G1 00113 CAPSTONE PROJECT REPORT BUSINESS STRATEGIES FOR TRUONG SON CONSTRUCTION CORPORATION UNTIL 2020 BÁO CÁO DỰ ÁN CAPSTONE CHIẾN LƯỢC KINH DOANH CỦA CÔNG TY CỔ PHẦN XÂY DỰNG TRƯỜNG SƠN ĐẾN NĂM 2020

G1 00113 CAPSTONE PROJECT REPORT BUSINESS STRATEGIES FOR TRUONG SON CONSTRUCTION CORPORATION UNTIL 2020 BÁO CÁO DỰ ÁN CAPSTONE CHIẾN LƯỢC KINH DOANH CỦA CÔNG TY CỔ PHẦN XÂY DỰNG TRƯỜNG SƠN ĐẾN NĂM 2020

CAPSTONE PROJECT REPORT

BUSINESS STRATEGIES FOR TRUONG SON

CONSTRUCTION CORPORATION

UNTIL 2020

Hoang Viet Duong

Le Hong Son

Cao Quang Chien

Pham Thi Huong

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Chapter I: Generally theoretical basis of business strategy and 5 Establishment of enterprise’s business strategy

I / Business strategy and levels of strategy 5

1 Concept business strategy and strategic administration 5

2 Role of business strategy for enterprise's development 5

II / Establishment of enterprise’s business strategy 6

1 Requirements and grounds in establishment of business strategy 6

2 Concepts to be grasped thoroughly on establishing business strategy 7

3 Procedures of business strategy establishment 7

Chapter II: Analysis of reality of business strategy establishment 15

in Truong Son Construction Corporation

I Process of formation and development and Primary technical and 15 economic features influencing strategy establishment in Truong Son

3 Measures of objective execution 34

III Reality of strategy management organization 37 [V Real situation of professional staff executing strategy 39 establishment

V Evaluation on reality of business strategy establishment in Truong 40

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Son Construction Corporation

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Preface

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1 Why choose the topic

After twenty years of our State and Party's execution of economic renovation, especially from open-door for integration, Vietnam economy has considerately prospering Process of shifting in the economy from centralized planning mechanism to socialist oriented market mechanism first and foremost Vietnam’s full membership of WTO on January II,

2007 has led to increasing polarization among enterprises, increasingly severe and keen competition For existence and development, enterprises must determine their own duly business strategy Without business strategy or worthless or erroneous one shall result in fail

in business

After study and investigation of Global advanced master of business administration program associated by Griggs University, United State and postgraduate department of

National University based on study and collection of data on production and business

operations of Truong Son Construction Corporation, we realized that the Corporation’s foremost concern is how to have duly direction and reasonable business development forecasts

in business and production operations in severe competition environment and rain-storm development of technology science as present This requires the Corporation’s business strategy establishment must be extremely sharp and level-worthy of organization’s scale Nevertheless, this operation has had many shortcomings and needs to be appropriately invested for improvement and perfection This imperativeness created premise for our group

to implement research-intensive and choose topic “Business strategy establishment in Truong Son Construction Corporation until 2020” for Group 3’s Final exercise

2 The Object of research

Research aims to apply generally theoretical basis of strategic administration so as to analyze and evaluate reality of business strategy establishment of Truong Son Construction Corporation in stage of from 2006 to 2010, thence; lessons and experiences are drawn in order

to propose completion of this operation in stage of from 2010 to 2020, simultaneously useful solutions are defined and proposed strategy are successfully applied to help the Corporation

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Overcome current inflation storm and globally economic crisis in order to become

compreHents ER SSAC LF ONO

3 Method of Research

3.1 Method of data collection

The Primary data collection: By real observing of the corporation personal interview ( mainly the officer, the staff who work in the aspects of plan, finance human resource marketing )

The secondary data collection: Collect from the reports and docucments of the agencies, Statistical Yearbooks, the information in the press, television, internet and legacy previous studies

3.2 Method of Comparison and synthesis: Comparison a target with base (origina target) for the data of business results, the parameters of the market, the average target, the other targets can be compared Conditions of comparing is the data has to fit with the space time, economic content, units of measurement, methodology scale and business conditions

3.3 Statistical methods in the table: Using synthetic data through statistical tables t find trends or common characteristics of the factors analyzed directly

3.4 SWOT method: Find out the strengths, weaknesses within the business,

opportunities and risks outside the enterprise This is the key in building business strategy

4 Scope of study

Research projects about business production activities of Truong Son Construction corporations to g between 2006 -: -2009 and propose business strategies for this company in the period 2011-2020

Group 3’s capstone project structurally has 3 chapters including the following specifi

contents:

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Chapter I PDF Compressor Free, Version ,

Generally theoretical basis of business strategy and establishment of

enterprise’s business strategy

I Business strategy and levels of strategy

1 Concept business strategy and strategic administration

There are many different concepts on business strategy and strategic administration, of which the most popular concept is “Business strategy is generalization of long-range objectives, policies and great solutions on business and production, finance and human factor handling in order to develop enterprise's business operation up to new Status in higher quality”

“Business strategy is a series of commitments and actions that a company uses to take competitive advantage by exploiting core capacities in the market "

"Strategic administration is process of investigating environments at present as well as

in the future, planning organization's objectives, proposing, implementing and inspecting performance of decisions in order to successfully achieve those objectives in environments at present and in the future as well; many investigators stated that strategic administration is both an art and a science "

2 Role of business strategy for enterprise’s development

Firstly primary function of business strategy aims to create a uniform orientation for types of plans in enterprise In other words, business strategy helps enterprise be thoroughly aware of its objective and direction, which is guideline for all enterprise’s business operations Although only one type of plan has not ensured enterprise to reach their expected goals, strategy is key basis for other plans and policies of operations, therefore; it is preferred to handle first

Secondly together with prompt change and development of business environment, opportunities and threatening risks always exist in the market At that time, business strategy helps enterprise eaten and take full advantage of all business opportunities, take initiative in finding solutions and overcome trapping risks of market

Thirdly business strategy makes contribution to increase performance of enterprise’s resources, strengthen competitive position and ensure its continual and strong development in long term

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Fourthly establishment and implementation of business strategy creates firm basis for enterpHée CP PPISSS BE HES Art 8ion in conformity to market fluctuation

3 Levels of strategy

In each field, products, market and customers are relatively independent These enterprises usually have different strategies for different levels of operations In general there are three levels of strategy including:

3.1 Strategy at enterprise level

This strategy determines enterprise's operation line and position in environment anc role of each business line in enterprise

3.2 Strategy at business unit level

It defines position of business line in enterprise and position of branch in environmen and specifies how to compete in each its field of operation

3.3 Strategy at functional level

This strategy is established to support implementation of strategies at business uni level and at enterprise one, which includes Research and development, Production, Marketing Personnel and Finance

In words, one unit usually has three distinguished levels of strategies However, owing tc orientation of strategies, strategies that are at the higher level play more important roles

II Establishment of enterprise’s business strategy

1 Requirements and grounds in establishment of business strategy

- Specifying key objectives and primary conditions for implementation of those objectives:

- Having thorough gasp of information and constructing information system on market customers, suppliers and competitors:

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- Construct sane strategies and substitution ones for use if necessary and avoiding passive ủng fien HH nu LH lên current performance of strategies meets with troubles:

- Seizing opportunity and maximally take full advantage of opportunities and having decisiveness

1.2 Grounds

Each enterprise operates business and production in order to seek profits Therefore, it must produce products for customers and use factor inputs and process optimally so as to create highest quantity of products with lowest cost However, not only the enterprise produces those commodities and services, many other enterprises that also produce them are competitors of the enterprise Accordingly for attraction of more customers, the enterprise’s products and services must have better designs and quality than competitor’s or the enterprise has better competitive advantage

Consequently, important grounds for establishment of business strategies include:

2 Concepts to be grasped thoroughly on establishing business strategy

- Establishment of business strategy must be based on exploitation of enterprise’s key factors for taking success:

- Establishing business strategy based on promotion of comparative advantages:

- Business strategy is established depending on exploitation of new and creative factors;

- Establishing business strategy in order to absolutely exploit surrounding factors and key ones

3 Procedures of business strategy establishment

3.] External environment research and forecast

Analysis of external environment aims to be thoroughly aware of opportunities and threatening risks for enterprise’s business operations

a) Macro-environment

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al) Economic factors include:

Grovth bế: Qmpressox tree VeRsion gd for development of economic sectors: inflation rate

impacting interest and interest rate of investment; unemployment rate affecting recruitment

and demission: and exchange rate influencing banker's rate, financial policies and control of pay price and financial balance

a2) Political factors

This group of factors that increasingly keeps important position includes stabilization

of public authorities, regulations on tax, charge and fees, rules of labor recruitment anc demission, and stipulations of environment protection and safety, etc

a3) Social factors

These include life quality, common practice, regional culture and population growth rate, etc

a4) Natural factors

These factors are resources, environment pollution and shortage of energy, etc

a5) Technological factors

This type of factors has remarkable and direct influence on enterprise’s busines: strategy because in age of rain-storm development of technology at present appearance anc change of new technologies always create opportunities but not few implicit risks threatening existence and development of enterprise Therefore, enterprise needs to have strategy o flexible application of technology and science to avoid falling into passive anc underdeveloped position

b)Operation environment (Micro) Operation environment includes factors in Industry and are external factors fo enterprise, which decides competitive nature and grade in that Industry There are fiv primary factors (five forces model ) including Buyers , Suppliers, substitutes, New entrants Industry competitors Enterprise must analyze these factors to recognize opportunities an risks that enterprise meets

3.2 Research and forecast of enterprise’s factors

That is analysis of reality and real ability of enterprise’s resources

Analysis of reality and real ability of enterprise’s resources means analysis of interna factors for recognition of strong movements as well as weak points, thence measures fo

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expansion of strong points and overcoming weak points This analysis focuses on the eileen PDE Compressor Free Version

a) Analysis of enterprise's resources

- Human resources consist of senior administrators executive administrators and staff On analysis of human resources, it is necessary to pay attention to aspects including:

- Marketing analysis: this is the most important content in internal analysis allowing evalution

of enterprise’s ability to meet market demand and concentrating on product category, product quality, market share, price and customer’s trust

b)Analysis enterprise's ability of organization Evaluation of enterprise’s organization is usually hidden under form of question if enterprise’s Organization has been conformable to requirements of business strategy and they are strong enough to ensure implementation of proposed strategy Contents of this analysis are:

- Current reality of enterprise’s management and organization structure on two faces including organization system and operation regulations

- Organization’s adaptability in the face of changes in environment and business condition

- Whether strategy are in conformity with enterprise’s objective and mission

- Whether process of enterprise’s decision-making are valid

- How working style of enterprise’s leadership is

c) Analysis of enterprise’s ability of competition Enterprise’s ability of competition refers to ability that enterprise can unshakably and meaningfully maintain its position in long-term in market

Factors that influence enterprise’s ability of competition are:

- Working atmosphere inside enterprise;

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- Return on Equity/Assets

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- Product costs and enterprise’s ability of reduction of product cost;

- Business experience in market world;

- Flexibility and keenness of leadership staff in enterprise

- Quality of service and products

3.3 Establishment of strategic plans

As above analyzed, we see that an enterprise has many objectives and strategies One

of principal objective that enterprise usually pursues is growth Because most of strategies al enterprise level focus on growth, construction of strategic models is mainly based on growth objective In addition, current maintenance objectives or decline has stable or cutting strategies, objectives of expansion to oversea market have extroversive strategy anc association of types of strategies for levels of enterprises The aforementioned strategies are generally called the general strategy

3.4 Choice of strategic plan

After successfully determining model of strategy selection, we move to the next ster that is choice of strategic plan Grounds for evaluation and choice of strategic plan refer tc sorting out ome plans considered better among established ones, then choosing the mos optimal one

3.5 Decision of strategy

After analysis and choice of strategy, executive board evaluates strategy so that owne make strategic decision in order to institutionalize chosen strategy serving as basis for th following steps of strategy cycle such as implementation of strategy

Consequently, decision of strategy is leader’s brainpower product but decisions mus depend on the following:

- Decision must closely follow the general objective and long-range objective of system:

- Decision of system must comply with law and social practices:

- Decision must be based on system’s available resources or resources ensured for possibl: mobilization

- Proposed decision must be timely

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3.6 Implementation of strategy

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This 1s very important stage changing planned strategies into specific actions

Strategy implementation has wide and deep effect on entire enterprise and impact on both departments and functional divisions Strategy implementation includes development of strategy such as support budget, the Company cultural programs, association with system of encouragement and rewards for personnel, etc

Whether the strategy implementation is successful or not depends on not only strategy quality but also administrator’s ability to urging personnel

3.7 Inspection and evaluation of strategy implementation

During strategy implementation, it is necessary to frequently inspect and consider whether those strategies have been executed as expected or not There are many reasons for that a certain strategy can not achieve proposed goal These reasons refer to change in environment or no attraction of human resources Therefore, it is essential to be through feedback systems and inspection measures in order to inspect and evaluate the implementation

As a result, Strategic plaining process is implenented though the following steps:

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4 Models of strategy analysis

4.1 Models Of ane alysis 0 07700020) ‘and environment

+ W/O coordination is attained from association of disadvantages and opportunities Enterprise needs to take advantage opportunities in order to overcome disadvantages

+ W/T combination refers to coordinating disadvantages with risks of enterprise The

important thing is to minimize disadvantages to avoid risks

4.1.2 Model of Five market forces

+ threat of new entrants

+ Insustry competitors

+ Bargaining power Suppliers

+ Bargaining power of Customers

+ Threat of Substitutes

4.2 Determination model of enterprise’s eperation schedule

Regarding BCG matrix, this is quite classical and simple matrix which is conformable

to determination of enterprise’s position and analysis of enterprise’s product structure anc investment portfolio

This matrix consists of two axes as follows:

- Vertical axis: Market growth rate

- Horizontal axis: Relative market share

- Area |: enterprises located in this area have convenient position and relatively attractiv: growth opportunity

- Area 2: enterprises located in this area have average attractive degree Executive boar must be careful of investment decision-making

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- Area 3: belonging to this area, enterprises have inconvenient position Primary strategy is

4.3 Model of general strategy

4.3.1 Model of growth strategy

The object of growth strategy is increase in scale of operation, revenue and market share thereof increase of profits in business operations Growth strategy can be executed by + Direct development

+ Diversification of business and production operations

+ Expansion

4.3.2 Stabilization strategy

Stabilization strategy aims to ensure strong existence and stabilization as well as maintain enterprise’s position in market through:

- Careful and emphasis investment

- Maintenance of existing product list and direction towards deep specialization, improvement

of prestige and scale expansion

4.3.3 Contraction strategy

The target of this strategy is maintaining forces and concentrating strength on the most important products in order to be well-established in the market

For implementation, enterprise must offer strategic patterns such as reduction of

operation lines or decrease in product list and investment scale for maintenance of existing stabilization

In addition, enterprise can deploy research of business diversion, substitute product and market sourcing to implement strategy

Solution in force majeures is declaration of dissolution or bankruptcy

4.3.4 Mixing strategy

Each organization or enterprise usually operates with multi-targets Therefore, in each

period, it can execute some certain targets that have their own relative independence As a

consequence, it is necessary to use coordinately the aforementioned in order to maximally promote advantages and restrict risks

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4.4 Model of competitive strategy

PIE SPURISSSP EE ESE Nae strategy is determined by analysis of two basic factors including competitive scopes and competitive edge of products Application of competitive image matrix for comparative evaluation between the Corporation with main competitors in the same industry and comparison in conformity to industry influencing the Corporation’s competitive ability in sector enable administrator to recognize the Corporation's advantages and disadvantages in comparison with competitors’ and determine competitive advantage for the Corporation and disadvantage to be overcome

+ Strategy towards expenses

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Chapter IT

Reality o business Strategy establishment in Truong Son Construction

Corporation from 2006 to 2010

I Process of formation and development and Primary technical and economic features influencing strategy establishment in Truong Son Construction Corporation

1 Process of formation and development of Truong Son Construction Corporation

Truong Son Construction Corporation (the twelfth corps — Ministry of Defense) is unit inheriting tradition of Truong Son army — legendary Ho Chi Minh trail, founded on May 19"

1959 it is a great unit of construction industry with the following legal entities:

Establishment decision no 399/QD-BQP on April 4"", 1996 by Ministry of Defense;

Decision no 165/2003/QD-BQP on September 15”, 2003 by Ministry of Defense

regarding re-determination of business line and organization of Truong Son Construction

Corporation;

Business license no 110.736 issued by Hanoi Planning and Investment Department, third

revision, on June 24", 2005:

Work permit for survey, search and treatment of bombs and mines and explosive objects

no 7223/BQP on December 31", 2007 issued by Ministry of Defense;

Decision no 1369/QD-BXD on October 3", 2006 by Ministry of Defense recognizing testing capacity of Building material testing center of Truong Son Construction Corporation,

code LAS-XD45;

ISO9001-2000 Quality management certificate issued on February 27", 2008

English name: Truong Son Construction Corporation

Address: No 475 - Nguyen Trai — Ha Noi

Business line: Execution of road and bridge works, airport structures, ports, irrigation works and hydroelectric projects, etc

From 1989, implementing change in economic management mechanism according to decision of State and Ministry of Defense, the Twelfth corps changed into Defense - economic enterprise named Truong Son Construction Corporation directly under Ministry of Defense Truong Son Construction Corporation has overcome difficulties and challenges, self- affirmed for survival, being well-established in the market and development in market mechanism, contributed to affirm army’s prestige in economic operation, made contribution

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together with other enterprises to maintain key role in national economy and practically mairtdieá- Oe TS SSPE Ra SEdY SERA potential ready to satisfy requirements when war happens Undergoing more than 50 years of construction and growth, the Corporation has been directly executing various domestic and oversea focus constructions with high quality prompt progress and reasonable prices, etc These includes Hoa Binh hydroelectric plant North — South 500 KV line, Northern Thang Long - Noi Bai Expressway, Lang — Hoa Lac street, National road 1, national road 5, martyrs’ cemetery Al (Dien Bien Phu), Hang Duong martyr’s cemetery (Con Dao), Hydroelectric plants of Tua Sarh village Kop village Sepoc3 Son La and Chat village, Savanakhet airport (Laos), Vinh airport, etc

In addition, Truong Son Construction Corporation has expanded business in export of agricultural products from coffee farm (approximate 400 hectares) in Daklak In order to carry out improvement of professional and technical knowledge for technical workers, the Corporation established Vocational training and Civil engineering secondary school etc

Apart from expansion of domestic and oversea construction market and development o! new lines in construction through tendering participation, the Corporation decided to invest some business fields such as design investigation, construction testing, bombs and mines scanning and destruction, etc Units directly under the Corporation have frequently handlec employment for above 5500 officers and soldiers, professional soldiers and defense workers

At present, the Corporation has two branches, 18 membership units and 11 executive managements of projects of business and production operations throughout nation with ove

1000 managing officers and engineers from postgraduate, universities, colleges and higt school and approximate 4500 technical workers of which skilled ones account for majoi proportion, together with many types of modern construction machineries and equipments That indicates that the Corporation has enough capacity to execute large-scaled constructiona works with complicated specifications and high esthetics

2 Primary technical and economic features influencing business strategy establishmen

in Truong Son Construction Corporation

2.1 Mission of production and business operation and product features of the Corporation

2.1.1 Construction

a) Road and bridge construction:

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This is traditional sector of decisiveness for the Corporation’s business and production

operations Real IMP pressor Ay C

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> Corporation's strength in this field through completed works of high quality and beauty such as national priority projects including National road 5

national road 6, national road 1A, Ho Chi Minh road etc

b) Construction of hydroelectric plant and airport

The Corporation has directly executed great hydroelectric works such as Hoa Binh

hydroelectric power plant, Son La hydroelectric power plant, hydroelectric power station of Chat village hydroelectric power station of Cop highland village and of Tua Sarh village

Vinh airport Savanakhet — Laos, etc

c) Construction of civil and industrial works

apart from construction of road and bridge structures and hydroelectric power works,

the Corporation has participated in construction of civil and industrial works such as hall of Ministry of Defense, National conference center, etc Those works are of high quality and

favorable price

Table 1: The Corporation's some typical works that have been constructed are specified as

period (VND billion)

I Road and bridge works

2 | National road 6 03 — 05 1S0Km 1,300 | Son La

3 | National highway 1A 98-0I 300Km 942 | Vinh — Dong

Ha

4 | Ho Chi Minh road 00 — 09 350Km 2,576 | Q.B, Hue, HB

Il | Hydro.c power + Airport

1 | SonLa hydro power plant 04-09 Hyd.power 2,112 | Son La

2 | Hyd.power station of Chat 05-08 Hyd.power 1 620 | Lai Chau

3 Vinh airport 94-95 Airport 550 | Nghe An

(Data source according to achievement reports of Truong Son army)

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2.12 Other production

PIS OReREADS GiVEEAGCAISHOBE operations in association with market economy, the

Corporation has concentrated on investing fields of design investigation and work test, etc

with annual operating value of approximate VND 190 billion

2.2 Features of organizational structure

According to operating statute of the Corporation, general director and deputy general manager together with assistant departments have been primarily organized and established on army model with adjustment in conformity with mission and function of economic construction

a) General Director is appointed, dismissed, commended and rewarded and disciplined

on request of the twelfth corps’ standing committee of the party He is legal representative of

the Corporation and responsible to Ministry of Defense and Law for management of the

Corporation’s operation General Director has highest management rights in the Corporation b) Four deputy general directors assist General Director in managing some fields of the corporation under allotment of General Director and Ministry of Defense

c) The Corporation’s specialized departments and offices has function to consult and assis! general director in managing works according to function of each sector

d) Member units of the Corporation include:

- Project management departments;

- Independent accounting units;

- Dependent accounting units;

- Administrative and career units

Table 2: Organizational chart of Truong Son Construction Corporation

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With labour force of large quantity and high quality Truong Son Construction

Capstone Project Report

Corporation has more advantage by far in comparison with competitors which always create customers’ and investor's firm confidence, first and foremost officer forces of high professional skills and firm stuff Wage is allotted according to job title and performed products with adjustment based on defense allowance which has encouraged and promoted creation and contribution

2.4 Performance of machinery and equipment and production line

Formerly construction plants were mainly of Soviet Union, since 2005 until now the Corporation has invested in purchasing processing equipments of G7 countries

— Production line of hot asphalt concrete and sand piling is synchronized

— Open drilling equipment, excavating plant, backfilling and shoveling equipment, haulers and equipments are mainly imported from America, Germany, Korea, Japan and China, etc

— Concrete mixing plant, break-stone crushers, hauling container of concrete mortar

and concrete pump, etc have been imported from Germany and Japan, etc

2.5 Financial position (Calculation unit: VND billion)

Table 3: Financial data from 2005 to 2008

7 Profit before taxes 16.6 5.0 25.8 15.2

8 Profit after taxes 11.8 0.9 21.4 10.6

(Data sources from Company profile of Truong Son Construction Corporation)

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II Reality of business strategy establishment in Truong Son Construction Corporation

in stige ‘of FPUnP BOWS to Zo orsion

Truong Son Construction Corporation is State-owned enterprise (directly under Ministry of Defense) Therefore in subsidiary bureaucratic and centrally planned mechanism, enterprise is also controlled by bureaucratic orderliness that leads to expectation and relying on State, Ministry of Defense, inflexibility in establishment of a business strategy and orientation of enterprise development and being on the defensive in employment handling, especially after completion of large works

After changing into market economy in the face of severe competition from rivals, together with State’s abolishment of subsidy mechanism for enterprises’ business self- accounting, and recognizing new business environment, the Corporation § specifies importance of business strategy establishment as guideline for action The Corporation is currently attaching special importance to construction of long-term and annual plans Long- term plans last from five years to 10 years; and short-term plans are considered as adjustment of long-term plans in each year For convenience of analysis, long-term plans are considered as “strategies”

Real investigation indicates that process of the Corporation’s business strategy establishment is divided into three steps as the following chart:

Analysis of Determination Proposal of

business >| of objective > solutions

environment

1 Analysis of business environment

1.1 Analysis of business environment in state of 2006 - 2010

In fact, the Corporation has not had specific documents of busness environment However, during its own strategy establishment, by chance factors of business environment analysis have been intermingled in different documents Documents that the Corporation is usually based on to orient operations in state of 2006- 2010 includes

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- Orientation of Ministry of Defense on unit’s mission and target until 2010 resolution Se lon TU, ‘and HỘ X2 2MJTE THỊ TỢT policy of term 2006 - 2010 of the twelfth

corps’ party congress:

- Reports on the Corporation’s operation situation and financial position until 2009:

- Real capacity of the Corporation, direction of investment and development in

2008 and 2009 and the following years etc

After studying, analyzing and generalizing those documents, we can see that the Corporation's analysis of business environment relies on the following factors:

a) Macro-environment

+ Economic environment

In order to obtain the target that GDP in 2020 is two point five times as much as in

2010 we must keep annual GDP growth of from 10% and above, which requires capital in total society in scope of the Corporation to be approximate VND 40,000 billion, remarkable increase in effectiveness and competitive power of enterprise’s products and economy, better satisfaction of essential consumer demand, a considerate part of production demand and export heightening, stabilization of macro-economy, soundly international balance of payments and rise in foreign currency reserves; budget deficit inflation and foreign loan are controlled in safe limits and positive impact on growth Internal accumulation of economy reaches above 15% GDP Rate of export increase is more than 1.5 times higher than that of GDP increase Industry’s density in GDP increases 20%, service’s 25%, etc These economic factors create many conveniences for the Corporation’s development in the coming time

+ Legal and political environment

- Credit structures in association of the Corporation’s borrowing power, especially in

2009 Government applied package of demand incentive, of which borrowing rate is supported by 4% per year, and expanded borrowing limit and capital received from budge for ownership capital source create condition to take initiative in financial resources for more convenient operations

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- State's policies that attract the directly foreign funds has led to formation of series

of fuitnetriad oo NI version ag which creates more opportunities of employment

as well as investment for increase in capacity of equipments and modern technology

- Strategy for development of infrastructure of material production sectors and socio- culture creates greatly social welfare, develops awareness and promotes officers’ and soldiers’ thought and creation in the entire Corporation

- Agreements signed by our State and international organizations on infrastructure construction expand more opportunities of joint venture and association to assess advanced technologies in every aspect

- Law system has been increasingly improved and promoted their effects such as

Enterprise law, value added tax law, and law on business income tax, insurance business

law, bidding law, etc

+ Socio-cultural environment

Together with development of national economy, quality of material, spiritual and cultural life has been considerately improved in safe and healthy construction environment, which makes people’s demand higher, more diversified and abundant Produced products must be of fineness degree, aesthetics and high quality to satisfaction of social profit, enterprises’s interest and consumers’ benefit as well

+ Natural environment

This factor has increasingly had strong influence on the enterprise’s operation, especially for construction enterprises It affects exploitation capacity, progress of machinery and equipment use, progress of work, and quality and beauty of works, etc

+ Scientific and technological environment

Science and technology revolution, informatics technology in particular, has been powerfully taking place in the world and impacted every socio-economic fields of different nations, which pushes formation of intelligence economy and hasten shift in economic Structure, and turnover cycle of capital and technology This requires that the Corporation must always have changes for adaptations, if not, shall be behind the times and bankrupt, which the Corporation has been aware of and is having strategy for research and development and application of modern processing equipment

b) Sector environment

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The Corporation has hardly had thorough analysis of this factor The Corporation foremost eotinethei NHÀ Pa Hới investors which indicates customers’ and investors’ pressures such as capacity of price squeeze and capital tie-up Simultaneously the Corporation also determines for itself major competitors including Thanh An Construction

Corporation (Ministry of Defense), Hanoi Construction Corporation, Vinaconex,

Construction Corporation 1, Construction Corporation 4, Lung Lo Company (Ministry of defense) etc and some other constructional material suppliers

c) Analysis of the Corporation inside

The Corporation has internally analyzed the following matters;

- Capacity of machineries and equipments: the Corporation has had sufficient constructional machineries, plants and equipments with about 2.000 device heads and value

of initial price of approximate VND 1.000 billion, which enables it to execute large works

of complicated engineering

- Strong staff consists of 5,500 people of which there are about 1.000 postgraduate and graduate economic managers and engineers together with 4,500 skilled technical workers

- Financial position is strongly sound; until 2009 the Corporation’s total assets available are of approximate VND 3,200 billion, of which budgetary resources account for VND 300 billion

Based on that, the Corporation has pointed out its strength that it has specialized machineries and experienced labour forces and powerful financial position

1.2 Analysis and forecast of business environment in stage of 2011 - 2020

1.2.1 Analysis of business environment outside the Corporation

a) Macro-environment + Economic environment

In order to obtain the target that production value in 2020 is two point five times as much as in 2010, i.e approximate VND 6,000 million per year, we must keep annual growth of from 10% and above, which requires total social investment of approximate VND 40,000 billion, remarkable increase in effectiveness and competitive power of enterprise’s products and economy, better satisfaction of essential consumer demand, a considerate part of production demand and export heightening, stabilization of macro- economy, soundly international balance of payments and rise in foreign currency reserves; budget deficit, inflation and foreign loan are controlled in safe limits and positive impact on growth

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+ Legal and political environment:

PĐE'€ditRtrrstswesEareeaysoeiured with the Corporation`s borrowing power as well as

budgetary resources

- State’s policies that attract the directly foreign funds has led to formation of series

of industrial parks and processing zones, etc

- Strategy for development of infrastructure of material production sectors and socio- culture

- Agreements signed by our State and international organizations on infrastructure construction and attraction of foreign funds

- Law system has been increasingly improved and promoted their effects such as Enterprise law, value added tax law, and law on business income tax, insurance business

law, bidding law, etc

+ Socio-cultural environment

Together with development of national economy, quality of material, spiritual and cultural life has been considerately improved in safe and healthy construction environment, which makes people’s demand higher, more diversified and abundant Produced products must be of fineness degree, aesthetics and high quality to satisfaction of social profit, enterprises’s interest and consumers’ benefit as well

+ Natural environment

This factor has increasingly had strong influence on the enterprise’s operation especially for construction enterprises It affects exploitation capacity, progress of machinery and equipment use, progress of work

+ Scientific and technological environment

Science and technology revolution, informatics technology in particular, has been powerfully taking place in the world and impacted every socio-economic fields of different nations, which pushes formation of intelligence economy and hasten shift in economic structure, and turnover cycle of capital and technology This requires that the Corporation must always have changes for adaptations, if not, shall be behind the times and bankrupt, which the Corporation has been aware of and is having strategy for research and development and application of modern processing equipment

b) Economic branch environment

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In the branch environment the Corporation foremost concerns factors of customers

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and investors this indicates customers and investors’ pressures such as capacity of price

squeeze and capital tie-up, etc It is necessary to continue application of competitive image

matrix implemented in stage of 2006-:-2010 in order to determine competitive advantage for

the Corporation and disadvantage to be overcome

1.2.2 Analysis of the Corporation inside

allotted by State and tender structures Strength of the Corporation’s machinery and

equipment capacity is specified in the following table:

Table 4: Machinery and equipment capacity of Truong Son Construction Corp

Equipment name Unit | Quantity Main country of origin

Tyred wheels excavator 99 America, Japan, Korea, Germany, China Bulldozer 7 193 America, Japan, Korea, Germany, China Grader , 58 America, Japan, Korea, Germany, China Steel — wheels static roller " 150 America, Japan, Korea, Germany, China

Tyred wheel static roller 33 America, Japan, Korea, Germany, China

Viberating roller " 87 America, Japan, Korea, Germany, China Dump truck k 390 America, Japan, Korea, Germany, China Other vehicles and machines " > 1.000 | America, Japan, Korea, Germany, China

(Data sources from Company profile of Truong Son Construction Corporation)

b) Workforce and leadership

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The Corporation’s workforce and leadership have professional skills much expeldhteG0190X999đ Ci SKS! Ave experienced large or priority works such as Hoa

Binh Hydroelectric Power station, Son La Hydroelectric Power station, National road 5,

national road 6 Ho Chi Minh road, etc That is the Corporation’s great strength that not any company has The Corporation’s weakness of this field is that management has inexperience

in market, market survey and foreign trade in particular and lacks flexibility and

decisiveness in business

c) Finance

The Corporation’s finance is strongly sound; total capitals are of VND 3.024 billion,

of which own funds are of VND 50 billion and budgetary funds are of VND 219 billion With such capital, the Corporation has enough capacity to take part in tender for large works

in the future We shall implement analysis of some financial indicators of the Corporation in

2008 in comparison with level of branch average as follows:

Table 5: Some financial indicators in 2008 in comparison with level of branch average( The Construction Businesses in the Military)

Inventory turnover ratio round 2.5 3.0 7 0.5 Average debt recovery period Day 300 280 (20)

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- Quick ratio is 0.28 times lower than branch average which shows that the Corporation’s quick paying a HN “Short Hae lá He is not as good as that of branch

- Current ratio is 0.3 times lower than branch average; circulating ratio of branch and company is extremely high compared to once, this indicates that operations use long-term capital and owner's funds to circulating assets (or most of circulating assets are formed from

owner's finds and long-term capital), therefore: risks are restricted and capitals are

proactively utilized, but achieved economic efficiency is low due to utilization of little borrowing resources: as consequently the Corporation must bear non-deduction tax

- Inventonry turnover ratio is 0.5 turns higher, which shows that the Corporation uses inventories more flexibly than branch (goods rotate more quickly), and this reduces capital cost for warehoused goods, warehousing and preservation, etc

- Average dept recovery period is 20 days shorter than branch average, which indicates the Corporation’s rate capitals receivable is occupied more shortly and it shall reduce expense for utilization of capital compared to branch

- Fixed assets turnover increases by 1.6 turns, which denotes the Corporation’s productive

capacity of fixed assets is more effective than branch average, equipment capacity is highly promoted

- Assets turnover is 0.6 turns lower, that means the Corporation uses assets less effective

than the entire branch

- Return on assets (ROA) is 1.6% lower, which shows the Corporation has used total assets

waster than branch Assets are more slowly returned and capital maintenance is more difficult

- Return on equity (ROE) is 0.1% higher, i.e the Corporation mainly uses borrowing capitals and reliabilities, therefore; equity capital shall be withdrawn more promptly

- Debt ratio is 5% higher, which indicates rate of capital structure on debt utilization is

higher than that of entire branch, therefore; the Corporation shall meet more risks but operational efficiency is better

- Marginal profit is 1.9% lower, which indicates the Corporation’s net interest on one product unit is lower than the entire branch

In addition, performance of capital utilization is low, capacity of capital turnover is slow because investors usually disbursed slowly and must be stopped for land clearance and

inconvenient market etc

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d) Marketing operation

PI KOM UPA SEAS thfs SEESBn mainly focuses on bidding because specific prcduct

of construction field is that purchasers or investors have accepted buying price and products under contract In the last five years, the Corporation determined important role of maket operation, marketing operation in particular, therefore: it decided to establish project department specializing in this operation Initially operation of marketing departmen: has brought considerate results; this has been proved through productivity rate performed trom bidding works that increasingly accounts for total productive value of erection and

construction, from 60% in 2001 up to 80% in 2010, and value increased from VND 1,000

billion in 2001 up to 2,200 billion in 2010 (2.2 times higher) However, weakness is that qualifications and capacities of executives executing this operation are low and inexperienced Furthermore, the Corporation had to undergo too long bureaucratic period therefore; personnel’s awareness of market and market operation is inadequate Consequently, training is a key factor in the Corporation The Corporation needs to further promote “Truong Son” trade name

1.2.2.2 Analysis of the Corporation’s organizational ability

The Corporation’s organizational model is online — functional model, therefore; it ensures leader’s power and maximally promotes specialty in fields such as planning, business, engineering, finance — accounting, etc This model has top-down uniformity in conformity with the Corporation’s proposed strategy of diversification of products and business lines, etc to create quite great advantage compared to competitors However, the most restriction in organizational ability is delay in business decision-making, therefore: the Corporation’s business opportunities are lost

1.2.2.3 Analysis of the Corporation’s competitive ability

In demand exceeding supply condition, the Corporation must face up with a big problem that is competition from other enterprises in the same sector Therefore, analysis of the Corporation’s competitive ability is extremely meaningful in proposing strategy in order

to ensure Win in competition Reality of competitive ability of Truong Son Construction Corporation in comparison with typical rivals with strengths and weaknesses through competitive image matrix is specified as follows:

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ssessing factor’ | ‘Degree of | Trong Son Lung Lo Const Corp 4

_ importance | Class | Importan | Classific | Important | Classific | Importan

ificati | t point ation point ation t point / on

Truong Son Construction Corporation has more competitive ability than that of Traffic

Structure Company 4 and exceeding that of Lung Lo Company — Ministry of Defense

according to some aforementioned assessing factors

2 Determination of objective

2.1 Proposed objectives for stage of 2006 - 2010

Strategic objectives are established by the Corporation according to the following

grounds

- Based on the Corporation’s strategic segment Previously, in subsidiary

bureaucratic and centrally planned mechanism the Corporation had only one operation field

of construction and erection; moving to market mechanism, in order to satisfy the increasing

demand the Corporation has penetrated into many new fields such as coffee production,

investigation and design and material testing, etc Due to operation of different fields, the

Corporation also determines its own strategic segments and states successful key factor of

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each segment to be concentrated Determination of strategic segments allows the Corph a kol 2 d3[áBïiSA Seth AES! finition of objectives of its business strategy

- Pursuant to results of implementation of strategy for stage of 2001-2005, objectives

of business strategy for stage of 2006 — 2010 were proposed as follows:

+ Comparing proposed objectives with achieved results and considering how much

percentage of total value of productive output is obtained In 2005 total value of productive output reached 146% compared to 2001

+ Such comparison indicates whether objectives have been achieved or not, then reasons for unsuccessful objectives shall be defined In 2006, the Corporation had not obtained the proposed objectives because performance of investment utilization had been low, the Corporation had managed and operated strangely and embarrassedly, ability of tender marketing is low and many works have been missed, and in addition domestic material market in the past years had unexpected changes, etc

+ According to such reasons, the Corporation has found out solutions such as

establishment of measures of productive organization, salary, engineering management, personnel’s labour emulation movement and promotion of ability of tender marketing

- Orientation of Ministry of Defense on principal objectives is based to develop construction sector of enterprises and Truong Son Construction Corporation in particular on indicators:

+ Value of total output and quantity of construction and erection

+ Primary in-kind volume

+ Hand-over completed works

+ Realized profit

+ Budgetary earnings

- Finally, based on the Corporation’s productive ability where it analyzed and showed its advantages and disadvantages of finance human resources, organization processing plant and production, etc

According to the aforementioned grounds, the Corporation has established its own short-term and long-term objectives Pursuant to document “Orientation of Truong Son Construction Corporation successfully defining primary objectives of business operation in stage 2006 — 2010°, long-term objectives consist of:

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— Increase of the Corporation’s market share

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— Bonanza

— Improvement of personnel’s life

— Change of constructional equipments and processing plants for construction of some categories

Those are specified as:

1 Total value of production and business: annually average growth has been maintained from 10% and above Until 2010 this value is striven for VND 2.200 billion

2 Production and business capital:

Average growth has increased by around 9% in stage 2006 — 2010, until 2010 the Corporation’s production and business capital is striven for VND 3,200 billion

3 Profits and capital accumulation:

With annually average profit rate of 3.0% on revenue, until 2010 it reaches over VND 66 billion

4 State taxes:

Annually average growth has been maintained at 11%, until 2010 payment of budget accounts for VND 142 billion, furthermore; medium and long-term liabilities (primary and interest) must be reliably paid on time

5 Each staff's average income increased from VND 2.5 million/person/month in 2006 up

to 4.2 million/person/month in 2010 with average rate of 30% per year, etc

The Aforementioned short-term objectives are concretization of strategic objectives Over each year of implementation, these objectives shall be adjusted in conformity with conditions inside as well as outside the Corporation

2.2 Stage of 2011 - 2020

2.1 Long-term objectives

Through thorough awareness of advantages and difficulties of country, construction industry as well as of the Corporation, based on 10 years strategic objectives of socio- economic development passed by the Tenth National Party Congress and pursuant to enterprises’ strategies for construction development, the Corporation’s orientation and objectives of development in stage of 2011- 2020 are specified as follows:

* Orientation:

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Constructing and developing the Corporation to become powerfully economic

corpdrb\loí-8WARXEBB'Sddi6SeY6R8ÄAI efficiency as primary measure of firm development:

diversifying business lines and products on the basis of maintenance and development of traditional construction in order to ensure that Truong Son Construction Corporation is powerful contractor having ability to serve as general contractor of domestic and international large works: promoting all resources, spirit and tradition of Ho great grandfather’s soldiers to a high degree to increase competitive capacity in order to make important contribution to national industrialization and modernization

* Objectives:

1 — Striving for annually average growth rate of from 10% to 13%

2 — Attempting to become a powerfully economic corporation with various business lines, different products and highly comparative ability

3 — Taking socio-economic efficiency as primary measure of the Corporation’s strong development in quality that is quality of managing staff, the Corporation’s prestige in domestic and oversea market

4 — Maintaining and continuously developing the Corporation to become powerful enterprises of construction industry having ability to serve as general contractor of domestic and international large works

Š — Making value rate of engineering products account for 80% and above of the Corporation’s total value of business and production

In objective of construction and erection execution, still taking construction of road and bridge works, hydroelectric power structures, airports and ports as decisive, simultaneously attaching special importance to irrigation works to promote existing cepacity and invested facilities; maintaining and developing industrial works, civil structur>s and infrastructure constructions at equal level; annual value makes up above 80% cf total production and business value

Regarding other business target value of this operation in next ten year; shall account for 20% of total production and business value Executing this procuction mechanism, we must attach special importance to consulting service that is decisive factor

in field of construction and erection business as well as in the Corporation’s incustrial production projects

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Business in consulting service is still foremost concerned in measure of sanhadanation pCmnpressor Free version and consulting must be really of foundation and one-step ahead in technological solution survey and design and manner of constructional organization, and in investment and construction

In addition the Corporation’s consulting organizations must really make great contribution to seeking works through tendering and establishment of the Corporation's projects

2.2 Short-term objective (annual)

Short-term objectives are concretization of long-term ones, which is considered as what to be achieved in each year The Corporation’s current objectives are to ensure to become successful tenderer of projects including national road 3, national road 5, construction of infrastructure in Phu Quoc Island, Cai Mep — Thi Vai port, Nghi Son Petroleum premise, etc., to invest more advanced constructional facilities and human resources including managers, technical workers, and skilled workers and to strengthen

tendering marketing system

3 Measures of objective execution

3.1 Measures of investment and development

From 2011 — 2020 it is estimated to invest capital resources of about VND 2,000 billion in renovation of processing plants in order to modernize constructional plants Basic measures of investment are specified as follows:

- Investing advanced and modern tunneling line and technology, synchronously equipping drilling and tunneling equipments for small roads and tunnels, underground tunneling plants and drilling equipments for infrastructures Estimated investment for this field is around 30% of total investment, accounting for VND 600 billion

- Purchasing more constructional plants for execution of road traffic works and hydroelectric power structures, etc., with about 70% of total investment accounting for VND 1,400 billion

3.2 Measures of human resources

In order to perform proposed objectives of the Corporation’s development orientation

in stage of 2011 — 2020, its average human forces are annually required about 5,500 people (If insufficient, it is possible to supplement more seasonal labor), in which postgraduate and