Formulation of business strategies for VIG Trading in the period of 2012-2016

CROLP NO.03 FORMULATION OF BUSINESS STRATEGIES FOR VIG TRADING IN THE PERIOD OF 2012-2016 CHAPTER I - FOUNDATION OF STRATEGIC MANAGEMENT AND STRATEGIES FORMULATION icessssscssvsssessscns

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GROUP NO.03 FORMULATION OF BUSINESS STRATEGIES FOR VIG TRADING IN THE PERIOD OF 2012-2016

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT

FORMULATION OF BUSINESS STRATEGIES FOR VIG TRADING IN THE PERIOD OF 2012-2016

Group number: 03 Student’s name: Nguyen Truong Thang

Tran Thi Minh Hien Tran Thanh Tu

Le Anh Tuan

HANOI 2012

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VIG TRADING JOINT STOCK COMPANY Headquarters: 2"“floor, VIT Building, 519 Kim Ma St., Ba Dinh Dist., Hanoi, Vietnam - Tel: +84 (04) 2220.9119 - Fax: +84 (04) 3762.1243

VỊG TRADING Website: www.vigtrading.vn — Email: info@vigtrading.vn

Date: April 27" 2012

CONFIRMATION

To: Master of business administration program - Griggs University

Subject: Comments of VIG Trading JSC on the project of Group 3 - GAMBA 01.X0710

Class

We, VIG Trading, has done fully support for these students when they studied about the company ‘s vision, strategy and operation status The students have closely followed up the current situation of the company ‘s organization structure and the business activities when implementing the project;

- The content of “Formulation of business strategies for VIG Trading in period of

2012 — 2016” project is appropriate the goals that VIG Trading is trying to reach, and has high feasibility

VIG Trading Joint Stock Company

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CROLP NO.03 FORMULATION OF BUSINESS STRATEGIES FOR VIG TRADING IN THE PERIOD OF 2012-2016

CHAPTER I - FOUNDATION OF STRATEGIC MANAGEMENT AND

STRATEGIES FORMULATION icessssscssvsssessscnssssvansecssnsacussaasssssnsnssasssnicasenssvnssassooscessosss 11

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GROLP NO.03 FORMULATION OF BUSINESS STRATEGIES FOR VIG TRADING IN THE PERIOD OF 2012-2016

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LIST OF TABLE

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LIST OF FIGURES

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COMMITMENT

We, the research team, would like to commit that this Capstone project is our own research and has been done using various sources and real information The Capstone project is not copied from any other report

We undertake any responsibility for the content of this report

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GROLP NO.03 FORMULATION OF BUSINESS SERATEGIES FOR VIG TRADING IN THE PERIOD OF 2012-2016

ACKNOWLEDGEMENT

For gaining such research results, we would like to express our thanks to Griggs University, ETC Centre and especially to all lecturers who have taught, guided and provided us with the valuable knowledge

Our sincere thanks would also come to the support and assistance of all the people in VIG Trading They have spent their valuable time discussing with us the topic contents and practical situations at the company, help us create a strong connection between theory and practice, which play a pivotal role in completing the project

We, Group No.03, would like to receive the continual support from lecturers and the university to help us complete the course with highest results Also, the support of VIG Trading will be an indispensable motivation for the success of the research

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GROUP NO.03 FORMULATION OF BUSINESS SERATEGIES FOR VIG TRADING IN THE PERIOD OF 2012-2016

INTRODUCTION

Vietnam's economy is gradually integrating into the region and the world economy As

a result, businesses have the chance to expand their horizon but the competition pressure also becomes stiffer On one hand, many new opportunities are present but on the other hand potential risks are also greater

Facing a more uncertain environment which has been hit hard by the double-dip global recession, the issue of defining, formulating and implementing an effective business strategy for each enterprise has become not only critical but also a matter of life and

death

VIG Trading, a trading firm in the building material industry set up right at the start of this global economic downturn (2008), can be seen as a highlight example to illustrate the importance of strategy formulation Continuously applying a rigorous but very adaptive strategic management approach, VIG Trading has achieved outstanding results despite the difficult business climate In order for the Company to continue its success in seizing business opportunities and at the same time mitigating risks, the whole process of strategy formulation and implementation should be examined, revised and changed accordingly With the support from the Company Management Board, our group has obtained an invaluable chance to be involved in this process The research

topic:” FORMULATION OF BUSINESS STRATEGIES FOR VIG TRADING IN

THE PERIOD OF 2012-2016" was therefore selected

The purpose of this research project is to help clarify some key theoretical issues on formulating and implementing business strategies of VIG Trading on the basis of analytical evaluation of the Company’s business as well as of the changes in the business environment in recent years

The project comprises of three parts:

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Chapter I: Foundation of Strategic Management and Strategies Formulation

Chapter II: VIG Trading Strategy Analysis

Chapter III: Proposed Business Strategies and Solutions for Implementation

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CHAPTER I - FOUNDATION OF STRATEGIC MANAGEMENT

AND STRATEGIES FORMULATION

1.1 Strategy Concepts

1.1.1 Definition

Strategies are the means by which jiong-term objectives will be achieved Business strategies may include geographic expansion, diversification, acquisition, product development, market penetration, retrenchment, divestiture, liquidation, and joint ventures

Strategies are potential actions that require top management decisions and large amounts of the firm’s resources In addition, strategies affect an organization’s long- term prosperity, typically for at least five years, and thus are future-oriented Strategies have multifunctional or multidivisional consequences and require consideration of both the external and internal factors facing the firm

1.1.2 Types of strategies

There are number of alternative strategies that an enterprise could pursue and can be categorized into 11 actions: forward integration, backward integration, horizontal integration, market penetration, market development, product development, related

diversification, unrelated diversification, retrenchment, divestiture, and liquidation

Each alternative strategy has countless variations Many, if not most, organizations simultaneously pursue a combination of two or more strategies, but a combination strategy can be exceptionally risky if carried too far No organization can afford to pursue all the strategies that might benefit the firm Difficult decisions must be made Priority must be established Organizations, like individuals, have limited resources Both organizations and individuals must choose among alternative strategies and avoid

excessive indebtedness

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Seeking ownership or increased control of a firm’s suppliers

Seeking ownership or increased control over competitors

Seeking increased market share for present products or services

in present markets through greater marketing efforts Introducing present products or services into new geographic

area

Seeking increased sales by improving present products or services or developing new ones

Adding new but related products or services

Adding new, unrelated products or services

Regrouping through cost and asset reduction to reverse declining sales and profit

Selling a division or part of an organization

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It is important to note that all persons responsible for strategic planning at the various levels ideally participate and understand the strategies at the other organizational levels

to help ensure coordination, facilitation, and commitment while avoiding inconsistency, inefficiency, and miscommunication Plant managers, for example, need

to understand and be supportive of the overall corporate strategic plan (game plan) while the president and the CEO need to be knowledgeable of strategies being employed in various sales territories and manufacturing plants

Figure 1 - Levels of Strategies

Corpo-ate Leve—chief

execurve officer

Gaupary

Dresiden: or 2xecutive a ee vice president Fanctional Level—

SS finance, marketing, R&D, Panctansl 1zvel—fan+, marketing tarubsctu ing information

and human resource managers resource managers

small Com rany

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As this definition implies, strategic management focuses on integrating management, marketing finance/accounting production/operations, research and development, and information systems to achieve organizational success

1.2.2 Benefits of strategic management

Strategic management allows an organization to be more proactive than reactive in shaping its own future; it allows an organization to initiate and influence (rather than just respond to) activities—and thus to exert control over its own destiny Small

business owners, chief executive officers, presidents, and managers of many for-profit

and nonprofit organizations have recognized and realized the benefits of strategic

management

Historically, the principal benefit of strategic management has been to help organizations formulate better strategies through the use of a more systematic, logical, and rational approach to strategic choice This certainly continues to be a major benefit

of strategic management, but research studies now indicate that the process, rather than the decision or document, is the more important contribution of strategic management

In summary, strategic management offers the following benefits:

e It allows for identification, prioritization, and exploitation of opportunities

e It provides an objective view of management problems

e It represents a framework for improved coordination and control of activities

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1.2.5

It minimizes the effects of adverse conditions and changes

It allows major decisions to better support established objectives

It allows more effective allocation of time and resources to identified

opportunities

It allows fewer resources and less time to be devoted to correcting erroneous or

ad hoc decisions

It creates a framework for internal communication among personnel

It helps integrate the behavior of individuals into a total effort

It provides a basis for clarifying individual responsibilities

It encourages forward thinking

It provides a cooperative, integrated, and enthusiastic approach to tackling problems and opportunities

It encourages a favorable attitude toward change

It gives a degree of discipline and formality to the management of a business Strategic management Model

The strategic-management process can best be studied and applied using a model Every model represents some kind of process The framework illustrated in Figure 1-1

is a widely accepted, comprehensive model of the strategic-management process This model does not guarantee success, but it does represent a clear and practical approach for formulating, implementing, and evaluating strategies Relationships among major components of the strategic-management process are shown in the model, which appears in all subsequent chapters with appropriate areas shaped to show the particular focus of each chapter These are three important questions to answer in developing a

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strategic plan:

e Where are we now?

e Where do we want to go?

e How are we going to get there?

Figure 2— A Comprehensive Strategic-Management Mcdel

A Cornprehensive Strategic-Management Model

The strategic-management process is dynamic and continuous A change in any one of the major components in the model can necessitate a change in any or all of the other components For instance, a shift in the economy could represent a major opportunity

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and require a change in long-term objectives and strategies: a failure to accomplish annual objectives could require a change in policy: or a major competitor's change in strategy could require a change in the firm’s mission Therefore, strategy formulation, implementation, and evaluation activities should be performed on a continual basis, not just at the end of the year or semiannually The strategic-management process never really ends

The strategic-management process is not as cleanly divided and neatly performed in practice as the strategic-management model suggests Strategists do not go through the process in lockstep fashion Generally, there is give-and-take among hierarchical levels

of an organization Many organizations semiannually conduct formal meetings to discuss and update the frm`s vision/mission, opportunities/threats, strengths/weaknesses, strategies, objectives, policies, and performance These meetings are commonly held off-premises and are called retreats The rationale for periodically conducting strategic-management meetings away from the work site is to encourage more creativity and candor from participants Good communication and feedback are needed throughout the strategic-management process

1.3 Strategies Formulation

1.3.1 Vision and Mission Statements

1.3.1.1 Vision versus Mission

Many organizations develop both a mission statement and a vision statement Whereas the mission statement answers the question “What is our business?” the vision statement answers the question “What do we want to become?” Many organizations

have both a mission and vision statement

It can be argued that profit, not mission or vision, is the primary corporate motivator.But profit alone is not enough to motivate people Profit is perceived

Ly

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negatively by some employees in companies Employees may see profit as something that they earn and management then uses and even gives away to shareholders Although this perception is undesired and disturbing to management, it clearly indicates that both profit and vision are needed to motivate a workforce effectively

When employees and managers together shape or fashion the vision and mission staternenis for a firm, ihe resultant documents can reflect the personal visions that managers and employees have in their hearts and minds about their own futures Shared vision creates a commonality of interests that can lift workers out of the monotony of daily work and put them into a new world of opportunity and challenge 1.3.1.2 Importance (Benefits) of Vision and Mission Statements

The importance (benefits) of vision and mission statements to effective strategic management is well documented in the literature, namely,

e To ensure unanimity of purpose within the organization

e To provide a basis, or standard, for allocating organizational resources

e To establish a general tone or organizational climate

e To serve as a focal point for individuals to identify with the organization’s purpose and direction, and to deter those who cannot from participating further

in the organization’s activities

e To facilitate the translation of objectives into a work structure involving the assignment of tasks to responsible elements within the organization

e To specify organizational purposes and then to translate these purposes into objectives in such a way that cost, time, and performance parameters can be assessed and controlled

1.3.2 The External Assessment

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External forces can be divided into five broad categories: (1) economic forces: (2)

social cultural, demographic, and natural environment forces; (3) political, governmental and legal forces: (4) technological forces; and (5) competitive forces External trends and events, such as the global economic recession, significantly affect products, services, markets, and organizations worldwide

Changes im external forces iranslate into changes im consumer demand for both indusirial and consumer products and services External forces affect the types of products developed, the nature of positioning and market segmentation strategies, the type cf services offered, and the choice of businesses to acquire or sell External forces directly affect both suppliers and distributors Identifying and evaluating external opporunities and threats enables organizations to develop a clear mission, to design strategies to achieve long-term objectives, and to develop policies to achieve annual objectives

In facts, the external forces can be divided into macroeconomics forces and industrial

forces that affect the company’s strategies

We often use PEST analysis (Political, Economic, Social, and Technological analysis)

to reflect the influences of macroeconomics factors to the company strategies Meanwhile, The Five-Forces Model is often used to investigate the effects of industrial factors to the company’s strategies

Figure 3 — Five-Forces Model

The Five-Forces Model of Competition

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The External Factor Evaluation (EFE) Matrix

An External Factor Evaluation (EFE) Matrix allows strategists to summarize and evaluate economic, social, cultural, demographic, environmental, — political, governmental, legal, technological, and competitive information and can be developed

in five steps:

| List key external factors as identified in the external-audit process Include a total of

15 to 20 factors, including both opportunities and threats that affect the firm and its industry List the opportunities first and then the threats Be as specific as possible, using percentages, ratios, and comparative numbers whenever possible

2 Assign to each factor a weight that ranges from 0.0 (not important) to 1.0 (very important) The weight indicates the relative importance of that factor to being successful in the firm’s industry Opportunities often receive higher weights than threats, but threats can receive high weights if they are especially severe or threatening Appropriate weights can be determined by comparing successful with unsuccessful competitors or by discussing the factor and reaching a group consensus The sum of all weights assigned to the factors must equal 1.0

3 Assign a rating between | and 4 to each key external factor to indicate how effectively the firm’s current strategies respond to the factor, where 4 = the response is superior, 3 = the response is above average, 2 = the response is average, and | = the response is poor Ratings are based on effectiveness of the firm’s strategies Ratings are thus company-based, whereas the weights in Step 2 are industry-based It is important

to note that both threats and opportunities can receive a 1, 2, 3, or 4

4 Multiply each factor’s weight by its rating to determine a weighted score

5 Sum the weighted scores for each variable to determine the total weighted score for

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the organization

1.3.3 The Internal Assessment

A firm’s strengths that cannot be easily matched or imitated by competitors are called distinctive competencies Building competitive advantages involves taking advantage of distinctive competencies All firms should continually strive to improve

on their weaknesses, turning them into strengths, and ultimately developing distinctive competencies that can provide the firm with competitive advantages over rival firms Below diagram show the number of internal forces that drive enterprise’s business strategy:

igure 4 — Internal Forces

Production Marketing & PR and operations

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To technically evaluate the significances of each internal factor to the company’s

strategy, we use the Internal Factor Evaluation (IFE) Matrix

A summary step in conducting an internal strategic-management audit is to construct

an Internal Factor Evaluation (IFE) Matrix This strategy-formulation tool summarizes and evaluates the major strengths and weaknesses in the functional areas of a business, aiid it also provides a basis for identifying and evaluating relationships among those areas Intuitive judgments are required in deveioping an IE Matrix, so the appearance

of a scientific approach should not be interpreted to mean this is an all-powerful technique A thorough understanding of the factors included is more important than the actual numbers Similar to the EFE Matrix and Competitive Profile Matrix described in Chapter 3, an IFE Matrix can be developed in five steps:

1 List key internal factors as identified in the internal-audit process Use a total of from 10 to 20 internal factors, including both strengths and weaknesses List strengths first and then weaknesses Be as specific as possible, using percentages, ratios, and comparative numbers Recall that Edward Deming said, “In God we trust Everyone else bring data.”

2 Assign a weight that ranges from 0.0 (not important) to 1.0 (all-important) to each factor The weight assigned to a given factor indicates the relative importance of the factor to being successful in the firm’s industry Regardless of whether a key factor is

an internal strength or weakness, factors considered to have the greatest effect on organizational performance should be assigned the highest weights The sum of all weights must equal 1.0

3 Assign a 1-to-4 rating to each factor to indicate whether that factor represents a major Weakness (rating = 1), a minor weakness (rating = 2), a minor strength (rating = 3), or a major strength (rating = 4) Note that strengths must receive a 3 or 4 rating and weaknesses must receive a | or 2 rating Ratings are thus company-based, whereas the

bo t

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GROLPNO.03 FORMULATION OF BUSINESS STRATEGIES FOR VIG TRADING IN THE PERIOD OF 2012-2016

weights in step 2 are industry-based

4 Multiply each factor’s weight by its rating to determine a weighted score for each variable

5 Sum the weighted scores for each variable to determine the total weighted score for the organization

1.3.4 Strategies Analysis and Selection

Important strategy-formulation techniques can be integrated into a three-stage decision-making framework, as shown in below:

STAGE 2: THE MATCHING STAGZ

|

Quantitative Strategic Planning Matrx (QSEM) }

1.3.4.1 The Input Stage

The information derived from internal (IFE Matrix) and external (EFE Matrix) ffactors evaluation provides basic input information for the matching and decision stage cof the strategies Analysis and Choice The input tools require strategists to quantify subjectivity during early stages of the strategy-formulation process Making small decisions in the input matrices regarding the relative importance of external and internal factors allows strategists to more effectively generate and evaluate alternative strategies Good intuitive judgment is always needed in determining appropriate weights and ratings

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1.3.4.2 The Matching Stage

Strategy is sometimes defined as the match an organization makes between its internal resources and skills and the opportunities and risks created by its external factors [he matching stage of the strategy-formulation framework consists of five techniques that can be used in any sequence: the SWOT Matrix, the SPACE Matrix, the BCG Matrix, the IE Matrix, and the Grand Strategy Matrix These tools rely upon information derived from the input stage to match external opportunities and threats with internal strengths and weaknesses Matching external and internal critical success factors is the key to effectively generating feasible alternative strategies

Below is the development of most commonly used matrix:

SWOT Matrix (strengths, weaknesses, opportunities, threats)

To form SWOT Matrix, at first, we need to list strengths, weaknesses, opportunities and threats by the order of priority Next step is systematically comparing each corresponding level between factors to create combination level

S/O combination is gained from major strengths with opportunities of the enterprise The enterprise needs to use strengths and opportunities to compete with other enterprises and non-stop expand its market share

W/O combination is the combination between weaknesses of the enterprise with Opportunities This combination helps the enterprise to overcome weaknesses to take advantage of opportunities

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GROL P NO.03 FORMULATION OF BUSINESS STRATEGIES FOR VIG TRADING IN THE PERIOD OF 2012-2016

1.3.4.3 The Decision and Selection Stage

Analysis and intuition provide a basis for making strategy-formulation decisions The matching techniques just discussed reveal feasible alternative strategies Many of these strategies will likely have been proposed by managers and employees participating in the strategy analysis and choice activity

The Quantitative Strategic Planning Matrix (QSPM)

Other than ranking strategies to achieve the prioritized list, there is only one analytical technique in the literature designed to determine the relative attractiveness of feasible alternative actions This technique is the Quantitative Strategic Planning Matrix (QSPM), which comprises Stage 3 of the strategy-formulation analytical framework This technique objectively indicates which alternative strategies are best The QSPM uses input from Stage | analyses and matching results from Stage 2 analyses to decide objectively among alternative strategies That is, the EFE Matrix, IFE Matrix make up Stage 1, coupled with the SWOT Matrix that make up Stage 2, provide the needed information for setting up the QSPM (Stage 3) The QSPM is a tool that allows strategists to evaluate alternative strategies objectively, based on previously identified external and internal critical success factors Like other strategy-formulation analytical tools, QSPM requires good intuitive judgment

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CHAPTER 2 - VIG TRADING’S STRATEGY ANALYSIS

2.1 The Company overview

2.1.1 History and development

VIG Trading is a joint stock company and a part of Vietnam Financial Investment

Service Joint Stock Company (VIG GROUP) Its operation is in compliance with the

Enterprise Law passed by the National Assembly of the Socialist Republic of Vietnam, Eleventh Legislature, 8th Session, in 2005

registrationcertificateNo.01050558700f theHanoi Department of Planning and Investment issued on12.01.2008(the first registration)

Prior to the establishment of VIG Trading, VIG Group’s trading deals are scattered around different divisions The birth of VIG Trading is aimed at centralizing all trading activities in the Group for more effective and efficient management and control

Thanks to VIG Group’s long track record in the trading business, which passes through

to VIG Trading, the company does not encounter the usual difficulties that most young enterprises have to face Since its inception, VIG Trading had available high quality human resources, customers, markets and suppliers

Although the establishment of VIG Trading met many difficulties in the initial stage, it shows effects on not only management but also the inner strength Only after 3 years of operation, VIG Trading has created reputation on the market and had good strategic relationships with suppliers and major banks

2.1.2 Organizational structure

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2.1.3 Products and Services

TRADING BUSINESS.,

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Sanitary Ware Equipment

Sanitary Ware products which are distributed by VIG Trading is produced by Hao Canh Sanitary Ware Company one of the biggest sanitary ware companies in the North

of Vietnam The company possesses a modern sanitary ware production line from Zhongya Kiln and Furnace Co.,Ltd The sanitary ware products of Hao Canh meet European standards and are currently exported to Cambodia and Laos We are planning

to integrate a Spanish sanitary brand to Hao Canh’s products in order to export those to

the Middle East in near future

Concrete unburned brick

VIG Trading is currently a sole distributor of Concrete unburned bricks of Khang Minh Brick Joint Stock Company we have a lot of types and model of the products from solid bricks ( used to build foundation and load-bearing walls ) to hollow bricks with over 40% porosity ( used to build partition wall with light weight ) Products of Khang Minh Brick characterized by the variety in size, satisfying all standards in thickness of building wall and many outstanding advantages compared with clay burned brick, such

as high compress intensity, fast construction progress, cost minimizing, convenience in construction Additionally, we may be produced under cooperation according to specific order of each owner

Plastic doors, aluminum doors - European Building Material Joint Stock Company (EBM)

VIG Trading is the exclusive distributor in the North of the products of European Building Material Joint Stock Company (EBM) EBM doors & windows are manufactured at EBM factory in the Nhon Trach Industrial Park 3, Dong Nai Province, equipped with modern production lines imported from Germany, Italy and Poland Design and technical control and production systems are developed based on specialized software STOLCAD Our Quality Management System has been assessed

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and issuing ISO 9001 certificate by the Bureau Veritas (British)

EBM doors & windows have been certified to meet the European quality standards, and received many prizes in Vietnam such as Gold Cup — WTO Integration Brand Gold Cup - Vietnam Construction Industry; Gold Medal for Product Quality

EBM doors & windows with their preeminent features such as the durability, acoustic and heat insulation and most notably, non-deformation even in the hot and humid climate have been chosen by many customers Up to now, there have been thousands

of constructional works all over the country (housing, offices and hotels) in which EBM doors and windows were used EBM products have been considered as the best quality products in Vietnam market With slogan of “Not the first but must be the best”, EBM has continuously strived to improve its product quality as well as provide professional service to maintain its position as the leading supplier of u-PVC products

in Vietnam, well deserving its customers’ trust

Consulting activities

Acting as a distributor of building material to construction projects, VIG Trading also provides consulting services where possible as a plus for the ease of entering a project Normally, VIG Trading with corporate with an Architect Company in VIG Group to execute this services for customers and the services so far are provided mostly complementally

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nearly 110 billion, that is, 50% growth over 2009 Due to the difficulties of

construction industry of 2011, the company’s revenue for first nine months of 2011

merely reached VND 189.455 billion, which means it dropped 25% in comparison to the same period of 2010

As the company only started in 2008, its business result of 2009 was not so impressive However, thanks to efforts of board of management and staff, its business result of

2010 reflected spectacular growth Unfortunately, in 2011, especially the third quarter, Vietnamese economy has gone through a financial scrunch and many construction projects are postponed or cancelled The company’s business result, therefore, has decreased significantly this year, just equals to 75% of the result of the same period of previous year

Table 1-VIG Trading performance (2009 — 2011)

Unit: VND

Revenues from sale of goods

and rendering of services

Net revenues from sale of goods

and rendering of services

218,946,555,554 | 328,419,833,332 | 189,455,462,962

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GIOLP XO.03 FORMULATION OF BUSINESS STRATEGIES FOR VIG TRADING IN THE PERIOD OF 2012-2016

Expenses from financial activities | 0 | 313,479,718 | 433.236.568

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The main markets of the company are the two largest cities of Vietnam: Hanoi and Ho Chi Minh City The year 2009 was merely the second year that the company is in operation, thus it focused mainly on Hanoi market That is why the 2009 revenue from Hanoi market accounted for 89.7% of the total figures The year 2010 and 2011 has witnessed a significant shift in the regional structure of revenue The proportion of revenue from Hanoi market has markedly decreased to just above 62% in 2010 and to 59.9% in the first 9 months of 2011 VIG Trading has diversified to other markets In addition to the expansion into Ho Chi Minh City market, other provinces are also targeted including Bac Ninh, Thanh Hoa, Da Nang and KhanhHoa The diversification effort help the company reduce the regional concentration risk and at the same time open new opportunities

Figure 6 - Revenue by products distributed

® Building materials ™Paper ® Others

The products accounting for largest proportions of VIG Trading’s total revenue are building materials and paper The proportion of building materials in total revenue was greater than 70% in the period of 2009, 2010 and first nine months of 2011 In addition, the percentage of paper over total revenue only changed slightly around 25%

at that period Other products contributed insufficiently to the Company’s revenue

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Table 2—List of major projects that VIG Trading have been supporting

Xuan Dist., Ha Noi

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Monaco Garden Km18, Lang Hoa Lac Highway, Yen Son Commune,

Quoc Oai Dist Ha Noi

Han River Side

Profit

The company’s profit of 2010 rose 47% over 2009 thanks to the high revenue growth

There have been many disadvantages of operating conditions in 2011, including the fluctuation of exchange rate, the low demand and the unfair competition from goods imported through smuggling channels Consequently, the company’s sales revenue dropped during first nine months of this year Nevertheless, its profit was unchanged ccmpared with the same period of 2010 owing to the decrease of administration and seling expenses The quality of making and conducting short-term strategy of the lbcard of management has led to much better-than-expected result

Table 3 - Main financial ratios

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a

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The year 2011 is a very difficult year for Vietnam's real estate market due to the monetary tightening policy of the Government and State Bank of Vietnam As a company participates in building materials industry, VIG Trading’s operation has faced many obstacles, which causes its figures being not as good as the previous year However, with the innovations and effort from the management team, the result is expected to be at least as good as the previous year

The analysis of VIG Trading revenue and profit has shown clearly that the Company’s operation improve significantly over time Risk has been reduced and at the same time more opportunities are in place

2.2 Analysis of external environment for VIG Trading

2.2.1 Macro Environment

2.2.1.1 Economic Environment

Economic factors have a direct impact on the potential attractiveness of various Strategies.For example, when interest rates rise, funds needed for capital expansion become more costly or unavailable Additionally, when interest rates rise, discretionary income declines, and the demand for discretionary goods fall alongside When stock prices increase, the desirability of equity as a source of capital for market development increases Also, when the market rises, consumer and business wealth expands A summary of economic variables that often represent opportunities and threats for organizations is stated below:

Key Economic Variables to Be Monitored

Shift to a service economy Import/export factors

oo - Demand shifts for different categories of goods Availability of credit

and services

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Level of disposable income

groups Propensity of people to spend Price fluctuations

Interest rates Export of labor and capital from the country

Money market rates Fiscal policies

Federal government budget

Tax rates deficits

Gross domestic product trend Value of the dollar in world markets

Consumption patterns Stock market trends

Unemployment trends Foreign countries’ economic conditions

Below is the SWOT analysis of the economics factors that will affect the business Strategy of VIG Trading:

e Vietnam still suffers from substantial trade, current account and fiscal deficits,

leaving the economy vulnerable to global economic uncertainties in 2011 The fiscal deficit is dominated by substantial spending on social subsidies that could be

difficult to withdraw.

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GROLPNO.03 FORMULATION OF BUSINESS STRATEGIES FOR VIG TRADING IN THE PERIOD OF 2012-2016

The heavily-managed and weak dong currency reduces incentives to improve quality of exports, and also serves to keep import costs high, thus contributing to inflationary pressures

and liberalizing the banking sector

Urbanization will continue to be a long-term growth driver The UN forecasts the

urban population to rise from 29% of the population to more than 50% by the early

2040s

Threats

Inflation and deficit concerns have caused some investors to re-assess their hitherto upbeat view of Vietnam If the government focuses too much on stimulating growth and fails to root out inflationary pressure, it risks prolonging macroeconomic instability, which could lead to a potential crisis

Prolonged macroeconomic instability could prompt the authorities to put reforms

on hold, as they struggle to stabilize the economy

The double-dip world economic recession puts further pressure on Vietnam economy which is increasingly dependent on international trade The year 2012 is expected to be a very tough year for Vietnam businesses

2.2.1.2 Business Environment

Business Environment includes Social, Cultural, Demographic, and Natural

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