Business strategy development of manganese mineral joint stock company period 2011 - 2020

CAPSTONE REPORT BUSINESS STRATEGY DEVELOPMENT OF MANGANESE MINERAL JOINT STOCK COMPANY PERIOD 2011 - 2020 Group: 9 Members: 1.. Business Strategy Development of Manganes Mineral Join

CAPSTONE REPORT

BUSINESS STRATEGY DEVELOPMENT OF

MANGANESE MINERAL JOINT STOCK COMPANY

PERIOD 2011 - 2020

Group: 9 Members:

1 Phan Nguyễn Quốc Khánh

2 Bùi Văn Minh

3 Võ Văn Hải

4 Hoàng Quốc Trường

Business Strategy Development of Manganes Mineral Joint Stock Company –

We would like to express our gratitude to the Management Board and other executives of Manganese Mineral Joint Stock Company and its parent company – Ha Tinh Mineral and Trading Corporation for supporting us as well as providing us with useful comments during the process of completing this project

Due to the limitations of time and our knowledge, it is inevitable that our report

- “Business Strategy Formulation of Manganese Joint Stock Company for 2011 – 2020” may have some limitations We hope to continuously receive support and advice from our lectures of Global Advanced Master of Business Administration –ETC – VNU and Griggs University as well as the Management Board and other executives of

Ha Tinh Mineral and Trading Corporation ; Manganese Mineral Joint Stock Company; sothat we can improve our captone report

Best Regards and Many Thanks!

Chapter 1: THEORETICAL FOUNDATION OF STRATEGY

FORMULATION

Business Strategy Development of Manganes Mineral Joint Stock Company –

Bargaining Power of customers

Bargaining Power of suppliers

Competitive rivalry among existing firms

Threat of new entraints

Technology and Equipments

2.6 Building Internal - External factor matrix of MMC’s business lines

36

Chapter 3: DEVELOPING A BUSINESS STRATEGY FOR

MANGANESE MINERAL JOINT STOCK COMPANY

3.3.6 Building standard operating procedure

49

Business Strategy Development of Manganes Mineral Joint Stock Company –

Period 2011 – 2020

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ABBREVIATIONS

LIST OF TABLES

Business Strategy Development of Manganes Mineral Joint Stock

Company – Period 2011 – 2020

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INTRODUCTION

1 The importance of the research

In the competitive environment of the business community, some companies make the leap but others do not This phenomenon has been observed and brought into question for years; and the answer seems to lie in the business strategy of a company To survive and rise to prominence, every company has

to propose an appropriate business strategy that goes in line with the current trend of integration and the general development of the economy In other words, the future of an enterprise mainly depends on the management, the formation, and the implementation of a business strategy

Manganese Mineral Joint Stock Company (MMC), a joint stock company that has been effectively operating in the last few years, is a subsidiary company of

Ha Tinh Minerals and Trading Corporation However, its business environment has undergone major changes, putting significant pressure on its activities, thus leading to the reestablishment of its overall strategy Some tremendous pressure for MMC includes:

First, the core business activity of MMC is mineral exploiting, whereas

deposits of manganese and iron ore in Ha Tinh, its main area of exploitation, have been worryingly exhausted If no immediate measures are taken, MMC may experience difficulties in doing business from this point onwards

Second, changes made by the state in natural resources management in the

legal system have regulated that the grant of mineral mines to individuals and organizations shall be replaced with the introduction of bidding for the exploitation of mines in the upcoming years That has imposed considerable pressure on MMC

Third, the vigorous growth of the economy in Vietnam in general and in Ha

Tinh in particular, along with the economic cooperation with neighboring countries like Laos, Thailand, China, and other nations have brought about both opportunities and challenges for businesses based in Hanoi, including MMC in Ha Tinh

Under the circumstances, MMC not only needs to focus on strategic measures, but also has to pay due attention to building, implementing, and controlling its

long-term strategy in order to maintain its growth rate, take advantage of its opportunities and strengths accordingly to the existing economic and legal environment and Mitraco’s assistance in decision-making process Therefore,

it is advisable that MMC build and apply its overall strategy for the period 2011-2020 based on Mitraco’s development strategy so as to maintain its position and put stable stepping stones for the future

2 The aim of the research

The goal of this thesis is to formulate a business strategy for MMC with a view to answering two key questions: (i) how MMC should transform in order

to sustain its growth rate as core business activity is narrowed down and (ii) how to achieve the maximum capacity in business

3 Objectives and the scope of the research

To evaluate the business activity of the enterprise To identify activities that it will maintain, apply, or eliminate, if any To define and assess strategic choices and necessary measures to sustain or expand its strategic business activities

4 The methods of the research

To do this research, we use popular research methods in economic research such as analytical, synthetic, statistical, and comparison-and-contrast methods Others include macroeconomic analysis, industry analysis and business analysis In addition, SWOT and IE matrixes are built, then MMC’s strategy is formulated

5 The structure of the research

This research is divided into three chapters:

Chapter I: Theoretical foundation of strategy formulation

Chapter II: Overview and analysis of MMC’s business environment

Chapter III: Developing a business strategy for MMC – Period 2011-2020

Business Strategy Development of Manganes Mineral Joint Stock

Company – Period 2011 – 2020

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CHAPTER I: THEORETICAL FOUNDATION OF STRATEGY FORMULATION

1.1 Basic concepts of business strategy

One of the most popular concepts of business strategy is one by Chandler: “the determination of the basic long-term goals and the objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals”

Alain Threlart acclaims that “Strategy is an art which the enterprise use to

fight against competition and win” Indeed, a business strategy help enterprises define clear goals and plans so that it can make the most of its resources and opportunities, thus giving it a competitive edge over other counterparts Also, businesses can broaden its vision and take precise actions when it comes to challenges and threats in a competitive environment, therefore nourishing its sustainability

1.2 Strategic levels of the business

Every company has numerous different strategies in respect to their organization structures, varying periods and specific goals

Stability strategies

Exit strategies

1.2.2 Competitive strategies

There are three fundamental competitive strategies: cost leadership, differentiation, and segmentation strategy

1.2.3 Functional strategies

Include Financial strategies; Marketing strategies; Human Resources strategies; Technology strategies; Production strategies, etc

1.3 Strategy developing process

According to established theoretical foundations, existing economic situation, and future tendency, this thesis will examine internal business environment analysis with respect to industry environment and macroeconomic environment It employs SWOT analysis, competitiveness analysis, and business activity analysis to come to the conclusion

1.3.1 Macroeconomic environment analysis

Macroeconomic environment, where businesses have to seek opportunities and avoid potential risks, encompasses Economic environment; Technological environment; Socio-cultural environment; Natural environment; Political and Legal environment

Macroeconomic environment model:

Macroeconomic environment Industry environment

Business’s internal environment

Socio-cultural Environment

Political – Legal Environment

Economic Environment

Technological

Environment

Natural

Environment

Business Strategy Development of Manganes Mineral Joint Stock

Porter’s Five Forces Analysis

Threat of new entrants

Competitive rivalry within an industry

Competitive rivalry among existing businesses

Suppliers

Bargaining power

Bargaining power

Threat of substitute products

Customers Entrants

Substitute products

1.3.3 Internal business environment analysis

In conventional wisdom, internal factors of a business play a detrimental part

in its efficiency Within the scope of this thesis, only the resources of the business are taken into account; those comprise Human Resources, Finance; Facilities; Technology and equipment As such, strengths and weaknesses of the business are pointed out, leading to possible solutions to the intensification

of strengths and the mitigation or diminishment of weaknesses

To have a base for the selection of a business strategy, SWOT and IE matrixes are built, giving an insight into suitable vision, mission, goals and the procedure of implementing that strategy

Business’s Resources

SWOT MATRIX

There are eight steps to build a SWOT matrix:

Step 1: List external opportunities (O1, O2 )

Step 2: List external threats (T1, T2 )

Step 3: List major strengths of the business (S1, S2 )

Human

Equipment - Technology

Facilities

Business Strategy Development of Manganes Mineral Joint Stock

Company – Period 2011 – 2020

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Step 4: List major weaknesses of the business (W1, W2 )

Step 5: Combine strengths and opportunities to form strategies (SO)

Step 6: Combine weaknesses and opportunities to form strategies (WO)

Step 7: Combine strengths and threats to form strategies (ST)

Step 8: Combine weaknesses and threats to form strategies (WT)

Threats

T1: Threats ordered in level of importance T2:

Total score of IFE on the x-axis

Score from 1.00 to 1.99: internally weak business

Score from 2.0 to 2.99: internally mediocre business

Score from 3.0 to 4.0: internally strong business

Total score of EFE on the y-axis

Score from 1.0 to 1.99: weak ability of the business to respond to external factors

Score from 2.0 to 2.99: medium ability of the business to respond to external factors

Score from 3.0 to 4.0: good ability of the business to respond to external factors

Units/Business activities in i, ii, iv cells should be developed

Units/business activities in iii, v, vii cells should be preserved

Units/business activities in vi, viii, ix cells should be limited or eliminated

IE Matrix

Internal Factor Evaluation (IFE)

High Medium Low

Medium

Low

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Company – Period 2011 – 2020

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CHAPTER 2: OVERVIEW AND ANALYSIS OF BUSINESS ENVIRONMENT IN MAGANESE MINERAL JOINT STOCK COMPANY

2.1 Overview:

Business name:

Vietnamese name: Công ty Cổ phần Khoảng sản Mangan

Trade name: Manganese Mineral Joint Stock Company

Trade name abbreviation: MMC

Address: Phu Loc Commune, Can Loc District, Ha Tinh Province Corporate information: Manganese Mineral Joint Stock Company,

formerly the Manganese Company, was established under Decision 52 issued on February 9, 2001 by the manager of Ha Tinh Minerals and Trading Company (now Ha Tinh Minerals and Trading Corporation; trade name MITRACO Ha Tinh) MITRACO Ha Tinh is a state-owned enterprise with 23 unit members

In 2005, in accordance with the policy of the Party, Manganese Company converted from a fully state-owned enterprise into a joint stock company Under the direct direction of Ha Tinh Minerals and Trading Corporation, Manganese Company gradually reorganized itself accordingly to Decision

1299 issued on December 6, 2005 by Ha Tinh People’s Committee The decision concerned the permission of transforming Manganese Company into Manganese Mineral Joint Stock Company, making it a business directly under

Ha Tinh Minerals and Trading Corporation, its parent company

Manganese Mineral Joint Stock Company currently has a charter capital of 31,600,000,000 VND (thirty billion and six hundred million Vietnam dong),

equal to 31,600,000,000 shares with 10,000 VND each Its parent company,

Ha Tinh Minerals and Trading Corporation, holds 51% of its charter capital Its business fields range from exploiting, processing, trading manganese ore, trading and deep processing products from manganese ore, dolomite ore, iron and additives for steel manufacturing

Business Strategy Development of Manganes Mineral Joint Stock

Operator Statistician

Mechanician

Shifts Watchman + Warehouseman Cook

Operator Statistician

Mechanician

Shifts

Watchman + Warehouseman Cook

Operator Statistician Plant

2.2 Analysis of the Manganese Mineral Joint Stock Company's business environment

2.2.1 Macroeconomic analysis:

Economic factors:

Manganese Mineral Joint Stock Company employs the exploitation and processing of manganese minerals as its main business activity Its main products are manganese ore, cast iron, and manganese cinder Its markets include both domestic and foreign ones Most manganese ore (90% of total production) produced used to be exported raw to China, but now is increasingly consumed by the local market as the need for manganese to manufacture Fero Mangan, a material for steel making industry, rises

For the last few years, Vietnam’s economy has enjoyed high and stable growth rates (7.5 – 8.5% per year on average) Going in line with that growth of the economy, the steel making industry has maintained a growth rate of 10% per year

The fast and stable growth of Vietnam’s economy has a positive impact on the development of manganese industry As can be seen from those above-mentioned points, the likelihood of economic risks that can affect the company

is low

Besides, Ha Tinh Province has implemented numerous enormous projects such as the Thach Khe iron mine exploitation or the building of a steel complex of Pomosa (Taiwan) in Vung Ang Economic Park Those offer MMC

Business Strategy Development of Manganes Mineral Joint Stock

Company – Period 2011 – 2020

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a great opportunity to expand its business and production Overall, the business environment of Vietnam in general and that of Ha Tinh in particular are in favor of MMC as well as other companies in the same industry

Political and legal factors:

In 2009, of the business’s total production, 50% was exported to China, 50% for local consumption Nonetheless, in 2010, the rate of exports experienced such dramatic drop that only 3.3% was for exportation while the remaining 96.7% was locally consumed The government has imposed limitations on the exportation of raw minerals including manganese; however, official documents concerning a maximum manganese exports for companies remain

to be seen

In addition, local demand for the company’s manganese products is on the rise with an increase of 50% in 2009 and 96.7% in 2010 As a result, the scales of productions of its Fero Manganese factories have been expanded in order to meet the demand of local steel making plants Therefore, the risk posed by the government policy is not high, especially in the upcoming period as the local market is broaden

In general, Vietnam has a fairly stable political and social environment in comparison to other countries in Southeast Asia Thanks to some certain

“renovation” policies, Vietnam has acquired a steady level of GDP growth rate The stability of politics and macroeconomics has been preserved Vietnam is regarded as a safe destination for investment Moreover, Ha Tinh Province has issued a number of supportive guidelines encouraging the

development of MITRACO, such as policies on mine grants or assistance in investment Those are opportunities for subsidiaries of MITRACO as MMC

Technological factors:

The industry of exploiting and processing minerals in Vietnam is technologically deprived compared to global standards MMC is not an exception According to recent estimations, its technological level is fairly adequate as level of procedure mechanization is 70% This level is appropriate

to the current condition of and demand for minerals exploitation of the company as MMC has yet to bring up projects to enrich manganese density in products

However, the available equipment for the deep processing of manganese minerals is of mediocre quality, making it a setback for the company It is recommended that MMC transfer high technology from foreign countries so as

to improve its deep processing efficiency and its business capacity, and to respect the policies of the Party and the state

Socio-cultural factors:

MMC operates in Ha Tinh Province, where the tradition of fondness of learning, hard work, ingrained traditional values, and valuable customs are highly evaluated, which is really beneficial to the business However, narrow-mindedness, indiscipline, and lack of professional manner are still prevalent among people

Natural factors:

MMC mainly works on business areas that involve exploiting and processing minerals, so there might be additional expenditures on strict observance to

Business Strategy Development of Manganes Mineral Joint Stock

by long working time at ore bodies and fields located far from factories Those matters are an influential hindrance to the MMC

2.2.2 Analysis of MMC’s industry environment

Bargaining power of customers

MMC has several competitive edges over other businesses as there are a number of loyal customers supporting MMC over the years; moreover, its credit is reliable to customers in both local and foreign countries Besides, demand for manganese products has been on the rise recently Therefore, pressure of customers is negligible

Bargaining power of suppliers

The main input material of the company is manganese ore; in addition, varied types of diesel fuels, coking coal, electricity, grease are used for other procedures in exploiting mills and the Manganese Cinder Manufacturing Plant

The trend of rising fuel price is inevitable, putting much pressure on the manufacturing and trading efficiency of the business

The existing manganese ore is exploited and purchased from local people by MMC itself Its density is increasingly low, its deposit lessen, leading to a potential shortage of input material It is essential that MMC expand its exploitation to areas in other countries such as Laos, and plan for the purchase

of materials from other domestic and foreign counterparts This is a significant challenge to the business

Competitive rivalry among existing firms

In terms of technological level, equipment, exploitation and consumption, and turnover, MMC is the most competitive business On the other hand, market demand for its products is substantial and thus in favor of MMC Threat of competitive rivalry among existing businesses hardly exists

Threat of new entrants

There are several coexisting businesses that have invested in exploiting and deep processing manganese minerals MMC should improve its technology, fine-tune current manufacturing system and lower its price so that it can effectively compete with other counterparts on the market

Substitute products

The main products of MMC are manganese, cast iron, manganese cinder, produced for consumption of steel making factories MMC has to develop a strategy of deep processing other kinds of minerals to vary its product range

In the final analysis, here is a summary of opportunities and threats to MMC:

Summary of opportunities (O) and threats (T)

Table: 2.01

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Company – Period 2011 – 2020

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1 Fast development of steel making

industry, numerous steel making

projects in Ha Tinh, great

products development

2 Favorable policies that encourage

and assist business, and attract

investment

3 Policies of mine grants and

additives supply for metallurgy;

the status of a large local business

makes it easier for MMC to

receive assistance

willingness to adopt policies of

the party and the State (vital to

the development of the business)

1 Decrease in mineral deposit

businesses

3 Pressure of limitations on raw export leads to demand for investment in deep processing technology

4 Low level of deep processing technology in Vietnam

5 Poor management of mineral exploitation in local area, losses in expenditures and natural resources (leading to decrease in mineral deposit)

6 Harsh weather

7 Abundance in low-skilled labor force

There is a lack of people who have both professional and management skills

in MMC The company is facing the competition of the labor, especially when the competitors are trying to attract the professional and management-skilled people

MMC is also lacking a long – term strategy to train and develop human resources in order to attract those professional and management-skilled people

MMC’s productivity is quite low in comparison with the average level of other state – owned companies

Average level of private sector

Average level of FDI sector

Total number of labors (person) 289

Average income per person

(million VND/ person/ year)

Average revenue per person

(million VND/ person/ year)

Business Strategy Development of Manganes Mineral Joint Stock

(Source: Central Statistical Office)

In 2009, on average, the revenue and profit generated by one MMC’s worker were 107.8 million VND and 24.3 million VND respectively while the average levels of those

in state- owned sector were 1,024 million and 64.9 million VND and in FDI sector were

522 million and 56.6 million VND Therefore, the operational efficiency and productivity

of each MMC’s worker is lower than those in the state – owned and FDI sectors

Total profits before tax 50 6.308.854.403 3.990.225.525 5.824.653.288 Corporate income tax expenses 51 1.577.213.601 379.332.419 758.623.719 Profits after Corporate Income

I Cash and Cash equivalents 110 4.473.826.262 954.124.501 4.380.950.021

II Short term financial

II Fixed assets 220 12.987.665.863 12.857.366.802 5.448.309.447

IV Long term financial