G1_00211 BUILDING BUSINESS STRATEGY FOR 12/9 PETROVIETNAM CEMENT JOINT STOCK COMPANY IN PERIOD OF 2010 - 2020 XÂY DỰNG CHIẾN LƯỢC KINH DOANH CHO CÔNG TY CỔ PHẦN XI MĂNG DẦU KHÍ 12/9 GIAI ĐOẠN 2010 - 2020

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CONG HOA XA HOI CHU NGHIA VIET NAM

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Anh Son ngày tháng năm 2012

CHUNG NHAN CUA CONG TY CO PHAN XI MANG DAU KHi NGHE AN

Đề tài: Xây dựng chiến lược Kinh doanh của Công ty cỗ phần Xi măng Dầu

khí Nghệ An” đã được nhóm học viên số 12-VOI10 Chương trình MBA Quốc tế

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và thực tiễn tại Công ty cô phần xi măng Dầu khí Nghệ An

Công ty chúng tôi nhận thấy đây là đề tài có chất lượng tốt cho khả năng áp

dụng vào thực tế sản xuất Kinh doanh tại đơn vị phục vụ phát triển chiến lược phát triên của Công ty

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CAPSTONE PROJECT REPORT

BUILDING BUSINESS STRATEGY FOR 12/9 PETROVIETNAM CEMENT JOINT STOCK COMPANY IN PERIOD OF 2010 - 2020

Group: 12 -VO110 Students:

Nguyen Thi Le Tram (Group leader) Phan Sy Thang

Tran Nghia Hoa Bui Thai Truong

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381669) BUILDING BUSINESS STRATEGY FOR 12/9 PETROVIETNAM CEMENT JOINT STOCK COMPANY IN

PERIOD OF 2010 - 2020

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1.4.2 Selecting product strategy - business base strategy 22

1.5 The specific characteristics of building business strategy of PVC 12/9 24

CHAPTER II: BUSINESS ENVIROMENT ANALYSIS AND INTERNAL

ANALYSIS OF 12/9 PETROVIETNAM CEMENT JOINT STOCK COMPANY 25

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Gris) BUILDING BUSINESS STRATEGY FOR 12/9 PETROVIETNAM CEMENT JOINT STOCK COMPANY IN

PERLOD OF 2010 - 2020

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ABBREVIATIONS

l PVN Vietnam Oil and Gas Group

2 PVC 12/9 PetroVietnam Cement Joint Stock Company

Company

6 UBND People’s Committee

9 WTO World Trade Organization

11 HDQT Board of Directors

12 BGD Board of Managers

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1 General background and rationale of the assignment topic

The globalization and international economic integration, with the strong development of science and technology have created huge opportunities, however; also pose many challenges for enterprises Enterprises always face with competitions which are severe and have the sense of “internalization”, therefore, to survive and develop in this context, each enterprise is required to have its own business strategy to exploit advantages and to turn international commitments into their actions, to promote internal resources combining production and business closely, to renew continuously technology, and improve the product quality and the competitiveness to strengthen its position in global economic integration

Participating in production and business activities in the cement industry and

construction material manufacturing industry- an industry currently is facing with

the severe competitive pressure, not only among domestic enterprises but also

competition with exported cement- this fact requires enterprises in cement and

construction material industry in general as well as PVC12/9 in particular have to a reasonable business strategy to keep their positions stably and develop

Starting from the above fact, the group 12-VO11 has chosen the topic:

“Building up business strategies for PVC 12/9 in the period of 2011-2020” to

research with the aim of building a reasonable business strategy for PVC 12/9, to

help the company be active in business, perform well short-term goals as well as be more successful in the future

2 Purpose and object of the study

* Purpose of the study:

- To analyze and assess the state of the whole production and business of

PVC 12/9

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GriGcs) BUILDING BUSINESS STRATEGY FOR 12/9 PETROVIETNAM CEMENT JOINT STOCK COMPANY IN

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- To select and propose business strategies for the company in the period of

2011-2020

* Subject of the study:

Internal and external environment of PVC 12/9; business strategies of the

company in the period of 2011-2020

district (Nghe An), press information

The primary sources are collected from the meeting, interviewing of the PVC 12/9‘s leaders, and staffs to learn more about those information which is not

released in annual reports and about some strategic orientation of the company in the following years

4 The assignment is divided in to 3 main chapters as follows

Chapter 1: The theoretical background to corporate’s strategy

Chapter 2: An Analysis of business environment and internal environment of

PVG 12/9

Chapter 3: Recommendation of strategy and solutions for PVC 12/9

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UNIVERSITY BUILDING BUSINESS STRATEGY FOR 12/9 PETROVIETNAM CEMENT JOINT STOCK COMPANY IN

PERIOD OF 2010 - 2020

CHAPTER 1: THEORETICAL BASIS TO BUILD CORPORATE’S

BUSINESS STRATEGY

1.1 The concept and the role of corporate strategy:

1.1.1 Corporate Business Strategy concept:

In economics, there are now many definitions of strategy which are different

depending on each author’s conception In 1962, Chandler defined “Strategy is the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying

out these goals.[1]

Chandler is one of the first to initiate strategic management theory Until 1980 when

the subject of strategic management has become ripe, Quinn gave a more general definition: "a strategy is the pattern or plan that integrates an organization's major

goals, policies, and action sequences into a cohesive whole Then, Johnson and Schole define strategy as follows: "Strategy is the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations”

In other words, business strategy 1s:

- Where is the business trying to get to in the long-term (direction)

- Which markets should a business compete in and what kind of activities is

involved in such markets? (Markets; scope)

- How can the business perform better than the competition in those markets?

(advantage)?

['] Chandler, A (1962) Strategy and Structure Cambrige, Massachusettes MIT Press

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VANER RAY BUILDING BUSINESS STRATEGY FOR 12/9 PETROVIETNAM CEMENT JOINT STOCK COMPANY IN

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- What resources (skills, assets, finance, relationships, technical competence,

facilities) are required in order to be able to compete? (resources)?

- What external, environmental factors affect the businesses’ ability to

compete? (environment)?

- What are the values and expectations of those who have power in and around the business? (stakeholders)

* Features of a business strategy:

- A business strategy defines the purpose and the development direction of

an enterprise in a relatively long period (three years, five years, even more ) to

ensure the business of this enterprise to develop continuously and steadily in

volatile business environment of the market economy

- A business strategy only outlines a long-term and oriented direction while

in practice, business has to implement the principle of combining the strategic objective with the situation objective, combining strategy with tactic and plans of operational business Building up a strategy is to outline the framework for long-

term business activities of an enterprise in the future on the basis of information

collected through the process of analyzing and forecasting

- All decisions of important strategies in the process of building, deciding,

organizing to implement, evaluating, and controlling strategies are focused on the

highest leaders of an enterprise However, the development/construction of an

enterprise’s strategies is by the staff of consultants participating in providing information, but making important decisions belongs to the leaders of that enterprise

- A strategy is guaranteed the secrets of business information in the market

economy

- A business strategy firstly and mainly is built up for businesses,

specialized busisness fields, tradition, and strengths of an enterprise That makes an

enterprise to develop, select and implement strategies as well as participating in business on the marketplace with preparation and strengths

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1.1.2 Role of business strategy to the corporate

In any filed of management, a business strategy is still confirmed the important role in the following sides:

- To orient long-term activities and to be a solid foundation for the

implemetation of operational activities Lack of strategy or unclear strategy will

make activities lose direction, only see in the short term but cannot see in the long- term, only see a part without seeing the whole

- To create a solid foundation for activities of research and development, investment, training human resources; to strengthen the competitive position of enterprises, and to ensure the sustainable development of enterprises In fact, most

of negotiation mistakes of investment, and implementation research are derived

from lack or mistakes in determining strategic objectives

- To provide the foundation for enteprises to actively develop aprropriate business directions to environment on the basis of making use of opportunities, avoiding risks, and promoting the advantages of enterprises in business

Strategy at Different Levels of a Business

Strategies exist at several levels in any organization - ranging from the overall business (or group of businesses) through to individuals working in it

Corporate Strategy - is concerned with the overall purpose and scope of the

business to meet stakeholder expectations This is a crucial level since it is heavily

influenced by investors in the business and acts to guide strategic decision-making

throughout the business Corporate strategy is often stated explicitly in a "mission

statement”

Business Unit Strategy - is concerned more with how a business competes

successfully in a particular market It concerns strategic decisions about choice of

products, meeting needs of customers, gaining advantage over competitors, exploiting or creating new opportunities etc

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Oompressor Free Version

Operational Strategy - is concerned with how each part of the business is organized to deliver the corporate and business-unit level strategic direction

Operational strategy therefore focuses on issues of resources, processes, people etc

1.2 How Strategy is Managed - Strategic Management

In its broadest sense, strategic management is about taking "strategic decisions" - decisions that answer the questions what the business strategy is In practice, a thorough strategic management process has three main components, shown in the figure below:

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NA BUILDING BUSINESS STRATEGY FOR 12/9 PETROVIETNAM CEMENT JOINT STOCK COMPANY IN

PERIOD OF 2010 - 2020

The decisions in the period of making strategies propose to enterprises to focus on specific products, markets, resources, and technology in a specified period

of time Strategies show the advantages of long-term competition

The process of building up strategies for an enterprise as follows: (Textbook

of Business Strategy Management and development of business of Thai Nguyen Economy and Business Administration university )

Analyze and Deter

Analyze and and carry

forecast corporate strate

selecti out environment gic

"| soluti „ „ Corporate’s duties ons optim Ẻ

A company is established with a main objective However, sometimes they

do not understand their duties so that works do not bring high effect as expected Sometimes, because of not having thorough grasp of objectives, duties, some

businesses choose wrong way and all the subsequent conduct would be

meaningless Therefore, businesses first should know what they need to do

Identify tasks and strategic goals of business are the important opening state

in the implementation of business administration according to proposed strategies The clearly and particularly defined objectives are extremely important for a

business to be successful

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GRIGGS Gros) BUILDING BUSINESS STRATEGY FOR 12/9 PETROVIETNAM CEMENT JOINT STOCK COMPANY IN

PERIOD OF 2010 - 2020

Strategic functions, tasks, and objectives of enterprise are often summarised through The mission statement, including the following 3 aspects:

- Tasks of an enterprise: To raise existed reasons and purposes of business activities; to focus on orienting on customers; to identify major fields and

businesses According to D.Abell, the identification of business fields has to answer the questions: Who need to satisfy? (Customers); what need to be met? (The demands of customers), How to satisfy the demands of customers’? (Unique competences)

- Strategic Objective: The strategic vision and objective showed in the Mission statement is a clear and ambitious statement which enterpeises pursue.It is

the specificialization of objectives of an enterprise about direction, scale, structure

and process of implementation over time

System of strategic objectives of an enterprise is classified according to the following foundations:

- The hierarchical position of an objective: The top objective and the

secondary objective

- Time: Long-term, medium term, and short term

- Different departments and groups of an enterprise: including objectives of shareholders, Board of Directors; objectives of employees, labor union

- According to correlative types of strategy: General objective of the whole

enterprise, objective of each segment of a strategy

Business philosophy: Identifying the values of an enterprise need to be

achieved, they are standards set and considered as action and behavior formula in business The values have to reflect the interest of an enterprise to employees as well as customers, owners and society

Vision: Claims of enterprise on their position in business environment in a

certain period of time — is guidelines for company’s action in all the times and

circumstances

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Mission: Reflecting the important tasks of the business in_ business

environment and is often expressed through brief philosophies of business Mission shows the reasons for the formulation and existing of a business Businesses can

change their strategy to carry out the mission but hardly change the reason of their existing

Objective: is the final goal the enterprise wants to achieve Objectives show the directions for all the decisions and forming criteria for measuring performance

in practice

1.2.2 Assessing the external environment

The objective of the assessment of external environment is to propose the lists to summarize opportunities from the environment which an enterprise need to capture, and risks from environment that can cause challenges for the company, and need to avoid

1.2.2.1 Macro environment — National business environment (using PEST model)

In order to analyze the national business environment, in this assignment, our

group use PEST theory including assessing political/policy (P), economic (E),

societal (S) and technological (T) factors to find out opportunities and threats for

firms operating in that environment

a Political/policy factors - P

Political/policy factors are the foundation to form other elements of the business

environment, the foundation for political, legal environment has its business

environment These factors include institutional politics, the legal system Stable political institutions, clear and broad policy will bring opportunities to business and vice versa

b Economic factors -E

These factors play the most important role among factors inluencing operations of a business They include elements such as economic growth rates, exchange rates, inlation rates, interest rate policy, economic policy If the

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PERIOD OF 2010 - 2020

economic growth rate is high, the exchange rate increase, the inlation rate is stable, the interest rate policy is suitable, economic policy create a level playing field for businesses, it will bring opportunities to businesses Conversely, these elements will create challengues for business in that economy

c Social factors —S

These factors impact slowly on business environment but has a strong impact

on market demand as changes of customs, consumption habits

d Technological factor -T

Technological factor is playing more and more important role which determine business environment, have direct influence on business strategies of an enterprise The world is being in the evolution of technology, a lot of new technology has been

born and and been intergated into products and services Therefore, consider how technological factor influences the field a business is doing on from such different

angles as: speed of technology development, the investment of government

1.2.2.2 Micro-environment

In order to analyze the micro-environment, we use Michael Porter’s Five

Forces Model This model mentions five forces which bring opportunities or threats

for business in an industry, including (1) Suppliers, (2) Current competitive rivalry,

(3) Potential competitive ricalry, (4) Buyers, (5) Substitutes Each of these five forces is influenced by many different factors and those factors themselves are also

need to be researched to create a full picture of competition in an industry

=_ Bargaining nin

Bargaining Competitive level — power of power of buyers

14 V0110.Group12

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a The bargaining power of supplier

The bargaining power of supplier is reflected in increasing or decreasing

price or quality of inputs Particularly, suppliers will be stronger in case that suppliers do not have many substitutes in industry market that force bussinesses choose them; when suppliers find the business of an enterprise is not important; when the suppliers have advantage of specilization of products that make

enterprises dificult to find an alternative supplier; when the suppliers can take part

in the bussiness of the company to compete directly with business

b The bargaining power of buyer

The pressure from customers is shown in bargaining position, the number of buyers, the information buyers can get, features of trademarks, sensitivity of price, the differentiation of products, the concentration of customers in the industry, the

availability of substitute goods, motivation of customer

c Competitive pressure from internal environment — Competitive Intensity of existing rival

Competive intensity of existing rival is shown at: the concentration of the industry, the difficulty of withdrawing from the industry, fixed costs, added value,

enhancing status of the industry, redundant status of capacity, the diffence among

products, conversion costs, features of trademark, the variety of competitive rival, selected status in the industry

d Competitive pressure from subsitutes

According to M Porter, subsitute goods are goods of competitive rivals in the other industry which have the same fuction, satisfy the same needs of customers The existing of external products increases the the general trend of

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ENE EONS, BUILDING BUSINESS STRATEGY FOR 12/9 PETROVIETNAM CEMENT JOINT STOCK COMPANY IN

PERIOD OF 2010 - 2020

customers to change into the alternative choice such as: substitute customer trend,

relative price of subsitutes, awareness level of different products, quantity of available products in the market

e Barriers to entry — threats from potential rivals

This threat is measured by “the height of barriers to entry” If the entry barrier is high, the threats from potential rivals will decrease and opportunities for bussiness increase The decisive factors to entry barriers includes the economics of scale, the difference of product, the loyalty with brands, distributing channels, absolute cost advantage

1.2.3 Analysis of internal business

1.2.3.1 Resource analysis of a corporate

Analysis of internal enterprise includes finding weaknesses and strengths

within that enterprise which affect the strategic competitiveness The purpose is finding strengths and weaknesses Analysis of internal environment has to show what an enterprise needs to do

Analysis of internal environment of an enterprise is considered on the basis of the value chain of that enterprise.A value chain is to synthetize related activites of an enterprise to inrease the value of customers.Implementing effectively activities of a value chain will determine effectiveness of general operation and create the

competitiveness of that enterprise

a Personnel analysis

Humans play an important role in all production processes Through

activities of people, the stages of the process of strategic management are implemented with high quality When analyzing and evaluating human resources of

an enterprise, we pay special attention to the following 3 types of employee:

- Leaders of an enterprise (senior administrators) are people who have an

important role in the process of building and managing strategies

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GaiGcs) BUILDING BUSINESS STRATEGY FOR 12/9 PETROVIETNAM CEMENT JOINT STOCK COMPANY IN

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- Managers ( middle and practical members of administration) are people

who directly do functional tasks and practice the production and_ business

management

- The mater worker craftsmen, and skilled employees Analyzing the factual state of quantity, quality, and structure of kinds of labor in an enterprise

The evaluation results are the foundations for identify objectives and policies

of developing human resources, and for solutions of training, and cultivating human

resources

b Financial Analysis

For business companies, financial analysis plays an important role in the process of preparing information to build up strategies Evaluation content needs to

focus on the following issues:

- The real situation of capital demands and the real situation of capital structure in an enterprise

- The real situation of capital allocation

- The real situation of the effectiveness of using production and business

The criteria used to analyze an enterprise’s finance :

Profits before tax

1 Rate of Sales (ROS)

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Net profits of public shareholders

4 Rate of asset recovery (ROA)

lotal assets

5 Rate of contributed capital recovery (ROE) i PRGERS OF PONS RADE NES

| otal shares of public shareholders

c Production capacity and technology analysis

Analysis of internal content is very important It is the production system and equivalent technology that help create products which meet the requirements of the market On the other hand, production is related to quality and production cost Those are two advantages of the corporate in the market

Production capacity analysis includes the following issues: production capability and quality, cost and production period, production features, effects of experience and scale Moreover, it includes related information to supplying and changing materials, maintaining and fixing equipment, using and developing the

b Competition in quality of product

Quality of product is one of the core elements in competition Those products which have the same selling price but the different quality will have different competitiveness

c Competition in market share

Distribution channel is playing more and more important role in the development of market share of the business A business with strong distribution

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GnGoS) BUILDING BUSINESS STRATEGY FOR 12/9 PETROVIETNAM CEMENT JOINT STOC K COMPANY IN

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network will be able to overwhelm the market, increase competition in comparison

with the other businesses

1.3 Developing strategic planning

In order to form strategies from the basis, opportunities, threats, strengths, weaknesses from the above analysis of the business environment, the corporate

should use matrix of opportunities, threats, strengths, weaknesses - SWOT Matrix

Matrix of opportunities, threats, strengths, weaknesses - SWOT Matrix is the matrix in which a part decribing strengths and weaknesses, the other one describing opportunities and threats to busines of the corporate in the strategic period ; the square describing strategidc ideas to promote opportunities, take advantage of strength, limit threats andovercome weaknesses The ideas are formed based on the

matrix of priority of opportunities, threats and table analysis of internal enviroment

The proioritized factors will be noted in the collumn and row of the matrix

utilizing opportunities threats

Develop SWOT model based on strategic planning

SWOT analysis is analyzing external factors a business has to face (opportunities and threats) as well as internal factors (strengths and weakness)

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Once the business wants to develop, set up a brand name definitely and firmly, SWOT analysis is indispensable stage in business strategic planning

Determining the opportunities and threats by analyzing data about changes in environments: economics, finance, politics, legality, society, competition in the market where the business is operating in or intends to penetrate

The opportunities can include the potentiality for market development,

market space, near sources of raw materials or cheap and skilled labor The threats

can be market narrowing, more fierce competition, changes of policy, the political instability in the major markets or the development of new technology cause means and the production line of the enterprise become backward

About internal business analysis, the strengths of business’s organization can be skills, resources and the advantages in comparison with competitors (key capacity

of the business) such as lots of talented managers, superior technology, famous brand, availability of cash, good impression in customers’ eyes or large market share in key markets The weaknesses of the business are reflected in the

shortcomings or weaknesses and skills, resources or other factors limiting the

competition of enterprises It can be ineffective distribution network, bad labor relation, international inexperienced manager or backward products in comparison with competitors

The result of SWOT analysis process must be concrete, accurate, practical

and feasible because the businesses will use this result to conduct the next step such

as forming strategy, strategic goals and external controlling mechanisms and

internal strengths as well as neutralizing external threats and limit or overcome

weaknesses of business

1.4 Analysing and selecting stategy

Strategic selection is one of the important steps of business making process

In terms of nature, decision to select strategy is the process that the strategy makers use appropriate tools to form strategic solutions based on determined objectives.Quality of this action affects directly on strategy deployment and other

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activities such as investment, organization innovation, personnel training, etc In order to assure the right selection of strategy which is appropriate with the market, the business strategy selection process requires:

- Assuring longterm effectiveness of the business process

- Assuring continuaness and inheritance of the strategy

- The strategies must be comprehensive and clear

- Assuring the consitency and feasibility

- Assuring to fulfil prioritized target

Main factors to select strategies

- Sector and corpartate’s strengths: this factor have strong influence on

selection of strategy of the corporate

- Targets, behavior of the Managers and qualification

The chosen target affects directly on selection of strategy therefore the target

system must be analyzed and set to be one of the basis to form the strategy

The Manager’s behaviour affects directly on how the strategy is made

- Financial capacity : financial conditions is always the important basis to

deploy strategies as well as plan to deploy strategies An independent corporate always does research and make strategies independently and vise versa

- Response of related objects : whether the strategies are feasible depends so much on the exact forecasting of the related objects’ response

- Determining the right time to deploy the strategies: this is one of the

important factors because the sucess of the strategy depends on the time of deployment

Business strategy is made at 3 levels: corporate, business units and functional division

1.4.1 Selecting corporate strategy

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When companies choose to diversify beyond a single sector and operate in many industries, they must use corporate level diversification strategy Corporate level diversification strategy allows using its core competencies to pursue the opportunities from the external environment

If competitive strategy shows how businesses compete, corporate level strategy help companies to identify the sectors businesses will compete and how to create the advantage of competition from that diversification

Corporate level strategies include:

+ Concentrated growing strategies: growing strategies based on concentrating on main factors of the corporate in a particular strategic period It aims to improve the current products and markets without changing any factors, which including: market access, market development, product development

+ Growing strategy by integration: Strategies of integrating business

sectors in the positive, inverted, vertical and horizontal directions

- Strategies to diversify the business sectors This is the strategy of producing

the variety of products and services in the different markets to increase revenues,

profits and increase business activities to ensure the increase of competitive position

of the enterprises The diversification strategy includes: concentric diversification,

horizontal diversification, mixture diversification

1.4.2 Selecting product strategy - business base strategy

With the purpose to be antagonistic with 5 market force, Michael Porter

determined three generic strategies which can apply at business level to

create competitive advantages

* Cost leadership strategy

This is a series of actions to produce goods and services with the features pleasing customer with the lowest price

This strategy aims to be the producer with the lowest price in the sector with

a certain quality standard At that time, companies either will sell the products at the

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average price of all sector to get the higher revenue compared to competitors or sell

at the lower price than average price to hold more market share

The successful businesses in implementing cost leadership strategy often have the following characteristics:

- Power of approaching good capital to invest in producing devices This is

also the barrier that many other companies can not overcome

- Capacity of designing products to increase production effectiveness, create more a small detail to shorten assembling process

- Have high level of production

- Effective distribution channels

* Production differentiation strategy

- Production differentiation strategy is a series of necessary actions to produce goods and services (at an acceptable price) with the differences valuable for target customers

This is a strategy of product and service development so that these products and services have unique characteristics and be highly appreciated by customers compared to competitors

- Added value due to uniqueness of the products allows enterprises to set

higher prices without fear of being ostracized by buyers They hope that higher prices will not only cover the additional costs of providing the product, but: thanks

to the different characteristics of the product, if suppliers raise prices, businesses can transfer that difference to customers, because customers can not easily find substitutes

The successful businesses in differentiation strategy often have the

following advantages:

- Ability to research and access to leading scientific achievements

- The research and product development (R & D) team has high skills and creativity

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- Positive sales team with the ability to communicate the strength of the

product to the customer successfully

- Reputation for quality and innovation capability of enterprises

* Centralized strategy

Centralized strategy is a series of actions to do to produce goods and services

to focus on serving the needs of a targeted competitive market segment targeted

A business using centralized strategy often keeps higher loyalty of customers

and this loyalty discourages competitors that make them do not want or dare to

confront directly

1.5 The specific characteristics of building business strategy of PVC 12/9

- Being a joint stock company listed on stock market, in addition to the regular funding channels, PVC 12/9 has capital funding channel through the stock exchange (UPCOM)

- The company is the member of PetroVietnam, belongs to The Vietnam

National Oil and Gas Group Therefore, developing strategy os PVC 12/9 is controlled by PVC’s stratefy and The Vietnam National Oil and Gas Group

- Cement is an indispensable material in construction However, consumer

market is local because “a cement factory can only produce effectively within a consumption radius of about 300km”- according to experts’ evaluation The reason

is: This is the manufacturing sector which consumes a lot of national resources and fuel such as stone, coal, oil, electricity, If this product is not well preserved, it will

be frozen and regenerated in a short time Moreover, production costs are high due

to electricity and coal prices continue to rise If the transportation costs are high, it

can not make a profit

- Planning strategies for PVC 12/9 should be long meaningfulness because the importance of cement industry in general and the investment and development

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of the Company in particular Business strategies of PVC 12/9 must be in the general strategies of Nghe An province

CHAPTER II: BUSINESS ENVIROMENT ANALYSIS AND INTERNAL ANALYSIS OF 12/9 PETROVIETNAM CEMENT JOINT STOCK

COMPANY

2.1 History of establishment and development

- Company’s name: PETROVIETNAM CEMENT 12/9 JOINT STOCK COMPANY

The forerunner of the Company is 66.CX roadwork which was established in

March, 1966 Initially, the roadwork is built in the Kim Nhan mountain rock with a

capacity of 5.000 tons per year, technological line is primitive, almost manual labor

In 1976, 66.CX roadwork was relocated to a new location on Truong field 400m2 away from Kim Nhan rock mountain with a capacity of one thousand tons/year and renamed Cement Factory 12/9 Anh Son — Nghe An

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The period from 1976 to 1990, before the overall difficult country after the

war, 12/9 cement factory faced big difficulties and challenges The products decreased gradually At the beginning of 1987, Chairman of the Council of Ministers had the decision of the right to accounting factories and enterprises This greatly influenced the existing of the factory In order to exist, the factory must reduce direct labor as well as indirect apparatus The redundant labor had to sign contract to work outside the factory The cement factory 12/9 at that time had to face three choices: Assign to People’s Committee of Anh Son District; or dissolution; sell machinery, workshops, pay to the State

However, the entire staff of the factory was still determined to strive The factory invested and improved product quality, has produced P400 cement and PCB

30 cement At that time, the cement factory 12/9 Anh Son has become the most prospering industry in Nghe An province

In 1993, implementing the policy of economic reform, reorganization of State enterprise to match the market economy, the cement factory was established under Decision No.2121 QD/UB by Chairman of Nghe An province issued on November 12th, 1992 In October of 1993, the Ministry of Construction has agreed

to the decision that Nghe An Province, particularly 12/9 cement factory would build equipment line producing 8.8 thousand tons/year Late in 1996 the construction and installation of the new factory was completed to put in use

On December 12", 2003, Nghe An People’s committee renamed Cement Factory 12/9 Nghe An to Cement Company 12/9 Nghe An under Decision No 4879 QD/UB-TCCQ On May 4"", 2006, implement the policy of corporate stock of the

Government, the Cement Company changed its name to Joint Stock Company

In February, 2009, the Company completely merged into Petro Vietnam

Construction Joint Stock Corporation, a member of Vietnam National Oil and Gas Group, increasing its charter capital to 200 billion dong, with the name

PetroVietnam cement joint stock Company 12/9, implementing a new investing project of cement production line with European technology and a capacity of 55

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thousand tons/year This is really an important milestone marking a big turning point in the development and is the new opportunity and challenge for the company 2.1.1 Functions and duties:

- Produce and supply cement for construction works in the country At the same time, the company must provide cement to the local area in the country under the administration of the Vietnam National Oil and Gas group and contribute to

stabilize the market

- Moreover, the company will have to work well to use capital and labor resource reasonably, effectively, manage and train the employees to meet the production requirements in the company

- Ensure working safety, environmental sanitation, good security and politics

- Improve material and moral life of laborers

- Plan strategies and orient to organize business in excess of the proposed plan

- On the other hand, the Company has to submit the budget; execute policies, regulations and laws of the State; protect environment; protect social properties and

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2.1.3 Vision and Strategic Mission of the Company

PVC 12/9 defines to be united, unanimous to increase the development, create a breakthrough in technological scientific applications and innovate mode of

leadership, business management Accelerate project implementation, improve the efficiency of production, make the company grow, integrate, be able to compete and stand firm on the market Build the brand of PVC 12/9 become a strong brand

in the cement industry

2.1.4 Business philosophy

Listen and find the best solution to serve customers, a professional working environment with rules, encourage the creativity, enhance the loyalty and responsibility to the community

2.1.5 The major business areas:

** Business sector: PVC 12/9 operates under the business license No

2900325156 issued by Department of Planning and Investment of Nghe An province on December 29", 1992 and registered the 7" change on April 27", 2010, operating mainly in the production of building materials, including:

Produce cement, adhesive and uncalcined materials;

Exploit, process, buy, sell stones, sand and gravel;

Produce, sale bricks;

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In addition, in order to take advantage of being the member of Vietnam National Oil and Gas, the company has also built civil project, industry, traffic,

irrigation for enterprises in the same sector; real estate business

2.2 Analysis of elements affecting business performance of 12/9 PetroVietnam Cement Joint Stock Company

2.2.1 Law — Political elements

Pursuant to the policy of macroeconomic stability to develop production, stabilize society and develop firmly With the policies of promoting investment, growth and prevent inflation and ensure safety of financial and banking systems These are advantages for domestic businesses as well as foreign investors to invest, develop business PVC 12/9 has also received these advantages

Cement is an important industry in strategies of economics development of

our country Therefore, the Prime Minister has approved and added a plan of developing Vietnam’s cement industry till 2010 and towards 2020 with the goal to meet consumer’s demand for cement in the country and can export when having enough conditions, help the cement industry become a strong industry with modern technology, can compete on the domestic market and international integration process Vietnam Government priorly develops investment projects of expansion,

new projects in southern and central regions, and projects in the northern

mountainous provinces Implementing modern and highly automated technology is

to ensure high quality products, with stable, affordable price and diversified

products Gradually remove blast furnace technology of cement before 2020

Maximum mobilization of domestic and foreign capital includes credit, bonds, equity capital, equity or venture capital to invest in cement Encourage all economic sectors to invest in cement, even foreign investors according to the form

of joint ventures or joint stock The State has appropriate support for development projects of developing cement in mountainous and far areas through the mechanism

of current policies

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Policy on importing tax implemented by the Government of Vietnam recently such as reducing Clinker import tariffs to 0%, reducing cement importing tax to 5% This is a huge challenge for Vietnam enterprises when they have to face

the source of Clinker and cement imported from foreign countries

2.2.2 Economic factor:

Economic factor has a great influence on Vietnam cement industry in general, PVC 12/9 in particular In long term, Vietnam is a developing country, so the growth speed of urbanization occurs rapidly According to the data of Ministry

of Construction, the urbanization speed in Vietnam has increased significantly, the rate of urbanization in 2010 is 33%, and in 2015 will reach 45% Since then, the demand of housing is extremely huge And so, the demand of cement for

construction will increase highly in the next years

However, in short term, in the past year, Vietnam economy has faced with

many problems which affect negatively the cement industry

Firstly, according to the prediction of experts, the rate of inflation in Vietnam

in 2010 is up to 17-18% Prices of input materials (clinker, gypsum, etc) have

simultaneously increased, creating a heavy pressure on prices of cement businesses

Market price have risen, wages paid to employees have increased to guarantee the lives of officers and workers However, the increasing rate of wage was lower than

the price; therefore, lives of labor still have many difficulties

Secondly, petrol and oil prices increasing are one of the reasons which cause inflation, and directly affect negatively production units To operate the production lines of cement, oil is the essential fuel That oil price increases push production

costs higher Combined with the price rise of input materials prices of cement

increase greatly, but to be consumed on the market, product price cannot increase correlatively This causes huge losses for enterprises

Thirdly, the electricity productivity is not stable; electricity price has a tendency

to rise In 2010, the electricity productivity lacks seriously, the situation of power cut,

power failure occurs everywhere, causing vary serious consequences For cement

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factories, electricity is the key fuel to operate the production lines When power failure

is prolonged, production units must stop operation, enterprises have to suffer huge losses because technology investment capital is too large to operate Moreover, the cost

to operate cement factories is very expensive, thus to ensure that factories, and production lines operate continuously is now a top priority In 2010, the state of power

failure reduces but price increases On February 19, 2011, Vice minister of Trade and

Industry Hoang Quoc Vuong officially announced the new average electricity price in

2011 increasing 15.28% compared to that in 2010 Therefore, the production cost of cement is on the rise again

Fourthly, implementing | 1/NQ-CP Government Resolution issued on February

24, 2011, many basic construction projects are halted, and thus the demands of cement

reduce,

2.2.3 Social factors

A current fact shows that the Vietnamese in the north, south, and the central

tends to build houses with strong reinforced concrete, using different constructing

materials like bricks; cement Demand for building houses with glass is still low This demand mainly is serving for market segments which are public works,

working offices However, despite using houses with glass or reinforced concrete, cement is indispensable And in the future, the housing demand will continue to

increase

2.2.4 Natural factor

Anh Son is a mountainous district of western Nghe An, stretching along the Lam river and Highway 7, the east is bounded by Do Luong district, the north is bounded by mountainous district of Tan Ky and Quy Hop highland districts, the

west is bounded by Con Cuong highland and Laos, the south by the mountainous

district, Thanh Chuong, 100km far away from Vinh city Road transport is the main highway in Anh Son, due to unfavorable topography and the continuous disaster, quality of roads has been seriously degraded Therefore, local enterprises have

many difficulties in transporting materials and goods for consumption

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Anh Son ts a potential district in minerals, especially limestone with dozens

of limestone rock wool, reservation up to | million m3, with many yards of sand and gravel along the river This is a good condition to develop industry, cottage industry In addition, there are other minerals such as iron, lead However, in the manufacturing process of cement, the percentage of gravel is relatively low, so the company faces many difficulties in raw materials phase because of having to transport coal, gypsum from the plains to the plaster

2.2.5 Technological factors

In two decades of "Innovation", the cement production industry in Vietnam has growth strongly Many experts inside and outside country evaluated that technology equipment for cement production in our country is now keeping pace

with the average level of the world There are some factories on the level of modern

of the world This is a good sign for Vietnam's cement industry

Most of the cement factories which have been built in the latest 10 years have applied the most advanced and modern equipments and technology Many experts inside and outside country evaluated that technology equipment for cement

production in our country is now keeping pace with the average level of the world

There are some factories on the level of modern of the world However, innovation

and technological development of cement is still continuous to obtain the highest

production efficiency and reduce lowest emission of substances polluting the environment

Therefore, the quality of cement is similar and there is few major differences The ongoing development of science and technology positively influence the production and trading of cement industry The cement factories later use modern technology, make use of achievements of science and technology to reduce

investment costs, save the consumption, and help reduce the cost of production

This is a very important factor for new cement projects to compete in the market 2.3 Sector environment analysis

2.3.1 Pressure of suppliers

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For cement production, the important factors of a supplier include characteristics of inputs, pricing policies and supplying volumes For PVC 12/9, input materials are mostly available near production factory, except for gypsums imported from Laos, Thailand and coal source taken from Quang Ninh However, gypsums in Laos were licensed by Laos Government for Vietnam enterprises to exploit and supply for cement production VICEM also has a subsidiary company which supplies Laos gypsum for cement companies

The volume of raw materials to provide PVC12 / 9 is very abundant and full

of raw materials; promote suppliers to invest in the exploitation of raw materials The result is quite competitive prices and stable supply Therefore the influence of suppliers to the company is low

2.3.2 Pressures of customers

Because of supply over demand in the cement industry is getting serious, the

strong establishment of cement production factories in the region in recent years

cause the social supply to exceeds demand, leadings to cement abundance crisis, therefore the pressure of customers on cement businesses in cement sector Is very big

Oriented customers of PVC12 / 9 are organizations as large projects, constructions and individual customers as retailer The company distributes cement through main distributors nationwide

In the structure of consumption, organizational customers of PVC12/9 are up

to about 30% and 70% of individual customer groups Because customers have

many choices on the market so their ability to down price 1s enormous

2.3.3 Threat of potential rivals

As for the nature, the cement industry is the natural monopoly with great

barrier to entry

Requirement for capital of cement industry is high; Vietnam cement industry

is now using both rotary kiln and shaft kiln However, in the following time, only rotary kiln technique is encouraged to use It takes a lot of money to invest to a

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rotary system, as for the factories with capacity of 1.5-2 million ton per year; the capital is up to USD 200 million if the material is available This is a barrier which not all companies can overcome

The permission to exploit natural resources is one of the barriers to the new comers The production material is national resources and the cement industry is also the key industry of the country Therefore, the issue of permission must be allowed by the local authorities, the related Ministries and Departments

Moreover, in the condition of cement abundance, the Ministry of

Construction has submitted the document and is accepted to stop issuing permission

for cement project until 2020

In short, in the short-term, it can be said that the threat of potential rivals is

small

2.3.4 Threat of substitute products

At the present, in the construction sector, hardly have any material that can replace Portland cement There are 2 main kinds of cement used in civil construction which are Pirtland and slag cement Slag cement is produced from the Slag of cast-iron production In terms of quality, slag cement is equivalent to Portland cement But in terms of material, material for slag cement is limited due to productivity and technique of steel and cast-iron industrial park Portland cement is the right selection for the future work

2.3.5 Analysis of competition intensity of the current rivals

According to the assessment of Ministry of Industry and Trade, the cement industry is one of the industries that have high competitive pressure At the present, there are 59 companies with 105 cement production system line all over the

country

Within Nghe An province, there are cement companies such as PVC 12/9,

Hoang Mai Cement Joint Stock Company, Cau Duoc Cement Joint Stock Company, etc with total productivity is approximately 12/9 million ton per year

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Chart: Cement project in the period of 2010 — 2030 of Vietnam Cement

Corporation (for companies in Nghe An)

such threats as the harsh competition from Linker, cement of foreign companies like

China, Thailand, India

When the supply of product in the market exceeds the demand, the competition pressure of the company in the industry is very high Therefore, if the products are not consumed, the inventory is in large quantity will cause the serious loss especially when the cement companies have to incur large financial cost

=> In short, the current structure of Vietnam cement industry can be described by Porter modei as follows

Chart: General Matrix assessing business environment of Vietnam’s cement

industry

Threat of new

comers

Low

Bargaining Internal Pressure from

Tiêu đề	Building business strategy for 12/9 PetroVietnam Cement Joint Stock Company in period of 2010 - 2020
Tác giả	Nguyen Thi Le Tram, Phan Sy Thang, Tran Nghia Hoa, Bui Thai Truong, Ngo Van Toan
Trường học	Griggs Global Advanced University
Chuyên ngành	Master of Business Administration
Thể loại	Capstone project
Năm xuất bản	2011
Thành phố	Ha Noi

Định dạng
Số trang	75
Dung lượng	12,78 MB