Building and selecting business strategy for Vinaconex Construction and Import - Export Joint Stock Corporation till 2015

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT “BUILDING AND SELECTING BUSINESS STRATEGY FOR VINACONEX CONTRUCTION AND IMPORT — EXP

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT

“BUILDING AND SELECTING BUSINESS STRATEGY FOR

VINACONEX CONTRUCTION AND IMPORT — EXPORT JOINT

STOCK COPORATION TILL 2015”

Group number: Group 2 Student’s name: X0610

1 Ms Lan, Nguyen Thi Phuong (Team Leader)

2 Mr Quy, Le Minh

3 Mr Vu, Pham Anh

4 Mr Chung, Nguyen Thanh

Ha Noi, Jan 2012

To — : Master of business administration program — Grigg University

ETC — Vietnam national university, Ha Noi

Subject: Comment of VINACONEX about Capstone of Group 2 Gamba0l- X0610-

Grigss University:

VINACONEX CONTRUCTION AND IMPORT -— EXPORT JOINT

STOCK COPORATION TILL 2015”

We would like to commit that this report is group’s research result Data and results

stated in the report are honest with a clear origin

VINACONEX has done fully support for Group 2 — X0610 when they practiced and

learn in company about operation status, vision and stratergy of company

Group members have expressed an enthusiastic and creative, have closely followed up

current situation of company and receive a good result in working time in

VINAVONEX

luyện “y Ähuý,:ùMg,

Deputy Director of Finance - Planning Department

VINACONEX

Gamba 01.X0610 — Group 2

Vietnam National University and Griggs University who have brought helpful

and interesting courses to all program attendants, especially those who have enthusiatically supported us in the completion of this assignment

During the performance of this assignment, we could have made some inevitable mistakes and we do hope to receive your kind supportive opinion in order to make the assignment of Team No.2 be more corrective and completed

Throughout the execution of this assignment as well as discussions, we have received kind supports from lectures, especially, Professor PhD Vu Thanh Hung who has enthusiastically provided helpful ideas to support our team to complete our assignment We also express our appreciation to leaders of VINACONEX Corporation who have supported us to access the firm’s data and information

and provided us with references so that we can complete our assignment

Members of Team No.2 - GaAMBA X06.10

Hanoi, Nov 22™ 2011

Group Leader

LAN, NGUYEN THI PHUONG

Andrews @ University

Sige mồ Master of Business Administration

TABLE OF CONTENTS ACKNOW LEDGEMEN T scsssssssscssasensscsaccosacesesmseansomasecorsevismseasvansaosvoesamomnsouccssoniies 3 GEN HAI; NT HH LH N gu guadaesddiidieiedieeelllAxcbl664026si021040616eus6g33se 6

1 Reason for selecting the topic and the meaning of research topic 6

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CHAPTER I: GENERAL RETIONALE FOR BUSINESS STRATEGY

1.1 Overview Of Business Strategy ssccsccccssscsssscsssscsesssessssesensesssssesscecssssonsseusssnessseseseness 9

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1.2.3.3 Corporation Culture and Reputation AnalyS1s 20 1.2.3.0 Il[€fHnll P4610 EVHHSHEeseeeseesesserredsesoiienersdioervtgeorrostrkitextgfe 21 Lodo SWOT WAC onennccomoncemmncmememememmonanrmnees LD 1.2.4 SUPPOPT 10018 JOP SU GEDY SALOCHON now senqurernommsurermmevernanennemusesasonntnniiviines 23

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2.1.3 ACMIOVOMENTS GNA DIGDICTIS ccccrscnpcecsmancecemnmancacammmmranneurcmnmeenets 31

2.2Analysis of current business strategy development at VINACONEX 33

2.2.1 The fundamental basis for business strategy development 0000++ 23

2.2.1.1 Define the demand for strategy development cssescsscarviseevorcees 33 ds2slae LG DESIS TöY SIERIEPV [GVGIOIHHĐHT taucuaaadsuiauiduisadopoaaslsassi 33 2.2.2 Ewternal Factor EVdÏ1fÏOlW - G5 011112511 1112 11111 51111 111k vi 33

Dwdse MOBY 0S nusesgsoiiibietiiiioaaedgiagilgtiEESbS16021460080800443340316416080468g8 s7 2.2.2.3 External Factor Evaluation (EFE) Matrix - 43 Coie’ LRAT FACTOR EVGUIIION duuenengakdaaagtiAGlA04000003000110100008004R6)010SV205904899 45

sai, Ê VHIE CHATH (AHH VD caadeeadica0210144006106061)6/G01468040060030161030046660E 45 S0» È HÌNPGIRI PORE Y SIS cn cconsasnecsnenrssnsmmccnenemenmenummnvenunvnelseninmmnnedes 47 2.2.3.3Corporation Culture and Reputation AnalySIs - 47 2.234 intemal Factor EvaluaHon (EE) ME oacceiaiaia,„ddởae 4I

2.5.2 SWOT MAGIPIX JOP CONSIFHCTION PIOGWAS sss cessnssiisscusimncamsanccxascnnmommnmnaiarsus 35

lên ng: CIUDHE Liễ naasteeeennnnnsdtesrenudiberrseneesrersesenseeoginilisieerotsarsereeidbnrteorsoibOLEESNG 55

tae’ OPPOSE ccm mmm 3í

2.4 A few comments on the Corporation's business and production .0+ 58

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Andrews @ University

% Master of Business Administration (¡ft ca

CHAPTER III: BUSINESS STRATEGY VINACONEX CORPORATION TILL

3.1 Recognizing the industrial trends towarrd 2) ÍŠ - «<5 5< << sesssesse 60 3.2 VINACONEX Corporation’s Business Strategy development and selection 64

3.3 Stratepy implementation Methods ccccasscsisssscsssscssessvsseasesssevseassnsasssesnscerescesvenencons Ta 3.4 Reconnnendafioiis “HỦ DFOD0SBÂS eeseeererereenrrdrndrriiniainidlainassi01asg40903656 76 CONCLUSION AND PROPOSAL duuaaasagqededqaddaddqqqaqaaangdadgauqdaaao 80

At present, in the context of extreme competitiveness happening in every aspect

of business and the severe crisis on financial and monetary market, in order for

a firm to survive and grow, the most important and necessary task is to drive the firm toward the right direction that suits to fluent and sudden changes in business environment so as to obtain high level of adaption and to ensure the

sustainable development for the firm To achieve that goal, every firm has to

determine and develop nothing but its own suitable business strategy It’s all because business strategy means the foundation, the compass for every activity

of that firm

Hence, this is the common and main issue of firms, including those engages in

construction sector — the sector that is growing rapidly in accordance with

consuming trend, the sector that satisfies one of the three fundamental needs of human which are food, shelter and entertainment Each firm needs to develop a sound business strategy which is appropriate with continuously changing high competitive environment and at the same time suitable with its own condition

and situation This is the motivation for our research on the topic “Business strategy development at Vietnam Construction and Import-Export Joint Stock

Corporation (VINACONEX Corporation) in the period 2012-2015” in order to figure out the right direction for the firm in present context

Objectives and Scope of the research

In this research, we - a team of class X0610 (Team No.2) — are comprised of following members:

- Lan, Nguyen Thi Phuong

- Quy, Le Minh

- Vu, Pham Anh

- Chung, Nguyen Thanh

its real estate business

At present, the operation of real estate business meets plenty of difficulties

Despite of being a big company, the company has still made some wrong moves

that were not appropriate with the company’s real capacity Attending the program has provided our team with important supplementary knowledge so that we have tools to analyze and to evaluate the presenting situation of VINACONEX in order to obtain solutions to develop strategy that suits the real

estate operating market which is sinking into crisis so as for VINACONEX to grow stably in new period

To develop the business strategy, our team has made analysis based on following basic issues:

- Analysis of present real estate market;

- Analysis of the actual fact of VINACONEX’s strategy development activities;

- Analysis of External environment

- Assessment on Strength, Weakness, Opportunities, Threats from business environment

- Developing an appropriate business strategy for VINACONEX in the period

of 2011-2015 on the basis of minimizing the weakness and improving the strength in order to enhance the recent achieved results and keep on developing continuously and sustainably

Besides, there are also different types of matrix used as analysis methods such

as: BCG matrix, IFE matrix, EFE matrix These analysis methods will be

presented in Theory for strategic management

4 Structure of topic

Chapter I: GENERAL RATIONALE FOR BUSINESS STRATEGY DEVELOPMENT Chapter II: ANALYSIS OF THE ACTUAL SITUATION OF VINACONEX CORPORATION’S BUSSINESS IN RECENT YEARS

Chapter ITI: DEVELOPING BUSINESS STRATEGY FOR VINACONEX CORPORATION FOR THE PERIOD 2012-2015

1.1 Overview of Business Strategy

Many firms and enterprises in Vietnam, particularly small and media enterprises, are often absorbed in a sprial of daily generated works (production, sales, customer search, delivery, collection .) Most of these tasks are solved seperately in the order

of arising demands, it means what happens first, solved first, not to be pre-planned

or given a methodical strategy, not to be systematically managed or effectively

evaluated in a scientific way Senior managers are so inactively led by the works that they lose their direction without recognition They have no specific orientation, they just move on the path they come across and they keep losing their direction This fact is what Vietnamese firms need to change in present trend of globalization

because the competitiveness between Vietnamese firms and international firms is getting more and more intensive The other reason for the demand of changing is that firms and enterprise have to clearly identify their target, their orientation They have to find out a suitable path and to deploy their resources optimally in order to

ensure the objectives within given time Strategic Management allows us to

complete the whole process So “What is strategy?”

1.1.1 The concept of business strategy

Strategy is “a coordinated series of actions which involve the deployment of resources to which one has access for the achievement of a given purpose”

Strategies are the means to achieve long-term goals Business strategy may include the development of network geographically, activity diversification, possession, product development, market access, expense cutting, liquidation and joint venture Meanwhile in a firm/enterprise, the head of enterprise should aware that the

enterprise must have a specific business strategy to be addressed on the market

The firm must have competitive advantage Once the advantages lost, the expense

could not be recalled; therefore a firm must develop long-term and sustainable

1.1.2 Characteristics of the business strategy

In specific business condition and different contexts, firms must have their own strategies but there are 3 common things that help firms to implement their strategy successfully The three common things are concentration, differentiation and a

slogan/ motto Besides, there are also different features:

~ The business strategy must clearly identify the basic objectives for each period

of time and must be consistent in all aspects, at all level of the business

Y The business strategy must ensure the maximum mobilization and optimal

exploitation and utilization of the firm’s resources (labor, capital, technology,

technique ), take advantages, and grasp opportunities to obtain competitive advantage on the market

Y Strategies are the tools to set up firm’s long-term goals

¥ Business strategy always contains the idea of attack for the success on market Business strategy defines the scope of competition

Y Business strategy establishes a mutual relationship between external opportunities & challenges and the firm’s strengths & weaknesses which generates the firm's competitive advantage

Y Business strategy must clearly define the economic/ non-economic benefits that the firm tends to bring to its shareholders

1.1.3 The roles of business strategy

Every wise firm leader awares the fact that: To obtain success, they have to strive for the best outputs These outputs put challenges on small business leaders and employees However, achieving the highest level of satisfying the customer’s demand many leaders ignore the strategic vision and just focus on completing short-term goals This makes the business become stagnated and underdeveloped Hence, business strategy plays very important roles in a firm’s development process, the most important roles in a firm’s development process are:

1.2 Strategic development process

/.2.1 Organization’s missions and goals indentification

Every firm has its own mission, targets and strategy even when these factors are not set up, in written form or officially publicized A firm when managing its strategy is fully aware of its targets in each period of time, which resource is strong or weak

and how to implement the actions to make the strategy effective

Strategic management process involves the full set of

It us not easy for a firm to develop a strategy If just counting on strategy proposed

by a person with new ideas, not every member will approve Once the strategy is defined, every member must give commitments to bring strategy into life, avoiding what people usually says NATO — No action, talk only

Strategy management process contains 3 stages

Stage 1: Strategy formulation

This is the stage of setting up business tasks; perform investigations to determine

11

Stage 2: Strategy implementation

This is the stage of actions in strategy management process In this stage, the firm

must conduct 3 basic activities in strategy implementation which are: annual goals defining, policies making, and resources allocating This is the most difficult stage

in strategic management process

Stage 3: Strategy Evaluation (monitoring, evaluating, implementing)

The final stage in strategic management process is strategy evaluation The 3 main

activities in this stage include:

o Review the factors that are basis for current strategy

o Results measurement

o Perfomance of adjustment operation This stage is very important and essential because the current success of a firm does not ensure the success

in the future

1.2.2 External factors evaluation

1.2.2.1 General environment (PEST)

External environment is a system of complex factors There are many opportunities as well as risks affecting the operation of the business at different levels The external factors focus on the identification and evaluation of trends

with events that go beyond the control of a single firm The analysis of external factors show the important opportunities and risks that a firm encounters in

order for leaders to draft a strategy to take advantages of opportunities and avoid or reduce the effects of threats

External factors that influencing a firm include Macro factors and micro factors Macro factors: we use PEST model to analyze these factors

Here are 4 factors that directly influence economic industries

- Interest rate, inflation - Incomes allocations

Picture 1.1 : P.E.T.S Model

Influences of external fators

Capstone Project Report

Economic influences: Economic factors have a direct impact on the potential attractiveness of the different strategies Vietnam's economy continues to

recover quickly from the global crisis After growing 5.3% in 2009, Vietnam's economy grew 6.8% in 2010, the highest in three years GDP per

capita between USD 1,290 to 1,300 is one of the targets in the 2011 that the Government has proposed to the National Assembly Standing Committee in

Parliament last meeting The year 2011 is not the acceleration period for the economy of Vietnam Therefore, the economic growth of about 7% is in line with current practice conditions Besides, the monetary and credit balance one hand ensure the macro economic stability, especially the success in

controling inflation limitation and on the other hand, make it enable for enterprise to mobilize fund for investment in production and _ business

development, especially the real estate sector National foreign debt and government debt are limited at safe level In case of high inflation, interest rates at 22-25% / year, the business losses their benefit and unable to pay

Gamba01.X0610 - Group 2

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market as banks tighten the credit for non-manufacturing sector, and raise

interest rates up to 20%

Social-cultural influence: Today, our lives have been changing rapidly, young population rate increase sharply that makes the life become modern The young people have their own demand for independent lives, not depending on their parents The demand for housing is also increasing when

an apartment becomes shelter for 4 generations The trend of living in apartments becomes more popular Grasping this trend, VINACONEX has quickly made plan for new urban zones, providing houses for those in real need

Legal, political influences: The factors of politic, government, law show the

main opportunities and threats to every firm, no matter small or big Especially the real estate sector depends remarkably on regulations on real estate trading So even tiny change in government’s policies plays important role As in 2008, the year with skyrocketing real estate prices, the real estate

prices in Vietnam has increased to more than a dozen times just in a short time The price for high class apartment in early 2008 rose 3 times higher

than the price in early 2007, from USD 1,200 to 4,500 per square meter The

price for office leasing in HCMC has increased from 30%, 50% of the price

in 2007 HCMC and Hanoi are in the list of Top 10 cities with highest real

estate price However, when the Government tightens the policies on investment in real estate sector, many firms encountered difficulties and VINACONEX is not an exception

Technological influence: the technological influences show the main opportunities and threats that need to be considered while drafting the strategy Changes in technology can reduce or eliminate the pricing barriers

Capstone Project Report ~ Gamba01.X0610 - Group 2

Andrews @ University

` Master of Business Administration

GRIGG

among firms, shorten the time of manufacturing operations, createa shortage

of technical ability that results in changing the values and expectations of

employees, managers and customers

- Competitiveness influence: Collecting and accessing information about

rivals are important tasks in order for a success strategy draft Recognizing main rivals is not always easy because many companies deploy competitive units in different sectors

New entrants

Threats of new entrants

Product

substitutes

Competitor analysis is one of important stage in strategic management process There is high competitiveness in real estate sector, especially at present time as there are many suppliers while demands are sharply decreasing Firms always change their sales policies in order to get quick returns Hence, competitor analysis is very important in sales Therefore, in order to stand and sustainably develop on market, VINACONEX does not ignore the stage of competitor analysis, keeps eyes on other companies such as HUD, HACINCO, VIN Group

1.2.2.3 External Factors Evaluation (EFE)

- Due to the erratic fluctuations in the growing business environment

worldwide, the control of external factors is increasingly becoming an

important and clear task in the strategic management process If an

enterprise fails to motivate and empower managers and their staff to identify,

monitor and predict and evaluate the important environmental effects, that

enterprise will fail in predicting the oppotunities and threats that are happening, as the result, the firm will fail in implementing the strategy, loosing the oppotunites and make the organization collapse

EFE Matrix - External Factor Evaluation Matrix is the model often used in

strategic management in order to summarize and evaluate the external factors

Table 1.3 EFE matrix

2 =the response is below

average

3 =the response is above

17

Similar to IFE, to develop EFE matrix, we carry out 5 steps

Step 1: Make a list of main opportunities and threats that influence the success of a business (usually 10 to 20 factors)

Step 2: assign a weight that ranges from 0.0 (not important) to 1.0 (most important)

to each factor The weight assigned to a given factor indicates the relative importance of a factor to the success of business in a specific industry The total

value of all weights together should equal 1

Step 3: Assign a rating to each factor ranging from | to 4 (the rating may get higher

values in practice) Rating indicates how effective the firm’s strategies respond to

factor The rating equals | when the response is poor, equals 2 when the response is below average, equals 3 when the response is above average and equals 4 when the

response is superior

Step 4: Score each factor by multiply the factor weight and its rating

Step 5: calculate the total score for all factors listed in the matrix by summing all weighted score for each factor

The maximum total weighted score that a firm can get is 4 and minimum score is 1

The average total weighted score is 2.5 If a firm get the total weighted score equals

4, it indicates that the firm’s strategy responses very well to current opportunities and threats from environment

1.2.3 Internal Factor Evaluation

Internal analysis focus on identifying and evaluating the strength and weakness in the firm’s business, including management, marketing, finance, accounting, production, research and development, and information system

1.2.3.1 Resourses analysis

Vndrews @ Unis ersity

AK Master of Business Administration

Cah sas

To fomulate a business strategy, a firm need to base on its available resourses and

analize those resourses

- Resourses: are what a firm possesses such as human resources, assets, equipments; or intangible resources (brand name, patients, relation, management capability — every firm has same resources but a change in management method will make a firm different

- The core competence of a firm is human resource: do not copy the idea of people, this depends on ability of each people: IQ

- Competitive advantage: VINACONEX have better competitive advantage in

comparison with other firms due to its brand name, abundant financial

resource, good ability of key persons, good procedure of management and high security, clear organizational structure

- Financial analysis: capital structure, evaluating business results through cost, sales, basic financial indicators: ROA; ROE; ROI (return on investment)

- Physical resources include: capital for production, factory, machines and

equipments, reserved materials, information about business environment

e The First: classifying the firm’s available physical resources: capital in

cash, machines and equipments, factory, warehouse, land, reserved

materials

e The Second: determining the scale, structure, quality and features of each physical resource

e The Third: evaluating the ability to meet the actual needs of each

resource in action plan of each unit in specific period of time

e The Fourth: Evaluating and determining the strength, weakness of each physical resource in comparion with other main competitors in the industry and on market and by geographic area Depending on the type

of resource, the analysis should be conducted regularly or irregularly to

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in order to aware of the presence and the importance of this resource

1.2.3.2 Value Chain analysis

Value chain is the chain of activities of a firm to generate value The value chain of an organization is comprised of sequential set of primary and support

activities

- Primary activities: those that are directly concerned with a firm’s

products and services Primary activities include procurement, inputs management, service marketing and customer care Those activities are

evaluated to see if they contribute to cost savings, improve product quality, and whether the service best sastify customer requirements or not The more effective those activities contribute, the more the firm’s

value chain is appreciated and the firm gain competitive advantage

- Support activities: Besides primary activities that directly concern with a

firm products and services, support activities also indirectly impacts to

the products and services Support activities help the major activities of the business operated better, with higher effeciency The activitie we're talking about are human resource management activities, technological

development

1.2.3.3 Corporation Culture and Reputation Analysis

Capstone Project Report

Organizational culture plays an increasingly important role in the formation of the organization Each company needs to make its members grasp the goals and actions point of that company That will boost the company's members strive to achieve common goals set forth by the company

The reputation of the company also contributed significantly to the successful implementation of corporate objectives Reputation is a form of intangible value that a company formed throughout long-term development The more reputable a company is on market, the easier that company can access new market and its products are accepted However, creating as well as preserving and strengthening a reputation for a firm are difficult In addition to internal analysis, other factors such as the legality of the company's activities,

leadership are also brought into consideration

1.2.3.4 - Interal Factor Evaluation Matrix

Internal factor evaluation matrix is the model used in strategic management

process to summarize the analysis, to evaluate the internal strength, weakness

of a firm

Table 1.4 Internal Factor Evaluation Matrix

3 = Minor strength (4) = (2) x (3) internal factors | The higher weight, ;

4 = Major strength the more important

the factor is

_— Œamba01I.X0610 - Group 2

Andrews @U niversity

= Master of nes \dministration

IFE Matrix is deployed in 5 steps

Step 1: Make a list of factors that play decisive roles to a firm’s competitive capability in a specific industry (usually 10 to 20 factors)

Step 2: Assign a weight that ranges from 0.0 (not important) to 1.0 (most important)

to each factor The weight assigned to a given factor indicates the relative

importance of a factor to the success of business in a specific industry Hence,

among firms in the same industry, importance of factors listed out in step | are

similar

Step 3: assign rating ranging from | to 4 to each factor (the range may be wider): Rating | for major weakness, rating 2 for minor weakness, rating 3 for minor strength and rating 4 for major strength Therefore, the ratings indicate the competitive capability of each factor in comparison with competitors in the

industry

Step 4: Score each factor by multiply the factor weight and its rating

Step 5: calculate the total score for all factors listed in the matrix by summing all weighted score for each factor The total score indicates the competitive capability

of a firm

The total score lower than 2.5 indicates weak internal firm, total score above 2.5

indicate a strong internal position

Minimize the weakness and avoid threats

1.2.4 Supporting tools for strategy selection

In order to gradually achieve above objectives, the first step requires a firm to

formulate a suitable strategy And among the tools that make makes strategic management process more convenient are strategic models Some models usually used in strategy formulation are described below

1.2.4.1 Selecting a strategic model

TOWS Matrix is a table showing the company's strategy The strategy is made

on the basis of SWOT analysis as described above Each strategy has the strategic level:

- Company strategy

- Strategy for specific product

- Strategy for functions

-CA_: (Competitive Advantage)

-ES _ : (Environment Stability)

-IS : (Internal Strenghts)

To construct a SPACE matrix we conduct following steps

ration

products

Ease of exit from market

Customer loyalty

Utilization of capacity

Technological know-how

Control over competitor and suppliers Technological know-how

Human resource utilization Capital scale

Ease of Entry

ES Utilization of capacity

e Step 1: Choose a set of variables expressing financial strength (FS),

Competitive Advantage (CA), Environment Stability (ES) and Internals Strenghts (IS) Hereinafter are some factors to display on SPACE Matrix axis

e Step 2: Assign value from +1 (worst) to +6 (best) to all variable of FS and

IS, Assign value from -1 (worst) to -6 (best) to all variable of ES and CA

e Step 3: Calculate the average score for FS by summing the values assigned

to all variables, then divided to number of variables chosen to display in FS

Do the same with IS, ES and CA

e Step 4: Plot average scores of FS, IS, ES and CA on the appropriate axis of the SPACE matrix

e Step 5: Add the scores on axis X and mark the result on axis X Do the same with axis Y then find the intersection of X and Y points

25

Master f e: \dministration

e Step 6: draw a line from the center of the SPACE matrix to intersection point This line reveals the type of strategy the company should pursue: aggressive, competitive, defensive or conservative

1.2.4.3 | BCG (Boston Consulting Group) matrix

This matrix was created by an American leading management consulting firm to assist large corporation to evaluate the strategic business units which help

business leaders to decide how to allocate cash among strategic business units and to evaluate the financial situation of the Corporation The matrix is a table

of 4 categories in which:

e Horizontal axis: show the relative market share of strategic business units determined by the ratio of SBU sales to sales of first or second competitor

¢ Incase SBU is not an industry leader in sales, the relative market share of

SBU is determined by the ratio of SBU sales to sales of largest competitor

+ In case SBU is an industry leader in sales, the relative market share of SBU is determined by the ratio of SBU sales to sales of the second largest competitor

e Vertical axis: Annual market growth rate of the product line that SBU is

working on The rate is in percentage If SBU gain a percentage above 10%,

the market growth rare is considered high

Strategies suggested to each categories of BCG matrix

Nadrews@ University

Master of B ( Adiministration

Direct attack - encircle

Strategic withdrawal strength

BCG matrix analysis helps allocate resources to SBU appropriately from which

a firm can make decision on which SBU to keep and which SBU to eliminate

However, this matrix express some weak points when just using two factors

which are RMS and MGR in SBU positioning on market but not suggesting a

specific strategy for SBU; does not address SBU position in trading new

products

1.2.4.4 QSPM (Quantitative Strategic Planning Matrix):

Decisive step: Analysis and perception are the foundation for decision in

strategy formulation Hence, after finishing analysis, we should use QSPM Quantitative Stratergic Planning Matrix In strategy selection, this will be decisive matrix from which a firm will select the best strategy for its business QSPM use inputs from phase | analyses match them with results from phase 2

to objectively decide among alternative strategies QSPM is the tool that helps

Capstone Project Report S —— Gamba01I.X0610 - Group 2

27

drews@ University

~\ `

( i Master of Business Administration

strategists to objectively evaluate the alternative strategies, based first on key

success external and internal factors

Each unit must be responsible for implementing the strategy set forth and

together build commitment to the success of their firm These are steps to formulate a strategy for a firm

Nadresss@ Uni crsity

\ Master of Business Administration

CHAPTER II:

ANALYSIS OF THE ACTUAL SITUATION OF VINACONEX

CORPORATION’S BUSSINESS IN RECENT YEARS

2.1 Coporation overview

2.1.1 History and development

VINACONEX was established on 27th September 1988 in accordance with Decision No 1118/BXD/TCLD with the initially name of Overseas Construction and Service Company, transaction name was VINACONEX whose main task was managing local construction workers and employees working overseas

On 10th August 1991, the Ministry of Construction (MoC) signed the Decision No

432 BXD/TCLD to transform Overseas Construction and Service Company into Vietnam Construction and Import-Export Corporation with the core business of

construction, material, equipment, technique export-import and manpower export

From a company specialized in overseas labors managing, VINACONEX has

gradually built up its human resource, ventured and cooperated with domestic and

foreign partners to develop and continuously grown and become a leading corporation in Construction industry

In accordance with the policy of restructuring state-owned enterprises, on 20/11/1995 Ministry of Construction issued Decision No 992/BXD - TCLD on the

establishment of Vietnam Construction and Import-Export Corporation with the model of Corporation 90 Accordingly, the Vietnam Construction and Import- Export Joint Stock Corporation received some companies from Ministry of Construction to put under the VINACONEX Corporation

On implementation of Decision No 84/2004/ QD-TTg dated May 13, 2004 by The Prime Minister, VINACONEX was among the first state-owned enterprise being

equitised On November 27, 2006, General shareholders’ meeting to establish the

joint stock corporation was held and from December 1, 2006, VINACONEX

officially operated under the model of Joint Stock Company with chartered capital

of VND 1.500 billion in accordance with Certificate of Business Registration No

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Corporation’s milestones

27/9/1988: Overseas Construction and Service Company

10/8/1991: Vietnam Construction and Import-Export Corporation

20/11/1995: Vietnam Construction and Import-Export Corporation

01/12/2006: Vietnam Construction and Import-Export Joint Stock Corporation

05/9/2008: Stake of VINACONEX JS Corporation (name: VCG) was officially

listed on Hanoi Stock Exchange

At present, VINACONEX manages over 40 affiliates, participates in 5 joint ventures and 14 associated companies operating in various fields all over the country VINACONEX is employing more than 40.000 employees including large

number of officials, engineers, specialists and staffs who have been trained &

worked abroad, with in-depth knowledge and experience

2.1.2 Organizational structure

Since December 1, 2006, Vietnam Construction and Import-Export Joint Stock

Corporation - VINACONEX has been organized and managed in form of Joint Stock Corporation, operating in accordance with amendment of Vietnam’s Laws on Enterprise, accordingly, the Corporation is the parent company of affiliate companies, a capital contributing member of joint ventures or associate of other

companies As of 30/06/2011, VINACONEX has 43.843 employees working in 56 units including 01 wholly owned company, 35 subsidiaries with joined capital from

50% and above, 3 joint ventures, 17 associated companies The Corporation also invested capital into 19 other companies

Company structures

Administ ation

LISTING COMMITTEE

DIVISION OF DIVISION OF DIVISION OF DIVISION OF DIVISION OF DIVISION OF OFFICE

EXTERNAL HUMAN INFRASTRUCTU FINANCE AND FINANCIAL INVESTMENT

TNOUERA, RESOURCES PLANNING SUPERVISION

AFFAIRS

DEVELOPMENT

AFFILIATES STEERING UNITS & LOCAL & ADMINISTRA SUBSIDIARIES ASSOCIATED

product diversification, VINACONEX Corporation has taken full advantages of all

its strength striving to drive the Corporation into a strong group With the rapid growth rate, between 20%-25% in recent years, the value of gross production, turnover, return as well as distribution to state budget are getting higher; quality of

Earning before tax

= Contribute to State Budget

For its achievements and distribution to the country’s industrialization — modernization process, VINACONEX has been granted with many prizes and honors:

Labor Hero Title

Award "National Brand" - The Ministry of Industry and Trade

Award "Strong Brand" - The Vietnam Economic Times

Gold cup — Integration and development

Gold cup — For the development of community

2.2 Analysis of current business strategy at VINACONEX Corporation

Gamba01.X0610 - Group 2

Nadrews @ University `

( rt , Master of Business Administration

2.2.1 Fundamental basis for business strategy development

2.2.1.1 Define the demand for strategy developement

For short-term plans, the Corporation usually designs plan at periodical turning point of time such as quarterly, annually However, for long-term strategy- oriented plans, dues to their complexibility in management process, they are

developed irregularly Long-term plans and strategies are only developed at

milestones of Corporation in particular, of industry or entire economy in general 2.2.1.2 The basis for strategy development

National and sector economic development orientation: Bases on national socio- economic development orientation and construction sector orientation, the

Corporation will analyze the changing of demand for products, services and supportive policies from the Government On that basis, the Corporation assesses the rate of trend in demand for product, service and set out plans to

satisfy that demand

Policy of corporation’s leaders: Board of Directors, Board of Management are those who have strongest responsibility and power in the Corporation, so the policy of Board of Directors and Board of management always pose impacts on the entire operation of the Corporation Hence, when developing plans, the Department of planning and investment — the unit to develop plans — really

concerns about the policy of these leaders

The outputs of analysis reports on business of previous stages: these outputs show the demand of market and how much the Corporation can provide

2.2.2 External factor analysis

2.2.2.1 P.E.S.T Analysis

“¢ Economic:

General economic environment

According to estimates by the General Statistics Office, GDP growth rate in quarter 2/2011 was about 5.67%, 0.24 percentage points higher than previous quarter but lower than the same period last year at 0.73 percentage points With

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under Economist lowered the rate of forecasted Vietnam’s economy growth in

2011 down to 6%, compared with 6.3% made in June

Chart 2.2: GDP growth rate according to EIU forecast

Source: Economist intelligence Unit,

The above number has somehow described the overview of Vietnam economic

environment in current stage That will be a difficult quiz for firms to solve in order to survive and develop on market

Construction sector environment:

As a sector directly affected from the direct changes of the macro economy, in first nine months of 2011, the growth of construction sector has sharply declined and is no longer a the leading driving force of the economic growth in general

Although still benefiting from the preferential policies from the Government that gave priorities to infrastructure development as the infrastructure in

Vietnam is still very weak, the construction sector was strongly influenced by the government’s efforts to control inflation in recent years As forecasted, in

\ndrews @ Unis ersity

Master of Business Administration

is reputable, prestigious and capable constractor in these sectors

Sequences from the difficulties of the industry::

¥ The weight of contribution to GDP declines slightly

According to the data of General Stastic Office, the value of Gross Domestic Product of construction sector reached VND 101.564 billion, accounting for 5.94% of Gross Domestic Product of Vietnam in first 9 months in 2011, slightly declined in comparison with the weight of same period in 2010 (6.05%)

Chart 2.3: Structure of GDP in Vietnam in first 9 months of 2011 and the same

period of 2010

@ Agriculture w= Forestry

Construction sector is no longer the leading sector in growth rate:

Compared to same period in 2010, the construction sector reaches the growth rate of 4.92% (based on 1994 prices) The difficulties of the economy in general and of the construction sector in particular in the first 3 quarters of 2011 has remarkably declined the growth rate of the industry, from 2 digits in 2010

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Andrews Ql HIN CESILY

X Master of Business Administration

One of the biggest advantages of Vietnam's construction sector is still the

priorities given to investment in the construction of infrastructure although there was the general orientation of reducing public investment Spending on development & investment is the second largest expenditure of the annual state budget after regular expenses and over 20% of estimated total cost State budget

for development and investment in 2011 was estimated at VND 152,000 billion, declined by 12% over the real spent but 21% increased over the estimated budget for 2010, in which the estimated budget for fundamental investment was

about VND 145,000 billion

* Politic

Currently, Vietnam is highly appreciated for political, legal environment, with reformed policy, improved legal framework together with political stability, safe and secured living environmental This is the fundamental basis for the growth

X Master of Business Administration

development of factories and the investment into property development Therefore, Vinaconex has many opportunities and options to select prestigious and potential partners in order to develop its business

s* Socio-economic environment:

The social environment in Vietnam in recent years has been improved

increasingly in every aspect The development of the country accompanied by

the rise of people's quality of life reflected in the increase in expected income with per capita GDP in 201i Vietnam reach USD 1,300 By 2020, the Real income of population is roughly 3.5 times higher than in 2010, narrowing the

income gaps between regions and population groups Eliminate makeshift houses, rate of fortified house reach 70%, on average an area of 25 square meter

of floor for each people

“* Technological environment

The issue of technology is a major concern of the Government to achieve

objectives in accordance with the orientation of modernization in coming period Technology in industrial sector is paid special attention In recent year, the application of science and technology in construction sector experiences great progress, the presence of advance technology in construction works

become more and more popular

VINACONEX is one of the pioneers in construction sector to apply advanced

technology such as sliding formwork technology, prestressed concrete

2.2.2.2 Industry factors

Competitors

The increase in the number of construction enterprises has created increasingly fierce competition in the market In real estate sector only, the number of participating enterprises is too many Look at the real estate market, we can realize that: foreign investors in Vietnam, HUD Corporation, Song Da Group, Saigon Real

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Nadresss & University

multifunction, multisectors business as that of VINACONEX At present, Song Da

Corporation operates in the model of parent company and subsidiaries in which, Son Da Corporation has 27 affiliates companies and 20 joint ventures and associate companies nationwide Besides the traditional strength in construction sector in

Vietnam which is hydroelectric plant construction (such as Thac Ba, Hoa Binh, Tri

An, Vinh Son Song Hinh, Yaly, Se San 3, Tuyen Quang and Son La .) Song Da Corporation also engages in infrastructure construction, transportation, civil works

and industrial works construction, manufacturing construction materials such as

steel and cement, providing consultancy service in construction sector, export —

import construction materials, construction equipments, construction technology;

real estate developing, investment in industrial zones and urban areas (with many key projects on progress such as My Dinh — Me Tri new urban area, South An

Khanh urban area

Strategic objective of Song Da Corporation is to develop the Corporation into a

strong Group on the basis of exploiting internal strength, diversifying operation and

Andress QA Uni ersity

Master of Business Administration

C RIC,

27,790 / equals to 50% plan of whole

Revenue in first 6 months

year ' Profit in first 6 months 572 / equals to 50% plan of whole yea

Housing and Urban Development Corporation (HUD)

HUD Corporation is a state-owned enterprise with the similar scale with VINACONEX Corporation before equitization However, HUD Corporation tends to operate mainly in

real estate business At present, HUD Corporation is considered the largest corporation

of Ministry of Construction specialized in real estate

The major operation of HUD Corporation is in real estate business, including: invest and develop residential areas, new urban areas, tourism areas, entertainment areas,

economic zones, industrial zones, trading houses and urban infrastructure, industrial parks Some key projects of HUD Corporation in Hanoi include: Van Quan — Yen Phuc New urban area (Ha Dong District), Phap Van — Tu Hiep new urban area project (50 hectares) at Hanoi southern area, My Dinh II urban area project (26.24 hectares), Dinh Cong new urban area project (35 hectares), Linh Dam complex buildings project (184 hectares), Tan Lap new urban area project, Chanh My new urban area project, Van Canh project, Viet Hung project

Primary operating in real estate business, HUD Corporation has been developing real estate projects, especially new urban area projects on large scale with much

higher number of project in comparison with VINACONEX Corporation Besides the operation in real estate business, HUD Corporation also engages in other business such as: construction, construction consultancy, construction material

manufacturing and other businesses

Some key figures on business result

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