G1_00288 XÂY DỰNG CHIẾN LƯỢC KINH DOANH CHO CÔNG TY CỔ PHẦN INOX HÒA BÌNH GIAI ĐOẠN 2012-2016 FORMULATION OF BUSINESS STRATEGY FOR INOX HOA BINH JOINT STOCK COMPANY IN THE PERIOD 2012-2016

G1_00288 XÂY DỰNG CHIẾN LƯỢC KINH DOANH CHO CÔNG TY CỔ PHẦN INOX HÒA BÌNH GIAI ĐOẠN 2012-2016 FORMULATION OF BUSINESS STRATEGY FOR INOX HOA BINH JOINT STOCK COMPANY IN THE PERIOD 2012-2016

CAPSTONE PROJECT REPORT

FORMULATION OF BUSINESS STRATEGY FOR INOX HOA BINH JOINT STOCK COMPANY

IN THE PERIOD 2012 — 2016

Group number: 07 Student’s name:

Dang Hai Nhu Khong Thi Hang Trinh Trung Nghia Luu Dinh Dai

HANOI 2012

To: Global Advanced Master of Business Administration Program,

Griggs - Andrews University

ETC — Vietnam National University, Hanoi

Subject! CONFIRMATION OF USING DATA FROM INOX HOA BINH JOINT STOCK COMPANY on Capstone Project Report of Group 07 -— GaMBA.MO0310 — Griggs - Andrews University

- Inox Hoa Binh Joint Stock company would like to confirm the full support for Group 07 - M0310 class when the group members performed the capstone project

We wish all members of Group 07 would achieve high results in the graduation exam and ETC - Vietnam National University, Hanoi and Griggs - Andrews University (United States) would develop more and more in the future

f i, “ng Pal

( Vietnam National University, Hanoi for offering a practical, useful, and interesting )

<2 Binh joint-stock company facilitated our data collection and survey to complete the ) à

Nk capstone project report

= ( We would like to thank our family, colleagues, and friends for help, support and \

yy) We are committed this capstone project report has been written on our own effort (a

đồ đc 4 Dang Hai Nhu — Team leader

-_ “et =

TABLE OF CONTENTS COVER PAGE

CKNGVWLUENGEMETN.H3+444a qddeieddduioiudedoanauyuee 2 TABLE CO GÓT EN TT nggudaeaeaoadeadaoecsbiovbi061110400005606642666116866036066140k66660061ã06 3 L0 CE ÁN KV eeeeỏteessurdtrtterurtqhcereetiindritrduldanitvvertitoinfirtoworres 7 LIST ỌQE TA BE dau da tt ci6ả624464564466254443366ã636ãc:35832.e664 8 [0 ý 9 3y ( 2072220 nu 1 1 1 " 10 2/79/27 T0 gyựờẽ3n 51 , 1 ' 1.117 11

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Z Objective anid SG0 pe OF THE SHUEY wisccsiscsoxcnsoncesvenseeanccnesnnnnnnienasamnisesaweannnoncaeunnsesie 12

3 Methodology of the $tUdy - - - -Ă + S3 nọ nọ na 12

Š SrUEliie 6Ý Chè CHÐSGOHG DẫGIBE auto dattittig115630584304053960596044466900ã0606/4020488 12 Chapter 1 THEORETICAL BACKGROUND .GGSĂSSSĂSnSẰ°SSeessesse 14 1/1 TRE €øiicèept aHd röle GỀ B”—SHHCšš SÚYÄ KÝ các con b ái 0d A05 114666 c 2g 6ãng 14 1,1„1 K0Nfept:df DU“IHESS SIHHEUV ucoccenoriiienioedidianisoretiiboliitisstodl0gg(240466635 14 1.1.2 The role of business StFat€g Y - - - - SH nga 15 k.2, Foriilaltii DũSHSS SHHLSEE do ddeudaodggiikoiltGiG1410611096X690600646000191024485442688 15 1.0 c.20NEIVNIX:GIẾ OUẾNNENWE GHI HNHHDUDEGsaaaneiadiaeiceroannidiitieonnoilaessEkogasanssifoSgi28) 15 1.2.1.1 Analysis of macro enVironmernt - - - «<< xxx ng ng vn l6 1.2.1.2, Analysis OF GUSH Y 6úVHGHHHĂGsocoiccieiooniibioobiss.2111404051666504á340ãdg686 18 1.2.2 Analysis and evaluation of the firm`”s internal - «<< ««ss+<<>sss 2I 1.2.2.1 Analysis of the enterprise’s internal factors according to the fields of DUSHIESS GOIN RUIN sess ssssssansceasocecissennmnoncennvermmemecnupunrneswuniassionatunenieipiieaees 22 1.2.2.2 Core competencies and competitive advantages of the enterprise 26 L.2.d; otratesy anal YSIS and CHOICE sisiscisiccimarcnmminimnnnionnmmman 27 1.2.3.1 Technique of analysing business strategy orlentatlons - 27 1.2.3.2 Selection of business strategy for the Íirm 5c Ăsssssvevsess 29

Chapter 2, FORMULATION OF BUSINESS STRATEGY FOR INOX HOA BINH JOINT STOCK COMPANY IN THE PERIOD 2012 — 2016 31 2.1 General introduction of Inox Hoa Binh joint stock company .- 31 2.1.1.:General information about the COMPANY cccsciosscissaccssesccssscaseoossescsssacamausesie 31 2.1.2 The process of establisnment and deveÌopmen1 - - s<<<<<xss+ 3] Z7: 80506 " ' za tt Gai Gan Ghia\GtAiAd4@GsftGusiana 33 l1 K-KWHIDMHV:S TIEEENNEDHE caoccecesccoennoinoitaasiipioliissgavdigsseibokadkigsgdui00/62061586301”966548 34 2.1.4.1 The concept of stainless st€eÌ -< 5-1113 vn ngưkg 34 2A AZ: THE COMPANY'S INAIN ffODDCEudddaadandoovatuidaodGtid666s8506302xs8382s6ssg1 35 n1.5‹ KP Ø8nriiza4tlondl HH EEosaeeeeeneoaanasereriaieergseeii0000025600001094456614406640060610y6 35 2.1.6 Development orientation of the Íirm << Sky 36 2.1.6.1 The Mission Of We TM caisson 36 21.6.2 Lhe strategic objectives Of C6 TIM scisssussssovsncsuxncasnnenssnrenssnnnnsnsnoneenunevenss 37 2.2 ANALYSIS OF DUSINESS CNVIFONINOIN ceccsicccncmrcncnuiriimncmmnmarciamare 37 266,120 {VS1S 0V TiMGtD 6HWITOHHIEHEccvocsveoeeiiiokeoiiiciEgividilLAEEL615806k684/20015 446-036 37 2.2.1.1 Political, governmental and legal environmeit . - ««- 37 20:1: ĐCDfDITDC EIIVITORHIHEDE caiioicbnadiacdGAciill0i854463650616446649x3568X3Qu554.20484 39 Rite Se SOCOHCUIRUTA CA VIPONITIONG ic naccccsnassinesnsascemnncnrnemamncsunnncereneunmunaawcnnamnnanins 44 2.2.1.4 Technological environmefnt - - << << xxx nh nHrư 45 608,1, TAND BIVHEUOHTRTTE ciuasseeeiisoesiogaxsrpuussgiObgpusckbidbgsudupddgZekdlgtgbyaSodgoudagsi 45 2.2.1.6 Global environmeInt .- - - - c1 91x ng rư 46 2:2.0) Analysis Of industry ETVITOHHDE Lá 6cicgá Gái ải44446010 826 at 47 2.2.2.1 Analyzing the rivalry among competing Íirms -«« «<5 48 2.2.2.2 Analyzing the potential entry of new competi†OFS s+<>+ 56 2.5‹.3: AATif|9ÿ£ing tê DữW6f 0Ï SHDDHDÌ san okua dua di ko k0 x00 0ggueg ST 22.20 Analysing The POWEP OF COMBIMENS vances scesusvcsruorevrcnescenneneseesausncceuatcernes 59 2.2.2.5 Analysing the potential development of substitute products 62

2.2.3 Determining the opportunities and thr€atS - -ĂcSSsSeserrreree 62 2.2.3.1 Summing up the results of business environment analysis - CJDfiöYU(0niifi6# NHÀ, TORE cóc cácccoseniekoknioLiiidiBadnualt20/4gsi/A0800582i0ã/A3)300582430/826/300685040164 62

2.2.3.2 External Factors Evaluation Matrix (EFE MatrIx) - - 67

2.3: Analysis and evaluation 0í thể Hi THÍ TH 6 ácbcbcsaci2646266016465661 6.009 d0668 70

2342, DYNIWREIĐ thE HHHEK€DHDooeeeseeieaudenidenniiniiainiaoonnieiAgiLA001000160162480000001000010Đ005 70 T>2:1.1 0911087 1 —sns=nseisereiiioesrtrooiroreesenarrneeoirosst se 70 2.3.1.2 Market segments and identification of target markets - 70

AN PAE REIS REED sư enwoonasitiondttoritssrnssoentinsftvitrtavepisuegftatssdioeGiinndriiDxGNESGi 72 2.3.2 EVálu3fnp TÍG(AHGSAACEOH HE ssicoxsicssscnnsiisavscnassesansessnssavsasisnedincsvosovenseuacunent 84 2.3.2.1 General analysis of financial situation over the financial statement 84 2.3.2.2 Analysis of financial situation over the financial ratios 89 2.3.3 Evalualing øroducfon ad OD6IRĐOT cac Gà 012 0644646553666356 6664 93 sa.3.-3,1, £ ĐfPEeusting san To† DO vicvcescosnsecmssssnsnsnnescsnvonncnennsnonnmenneaennns 93 2.3.3.2 Product and technology process design - 55s eeeerrke 94 2.3: dds MAHARINE the CAPACITY GF TT vicsesesscsievssncevcvaressrvinsasnicorenconsoucersswoasuts 95 song 40081018 10 1 NaeeeeeeeeereeeeanuroatiasrereieeandotreiiDdlGisanasiidd 96 2.3.5.3 Lðating píođietfoni i0 Pế HN iu an 5ã606sgx86ã8 98

li 25.0,::£ TA IHTP VESUDWUTEEEE cooocduinadayoiotaiGii00000L01ã0000064060036620g5g800g016006663086i6./0/86 100 2.3.3.7 Moderating the production - - 5 c1 133 13v vn re 100

2 dia.O> CONTOLINE DIOCUCHON SVSCO I sccssissssccscsssesosniosssrensseomseiseasimeretmssacens 101 2.3.4 Evaluating human resource managemeiI - - - - -« «5< <« «xe eeexs 101 2.3.4.1 Overview of the company's human r€SOUTC€ .-‹- << <ss<<<2 101 2.3.4.2 Activities of human resource management at the company 103 2.3.5 Identifying SHENGS = WEAKIOSSES a,c csccsesensncssanennnsnversnnaxcenmanvenraecencennan 111 2.3.5.1 Summing up the results of the firm’s internal environment analysis -

SH EIiPlT§ 8H WEH HE EEaeageaeonoeoiorgiroogiigxreatesaidtdiecbskáidiag400x233i6guxgrdgggeylu 11]

2.3.5.2 Internal Factors Evaluation Matrix (IFE Matrix) . - 115 2.3.6 Core competencies and competitive advantages of the enterprise 117 230.1, COre COMPEISHCY OF (NO CAIRN IISE cccaasssxaasunssnncunnannancavesscmanaaeaanneseanies 117 2.3.6.2 Competitive advantage and competitiveness of enterprise 121

ZA, SWACRY GNAlVSIS HHỦ CHÓ Gan utGGaG01050011026131500.(66039360505009636G9083đ8k 127 2.4.1 Analysis of DUSINESS StrateRy OFICNIALIONS scasscsscnecionsacveneassonecernncseeanssanonvays 127 2.4.1.1 Analysis of Strengths - Weaknesses — Opportunities — Threats (SWOT)

ý Noi960008034138i0593v60000/60gã8g09i033ugg002.23080vg606000360866i0/4G098080400991i904i2/0i0g04G2480ggigii009g30/g8.-z662v46 127

2.4.1.2 Internal —- External Factors Evaluation Matrix (IE Matrix) 132

2.4.2 Seléction of biisiness Strategy for the Ti ‹‹ c6 202602 suunang 132 ZA.2 1 THE DUSESS STERIC SY SEISTHON MODE) wis icsssissassswcsnasicsinvosarensacsssaesseases 132 2.4.2.2 Selection of business StTat€Ø.Y - - HH vn ren 139 Chapter 3 SOLUTIONS TO IMPLEMENT BUSINESS STRATEGY FOR INOX HOA BINH JOINT STOCK COMPANY IN THE PERIOD 2012 - 2016 142 3.1 SOMMONS OF PROGUCHOR/OPEPAHON 025 <ccnccersesassisicaseaiiasvonnseinnssnassssiesacesdeannsavins 142 3.2 SOWUUONS OR, MATRON G toovsstsecoyeniiiotigscbcdiadacc0100006066646466560660008065.004056063086436006046ã4 146 3.3 Solutions on Financing - AcCOuntIng - - -«s- cxxnnnhnnnnrưn 147 24; SOMUUONS Of HNN TESOUIRE sccm 147 CONCLUSION sisonsssissaviisnnvionacsosseanssasarcovenes , 150 REP ERENCE cccsossssnsssassteqnsonconeanesnnsonennesconssensbonsee’ — ‘ 152 APPEND D cisisicssnnissinnninscniarswanssvcsnatsnetwaminwicess 154 Appendix I1 Financial ratios ‘ vã 154 ACIDOHGIN 2, MAQQi® si scsssscsssssscctssersmmeceasineca innit 158 Appendix 3 Analysis of the financial statements of Inox Hoa Binh 00+ 166

LIST OF ABBREVIATIONS ASEAN | Association of Southeast Asian Nations

AFTA_ | ASEAN Free Trade Area

CEPT | Common Effective Preferential Tanff

EFE External Factors Evaluation

EBT Earning before tax

EPS Earning Per Share

GDP Gross domestic product

IFE Internal Factor Evaluation

IE Internal — External

QSPM | Quantitative Stategic Planning Matrix

SWOT | Strengths —- Weaknesses — Opportunities — Threats WTO World Trade Organization

LIST OF TABLES Table 2.1 The common strategic objectives and specific objectives of Inox Hoa Binh

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Table 2.2 Analysis of the direct competitors of Inox Hoa Binh . 52

Table 2.3 Competitive Profile Matrix of Inox Hoa Binh -cẶc<<<<<<<2 54 Table 2.4 Comparing quotations of the companies supplying big hot rolled stainless stee] materials of Inox Hoa Binh and published rates - 55 << << <c<<ss 59 TabïE 2.5 A number of vip customers of Inox Hoa BÌHH ecccocooeiiiii¿»a-seio 60 Table 2.6 Summary of business environment of Inox Hoa Binh - - 62

Table 2.7 Rating opportunities and threats of Inox Hoa Binh . «- 66

Table 2.8 External Factors Evaluation Matnx (EFE Matrix) of Inox Hoa Binh 67

Table 2.9 Assessing the attractiveness of the market segmenIs «+ 71

Tab1ð 2.10 REavebue by triifliel SEEHHIĐDE cococccccooiccinicccccoiiccbtkvysvác000146168021066666860406588 72 Table 2.11 Applications of types of stainless steel] cece ccceeeeseeeeteeeeeeeneeeeeeeeeseees 73 T5 2.12 Reveite by E002 laqs+ qqqtgttddeditideisaadbilitlakiviadge 74 Table 2.13 Analysis of the factors affecting the design of distribution channels 78

Table 2.14 Ratio of costs and profits from Sales :::ccesseceseeeeeeeseeeeeeeeseeeenteeeeeeaees 86 Table 2.15, Cash inflows ~ Cash O0ulows sissscscmcsctessinncnnancumuanmncmammanany 87 SAIN oc bs Í HĐRIGIRI TRHUĂểNouorebseoagusnioiinioodttoiaoinhitlironAdEn0G0IG001160010106050116800000g380009Y6/0006000GMn600061E 89 Table 2.17 The items in Inox Hoa Bình MIIÏ proJ€Ct s5 555 s+xceexes 97 TaBlð 2.18 Synthesis 0 HutfilAH TESDUEEE coccaoccgiccgdiniddgdn gà 11ãn021450605603i0ud0ggiux58.0688640c6680 101 Table 2.19 Summary of internal environment of Inox Hoa Binh 111

Table 2.20 Rating strengths and weaknesses of Inox Hoa Binh 114

Table 2.21 Internal Factors Evaluation Matrix (IFE Matrix) of Inox Hoa Binh 115

Table 2.22 The business performance of Inox Hoa Binh in the three years 2009 - 2010 2 ADL, Nii SGA SRB Des RISA STI ERS ELIAS GS CLES DURST SIGESU SHON SSSA NESSIE 118 Table 2.23 Cost structure of Inox Hoa Binh after investment in new technology 124

Table 2.24 Investment costs of Inox Hoa Binh and Posco VSÏT - - «s2 127

Table 2.25 SWOT Matrix - Strengths - Weaknesses - Opportunities - Threats of Inox CGE Bl seudtireraaersoscraBiessiiatasfigorrituoe(ihftossfftoreftitentfnSftnsvcietowgtoagNfffS0avgg6i 128

Table 2.26 Internal — External Factors Evaluation Matrix (IE Matrix) 1352

GE WG FIG Bi essiscicccrsccceveinecensomameasaecennuasaaneneascesooascewiaswaveneancamaianansmnsmpawagentes 132 Table 2.27 Quanuitative Stategic Planning Matrix of Inox Hoa Binh 132

TaBïIE 2.25 THE BHGFIW 6r06f TGfEðHIBSGHBH tuodaaaaaadaadaiuiooaiddoiosiddsaag 142 Thi 1.1 HH ĐỀ BHODHRDUHTEW coeeeoianoiioeieoeniioboinoiatdkiiaebguksgecahlgiohiddsu0006680 05180500688 154 Table P1.2 Ratios of operating aCfIVILY HH He 155 Fable P13 Ratios OF WW Oy cccissssosssenscaasinevsuesrnswncsenanraronrssanicaaseormaatacarseraarmoaleeas 156 RUN th Loitc | PK TH HN kbsngganaswnanndindfdtsasaulirilsrauonnnnauangnunsssssawnldbanuessaDnottoigoiisfoifEbgi 157 Table P2.1 Summary of business enVirOnm€TI 5< 533533313 ra 158 ‘Table P2.2: Summary Of intertidal CNVitOM MO? ss sissscsisscesasscancssevacscauscunnesconnvencsavessunasss 159 Table P2.3 SWOT Matrix - Strengths - Weaknesses - Opportunities - Threats 160

Table P2.4 External Factors Evaluation Matrix (EFE Matrix) .- - - - 161

Table P2.5 Internal Factors Evaluation Matrix (IFE Matrix) - - - 162

Table P2.6 Internal — External Factors Evaluation Matrix (IE Matrix) 163

Table P2.7 Quantitative Stategic Planning Matrix - QSPM - 555 ẶẶ S55 164

Table PZ.5 Compebtive Eroiile MHE (CC NI) ecseeeeienideiiiinoiAtiiiidokidlskaaavaa 165

TAPE PS.1 BALAN BCG Seo soaybetssaieiasbesgiaskisi 166 (Pa 6 8s.3.:.11E001f6 SHIREtHGHEtceceooesesesusooobssssooobodadbidgubatdugdtoitddcdbiapuigdobst2056210018/2U5064 167

"80T 8.4.2 1SH: 0W SEBIETNGH eeedeueioadaidhosesivGirnaretnorBVsdilpuasseaftl1x680A0/50008/0U0N8 168

LIST OF FIGURES Fisare 1.1, The levels of ĐúSIi6šS EIIvdHiDHHeaiadadddaduad¿aadsdadodkoilaiiasaiklisiaude 16 Figure 1.2 The five-foree model GF COMPCHUON sassssccsicsssoscineencasnsvanersonommnscaccceeanatnenss 18 Figure l1.3 Parts of the macro environment and Industry environmenI - 21 Figure 2.1 Organizational structure chart of Ìnox Hoa Binh .-5- «5 35 Figure 2.2 Chart of stainless steel exporter into Vietnam market ‹5- 50 Figure 2.3 Chart of stainless steel market share in VIetnam - -ss+2 51 Figure 2.4 Chart of Revenue based on market segmenIs - - << «<< «<2 72 Figure 2.5 Chart of Revenue by prdguet « ccncancsecannersetecmnonnreasoncexnseennnonsvexRexamadennanas 75 Figure 2.6 Distribution channel system of Inox Hoa Binh .- - «55 5<< «<2 80 Pacre 2 7 PASSEE CUUCITE cscs cssctarzaimcrancasosrsacnpemamnamveneannewerssuinmunnaciuseasasinceniamcirenaees 84 iÐffE l6 CmibU SE CUTE ccnstemencemnaerenonnememeinonointn MEE eR ERE 85 Figure 2.9 Production MãyouEin MìöX Hỏa ĐH] cau cach G2026456666360agsg 99 Figure 2.10 Labor structure based on qualifiationt cs ccscissccsisicanssnsnsssnsvsvesoeouonensuioncuss 103 Figure 2.11 Labor structure based on the number of years of experience 103 Figure 2.12 Net sales revenue, Gross profit and Net profit from Sale activities of Inox Hoa Bink in the three years 2009 = 2010 @ QOUT pconcersnssexercanntenmnanves tannstvendurcnenenmenaeaie 119 Figure 2.13 Ratio of cost and profit compared to revenue of Inox Hoa Binh after TTVESIICNE 111 HOW TECHNOLO EY ies concacvessescancxesaccvnvscsneneversuanascasosnseesenaeneonnacrenatenesene 126

10

PREFACE

1 The reason for choosing the topic

Business strategy is always compared to a rudder of the ship helping firms overcome the oceans to the shores of success The shutdown of loss-making firms and tne development of the efficient production firms realiy depend significantly on the business strategy, especiaily in the market based economy

Following the changes in the business environment today, more than ever, there is only one thing that firms can know for sure, it's a change Therefore, the process of strategic management as an approach helps organizations overcome the waves in the market, reaching the future with their own efforts and abilities

In the stages of strategic management, strategy formulation can be considered as the first brick to set a solid foundation for the strategic management of the business Therefore, this stage can be considered as the beginning of business success

Vietnamese Steel industry in general and the stainless steel in particular was established fairly late in our country as a young industry, playing an important role in the industrialization and modernization of the country

Inox Hoa Binh is the flagship of Vietnamese stainless steel Over a long way of building and growing with the efforts of the pioneers, along with the contributions of all officers, employees, and vantages of circumstances, vantages of the locations, and human vantages, the brand has been stabilized, developed and asserted in the market full of fierce competitions However, brand building is difficult, maintaining brand and class are far more difficult In the near future, Inox Hoa Binh should have the nght strategic direction to reach new heights Stemming from the importance and necessity

of business strategy issues in each business, our group chose the theme "Formulation

of business strategy for Inox Hoa Binh joint stock company in the period 2012 - 2016" We hope the knowledge learned in the Master of Business Administration program can be successfully applied to business practices to contribute to building

stronger firm and to assert the capability in the period of the renovation and integration into the world

2 Objective and scope of the study

The goal of this project is to systemize the rationale of business strategy and business strategy formulation for firm and, at the same time, to apply to business strategy formulation of Inox Hoa Binh Joint Stock Company

Research scope is limited as follows:

- Space: The study was limited to the business strategy formulation phase which focuses on research proposals for Inox Hoa Binh Joint Stock Company

- Time: Research and formulation of business strategy for Inox Hoa Binh Joint Stock Company is limited to the period 2012 - 2016

3 Methodology of the study

- Method of collecting research material

Our study materials were collected from two sources:

+ Secondary resources: Textbooks, slide lectures, scientific reports, dissertations, previous survey

+ Primary resources: Report of business statistics, information supplied by the firm managers

- Method of data processing

After collecting data, we selected the necessary information to analyze, identify, evaluate and present ideas for research topics

4 Structure of the capstone project

In addition to the introduction, conclusion, references, the capstone project includes 37 tables, 14 figures and graphs, which is organized into the following three chapters:

- Chapter 1 Theoretical background

- Chapter 2 Formulation of business strategy for Inox Hoa Binh joint stock company in the period 2012 - 2016

- Chapter 3 Solutions to implement business strategy for Inox Hoa Binh joint stock company in the period 2012 - 2016

Chapter 1 THEORETICAL BACKGROUND 1.1 The concept and role of business strategy

1.1.1 Concept of business strategy

"Strategy" is a term derived from the military field Since the '60s of the twentieth century, the strategy has been applied in fieids of business and the term "business strategy" was born The concept of business strategy has developed over the years and

it has been approached in different ways [11, p 5]

* Business strategy is the art

- Alain Threlart said "Strategy is the art that companies use to fight against the competition and win"

- M.Porter said "Strategy is the art of building a solid competitive advantage to defend"

Thus, these authors considered business strategy as the art to compete in the market and to develop the business

* In viewpoint of management category, business strategy is a plan

- G Arlleret said "Strategy is the identification of the roads and the means to achieve the objectives which have been identified through the policy"

- D.Bizrell and a group of the authors said that "Strategy as a general plan offers guidances or directions for business to achieve desired objectives It is the basis for mapping out policies and operational mechanism”

- Gluecl said: "The strategy is an unified, comprehensive and integrated plan designed to ensure that business objectives will be implemented

* Viewpoint of combining the unification:

- "Business strategy is the art of coordinating activities and controlling them to achieve long-term goals of the business”

- Chandler considered that strategy involved the determination of long-term basic goals of the firm, choosing the courses of action at the same time, allocating the necessary resources, and organizing to implement these goals

In a firm, "Business strategy is an art of designing and organizing all means to achieve long-term goals of the firm and to have relationships with the change of business and competition environment”

[12]

1.1.2 The role of business strategy

The formulation and implementation of business strategies are important for the survival and development of firms The role of business strategy for firms is shown in the following aspects:

- Business strategies help firms identify their purpose, direction as a basis, and guidelines for all business activities of firms

- Business strategies help firms understand and take advantage of business opportunities, and proactive measures to overcome the risks and threats in the competition market

- Business strategies contribute to improving the efficient use of resources and enhancing the competitive position of firms to ensure their sustainable development

- Business strategies create a solid basis for working out policies and decisions on production and business in accordance with the fluctuations of the market

Thus, the source of success or failure depends on one of important factors as what the firm’s business strategy is like

[11, pp 8-9]

1.2 Formulating business strategy

1.2.1 Analysis of business environment

Analysis of the business environment is the process that strategists started to check and examine the various environmental factors The objective of the business

15

environment analysis and judgement phase is to identify the opportunities and threats for a firm The scope and content of environmental analysis include macro- environmental analysis and micro-environmental analysis, also known as industrial environment Therefore, analyzing the business environment is often divided into several levels The interaction between environmental levels is illustrated in diagram 1.1 [11, pp 51-52]

-

— ———

Figure 1.1 The levels of business environment

[Source: Textbook of Strategic Management]

1.2.1.1 Analysis of macro environment

a Political, governmental and legal environment

Government, legal and political factors impact on firms in different directions They can create opportunities or obstacles, even true threats for firms such as political stability and decisions on taxes and fees, labor law

b Economic environment

Current economic situation and future trends have affects on the future success and strategy of a firm Major factors many businesses often analyzed are the growth of the economy, interest rates, exchange rates and inflation rates

16

c Socio-cultural environment

During medium and long term strategy, this could be the greatest kind of change Companies should take into account factors such as the introduction of the new lifestyle, consumer behavior, the change of the age pyramid, the percentage of marriages and births, the foundation of the consumers’ association, the people’s level

of knowledge

d Technological environment

This is the most influential factor, directly to the business strategy of the fields, sectors, as well as many firms The technological changes definitely affect the life cycle of a product or a service Moreover, technological change also affects the production methods and materials as well as the behavior of workers Since then, strategists are requested to regularly take care of changes along with the investment in technological advances

e Natural environment

The prudent strategists are often interested in climate and ecology The trends of the natural environment such as the gradual depletion of natural resources, increased pollution, global climate change has caused the threats to this firm but to create business opportunities for the other, requiring the strategists always have to consider carefully

f Global environment

Regionalization and globalization have been an inevitable trend that every firm, every industry, every government must take into account Today, many strategists have known that the world is named as "the common house" In this context, the international environment is a special case of the general environment outside the company However, the international environment will be more complex, more competitive in view of the social, cultural, structural, institutional, policy and economic

differences

In summary, global environment has opened a lot of opportunities for business but in reverse, the threats in the world competition will be more aggressive

[1 1, pp 53-56]

1.2.1.2, Analysis of industry environment

The mission of the strategist is to analyze and judge the competitive forces in the industry environment to identify opportunities and threats to their business

There is a model of five-force analysis created by M.Porter which helped strategists in this analysis This model is shown in diagram 1.2

Figure 1.2 The five-force model of competition

[Source: Strategic management]

a Analysis of the rivalry among competing firms

The first force of M.Porter’s five-force model is the competition scale among existing firms of an industry Competition among firms in an industry often include contents such as: industry’s competitive structure, status of industry needs, and exit barriers

* Competitive Profile Matrix (CPM) (See Appendix 2)

In all the events and trends of the environment likely to affect the strategic position of a company, the impact of competition is often considered to be the most

important The Competitive Profile Matrix identifies a firm’s major competitors and its particular strengths and weaknesses in relation to a sample firm’s strategic position [17 p TÚ]

b Analysis of the potential entry of new competitors

The second force that needs to analyze is the potential competitors The potential competitors are companies which currently don’t compete in the same industry, but there are likely competitions if they choose and decide to join the industry The pros and cons for the entrants of the potential competition depend largely on the barriers to entry into an industry Its content typically includes:

- The absolute advantage of cost

- Product differentiation

- Economies of scale also known as the economic ladder

- Distribution

- The response of the existing businesses in the area of business

c Analysis of the power of suppliers

The third force in the competitive forces is the ability of suppliers to bargain In some ways, the threat from suppliers creates reliance on business Relative pressure of suppliers is often shown in the following situations:

- Supply sector that the company has only a few, even a monopolist supplier

- The situation there is no alternative product, and companies do not have any other supplier

- The company who purchases product factors is not important customer and supplier’s priority

- Type of input, such as the materials of supplier, are the most important materials for the company

- The material suppliers also provide vertical integration strategy, i.e a closed production

d Analysis of the power of consumers

This is the force to create the bargaining ability of the buyer Buyers include end- users, distributors (wholesaler and retailer) and industrial buyers

Customer pressure is usually shown in the following cases:

- Many suppliers of small and medium scale in supplying industry Meanwhile, buyers are few and on a large scale This situation allows buyers to govern the company offers

- Customers who bought large quantities In this situation, buyers can use their buying power as an advantage to bargain for discounts

- Supplying industry depends on customers with a large percentage of total orders

- Customers can use vertical integration strategy, i.e they tend to make closed production process

- Customers who have full of information about market such as demand and prices of the suppliers have greater bargaining pressure

e Analysis of the potential development of substitute products

Final force of M.Porter model is the threat of substitute products Subsitute product is another product that meets the needs of consumers Its basic characteristics generally have more advantages than products substituted in terms of specific traits The threat from substitute products requires firms to have the analysis and regular monitoring of technical and technology progress, which is directly related to technology and product innovation Moreover, the change of market demand is also an important factor for creating this threat

Combining parts of the macro environment and industry environment, we have the diagram 1.3

20

Ss Technological

Fconome Se z “= environment environment ae

` ta Analysing the potential NV

enn of new campetitors

he power of}-—> the nvalry amons | the power of \ TC

| suppliers SHES ERS | consumers | “PY"enment

Figure 1.3 Parts of the macro environment and industry environment

[Source: Textbook of Strategic Management]

In summary, analysis of business environment is extremely important for the firm The objective of the analysis is to judge the environment to identify opportunities and threats, and on that basis there are reasonable management decisions

[11, pp 56-62]

1.2.2 Analysis and evaluation of the firm’s internal

The objective of the firm’s internal analysis to research what’s inside the firm itself, impacting directly or indirectly to the business activities of which characteristics created we call the strengths and weaknesses of the business It is the same purpose of creating the basic information for planning business strategy in the strategic management process, but our object analyzed in this review are within the range of control by firms, other than those who belong to the external environment From there, pointing out the strengths and weaknesses of each field serves as a precondition for the next step to develop the analysis and evaluation of the enterprise’s internal factors The analysis of the enterprise is now the routine work of managers at all levels But the requirements of analyzing the enterprise’s internal factors at a higher level is to point

out the strengths, weaknesses and advantages of firms in each sector and the operation

of the business, as a basis for planning strategy

[11, pp 65]

Analysis of the firm’s internal is conducted under a variety of approaches One common approach ts te analyze the firm in accordance with the field of the business administration

1.2.2.1 Analysis of the enterprise’s internal factors according to the fields of business administration

a Evaluating the marketing

The term marketing refers to the processes, functions, exchanges and other activities aimed at creating values by responding to individual needs Marketing makes customers closer to making a buying decision and creating favorable conditions for the sale [11, pp 218]

According to American Marketing Association, 2004 "Marketing is a organizational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and the stakeholders"

To analyze and assess the marketing in the firm, we focus on such issues as:

b Evaluating Finance/Accounting

In order to form effective strategies, we need to assess the current financial position of the firm Financial analysis is the process of examining the financial situation of firms This helps managers to identify strengths and weaknesses of finance, which set out the strategies needed to improve the situation By examining the financial information of firms through financial statements and financial indicators in comparison with the standard indicator, it will be given the necessary assessment

* General analysis of financial situation over the financial statement

For financial analysis, we first need to conduct analysis of financial statements

By analyzing the financial statements relating to the use of information to be able to fully understand the most about the firm Financial statements can be regarded as a vivid picture of the financial situation of the company

- Analysis of balance sheet

The balance sheet is a financial statement reflecting the assets and capital of the firm at a specific time during business operations

- Analysis of income statement

In essence, this is a summary of the earnings of a firm during an accounting period (usually a year), it indicates the distribution of profits for the relevant stakeholders of the concerned owner such as creditors, state, preferential shareholders, public shareholders and owners of other resources

- Analysis of cash flow statement

The report reflects the impact of the activities of the firm on incoming and outgoing cash flow in an accounting period In other words, this is the report of funds

in an accounting period and it showed the cash position of the firm shown by the amount of money raised and used in the firm’s operations, from which revealing cash balance at the end of the period

* Analysis of financial situation over the financial ratios

The financial statements assembled showed general financial position of the business at a specific time or during an operating period However, in order to better understand the financial performance and to estimate the power and value of the firm,

we need to conduct the analysis cf financial! ratios Financial ratios are the quantitative measure set te evaluate all the different aspects of financial operations Calculation method of financial ratios presented in Appendix I

- Analysis of financial performance

+ Analysis of profitability

The objective of financial management is to contribute with other functional activities striving to maximize the value of the business So the first questions the analyst should answer are whether the firm is profitable or not and at what level it is like? Profitability is the end result of a series of policies and decisions proposed and implemented by managers This is the group of ratios for assessing the impact of coordinating the firm’s asset and capital management activities

+ Analysis of asset management capability

The group of ratios indicates the degree of business efficiency in the use of his property, ie performance evaluation, the intensity of use (level of turnover) and the productivity of assets during the year In other words, these ratios answer the question: how much revenue can the money from property of the business generate?

- Analysis of financial risk

+ Analysis of liquidity

Liquidity of an asset is capable of converting it into money, while the liquidity of

a firm is understood as its ability to meet short-term debt obligations

+ Analysis of solvency

c Evaluating production and operation

Manufacturing is one of the main subsystem playing a crucial role in creating products and providing services to society Managing the system of production and service is the function and task of each firm Formation, development and good organization and operation of production is the basic and essentia! requirement for the firm’s strength and market development Production management is the process of planning, designing, organizing, and monitoring the production system to fulfill the targets set

Tasks of production and service management is to design and organize the production system to transform inputs into outputs after the transformation process but with a larger amount of initial investment

The main contents of production management that we need to evaluate are:

- Forecasting demand for products

- Product and technology process design

- Managing the capacity of firm

- Locating facilities

- Locating production in the firm

- Planning resources

- Moderating the production

- Controlling production system

[13, p 5; p 7; pp 11-16]

d Evaluating human resource management

Human resource management is a system of philosophies, policies and function operations in attracting, training — developing, and maintaining an organization's people to achieve optimal results for both organizations and employees

We can divide the major activities of human resource management into three major function groups as follows:

- Function group to attract human resource This function group focuses on the issue Of ensuring a sufficient number of staff with appropriate job qualities for the firm

- Function group of training and development This function group focuses on building staff ability, ensuring that the firm’s employees possessed with the required skills necessary to complete assigned work and creating conditions for employees’ maximum develepment of individual talents

- Function group of maintaining human resource This function group focuses on maintaining and using human resources for the firm in an effective way This function group of two smaller functions is to stimulate and motivate employees and to maintain and develop good relationships in the firm

[6, pp 3-4; pp 13-15]

1.2.2.2 Core competencies and competitive advantages of the enterprise

Without the competitive advantages, the enterprises often struggle to gain successes on the marketplace Therefore, a common trend of today is the strategy built

on the basis of the advantages built by enterprises themselves to take advantage of the business and to make a difference in the competition Competitive advantages are the foundation for improving the competitiveness of enterprises Issues such as core competencies of the business, competitiveness and creation of sustainable competitive advantages are the basis for competitive strategy of the enterprise

[11, p 107]

a Core competency of the enterprise

Core competency is the skill that businesses can perform better than other capacities within the company, which is critical to the competitiveness of enterprises Core competency is the resource and ability of the company to be used as a source of competitive advantage

The core competency must meet four criteria of sustainable competitive advantage: valuable, rare, difficult to imitate, and irreplaceable On operations

perspective, a capability is a core competency, which must be "worthy and irreplaceable on the customer's viewpoint and unique, inimitable on the competitor's stance”

* Competitive advantage of the enterprises

- The advantages created and used for competition are called competitive advantages The core of the current competition is known to create business advantage over competitors

- Using competitive advantages to win the competition is required to meet certain

requirements:

+ Firstly, determine the main competitors

+ Secondly, when you want to create a competitive advantage, enterprises need to select appropriate competitive weapon

[11, pp 113-117]

1.2.3 Strategy analysis and choice

1.2.3.1 Technique of analysing business strategy orientations

With the results of business environment analysis and analysis of the firm’s internal, we will certainly give the different strategic options, forcing business to choose the appropriate strategy Then the technique of strategy analysis will prove very effective in helping firms formulate and choose strategies The two techniques most commonly applied and used in combination are common now in the strategic

management: Strengths - Weaknesses - Opportunities - Threats (SWOT) and Internal- External Matrix (IE Matrix)

a Analysis technique: Strengths - Weaknesses - Opportunities - Threats (SWOT) SWOT stands for the first letter of the English words: Strengths - Weaknesses - Opportunities — Threats (SWOT) SWOT analysis provides useful information for connecting the resources and capabilities of the company with a competitive environment that companies operate SWOT analysis provides a tool in analysing, formulating, choosing strategies, revising strategies, reviewing and assessing the location and orientation of a firm or a business plan SWOT analysis can be used for all kinds of decisions and the SWOT template enables positive thinking beyond the framework of habit or instinct This method is very simple and easy to apply and can

be used in many areas of business activity

SWOT matrix is used to form the strategic plans as the steps presented in Appendix 2

b Internal — External Factors Evaluation Matrix (IE Matrix)

JE Matrix is used as an analytical technique applied in parallel to the SWOT matrix and effective against SWOT matrix In order to formulate the IE matrix, it is usually based on the results of the business environment analysis and the firm’s internal analysis and it is set up on two dimentions: External Factors Evaluation matrix

(EFE Matrix) and Internal Factors Evaluation matrix (IFE Matrix)

* External Factors Evaluation Matrix (EFE Matrix)

Strategists often use External Factors Evaluation Matrix (EFE Matrix) to

summarize and evaluate the impact of external environment factors to the firm The process of conducting an EFE matrix consists of 5 steps (see Appendix 2)

* Internal Factors Evaluation Matrix (IFE Matrix)

The strategists usually use IFE Matrix to summarize the analysis and evaluate the strengths and weaknesses of the dominant elements of the firm’s internal activities

Development of a IFE matrix similar to EFE matrix differs only in step 3: We categorized as | if it's the biggest weakness, 2 if it is the smallest weakness, 3 if that is the smallest strength, and 4 if that is the biggest strength (see Appendix 2)

* Internal — External Factors Evaluation Matrix (IE Matrix)

After summerising EFE and IFE Matrix, we formulate IE matrix to identify and estimate the strategic position of the firm (see Appendix 2)

1.2.3.2 Selection of business strategy for the firm

The analysis, choice and decision on a business strategy is necessary to ensure there is a feasible strategy, requiring businesses to develop alternative options, giving the standards as the basis for the selection of an optimal strategy

Based on the principles and standards set out, firms conducted the comparation of the strategic plans scheduled with the strategic mission and objectives in order to find a suitable strategy for implementation Chosen strategy must be the optimal one or at least best suited to the conditions and circumstances of the firm

Firms can choose strategies by using Quantitative Stategic Planning Matrix

(QSPM)

QSPM uses input data from the analysis in the previous steps to help strategists decide what strategic among the alternative strategies is the most attractive strategy and deserves to be pursued by firm in order to successfully implement the goals Development of QSPM includes 6 steps (see Appendix 2)

Strategic choice is the final step of the strategy formulation and also the first step

in the process of implementing strategies Formulation and selection of business Strategy has given the steps required to have a feasible business strategy Overall this is

a significant stage in strategic management of the business

[11, pp 289-291]

Through the theoretical background of the business strategy and formulating business strategy, we can imagine the strategy-formulation analytical framework as

Figure 1.4 The strategy-formulation analytical framework

[Source: Strategic management]

30

Chapter 2 FORMULATION OF BUSINESS STRATEGY FOR INOX HOA BINH JOINT STOCK COMPANY IN THE PERIOD 2012 - 2016

2.1 General introduction of Inox Hoa Binh joint stock company

2.1.1 General information about the company

+ Short name: INOX HOA BINH.,JSC

- Address of head office: Yen Phu - Giai Pham commune -Yen My district- Hung Yen province, Vietnam

[7]

2.1.2 The process of establishment and development

Starting as a small store specializing in stainless steel material products, but after

15 years of development, Inox Hoa Binh rose to become a strong brand, not only meeting the demand for stainless steel products for the domestic market but also exporting to many countries in the region and the world

3]

Marking the start of the company is the country's big day - the Unification Day on April 30", 1996, Inox Hoa Binh Store was opened in Hanoi with the scale of just over 1( employees Five years later, December 20", 2001, Thien An Co., Ltd was officially es:ablished This is the first step to develop stainless steel from an original Inox Hoa Binh store

In 2002, in order to meet great demand of the market, Hoa Binh Engineering Factory was established, initially supplying various kinds of stainless steel in different shapes (pipe, tube, round, square, box, rectangular, etc.)

In 2005, the Company continued to invest into installing a chain of cold-rolling steinless steel at Hoa Binh Engineering Factory, making a considerable progress in suoplying many other kinds of stainless steel to serve local market as well as regional merkets

The next milestone was on September 21", 2006 when Thien An Co., Ltd was officially renamed as Hoa Binh Trade and Production Company Ltd

On June 15", 2007, Inox Hoa Binh joint stock company was born

From the Orientation of the Vietnam State and Goverment, our country must have

an advanced industry to modernize agriculture and all aspects of social life, and due to stainless steel annual demand of Vietnam's market develop much more, in late 2009 to eaily 2010 Inox Hoa Binh joint stock company decided to invest stainless steel wide strp cold rolling mill width 1380mm with its heart is 20-hi Sendzimir mill With the combination of advanced technologies and the enthusiasm hard working labor team, creative minds of Inox Hoa Binh people, the operation of 1° Vietnam cold rolled stanless steel wide strip mill will be ready to respond quickly demand of local menufacturers, avoid high price importing of similar stainless steel coils from other countries, and partly to export to other countries in the region, making Inox Hoa Binh

to 1ew high level, adding a red mark on Sendzimir technology world map

In 2010, According to VNR 500 - Top 500 Vietnamese largest private enterprises, Inox Hoa Binh stood at 369

For over 15 years of operation, Inox Hoa Binh has increasingly asserted its position on the stainless steel market domestically and abroad by providing the market with diversified products to meet the requirements of the U.S standard and Japanese standards

The company has been honored to obtain many certificates and awards of good performance such as the International Standard ISO 9001:2008, Golden Lotus cup for Vietnamese and international famous brands, gold medals and the title of certified Vietnam high quality product, the Gold Cup for the cause of environmental protection

in Vietnam, the Gold Cup for typical products of 1000 years of Thang Long — Hanoi anniversary, prestigious brand names in Vietnam, Green and Friendly Brand, Gold Cup for Typical Enterprise for 1000 years of Thang Long - Hanoi anniversary and many awards, certificates of merit, medals awarded by State organizations and agencies With Operating guidelines

Exhaustive & Reliability

- Trading stainless steel (Inox)

- Importing and exporting all kinds of stainless steel (Inox)

- Consulting the consumption of products from stainless steel (Inox)

[3]

2.1.4 Company's products

2.1.4.1 The concept of stainless steel

- Stainless steel also known as inox is a form of elemental iron alloy containing at least 10.5% chromium content This compound does not corrode, rust or stain as ordinary steel does Stainless steel is attached to the name of a British steel industry expert, Mr Harry Brearley in Sheffield in 1913 when he invented a special type of steel which had high corrosion resistance by reducing carbon down and adding

chromium in the steel components (0.24% C and 12.8% Cr)

- Based on chemical composition and distinct properties, it is divided into four

main types of stainless steel: Austenitic, Ferritic, Austenitic-Ferritic (Duplex) and

Martensitic

- Over nearly a century with the advent and development of many research projects and improvements of this type of special steel, stainless steel has had over 100 different grades which are widely used in industries up to now:

+ In civil uses: manufacturing medical equipment and materials, interior furniture, household objects such as kitchen accessories, water tanks, oven, gas stove, other kitchen appliances

+ In industry: heavy industry (shipbuilding, oil and gas, clinker grinding industry

in the cement plant, the hydro-electric power, chemical plants, transportation, construction, textile and paper industries), light industry (in the food industry, canned food, frozen seafood) Currently, the scientists also studied the application of stainless steel as heat-resistant roofing for factories

[8, 15]

34

2.1.4.2 The company's main product

Currently, the company has product lines such as:

- Stainless steel coil, strip

- Stainless steel pipe, tube

+ Round tube

+ Tube (square, rectangular)

- Stainless steel bright bar

+ Round bright bar

+ Flat bar

- Stainless steel sheet

- Stainless steel wire

- Stainless steel angle

Thus, products that the company offers to market are the semi finished product of stainless steel Company's products become inputs for the production units of different

sectors (construction, industrial, civil )

| | i as ————

Figure 2.1 Organizational structure chart of Inox Hoa Binh

[Source: Inox Hoa Binh]

2.1.6 Development orientation of the firm

Identifying the tasks and strategic objectives of the firm is the very important first stage in the whole process of strategic management Two problems contributed to creating the contexts from which strategic decisions are made In other words, it creates the focus and direction for the firm

2.1.6.1 The mission of the firm

Identifying tasks of the firm is actually to identify business scope Inox Hoa Binh

is the firm of specializing in one area of manufacturing and doing business in the field

of stainless steel (Inox)

To answer the question of what business the firm is doing ? We have applied the model to determine the three aspects of the author D.Abell:

- Who should be satisfied? (What group of customer?)

The company only focuses on the group of corporate customers including:

+ Industrial customers/Firms producing products from stainless steel

+ Intermediatary/resellers: Commercial companies selling stainless steel business

- What needs to respond to? (What are the specific needs of the customer?)

+ Quality Products

+ Competitive Prices

+ Good customer support service

- How are the needs of the customer met? Or in what ways they are responded?

(What resources or unique skills?)

+ Ensuring the most efficient

+ Ensuring high quality

+ Responding to customers in time

In the future, firms will still pursue this task In the period 2012 - 2016, if the market is not too largely fluctuated with a turning landmark, Inox Hoa Binh will only focus all resources on the business activities of producing and selling stainless steel

36

2.1.6.2 The strategic objectives of the firm

Strategic objectives of the firm is clearly the ambition that the firm pursues Thus, the strategic objectives is the desired finishing line of the firm

Table 2.1 The common strategic objectives and specific objectives of Inox Hoa

Binh in the period 2012 - 2016

The common strategic |

No ; The specific objectives

objectives

Increasing the overall rate of return of 4% to

1 | Increasing the overall profit

Increasing from $12 million in export in 2011 to $120 million in 2016 Details:

+ America - Brazil market: 55 million

Increasing the export value to

3 + Southeast Asia market: 45 million

2.2 Analysis of business environment

2.2.1 Analysis of macro environment

2.2.1.1 Political, governmental and legal environment

South China Sea disputes are threatening to regional security in particular and world peace in general

b The Government

Government of Vietnam attaches great importance to the construction and development of the steel industry of Vietnam into a vital industry, ensuring stable development and sustainability, and also offers encouragements and investment incentives to call for domestic and foreign investors investing in the steel industry These contents were expressed in Decision No 145/2007/QD-TTg dated September 04", 2007 of the Prime Minister approving the master plan on the development of Vietnam's steel industry in the period 2007-2015, with the 2025 vision taken into consideration This is a great encouragement for firms operating in the sector

of firms (such as Competition Law No 27/2004/QH11; Intellectual Property Law No 5.0/2005/QH11; Technology transfer Law No 80/2006/QH1 1 )

Recently, good news for stainless steel producers in the country is that the Ministry of Finance has issued Circular No 157/2011/TT-BTC dated November 14",

2011 with preferential export-import tariffs following the list of taxable items There are many changes in 2012 Tariff which commodity codes 7219 and 7220 for the products of cold rolled flat stainless stee] with a width of 600 mm or more and 600 mm

or less had a 5% import duty This tax rate is applied formally on January 01", 2012, s.atisfying domestic manufacturers with the indirect support of the Government through the taxation of imported commodities When many local firms have invested in

38

production machines, rolling out products not inferior to imports in quality, the output situation of these firms which rely mainly on the domestic market had the mainstay to focus on production and development

[10, 16]

2.2.1.2 Economic environment

Economic environment represented through the economic variables

Vietnam steps into 2011 in the context of increasing macro-economic instability

In February, 2011, the Government announced a series of measures to stabilize the economy and to ensure social security Resolution 11, declaring the most important policy to stabilize the economy, requests to cut credit growth and dollarization against the economy, to lower budget deficits, to restructure state firms and to protect poor households from being affected by higher energy prices These policy measures are clearly stated and done quite thoroughly by the top leaders of the country, together with some additional policies as needed So far it is clear that Resolution 11 has been successful in stopping the risk of instability and helping the Government restore its credibility on economic governance capacity

a The growth rate of the economy

* Overall growth of the economy

Vietnam economy appeared to slow down for a few months ago with the growth rate in the first two quarters of 2012 estimated below 5 percent Real GDP growth is on the downward trend, declining from 6.8 percent in 2010 to 5.9 percent in 2011 and a lower level of 4 percent in the first quarter of 2012 The experts predict growth will continue at low levels in 2012 and lower than in 2011

In general downward trend of the economy, some sectors were particularly badly affected Sector contributed most to the stagnation of the economy is the civil engineering, with a negative growth rate of 3.9 percent in the first quarter of 2012 Similarly, it is the industrial production sector, especially small and medium firms It is

39