Business development strategies of Phu My thermal power production division belonging to powe generation corporation 3 for the period of 2013 - 2018

ABBREVIATIONS EVNGENCO 3: Power Generation Corporation 3 - One Member Limited Liability Company EVN: Electricity of Vietnam PMTP: Phu My Thermal Power Production Division A0: National Po

1 Phan Thanh Xuan

2 Truong Quoc Phuc

3 Truong Van Phuong

4 Nguyen Thi Thanh Hien

Ho Chi Minh City - 2013

TABLE OF CONTENT

ABBREVIATIONS 5

ACKNOWLEDGEMENT 6

LITERATURE REVIEW OF BUSINESS STRATEGY 12

1.1 Concept of strategy and strategic management 12

1.1.1 The benefit of strategic management 13

1.1.2 The model of comprehensive strategic management 13

1.3.1 Vision, mission and objectives 14

1.3.2 External factor evaluation 15

1.3.2.1 Macro-condition 15

1.3.2.2 Industry condition 18

1.3.3 Internal factor evaluation 20

1.3.3.2 Marketing 21

1.3.3.3 Finance/Accounting 22

1.3.3.4 Production/Operations 22

1.3.3.5 Research & Development (R&D) 23

1.3.3.6 Information system 23

1.3.4 Process to implement strategies 23

1.3.4.1 Stage 1: Input stage 24

1.3.4.2 Stage 2: Combination stage 24

1.3.4.3 Stage 3: Decision - making stage 24

1.3.5 Tools for establishing and selecting strategies: 24

1.3.5.1 EFE matrix 24

1.3.5.2 Competitive Profile Matrix 25

1.3.5.3 IFE matrix 26

1.3.5.4 SPACE matrix 27

1.3.5.5 SWOT matrix 28

1.3.5.6 QSPM matrix 29

CHAPTER 2 31

2.1 Overview of electricity industry 31

2.2 Analysis of PMTP situation 34

2.2.1 History of establishment and development 34

2.2.2 Business sectors 34

2.2.3 Technology and production scale 35

2.3 Analysis the external environment 40

2.3.1 Macro environment 40

2.3.1.1 Economic environment 40

2.3.1.2 Political and legal environment 41

2.3.1.3 Cultural and social environment 41

2.3.1.4 Technological - scientific environment 42

2.3.1.5 Natural environment 42

2.3.1.6 Global environment 43

2.3.2 Analysis of industry environment 44

2.3.2.1 The power of buyers (customers) 44

2.3.2.2 The power of suppliers 45

2.3.2.3 The current competitors 46

2.3.2.4 The potential competitors 47

2.3.2.5 The threats alternative products 48

2.3.3 External factors evaluation (Matrix EFE) 48

2.4 Developing strategies for Phu My Thermal Power Production Division 60

2.4.1 Vision and mission 60

2.4.2 Analyzing the SPACE matrix of Phu My Thermal Power Production Division 61

2.4.4 Selection of strategies 64

CHAPTER 3 68

SOLUTIONS TO IMPLEMENT THE STRATEGIES OF PMTP DIVISION 68 3.1 The business strategy for power production 68

3.1.1 Short-term objectives 68

3.1.2 Long-term objectives 68

3.1.3 Solutions to implement the strategy 70

3.1.4 Plans for implementating the strategy 72

3.2.1 The human resource strategy 73

3.2.1.4 Plans for implementating the strategy 76

3.2 2 The cost reduction strategy 77

3.2.2.1 Short - term objectives 77

3.3.2.2 Long - term objectives 77

3.3 Recommendations 80

3.3.1 To the State 80

3.3.2 To Electricity of Vietnam 81

3.3.3 To EVNGENCO 3 81

CONCLUSION 83

REFERENCES 85

ABBREVIATIONS

EVNGENCO 3: Power Generation Corporation 3 - One Member Limited Liability

Company EVN: Electricity of Vietnam

PMTP: Phu My Thermal Power Production Division

A0: National Power Load Dispatching Center

OEM: Original Equipment Manufacturer

Non-OEM: Non- original equipment manufacturer

BOT: Built-Operation-Transfer

HRSG: Heat Recovery Steam Generator

ST: Steam Turbine

ACKNOWLEDGEMENT

First of all, we respectfully show my gratitude towards the Leadership of Phu

My Thermal Power Company/Power Generation Corporation 3 for creating conditions for us to have the opportunities to learn and absorb the knowledge of business administration, and helping us to have opportunities to approach the valuable knowledge from the program

We respectfully thank the leadership, the lecturers and assistants of program for transmitting us the valuable knowledge and experience and helping us to open

my awareness as the mean for us to develop, implement our objectives and serve for Power Generation Corporation 3 in specific and Electricity of Vietnam (EVN)

Best regards!

Ho Chi Minh City, - March , 2013 Group members

Our country is a developing country Therefore, the demand for the growth

of electricity is very large in order to meet the increasing demand in the operation of economics, industry, service and activity

During the past time, there were many electricity business units of many types of enterprises (state-owned enterprises, joint-stock companies, BOT) participating in providing electricity Particularly, EVN is the state-owned group that its duty is to play the key roles in the fields of production, transmission and distribution With such mission, during the past time, despite of difficult finance, it not only does business, but serves for the public, contributes and supports for the implementation of mode and policy of the State; EVN also implemented the mission of providing the electricity for the national economy and securing the national power well

However, the apparatus and the economic - financial mechanism of EVN in specific and the electricity industry in general are not consistent with the market economy to continue the powerful and stable growth and meet the general demand for growth of the country

For above reasons, according to the guidelines of the Government and Ministry of Industry and Commerce, EVN is in the process of restructuring the organization to form and develop the electricity market: firstly, establish 5 electricity distribution corporations and then 3 power generation corporations (3 power generation corporations are based on upgrading 3 one member limited liability companies: Uong Bi Thermal Power, Can Tho Thermal Power and Phu My Thermal Power)

Our group includes members who previously work for Phu My Thermal Power Company and are working at Power Generator Corporations 3 (EVNGENCO 3) as one of three corporations which are new and entered into from January 1st,

2013

With a new organizational structure, thermal power companies: Phu My 1, Phu My 2.1, Phu My 2.1 and Phu My 4 are located in the parent company EVNGENCO 3, although the operating scope almost does not change, it is mainly the operation and maintenance, and repair of combined cycle gas turbine power generators However, in the new situation, the internal and external factors of these plants have much change than before

Therefore, the issue is that Phu My thermal plants in the parent company EVNGENCO 3 need to understand the operating environment in order to take advantage of the opportunities and limit the weaknesses and reduce the threats in business of the plants and EVNGENCO 3 in the competitive power generation market- the market that the degree of competition is expected that it will be more difficult, complicated and severe in the near future Phu My Thermal Power Company took part in the official order on the power generation market from July

1st, 2012, but it was jut in the stage of learning and drawing the experience in order

to construct more effective order strategy in the coming period With the mission as becoming one of the stable and quality power generation corporations in the Southeast Asia, EVNGENCO 3 must understand the environmental factors of Phu

My power plants - the power plants are accounting for a large proportion of

capacity in the power output of EVNGENCO 3, as well as the national power system, so that it can propose appropriate business strategies

With above reasons and urgent requirements, our group decides to choose the

topic “Business Development Strategies of Phu My Thermal Power Production Division belonging to Power Generation Corporation 3 for the period of 2013 - 2018”, the topic focuses on Phu My power plants, to do a dissertation of the business administration course, aiming to apply the knowledge to the practice of the

parent company of EVNGENCO 3, where our group is working From that, we will continue to consider and deploy the implementation in the future

3 Purpose of research

The purpose of topic is to analyze the operations as well as the effect of business environment on the operations of Phu My power plants aiming to identify the strengths as well as the weaknesses, and opportunities as well as threats of the these plants On such basis, business strategy of Phu My power plants, as well as offer some solutions in order to overcome the weaknesses and improve the operations of Phu My power plants, in the first stage of construction and development of EVNGENCO 3

4 Scope

Object:

Although our group has an ambition that we will research all power generation units directly under EVNGENCO 3 in order to construct the business strategy got these units, we are concentrating on the direct management and operation and obtaining the comprehensive operating process as well as the present working aspects of member units because EVNGENCO 3 is new and it was entered into from the beginning of 2013 - the basis needs to construct the business strategy

Therefore, the objects of these dissertations are: the research of business environment of electricity industry nationwide, the operation of SBU of Phu My power plants, the activities of domestic and foreign competitors that cause a strong impact on the operations of these plants

of competition between the power generation companies, the bargaining power of the power purchasing company, the bargaining power of fuel suppliers, technology, and the threat of alternative products

Approach the internal environment: Analyze the existing resources of PMTPin order to find out the strengths and weaknesses

5.2 Practical research method

This dissertation uses the research method: historical method, statistical method, descriptive method and analytical method The data is the financial statement and internal report of Phu My Thermal Power Company from 2008 to

2012

6 Scientific and practical significance of research topic

The topic of our group starts from the use of knowledge of scientific subjects obtained from the Global Master Advance of Business Administration of Griggs University and the practical and specific conditions of Phu My power plants where

we are working with the hope to find out the internal strengths and weaknesses, as well as identify the external opportunities and threats in order to advise the leaders the direction for these plants to the long-term strategic objectives During the process of constructing and using the strategy, our group hopes that it will continue

to comprehend the basis of analysis, new theory, and accumulate the practical experience, gather the data, so that we can gradually complete and construct the intensive strategy in the scope of the entire Corporations, in all fields (power production, sales, power market and construction investment) aiming make

EVNGENCO 3 sustainable in the new and young state, and help it gradually develop and reach out the global market in the future

7 Main summary of topic

The dissertation is divided into three chapters as follows:

Chapter 1: Literature review of business strategy

Chapter 2: Analysis of business production situation and strategy of PMTP

for the period 2013 – 2018

Chapter 3: Solutions to implement the strategies of PMTP

CHAPTER 1 LITERATURE REVIEW OF BUSINESS STRATEGY

1.1 Concept of strategy and strategic management

- According to Rudolf Grunig và Richard Kuhn (2003): the strategy is the long-term; it orients the management and guarantee the long-term completion of objectives and main purpose of company

In summary, the business strategy of a company is the plans established, or actions implemented in the efforts of reaching the purpose of an organization From that, the company will gain the victory in the competition and obtain the proposed objectives

Concept of strategic management

- The strategic management is to direct the efforts of organizations to plan the strategies and focus on the implementation of proposed strategies

- The strategic management includes the complete actions of four functions: planning, organization, control and evaluation of strategic control Therefore, the strategic management will track and assess the external opportunities and threats in the context of internal strengths and weaknesses of the company

1.1.1 The benefit of strategic management

- Obtain the stable competitive advantage This is an advantage that a company can get when it constructs a strategy that no other competitors can have Create the advantages that the current and potential competitors cannot obtain

- Companies use the concept of strategic management will get more benefits than those which do not use

- Therefore, the main benefit of the strategic management is that it helps the company create the better strategies by using the approach of system systematically, appropriately and logically, to the best strategic option

1.1.2 The model of comprehensive strategic management

Fig 1.1: Comprehensive strategic management

the term objective

long-Set up annual objectives

Review the objectives

Implement the internal control

to identify the strengths and weaknesses

Select the strategies to check

Propose the policies

Distribute the resources

Measure and assess the achievement

Feedback

Establish the strategy

Implement the strategy

Assess the strategy

1.2 The levels of business strategy

The strategy definition also depends on the level of strategy There are three strategy levels have been identified:

1.2.1 Corporate - level strategy

Corporate-level strategy determines the orientation of the organization in the long term in order to complete the mission, achieve the growth target On the basis

of corporate-level strategy, the organization will implement its own strategy

1.2.2 Strategic Busniss Unit: in relation to how the competition on a specific market

Strategic Business Unit (SBU) within a company can be a business industry

or a sort of product, etc This strategy aims at development orientation of each industry or each sort of product contributing to the completion of corporate-level strategy, to define clearly the advantages of each industry in comparison with its competitors to devise strategies suited to corporate-level strategy

Functional - level strategy

A company would have the functional divisions such as: marketing, human resources, finance, manufacturing, research and development, etc These functional divisions should support to implement the strategic business unit and corporate-level strategy

1.3 Content of strategic management

1.3.1 Vision, mission and objectives

- Vision: offer an orientation to the future, a desire of an organization for

what it wishes to reach The vision is a lively image and picture of what can happen

to an organization in the future Describe what an organization should reach by the sign or ời nói The vision creates the endless source of inspiration of all members of organization in order to gain the higher level of the ordinary activity and create the new thinking

- Mission: presented by the declaration of mission of an organization It

makes clear the trust and guidance of identified visions The mission of the

company is the bản tuyên ngôn of company towards the society It often mentions the products, market, customer, technology and the philosophy that the company pursues

- Objectives: the main objectives of a company identifies the state,

milestones and specific targets that the company wishes to obtain in a certain period The company always ensures that the implementation of mission and short-term, objectives must be placed on the context of the strategy and general objectives aiming to reach the long-term objectives, mission and vision of an organization

1.3.2 External factor evaluation

External factor evaluation is the focus on identifying and assessing the tendencies and the events beyond the control of the company For the managers who can offer the strategy aiming to take use of the opportunities and avoid or reduce the threats that company is or will encounter during the operating process that is an important basis for the strategic management process

Tecniques of external factors environment

Check Identify the signs of environmental changes and its trends early

Track Discover the meanings by the regular observations of

environmental changes and its trend

Forecast Develop the prediction of the forecasted ending based on the

changes and trends that are tracked and monitored

Evaluation Identify the time and importance of the environmental changes and

trends for the strategies of company and the management

1.3.2.1 Macro-condition

(1) Economics

This is a very important factor that attracts the concern of all managers The impact of these environmental factors is direct The development of the economic

condition always contains different risks and threats towards each company in different industries, and causes the potential effect on the strategy of company

The main effect of the economic factors includes: the economic growth arte, the banking interest, the payment balance, the exchange rate, the actual income, the inflation rate, the tax system and tax rate

(2) Politic and law

It includes the system of opinions, the guideline and policy of the government, the current law system, main tendency of foreign affair of the government and the political development in domestic, regional and the global country It can affect the political and legal conditions towards the enterprises as follows:

- Politic: the political institution and the complicated changes in the

political environment will create the opportunities and threats for the enterprises

- Law: offer the provisions that allow or do not allow, or give the

constraints that request the enterprises to observe The problem is that the enterprises need to obtain and observe the law well aiming to take use of the opportunities as well as cope up with the threats of business

- Government: plays a big role in regulating the macro conditions by the

policy on economics, finance, currency and spending programs The enterprises must obtain the opinions, stipulation and spending programs of the State and set up good relationship aiming to create the favorable condition for the operation of the company if it wishes to take advantage of opportunities and cut down on the threats

(3) Culture and society

The change in cultural and social factors is a part of consequence of the term impact of other macro factors The impact of the cultural and social factors is longer and more elegant than other ones On the other hand, its scope of impact is very large: “it determines how the people live, work, produce and consume products and services”

long-The aspects formed in the cultural and social conditions cause the strong impact on the business activities as follows:

- Moral and aesthetic conceptions, life-style and career;

- Custom, practice and tradition;

- Concern and priority of society;

- Level of intelligence and general level of education of the society

(4) Technology

This is one of very important factors that include many opportunities and threats towards the enterprise The pressures and threats from the technological conditions are:

- The birth of new technologies increases the competitive advantage of products;

- Make the existing technology old-fashioned and create the pressure that forces the enterprises to change the technology in order to enhance the competitive competence;

- New technology create favorable conditions for entrants and increase the pressure for the existing enterprises;

- The boom of new technology makes the life circle of technology shortened This increases the pressure on reducing the depreciation

(5) Natural condition

It can be said that the natural condition is always an important factors in the people’s lives In many cases, it becomes the important factors that form the competitive advantage of the product and service

In the present context, the business strategy of enterprise must meet the following requirements:

- Take priority for developing the production and sale or services aiming to exploit the conditions and advantage of natural conditions on basis of ensuring the maintenance and renovation Especially, it enhances the natural conditions

- Have the saving method and effective use of natural resources Particularly, it can be gradually transferred from the use of resources that are not renewable in the nature to the use of artificial materials

(6) Global conditions

In the global and integration trend, no enterprises have direct or indirect relationship with the world economy In contrast, the relationship between the company and the world economy is stronger Thus, the change in economic conditions will affect the business environment of the domestic countries

In conclusion, the main objectives of the macro factor evaluation are to identify the change of expected tendencies from the external environmental factors

If the enterprise wishes to look for the opportunities and threats, it must include the all factors and forces that affect the operation and implementation of enterprise

1.3.2.2 Industry condition

(1) The necessity of industry analysis

Industry factor evaluaiton is a necessary factor for planning the strategy for the managers, especially the decision making in business

Objectives of the industry factor evaluation towards the company is to find out a position in an industry that the company is able to have the best defense before these competitive factors or they can change them in the useful way Understand the fundamental origin of the competitive pressure will clarify the strengths and weaknesses of company, bring the life for the company of the same industry, identify the areas that the startegic change can bring the most benefits and point out the regions that the tendency in the promising industry will be the most important, whether the opportunities or threat

Threats of alternative products and services

Bargaining power

Bargaining

power

(2) Five competitve forces model

Fig 1.2: Model of 5 competitive forces

Michael Porter, a famous professor of business startegy of the Harvard School,

offered the model with 5 competitive pressures, they are:

+ The quantity of suppliers

+ Nature, specific characteristics of products and services

Alternative products

+ Price, quality and consumption of products and services

+ Ability and cost when the supplier is changed Current competitors:

Identify the competitor

Necessary content when analyzing the competitor:

According to Michael Porter, there are six barriers to entry:

+ Economy advanatge by the scale

+ Feature of products

+ Requirement on capital

+ Transfer cost

+ Approach of dealer

+ Disadvantage of cost that is not related to the scale

- Threats of alternative products:

The alternative products are other products, but bring for the consumers the similar features and interests with products of the industry The alternative products are often the result of an improvement or boom of new technology

1.3.3 Internal factor evaluation

Internal factor evaluation is to find out the strengths and weaknesses of the company, and then identify the differential capacity and the competitive advantage

of the company

According to Fred R David, the internal factor evaluaiton aims to identify and assess teh sstrengths and weaknessess in the business of the company including the management, marketing, finance / accounting, produciton / operations, research

& development and imformaiton system

1.3.3.1 Management

The management has 5 basic functions: planning, organization, promotion, personnel and control:

- Planning: include all managerial operations related to the preparation for

the future The specific missions are: prediction, set up the objectives, propose the strategy, develop the policies, and establish the purposes

- Organization: includes all managerial operations that create the structure

of relationship between the rights and responsibility The specific tasks: design the organization, describe the job, expand the control, design the job and analyze the job

- Promotion: includes the efforts aiming to orient the operations for people

including the leadership, contact, group work, and change of operation, authorization, and improvement of job quality, satisfaction of the work and needs, change of organization, spirit of staff and spirit of management

- Personnel: the personnel focuses on managing the individuals or human

resources including the management of salary and wage, benefit of staff, interview, recruitment, unemployment, training, development, management, safety for the staff, development of qualification, policy of discipline, the public work

- Control: relates to the management aiming to ensure that the actual result

is appropriate and consistent with the planned result The main operations: inspection of finance, inspection of quality, sale, inventory, cost, reward

1.3.3.2 Marketing

Marketing is described as the process of determination, forecast, establishment and satisfaction of needs and wishes of onsumers towards the products and services

Joel Evans and Barry Berman suppose that Marketing consists of 9 basic funcitons:

- Analysis of customer

- Purchase

The important financial ratios can be classified into 5 types as follows:

- Solvency ratios assesses the solvency of maturity short-term debts of company

- Debt balance ratios shows the scope taht is financed by the liabilities of company

- Operating ratios measures the efficiency of resources utilization

- Fianancial ratios show the common performance of management, and the profit from teh revenue and investment

- Growth ratios show the ability to maintain the economic position of the company in the growth rate of teh economy and industry

1.3.3.4 Production/Operations

The funciton of production/ operations in the business activity includes all activities aiming to turn the input into the goods and services

Roger Schrocder supposes that the produciton/ operations management

process includes 5 types of decision and function:

- Process

- Capacity

1.3.3.5 Research & Development (R&D)

The R&D aims to develop new products before the competitors, improve the product quality or renovate the produciton process in order to cut down on the cost

There are 2 forms of R&D: self - perform/or rent the researchers or

independent organizations in order to develop the seperate products

1.3.3.6 Information system

The information connects all business functions to each other and provides the basis for all decisions on management It is fundamental for all organizations Assess the strengths and weaknesses of the internal informaiton system as an important aspect for implementing the internal control

According to Porter and Miller, if we wish to establish the effecient information system and exploit the competitve advanatge of information, we need

to implement the following steps:

- Assess the information intensity: the level of potential and current informaiton on the process and products of company

- Identify how the technique of informaiton ystem can establish the competitve advantage

- Develop the plan to take use of the technique of informaiton system

1.3.4 Process to implement strategies

To implement the strategy, we need to have a decision making process including 3 stages:

1.3.4.1 Stage 1: Input stage

This stage summarizes the basic information that was entered and necessary for establishing the strategies

This stage uses the tools: external factor evaluation (EFE), internal factor evaluation (IFE)

1.3.4.2 Stage 2: Combination stage

This stage focuses on offering the feasible strategies that can be selected by the arrangement and combination of internal and external important factors

This stage uses the tools: strengths - weaknesses, opportunities - threats (SWOT), Strategic Positioning and Action Evaluation (SPACE)

1.3.4.3 Stage 3: Decision - making stage

This stage only use one tool, quantitive strategy planning matrix (QSPM) The QSPM matrix will use the input information drawn from stage 1 in order to assess the feasible strategies objectively that can be chosen in stage 2

Note: Tools such as SWOT, SPACE and QSPM can increase the quality of

decision making on strategy, but it is not used to control the strategy The aspects of forming and choosing the strategies such as the behavior, culture and politic are always the important issues that need to be considered and managed Under the pressure of external factors, the leadership must take over the active role in analyzing and choosing the strategy

1.3.5 Tools for establishing and selecting strategies:

In the scope of this dissertation, and the practical situation of the production and sales of EVNGENCO 3, the appropriate tools for planning the strategies as follows:

- Step 1: Establsih the factors that plays a decisive roles in the business that

the company is doing including the opportunities and threats of company and line of business of company

- Step 2: Assess the level of importance of each factor according to the

range from 0.0 to 1.0 (the gradual increase in level of importance) with total score

of each factor is 1 The appropriate classification is compared between by the sucessful enterpises and unsucessful ones

- Step 3: the range from 1 to 4 for each factor with the score showing the

degree of response of enterprise to such factor 4 is good response 3 is over average response 2 is average response and 1 is less response These levels are based on the efefctiveness of the startegy of company Therefore, this classification is based on the company while the classification in the step 2 is based on the industry

- Step 4: Multipy the importance of each variable with its classification to

get the score of importance (step 4 = step 2 x step 3)

- Step 5: Identify teh total score of importance of enterprise by total score

that we got in the step 3

Total highest score is 4 and the lowest score is 1, the average is 2.5 The higher score show that the company has a good response to external factors

1.3.5.2 Competitive Profile Matrix

In order to build a competitive profile matrix (CPM) should be made via 5 steps:

- Step 1: Make a list of the main elements to have an important influence to

the competitiveness of companies in the industry

- Step 2: Classify the importance from 0.0 (not important) to 1.0 (very

important) for each factors.The total score of the importance of these factors must

be equal to 1.0

- Step 3: Determine the weight from 1 to 4 for each factors, the weight of

each factors depending on the ability of the company to the factors, of which 4 are good, 3 is over average, 2 is average , 1 is weak

- Step 4: Multiply the importance of each factors with the weight of it to

determine the score of the factor

- Step 5: Add score of all the factor in order to determine the total score of

IFE matrix is established by 5 steps:

- Step 1: List successful and key factors as determined in the internal

control process, including the strengths and weaknesses

- Step 2: Fix the importance by the classification from 0.0 (unimportant) to

1.0 (the most important) for each factor The importance fixed for each certain factor (regardless of strengths or weaknesses) shows the relative importance of such factor towards the success of the company of the same industry Total score of importance is 1.0

- Step 3: Classify from 1 to 4 for each factor will express such factors that

represents the largest weakness (classification is 1), the smallest weakness (the classification is 3), or the largest strengths (the classification is 4) Therefore, the classification is based on the company while the level of importance in the step 2 is based on the industry

- Step 4: multiply every level of importance of each factor with its

classification to determine the score of important of each variable (step 4 = step 2 x step 3)

- Step 5: Add up all scores of importance of each variable to determine the

score of importance in an organization

Despite of IFE, the score of importance can be classified from the lowest as 1.0 until the highest as 4.0 and the average as 2.5 If the score of importance is

smaller than 2.5, it shows that the company is weak in internal factors, and if the score is higher than 2.5, it show that the company is strong in internal factors

1.3.5.4 SPACE matrix

The strategic positioning and evaluation activities matrix (SPACE) is a combination tool in stage 2 of the strategic establishment process The axises of SPACE matrix is the representative of 2 internal aspects of an organization (financial strengths [FS] and competitive advantage [CA]) and 2 external aspects of

an organization (environmental stablization [ES] and industry strengths [IS]) Four factors will be the most important for the general strategic position of an organization

Subject to each type of an organization, there are many variables of representative factors for the axises of SPACE matrix Some variables are often used: the investment revenue, debt balance, solvency, working capital and cash currency are considered as the factors of financial strength of an organization

Steps for a SPACE matrix:

- Step 1: Select a group of variables for the financial strengths (FS),

competitive advantage (CA), environmental stability (ES) and industry strengths (IS)

- Step 2: Fix the value by the number: +1 (the worst) to +6 (the best) for

each variable of FS and IS Fix the value by the number from -1 (the best) to -6 (the worst) for each variable of ES and CA

- Step 3: Calculate the average score of FS, IS, ES and CA by add up all

fixed values for the variables of each aspects and then it will be divided with the variable of corresponding aspect

- Step 4: Mark the average score of FS, IS, ES and CA on the appropriate

axis of SPACE matrix

- Step 5: Subtract 2 scores of X axis and mark the score of scores on X axis

Add up two scores on Y axis and mark the result on Y Mark the intersection of 2 new points on this XY axis

- Step 6: Draw vector from the original point of SPACE matrix through new

intersection This vector represents the strategy got the organization: Attack, Competition, Defense or Caution

1.3.5.5 SWOT matrix

We must have 8 steps to establish SWOT matrix:

- Step 1: List external opportunities of company

- Step 2: List external threats of company

- Step 3: List of internal strengths of company

- Step 4: List of internal weaknesses of company

- Step 5: Combine the internal strengths and external opportunities and

record the result of SO strategy to the appropriate cell

- Step 6: Combine the internal weaknesses with the external opportunities

and record the result of WO strategy

- Step 7: Combine the internal strengths with the external threats and record

the result of ST strategy

- Step 8: Combine the internal weaknesses with the external threats and

record the result of WT strategy

A SWOT matrix is illustrated by the following cells:

Fig 1 SWOT matrix

External factors

Internal factors

O

List opportunities

T List threats

T-W

The startegies combine teh weaknesses and threats

1.3.5.6 QSPM matrix

Quantitative Strategic planning Matrix - QSPM uses the information obtained from the matrix in stage 1 (input stage) and matrixes of stage 2 (combinaiton stage) From that, assess which the alternative startegy is the best Similar to other tools for analyzing the startegies, QSPM matrix requests the good require the intuitive guest

The startegies selected to the QSPM matrix is not all startegies found out in the stage

To construct the QSPM matrix, we need to implement 6 steps:

- Step 1: List factors S, W, O, T taken from IFE matrix and EFE matrix

- Step 2: Classify for each internal and external sucessful factors with IFE

matrix and EFE matrix

- Step 3: Study the matrix in the stage 2 and identify which startegy should

be considered

- Step 4: Identify teh total attractive score (TAS) according to each factor:

the score is assessed from 1 to 4, with 1 as unattractive, 2 less attractive, 3 relative attractive, 4 very attractive

- Step 5: Calculate the total attractive score (TAS) in each row by

multiplying the number of classification points in step 2 and AS in step 4 together

- Step 6: Calculate the total attractive score in each strategy

The most attractive strategy is the strategy with total attractive score in step 6

is the highest

Conclusion for Chapter 1

To reach success in business operation, enterprises must analyze the external environment to realize the opportunities and threats that the enterprise is being or will be faced to the process of operation The analysis of impact factors such as: economic conditions, political-legal, socio-cultural, population, natural and technological conditions for the operation of the company for setting out the strategic objectives in order to specify the detail action and solutions, so that the

company can continue to build and maintain a competitive advantages from the strengths and overcome the weaknesses as well as identify opportunities and prevent the risk that will occur

To achieve the company's success in business operations, the company not only to analyze the external environment, but also to analyze the company's own internal environment Companies have to know their core competencies such as the ability to finance, revenue, knowledge, skills and experience of human resources, building capacity and vision development The analysis of the inside and outside environment will help the company make the right decisions in building their business strategy

The planning and implementation of business strategy is feasible or not depends very much on the analysis, the current core capacity assessment and the impact of external factors to the company

The theory contents in Chapter 1 will be used to build business strategy of PMTP periods of 2013 - 2018 are presented in Chapter 2

CHAPTER 2 ANALYSIS OF BUSINESS PRODUCTION SITUATION

ANDSTRATEGIES OF THE PMTP FOR THE PERIOD 2013 TO 2018

2.1 Overview of electricity industry

* Features of electricity industry:

- The electricity sector is a key economic sector, has very important position in the national economy Electricity supply of essential goods for life, living, production of all sectors and people

- This industry has great and modern facilities, requiring huge capital investment, long construction time and is influenced greatly from inputs (fuel, supplies) and also the incidence, impact on the environment, natural resources (land, fossil fuels, etc.); thus also creates a difficult barrier to overcome for the investors in the electric market

- Electricity can not be stored; supply must balance immediately with demand, if there is an imbalance between supply and demand that not promptly remedy will cause the production systems power breakdown, leading to load fired from a small scale, the area to the entire system (the grid)

- Electricity is input materials for all manufacturing and service sectors in the economy Electricity has a great impact on economic development, especially in the early stages of development such as Vietnam According to statistics from the Electricity Plan VI, elasticity coefficient of electric (coefficient of elasticity is the ratio between the growth rate / GDP growth rate) during 5 years of Vietnam, it varies in about 1.98 - 2.0 This figure is relatively high compared to other countries

in the region and the world In particular, in developing countries, this coefficient only around approximately equal to 1.0; other countries even only from 0.5 to 0.8,

so talk to the media machinery and equipment technology for the industrial production during this period is quite outdated, inefficient, energy - consuming

* Objectives of electricity industry: (according to the Electricity Plan VII of the Government)

 General objectives

- Using effectively domestic energy resources coupled with importers of primary energy for electricity production; provide full power with increasing quality, reasonable price for economic - social development; ensure national energy and security

 Detailed objectives

- Providing enough electricity demand in the country, the electricity output

is produced and imported in 2015 about 194 - 210 billion kWh; in next 2020 about

330 - 362 billion kWh; in next 2030 about 695 - 834 billion kWh

- Priority to the development of renewable energy sources for electricity production, increase the proportion of electricity produced from energy sources from 3.5% in 2010, to 4.5% of total electricity production in 2020 and 6.0% in

* Strategy to develop power resource

- Prioritize the development of electricity from renewable energy sources (wind power, solar power, biomass power, etc.), rapid development; gradually increase the proportion of electricity produced from renewable energy sources; electricity production from wind power accounted for 0.7% in 2020 to 2.4% in

2030

- Prioritize the development of hydropower resources, especially the projects with integrated benefits: flood control, water supply, electricity production; bringing the total hydro power capacity from 9,200 MW at present to 17,400 MW

in 2020

- Try to raise the power plant to operate in accordance with the development of the power system to improve the operational efficiency of the system: It is expected that by 2020, the area has a total hydropower capacity 1,800

+ Thermoelectric using coal: Mining the maximum quality of domestic coal for develop thermal power plants, priority use domestic coal for thermal power plants in the northern areas By 2020, the total capacity of thermal power will be about 36,000 MW, producing about 156 billion kWh (accounting for 46.8% of electricity production), 67.3 million tons of coal consumption Due to limited domestic coal production, should be consider building and coal-fired power plants into operation in 2015

- Development of nuclear power plants to ensure stable power supply in the future when the domestic primary energy source is exhausted: Put the country's first nuclear power plant into operation in 2020

- Development of power plants using liquefied natural gas (LNG) to implement the diversification of fuel supply for electricity production, to ensure security of supply of electricity and gas In next 2020, the use of LNG power capacity of about 2,000 MW

- Export and import of electricity: Implementing effective power exchange with other countries in the region, to ensure the interests of the parties and increase the exchange system to ensure safety, boost imports in hydropower potential areas, especially Laos, Cambodia, China It is expected that by 2020, electricity imports will reach 2,200 MW, 2030 about 7,000 MW

2.2 Analysis of PMTP situation

2.2.1 History of establishment and development

- On February 15, 1997 Phu My Power Plant was formally established under decision No 48/ĐVN/HĐQT of EVN.On October 4, 2005 Phu My Power Plant was converted into Phu My Thermal Power Limited Company under decision

No 241/2005/QD-TTg by the Prime Minister

- On June 1, 2011 by decision No 3025/QĐ-BCT, Phu My Thermal Power Limited Company was became to the parent company and to be called EVN Power Generation Corporation 3, it operates in the form of the parent company-subsidiary, belonging to Electricity of Vietnam, on the basis of organizing, reorganizing from Phu My Thermal Power company Some power companies operated dependent, some management boards of power project were transfered the right to represent the state capital owners from Electricity of Vietnam to EVN Power Generation Corporation 3

- On January 1, 2013 EVNGENCO 3 has officially gone into operation and Phu My thermal power plants belong to EVNGENCO 3

2.2.2 Business sectors

Business sectors guest PMTP of EVNGENCO 3 was conducted under the business registration certificate dated November 26, 2012 issued by the Planning and Investment Department of Ba Ria - Vung Tau Province

The main field of business of EVNGENCO 3 including:

- Manufacture and sales of power, production and sales of mechanical power

- Repair, maintenance, overhaul, upgrade, renovate electrical equipment, electrical works

- Repair, maintenance mechanics

- Testing, adjustment, control, automation of the plant (line) power production, non-destructive laboratory

- Consulting preparing production preparation activities for power plants

- Training and development of human resources in management and operation, maintenance and repair of power plant’s equipment

- Sales of fuel, raw materials, supplies and electric equipment

- Construction and installation of the building

- Other business activities

* Note: With the scope of the research described in this article, we only study manufacturing and business strategy of PMTP, the figures in technology, production scale, production, performance of business in the past year were taken

MW, details are as follows :

(1) Phu My 2.1 power plant (2 gas turbines, 2 HRSGs, 1 steam turbine)

Capacity: 450 MW

Manufacturer: ABB / Alstom (Switzerland)

Power augmentation system: 27 MW (Alstom)

(2) Phu My 2.1 Extension power plant (2 gas turbines, 2 HRSGs, 1 steam

turbine)

Capacity: 440 MW

Manufacturer: Alstom (Switzerland), Siemens (Germany)

Power augmentation system: 28 MW (Alstom)

(3) Phu My 1 power plant (3 gas turbines, 3 HRSGs, 1 steam turbine):

Capacity: 1,090 MW

Manufacturer: Mitsubishi Heavy Industries (Japan)

(4) Phu My 4 power plant (2 gas turbines, 2 HRSGs, 1 steam

turbine)Capacity: 450 MW

Manufacturer: Alstom (Switzerland)

Main fuel for electricity production of these plants is natural gas DO (Diesel Oil) is the backup fuel, used in case of gas supply shortages

PMTP owns the power plants with modern technology and equipment, advanced automatically control systems; infrastructure; material and technology are equipped with modern and science system, having great value, green environment, clean Thus requiring the employee to have the industrial working style , management and use of technical equipment to be active, careful, trying to explore, research and innovative created, and shall be always aware of the important role of the national electricity system PMTP in particular, as well as for the country's economy in general

* Production scale

After 15 years of operation, the power output of Phu My power plants has increased significantly Starting in 1997 with an electrical output of 1.08 billion kWh, up to 2010 output reached 17.5 billion kWh, an increase of 16.2 times; electricity output increased dramatically from 1997 to 2007 due to data an investment and in turn put into operation in different stages.

After all the investment projects are put into operation, implementation of the annual power output of Phu My power plants were kept at an average of about

16 - 17 billion kWh and the total capacity through 2012 is 172.77 billion kWh

Figure 2.1: Diagram of growth in electricity output in the period from

1997 to 2012 of Phu My power plants (Source: EVNGENCO 3)

Currently, Phu My power plants with a total capacity of 2,485 MW,

accounting for about 9% of the total capacity of the national electricity system

Figure 2.2: Production capacity of Phu My power plants in the national

electricity system (Source: EVN)

ANNUAL POWER ENERGY OF EVN AND PMTP

Figure 2.3: Market shares of Phu My power plants in the national

electricity system (Source: EVN)

Figure 2.4: Proportion of annual power output of Phu My power plants

compared with EVN

From the statistics shown in Figure 2.2 and Figure 2.3 above shows the annual electricity output of the power system up very quickly Within five years, from 2008 to 2012, the market share of Phu My power plants was reduced from 22.9% to 14.08%, due to many new power plants are built and put into operation

Administration - Inspection &

Protection Board

Investment – Construction Board

1st Operation Department

Thermal Mechanical Maintenance Department

Organization - HR Board

Tender Management Board

2nd Operation Department

Electrical Automatical Maintenance Department

Planning Board Legislation Board

Chemistry Department

DEPUTY GENERAL DIRECTOR OF

ECONOMY -

FINANCE

DEPUTY GENERAL DIRECTOR OF TECHNOLOGY PRODUCTION

DEPUTY GENERAL DIRECTOR OF BUSINESS - ELECTRICITY MARKET

DIRECTOR OF PHU

MY THERMAL

P OWER PRODUCTION

DEPUTY GENERAL DIRECTOR OF INVESTMENT - CONSTRUCTION

2.3 Analysis the external environment

GDP structure: agricultural 17 - 18%, industry and construction 41 - 42%; services 41 - 42% High-tech products and high-tech application products reach 35% of the total GDP

Growth model and economic structure shifted towards the development of depth Manufacturing and service sectors with the increasing level of technology, clean, consume less energy High-tech products and high-tech application products reach 35% of the total GDP

Elastic coefficient / average GDP declined from 2.0 today to 1.5 in 2015 National target program on the use of power and efficiency savings for the period from 2011 to 2015 is widely implemented by target until 2015 savings of 5 - 8% of total power consumption

Exchange rates tend to be higher next year compared to last year, affect the business results of the Phu My power plants because most of the materials and spare parts of these plants were purchased from the genuine manufacturers (about 90% is imported) Investment loan of PMTP are using the Japanese yen, CHF and USD, the volatility of the exchange rate led to an annual cost of PMTP increases, this cost is not included in the price of electricity according to current regulations Therefore, the annual profit of PMTP has affected by exchange rate differences are quite large

Consumer price index (CPI) in 2012 increased by 9.21% compared with

2011 This is also the successful efforts of the government to control inflation