G1_00245 CHIẾN LƯỢC PHÁT TRIỂN THỊ TRƯỜNG NỘI ĐỊA CỦA CÔNG TY CỔ PHẦN HÓA DẦU VIDAMO GIAI ĐOẠN 2011 – 2015 DEVELOPMENT STRATEGY OF THE DOMESTIC MARKET OF VIDAMO PETROCHEMICAL JOINT STOCK COMPANY IN 2011 – 2015 PERIOD

G1_00245 CHIẾN LƯỢC PHÁT TRIỂN THỊ TRƯỜNG NỘI ĐỊA CỦA CÔNG TY CỔ PHẦN HÓA DẦU VIDAMO GIAI ĐOẠN 2011 – 2015 DEVELOPMENT STRATEGY OF THE DOMESTIC MARKET OF VIDAMO PETROCHEMICAL JOINT STOCK COMPANY IN 2011 – 2015 PERIOD

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DEVELOPMENT STRATEGY OF THE DOMESTIC | MARKET OF VIDAMO PETROCHEMICAL JOINT STOCK COMPANY IN 2011 — 2015 PERIOD

GROUP 2

e LE THI DIEU TRAN THANH HIEN DANG THI LAN PHUONG NGUYEN THIEN CHUONG TRAN NGUYEN HUU LUAN

HO CHI MINH CITY - 2011

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Our group consisting of 5 members, wouid like to commit ihat ihe research project titled “Development strategy of the domestic market of

VIDAMO Petrochemical Joint Stock Company in 2011 — 2015 period”

was completely done by our group

Datas used were clearly provided their sources in the references So far, the research results have not been published in any research project

HoChiMinh City 30" of July 2011

Group 2 — Class GaMBA01.C0210

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There is no path leading to success with only roses There is no success

with any tears and perspiration At first, all achievements that we have today

originated in our effort However, unless there is help from people surrounding us, we will not be as successful as expected

Therefore, after finishing this research project, we would like to send our appreciation to The Griggs University that offered us the course Global Advanced Master of Business Administration, which is organized under an agreement of Ha Noi National University and Griggs University The Universities did open comfortable conditions for us during studying

Besides, our group would like to show our appreciation to our lecturers who enthusiastically taught and transmited their valuable knowledge that can

be applied in our work in the future

We also send our acknowledgement to members of the instructive

council, especially Dr Le Van Bay, who enthusiastically instructed and

supported us in accomplishing this thesis

Aside from this, we would like to be thankful to the leaderships of Vietnam Petrochemical Join Stock Company for their precious data and documents

We will not forget to send our thanks to our classmates, who were willing to share their knowledge and practical experience in their work We did truly find a close friendship after attending this course

Last but not least, we would like to send our honest appreciation to our families who always supported us and opened convenient conditions for us during the course

Group 2 - Class GAMBA01.C0210

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Ơi ý 1000 44 3 THE PRINCIPLE OF BUSINESS STRATEGY AND LUBRICANTS TRADING 3 1.1 The principle of strategic managemeii ẲẲ 2-2 s2 5S S25 5 s3 3 1 v2 3 1.1.1 Definition of strategic management .0 0 cece cece eee ceeeteeeees 3 1.1.2 Classification of strategic management S5 c2 4 1.1.3 Process of strategic managemen - + +2 222 c2 321 2z errke 6 1.2 The theory of strategic market development -ccc.-.-ei 18

I.2.2 The roles of market to manufactures - 222 s22 3325525 21 2553223552212 19 1.2.3 Objective indispensability in market broaden À 2-2255 225 z3 £<v2 20 1.3 Current status of production and requirements of lubricants consumption in

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LUBRICANTS IN DOMESTIC MARKET OF VIDAMO 000000.00 0.c0ccccccccceceeeee 23

2.1.3 Historical establishment and development: .0 00.00 0.00cccccccceeeeeeeeees 25 2.2 Organization structure — Functions and duties of departments 0 00 00.00.000 26

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DOMESTIC MARKET OF VIDAMO - PETITIONS 58

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: Petrolimex Petrochemical Joint Stock Company : Vietnam Oil and Gas Group

: Vietnam National Petrol Corporation

- PetroVietnam Drilling : PetroVietnam Gas : PetroVietnam Oil : PetroVietNam Oil Processing and Distribution Company : Petrol Technical Services Corporation

: PetroVietnam Trans Corporation : PetroVietnam Power

: PetroVietnam Fertilizer and Chemicals Corporation : VIDAMO) Petrochemical Joint Stock Company : JSC lubricantss and chemicals Vietnam (VILUBE Corp.) : Vietsovpetro Joint Venture

‘ World Trade Organization

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Table !.l External Factov Evaluation Matrix(EEE) IÔ

` ;`13s, ý — 5 14 Table 1.4 QSPM matrix 17 Table 2.1 Several Business Criterta:in 2009-2010 period scccscsscscsccscssccssscscessescceses 32 Table 2.2 Primary customers of VIDAMO 0 1121121112111 1121118 xi 35 Table 2.3 Income Statement in 2009-201 [ period - S121 5118511211215 37

Table 2.5 Analysis of basic financial criteria of VIDAMO - 5 Scscssszss2 4I

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Table 3.5: QSPM matrix of intergration strategies SO, ST, WT -sccs¿ 72

Table 3.7 Estimated Production Capacity in 201 1-2015 period - s5 ss¿ 78 Table 3.8 Expected Consumption in 201 1 —2015 period 78 Table 3.9 Expected Proportion of market share in 2011 — 2015 period 79 Table 3.10 Investment plan in 201 1 - 2015 period - 22 S1 s25 12 112 11225 2 82 Table 3.11 Scheme to increase Chartered Capital in 2011-2015 period 83

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Figure 1.1 Comprehensive model of the strategic management process 7 Figure 1.2 A model of five competitive forces designed - Sa 8

Ffgptel.6 591 206 .TTNNĂWD-:coeccocoicEi000000GG2014003016061106GS0G001G10E366603106 g81g366lanx/22xe- 13 ElpurE Í.5S Grand SH0(GHÿV MNWDG scescccscsscsscscccssigisssceiseidesessentececansecencaeeeenenreneens 15 Figure 2.1: Organization Structure of VIDAMO 2 3S 1E 15211 15 1825011 se 27 Figure 2.2 VIDAMO products 0 ccccccccccescescescescscesessecseescsacsececssesaceeaceaceareee 31 Figure 2.3 Consumed yield of lubricantss in 2009-2011 period 22 2 8255252 33 Figure 2.4 Revenues of lubricants consumption in 2009-2011 period 34 Figure 2.5 VIDAMO distribution network 0.0 00.00.00 0cccccccceccesceseesseseeeeeseseeeeeeeveees 36 Figure 2.6 Earning Before Tax in 2009-2011 period S535 323528 25 23 c2 cz2 38 Figure 2.7 Revenues — Costs — Earning Before Tax in 2009-2011 period 38 Figure 2.8 Proportion of selling cost structure ¡n 2009-2010 period 40 Figure 2.9 Cash flows and inventory in 2009-2010 period S2 s2 825 z1 zzx4 4I Figure 2.10 Market share of lubricants companies In Vietnam 22s s s52 43 Figure 2 1 Market share of lubricants Companies in Vietnam 2 scscsẻ 45 Figure 2.12 MIPEC products - 22 S5 5S 55255 121 111011215 10 1111101 01 01111 1 co 46 Figure 2.13 AP SAIGON PETRO products À 22 S5 5 5E 3c S1 1 1E ra 48 Figure 2.14 VILUBE products 1 121221251 1511211 211111 0115110118110 11 ng 50

Figure 3.2 Demonstration of conservative strategy in SPACE matrix 68 Figure 3.3 New labels of VIDAMO 22 2222 2 75

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IIBH(CoánpeasercHreesWecgianC'apacity in 201 1-2015 period 22 22 52552 78

rigure 3.6 Expected Proportion of markei share in 2011 — 2015 period 80 Figure 3.7 Expected Revenues and Costs in 2011 —- 2015 period sssss: 80

Figure 3.9 Expected Earning Before Tax in 2011 — 2015 period 5s: 81 Figure 3.10 Investment Plan in the period of201 1 - 2015 period 82 Figure 3.11 Scheme to increase Chartered Capital in 2011-2015 period 83

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1 Background and indispensability of the topic

Lubricants is the main greasing substance in industry and common use Under a developing society according to industrialization and modernization, more machines, equipments and tools have been applied in industry and common use, thus leading to

an incessant increase in the consumption of lubricants in the recent years At this moment, market of lubricants is critically competitive due to patricians of join-venture enterprises and local big companies

VIDAMO Petrochemical Join Stock Company is one of companies that are under

“National Oil and Gas Corporation - PETROVIETNAM” This is the only company of oil and petrol field that produces and trades lubricants under PETROVIETNAM- VIDAMO trademark Besides, VIDAMO trade name has deeply ingrained in customers’ consciousness because this is the product made in Vietnam and produced

by Vietnamese to serve national economy With a hope to bring the best lubricants products to the customers with reasonable price, VIDAMO has been researching to find new materials for production of base oil, thus limit importation to reduce product

costs

Confronting this situation, VIDAMO Petrochemical Join Stock Company, with available advantages, must determine its business strategy in the upcoming years for their unshakeable existence and development

Originating from above actual requirements, our group has decided to choose a topic for our final project: “Development strategy of the domestic market of VIDAMO Petrochemical Joint Stock Company in 2011 — 2015 period”

Capstone Project Report

regarding lubricants trading: evaluate competitive status among competitors in the same tield to determine opportunities and threats

Generally analyze and evaluate the status of production and operation at VIDAMO Petrochemical Joint Stock Companyfrom which determine strength and

weakness

From opportunities, threats, strength and weakness, business strategy will be established so that it is suitable to real situation of the company, from which developing different solutions to beneficially carry out the proposed business strategy in 2011-2015 period

3 Study scale

Business activities of lubricants in VIDAMO Petrochemical Joint Stock Companyare are based on market investigation, selling output, profits, prices, distribution system, competition to competitors and promoting activities in selling to push up production activities of lubricants

4 Study methodology

Secondary data were recorded at VIDAMO Petrochemical Joint Stock Company and competitors Quantitative analysis and specialist analysis were applied to establish strategic matrixes and forecast future development orientation

5 Outline

The topic consists of three chapters:

- Chapter 1: The principle of business strategy and lubricants trading

- Chapter 2: Analysis of production and business development status of lubricants

in domestic market of VIDAMO

- Chapter 3: Strategic determination and solutions to develop domestic market of

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THE PRINCIPLE OF BUSINESS STRATEGY AND

LUBRICANTS TRADING

1.1 The principle of strategic management

1.1.1 Definition of strategic management

Definition of “strategy” was known by studies about war in the past A Greek historian, Xenophon, is believed to be the one who gave the earliest definition of strategy in VI century BC (before Christ) Also at that time, Sun Tzu, a military ideologist in China, wrote The Art of War discussing about military strategies

Until middle of 20" century, strategy studies and development have been truly started From many scholars, such as Drucker, Chandler, Ansoff, Andrew who studied about great success of economic corporation in USA before and in the World War II, to modern demonstrators and economists, such as Michael E Porter, Fred R David, Rudolf Grunig, Richard Kuhn, they have different ways in approaching strategic management in business The following statements are several definitions of strategy:

- "Strategy is the determination of the basic long-term goals and the objectives

of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals’’- Chandler (1962)

-“Strategy is the mediating force, or match, between organization and environment, that is, between the internal and the external context”- Mintzberg (1979)

- “Strategy is the pattern or plan that integrates an organization's major

goals, policies, and action sequences into a cohesive whole- Quinn (1980)

- "Strategy means deliberately choosing a different set of activities to deliver a

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- “Strategy is a mean to achieve long-term goals” Strategy - Fred R David (2003)

- “Strategy is long-term, administrative orientation and the guarantee of long- term finishing major goals and purpose of’- Rudolf Grunig and Richard Kuhn (2003)

Therefore, though there are many ways in approaching and defining, a strategy usually includes main contents listed as the followings:

e Propose general action programs

e Choose action plan, deploying and distributing resources to achieve particular goals

1.1.2 Classification of strategic management

There are different kinds of strategy in an enterprise Depending on levels and approaching method, business strategies can be categorized as the followings:

1.1.2.1 Different levels of strategy

e Corporate - level: is heading to goals and general scale of an organization

e Business - level: relates to mode of successful competition on particular market

e Functional - level (or Operational level): strategies at this level helps Corporate - level and Business - level strategies carry out significantly based

on component parts on the fields of resources, human process and necessary skills

e In the globalize environment with fierce competition, borders among nations seem to be omitted, hence existing the fourth level of strategy called Global Strategy

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1.1.3 Process of strategic management

Process of strategic management consists of three stages:

a) Analysis of external environment

The purpose of analysis of external environment is to develop list of limit opportunities that environment brings to the enterprise and threats that the enterprise should avoid to decrease dangers caused by external environment There are many

external environment analysis should be limited by factors that significantly affect

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e Cultural and social environment

e Demoghraphic and geographical environment

e Technological environment

e Global environment

s* Micro- environment: |s considered as competitive environment (or so called field environment), that closely connect to the enterprise, and most business

activities are inside this

Professor Michael E Porter, from Harvard University, provided a chart that showing five competitive forces as hereunder:

Figure 1.2 A model of five competitive forces designed

by Professor Michael E Porter (Source: Griggs University — Syllabus of Strategic Management)

Factors of internal environment consists of:

“* Finance: includes factors about financial capability, financial management, financial accounting

** Management includes all administrative activities that ensure actual results of business activities suitable to determined results, such as: abilities in

human resources management, production management, quality management, raw

materials-finance-sales activities

“* Marketing: Marketing is described as a determined process to forecast, establish and satisfy products and services demand Marketing management includes market research and development, choosing target market, distribution system, after-sale services

s* Human resources: play an important role to an enterprise success Though

an enterprise has a right strategy, there will not any benefit if it doesnot have effective staff Human resources include several factors: organizational structure, human resources quality, maintaining and developing policies

** Production management and operational: includes all activities to alter inputs into commodities and servies Production and operational process include: design of production process, choosing production lines, services, cost of production

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The establishment of EFE matrix allows us to summerize and determine impacts of external factors on an enterprise, specifically on business activities, including oppotunities and challenges

To establish this matrix, all external factors that affect to an enterprise activities will be listed The importance level of every factor will be assessed by its weight, and total weights always sum to | This classification shows significant importance of every factor to an enterprise success

Evaluate the importance level of every factor by rating on the scale from | to

4, in which rating captures if the factor represent a major strength (rating =4), a minor strength (rating = 3), a minor weakness (rating = 2) or major weakness (rating = 1) This rating depends on how significance of the strategy carried out The next step is determination of relative importance of each factor by multiplying each factor’s weight by its rating This gives you a weighted score for each factor The last step is to sum all the weighted scores to determine the total weighted score, ranging from | to 4 in which 2.5 will be considered as average

If the total weighted score is 4, it means that a company is taking most advantage of external oppotunities and good control or minimizing external threats

If the total weighted score is 1, it means that a company is not catching external Oppotunities and not decreasing external threats

Table 1.1 External Factor Evaluation Matrix (EFE)

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To build up of Internal Factor Evaluation Matrix (IFE) allows us to summerize

as well as evaluate important strength and weakness in functional business units

This affects business activities

To build up this matrix, a list of all internal factors that affect business activities of the company will be listed as determined in the above section, analysis

of internal environment The importance level of every factor will be assessed by its weight, and the weights always sum to | This classification shows significant Importance of every factor to success in business of the company

Evaluation of importance level of every factor by rating on the scale from | to

4, in which rating captures if the factor represent a major strength (rating =4), a minor strength (rating = 3), a minor weakness (rating = 2) or major weakness (rating = 1) This rating depends on how significance of the strategy carried out by

an enterprise

The next step is determination of relative importance of each factor by multiplying each factor’s weight by its rating This gives you a weighted score for each factor The last step in constructing the EFE matrix is to sum all the weighted scores to determine the total weighted score for an enterprise, ranging from | to 4 in which 2.5 will be considered as average

If the total weighted score is 4, it means that the enterprise is having many advantages and can be able to overcome its disadvantages On the contrary, if the total weighted score is 1, it means that the enterprise does not have advantages and does have so many disadvantages that are impossible to overcome

Table 1.2 Internal Factor Evaluation Matrix (IFE)

List of all internal factors

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s* SWOT matrix

SWOT matrix allows us to evaluate strength and weakness of the company and estimate threats and risks from external environment From which, factors of environmental state and the enterprise ability are combined into business strategies SWOT matrix is constructed as the followings:

Strength (S) Combined strategies SO Combined strategies ST

order S1, S2, S3

pn nent (1M) Combined strategies WO Combined strategies ST

* The Strategic Position & ACtion Evaluation matrix (SPACE)

SPACE (The strategic Position & Action Evaluation matrix) is the administrative tool used for strategic analysis It is used to determine which strategy that the company should carry out

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Steps to develop SPACE matrix are pointed hereunder:

competitive advantages, environmental stability and strength of the industry

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PDF Compressox FreeaVersianging from +1 to +6 in accordance with the worst

to the best of variables that create FS and IS Similarly, stick value from -1 to -6 in accordance with the best to the worst of variables that creates ES and CA On FS and CS axises, make comparison between competitors, on ES and IS axises, make comparison between different fields

values in accordance with variables and divide to numbers of variables

- Step 4: Marking the average of FS, IS,ES and CA at corresponding axises

in SPACE matrix

- Step 5: Plus 2 points of X axis and mark the point of X result Plus 2 points

of Y axises and mark the point of Y result

- Step 6: Draw a vector orienting from the original point of SPACE matrix through new intersection This vector indicates strategy type for the organization

“* Competitive Profile Matrix (CPM)

To build up CPM matrix helps an enterprise to regconize its competitors together with its strength and weakness, thus having suitable business strategies

This matrix includes all internal and external factors that are important to an enterprise success In CPM, significant points of competitors are considered and calculated After that, make comparison between competitors and the company sample, through which, there are many information to construct business strategies for the enterprise

Table 1.3 CPM Matrix

Importance Company sample | Competitor 1 Competitor 2

point point point List of all

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Grand strategy matrix is the tool to establish strategies that are selective All organizations might be in either angle of the matrix Company depariments might also lie at similar positions The grand strategy matrix is based on 2 aspects for evaluation: competitive position and the growth rate of market Suitable strategies are listed In attractive order in each angle of the matrix

Fast growth of market Quarter Il

3 Product development 3 Product development

5 Reduction 5 Backward integration

6 Liquidation 6 Horizonal integration

position position

3 Horizontal difversification 3 Conglomerate diversification

4 Conglomerate diversification | 4 Joint venture

5 Divestiture

6 Liquidation

Weak growth of market

Figure 1.5 Grand Strategy Matrix (Source: Fredr David — The principle ofStrategic Management)

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information and data from the above matrixes, IFE EFE CPM and SWOT

To develop and establish a QSPM matrix, there are total 6 steps needed to be performed:

Oppotunities and threats (at least 10 factors) in the left column These information should be taken from EFE and IFE matrixes

- Step 2: Classify each important factor (both internal and external) The Classification is as similar as the one in EFE and IFE matrixes

- Step 3: Determine alternative strategies that the organization should consider to perform These strategies are formed and gathered into seperate groups

- Step 4: Determine attration

Determination of attrative points is quanlification of significant attraction of eachstrategy in alternative groups of strategy The attractive points are determined

by considering significant level to selection of evaluated strategies of internal and external factors The attractive pointsare allocated to each strategy to show the Significance of each strategy as compared to the others The attractive points are Classified as the following:

| — not attractive, 2 — little attractive, 3 — quite attractive, 4 — extremely attractive If any factor that has no effect to the selection, there will be no point and the row will be left in blank

- Step 5: Calculate total attraction

Calculate total attractive point (TAS) ultiply rating points with attractive points in each row If only counting the evaluated internal or external factors, TAS shows relative attraction of each strategy and the higher TAS is, the more attractive the strategy will be

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Important Rating | Weight | Weighted | Weight | Weighted | Weight | Weighted

Internal factors:

Administration,

finance, accounting, marketing, production, study and development of information system

External factors:

Economics, Politics/Law, Society, culture,

QSPM matrix has many advantages, such as giving combination of external and internal factors into decision-making, groups of strategy can be studied continuously or simultaneously Though there is no limitation of strategy quantity that can be evaluated, it still has several disadvantages: Performing QSPM matrix requires judgments by intuition and experiences Discussion between administrators

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d) Develop missions (business missions)

¢) Establish long-term objectives

J) Generate, evaluate and select strategies

I 1.3.2 Strategy implementation

To carry out efficiently established business strategies, the company must have:

* Mediation of frame of organization

e Check and test if the business strategies are suitable before performing

e Evaluate how efficiency of business and production activities in an enterprise by every stage to detect deficiency in strategies, from which having timely mediation, alteration and implementation

1.2 The theory of strategic market development

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cok Geom pressandhreenVessi@iodity production Market is where transaction exchange and selling-purchase process take place The important thing to understand the essense of the market is that it is not simply an exchange field nor commodity and service transfer from producers to consumers, it is actually known

as the exchange organized according to the rules of commodity and currency

circulation

1.2.2 The roles of market to manufactures

To manufactures, market plays an important role for its connection between producers and consumers The manufactures controlling big market share will incessantly open their production scale, growing benefit, increasing competition, indispensable factors that bring success to their organizations

Market is known as the space between the producers and consumers It must

go through the marker when selling and purchasing something The interaction between the consumer and the seller will determine suitable price and quantity on

the market

To manufactures, market is the centre sending signals for business decision making Market motivation is rules of value and competition Every subject, taking part on the market, always has a purpose, for example, maximizing benefit is the purpose of the consumers However, on the market, individual purpose can only earn via doing social general purpose

Market, aside of these above factors, is also where to examine and evaluate manufacture activities When a company is organized to produce commodity goods that will be sold outside, these products will be tested and evaluated via appropriateness in usage value including color, quality, models of the products Secondly, market is also the evaluation of product value via product price Manufactures will rely on market to make decision, simultaneously, market regulates producers and entrepreneurs Market allows the producers to know which products or services should be produced and when they should be launched to the

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1.2.3 Objective indispensability in market broaden

1.2.3.1 The roles of product consumption

In the current market structure, product consumption is always a concerned issue in industry manufactures The product consumption will allow manufactures

to take back their source of capital, thus getting profits and accumulation for broadening production When the commodity economy has been more and more developing and the market structure has been more and more improving, the product consumption of manufactures has become more difficult and complicated Result of product consumption is the most general norm through which evaluating a whole production and business process

Process of reproduction in industrial manufactures will be shown when analyzing the process of product consumption A quick consumption on the market allows the manufacture to take back their source of capital quickly, from which using this as a foundation for further benefits in production process Currently, product consumption with high benefit is a target of all the manufactures

Product consumption contributes in maintaining and opening consumer market Clearly, when product consumption is recorded by good results, the relationship between manufactures and traditional customers will closer Besides, prestige of both products and manufacture will be improved; hence new customers and new consumers will come making an increase in product consumption This is the foundation to broaden and develop product consumption of an enterprise on the market regarding both quality and quantity

Positive activities in consumption process contribute an important role in raising benefits in business and production activities that are analyzed by two different points of view To economy, product consumption takes part in creating

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demand To manufactures, product consumption brings high profits, broadening market and enhancing employee life

!.2.3.2 Broadening product consumption is indispensable

In any manufacture, business and production activities are always set up in a period of time to obtain profits To do this, manufacture must carry out via market for their consumption activities

As we all know, requirements of consumption are abundant and diversified, however, requirements of a typical product in a particular period of time are limited while there is always drastic competition between manufactures that are producing the same type of product Certainly, every manufacture always finds a way to get the best conditions for its own product consumption

In conclusion, wide-broadening product consumption is an objective requirement to all manufactures

1.3 Current status of production and requirements of lubricants consumption in Vietnam

In the world, lubricants is the main greasing substance in industry and civil use For its important role, lubricants has become the industrial indispensable material Together with the social development, more and more machines, equipments and tools have been applied in industry and civil use, thus making an incessant increase in the use of lubricants in the recent years In general, lubricants has a wide application in the current life Especially, it is very important to

machines, because machines cannot work without it

According to a report regarding the current oil and gas consumption, there are approximately 40 million tons each year In our country, though the consumption level of oil and gas is much lower as compared to developed countries There are 100,000 tons of lubricants consumed every year with growth rate is 4-8% per year

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1.4 Indispensability in determining strategic development of lubricants

on domestic market of VIDAMO

Vietnam is on the way developing into an industrialised-modernised country, hence requirements of lubricantss, oil and petrol are urgent Besides, to all countries, this is an issue relating about energy safety Guarantee of energy- Supplying source ensures a safe development to the economy and stabilize people life However, product quality and quantity made in Vietnam have not met the demand yet There are 65% of domestic market share belonging to oil and gas joint- venture companies

General evaluation the need of lubricantss and petrol in Vietnam is extremely high and expecting that this field will continuously develop, especially when market

of oil and gas is still big Oil and gas system has not supplied throughout the country yet This is a good opportunity for VIDAMO to jump in The company must have a suitable strategy to develop its products, to improve and broaden its market Determination and practices right strategies are the shortest path to achieve proposed targets, strengthening and developing the company in the market

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ANALYSIS OF PRODUCTION AND BUSINESS

DEVELOPMENT STATUS OF LUBRICANTS IN

DOMESTIC MARKET OF VIDAMO

2.1 VIDAMO establishment and devepment

- Address: 201 Dien Bien Phu, Ward 15, Binh Thanh District,

Ho Chi Minh City

- Chartered Capital: 89,000,000,000 VND (eighty nine billion VND)

- VIDAMO Petrochemical Joint Stock Company is a member directly under

“Vietnam Oil and Gas Group- PETROVIETNAM”

Since 1991, VIDAMO Petrochemical Joint Stock Company is one of the first Vietnamese companies producing and trading lubricants with personal trade mark Currently, this company is the only unit in oil and petrol field producing and trading lubricants under PETROVIETNAM-VIDAMO trademark

Being a member of PETROVIETNAM, VIDAMO has opportunities to broaden and diversify its business and production activities Aside of its main role

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inBRW CompuessamKree dersdeand fuel, the company takes part in trading sectors belong in PETROVIETNAM general development orientation

2.1.2 Business field of the company

use VIDAMO also organizes relating to production and business activities, import and export of lubricants (construction of a base for import and export, for storage and preservation, construction of factories producing lubricants, construction of business network)

e Produce and trade equipments used in lubricants field

e¢ Consulting and serving lubricants for industry and common use

e Oil and gas agency, trading motorcycle oil, car engine oil and hydraulic oil, Liquefied Petrol Gas (LPG) agency (no trading at the head office)

e Business in ethanol fuel bodies Doing business in fields relating to biological fuel

exploration and doing business in oil and gas products

e Collecting, processing and reproducing petrol-originated products that have been used once Process environmental pollution due to petrol and oil substance pollution Produce and trade machines relating to collection, treatment, reproduction of petrol-originated products

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2./.3.] Historical establishment

The forerunner of VIDAMO Petrochemical Joint Stock Company is VIDAMO lubricants manufacture, directly under Vietnam Oil and Gas Group, borned in 20"

of June 1991, according to decision 470/DK-TK

In 1992, VIDAMO lubricants manufacture was allowed to transfer to

VIDAMO lubricants Company by the Ministry of Heavy Industry

In 16" of February 1996, PetroVietNam Oil Processing and Distribution Company was established, abbreviation name is PV PDC, based on the foundation

of merging two companies, Petrol filtration Company and VIDAMO lubricants

2.1.3.2 Production and business development

In 1991, VIDAMO lubricants manufacture was established with a lubricants factory (1,000 tons/year in capacity) that produced lubricants under VIDAMO

trademark

In 1994, under VIDAMO trademark, VIDAMO produced lubricants at two factories working with 16.000 tons/year capacity The company produced products according to order-forms from domestic private companies

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Capstone Project Report

PDih Compressenk res MRKS@N|ubricants under PETROVIETNAM-PDC trade mark and produced products to order from foreign companies, such as SHELL, MOBIL TOTAL in three factories working with 18,000 tons/year capacity

From 2000 to 2008, lubricants, under PETROVIETNAM-PDC was produced

In two factories with 26,000 tons/year capacity

Since December 2008, the company has produced lubricants under

PETROVIETNAM-VIDAMO trade mark

The company has produced more than 60 types of lubricants, including engine oil, industrial oils, and industrial oils in common use such as hydraulic oil, transmission oils, industrial gear oil, brake oil

2.2 Organization structure — Functions and duties of departments

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2.2.2 Functions and duties of departments

2.2.2.1 Human Resources Department

Human Resources department functions as an advisor that helps the General manager in directing and managing organization in Human Resources, training, wages, legislation, documents storage, assets management and security activities under Government regulations

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2.BE.Qou)pw@A09r,bx£SÀ/€RSWBSbartment

Technology and safety department functions as an advisor that helps the

managements of technology and equipments and machines in the whole company; technical consultancy in buying facilities and vehicles, internal guidance and training about products, technical guidance in operation and maintenance machines, equipments in the company; occupational safety and fire prevention

2.2.2.3 Sales department

Sales department serves the General Manager in organizing and managing business activities of lubricantss, petrochemical and other products to ensure achieving best benefits under the Government and field regulations

2.2.2.4 Investment-Planning department

The investment-planning department is in charge of planning and operating Short-term plan, medium-term plan and long-term plan Besides, the department manages, monitors and examines import and export process, inventory, raw materials and packaging The department performs import and export process as well as exchanges foreign trade, carrying out product insurance, organizing Statistical assignments and making periodic reports

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2.3.1 Overview of iubricants products

Lubricants is the product consisting of two major compositions: base oil and additives

Major application of lubricantsl: lubrication, bleaching, tightening, cooling, preservation, heat transmission and insulation,

Effects and properties of lubricants: In engines, lubricants is used to decrease friction between two directly-contacted components, heat releasing, cooling, tightening, avoid erosion and insulation However, the most basic effect of lubricants is to minimize friction, hence viscosity is the most important standard to define the quality of a lubricants product

Lubricants industry includes three major products:

as Lorries, trading cars and some engines of equipments and machines

e Industry oils: are oils used in industry, based on application purpose, there are transmission oils, industry oils, hydraulic oils, transformer oils, greasing oils and other specialized oils,

e Marine engine oils: used in engines, machines and equipments of ships and boats

Lubricants oil products in Vietnam: lubricants oil on domestic market can be fully imported, some are processed; some are produced or prepared in Vietnam, in which original compositions are imported Lubricants products in Vietnam can be classified into four major groups:

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when they reach higher living standard Oil for coach, trucks accounted for 56% and this is the largest market segment in consumption

e Engine oils: used for engines and diesel engines which accounted for more than 12% Especially in marine engines, producer sells by barrels with no trade

Production is the priority assignment concerned by the company The company strictly examines input materials to ensure product quality The products must be correctly sorted and qualified according to standards of the company In

2010, the company has achieved several results as the followings:

e To complete design and printing labels for barrels and cans of VIDAMO lubricants products

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