CAPSTONE PROJECT REPORT BUILDING THE DEVELOPMENT STRATEGY FOR THE POWER ENGINEERING CONSULTING JOINT STOCK COMPANY NUMBER 4 IN THE PERIOD FROM 2010 ΤΟ 2015 BÁO CÁO DỰ ÁN CAPSTONE XÂY DỰNG CHIẾN LƯỢC PHÁT TRIỂN CHO CÔNG TY CỔ PHẦN TƯ VẤN XÂY DỰNG ĐIỆN LỰC

CAPSTONE PROJECT REPORT BUILDING THE DEVELOPMENT STRATEGY FOR THE POWER ENGINEERING CONSULTING JOINT STOCK COMPANY NUMBER 4 IN THE PERIOD FROM 2010 ΤΟ 2015 BÁO CÁO DỰ ÁN CAPSTONE XÂY DỰNG CHIẾN LƯỢC PHÁT TRIỂN CHO CÔNG TY CỔ PHẦN TƯ VẤN XÂY DỰNG ĐIỆN LỰC SỐ 4 GIAI ĐOẠN TỪ NĂM 2010 ĐẾN NĂM 2015

G R 6o (ŒGó17B 101.E02 Strategy Management UNIVERSITY

GRIGGS UNIVERSITY

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GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT

BUILDING THE DEVELOPMENT STRATEGY

FOR THE POWER ENGINEERING CONSULTING

JOINT STOCK COMPANY NUMBER 4

IN THE PERIOD FROM 2010 TO 2015

Group No.: |

Students’ name:

Pham Minh Son

Vu Thanh Danh Nguyen Ngoc Son

Vo Thanh Cong Luu Ngoc Lam

Griccs GeMBAO0T E02 Strategy Management

CONFIRMATION

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Nha Trang, Dated December 22nd, 2009

To whom it may concern

Subject: Comments of the Power Engineering Consulting Joint Stock

Company Number 4 (PECC 4) on the capstone project report of the Group 1,

GeMBAOl1 E02 Class —- MBA in Finance, Griggs University

| The students have closely followed up the current situation of business activities

of PECC 4 to implement the project;

2 The content of "Building the development strategy for the Power Engineering

Consulting Joint Stock Company Number 4 in the period from 2010 to 2015"

project mentions the goals that PEEC 4 is trying to reach, and has high feasibility;

3 The display and content of the project is scientific

Van Cong Minh

Member of the Management Board

THE POWER ENGINEERING CONSULTING JOINT STOCK COMPANY No 4

Address: | 1 Hoang Hoa Tham Street — Nha Trang city — Khanh Hoa province Telephone: +84 58 3220405: Fax: +84 58 2220400

Email: pecc4(@dng.vnn.vn; = Website: www.pecc4.com

UNIVERSITY

COMMITMENT

RDF GOMBHESIOG Free SESl@ Mould like to commit that this Capstone Project

has not submitted to any MBA program, also to any degree training program

We also would like to commit that this Capstone Project is all ours group’s exertion The analysis results and conclusions in this project (excluding quoted

sections) are own ours intelligence product, but not copied from any other available

material

ACKNOWLEDGEMENT This Capstone Project is the last and most important request of our MBA program

in finance This project focuses on the business strategy management which 1s integrated with others as marketing management, human resource management and

corporation finance management This project helped us having an occasion to match the knowledge and skills of modern business management from MBA program with the practical] situations of the medium firm in Vietnam

To fulfill this project, we would like to express our deep gratitude for the fervor support of Griggs University, Center for Educational Technology and Career Development (ETC) of Hanoi National University and especially to the lecturers who have enthusiastically taught, guided and provided us with the valuable knowledge We sincere thank also to the support and assistance of the leaders and

staffs in the Power Engineering Consulting Joint Stock Company Number 4

(PECC4) They have spent highly valuable time on organizing surveys, providing data and discussing with us about the relation between the project contents and practical situations at the Company; from that, helping to create a close connection

between theory and practice and resulting in a highly feasibility in the future

We, the Group 1’s members, would like to receive the continual support of the lectures to help us completing the course with the highest results Particularly, the

support of all PECC4’s leaders and staffs will be an indispensable motivation for this project coming into the Company’s practice

G Rigas ŒGe1MB.101.E02 Strategy Management

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1 General context, the necessity and significance of research proJect: 10

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CHAPTER II - COMPANY?S ACTUAL SITUATION ANALYSIS 35

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Griccs) GeMBAOL E02 Strategy Management

1.4 Organizational structure of PEEC4: 3i (j©si263(42A08399103/00A/018t038/8Q0Q3G 38

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2 Business performance results analysis in the period 2001 - 2009: 42

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Griccs) GeMBAOI.E02 Strategy Management

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5 Limitations of the project and direction for study in the future: - 104

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Na guoua ga tt Q000103805000010 RQADAGGNA040BG3161240139/03004 3AGG4BÄ449934245610700100G010g134L348 108 Annex | ~ List of experts discussing to implement the proJect - +cs<+s: 108 Annex 2 - General statistics of electrical construction consultancy made 109 Annex 3 - List of major machineries and equipments of the company 111 Peis Le Tes ccremecrrencromanneasnmmeoaenennemmmnenasaoncenmumnnimeaneetes 114 XiiEX.S;EHiElifl4G0/NGHEogeosoagasaedgoutitiaqoMiGGEBRISGISICANQIGNASGA3200019/03244 03040 116 Annex 6— Assessment on satisfaction of PECC4”s stafÏ 22c S22c 222v 119 Annex’ 7.— The 1i§t GỀ tri: GB casaascssnia10.0uáaGt Q1 ay2i8308/600432304660616804/20386 14.0064 130 Annex 8 - The customer OpInIO' SUTV€Y - c2 2221222352322 18 1115 nh nào 132 AnnexS — General Statiste ư0E/H1nTKEE TOIGCHĐĂ wii scccscinaniaccenmmswnamaaenncasenanesen is 138 Annex 10 - Establishing the business plan in the period 2010-2015 - - 139

Griccs) GeMBA0TL E02 Strategy Management UNIVERSITY

LIST OF ACNONYMS

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EFE External Factor Evaluation

EVN Electricity of Vietnam

IE Internal - External

IFE Internal Factor Evaluation

PECC4 The Power Engineering Consulting Joint Stock Company Number 4 PEST Politic - Economic - Socio - Technology

SWOT _ Strengths, Weaknesses, Opportunities and Threats

VND Vietnamese Dong

I The PEEC4's charter capital structure at lune 30th 2009 38

.4 Sales percentage by customers 44

.6 Increase sales with new investment 45 7 The qualification and labor productivity 46

.9 Financial ratios and comparison with the industry 48 10 Labor structure allocated by education level 13 LI Growth rate and quality of work force In period 2001 — ee

12 GDP growth rate of some Asian countries (2004-2007) — 66 13 Overall economic situation of Vietnam 1n recent three 67

.14 Market share of power engineering services in 2008 73

1 Strategic economic goals in 2010 -2015 period 89

2 Human resources plan in 2010 — 2015 period 96 Table 3.3 Investment Plan in 2010 - 2015 period 10]

| Figure |.1 Alternative Strategic Management Structures 17

2 Figure |.2 Strategy Management Model 18

6 Figure 2.2 The sales and profits growth rat 43

7 Figure 2.3 The sales structure by products 43

8 Figure 2.4 The sales structure by customers 44

10 Figure 2.6 The qualification and labor productivity 46

13 Figure 2.9 GDP growth rate of Vietnam (forecast for the year of 66

20 Figure 3.3 New product development strategy 92

21 Figure 3.5 Organization restructuring strategy 95

Griccd ŒGeMB.101.E02 Strategy Management

millions MWH, and to 2020 as 200-250 millions MWH

According to The Approval of the National Power Development in the period of

2006 — 2015 with considering to 2025 (The Master Plan VI) of the Primer Minister, the electric demand grows 17% - 20%/year with probability of 22%/year in the period 2006-2015 The high development rate of power source and grid will open widely a large market for the power engineering consulting service

According to the Master Plan VI too, the power engineering consulting development strategy is to focus on building of specialized consulting companies, gradually improving of ability to design themselves the large power works as power planes and super high - tension grids

Although in front of that potential market, the consulting companies still have many

difficulties in penetrating and expanding their market share Their current most

diificulty is still to face the awareness that “the services are not favored by the

material productions” The value of the consulting service is still not fully

appreciated while this is the sound base that gives significant contribution to the enterprises using consulting services On the other hand, the policies and regulations are not perfect, not keeping with advanced nations and lacking of encouragement to the consulting service For example, the building consulting service costs is still rather low only from 1.3% to 2.5% while abroad often as from 4% to 12% of building value in the same type and scale of project

On the market, the consulting demand is not large but the service quality is highly required while the consulting supply is limited and its quality is difficult to evaluate

The consulting service is very difficult in marketing promoting: also in training and

PiEdfioznftbss0eli‡eB Mensiorrsourcc etc

1.2 The necessity:

1.2.1 The practical base:

The topic outlines the situation of establishment and management on business strategy of PECC4 up to now: identifies strengths, weaknesses of PECC4 at present, and opportunities and challenges for the development of PECC4 in the next time The research group bases on the situation and implementing results of the development strategy in the past in conjunction with forecasts about the world and

inland situations in the period of 2010-2015, and the PECC4’s development

orientation in the future to establish the development strategy for PECC4 in the period of 2010-2015

1.2.2 The reasons to choose this topic:

From an 100% state capital business, in the year of 2007, PECC4 was equitized Facing the business environment with full of changes and fierce competition, to

survive and develop firmly, PECC4 has to approach and apply well modern

knowledge in management strategy On this base, PECC4 will establish the development strategy for itself Those are:

(1) Increasing the value of consulting services for power projects; meeting the

financial targets as the Shareholder Meeting’s resolutions set out

(2) Ensuring the mobilization of resources to develop consulting services to be

, UNIVERSITY

With a desire to the PECC4’s rapid and stable development, the research group chRDKComopréssBriKree Nerstoalopment strategy for the Power Engineering

Consulting Joint Stock Company Number 4 in the period from 2010 to 2015”

To implement this project, the research group is going to approach and apply knowledge of modern business management, based on which to build a

development strategy that can be applied in practice for the PECC4

On the other hand, the research group chooses to build the business strategy 1n the

period of 2010-2015 and subsequent years in order to fit well with the period

approved by the Master Plan VI of the power industry When there are adjustments

in the approval of planning of the following years, the ideas given in this project should be adjusted promptly,

1.3 The signification of project:

¥ Setting up a long-term orientation in the period of 2010 — 2015 and the

following years This orientation has clear objectives, shared widely within the company and the functional divisions in the same time specifies the real resources to implement

Y Building this strategy as the PECC4’s commitment to customers

Y Analyzing thoroughly the environment and the ability of risks, specifying

clearly the potentialitics and the techniques to transfer them into the

PECC4’s real power

Y Specifying the PECC4’s internal limitations when implementing § this

GRIGG GeMBA0DTLEO2 Strategy Management

a/ Development of human resources:

b/ Raising the quality of service and developing brand:

c/ Investing for development and expanding market share

In which, the human capital solution is the foundation while the service quality

improvement and brand development are the key solutions

3 Object and scope of research:

3.1 Object of research:

The main research subject in this project is the PECC4 on the business strategic management in conjunction with the others as human resource, financial and marketing managements

3.2 Scope of research:

Focus on analyzing and evaluating the PECC4’s business results in the period of 2001-2009 on the important factors affecting the formulation and implementation of business strategy Simultaneously analyze and evaluate the development prospects

of electricity in general and of the consulting service in particular in the near future,

based on which to build the development strategy for PECC4 in the period of 2010-

G Rigcs) GeMBAOI1 E02 Strategy Management

+ The Decision No 110/2007/QD-TTg of the Primer Minister, dated of

ISP Di CU p rBss ofp Pivee Neidio wWational Power Development in the period of

2006 — 2015 with considering to 2025 (The Master Plan V1);

+ Discussion and taking opinions from the specialists of the some power companies in Nha Trang city, Khanh Hoa province;

+ The survey letters of customer’s opinions from the managers in the

companies as the PECC4’s customers;

+ The survey letters to assess the satisfaction of employees working in

the PECC4;

+ The data on business activities of PECC4 in years from 2001 to 2009:

+ And other information in the newspapers, magazines and internet

After collected, the data are organized to analyze, synthesize and compare with both

historical data and industry data The tools and methods can be applied as the followings:

+ The matrices of IFE, EFE, IE and Competitive Profile;

+ The Five Forces Model;

+ The analysis of PEST and SWOT,

+ The Regression Equation;

+ The statistical analysis in the SPSS 11.5 software;

+ The financial analysis and equity evaluation

+ And other approaches

From those, the development strategy is built for the PECC4 in the period 2010-

2015 and subsequent years

5 Structure of the capstone report:

» Chapter I — Literature review and theoretical basis:

This section generalizes the basic concepts of business strategy, strategic

management, human resource management, marketing management and financial

G R 6o GeMBAOTL E02 Strategy Management NIVERSITY

management, and the tools and methods to analysis establish and select strategies PDF Compressor FrebVetsionfrom the theoretical research on building the business strategy

Z Chapter Il - Company’s actual situation analysis:

This section takes an overview of the PECC4; analyses and evaluates its business performance and strategy in the period of 200] — 2009: analyses the internal and external environments to specify its strengths, weaknesses, opportunities and threats: finds the reasons for shortcomings Those are the bases to build the business strategies for the PECC4 in the next section of this project

xz Chapter IIl -— The strategies, solutions, recommendations and

conclusions:

This section establishes the vision, mission and core values for the PECC4 to set up business strategies in period from 2010 to 2015 At the same time, formulate the

solutions for development of such business strategies such as proposes solutions for

development of human resources, structural organization, marketing, solutions on consulting products, financial solution, management of service quality, setting up enterprise’s culture

G Rigcd GeMBA01 E02 Strategy Management

CHAPTER I—- LITERATURE REVIEW AND THEORETICAL BASIS

1 PEG MORITA Tote VERUAtrategy:

1.1 Overview of strategy and strategic management:

1.1.1 What is the strategy?

Johnson and Scholes (Exploring Corporate Strategy) define strategy as follows:

"Strategy is the direction and scope of an organization over the long-term: which

achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations"

In other words, strategy is about:

e Where is the business trying to get to in the long-term (direction)

e Which markets should a business compete in and what kind of activities are involved in such markets? (markets; scope)

e How can the business perform better than the competition in those markets?

e What are the values and expectations of those who have power in and around

the business? (stakeholders)

1.1.2 Strategy at different levels of a business:

Strategies exist at several levels in any organization - ranging from the overall

business (or group of businesses) through to individuals working in it

Corporate Strategy - is concerned with the overall purpose and scope of the business to meet stakeholder expectations This is a crucial level since it is heavily influenced by investors in the business and acts to guide strategic decision-making

G R 6o GeMBAOLEO2 Strategy Management UNIVERSITY

throughout the business Corporate strategy ts often stated explicitly in a "mission

PDE @owpressor Free Version

Business Unit Strategy - is concerned more with how a_ business competes successfully in a particular market It concerns strategic decisions about choice of products, meeting needs of customers, gaining advantage over competitors, exploiting or creating new opportunities ete

Operational Strategy - is concerned with how each part of the business is organized

to deliver the corporate and business-unit level strategic direction Operational strategy therefore focuses on issues of resources, processes, people ete

Depending on the corporation scale, the strategies can be levels as in the Figure 1 |

| Business | | | Business 2 | | Business 3 | Business level

strategies accounting strategies relations Functional level

R&D Financial/ Marketing Human Functional level

1.1.3 How strategy is managed — Strategic management:

In its broadest sense, strategic management is about taking "strategic decisions” -

decisions that answer the questions in the section 1.1.1 above

Griccd GeMBA01, E02 Strategy Management

Long-term ”—————— Generic and Grand

——> Major Impact Strategic Control,

— > Minor Impact Innovation.and [ =====================

sii ['eedback Entrepreneuship

Strategic management is defined as the set of decisions and actions in the

formulation and implementation of plans designed to achieve a company’s

objectives One strategic management model can be shown as in the Figure 1.2 above It comprises nine critical tasks:

(1) Formulate the company’s mission, including broad statements about its purpose, philosophy, and goals:

(2) Conduct an analysis to reflect the firm’s internal conditions and capabilities;

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(3) Assess the company’s external environment, including both the competitive

(7) Develop annual objectives and short-term strategies that are compatible with

the selected set of long-term objectives and grand strategies:

(8) Implement the strategic choices by means of budgeted resource allocation in

which the matching of tasks, people, structures, technologies, and reward

systems is emphasized:

(9) Evaluate the success of the strategic process as an input for future decision making

1.1.4 Strategic analysis and tools:

The strategic analysis is all] about the analyzing the strength of businesses’ position and understanding the important external factors that may influence that position The process of strategic analysis can be assisted by a number of tools, including: 1.1.4.1 PEST Analysis - a technique for understanding the "environment" in which

a business operates

The acronym stands for the Political, Economic, Social and Technological issues

that could affect the strategic development of a business

Identifying PEST influences is a useful way of summarizing the external

environment in which a business operates However, it must be followed up by consideration of how a business should respond to these influences

1.1.4.2 Five Forces Analysis - a technique for identifying the forces which affect the level of competition in an industry

G RIGGS) GeMBA01 E02 Strategy Management

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Defining an industry: An industry is a group of firms that market products which

arcRIDE Gaastpuressfir KacheoVeirs ame industries are more profitable than others

Why? The answer lies in understanding the dynamics of competitive structure in an industry

The most influential analytical model for assessing the nature of competition in an

industry is Michael Porter's Five Forces Model, which is described as the Figure

| 3:

Figure 1.3 Five Forces Model

Threats of New Entrants

A

Threats of Substitutes

(2) Threat of Substitutes: The presence of substitute products can lower industry attractiveness and profitability because they limit price levels The threat of substitute products depends on: (1) Buyers’ willingness to substitute; (2) The

G RIGG GeMBA0L E02 Strategy Management

relative price and performance of substitutes; and (3) The costs of switching to

PD¥'(Compressor Free Version

(3) Bargaining Power of Suppliers: Suppliers are the businesses that supply materials & other products into the industry The cost of items bought from suppliers (e.g raw materials, components) can have a significant impact on a company's profitability If suppliers have high bargaining power over a company then in theory the company's industry is less attractive The bargaining power of suppliers will be high when: (1) There are many buyers and few dominant

suppliers: (2) There are undifferentiated, highly valued products; (3) Suppliers

threaten to integrate forward into the industry (e.g brand manufacturers threatening

to set up their own retail outlets); (4) Buyers do not threaten to integrate backwards into supply; and (5) The industry is not a key customer group to the suppliers

(4) Bargaining Power of Buyers: Buyers are the people’ organizations who create demand in an industry The bargaining power of buyers is greater when: (1) There

are few dominant buyers and many sellers in the industry; (2) Products are

standardized: (3) Buyers threaten to integrate backward into the industry; (4) Suppliers do not threaten to integrate forward into the buyer's industry; and (5) The industry is not a key supplying group for buyers

(5) Intensity of Rivalry: The intensity of rivalry between competitors in an industry will depend on:

- The structure of competition - for example, rivalry is more intense where there are many small or equally sized competitors; rivalry is less when an industry has a clear market leader

- The structure of industry costs - for example, industries with high fixed costs

encourage competitors to fill unused capacity by price cutting

- Degree of differentiation - industries where products are commodities (e.g steel, coal) have greater rivalry; industries where competitors can differentiate their products have less rivalry

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- Switching costs - rivalry is reduced where buyers have high switching costs - i.e

- Exit barriers - when barriers to leaving an industry are high (e.g the cost of

closing down factories) - then competitors tend to exhibit greater rivalry

1.1.4.3 The External Factor Evaluation (EFE) Matrix:

The EFE Matrix evaluates the external factors, synthesizes and summarizes the

major opportunities and threats of external environment that affects the operational

process of the business Thereby it help the business managers to evaluate the level

of the business response to opportunities, threads and get out the considerations of external impact factors as favorable or difficult to the company The EFE matrix

should be made by 05 following steps:

Step 1: Make a list from 10 to 20 factors of major opportunities and threats which can be major influences to the firm’s success in the sector of business

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

for each factor The importance of each factor depends on the influence degree of

that factor to the field/ the industry that the firm is in business Total importance score of all these factors must be equal to 1.0

Step 3: Identify the weight from | to 4 for each factor, the weight of each factor depends on the responsive degree of the company with the elements, of which 4 as

the best response, 3 as the over average response, 2 as the average response, | as

the weak response

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

of factors

Step 5; Add the scores of all factors to determine the total score of the matrix

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Rank: Total score of the matrix does not depend on the number of elements in the

PDE Compressor Free Vershonowest is | If the total score is 4, the company

responds well to the opportunities and threats; if the total score is 2.5, the company has the average response to the opportunities and threats; if the total score of 1, it has weak response to the opportunities and threats

1.1.4.4 The Internal Factor Evaluation (IFE) Matrix:

The internal factors are considered as very important in every business strategy and

objectives that the firm set out After considering the internal factors, the strategic

managers should form a matrix of these factors to consider the firm’s reactivity and recognize strengths and weaknesses From that, they can help the firm make the most of strengths to exploit the internal resources, prepare to confront their weaknesses and find methods to improve these weaknesses How to build this matrix 1s similar to the EFE matrix building

1.1.4.5 The Internal-External ([E) Matrix:

The Internal-External (IE) matrix is used to analyze working conditions and strategic position of a business The IE matrix is a continuation of the EFE matrix and IFE matrix models when they are combined into one suggestive model:

(1) Score from the EFE matrix this score is plotted on the y-axis

(2) Score from the IFE matrix plotted on the x-axis

On the x axis of the IE Matrix, an IFE total weighted score of 1.0 to 1.99 represents

a weak internal position A score of 2.0 to 2.99 is considered average A score of

3.0 to 4.0 is strong

On the y axis, an EFE total weighted score of 1.0 to 1.99 is considered low A score

of 2.0 to 2.99 is medium A score of 3.0 to 4.0 is high

The horizontal and vertical lines meet in one of the nine cells in the IE matrix One strategy should be followed depending on in which cell those lines intersect The IE matrix can be divided into three major regions that have different strategy implications

Griccd) GeMBA01 E02 Strategy Management

Figure 1.4 The IE matrix

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medium maintain

low

1.01 4,0 IFE 2.79 1.0 IFE score

& Maxipedia

In the Figure 1.4 above:

Cells I, Il, and II] suggest the grow and build strategy This means intensive and

aggressive tactical strategies The strategies should focus on market penetration, market development, and product development From the operational perspective, a

backward integration, forward integration, and horizontal integration should also be

considered

Cells IV, V, and VI suggest the hold and maintain strategy In this case, the tactical strategies should focus on market penetration and product development

Cells VI, VIII, and IX are characterized with the harvest or exit strategy If costs

for rejuvenating the business are low, then it should be attempted to revitalize the business In other cases, aggressive cost management is a way to play the end game 1.1.4.6 The competitive profile matrix:

This matrix is formed to evaluate and compare the company to the other

competitors in the industry, the comparison is based on the factors affecting the

competitiveness of companies in the industry Through which, the managers can

identify the company’s strengths and weaknesses in comparison with the competitors’, and specify competitive advantages for the company and weaknesses

should be overcame

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Table 1.1 The competitive profile matrix

A competitive profile matrix can be performed through 05 steps:

Step 1: Make a list of about 10 major factors influencing importantly to the company’s competitiveness in the industry,

Step 2: Sort the importance from 0.0 (not important) to 1.0 (very important) for each factor The importance of each factor depends on the influence level of that factor to the company’s competitiveness in the industry Total important score of all

factors must equal 1.0

Step 3: Identify the weight from | to 4 tor each factor, the weight of each factor depends on the company’s ability to that factor; in which, the point of 4 is we//, 3 is abeve average, 2 1s the average , | is weak

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

of factors

Step 5: Add scores of all factors to determine the total score of the matrix

Raking: Compare the total score of the company with the main competitors in the industry to assess the company’s competitiveness,

G RIGG GeMBAOT E02 Strategy Management UNIVERSITY

1.1.4.6 SWOT Analysis - a useful summary technique for summarizing the key

iISSRD i GogipressonmseewKersiba businesses "internal" position and "external"

business and marketing students because it is quick and easy to learn

The Key Distinction - Internal and External Issues:

Strengths and weaknesses are internal factors For example, a strength could be

your specialist marketing expertise A weakness could be the lack of a new product

Opportunities and threats are external factors For example, an opportunity could

be a developing distribution channel such as the Internet, or changing consumer

lifestyles that potentially increase demand for a company's products A threat could

be a new competitor in an important existing market or a technological change that makes existing products potentially obsolete

It is worth pointing out that SWOT analysis can be very subjective - two people rarely come-up with the same version of a SWOT analysis even when given the same information about the same business and its environment Accordingly,

SWOT analysis is best used as a guide and not a prescription Adding and weighting criteria to each factor increases the validity of the analysis

Changing customer tastes

Liberalisation of geographic markets

Change in ulation age-structure

New distribution channels

Management

Changing customer tastes Closing of geographic markets Technological advances Changes in government polities Increase taxes

Change in ulation age-structure New distribution channels The points of S, W, O and T can be combined to form strategies:

The strengths - opportunities (SO) strategies: use the company’s internal strengths, take advantage of external opportunities, deal with weaknesses and try t0 pass over and translate those into strengths, avoid the important threats and focus on the opportunities

Figure 1.5 SWOT analysis diagram

Cell 3: Supports

a turnaround- oriented strategy

Numerous environmental

—_}>

environmental threads

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Go ŒeMB.01.E02 Strategy Management

« The weaknesses — opportunities (WO) strategies: Improve the internal

PDIN€lbnep+esbertltree Wdysiipe of the opportunities outside and consider

weaknesses which can prevent the exploitation of external opportunities

« The strengths — threats (ST) strategies: Use strengths to avoid threats, powerful organizations often have threats from outside

¢ The weaknesses — threats (WT) strategies: Defense to avoid and reduce the

inside vulnerabilities and threats from outside This is a bad situation and

(1) It can overemphasize internal strengths and downplay external threats;

(2) It can be static and can ignoring changing circumstances;

(3) It can overemphasize a single strength or element of strategy:

(4) A strength is not necessarily of competitive advantage

1.2 The importance of building strategies for the company:

1.2.1 Benefit of strategic management:

Studies show that if the strategy management was applied, the organization would achieve better performance in comparison with other organizations did not perform this process If achieved conformity between the organization's environment and its

strategy, structure and processes will create positive effects on the organization's

performance Benefits of strategic management has been tested in many different industries, with many different sized companies, can be summarized into 03 most

basic points, that is:

- Develop more clearly strategic vision of the company;

- Focus more exactly on the strategy’s significance;

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- Improve awareness of the rapid changes of the environment

DK Gampressan Free MErsion tratevic management always needs a_ formal process, and it can be started with the questions:

- Where is the organization In?

- If nothing changes, where will the organization go to after Ol year, 02 years, 03 years, 05 years or 10 years? Your answers can be accepted or not?

- If the answer is not acceptable, what must specific management actions be taken?

What must risks and considerations be interested?

1.2.2 Risks of strategic management:

Managers must be trained to guard against three types of unintended negative consequences of involvement in strategy formulation

First, the time that managers spend on the strategic management process may have a

negative impact On operational responsibilities Managers must be trained to

minimize that impact by scheduling their duties to allow the necessary time for strategic activities

Second, if the formulators of strategy are not intimately involved in_ its implementation, they may shirk their individual responsibility for the decision reached Thus, strategic managers must be trained to limit their promises to performance that the decision makers and their subordinates can deliver

Third, strategic managers must be trained to anticipate and respond to the disappointment of participating subordinates over unattained expectations Subordinates may expect their involvement in even minor phases of total strategy formulation to result in both acceptance of their proposals and an increase in their rewards, or they may expect a solicitation of their input on selected issues to extend

to other areas of decision making

Sensitizing managers to these possible negative consequences and preparing them with effective means of minimizing such consequences will greatly enhance the potential of strategic planning

Griccd GeMBAO0I E02 Strategy Management

2 Theoretical models of human resources, marketing and finance:

2.1 PRE GOMRE ASCE eS anaoenent:

2.1.1 The organizational structure:

Implementing successfully of a strategy depends on choosing a right organizational structure and a control system in accordance with the company’s strategy Basic tools of the strategic implementation is to design organization

A well-designed organization can increase profits by 02 ways:

(1) Saving management costs and lowering costs for the activities of creating value;

(2) Improving the ability of the functions of creating the company’s value to

achieve efficiency, innovation, quality and meet over customer’s demand,

and from that gain competitive advantage

There are (2 types of assignment:

(1) Vertical assignment: the way that the company chooses to allocate the right

on the requirements of the company's strategy

2.1.2 The organizational culture:

Organizational culture is a set of norms and values which dominate the way people act and behave in the organization

Organizational culture is the product of the values from the group of senior managers or the founders, as the product of the way that the managers apply to

design organizational structure, and as the product of the reward system that the managers use to guide and motivate the behavior of employees

G RIGoS) GeMBAO1 E02 Strategy Management

2.1.3 The core values:

KDE COMPHESSOL AERC NATSHQB ng the long-term confidence of an organization

As a small group of guiding principles in the long time the core values does not require the demonstration from outside they have internal value and importance to everyone in the organization

System of core values is the primarily motivation to promote people working, as the nucleus that connects individuals in the company together, matches the company with its customers, partners, and links the company with the society in general 2.1.4 Measurement of employee satisfaction:

Satisfaction of employees is the beginning point of the road leading to the satisfaction of customers, from which to maintain and increase the sustained value

of the company

The strategic goal is to understand thoroughly the needs, views of the staff to build the reward system and apply human administrative policies suitably

The research was conducted through two main periods: (1) qualitative research to

build the questionnaire interview, (2) quantitative research to gather information and analyze survey data

The research methods were applied as the questionnaire survey and the statistical software SPSS 11.5 for analysis in order to get out the strengths and weaknesses in the human resource management, one of the key elements of internal environment

On that basis, develop strategies for human resources and propose solutions for implementation

2.2 The marketing management (Customer research):

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UNIVERSITY

- Find the gap between demand (expectation) level of customers and satisfaction IcvPlIhc€ dndpfressdhdFPE€ Vórsiemby finding strengths and weaknesses of the company

The research process and methodology is similar to the measurement of employee satisfaction on the quantitative and qualitative, using the questionnaire survey and

the statistical software SPSS 11.5

The research is the basis for the external environment analysis, from that the

company’s strategy will be proposed

2.3 The corporation financial management:

2.3.1 The financial statement analysis:

Analyze sales, costs and profits of the last years; identify the financial and market

ratios; compare with the industry to determine strengths, weaknesses and the

financial position of the company in comparison to its competitors

2.3.2 The regression analysis and forecasting:

Based on the past data, the regression equation is applied to determine the influence

of independent variables to the dependent variable as sales From that, the strategic

goals for revenue, expenses and profits will be set up for every year in the future, in

which the labor productivity, the primarily factor generate revenue for PECC4, is

the focus

2.3.4 The optimal capital structure:

An optimal capital structure is defined as a capital structure (how much is equity,

and how much is debt?) in which the average cost of capital is smallest and the

corporation value is largest

The core matter of optimal capital structure is when a business has a debt, it can take advantage of the tax shield from debt due to the interest expense is deducted before tax Simply, it can be imagined that the corporation value in debt equals the corporation value without debt plus the present value of the tax shield from the

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debt In the special case if the company has debt permanently, the present value of PDE ogitessok! PréeecVersiontax rate multiplying by the debt

Left side of the debt is more debt, the financial exhausted costs will appear and "ata certain time”, the present value of the financial exhausted costs will then eliminate

the present value of the tax shield from debt

Of course, it can not be stated that the more debt the corporation value higher, so

the corporation value must be compensated for the financial exhausted costs The

problem is that up to present, there is not a work which can measure the present

value of the financial exhausted costs

2.3.5 The business valuation:

Valuation is an important outcome of many types of business and_ financial statement analysis Valuation normally refers to estimating the intrinsic value of a company or its stock

The basis of valuation is present value theory This theory states the value of a debt or equity security (or for that matter, any assets) is equal to the sum of all

expected future payoffs from the security that are discounted to the present at an

appropriate discount rate Present value theory uses the concept of time value of money — it simply states an entity prefers present consumption more than future consumption Accordingly, to value a security an analyst needs two pieces of information:

(1) expected future payoffs over the life of the security and

(2) a discount rate

The basis of equity valuation is the present value of future payoffs discounted at an appropriate rate

There are three valuation models which generally used:

(1) The dividend discount model;

(2) The free cash flow to equity model (FCFE):

(3) The residual income model

22" December, 2009

Group 1

All three models above are identical While the dividend discount model and the freP Ba&shChawp ressquit¥remVarsionkk well under certain circumstances in finite

horizon, the residual income model usually outperforms both, so this model will be selected to value the PECC4’s equity

The residual income model computes value using accounting variables It defines

equity value at time ¢ as the sum of current book value and the present value of all future expected residual income:

# EM) E(RE 2) | ECR as)

Where: BV, is book value at the end of period í;

Rij is residual income in period ¢ + n;

k is cost of capital

Residual income at time ¢ is defined as comprehensive net income minus a charge

of beginning book value, that 1s, Ri,= NI, - (A x BV,.;)

The intrinsic value is the actual value of a company or an asset based on an

underlying perception of its true value including all aspects of the business, in terms of both tangible and intangible factors This value may or may not be the

same as the current market value Value investors use a variety of analytical techniques in order to estimate the intrinsic value of securities in hopes of finding

investments where the true value of the investment exceeds its current market value

From this basis, the company’s managers can calculate to define the price for new

stock issuing

3 The research results:

(1) Studying the theoretical base on strategy and build business strategies

(2) Building and reinforcing the arguments about strategic planning process to develop at the PECC4

(3) Delivering the solutions to implement the strategy that has been built

G RiGcs) GeMBA0T E02 Strategy Management UNIVERSITY

CHAPTER Il —- COMPANY’S ACTUAL SITUATION ANALYSIS

1.1 Establishment history and development:

The forerunner of the Power Engineering Consulting Company 4 (PECC4) is the

Southern Power Planning and Designing Sub-Institute which was established on

all VA ~ 4 ` 7 ` , "¬ i ‹ *

the July 14°, 1976, the first professional power engineering survey and design unit

in Southern Region of Vietnam after the National liberty date

From 1976 to 1981, the Southern Power Planning and Designing Sub-Institute was directly under Power Planning and Designing Institute In 1982, the name of the

Southern Power Planning and Designing Sub-Institute was changed into the Nha

Trang Power Design Sub-Institute

In May 1986, to enhance the work of survey, design for power project construction

and development in the Southern provinces, the Ministry of Electricity and Coal

transferred the Nha Trang Power Design Sub-Institute belongs to the Power

Engineering Consulting Company 2 (established in 1985)

In recent years, to serve the national industrialization and modernization and especially to build one independent survey and design consulting unit that strong enough in the central region, in accordance with proposal by Electricity of Vietnam,

with the consent of the Government on the June 3“, 1999, the Ministry of Industry

issued the decicion No 33/QD-BCN to split Nha Trang Power Design Sub-Institute from the Power Engineering Consulting Company 2 for setting up the Power Engineering Consulting Company 4

Implementing the roadmap for equitization of power engineering consulting units under the Electricity of Vietnam, on the January 17'", 2007, the Ministry of Industry issued the Decision No 231/QD-BCN to transfer the Power Engineering Consulting

Company 4 into the Power Engineering Consulting Joint Stock Company 4

General Assembly of shareholders was established on the July 10", 2007

On the August 1“, 2007, PECC4 is granted the Certificate of Business Registration and officially operated under the form of joint stock company model

Go) ŒGeMBA01.E02 Strategy Management

Date of listed shares on the Hanoi Stock Exchange floor (HASTC): July 22", 2008

wiRDE Camphess oF red Vérsion

Slogan: “Reliable solution — Stakeholders Enhancement’, in Victnamese: “Gidi

pháp tin cay - Nang tam đôi tác”

1.2 Field of business:

+ Offering consultancy for construction of power plants, power networks, renewable energy, electrical telecommunication, transport works, irrigation works, technical infrastructures and civil works, industrial works, including:

- Formulating power development planning for region, domain, provinces,

cities, districts

- Formulating power development planning for renewable energy

- Topographical survey; providing services for topographical map measuring and plotting, land survey map; works deformation observation

- Geological investigation for engineering works; — hydrogeology; geotechnique; technical treatment for foundation consolidation, including:

measuring and plotting engineering geological map for works, hydrogeology,

boring and excavation investigation, geophysics, construction materials investigation and grouting

G R G9 GeMBAOLEO2 Strategy Management

- Project survey supervision

PDE Cnpup©ss6:ki5e€ Ñ€ESIBRtion, Measurement and observation for projects

- Environmental impacts investigation and assessment, — setting up compensation, agriculture resettlement, residential resettlement plans of

construction investment projects

- Environmental supervision

- Testing on physical-mechanical properties of soils and rocks, works’ foundation and construction materials, testing and verifying project quality

- Testing, analyzing and evaluating environmental criteria

- Providing consultancy services on formulating pre-feasibility study report,

feasibility study, technical design, detailed drawings, total investment cost, total cost estimate, cost estimate ; preparing bidding documents, tender documents evaluation; construction supervision

- Providing consultancy services on examination and appraisal of pre- feasibility study report, feasibility study, technical design, detailed drawings, total investment cost, total cost estimate, cost estimate, bidding documents for engineering construction works

- Providing consultancy on environmental issues, setting up compensation,

agriculture and residential resettlement plans of construction investment

projects

- Providing consultancy services on construction investment management + Other business activities compliance with regulation by laws

+ Scope of business:

- In over Vietnam territory

- Outside of Vietnam territory: Lao People’s Democratic Republic, Cambodia

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Charter capital:

TaHid 1 COP PERSED RSF ce tu structure at June 30", 2009

Domestic shareholders bó shareholders

1.4 Organizational structure of PEEC4:

The organization structure of PECC4 is set up in accordance with the Enterprise

Laws and regulations of by Vietnam laws

* General assembly of shareholders: General Assembly of shareholders is the

highest authority unit in PECC4 General Assembly of shareholders decides the

issues of duty and power specified under laws and the Charter of PECC4

* Management Board: Management Board is the management agency of PECC4,

have full authority on behalf of PECC4 to decide issues relating to purposes and

benefits of PECC4, except for matters under the jurisdiction of the General

Assembly of Shareholders

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Figure 2.1 The PECC4’s organization chart

DUPUTY GENERAL DUPUTY GENERAL DUPUTY GENERAL

Administration Transmission lìne Hydropower

survey Division Topography

Planning & Public

engineering Supervision Consulting Dept Division

Geology survey

- Division

Dept

Thermo and nuclear electric consulting Dept

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* Supervisory board: Supervisory Board is the agency to inspect the financial OPE DP Comprsér FURE WAS df Observance of the accounting regime, the operation of inspection systems, internal audit and the implementation of resolutions of General Assembly of shareholders

* General Director: General Director is responsible to the Management Board, under the law for the daily operations of PECC4 The Deputy General Directors and

professional experts shall be responsible to assist the General Director

1.5 Services provided by PECC4:

(See Annex 2 - Statistics of implemented power engineering consulting services) 1.5.1 Grid consultancy qualification:

Qualification and experiences of PECC4 in designing of power transmission

network satisfy all strict technical requirements Volume of power transmission projects have been mainly made by PECC4 in Vietnam and within the region in the

period from 1990 to 2009 as follows:

e Power transmission lines:

* $00 kV transmission line: 08 projects, total length: 750 km

* 220 kV transmission line: 34 projects, total length: 2,600 km

* 100 kV transmission line: 50 projects, total length: over 3,000 km

* Power distribution network in Central Region and Highland provinces: over 4,000km with total capacity over 5,000 KVA;

e Electrical substations:

* 500 kV substation: 05 projects, total capacity: 3,900MVA

* 220 kV substation: 17 projects, total capacity: 2,.026MVA

* 110kV substation: nearly 30 projects, total capacity: over 1, OOOMVA

1.5.2 Hydro-electric projects consultancy qualification:

Technical consultancy for the hydro-electric project is a field that PECC4 started implementation since 2001 PECC4 is one of the leading hydro-electric design

consultant units in Vietnam PECC4 has built a team of technical consultant staffs