Luận văn thạc sĩ quản trị kinh doanh quốc tế MBA (283)

EXTERNAL ENVIRONMENT ANALYSIS AND CURRENT SITUATION OF BUSINESS PRODUCTION OF SONG HONG CONSTRUCTION CORPORATION JSC - INCOMEX 24 2.1.. Development and recommendations on Incomex’s busin

GRIGGS UNIVERSITYGLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT

BUSINESS STRATEGY OF SONG HONG

CONSTRUCTION JSC FOR THE PERIOD FROM 2012-2017

Nguyen Huu Thang Duong Anh Minh

Vo Duy Quang

HA NOI 2011

WORDS OF COMMITMENT

We, the group of 11 - Class MBAX0810, would commit the theme:

"Building the business strategy of Company Song Hong construction period from

2012 to 2017" is the subject of study by our group The data relating to thecompany: the company offers, the prospectus filed with the State SecuritiesCommission, the data of public companies registered with the State SecuritiesCommission and other data synthesized from the stock market, real estate market

Until now, this is the first topic to be studied The team members have noconflict of interest to any company

Hanoi, 12/2011

Team No 11 made:

Nguyen Xuan Tien (team leader) Nguyen Huu Thang

Duong Anh Minh

Vo Duy Quang

We send our most sincere thanks to the professor's Ph.D program MAInternational Business Administration (MBA) from University Griggs collaborationwith ETC have dedicated teaching and guiding them during my training Thisknowledge is the basis needed to help us build this topic as applied to practicalwork

We especially thank sincerely to the academic council of the University ofGriggs has guided us during the study

We would like to thank deeply Construction Company Song Hong INCOMEX, allows us to research the company and also enthusiastic to providedata for us to complete the task

Hanoi, 12/ 2011

The authors do:

Nguyen Xuan Tien (team leader) Nguyen Huu Thang.

Duong Anh Minh

Vo Duy Quang

1.1 concept of strategy, role and basic characteristics of strategy 3

1.1.3 Basic characteristics of business strategy 41.2 Construction process of business strategy 10

1.2.1 Analysis of external environment and internal environment 10

1.2.1.1 Analysis of external environment 10

1.2.1.1.1 Analysis of macro environment 10

1.2.1.1.2 Analysis of industry environment 10

1.2.1.2 Building of external factor evaluation matrix EFE 14

1.2.1.3 Construction of competitive profile matrix (CPM) 15

1.2.1.4 Analysis of internal environment: 16

1.2.1.4.2 Analysis of the nature of competitive advantage: 18

1.2.1.5 Construction of internal factor evaluation matrix IEF 20

1.2.3 Business strategy option

22

1.2.3.1 Organization and creation of business strategy 22

1.2.3.2 Evaluation of strategy efficiency 22

CHAPTER II EXTERNAL ENVIRONMENT ANALYSIS AND

CURRENT SITUATION OF BUSINESS PRODUCTION OF SONG

HONG CONSTRUCTION CORPORATION JSC - INCOMEX

24

2.1 Overview on Song Hong Construction JSC – INCOMEX. 24

2.1.1 Process of formation and development, operation organization

2.1.2.1 Indicators on general market and revenue 26

2.1.2.2 Indicators of the financial situation 28

2.1.2.3 Targets contributing to state budget 292.2 Analysis of business environment factors of INCOMEX 30

2.2.1.1 Analysis of macro environment - PEST model 30

2.2.1.2.Industry environment analysis – M Porter’s model of 5 competitive

forces

34

2.2.1.3 Analysis of Competitive profile matrix (CPM) 39

2.2.1.4 Analysis of external factor analysis evaluation matrix (EFE) 48

2.2.2.2 Evaluation of operation situation of Incomex in 2008, 2009,

2010.

50

2.2.2.5 Analysis of internal factor evaluating matrix of INCOMEX 62

CHAPTER III:

BUSINESS STRATEGY SELECTION AND CONSTRUCTION

SOLUTION OF INCOMEX IN THE PERIOD OF 2012 - 2017

64

3.1 Objectives of INCOMEX by 2017 and vision by 2020 64

3.1.1 Immediate objectives and targets by 2017: 64

3.1.2 Objectives of the period of 2018 - 2020: 65

3.1.3 Analysis of nature of sustainable competitive advantage 673.2 Development and recommendations on Incomex’s business

strategies

69

3.2.1 SWOT matrix construction to select strategies for Incomex 69

3.2.2 Construction and analysis of IE matrix to choose strategy for

3.3.1 Low cost strategy 75

3.4 Strategy implementation roadmap of Incomex 78

1 Summary of Incomex business strategy in the period of 2012 - 2017 80

REFERENCES

APPENDIX

Confirmation of research units

LIST OF SYMBOLS AND ABBREVIATIONS

GRIGGS hoặc Griggs University ……… Griggs University, USA

VNU-Hanoi ……….National University, Hanoi, Vietnam Incomex .Song Hong Construction SJC ICG……… Stock of Song Hong Construction SJC

PVC……… PetroViet Nam Construction SJC

PVN……….……Vietnam Oil and Gas Group

SWOT……… Model of competitive analysis

(Strengths, Weaknesses, Opportunities and threats)

LIST OF TABLESFigure 1-1: Analysis of competitors

Figure 1-2: EFE Matrix

Figure 1-3: Matrix image analysis competition

Figure 1-4: Results from a combination of four sustainable competitive criteriaFigure 1-5: IFE Matrix

Figure 1-6: SWOT analysis summary table

Figure 2-1: Some investment projects and large construction have been

implemented by INCOMEX

Figure 2-2: Summary table of indicators of financial situation

Figure 2-3: Inderect HR of the company over the years 2008-2010

Figure 2-4: Contributions budget and the annual social security

Figure 2-5: List of supplyer

Figure 2-6: Analysis of competitors

Figure 2-7: Incomex’s EFE matrix evaluating response response ability for externalconditions

Figure 2-8: Evaluation of awareness of the internal environment of INCOMEX

Figure 3-1: Solutions for all types of market

Figure 3-2: Sustainable competitiveness

Figure 3-3: SWOT analysis synthesis of Incomex

Figure 3-4: IE Matrix

Figure 3-5: Business strategy selection

Figure 3-6: Applied strategy and market

Figure 3-7: Roadmap for Strategic

LIST OF FIGURES, GRAPHS

Figure 1-1: Process of strategic planning

Figure 1-2: Business strategy

Figure 1-3: Decisive factors of competitiveness in the industry

Figure 1-4: The components in the analysis of competitors

Figure 2-1: Organizational chart of Incomex

Figure 2-2: FDI attracting chart for real estate investment sector

Figure 2-3: Supply chart of apartments in Hanoi

1 Reasons to choose the research thesis:

Vietnam's economy is gradually integrating into regional and the world economy,environment of enterprises is extended but the competition is becoming tougher Thishas created business opportunities also contain potential risks that threatening thedevelopment of enterprises

In volatile market, ignoring the random element, the affectingfactor of thesuccess business is strategyfrom time to time On the stock market, one of the stocksthat investors have chosen to invest, ICG is a stock code with many waves and highliquidity right from the time of listing in April 2009 It become one of the notableevents on the listing market of HNX Moreover, the necessity to study and provide areport on one enterprise through the aspect of "strategy construction"; and also inthe research group there are some members as officials who have been working inSONG HONG CONSTRUCTION CORPORATION JSC -– INCOMEX has appliedstrategy management that brings success since it’s establishment Knowing the important

of business strategy and some of we are Incomex’s staff, so our group have agreed to

decide to select the thesis: "Business strategy construction of Song Hong

Construction Corporation JSC - Incomex in the period of 2011 - 2015" with the

hope to apply the learned knowledge to contribute to the sustainable development ofthe Company in the current situation

Content of report has three parts as follow:

PART 1: THEORICAL OF STRATEGY MANAGEMENT

PART 2: CURRENT SITUATION OF INCOMEX’S BUSINESS PRODUCTION

PART 3: BUSINESS STRATEGY SELECTION AND BUSSINESS STRATEGYSOLUTION OF INCOMEX 2012 2017

2 Object and scope of the research:

- Object: Real estate bBusiness strategy of the company

- Scope: Base on research time limitation this report only focus on real estate ofIncomex JSC in HanoiWithin the framework of training program and Vietnammarket

3 Purpose of the research thesis:

- Systematization of the theoretical issues of strategic construction

- Analysis and evaluation of business situation at Song Hong ConstructionCorporate JSC - Incomex

- Apply strategy management to real estate business strategy of Incomex JSC from

2012 - 2017

4 Research methodology:

Primary data source, which is used, source which is used is officialinformation of the business, the prospectus, annual report of the Company, of theother companies in the same industry and the data on public company in the market.From there, using research methods such as analysis and synthesis of data, logicalthinking, deductive to complete the graduation capstone

5 Contribution of the thesis:

Recommendations on strategicstrategiic solutions for the Company in realestate field during the period of 2011 - 2015

-

- Supporting of the company to identify its position in the market and then havingplan to develop and implement other strategies for stable, sustainable development

CHAPTER I THEORETICAL BASIS

1.1 concept of strategy, role and basic characteristics of strategy

1.1.1 Concept of strategy

What is strategy?

Strategy is a term used to 3 meanings follow: (1) activities program and usingresource to gain the goal (2) is the organization's programs, the needed source to use

to achieve the goal and operating policies of collection, using and resources

arrangement, (3) determine the long-term goals and selection guidelines and allocatethe resources to achieve the goal

As operating, in general, every business must develop its own strategy If thecompany has a clear strategy and everyone in the business knows – captures thatstrategy, then that business will be successful in the market In contrast, anenterprise has no clear strategy, sooner or later, will fail in the market

So what is strategy? Understanding in a simpler way, business strategy is aset of plans, methods and objectives in order to bring above-average profits orgiving the business a competitive advantage over rivals

So far, there are many views on the strategy For example, the views of AlainThrelart, ME Porter, G Arlleret, D Bizrell But they all revolve around the internalcontents such as: "Strategy is art" or "Strategy is a special plan" or "Strategy is aplan, just an art"

In summary, the built strategies must help the business achieve the set goals.However, in the process of strategic building and decisions towards the goal is notenough, the strategy must make a roadmap to implement on specific times,associated with certain resources

1.1.2 Role of business strategy

Strategic management enables a company to be more active rather thanreacting in shaping the future It allows a company to create and influence (ratherthan just reaction) with the environment and thus, controlling its own destiny Thesmall-business owners, senior managers, presidents and administrators of the profitand non-profit organizations have received and been aware of the benefits ofstrategic management To summaries, Strategic management is designed to helporganization that pass to adapt to long-term changeStrategic management offers thebenefits:

- It allows the identification, prioritization and taking advantage ofopportunities.

- It gives us an objective perspective on issues of governance

- It represents the structure of the cooperation and improvement control foroperations

- It minimizes the impact of the key conditions to better support the goalsset

- It demonstrates the efficient distribution in time and resources foridentified opportunities

- It also allows spending of less resources and more time to adjust thewrong decisions or specific decisions

- It creates structure for internal communication in the HR department

- It helps harmonize the behavior of individuals in the overall effort

- It provides the basis for the clarification of personal responsibility

- It encourages thinking about the future

- It gives us a way of cooperation, harmony and enthusiasm to deal withthe arising problems and opportunities

- It encourages a positive attitude for innovation

- It provides us with a level of discipline and corporate management

1.1.3 Basic characteristics of business strategy:

The strategy is a sequence of activities, including activities, analysis,assumptions and decisions, the actions of a business is executed to achieve strategiccompetition advantage/ sustainability with profit over the average

Figure 1-1: Process of strategic planning.

Typically, a strategic construction process can be divided into four phases:

1 Strategy planning Identify function, target and company’s value, to analysisstrategy and strategy formulation

2 Specifying strategy, indentify objectives , key ideas, measure tools

3 Planning and improving processes of sales, resource and budget

4 Implementation

5 Check and evaluation of implemented results

Stage 1: Identify the corporate objectives through SWOT

Stage 2: Develop and select appropriate strategies for businesses

Stage 3: Implement strategy

Stage 4: Test and Evaluate strategy implementation, strategic adjustment ifnecessary

Strategic mission fucntion function & target of

the firm (1)

Analysis of internal

enterprise (S,W) (3)

Analysis of business environment (O,T) (2)

Selection of strategy (4) Corporate-level strategy (5) Business unit & functional department

strategy

Implementation of strategy (6)

Check & evaluation of implemented results (7)

Feedback information

Business strategies

As mentioned above, strategy is related to long-term goal of a business, thestrategies, which are built, must help the business achieve set goals However,business strategy is related more to how a business can compete successfully on aspecific market It involves in the strategic decisions about the choice of products tomeet customer demands and gain competitive advantage over competitors,exploiting or creating new opportunities etc

Therefore, we can understand: Business strategy is a series of commitments

and actions that a business use s to take a competitive advantage by exploiting core competencies in a market certain.

Figure 1-2: Business strategy

(Source: Business Strategies, author: Le The Gioi, Nguyen Thanh Liem)

Basically, a business strategy is considered good success when it hascorrectly answered correctly three basic issues including: Who will be object to beserved? Which demand will be satisfied? and How will the above demands besatisfied?

Many approaches exist, but base on the nature of strategy we have: Speakingabout strategy, poeple often divide strategies in different levels: As corporatestrategy - Study of the entire company from humans, organizational structure, otherproducts, services

Product strategy: only studies certain type of products that the companyshould focus on studying also pulling all of the relevant factors such as: Who will

STRATEGY

perform? How will implement? How is control process? How is finance, whatsubject impacts directly on product

Industry Market strategy: as strategy implements for the whole industry it’smore macro than product strategy often applied to the major corporations: Astelecommunications, textiles, companies with stable production and service supplycharacteristics

Competitive strategy

Investment strategy

Therefore, the essential content of business strategy is that companies shouldchoose the target customers, target markets based on core competencies as well asstunted from environmental opportunities According to M.E Porter, there is a type

of business strategy mainly: Low-cost strategy, differentiation strategy, and focus strategy.

Here are some of the content of these strategies

* Low cost strategy:

Concept:

This strategy focuses on actions with the aim at production of goods andservices with acceptable features of the customer with the lowest cost, lower thanthe cost of competitors also having features that customers accept

Applying contents and conditions:

This strategy is understood as maintaining the lowest costs in the industry or

in the market These companies pursuing this strategy should have:

Relatively high market share, favorable access for raw materials

Capital for investment in the technologies that help cut costs

Highly effective effecting operating procedures

Low cost (labor, materials, equipment, )

Risk:

This strategy is enablingsome risks that company has to consider in selection and

implementation.For example, trying to reduce costs is to cut down on labor This canimpact negatively on the morale of employees, and can affect performance business

in the distant future In addition, this strategy also has other risks such as when one

of the competitors get a new technology that can lower unit costs, the company willhave face difficulties

The biggest risk as applying this strategy is not only your business accessescheap resources Thus, competitors can completely copy your strategy.Technological change as experience and large investment amounts are disabled Theinability to see the changes of products and needed maketing because the tooattention on the costs The important thing is whether you are able to keep costslower than competitors in the distance race or not?

* Differentiation strategy:

Concept:

Differentiation strategy focuses on actions to produce goods and services at aprice that is acceptable the customer supposes that that product is different from theproducts of competitors The difference makes sense for them

Applying contents and conditions:

- Contents: make the enterprise’s products/services different and moreattractive than products/services of competitors (in form, features, reliability,service quality, brand image , )

- Conditions of application: To successfully apply this strategy, the enterpriseshould have: Process of research and development (R & D), good productinnovation, ability of high quality supply of products/services; and effectivemarketing and sales, to ensure that customers can feel the difference and thebenefits it brings

Risk:

Differentiation strategy can meet the risks:

- The difference in cost between the low-cost competitors and businessespursuing this strategy is too large so that the bargaining power of customers is largerwhen they sacrifice some of the elements of quality, utility.

- The needs of customers on the reduced different factors by the subjectiveand objective causes

- The imitation of competitors especially in industries with simpletechnologies

* Focus strategy:

Concept:

The focus strategy concentrates on actions for the production of goods andservices to serve the needs of a specific competition market segment

Applying contents and conditions:

- Content: only focuses on the specific markets Those are a small marketsegments with unique characteristics

- Conditions: Based on the competitive advantage of this enterprise e createdbased on deep understanding of the peculiarities of the market and the ability toprovide products/services consistent with those characteristics

Risk:

Risk occurs when large enterprises with better resources can still attack onthis segment

Thus, when the company adopts the focus strategy it tends to be focused on

to create other advantages (by cutting costs or differentiation products/services), tobring more added value for customers in its segment Thus, focus strategy is oftendivided into the two strategies: "The focus strategy on low-cost " (Cost Focus) and

"Focus strategy on differentiation" (Differentiation Focus)

Some notes as selecting strategy:

Here are some of the problems often occuring when selecting strategy

Trapped status between the strategies:

When businesses participate in the strategies have been chosen wrong orchoosing too many strategies for a target market and in the process ofimplementation is not consistent with the objectives that is tempted must make fadeoverall strategy Sometimes, in a certain situation the enterprise has advantages incost, while ensuring difference but it is a short-term status of the business.

Ability to maintain the competitive strategies:

Because the movement of industry, the movement of the rival is alwaysevolved and each strategy has implied different risks This leads to the severity ofthe market while competitors choose the same strategy Be consistent with theobjectives and then results will come to you

Competitive strategy and organizational structure:

Each form of strategy must always have a suitable structure of culture,maketing, R & D, manufacturing, etc Businesses have many industries but thesame strategy may be ideal condition for success

In summary, the choice of what strategy is dependent on the capabilities andstrengths of the business Also, it should be noted that sometimes the companycan pursue more successfully a strategy, although this is rarely feasible and oftentrapped between the strategies

1.2 Construction process of business strategy

1.2.1 Identify function, target Analysis of external environment and internal environment

1.2.1.12 Analysis of external environment

1.2 1.1.12.1 Analysis of macro environment

Analysis of the macro environment helps the corporationanswer to question that

enterprises are dealing with something? There are 6 elements of macro environmentthat businesses have to deal:

Analysis of the macro environment helps the business identify and evaluate:Opportunities (O) of the environment that the business can take advantage andThreats (T) that the enterprise may face Since then, it enables the enterprise to

build business tasks clearly, define feasible long-term goals and design strategiesconsistent with business objectives.

The techniques of analysis of macro environment includes reviewing andmonitoring prediction and evaluating

The departments should analyze in this section including: first, Analysis ofeconomic environment; Second, technological environment, third, socio-culturalenvironment; Fourth, demographic environment; Fifth, political and legalenvironment and sixth, Global environment:

Group of the macro factors regularly acts, changes, and they createopportunities - challenges in the business activities of the firm It should be notedthat these factors have a relationship dependent

1.2 1.12 2 Analysis of Microindustry environment.

Analysis of the industry environment will determine the nature and extent ofthe industry's competitiveness There are five basic factors: suppliers; customers;existing competitors; potential rivals, and substitute products Below is a chartshowing five of competitive forces

Figure 1-3: Decisive factors of competitiveness in the industry.

(Source: ME Porter, Competitive strategy)

This is also a useful tool to analyze the industry environment, which helpsmanagers to clearly see opportunities and challenges

This factor group also regularly acts, changes, and they also createopportunities and challenges in the operation of the business But unlike the group

of macro-economic factors, the impact of this factor group on the enterprise moreindividual, bilateral, interactive So, besides the ability to identify adaptiveforecasting, leveraging the impact of these factors can also affect response back tofactors mentioned above

1.2 1.12 3 Analysis of competitors:

According to ME Porter, "Competitive strategy requires business

positionong positioning how to maximize the values of the business to make a difference with competitors Thus, the central department of strategic planning is analyzing competitors' (3)

When analyzing the competitor, there are 4 parts to consider including:Future goals, current strategy, assumptions and capabilities (see Figure 1.4)

Factors governing competitors Action of competitors are doing or can do

Does the rival satisfy with the current position?

Which strategic change action is the rival able to perform?

Where is the rival vulnerable?

What would provoke the rival to have the strongest and most effective retaliation

About ifself and about the industry

ABILITIES

Both strengths and weaknesses

Figure 1-4: The components in the analysis of competitors:

First, the future goals:

The identification of the target of competitors in other words the research ofcompetitors self-assesses the extent of the target completion is extremely important.Knowing the targets of competitors helps the business predict its response forstrategic changes Content analysis may include the following problems: Financialtargets; beliefs or economic or non-economic values, organizational structure of therival; opponent's attitude for risk; System of control and encouragement; accountingsystem; consensus level of the leaders, managers and capacity of leaders and themanagers; board of mangement structure; commitments and contracts with thelimitations or expansion; limitations of government, laws for competitors; thelimitations and constraints supported by the parent company; analysis of target andlist of competitors; the targets of competitors and strategy positioning

Second, assumptions:

When analyzing, it’s necessary to answer the following questions:

- What do rival believe about its relative position?

- Does the rival has history or strong emotional attachment with product ordesign, location of production and sales methods ?

- Does the rival have the cultural, regional or country tastes?

- What are the values or standards organization?

- What do rival believe about the future demand of products and thesignificance of the trends in the industry

- How does the rival assess about the competitiveness of its rival?

- Does the rival believe in the core values?

- Is the hypothesis of the rival feasible, objective?

- History indicates the objectives and assumptions

- Foundation of knowledge and leadership experience, consultingrelationships.

Third, current strategy:

The analysis and evaluation of the current strategy of the rival is veryimportant A rival’s strategy is operational, main policies in each businessfunctional area and the way to connect between those functions

The strategy can be explicit or implicit, or both types

Fourth, ability:

When analyzing a rival’s ability the following problems should be noted:Core competencies; growth capacity; rapid response capability; ability to adapt tochange, strength endurance;

Based on analysis of future goals, assumptions, current strategies, and theabilities as above, we can predict reaction possibility of competitors - Ability ofattack or defense ability

To be favorable for the analysis in this item, we can set the table for eachgroup of indicators for assessment, in which selecting suitable rivals

Here is a sample table

Table 1-1: Analysis of competitors

Competitor A Competitor B Competitor B STT Các yếu tố cần

No Name of item Compe

titor A A’s score

Income x

Income’

s score

Compe titor B

B’s score

I Goals

1,2, 3 etc

II Assumptions

No Name of item Compe

titor A A’s score

Income x

Income’

s score

Compe titor B

B’s score

In summary, this is a part of the process of analysis and strategy construction

In order to facilitate the process of a scientific, professional analysis, people use thetools/techniques supporting for the development process of business strategies

1.2.1.23 Building of external factor evaluation matrix EFE

EFE Matrix allows strategists sum up and evaluate the socio-economic,cultural, demographical, geographical, political, legal, technological andcompetitive information Thereby, it helps the corporate managers evaluate thebusiness’s response level for opportunities and challenges and make judgmentsabout the external factors as favorable or difficult for the company

To build this matrix, it should perform 05 following steps:

Step 1: Make a list of factors (from 5 to 10 factors) which have decisive role

for the success of the industry, identified during the inspection of external factors

Step 2: Sort the importance on a scale from 0.0 (not important) to 1.0 (very

important) for each factor The importance of each factor depends on the influence

of such factors to the sector/industry that your business is manufacturing/trading.The total important score of all the factors must be equal to 1.0 (giving the weightfor each factor mentioned)

Step 3: Determine the weight from 1 to 4 for each factor, the weight of each

factor depends on the degree of reaction of each company with the factor, of which

4 is best response, 3 is reaction on average, 2 is average response, 1 is weakresponse

Step 4: Multiply the importance of each factor with its weight to determine

the score of factors

Step 5: Sum up all the factors to determine the total score of the matrix.

Table 1-2: EFE Matrix

Evaluation: Total score of the matrix does not depend on the number of

factors in the matrix, the highest is 4 and lowest is 1 If the total score is 4, thecompany is responding well to the opportunities and challenges If the total score is2.5 the company is average responding to these opportunities and challenges Iftotal score is 1, the company is responding weak with the opportunities andchallenges

1.2.1.3.4 Construction of competitive profile matrix (CPM)

Affecting the strategic position of the company and competitive affecting isconsidered most important Competitive profile matrix identifies the maincompetitors along with their advantages and disadvantages Competitive profilematrix is an extension of the matrix evaluating external factors in the case,importance levels, classification and total important score have the same meaning.Competitive profile matrix is different from external factor evaluation in place, theinternal factors have decisive importance to the success also included in that such asfinancial stability, effectiveness of advertising, specialization for research anddevelopment Also, the difference between the two matrices is the classificationlevels of the competitor company included in the competitive profile matrix andtotal important score of these companies are also calculated The total evaluated

score of the competitor company is compared with research firms This comparisonprovides important strategic information:

Table 1-3: Analysis of competitive profile matrix:

No Successful

factors

Level of importanc e

INCOMEX Competing

companies

Classification

Importantscore

Classification

Importan

t score1

1.2.1.45 Analysis of internal environment:

Internal environment of a business includes the internal factors that abusiness can control The analysis of the internal environment requires collectingand processing information on finance, organization, personnel, research anddevelopment, marketing, and the situation of production and business activities ofthe enterprise

Evaluation of internal factors of a business is often evaluated by thefunctional business departments of the business such as management, marketing,financial accounting, production/operation, research and development, informationsystem, organizational structures, strategies which have been doing

According to Michael E Porter: "The analysis of internal environment aims

at helping the business identify its strengths (S) and weaknesses (W) Since then,the chosen strategies should promote maximum strengths and overcome weaknesses

of the enterprise "(1)

The analysis of internal environment may include the following issues:

Financial Analysis: analyzing the financial situation of enterprises needs to use datafrom financial reports of enterprises in a number of years and compare these

indicators with each other

The indicators can be used to analyze such as total capital of the business, revenue,profit and a general indicator

Financial capabilities include:

- Debt service coverage

- The function of marketing and consumer products can be described as a process toidentify, establish and forecast meet desired demand of consumers for products orservices

- The function of Human Resource Management: Human Resource Managementnow has a great importance in all business The goal of HR is to develop a plan ofhuman resources including: Prediction of human resources that businesses need inthe future; Streamlined human resources management in the enterprise; Make suresupply and demand human resources for all activities and identifying specificmeasures to manage human resources

- Functions of materials management: This is a management function and increasingscientific attention because it helps businesses create the strength of the low cost

1.2.1.4.1 Mission, vision, core values

Mission:

Mission is a purpose statement reporting the existence of the business, inwhich it defines the values and rules that govern the business and as an essentialpart in the process of strategic planning

Thus, the mission has a great significance Mission statement is thefoundation for the company's vision, from which it helps the company choose theright goals and corporate strategy, brand consolidation etc However, it should benoted that the mission should not be great to the level of not doing.

Vision:

A visionary statement is a report mentioning to the position your companydesires to achieve it The visionary statement outlines the future of your companywhen you achieve your goals and purposes The visionary statements may bedifferent in length; may be a short statement, can also be a long paragraph, but mustdetermine your final destination

Core Values:

The core values are essential factor and long-term trust of an organizationand a small group of long-term guiding principles The core values do not requireexternal evidence, we have value and intrinsic importance for those who in thatorganization

For example, the core values of the Walt Disney Animation Company isimaginative and beneficial to human health Core values of Phillips PlasticsCorporation are all important people and people working together will achievehigher performance Core values of KRM: work in ethics; Work fairly and showrespect etc

Analysis of current strategy:

In this work, it should analyze the issues as follows: How is the companyimplementing the current strategy? Does the company achieve profitability onaverage? How are financial indicators? Do market share and sales, revenue increasecompared to the growth of the market? How is image and reputation of thecompany before customers and stakeholders? etc

When analysis is complete, we must make judgments about: (*) Strengthsinclude: skills or know-how, valuable material assets, valuable organization assets,valuable intangible assets, competitiveness, position in the market, with the alliance

or joint venture partnership (*) Weakness are: Lack of ability, competitiveexperience, lack of physical, intangible assets, important personnel organization.

Finally, we must answer the question, "Does the current strategy developsustainably?"

1.2.1.4.2 Analysis of the nature of competitive advantage:

Competitive advantage is a very important issue to help the business moreviable and develop in the market A business is considered having competitiveadvantage when its rate of return is higher than the industry average rate Theenterprise has sustainable competitive advantage as it can maintain high rates ofreturn in a long time

It is therefore necessary to have the company's profit rate higher than theindustry average rate as to maximize profits Then, in addition to other factors, weneed to increase the value for customer (value for the customer must be larger thanthe exchange value) and at the same time must reduce the overall cost/cost of goodssold

To accomplish that goal, every business needs to fully exploit the corecapacity or competitive advantage

So what are resources to create competitive advantage?

Basically, the resources to create competitive value are: financial resources;organizational resources; human resources; technological resources, inventions,patents, copyrights, trademarks, patents, trade secrets, reputation with customers,perception of durability, reliability of products, reputation with suppliers on theeffectiveness, efficiency, support for interactions and mutually beneficialrelationship etc

Thereby, we need to analyze and find out the potential abilities, therebydetermining the core competencies Here are four criteria to identify corecompetencies:

+ Valuable: helps the company neutralize the threats and exploit

opportunities

+ Rare: is the capacities that many competitors do not have.

+ Expensive if imitating: culture, valuable brand, unique, hidden causes, trust

relations in the country and abroad

+ There is no alternative: There is no equivalent competitor That is the

particular secret of own company, organizational culture, or performing superioravailable business model

Thus, the nature of competitive advantage is to identify, use and maintaincore competencies with the aim at improving competitiveness in the market

To facilitate the analysis process, the table below is origination of corecompetencies

Table 1-4: Results from a combination of four sustainable competitive criteria.

(Source: Document of the lecture of Strategic management)

Criteria Valuable Rare

Expensiveifimitating

There isnoalternative

Competitiveness Impact of

effect

competitiveadvantage

averageprofitability

advantages

Averageprofit

competitiveadvantage

Profit fromaverage toabove

average

competitiveadvantage

Profit onaverage

So, What should the business do to maintain its competitive advantage Theanswer might be: Focus on creating blocks of competitiveness, continuous

improvement of institution and learning; Follow the best performance of theindustry and use of the standard; and regularly adjust strategy to be appropriat.

1.2.1.5 Construction of internal factor evaluation matrix IEF

The establishment of IFE matrix also includes five steps as the establishment

of EFE matrix But the only difference with EFE matrix, that is the IEF matrixselects criteria as the internal factors of the business

The highest total score is 4 and the lowest is 1, the average is 2.5 If a totalscore lower than 2.5 shows that the firm is weak internally; higher than 2.5 showedthat the firm is strong internally

Table 1-5: IFE Matrix

No Internal factors Weights

Evaluating score for the response of the firm for environmental changes

Converted score

1

2

…

n

1.2.23 Building and analysis of SWOT matrix

SWOT is abbreviation set of first letters of English words: Strengths,Weaknesses, Opportunities and Threats SWOT Matrix is a tool of combining of thestrengths (S), weaknesses (W), opportunities (O), threats (T), and to form fourtypes of business strategy

Table 1-6: SWOT analysis summary table

SWOT Matrix

O: opportunities

List of business opportunities)

T : threats

- (List of the threats ofthe business)

(Use of the internal strengths of the firm

to exploit opportunities of the external

ST Strategies

(Use of strengths toavoid or reduce the

environment) threats from the external

possible)

WT Strategies

(This is a conservativestrategy to reduce theinternal weaknesses andavoid external threats)

Through SWOT analysis, the enterprise can draw the conclusion thatchoosing the best strategy in mobilizing and using resources with the situationinside and outside the enterprise

1.2.34 Business strategy option

1 2.3.4 1 Organization and creation of business strategy

After analyzing the external environment, internal environment, making theimpact assessment matrix of factors, synthesis matrix The important techniques toform a unified strategy into one process of making decision consists of three stages,the tools used for this process can be applied to all types and sizes of theorganization and can help strategists identify, evaluate and select strategies:

Analysis framework of strategy formation:

Phase 1: Input phase External factor evaluation

matrix (EFE)

competitive Competitiveprofile matrix

Internal factor evaluation

matrix IFEPhase 2: Combination phase

evaluationmatrix (TOWS)

Botstonconsultingmatrix (BCG)

Internalfactorevaluationmatrix (IE)

Competitivestrategymatrix

Stage 3: Decisive stage

Quantitative planning strategic matrix (QSPM)

1.2.3.2 Evaluation of strategy efficiency

The evaluation of strategic effectiveness will help managers find the chosenstrategy implementation is correct or should be adjusted accordingly so themanagers agree that the strategic evaluation is necessary for the prosperity of theorganization, the timely assessment can alert the management to the difficulties orproblems may occur before a situation becomes serious, evaluation of strategyincludes three basic operations:

- Control of the strategic basis

- Comparison of the desired results with real results

- Receiving of the correct operations to ensure that the work is being done inaccordance with the plan:

CHAPTER II EXTERNAL ENVIRONMENT ANALYSIS AND CURRENT SITUATION OF BUSINESS PRODUCTION

OF SONG HONG CONSTRUCTION CORPORATION JSC

-INCOMEX

The main content of this chapter is to analyze the business environmentfactors (both internal and external) to identify opportunities - threats, strengths - andweaknesses and their affecting level to business results of INCOMEX Then,summary of the results and presenting though the SWOT model in order to build thebusiness strategy of Incomex in the next chapter

2.1 Overview on Song Hong Construction JSC – INCOMEX

2.1.1 Process of formation and development, operation organization structure ofINCOMEX

2.1.1.1 Process of formation and development

General information:

Company name : Song Hong Construction Corporation JSC

Trading name : Song Hong Construction JSC

Abbreviation : INCOMEX

Stock code : ICG

Representative : Nguyen Thanh Tung

Position : General Director

Headquarter

: No 164 Lo Duc – Dong Mac ward - Hai Ba Trung district - Ha Noi

Business registration certificate : 0100107042

Song Hong Construction Corporation JSC was formerly known as theBranch in Hanoi of Song Hong Construction Corporation was established on 14May 06 1997 by Decision No 354/BXD-TCLD On 15/12/2004, to suit the long-term development orientation of the Corporation, the Chairman of Song Hong

Corporation issued Decision No 958/QD-HDQT-TCT about merging the branch ofthe Corporation in Hanoi into Hanoi Export Import and Construction InvestmentCompany and took the name as Hanoi Export Import and Construction InvestmentCompany.

On 02/21/2006, Minister of Construction had Decision No 257/QD-BXD

on changing Hanoi Export Import and Construction Investment Company into JointStock Company with the name of Hanoi Export Import and ConstructionInvestment Joint Stock Company: Chartered capital of VND10 billion

On 9/5/2009, according to Decision No 747/QD-BXD of the Minister ofConstruction Ministry about amending the content of Decision No 257/QD-BXDdated 21/2/2006 Accordingly, the Company would be named Song HongConstruction Corporation JSC, the abbreviation is INCOMEX Certificate ofbusiness registration No 0103011599 was issued by Hanoi Department of Planningand Investment on 17/4/2006 with a chartered capital of VND 10 billion; stateownership of 40%

On 5/19/2007, Shareholder meeting of the Company adopted Resolution No.01/NQ-DHCD which passed the pla to increase its chartered capital to VND 150billion

In October 2009, the company decided to increase its chartered capital toVND 200 billion

2.1.1.2 Organizational structure

Organizational chart of Incomex (Figure: 2-1):

Primary business sectors:

- Real estate investment and trading (with property ownership or renting); realestate brokerage and auction (not included real estate consultation services)

- Construction of civil, industrial, transportation, irrigation, infrastructure,underground projects; construction of power systems and power projects,telecommunication and other technical projects

- Investment and trading in hotel, restaurant, dining business and other travel

businesses (not included the bar, club, karaoke business)

2.1.2 Situation of production and business activities in the three recent years

2.1.2.1 Indicators on general market and revenue:

The outstanding achievements of Incomex in recent years:

- Continuously comprehensive exceeded completion of the manufacture plantargets in the business in 2008, 2009 and 2010;

- Consistently investment in large projects such as B4, B14 Kim Lien, Hang

Da trading center, Son La trading center, Khuong Dinh market, Bien Bachigh-level apartment, Vinh Tuy Bridge trading center and office for lease

- Successful implementation of share listing of Incomex on Hanoi StockExchange with trading code ICG Immediately after being listed (4/2009)ICG was evaluated as strong equity, high liquidity and frequently greattransaction volume

- Expansion of the cooperation relation through signing the agreement oncomprehensive cooperation with the design, project management units,

product distribution units such as construction companies, units: SavillVietnam

- Corporate management is completed and renovated towards theestablishment of the project management units to direct on the site; the rulesand regulations of internal management have been completed in accordancewith actual business production requirements

- Completion of renovation plans and business development in the phase of

2009 -2010 which was assigned by the Group in 2009; arranged, restructuredaffiliates in a reasonable manner, contributing to improving performance ofthe business, in October 2009, Incomex continued issuing of more 5 millionshares to raise equity to VND200 billion

- INCOMEX prestige and brand has been increasingly confirmed and has beenrecorded over the achieved achievements and awards as:

- The social security works have been actively implemented by Incomex such

as supporting the construction of great solidarity house, building schools,supporting flood people and families ith problems; contributing to the othersocial security funds with a total of billion

Shareholder structure, organization and control system of Incomex

Incomex is organized by the "online – functional advice", including theGeneral Annual Meeting, Board of Management, Board of Executives, Board ofFunctions (including 4 functional departments and project management units, andjoint ventures, partnerships (10 companies)

Incomex’s products and services:

Corresponding to the business sectors, Incomex’s products include: Realestate investment and business with ownership or rent Real estate brokage, auction(not including housing counseling services), Construction of civil, industrial,transportation, irrigation, infrastructure, underground works and power systems,telecommunications and other technical works, finishing construction works,Investment, business of hotel and restaurant services Business of catering services

Business of travel service and travel hotel services (not including business ofdiscos, bars and karaoke).

Some typical products have been performed

- As investor in large projects such as Hang Da trade center, B4, B14 KimLien areas, North Sea building

- As one of the first units carrying out demolition of the old markets andinvestment in existing commercial center on the existing ground, the old assemblyapartment buildings, re-investment on the existing ground

- Some projects that Incomex has been performed (see Table 2-1):

Table 2-1 Some investment projects and large construction have been

implemented by INCOMEX

No Investment projects Total investment

level (vnd) Scope ofproject Implementationtime

1 Rehabilitation project of

B Kim Lien area

B14: 191 billionB4: 318 billion

B14: 3,250m2B4:3,440m2

2008-20102010-2012

20,000m2

2008-2010(handing over

to celebrate

1000 years ofThang Long)

3 Xuan La Trade Center 300 billion Total areas:

20,000m2 2010-1012

4 The project of trade

center and office for rent

in Vinh Tuy bridge

800 billion Total areas of

75,600m2 2010-2012

2008(Source: Incomex)

2.1.2.2 Indicators of the financial situation:

Summary of assets on the basis of financial reports had been audited within 3consecutive years 2008, 2009, 2010:

Table 2-2: Summary table of indicators of financial situation

6 Profit before tax 27.999.865.867 35.926.919.058 48.412.077.578

(Source: INCOMEX)2.1.2.3 Indicators of human resources:

With the goal of sustainable development, INCOMEX’s personnelrelatively stable over time, especially in recent years, the life of officials andemployees has been improved and properly concerned, annually INCOMEX hasheld many sessions of collective activity, reflecting the company's own culturecreated for employees to feel work and stick more with the company Averagesalary: 8tr/person/month This is high average

Table 2-3: Inderect HR of the company over the years 2008-2010:

2.1.2.4 Targets contributing to state budget:

With the business’s motto for the community development,INCOMEX is unit which is always rewarded by Hai Ba Trung tax department as theunit fullly participating in its tax obligations without tax debt, in addition, thecompany also has the activities to support great social security, every year the

company extracts from welfare fund of thousand billion to contribute to the socialsecurity all over the country, special paying attention to the flood plains, thedifficult people, the poor schools in the mountains, constantly in response tomovements held by the Government, People Committe, Youth Union for donationsfor the works of social security.

Table 2-4: Contribution to budget and annual social security

No Content Year 2010 Year 2009 Year 2008

2.2 Analysis of business environment factors of INCOMEX

2.2.1 Analysis of external environment

2.2.1.1 Analysis of macro environment - PEST model:

Overview of the real estate industry market

According to the latest report of the Foreign Investment Department underthe Ministry of Planning and Investment showed that the total investment capital forreal estate in early 11 months only reached $464 million, ranked the fourth inattracting FDI This is the lowest on record for 5 years Earlier, in 2008, FDIinvested in real estate reached $23 billion, in 2009 FDI reached $21.48 billion In

2010, despite the global economic crisis FDI for real estate reached $6.8 billion

Figure 2-2: FDI attracting chart for real estate investment sector