G1_00160 CAPSTONE PROJECT REPORT BUILDING BUSINESS DEVELOPMENT STRATEGY OF SONG DA -THANG LONG JOINT STOCK COMPANY FOR THE PERIOD 2010-2015

CAPSTONE PROJECT REPORT BUILDING BUSINESS DEVELOPMENT STRATEGY OF SONG DA -THANG LONG JOINT STOCK COMPANY FOR THE PERIOD 2010-2015 VeFS/9#/NIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT BUILDING BUSINESS DEVELOPMENT STRATEGY OF SONG DA - THANG LONG JOINT STOCK COMPANY FO

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GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT BUILDING BUSINESS DEVELOPMENT STRATEGY OF SONG DA -

THANG LONG JOINT STOCK COMPANY FOR THE PERIOD 2010 — 2015

Group No.: 03 Student’s name: Trinh Thanh Hung

Vu Viet Son Cao Tung Lam

Le Thi Tuyen

Ha Noi, 2010

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Acknowledgement

First of all, the group of authors would like to express our deep gratitude to: The lecturers of the MBA training program of United State Griggs University - who provide knowledge: Managers and staff of the Centre for Educational Technology and Career Development - Hanoi National University(ETC)-who are enthusiastic and indispensable helpers in the process of learning:

The authors would also like to thank the Managers and staff of Song Da — Thang Long Joint Stock Company- who are main supporters in the process of studying about the situation of the enterprise and create the opportunity, finance, provide the support of time so that members of the group can join and complete the training course

Finally, we would like to send the most sincere thanks to families, colleagues and classmates -who are the solid basis of spirit for members of the group during the participation of Griggs University MBA program and the process of completing major assignment Capstone Project "Building business development strategy of Song Da — Thang Long Joint Stock Company for the period 2010-2015"

We also wish to thank all the Lecturers and Administrative staff of Grigg University, Global Advanced Master of Business Administration Program for assistance and kindness throughout the process of MBA program

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Exercise’s structure THEORY BASIS OVERVIEW OF STRATEGY AND STRATEGIC MANAGEMENT

Concept of strategy and strategic management Role and significance of strategy and strategic management

CONTENT OF STRATEGIC MANAGEMENT The enterprise’s vision and mission determination External environment analysis

Macro-environment analysis Environmental analysis of industry Internal environment analysis STRATEGY CONSTRUCTION, SELECTION AND IMPLEMENTATION

Information collection and systematization phase EFE matrix

Competitive profile matrix IFE matrix

Co-ordination phase SWOT matrix SPACE matrix

8-9 9-10

10 10-12 12-13

14 14-15

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FOR SONG DA - THANG LONG JOINT STOCK COMPANY IN 2010 — 2015 PERIOD

STOCK COMPANY 21.1 The company’s formation and development history 21-22

2.1.3 The company’s organizational structure and management 24-25

machinery

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[he industry s development prospect Evaluating opportunities and challenges of Song Da Thang Long

Opportunities and opportunity ranking Challenges and challenge ranking External factor evaluation (EFE) matrix of Song Da - Thang Long

Competitive profile matrix of Song Da — Thang Long INTERNAL ENVIRONMENT ANALYSIS

The company’s strengthes Equipment resource, infrastructure The company’s position in industry Technological level

Main material management Production cost management The status of product/service quality control Applying quality control system

Quality control work The quality of big works which have been constructed by the company

Trademarks, patent and copyright Synthesis of SONG DA - THANG LONG internal environment analysis

Internal factor evaluation (IFE) matrix of Song Da — Thang Long

MAKING PRODUCTION AND BUSINESS STRATEGIES AND SELLECTING THE OPTIMUM STRATEGY FOR SONG DA - THANG LONG

SWOT synthesis matrix

39-4] 41-44 44-45

45-48

49 49-53 53-56 56-57 57-58 58-60 61-63

63

64 65-66 66-68

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CONTENTS OF SELECTED STRATEGIES

STRATEGIC SOLUTIONS AND PLANS OF IMPLEMENTATION

COST-LEADERSHIP STRATEGY The content of strategy

Short-term goals by 2015 Long-term goals

Strategic solution Plans of implementation STRATEGY FOCUSING ON EXPLOITING STRATEGIC CUSTOMERS

The content of strategy Short-term goals by 2015 Long-term goals

Strategic solution Plans of implementation SOME PETITIONS TO ORGANIZE AND IMPLEMENT STRATEGIES SUCCESSFULLY SHORTCOMINGS OF THE BIG EXERCISE CONCLUSION

83 83-85 85-87

88

88 88-90 90-9] 91-92 92-94 95-96

96 97-98 99

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LIST OF ABBREVIATIONS

In this document, abbreviations are understood as follows:

SONG DA —~ THANG LONG Song Da — Thang Long Joint Stock Company

HBC Hoa Binh Real Estate Construction and Trading Joint

Stock Company

SJS Song Da Urban and Industrial Zone Investment Joint

Stock Company

LIST OF FIGURES

Page

Figure 1.2 Model of five competitive forces created by M Porter 13 Figure 1.2 Diagram of main and support activities 14 Figure 2 | Song Da — Thang Long’s organizational structure chart 24 Figure 2.2 The company’s qualification level structure 26

Figure 2.3 Model of five competitive forces by M.Porter 33

Figure 2.5 SWOT matrix for SONG DA - THANG LONG 74

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Operating result form 2007 to 2009 of SONG DA - THANG LONG

Forecasted GDP growth rate of regions and countries in

2009 and 2010 compared to the one in recent years Evaluating the impact of opportunities for SONG DA - THANG LONG

Impact assessment of challenge to SONG DA - THANG LONG

Summary of opportunities and challenges for SONG DA

- THANG LONG Matrix to assess external factors Competitive profile matrix of Song Da — Thang Long The company’s capital and asset status from 2008 to

2009 The report of business operating result from 2008 to

2009 Song Da — Thang Long’s major equipment resource Some partners normally selected by the Company to construction the projects

List of some main material suppliers of the Company Cost structure of the Company in comparison with other enterprises in the same industry in 2009

GREAT model selecting optimal strategy SONG DA - THANG LONG

The company’s expected operating result in 20010-2015 period

Implementation plans concerning cost-leadership strategy

The company’s project and total investment The plan on implementation of strategy focusing on exploiting strategic customers

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INSTRODUCTION

1 The reason for topic selection:

In the context of globalization and Vietnam's access to the World Trade Organization in particular, the global economy’s changes will directly effect on Vietnamese economy for sure That is more confirmed after financial crisis happenned in the United States Each case obviously consists of positive and negative aspects, as a result, from this financial crisis, we have condition to review the economy's strengh as well as weakness thereby find out our appropriate way and create condition for steady development in the future

With developing countries, construction industry is always considered as one of the key economic industries playing special important role in economic and social development career, in particular in national industrialization and modernization period

With market economy, competitive laws exist at any sector and business line and construction industry is not naturally out of such laws, therefore, organizations have

to find out their own way, make detailed and appropriate business strategy to exist and develop steadily

The forerunner of Song Da - Thang Long Joint Stock Comany (SONG DA —- THANG LONG) is a branch of Song Da Investment and Development Joint Stock Company founded in June, 2005 operating in the field of investment, business and development of housing services, urban areas, medium and small hydroelectric work, civil and industrial work construction and erection and so on In September,

2006 Song Da Investment and Development Joint Stock Company sold this branch

to Song Da 1 One Member State-owned Company Limited and became a branch of Song Da 1 One Member State-owned Company Limited at Hanoi

On December 5'", 2006 Song Da — Thang Long Joint Stock Company was officially founded under business license no 0103014906 dated December Sth, 2006 by

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Hanoi Department of Planning and Investment with business line of investing and providing housing services urban areas: trading medium and small hydroelectric work, constructing civil industrial traffic and hydroelectric ect work with registered capital of VND 25.000.000.000 The company repurchased total the brand of Song Da 1 One Member State-owned Company Limited at Hanoi

On December 6", 2006, the company carried out general shareholders meeting and agreed to adopt adjustment on the first registered capital from VND 25 billion to Vnd 40 billion and finished collecting equity share capital before December 20",

2006 On December 20", 2006, it completed capital contribution for company foundation with total quantity of 171 shareholders and total equity capital of Vnd 40 billion As a result, it carried out changing business license of increasing registered capital to Vnd 40 billion (According to business license changed for the first time

on September 29", 2006)

With international and national economic changes, the most important matter for SONG DA - THANG LONG now is to plan overall development strategy for all production and business activities aiming at competing and dominating market share against foreign and domestic businesses to meet growth targets in all aspects

in 2010-2015 period, creating condition for steady development in the incoming years, This is the reason why the group of authors selects the topic “Making development strategy for Song Da — Thang Long Joint Stock Company for the period 2010 — 2015”

2 Purposes and scope of the study:

Purposes: Studying the basis of making strategy, procedure of making strategy and the way of making the right choice for optimum strategy aiming at helping SONG

DA - THANG LONG to determine its most reasonable production and business strategy in current condition and situation thereby, presenting proposals and solutions aiming at improving process of making production and business strategy

tot SÔNG WN°%⁄TIAN€ \EpMœ in current condition together with planning implementation schedule for selected strategy from 2010 to 2015

Scope of study: Getting in close contact with analysis construction, selection

solution and implementation schedule of production and business strategy for SONG DA - THANG LONG for the period 2010 — 2015

3 Conducted methods:

Qualitative method: Studying cases of SONG DA - THANG LONG

Detailed study method: Analysing, comparing and summarizing data based on figures: Primary and secondary

Data collection method: Basing on data released in public media and capacity

introduction document of SONG DA - THANG LONG

4 Exercise’s structure:

The exercise consists of introduction part and 03 chapters The main content of each chapter is presented as follows:

CHAPTER I: THEORY BASIS

- Overview of strategy and strategic management

- Content of strategic management

- Strategic construction, selection and implementation

- Conclusion

CHAPTER II: ANALYSING CURRENT SITUATION AND MAKING

DEVELOPMENT STRATEGY FOR THANG LONG - SONG DA JOINT STOCK COMPANY IN 2010 —- 2015 PERIOD

- External environment analysis

- Internal environment analysis

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- Production : usiness strategies and optimum strategy selection flor SONG DA

- THANG LONG

CHAPTER III: CONTENTS OF SELECTED STRATEGY, STRATEGIC SOLUTION AND PLAN OF OPERATION

- Cost leadership strategy

- Strategy of concentrating on strategic customers

- Limitations of big exercise

- Orientation of continuous study

- Conclusion.

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THEORY BASIS 1.1 OVERVIEW OF STRATEGY AND STRATEGIC MANAGEMENT:

1.1.1 Concept of strategy and strategic management:

Concept of strategy:

1 Strategy is a process of determining long-term basic targets of a business, selecting method or guidelines for action and distributing essential resources

to achieve such targets (Alfred Chander)

N Strategy is a format or a plan of coordinating main targets, policies and action order into united whole (James B Quinn)

3 Strategy is a unified, comprehensive and coordinative plan made to ensure that the company’s major targets will be reached (William J Glueck)

4 Strategy, Michael L Porter, the Father of competitive theory thought that:

e Firstly, strategy is to create valuable and original position consisting of different operation

e Secondly, strategy is selection and swap in competition

e Thirdly, strategy is to create coherence among all activities of a company

In conclusion, strategy firstly involves in a business's targets Secondly, it is a method to perform actions and decisions which are closely involved in each other and select method of coordinating such actions and decisions (Strategy of a company must make full use of major advantages and capacity as well as foresee external environment’s opportunities and challenges)

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Figure 1.1 The strategic management process

Sirategy helps economic organizations to be keener and more dynamic with the

trol their Operation to cnhanece corporate competitive strength and step by step

‘Hisure the Company s powerful position i the market mechanism

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operation and the destination of all members to strive for reaching to: That is a

method of optimum coordination of material resource with immaterial resource aiming at achieving proposed targets

Strategy is expression of business value concept: All businesses have difference and their own mark in their strategic operation That typical style tells value concept aribitious spirit and managing role of the leaders to meet targets proposed by the strategy

Strategy helps leaders of companies to have clear orientation and vision in the future: Strategy is the basis for business managers to make decisions which are proper, timely and even create break-through in their firms It is an instrument to make use of and determine the strength to promote and the weakness to overcome,

to take full advantages of opportunities and cope with challenges and threats to gradually build up the company’s position

Strategy is creation in business management: Management is a process, strategy is a period Basing on targets set by a firm and method and manner of handling problems which are harmonious and flexibly combined in accordance with reality of the firm to create competitive advantages for company forward the final target wiich is expected value optimization

Srategy is expression of a company’s competitive position: Thereby an ertrepreneur established a method of coordinating of internal strength with external opportunity to overcome weakness and avoid hidden risks They are corporate competitive ability, ability of dominating market, maintaining market segment against competitors and ability of creating significant pressure to competitors

Michael Porter said in "Competitive war" that "competitive strategy lies in relationship between firm and its market"

Thank to such importance, business circle needs to make long-term business srategy This is essential to help company to be well-established in the market and

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develop in the future However business environment always changes so does company’s resources in each strategic period, as a result, strategy of company must

be flexible and changeable in accordance with objective reality to ensure existence and development

The company can select strategy under the rule of applying data analysis method basing on factors in order arranged as follows:

1.2 CONTENT OF STRATEGIC MANAGEMENT

Strategy is made on the basis of company’s mission It is basis to set goals and what should be done for customers as well as other involved partners

Basing on this mission, leaders at all levels will decide to set goals Such goals are clear expression of organization’s mission and are used to make action plan and assess process They are guided by actual knowledge of both external marketing or business environment and company’s internal capacity In common, making strategy starts with wide investigation and analysis and also making a process which

by it, leadership levels recognize top prioritized problems that organize needs to deal with for succeeding in the long term

Departments’ participation in planning strategy plays an important role because they own plentiful knowledge of competitive environment in which their company

is Operating in as well as good ability and can make lucid proposals on what should

be executed by organization Moreover departments involved in the process of planning have more abilities of supporting and implementing proposed plans The major department is the strategy implementation centers because they have hegemony human resource and required skills to do well

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By gathering ‘together to implement the process of planning, leadership level and managers of departments ensure to make appropriate, coherent and feasible strategy whether the strategy made by organization or department

Implementing strategy relates to carrying work in accordance with the process of the whole company Leaders and managers at all levels must highly concentrate on implementing strategy because even a perfect strategy will also become valueless if

it is not executed in the right way by organization managers

1.2.1 The enterprise’s vision and mission determination:

Vision and mission point out destination in the future and long-term targets which company aims at They are basis to make short-term policy, strategy and business strategy

Vision determination is to define the position that the company expects to reach to Vision statement draws up the company’s future when it meets targets and purposes Vision statement must enable to determine the final destination of the

company

To succeed Davidson defined 6 essential factors which a vision must contain:

* Providing direction in the future

* Attaching much importance to the consumer’s benefit

* Be practical

* Creating motivation

* Being absolutely fully communicated

* Being always closely followed and assessed

Mission statement determines values and rules dominating company and is essential part of the process of making strategic plan The company’s mission is the reason why it exists in the market and what product and services which the company brings

to customers and community The decisions in the process of making strategic plan must always harmonize with mission declaration

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Mission statement is the foundation of the company’s vision Mission declaration or can be motivator encouraging staff when sending the company’s purposes and value

to customer and community

1.2.2 External environment analysis:

“* Political factors:

These are factors with range of influence on all business line all over the territory Political factors can threaten existence and development of any industry When doing business under administrative unit, entrepreneur is compelled to abide by political regulations at that area

+ Stability: Institution with high stability will create good condition to do business and vice versa

+ Tax policy: Import and export tax policies, sales tax, income tax and so on will impact on revenue, profit of a business

+ Involved laws: Investment law business law, labor law, antimonopoly law, antidumping law and so on

+ Policy: The state policies will impact on a business, they can produce profit or challenges for a company such as trade policy industry development policy

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economic development policy, competitive regulation policy consumer protection

policy and so on

+ Factors effecting on economy: Interest rate, inflation etc

+ The government’s economic policies: Basic salary law, the government's economic development strategies, preferential policies for industries such as tax reduction, subsidy and so on

+ Economic prospect in the future: The speed of growth, GDP growth, GDP ratio

on investment capital etc

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“* Sociocultural factors:

Each nation, each territory have their own typical cultural factors and social value

These factors are characteristics of the consumer at such areas

Social features also cause firms interested when doing market research Social factors divides community into groups of customers, each group has different features, psychology, income and so on:

+ Average duration of life, health situation, nutritive regime and fare

+ Average income and distribution of income

+ Life style, knowledge, viewpoint of aesthetics and living psychology

+ Living condition

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“ Tec noldgical factors:

The whole world is in the technological revolution series of new technologies appear and are applied to products, services in particular to the field of modern information technology and communication technology

+ Investment from the government businesses on R&D work: Combination between businesses and the government aims at studying to produce new technologies and material etc which will positively effect on economy

+ Speed, cycle of technology, the rate of out-of-date technology:

+ Influence of information technology and internet business operation

s* Integrative factors:

No one disagrees that globalization is a trend and this trend induces opportunities as well as challenges for businesses and nations in developing production and business operation

P.E.S.T model is now expanded into S.T.E.E.P.L.E matrix (Social/demographic, Technological, Economics, Environmental, Policy, Legal, Ethical) and more and more improved as an indispensable standard to apply research on external environment of a company

1.2.2.2 Environmental analysis of industry:

Environmental analysis of industry by the model of Michael Porter built with 5 impacts on a business or called as 5 competitive forces, they are:

v The power of the provider

~ The power of the customer

~ Hidden competitors

Y The threat from substitution product

Y Current competitors

Figures 9 “Model of Fee er og forces created by M Porter

Rivalry among Existing firms

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.2.3 Internal environment analysis:

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Internal situation of a business is regularly assessed by functional sectors such as finance, human resource management, organizational structure marketing: research/development and information technology

Figure 1.3:Diagram of main and support activities

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(Source: Strategic management textbook - Griggs University)

Corporate internal analysis will allow us to realize strenghs (S) and weaknesses (W) of an entrepreneur Thereby, selected business strategy need to promote maximally strengths and deal with weaknesses of the company

Similar to techniques applied to analyse external factors, aiming at quantification for analysis of the company’s internal situation, “ internal factor assessment matrix” (IFE)

1.3 STRATEGY CONSTRUCTION, SELECTION AND IMPLEMENTATION There are 3 phases to create a business strategy and each phase uses different instrument

Phase 1: Information collection and systematization phase

This phase summarizes collected basic information and systematizes to form

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business stratégy It use 3 instruments: EFE matrix competitive image matrix and

IF E matrix

Phase 2: Coordination phase

This phase selects arrange and coordinates external environmental factors with internal factors to make feasible strategy It uses matrix instrument: Strength — Weakness — Opportunity — Challenge matrix (SWOT): strategic position and action evaluation matrix (SPACE) and big strategy matrix

Phase 3: Decision phase

This phase uses the only instrument which is quantitative strategy planning matrix (QSPM) QSPM matrix uses information in phase | and objectively assesses business strategies that can be chosen in phase 2 aiming at making decision of what

is the optimum strategy for company

1.3.1 Information collection and systematization phase

1.3.1.1 EFE matrix

EFE matrix is established in the order of 5 following steps:

Step 1: Indexing factors playing a decisive role in the field which company is doing business in, including both opportunity and challenge

Step 2: Evaluating significance of each factor according to score band from 0,0 to 1,0 (significance increases score by score) with total score of factors equal to 1 This significance relies on business industry in which company is operating

Step 3: Giving mark from 1 to 4 to each factor with score telling the company’s reaction level with such factor Mark 4 is good reaction Mark 3 is above average reaction Mark 2 is average reaction and mark | is little reaction

Step 4: Determining total score for each factor (by product achieved in step | and step 2)

Step 5: Determining total score about the company’s significance by total score achieved in step 3

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line highest total score is + and the lowest one is | The average is the score of 2.5 The higher score, the better reaction from company with external factors

1.3.1.2 Competitive profile matrix:

This matrix identifies a business’s major competitors It is an expansion of EFE matrix with factors’ significance level, score signification of each factor and important total score at the same meaning

Competitive profile matrix differs EFE matrix by the fact that: there are a few internal factors with decisive significance which are also mentioned to compare Total score used to assess competitors will be compared with the firm chosen as an sample

1.3.1.3 IFE matrix

Establishment of IFE matrix also follows 5 steps:

- Indexing internal factors playing decisive role

- Assessing significance of each factor according to score band from 0.0 to 1,0 (significance increases score by score) with total score of factors equal to 1 This significance relies on significance of such factors with a business without discriminating that this factor is strength or weakness of the business

- Giving mark from | to 4 to each factor with score telling internal features of a company with such factor Mark | is the biggest weakness, mark 2 is the shallowest weakness, mark 3 is the shallowest strength and mark 4 is the biggest strengh

- Determining total score of importance for each factor (by the product of scores achieved in step 2 and step 3)

- Determining total score about significance of company (by the total score get

in Step 4)

The highest total score is 4 and the lowest one is | The average is 2.5 The score of importance below 2.5 shows that the company is weak inside and the mark over 2.5 shows that the company is strong inside

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1.3.2 Co-ordination phase

1.3.2.1 SWOT matrix

SWOT matrix is a tool to form four strategies with the combination of Strengths

(S), Weaknesses (W), Opportunities (O) and Threats (1):

- SO Strategy: Using the internal strength of business to explore the opportunities inthe external environment

- WO Strategy: Taking advantages of external opportunities to improve the in‘ernal weakness

- ST Strategy: Using the strength of business to avoid or to decrease the threatens

of external environment

- WT Strategy: This is a defensive strategy to decrease the internal weakness and external threatens

SWOT matrix is illustrated by the following diagram:

Table 1.1 SWOT Matrix

SIACE Matrix is established through these steps:

- Select a group of representative variables for FS, CA, ES and IS

fF

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- Fix a value from | (the worst) to 6 (the best) for FS and IS from -1 (the best) to -6

(the worst) for ES and CA,

- Calculate the average score of FS, IS ES and CA

- Mark the average score of each aspect

- Adding two those values and mark the result, adding two values on the vertical axis and mark the result Mark the co-ordinate of this point

- Draw a vector with the direction of from point of origin to this new point

Table 1.2 SPACE Matrix

(Source: Strategic management textbook - Griggs University)

If vector is at the point of origin of offensive: The business at the best position where it can use up the internal strength Strategies are market penetration, market development, product development; combining with the front side, back side and horizontal side according to the specific situation of each business

If vector is at the point of origin of caution: The business should operate with its basic capacity, don’t be reckless Available strategies are market penetration market development, product development and focus diversification

If vector is at the point of origin of defensive: The business should focus on improving the weakness and avoid the external threatens The strategy for defensive: cost cut-down, liquidation and focus diversification

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if vector is at the point of origin of competitiveness: Competitive strategies are combining with the front side back side and horizontal side, market penetration market development, product development and joint-venture participation

1.3.2.3 Grand strategy matrix

Matrix include: horizontal axis shows the competitive position of business in market (strong or weak) and vertical axis shows the growth of market (slow or quick) The appropriate strategies are listed in the following right angle:

Table 1.3 Grand strategy matrix

Quick

1 Market development 1 Market development

2 Market penetration 2 Market penetration

3 Product development 3 Product development

4 Horizontal combination 4 Forward combination

1 Cost decrease 1 Focus diversification

2 Focus diversification 2 Horizontal diversification

3 Horizontal diversification 3 Association diversification

4 Association diversification 4 Joint venture

SLOW (Source: Strategic management textbook - Griggs University)

1.3.3 Decision phase

QSPM matrix uses the information from three matrix in phase | (information

collection and systemization) and three matrix in phase 2 (co-ordination phase) to

give out the objective evaluation on replaceable business strategy

The strategies are selected to put in QSPM matrix, not all the found strategies in the phase 2

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Formation of QSPM matrix must be implemented through six steps:

-Step |: Listing the factor of S W.O.T from the EFE TFE matin

- Step 2:.Classifying the appropriate factor for kK FE IFE matrix

- Step 3: Study about the matrix in stage 2 and determine which strategy needs

to be considered

- Step 4: Identifying total attractiveness scores (TAS) according to each factor: the evaluated score of 1 to 4: 1- the least attractive, 2 — a little bit attractive 3 — quite attractive, 4 — very attractive

- Step 5: Calculating total attractiveness scores (TAS) based on each row by multiplying the classified score by average score (AS) in step 4

- Step 6: Giving out the total score of each strategy

The most attractive strategy is the one which have the highest score in step 6

In summary, enterprises in the business process must always define its annual targets and long-term target Business strategy is the way and steps to achieve the target

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CHAPTER II ANALYSING CURRENT SITUATION AND MAKING BUSINESS DEVELOPMENT STRATEGY FOR SONG DA —- THANG LONG JOINT

STOCK COMPANY IN THE PERIOD 2010 — 2015

2.1 OVERVIEW OF SONG DA-THANG LONG JOINT STOCK COMPANY 2.1.1 The company’s formation and development history

On December 5", 2006 Song Da — Thang Long Joint Stock Comany was officially founded under business license no 0103014906 dated December Sth 2006 by Hanoi Department of Planning and Investment The forerunner of Song Da - Thang Long Joint Stock Comany (SONG DA - THANG LONG) is a branch of Song Da Investment and Development Joint Stock Company founded in June, 2005 operating

in the field of investment, business and development of housing services, urban areas, medium and small hydroelectric work, civil and industrial work construction and erection and so on

In September, 2006 Song Da Investment and Development Joint Stock Company sold this branch to Song Da | One Member State-owned Company Limited and became a branch of Song Da 1 One Member State-owned Company Limited at

Hanoi

On December 5", 2006 Song Da — Thang Long Joint Stock Comany was officially founded under business license no 0103014906 dated December Sth, 2006 by Hanoi Department of Planning and Investment with business line of investing and providing housing services, urban areas: trading medium and small hydroelectric work, constructing civil, industrial, traffic and hydroelectric ect work with registered capital of Vnd 25.000.000.000 The company repurchased total the brand

of Song Da 1 One Member State-owned Company Limited at Hanoi On December 6", 2006, the company carried out general shareholders meeting and agreed to adopt adjustment on the first registered capital from Vnd 25 billion to Vnd 40 billion and finished collecting equity share capital before December 20", 2006 On December

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20" 2006 it completed capital contribution for company foundation with total quantity of 171 shareholders and total equity capital of Vnd 40 billion As a result i carried out changing business license of increasing registered capital to Vnd 40

At present, the company has been taking part in numerous technical infrastructure construction project, civil and technological construction and working as an investor

of big projects such as housing complex of Van Khe urban area (Vnd 1.006 billion), Phong Phu Plaza trade center (Vnd 419 billion), Song Da — Thang Long city view extended high-ranking apartment and office complex building (Vnd 988 billion)

Van Khe extended urban area (Vnd 10.000 billion), Phu Lam urban area (Vnd 5.000

billion) and Tran Xuan Soan apartment building (Vnd 412 billion)

2.1.2 Major information of the company:

e Thecompany’s name: Song Da - Thang Long Join Stock Company

Abbreviated name : SONG DA - THANG LONG., JSC

Headquarter: Van Khe Complex, La Khe Dist Ha Dong City, Ha

Noi Viet Nam

FOE 0n BES3501 106 MOST changing the 8" time on October 10" 2008

dong) Quantity of shares: 10.000.000 shares (Ten million shares)

Song Da — Thang Long Joint Stock Company owns 4 branches 2 project management unit and 3 subsidiary companies

Business line:

- Investing, trading housing services, urban area:

- Investing, trading small and medium — scale hydroelectric power plant:

- Building civil, industrial and traffic works, irrigation structure, post office engineering works, urban infrastructure, industrial zones, water supply and

drainage works, line construction work and transformer station;

- Producing, merchandizing building material, construction machinery and equipment (without waste material reprocessing, metallurgy and electrical coating):

- ‘Transporting materials, construction and industrial equipments:

- Hotel and restaurant business and investment (without including bar

karaoke rooms and dance hall):

- Producing commercial concrete and concrete member:

- Trading material, building material construction equipments, interior and exterior ornament;

- Managing projects of civil and traffic construction works and up-to-group

A urban technical infrastructure

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[he company’s management machinery and organizational structure are

constructed under joint stock company model as follows:

Figure 2.1: Song Da — Thang Long’s organizational structure chart

(Source: Song Da — Thang Long Joint Stock Company - vear 2009)

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Bai Copan S corpé te UHice block contains: Department of materials engineering: department of finance and accounting: department of planning and economy; department of human resource: investment project department;

Member units include: 2 project management units under the company, 03 subsidiary companies and 10 joint venture and associated companies; real estate exchange

2 1.4 The company’s human resource structure

The quality of human resource is one of important factors deciding the company’s development, as a result, it always lays the targe of building professional staff in the top priority in its development strategy By December 3 1“, 2009, the company’s number of official staff has been 158 people

Table 2.1: Human resource situation in the company by December 31”, 2009

(person)

The average salary (Vnd/person/month) 4.5 triệu

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a0 cá09/1/010011 00 Hƒ]1Caf[OH level structure

(Source: Song Da - Thang Long Joint Stock Company - year 2009) Ihe company’s labour force is mainly concentrated in managing staff It doesn't own common labour force because its nature of industry is the construction work contractor furthermore the construction works sporadically locate at many different regions so that in cach area the company hire local common labour force

to mininiize cost of labour using

- 26

-Ne A oe Seon iT ESE SHU Ro 2009

For having overview of the company’s operation situation over the past 3 years we synthesize by following spreadsheet:

Table 2.2: Operating result form 2007 to 2009 of SONG DA - THANG LONG

(Source: Audited financial statement 2007, 2008 and 2009 of the Company)

Financial situation of the Comppany is relatively stable fixed capital dominate in total capital for manufacture and business of the Company In 2008 alone, inspite of being affected by global economic crisis, the Company still had growth in total output since the Company further develops project investment Project investment increasingly accounts for high density in business manufacture structure of the Company

Profit from project investment accounts for high density in profit structure of the Company

2.1.6 Misison and vision confirm

Construct company to be the leading construction, project investment and real estate business firm in Vietnam Develop to invest in project and real estate business is the top objective and is main development trend in the future of company Objective of

Tu

subs 2háumpK§0r Free Version responsibility to society and contributes more

and more for the des clapi the country is operation policy of the company

Frain and develop contin isis human resources unify, cooperate in work discipline and industrial sty ic ss the main value, is cultural tradition of company

Incessantly to study learn and apply new technology, continuously invest advanced equipments in order to satis!y requirements of market

Costumer is center of every \\ ork is the most important objective of company Best quality of produce and service in every business operation of company is the number one objective continuously improve to satisfy high demand of customers Profit is a vital requirement for the survival and growth of the Company

The company wish to be a good customer and expand cooperative relationship in all fields with anorm of good quality efficiency and mutal benefits

2.2 EXTERNAL ENVIRONMENT ANALYSIS

22.1.1 Economic and politic environment: (P)

Itis the stability of politics !4\\ system and policy mechanism which is issued by the Sate, has been synchronized and bring into full play It encourages the enterprises to inplement its operation and business based on the market mechanism

-PDL Cam i " ¬ esp Hob RE Compressor tres e00lAnual policies which raise the difficulties for construction industry such as monetary policy interest policy and especially the policy of urban re-planing

Stability of politics labor force and development in recent years and the next years has create the favorable condition for national economy development in general and for enterprises in construction sector in particular

WTO joining of Viet Nam makes a positive effect and creates the job as well as increases the incoming of labors WTO participation will help Vietnam to improve trading exchange and to increase FDI (foreign direct investment) into Viet Nam The change in law will create a powerful effect on the production and business of legal entity State management is implemented by law system which avoids the administrative interference towards the activities of enterprises and market The stability of politics, labor force and development

With the powerful international integration, Viet Nam becomes the attractive destination for foreign investors and great-scale economic groups Besides the advantages, Vietnamese enterprises will must face with a considerable competition, tariff barrier and priorities forces them to comply with the international law system The enterprise must improve the level of management and invest into the technology in order to produce the high quality product with the lowest price It is a challenge for construction and real estate industry in general and for Thang Long - Song Da Joint Stock Company in particular

2.2.1.2 Economic environment: (E)

In common with the powerful development of economy GDP growth rate in 2007

is 8,48%/year which is rather high compared to other countries in the world an in the region GDP growth rate in 2008 is only 6,23%/year (www.vnexpress.net) due

to economic depression The advantages leading to the development of company are the development of the country, the continuing improvement of people’s lives, and growing invesement into basic construction Whereas the increasing inflation rate

P : —_

the DE A RERRE RESO dr kEF ME HER scalation price makes a negative impact on the economy, leading to the serious loss of economy, threatening the invesment into the

hasic construction of investors and the Government

At present the Government has been focusing on the consuming demand stimulating programs and investment into the construction industry, especially the basic infrastructure for society and for the poor Despite the forecast about the difficulties of industry production in 2009 due to global economic crisis, consuming demand stimulating policies for economy recover create the chance for construction industry to development

Due to economic crisis Vietnamese enterprises, especially the construction ones must face a lot of difficulties in recent time On the 16 April 2009, Prime Minster has make a decision of 50% VAT cut down for some of goods, construction materials for example, leading to the decrease of price of construction products

Table 2.3: Forecasted GDP growth rate of regions and countries in 2009 and

2010 compared to the one in recent years:

› + DƑ &;0PP#305} dt ở envir roth ment: (S)

With the advantages of geographic location for open-door policy and integration Viet Nam is favorable to eonomic and experience exchanges with other countries in

the world

The fast growth of population leads to the booming of urban area and infrastructure development project; however the limited number of skilled labor interupts the economic development and integration

In addition the customer has a increasingly higher knowlege so they will choose the best product with perfect services It is a chance for great-scale enterprise but a challenge for small ones

In brief, structural shift in the economy of the world and in the region makes a considerable impact on Viet Nam, opportunites and challenges in the next phase

are:

Vietnamese enterprises will not endure the discrimination in the international trading They will have more chances of investment attraction, technology exchange and advantages promotion towards the cheap labor force and open investment environment Especially, Viet Nam has more chances of benefitng form the priority for developing countries in order to improve the intenrational position and to ensure the nationality interests It requires the Government to boost the economic re- structuring, administration reform and law system establishment in order to improve the capacity of competition

In the phase of economic shifting period with the low starting point, Viet Nam faces with a lot of challenges besides the opportunities The route of tax cut-down makes

a considerable impact on the budget of the Government It requires Vietnames enterprises to have a good preparation otherwise they will be eliminated in the competiton rule of the global economy

According to the Decision No 76/2004/QD-TTg issued on 6" May.2004 by Prime Minister about the housing development orientation, until 2020, the urban housing rate