General Dvelopment Strategy Of Vietnam CementIndustry Corporation (Vicem) In 2009 - 2020 And The Direction To 2050 Chiến lược phát triển chung của Tổng công ty Xi măng Việt Nam (Vicem) giai đoạn 2009 - 2020 và định hướng đến năm 2050

General Dvelopment Strategy Of Vietnam CementIndustry Corporation (Vicem) In 2009 - 2020 And The Direction To 2050 Chiến lược phát triển chung của Tổng công ty Xi măng Việt Nam (Vicem) giai đoạn 2009 - 2020 và định hướng đến năm 2050

Griccs) General development strategy of Vicem in 2009 — 2020 and the direction to 2050

GENERAL DEVELOPMENT STRATEGY

OF VIETNAM CEMENT INDUSTRY

CORPORATION (VICEM) IN 2009-2020

AND THE DIRECTION TO 2050

Group: 4

Students: Tran Van Son

Pham Duc Binh

Vu Dinh Dung

Nguyen Thi Hong Dung

Class : GaMBAO01.NO1 HANOI 2009

GR&o) General development strategy of Vicem in 2009 — 2020 and the direction to 2050

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INTRODUCTION GENERAL INTRODUCTION

3 Vietnam economic context

construction

LJ Definition of strategic management process 13

L,1,1 Definition of strategic management process: 13

Go General development strategy of Vicem in 2009 — 2020 and the direction to 2050

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ANALYSIS AND PROPOSAL STRATEGY

211 Currently organizational structure of Vicem 30

2.1.2 Judgment about Vietnam cements industry 34

2.1.3 Forecast the cement demand in Vietnam 36

215 Evaluate the cement export opportunities 42

2:18 Evaluating ready-mixed concrete and quality 43

of aggrade

2.1.9 Evaluating the corporation level among sub 44

companies of Vicem 2.1.10 Evaluating the control rights of Vicem to sub 44

companies

2.1.12 Evaluating the coal and gypsum of Vicem 46

21:13 Initial evaluation about business operation 47

results of Vicem

Giíóos) General development strategy of Vicem in 2009 — 2020 and the direction to 2050

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2.2 Suggesting the overall development strategy of 49

2009 - 2020 22:5 The industry structure strategy, business lines 52

strategy

2256 Strategy of synchronization of enterprise’s 53

structure

2.2.8 Strategy for production management with 54

internal standards 2.29 Strategy for purchasing main materials and 55

combustible and build strategy for material resource

2.2.10 Strategy for integration to become a brand of 56

Vicem 22.11 Strategies for upgrading distribution system 56

and sales forces

dua LÔ Strategies of human resource organization 57

2.2.14 Strategies of financial organization and 58

operating process Tóc) Strategies of infrastructure development and 58

organization of information technology 2.3 Strategy of organizational structure of Vicem 59

Corporation to 2020 and financial demand for investment of corporation development

2.3.] Organizational structure of Vicem Corporation 59

to 2020

Griccs)_ General development strategy of Vicem in 2009 — 2020 and the direction to 2050

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2.3.2 Financial demands for investment to develop 61

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PROGRESS AND CONCLUSIONS

structure of enterprise 3.1.3 Strategic solution to output development 72

3.1.4 Strategic solution to production management 73

by internal standards 3.1.5 Strategic solution to source of raw materials 74

and main fuel

3.1.6 Solution to unify trade mark of "Vicem" 80

3.1.7 Strategic solutions to improvement distribution 81

system and sales force

3.1.9 Strategic solution to personnel organization 84

3.1.10 Strategic solution on financial organization and 85

operation process

development and _ information technology organization

3.4.3 Matter of organization model and finance 102

INTRODUCTION

Viethdhk Commeptrbsdostrly1€erperation is one of 17 State Corporation which have the

organ zation and operation scale according to the Decision No 91/TTg dated March 07,

1994 of Prime Minister The Corporation was established on November 14, 1994 at the Decison No 670/TTg of Prime Minister and the forerunner is the Cement Department Unior

for over 10 years establishing and operating, Vietnam Cement Industry Corporation has geatly contributed to the industrialization and modernization, carried out all the stratecic missions that State appoints to ensure the balance of cement in domestic market, stabilize market and is the physical instrument for State to regulate the economy according

to Sodalist direction

li the current integrated economy, our country is joining in the WTO ground, before the opportunities and threats to economy, it is necessary to have innovations in managing regime; build the development strategy and long term perspective for the Corporation Vith the desire to apply knowledge from the Master program on International Business Administration to the reality, basing on the knowledge in building strategy in trainirg program together with the real research on Vietnam Cement Industry Corporation, Group 4 — Gamba 01.NO01 has build the project on the general development strategy of Vietnan Cement Industry Corporation in 2009 — 2020 and its direction in 2050

During the time carry out this project, We would like to receive the instructions and

helps rom Assoc Prof PhD Vu Tri Dung, Management board and other departments of

Vietnan Cement Industry Corporation, however the project is not as profound as we desire because we do not have time conditions and survey the overall conditions of Corporation,

We would like to receive the supplement contribution from the evaluation board to make our project more complete

Respectfully thanks!

Griccd General development strategy of Vicem in 2009 — 2020 and the direction to 2050

GENERAL INTRODUCTION PDF Compressor Free Version

1 Vietnam economic context

In 2007, Vietnam became the formal member of WTO and carried out the PNTR commitment with America, so the export market is open; the Vietnam trade barriers to WTO country members are removed and restricted Vietnam position in the international market is improved due to the APEC Conference in the end 2006 The diplomatic relationship, economic corporation activities, investment, export market expansion are consclidated and improved senior visits of Party and State leaders as well as business participation The stable and ensured conditions of politic, security and defense have created the favorable environment to attract foreign investors as well as domestic enterprises The above context has impacted directly and completely to the procedure,

business results from industries and businesses In 2007, GDP growth rate in Vietnam was

8, 44% as the third position in Asia (after China: 11, 3% and India: 9%) This is the important physical premises and the primary advantages for the industry to carry out

planned target in 2007

Besides, in 2007 Vietnam suffered some disadvantage factors such as natural calamity, diseases which are going on in the complex way, in addition, the disadvantage fluctuation in the world price market and cause serious results, the consuming price in country increase rapidly and has non-stop point To the year 2008, the economic and social development situation suffer the interactive reaction between the international economic integration The global economy fluctuates seriously: the oil price increase rapidly and the food price escalates to August of 2008; the global financial crisis explodes in the September of 2008 and the world economy is deep in depression These effects has had the great effect on Vietnam economy like high inflation, deficit in commercial goods and current balance, risks in banking system increase Before the inflation situation, in April of

2008, Government issued the policy in pushing growth to inflation To October of 2008, the economy has to resist in the negative way in the global crisis and depression storm and once more time, Government move to the centralization policy to be against the economic

depression, stabilize the macroeconomic, social insurance, the monetary policy is relaxed gradually from December of 2008 The economic growth rate in 2008 is slow down at

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6,2%, this is the lowest growth level from 2000 However, the 6,2% is recorded as the valuable RéhieConmptresnqpatéce to Vbesdoneloping countries in the region (the growth rate

in industrial — construction area: 6,1%, the agricultural — forestry — fishery: 4,1%) The investment capital of overall society to 2008 take the 40% percentage of GDP, mainly from the investment capital in FDI area and outside state area, invested significantly reduced public sector (-11.9%) and the first year the state has invested a small proportion of total investment in social development Effective investment of public sector low, especially for corporations and state-owned enterprises (SOE) large scale After more than two years that FDI flow massively into Vietnam, the economy has revealed many inadequacies in the ability to absorb capital efficiency Planning, decentralization of state management on investment is heavy administrative procedures and not appropriate

2009 is the third year marks the comprehensive integration of Vietnam's economy with the world economy The decline of the world economy as factors detrimental to our economy, an economy based heavily on foreign investment and exports In the country, the implementation of economic stimulus policies, in a certain extent, will result in increased

inflationary pressures

Therefore, the goal of economic growth which is set out by Congress for 2009 will be difficult to test, if the negative impacts to the economy Vietnam became reality and the implementation of policy stimulus did not reach the desired effect The forecast of international organizations also showed the ability to grow the economy Vietnam will lower the growth rate in 2008 IMF (2009) and WB (2009) forecast GDP growth of Vietnam in 2009 and 3.3% respectively reached 5.5% compared with 2008 Estimated by ADB (2009) and EIU (2009) average growth of 4.5% Thus, the ability to achieve the target GDP growth above 5.5% in 2009 seems hard to become a reality

In short the economy of Vietnam in recent years have high growth rates, the industry production is expanded and develop many new urban areas in many localities in country However, since 2007 inflation and trade deficit increased, macroeconomic have bad changes and the negative impacts to international markets and also affects on the Vietnam economic growth rate All of this express show the weaknesses in the institution, economic structure, development quality, administration capacity, competitive capacity of country

Grisos) General development strategy of Vicem in 2009 — 2020 and the direction to 2050

2 The necessity and meanings of strategic construction

In qrủ# đieqplstr teedrgkefioqeonomy ¡nstitutlon according to the soclalist directon and improve industrialization and modernization, the X" Meeting of Party has suggest the strategic mission to establish and develop Vietnam business system which have great -ompetitiveness and brand name

ln order to archive the above target, State owned enterprise, Party and State improves the atangement, innovation and improvement in business efficiencies; Improving the estab] shment of some strong economic corporation in region with the stock participation

of eccnomic components, and State keeps the rule shares in order to improve efficiencies and c)mpetitiveness, taking well the core roles in key industry and improve economic development

After carrying out the order performance, most State owned enterprises are restructured in the primary steps with middle and large scale, the number of State owned

enterprises in small scale decrease Although the amount decreases, State owned

enterprises still govern in many key areas and industries, give the important contribution to the economic and social development of country (nearly 40% GDP and 50% total state budge) State corporations are changing steps by steps; production capacity, operation efficieicies, competitiveness are improved and play important role in economy; they also have the foundation to establish some strong economic corporations

However, over the past time especially when joining WTO in 2007 to this moment, State cwned enterprises have shown some weaknesses Although State owned enterprises will tace the small percentage in quantity but own most of national resources and take the business advantages but the profits they give is about over two third compared to the profits that come from civil businesses and FDI The weaknesses in state owned enterprises are Onc of the primary reasons that make the competitiveness of overall Vietnam economy

weake: and so on

After researching, considering and evaluating the current situation about organi:ational structure, management scale, online business, and our group sees that Vietnan Cement Industry Corporation still has many insufficient problems which are needec to innovate and direct specifically On the other hand, cement production requires

Griccs) General development strategy of Vicem in 2009 — 2020 and the direction to 2050

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using materials locally; distribution and transportation expenses take the high percentage in product Prikk,GornherdevelopmentVelasmomg is needed to calculate carefully basing on the real statistical data as well as general development direction of State

Basing on the guideline of Party and State, in order to recover the remaining weakness and define clearly the development target in the next period, Group 4 realizes that Vietnam Cement Industry Corporation (Vicem) needs to realize the urgent characteristics in defining the long term visibility and building the overall development strategy in order to

be suitable with the stable development and remain the position and the largest producer and cement supplier in Vietnam market and at the same time diversify the business line and rapidly become the leading economic corporation in Vietnam and Asia From this point, Corporation can improve management and business capacities, knowledge and ability to approach information about market, competitiveness in the advanced and modern direction WTO door is open to welcome the Vietnam economy to step in a common play ground with other countries WTO integration gives big opportunities as well as threats to Vietnam business in general and State-owned-enterprises in particular So, building the development strategy, directing clearly the mission, vision, target and _ scientific organization is the stable and necessary pedal for Vicem confidently joins in that play ground, win in the home ground and develop stably

3 Research purpose

The research for evaluating the operation, market and cement market in the next time, strengths, weaknesses, opportunities, threats of Vietnam Cement Industry Corporation and units directly under From this, giving out the overall development strategies in human resources, business, product structure, and production, and marketing, distribution and so

on in the suitable ways ensure the stable, solid and efficient development

4 Research method

Method of summary is used as the research method, including: collecting statistical data, reference opinions from specialists; applying directions, perspectives, development ways in economy from Party and State, developing strategy of Vietnam Cement Industry, and then analyzing and giving out the strategic ways and establishment The major methodology is dialectical materialism which applies and research to build strategy

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“he construction project includes three phases:

#” LHHáSso thì Ciek counignedovimatiom and data

* Phase 2: Building plans and establishing strategies

* Research the potentiality and development of cement market

* Comparing with the competitors

* Evaluating about assets and internal capacity

* Evaluating about financial results in business area

« Finding new business opportunities

* Building mission, structure of business and operation scale of Vicem

Basing on the results which are collected in phase 1, phase 2 and phase 3 give the choices and establish strategy for Vicem, suggest organizational structure and performance plans as well as planned scenario in 2050 and development direction for Vicem basing on

it

5 Strategic report structure

Srategic report structure includes the following parts:

Introduction

Chapter II: Basis of theory;

Chapter II: Analyzing the business’s current situations and suggesting strategies; Chapter III: Solutions, progress, suggestion and conclusion

Referenc

1.1 Definition of strategic management process

11.1 Definition of strategic management process:

"Strategic management is a set of decisions and actions which are shown through the results of the plan, implementation and evaluation of designed strategies to achieve the objectves of a business.”

Srategic management is a process that arranges flexibly strategies, operation status and business results, it includes human resources, leadership, technology and methods of

manag-ment Effective combination between these factors will assist the strategic direction

and provide perfect service This is a continuous operation to establish and maintain the

strategce direction and business operation of an organization; decision process to deal with

changing situations and challenges in the business environment is made everyday As a part of the strategic idea of business development, the business has to map out a specific orientaion, however, the impact in terms of the policy (for example: businesses has new activitzs target) or impact in terms of business (for example: demand for service is increasngly higher), which makes the direction of the business activities change This also implie: the accountability of the enterprise when the enterprise determines whether to have the actons which are adjusted to follow the right set direction or take a new direction

Similaily, it will be also related to the business operation if the business relationship with

partners changes

With the cement industry, the production and business process includes the building the maerial area, producing products to selling so the strategic management in cement industr’ is relatively general, it includes the group of the strategic procedure, plans to carry out the strategies in many steps So the strategic management process in cement industry has to ›»e built and carried out in the strict way and it is necessary to have administrative step be:ause the overall administration process can be inefficient if having any bad step Tte dominant strategic management model:

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1.1.2 Task of strategic management:

Strategic management is a very important task because it is essential for business organization to cope effectively with the arising challenges, including the difficulties and opportunities In return, the organization is moving toward ways to provide services which are focused on appearance, a traditionally important basic change which is focused on the inside problems Meanwhile, the big opportunity for reform may appear from advances in communications technology and available supporting financial resources

Strategic management consists of five tasks which are related closely:

Create a strategic outlook and mission that describe future image of the business, state specifically the desire of the business This provides long-term orientation, specify the image that businesses want to become, transmit the sensation of action to the businesses

Set up objectives — transform strategic outlook to specific results that the company must achieve

Set up strategies to achieve the desired objectives

Implement and manage strategies which have been selected effectively and efficiently

1.1.3 Characteristics of effective strategic management are:

- “¿ business strategy and clear outlook in the future;

- £ Strategic orientation which are approved by the senior managers, including partners aid fund raiser;

- f mechanism for accountability (with customers in the satisfaction of their expectations and focus in meeting the policy objectives);

- “ general framework for managers in several levels (from general management to irternal report arrangement) to ensure that you can coordinate everything together (nany objectives) even when there is competition between order of the priority job aid different goals;

- Tie ability to exploit opportunities and response to external changes (instability) by naking more strategic decisions;

- A tight framework risk management - whether balance the risks and rewards of a bisiness orientation, copes with predefined changes or risks ensure the continuity in

bisiness or not?

For VICEM to build an effective strategy will need to learn technical current orgami:ation model very well, capital structure, production processes, sales at the subsidaries from which analyze to find out the advantages, disadvantages, the existence

of the organization, management and administration to set out the specific strategic directtiens appropriately and effectively

1.1.4 Strategic administrators:

Tie business administrators and senior executive in public sector organizations are

the hiigiest responsible officers for the success or failure of the company; they need to find

out the opportunities for the new working style in order to help organization to identify

Go) General development strategy of Vicem in 2009 — 2020 and the direction to 2050

problems in changing the public service, they should be aware of the need to rearrange the

organizatl0p hviemnstnate go directiverchemges The senior administrators are responsible

for reviewing and evaluating the requirements in terms of provision of basic services and the administrators are also responsible for seeking methods to provide these services The staffs are responsible for implementing and evaluating business strategies of the organization; they need to respect partners and fund raisers who are under the influence in the context of more open business strategy In many cases, the response to the difficulties and opportunities will need constant attention of senior administrators, which affects most part or the whole of the organization in long-term, and it is necessary to have large and strong human resources

In this topic, our group sees that the strategic administrators of Vicem are the Board of Management, Director Board and the people who are appointed and assigned by the Director Board to participate and carry out the strategy

1.1.5 Strategic decisions:

- Decision which is related to huge financial resources or other resources such as staff

or machinery equipment;

- Decision which will be related to a some major changes in the organization;

- Decision which affects the whole of or a majority of the organization;

- Decision which forces the organization to have long-term commitment;

- Decision which will great impact outside the organization;

- Decision which contains risks to business operations;

- Decision which will be related to changes in business activities in the organization such as the products and services that are provided by the organization

- Decision which is related to the field of other important decisions and emerges complex interactive relationships

For Vicem, the strategic decisions are the organizational decisions about structure,

production, products, materials resources and selling and so on

1.1.6 Strategy levels of the business:

- Strategy at enterprise level: Strategies at enterprise level is related to overall goals and scale of the enterprise to meet the expectations of shareholders Strategy at enterprise

- Business strategy: Business strategy is related to how a business can compete successfully in a specific market (market segments) Business strategy must be able to point out ways of competition among enterprises in different business sectors, to identify the position of competition for the SBU (Strategic Business Units) and how to allocate resources efficiently

- Strategy of function level: Functional strategies which are associated with each functional part in the organization (Research & Development, Logistics, Manufacturing, Marketing, Finance,) are held how to operate the strategic direction at the enterprise level and of business and each Strategic Business Unit in the business Functional strategy is a specific announcement about the short-term objectives and methods of action which are used by functional areas to achieve short-term goals of the Strategic Business Unit and long-term goals of the organization Functional strategy solves two problems which are related to the field of function, the first is the response of functional area to operation environment, and the second is to coordinate with policy of different functions Functional strategy and choices include:

+ Strategy of operation production

+ Strategy of Marketing

+ Strategy of materials management

+ Strategy of research and development (R & D)

+ Strategy of Finance

+ Strategy of human resources

+ Strategy of infrastructure development

For Vicem, the group for researching and completing the strategy is in the business level because Vicem is the Corporation which does not directly product; it only owns

partly the direct production company

Griccd General development strategy of Vicem in 2009 — 2020 and the direction to 2050

1.1.7 Mission:

Declaiatioh’smontestoabbue bisémess mission is necessary to give the message about meaning of the existence and benefits that business can bring, specifically the mission message needs to mention the following problems:

- | Customer: Who will consume the products?

- Goods/services: What are the main goods and services?

- Market: Where does the business compete?

- Technology: Whether technology is the leading care of business?

- Caring about the existing, developing and beneficiary problems of business: whether business ties down with economic targets or not?

- Business philosophy: Where are the beliefs, values and preferences?

- Self evaluation: Which is the special competence or competitive advantages?

- Care with community images: Whether are community images the major care of business or not?

- Cares about staff: What are the business’s attitudes to staff?

- Planning process of business missions

Step | Step 2 Step 3 Step4 | Step 5 Step 6 Step 7

Forming | Analyzing | Defining | Carry | Appraisi | Implementin | Considerin

idea and about | buildin | business business adjusting

business | environm | missions | busines mission

For Vicem, the clear definition for vision of business in building strategy is extremely important because Vicem’s vision is defining the function of Vicem (product), for what object (customer) and business view From that, the strategic plans are carried out specifically and efficiently

Go) General development strategy of Vicem in 2009 — 2020 and the direction to 2050

1.1.8 Vision:

BuilfllàE Hensategior vision Vélsection for future, a business desire about all the

things that business wants to archive.”

The primary foundation of strategic vision, as following:

- Shareholder

- Customers

- Staff

The strategic mission has to ensure:

- Simple, clear and understandable;

- Keeping an enough distance about allowed limited time, and if there is any big changes, the devoted strengths of the collection in business can be made;

- Is able to create the resources collection in business with the attention to scale and time;

- Is always connected by superior administrators

1.1.9 Strategic target

Establish the strategic target, including:

- Long term target (from 3-5 years and above);

- Annual target (less than | year)

The long term strategy transforms the vision and mission to the specific performance targets which are measurable Targets are the conditions, landmark, specific ways that business wants to archive in a consistent time

Each unit in business has to have the specific and measurable purposes and contributes actually in archiving the general purpose

The long terms target is:

Griccd) General development strategy of Vicem in 2009 — 2020 and the direction to 2050

- Relations with staff

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Internal environment is the domestic environment which includes the available resources such as: tangible resources (finance, materials, human, and organization) and intangible resources (technique, creativity, fame) The internal environment shows the available strengths, weaknesses

1.1.11 External environment:

External environment is the objective and macro factors that business is existing and operating in External environment has the active and negative reactions to business and these reactions are shown in opportunities and threats to business

Gióo)_ General development strategy of Vicem in 2009 — 2020 and the direction to 2050

Studying history of business is really useful for understanding strategic development

of the businésCimntlpapaso,ral tke Presenbiand in the future On the date of establishment, capacity in adoption of the business with conditions, method of establishment is a significant advantage;

For an example, private enterprise has been holding by hereditary The enterprise is developed on the downward trend which enables the owner remains his power and authority on the enterprise In a contrary, an enterprise which is developed strongly by buying or being merging with other companies will not change its strategy except a significant change in authority structure;

1,2.2 Human resources

Human resource is as important as financial capacity of any enterprise Financial capacity is fading away over times as investment in future contracts which run down financial capacity of multi-national enterprises In contrast, human resource capacity rarely disappears totally On the other hand, it takes more time and expenses to train a rich human resource than replacing manufacturing technology but machines cannot be replaced for human An enterprise has two kinds of labor:

Executive labor

Some executive officer is famous on the world such as Michel Bon, former president

of Carrefour and president of France Telecom, Christian Blanc, former president of Air France Both of them have significant affects on success of enterprise which they manage

It is not difficult to distinguish an executive officer of a joint stock company and of a private enterprise Executive officers who are retired soon have trend not follow big projects this effects on the development of any enterprise in some subsequent years Therefore, ages of executive officers is as important as capacity in management of executive officers;

Employees

Employees include officers and workers They are key personnel for enterprise development Highly qualified employees can improve working conditions therefore

finished goods It is important to study carefully the process of recruitment and training for

human resource Actually some enterprises such as IBM has applied “unchanged”

GRIGG General development strategy of Vicem in 2009 — 2020 and the direction to 2050

recruitment policy in which new employees are trained and vocationally guided exactly the same withDitheCohipongsorlhaeasersieasonable explanation for the late of IBM in telecommunication technology in the early of 90 decade;

1.2.3 Financial resources

Strategy of an enterprise must be put in the relation with financial capacity It is not sufficient if an enterprise want to development depending on external sources such as loans without any valuable assets An enterprise must have enough means and finance to reach its goals and ambition In reality, it is no use if the enterprise is awash with cash but not take it into investment but for put it into current deposit in bank It is even much more wasteful for the enterprise invests cash in short — term investment than loans fund to invest; 1.2.4 Production tools

It is necessary to record investment into tangible fixed assets which is for purposes of research and development Under laws on taxes, investment in machines, equipments cannot be deducted as investment expenses for the first financial year It must be depreciated partly after years Whenever there is any decrease in depreciation, it is an increase in operating result this is questionable Why is there a decrease in depreciation? Most possibly, the reason is out of date machines, equipment or there is not any feasible investment of the Company This leads to a decrease in production of the enterprise in the next year or a decrease in comparative advantages It is critical for studying investment in production tools for strategy analysis

1.2.3 Products

The enterprise should diversify its production activities so reduce the risk of production In the past many enterprises had tried to follow producing avian thread One day when they woke up, thread production suddenly had been forbidden Other enterprises who had produced abacus cannot realize the age of computer booming All examples considered we found out that the enterprises cannot be in business for a long term if there

is any crisis in their products On the other hand, the enterprises that have wide range of production will not meet so many difficulties if there are significant changes in laws and regulations

GRIGG General development strategy of Vicem in 2009 — 2020 and the direction to 2050

Some is not all There are some products which are launched, developed and then gone to nkabitY owitp es ovmHifee Yeprnaiact list of an enterprise must be organized to be balanced among other products with different life circles

1.2.6 Business strategy

Business strategy should study how enterprises divide their customer classes in total revenue not product distribution Actually an enterprise always depends on customers and suppliers What happens if a customer who consumes 50% of total production of an enterprise switches to use product of competitor? The possibility of not meeting financial obligations soon in due for some months of that enterprise is about 95% Therefore, the enterprise must give customers more benefits to remain output consuming leading to difficulties in financial status In short, an enterprise cannot concentrate on a small number

of big clients It is better for the enterprise to have many small clients than having small

number of bid clients;

1.2.7 Research and development

Research and development expenses is currently used but it result is for the future Any enterprise which has highly developed technology has conditions to develop quickly Therefore, it is urgent to understand about research and development specially its movements over time But an extraordinary research and development expenses may contain uncontrollable expenses;

1.3 Strategy level analysis

Vietnam cement Industry Corporation is a Mother Company of many subsidiaries, joint — stock companies and joint — venture ones that is why it has a strategy at business level which must contain a studying about general strategy and scope of business to meet

expectation of stockholders In a short — term cement market in Vietnam is potential, domestic production cannot meet the domestic demand However there will be a surplus in supply soon as a result of investment in cement factories Under plan of the Government,

Vicem must keep the position of cement leader in Vietnam cement market and diversify business activities as an industry corporation The long — term strategy of the enterprise must contain analysis about strengths/weakness, opportunities/threats as well as

development objectives and suitable solutions;

Griccs)_ General development strategy of Vicem in 2009 — 2020 and the direction to 2050

1.4 SWOT analysis

Anwdhlaáisatipwdsaoitd'øewa Yireagihs and weaknesses that is why there are not two

enterprises which are strong or weak in the same areas Strengths and weakness, opportunities and threats are the basis for drawing out goals, objectives and strategies Evaluating internal environment is to review and evaluate the enterprise respects, relationship between sections, point out strengths and weaknesses to capture the opportunities and maximize strengths and minimize weaknesses

It is essential and reasonable to use SWOT model to analyses and summarize

¢ SWOT Model (Strengths, weaknesses, opportunities and threats)

among them to have cooperated criterion

S/O is cooperated between major strengths and opportunities of the enterprise in which the enterprise should maximize the strengths, capture the opportunities to compete with competitors for unlimited market extension

W/O is cooperated between weaknesses and opportunities of the enterprise This

cooperation enables the enterprise to overcome its weaknesses by capturing any

opportunities

Griccd) General development strategy of Vicem in 2009 — 2020 and the direction to 2050

1.5.1, External environment analysis

External environment comprises of subjective conditions which are out of control of the enterprise External environment conditions have indirect effects on operations of the enterprise External environment analysis is to analyses opportunities and threats of the enterprise to find out reasonable development solutions;

External environment comprises of:

Political and Legal

Environment

Technological Environment

a Macro - Economic environment:

- | Macro economic conditions are health, prosperity of economy which effect on enterprises and businesses;

- Economic environment is about nature and economic orientation that the enterprise operates in;

GRIGG _ General development strategy of Vicem in 2009 — 2020 and the direction to 2050

- Affects of economy on an enterprise can change the possibility of creating value

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- Four important criterion of macro economic environment: Economic growth rate, interest rate, exchange rate and inflation rate;

- Buying from oversea or

- Newly invented technology

c Social and cultural environment

Social attitude and cultural value creates social foundation, leads to social changes and other conditions such as technology, politics, laws, economy, demography that is resources of opportunities and threats

e Political and legal environment:

Political and legal environment have significant affects on degree of opportunities and threats of environment The major is the interaction between enterprises and government;

Changing continuously, this segmentation will effect significantly on competition in the market Political and law conditions often relate with the following conditions:

- New policies relating with state management

- Laws on monopoly restriction and taxes

Griccs) _General development strategy of Vicem in 2009 — 2020 and the direction to 2050

Selected businesses for adjustment or priority

Plàkiáeesngooœtš§eerilreehbrsianapgement policy of the State may effect on

operation and profit possibility of enterprise or industry

- Doing business globally, enterprises must face up with controversial issues of laws and policies such as trade policy, and national protection;

f Global environment includes:

- Related global markets

- | Changeably current markets

- international politic events

- Characteristics of basically global system and culture

- Globalization with both opportunities and threats

- The importance of conception in differences between society, culture and system

of global market

Industry competition analysis: An industry includes of enterprises and companies which supply alternative products Industry is also an important criterion of external environment directly effects on the enterprise In environment of industry the enterprise must stiffly compete with competitors There are existing competitors and potential competitors who are going to enter the market soon in any industry Environment of an industry is presented as follows:

Bargaining Power of

1.5.2, Intenal environment analysis

Analyzing internal environment is to analyses enterprise on the basis of existing resources and evaluates internal conditions to find out strengths and weaknesses of an

Griccs)_ General development strategy of Vicem in 2009 — 2020 and the direction to 2050

enterprise; Comparative advantages are the things that an enterprise can do better than

existing did bdtentiginasnpetitues, Version

Analyzing strengths and weaknesses allows enterprise define its goals, objectives and strategic developments for the future;

Strengths are the things that the enterprise does well or enable the enterprise improve its comparative advantages Strengths may be as follows:

- Any skill or important experience;

- Valuable organizational assets;

- Valuable intangible assets;

- Competitive advantages;

- Market position, effects on the market

Weaknesses are the things which the enterprise is in short, weak or any condition which put the enterprise in disadvantages Weaknesses of the enterprise may be

- Bein short of skills or comparative experience

- Be in short of intangible assets, important tangible assets with comparative advantages;

- Bein short or weak in competition in core activities

Major resources of internal environment analysis are: Tangible resources (finance, tangiible assets, human resource and organization) and intangible resources such as

techmology, know-how and reputation;

Process of analysis includes analyzing relationship between functional sections, busimess management and functional resources;

Functional sections of an enterprise are: marketing section, accounting — financing sectiion, production section, and research and development section and information system; 1.6 Strategy control and evaluation

Strategy control is a system which set up the objective, measure and officially send feed back to strategy manager so that he can evaluate if the enterprise meets expected the

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Griccd General development strategy of Vicem in 2009 — 2020 and the direction to 2050

efficiency, improvement of qualification, customers’ requirements and in the right track of

the encerptRt 4rotearessww Free Version

An effective controlling system usually has 3 characteristics: Elasticity to meet the unexpected events; giving a fair and true view on operation of the enterprise, providing timely information to strategy manager;

Steps of strategy evaluation:

Setting up standards and objectives to evaluate strategy execution;

Setting up an effective controlling and evaluating system to measure if it reaches the objectives or not;

Comparing the actual outcomes with expected objectives;

Carrying out necessary adjustment for under expected outcome

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Griccd) General development strategy of Vicem in 2009 — 2020 and the direction to 2050

CHAPTER II STATEVENT @MCONDIVEGN ANALYSIS AND PROPOSAL STRATEGY Beli Condition analysis of Vicem:

2.1.1Currently organizational structure of Vicem

Genera information about operating history of Vicem

Vietnam Cement Industry Corporation (formed Cement Factory Association) was establ:shed under Decree No 670/TTg dated 14/11/1994 issued by Prime Minister and operates under Charter of Organization approved by Decree No 08/CP dated 08/12/1996

of the Government Vietnam Cement Industry Corporation is one of 17 Corporations operating under Decision No 91/TTg dated 07/3/1994 issued by Prime Minister

For over ten years of operation under No 91 Corporation, VICEM has made the enormous improvements in its business and has obtained its missions as well as its objectives It plays a vital role in stabilizing the demand as well as the market It is very obvious that VICEM operates like a useful tool of the State in regulating economy in accordance with socialism orientation

On 6/12/2007 Prime Minister issued decision No 189/2007/QDTTg to amend some contierts stated in Decision No 196/2006/QD-TTg and No 197/2006/QD-TTg as follows:

= Vietnam National Cement Corporation is renamed "Vietnam Cement Industry Corporation - VICEM VIETNAM CEMENT INDUSTRY CORPORATION (VICEM)

« Adding business activities are added to the business license of Mother company - VICEM including Port Operation (Building, Management, Logistic services of sea ports, river ports), Transportation (Building, Management, Operation of high- way, sea way, rail-way), Real-estate investment, Investment in Energy industry, Investment in Forestry Industry (forestation, exploitation, rubber processing), Labor Export, Treatment, rehabilitation of occupational disease, Tourism, Business in Hotel, Restaurant and other public services

= Keeping Hoang Thach Cement Company as the independent accounting subsidiary which will be equalized in 2008

« Changing Cement Consulting Investment & Development Company into one member Limited Company in 2008

Griccs) General development strategy of Vicem in 2009 — 2020 and the direction to 2050

Decision No 193/2006/QD-TTg was issued on 13th Dec 2007 by the Prime Minister

of Victngr Prcthe phates of Mother Company - Vietnam Cement Industry Corporation (VICEM)

Vietnam Cement Industry Corporation maintains the speed of development, production to have significant contribution on the State Budget for period from 2002 to

Year (Tones) (Billion | Payment (Billion | (Billion

- Management board and Control board of Management Board

- The Administration machine includes:

s General director, Deputy General Director

* Chief Accountant

«= Managers of functional departments (14 departments)

- Business and production organization of Corporation:

« Independent accounting member units which State holds 100% charter capital + Hoang Thach Cement Company

+ Cement Development and Investment Consulting Company

+ Cement Import Export Company

+ Tam Diep Cement Company

+ Hai Phong Cement Company

» Career units

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+

Cement Technical Vocational School

+ Ha Tien 1 Cement Joint Stock Company

+ Ha Tien 2 Cement Joint Stock Company

+ Cement and Gypsum Joint Stock Company

+ Hai Van Cement Joint Stock Company

+ Da Nang Construction Materials Cement Joint Stock Company

+ Commercial Cement Joint Stock Company

+ Cement Transportation Material Joint Stock Company

+ Bim Som Cement Package Joint Stock Company

+ Hoa Phat Construction Building Stone Joint Stock Company

+ But Son Cement Package Joint Stock Company

+ Hai Phong Cement Transportation Commercial Sevices Joint Stock Company

+ Hoang Thach Transportation Joint Stock Company

+ Hai Phong Cement Package Joint Stock Company

* Companies co-operate with the foreign investors

+

+

+

+

ChinFon Cement Company — Hai Phong;

Holcim Cement Company — Vietnam;

Nghi Son Cement Company Vietnam Lafarge Concrete Limited Company

* Companies co-operate with the domestic investors

+

oF

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Ha Tien 2 — Can Tho Cement Joint Stock Company;

Ha Tien — Kien Giang Cement Package Joint Ventures Song Da 12 Joint Stock Company

Dong Phu Rubber Joint Stock Company Cement Finance Joint Stock Company

Dong Nai Building Material Roof Joint Stock Company

Hoang Thach Package Joint Stock Company

Projec: - Group 4- Gamba01 N01 32

Griccs) General development strategy of Vicem in 2009 — 2020 and the direction to 2050 |

+ Ha Tien Transportation Company

The VieBlaR Cemopnredadagsine Cpepetation currently has 15.398 staffs and following organization:

Board

General Director

Deputy General Deputy General Deputy General Deputy General Deputy General

Northern regron Middle region Southern region Technique - Business

Market and internal condition evaluation

All things considered, cement market and internal condition of Vicem is summarized

as follows:

1 Estimated cement demand of Vietnam by the year 2008 is higher than neighboring nationals and worldwide in the relation of GDP

There is a surplus in the North and the Center but a deficit in the South;

Vicem will have some opportunities to export but exporting cement is for a band- Aid solution Profit from exporting cannot meet demand for production expansion

Price of cement in Vietnam is currently much cheaper than in other nations and

PDdvCamatireskve iivestiient ipnofit margin

Production capacity of Vicem is much lower than production of domestic competitors;

Prefabricated concrete and aggregate concrete has the same growth rate with cement;

There have not been enough cooperation between subsidiaries of Cement which cannot capture cooperated advantages and scale advantages

Vicem currently does not full control on subsidiaries as capital and organizational structure which cannot capture cooperated advantages and scale advantages

Currently organizational structure of Vicem is not reasonable

There are some unreasonable and ineffective business activities which must be

changed

Vicem will lack of supply for coals and plaster in the future

Currently organizational structure evaluation

Currently organizational structure of Vicem is unreasonable containing 5 issues relaiting with organizational structure and operation of Vicem that are:

Vicem does not have power to control some core subsidiaries

Operating model of Vicem is as a stated owned enterprise that not allow Vicem

to operate effectively;

Difficulties in requiring a strong roles of Corporation level

IInvestors who invest in materials for construction in Vietnam prefers investing in

cooyperated Vicem to investing in subsidies because:

Subsidiaries with higher rate of equitilization is highly priced

Investing in subsidiary will be riskier than in Vicem because it operates in a regional market which is narrower than market of Vicem:

It is virtual attention on liquidation of stocks of subsidiaries because stock of Mother

Company is much more liquidated;

Griccs) General development strategy of Vicem in 2009 — 2020 and the direction to 2050

2.1.2 Judgment about Vietnam cements industry

AftPDrbféteneing ther fireativertsidhe developing countries and corresponding the experiences from International consulting corporation, our Group see that there are three constitution characteristics as the strong cement industry and Government places special important role in shaping the industry, like:

- The suitable number of company participates in the market because if there is too little company the competitiveness will be too weak and vice verse So the establishment

certificate number has to be suitable with the cement consumption demands in

country

- | Remaining harmony number of domestic and foreign companies in order to help the experience studies in international companies and encourage the participation of domestic company and develop investment

- The cement price levels have to ensure to give suitable benefits because the low price levels will not encourage the career investment So, it is necessary to control the cement prices in the level that can ensure the stable development about cement quantity and cause no damage to customers

Finally, target is to build an ecological system for a stable industry which is shown in the following graph:

P

Griccs)_ General development strategy of Vicem in 2009 — 2020 and the direction to_ 2050

2.1.3 FoeyRs€the pement-deraandsinsiMietnam

The cement demand in Vietnam has increased 14% every year in the last decade (1997-2007), get 36 million ton in 2007 and the estimated value is nearly 2 billion USD The cement demand in the North gets the Compound Annual Growth Rate (CAGR) 14% and the South increase 12% but the strongest growth rate is in the Middle within 10 years with 19%

Table 1: Cement demand in Vietnam in 1997- 2007

(Unit: Million tons)

Table 2: Cement demand in Vietnam per capita in 1997- 2007

(Unit: kg/per capita)

Demand estimation is the especially important work which helps much in establishing

investment and opening production capacity in cement industry, at the same time, developing infrastructure relation to the suitable balance about supplies of electricity,

materials, cement transportation as well as import and export Two high demand estimation

will create the too open investment wave compared to the real domestic consumption,

Griccs)_ General development strategy of Vicem in 2009 — 2020 and the direction to 2050

causing the big loss in resources and have bad effects on the strong developments of

cement gap Ra(ioeaÌeasomfFree Version

Pursuant to the macroeconomic indicators of Vietnam, including GDP, growth rate of industrial and construction industry, investment capital for construction, population growth, inflation indicator and cement consumption indicators per capita compared to other countries and so on, investors forecast that cement demands in Vietnam have relatively high growth rate The investment capital in construction business continuously increases and GDP per capita which is planned to increase is the basis for increasing cement demands

It is forecasted that cement demand of Vietnam will increase in the next 5 — 10 years with the consumption amount per capita is planned to archive nearly the highest point in

2020 Within that, the average increasing demand every year is from 5, 2% to 7, 3% to the year 2020 and the demands in 2012, 2020 are planned to be 52, 4 million ton and 78, 6 million ton This figure shows that the market is becoming saturated from the annual growth rate about 13% within 5 years to the increasing level 8% within 5 years to 2012 According to the newest estimation of Ministry of Construction, the cement consumption per capita at 941 levels in 2010 and higher than the highest estimation level

of foreign consulting organization is 804 kg

Table 4: The cement demand forecast of Vietnam according to planning of Vietnam

Institute for Building Materials from 2007-2020 (unit: million ton)

The above demand forecast in 2020, consultants have placed Vietnam in the higher

cement consumption level than other countries in the correlation about GDP

According to the international experiences, the solutions for supplying resources are always easier than the one for surplus conditions This is especially true for cement industry because the new construction for a factory only takes 18 months The investment and opening producing factory and newly building basing on the too high demand forecast

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Gióo)_ General development strategy of Vicem in 2009 — 2020 and the direction to 2050

may results in serious productivity surplus and this can cause the high expenses and waste the inveptpEn€ Gapitabswhich rise tersight, the great effect on economic efficiencies of cement industry as well as national economy

2.1.4 Evaluating supply — demand balance

Pursuant to the design productivity and progress for calling products of cement companies according to State planning, the cement supply will increase strongly in the next years, especially in the middle 2010 and 2015

Although the demand increases strongly, the domestic market will have cement surplus amount in the future The supply and demand balance according to the consultant’s forecast and progress to call productivity due to Development planning of Vietnam cement industry to 2010 and the direction to 2020 of Ministry of Construction will have cement surplus in 2009 Moreover, the difference between supply and demand will increase the investment growth in new production lines to increase productivity over the growth rate of demand Even if the cement market can archive the forecast level about cement demand as Ministry of Construction, Vietnam cement industry will fall in the surplus conditions in the next years, especially in the economic context of Vietnam in general and the world in general

Table 5: Current cement supply and demand in Vietnam from 1997-2000 (basing on the

(Unit: million ton)

Griccd) General development strategy of Vicem in 2009 — 2020 and the direction to 2050

* UNIVERSITY

Gross excess (million ton)

“So we can see that in 2012, total design capacity of cement projects over the demand

in 2015 and nearly equal to demand in 2020 So, the supervision and direction to carry the cement development planning of Vietnam which is being made by Ministry of Construction have to do continuously to order to suggest adjusting, adding or canceling the progress of cement project in a suitable ways, ensure the cement demand in Vietnam in the next

period”

Table 6: Current cement supply and demand in Vietnam from 1997-2000 (basing on the

Construction Ministry’s demand)

(Unit: million ton)

the cemen consumption is higher than open wide investment speed for cement production

factories

Gricsd General development strategy of Vicem in 2009 — 2020 and the direction to 2050

will have difficulties in domestic consumption market and Vicem has to find the export

market or close some factories in some years

2.1.5 Evaluate the cement export opportunities

By the export market, the Group has evaluated according to the following criteria:

s Cement demand in period 2008 — 2010

= Cement price in the import country