G1_00210 BUILDING BUSINESS STRATEGY OF TAN NAM CONSTRUCTION JOINT STOCK COMPANY UP TO 2020 CHIẾN LƯỢC KINH DOANH XÂY DỰNG CỦA CÔNG TY CỔ PHẦN XÂY DỰNG TÂN NAM ĐẾN NĂM 2020

G1_00210 BUILDING BUSINESS STRATEGY OF TAN NAM CONSTRUCTION JOINT STOCK COMPANY UP TO 2020 CHIẾN LƯỢC KINH DOANH XÂY DỰNG CỦA CÔNG TY CỔ PHẦN XÂY DỰNG TÂN NAM ĐẾN NĂM 2020

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER BUSINESS ADMINITRATION PROGRAM

CAPSTONE PROJECT REPORT

BUILDING BUSINESS STRATEGY OF

TAN NAM CONSTRUCTION JOINT STOCK

VINH, 2011

Glass: GaMBA0110_Group 5

INTRODUCTION

1 Rationale of the study

Vietnam economy after 25 years (1986-2011) has made the economic renewal of the party and state, with the general economic model is to build a socialist-oriented market economy Our country got rid of economic-social crisis, created the necessary premises to move to a new development period- the period of promoting industrialization and modernization Especially after that Vietnam joins in WTO has put /make domestic businesses face many challenges in the business and production activities, the level of com petition is more fierce and drastic To help businesses survive and develop, they should have self-control in all aspects of production and business activities from investment, the use of capital and the organization of production, etc Besides, they have to make use of their strengths and advantages to take advantage of opportunities and options for their business right direction To achieve it, they have to build a business strategy If there is not a business strategy

or their business strategy is not proper, their production and business activities will certainly go to failure

Based on researching and collecting data on production and business activities of Tan Nam Construction joint stock Company and the knowledge trained in the period/time of taking part in MBA course International business administration of the associating program between Griggs university and training and employment under Hanoi National university, our group selected the topic “Buiding business strategy of Tan Nam construction joint stock company up to 2020” to help the company have a right production and business strategy, to make Tan Nam construction joint stock company become a strong/powerful enterprise in the construction industry

2 Purpose of the study

To research and systematize the theories of bulding and implemeting business strategies, to choose effective analyzing models for construction and performance of business strategies

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To apply theoretical basis system and models to analyze evaluate internal and external environment in order to build a business strategy for Tan Nam construction joint stock company

To propose solutions and recommendations in the implementation of business strategies to improve the business strategy the company chose

3 Object and scope of the study

Objective of the study is Tan Nam construction joint stock company with construction activities in the whole country, but mostly in Nghe An province

4 Methodology

The report largely uses quantitative method of analysis: study and analysis of the situation of Tan Nam construction joint stock company The methods of collecting data specially are listed such as interviewing experts, etc It also uses the data of financial reports, contractor capability reports, statistical reports, and information and data of the field, the secondary data of previous strategies, studies and reports

of Tan Nam construction joint stock Company

5 Structure of the study

Including:

- Introduction

- Chapter 1: (General theoretical basis of building a business

strategy.) Theoretical background to business strategy building

- Chapter 2: Analysis of business environment and internal Tan Nam

construction joint stock Company

- Chapter 3: Options of business strategies of Tan Nam construction joint stock Company up to 2020 and implemented solutions

- Conclusion

- List of references and appendices

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CHAPTER I:

THEORETICAL BACKGROUND TO BUSINESS STRATEGY BUILDING

1.1 Denifition and Role of a business strategy

1.1.1 Definition:

Historically, the term of “strategy” is used in the military with the meaning of long-term plans, established on the basis of completely trusting/believing what the enemies can do and cannot do

There are many definitions of strategy; each definition is more or less different depending on the author’s concept In 1962, Chandler defined “strategy” as “the identification of goals, long-term basic purposes of the enterprise and the application of a sequence of actions as well as the allocation of necessary resources

to perform this objective” Chandler is one of the first people to initiate Strategic management Theory Until 1980s, when strategic management subject has become ripe, Quinn gave a more general definition: “Strategy is the pattern or plan integrating the key objectives, policies, and a sequence of actions into a closely united group.” After that, Johnson and Schole redefined strategy in the environmental conditions with a lot of rapid changes.” Strategy is the long-term direction and scope of an organization in order to gain/get competitive advantages for it through defining its resources in changing environment, to meet the market demands and satisfy the expectations of concerned parties.”

It can be seen that all definitions of strategy appear the phrases denoting different aspects need to be included in it In the definition of Strategy with 5P, Mintzberg summarized all aspects of strategic management as follows:

Planning: A sequence of consistently planned actions/activities

" Pattern: The consistency of behavior overtime, maybe intended or not intended

Position: Match between a organization and its environment,

Perspective: The way to aware the world

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= Ploy: The specific way to deceive competitors

Not only including many different aspects, the definitions of strategy are different depending on the level The correct definition of strategy according to the level naturally depends on opinions It is essential to have at least 3 levels of strategy need to be recognized: Company, business unit and business Nowadays, strategy is used popularly and is considered as the factor increasing the success possibility and reducing the failure possibility of enterprises

In summary, although there are a lot of different definitions of strategy, in this study, this topic’s author thinks that “An orientated business strategy is all long- term goals, policies, and big solutions of production and business and finance, and the solution of human resource in order to make enterprise’s business develop to a higher state of quality.”

1.1.2 Roles of a business strategy to an enterprise

A business strategy plays an important role for the survival and development of each enterprise A correct business strategy will create a good direction for enterprises; it can be considered as a guideline guiding for enterprises in the right direction The importance of a business strategy is shown in the following aspects:

- It helps enterprises have a guideline for their activities in the future through analysis and forecast business environment

- It helps enterprises grasp/get opportunities as well as forecast all risks for the development of their resources; it helps them exploit and use properly resources, promote their strength

- It creates an orbit of activities for enterprises; help them associate with individuals with other benefits together towards a common goal, and developing business/enterprises

- It is an effectively competitive tool of enterprises

1.1.3 Basic features of business strategy

The strategy to define the basic targets of business direction must be figure out in each specific period and be fully aware in every management field of the

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organization The purpose of the strategy orientation is to assure the continuous and sustainable development in continuously flexible business environment

The business strategy only sets out operation orientation in the long term and operation frame of the organization in the future It is only theoretical while actually, the business activities requires to combine both strategic target and economic target, to consider rationality and adjust to be suitable for the business environment and condition to assure business efficiency and overcome mistake caused by strategy orientation

The stratrgy is built up on the competititve advantages of the organization to assure mobilizing resources and to take advantage and use of the resource Business strategies are shown in a long period of building the organization, working, assessing, examining and adjusting the strategies of the organization

1.2 Process to build up a business strategy

1.2.1 Assessment of external and internal environment of the company

1.2.1.1 Assessment of external environment of the company

The analysis of external environment is to realize clearly opportunities and challenges threatening business activities of enterprises

a Macro environment

- Economic factors:

The growth of the economy gives more new demands for the developments of economic fields; the rate of inflation affects interest rates, the proportion of investment interest rates; the rate of unemployment affects the recruitment and dismissal; exchange rates affect bank rates, financial policies, labor cost control and balance pf payments

- The political factors:

This group of factors is more important, including:

The stability of the government, the rules of tax, fees, regulations on hiring and firing workers, the regulations of safety and environmental protection

- The social factors:

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Living quality, manners and customs, regional culture, the rate of population growth

- The natural factors:

Natural resources, environmental pollution, lack of energy

- The technological factors:

This factor has big and direct influence on the business strategy of enterprises Because in the age of rushing development of technology as today, the appearance and change of new technologies always create opportunities but also have other potential risks to the existence and development of an enterprise Therefore, it 1S essential for enterprises to have strategies of applying technology flexibly, avoiding being passive and lagging behind

b Industry environment:

Working environment includes factors in the industry and is the external factor to enterprises, determines levels and competition in that field

There are 5 basic factors (5 market forces) are:

- Bargaining power of Customer

- Bargaining power of Suppliers

- Availability of Substitute products

- Existing competitors

- Potential competitors

Enterprises have to analyze these factors to realize opportunities and risks that they face

{.2.1.2 Analysis of internal environment

Analysis of internal environment situation of an enterprises is analyzing the internal factors (internal company) to realize strengths as well as weaknesses, and have solutions to promote strengths and overcome weaknesses The analysis focuses on the following issues:

a Financial analysis:

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Analysis of financial status is the process of reviewing, testing, and comparing the current financial data with the past one, then, it can be made comments the efficiency of business and the potentialities as well as risks of enterprises in the future

Through analysis of financial situation, administrators and interested individuals lave an overall and comprehensive view of assets, debts, and capital sources, business activities of enterprises to make plans, business strategies, and financial protection solutions effectively

b Aanalysis of human resources:

- Human resources: including teams of senior administrators, teams of executive administrators and staff

When analyzing human resources, it needs to be paid attention to:

+ The leadership

+ The staff's skills, ethnics

+ The ability to adapt to the changes

c Analysis of facility and technology

- Financial resources: Focusing on issues such as the state of allocating capital, the

effectiveness of using capital, and financial indicators

- Equipment technology resources: Including factories, system of warehouses,

yards, roads, and transporting means, machines and equipments

d Analysis of marketing:

- This is a very important content in analyzing internal company; it allows enterprises to assess the ability to meet the market demands, focusing on issues: Categories of products, product quality, market share, price, customers; confidence

e Analysis of enterprises’ competitiveness

- Enterprises’ competitiveness is the capacity which enterprises can maintain their positions on the market stably and meaningfully

The factors affect enterprises’ competitiveness

- Working atmosphere within an enterprise

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- The profitability of investment capital

- Labor productivity

- Product’s price the possibility to reduce price

- Business experience in the marketplace

- The flexibility and responsiveness of the leadership of enterprises

- Quality of service products

1.2.2 Building Matrix of internal and external factor to select the strategy

|.2.2.1 General matrix of external factors

From analysis of the factors, we can summarize general matrix of external factors Enterprises often have 10 external factors and analyze step by step and we give the basic factors (Calculated based on 4)

- Step 1: Make a list of factors that play a decisive role for the success of enterprises

- Step 2: Identify the importance from 0.0 (not important) to 1.0 (very important) for each factor Total classification level is 1.0

- Step 3: Classify from | to 4 for each factor to realize the way how the current strategies of an enterprise response to this factor, including 4 is the best respond, 3 above average, 2-average, |-the least

- Step 4: Multiply the two criteria of importance of each factor with the classification of the factors to determine the points of importance

- Step 5: Add all points of importance of the factors to determine total point of importance of each enterprise

The highest total score is 4 and the lowest 1, and average 2.5 The higher points show that enterprises have a good respond to external factors

1.2.2.2 General matrix of internal factors

Using matrix of internal factor evaluation to summarize analysis, assessments of strengths, and weaknesses of the factors governing inner activities of enterprises The process to develop a matrix of internal factors is similar to a matrix of external

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factors, except the 3™ step: we classify that I- the biggest weakness, 2- the smallest weakness, 3-the smallest strength, 4-the biggest strength

No matter how many factors in IFE matrix, the total important point can be classified from lowest to highest is 1.0 to 4.0 Total important point below 2.5 point shows that enterprises’ competitiveness is weak and above 2.5 point shows that enterprises’ competitiveness is strong

|.2.2.3 General matrix of internal and external factors IE

Based on general matrix IE, we identify the center of the circle and determine the

circle reflecting the scale, if the center is green light: a growth area, the yellow light

is to maintain stably, and the red light is dangerous so withdrawing gradually Therefore, depending on the position of each enterprise, we choose strategies suitable for the matrix and this helps us to know the position of strategies of enterprises

1.2.2.4 Matrix of competitive image

This kind of matrix defines the key rivals of the company It is the extended version of EFE matrix with the degree of importance of the elements, point of each element and the total point of degree of importance with the same meaning

The matrix of competitive image is different from EFE matrix in: some EXternal factors with decisive importance are compared The total mark of assessment of the rivals will be compared for the company to select as sample

1.2.2.5 SWOT matrix

Analysis of SWOT matrix is to analyze strengths and weaknesses, opportunities and challenges (Threats) From the analysis of external factors, we can synthesize opportunities and challenges, and the analysis of inner enterprise will help us realize weaknesses and strengths; the analysis of investment lists, and core competence, we have to point out the competitiveness, and advantages

The result of the SWOT analysis must guarantee the specification, accuracy, reality, and feasibility because enterprises will use this result to perform the next steps such

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as formation of strategy, strategic objectives, external control and inner power as

well as to neutralize of external risks and to limit or overcome weaknesses

The process of a SWOT matrix includes 8 steps:

- Step |: List external opportunities

- Step 2: List external risks

- Step 3: List mainly internal strengths

- Step 4: List mainly internal weaknesses

- Step 5: Combine internal strengths with external opportunities to form SO strategies

- Step 6: Combine internal weaknesses with external opportunities to form WO strategies

- Step 7: Combine internal strengths with external threats to form ST strategies

- Step 8: Combine internal weaknesses with external threats to form WT strategies

Table 1: SWOT matrix

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We have the following combinations:

SO: Use strengths to take advantage of opportunities

ST: Use strengths to avoid threats

WO: Joint venture

WT: Complementing each other

In addition, we can have other groups of strategic solutions combined and small groups

1.2.2.6 QSPM Matrix

OSPM Matrix use the information gained from other three matrixes in the Ist period (selecting and systematize information and 3 matrixes in 2nd period (combination period) and then assess the replaceable business strategies

The strategies selected to put in QSPM matrix are not all the strategies which are found in the 2nd period

In order to build up QSPM matrix, the 6 following steps should be done:

- First step: list factor S, W, O, T from EFE, IFE

- Second step: sort out each factor to be suitable for EFE, IFE Matrix

- Third step: research on the 2 period matrix and define the replaceable strategies which need be considered

- Fourth step: define the attractive point (AS) for each factor: from | to 4, 1 is unattractive, 2 is a little attractive, 3 is quite attractive and 4 is very attractive

- Fifth step: Calculate the total attractive point (TAS) for each row by multiplying the sourting point by AS point in the forth step

- Sixth step: Calculating total attractive point in each strategy

The most attractive strategy is the one having the total point calculated in the sixth

step

1.2.3 Selection of business strategy

- Selecting a business strategy is necessary to ensure that there is a highly feasible strategy It requires many strategies, and give the criteria as a basis to select the best

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choice If there are difficulities in selecting, it must be patient to find a new opportunity, not too daring

Based on the principles and standards, enterprises perform comparing strategic plans expected with the aim of finding the most suitable one to implement The selected strategy has to be the best, or at leat the most suitable with condition, and circumstance of the business

- Business unit strategy

Business unit strategy is the total/whole of commitments and actions to help enterprises gain the competitiveness by exploiting their core competences in specific product markets — only the enterprises continuously upgrading the competitiveness overtime are capable of achieving long success with business unit Strategy

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CHAPTER HU: ANALYSIS OF BUSINESS ENVIRONMENT AND INTERNAL ENVIRONMENT OF TAN NAM COMPANY

2.1 Introduction to Tan Nam Construction Joint Stock Company

2.1.1 Establishment and development

Vietnamese Name : CONG TY CO PHAN XÂY DUNG TAN NAM

English Name - TAN NAM CONSTRUCTION JOINT STOCK COMPANY Abbreviated name : TAN NAM CO, JSC

Address : No.13 Phan Dang Luu Street Truong Thi ward Vinh city, Nghe An

hamlet, Do Thanh ward, Yen Thanh district, Nghe An

In 2004, with the growth of the company, it requires a huge amount of capital so Tan Nam construction limited company is converted into Tan Nam construction joint stock Company The company’s headquarters are moved to No 13, Phan Dang

Luu Street, Truong Thi ward, Vinh city, Nghe An

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With the great development, the good reputation on construction, and good quality projects, Tan Nam construction joint stock Company has signed many large contracts not only in the province but also many other provinces, national important projects such as the part of Ho Chi Minh road through Kien Duc, Dak Nong, Kenh Ngang bridge across Nam Can, Ca Mau,etc The company also participates in charitable programs in Nghe An province

The charter capital of Tan Nam construction joint stock Company according to the business registration certificate No 2900601014 (Registration to change the 4" on 12/9/2010) is 18.8 billion VND (in words: eighteen billion , eight hundred million VND)

2.1.2 Functions and missions

+ Building civil projects, industrial projects, transportation (bridges,

roads, etc), irrigation and power (lines, transformers, etc), water supply-

drainage system

+ Transporting goods by roads

+ Mining

+ Consulting and monitoring construction projects

+ Producing NPK mixture fertilizer

- Core competences: Building transport projects (bridges, roads), irrigation (dikes,

dams, canals, etc)

- Market: the key market of the company is Nghe An province and provinces in the North-Middle of Vietnam In recent time, in order to reduce inflation and

investment, the company has to launch in other provinces in the country and foreign market in Laos, Angola, etc

- Customers: the relationship between customers and coperation is one of the valuable properties of the company It helps to create a market with customers who have belief in the company’s product, who are loyal to the products and are willing

to introduce to other customers

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Tan Nam construction joint stock Company will make its best effort to become a strong brandname which can develop the relationship with customers, It tries to create belief of custoners by doing the work with slogan “Strong, Quick, Good Quality and Cheap Price”

2.1.3 Human resource organizational structure

According to the regulations of the company, company’s organizational structure

Constructio Constructio Motorbik Repairi Electri Constr

n team No n team No € team ng city- uction

" team M2

kã

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2.1.4 Development orientation of the company

a The vision

Constructing and developing Tan Nam construction joint stock Company into a company specializing in building transportation projects, irrigation projects, with international levels of management and technology, being a top Coatractor in Vietnam and competing with other contractors in the central region and ‘he country

in the field of construction and installation of transportation and irrigation,

b Mission

Building good quality, aesthetics and modern works

- Quality construction is friendly with environment

- Bring the highest surplus value, “Prosperity, and success” for shareholders and staff of the company

- Connecting and sharing with the community and society in an ethnic so idarity,

c Objectives

Constructing and developing Tan Nam construction joint stock Company to be strong in construction, considering economic effectiveness as a main neasure for sustainable development Implementing step by step the diversiication of

industries, and products on the basis of maintaining and deve oping the construction industry to ensure that Tan Nam construction joint stock Company isa

powerful contractor , and able to become a general contractor with big projacts in the region and the country Promoting all resources, spirit and patriotisn tredi:ion, responsibility for people to enhance the competitiveness, and contritute to the industrialization and modernization

Striving for achieving the following specific objectives:

- Striving for achieving the average annual growth of 30-40%

- Striving for becoming a strong company in the construction industry, developing it

to become a powerful enterprise with high competitiveness, and a genera con:rector

of big projects in the area and the country

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- Considering the economic-social effectiveness as a main measure and the sustainable development of the company

In the construction and installation tasks, building transportation and irrigation projects is mainly decisive, about 90% of the total value of production and business, and temporarily paying attention to the construction of other civil technology projects to promote the available capacity of equipment invested

The value of other business objectives accounts for 10% of the total value of production and business Paying attention to construction consulting services

properly, and continuing to accelerate the mining (soil mining) to make inputs for smoothening the space of some works, new industrial areas

2.1.5 Production and business performance of the company within the period (2008-2010)

Table 2.2 Production and business performance of the company in the past 3 years

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Table 2.3 Some work of the company

6 | Thinh Thanh commune — 3,865,800,000 | 2003 | People’s

Yen Thanh district Committee

TH ny ipa ein ef ci cafes Dong oon Tan Thanh Traffic Road —

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Road, Chau Tien, Quy Hop

Vung Dua Traffic Road

(second period)

Nghia Minh Traffice Road,

Nghia Dan

Muong Long Traffict Road,

Bao Na, Ky Son

Trang Bai | rural traffict

Road

National Highway i= 48,

Con Cuong district

Cassava transforming road

from Provincial highway

538 — Yen Thanh cassava

Nghia Dan K

Ky Son Project Management Board

Nghe An Traffict work Project Management Board

Bridge across N18 chanel of

‘Tho Thanh, Yen Thanh

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Bamboo and Rattan export

village, Tho Thanh

commune, Yen Thanh

district

Auto-water system of Chau

Tien Commune, Quy Hop

Traffict road in small

industry area of Dien Hong

commune, Dien Chau

district

Rural traffict road from Duc

Thanh commune to Yen

Dinh high bridge, Duc

Thanh commune, Yen

Thanh district

Ngoc Son = Quynh Lam 2

Intercommune traffict road,

Quynh Luu district

Ï_— Hop Dong Waa

Intercommune traffict road,

committee

Duc Thanh commune People’s

Huong Son — Nghia Hanh fo

and Phu Son — Nghia Hanh

Intercommune traffict road, 12,925,053,000 2006

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26 Loc rural traffict road 36,890,000,000 management

2007

board

Tender package No 3 Tien

Nong bridge road of the two Nghe An traffict sides of the bridge work project

Traffict road from Vuc | Nghia Dan project

29 | Giong to Khe Son, Nghia 32,861,085,000 ‘oF management

30 | Thinh Thanh commune to People’s

54,494,247,000 | 2007 Yen Thanh cassava factory committee

si Building Nam Son bridge | = a ee bridge =

and road of the two sides of 2007 | project

21

the bridge (Nam Son bridge

Quy Hop, Nghe An)

Ke Gia — Ba Ha traffict

road, Con Cuong district

Building Khe Da bridge and

road of the two sides of the

Waste water lake of Dien

Hong light industry area

project, Dien Chau district

35

Ban Duoc — Ban Quan

traffict road of Quy Hop

management

board Traffict work project

Que Phong People’s

committee

Dien Chau People’s

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Chau Thon — Tan Xuan

Xop Phong chain bridge,

Muong Ai commune, Ky

Son, Nghe An

To improve Lien traffict

road of Khe Nan commune

- Phu Quac Commune

To build the road to centre

of Hung Thanh commune,

Yen Thanh, Nghe An

road and other work of the

invesment and construction

Nghe An traffict work project

management

board

135 Project management board, Ky Son

district

Ky Son

intercommune

project management

board

Yen Thanh People’s

41 | project to build the road to

centre of Giang Son Tay

commune, Do Luong, Nghe

An

42 Tender package No | 8,107,000,000 |

23

Yen Tinh traffict road,

Tuong Duong district

Tender package No 3:

Km8&+201.87-

Km11+469.41 Bai Xa - 19,106,660,000 | 2009 | Construction

Tung Huong traffict road, Management

Tuong Duong district board

Tender package No RT3- Nghe An traffict I8-01-01-2/8 (Km7+00- work project

2.637.108.600 | 2009 Km10+00) Dooc May - management

Keng Du Road board

Tender package No RT3- Nghe An traffict | 18-01-01-7/8 (Km17+00- work project

2,739,631,650 2009

Km20+00) Dooc May - management

Keng Du Road board

| Tender package No | (| | Nghe An traffict — Km1+00- Km4+00) — 8B work project

16,995,924,000 | 2009 road building project, Hung management

Management

National highway across

Board Kien Duc Town, Dac Nong

province

Investment and Construction

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49

50

build NI Road of Thai Hoa |

new urban area traffict

Ho Chi Minh construction

project from Nam Can — Dat

Mui of Ca Mau

~ Tender package No 05 to

build road of the project to

build traffict road in cassava

material area of Yen Thanh

Project to build the west

S| area of Nghe An: Tender

package No TNA17

= Lengthening Kim Thanh

: Road, Yen Thanh

2 Lengthening Hung Thanh

Road, Yen Thanh

Chau Loc — Lien Hop

54 | Traffict Road of Chau Tien,

Quy Hop, Nghe An

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South Economic

Area

2.2 Analysis of company’s business performance

2.2.1 Analysis of external environment

2.2.1.1 Analysis of micro environment

a Political and legal environment

- Vietnam is a country with stable politics Vietnam’s Government has made many

macroeconomic policies in order to stabilize socio-economy and social security such as: monetary policy, investment promotion policy, and development policy to prevent inflation and assure security, demand stimulus policy to support interest rate In 2010, due to high inflation, Vietnam Government has promulgated such policies as tight monetary policy, reduced public investment policy to reduce

inflation

- Nghe An People’s Committee also makes policies to provide favorable condition

to companies to pay for the finished construction work, promulgating some

investment incentive policy and regulate land-tax that is appropriate with the

regulation of the decree and with the local condition, which helps corporates to develop

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- However, Vietnam’s legal system ts still deficient, some laws and by-laws are contrast and overlapped which 1s difficult to apply in reality Some by-laws are not promulgated in time with low feasibility

b Economic environment

- Vietnam has stably developing economy, the integration to AFTA and WTO provides construction companies the chance to expand the market, approach advance construction technique

- Nghe An province has quite high economic growth rate which is 11.6% in the first

6 months In recent years, the Government has invested to much great work in Nghe

An province, which helps companies to find business opportunities

- However, the economic environment in recent time has some difficulties for the companies such as: the Government issues Resolution 11/NQ-CP on key solution to reduce inflation, stabilize macro-economy, assure social security, which including such policies as: ught monetary policy, reduced public investment policy, reduced over-expenditure The Resolution has achieved the objective to stabilize macro- economy but as for all companies in general and as for construction companies in particular, it causes difficulties to find business opportunities and borrow capital to produce and do business

c Cultural and Social environment

- Cultural and Social environment is very important to business operation of a company The more developed the country is, the higher quality of life, spirit and culture is Therefore, the products need be at high quality and be suitable for customers

d Technical environment

- Nowadays, the science and technique is developed, machines and equipment is more modern and can replace human’s labor, which helps to develop soci-economy, increase productivity and products with high quality; meanwhile increase the economic restruction, capital and technique rotating process Therefore, it requires the company to improve technique and update information to develop

a.

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e Natural environment

- Natural environment affects strongly the company’s operation, especially the construction company In Nghe An, the weather and climate is very servere, in which sunny season has South-Lao wind and North-west wind in winter This kind

of climate affects seriously work performance and ultility of machines and equipment

2.2.1.2 Analysis of sector environment

a Customers

Customers are very important to the company Customers’ trust is built from satisfaction of their demand Therefore, the company should create trust of customers by executing work effectively, assuring the slogan “durable, quick, good and cheap” When the trust of customers is created, tender competence of the company is improved, which provides it favourable condition to win the tender in the region and in the whole country

b Analysis of new potential rivals

- Every year, millions of companies are founded in the whole country, in which the construction sector accounts for 45% In 2010, 1,600 companies are founded in Nghe An province, in which there was 4,000 construction companies Some newly founded companies has stakeholders specializing in construction, therefore the threat of new potential rivals to construction companies is very high On the other hand, according the law, some state owned companies (head of companies) are turned into limited companies or joint stock companies with effective and independent management system, which is also the rival of the company

c Analysis of the threat of substitute products

- Investors carry out the project and construction work Within the last time and in the next time, the government invests to thermo-electric factories, nuclear-electric factories, which reduces the hydroelectric work and affect the work of the company The investment in waterway, airway will gradually replace roadway Those chances will be the potential challenge affecting the company’s growth rate

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d Analysis of the current companies* competition intensity

- In Nghe An, there are some great construction companies such as: Construction Company number 36 (Ministry of Defense); Hanoi Construction Company: Vinaconex; PVC Nghe An; Lung Lo Construction Joint Stock Company, Hoa Hiep Ltd., Hoang Son Ltd., ete

- In those above companies some are state owned companies, some are privatized Their strengths include the following: capital is supported; they have experience in construction, skillful workers and modern equipment However, their weaknesses are: in the past they operated according to subsidizing regime, therefore, some of the staffs have not change their mind and attitude, especially the leaders; the structural organization 1s unflexible

- Some companies are founded and operate pursuant to Corporate Law such as: Hoa Hiep Ltd., Hoang Son Ltd Although they are newly established, they have great business performance, winning many great tender, etc Their organizational structural is effective and flexible Their weaknesses are: the leaders are not equivalent to the development the the company, the workers do not meet the demands of the work in some process

e Pressure of suppliers

- The company’s suppliers includes machine suppliers, material suppliers, etc at the present, most machines and equipment of the company are imported from Russia, German, US, Japan, China, Korea, etc who are monopolist in supplying machines and equipment Therefore, the company is pressured highly from them because they often increase price or supply the machines that are not up to quality Moreover, due the limitation in foreign trade knowledge of the staff, the contracts are not descreibed clearly, without condition binding suppliers so the company is often get disadvantage

- As for construction suppliers such as soil, sand, stone, etc or the legal authorities who have the materials might cause trouble to the exploitation of the company

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Glass: GAMBAOI 10 Group 5

The demand for human resources of the company, especially demand for technical workers, skillful workers is still high, there are not many training school therefore the supply of workers in height period is still limited

2.2.2 Analysis of Tan Nam Construction Joint Stock Company’s internal

Glass: GAMBAOI 10 Group §

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