G1_00164 Formulation of Business Development Strategies for Song Da 10 Joint Stock Company in 2010 - 2015 Xây dựng chiến lược phát triển kinh doanh cho Công ty cổ phần Sông Đà 10 giai đoạn 2010 - 2015

G1_00164 Formulation of Business Development Strategies for Song Da 10 Joint Stock Company in 2010 - 2015 Xây dựng chiến lược phát triển kinh doanh cho Công ty cổ phần Sông Đà 10 giai đoạn 2010 - 2015

GRIGGS UNIVERSITY

| GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM |

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CAPSTONE PROJECT REPORT

Formulation of Business Development

Strategies for Song Da 10 Joint Stock

3 Phan Thi Que

4 Nguyen Thi Cam Tho

Class: GaMBA01.M06

HA NOI 2010

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I Justification of the necessity of the capstone project 13

CHAPTER I- THEORETICAL BACKGROUND S5 18

I | Fundamental issues of strategy and modern business strategy 18

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Il The role of business strategies in modern business environment 22

1 _ Description ofthe formulation process of a strat€egy 22

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3 Analysis of business environment of a firm (external environment) 25 3.1 Impacts of external environment on business strategy .25

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I An overview of Song Da 10 Joint Stock Company (SDT) 36 L,„ ĐigtFVv atHEfEVEIUDIWNEHÍ c.‹‹eeoecocoiaoiionaaerooiiiniiiidiaoeoigGa00x608 00080000806 36

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I.I.2 Tcechnological environmenI - - ccccssSssssesserees 42

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1.1.4 Political and legal environmenI - «sa 44

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2 THỈNTNỮ:PHVYOHGOTEHCHHBHIVENSueessesse°bedrerdondivainditdtitrioDtogtptitesespsvetiestiotpsgaes 63 2.1 Vision, mission statement, business principles and objectives of Song Da 10 Joint StocK Company s- cv sses 63 2.2 Business performance results of the most recent three years 65 2:3: Analysis-on some financiaÌ-CFI(€TiA : : : :.2-c 2222122 S62c16214 1251166542 67 2A Key product arid S€rViCE dHR|WSỈ: coleicizeadiaaiddiiibageiadoadosaes 69

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2.6.3 Recruitment and human resources attraction policies 80)

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3 Improvement of the steering information system for the implementation

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5 Human resources attraction, staff training, recruitment and appointment

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6 Technology renovation and InverSfmenI +«-«««+<-xx<eexzxes i

7 ‘Establish the company’s peculiarities « ciccsisccsiossnesinineecaienians 117 Ill Obstacles in the course of the studies and future orientation 118

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I] List of other organizations and individuals, who joined in the research

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Ha No Securities trading center

Ho Chi Minh Stock exchange The United States

Board of Management Information Technology Gross Domestic Product Strategic Business Unit

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Table 2.2 — Changes in concentrated growth strategy 33 Table 2.3 — Changes in integrated growth strategy 33 Table 2.4 — Some major indicators in 2009 as against 2008 39 Table 2.5 —List of capital and market share of underground 55

construction companies in Vietnam as at 3/2010

Table 2.6— List of finished and under-construction works of SDT 57

Table 2.8 —Asset and financial statement of three most recent years 65 Table 2.9 — Key financial indicators of the most recent three years 67

Vable 2.15- Criteria to define core competencies 86

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Table 2.17- Internal Factor F-valuation matrix

lable 2.18- Image competitive matrix

Table 2.19- SWOT matrix application for SD]

Table 2.20— Product structure in 2010 - 2015

Table 2.2 1—Main estimated criteria for 2010 - 2015

3 CHART

Chart 3.1 —Structure of SDT’s groups of activities

Chart 3.2—The illustration of price and trading volume of SDT shares in 3

recent years

Chart 3.3— The fluctuation of SDT stock price as compared with

MCV price in recent 3 years

Chart 3.4— The fluctuation of SDT stock price as compared with

HIN X-index in recent 3 years

Chart 3.5—Number of employees by qualification level as at 12/2009

ASĐEEf$0@Nssor Free Version

We affirm that we reserve the sole ownership of the topic “Business development strategic planning for Song Da 10 Joint Stock Company in 2010 — 2015” Data of the thesis was provided by Song Da 10

Up to present, this is the first time this topic is studied The members of the group are not in any conflicts with company’s interest

Hanoi, March 4th 2010

THE AUTHORS

Vii Tuan Hang (Team Leader)

Phan Thi Qué

Lé Xuan Hai

Nguyén Thi Cam Tho

11

A PRNROMMDb#EÐGIHMtENđrsion

We would like to thank Song Da 10 Joint Stock Company for your enthusiastic support providing us data as well as arranging meetings with regard to the company's business strategy Besides we would like to sincerely thank professors and PhDs who equipped us with corporate governance skills and knowledge throughout the course These are essential background for this study as well as applicable experience for practical uses We would also like to express our special thanks to the Academic Board of Griggs University for your supervision during the

course of our research

Finally, we are particularly thankful to the valuable tutoring from Madam Nguyen Thi Tuyet Mai — PhD, Sir Pham Ngoc Thang- MA and Sir Sean Mc Gough — PhD

in our completion of this research work

ABOUT THE AUTHORS

ININƠDU†ft@M Free Version

L Justification of the necessity of the capstone project

-008 is a remarkable year of the post economic crisis period in Vietnam and all cver the world As part of the economic panorama, Vietnamese and world construction industries have slowed down significantly due to tightened investment flows and slumped material price that hinder and slacken many projects

As 2009 comes to its end, total business transactions attained 123,437 billion VND which is 14.6% higher than the same period in 2008’; there has been many ongoing large projects and they are in the finishing phase since materials price has been on

he fall, interest rates has started to take effect and public investment and ODA cisbursement has been strengthened

Nevertheless, many construction companies, especially those in basic construction, tave faced a number of difficulties in their operation as a result of the world economic crisis In particular, it is not as easy to approach and mobilize capital sources for investment as before Lack in capital has prevented many projects from starting off and slacked off construction process Moreover, operation in some companies is inefficient and has not been able to fulfill management requirements

in new conditions when business areas are enlarged Many key activities in the

industry like urban construction have yet been paid appropriate attention At the

same time, investment attraction and project implementation are not carried out in a professional manner This has major impact on companies’ profit and other economic objectives

"Ministry of Construction (2010) Report on the implementation of 2009 plans: direction and key tasks of the construction industry in 2010 Hanoi: Ministry of Construction gateway

13

SAD PCompressetoHréeoWexstonvhich specializes in subterranean constructions

of Song Da Corporation has more than 30 years of developing and growing’ The company has run many underground construction projects and now has leading market share in the industry However on investigating the company’s activities, it has been found out that behind successful projects and positive profits in recent years, there still exists insufficiency in the company’s activities which also occur in other companies during post global economic crisis period Moreover the company has not taken its full advantages to surpass other companies in the industry Financial results do not reflect the company’s existing potentials as well as key

shaken

Under such circumstances, it is essential to seek and establish stable solutions and business development strategies for underground construction companies Effective business development strategies not only trigger stable and sustainable development

as well as many other benefits for the company but they are also significant contributions to the development of the industry and the country’s economy

Keeping in mind the above rationales, the topic “Formulation of Business Development Strategies for Song Da 10 Joint Stock Company in 2010 -

ˆ Song Da 10 Board of Management (2010) Annual Report 2009 Hanoi

20H BF ojdprfesEdgbd°neesWerifiolhncc to the companv in particular and to the

construction industry in general

HH Research objectives and applicability

The research objective of the topic is practically meaningful The research provides

an overview of activities and development direction of Song Da 10 Joint Stock Company in the post financial crisis period as well as in the fierce competition condition among construction companies Particularly, significant attention is paid

on tunnel construction, an essential area in transportation and hydroelectric infrastructure which are considered the locomotives of the country’s economy Therefore, the primary objects of this study are subterranean construction companies, as well as individuals and organizations operating in this field

The study will set out a panorama of the operations in Song Da 10 Joint Stock Company in recent years, analyzes operational strategies, recommends some solutions that help reorganize management structure, strengthen business strategy and boost other operation strategies, aiming at strengthening the company in terms

of entrance barrier and the company’s value in the condition of post financial crisis and growing fierce competition

Besides, the topic is used as a reference for projects and other research on management in construction industry and on operation efficiency of construction companies over the last periods The study also has theoretical value which is a new sight into the company’s strategies and business management methods

IH Scope of the research work

Despite the many lessons on business performance of construction companies drawn from the post financial crisis period our research work, due to certain constraints and obstacles, concentrates only on SDT’s business development strategies, which are in central interest of its Board of Management and other

15

suPllYa€toanpdiessovtloeeoWgrglo8 Subsequentlv the capstone project contenL is

adhered to studying the factors that affect SDT's sustainable growth from strategic points of view and given the post financial crisis period

IV Approaches

® Conduct surveys and collect information for summary and analysis, using

logical approaches;

s Hold field visits for assessment and comparative studies:

° Conduct consultation with international experts on management of

construction companies and subterranean construction companies;

® Organize interviews with domestic and foreign speclalists and the

Management construction companies to get their consultation ideas for improvement of the capstone project's recommendations;

Ẳ Research methodology

In elaborating the whole capstone project, the dialectical and historical materialism

is utilized in combination with other approaches such as analysis, statistical work, group survey, scientific abstractionism and illustrative models

In analyzing the company's financial performance, cross-sectional and time-series techniques, trend analysis, common-size statements and financial ratio analysis are tapped

In other analyses, five forces, SWOT models, and several other theoretical models are to be presented in Chapter I and used

VI Structure

This research includes three chapters Chapter one presents the theoretical background and new approaches of the capstone project Chapter two is the core of the whole paper It provides an analysis and assessment of current performance of

SIPDkI Cứm ppfedsoildregcwersiohe cntire construcuUon service TU also looKs into

some issues of SD T's business strategies and governance through which constraints and the roots of such constraints can be identified The last Chapter gives an overall briefing of the research work puts forth measures and recommendations, and points out arising problems and obstacles that prevent the authors from fulfilling their capstone project to the desired quality

17

C ff B F'KEKRniirec3iEØRE MEAD BACKGROUND

I Fundamental issues of strategy and modern business strategy

l Viewpoints about strategy

From the traditional viewpoint of Michael Porter’, a strategy can be defined as “the study to identify the most suitable competitive position for an industry, and major scope of activities where competition is present” Strategy, according to him, emphasizes the point of competition

Alfred Chandler — a professor from Harvard University’ has another idea

“Strategy", in his view, "is to define long-term key goals of a company, action programs and allocation of necessary resources to achieve those goals” James Quinn’ from Dartmouth University defines “Strategy as the model or plan of an organization to integrate steering goals, corporate policies and priority order of actions in a unified entity”

William F Gluek® is of the view that “Strategy is a unified, comprehensive and integrated plan designed to ensure a firm's achievement of its business targets” Planning-based strategy development approach is no longer in fashion Practice shows that detailed plans that are formulated formally sometimes fail, and contingency plans, therefore, are needed in the business operations of a company In this regards, traditional viewpoints show certain weaknesses Strategy, in its nature,

is a science and a tactic in achieving targets Such nature, however, is not emphasized in the above viewpoints

Quinn, J., B (1980) Strategy for change: Logical Inscrementalism; Homewood, IIlinois, Irwin

° Lawrence R Jauch and William F Gluek( 1989) Business Policy and Strategic Management

InP GCoomprensoer knee Version strategy gradually replace the traditional ones

I:ndeavors have been made to reflect the nature of the term "strategy" in these concepts while ensuring its compatibility with the changing business environment With this approach, the modern concepts do not emphasize the projection and planning aspects but rather the selection of strategies that respond to the targets set out by an organization

It is obviously uneasy to give a clear definition of a strategy Yet this problem can

be solved if attention is paid to each strategy’s factors, which are meaningful for any organization In any circumstance, these factors depend strictly on the current situation of each enterprise, member organization as well as organization structure

It is necessary to separate the definition of a strategy and the strategy formulation process in order to have a unified definition with the assumption that we had a consistent strategy with goal, orientation and could face with changes in a fluctuating environment

pF Typical features of a strategy

It can be seen that the concepts of a strategy are varied Yet, a strategy, from any angles and at any time, has some most typical features that reflect the nature of the business strategies of an enterprise specified below:

@ A business strategy must clearly define the key goals to be achieved in

specified periods and must grasp at all aspects and levels of the production and business activities of an enterprise

° Business strategies must be reflected in a continued process from

development to achievement assessment and review, and adjustment of the set goals

8 A business strategy must ensure optimal mobilization and full exploitation of

the firm's resources like manpower capital technique and technology: and

19

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to gain comparative advantages in the market

° A strategy is an instrument that sets out long-term objectives of an

enterprise; and

* A business strategy defines the clear scope of competition of an enterprise

The essence of this characteristic is to identify clearly the business scope of an enterprise This is an important step of an enterprise in reflecting business environment, positioning strategies, allocating resources and administering its investment portfolio Two basic questions raised are:

What are we trading in? and What should we trade in?

This is a relatively complex problem since the market segmentation has a great impact on identification of organizational structure of a company

8 A business strategy creates interaction between opportunities and threats of a

company, and between its strengths and weaknesses, from which its competitiveness is built

This feature highlights a key aspect of strategy — the long-term sustainable competitive advantage of a firm over its major competitors in the involving business sector It is a modern approach to make a research on competition status of an enterprise

ae Types of business strategy

3.1 Classification of business strategy by levels

The common level-based classification of a strategy is:

+ Company (overall) strategies are the strategies formulated for the whole

company in all the sectors that it deals in The objectives of the strategies of

PDHoimmrdespơnktreeVbzsiÙimate goal that the company is pursuing from tts

overall performance directions and measures to achieve the goal

Business (sectoral) strategies are designed for a niche specialized business sector When a company deals in one business sector its business-level strategy is identical with its company-level strategy

Functional strategies are the strategies of specific service of a company such

as financial, marketing and personnel, etc Functional strategies are supportive in achieving the success of business and company strategies

Classification of business strategies by content

Based on contents of strategies, French administrators divided business strategies into the following types:

Technological and technical strategies

Financial strategies

Human strategies describe directions and ways to mobilize and use human resources for successful implementation of the above strategies

Classification of business strategies by process

Business strategies include

*- Orientation strategies that indicate major orientations on a firm's targets, its

directions and ways to achieve such targets The strategies are built upon the analysis of the internal and external environment of an enterprise They steer the key strategic options of a firm

Action strategies that comprises of action alternatives of an enterprise in a specific situation and expected adjustments of the strategies Action

21

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orientation strategies or from the strategies established during the performance of orientation strategy

II The role of business strategies in modern business environment

In modern business environment strategies play an increasingly important role in the existence and growth of an enterprise

Strategies are a tool to reflect collectively all the long-term goals of an enterprise These goals are the ultimate targets that the firm wishes to achieve in its business performance Specification and documentation of such targets in the form of strategies helps every member of the enterprise be fully aware of where they want

to go, and what they need to do Consequently, this contributes to the accomplishment of the firm's targets

1 Description of the formulation process of a strategy

Although there are various viewpoints of the various formulation approaches of a strategy, a normal process is composed of the following steps:

Assignment of labors, cooperation

technical, financial &

managerial resources of the firm

Organizational and behavioral =

determination of the leadership

Figure 1.1 — Business strategy formulation procedure

2: Identification of corporate mission and objectives

2.1 Identification of corporate mission

Before looking into this issue, a question raised is what are the objectives and mission of an organization?

Corporate objectives of an organization are considered as reasons for its existence The approaches of strategists, therefore, to target issues will steer the formulation of

a Strategy and influence its content

The regular formulation of a mission statement is a continuous process that has six

steps:

Step 2: Assess external environment and review internal conditions

23

StPp¥: € ordqfnessbr iHcee'Welsidness mission

Step 4: Rewrite the mission statement of the company

Step 5: Organize the implementation of the mission statement

Step 6: Review and revise the mission statement

In writing the mission statement, it is necessary to take into account not only the wishes of the owner, the leaders, but also the internal and external factors of the company

2.2 Identification of strategic objectives

A company's objectives present clear orientations that it pursues, and influences its business performance For example, the increase of 15% in the company’s market share requires various actions to enhance its productivity Corporate objectives are also good incentives For instance, to achieve the revenue of one billion in the next year can be a challenge to an enterprise Finally, a company's objectives are used as

an instrument for assessment and control It allows the company to check whether the planned business outcome is consistent with its requirements like whether the delivery of the commodity can be contracted within two weeks This allows the firm

to take rational actions to get the desired outcome such as improved production and storage and reduced order and delivery time, and raised sense responsibilities at

work

Target has also central role that is the result of comparison For each enterprise, target can be long-term, medium or short-term Economists assumed that an enterprise fixes its targets in eight main sectors as follows:

Market position; Renovation; Capacity; Financial and logistics source; Profits; Personnel development and efficiencies; Employee attitudes and efficiencies; Social responsibilities ;

[IPdXIBGom pfeswop [Rhee'Vbrdiơneoine sectors shall lead to serious consequences

to the whole enterprise In order to fix short-term targets and not to harm long-term ones a balance between these targets is required

3 Analysis of business environment of a firm (external environment)

3.1 Impacts of external environment on business strategy

External environment includes factors that may affect the performance of targets of

an enterprise The analysis of the external environment comprises of macro environment and sector environment (micro) The analysis of such factors shall help

an enterprise identify its position and environmental properties, the existence age determine influences of the external environment and its targets, then be able to make decisions in planning of strategy

es Macro environment:

Macro environment includes various factors that have indirect impacts on activities

of an enterprise through its influences on factors of the sector environment, of which there are 5 factors considered by administrators as those that influence most strongly, that is: economic, institutional, legal, technological, social and natural

factors

® Economic factors: have great influences on enterprises and the most

frequently movable factor, the most difficult factor to forecast among macro ones Its movement always contains both opportunities and challenges for enterprises, of which the following moving trends are the most prominent:

- GDP and GNP trend: directly affects the growth rate of the economy, the

growth of disposable income of the population It shall make changes in consumers’ needs, consumption market scale affecting demand-supply balance of products

25

- PDF Wonipresso tak tvetVarbionmpacts on consumption saving and investment

Social, population, custom preference factors, ete directly affect

consumption needs of the society

Natural factor: is an important factor in human life; at the same time is an input supply for many production sectors Natural factor is considered as the least variable factor However, in the past decade, the natural environment has been seriously deteriorated This may have great impacts on movement trend of enterprises

Sectoral environment:

Sector environment closely attaches activities of an enterprise: factors of the Operation environment shall decide the investment environment, competition strength and profits in the sector According to Professor Michael Porter, the context of the operation environment is subject to influences of five competitive forces: risk of penetration of potential competitors, competition strength of companies in the sector, power of buyers, power of sellers and threats of alternative

products

Figure 1.2 — Michael Porter's model of five competitive forces’

- Threat of New Entrants: are companies that are currently not participating in

competitive rivalry within but are likely to penetrate into the industry Their appearance shall increase competitive intensity, decrease profits within the

industry The penetration capacity of potential entrants will depend on the extent to which there are barriers to entry The higher penetration barriers are, the easier it is for other companies to enter this industry and vice versa According to Joe Bains, there are three major barriers hindering the

penetration namely Brand loyalty of customers, absolute cost advantages, and economies of scale If an enterprise has suitable strategies to enhance penetration barriers in to the industry, the penetration threat of latent entrants

shall be restricted

”M.E Porter, Competitive Strategy (New York: Free, Press, 1980

* J.E Barriers to New Competition (Cambridge, Mass: Harvard University Press, 1956) For a review of the modern literature on barriers to entry, see R,J Gilbert, “Mobility barriers and value on Incumbency” in R

Schmalensee and R.D Willing, Handbook of Industrial Organization, (Amsterdam,, Holland 1989)

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- PDF GotingnessorsFree Version

I:xisting players are regular pressure and direct threat to companies The more aggressive the competition of existing players within the industry is, the more profit-making capacity, their existence and development are threatened It is such latent competition that existing companies within the industry keep enhancing investment costs with an aim to differentiating their market-access products services or reducing their prices The competition intensity within the industry often depends on the following factors:

7s The number and capability of companies within the industry:

The number and capability of companies within the industry decides competition nature and intensity within the industry In the industry with big companies of equivalent capabilities, the competition tends to be fierce and much more inclines to

a price war In the event of only a few influenced companies prevail: they tend to have connections with each other to control the market, which makes less influenced ones reluctantly follow playing rules set out by the prevailing

Market demands: Demands for products and services of companies greatly affect the competition intensity When product demands tend to increase, companies find

it easier to protect or expand their market shares, thus the competition appears less severe Conversely, when the demands tend to decrease, companies shall be indispensably involved in a fierce war with other companies if they want to protect their market shares and expand the market

The costs are higher and higher, which makes companies more difficult to leave the industry thus they have no other choices other than involving in a decisive battle for existence This makes the competition intensity higher and higher, esp for industries at maturity or degeneration stages In the event of low withdrawal barriers, the competition intensity tends to drop

APDE!|@ontpedosvegdmed Weesiotke Competition intensity also depends on others such as the differentiation of products services among companies within the industry the growth rate of the industry entry betting and fixed costs, etc

3.2 Evaluation of the environmental impacts

To evaluate the environmental impacts, quantitative assessment of the impact of environmental factors on operations of companies is widely used in which factors are synthesized through a five-step procedure:

Step 1: Make a list of factors decisive to the success of companies

Step 2: Assess the importance of each factor to the industry

Step 3: Identify the weight of each factor in relation with responsive capability of companies’ current strategies or the importance to the companies

Step.4: Scale the marks of each factor

Step 5: Calculate the total marks

The total marks shall reveal impacts on the environment on companies, thereby identifying opportunities and challenges companies are now facing This is the basis

to formulate business strategies to ensure the suitability of the strategies and the mobilization environment

4, Internal analysis of an enterprise

The capabilities of an enterprise are a basic factor to decide what it can do, whether its strategies can be successfully performed To ensure the feasibility of strategies, during their formulation it is necessary to assess the current situation, to determine strengths and weaknesses, from which differentiate capacity or the competitive advantages of the enterprise can be identified The internal analysis is conducted in the following aspects:

29

4.1.P DÁI(alyisie eđ‹£le-vatue thaisinf an organization

Information system Human resources

activities Research & Development |

Main activities Marketing Production After-sale =

Figure 1.3 — Value chain of an organization’

The value chain is the synthesization of activities of an enterprise in order to

increase the value The value chain of an organization is constituted from two groups of activities — main activities and supportive activities

Main activities are those that are closely attached to products and services of the

enterprise They include purchasing and management activities of input factors,

marketing activities, service activities and after-sale customer care activities

Consideration is made whether these activities contribute to cost saving and

improved quality of products and services, which best satisfies customers’ demands

The more the activities are saved; alongside with increased quality and satisfaction

of customers’ demands, the higher the value chain of the company is evaluated with

its advantages in competition

* Le The Gioi, Associate Professor, PhD., (2007), Strategic Management, page 166, Statistical Publishing House

Suppd7 ie mathessor dines Wersiobetter operations of the company and its more effective performance They comprise of personnel management technological development and purchasing

4.2 Analyses of financial situation

An important and indispensable part seems the results of the company’s business performance through its financial standards Through data of the analyzed financial standards, we can clearly distinguish how its financial capability and financial planning and management work is conducted

Apart from the above-mentioned factor, internal analysis includes such issues as sustainable value, internal control, and control of investment risks that will be analyzed and evaluated by activity

Upon the completion of the internal analysis, a table of strengths and weaknesses of the companies shall be synthesized This is the final stage, and the results of the internal analysis The table of strengths and weaknesses is developed in alignment with the table of opportunities and challenges in the environmental analysis

The combination of the two tables — opportunities and challenges, and strengths and weaknesses builds up a SWOT matrix, which is the ultimate results of the environmental and internal analysis, and foundation for the formulation of the firm's business strategies

31

PDF Compressb#ttđờelVerssanysis of SWOT matrix'"

On the basis of the SWOT matrix, the company is able to identify strategies to bring into full play its advantages, and make full use of the opportunities, and avoid challenges from the environment

5 Strategy formulation and selection

Strategies are a system of key policies and measures to implement and coordinate programs of action, supportive organization and fulfillment of targets in the most effective way Company strategies cover the entire operations of firm that are targeted to the most effective competition, predominance in the market, and sustainable growth Company strategies can be selected from the following strategies:

Concentrated growth strategy: To pursue this strategy, the company’s strategies

must focus on product renovation or the market while leaving other factors intact

The company strives to tap any opportunities of its current products, and services or the operating market

'” http://www.sciencedirect.com/science (Februa, 20th 2010)

PDF Cokapledsdr Gangerdm goncentrated growth strategy"

Products, services Market Sector Sector level Technology Current implementation Current or Current Current Current

Concentrated growth strategy enables the company to direct all its efforts to the activities that it has comparative advantage, and tap its prominent strengths to develop its business However, concentrated growth strategy tends to miss Opportunities to expand the market, fail to take advantages of its prominent characteristics, or grasp development opportunities of other professions

Integrated (aligned) growth strategy: With this strategy, the Company shall take measures to undertake the production of inputs or consumption of products The company can implement frontward integration (in reverse order) or backward integration (in clockwise order) (total or entire integration, internal or external integration) Table 2.3 — Changes in integrated growth strategy”

Products, services Market Sector NJ2 [11% Technolog

¡in#3Ð EcŒownpressdøpfirebtSersiormethods [his strategy can be applied to capable enterprises that are able to grasp opportunities in line with their long-term targets

Diversification strategy: In this strategy companies shall take measures to develop new products and services to conquer new markets for increased efficiency They can exercise concentrated and composed diversification strategies without relating

in terms of technologies, to their current products and services Diversified strategy makes full use of the surplus financial resources, creates new competitive advantages, and restricts risks It also requires companies to improve their managerial capacity, and calculate benefits and costs of their growth in this

direction

Streamlining strategy: The strategy plays an important role in the restructure of companies when offering new services It is implemented when business activities that they are pursuing have little prospect for long-term development, and

unsuitable economy or appearance of new and valuable opportunities Streamlining strategy focuses on cost cutting and investment capital recovery

Mixed strategy: A company, at the same time, can apply different strategies It can accelerate its growth in one sector while cutting down on another These activities are all aimed to achieve successful implementation of the company's overall goal in the execution course of its business strategies

The choice of one from the foregoing strategies depends on a company’s capacity and the conditions of the involving environment From the SWOT analysis the company can select the most business strategy that fits its operation most

6 PDH-Gmmuazdeòffsreetbteytioevel

For sole-sectoral companies, their level strategy is identical with company strategy For multi-sectoral companies, cach of their business sectors needs a separate business strategy Due to the different characteristics and the environmental conditions of each sector, strategies designed for each sector are certainly not the same

6.2 International business strategy

An international business strategy addresses two issues — oversea market penetration for expansion, and competition Competition in the international market

is Similar to a great extent to the competition in the domestic markets The degree of competition and complexity of the business strategy in the international markets is much higher than in local ones

CI EPKRRn pressoBUSENBSSSRVELOPMENT STRATEGIC PLANNING FOR SONG DA 10 JSC

I An overview of Song Da 10 Joint Stock Company (SDT)

is History and development ’

4 Subterranean and underground service construction:

4 Hydroelectric, hydraulic transportation and other constructions:

“# Industrial public contrucstion and housing:

4 Mine exploitation and mineral processing;

# Construction consulation (excluding legal consultation) :

Song Da 10 Board of Management (2010) Annual Report 2009 Hanoi

PDE Compreksardtces Version

# Producing and trading materials and means of construction and concrete structural elements:

# Producing and trading metal construction spare parts and accessories:

# Mechanical automotive and motorbike repair:

+ Import of spare parts, mechanized accessories and construction technology:

4 Trading and exporting specialized mechanical means of transportation:

# Investment on medium and small hydroelectric constructions, trade on commercial electricity./

2 Development and achievements

Song Da 10 Joint Stock Company is a member enterprise of Song Da Corporation — Ministry of Construction The company’s predecessor is Subterrenan Construction Company which was established under decision No 54/BXD- TCCB dated

11/2/1981 of the Minister of Construction

During 25 years of establishing and developing, the company has been titled variously, such as Subterrenan Construction Company Song Da 10 Subterrenan Construction Company In 2002, the company’s name was changed into Song Da

of Planning and Development

On 27/11/2006, SDT’s shares were licensed to be listed and on 14/12/2006, the

company’s shares were officially traded in Hanoi Securities Trading Center

37

In PIDEU0ömepressuraRceblfegsioanted the listing license the Company increascd its charter capital from 60 billion VND to 117 billion VND, marking a milestone in the new stage of development ot the company’s operation

3 Organizational and management structure of the company

Organization structure of SDT is organized and operated in accordance with the State owned Enterprise Law and the characteristics of the construction industry In this chart, the General Assembly of Shareholders is the highest authority organ of the company and following is Board of supervisors The Supervisory Board comprises three members appointed by the General Assembly of Shareholders Ranking the third is Board of Management, in which five members are selected with five-year term This board has an adequate power to implement all the rights

on behalf of its company, excluding the competences of the General Assembly of

Shareholders

Board of Directors stands in the fourth position of the company The membership of this board consists of five persons who are appointed by Board of Management The General Director is the Head and responsible for the daily operations of the company within his assigned functions Four deputy managers of technological, economics, material-mechanical and construction field will support the General Director in each and every aspect of their competences The last Board is Functional Departments, SDT Joint stock company 10.1 and six branch enterprises

Organization structure of SDT” (see appendix 3)

“ Annual Report 2009 of SDT

II PD#n@lyRi»øÊcarperate triafegsy and governance

l External environment analysis

1.1 Macro environment

Table 2.4 Some major indicators in 2009 (increased/decreased) as against 2008

(%)"°

GDP

Values of agricultural, forestry and fishery production

Values of industrial production

Total goods retailing and consumption service revenue

Total export turnover

Total import turnover -

profits with the whole year rice output of 38.9 millions tons, increasing by 165,7

thousands tons as compared with 2008

'S Source: General statistics office of Vietnam

39

I3cPlJj& đlembressørmpErteetVehs¿enincnts there are still a lot of restrictions which

require effective solutions to overcome if not, Vietnam socio-economic development plans in 2010 in general and the construction industry in particular

will be affected These restrictions consist of:

Firstly, although the economy has grown considerably and overcome the difficult stage, the economic growth mainly based on the growth in width with the increase in the resource volumes, especially investment capital increase hasn‘t really based on the increase in productivity of social labor and the efficiency enhancing, therefore the growth quality was not high and stable yet The investment ratios as against GDP were 41.3% in 2008 and 42.8% in 2009 but the growth of GDP in the two years only got 6.18% and 5.32 %, which was not corresponding The ability of competitiveness of the economy and many sectors, products was still low while our country had fully integrated into the world

Secondly, although the economic structure has taken steps to move in the positive trend, it hasn’t still got out of the traditional sector structure with a relatively high proportion of the material production sector in general and the agricultural, forestry and fishery sector in particular In recent years, the economic structure has moved slowly in which in 2009, the structure of GDP subject to the current price in the three sectors: agriculture, forestry, and fishery; industry and construction, service were 20,66%, 40,24% and 39,10% correspondingly, not much different from those

in 2008 and the recent years The sector, region and product structures were still unreasonable, didn’t fully prove the strengths of each locality, each area and the whole country

Thirdly the macro-economic balances were not really stable Although the budget deficiency has been controlled, it still gained up to 7% of GDP: the trade deficit in

2009 went down by 32.1% as compared with 2008 but still equaled 21.6 % of the total export turnover; the service deficit was 18.6% of the service export turnover and increased by 17% as against 2008 The inflation was controlled in a reasonable

IcPÐlồŒomapreBsdu: HreeNar$fonbececn escalating and has potentiality to cause a high re-inflation

Fourthly some social problems have been slowly solved The lives especially those

of low income people, people in the farthest land, in the sparse ethic groups and in the regions suffering from disasters have been still ¡in difficulties The unemployment is still high According to the results of Population and housing census 1/4/2009, the whole country had 1.3 millions labors with the unemployment rate of 2.9%, higher than the level of 2.38% in 2008 Although the rate of poor households had decreased, it still stood at 12.3% The plague problem was in a complicated progress

The analysis shows that although the Vietnamese economy in 2009 has grown considerably, this environment still has certain restrictions, including a slow growth rate, slow and unreasonable sector structure transferring, a risk of high inflation and some other problems These limitations have directly influenced on every business

and production activities in every sector, especially the construction sector and

Song Da 10 Firstly, such limitations will pose certain challenges to the company’s direct and indirect capital mobilization Since SDT is a listed company, capital is mainly mobilized in stock market The economy's fluctuation will deal a fatal blow

on the stock market and push prices and demand to slump, and even make the market lose its liquidity Thus, isusing shares to mobilize capital is a challange for companies

Besides, swinging macro balance, budget deficit and threat of re-inflation have also dealt a blow to enterprises in estimating input cost and developing products The company has to face jumping material price as well as difficulties in seeking new projects In addition, competition also takes roots from these fluctuations This at the same time brings about opportunities for foreign players to set their foot on the market as the company’s capital as well as its investment on products become less competitive lastly, social issues and natural disasters are another constrains to the

41