G1_00315 XÂY DỰNG CHIẾN LƯỢC KINH DOANH CHO CÔNG TY CỔ PHẦN THÉP VIỆT NHẬT GIAI ĐOẠN 2012 ĐẾN NĂM 2017 BUILDING BUSINESS STRATEGY FOR VIETNAM JAPAN STEEL JOINT STOCK COMPANY IN PERIOD OF 2012 ΤΟ 2017

G1_00315 XÂY DỰNG CHIẾN LƯỢC KINH DOANH CHO CÔNG TY CỔ PHẦN THÉP VIỆT NHẬT GIAI ĐOẠN 2012 ĐẾN NĂM 2017 BUILDING BUSINESS STRATEGY FOR VIETNAM JAPAN STEEL JOINT STOCK COMPANY IN PERIOD OF 2012 ΤΟ 2017

CAPSTONE PROJECT REPORT

BUILDING BUSINESS STRATEGY FOR

VIETNAM JAPAN STEEL JOINT

STOCK COMPANY IN PERIOD OF

2012 TO 2017

Group Number: 4 Student’s name: Kieu Huu Trung

Dinh Thu Huong

Vo Xuan Hung Nguyen Thanh Son

HANOI: 2012

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ACKNOWLEDGEMENTS This Capstone Project is the last and most important request of our MBA program in finance This project focuses on the business strategy management which is integrated with others as marketing management, human resource management and corporation finance management This project helped us having an occasion to match the knowledge and skills of modern business management from MBA program with the practical situations of the medium firm in Vietnam

To full fill this project, we would like to express our deep gratitude for the favor support of Griggs University, Center for Educational Technology and Career Development (ETC) of Hanoi National University and especially to the lecturers who have enthusiastically taught, guided and provided us with the valuable knowledge We sincere thanks also to the support and assistance of the leaders and staffs in Vietnam Japan Steel Joint Stock Company They have spent highly valuable time on organizing surveys, providing data and discussing with us about the relation between the project contents and practical situations at the Company; from that, helping to create a close connection between theory and practice and resulting in a highly feasibility in the future

We, the Group’s members, would like to receive the continual support of the lectures to help us completing the course with the highest results Particularly, the support of all HPS’s leaders and staffs will be an indispensable motivation for this project coming into the Company’s practice

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TABLE OF CONTENTS

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CHAPTER 1: CONCEPT OF STRATEGIC PLANNING AND STRATEGIC

I.I Definition, characteristic and kinds of business strategy lã 1.1.1 Strategic planning and strategic management definition 13 1.1.2 Strategic management characteristics 0 ceeeeeeseeeseeeeeeeneeeneeeneeeaeees 13 j5 ClăssilYImẪE BUSIHESSSHTNIGBV eeseseerereseexsessmrssreosrtrseordsermsse 14

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CHAPTER 2: ANALYZING BUSINESS ENVIRONMENT FOR VIETNAM JAPAN STEEL JOINT STOCK, COPAY cnecncecnunneurnnrrsionneaswamanenenmonenininennension 27 2.1 Overview of Vietnam Japan Steel Joint Stock Company ae 2.11 ESTADUShICnt afd UeVClOPINOT cnccnerocnemneeeemmrenmns at 2.1.2 Company’s business scale and organization strucfure 27 Sid VISION GHC MISSION aNd COM VENUE sosnccssicssecasnnsnanmanieoamsacpncnimieneum 29 2.2 Atialysis BUSINESS ENVITONMIENL OF HPS 00.00 covers cnoververenseveresoreecreerensnenoeruess 30 Dbud ERISA) TACUOTS AI Slễesssensnnsvevstrrarnrttecsvarssgie9a94101/6/04E18000000 00000009 31 eben | TVIHCED ElIYlf0hifiefiE(P E T1 TT100615ÌsessuspsaernatoneriaastrrtririooigndstvgL40 10 31 2.2.2.2 Micro environment (Michael’s porter five forces model) 39 Deduvket ROI PICtOTs SVAN TIEN scone cumamamanmmmcamens 44

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2.2.0 CPM (Competitive profile Tiatrix) Of FIPS 0c<crnencesnnerspenrsmssencernnensncies 65 CHAPTER 3: SOLUTIONS TO APPLY BUSINESS STRATEGY FOR

VIETNAM JAPAN STEEL JOINT STOCK COMPANY IN THE PERIOD OF

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4 IFE Internal factor evaluation matrix

6 |HPS | ‘Vietnam Japan Steel Join Stock company

8 MOIT Ministry of Industrial and Trading

9 PES! Political, economic, social and technology

QPDS Quality, price, delivery and service

QSPM Quantitative Strategic Plan Matrix

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Figure 24° Urbanization treng GT V1etitiili HH 2007 sv ccecmenrarecemmemnmnan 38 Figute 2.5: Market share for steel Vietnamese steel market cisccscssccasscssaasseresnnerees 40 Figure 2.6 Castomer’s type Of HPS icccccccunceumncmmemmmnaneumermmmammnanuiel 42

Figure 2.7: Product cost structure Of HPSS Stee] Products sicseccssccssinistiionmisicrierronevans 52 Figure 2.8: Revenue and profit Of HPS fromm 2009-2011 -0ncnassnrerercorrerneeververnes 54 Figure 2.9: Production quantity of HPS from 2010-2012 .- «<< <2 54

Figure 2.10: Compare key financial indexes of HPS and steel industry 56 Figure 2.11; "lotal employees of HPS (100 2010-201 2 cescasscennesccemenmamnncenns 60

Fiptte 2.11: Labor force structure of HPS Drom 201022012 siscssecsmaccvsascenconsmerecease 60

Figure 2.12: Quality management system flow chat of HPS 60

List of table

Table 1,1 iiterial factor evaluation matrix (IPE) sscsscsnsssnncsancemnccmanenweiunscenne 21 Table 1.2 Intermal factor evalmation mit (EE) usamsaccmscamnncmmmssonmnsumin 21 18I16 1uii LẠ NGHĨ Du ngseaeouanerseaortdidsstiteid6v806G126163600Gxg618522asgsmavsasphiirmskartnntsgnie 21

100018 Tá TT 1T eeseessnsnsneeessrenteerrnraiosenngtevgeotrtogsiNfntnlern(CEA2ingi00PG0009900060S 23 Table 2.1: Vietnaii key e6orTotile develo0ifiefit TH eeeeseeeseodoedrderdrdae 35 Table 2.2 Factors concerning to reach customer decisions sanissscsesnensuvevorsevesenvvncvaes 42 Table 2.3 HPS’s external factor evaluation matrix (BFE) scsssisssescsssscccssscesccsscessncvevs 44 Table 2.4 Revenue and profit of HPS from 2009-20] Ï .-. c-cc<cc<xei a Table 2.5: Key financial indexes of HPS from 2009-20] 1 ‹ <-<« a Table 2.7: The world Consumption Of st6€) Toit 2010-201 2 ccccmcnsonnornmacusmense 6]

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Table 2.8: Forecast demand for steel products in Vietnam .- - sex 61 Table 2.9 Production and consumption volume of steel in Vietnam 63

Table 2.103 PM oF HPS, 108 Pha SC ccencecosmncmmemm ae 65

Table 3.1: General economic development Iindicator until 2020 67 1able 3.2: Steel voluame targef ïn the perlod öỀ 2015-20 co eceiiiiiieiesee 67 TRHE 2.7700 l1 TW TK ĐI HH ` eeeeemeensvereensreenssdsrortrnoesnvsoegorsgg0Ec89T501001904040930000010220ng 68

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Table 3.5: Road map to apply business strategy for HPS until 2017 TW

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Besides the opportunities come from increase in demand of steel and Government’s policy for development of country in general and steel industry in particular companies in steel sector also meet many difficulties from fluctuation of the world economy, the frozen status of real estate To get through this crisis situation and expansion the production in soon future, each steel manufacturer has

to get suitable business strategy base on comprehensive analysis on both internal and external factors

Realizing the importance of building business strategy for metal companies

in particular and the whole industry in general, there are many significant projects and studies of domestic and international researchers on this topic Some significant projects are:

Topic: “Vietnamese steel industry in 2010”, Pham Chi Cuong, President of Vietnamese Steel Association The topic shown out observation identifications about recent activities of Vietnamese steel industry in 2010: achievements and limitations From these identifications Vietnamese steel industry can limit its weaknesses and promote strengths in production and business

Topic: “Vietnamese steel industry - A period of develop and converse new policy”, Nozomu Kawabata, Tohoku University, Japan The topic raised out general

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2 Purposes of project

Base on practical understanding about steel industry in general and production and business of HPS in particular and knowledge of strategic management subject, the project shown out a comprehensive and clear picture about strategic building and business of HPS in Vietnam market Throughout practical analysis of production and business of HPS in integration, the project affirmed explicitly the role of building business strategy for Vietnamese company in modern time

The project not only stopped at practical analysis but also gave out specific solution for each section in each period for HPS In chapter 3 the project will show out forecast of steel market till 2017 These solutions and forecast will also be guide line for other companies in steel industry

3 Scope and objective of project

The project analyzes production and business of HPS in Vietnam market From this analysis the project concludes suitable strategies to expand business scale

as well as company profit in both short term and long term The target of this topic

is have comprehensive evaluation on business operation actuality of the Company and find out advantages and weaknesses, opportunities and threats in order to map Out business strategy for the Company in the 2012-2017 period

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Data and information in this capstone project were collected from actual production and business of HPS in these 5 years The project also gave out some forecasts about steel market to 2017 and business orientation for HPS in the period

of 2012 to 2017

4 Methodologies

The project is the combination of a great theory “strategic management” on practical business strategy building of a big corporation To be successful in app!ving this theory on production and business of HPS, researchers used both qualitative and quantitative method in studying These methods are:

- Collecting and analyzing method

- Comparative analysis method

- Specialist analysis method

- Economic statistic method

The project also use kinds of models for analyze such as: SWOT matrix, QSPM matrix, CPM matrix, etc

A wide variety of academic researches, market report, journals are utilized to bring out the best understanding of the subject The sources of data are listed clearly

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CHAPTER 1: CONCEPT OF STRATEGIC PLANNING AND STRATEGIC

MANAGEMENT 1.1 Definition, characteristic and kinds of business strategy

1.1.1 Strategic planning and strategic management definition

“Strategy”, a word of military origin, derives from a Greek word “Strategos” According to military theorist Clawzevit, military strategy is the art of commanding

in upper hand position Strategy is the art of distributing and applying military means to gain the victory Today, strategy term is used in many various fields of the society; especially in economic field According to Fred R.David, strategy is means

to obtain long-term goals; Johnson and Scholes re-defined the strategy in the conditions of the environment with a lot of speedy changes: “Strategy is the direction and scope of an organization over the long-term: which achieves

advantages for the organization through its configuration of resources within a

challenging environment, to meet the needs of markets and to fulfill stakeholders

expectations” Similarly, there are many more definitions

In short, strategy is the planning of orientation and ways to obtain the planned

targets

Business strategy: Bruce Henderson, a strategist cum the founder of Boston Consulting Groups said that “strategy is a deliberate search for a plan of action that will develop a business competitive advantage and compound it However, the difference between the competitors and you is the foundation of your advantages” Professor Alfred Chandler, Harvard University, said: “Business is the determination

of the basic, long-term goals and objectives of an enterprise; and the adoption of courses of action and the allocation of resources necessary for those goals”

In today’s competitive environment, it can be said that business strategy is create competitive advantages for the purpose of obtaining business targets in the best wavs

1.1.2 Strategic management characteristics

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Together with the movement economy, strategic ideas are also changing to adapt to business environment However, in any point of view and any period strategy always keeps its general characteristics, which reflects the essence of enterprise Most primary characteristics are:

Business strategy needs to define clearly basic targets of an enterprise in each period Strategy must be grasped thoroughly in every sides, every sections

Business strategy must ensure maximize mobilizing and optimum promoting all company’s resources (human, capital, technique, technology etc), promote company’s advantages, catch company’s opportunities get comparative advantage in market

Strategy is the tool to establish company’s long-term targets

Business strategy is always ideally to be successful in market Strategy is established and implemented base on detecting and using company’s opportunities and comparative advantages to reach high economic result Strategy clearly shows out company’s competitive sphere

Business strategy establishes mutual relationships between opportunities and challenges, strengths and weaknesses to create company’s comparative advantages

Business strategy is a clear definition of economic and noneconomic distribution of the company to its shareholders In recent years, shareholders definitely distribute an important role to business strategy of each company They are all people who have direct or indirect relationship to company’s profit distribution and the capital contribution to maintain company’s operation

Classifying business strategy

>» Basing on strategic levels

Corporate strategy: Is the overall strategy of the organization aiming at obtaining its goals

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Business level strategy Refers to the aggregated strategies of a strategic business unit in the organization, each strategic business unit will make their efforts

to obtain their goals and the overall of these units will help obtain the goals of the whole organization

Functional strategy This base on the functions of the organization such as financial strategies, human resource strategy, marketing strategies, etc

> Basing on scope of strategies

Generic strategy or so-called the corporate strategy which mentions to the most important matters that cover the whole of the organization and have long-term meanings, can possibly decide the life or death of the organization

Functional strategy: is the secondary strategy such as marketing strategy, financial strategy, price strategies, distribution strategy, etc

Generic strategy (or corporate strategy) and functional strategy link closely together to create a complete business strategy

> Basing on strategic approach

Concentration strategy: only focuses on key points that have decisive

meanings to the production and business situation of the company but not spreads out resources

Relative strength-based strategy: The strategic planning thought is base on the organization’s analysis and comparison of products or services in comparison with those of its competitors, takes its strength to prop up its business strategy planning

Creative attach strategy: Business strategy relies on the new exploitation to gain priority in front of the competitors

Liberal strategy: this strategy does not aim at key factors but exploits factors that surround the key ones

1.2 Process to build business strategy

1.2.1 External environment analysis

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External factors are objective ones that have influences on the business and production activities of the enterprise including all that have negative and positive impacts Positive factors are opportunities for the enterprise such as the increase in market demands, supporting policies of the Government, macroeconomic regulations of the State Negative factors are threats on the enterprise such as the decrease in market demands: the increase in the number of competitors; the increase

in input material prices

It can be said that external factor analysis is analyze opportunities and threats

of the enterprise

To analyze opportunities, we collect all external factors that can bring back opportunities for the enterprise; then analyze, evaluate these opportunities; at the same time point out which opportunities are the best and which ones should be made use of next time

To analyze threats: we collect all external factor; then analyze and evaluate each factor’s bad impacts on the business process; at the same time, point out which factors have worst impacts on the enterprise and which ones need paying attention

Potential entrants

Source: Strategic Management: Concepts and Cases (12th Edition) Fred R David

Figure: 1.2 Michael Porter’s five forces models 1.2.2 Internal factors analysis

The internal environmental factors are the subjective factors affecting business operations of enterprise, including negative and positive factors The factors having positive impacts are strong points of enterprises such as qualified and

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professional staff, abundant financial resources: strong brand, fame The main negative factors are the weaknesses of the business, such as limited financial resources, less professional sales staff

It can be said that analysis of internal environmental factors is analysis of strengths and weaknesses of the business

To analyze the strength analysis, we gather all advantageous elements and then analyze, compare to competitors and assess ievel of creating business advantages for your business of each factor; pointing out elements that have most negative impact to the enterprise: defining factors that need to be corrected right away and which is followed

To analyze the weaknesses weakness, we gather all the disadvantageous elements of business, and then analyze, compare to competitors and assess the adverse impact level on business process of enterprise of individual factors; at the same time, pointing out factors that have the most negative impact to the enterprise and identifying factors that need to be corrected immediately and which is followed

The basic fields of internal environmental factors:

Human Resources and Organization: Including factors such as: the quality

of human resources, organization and structure of human resources and policies to maintain and develop human resources, etc

Financial resources: including factors such as financial capacity, financial management, accounting systems, etc

Managerial capacity including factors such as quality management capacity, business management, human resources management, etc

Marketing and sales: including factors such as research and development market distribution systems, after-sales service, marketing campaigns, etc

1.2.3 Supporting tools for strategy choosing

1.2.3.1 External factors evaluation matrix (EFE)

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Internal evaluation factor matrix (IFE) summarizes important strengths and

weaknesses of business departments as well as overall enterprise IFE matrix is developed in five steps:

Step 1: Making a list of factors crucial to the competitiveness of enterprises

in an industry (usually from 10 to 20 factors)

Step 2: Assigning a weight from 0.0 (not important) to 1.0 (most important) for each factor It should be noted, the weight assigned to the factors show relative importance of those for the success of the enterprises in industry Thus, for enterprises in the industry, the importance of factors listed in step | is the same

Step 3: Assigning a rating from | to 4 to each factor (actually point to a wider range) Marking the biggest weakness when sorting by one, the smallest weakness when sorting by 2, the minimum strength as classified by 3 and biggest strengths when sorting by 4 So, this is the point of reflecting competitiveness of each factor in enterprise against rivals’

Step 4: Calculating weighted score for each factor by multiplying the weight

of that factor with the corresponding rating

Step 5: The total weighted score for all factors in the matrix is given by summing the number of relevant factors of each enterprise The total score shows that, this is the absolute competitiveness of enterprises

Accordingly, if the total weighted scores of all factors to be included in the IFE matrix are 4, the enterprise’s competitiveness is absolute If it is between 2.50 and above, it shall be absolutely competitive on average In contrast, the total number of points in the IFE matrix is smaller than 2.50, the absolute competitiveness of enterprises is lower than average

Table 1.1: External factor matrix

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Step 1: Making a list of factors crucial to the competitiveness of enterprises

in an industry (usually from 10 to 20 factors)

Step 2: Assigning the a weight from 0.0 (not important) to 1.0 (most important) for each factor It should be noted, the weight assigned to the factors show relative importance of those for the success of the enterprises in industry Total importance of factors listed is 1

Step 3: Assigning a rating from | to 4 for each factor (actually point to a wider range) Mark the biggest weakness when sorting by one, the smallest weakness when sorting by 2, the minimum strength as classified by 3 and biggest strengths when sorting by 4 So, this is the point of reflecting the adaption of enterprise to threats and opportunities from environment

Step 4: Calculating weighted score for each factor by multiplying the importance of that factor with the corresponding classification scores

Step 5: The total weighted score for all factors in the matrix is given by summing the number of relevant factors of each enterprise

Accordingly, if the total weighted scores of all factors to be included in the Il'E matrix are 4, the enterprise’s competitiveness is absolute If it is between 2.50 and above, it shall be absolutely competitive on average In contrast, the total number of points in the IFE matrix is smaller than 2.50, the absolute competitiveness of enterprises is lower than average

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Table 1.2: Internal factor evaluation matrix (IFE)

| Internal factors | Classification

500 companies SWOT matrix usually gives out four basic strategies: (1) SO (strength — opportunity): strategies which base on company’s strengths to deploy market's opportunities (2) WO (weaknesses - opportunities): strategies which base

on ability of getting through company’s weaknesses to deploy market’s opportunities.(3) ST (strengths - threats): company’s strategies to avoid market’s threats, (4) WT (weaknesses- threats): company’s strategies to get through weaknesses and avoid market’s threats

Table 1.3: SWOT Matrix

|

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| - | Using strong points to | Getting through weakness

Source: Strategic Management: Concepts and Cases (12th Edition) Fred R David

Strategies from SWOT matrix are withdrawn from the combination of such factors as the strengths, the weaknesses, the opportunities and the threats Proposed strategic methods:

Strength — Opportunity (O — S): Proving the strengths to make use of

opportunities

Strength — Threat (T- S): Prove the strengths to avoid threats

Weakness — Opportunity (O — W): Make good weaknesses to take advantages of opportunities

Weakness — Threat (T — W): Make good weaknesses to avoid threats

1.2.3.4 Competition profile matrix (CPM)

Competitive profile matrix is an essential strategic management tool to compare the firm with the major players of the industry Competitive profile matrix shows the clear picture to the firm about their strong points and weak points relative

to their competitors The CPM score is measured on basis of critical success factors, each factor is measured in same scale mean the weight remain same for every firm only rating varies The best thing about CPM that it includes your firm and also facilitate to add other competitors make easier the comparative analysis

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IFE matrix only internal factors are evaluated and in EFE matrix external factors are evaluated but CPM include both internal and external factors to evaluate overall position of the firm with respective to their major competitors

1.2.3.5 QSPM matrix

QSPM matrix is the tool used to re-quantify the information analyzed in the initial stages, allowing managers to select the optimal strategy According to Fred R David, QSPM matrix includes six basic steps as follows:

Step 1: Listing major external opportunities/threats and major weaknesses/strengths of the enterprise

Step 2: Assigning a weight to each critical internal and external success

factor The rating is similar to EFE and IFE matrices

Step 3: Determining strategic alternatives that enterprises should consider

implementing

Step 4: Calculating the attractiveness score for each strategy The attractiveness score shows the relative attractiveness of each strategy compared to other strategies The rating ranges from | to 4 (1: not attractive; 2: somewhat attractive, 3: reasonably attractive, and 4: highly attractive)

Step 5: Calculating the total attractiveness score Total attractiveness scores are defined as the product of multiplying the weights (step 2) by the attractiveness scores (step 4) in each row The higher the total attractiveness score, the more attractive the strategic alternative

Step 6: Calculating the sum total attractiveness score by adding all total attractiveness scores in each strategy column of the QSPSM The higher difference between the sum total attractiveness score in a group of strategy, the more attractive the strategies are

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1.3.1 Low cost strategy

Low cost strategy aims at the target to become the lowest cost producers with certain quality standard In which, the company will sell its products with industry average’s price to obtain bigger profit and share than competitors

In the case of a “price war” happens, the company still can achieve a certain

profit Meanwhile, competitors are all lost Even when there’s a confliction in prices, industry is expanded and price’s down, companies with low production cost still can achieve profit in a long term This strategy is always applied for wide market

Enterprise can base on some main method to obtain advantage in reducing cost such as: improve productivity, search for big material source with low price, utilize comparative advantages between countries or reduce unnecessary expense If the competitors cannot cut the same expense level, the company can keep its comparative advantage by leading in cost reduction

1.3.2 Product specification strategy

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This is the strategy in which the company aims at developing products and services With special and unit characteristic These characteristics are highly appreciated by customers, added value of the product specification allow the company set a higher price level than competitors When applying this strategy, the company must evaluate suitable price so that this price gap can cover additional cost arise in production and distribution Moreover, this additional cost can be transferred to customers because they cannot find the same product to replace

Because of focusing on a narrow market, enterprises apply this strategy have lower turnover Then it makes them hard in negotiating with suppliers Anyway, the company can transfer this advantage to customers by setting them a higher price level

Enterprises in centralization strategy can change their advantage in product development so that it is suitable for the market segment that they investigate thoroughly and_ know clearly One of major risk that created by this strategy is the imitation technology of competitors Moreover, producers with leading cost in a major market can easily compete directly to company using centralization strategy Other company with the same strategy also can attach this market segment to take out a number of customers in this narrow market

1.3.4 Integrating development strategy

Company follows this strategy can find the way to produce material or distribute its products internally Applying integrating development the company can use reverse integration or positive integration, partly or total integration, internal or external integration

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1.3.5 Mixed strategy

A company can apply many different strategies in a period The company can pay much attention to development in this area while cut down in others Those activities aim at implementing successfully the company’s general objective during the strategy implementation period

The strategic choice out of strategies above depends on the company’s capability and related environment factors From the result of analysis of SWOT matrix, the company will choose for itself the best business strategy

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CHAPTER 2: ANALYZING BUSINESS ENVIRONMENT FOR VIETNAM

JAPAN STEEL JOINT STOCK COMPANY 2.1 Overview of Vietnam Japan Steel Joint Stock Company

2.1.1 Establishment and development

Company's name: VIETNAM JAPAN STEEL JOINT STOCK COMPANY

Abbreviation name: HPS

Address: Km 9, Quan Toan, Hong Bang, Hai Phong

Tel: 031.3749998 / Fax: 031.3749051

Web: www VijaGroup.com.vn Email: hps@hn.vnn.vn

Staff and revenue in 2011

Y Staff: more than 500 corporate officers and employees

Y Revenue: 2011 is estimated at 2,100 billion VND

2.1.2 Company’s business scale and organization structure

Company’s business scale

Production, sales, export and import of steel billets

Provide materials, special materials, special kinds of steel, special steel, high quality steel in defense production

Below are the charts of company’s main production scale:

> Billet production

Total investment: 156 mil VND

Making capacity: 120.000 tons/year

Production range: Billet SD290, SD390, SD490

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Figure 2.1: Billet steel making line

” Rolling steel making

Total investment capital: 30.000.000 USD Technology: Japanese

Rolling capacity: 240.000 tons/year, Making steel capacity: 120.000 tons/year

Production range: from D6 to D4]

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Source: Administration department, Vietnam Japan Steel Joint Stock Company

Figure 2.3: HPS’s organization chart

In essence, the company's activities are divided into 4 main areas as follows:

Y Manufacturing (Including factories and quality control section)

v Business operation (Including purchasing and sale)

Y Finance (Finance: control and using capital efficiently, Accounting: tax

report and cashier)

¥ Administration (Human resource, security)

2.1.3 Vision and mission and core value

» Vision and mission:

Company’s philosophy “The company does its best for the safety of

construction works and benefit of customers” To apply this philosophy HPS set its

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- On time delivery

- Best customer service

- Always improving the quality of products, maximizing operation efficiency, minimizing operation cost to provide highest benefit for customers

> Core value:

- Building company’s culture oriented as: Honesty, responsibility and community Clearly defining that human is the most valuable asset of the company Company’s principle has to orient to the target of building and training the best human resource and also always attract talent people and support them to become the best in their position

- Creating excellent individuals in a dynamic and unit collective Building a team work with talent, independent and active individuals And they always innovate and improve in every field

- Building innovating and improving culture in everywhere, every time so that the company can have a group of pioneer who always innovate and receive high technology and technique Continuing innovation in every field to become the better and the best

- Continuing update management skill for board of managers and give change for young employee to train legacy team

- Renovating technique and quality control procedure to catch the target to become the company with best management system and approach the word’s management system

- Customers’ satisfaction is the company’s core objective and motivation So the company consist the target: 100% products and services are highly appreciated

by customers

Expanding company’s activities together with social responsibility, environment and orient to objective of ensuring stable development and respect for environment

2.2 Analysis business environment of HPS

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> Basics to build business strategy

When building long-term strategy HPS based on below foundations:

- The industry and country economic orientation development

Base on economic and social orientation of the country and the industry as well VJSCO analyzes changes of demand and Government’s support policies Then the company evaluates trend and development rapid of customers demand and set

up plans to satisfy these needs

- The board of management's policy

Board of Management and general manager are people who have top responsibility and powers in the company So all policies from Board of Management and Board of Directors dominant all company’s activities And when setting up plans for company the investment and planning section always take care

of management policy

- Analyzing business result in the previous periods

This result shows out market demand and company’s ability to meet this demand Moreover, result from this analysis provides information about efficient of capital using and company general operation This is also the most basic and popular foundation to set up the plan for HPS However, this basic contains some backward factors that may cause the deviation between plan and actual

2.2.2 External factors analysis

2.2.2.1 Macro environment (PETS models)

> Political condition and law system

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One of the outstanding advantages of Vietnam as compared to other countries in the region is that Vietnam has a stable political, security and defense system which helps attract investment and boosts economic growth

The change of the political events in the country has certain implications for the economy of each country And political events have influenced and most prominent on the economy of Vietnam are the event on 7/11/2006, Vietnam officially became member of the World Trade Organization

Joining WTO helps Vietnam increase commercial exchange and increase foreign direct investment into Vietnam The legal changes always have great impact

on the production and business activities of economic entities Government management by legal system will avoid administrative intervention into the movement of enterprises and the market Stability in terms of politics, labor force and development guideline during recent years and in the coming years will create favorable conditions for the growth of the country’s economy in general and construction enterprises in particular

During recent years, the construction of legal system has been a point of focus and been applied timely, there has been a Law closely relating to enterprises

in the industry such as: Law of enterprises No 60/2005/QH11 dated November 29,

2005, Law on Investment No 59/2005/QH11 dated November 29, 2005, Vietnam Commercial Law No 36/2005/QH11 dated June 14, 2005, accompanied by Decrees, Circulation timely issued by Ministries, Departments to instruct the implementation

New law on Investment and the Law on Promotion of Domestic Investment issued by Vietnamese government in 2005 which focuses to combine all legal investment documents, reduce the illegal activities between local and foreign investors In addition, the new law investment also simplifies the investment procedures and gives the support conditions for capital attraction This is a great improvement when the foreign investors always complain about the complicated

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procedures and management of the central authorities previously Moreover Vietnamese government assists companies to access investment credit with different types of assets for mortgage The Civil Law encourages corporations to use moveable estates assets, intangible and tangible assets, mortgage loans

In 2006, the final Law on Securities was also issued to regulate how the securities market and the stock exchange market operate legality Both foreign and local investors are protected due to new Enterprises Law which requires investors participating in the key business activities of a company and pronouncing related information honest

In the field of steel products, the Government has policy to develop the heavy industry The Government policy in shifting the economic structure from agriculture activities to industrial activity will help to create suitable environment for development of steel products

Although the system is rather perfectly launched, when being put into practice, below-law documents sometimes cross one another and do not catch up with the market happenings Local administrative organizations still require a lot of permits which bothers investors, ending up with the prolongation of project implementation, cost and expense increase

The government has already issued policies to encourage the equitization of State enterprises and issued decisions asking state corporations to be equitized within a limited time range With such a determined policy, most of state enterprises have been going on the road of equitization, supplying to the market diversified products with big capital value

In addition, the trend of international integration is increasing Vietnam is being considered an attractive destination for foreign investors and big economic groups However, besides the favorable conditions, Vietnamese enterprises also have to suffer from the pressure of fierce competition, tariff barriers and privileges from the Government will no longer exist so enterprises are forced to improve the

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management level, invest in technologies and equipment to create quality, diversified products at the lowest cost This 1s also a challenge to Vietnam Japan Steel Jsc

High growth rate of economy as mentioned above will create good opportunities for development of Vietnam Japan Steel Jsc When economic growths, it will leads to change market size and market share of each factor of the business And there is opportunity for HPS to provide many kind of steel product for construction works However, this will be the challenge for the Company for involvement of large foreign companies, joint venture that lead to fiercer competitive Therefore, business of the company should be constructed based on carefully analyzing impacts of increase of GDP’s high growth rate

From beginning of 2008 up to now, world economic crisis has happened and the world economy has been in the danger of collapse with the disruption of a number of banks and financial institutions in rich countries Due to negative influences of world economic crisis, most companies have met difficulties, production has decreased, import and export of Vietnam has reduced quickly, and unemployment has risen From beginning of 2009, Vietnam Government has implemented some economic stimulus packages to against the reduction of the economy It also carries out financial policy tightening to maintain stable growth rate, against inflation However, the economic has still not recovered, enterprises and manufacturing companies meet financial difficulties Until now, Vietnam economy still express not positive factors: Growth rate of economic industries rise

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slowly; import and export increases but not sharply To evaluate the crisis influence, VCCI has implemented a survey by questionnaires to enterprises They found that there are 91% enterprises still ensure production stably, over 51% still continue to increase investment and 56% enterprises still tries to expand its market (source: VCCI

Beside, one more main concern is that unemployment will not reduce drastically as the recovery is still going slowly Because the high unemployment rate not only makes low income, purchasing power and liquidity is limited, but more important also causes social evils However, this is an opportunity for business in need of labor recruitment Particularly for Vietnam Japan Steel Jsc, they can easy to employ worker or staff with lower salary that help them to reduce a part

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recover trend of GDP and PPP then the demand for instruction and heavy industry are increasing also However, the unexpectedly growth of CIP and inflation which force the Government have to issue tightening fiscal and moneytary to limit this numbers These macroeconomic policies will lead to the difficulty in investment for both private and state enterprises It is also lead to difficulty in approach capital from banks

The economic condition also leads to the unbalance in supply and consumption of steels in these years:

The current steel production capacity for Vietnarnese enterprises is about 7.85 million tons per year but the actual consumption is only about 6 million tons per year Vietnam steel production is facing to the supply surplus then the competitiveness between domestic manufactures is higher and higher The gap between production and consumption is indicated via table 2 below:

Table 2.2 Production and consumption volume of steel in Vietnam

2020 is only about 20 million tons/year, with these big investment packages Vietnam has to find out exported markets in Cambodia, Laos to avoid big stock of steel products

» Technology

About steel production technology in Vietnam now is in average level, only 20% of steel producers has modern technology, others companies now are using under developed technology It’s difficult for small and medium enterprises in steel industry when using under developed technology when the price of many input

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+ Improve capacity of steel production

+ Reduce lost of material during production

+ Reduce harmful gas during production

+ Reduce input cost: gas, coal and electricity

With the trend of improvement in technology of steel production HPS also have the chance to improvement its production technology also With Japan’s original equipment and production technique, HPS can be easily adjust and adapt to the new trend of steel making to take the advantage of improvement in mechanical sector in general

> Social

Together with the development of country economy, the purchasing power of the whole society is also expanded Besides, the urbanization ration is continuously increasing it means that demand for construction in both public and private sectors increase And the urbanization ration is predicted to keep its growth rate reaches to nearly 40% in 2020 It’s big chance for steel companies in expanding market size The forecast of urbanization ration of Vietnam until 2025 is forecasted as below

figure:

Due to the fast growth rate of urbanization the demand for steel is increasing quickly also This demand is forecasted increasing in in both construction and heavy industry is fast increase year by year With the target to become a developed industrial economy in 2020 the demand for public construction works (bridge, infrastructure) and heavy industry are both increase And this number is forecasted

to continue increase until 2020 with the growth rate about 30% in five years from

demand Long steel (1.000 ton) Flat steel (1.000 ton)

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Source: Steel industry report, MOIT, 2011 The expansion of steel demand in both domestic and global market shows a bright picture for development of steel industry in general and for development of HPS in particular The expansion of market scale will also help to reduce the competitiveness inside steel industry

The demand of steel is increasing it means that market scale for HPS and others company in this sector is expanded also It’s creates opportunities to for companies in the industry

2.2.2.2 Micro environment (Michael’s porter five forces model)

>» Density of rival

According to evaluation result of Ministry of Industrial and Trade (the Labor Times published on 12.7.2010), there are about 74 steel production projects with productivity over 100,000 tons/year, total investment for these project is more than VND 41.997 billion and USD 20,101 million Since the development of steel industry has been planned in 2007, there are more than 65 steel production projects with design capacity reached to 100,000 tons/year, in which there are 58 domestic projects, others are FDI Total investment amount for these projects is VND 41,623 Billion and USD 19.878 Total steel production capacity of Vietnam in the period of

2015 to 2020 is: iron production — 2.04 million tons/year, billet production — 16.28 million tons/year and hot rolling steel — 33,575 million tons/year

In comparison with steel demand, to 2015 total demand of the whole country will be around 15 million tons and to 2020 will be 20 million tons With total capacity of all factories is about 33.29 million tons/years (in which 65% is construction steel) then supply will 1.5-1.8 times excess the demand

About market condition for steel producers in Vietnam, the main market share is belong to big and traditional steel corporation such as: Pomina, Hoaphat, TISCO with about 12-14% total share and this number for HPS is 4% To a company with 10 years of development history (compare with TISCO is more than

30 years, POMINA is more than 25 years) the share 4% is positive signal for

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development of HPS With suitable development strategy the company can expand this number in future

@Pomina MWHoaPhat @MTisco MVIS MHPS BWVGS MOthers

Source: Steel industry report in 2011, Vietcombank Securities Figure 2.5: Market share for steel Vietnamese steel market

About competitive ability, for the sector of construction projects the biggest competitors of HPS are Hoa Phat, VIS (Vietnam Italia Steel Co.) and VGS (Vietnam Germany Steel Co.) And the most competitive factor in this sector is the quality of high grade steel and the stable in production capacity of suppliers To civil market (retail customers) the most competitive companies to HPS are TISCO, Hoa Phat and VAS (Vietnam Austria Steel Co.) To this sector the attractive points

to customers are price, after sale services and brand name To evaluate enhance the company position in market the company need to set up suitable strategy for each stage of development

>» Power of suppliers

Share-holders: HPS is one member established by Vietnam Japan Group with other 4 companies to become a big corporation with wide business range in production, construction, technology transfer and trading Vietnam Japan group provides the biggest capital chatter for operation of HPS with about 1.150 million VND The power of share holders provides the company’s below advantages:

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