G1_00231 CHIẾN LƯỢC PHÁT TRIỂN CỦA CÔNG TY CỔ PHẦN VIỄN THÔNG VÀ TIN HỌC GIAI ĐOẠN 2011 - 2015 STRATEGIC DEVELOPMENT OF JOINT STOCK COMPANY FOR TELECOM AND INFORMATICS IN PERIOD 2011 - 2015

G1_00231 CHIẾN LƯỢC PHÁT TRIỂN CỦA CÔNG TY CỔ PHẦN VIỄN THÔNG VÀ TIN HỌC GIAI ĐOẠN 2011 - 2015 STRATEGIC DEVELOPMENT OF JOINT STOCK COMPANY FOR TELECOM AND INFORMATICS IN PERIOD 2011 - 2015

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GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

Nguyen Xuan Hoang Pham Cong Khanh Nguyen Quoc Khanh Mai Huong Lan

HO CHI MINH CITY, 2011

CHAPTER 1 THEORY OF BUSINESS STRATEGY

1.1.2 The role of the strategic management

1.2 Classification of business strategies

1.2.2 Viewpoint of Michael Porter on typical strategies

1.4.2 Analysis of industry environment (micro-environment)

1.7.2 Industry analysis: External factor evaluation matrix (EFE)

1.7.3 Industry analysis: Competitive Profile Matrix (CPM)

1.7.6 The Strategic Position and Action Evaluation matrix (SPACE)

1.7.7 Internal - External Factor Matrix (IE)

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CHAPTER 2 BUSINESS OPERATION OF JOINT STOCK COMPANY FOR

CHAPTER 3 DEVELOPMENT STATEGY OF CT-IN IN THE 2011 — 2015 PERIOD 63

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PDE, COMRERSHON A SEELY THM egional countries

3.3 Objectives of CT-IN in period of 2011 - 2015

3.3.2 Specific annual objective in 2011 - 2015 period

3.4.2 Competitive Profile Matrix (CPM)

3.4.3 Internal factor evaluation (IFE) matrix

3.4.4 SWOT Matrix analysis

3.4.5 The Strategic Position and Action Evaluation matrix (SPACE)

3.4.6 Internal — External Matrix (IE)

3.4.7 Preliminary strategy selection

3.4.8 Quantitative Strategic Planning Matrix (QSPM)

3.5.2 Product development strategy

3.5.3 Market Development strategy

3.5.4 Market Penetration

3.5.6 Human Resource Management strategy

71 7]

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Broadband Remote Access Server

Base Station Controller

Business support systems

Base Transceiver Station

Compound Annual Growth Rate

Intelligent Building Automation Solutions

Computer Telecommunication Limited Company

Consumer Price Index

Customer relation management

Joint Stock Company for Telecoms and Informatics

Digital Subscriber Line Access Multiplexer

Enterprise Resource Planning

Electricity of Vietnam

the Corporation for Financing and Promoting Technology

General Statistics Office Hardware/Software Intelligent Building Solution Information and Communication Technologies

the 3rd generation mobile communication standard of ITU,

IMT stands for "International Mobile Telecommunications"

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Metro Area Network

Managed Services

Mobile Service Center

Managed Services Provider

Next Generation Network

Original Equipment Manufacturers

Purchasing Power Parity

the State Bank of Vietnam

Service Level Agreement

Short Message Service

Total attractiveness score

Technical Services Telecom JSC

Content and Value-added services

Vietnam Mobile Telecom Service Company (the brand MobiFone)

Vietnam Posts and Telecommunication Group

Worldwide Interoperability for Microwave Access

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LIST OF TABLES

Tables 12 Extermal factor evaluation niatiix (BPE) osccssiencnsmmnnmmnnancumviws 20

Tablés 1.4: Thternal Factor Evaluation Matrix (IPE) scscsssccccssssccconscascesccsavacsscrgevecess 21

TH W1 là VVLA.L XIN EENxaxnnsieseuenernreantrronreoesnrtineibpiianstssilSeosS661001X-a080180000/00800/00040:GGE

Tables 1.6 Matrix of Strategic Position and Action Evaluation (SPACE) 23

Tables 2.1 Business performance of CT-TN from Y2008 to Y2010 34

Tables 2.2 Analyzing changes in balance sheet of CT-IN during Y2008 - Y2010 35

Tables 2.3 Status of revenues and profits from 2006 to 2010 38

Tables 2.4 Analysis of some basic financial IndiCafOTS .« «<<s<<cx+<<+ssc+ 39

Tables: 3.1 Targeted revenue of each year front 201.1 10 ZO1S cccssmisnnasenesersionnenns 71

Tables 3.2 Extetiial factor €ValuatiGn Inari cau dũGuodg0 6601442348380 384068 72

Tables 3.4, Internal factor €valuaODi MAIN ssicscscccsrscneccspesctncnccenecnnasssvvenssouseness 74

Tables 3.6 The Strategic Position and Action Evaluation matrix (SPACE) 78

Tables 3.9 The matrix to select the strategi€s ( Ï/2) + S se 82 Tables 3,10 The mattixte select the strategies (2/2) cccecscsscasasiccceavsrmnnvecsonrennecsorannins 84

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Comprehensively strategic management model of Fred R.David 14

Factors impacting the MACTO-ENVITONMEN wisssscsssasanssrccsscmswerecens 15

Organizational chart of VNPT Group -c+c-cc Series 28

GIDP srowth on the monthly basis during 2008-2010 45

Maiiied Services Markel CriVENS wsccisccsccccasmicmmanmmnnaanncnees 55

Managed Services structured from a scope and reward perspective 67

SPACE matrie digger OE CSD excscnsaneocemen ceeenuneumenenemenmsnenns 80

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The ICT sector of Vietnam is a dynamic market bringing not only great potentials but also many challenges to ICT solution and service providers Telecommunication

- Computing - Post Joint Stock Company (also called Joint Stock Company for

Telecom and Informatics or CT-IN) belonging to General Post Office (currently

called Vietnam Post and Telecommunications Corporation - VNPT) has nearly 40 years of experience in the ICT industry and is one of the leading ICT-related

product/service suppliers in Vietnam

Through the analysis of the current condition of the socio-economy and ICT industry in Vietnam, and of CT-IN’s business performance of, we would like to contribute to the Company some recommendations about development strategies in the 2011 - 2015 periods

Objectives and applicability of the research

The main objective of the thesis is to build up the development strategy for CT-IN

from 2011 to 2015 (the period in which integrated managed services and mobile broadband technology are expected to develop strongly) With its many-year

experiences in the ICT industry, CT-IN will take advantage of this opportunity to

develop more diversified service/product packages to meet the market demand

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We use both qualitative and quantitative approaches Besides, the thesis is herein based on a market research data collection ICT experts’ viewpoints, forecasts about the demand and growth rate of the ICT industry, and is referred to some successful integrated managed service models in regional countries and in the world

The data used in this thesis is partially provided by CT-IN and published on

websites of authorities (i.e General Statistics Office, Ministry of Information &

Communications and VNPT) or the ones specialized in ICT

Thesis structure: includes 03 chapters as below:

to the research scope

to 2015: accordingly, it focuses on the model of integrated managed services

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CHAPTER 1 THEORY OF BUSINESS STRATEGY

The strategy is often considered to be a “product” of a rational planning process which is led by senior executives, but not everything In many cases valuable strategies can arise even from the inside of the company but without anything

planned in advance

The strategic management is a set of management decisions and actions to determine long-term performance of a company The strategic management

includes continuous actions such as internal and external environmental review,

strategy construction, strategy implementation, and strategy control and assessment Therefore, the strategy research focuses on the monitoring and assessment of external opportunities and threats that a company will potentially face by its internal strengths and weaknesses

The strategic management originates from business policies and long-term

projection However, contrary to the strategic management, business policies aim at the general management orientation and focus on the integration of internal

departments’ functions Meanwhile, the strategic management focuses on not only inside elements but the environment and strategy as well' Therefore, the term

“strategic management” is commonly used instead of “business policy”

1.1.2 The role of the strategic management

The strategic management and build-up help enterprises:

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business: and to determine business tactics which should be applied in the coming time;

targeted customer group) in comparison with its competitors:

know-how, etc ) to fulfill the goal:

resources); and to come up with risk mitigation plans; and

To determine the values that the company will bring to end-users and the whole society;

According to Fred R David, strategies can be classified into 14 specific types and

categorized into four groups as follows:

1.2.1.1 Integrative strategies

distributors or retailers An efficient way to implement the forward integration strategy is the franchise model Enterprises may possibly grow rapidly with franchise business model in which the cost and opportunities will be shared to many individuals

company's suppliers This strategy particularly makes sense in case that the

existing suppliers of the company are unreliable or incapability of satisfying

requirements of the company

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competitors The merger acquisition and domination of the control power over competitors possibly enable the company to enhance the efficiency and the exchange of resources

1.2.1.2 Intensive strategies

by intensifying marketing and promotion programs: the market penetration strategy includes rises in the number of salespersons advertising costs, and promotional products or advertising efforts

regions/markets:

existing products or services; As usual, research and development (R&D) costs are quite high

1.2.1.3 Expansion strategy

related to each other;

services which are not related to each other;

not related to each other;

1.2.1.4 Other strategies

from two or more sponsoring firms for the purpose of cooperation;

get the organization back on the track to profitability Turnaround strategies usu-

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ally try ‘to reduce operating costs either by cutting "excess fat" and operating more efficiently or by reducing the size of operations:

a SBU a product line or a division:

According to Porter, specific strategies give the company competitive advantages from three different drivers:

at the low unit cost to serve price-sensitive customers;

customers who are insensitive to price:

group of customers:

A key reason for pursuing the forward/or backward/ or horizontal integration strategy is to take benefits from the cost-oriented production;

Product development is a specific strategy to facilitate the Company to make

product differentiation Making the product differentiation successfully means to enhance the flexibility and function synthesizing of the products, to lower costs, to

improve service quality, reduces maintenance cost and time, and offers more convenience to customers:

Market penetration and market development strategies drive many centralized advantages

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l3)! eR ee BERNNING PROCESS

According to Fred R.David the strategic management process comprises three

Source: Strategic Management and Business Policy, 11th Edition

Figures 1.1 Comprehensively strategic management model of Fred R.David Strategy formulation is a process of setting business tasks and doing researches/ surveys in order to determine internal and external drawbacks, to define long-rum

objectives and to pick out alternative strategies This phase is sometimes also

known as "strategic planning" including three basic tasks such as doing research,

intuitive integration and analysis, and decision-making

Strategy implementation (also called the action stage of the strategic management)

is to mobilize administrators and staffs to implement the given strategies Three

basic activities of the strategy implementation are to set annual goals, to put forward

policies and to distribute resources This stage is considered to be the most difficult

in the strategic management process

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Ses) evuliarion is tie Haine stage of the strategic management All strategies depend on changes in the future because all internal and external factors change regularly Three main activities of this phase are to determine what elements are the base for the current strategy to measure achievements and (3) to make adjustments

The external environment comprises all external factors which cannot be controlled

by business managers but have great influence to the objective fulfillment, growth and profitability of each company The analysis of the external environment includes macro-environment and industry analysis The analysis of these factors helps enterprises to identify their market position, and environmental characteristics and the era at which they are present, to determine influences of the external environment on business, and thereby to make relevant decisions

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acro-environmental changes possibly influence directly on any forces in the industry which results in changes in relative strengths of these forces and in attractiveness of the industry The macro-environment consists of six factors namely economic socio-cultural demographic political legal, technological and global elements

Economic elements include the growth rate and stability of the economy

purchasing power, price stability, monetary inflation, foreign exchange rate, etc These factors all affect business activities of enterprises

The social characteristics are also the concern of enterprises as they do market research These social factors will split the community into customer groups, each

of which has different characteristics, psychology and income; for example:

+ Lifestyle, knowledge aesthetic viewpoint, psychological life:

Including issues related to population, age structure, geographic distribution, ethnic communities and income distribution;

+ The political stability;

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The globalization and integration trend forces local firms to take international

factors into account when they plan a long-term business strategy for themselves

which is highly integrative and capable of reaching the geographic scope and politics

1.4.2 Analysis of industry environment (micro-environment)

According to Mr Michael Porter, five forces orienting the competition within the sector are (1) threats of new entrants, (2) rivalry among existing players, (3) bargaining power of buyers, (4) bargaining power of suppliers; (5) threat of substitute products/ or services,

Stakeholders F % Power

of Buyers

Buyers |

Suppliers Rivairy Among

Bargaining Existing Firms Power

of Suppliers

- Threat of Substitute Products

or Services Substitutes

Source: Strategic Management, chapter 3(concept 03)

Figures 1.3 M Porter five-force model

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+ Capacity of producing substitute products/services:

Customers are categorized into two groups, namely end-users and distributors Both groups put pressure on enterprises (in terms of price, product quality and enclosed services): besides, they can impact on the competition in the industry with their

purchasing decisions

According to M-Porter potential rivals are firms who currently have no presence in the market but may affect the industry in future

Substitute products and services are the ones having the same ability to satisfy

customers’ needs as that of existing ones

Firms operating in the same sector will compete directly with each other, which in its turn put pressure on the industry and enhance competitive intensity In any

sector, the following factors will increase the competitive pressure on rivals:

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12! SRERRNAL ENVIRONMENT ANALYSIS

In order to survive and develop all organizations must conduct the following tasks: management and administration, finance, accounting, manufacturing, trading professional executing R&D, marketing and building up an information system In each activity, each organization has its own strengths and weaknesses

Internal environment analysis is an important and indispensable part of the strategic management If the management team does not analyze the internal environment or cannot recognize strengths and weaknesses of the company exactly, they cannot set

and competition level of the markets where they are operating or intend to entry

With the internal environment analysis, strengths of the firm (related to his/or her

skills resources and competitive advantages) The weaknesses of the firm are

reflected in the shortcomings related to skills, resources or other factors limiting

his/or her competitiveness

1.7.1 Grand strategy matrix

According to Fred R David, the strategy formulation process includes three stages,

namely input stage, matching stage and decision stage

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Tables 1.1 Strategy formulation process

Phase 1: Input stage

Evaluation Matrix (IFE)

Phase 2: Matching stage

From the current situation of CT-IN, we mainly focus on the EFE and IFE matrix in

the input stage, SPACE and SWOT matrix in the matching stage to form strategies

of CT-IN, and QSPM matrix in the decision stage to pick out an appropriate

strategy for CT-IN

The EFE matrix helps strategy-planners to summarize and access the economic,

social, cultural, demographic, geographic and political information, and the one about government, legal regulations, technology and competition

Tables 1.2 External factor evaluation matrix (EFE)

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The CPM matrix helps the firm to identify competitors, as well as his/or her strengths and weaknesses, and to put forth an appropriate business strategy eventually

Tables 1.3 Competitive Profile Matrix

Competitive | Wzjøpy Weighted Weighted Weighted

factors

The IFE matrix summarizes and reviews key strengths and weaknesses affecting

important functional departments and operation of enterprises

Assigning a rating to each variable to determine the total weighted score of the firm; the highest rating is 4, the lowest is 1, and the average is 2.5

Total weighted score of less than 2.5 indicates that internal factors of the firm; and

List of internal factors

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The SWOT matrix is an important integrative tool to help develop 4 kinds of

strategies as follows:

Strength - Opportunity strategy (SO)

Strength - Threat strategy (ST)

Strength - Weakness strategy (SW)

We have a SWOT matrix as follows:

Tables 1.5 SWOT matrix

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1.7.6 The Strategic Position and Action Evaluation matrix (SPACE)

Steps to develop a SPACE matrix:

advantages (CA), environmental stability (ES) and industry strength (IS)

- Step 2: Assign a numerical value (ranging from “+1” (worst) to “+6” (best)) to

each of variables that make up the FS and IS dimensions;

- Assign a numerical value (ranging from “-1” (best) to “-6” (worst)) to each of

variables that make up the ES and CA dimensions:

SPACE matrix;

on X-axis: Add two scores of FS and ES together, and then plot the resultant

point on Y-axis; Consequently, we have the coordinate (X, Y);

coordinate (X, Y) This vector indicates kinds of strategies: aggressive,

competitive, defensive or conservative

product development, forward/ backward

diversification, concentric diversification

horizontal diversification

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threats

horizontal integration, joint venture

FS +4 Conservative +3 Aggressive

+2 +]

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1.7.7 1H External Factor Matrix (IE)

IE matrix is based on the two main aspects including the total scores of importance

of IFE on X axis and the total score of importance of EFE on Y axis

IE matrix may be divided into 3 big sectors, each of which is comprised of various strategies

1.7.8 Quantitative Strategic Planning Matrix (QSPM)

The QSPM matrix aims at evaluating and ranking the strategies so that we have the base to pick out the best strategy for the firm

This matrix uses all information and data from the above matrices (namely EFE, IFE SWOT, and SPACE matrix) This is a tool to evaluate alternative strategies objectively: firstly, based on the pre-determined key internal and external success

factors

Tables 1.7 Quantitative Strategic Planning Matrix (QSPM)

Usable strategies

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CHAPTER 2 BUSINESS OPERATION OF JOINT STOCK

INFORMATICS (CT-IN)

TELECOMMUNICATIONS GROUP (VNPT)

Full name: Tap doan Buu Chinh Vién Théng Viét Nam

International trade-name: Vietnam Posts and Telecommunications Group (VNPT)

VNPT is the leading group in Post and Telecommunications

VNPT

in Vietnam

With the contribution and achievements gained in the process of Socialism build-up

and Homeland protection, VNPT was honorably awarded as “Hero of Labor in the

1999-2009 period” by the President on December 22, 2009

Experiencing 65 years of construction and development in the Telecommunications market of Vietnam, VNPT is the first service supplier who lays the development foundation of the Post and Telecommunications industry of Vietnam, and is the Group who plays a key role in turning Vietnam into one of the ten countries having the fastest growth of Telecommunications industry in the world

With more than 90 thousand employees, advanced telecommunications technology infrastructure and service network covering 64 provinces nationwide, VNPT prides

itself on being the leading Post and Telecommunications service-provider (who

serves more than 71 million mobile-subscribers, approximately 12 million fixed- telephone subscribers and dozens of millions internet-users) in Vietnam

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Group (replacing the preceding Corporation model) pursuant to Decision No

06/2006/QD-TTg by the Prime Minister with the strategy to develop upon a key economic corporation model of Vietnam and to operate in the conglomerate industry but core business still being Post — Telecommunications — IT

On 24 June 2010, Vietnam Post and Telecommunications Group were officially converted into a State owned One-member Limited Liability Company pursuant to

Decision No 955/QD-TTg by the Prime Minister

2.1.2 Business scope — key products/services:

Telecommunications and ICT projects;

equipment:

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— Informatics segment Its former was the Informatics Equipment Manufacturing -

Science Enterprise No.1, established pursuant to Decision No 33/QD dated on

January 13, 1972

- Telephone: (84 4) 3863 4597 - Fax: (84 4) 3863 0227

and Investment Department on December 12, 2001

Some achievements CT-IN has gained for recent years:

ISO 9001: 2000 Certificate; awarded gold medal at EXPO-2005 International Trade

Fair; Prized as the most excellent Software Company in 2005 by the Ministry of Post and Telecommunications (currently renamed the Ministry of Information and Communications — or called MIC); Awarded Sao Khue prize in the ICT field in

2007; Prized as the most excellent Software Company in 2008; ranked in Top 4 of the largest Telecommunications and IT private enterprises pursuant to the list of

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2.2.2 Functions and missions of CT-IN

particular:

2.2.2.1 Providing Telecommunications and IT equipments

(including microwave transmission, multi-service access equipment, multi- media services terminal server, network devices (i.e routers, switches, firewalls etc ), Data Center, Contact center and others equipments serving mobile information network WiMAX, NGN, etc

system, application software, Billing Customer Care System (BCCS) etc ):

2.2.2.2: Manufacturing equipments for Telecommunications and IT network, and application software

warning device, antenna bracket, cable bridge rack, etc

management of value added services in Telecommunications network and internet; and

2.2.2.3 Leasing Telecommunications—Informatics infrastructure and equipments

and optical transmission, multi-service access equipment, Data Center, etc

etc ) which serves mobile network and Wimax:

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2.2.2.4 Providing Telecommunications and IT service

installation of microwave and optical transmission, switchboard, access, mobile network devices (BTS MSC, BSC), network devices (i.e routers, switches,

transmission, switchboard, multi-service access equipment DSLAM BRAS Servers.)

Fixing Telecommunications and IT equipments:

2.2.2.5 Telecommunications — computing related consultancy service

network;

2.2.2.6 Managed services

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MEETING OF SHAREHOLDERS

Investigation Board Management Board

General Director

| Deputy General Director

NGN Technology RKERNER VI Center (Cnext)

Branch Office Branch Office Emergency Support — Unit

¬ Administration Unit — Administration Unit Informatics Center

Software Unit LL | System Integration |

| | (Csoft) | Unit (Cis) |

= Finance Unit | FF Finance Unit |

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In development process, CT-In has established and kept steady relationships with a

great number of customers and local and foreign partners

Mobifone), Vinaphone, Viettel, Interprovincial Telecommunications Company (also called Vietnam Telecom National - VIN), Vietnam Data Communications Company (VDC), Vietnammobile, Central Post Office, etc Among customers, VNPT is one of the major and traditional customers of CT-IN

IBM, HP, SUN, OPNET, NEC, ADTRAN, NORTEL, MICROSOFT, Amdocs, NOKIA-SIEMENS, etc

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2.2.5.1 Balance sheet

Tables 2.1 Business performance of CT-TN from ¥2008 to Y2010

43.488.401.661 11,191,000,000 3,791,251,526

24.248.768.869

495.840.920.667 433,168,935,389 16,383,737,935 59,612,280,803

43.649.533.418 11.791.000.000

4.171.747.385

27.466.172.39

465.222.713.4&( 158,572,826,254 3,503,570,261 150,211,993,53:

3710155

11.791.000.00(

1,085,777,538

UNIVERSITY

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Changes in total assets

year 2009 witnessed a robust asset growth of 34.09% in comparison with 2008

figure, driven by a boom of 170% in account receivables

provisions for devaluation of stock value and the fact that the Company paid back a portion of inventories to VNPT Group

because the Company made a property investments of VND85 billion for setting branch office in Ho Chi Minh City

76.77% since 2009, driven the Company's capital withdrawal from some associated companies from

corporate income tax (CIT)

Changes in total resources

(approximately a rise of 16.02%) due to rising bank loans to finance the project

of supplying MAN Ethernet service package to 17 provinces That means CT-IN used capital efficiently

result of 2008

Witnessed a stronger growth than in 2009

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As can be seen from the chart, turnover and profit of CT-IN climbed stably year by

year (from 2006 to 2010); besides, the high net profit margin facilitated the

Company to re-invest

Especially, in 2009, the Company generated a robust growth of revenue and profit because the Company got the USD36-million-valued contract of supplying MAN Ethernet service package to 17 provinces 2009 revenue reached VND1,310 billion compared to the figure of VNDS515 billion in 2008, equivalent to a growth of 254% Moreover, the Company generated VND102 billion in 2009 against the figure VND27 billion in 2008 (equivalent to a growth rate of 379%)

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difficulties which had direct impacts on CT-IN’s business performance (i.e

Jluctuated foreign exchange rate and scarcity of foreign currency influenced on the schedule of project implementation in 2010), the Company still maintained a stable growth pace

Tables 2.4 Analysis of some basic financial indicators

IH | Activity analysis

3 Account receivable (AR) turnover X 1.80 3.83 2:15

IV | Leverage ratio