CAPSTONE PROJECT REPORT FORMULATING BUSINESS STRATEGY FOR SONG DA 11 JOINT STOCK COMPANY IN PERIOD 2010 2015 AND VISION TO 2020 BÁO CÁO DỰ ÁN CAPSTONE XÂY DỰNG CHIẾN LƯỢC KINH DOANH CHO CÔNG TY CỔ PHẦN SÔNG ĐÀ 11 GIAI ĐOẠN 2010 - 2015 VÀ TẦM NHÌN ĐẾN NĂM

CAPSTONE PROJECT REPORT FORMULATING BUSINESS STRATEGY FOR SONG DA 11 JOINT STOCK COMPANY IN PERIOD 2010 2015 AND VISION TO 2020 BÁO CÁO DỰ ÁN CAPSTONE XÂY DỰNG CHIẾN LƯỢC KINH DOANH CHO CÔNG TY CỔ PHẦN SÔNG ĐÀ 11 GIAI ĐOẠN 2010 - 2015 VÀ TẦM NHÌN ĐẾN NĂM 2020

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CAPSTONE PROJECT REPORT FORMULATING BUSINESS STRATEGY FOR SONG DA 11 JOINT STOCK COMPANY

IN PERIOD 2010 — 2015 AND VISION TO 2020

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CHAPTER 3: PRACTICAL ANALYSIS ON SONG DA 11 JOINT STOCK

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3.5 SWOT analysis of Song Da II Joint Stock Company .‹ ‹‹¿ 63

3.6 Business strategy selection for Song Da 11 Joint Stock Company using average

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APPENDIX : List of subsidiaries of Song Da 11 Joint Stock Company 82

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ABSTRACT

1.1 The rationale of the research

Along with our country’s strong economic development in recent years, many state owned companies have been transferred to joint stocks enterprises, they have stood

stably and steps by steps affirmed their roles in the business environment Song Da

11 JSC was one of those companies However, the business and especially the market economy require companies to be continuously renewed and to improve their adaptability with market They have to determine where they want to go? How and in which way? To do so, they have to do well the business strategy formulation

and implementation Having a suitable business strategy will help the business to

ensure its survival, sustainable development and achievement of its goals However, there are still limitations in formulating and implementing of business strategy for most of Vietnamese enterprises in general and enterprises in constructions industry

in particular For many enterprises, it is still a very new concept and be considered

not important

Song Da 11 Joint Stock Company is a subsidiary of Song Da Corporation The company‘s business plans used to base on the plans assigned by Song Da

Corporation Therefore, the company’s market researches and developments were

not invested intensively Company’s business was only planned for yearly level The medium and long term planning was done rawly, lacked of scientific

background and did not meet the requirements of the market because the company

was not be able to evaluate the impacts of its internal and external environment in

order to see its potential in the relation with overall market; to realize market opportunities and challenges, and to identify its strengths and weaknesses

With the hope to apply harvested knowledge to the real practice of a company, where one of our group members is working for, the topic “Formulating business strategy for

Song Da 11 JSC in period 2010 to 2015 and vision to 2020” has been selected by our group

1.2 Reserchublc£ft©r Free Version

- To research and systematize theories on formulating and implementing business strategy; select effective analysis models in order to formulate and implement business strategy

- To apply conceptual basis and above analysis models to evaluate the internal & external environment in order to formulate the Song Da 11 JSC‘s business

strategy

- To propose recommendations and solutions for the best implementation of the

company’s selected business strategy

Da 11 Joint Stock Company

1.5 Capstone report structure

The capstone report includes 4 chapters:

Chapter 1: Abstract

Chapter 2: Conceptual basis

This chapter reviews conceptual basis of business strategy such as concepts, nature and main features The capstone report has applied some of the external environment analysis models such as: 6 aspects of external environment, five competitive forces and some of the internal environment analysis models, for instances: value chain, stable competitive advantage SWOT analysis model was

also Usage thịinghaRlesr2lSpeecptiost the way to select business strategy using average weighted method

Chapter 3: Facts analysis of Song Da 11 Joint Stock Company

This chapter captured the general introduction of Song Da 11 Joint Stock Company, its business strategy to 2015 and vision to 2020 The chapter had used the six external influencing forces model; the five forces model in analyzing the general macro environment and electrical construction industry‘s environments The value chain and stable competitive advantage models were also applied to do the internal analysis of the company SWOT model played a critical role in doing the general evaluation to find out the company’s strengths, weaknesses, opportunities and threats Besides, it also applied the average weighted method model in the business strategy selection process Chapter 4: Conclusion and recommendation

Solutions were proposed for successful implementation of the selected business strategy Limitations and recommendations were also discussed for resolving current existing problems and direction for future development

Conclusions, list of references and appendices

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CONCEPTUAL, BASIS

Chepter 2 focuses on conceptual basis of strategy and business strategy: external and internal environment analysis models, general competitive strategies, average weizhted method model in analysis and selection of business’s strategy

2.1 Business strategy theories

2.1.1 Concepts

Nowadays, the concept of strategy has been widely and popularly used and it has beea considered as an important foundation for company’s activities There have beea a variety of ways to define strategy: ‘strategy is the model concluding options, missions and plans built to achieve these objectives” (Kenneth, 1965) or “strategy

is ¢ red thread lining through all of organization's activities’ (Ansoff, 1965)

“Strategy is the plan for controlling and utilizing the organization's resources like

human, assets, finance with the aim to ensure and increase its own essential benefits’ This outstanding idea has been firstly introduced Kenneth Andrews in his famous classic book “Zhe Concept of Corporate Strategy” According to him, straiegy is what to be done by the organization basing on its strengths, weaknesses

in the condition that contains both threats and opportunities

2.1.2 Nature

Business strategy is the way to do business, the enterprise’s operation creed,

the way to use resources, and the foundation to solve all matters of the enterprise

Business strategy is a creative activity in management Basing on the set objectives to arrange and create a new effective and high competitive

management system Copying the business strategy of other will not bring the long term development and prosperity for the company Therefore, making business strategy must be based on the real context of each firm Two

E9/P@f/8?p9B€r6era {e-saIne industry, providing the same product or service with the same production scale will have different business strategies because of differences in their internal conditions In addition, a business strategy can only show its effectiveness when there is a good combination of creative in management and creative in organization and technology

- Business strategy is the action plan of company, building a business strategy

is a crucial task but implementing it is considered to be more essential Obviously, a business strategy will be worthless if it is not put into implementation For implementing the business strategy, all members of the company must know and clearly understand it, it then must be broken down

to detail feasible objectives for each year for each department and specified

tasks for each individual

2.1.3 Features

Overall: Business strategy is the overall map guiding the firm’s development; it decides the relationship of company with external environment The overall feature can be seen in three aspects: be consistent with the overall development trend of the firm, be the directing ground for all of company’s activities; be consistent with the country’s development trends in economic, technology and society for a particular period; be consistent with the trend of global economic integrations

Visionary feature: In the previous time, although employees worked hard, their work result and effectiveness were not high; the reasons were the company did not have a strategy to direct its business activities and it could not predict the company’s development trend Therefore, in order to build a successful business strategy, it is crucial to precisely anticipate the trends of overall economics, technology and society And a winning strategy must be built basing on the accurate future

must ap‡ÐtSo†fpìtasoeWetOvearbioW the competitive advantages to win their

competitors

Risks: Business strategy is future development plans for the company and it is a difficult task since future market environment is unpredictable and changeable The

longer strategy’s period, the more changeable environment factors and the riskier

the strategy will be Therefore to reduce potential future business risk, company must develop business strategy on the foundation of good vision, unbiased and cautious observation and prediction

Professional and creation: Basing on its own capability, the company should select business activities that fit with its strengths and avoid heading directly with large competitors Because advanced technology and market competition is unlimited, companies should continuously catch up with advanced technology Specialization and technical innovation are also considered as survival factors for the existence and development of the company, especially for the small and medium enterprise Relative stability: Business strategy of a company must be relatively stable during a

particular period; otherwise it cannot be the direction for the firm’s business

activities Since the external environment and business activities continuously change over time, the business strategy also must be able to adapt with these changes Accordingly, the strategy should neither be permanent nor changeable in shot term period, it should be comparatively stable

2.2 Strategy formulating process

Strategic management process includes:

- Analyzing Company’s external environment to determine opportunities and

threats; analyzing company’s internal environment to determine strengths and weaknesses

- Drafting and selecting the best strategy basing on the company’s vision,

mission, opportunities, threats, strengths and weaknesses

- Implementing and adjusting the strategy, supervising and evaluating the implementation then making necessary adjustments to ensure that the strategy is suitable for the company

The SU9{?g!C-BWIff€460t©€Sädidiiplayed as below:

Figure 2-1 Strategic management process model

Vision Mission

External environment + Macro analysis:

external macro environment

+ Micro analysis: Five

forces model + Conclusion:

Focus

and org‡jZ@1/9Ipi0MUI9RredVewalwi$ are important backgrounds for setting a strategy, which is consistent with the business environment Doing business in the constantly changing environment, the company’s manager must have a good intuition and vision to accurately analyze business environment and find out the actual advantages as well as disadvantages that have large impacts on the company Mo-eover, it will help to make a high feasible strategy, which fits with the bus:ness’s environment and the company’s vision

Mission

It is no doubt that each organization has its own objectives even when the objectives

are not officially announced Most of company’s founders and leaders believe that their business will be highly imaged by customers The earliest step of strategic maragement is to set objectives and strategy And after a period of time joining the fluctuated business environment, the manager will see the need to review the original objectives

Obiectives

To ensure the unification in objectives of the company

To set standard or benchmark for resources allocation

To establishing same communication language or company’s culture

To serve as a central connection for all individual to follow the company‘s objectives and direction

To provide support in creating work flow to determine tasks and

responsibility for each position in the company

To determine clearly the company’s measurable objectives in term of cost control, time and other variables

Source: The strategic management lecture- Gemba01.01

2.3.External environment analysis model

2.3.1 Marco analysis

Ma:ro analysis is used to analyze macro environment - enterprise’s external envronment To analyze, summarize external forces affecting to the enterprise’s

exist 2Ð £‹+6lapreorl RfeeWerPliän has to identify opportunities and threats in the external environment: Macro environment’s factors are showed as following model:

Figure 2-2 External enviroment

Age PH EUS nh rEg Hie Whaws, the potentiality for the elderly-care and insurance service However, it is also a threat for company in term of labor

resources

Geographic distribution: can create advantages for information technology firms With computer, people could stay at home and work, contact or communicate with others through telecommunication network

** Politics and legal analysis

Political environment: is political factors and environment that impacts the business activities They consist of political system, parities, union, atmosphere and

government policies

Legal environment: is legal system, the mechanism for creating, interpreting and

enforcing the laws related to business area, it comprises the legal norms and rules

that govern business activities

It is undoubted that the Politics and legal environment have deep influence on

business activities On the whole, company can only grow stably and healthily in a country that has the political stability, transparent policies and low level of corruption risk

“* Economic analysis

The economic environment is defined as the economic policies, socioeconomic

circumstance of the country in which company do business Macro economic environment is consisted of factors that affecting consumer’s buying power and spending patterns, including: the socioeconomic structure, economic development level, economic regime and macro-economic policies

Socioeconomic structure analysis: socioeconomic structure is the structure of the national economy, it includes: industrial types, distribution, consumption, technology, property Because the industry development strategy is considered as the most crucial element, company’s manager has to carefully study the development and future tendency of the industry which covers the company’s

business activities

ECOnOPHS ER BH hy /449fifreeopopgiorgrowth is the economy-scale, the economic growth of a country, a region The indicators of economic growth: GDP, national income, national income per capital, economic growth rate By analyzing the economic growth, company could understand the economic development trend and anticipate the future trend, base on that to build a suitable business strategy

Economic regime analysis: economic regime is the model of the national economy

It governs the relationship between government and business, business and business, business and industry by applying certain methods in managing and adjusting the scale, content and mode of the economic activities

Government economic policies analysis: economic policies are the economic development objectives in a particular period and approaches as well as strategy of

government to achieve these objectives

** Science and technology analysis

Science environment: includes factors and social phenomenon that have close relationship with scientific technology in areas where company‘s business Is

expanded Scientific technology factors consist of four elements:

- Development level of the technology in society

Scientific forces

Scientific institutions

Policies and law documents relating to science and technology

“* Cultural and social analysis

Social environment consists of:

- The establishment and changes of classes in society, population structure

- Geographic shift in population

- Power distribution in society

- Schedules of people’s daily activities and working in society

Cultural environment: consists of philosophy, region, language, literature and art The impacts of these elements on business activities are often indirect, but can not

be underestimated

“* Global environment

15

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- Global market of company’s business activities

- Current markets that have been changing

- Important international political events

- Culture of countries or regions

Macro- environments analysis helps us to evaluate easier:

- Macro-economic factors which influence company’s business activities

- Major changes in competition

Macro- environments analysis is shown as below:

* Inflation rate Household’ s savings

¢ Interest rate business’ s savings Economic * Deficit/ surplus balance of trade GNP

segmentation ¢ Deficit/ surplus government

budget

* Anti-monopoly law Human resource training

trend

¢ Female proportion in labor Environmental concerns

Social and cultural | + Labor force diversity decision of service and segmentation ¢ Perception bout work-result occupation

to goods and service’s attributes

¢ Renovating products Government budget for Technological * Knowledge application R&D

technology

¢ Important international political New industrialized

segmentation ¢ Key global markets Cultural differences

Source: strategic management text book- statistic publishing house 2007

2.3.2 BAY GSO RSS FRM EE ABAD 515

Secors in the national economy are classified basing on the features of goods or sersices and its roles in the national economy:

It is a fact that when taking part in the business game, companies have to face with five types of competitive pressures associated with:

- Competition pressure from new entrants

- Competition pressure from same products providers

- Competition pressure from substitute products

- Supplier bargaining power

- Buyer bargaining power

The five forces model of competition provide by Michael E Porter is displayed as

Supplier Rivalry among Buyer

bargaining >| same products — bargaining

A

Competition from substitute products seller

17

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Source: strategic management text book- statistic publishing house 2007

** Rivalry of potential new entrants

New entrants can be a newly established company or an existing company in market expands business into your industry The newcomers will increase the industry capability but demand their own market share The competition pressure 1s large or small depending on level of the expenses occurred for the new suppliers

join in the market and the reaction of other existing suppliers; and the low or high

industrial barrier

** Competition from substitute products seller

Substitute goods are products that offer the identical uses, bring the similar benefits

to customer If the profit of substitute goods is large, the pressure will be high (in

term of producing cost and selling price), the company will fall into passive position If the substitute goods suppliers aggressively extend the production, the

industry competition will be at high level of threat If consumers accept the

substitute products positively in term of economic and psychology, the threat will

be bigger

** Buyer bargaining power

Customer of the company can be the end-user of the products When customers demand for the better products with cheaper price and better after sales services, it

will bring pressure to the company

“* Rivalry among current same product suppliers

Competition between companies in the same industry is related to the below

factors:

- Industry feature: the company can base on the distribution and position of

the industry in the social production, resources used, technical structure and development to analyze the technical aspect of the industry to know its feature and have suitable policy

- Size of companies in the same industry, in general, if the number of

companies in the one industry is big, entrant barrier for that industry is low

PB£©ñ/08xrtstt'wab/4Sf@impanies in the one industry is small, it means the market size is small and the entrant barrier is high

- Market structure of the industry is depended on the relationship of supply and demand: supply surplus, demand surplus or supply and demand in balance If there is a demand surplus, which ways should the company enter

the market If there is a balance in supply and demand, which ways should

the company strengthen its position If there is a supply surplus, the company has to create its own competitive advantage or consider exiting the market

“* Supplier bargaining power

Material supplier has the power to increase the prices or decrease quality of the products, or increase prices and decrease quality of the products

Company should care about the bargaining power of supplier to achieve main requirements on: method, quality, products capability, capital ability, and capital

Michael Porter had provided the conclusion: Value chain is a collection of design, production, sales, distribution and supported service activities Each activity has contribution to increase the products and service’s value Value chain could be

divided into the primary activities, supported activities as following

19

Sales and marketing

After sales service

External logistics

Supporting activities Materials management Research & Development Company’s infrastructures Human resource

management

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Source: The strategic management lecture- Gemba0!.01

In order to achieve the objectives of efficiencies, quality, innovation and customization of products and services, company has to build specific strategies that

are closely linked to activities creating the products differentiation These

mentioned objectives could be seen as cross- objectives which make contribution to company value chain

2l

2.4.2 SOSH CCAM BPEL FOALS ion

The stable competitive advantages of a company have four main attributes:

** Valuable: competitive advantages help the company to create value, reduce cost, and boost the business activities’ efficiencies

** Uniqueness: competitive advantages can combine with company’s other resources in the unique way

“* Internal reproduction: it is the result of internal coordination between company’s individuals and divisions through the combination and organization of technical resources to create the company‘s main capability

** The competitive advantages are formed through the studying and experience accumulation process It could not be sold or bought and copied

2.5 SWOT analysis

Constant changes in company’s environment could bring potential opportunities to business activities However, whether company can make use of potential opportunities; this depends on both external and internal environment factors It is

the fact that although many companies have supportive external environment, they can not take advantages of their opportunities since their internal resources are in

shortage Meanwhile, some companies with unsupportive external environment, but

they still gain success because they actively and fully make use of their competitive

advantages and strengths Consequently, it is necessary and important to analyze company’s external as well as internal environment

SWOT analysis: analyzing company’s strengths and weaknesses, opportunities and threats SWOT analysis is the key to develop a strategy, to highlight the internal

strengths, also external opportunities and threats

Strengths and weaknesses are internal elements, while opportunities and threats are from external environment SWOT allows to analysis various environment factors,

which can relatively affect the company‘s competitive advantages in a logic that

enables readers to understand, present and discuss in order to have a final decision

To build business strategy, SWOT analysis is often combined with other analysis

tools

SWO bbepelysJ3nodsi earbeelWaYBiôì following table:

Strengths Strong strategy

Healthy financial situation

Popular brand name or reputation

Good customers’ service

Good products’ quality

unhealthy financial situation

Higher cost than rivals Lack of basic capabilities or

resources

Production breaking down Backward R&D

Little products line

Little advertising budget

Larger customers segments

Geographic expansion

products line expansion

Launching new products

Backward and forward integration

Expanding to gain market share’

rivals

Taking over rivals

Joint-venture or partnership to

increase market share

Expanding to taking advantages of

potential opportunities

Expanding to make brand name

More new entrants Decrease sales due to substitutes Slow demand growth

Unfavorable exchange rate movement

New costly regulation Positive relationship with business cycle changes Strong bargaining power with buyers and suppliers

Shifts in customers’ demands

Demographic changes

25 Source: Strategic management lecture - Gemba0!.0]

2.6 GerieFad`eoMìetlflx¿e SE:af$8lÊSion

Enterprises pursue company strategy to achieve compctitive advantage, operate better than competitors in order to achieve above-middle revenue Enterprises usually select its business strategy from basic strategies: cost leadership, product differentiation and focus

2.6.1 Cost leadership strategy

This is the strategy that can produce goods or services with lower cost in comparison with competitors This strategy has two basic advantages Firstly, with lower cost, cost leadership enterprise can impose the lower price than competitors but achieve profit as competitors If enterprises in one industry achieve similar value for their products, cost leadership enterprise can achieve higher profit because it has lower cost Secondly, if

industry competition increase and enterprises compete with each other by price, cost

leadership enterprise is able to stand better than other enterprises because of its lower cost

Advantages: In the most general, solutions to achieve cost advantage depend on each industry and industrial structure Advantage may come from production scale, technological monopoly, favors on materials, product’s structure, service level, technological process

Disadvantages: The main threats of cost leadership method are that competitors find ways to produce with lower cost and attack the cost leadership enterprise to its

own strong point Competitors’ imitative ability with cost leadership enterprise’s

method is one of threats with cost leadership strategy Cost leadership enterprise may only think of decreasing cost but it they can not track changes in customer’s the demand will be affected dramatically

2.6.2 Differentiation strategy

The differentiation strategy seeks to produce a competitive edge by producing

products or service that buyers consider valuable and worth to purchase The company'‘s ability to differentiate their products to satisfy demand of the buyers in a

unique way that the competitors can not offer, enables them to put a remarkable

higher price than the industrial average one Earning higher revenue by setting

higherppE£©6Ablew0r theeeoekrW/enthe case of the cost leadership) allows the product differentiation company to operate better and receive higher revenue

2.6.3 Focus strategy

What makes focused strategy be different from Cost leadership strategy or broad differentiation strategy is the concentrated attention on a particular customer group

or market segment The targeted segment or niche can be defined by geography, by

a specific group of customer, or by a branch in the whole product line through differentiation or cost leadership In nature, a focused company Is a cost leader or a differentiator

Another point is that a focused company competes with a differentiator in only one

or several chains of the product by successful differentiation as they have knowledge at only a small group of customers or areas Moreover, the focus on a

small chain of product allows better focus to bring out new ideas than a broad

differentiator

2.7 Analysis and selection model using average weighted method

Average weighted method is used to select one of projects based on evaluating the

selected criteria such as enterprise’s value, revenue, profit, investment, competitive

advantage, cultural suitability, time to find out the best strategy This method

includes four steps as:

Step 1: Select the most important and suitable criteria for evaluating the competitive

strategies such as the enterprise’s value, revenue, profit, risk level, investment level, competitive advantage This is the subjective step depending on the selector

Step 2: Assign average weighted method to criteria to determine level of importance

for each criterion affecting more to final decision

Step 3: Give mark to each strategy project according to each criteria

Step 4: Summarizing total score to make decision which strategies should be implemented

Table 2- 5 illustrates the average weighted method in selecting showed strategy projects

an

Tableppy: Gtrateeacssledtion using ayerage weighted method

** Pointing out concepts, nature and characteristics of business strategy

** Providing models and tools to analyzes company’s external and internal environment :

- Company’s external environment

- Five forces model

- Value chain

- Competitive advantages analysis

- Matrix SWOT model

** Analyzing basic competition strategy and selecting the business strategy basing on the average weighted method

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PRACTICAL ANALYSIS OF SONG DA 11 JOINT STOCK COMPANY

From conceptual basis in chapter 2, this chapter gives overview of the company, business plan until 2015, vision to 2020 This chapter applies analysis models of 6 external environment aspects and five external forces to analyze external environment It also applies value chain and stable competitive advantage models to analyze the company’s internal factors Besides, it applies SWOT model to analyze strengths, weaknesses, opportunities, threats and uses average weighted method to select a suitable business strategy for the Company

3.1 Overview of Song Da 11 Joint Stock Company

3.1.1] Establishing and developing process

The company originally was a subsidiary company belonging to Song Da Corporation In

2004, it was converted from a state-owned enterprise into the form of a joint stock

Company based on the decision number 1332/QD-BXD issued on 17/ 8/2004 by the Minister of Construction Now, Song Da Corporation is still holding 37.1% of company’s

capital shares

Together with the development of Song Da Corporation, Song Da 11 Joint Stock

Company has experienced over 40 years in construction and development with many times of changing its name and adding tasks, separating and integrating itself The company has grown up in terms of its size, organization, task, function and industrial Structure

- Song Da 11 joint stock Company was licensed to trade in Hanoi security transaction center (HASTC) on December 4th, 2006 with the code of SJE

- On July Sth, 2007, the president of the state security commission gave the decision for the company to issue IPO shares with the charter capital increasing from VND20 billions to

VNDSO billions

3.1.2 Company’s main business operation fields

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Inyiale rplpstls d#1s06391-32065 transformer stations up to SOOKV; building hydropower plants, irrigation & transportation, post office; managing, operating, and distributing electric power for projects whose contractor or investor is Song Da corporation

Building water supply and drainage system in urban and industrial areas; installing work structures; managing and operating small and medium size hydropower factories, water factories in urban and industrial areas

Manufacturing and trading mechanical products; managing and operating the electricity business

Trading mechanical transport vehicles specializing in carrying road freight and equipment materials serving for construction; export and import materials, equipments, mechanical accessories and construction technology, post office, irrigation and transportation works

Installing, testing, adjusting, carrying out maintenance, and assembling industrial electricity cabinets and boards for power lines and factories, transformer stations and

technological chains with voltage level up to 500 KV

Carrying out maintenance, and periodic maintenance for power plants, transformer stations, handling unusual problems of electric works Consulting professionally for the design of electric and automatic system

Constructing and developing urban areas, business towers, residential apartments and industrial parks

Other services allowed by the law in accordance with the company’s development objectives and orientation

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Since 2001, company has focused on expanding the market for electricity installation, participating in constructing many electricity works, such as: Pleiku- Phu Lam 500KV line, 500KV PleiKu — DocSoi — DaNang Company has invested to expand in some industries such as: experiment for electricity edit, investment in producing commercial electricity, mechanical process and products served for construction But the products

mainly focused on installing electric projects in the whole country spreading from the

North to the South The results for business production for 5 years and estimation up to

5 Profit after tax 6,004 6,853 8,672 12,438 | 20,083 | 31,000

6 Net income/ Sales ratio 3.1% 2.98% | 3.38% | 4.41% | 6.23% | 7.94%

7 Net income/Shareholders’ 27.1% | 22.4% | 23.4% 10.5% 17.9% | 2296%

Source: Reports of Song Da 11 Joint Stock Company 11- 2008

3.2 Company’s vision, mission and target to 2020

Capacity, developing company’s prestige and competitiveness to increase

produgwpit' + @4{est4v$0€SEraatdVegfffgigncies Improving staff's living standard,

ensuring dividend payment for shareholders, fulfilling all obligations with the state, increasing the company’s savings

32.3

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Strategy targets to 2015 and 2020

From 2009 to 2015: Stable production, develop stably, and business production output reached over VND600 billions up to the end of 2015

Product proportion of building lines and stations is from 60 to 70%, industrial

production is from 10 to 15%, trading construction products from 5 to 10%, trading houses and infrastructure from 5 to 10%

From 2015 to 2020: improving construction capacity, investing project, in the

form of BOT including: small hydroelectric factories from 10-30 MW,

projects for building materials production, electricity materials, house business and urban The growth target for business production value from 10-12% annually on average Up to 2020, business production value increase 2.5 times compared to 2010 reached VND1,000 billions Ensuring the company’s profit

grows annually over 8%-10% per year with the industry structure as follows:

the value of construction business accounts for 60-65%, the industrial production value accounts for 15-20%, the value of constructional products accounts for 10-15%; the value of electricity business, materials accounts 8- 12%; the value of house business and infrastructure occupies 5-10%

3.3 Company’s external environment analysis

Population size: In 2008, Viet Nam’s population was 86.1 millions people It’s estimated to increase approximately to 88.4 millions people with the population growth rate of 1.2% In one side, the high increase of population

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Pl#!€dn£tasw wndsydmitq other side ¡t requires for the increase of infrastructure construction and development of electricity industry

- The workers’ experience and skill: are being improved, the rate of workers

trained is 35% in 2008 and the plan is to gain 60% in 2015

In the population structure, the rates of population below 30 years old and those in the labor age are mainly Besides, awareness of importance of construction and industry development for residential classes, enterprises in the economy is more and more increasing People expect to have more modern infrastructure system, urban planning and energy supply in time and fully

** Political and legal environment

Politics: The stable politics of our country shows the stability of business

production environment The state manages the market economy with the views as

follows:

- Distinctive features from other countries: The market economies with many

components in which state economic component keeps the leading role,

along with development co-operation economy with the base of the national

economy

- Similar features with other countries: Recognizing the independence of the

market subjects including individuals and enterprises They make economic decisions by themselves and have their own responsibility; build market

system with competitiveness, the prices decided by the market; building regulation mechanism of macro-economy effectively, doing the guidance,

supervision and control to market; completing law system, economic laws, ensuring legal corridors for economic activities

Legal environment: Legal system is focused and corrected more completely to create favorable condition for business production

Business law; construction law; investment law; bidding law; competition law were born and regulations on business activities towards removing restrictions of

discriniyilerp rr65£êtSor€014L W@ygfgtitton environment for all construction

enterprises Our legal system is becoming more complete, accessing closer to

international practice and increasing the attractiveness of investment environment in

Viet Nam Open-door foreign affairs policies are being improved to rapidly promote investment situation in Viet Nam, with many big projects are being invested and

constructed

“+ Economic environment:

Social and economic structure: Investment percentage for industry and construction in 2008 rates 41.5% of GDP Investment for infrastructure rates about 10% of GDP annually Investment rate for industry and construction is planned to

achieve 44.6% of GDP until 2010

Economic development level:

According to the data of General Department of Statistics, although economic situation had difficulties because of financial crisis in the past years, there are still many positive changes

which bring chances for development of construction market, electric transmission system

for industrial zones, urban areas in general and of line installation and transformer in particular After having converted, state enterprises operate more effectively, private economy develops with the highest growth rate, foreign-owned economy develops

moderately which contribute more and more into general growth of the economy This demands electric sector to have strong growth and development Electric sector has to take

the first step to promote other sectors to develop

International integration or globalization is an indispensably developing trend Vietnamese economy had great development in the past years due to the open-door

policy of integration with the world economy However, with the characters of a

new open-door economy, low starting point and weak level of infrastructure development, Vietnam also has to face with the big challenges from world economies Especially, it’s the competition in Vietnam with strength of capital, technology of modern management; foreign enterprises will bring the high pressure with domestic construction enterprises Integration will give Vietnam opportunities

33

to 2ttPjrEf€r@]äprttotdfreenfelsfof chance for Vietnam to expand domestic installation market more abundantly and diversified

Policy of economy relating to the sector next years:

The development strategy of electric sector in the period of 2004-2010, the Orientation up to 2020 that was approved by the Prime Minister according to Decision No 176/2004/QD-TTg dated October 10", 2004 with some following basic contents:

- Developing synchronously electric source and network in the modern way Development of hydroelectricity, coal thermoelectricity, gas thermoelectricity, atomic electricity will coordinate, exchange and link with electric network of other countries in the area Meanwhile, hydroelectricity will have a priority of development, especially the works of general benefits (water supply, flood and drought prevention ) It’s

estimated that total capacity of power stations will be about 13.000-15.000

MW in 2020 Developing quickly electric line system of 220K V and 500K V

to enhance the confidence of electric supply

- Encouraging domestic and foreign investors to construct electric source

works and electric network according to investment model of Independent

Power Plant (IPP), contract of Biotechnology Transfer (BT), contract of

Building — Operation — Transfer (BOT), joint venture, joint stock

company EVN only invest the projects of power generation with capacity over 1|OOMW, creating opportunities for other enterprises to invest the works with smaller capacity

The Government advocate in investing the electric sector strongly is favorable

condition for the Company to develop widely the main business sector of installation line and station

“* Social environment

Company’ s social environment : In the past years, with the development spread

of industry, service and demand of improving civilians’ life quality, electricity supply sometimes don’t meet the demand sufficiently at the certain time and has to be cut off

in turnp.DJF %Btelb Rr€S817f%-đerVdtsidgy clopment investment of electric source and

electric supply system Otherwise, it still remained the corruption in basic construction,

defraud of bidding which led poor quality of works, loosing of capital investment, slow

progress and more seriously is unhealthy competitive environment This mentions that

Authority Departments and Investors have to consider and give good methods when choosing bidder which will meet technical specifications of the works with suitable

price Therefore, it’s a good opportunity for enterprises with enough capacity to affirm the trademark in the market If they keep the confidence and prestige with Investor, they will have many chances to get the bidding contract

Cultural environment

Society is more developed, modern and civilized with international integration Changes about social value which make people care much for

increasing demand on spiritual and cultural life, ensuring health care system,

solving heath insurance, safety and manufacturing, working and living

environment These maters lead to use the electric supply more increasingly

Educational standard is more higher, civilization, equality and democracy Trend of increasing expenditures, high standard of cultural, art life and spiritual life, so demand on using electricity increases suddenly in rush hours, electric sector still has shortage of electricity seriously to supply for households

“* Scientific and technological environment

Technical science and technology standard in the construction field in recent year

pushing the research, application, technology transfer of constructional execution Now

Vietnam has achieved success as below:

Up to now, 90% work at the leading Design Consultant Companies of sector has been used with information technology and digital technology

Electricity works have been applied remote control technology SCADA to make national electricity system moderately National electricity networks

P#Ø£ ttalle&oderrelisJetgginological equipments at power statlons and

electric plants to protect and control semi-automatically and automatically

- In field of executing construction of electricity works, technological

equipments help to pull cable across the river, pull electric wire without

ground connection That affirms optimal ability compared with the past

- Development of information technology; the trend of economic aggregation;

knowledge economy; merging movement, knowledge conjugation, internet That will change the science and technology environment of enterprises, speed

up innovation for science and technology of society, improve technology transfer and change sector mechanism at present

3.2.2 Industrial environment analysis (five forces model)

s* Occupational environment

Socio-economic position of sector: Construction field in general and electric installation in particular are paid much attention, given a priority of investment,

developed with investment rate for construction and industry of over 40% In the

development cycle, electric sector is in the period of growing up

- According to calculation of EVN, the demand on electric supply from now to

Source: Vietnam Electric power Corporation

We can see that demand on electric supply from now to 2020 will be increased more

quickly, with the average growth rate of 17%/ per year, which is double high in comparison with economic and electric manufacturing growth rate in the country now ( since 5 recent years)

- Electric output using in the period of 2004-2008 as follow:

Source: General Department of Statistics

- About transmission with development plan of electric net, it will give more details as following 3-3 figure:

Figure 3-3: Development plan of transmission system in the

Source: Vietnam Electric power Corporation (EVN)

Features of Electric sector:

It is specialized, the main products are electric projects, broadcasting and distributing

electric network, it also has specific characteristics in manufacturing and exploiting Operation Ministry of Industry, sector administration has a combination between

management of construction sector and locals where have project Electric development goes along with the common development of society Vietnam Electric

power Corporation (EVN) is a clue which is assigned to manage construction projects and operate national electric network Enterprises which belong to EVN have responsibility to consult and design these projects Working units are enterprises which have ability to install the project and they are chosen by the form of direct contract

bidding or through inviting tenders

Features of installing electricity market:

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- Pk€toil@slaa6Etecs€Slpsïowwarket for installing electricity nowadays IS

mainly due to investor EVN, state-owned enterprises invest capital, call for capital and some source of capital from other investors invest projects of power supply as: hydroelectric power plants, thermoelectric plants, urban zone industrial projects, using electrical energy and so on have to invest to build and install electric wire and station for selling or buying electricity through national transferring electricity system

- Investors conduct tender widely (according to Construction Laws, Tender Laws); international tender; short-list tender; tender nomination Projects with many capital sources: domestic capital, foreign loan- capital Investors are also diversified: State, local enterprises, private investors, foreign investors, etc but still mainly EVN

- Competitive features of electric building and installing market today:

* Enterprises are considered as competitors, “equal talent, equal strength”, when “demand” increases, competitions become fierce, in the period of

decreasing market, there have enterprises which applied “big sale-off”

provided that they have job, or having negative matter in tender, choosing tender

* Some enterprises are finding out all ways to demolish the barrier to joint sector without following the rule, bad-qualification, not enough still joining the sector, making trouble for enterprises

* “Demand” is high, even at the present and next years However, it is

shown irregularly, this makes enterprises difficult to stabilize

manufacturing; it is not easy to define the competitive happening

- Structure of policy for building and installing electric sector still is inadequate, overlapped, not clear and not carried out transparently This makes high risky in competition

Organizational structure and number of companies in the electricity sector

-_ Epu('2r96cd8Ug ImededWg-ajbenterprises operating in the construction field at

the end of 2008 have the average annual revenue of VND 23,7 billion and

average profit of VND 0,31 billion (General Department of Statistics)

- Only about the field of line and high-tension transformer installation in the air, there are five big companies holding the shares of over 80%: Electric

construction and Assembly Company No 1, Electric construction and

Assembly Company No 2, Electric construction and Assembly Company No

3, Electric construction and Assembly Company No 4 and Song Da 11 Joint Stock Company with total revenue in 2008 of VND 2461 billion, profit of VND

76.2 billion, total staff of 8.757 people (looking at 3-4 figure in 57th page)

Nowadays, five above enterprises which specialize in installing high-tension line in the air firstly take advantage of technology, value property, specific major, prestige in the market and they are companies which are always attended bidding with works of high technical requirement, nervous execution progress Other enterprises want to join this market but they encounter main hindrances of human force and skilled staff and

officers, requirement of high investment and prestige with big works so they have

difficulties in being accepted tender and chosen a bidder

“* The industry competition structure

There are five competition forces They are the competition force from the new entry, from the existing companies, the force from the substitute goods or services, from bargaining power of the suppliers and customers

The competition force from the new entry

- Government regulations: Corporation Law, Multi economic forms, wide bid, foreign investment give the new entries ‘cut barriers’ to participate industry, increase the competition factor

- The calling the foreign capital investment attracts some the appearance of some foreign bidders The foreign bidders have contract participating advantages but they mainly work in alliance with some domestic units because of the high expenses

- pr tnduälAls€9F1Paule/dl4ý6advantages of expenses, experience, major, technology, capacity (labor, facilities, capital) ; advantages of scale, high output, high productivity, low expenses ; advantages of contract bid and ask priorities ; advantages of the differentiated products, new technology, technology transformation and advantages of the prestigious image of industrial company The bargaining power from the customers:

Song Da Corporation is the main stockholder of Song Da JTC 11 which is oriented to develop the traditional works like electricity building and putting, projects in which the Corporation is the main bidder or the owner of investment The previous customer 1s

mainly the Song Da Corporation, company is assigned many electricity building and putting projects in Hoa Binh Hydropower, Yaly Hydropower, Vinh Son-Song Hinh Hydropower JTC During the previous years, the value of the contracts from the Corporation account for 20-25% the total value output of the company The orientation

of Song Da Corporation for the member companies for the next years is to continue

investing in more than 30 Hydropower plants from small to large scale This is a very good and potential advantage for the extending and developing the traditional career- building and putting the line and transformer station on air, because any hydropower plant when building needs to invest in the electricity system supporting for work in progress and transformer system to connect to the national electricity line Therefore,

Song Da JTC 11 still considers its traditional market as Song Da Corporation and the member units of the Corporation

The increase in the BOT, BT projects in hydropower plants investment results in the appearance of the new investors with the trend of calling the foreign capital

investment because of the limited in the domestic capital

The competition of the existing companies

With more than 40 years building and developing, company has become more and

stronger with the secure position all the country At the moment, the company is one of enterprises with high competition power and high in production comparing