G1 00248 PHÁT TRIỂN CHIẾN LƯỢC KINH DOANH CỦA PVOIL VŨNG ÁNG GIAI ĐOẠN 2011 - 2015 DEVELOPING BUSINESS STRATEGIES FOR PV OIL VUNG ANG IN THE PERIOD OF 2011 - 2015

G1 00248 PHÁT TRIỂN CHIẾN LƯỢC KINH DOANH CỦA PVOIL VŨNG ÁNG GIAI ĐOẠN 2011 - 2015 DEVELOPING BUSINESS STRATEGIES FOR PV OIL VUNG ANG IN THE PERIOD OF 2011 - 2015

CONG HOA XA HOI CHU NGHIA VIET NAM

Độc lập — Tw Do — Hạnh Phúc

Kính gửi: Chương trình thạc sỹ Quản Trị Kinh Doanh đại hoc Griggs Hoa Ky tai Viét Nam

Truong Dai hoc Griggs

Lớp: GaMBA01.V0110

Thành phần nhóm 06: Nguyễn Trung Kiên, Bùi Đức Duy,

Nguyễn Viết Đức, Nguyễn Văn Hoa

Đề tài: Chiến lược phát triển kinh doanh Công ty cô phần xăng dầu dầu khí Vũng Áng

XAC NHAN CONG TY CO PHAN XANG DAU DAU KHi VUNG ANG

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER BUSINESS ADMINITRATION PROGRAM

CAPSTONE PROJECT REPORT

DEVELOPING BUSINESS STRATEGIES

FOR PV OIL VUNG ANG

GaiGcs) DEVELOPING BUSINESS STRATEGIES FOR PV OIL VUNG ANG

ORIVERSITY : IN THE PERIOD OF 2011 - 2015

TABLE OF CONTENTS PAE, OP CONTIN Toy acossancsstitinonn S8S/GIIUNG9:80138003HMHDSNG-SMGB40100686400103019380L-Ìdh-dGhhghddr0f,húgSANG00090300108 | LIST OF TABLES AND FIGURES concrsasenmeremanngrnp ncn ammenmananrmmanencsiians Sting 5 FRC Ga eeeeeeeeessereesersseeribiossanaaesoniotosnorniartstesrasapifilorssiMIIEES40400018 6 1; Background, the imporfance and ne6eSS1ty öŸ [iế FESERTGỦ sa senuanananeaosee 6

2 SUb†€€f nirổ pbDäÍ ðÍ tĨ|G T6SGHRECÏ ssessessseseesnsnnsl4Eack183.SSAAI590001 8190 gi 8Si-203N091-01000G77m 7

Š, REoearchi if†€tHiodb DĐ sesesesssessesssaseronas380S1434 45I-CDI Đ.100%380-1893000G29/02JEE-29.30n04 0u 7

Ắ SHUGTUE€ (0Ÿ HE TGĐBGÍ seosssessea Ho Hồi A0200 60 06) 981180L49111100 GI5-4Đ-90-MMSSIEP-LH0012000S06 3010119 7 ICAP TERR (12 snaenesosesssebotnnesebenlilveidBENGNE965151)S6.00MH08.0040095380/160./500586'0N1040-V/0H4:0/82000-901800.8000000g 8 THEORETICAL BACKGROUND FOR STRATEGY DEVELOPMENT 8 Lads EnốTHiEffl GP BDT sei insists meron yaeeronemnor nom aorionacsnnsemacniniamancnensinaansiseedeentmn anol 8 [ÀÌ: — Thế EGHEBSPE GÌ DUSiHCSS SG Ý sessassesesoenkemsdbesisill0riodtklbs4G/420 000 8 Lda, — The rơle ðÍ ĐLMIHCBS SWMÙ6SY sensieeseeuoadBriiakelateshiindtosuplessitegsisddrnin 9 l/l.5, Classification Of BUSINESS SHALEGY sccmascmnn cases emccmemen creme mms 9 Luiện Business strateey develơpiniBfil DFDUESã se mueenensodanmronoeesisssasAidieoazae 10 l.1, — lđemllytrp nússlons e6 sWfWäÍSk6l€ VAN seseensrsenassenenssmeeen 10 I.2.2 — External environmental analysis (PEST mođel) 10 1.2.3 Micro environmental analysis (industrial): M Porter’s 5 force II l2.Á — Irfểrmal comipanV thả ÌÏý§là s.uessssssessssnsortlonoiulliSidGhptotglssioGossgiisse 13 l3, - Stnt6ble PHARHTDssssssssessendtidianlidino/VLOSEEROCPDIHDG00S09W3M000000097Đ% 15

126, — Stữategy s6l6CUOH SHAÌYSÌSassasarnusmaaeensbkddeitiioieislrnegpiaroeeoksesase 15 bad Gtrntegl@ ñftirllls (0018 oni saeutsee te nghggtHiồi gia 2n890181050 0HP1g00208000000960101108003400030700 0007 16

| số da External Factor Evaluation CEP E) Matt iin wicssscnmnivnccnvawesnennnaaan nating 16 1.3.2 Internal Factor Evaluation (TPE) Matyi scmcncnsc.cccesvunnernommannomeraniiits 16

[Lê WO RI G=ceaense-enesesronnnunissraeroernoadthbosuti6HINGERĐEBH-ĐESSBSUSM098 17

134 Quatititative Strateoe Planning Matrix nummer mimmecmnaenanser 19

ANALYSIS OF THE FOUNDA TIQIN ccs cnr enmsmriee-savemn ae vances nin eokemnimantmancmnonnsiain 20 FOR STRATEGY FORMUL ATION OF PV OIL VỮNG ANG 20

II Intredwetion about PV OTL, Vie Amie seeeseeanseeassesgaaasensonliitasusiehtilđO0AERUE0S6 20 Zolal Introduction about PV OLL Viti® HE su«ceeeasseraoakiid0PiED0/06l0012105 188000120 00g 20 2> 2 (JyZaiöiấtioTiil EYUGDUTE ‹eeeeeossessenddankiaoEBPVIEIASB©NELEIEOT08130//0000907 E00 30618 8.0 od 2.1.3 Distribution network: A Rome 23 2.140 EWWTIETS GUE, SERV IOENG sree amen one esas ener nee an eimenepwons ecmumnmemenmncn 24 2,128 TOONS SESIOUT seer cxnmen nema enrner een emncncwmenomenmneunnnnea 24 Zod, AAI YSIS (DỀ DUSÌIESE GIIVIYGHIHBH L2 eeseeaedossseodkedasogesbaiieagirGoggiorstotgbirgel38/885-8000 25

ø se lY LIOTfG ĐHVIFUTHNGIHT sau se snatnnoindinlineoeenterantdftsininstosgertassussicsosimnuglldiEosi.M04405/6E0089 25 ZIxL LƯỚNÔfIil€ THẾ HO G! seeessssesaeneasesterontrosdtrsoostsassalogS(ÐEDg350J010NDENSIHSIOBI31E.ED6 23 2 1.3 PØliieäal afil [6EiHI THÍGfẩI xeuossssoa noaleiBoA si BiSNA5 B6EGĐNUIR H84 390.00001011G148 26

2, 0u Lụ2: GIÔIEI=GTYL.DHP] 2THGDTYEY sưa niaihiigGi20/000g0LL000L-NG Sứ g0NEGĐ90SiBBLIGI4056300010000010 6,300 29 Beer POR TOTS cer anon ermeenem errr euernne een mamas 28 otal sy LEEINNWOILIĐTGAI TRE genaaaeinketei 2iRdAntvddiNdionGifnhohihE1206/n3R2HHG0 298000.10.3018E 28 n5 10110T0(EIYVIGNTTGWLcesesssieddddlksbsiniaaohdlgbugtiuitsoagigaisgtesgooicggansodililusulit0fSGEESIEISI 29

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Viavensy IN THE PERIOD OF 2011 - 2015

7.7 53.1 SUBITBTE sada sen tưng EiesaeeesesauniekoeagtetorneasecghEĂiuodl3.NN30G.ĐIP NBE-JNE990/071 0.49040 29

D DD ck COROT, cá vers: pee crercaeye anny ym.cnsn scones int A GR at a AU em 30 2.2.2.3 Competitors In the IndUSLY: «se nhHhheeeereriie 30 3.2.3.4 Potenitial Corrip€LlfÔẨB .esesoesaiei4 010-160 000068 x0E2200104008400 04.18.000.014 0014 BE, l2 7 Ã EHDSÏtHEElEsoeeseeesniunnniasSNBI3I0150780 0710680889 050102ie2iEkinarhsiOrgoginsgliicolđ60 E82HIG040300 34 2.2.3 Opportunities and threafS oeieererrrrrredeitiiimaiirirn 34 2,2,3,1 OBPOT(UTĐS sua canebeermevasesaaasenaeieneisesgnsrnisukT44040/98 51881-704139.00974 34

A ee Bìa nh HN HAI 6A 496 11540401000068608088.cg,seosl f1 094 4800500330001HEA 48300/11/080-00001004 36 2.2.3.3 The EFE Matrix ofPV OIL Vung Ang he SY Diode Internal analysis of PV OIL VungAng cece eee eters 38 2.3.1 Internal factors .cccrssovesscacenseiennasanvassneres tần K0 14 6156034 508018 50-848800448438 38

2.3.1.2 Manufacturing and business ACtiVIUleS cee eee tte au 2313: METRE a cccsceranammeiannen inne wt arene prime names nnn ones AERA 003 130 0080814 a0 291A ÍTRVGSITTTBHELL va noena khicne te pgaarosrseasasesassoseghoEds SESIHE NGHI 80.01451003 ECO ao BAYS FACT BE na sa khai lay gang kh ngiêt nghi ii 062gennglT14088/9/0D18004i66 001200-DRRGE-I104240588 40

2 3.1.6 Huirian fEeSOUTCS , cceseeeereeeierboe i2 10880001000130000004396 6050 40760118.68/0383.t093 km0 6 40 3.3.1.7 Fineahnclal Á CCOUHHUTTE sooeeenessssitiB số G66 H6 g5 tớ x645450413/6 206163)00A0162naa/ 003.480 40 B31 8 OF CCB ssseeendrdeeaad GhnhdSE BIGUEELIIGG GRS k289/80, 0009201001.05808400 ag-sdssn0/lifohkZb/ff6i30000003048 4I 2.3.2 Strengths and Weakness€s cằhhhhrernrrrrrrndedrirrdriien 4I 5.3.2.1 SifEDELHB sosssseannae th nginiggnnisngsresstiereokofgkeroterrnargvlAORDĐIAI T9 184 30% M802 9-0511 4I

DF 5D WRC SCS css acr nes newni yenresisnasssannnananiibonsl nine NHI 8GI0/49:40A.0).g500/860 06117030//6 42 2.2.3.3 The IEFE Matrix ofPV OIL Vung Ang .- ccehheeeheh 42

Si SWOT and QSPM Matrices ofPV OIL Vung Ang .- - 43

2 4.1 The SWOT HT se-oceeeeBnBtinga-rainogidiivno gi rengps seiiskesosdrnsipgassii 38, IAI80L/00 43 2.4.2 The Quantitative Strategic Planning MatrIX .-cen 46

STRATEGY SELECTION AND IMPLEMENTATION SOLUTIONS 48 COP PW GIL, NUNG AT bá caeesseaeaneoseanaassosesseE1848883N200008-)8520306 r6 to snitargi)ai/0HA1080380H0080 48 3.1 Development đirection in the next period oŸPV OIL Vung Ang : 48 3.2 Selection Of StFat€BICS cong ngghHge 49 3.2.1 Selection of strategies according to SWOT and QSPM matrices 49 3.2.2 The selected strategies ofPV OIL Vung Ang -ree 49 3.2.2.1 Market expansion Strategy? oo eee teeter cnt e renee tenet ntenes 49 3.2.2.2 Forward intepration SIra[CBVY cceehhhhrrhrddenrderiiirrrirrrr 50 3.3 Stralepie SDÏUUÍONS eeceeeeesssesisDeDBLiESvekiisigsnboiannleeseikiorisapTesesst48761 50 3.3.1 Marketing soluiO'S cha nhá n0 m trà He te tr00 50

Š 5 3 Inr06sftffief ebÐ|U[[OHS: caaeagaesA Han ceensis serene mncsaeierin amnnennnnnie l4 ie mr teh wR 5S] 3.3.3 Technological Solutions .c:ccscesecseeeneeneteestesnsensessenseesenseneraeteeneraeens 53 9.3.4 Hemant TesOurc’ SOLUTIONS 1a seesseiaaesaenessesk038-1830033 1469400049495 200-460 ere bees aD 3.3 5 TinnricTaÌ S0ÌG[HHE sueaeeeannaaaksssespassadlkBAS4/01118001304 aa pneaite sa 000.360 pom 0008 54

°42)15:300)1/ 577 ẽ 1 58

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DEVELOPING BUSINESS STRATEGIES FOR PV OIL VUNG ANG

Appendix 6: The major projects of Quang Binh province that are highly related

to BasOline CONSUMPTION csecnereseersseesererereersneneesaennensncnersenenesnencnnenenmeneeteet 62

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GaiGes) DEVELOPING BUSINESS STRATEGIES FOR PV OIL VUNG ANG

Saas IN THE PERIOD OF 2011 - 2015

PetroVietnam Oil Corporation Viet Nam National Petroleum Corporation Lao People's Democratic Republic

Strengths, Weaknesses Opportunities and Threats - a popular business analysis model

Diezel Oil

Kasosen

Fuel oil PetroVietnam Oil Processing Distribution Company Deadweight tonnage

Official Development Assistance Consumer price index

International Organization for Standardization External Factor Evaluation

World Trade Orgnization Internal Factor Evaluation Financial Strengths

DEVELOPING BUSINESS STRATEGIES FOR PV OIL VUNG ANG

GRIGGS NI IN THE PERIOD OF 2011 - 2015

LIST OF TABLES AND FIGURES Figure 1.1 F.David’s Model of Strategic Management

Figure 1.2 SWOT Matrix

Figure 1.3 ~ Internal - External (IE) Matrix

Chart 2.1 | Organizational chart of PV OIL Vietnam

Chat22 - Organizational chart of PV OIL Vung Ang ˆ

Table 2.1 Income statement of PV OIL Vung Ang

Table 2.2 Petroleum storage port system in North Central

Table 2.3 External Factor Evaluation (EPE) Matrix of PV OIL Vung Ang

Table 2.4 Internal Factor Evaluation (IFE) Matrix of PV OIL Vung Ang

Table 2.5 | SWOT Matrix of PV OIL Vung Ang

Table 3.1 Business plan from 2011 to 2015 of PV OIL Vung Ang

Yable 3.2 Investment plan for period 2011 - 2015 of PV OIL Vung Ang

Table 3.3 Labor and Income plan for period 2011 - 2015 of PV OIL Vung Ang |

“Table 3.4 Financial plan for period 2011 — 2015 of PV OIL Vung Ang) | |

Table 3.5 Process of implementation solutions of PV OIL Vung Ang s

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JIL

ane IN THE PERIOD OF 2011 - 2015

INTRODUCTION

1 Background, the importance and necessity of the research

Oil and gas are vital energy resources for both global and national economic development In recent years in line with economic development, the importance of those fossil fuels to every economic activity has been growing significantly

Since 2010 the petroleum industry has been regulated under the provision of Decree 84/CP of the government The active role of nodal enterprises has offered petroleum companies various opportunities of development As the business regulation has still been transforming the company will have to face unexpected changes of the market while state agencies consistently pursue the implementation of the Decree, enterprises and customers have to adapt to price fluctuations accordingly

The government has created a series of state-owned enterprises taking part in import and export, disseminating the monopoly of already invested enterprises with long history of business, giving first time import businesses a new position and emphasizing on the advantages of invested enterprises in a new perspective in the market economy

Besides the industry has established competitiveness among companies step by step, thus creating necessary social costs and appropriate profitability for petroleum business

In the making this trend will provide oil and gas from nodal ports to consumption area through shortcuts, with the cheapest mode of transportation and through the least immediate processes, thus bringing about benefits for the whole society

PV OIL Vung Ang is a company invested by PetroVietnam Oil Corp (PV OIL) with Vietnam Oil and Gas Group (PetroVietnam) being the authority in charge The establishment of PV OIL Vung Ang aims at providing oil and gas to the North Middle Coast and part of Laos

Devising business strategy for PV OIL Vung Ang is necessary to define suitable strategy for the company thus making its name on the market of the North Middle Coast and Laos as well as contributing to economic development in the North Middle

Coast

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Gr eo) + 3X3 DEVELOPING BUSINESS STRATEGIES FOR PV OIL VUNG ANG

SWAB IN THE PERIOD OF 2011 - 2015

2 Subject and goal of the research

The subject of the study is PV OIL Vung Ang company in terms of human resources, capital, advantage in the industry and assets of the business: information about customer, suppliers competitors products, etc

Research goal: Founded on general theoretical research on business strategy and overview of Vietnam's insurance environment this paper focuses on the analysis of the business environment current changes on the field and major development trends

of this market Then it recommends needed strategies for sustainable development of the PV OIL Vung Ang company in order for it to become one of the leading businesses in the field of petroleum industry in the North Middle Coast of Vietnam

3 Research methodology

The main methodologies used here are analytical, theoretical comparative, synthesis, and prediction methodologies based on data, the actual situation of the company and market research reports from recognized competitiveness evaluation organizations in order to find specific solutions for the company under certain circumstances

We also employ analytical techniques theories of SWOT matrix (model of Strengths Weaknesses Opportunities and Threats) [E model (model of internal and external factors of the business), as well as Porter's Five Forces Analysis

4 Structure of the report

Chapter 1: Theoretical background for strategy development

Chapter 2: Analysis of the foundation for strategy formulation of PV OIL Vung Ang Chapter 3: Strategy selection and implementation solutions of PV OIL Vung Ang

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DEVELOPING BUSINESS STRATEGIES FOR PV OIL VUNG ANG

1.1.1 The concept of business strategy

lhere have been numerous perspectives in which business strategy 1s viewed as an art:

- Alain Threlart states that “Strategy is an art which the enterprise use to fight against competition and win.”

- Michael Porter states that “Strategy is an art of creating firm competitive advantages to defend oneself”

These authors view business strategy as an art of competing in the market and developing the company

In management perspectives, business strategy is a form of plan

- G Arlleret claims that “Strategy is the definition of roads and means to reach to

an established objectives through policies.”

- D Bizrell and the groups of authors define strategy as “an overall plan leading

or directing the business to its desired target It is the foundation for the determination

of policies and operating approaches”;

- Glueck defines that “Strategy is a unified, comprehensive and integrated plan designed to ensure that the basic objectives of the enterprise are achieved.”

of resources necessary for carrying out these goals

In particular, “business strategy is the art of organizing and managing resources for the purpose of accomplishing the enterprise’s long-term goals in accordance with changing business environment and competitiveness.”

G il sues DEVELOPING BUSINESS STRATEGIES FOR PV OIL VUNG ANG

The aim of business strategy is to distinguish a company’s position in relation to its Competitors so as to reposition itself, and to decide whether to operate in a different way or take different actions from those of its competitors

1.1.2 The role of business strategy

- Business strategy helps companies define its goals and direction as a base for its business

- Business strategy assists companies in determining and grabbing opportunities as well as being active in dealing with threats in the market competition

- Business strategy contributes to effective resource use, improvement in competitive position, and guarantee for its sustainable development

- Business strategy establishes well-grounded foundation for policy-making and decision-making process in accordance with the market's ups and downs

1.1.3 Classification of business strategy

e Cost-leading strategy: A series of activities aimed at producing products and services with acceptable attributes and the lowest cost which equals to that of the counterpart of competitors

In order to implement this strategy, a business needs to take cost reducing actions: building scale effective facilities, closely monitoring manufacturing costs and management costs minimizing costs of sales, R&D and services

e Product differentiation strategy: When using this strategy the company should take appropriate actions to produce products and services (with an acceptable price) that customers view as different, and that difference matters to them

e Focus strategy: price segmentation; differentiation segmentation

To implement this strategy, the company has to take basic and supportive actions In

an excellent way to create and maintain competitive advantage and achieve a higher than medium profit

Grice) DEVELOPING BUSINESS STRATEGIES FOR PV OIL VUNG ANG

avert IN THE PERIOD OF 2011 - 2015

1.2 Business strategy development process

a statement of the company to the society

1.2.2 External environmental analysis (PEST model)

Economic environment

Economic environment significantly affects operating policies of businesses Macroeconomic growth leads to changes in industry and business growth Companies have to devise alternative policies in case the health of the economy goes down

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DEVELOPING BUSINESS STRATEGIES FOR PV OIL VUNG ANG

IN THE PERIOD OF 2011 - 2015

Conversely they also need to preserve necessary resources to boost their growth when

the economy revives

Fundamental factors of macro economy are economic growth interest rate exchange rate and unemployment rate

Technological environment

Technological environment offers both opportunities and threats to companies New technologies always bring about new competitive products with lower prices A technology boom may press pressure on businesses to improve their technological level in order to produce highly competitive products

Socio-cultural environment

Socio-cultural environment encompasses set values of ethics way of living conventions academic level etc in relation to attitudes towards culture and social values This environment varies with times Changes in socio-cultural environment can pose threats or offer opportunities to companies

Natural environment

Natural environment includes factors involving natural properties such as climate, soil, region, mineral, geographical position, etc Those factors can either directly or indirectly affect the business of companies

Political — Legal environment

Political and legal factors also deeply affect the degree of influence of opportunities and threats of the environment The focus of this segment is the way by which companies can have an impact on government, and vice versa If continuously changing this segment would have considerable effect on competition

1.2.3 Micro environmental analysis (industrial): M Porter’s 5 force

Bargaining power of suppliers:

Suppliers can claim their power by threatening to increase prices or reducing quality of products or services Therefore they can diminish profit of an industry when that industry is unable to cover increased production costs

Bargaining power of customers:

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Guo) DEVELOPING BUSINESS STRATEGIES FOR PV OIL VUNG ANG

Ván mAd vo, IN THE PERIOD OF 201] - 2018

Customers create a pressure that can directly affect the entire business activities

of the industry Customers are divided into two groups: Individual customers and distributors Both groups can add pressure on the business in terms of price product quality accompanying service and they are the driver of competition in the industry through: scale level of importance customer switching cost customer information Threat of potential competitors:

According to Michael Potter, the potential competitors are businesses that have yet appeared in the industry but may affect it in the future Whether the number of potential competitors if high or low their effects to the industry is strong or weak will depends on the following factors

+ The attractiveness of the industry: this factors shows through the criteria such as: return on investment, number of customer, number of business operating in the industry

+ The entry barriers: are factors that make the entrance into an industry more difficult and costly

Threat of substitutes:

Substitute products and services are products or services that can satisfy the need

in a similar manner to the products or service in the industry

Competitive rivalry within an industry:

The businesses within an industry will directly compete with each other and create pressure to the industry and the urge to compete In an industry, the following factors will increase the competitive forces on other competitors:

+ Industrial situation: Demand, rate of growth number of competitors

+ Industrial structure: the industry is concentrated or spreading out To the concentrated industry there is only one or several businesses that hold the ruling position (directing the competition - can be considerer as monopoly) To the spreading industry there are many businesses competing with each other but there

is nO one capable enough to rule the others

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DEVELOPING BUSINESS STRATEGIES FOR PV OIL VUNG ANG

or planning commitment

1.2.4 Internal company analysis

Internal company analysis is the examination of the major factors such as: maiagement marketing human resource finance accounting research and development manufacturing ~ operating and information system

- Organizing: includes all management activities that establish the structure of comection between authority and responsibility The specific tasks are: designing organization, specializing, describing tasks, specifying task, expanding authority, unring order coordinating in arranging and designing tasks and analyzing tasks

- Leading: includes efforts to navigate the human behaviors, i.e leading, comecting teamwork, changing the assigned activities, enhancing performance quaity fulfilling task requirements satisfying demands, changing the organization and working spirit of staff and managers

- Controlling: relates to all management activities that serves to guarantee the actial results would match and be consistent with the planned ones The major activities are: examining quality, controlling finance, selling, managing inventory anayzing changes and compensation

Griccs) DEVELOPING BUSINESS STRATEGIES FOR PV OIL VUNG ANG

Human resource Management:

Human resource management plays an important role in the process of implementing the strategy Human resource activities include: recruitment, interviewing examining, selection, orientation career development, relation management, performance appraisal promoting, compensation, demoting and laying off

Finance — accounting:

Finance — accounting are the activities related to the funding and consuming the business financial resource in each period, keeping business account in all the stages of operational process The financial condition is generally considered the best indicator

to evaluate the competitive advantage of a business and it is usually the best motivation to investors

Research and development:

This activity has an essential role in identifying and applying the new technology

in time to create competitive advantages on the market such as: developing a new product before competitors do enhancing product quality, improving — the manufacturing process to cut down costs

DEVELOPING BUSINESS STRATEGIES FOR PV OIL VUNG ANG

Based on the information of the current business situations internal environment

of organizational strengths and weaknesses as well as the external factors that create the opportunities and challenges the business formulates its own strategic business plans Strategic business plans have to be clear and directional in order to achieve the objectives through each stage

The steps to develop a strategy:

(1) Identifying the functions and objectives: This step points out the role nature and the function of the business It shows the main business activities of the organization It also recognizes the effectiveness of each activity: which are the most effective which are potential, which are perfunctory yet uncertain, which are ineffective or at a low level of effectiveness but have to be maintained

(2) Evaluating the external environment: It points out the role and nature of evaluating the external environment, the content and tools of evaluation

(3) Evaluating the internal environment: this steps shows the nature of evaluating specifically each part or management section related to the business activities of the organization

(4) Analyzing and formulating strategies: this step is completed by using the models, analytical tools to qualify and quantify in order to decide on the suitable strategy for the organization

1.2.6 Strategy selection analysis

From the proposed reasonable strategies, enterprises need to analyze and select the optimal strategy Based on the identified goals and objectives to select the optimal strategy, enterprises should sacrifice some short-term or less important objectives to accomplish some long-term objectives which create the condition and foundation for the enterprise's sustainable development

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Strategic analysis tools

External Factor Evaluation (EFE) Matrix

EEE Matrix is a tool to summarize and evaluate a business’ external information

such as economic, political, legal natural, scientific - technological factors There are five steps in developing the EFE Matrix:

(1,

(3)

(4)

The first step is to make a list of factors that have decisional roles to the success

as defined in the process of reviewing external aspects, including opportunities and threats to the organization:

Assign weight: in this second step, each factor will be assigned a weight of importance from 0.0 (not important) to 1.0 (very important) This assortment reveals the appropriate importance of those factors to the business success of the organization The total value of the weight for all factors must be 1.0:

Rate factors: Assign a rating between | and 4 to each factor that decides the business success to show how the current business strategy responds to that factor given that 4 = the response is superior, 3 = the response is above average,

2 = the response is average and | = the response is poor;

Multiply “Weight of importance” with “Rating” of each factor to obtain the weighted score for each factor:

Add all the weighted score for each factor to identify the total weighted score for the organization

No matter how many opportunities and threats are included in the EFE matrix, the total weighted score will reach the highest at 4.0, lowest at 1.0 and average at Bae The total weighted score at 4.0 suggests that the business has been responded positively to the opportunities and threats in its environment The total weighted score

at 1.0 reveals that the strategies formulated by the business can not take advantage of external opportunities or avoid external threats

1.3.2 Internal Factor Evaluation (IFE) Matrix

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DEVELOPING BUSINESS STRATEGIES FOR PV OIL VUNG ANG

(1) List all the factors analyzed in the internal analysis Use the internal factors mainly including strengths and weaknesses

(2) Weight of importance: assign a weight of importance between 0.0 (not important) and 1.0 (most important) for each factor This assortment shows the importance of each factor to the company’s success within the industry The sum

of those weights should be 1.0:

(3) Rating: Rating from | to 4 for each factor representing the biggest weakness (rate

at 1) the smallest weakness (rate at 2), the smallest strength (rate at 3), the biggest strength (rate at 4):

(4) Multiply the “weight of importance” with the “rating” of each factor to calculate the weighted score for each factor:

(5) Add all the weighted score for each factor to identify the total weighted score for the organization

The total weighted score of all factors can be categorized from the lowest level at 1.0

to the highest at 4.0 and average at 2.5 The total weighted score lower than 2.5 indicates that the business is internally weak The total weighted score higher than VẶT, indicates that the business is internally strong

1.3.3 SWOT Matrix

SWOT is the abbreviation for 4 letters: S (Strengths), W (Weaknesses), O

(Opportunities), T (Threats) SWOT helps analyze a strategic tool, review and examine the position of a company or business project SWOT is suitable for working and analyzing in group, and it is used in creating the business plan, developing strategy, evaluating competitors, promoting and developing products and services Strengths and Weaknesses are the internal factors of the business while Opportunities and Threat are the external affecting from outside

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opportunities

List all the fe strengths in

Defensive statics to Utilize strengths to avoid minimize weaknesses and | or minimize the impacts avoid external threats of external threats

Threats (T) List all the threats in order

Griggs) DEVELOPING BUSINESS STRATEGIES FOR PV OIL VUNG ANG

Nay nEV IN THE PERIOD OF 2011 - 2015

1.3.4 Quantitative Strategic Planning Matrix

Quantitative Strategic Planning Matrix - QSPM uses the in-put data trom the above analysis (mentioned in the previous chapters) to help strategists subjectively determine which strategy in a alternative set of strategies 1s the most appropriate for the company to pursue in order to successfully accomplish its objectives

Table 1.5 Quantitative Strategic Planning Matrix

It should be noted that QSPM shows the comparative attractiveness of the alternative strategies: and more importantly it provides subjective bases to consider and determine the most appropriate product strategy However, QSPM also has some limitations and it must have certain conditions to be used in practice One of the biggest drawbacks is that in the process of developing the matrix, intuitive judgment is required to give the factors the attractiveness score - although based on the environmental analysis information conducted before Therefore in order to effectively use QSPM, strategists are required to discuss thoroughly and reach a consensus on each number in the matrix by adding scoring bases in the attractiveness

score column

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DEVELOPING BUSINESS STRATEGIES FOR PV OIL VUNG ANG

2.1 Introduction about PV OIL Vung Ang

2.1.1 Introduction about PV OIL Vung Ang

Vung Ang Petroleum Joint Stock Company (PV OIL Vung Ang) is a joint stock company established under the Resolution No 1625/NQ-DKVN of Vietnam Oil and Gas Group (PetroVietnam) on 29/05/2007 The company operates under the business registration certificate No 28.03.000416 granted by Department of Planning and Investment of Ha Tinh province on 20/07/2007

The company was established to make its investment strategy in Vung Ang oil depot Project in Vung Ang economic zone in Ia Tinh province with scale of 60.000m°*

in the first period and the Project will expand further 50,000m° in the second period

Its functions is to store distribute the products of the oil refineries of PetroVietnam serve the demand of consuming petrochemical products in the North Central region and supply for the petroleum market of the Lao People's Democratic Republic

Charter capital: 100 billion dong, with shareholder structure:

PetroVietnam Oil Corporation (PV OIL) PetroVietnam: 56.5 billion dong approximately 56.5%;

PetroVietnam Northern Gas Joint Stock Company (PV Gas North)

(PetroVietnam Gas Corporation, PetroVietnam): I0 billion dong (10%)

Ha Tinh Minerals and Trading Corporation (MITRACO): 10 billion dong (10%)

Other shareholders: 23.5 billion dong (23.5%)

Address of head office: 417 Tran Phu St., Ha Tinh City

DEVELOPING BUSINESS STRATEGIES FOR PV OIL VUNG ANG

- Action guideline: PV OIL dares to think and dares to do; the company dares

to take responsibilities and make on-time decisions

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% ` : DEVELOPING BUSINESS SERATEGIES FOR PV OIL VUNG ANG

CHIEF EXECUTIVE OFFICERS |

RELATED COMPANIES OF CORPORATION

|

SUBSIDIARY | | MEMBER AFFILIATED |

COMPANIES — , COMPANIES COMPANIES |

DEVELOPING BUSINESS STRATEGIES FOR PV OIL VUNG ANG

IN THE PERIOD OF 2011 - 2015

PV OIL Vung Ang Company is a subsidiary of Vietnam PV OIL

Chart 2.2 Organization chart of PV OIL Vung Ang

FINANCE INVEST PRODUCT OFFICE —

ACCOUNT ome Aa “MENT ane -MENT and

DFP DEP

PETROLEUM, NGHE AN QUANG OIL pauline

DEVELOPING BUSINESS STRATEGIES FOR PV OIL VUNG ANG

storage capacity of 60.000m*, OL oil — import and export harbor - LPG 15.000DWT cver 20 oil — stores member, over 100 general agents and agents, and it consumes ebout 120.000m°* petroleum per year

2.1.4 Products and services:

The main products and services of PV OIL Vu

ing Ang includes:

- Services of transporting petroleum products and petrochemicals

ie Net sales from goods and services 197,564,193,048

4 Cost at puns Role (COGS) 193.725.909.015

8 Gross profit from sales of

2.2 Analysis of business environment

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Ni IN THE PERIOD OF 2011 - 2015

More than 2 years after the financial crisis in 2008 Vietnam has achieved stable economic growth which has strengthened the position of Vietnam as one of the fastest

growing economy in Asia - Pacific and become a middle — income country with GDP

per capital of $1.200 in 2010 GDP growth rate in 2009 and 2010 was 5.23% and 6.78% respectively During first months of 2011 Vietnam has remained high economic growth at 5.43% in first quarter and it is estimanted to gain 5.6% in the first half of the year

(Source: Ministry of Trade and Industry)

However, the continous fluctuation of price on Gold and Petrol may reverse out

of forecast of many countries which has affected their economies

Vietnam hasn`t escaped from the crisis with high bank interest rate, high inflation and reducing economic growth in comparison with previous years It is estimated that in 2011, many enterprises especially import enterprises would encounter many difficulties due to high inflation at 16%, high bank interest rate and unstable rate of VND With the lending interest rate fluctuating from 22% to 297 Th would be difficult to invest or broaden business

In the context of high inflation, high interest rate, unstable rate of VND, Vung Ang PV OIL has overcomed, stablised and developed which strongly affirms that PV OIL Vung Ang is a well-known brand in Central provinces

2.2.1.2 Political and legal factors:

Vietnam is considered to be a stable environment compared with other countries in the region Political stability, along with the macroeconomic policies of Vietnamese Government creates comfortable condition for investors to invest in Vietnam The political stability and solutions to the East Sea - dispute through peaceful negotiations and attractive investment policies in oil and gas sector have helped Vietnam to get the new oil fields exploited

Gas and Oil price stabilization fund is formed and operates under the mechanism with specific guidance on the management, usage, accounting to meet the practical requirements in terms of removing subsidies, offsetting losses, and the

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gasoline prices will follow the market price mechanism in accordance with international economic integration for the common objective of price stability, inflation restraint From 2010 up to now, the domestic oil price would increase higher and more frequently if there is no Price Stabilization Fund

For example if we had not use Stabilization Fund in the past Lunar New Year

2011 the petroleum price would have been adjusted to increase about 700 to

|.200VND/liter, kg, depending on each type, and we could not stabilize the price until (2/24/2011 and the new price adjustment increased about 3,510 to 5.850 dong / liter

kg but not 2.110 to 3.SS0VND/liter, kg Furthermore, if there is no Price Stabilization Fund we would have to adjust domestic oil prices continuously, for example: from 10/22/2010 until 02/24/2011 we would have to increase the petrol price of at least four times corresponding with the increase in the use of Petroleum Price Stabilization Fund (Source: Ministry of Finance)

The government has carried out suitable policies so that all petroleum enterprises are equal and the wholesale enterprises can themselves determine the price

at market prices which is approved by the Ministry of Finance

Besides the Government has decided to audit the petrol price at Petrolimex in order to make a healthy and transparent oil market and create equity markets for trading businesses

2.2.1.3 Socio-cultural factors:

Our economy is growing and the Government has policies to promote industrialization and modernization, infrastructure development, industrial parks, and raise people’s living standards When people's income increases, demand for procurement will increase For the concept and culture of Vietnamese people the procurement of vehicles such as cars and motorcycles is an indispensible need following living expenses

Basing on survey results, the researchers has predicted that our country's population in 2019 would be 95.3 million people 102.7 million in 2029 and 108.7

Grics) DEVELOPING BUSINESS STRATEGIES FOR PV OIL VUNG ANG

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The North Central Province has a long coastline; the residents here have a long tradition of fishing Due to the strategy of economic development on the exploitation

of sea products, ports, tourism the petroleum demand for fishing vessels, cargoes and vehicles will increase

Mountainous areas of North Central Provinces are being invested to develop forest economy, tourism, mineral, then demand for petroleum would be much larger However difficult mountainous terrains together with desynchronized traffic lead to higher transportation costs and petrol] networks’ limitation

The North Central provinces with frontiers near Laos and many border gates, then, relevant agencies should control illegal oil export to ensure supply and petroleum market in the region

2.2.1.5 Techonological factors:

The development of scientific and technological fields as well as the application o? science and technology into practical production activities of enterprises has brought about many economic benefits

With the tank system pipeline system using advanced technology will help to economize investment costs, maintenance, operating personnel fuel consumption

DEVELOPING BUSINESS STRATEGIES FOR PV OIL VUNG ANG

2.2.2 Micro environment

Current situation of the petroleum market in the region

Statistical data on fuel consumption in the provinces of North Central regions

shows that:

_ Diesel accounts for a very large proportion, up to 54.9% of total petroleum;

- Gasoline accounts for 34.8%:

- Mazut makes up for 4.7%;

- The remaining is 2.7% of kerosene and jet fuel 2.8%

Due to the fact that the regional economy is mainly agriculture, forestry and fishery the amount of diesel consumption for waterways vehicles (fishing, waterways transportation) forestry exploitation, irrigation agricultural tools, accounts for a large proportion In correlation with the formation and development of new urban areas, industrial zones, fucl consumption for cars and motorcycles also increases Many factories and plans use mazut as burning fuel in furnaces (production of steel, cement ) Currently, provinces such as Nghe An, Ha Tinh and Quang Binh are iritially prospered on economic structure transformation, rapid development of irdustries in mining, forestry and aquaculture products The industrial zone 1s

h ghlighted in the picture of socio-economic development of provinces in the region

According to the data of Petrolimex, the main petroleum — supplier in the North Central the market share of Petrolimex accounts for over 75% Besides there are any other enterprises are petroleum suppliers for Ha Tinh and surrounding areas sich as Military Petroleum Corporation, Vietnam Oil Corporation (PV OIL)

GaiGes) DEVELOPING BUSINESS STRATEGIES FOR PV OIL VUNG ANG

Currently there are some suppliers in the region such as Petrolimex, Military Petroleum Joint Stock Company PV OIL

on PV OIL Vung Ang in terms of discount, delivery terms, payment terms

2.2.2.3 Competitors in the industry:

Vietnam National Petroleum Corporation, known as Petrolimex, was established on 12/01/1956, it owns 1.500 petroleum stores and 5.000 dealers accounting for 55% of Vietnamese petroleum market share, equivalent to 7.5 to 8 million m’

Petrolimex is an enterprise with long development history, large storage port, and a large and powerful petroleum retailer system located on beautiful positions with convenient transportation such as Highway No.1A, provincial roads

Military Petroleum Company was established in 1965 with 60 petroleum stores and over 70 agents

Vietnam Petroleum Corporation - PV OIL was established on 03/06/2008 based

on the mergence of the two units: Vietnam National Gas and Oil Group (PetroVietnam Oil Processing Distribution Company ~ PDC) and Gas and Oil Trading Corporation - PETECHIM Although PV OIL has just entered in the petroleum market later than other enterprises, it takes the advantage of a member unit of PetroVietnam which has

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