Building the business strategy of Viet Nam construction joint stock company No. 21 - Vinaconex in the period of 2011 2015, vision by 2020

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT Subject: BUILDING THE BUSINESS STRATEGY OF VIETNAM CONSTRUCTION JOINT STOCK COMPANY

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT

Subject: BUILDING THE BUSINESS STRATEGY OF VIETNAM CONSTRUCTION JOINT STOCK COMPANY NO 21 — VINACONEX

IN THE PERIOD OF 2011 -2015, VISION BY 2020

Group No > 10

Student’s name

1 Nguyen Quoc Dung

2 Ngo Van Dung

CONFIRMATION OF VIETNAM CONSTRUCTION JOINT STOCK

COMPANY No.21 - VINACONEX

Vietnam Construction Joint Stock Company No.21 - Vinaconex has been established since 1969 and directly under Vietnam Construction And Import - Export Joint Stock Corporation (Vinaconex)

For 42 years of establishment and development, the Company has affirmed its position, prestige in business market and gained faith in customers inside and outside the city; its revenue and profit of following year has been always higher than previous year, ensuring sufficient work for staffs and officers, fulfilling

annual business production plan set forth by General Assembly of Shareholders

To maintain and develop, Our Company always attaches great importance to the establishment of annual business strategy

Recently students in Group 10, Class GGMBA01.XO410, Griggs University have come to our Company to collect documents, study business operation of our Company to serve for their thesis with the topic “Establishment of business

strategy for Vietnam Construction Joint Stock Company No.21 — Vinaconex

period 2011-2015 and vision to 2020” Our Company has created favorable conditions for them to collect actual data at our Company to complete their thesis (Data of the capstone are actual one of our Company) Contents of their research, their solutions and proposals in the thesis are very important to Our Company

We will consider such solutions and proposals to establish better business strategies for our Company upcoming years

Hanoi, 26" November 2011

Vietnam Construction Joint Stock Company No.21

Chairman of Management Board cum Director of the Company

~ Nguyen Xuan Viet

ACKNOWLEDGEMENT

We would like to thank Center for Educational Technology and Career Development (ET) VNU, as well as lecturers and officials of the faculty for having wholeheartedly taught, guicd and facilitated us during our study process at class GAMBA 01.X0410 for the course comletion

We also would like to express our gratitude to all teachers who have taught and guided

us athusiastically and responsibly in order to help us research and fulfill this capstone succssfully

Finally we would like to thank Board of Directors and officials of departments from Vietam Construction Joint Stock Company No 21 — VINACONEX for having created favcable conditions to help us collect factual data to fulfill this capstone

Thank colleagues, friends and family for encouraging and supporting us

Faithfully thank!

TABLE OF CONTENTS

PREAMBLE: Page 49/.9/0)00NẺẺ4 9

2 Research 0bj€CfÏV€S cuc HH H1 1121110 1n H HH ren 10

3 Scope of research oo cece eccesesescsesesesenesecscsssesesssseecsescscsevssatssusssusessavavavatansavavsvavessvassesseasees 10

4 Method of research ccc cece cseseseseseseessssesesesessvscscscscssssvavassesessvsavavacavaueavavavavesavaveveveneees 10

®./ 3a 2.8 5Ầ5ẤẠ1511111 12 THEORETICAL FOUNDATION OF BUILDING THE BUSINESS STRATEGY 12 1.1 Theoretical foundation 0Ý Straf€Øy - c cà S n1 Tn HH HH Hee k2 INDN2 7 7 12 1.1.2 Concept 0ƒ Strategic \aHqg€IIGHI - 5 5S S3 5111 11521 11x11 HH re 12 1.1.3 Roles and tasks of s(rategic managemehn( - - s21 1111511111 1151515512111 Eerrreo 12 1.1.3.1 Roles of strategic management 0.cccccccccccccscscsesesescscsesssvsvesvsvsssssuessassssestavaresestateveees 12 1.1.3.2 Tasks of strategic management 2.0.0.0 cc cccccccccccccscsescsesesccscstacscessevevasavaracatecsatavesessesseseseaces 13 1.2 Build the business strategy 2.0.0.0 ccccccccccccccsscscscsesoveceesscessacsevacsseevavsesasstissasevevasvessessveveveees 13 1.2.1 Vision, mission and objectives of the strategy c.ccccccccssssssssesceesesececsesusececsvseaveseaveseseeucevesees 13 1.2.1.1 Strategic vision and Mission 0 0.c.ccccccccccccccssesesesessscseeesevscscscsevevavasscatstecseveversssesuseesesees 13

7 51 .e 14 1.2.2 Analysis of external enVirOnIMEHI: 5c + 111 E151 11181 11515111111 1111111111115 TT EEErec 14 1.2.2.1 Analysis of general enYironmehn(: ch SH n1 T TH TH Hee re 14 1.2.2.2 Analysis of industry environments .0.0 ccccccccccsesesssssssesssvsesececececscscscscscseacseseesessssseeesees 14 1.2.2.3 External Factor Evaluation - EEFE MatriX: cSn HH TT HS HH nen l6

4

1.2.2.4 Competitive Profile Matrix (CPM) 0 0.0 0ccccccccccccccccecscscsecccecsesecsesssecssetevecisavesesveveteceevees 17

1.2.3 Analysis of intermal factors: .0.0.ccccccceccccccscstssescsssescecsvscevsvsvsscscevesssevsvavavavatevesssessisatsesseees 18 1.2.3.1 Internal Factor Evaluation — IFE Matrix: .0.0.0.c.cccccccccccccscscsscesscesscsescscscevevevecevesecesesees 19

lc Selecting the business strategies 0.00.0 ccccccccccccccsescscsessssscscesscsvsevavsnsvsasasssseavscecavsteveveeees 20 1.5.1 SWOT MatriX 0 n2 H111 11111 HH HH HH 20 1.:.2 Boston Consulting Group Matrix (BC) - ncn HH TH H HH HH Hee 2] 1.5.3 IE Matrix ( IEE - EFE), 6S 2S 22123 12221121211 112121 1 TH 1 1tr rờg 22

1.2.4 Quantitative Strategic Planning Matrix (QSPM) cccccccccccccscecscesecececescssscecscececsceeeesevees 23

ETE TEES A easrarcasanes creme nk inal nnmeenmmrenensanristnvenentmn cesar gr ERDAS REN Seen 25 ANALYSIS OF THE REAL SITUATION OF VIETNAM CONSTRUCTION JOINT-STOCK COWVPANY NO.21I - VINACONEX 0 HH 221g tre re 25 2.1 Introduction about Vietnam Construction Joint-Stock Company No.21 - VINACONEX 25 2.1.1 History on the establishment and development of the company .c.ccccccccccsseeseeeeeseees 25 2.1.2 Function and mission of the Company 0 cc.ccccccccseseeeseeeee su saanminnasinnrttuineceetceccentteeee 26 2.13 Organization Chart 0.0 cccccceccccccscssesssseseessscsscscsseavssescsucarsussnsasaresearsssatsusatescsessesesesevstereeseees ae 2.14 The current business position of the COMPANY .cccccsccscssessessesseseecsesecseseeseesesseseesesseess 29 2.15 The characteristics of the COMPANY .c.cccccccsescsessessesscecscavscscacseevssavesasessecsesessetevsesees 30 2.16 The results of business activities of the Company 0 ccccccccscssccccesssseessceseevessscscsveseseees 30 2.17 The development orientation of the company in the next time .ccccccccscscscsecececeeeseees 3]

2.2 Analysis of the external environment .0 cccccccccccscccsscecsesvecsscsesesesescscscavececsveveseseseseseeseees 32

2.2.1 General environment 2 ceccccecsessssssssesessssessessessssscsucsessesacsrcsucsusassuesuesssessestestsatsssssesesseene 32 2.2 1.1 Population Fa€fOF: 2c 22t t2 2122121 112121 1 11H11 1e 32 2.21.2 Economic environment .cccccccccccccssessescsscsessesesscecsveavsvesesusassssatesssesuestereassesaveressseteveseeee 33 2.2 1.3 Political environment, law and policy cccc.cccccscscsseseesesseesesssucsesuesesseasssssearseeecsreeveseees 33 2.2.1.4 Social — cultural environment .0.ccccccccccccscsscsscscsveccscsscecssecscsvesesesueatsrescateseecesssesesesees 34

~.2.1.5 Technology Fa€fOF: các c2 HH HH HH reo 34

~.2.1.6 Global ÍaCEOF: c2 n1 HH HH HH He 35 2.2.2 Industry envir0n m€TIE: -.- 5c c2 12 2n t2 HH Hee 55 2.2.2.1 Internal competitions .00 ccccccccccccccesscssessesssessesecssssresressessssressesessvavsressesiseieeverseveeteeseeees 35 2.2.2.2 CuSfOTTS 20 t2 212212111211 10111 HH Hee 36 2.2.2.3 SuppÌl€rS: HH HH HH 111111111 1101015115111 e si 2.2.2.4 Substitute produ€fS: s5: 2s t1 H21 neo 39 2.2.2.5 Barrier joining the industry: 0 0 0 0.ccccccccccccsccssssssesscsssssessessesssesesseseceesesevespeseesercenseneecessee, 39 2.2.3 Using EFE matrix to evaluate the external compefifive ÍacfoFS c 4I 2.2.4 Competitive profile matFriX - - St cv 2111122111121 EEE re 42 2.3 Analysis of internal environment -: sex 2121211 E1 nhe 44 2.3.1 Humah: Ñ€SOHFC€ - 25t x22 22122 T221 TH reo 44 2.3.2 Analysis of financial situation of the Company in 2008 - 2010 SE Hee 45 2.3.2.1 Assets and capital resource of the COMPANY .cccceccccssesssessecssessessesessecessseesescesceseeseeee 45 2.3.2.2 Fimancial indicator: 2.0.00 ccccceeccccessssssessesssssssessesssessesstesuesssessessesssessvarssssssssiveseteaseeseseseteeseess 46 2.3.3 Analysis of management situation of the eompany 522 2 SE 47 2.3.4 Situation of using technology, facilities of the COTIDAD: ẶQ Q SH HH ước 48 2.3.5 Analysis of Marketing activity of the COMPANY .ccccccccccsccscscsecssssessessecsececesessceseeseeseeses 50 2.3.5.1 Activity of market research: .ccccccccccccesssessssssssesssessecsucssessessessesesstssesssssssesstesteeveeseseee 50 2.3.5.2 Activities of Communication, product distribution, DI C cenacsomusmane rst ABineannannasimeamee 52 2.3.5 Capacity of Supervision ccccccsessesssessssssesssessrsssessessusssessessressssisarssesseesesessavsiseescesseeeeeeess 52 2.3.7 Internal factor environment evaluation matrix (TBE) ooo ccc cceecsccssesssessesseeeeeens 54 CHAPTER TDD oe 1A ,.A a Ặ 55 SELECTION AND ESTABLISHMENT OF BUSINESS STRATEGY FOR VIETNAM

CONSTRUCTION JOINT STOCK COMPANY No.21 - VINACONEX nhe 55

3.1 Goals of the Company period 2011 - 2015 and vision by 2020 25 2 2e 55 3.1.1 Basis for goal S€fẨÏng: 20 22121222 120 2n 1 ren 55 3.1.2 Goals of the Company period 2011 -2015 212225 1252155 rec 55 3.1.2.1 Orientation of strafegic goalS: 2s HE H2 2t re ra a5 3.1.3 Vision Dy 2020 ooo cceecseseseesssesueseesessssscsrssussssassssusapsussnssusssausssssessesversaresivaveseesteveeseese 57 3.2 Analysis of SWOT matriX: LH H2 ca 57 3.3 Analysis Of I-E, MatiX S222 222221 112112111011 2121111 S122 nhe 59

3.4.1 Figures for BCG matFiX 5-5 c1 221121111 1121121 1 12 He neerrg 60 3.4.2 BC mAfFÍX S0 2 2t 2 21221 112121 11111 11 Hee 62 3.5 Identification of business strategies of Vietnam Construction Joint Stock Company No.21

period 2011 - 2015 ceeeirieiiiihiinrirheriiiirrierriereiiiiiiiiie ky 63

3.5.1 Cost leadership strategy: se rrrerere 63 3.5.2 Focus strategy (real estate trading) (SO): “` ` 63_ 3.5.3 Market development strategy (ST): .c.cc.cccccsccsccsssesseesesseessecsessessessecsessessessereseesestseseeeesen 64 3.5.4 Diversification straf€gy: HH Hee 64 3.6 Solutions to implement: c2 HH H2 nen 66 3.6.1 Business s0ÏufÏOnnS: S252 S222 22222 E1 E1121111 1111 211112 Hee 66 3.6.2 Financial soÏufiOTS: ¿St 1 2x 2t 2t 21222222121 111tr 66 3.6.3 Human resources solufÏOIS: St 1 E1 1211211111 111122 HH ene 67 3.6.4 Produet SOlUfÏOHS: 6 5225222 22212211211 1111111111151 SEEEEEEEEEe ae 68 3.6.5 Technology s0ÏufÏONS: 2-52-5225 T3 TH HH TT re rrerese 68 3.6.6 Schedule of implementation of business strafegies - 220 TT nhan 69 3.7 Estimation of revenue, budget and risks: .0.0.00.cccccccscscsssssssstesessecsecscssescssesssssssussveseeveeveceeces 69 3.7.1 Revenue estimation: (having been calculated in 3.3) .cccccccccccccscsscssccscseessesessesseseeseeseeeeces 69

3.7.2 Bndgef estimafiOH -«<eseesss.debnsausoal R4 ad 488513645 5350835 18000538 GĐ79203 S5ESNETĐ5/092195831638 70

NI PEERED POCORN ses cra nse came nan nh non on a0 222 0ý thọ 2091 020 1ẹ2002229i60256n 9ê) 7] 3.8.1 Proposals to Vietnam Construction Joint Stock Company No.2l: 71 3.8.2 Proposals to Vietnam Construction and Import - Export Joint Stock Corporation

TIN ACO) test ans sess on wa tne amt ssa anes EE ERLE SEG ORNS PEE 72

CONCLUSION 75 73

3134000 5111 76

PREAMBLE 1.The urgency of the subject

From 1986 to present, our country’s economy has made rapid, strong and solid progresses, our country transformed from a centralized economy based on administrative subsidies to an economy towards open market economy and economic integration regionally as well as internationally How enterprises can do business successfully, profitably, not be bankcrupt, stand steadily in the market economy with severe competition, especially during the period of inflation, economic crisis as today In order to do that, enterprises should maintain and strengthen the competitiveness, maintenance, expansion of products Therefore, missions are given: planning, building, implementing the development strategy, business production strategy which are extremely important, essential needs in order to help enterprises be sharp

with the change of the market Also, enterprises should actively cope with risks, breakdown,

failfure in business to exist and develop firmly Thus, not only our country but also global enterprises has attached much importance to build the business strategy and regarded it as the top mission

Vietnam Construction Joint Stock Company No 21 — VINACONEX is directly under Vietnam Construction and Import-Export Joint Stock Corporation Its forerunner is II Architecture Company in Ha Tay found in 1969 During 42 years of establishment and development, the company has affirmed its position and prestige in the market, been trusted by customers inside and outside the city However, within the current context that the world economy as well as the domestic economy has met with a lot of difficulties, instability due to high inflation, post-economic crisis In order to maintain and expand the business market contrenting with a lot of difficulties and challenges; in order to exist and develop, the company shoulc take some long-term suitable business strategies in conformity with the change in the society, business production environment, to occupy the market, build the company to be more and more developed, contribute to the success and career of industrialization, modernization

For all reasons mentioned above, Group 10 of GAMBA01-X0410 selects the subject:

“Build the business strategy of Vietnam Construction Joint Stock Company No 21 — VINACONEX in the period of 2011-2015 and vision by 2020” with the aim of suggesting the

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most suitable business strategy for Vietnam Construction Joint Stock Company No 21 - VINACONEX in the period of 2011-2015

2 Research objectives

Research the subject aims at:

- Systematize and summarize theoretical matters of business strategy and building the business strategy

- Help students obtain skills to practice building the business strategy of Vietnam Construction Joint Stock Company No 21 — VINACONEX

- Analyze and evaluate opportunities, challenges, strengths, weaknesses of Vietnam Construction Joint Stock Company No 21 — VINACONEX

- Build the orientation of the development strategy in the period of 2011-2015 and vision by 2020 for Vietnam Construction Joint Stock Company No 21 —- VINACONEX

3 Scope of research

Scope of research is the business production environment of Vietnam Construction Joint Stock Company No 21 — Vinaconex in the period of 2008-2010

4 Method of research

The subject has applied the following methods: Qualitative and quantitative approaches:

© Method of comparison, analysis and synthesis: Analyze the data from the financial statements through periods, summarize and make comments

© Method of matrix analysis to analyze and handle research results of environment, helping enterprises to make strategies scientifically, etc

© Statistical and analytical approaches: table statistics, then withdraw inferences of trends

to evaluate the operation situation of the Industry and enterprises

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5 Structure of the subject

Apart from the preamble and conclusion, the subject is divided into three chapters:

Chapter I: Theoretical foundation of building the business strategy

Chapter II: Analysis of the real situation of Vietnam Construction Joint Stock Company

No 21 — VINACONEX

Chapter III: Selection and establishment of business strategy for Vietnam Construction Joint Stock Company No 21 —- VINACONEX

CHAPTER I THEORETICAL FOUNDATION OF BUILDING THE BUSINESS STRATEGY 1.1 Theoretical foundation of strategy

1.1.1 Concept of strategy

“Strategy” derived from the Greek “Strategein” means art and science as a general Art of commanding means to defeat the opponent There are a lot of definitions of strategy, Michael Porter defined that: “Strategy is an art of building solid competitive advantages for defense”

G Arlleret defined that: “Strategy is the determination of roads and means to achieve given objectives through policies”

Gluecl defined that: “Strategy is a type of comprehensively unified and synthetic plan designed for ensuring that corporate objectives shall be implemented”

What is strategy? According to MBA program — GRIGGS: Strategy is a mass of commitments and actions to mobilize all resources of an organization and individual in order to achieve a certain objective

1.1.2 Concept of Strategic Management

Strategic management is art and science of building, implementing and evaluating decisions in relation to many functions allowing an organization to achieve given objectives Strategic management focuses on unifying management, marketing, finance-accounting, production, market research and development and information systems of lines of business to achieve the success Strategic management includes _ processes: Building _ strategy, implementing strategy and controlling the process of implementing as-built strategy

1.1.3 Roles and tasks of strategic management

1.1.3.1 Roles of strategic management

- Business strategy helps enterprises clearly recognize their purposes, directions as a guideline for all business production activities of enterprises

- Business strategy helps enterprises catch and take advantage of business opportunities, and take proactive measures to overcome threats and risks in the fiercely competitive market

- Business strategy contributes to enhance the effectiveness of resources strengthen the compctitiveness of enterprises ensuring their sustainable development

- Business strategy creates strong foundations for proposing policies and decisions on business production in conformity with the market fluctuations

1.1.3.2 Tasks of strategic management

- Create a strategic aspect describing the future image of enterprises, clearly determine where the enterprise shall go how it shall become So, provide a long-term orientation, specify the image which the enterprise wants to become, transmit it emotion of purposeful action

- Build objectives: transform from strategic perspective to specific achievements which the enterprise must obtain

- Build strategy to achieve expected objectives

- Enforce and manage selected strategies effectively and efficiently

- Evaluate the implementation and carrying-out of perspective adjustments, long-term orientation, objectives, strategy or the implementation based on experience, variable conditions, new initiatives and opportunities

1.2 Build the business strategy

1.2.1 Vision, mission and objectives of the strategy

1.2.1.1 Strategic vision and mission

- Strategic vision is values which the enterprise strives for the future achievement (What

do you want to become), pursuing markets or products needed to innovate technology in order

to create differentiation or cost reduction, etc Vision helps enterprises, organizations to catch market opportunities and create competitiveness in the business world Unifying the operation process in order to achieve objectives and strategic tasks of the enterprise, and this will promote the enterprise to use limited resources in most effective way Therefore, enterprises should rapidly catch opportunities in the business world, make the most of available capabilities to create new competitive advantages

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- Strategic mission is to help enterprises determine their position in the future It must arswer the question “Who are we and what are we doing?” In the future which type of products shall the corporate capacity supply to customers? etc,

1.2.1.2 Strategic objectives:

Strategic objectives made from functions and tasks are more specific and may change in

a certain period There are 2 types of objectives: short-term and long-term ones

- Long-term objective (from 3 years and above but depend on industry): determine a big direction but not go into the details or fix a specific figure

- Short-term objective (to 1 year and also depend on industry): specifically direct and guide long-term objectives of the enterprise

1.2.2 Analysis of external environment:

Analysis of external environment is analysis of aspects in a wide society having an influence on a industry and internal companies The external environment is divided into macro environment and industry environment

1.2.2.1 Analysis of general environment:

The purpose of analysis of external environment is to help us recognize opportunities from the external environment which can be beneficial to the Company and threats from the external environment which the Company should avoid and put forth suitable strategies Analysis of external factors includes macro factors such as economics (inflation, interest, exchange rate etc ), politics (legal documents, government’s policies), natural conditions (soil, climate, etc ), technological level and social factors of the target market and micro factors such as: consumers, suppliers and competitors for helping the Company to evaluate opportunities and threats Then, the organization impiements suitable strategies with short-term and long-term objectives

1.2.2.2 Analysis of industry environment:

* Industry environment is an environment including a group of companies making products with highly mutually replace-ability

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* Five forces of competitive model

Diagram of micro environment

Threat of market share reduction

(Source: Michael E Porter, 1998)

~ Competitors: This is a pressure regularly and directly threaten enterprises; the more competitive pressure among enterprises is, the more position and existent of enterprises are threatened

- Customers: The trust of customers is very significant to enterprises However, when customers have advantages, they shall exert an influence on enterprises, for example: they shall depress price, require long-term payment, etc

- Suppliers: Including units supplying input factors such as: raw materials, machines and equipments, finance, source of labor, etc When suppliers have advantage, they shall put disadvantageous pressure on enterprises, for example: high sales price, short-term payment term, etc

- Substitute products: Ssubstituting products reduce the profitable potentials of enterprises, threaten corporate share

- Potential rivals (Barrier when joining industry): When new rivals participate in the industry, it shall reduce shares and corporate profits In order to protect their competitive pesition, enterprises must increase barrier breaking into the industry through measures such as:

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product diversification scale-based advantage or if want to join the industry, it requires huge initial investment cost

According to Michael E.Porter, there are two types of basic competitive advantages including cost leadership and differentiation

1.2.2.3 External Factor Evaluation - EFE Matrix:

`

[FE Matrix is a tool allowing strategists to evaluate information on economy, society culture demography, geography, politics laws, technology and competition affecting the enterprises EFE Matrix is implemented according to steps and then based on total point for evaluation: Total important point equals 2.5 as average Total important point is smaller than 2,5, showing the weak ability of reaction against the environment and bigger than 2.5 showing the positive ability of reaction

Table 1.2.2.3 External Factor Evaluation Matrix

Key external factors - Weight s Rating | Weighted score

“Opportunities -

— ® Politics, economic —

integration of Vietnam | | | |

e Threats

© Competitive level 7

° Exchange rate and

inflation

1.2.2.4 Competitive Profile Matrix (CPM)

In order to evaluate the competitiveness of an enterprise compared to other competitors within the industry, apply Competitive Profile Matrix (CPM)

Competitive enterprise:

Competitor 2 Rating Score

Competitors

Competitor 3 Rating Score

Competitor 4 Rating

After analyzing external factors, we have the opportunities and challenges of an enterprise

¢ Opportunities : are ones having big influence and big possibility of occurrence, it can bring enterprises a higher growth physically

1.2.3 Analysis of internal factors:

Threats: are threats having big influence and big possibility of occurrence it can cause big losses to the enterprises if there is no due diligence

Analysis of internal factors is analysis of resources, activities and evaluation of corporate capacity in order to find out strengths and weaknesses Analysis and evaluation of corporate capacity is through the following factors: Financial situation, human resource etc Analysis of internal factors aims at specify strengths and weaknesses of an enterprise:

Score

1.2.3.1 Internal Factor Evaluation — IFE Matrix:

[FE Matrix is a tool used for evaluating strengths and weaknesses of functional parts of

th enterprises

Building IFE Matrix also includes the following steps:

- List strengths and weaknesses of the enterprises;

- Evaluate the importance of each factor;

- Classify: determine the important point of each factor;

- Total important point for evaluation

Strong points: Form an overall picture of the internal enterprise with specific strengths and weaknesses which can affect the competitiveness of the enterprises

Table 1.2.3 Internal Factor Evaluation Matrix

1.3 Selecting the business strategies

Managers combine opportunities threats strengths, weaknesses which were determined

in the analysis of business environment and internal environment of the enterprises with the objectives to be achieved for putting forth suitable strategies

1.3.1 SWOT Matrix

SWOT Matrix is used for listing all opportunities, threats, strengths and weaknesses in the internal enterprise according to suitable sequence and position In order to build SWOT Matrix, managers firstly should carry out a process of selection to determine actual opportunities and challenges as well as key strengths and weaknesses of the enterprises On such basis, there are suitable choices of strategy, namely:

® Š O: These strategies are based on corporate strengths to exploit external opportunities The enterprises have a tendency to develop and participate in new lines of business,

e S_T: These strategies are based on corporate strengths to prevent or minimize external threats The enterprises have a tendency to create their barriers for them

e W_O: These strategies repair the internal weaknesses to take advantage of external opportunities The enterprises tend to have a business cooperation with others

® W_T: These strategies repair the internal weaknesses to prevent or minimize external threats The enterprises have a tendency to narrow investment or withdraw business production industry

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Table 1.2 -SWOT Matrix

1.3.2 Boston Consulting Group Matrix (BCG)

BCG Matrix shows growth share of the industry of each part compared to other parts within the industry

Relative share is the ratio between share of a part within a certain industry and a industry

of the biggest competitive company within that industry Relative share is on X-axis of the matrix, the middle point is 0.5 symbolizing the part occupying a half of share of a company leading the industry Y-axis represents the growth ratio of sales revenue within the industry, by % The growth ratio on y-axis is ranged from -2,0 to +2,0 with the middle point of 0,0

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RELATIVE MARKET SHARE POSITION

High +2.0 (ID (I)

INDUSTRY

SALES Stars Question Marks

GROWTH Medium 0,0 —————————————

Cash Cows Dogs

e Parts are on | angle: Question Marks

e Parts are on II angle: Stars

e Parts are on III angle: Cash cows

e Parts are on IV angle: Dogs

1.3.3 TE Matrix ( TFE - EFE)

IE Matrix ( Internal —External) is used for evaluating the position of enterprises based on analysis of opportunities, challenges, strengths, weaknesses of enterprises to the environment Total point of IFE Matrix on X-axis and total point of EFE Matrix on Y-axis

On X-axis of IE Matrix, total important point from 1.0 to 1.99 of IFE Matrix shows the

inernal weakness, 1,0 - 2.99 is average and 3,0 — 4,0 is strong

Like X-axis, on Y-axis, total important point from 1.0 to 1.99 of EFE Matrix is low, 1,0 -

2,°9 is average and 3,0 — 4,0 is strong

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THE IFE TOTAL WEIGHTED SCORE

1.3.4 Quantitative Strategic Planning Matrix (QSPM)

QSPM - Quantitative Strategic Planning Matrix, is a tool allowing strategies to objectively evaluate replaceable strategies, firstly based on factors as below

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1= Reaction ability of the company is poor

2= Reaction ability of the company is average

3= Reaction ability of the company is above average

4 = Reaction ability of the company is very good

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CHAPTER II ANALYSIS OF THE REAL SITUATION OF VIETNAM CONSTRUCTION JOINT-

STOCK COMPANY NO.21 — VINACONEX

2.1 Introduction about Vietnam Construction Joint-Stock Company No.21 - VINACONEX

General information about the company

- Name of company: VIET NAM CONSTRUCTION JOINT STOCK COMPANY No 2] - VINACONEX 21 JSC

- Company headquarters: Ba La street, Phu La ward, Ha Dong district, Hanoi city

- Tel: 0433516391 - Fax: 0433516391

- Account: 1020.10000.236.986 Bank for Industry and Trade - Ha Tay Branch

2.1.1 History on the establishment and development of the company

Vietnam Construction Joint-Stock Company No.21 is a member unit of Vietnam Construction and Import-Export Joint Stock Corporation VINACONEX The company’s precursor is formed from the architectural work team II of Ha Tay Architecture Company

- In 1969, it was renamed Khu Nam Architecture Company

- In 2002, the company became a member of Vietnam Construction and Import-Export Joint Stock Corporation (VINACONEX) and was renamed Vietnam Construction Company No.21- VINACONEX

- In 2004, Vietnam Construction Company No.21 — VINACONEX was renamed Vietnam Construction Joint-Stock Company No.2] — VINACONEX, with the charter capital

of 6 billion dong

- On 8/5/2009 the charter capital was increased 17 billion dong

Main business activities as follows:

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+ Construction and installation of the civil works, industrial works traffic works irrigational works, ports underground tunnel, water supply hydropower, thermal power plants transmission lines and transformer stations up to SOOKYV, ete

+ Investment and construction consultancy of projects, establishment of investment projects, supervision consultancy and project management

+ Business investment and development of houses, technical infrastructure of urban areas, residential areas, new economic zones, export processing zones and industrial zones

+ Import-export business of materials, machines, equipment, accessories, production and business of the construction materials, etc

In over 42 years of the building and development from directly under People’s Committee of Ha Tay province Company always fulfill the annual production and business plan, the following year revenues are higher than the previous year revenues from 15% -20% The profits are more and more increasing and there are enough jobs for officials and workers

of the Company The Company has been awarded many medals and other noble rewards by Prime Minister, Ministry of Construction, People’s Committee of former Ha Tay province, People’s Committee of Hanoi city and VINACONEX Corporation

2.1.2 Function and mission of the Company

Function: Vietnam Construction Joint-Stock Company No.21 — VINACONEX is an independent accounting unit, with its own seal and accounts, operating under the Enterprise Law and is a joint-stock company fully implementing the rights and obligations in the organization and management It operates the production activities and other activities in compliance with laws and policies of the state

Mission: Board of Directors of the Company and Directorate are the legal representatives of the company Annually, the Company is responsible for organization and implementation of resolutions adopted by General Meeting of Shareholders

Today the Company has been focusing on 3 main business fields including construction and installation, commercialization, real estate investment, production and business of the

coastruction materials

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Administr and Technical Materials Project Project

a-tion Accou Planning and Departme Manageme Departme nting Departme Equipment nt

nt Units ait Departme nt Departmen

| Construct- Infrastruct Electricity Commercia Mechanica General ior teams ureconstru and Water | concrete Iconstructi trading thoấi | -10 ction eams constructi factory on teams enterprise

from II- on teams

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- General Meeting of Shareholders: includes all the shareholders entitled to vote and is the highest decision-making agency of the company

- Board of Directors: is the management agency of the company having the full powers on behalf of the Company to determine and implement the rights and obligations of the Company

- Board of Supervisors: is an agency independently operating with Board of Directors and Directorate of the Company Board of Supervisors is elected by General Meeting of Shareholders, and on behalf of General Meeting of Shareholders to supervise all the aspects of the production and business activities of the company

- Company Directorate: has 4 members including 1 Director and 3 Deputy Directors The company Director is the operator and takes responsibilities for all the aspects of the production and business activities of the company under the regulations of law, Enterprise Law and resolutions of General Meeting of Shareholders, decisions of Board of Directors Deputy Directors are the people helping Company Director with the job fields assigned by Company Director

- Administration Department: has the function of acting as an advisor for Company Director about organization, management, training and personnel arrangements, salary, and sovial policies to ensure the rights of labors

- Finance and Accounting Department: has the function of acting as an advisor for Company Directorate about the management of finance and monetary, organizing statistical and accounting affairs, writing the annual financial statement

- Technical Planning Department: grasps and processes information about economy, production and business activities of the whole company, establishing the production and business plans, construction of the construction works in the company, presiding at the assignment, settlement and implementation of the bidding, etc

- Project Department: acts as an advisor for Company Director to invest projects, establish plens and monitor the implementation of investment projects, construction, investment in mzchines and construction equipment, etc

- Project Management Unit: is directly under the Company with the functions and mission:

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+ Coordinate with the Project Department and the functional departments of the Company

to select construction contractors, equipment suppliers for the company's projects

+ Direct all the construction activities on the works to ensure the quality of work progress, work safety, and organize the supervision and inspection of the construction process of the project items, phase acceptance, acceptance of the work completion directing the construction units to establish documents on settlement of the works, etc

~ Materials and Equipment Department: acts as an advisor for Company Director to purchase the construction machines and equipment Explore the resources of materials, Select main suppliers of materials for all the works in the company to ensure in compliance with the established design documents

- Cooperate with mechanical construction teams of the company to maintain and mar.age all the construction equipment in the company, improve the efficiency of using the construction machines and equipment

- Construction teams, mechanical construction teams, electricity and water

construction teams: are units directly under the company, directly organize the production, construction and installation, electricity and water, mechanical construction of the construction works in accordance with the annual production and business plans of the company and under the tasks assigned

- Commercial concrete factory: directly manage and operate all the commercial concrete stations, organize the production with the progress and quality assurance to satisfy the demands of investors and clients

- General trading enterprise: is a unit directly under the company specializing in business of synthetic materials, managing all the equipment and machines, signing the rental contracts and lease with the internal and external units of the company, providing all the main materials of the works for the units directly under the company

2.1.4 The current business position of the company

- Vietnam Construction Joint-Stock Company No.21 — VINACONEX inherits the brand name of VINACONEX joint-stock corporation, with the process of 42 year building and development having confirmed its own brand name and business position in the whole Northern areas, and especially in the localities such as former Ha Tay province, Hanoi city,

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nerthern provinces The company's share price on the stock market is high and stable at the level 36.000 dong / share (Source HNINDEX in 12/2010.)

The strengths of the Company are: constructing civil works, industrial works, traffic works irrigational works, hydropower works, technical infrastructure of urban areas, industrial zones, etc In addition Company also focuses on investing in the business fields of real estate and construction materials

2.1.5 The characteristics of the company

- The company was established in 1969 in former Ha Tay province From 1969 to 10/2002, the company specialized in constructing civil works, industrial works, traffic works and irrigational works in former Ha Tay province

- From 10/2002 to now the company is the member unit directly under Vietnam Construction and Import-Export Joint Stock Corporation VINACONEX specializing in constructing civil works, industrial works, traffic works and irrigational works, etc, investing in real estate, producing construction materials Its operating areas are in the city and the north provinces The charter capital: 17 billion VND

- Management officials and technical officials of the company are experienced, highly qualified with the professional and good management capacity

- The company has good material facilities, and modern machines and equipment Now the company is applying the quality management system under the international standards ISO 9001:2008

2.1.6 The results of business activities of the Company

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Table 2.1.6 The results of production and business activities of the Company from 2008 -

- The annual turnover has the stable growth, averagely 51.6%, other indicators such as:

profit, dividend and average income tend to increase This is the forecast signal that the

enterprise has been developing

- The annual profit rate is low: Must consider carefully the factors and stages in

enterprise management

2.1.'7 The development orientation of the company in the next time

- Upgrade the company to become Parent Company, in 2012 there will be 3 subsidiary

cornpanies, and in 2015 there will be 5 subsidiary companies with the main business fields:

coristruction and business of real estate, construction materials production

- Maintain the annual growth speed of the main goals from 13%- 20%

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2.2 Analysis of the external environment

2.2.1 General environment:

2.2.1.1 Population factor:

- Vietnam is ranked 13" in population among the most populous countries in the world

Vietnam is ranked 3™ in population in South-East Asia with the total population by 2009 of

85.787 573 people Among them, the number of urban people accounts for 29.6% (25.374.262 people), the number of rural people accounts for 70.4% with 60.415.311 people (Source: Department of Census, 2009)

- The whole country still has more than 770,000 households with average housing area

of 6-10 m2 / person In the big cities like Hanoi, the rate of new tenement houses accounts for 16.64%: in Ho Chi Minh City, the rate of new tenement houses accounts for 6.13% The number of students renting houses in cities is very large, for example in Hanoi it was 82% in

2009 (Source: General Statistics Office)

- Many technical infrastructure works in the past years were invested to construct by the state, but they have not met the use demands, the industrialization and modernization of the

(Source: General Statistics ( Office)

- Inflation and exchange rate:

- Inflation in 2008 was 22%; inflation in 2009 was 6.88%; inflation in 2010 was 11.75%

- Exchange rate in 2010 increased 10.9%,

Inflation and exchange rate annually tend to highly increase, which has bad influences

on the business activities of construction enterprises in general and Vietnam Construction Joint-Stock Company N.21 in particular

2.2.1.3 Political environment, law and policy

- Politics and society of our country are always stable, social order and security are guaranteed, social welfare is increasingly improved and enhanced, the legal system is coastantly perfected to create a good environment for business activities

- Our State is always given positive policies to create conditions to promote the economic development The policies on credit squeeze, limiting expenditure of public finances

of the government have worked well, have curbed inflation, and have stabilized the macro-

economy At the same time the administrative procedures are also reduced to create favorable

coiditions for business activities

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- In 2007 Vietnam is the 150" member of the World Trade Organization WTO, which creates favorable conditions for Vietnam's increasingly deep integration into the world economy The domestic enterprises have conditions and chances to approach the science and technology, modern management level of the world However, Vietnam also has to face severe competitive pressures from foreign partners

- The State has many policies to develop the construction of social houses for low income objects such as officials, workers pupils students, etc to buy and rent The government determines 3 breakthroughs in the five year plan (2010-2015) including the breakthrough on constructing the system of traffic and urban infrastructure By 2015, the average area of houses

in the whole country is 22m° floor/ person By 2020 the average area of houses in the whole country is 25m? floor/ person in urban areas In the newly-built cities by 2015 (cities grade 3 to special cities), the rate of tenement houses is 30- 80%: by 2020 this rate is 40 — 90%, which creates favorable conditions for the development of enterprises

- The regulations of law on the construction and business of real- estate are gradually perfected, which has good impacts on enterprises operating in these fields

2.2.1.4 Social — cultural environment

Vietnam has 54 ethnic groups, so the demand of houses between urban areas and rural areas, between plain and mountainous areas is very different People’s trend of wanting to live

in new urban areas and tenement blocks is more and more increasing, especially in big urban areas because the urban areas and tenement houses bring more benefits and comforts to the people

2.2.1.5 Technology factor:

The third scientific and technical revolution had very big influences directly affecting the development of Vietnam economy Especially, in recent years, the economy of our country has acquired applied many new technologies in the production industry in general and the construction industry in particular with the modern construction techniques such as the design and construction of pre-stressed floor, cantilever techniques, etc

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The technologies used in the construction are plentiful, so construction companies easily approach and apply the new technologies and techniques to their own business activities

2.2.1.6 Global factor:

Globalization creates favorable opportunities for Vietnamese enterprises including Vietnam Construction Joint-Stock Company No.21 to approach the new technologies, modern management sciences, and participate in the large business market: at the same time the company also has to face the huge challenges because of the competition with the big economic corporations and foreign enterprises operating in the industry such as POSCO E & C Company, HUYNDAI Construction Company (Korea), TAISEI company, SHIMIZU company (Japan), etc These companies have advantages about technology, equipment, experience and finance, so the competitive pressures with the domestic enterprises are very big including Vietnam Construction Joint-Stock Company No 21

of 2011-2015 is 11% (Source BMI - Business Monitor International, the world’s leading

organization researching, evaluating, and forecasting financial and economic situation located

in London — the UK) Vietnam Civil Engineering continues to grow with high rate due to the speed of urbanization and the needs of investment and infrastructure construction are still at high level, the data which BMI forecasted are as follows:

is an attractive industry has a prospect for high profitability the products of civil engineering: high-rise building, low-rise building, road, bridge plant, etc These products are often designed before production: it’s very difficult to create a differentiation At present, the number of corporate-level enterprises which takes part in trade in civil engineering in Vietnam

is very large Therefore the competitive intensity in this industry increases Competitions of Vietnam Construction Joint Stock Company No 21 are potential and advantageous companies such as: the structure of management apparatus is compact, scientific, constructional plant is modern equity is huge, etc like Song Da JSC No 2 HUD 3, Licogi LCS Licogi 10, etc

Table 2.2.2.1 Information about competitors

The management ability of competitive companies is better, so the profitability ratio is hisher than Vietnam Construction Joint Stock Company No 21

2.2.2.2 Customers

Customers of the Company belong to two main groups:

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Group I: They are individuals or organizations who need to buy civil engineering products or building materials of the Company such as: apartments adjacent houses villas, commercial concrete, etc

Group 2: They are agencies, enterprises signing construction contracts and authorizing the company to execute works: Construction — Industrial, bridge, road irrigational hydropower works In fact, they are the investors of projects: PMUs: Ha Dong District, Son Tay Town, Hanoi city the State Treasury of Quang Ninh Province, etc

In general, the products of the Company selling in the market sometimes had bigger supply than demand like real estate market in Hanoi in 2011, so the negotiation advantage is directed to customers or when investors need to implement construction projects, they often he:ve an advantage of power to select executing companies with: the most suitable price the most reliable progress, etc due to many enterprises trade in the same industry

Vietnam Construction Joint Stock Company No 21 has run business in this industry for

a long time (42 years), so the company has built good relations with traditional customers such as: PMU — Ha Dong District - Hanoi, PMU — Son Tay Town — Hanoi, etc With the above units, they are both customers and traditional partners, making an average contribution to 60%

of the annual income of the company This means that the company now possesses many advantages from traditional customers

Due to specific characteristics of civil engineering, the scale of business of the company

is very large, spreading over most of the Northern provinces such as: Hanoi, Hai Phong, Quang Ninh, Thanh Hoa, etc

Moreover, materials for civil engineering are also diversified; it’s very difficult to sign building material purchase contracts with some fixed suppliers

The Company is now implementing the following methods:

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For main building materials: Cement steel, the Company has actively signed the long- term contract with I-level agency of the Northern Cement Corporation and Vietnam Steel Corporation: the Northern cement supply enterprise, Tisco Steel Agency, etc

Other materials can be exploited in locals such as: golden sand, black sand building stones types of materials for finished works, electricity and water, etc The Company has actively signed the suppliers at locals with the quality and quantity according to the engineering requirements

TISCO steel dealer particularly in Quang Ninh Province, the Company actively guides the affiliated companies to buy cement produced by Cam Pha Cement Plant that is an aftiliated member of Vinaconex Corporation However, the amount have been limited due to:

The number of works near the plant is few

Payment must be made monthly without collecting interest like traditional suppliers Meanwhile, the payment shall be made every 3 month for traditional suppliers

At present, Vinaconex Cement has not level-1 agent in other provinces except for Quang Ninh, so the supply of cement to retail units is still inflexible and passive

Table 2.2.2.3: Information about main suppliers

Company (Thanh Hoa)

- Ton But Son Cement

4 Cement PC40 200.000 20

Company (Ha Nam)

; a Ton — | Hoang Thach Cement