
b Purposes of risk management
Protects and adds value to organizations and shareholders
c Roles of risk management
- Provide a framework that enables future activity to take place in a consistent and
controlled manner.
- Minimize losses and undesirable outcomes
- Realize opportunities with high profitability
III Risk control and financing
1 Risk control
a Risk avoidance
b Risk prevention
c Risk reduction
- Reduce the likelihood of the risk happening
- Reduce the impact if the risk occurs
d Risk transfer
Transfers the whole or a portion of risk through insurance, outsourcing or
hedging.
e Risk diversification
Spreads the risk from a specific area to different sections.
2 Risk financing
a Internal loss financing
* The retention of risks is used when:
- Risk occurrence frequency is low.
- The impact and the likelihood of risk are predicted with relatively high
accuracy.
- The cost of risk transfer is too high.
*Classified into two types: unplanned risk retention and planned risk retention.
b External loss financing
- Contractual transfer
- Derivatives
- Insurance contracts.