G1 00105 CAPSTONE PROJECT REPORT BUSINESS STRATEGY OF PVFC IN THE PERIOD FROM 2010 TO 2015 BÁO CÁO DỰ ÁN CAPSTONE CHIẾN LƯỢC KINH DOANH CỦA PVFC GIAI ĐOẠN 2010 - 2015

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GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT

BUSINESS STRATEGY OF PVFC

IN THE PERIOD FROM 2010 TO 2015

Group No.4 — Class GaMBA01.M06

Student’s name:

1 Trinh Van Hien - Group Leader

2 Pham Thi Tham

3 Nguyen Dinh Hai

4 Nguyen Minh Toan

HANOI, 2010

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GRIGG Group No.4 - GaAMBAO1.M06 Strategic Management

ACKNOWLEDGEMENTS

Members of the Group 4 - GAMBA01.M06 wish to thank the lecturers from GRIGGS University and ETC training center for the opportunity to expand our knowledge and develop our ability through exposure to theories and practice

We all so wish to acknowledge PetroVietnam Finance Corporation for providing data and support; without their assistance, this report would not have been possible

Members of the Group 4 - GaMBA01.M06

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UNIVERSITY Group No.4 - GAMBA01.M06 Strategic Management

INDEX

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Chapter I ARGUMENTATIVE BASIS FOR BUSINESS STRATEGY OF

VY BC sess ress ssc ce A SI LEER ASAE SE TU, SE SES RA TO SIS, 9

l.1.L The concept Of PUSIH€SS SỈY@Í€ĐJ .Ă Q2 9 1.1.2 Basic characteristics of the business SÍfdl€Ø ò 10 1.1.3 The role OƒĐMSỈH€SS SIFQ[€ĐV Ăn key 10

1.2 Steps in establishing business strafepØy che 12

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LAB, POCUSCE SHOUD sss insiouiitiamestinnna senneiarennnaensians annnian vacances sae wamaesnses see vo 26 1.4.4 Strate gies €OmIHQ[ÏOW c2 111121111 1118115 5151111111111 11tr 27 Chapter II ESTABLISHING AND DECIDING BUSINESS STRATEGY OF PVFC IN THE PERIOD FEROM 2010 TO 2015 29 2.1 Brief introduction about PVEC .- 2c n2 vn vn ng key 29 2.1.1 Foundaltion and đe€V€ÏODIH€HIL S331 3E EEvsEseksskeses 29 2.1.2 Functions and duties Of PVFC c3 3333 E%3EESEEEESeeeresreeeses 30 2.1.3 Business performance in 2007 - 2009 vcccccccccccccccccccsseesecessetssseseessetseseees 32

dê £'V #i( S TUSIHSS NỈTHBÍP TY nguanggirrrrbstitintitotiEbN1G1188531805 61300 OU Ret i ant 36 2.2.1 Development strategy of PVFC until 2015 and its orientation to 2025 .36 2.2.2 PVFC’S stralegiC HQÌV$iS 5 3221111151111 1Esk2 39

V2 1 0ì).1)Ằ.aaaaa 47 2.3 Deciding business SfrA(€ØY LH nh TH TH ng HH kk nghe 48 PIN C8 nan - BBäốăốăăẼẼốỐ 48

Chapter 3 RECOMMENDATIONS AND SOLUTIONS TO BUSINESS STRATEGY IMPLEMENTATION AT PVEFC ooo eececeneeeeeneeeeneeeees 50 3.1 Solution to organizational management 00.0 eee ceeeeeetteeeeeeneeeeeennes 50 3.1.1 Solution for the organizational mOd@Ï «- «c2 50 3.1.2 Suggestions for the Human Resources DiViSÌOH cài esẰ 50

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3.6 l Choose recFHiIeH[ IethOđÄS c5 St SE‡+tEE+vekrtesrxssrei 56 3.6.2 Policies 10 qÍÍFđCE ÍQÏ€HIS S223 E331 EE33 E53 EEE+EEEESrkessvei 57

SN 1) Nnố ố ằ.Aa ă ố 37 Ÿ.6.4 Training qHd r€lFdÌHÌH So Sàn S SE SH HH 57

E 0D se ti Ty jBi TT HUY TT giapegtspsy'qig'ö št oe T0BHAS253009820-200A9 292100090Z0T9908095/003860011395/0530/021003795021 58 3.6.0 PAUBUG, GEMOCALC SPLCOL AG TGS sicssivisasths can ites karatibictirsnndtiinienidsthacannt te 59 3.6.7 PromotiOH, d@IIOLiOH, FOfQ[ÏOH., à S562 S3 + E+svEsseees 60 3.6.8 Apply fair methods of work assessment, appropriate distribution 60 3.6.9 Ideal and popular business CUMUPE SG 3S + svkksrksreeces 62 CHHGÌNSIUH sa nrsttinsinntrrrirtitrttttiBSSS1,001202001500106/03000001001360500053/E0 200.3 Vi S0NS88.EB-380306 003 G88.183I 65

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UNIVERSITY Group No.4 - GaMBA01.M06 Strategic Management

Table 1.1: SWOT matrIx tabÏe - c1: 2 211211212211 111112111111 1 E1 1110111 rệt 24 Table 1.2: Type of competitive advantage being pursued . - ¿5c 25 Table 2.1: Achievement of the production and business targets of PVFC in 2007 32 Table 2.2: Achievement of the production and business targets of PVFC in 2008 32 Table 2.3: Achievement of the production and business targets of PVFC in 2009.33 Table 2.4: Qualification Report of HR to 31/12/2009 of PVFEC . 55: 34 Table 2.5: Qualification Report of HR to 31/12/2009 of PVFEC -¿ 34 Table 2.6: Ranking the oppOrtunIti€S ¿5c 2c 21 2x 21 2E 40 Table 2.7: The Impact evaluatlons ofthreats towards PVFEC : -c c5 4] Table 2.8: Determining the steady competitive advantage 45 Table 2.9: Strengths and weaknesS€S óc cv nọ nghe 45 Table 2.10; Score FOT Lhơ THƠ ÏO: susngona nh th nghir0tETh G001 gu 244 001 0L20546810324:8ASEL4018005805.0035 47

Figure I.1: StrategIc pÏanning DFOC€SS .- +2 S12 v12 1 v1 1v 11 Figure 1.2: Porter”s five forces model .- óc + tk 1321112 1321122111122 18 Figure 13; Matrix strategic position GÍÝ te ĐUSHHĐSS sessssnae nnaemaenrbrigrgoanoenea ssax2 22 Figen 2 13 Se (0G js mes seca aun shen, pcan wean seal case an agg a a He pacers tepals 35 Figure 2.2 Qualification (%) .ccccccccccceccssccctseesseesseeessessseeesecesseesseeenseeccseeeeenseees 35 Eigure 2.3: Age€ (⁄) HH TH HH TH HH HH ng HH Hà 35 Figure 2.4: Occupational structure (9) c cv v1 v1 ng ng kh 36

4 TUNNG đuối TẤN GI L (ÄHRIVÍseasm se inrentigiAGixA000301G0080i00007E3805d6160130/198295M87-9850080800810308i8880904 46 Figure 2.6: SPACE T4008 sacs on mance asics ms cnr oe RE oe RRA 48

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APPENDICES

lL, Orpanation mode! Wap PY EC suenssnosanaseboseesa Bo BhnBNU2X0010810 396 T86 già HIA tt 86g36019/6098/88 70

2 FORM 1: The job description (for general department of branch manager 7]

5 FORM 4: Work progress asSessmenf ÍOrm - c- cá che rưe 78

6 FORM 5: Persomnel assessimeni for maragement tÏi€§S ‹ s.cc.cesesesei 80

7 FORM 6: Personnel assessment for professional and staff titles 82

LIST OF ABBREVIATIONS

MBA: Master of Business Management

PVFC: PetroVietnam Finance Corporation

HR: Human Resource

HRM: Human Resource Management

FDI: Foreign Direct Investment

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Strategy consists of ideas and plans enabling a business to compete successfully The Master of Business Administration (MBA) training course equips students with the basic knowledge to have a strategic business vision for the company All we learned stresses the relativity and interdependance of factors, which, in turn, provided us with an important overview of all aspects However, because of the limitation of time and human resources, the research is limited to The Petrovietnam Finance Company’s (PVFC) business strategy from 2010 to 2015

Reasons for choosing this topic:

Businesses have access to resources such as materials, equipment, cash, and

people in varying degrees The success of a company depends not only on good management but also on appropriate business strategies — how the resources are used Therefore, strategic management plays an essential role in maintaining a competitive advantage and achieving success

Viet Nam has recently moved away from the ‘centralized planning’ model as defined in Marxist economic theory, to a capitalist market economy State enterprises have been restructured as ‘joint stock companies’ Business leaders have had to change methods of management and administration to meet new conditions, such as competitiveness, and the challenges of globalization Marxism has led to dependence on the State for strategy, and consequently, has resulted in stagnation and lack of dynamism In particular, this study offers solutions for human resources management as part of the business strategy

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The purpose of subject research of the group:

Based on the knowledge gained and the business strategy of PVFC, our group would like to recommend, evaluate and make suggestions for PVFC to implement its business strategy successfully

Object of research:

The analysis of the internal and external environment as well as the business situation helped PVFC establish its business strategy in the period of 2010 — 2015 Scope of research:

Establishing business strategy of PVFC in the period od 2010 -2015

Research methodology:

> Researching and studying the related materials in Vietnam and internationally

> Consultation with experts in relevant fields

> Investigating situation and materials of PVFC

Structure

Chapter I: Argumentative basis for business strategy of PVFC

Chapter II: Establishing and deciding business strategy of PVFC in the period from

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Chapter I ARGUMENTATIVE BASIS FOR BUSINESS STRATEGY OF PVFC

1.1 Some basic issues relating to business strategy

1.1.1 The concept of business strategy

Threlar said "business strategy is an art that businesses use against the competition to win"

Parter said: "Strategy is the art of building competitive advantage for a firm defense"

These authors consider business strategy as the art of competing in the market to develop business

Arlleret said "Strategy is the determination of roads and other means to reach the goals identified through the policy"

Bizrell said "strategy as a general plan or direction of the enterprise lead to the desired target It is the basis for the policies and the operation mechanism "

Gluecl said: "Strategy is unification, comprehensive synthetic plan to be designed to ensure that the objectives of the business will be carried out"

Accordingly, the combined point of view is:

"Business Strategy is the art of coordinating activities and controlling them

in order to reach the long-term goals of the enterprise”

Chandler considers strategy as encompassing the assigned long-term goals of the business base, and the selection process or how to act and allocate the necessary resources and organize the implementation of the objectives "Business strategy is

an art to design, organize the means to reach the long-term goals of the company and it’s relevance with the transformation of the business environment and competition”

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1.1.2 Basic characteristics of the business strategy

Business strategy clearly defines the objectives and basic directions of business enterprises in each stage

The nature of strategy is to ensure business continuity and development in a constantly fluctuating business environment

Business strategies ensure maximum mobilization and combine optimal exploitation and use of the enterprise resources in the present and future, and promote the advantages and seize opportunities to gain advantage over the competition

The business strategies of an enterprise are reflected throughout the organisation

Businesses strategies are always aggressive so as to win in the marketplace Business strategies are often built over a long period (3, 5, 10 years)

1.1.3 The role of business strategy

Business strategy helps businesses to identify their purpose, gives direction

to their work, and guides the production and business activities of enterprises

Business strategy helps companies to take advantage of business Opportunities, and proactively take measures to overcome the risks and threats in the market

Business strategy contributes to the efficient use of resources, strengthening the competitive position of enterprises and ensures the sustainable development of enterprises

Business strategy creates a solid base to set out policies and decisions for production and business in accordance with fluctuations in the market

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1.1.4 Strategic planning process

Business establishment strategy and

Source: The lectures on Strategic Management International MBA

Training Program - Ngo Kim Thanh, 2009

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1.2 Steps in establishing business strategy

1.2.1 Vision and mission

The future vision includes 2 parts: the purpose from 10 to 30 years and a description of how the goals are reached

* Mission

A mission statement is a formal written statement describing the purpose of the company The mission statement should guide the actions of the organization, spell out its overall goal, and provide a sense of direction, a guide for decision- making The mission is the focus that liberates the organization's potentiality, represent the competencies required to reach the goal in the certain period of time

1.2.2 Strategic objectives

Strategic objectives are the milestones that the corporation wants to reach in the different periods of time It is significantly important for any company to determine strategic objectives

The strategic objectives are various and classified as following :

- Based in time, the short — term or long — term objectives

- Based on the nature of objectives: economic objectives, political objectives and social objectives

- Based at levels: business level, business unit level or functional level

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- Based on the forms of expression of the objectives: oriental objectives or quantitative objectives

- Based on growth factors: increasing or static, or even decreasing market share

The main objective of any business is to have consistent growth in the market place However, it may be measured differently depending on conditions The author Peter Drucker suggests the short — term and long -term objectives as follows:

- Business market share;

- Business mission of the enterprise in general and in specific strategic phases;

- Business philosophy (mentioned in the business mission);

- General judgment of the business environment and capacity

1.2.3 Analysis of external environment

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to study the economic environment in order to recognise the changes, trends and strategic implications

Economic factors strongly affect business operation through the fluctuation

of macro economic variables as well as macroeconomic policy as determined by the government Some factors taken into consideration are:

Growth trends of GNP or GDP;

Inflation and price fluctuation;

Balance of payments;

Interest rate and its trends;

Exchange rate and currencyfluctuations;

Individual income levels;

Corporate tax policies

The four most important factors of the macroeconomic environment are:

- Economic growth;

- Interest rates;

- Exchange rates;

- Inflation

* The technological element

Technological changes affect many aspects of society These effects are influenced by products, technological processes and new materials

The technology plays an important role in creating new products, in forming new processes, and creating satisfaction These have an impact on the competitive advantage of the enterprises The impact includes:

- The current capacity of the infrastructure of the national economy

- The strategy to develop the technological sciences and resources to implement this strategy

- The investment in research and development in industry and the economy

- The ability to apply advanced technology and mechanization to industry

- Accomplishment of technology conversion in the national economy

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enterprises On the other hand, they create new challenges to business operations

* Social and cultural environment

Like the technology changes, the changes in society and culture also provide opportunities and threats

The social and cultural elements include:

- Population and its fluctuation trend;

- Households and mobilization trend;

- Movement of inhabitants;

- Religion;

- Life styles and living attitude;

- Women in the labour force;

* Demographic elements

The demography refers to population, age structure, geographic distribution, ethnicity and income distribution This should be analysed globally because it impacts can exceed the national frontiers

Some aspects of the demographic environment are:

- Scale: total population, total labour force;

- Structure: The fluctuations of population, age, sex, religion, etc;

- Quality: ability, education, competence, etc;

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- Occopation, Income level;

- The stability of the political system and international policies;

- The balance of payments;

- The economic development of the government;

- The adjustment and the intervention in the social and economic activities

- The legal system and its implementation in the economy

* Globalization

developments, the institutional features and the fundamental culture in the global

market

Globalization creates both opportunities and challenges All of these changes strongly influence the enterprises and bring many opportunities to the business arena Globalization is the first element that affects strategic management Some of the elements are asfollows:

- The impact of international politics;

- The effect of the international economy;

- The effect of the international laws and regulations;

- The effect of the international technology;

- The effect of the international culture

changes, and trends affecting the business operation focussing on this analysis

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allows enterprises to realize opportunities and threats so that the enterprise would

be able to deal with problems and promote business production activities

1.2.3.2 Industry analysis and competitiveness

Industry includes many companies that provide goods and services In the competition, the companies in the same industry have mutual impacts, but each industry has various competitive strategies that companies pursue in order to reach profitability

The industry and competitiveness analysis examines the following:

- Significant features of the industry

- The competition from rivals, their nature and strengths

- The impacts of industrial changes and their effects

- The strengths and weaknesses of other companies

- The company that might create the movements in the same industry

- The key factors for the success and failure in the competition

- The attraction of above average profits in the industry

* Porter’s five forces model

Porter, the analytical of strategist at Harvard Business Administration University mentioned the model which might help the managers identify opportunities and threats (Michael E Porter, Competitive Stratery, New York: Freepress, 1980) Five forces model presented in the following diagram:

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Competition

Presented by Ph.D Ngo Kim Thanh

Porter indicates that the stronger these five forces are, the more difficult for the enterprises to increase the price and profit However, the five forces might change through time with changes in industry conditions

The competitive environment has direct impact on business operation activities Thus, it is essential for enterprises to consider the mutual relationship in these five forces

a) Degree of rivalry

The first force is the competition scale among companies in the same industry The weaker the rivalry is, the more enterprises can have opportunities to increase prices and gain profits On the other hand, the stronger the competition among rivals the more price competition

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The competition among rival in the same industry includes some factors such

as the competitive structure in the industry, the demands of the industry and barriers

to entry

b) Barriers to entry/Threats of entry

A new firm may enter the industry and affect the competition This is a threat towards operating enterprises It is the fact that existing firms always try their best

to prevent other competitors from entering the market because the more companies operating in the same industry, the fiercer competition amongst them

The levels of benefits and challenges entering the industry depend on the barriers to entry These are:

- Absolute advantage of costs;

d) Supplier power

The suppliers might be a challenge when they tend to raise price of products

or lower the quality of products This will reduce the ability of enterprises to make profits In contrast, if supplier power is weak, companies will provide an opportunity to push suppliers to reduce prices and provide higher quality The relationship of suppliers to firms depends on their relative power

e) Threat of substitutes

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It is highly recommended that the enterprise should do appropriate analysis

of advanced technology to help the company innovate Moreover, the demand changes in the market are an important factor that creates these challenges

1.2.4, Internal elements

Internal elements analysis aims to recognize the potential resources as well

as existing resources in order to create a competitive advantage for enterprises The analysis of internal elements answers the basic questions such as: (1) What are the advantages and disadvantages of the company? (2) What causes these advantages and disadvantages? (3) Which core resources help the company keep stable competitive advantages?

Threrefore, the analysis of internal elements plays a key role in determining the current strategies and establishment of practical strategies

1.2.4.1 Strengths and weaknesses

Strengths are the company’s resources and capabilities that can be used as the basis for developing competitive advanttage Examples of such strengths include:

Skills and experience; cost advantages, the technology capability; strong

brand name; Experienced customer services; the innovation of products; Promotion

and good marketing; valuable assets; modern equipment; Attractive location; Professional and experienced staff; qualified employees; strategical thinking; cooperation in the organization; good quality control system; intellectual property rights and patents; customer loyalty; good reputation among customers; product

development in the short time; favorable access to distribution networks

Weaknesses are the absence of certain strengths and the disadvantages of the company Some of followings may be considered weakenesses: lack of competition

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skills; lack of intangible assets and tangible assets; a competitive human resource organization; lack of or weakness in core competition areas

1.2.4.2 Sustainable competitive advantage

* Resources and potential abilities

+ Resources: In general, resources include some factors about organizations, technology, human resources, and finances of the company These are divided into intangible and tangible resources

Tangible resources:

Financial resources: Borrowing capacity, self-financing;

Organizational resources: The structure of official reports; planning systems

and official coordinate control systems;

The material resources: The distribition of the factory, machinery, equipment ete

+ Potential ability

The potential ability is when the company uses certain resources to gain the effectiveness it expected The success may be the close connection in the organization, ability to produce based on intangible and tangible resources In general, the potential ability is the product of the organizational structure and control system Which determines how and where to make decisions in the organization

* Core competencies

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Core competencies are the resources of the company and capabilities of human resources which are used to create competitive advantage, and make the company become unique

Some of criteria in determining core competencies:

- Ability to evaluate: this helps enterprises prevent threats and exploit opportunities;

- Core competencies that do not exist in other competitors;

- Ability that is hard to copy: Valuable and unique culture and brand name;

- Inability to replace: No equivalent strategies

1.3 Using strategic analysis tools

ES Figure 1.3: Matrix strategic position of the business

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Steps to set up a SPACE matrix:

Step I: Choose a group of factors showing financial strength (FS), competitive advantage (CA), the stability of the environment (ES) and internal strength (IS) Here are some of the indicators used on the axis of the Space matrix

Step 2: Assign the value +1 (worst) to +6 (best) for each element of FS and IS, assign the value -1 (best) to -6 (worst) have a weak elements of ES and CA

Step 3: Calculate the average value for FS by sum the assigned values to these factors, then divide by the number of selected elements as shown in FS Similarly calculate the IS, ES and CA Mark average value FS, IS, ES and CA on the appropriate axis of the Space matrix Sum the values of the X axis and mark the result value at the X-axis, similarly on the Y axis, then determine the intersection of two new values on the axis XY

Step 4: Drawing vector with directions from point of origin of the Space matrix through the new intersection, this vector is strategic business: Attack, Competition, Defense or Caution

1.3.2 SWOT Matrix

Eight steps to perform SWOT matrix:

- The elasticity of price according to demand

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Step 1: List the major opportunities from the outside environment (O1, O2 .)

Step 2: List the major threat from the outside environment (T1, T2 .)

Step 3: List the major strengths of the enterprise (S1, S2 .)

Step 4: List the major weaknesses of the enterprise (W1, W2 .)

Step 5: Combining the strengths with opportunities to formulate strategies (SO) Step6: Combine the weaknesses with the opportunities to formulate strategies (WO) Step 7: Combining strengths with threats formulate strategies (SO)

Step 8: Combine the weaknesses with threats to formulate strategies (WT)

Table 1.1: SWOT matrix table

Sl: Strengths listed ¡in|l Use the strengths to| 1 Use strengths to evade

1 Limit the weaknesses to

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development; sales | Any differentiation competencies materials control

and marketing

1.4.1 Best-cost provider strategy

This is the overall action which can provide goods and services with added value and low-costs in comparison to other competitors

The best-cost provider strategy has two basic advantages: firstly, this strategy can charge a lower price in comparison to other competitors but still gain the same profits owing to lower costs Secondly, best-cost provider is able to sustain business when the number of rivals in the same industry increases and the competition among them gets fiercer

Advantages and disadvantages

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Advantages: according to Porter’s five forces model, the best-cost provider will be protected from competitors in the industry because of cost advantages With low-cost advantage, the company will be less impacted by increasing inputs compared to competitors if supplier power is strong

Disadvantages: Appealing product features are easily copied by rivals In addition, over focus on low-cost products can easily ignore buyers’ needs They may lose customers who need better product attributes

1.4.2 Differentiation strategy

The purpose of this strategy is to get company competitive advantages by incorporating differentiated features that make buyers prefer a firm’s product or service over the brands of rivals High prices may make the firm different from competitors However, the customers will be willing to pay with this high price because they believe that the quality is also differentiated Consequently, the products will be charged based the market

Benefits and pitfalls

Benefits: the differentiation strategy allows a firm to confront rivals and build the brand loyalty Differentiation and loyalty are very valuable assets which can protect a firm in any situation Also at the same time, these are barriers so that other companies cannot enter the industry

Moreover, differentiation providers will not have to face difficulties from suppliers because it can command higher prices without mentioning production costs

Pitfalls: Appealing product features are easily copied by rivals; therefore the firm will have difficulty maintaining high prices In addition, when the differentiation comes from the designs or physical features, the company will take a lot of risks because they are easily copied by competitors

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strategy, the firm can choose the market segment, market targets, and market distribution

When a firm decides to choose one market segment, it will pursue a focused strategy using best-cost provider strategies or a differentiation strategy If the firm chooses the concentrated best-cost provider strategy, it will compete with the rivals who are using best-cost provider strategy in certain market segment

a Strategy options

Focused strategy looks at a small piece of the market In that market segment, the firm will always try its best to have the competitive advantage due to low-cost provider or differentiation strategy The enterprise always keeps in mind that “The key to success is choosing a market niche where buyers have distinctive preferences, special requirements or unique needs”

b Attractions and Risks

The advantage of a firm using focused strategy rises from some resources that make the firm different such as effectiveness, focus, innovation and customers’ satisfaction Another advantage of this strategy is that the firm is always close to customers in order to meet their changing demands

Risks: it is true that production cost in this strategy is higher than those in best-cost provider strategy, which reduces profits when a firm is pushed to invest in differentiation strategy All errors or mistakes of this strategy can be avoided by the change of technology or buyers’ need Furthermore, competitors find effective ways

to match a focuser’s capabilities in serving niche For example, a best-cost provider can easily change its product features so as to directly compete with a focused provider In addition, niche buyers’ preferences shift towards product attributes desired by majority of buyers and niche becomes part of overall market and gets customers away

1.4.4 Strategies combination

Those strategies are not always combined together However, if a firm tries

to get the advantages in every area, it may not reach the goal The reason is that

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even when the product quality does not decrease, customers can still ignore this feature Therefore, Porter argued that in order to obtain long term success, each firm needs to choose one strategy amongst the three Otherwise, the firm will not reach a competitive advantage

Furthermore, according to Porter, if the firm wants to apply three strategies,

it should establish separate business units with each unit pursing one strategy If so, the company will be able to reduce the risks and develop quickly However, it is not

a good idea to choose only one strategy because with a product, buyers often want

to be satisfied by many features such as quality, design, convenience and reasonable price

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Chapter II ESTABLISHING AND DECIDING BUSINESS STRATEGY OF PVFC

IN THE PERIOD FROM 2010 TO 2015

2.1 A brief introduction of PVFC

2.1.1 Formulation and development

PetroVietnam Finance Corporation (PVFC) is a non-bank credit institution, previously known as the PetroVietnam Finance Company, established on June 19th,

2000 with the motto "For the strong development of PetroVietnam”

In the establishing process, PVFC has become a powerful financial institution and is one of the fast growing credit institutions; the brand name of PVFC is expanding in the local financial markets and emerging on the world market

In 2008, PVFC officially became a separate General Company, the PetroVietnam Finance Joint Stock Corporation This was the initial step in transforming PVFC from a 100% state-owned company to a joint stock company PVFC has charter capital of 5,000 billion VND, in which PVN holds 78% of shares, foreign strategic shareholder Morgan Stanley (MSIHI) holds 10% of shares, the rest are legal shareholders and local individual shareholders With the participation of shareholders MSIHI, PVFC, it is the first credit institution in Viet Nam after the equalization to have chosen foreign strategic shareholders This confirms the credibility of the PVFC brand

PVFC is continually growing, the employees are trained in professional skills; they are dynamic, creative and enthusiastic at work Recruitment at PVFC has gradually strengthened and expanded; To December 2009, besides head office

at 22 Ngo Quyen - Hanoi, PVFC has nine branches and offices spread across 16 provinces and cities in the country, three member companies operating in the field

of Real Estate, Financial Consultants,and Fund Management

The significant events of PVFC:

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On March 30, 2000: Chairman of the Socialist Republic of Vietnam governmental bureau signed a decision to establish the PetroVietnam Finance Company

On May 2, 2001: The Company launched operations in Hanoi with a charter capital of 100 billion VND

On January 10, 2001: The first organized Culture Festival of Company was held

On June 19, 2002: The Opening Ceremony at Stock Exchange Office BSC— PVFC

On January 10, 2002: Introduces PVFC website at: www.pvfc.com.vn

On September 30, 2003: successful first bond issue of PVFC

On May 5, 2004: Introduces the first Board of management of the Company

& Get Quality Management System ISO 9001:2000 certified by SGS Switzerland

On January 12, 2004: The charter capital reached 300 billion VND

On December 15, 2005: PVFC was ranked type I of state companies

On April 26, 2006: The charter capital reached 1000 billion VND

On February 14, 2007: The charter capital reached 3000 billion VND

On June 19, 2007: The President of the Socialist Republic of Vietnam awarded the "3rd Labor Medal" to the company

On October 19, 2007: Successful Organization of IPO with strategic partner: Morgan Stanley Group (USA)

On March 18, 2008: PetroVietnam Finance Joint Stock Corporation

appeared

On June 19, 2008: Traditional day of PVFC

2.1.2 Functions and duties of PUFC

Within the functions of financial institutions of the Vietnam Petroleum industry, it is a capital markets bridge to PetroVietnam that has developed the system of banking financial institutions in Viet Nam in the integration process,

PVFC functions are:

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- To meet credit needs of the PetroVietnam and member units;

- Mobilization of term deposits of the Group, the unit members, and the organizations and individuals; local and foreign loans of credit institutions;

- Negotiating and signing a credit contract for local and international investments of the Group and member units under the authorization;

- Issuing credit, bonds to mobilize domestic and foreign capital as defined by

law; as agents to issue bonds for PetroVietnam and the national member units;

- Get trustee investments local and foreign investment, including PetroVietnam and the member units;

- Implementation of financial services as defined by the currency laws;

- Perform other operations under the Law of Credit Institutions

Perform the important mission of arranging capital for the PVN, PVFC and actively cooperate with other credit institutions, financial institutions local and abroad; development and implementation, arrange prompt capital needs for PVN and member units to implement investment projects on schedule, ensuring the required growth of the oil and gas industry

One of services that partners and customers choose PVFC is consultation on equalization Previously, PVFC participated successfully as an equalization consultant for units in and outside the oil and gas industry In addition, many innovative products of PVFC have been made and become the featured products, contributing a vision of PVFC in the market as: co-sponsors, entrusted loans, and authorized investment, consulting and brokerage investment PVFC focuses on developing a product package for customers for credit, investment and financial services Two key products that PVFC has are post equalization of financial investment and financial consulting

In addition, products and services such as foreign exchange trading, factoring, issuing bonds, valuing documents, fund management consignment, trading gold, and stocks have been implemented and gained the trust of

customers who use these services

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Organizational Map of PVFC: (Appendix enclosed)

Group No.4 - GaMBA01.M06

2.1.3 Business performance in 2007-2009

Strategic Management

Table 2.1: Achievement of the production and business activities of PVFC 2007

Source: Report of Planning Department of PVFC

THE MAIN TARGETS IN 2007

2 [Interest before tax, bill VND | 470 781 — 166 %

Operations of the company have grown strongly compared to 2006 31/12/2007 total assets estimated at 54,000 billion, nearly three times at the same time of December 31, 2006

Revenue reached 3142 billion that year, completed 105% of the target plan

of the year Profit reached 781 billion, completed166% of the target plan in 2007 Revenues paid to the state budget were completed in excess of plan

Source: Report of Planning Department PVFC

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Revenue of the corporation reached 4468 billion, totaling 142% compared to

2007 (3144 billion) and exceeding 89% of the target plan Due to the impact of global economic recession and large fluctuations in the market, in 2008, the contingency of the Corporation was 1687 billion so that profit before tax in 2008 only reached 8.5 billion, exceeding 0.85% of the target plans

Source: Report of Planning Department PVFC THE TARGETS PLAN IN 2009

Hundreds of houses were built by PVFC with the contributions from

examination, but because of difficult family circumstances they were not

eligible to study In addition, PVFC has regularly contributed with the

PetroVietnam amount to hundreds of billion Vietnam Dong for visiting, and

Supporting the victims of natural disasters and other charities

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Overview of the situation of PVFC (Data updated to 31/12/2009)

Table 2.4: Qualification Report of HR to 31/12/2009 at PVFC

Source: HMR Department of PVFC

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Figure 2.4: Occupational structure (%)

According to the data and tables above, we can see the human resources in PVFC are high quality: the upper level of the University accounts for almost 90%, including majors in Economic and Banking accounts for over 70%, and average age

is quite young, less than 30 years old This is a trully outstanding strength of the business

Mission

- For PetroVietnam growth and national economic development;

- Meeting the demand of financial services with the guidelines of being fellow- passenger of customers, for the development and the trust of PVFC;

- Continuing adding values to enterprises and shareholders’ benefits;

- Creating a working environment which is professional, active, and equal in terms

of development opportunities for all members;

- Committing to build corporate culture and the stable development of publicity

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- Average growth in scale of 17% annually;

- Earning yield/chartered capital of 17% annually;

- Average payout rate of 12% annually;

- Average growth rate of 35% annually;

- Average payout rate of 15% annually;

- In 2015, trying to achieve the title of Labour Hero during Innovation;

Period from 2016 to 2025:

- Total and stable development; maintaining the position in the top ten of Commercial Joint-Stock Banks in the energy industry within the region;

- Maintaining an average growth rate scale of 25% annually;

- The average payout rate of 18% annually;

Deployed orientation

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Period from 2010 to 2011: Preparing all the conditions to convert into Joint- stock Commercial Bank

Restructuring the scheme, expanding and improving the operating productivity of PVFC system to prepare for converting to the model:

+ Organizing the scheme to be neat, effective, and suitable with the model of Joint-Stock Commercial Bank;

+ Completing the internal process and regulations;

+ Training the human resuource to be professional and to have high quality; + Completing the model of risk management, and controlling;

+ Asset structure — suitable capital;

+ Expanding the network of branches, transaction offices;

+ Upgrading the system of modern information and technology;

Deploying the supply of new services, meeting the development demands of Vietnam’s economy, concentrating on services from a position of strength,for example energy,mineral and infrastructure;

Arranging the capital and managing effectively the capital of PVN and its members, taking full advantages of strengths of strategic shareholders;

Listing PVFC’s stocks successfully on Singapore’s Stock Exchange

Period from 2012 to 2015: Operating as the model of Joint-Stock Commercial Bank:

- Implementing the operation of Joint-Stock Commercial Bank;

- Expanding the operation network at potential locations;

- Allocating the capital successfully for majority of PVN’s projects and its potentials units;

- Providing sufficient modern financial services for the Vietnamese market;

- Applying the model of managment and standardizing the staff as the

international standards;

- Globalizing the bank’s trade mark

Period from 2016 to 2015: The period of steady development

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UNIVERSITY Group No.4 - GAMBAO1.M06 Strategic Management

- Maintaining the position as the top ten of strong Joint-Stock Commercial Bank within the region, developing totally and steadily;

- Being the leader in supplying the financial services in the field of Energy within the area;

- Completing the management model to international standards;

- Continuing expanding the potential domestic and international market

2.2.2 PVFC’s strategic analysis

2.2.2.1 SWOT Analysis

(1) External environment

* Opportunities analysis for PVFC

- The politics in Viet Nam are quite stable; the economic growth is high in comparison to the region Therefore, PVFC has good opportunities for development

- Viet Nam is integrating gradually in the world economy, joining the WTO, which has provided PVFC with good opportunities to expand in the international market and access advanced technology and management skills

- The complex economic policies established by the Vietnamese Communist party, and the Vietnamese government have created good opportunities to expand the economy so the credit demands have been diversified

- The fast development of many businesses in the same industry and high credit demand provide PVFC with a stable credit environment

* The impact evaluations of opportunities with PVFC as following elements:

- The political and economic environment

- Credit demands

- The support from PetroVietnam

- Joining in the world economy

- Integrating in the WTO

Therefore, we have the ranking table as follows:

Tiêu đề	Business strategy of PVFC in the period from 2010 to 2015
Tác giả	Trinh Van Hien, Pham Thi Tham, Nguyen Dinh Hai, Nguyen Minh Toan
Trường học	Griggs University
Chuyên ngành	Strategic Management
Thể loại	Capstone project report
Năm xuất bản	2010
Thành phố	Hanoi

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