Ha Noi – The capital of Viet Nam was expanded its boundary to 3,300 square kilometers in 2008 with more than 6 billion citizens, it becomes top 17 biggest capitals in the world.
The expansion of the city certainly brings many opportunities for development of economy, especially for in infrastructure construction and transportation industry. However, come along with opportunities, many challenges might arise for firms in the transportation industry to adapt the environment: congestion traffic, unstable of fuel expenditure and overlap of tariffs policies. Recently, urban transportation in Viet Nam is one of the most pressing social; numbers of people migrated to urban increase faster than the development of infrastructure.
The number of vehicles such as automobiles, motorbikes increased while transportation infrastructure unsustainable; ?? inconsistent results curb traffic accidents and traffic congestion is unsustainable, the number of deaths due to accidents traffic is high and the potential increased risk. Traffic congestion in major cities such as Ha Noi, Ho Chi Minh City … is becoming increasingly complex. It shall be the challenges for policy makers, and is also a significant barrier in the process of urbanization and economic development of the country.
In addition, traffic accidents have become one of the costliest and deadliest in the field of public health worldwide. Every year, there are about 50 million people were injured and 1. 3 million people die from traffic accidents worldwide. In Viet Nam, according to 2012 data, there are 10,081 traffic accidents killed 9,838 people and injured 7,624 others. And at the moment, Ha Noi’s population is 7. 1 million people (90 million nationwide) with millions of tourists every year in which international arrivals to Viet Nam more than 6. 8 million and domestic tourists are counted for 32. million, the participant of those tourist is also a pressure transport of Ha Noi in particular and the country in general. Hoan Kiem Coach Transportation was established for the purpose of activities in the passenger transportation business area. The company has been established only the name, but not yet commenced operations. It did not have formal business structure. We are a team of 6 members who will work as a group of experts in devising and implementing effective strategy to provide HKCT appropriate advice and direction as consultants. In order to help the company make decisions, we use the classical model with 4 steps: 1.
Define goal specification and clarification. 2. Analyze the situation. 3. Construction of alternatives 4. Making choice or decision. In the course of scenario analysis, we have used a few as interpreting industry analysis model, Lewin’s three-step model… to clarify the strengths and weaknesses of the internal as well as external factors. Finally, after analyzing all the strengths or weakness, advantage or disadvantage, we have suggested the company should switch model and business purposes. INTRODUCTION Hoan Kiem Coach Transportation (HKCT) is a non-government company, newly established in the Ha Noi’s transportation industry.
It is intended to compete with other vendors in the transportation industry. HKCT look forward to providing short-distance transport services for people living in Ha Noi. Business has been established in name only, but not yet activated. HKCT is also considering the option of additional business as part of business operations and strategic planning such as it is also considering developing a business strategy to provide long distance transportation. Five friends who met each other while studying at La Trobe University MBA at the Ha Noi University established the HCKT.
But it has no resources or equipment. Moreover, it also has no formal business structure and five friends still support HCKT’s activities while they are working full-time with their own work. And they only have financial capacity to support HKCT in six months. Especially, one of them is pregnant and expecting her baby in next 3 months. HCKT did not really start doing anything, so business is currently being considered in its infancy. EXTERNAL ENVIRONMENT It is necessary for Hoan Kiem Coach Transportation that its owners have to understand external elements in order to make decision for the firm.
The external elements are very important to any enterprises, they strongly effect to the survival and development of enterprises. Politics/Legal elements: Vietnamese politics is relatively stable. Vietnamese Government always encourages the development of private sector, in particular encourages all economic sectors in investing in public transportation. The Government also allowing all economic sectors are involved in the implementation of public transportation projects funded by national budget, non-government organizations (ADB, WB) if they have enough competency.
For example, the project of building and operating high-quality buses in Ha Noi was sponsored by the World Bank. Government of Viet Nam and the People’s Committee of Ha Noi has issued a policy on bus subsidies from the national budget. However, the level of subsidies is low that the quality of public transportation service is not high. The public transportation firms in Ha Noi have not yet focused on, invested in enhancing the effectiveness of management, the ability of their staff and service quality.
Thus, sometimes, some buses ignore passengers at the bus stop or service officers in the bus had indecent behavior with their passengers like mass media mentioned. In Ha Noi, the urban transport infrastructure system has been improved to restrict traffic congestion such as expanding lanes, constructing of ring roads around Ha Noi, overhead highway, building overhead bridges through the major intersections of the town, etc. In fact, it can be seen these solutions have also limited the traffic jams in the main roads at rush hours in Ha Noi. Many highways connecting provinces together were also expanded or built help ravelling from Ha Noi to other provinces become easier. For example, Project North-South highway has the total length 1,811 km, with the first point is intersection with the Phap Van (Ha Noi) and the endpoint is the intersection Cha Va (Can Tho). The North – South highway was built includes 16 branches which are: Phap Van, Cau Gie, Ninh Binh, Thanh Hoa, Ha Tinh, Quang Tri, Da Nang, Quang Ngai, Binh Dinh, Nha Trang, Phan Thiet, Dau, Long Thanh, Ben Luc, Trung Luong and My Thuan (Can Tho). This project aids to shorten the time of the journeys on the road from Ha Noi to Ho Chi Minh.
Besides, the new No5 highway at the eastern of Ha Noi is also been built makes traveling from Ha Noi to Ha Long (Quang Ninh) get more convenient and faster. These are advantage for transportation firms and travelling firms. However, the too high tolls that to be applied to automobile travelling on these routes, is a major disadvantage for the transport enterprises today. Many transportation companies have reflected with the mass media that travelling on this highway is faster and more convenient, but road toll is too high, plus the high fuel prices led to business losses.
In recent years, the Vietnamese Government has launched a variety of policies on taxes, charges for transportation. These policies create the increase in operating expenditure of transportation enterprises. The corruption in the traffic police force mentioned in the mass media brings a large number of obstacles for the transportation business. Economic elements: Nowadays, Vietnamese economics is depressing in the global economic crisis, most industries of the economy are affected heavily.
The finance resource that funded from foreign countries and non-governmental organizations for Viet Nam to develop urban transportation infrastructure was significantly reduced. Even Vietnamese government also launched the policy of cutting down or limiting public expenditure. As a result, the state budget for improving, investing in transportation infrastructure gets narrower. This is a big disadvantage for transport industry. In particular, the fuel prices increase brings many financial difficulties to enterprises or leads them to the loss or bankruptcy.
At the moment, it is said that activity and investment in the transport sector is very difficult and enterprises will have to face many risks. Social elements: According to the report of Ha Noi Transerco, the number of people using buses in Ha Noi is growing recently, but it is not a trend. The passengers are mostly students, retired people and low-income people because the cost is lower than other traffic means. Ha Noi transport infrastructure is an interlaced system of small streets, tiny alleys with the small markets along the roads, small shops on the street.
Ha Noi people have a habit of using motorcycles to move and buy or shopping on the streets instead of using the bus. Especially, the theft, pick-pocketing on buses has not been solved also makes people afraid of travelling by this means. The poor economic management of the Vietnamese Government has made land prices and real estate increased unreasonably. The average income per person in Viet Nam is low compared with the world, but the price of real estate is highest in the world. This is the reason leading to the expansion of the roads becomes extremely difficult because of the cost of compensation for ground clearance is too high.
For example, the cost to build the Xa Dan road is considered the highest in the world. As a result, it is difficult to Ha Noi has a modern transportation infrastructure system and public transportation industry is very difficult to develop. Changing Ha Noi people’s habits of using motorcycles in order to use public transportation can only be done when the transportation infrastructure is more improved, better urban planning, and higher public transportation service quality. Traveling by bus will become trend if people see their traveling easily and conveniently.
There is an noticeable issue that the compliance with traffic law of many Vietnamese is poor, drunk driving , crossing the red light, driving in the wrong lane leading to many serious traffic accidents. This problem also brings risks to the transport business. Technology elements: Today, in the world, technology continues developing help to businesses in management, administration, production and sales. Biofuel has appeared in the Vietnamese market but the price is high. Consequently, it is not be cared by transport firms though it is not pollute the environment.
The development of information technology in Viet Nam is an advantage to attract investment. Transportation industry could apply effectively technology in operating, managing. The management software, global positioning systems, measuring devices mounted on the vehicle to help transport businesses saving operating expenditure and controlling all activities most efficiently. However, to have this advantage, enterprises have to spend a large amount of money to apply technology. This is an obstacle for Hoan Kiem Coach Transport because it does not have the good financial resources.
It can be seen that the external elements create many disadvantages more than advantage for firms in this industry, and it is unattractive to investors. Developing public transportation is social development and improving the life quality of the people. To gain this objective, Viet Nam Government should take strong, fierce and wisdom measures to overcome the above mentioned shortcomings. Government needs to build wise management policies such as issue of policy to real estate prices down to its true value, relying on that, the urban planning would not have to pay any reasonable costs.
It is should be centralized shops in the streets in the trade centre to prevent people shopping on the crowded streets. Banning motorcycles and encouraging people to use public transport. Improving the quality of service, security on public transport means. In the near future, we will overcome global economics crisis, the fuel price could decrease, and transport industry in Ha Noi will be attractive and potential because of crowded population of this town. INDUSTRY ANALYSIS After analyzing general landscape to get over view about environment the company is doing business, HKCT needs to understand deeply the industry which it is belong.
Transportation industry has a vital role to play in our lives. It helps us to move, travel and carry baggage, goods from place to place very quickly and conveniently. Besides, like many economic activities that are intensive in infrastructure the transport sector is an important component of the economy impacting on development and the welfare of populations. When transport systems are efficient, they provide economic and social opportunities and benefits that result in positive multipliers effects such as better accessibility to markets, employment and additional investments.
However, this is not easy for every company to join this industry and become successful and is this industry really attractive. Based on model of interpreting industry analysis, the industry can be defined attractive or unattractive. Threat of new entrant Identifying new entrants is very important because they can threaten the market share of existing competitors (Hitt, Ireland and Hoskisson, 2009, pp. 51). Threat of new entrant for transportation industry is very high because barrier to entry this area is low. There are a number of factors affect this trend:
Low switching cost: Switching costs are the one-time costs customers incur when they buy from a different supplier. In this industry, customers can easily switch to other modes of transportation. They can choose to go by bus, by taxi, train or airplanes without costs incurred. Size of the market is growing: The population of Ha Noi is increasing rapidly at the rate of 7% per year (http://www. gopfp. gov. vn/) and more and more immigrant from other province nearby such as Thai Binh, Nam Dinh, Nghe An, Hai Phong.. with the number of ……. Then it is a potential market for transportation company to explore.
High demand for public transportation: Recently, because of fluctuation and increasing in fuel price,( government adjusted fuel price 3 times from…) there are a number of people shift from using private vehicle to public transportation like buses. Environment awareness: Nowadays, due to diverse effects of global climate change on people’s lives and business and thanks to propagandize of media, public communication, social network helps to raise people’s awareness of protecting environment and using environmentally friendly products and services, so many people tend to use public transportation.
Potential customers: there are a number of customers available in the market which the other existing companies has not meet their satisfaction such as students, workers, tourist and so on. Position of supplier: In transportation industry is really high because the following reasons: There are only few suppliers in most categories such as fuel supplier, bus station or other equiment providers. Regarding fuel, it Is well known that fuel expense account for a large part of the transportation company expenses.
In Viet Nam there are only 14 petroleum companies like Petrolimex, Pvoil, Mipec…( petrolimex. com. vn) so they have strong power compared to HKCT. It takes time and effort for the company to change from supplier to others. Besides, Ha Noi has several main long-distance bus stations like Kim Ma bus station, Giap Bat bus station, Gia Lam, My Dinh bus station and each one serves a particular area, this is facing overcapacity and it is hard for company to provide services (Trammoc, 2012) Bargaining power of customers is very high.
There are availability of many mode of transportation and customers can easily move to other vehicle, therefore customers has strong postion compared to HKCT. Threat from substitute products/services: High There is a number of transportation available for people to choose. If they do not want to go by bus, they can use cars including hired cars, private cars, borrowed cars, motorbikes, bicycle, cyclo or even walking. Rivalry among competitors: Intense Industry’s firms are mutually dependent, action taken by one company usually invite competitive responses.
Competitive rivalry intensifies when a firm is challenged by a competitor’s actions or when a company recognizes an opportunity to improve market positions (Hitt, Ireland and Hoskisson, 2009, p. 58). Regarding transportation industry, the firms face a fierce competition both direct and indirect. Around Ha Noi, there are some well-established bus companies with support from government such as Ha Noi Transerco, Thang Long Bus, Bao Yen which are dominant the market, especially Transerco currently holds an more than 80% market share of Ha Noi’s public transport services market.
The company operates 926 public buses, which serve over one million passengers per day, accounting for 93% of the city’s total public transport users (http://www. transerco. vn/). For longer routes like Sapa, Da Nang, Dien Bien and so on, there are also a number of companies available at bus stations in Ha Noi such as Vietbus, Hung Thanh, Binh Minh, Bac Ha… and customers can easily book seat through phone. Travel companies also own fleet of coaches to serve their own visitors to nearby tourist destinations such as Ha Long, Sapa, Hue, Da Nang….
Moreover, the means to transport tourists require high quality with full amenities. To invest in such vehicles HKCT should have long-term and large finance resource. Beside direct competitors, HKCT compete with indirect ones in terms of taxi, airlines and train. It is very convenient for customers to take a taxi through phone or even on the side of pavement. There are a huge taxi companies existing in Ha Noi now which run both short and long way with competitive price such as Airport taxi, Mai Linh, CP Ha Noi, Huong lua, Thanh Nga, etc.
Moreover, with the popular and convenient of airplane, more and more people choose this to travel. Taking a journey by flying with Vietjet Air, Jestar Pacfic (low cost airlines) or Viet Nam Airlines (tradition airline) can help customers save time and feel healthier. Furthermore, airlines carry out a lot of promotion so their prices are quite flexible and affordable for most of Vietnamese people and tourists. The poor management of government in this industry makes many individuals that do not have a business license can still involved in transporting passengers.
Thus, it causes oversupply situation, unfair competition, traffic accidents, they are willing to use violence to have passengers and ignore Police. In addition, when entering this industry, the company has to invest a lot of money on buying vehicles, building premise so in case of remove from the industry the company will lose a number of asset values. That is the reason why it is a big obstacle for the company to exit the transportation industry and try to maintain even the return on their invested capital is low or negative.
Besides, the services the transportation companies provided are not differentiated so customers easily to move to use another mode of transport and when they find a differentiated products and services that satisfy their needs, they frequently purchase the product loyalty overtime. Potential profit: For every company, making profit or in other word has positive status of income statement is very significant. Transportation industry has very low ROE, it is just around 4% it means if you invest 1 USD you get only 0. 04USD return.
Whereas, the capital required entering this industry is really high. Public Transportation Company receives support from government with the commitment to maintain at low price, so making huge profit is difficult. From above analysis, we can see that the transportation industry is unattractive and HKCT should move to other industry to develop. INTERNAL ENVIRONMENT This part is going to analyze internal factors. At first, an over view of internal factors could help a better understanding of this analysis and then we categorize the factors in to two parts of SWOT analysis: Weakness and Strengths.
Then Porter’s Model should complete these analyses to understand the situation much better and help us to decide better according to “decision-making models” This section is going to reveal that changing Current Plan (Hoan Kiem Coach Transport) which we Name Plan A to another Plan (Hoan Kiem Consultant service) which named Plan B could be an effective way to continue according to our potentials. SWOT SWOT (strengths – weaknesses – opportunities – threats) analysis Model is the useful model for listing the strengths and weaknesses of an organization, and it could help understand value much better.
By using this method the core competences and core problems will reveal. Although this model is a monitoring model and lacking the mechanisms for acting, it can help us to program for an implementation plan. Developing core competences is the key to competitiveness. And finding the Core competences is a fundamental subset of the firm’s strengths. We are using this model because it is simple and clear. (“Focused SWOT: diagnosing critical strengths and weaknesses,” 2009) . We apply the focused current-reality tree (CRT) (Ronen et al. 006) derived from Goldratt’s (1994) technique. According to their technique: • The weakness must exist over a period of time (and not be a one-time phenomenon). • The weakness must be expressed in undesirable terms. • The weakness must be under our control or influence. Some weaknesses are sporadic while others are chronic that cause significant damage to the company. Some weaknesses are under our control and some are not. Some weaknesses are depending on other weaknesses and we could not consider them as an independent factor.
There is one “leading weakness” that causes other weaknesses. After linking the weaknesses through cause-effect relations, we could realize 2 or 3 core problems. The same pattern is followed for strength. (“Focused SWOT: diagnosing critical strengths and weaknesses,” 2009) Porter’s Model Another model considered here is Porter’s Five Business-Level Strategies. [pic] The result of SWOT analysis lead us to understand the hidden layer of this company and understand which strategies in Porter’s model can help them achieve their future plan.
Or simply they can realize the link between each factor and this model. For example they can understand whether factor A could lead them in a differentiation value or no. The weaknesses are illustrated as follows: Tangible Resource Weakness: • Lack of equipment • Lack of capital while they have only six month to carry out. Intangible Resource – Weaknesses: • Lack of clear strategy • Lack of innovation then lack of growth • Lack of time frame • Lack of operational plan • Lack of tools for advertisement • Lack of famous brands • Lack of full-time for this plan Lack of expertise and experience • Loosing of 20% of human resource because one of the five friends is pregnant (6 month) • Lack of vertical organizational chart or hierarchy. This lead to lack of good and powerful decisions maker and the decision are made collectively. – Strengths: • Having Dean’s Commendation for their high grades. • Having Academic knowledge. In the below table, we are going to analyze the weakness and strength of this company and try to reorder the factor in a cause-effect relation. We compare between plan A and plan B. |Event – factor review for plan A | |Leading factors ( Outcome |Factors |Description | | |Strength |weakness | | |Lack of experience |New MBA Student with Dean’s |This strength followed by: Lack |Leading to be unique academic group.
Which | |outweigh to Knowledge in |Commendation for their high |of enough expertise and |has little substitute in Viet Nam ( make | |this plan ( in this |grades ( Academic knowledge |experience |differentiation according to Porter’s Model (| |unattractive market ( fail| | |but this factor is not very helpful here, | | | | |because of lack of experience. |Lack of clear strategy ( | |Lack of innovation |Cause lack of growth. “Focused SWOT: | |fail | | |diagnosing critical strengths and | | | | |weaknesses,” 2009) | | | |Lack of operational plan | | | |Lack of proper available | |Lack of full-time of human |Because they all have their our full time job| |human resource ( fail | |resource for this plan | | | | |Loosing of 20% of human resource |Because one of the five friends is pregnant | | | | |and waiting for her baby within 3 month | | | |Lack of vertical organizational |the decision are made collectively | | | |chart or hierarchy | | |Lack of tangible resource | |Lack of enough Capital, only till|Without any plan and time| | |( in long term = fail. |six month |frame they cannot be | | | | | |depend on this small | | | | | |amount of money | | If we consider some factors, we can easily realize that these weaknesses are important enough to fail this plan very soon. We think the main and “leading weakness” of all factors are lack of good analysis, plan and strategy. As an example we decide to consider the lack of powerful decision maker: they are five friends which have not been defined as a proper hierarchy organizational chart. What would be happen if they could not result as a team?
According to (Hiller & Hambrick, 2005),in making decisions affected by these three conditions, judgment is required. And Judgment is the capability of making successful decisions when no obviously correct model or rule is available or when relevant data are unreliable or incomplete. In this type of situation, decision makers must be aware of possible cognitive biases. Overconfidence, for example, can often lower value when a correct decision is not obvious, such as making a judgment as to whether an internal resource is strength or a weakness. Nowadays, in competitive landscape, executive judgment can be a particularly important source of competitive advantage.
One of the reasons is that the decision which is made by decision maker of company can effects on the general image of company overtime, and this image allows a firm to build a strong reputation and retain the loyalty of stakeholders whose support is linked to above-average returns. (Hitt, Ireland, & Hoskisson, 2012) As we can see here the weaknesses outweigh strengths. According to Porter’s models there is neither cost competitiveness nor differentiation competitive. Is logical to stand on top of an iceberg which will be melted in near future? Or should we change our Plan ? According to this analysis we suggest them to change their idea. The idea of “Hoan Kiem Consultant service” is compatible according to their capacity. To support and implement this idea, the company need to change and time to do that. |Event – factor review for plan B | | |Leading factors ( Outcome |Factors |Description | | |Strength |weakness | | |Lack of the knowledge outweigh to |New MBA Student with Dean’s|This strength followed |Leading to be unique academic group. Which has | |lack of experience in plan B ( in |Commendation for their high|by: Lack of enough |little substitute in Viet Nam ( make differentiation| |this attractive market ( success |grades ( Academic knowledge|expertise and |according to Porter’s Model ( they can be unique. | | | |experience | | |A proper and clear strategy ( success|Innovation | |Cause growth. “Focused SWOT: diagnosing critical | | | | |strengths and weaknesses,” 2009) | | |Having operational plan | |In this plan they have enough time to plan. | | |Having infrastructure for | | | | |advertisement | | | |Known consultant group ( easier to |Having infrastructure for | |In this plan they have enough time to plan for | |find customers |advertisement | |advertising. |Proper and qualified human resource (|Have enough time to shift | |they all have their own full time job and it would | |success |from their job to new job | |be much easier to plan to quit in one year | | |All member will be ready | |Because one of the five friends is pregnant and | | |after one year | |waiting for her baby within 3 month | | |They should solve this |Lack of vertical |The decision is made collectively before. | |point during their plan |organizational chart or| | | | |hierarchy | | | |Knowing professional | | | | |English from university | | | | | | |This could make them to work in an international | | | | |environment | |No need to too much tangible resource|This plan does not need too|Lack of enough Capital,|They actually sell their knowledge | |( success |much capital. |only till six month | | | | | | |Le Thai Hoa |ID: 17498263 |Executive Summary & Introduction | |Nguyen Nu Hoang Anh |ID: 16350676 Overview | |Tran Thi Thanh |ID: 17498487 |External environment | |Doan Thi Hoa |ID: 17498659 |Industry analysis | |Maryam Pourmotahar |ID: 17589468 |Internal environment | |Nguyen Minh Tuan |ID: 17498627 |Conclusion and Recommendation | [pic][pic] ———————– [pic] Changing to overcome the pressures of both individual resistance and group conformity A change process that transforms the organization from status quo to a desired end state Stabilizing a change intervention by balancing driving and restraining forces