Construct business strategy for cosevco Gianh river cement compan within the period of 2012 - 2017

On that basis, our group selects the topic "Building business strategy of Cosevco Song Danh Cement Company for the period 2012 – 2017”... The object and scope of the study - Object: The

 Lê Gia Hiệp

Class: Ga.MBA V0210

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OPENING

1 The necessary of the research topic

In the context of the crisis of the world economy and the domestic economic difficulties, the State's public investment was cut, the market price is unstable, and the freeze real estate market has great effect to enterprises which producing construction materials, including cement

Vietnam Cement Association also concedes: first 6 months in 2012, clinker production reached 25.5 million tons; cement is approximately 24.3 million tons which decreased approximately 10% compared to the same period in 2011 Domestic cement consumption reached 23.6 million tons, down about 10% compared to the same period in 2011 However, the cement industry is faced with a paradox: the production and consumption reduce, but the production capacity of the industry increases

Therefore, to overcome this difficult period, the cement business must analyze their own situation, to find the strengths, weaknesses, and opportunities to take advantage

of and promote the available resources, from which building business strategies consistent with the characteristics of each enterprise in order to survive and develop

in the competition, overcome difficulties

As an enterprise that has just established and went into operation in August, 2006, the Cosevco Song Gianh Cement Company gradually assert them in the cement manufacturing sector However, in this context, the company faced many difficulties

in production and business activities To make good use of the current opportunities

as well as the prevention of threats, the company need to operate based on a right strategy in accordance with the changes of the business environment On that basis,

our group selects the topic "Building business strategy of Cosevco Song Danh

Cement Company for the period 2012 – 2017”

3 The object and scope of the study

- Object: The study object is the problem of strategy building, from that, applying in business operation analysis and development direction determination for Cosevco Song Gianh Cement Company in the future

- Scope: focusing on the factors of cement business production of the company through collected data in three years 2009, 2010, 2011 and the first six months of

2012

4 Research Methodology

4.1- Data collection and processing method: Collecting information through the business production result report, resources situation report, document about distributors, customers, partners of the Cosevco Song Gianh Cement Company, the information in the newspaper, Website, etc.; collecting data via surveys, interviews with experts, leaders

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SWOT matrix, the external factors evaluation matrix (EFE), the internal factors evaluation matrix (IFE), the IE matrix, QSPM matrix will be used in the strategy building process

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CONTENTS CHAPTER I: BASIC ISSUES IN BUILDING BUSINESS STRATEGIES

1 Business strategy of the enterprise

1.1 The concepts of business strategy

There are so many different views and approaches when mentioning business strategy

Business strategy is the art

Alain Threlart said that: "Strategy is the art which the enterprise used to front competition and to gain success."

M.Porter said that: "Strategy is the art of building solid competitive advantage to defend."

In view of management category, business strategy is a form of planning

G.Arlleret said that: "The strategy is to determine the ways and means to reach the defined objectives through the policies."

Gluecl said that: "Strategy is a series of plans with the nature of consistent, comprehensive and aggregation that is designed to ensure the objectives of the enterprise will be implemented"

According to the view of unification combination that:

Chandle considered: "Strategy includes the determination of the basic and long-term goals of the enterprise, and apply a sequence of actions as well as the allocation of necessary resources to perform these goals”

According to Johnson & Schole: "Strategy is the direction and scope of an organization in the long term to gain a competitive advantage for the organization through the format of its resources in a changing environment, to meet the needs of the market and satisfy the expectations of related parties "

In summary, business strategy has basic features as follows:

- Business strategy clearly identifies the basic objectives and business direction of the enterprise in each period

- Business strategy of the business is reflected throughout the process continuously

- Strategic business always has thinking of progress, to gain success in business market

- Business strategy is often built in the long term (3, 5, 10 years)

1.2 The role of the business strategy:

- Business strategy helps enterprises to identify the purpose, its direction as a basis, the guideline for all business activities of the enterprise

- Business strategy helps the enterprise to understand and take advantage of business opportunities, and having proactive measures to overcome the risks and threats in the competition market

- Business strategy makes contribution in improving the using efficiency of resources; enhancing the competitive position of the enterprise to ensure the sustainable development of the enterprise

- Business strategy creates a solid basis for proposing of business production policies and decisions consistent with the fluctuations of the market

1.3 Types of business strategy:

1.3.1 Concentrated Growth Strategy

Growth strategy is driven solutions having the ability to help enterprises increase sales and profitability of the business unit that is higher or equal to the average growth rate of the industry

This strategy is associated with rapid or stable growth target depending on the environment characteristics of each business industry, the growth can be achieved in

a number of different strategies This type has three main strategies:

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1.3.1.1 Market penetration

Market penetration is strategy that enterprise uses existing products to find ways to increase the current market share through marketing efforts Market penetration strategy can be used as a single strategy or a combination of different strategies

Nature of market penetration strategy is that the enterprise focuses on developing business in depth The enterprise well developed existing markets, increasing advertising costs, the number of sellers, offers the name of goods, increasing public relations

The goal to achieve is to increase new customers, the quantity of goods and services that are purchased by customers, maintain the existing customers, developing the reputation with customers, making the company's position increasing

Achieved purposes may both have created a new market for the company, and has helped the company to extend the product life cycle and increase sales and profits for the company

1.3.1.3 Product Development

Product Development is product development strategy that has just consumed in the company's current market New products can be selected according to this strategy is products that has just improved

New product development methods are mainly as following:

- Development of a separate product can be done through the path: Change of product features; quality improvement; product designs improvement

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The goal is to increase the reliability, speed, durability and other characteristics of the product that are producing, simultaneously changing the shape and form of products such as structural changes, the color, cover create product differentiation

- Develop product portfolio: product portfolio development can be done through the addition of new items or improving producing products, such as:

Adding product designs with features, effects, characteristic of inferior quality; Additional product design are higher features, effects, quality, or add both the product design features, and effects with lower quality than current products

The purpose is to create new models of products, besides the company can prevent the penetration of the enterprises that want to provide for the market the product with the different design, features and quality Meeting the needs of all customer groups that require quality products with different prices

1.3.2 Basic competitive strategy

1.3.2.1 Cost leadership strategy

Cost leadership strategy is a strategy which the enterprises intend to become low-cost producers in the industry

Cost leadership strategy is all actions to provide the product or service with characteristics accepted by the customer with the lowest cost in relation to all the competitors

The purpose of the person who pursuing cost leadership strategy is better than the competitors, so that the cost to produce and supply any products or services that it can do lower than competitors, creating the barriers to entry for competitors, while creating loyalty and avoid discount demanding of the customer

1.3.2.2 Product differentiation strategy:

In this strategy, enterprises find opportunities to become "the unique" in the industry, according to general acknowledgement, of the buyers under certain aspects The strategy chooses one or several attributes of the products that the buyer assesses importance level and positioning itself as the only person who can meet that need And separate price will be commensurate with this unique Increased rates of person creases differentiation that higher than the price that the direct costs required, and

1.3.3 Integrated Strategy

1.3.3.1 Horizontal integration strategy:

This strategy is basically working with enterprises in the business industry to create a favorable environment of the industry, reducing losses due to competition and gain potential profit

1.3.3.2 The rear vertical integration strategy

This strategy is the cooperation among partners for the supply of input, output product consumption to maintain, control the stability of resources, cost and business environment to support the other strategy for effective enforcement

2 Strategy building process

Overall business strategy is outlined based on the vision statement of the enterprise, oriented for the entire operation of the enterprise and therefore it has the nature of the long-term strategy

Building business strategy is the first stage in the process of strategic management Strategy building process consists of five steps, as follows:

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2.1 Defining the strategic vision, mission and objectives

Strategic vision refers to the future business direction of the Company, "Where will

we go?"

- The market should be pursued

- The concentration in the future is technology, products and customers

- Type of management Board Company is trying to be created

The mission statement of most companies focuses on current business activities “who

we are and what we do?"

- The current products and services

- Customer demand is being served

- The business and technology capacity

This message represents the core values of the enterprise It expresses the important things, contributions of the enterprise in terms of business and life; it says the motto

of the enterprise, the location of that enterprise and the things that enterprise committed to compliance

A strategy should begin by identifying the expected results that the business strategy

is established to implement them The strategic targets will play a role in operating of the business for a number of years

It is necessary to distinguish between strategic objectives and mission, the vision of the enterprise In fact, many enterprises tend to confuse objectives with the mission

of the enterprise The mission of the enterprise indicates the purpose or reason for existence of the enterprise, thus, it often has nature of high generalization In contrast, strategic objectives need to be specifically ensured, quantified and having clear deadline

The selection of goals has a large impact on the enterprise An enterprise that selects high profit is a strategic objective will focus on serving the customer groups or market segments high profits by offering high value-added or cost performance fees

in excess of dominant In contrast, the growth target selection can lead enterprise to diversify the product line to attract customers in different market segments

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2.2 Analysis of the external environment

The operation environment research of the enterprise focuses on identifying and evaluating trends and events exceed the control ability of a Company Operation environment of the enterprise is divided into two categories: macro-environment and industrial environment

2.2.1 Macro environment

Using PEST model to analyze the micro environment, this is the factors that affect directly to the economic sectors, these elements are external factors of the enterprise and industry, thus, the industry must be suffered its effects as part of objective factors

- The economic factor: the main effects on economy include: inflation rate, banking

interest, the period of the economic cycle, the balance of payments, fiscal and monetary policy

- Socio-cultural factors: culture and society impact enterprise mainly in the

following aspects: population, intellectual standard, customs, practices and views on living standards, ethical standards, business community and women workers, changing consuming habits, etc Social factors often change slowly so it is difficult to identify

- Legal, government and politics factor: the influence of factors of law,

government and polity is larger and larger to activities of the enterprise Enterprise must comply with the regulations of the Labor Code, loans, safety, pricing, advertising; rules on competition; tax laws, etc as well as political stability of the country

- Technological factors: technological factors have a huge impact on enterprise as:

new technology detection, the technology transfer speed, technology products market etc When many advanced technologies were established, it will create opportunities and risks for all industries and enterprise

- The natural factor: Nature has main effects such as: environmental pollution, the

influence of geographical conditions, lack of energy, and waste of natural resources with growing demand for limited resources

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2.2.2 Industrial environment

Industry is a group of companies providing products or services that can be substituted closely together Rigorously replacement means that the products or services meet the customer needs are basically the same The industry is very different in economic characteristics, the competitive situations and profit collection prospects in future

To analyze the industrial environment of the enterprise, we applied the five force model of Michael E.Porter (1980) shown in the following diagram:

Figure 1: five force model of Michael E.Porter

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Finger 1: 5 force model of Michael E.Porter

- Potential competitors: This force includes the companies that are not competitive

in the industry, but they are able to do it if they want Identifying new competitors may enter the industry is an important thing because they can be factors that reduce the profits of the company because they put in new production capacity, with the desire to gain market share and the necessary resources

- The competitors in the industry: the second force in the five competitive forces

model of Porter is the degree of competition between companies within an industry Because enterprises in an industry are mutual dependence, the actions of a company usually associated with the actions of the other company's response The rivalry is intense when an enterprise is challenged by the actions of other enterprises or the enterprises are aware of an opportunity to improve its position in the market

- The buyer: Customer's credibility is the most valuable asset of the company

However, the dominant buyer can make profit of industry dropped by price squeeze

or require higher quality and provide more services

Potential Competitor

s

Competitors in industry

Competition among current enterprises in the

industry

Buyer Suppliers

Substitute products

Risk from new competitors

Negotiation ability of buyer

Threats from substitute products and services

Negotiation ability of supplier

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- The supplier: The supplier includes the following subjects: providing materials,

finance and labor Supplier has the advantage, they can exert tremendous pressure and create disadvantages for enterprise as they push price rising or reduce input quality requirements that they provide to the company

- Substitute products are products of the industries that serve customer needs

similar as to the analyzing industries, substitute products limits industry's profit potential by control the highest price rates for companies in the industry The existence of close substitute products represents a competitive threat

As a result, the analysis of external environmental factors will allow enterprises to clearly identify what are the opportunities that enterprises can take advantage of, and what are the challenges that enterprises must face Assess opportunities and challenges from the external environment allows enterprises to build clear business tasks and setting reasonable policies to achieve the goal

2.3 Analysis of the internal situation of the enterprise

To survive and develop, all organizations must carry out activities related to human resources, technical infrastructure, technology, finance, marketing and organizational structure In each field of activity, each organization has its strengths and weaknesses

Analysis and evaluation of internal environmental factors allows identifying the strengths and weaknesses of the enterprise Factor brings strengths for the enterprise

if it offers a competitive advantage for the enterprise (the fields that enterprise has potential to perform is better than existing and potential competitors)

Analysis of the internal environment is an important part of strategic management If not good analysis of the internal environment, not right reorganization of the strengths and weaknesses of the organization will not be able to set up the perfect strategy Conversely, if good analysis of the strengths and weaknesses, it will allow determining the future goals and strategic direction of the enterprise

2.4 Developing strategic plans

On the basis of the results of external and internal environment analysis and evaluation, identifying opportunities and threats, strengths and weaknesses of the

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companies will build the right and suitable strategic methods, match between the resources and the ability of the company to the needs and characteristics of the environment in which the company is active

2.5 Analysis of strategic selection

The Company must evaluate several options corresponding ability that can achieve the main goal The created strategic plan can be at different levels, allow existing in the best way, best suited to the rapidly changing of environment As a result, in the business process, enterprises must always identify its short-term and long-term goals Business strategy is the way to reach the goal

2.6 The strategic selections and analysis techniques

2.6.1 External factor evaluation matrix (EFE)

This matrix helps us to summarize and quantify the effects of environmental factors

to the enterprise Development of an EFE matrix consists of five steps:

- Make a list of the factors that play a decisive role in the success as identified in the macro environmental assessment process (between 10 and 20 factors)

- Classify importance level from 0.0 (not important) to 1.0 (very important) for each factor This classification shows the importance level of the factors for the success of the company's business Total of classification level must be equal to 1.0

- Classify from 1 to 4 for each determinant of success In which: 4 is a good response, 3 is above average, 2 is medium and 1 is weak

- Multiply the importance level of each variable to its classification (= steps 2 x step 3) to determine the importance score

- Add the total scores of importance for each variable to determine the total importance score for the organization

Regardless of the number of opportunities and threats in the matrix, the highest total importance score that a company can have is 4.0; the lowest is 1, 0 and average is 2.5

2.6.2 Internal Factor Evaluation (IFE)

This matrix has functions of summarizing and evaluating the important strengths and weaknesses of function business department IFE matrix is developed in five steps:

- Making a list of the factors are the key strengths and weaknesses (between 10 and

- Multiply the importance level of each factor with its classification (= steps 2 x step 3) to determine importance score

- Add the total scores of importance for each factor to determine the total importance score for the organization

Total highest score is 4.0; the lowest is 1.0; the average is 2.5 Total score is larger than 2.5 indicates the company is strong in internal, score is less than 2.5 shows the company is weak in internal

2.6.3 Competitive profile matrix

This matrix helps the company to identify key competitors, along with their advantages and disadvantages; the way to build competitive profile matrix similar to the way building External factor evaluation matrix

Evaluation

factors

Weight Enterprise Competitor 1 Competitor 2

Evaluation score

Total score

Evaluation score

Total score

Evaluation score

Total score

Comparing the total scores of the Company with major competitors in the industry to evaluate the competitiveness of the company, through that, identifying competitive advantages and weaknesses need to be overcome

2.6.4 SOWT matrix

SWOT analysis is a useful tool for understanding and decision-making in any situation for any business organization Stands for 4 words Strengths, Weaknesses, Opportunities and Threats, SWOT analysis provides a strategy analysis tool, review and evaluates the position and orientation of a company or of a business plan

2.6.5 Internal and external factor evaluation matrix

IE Matrix set the different SBU of an enterprise on 01 state with 09 cells This matrix

is based on two key aspects:

- Total importance scores of the IFE matrix represented on the X axis

- Total importance scores of the EFE matrix represented on the Y axis

2.6.6 QSPM Matrix

According Fred R.David, QSPM matrix uses input information from the IFE matrix, EFE matrix, competitive profile matrix, SWOT matrix to evaluate objectively the best alternative strategies Six Steps of development of a QSPM matrix:

- Lists external important opportunities / threats and internal strengths / weaknesses of the company

- Classify each internal and external important success factor This classification is the same as in the IFE matrix and EFE matrix

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- Identify substitute strategies that the company should consider to implement Combine strategies into separate groups if possible

- Determine attraction scores of each strategy (AS) Attraction scores are divided

as follows: No.1 is not attractive, No 2 is somewhat attractive, No 3 is quite attractive and No 4 is very attractive If success factors do not affect the selection of strategy do not score attraction for strategies in this strategic group

- Calculating total attraction score (TAS) is the result of multiplying classification scores (step 2) with attraction score (step 4) in each row

- Calculating total attraction score for each strategy It is the addition of total attraction score in the strategy column The higher scores indicates the more attractive strategies

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CHAPTER II: ANALYSIS OF INTERNAL AND BUSINESS ENVIRONMENT OF THE COMPANY

1 Introduction about the Company

1.1 Development history of the Company

COSEVCO Song Gianh Cement Company is accounting enterprise depending on JSC Mien Trung Corporation

Address: Tien Hoa Communist - Tuyen Hoa District, Quang Binh Province

COSEVCO Song Gianh Cement Company was established on the basis of the COSEVCO Song Gianh Cement firm approved the construction by the Prime Minister in accordance with Decision No 509/QD-TTg dated 24.04.2001 issued by Mien Trung Corporation (current is a Mien Trung corporation joint-stock Company)

as an investor with a capacity of 1.4 million tones / year with a total investment of more than 3200 billion with the most modern technology equipment line in the world provide by the Polysius firm of the German Federal

On 04/06/2006 Factory started trial production of first clinker, then try the manufacture of cement

To manage and put into production, on 06.25.2005 the Board of Directors of the Central Construction Corporation issued Decision No 234/QD-TCT-HDQT, founded COSEVCO Song Gianh Cement Company under the Corporation In August / 2006, the Management Board of Project of building Song Gianh cement plant has handed the Factory for COSEVCO Song Gianh Cement Company to put into operation

1.2 Mission

- Mining and processing of minerals for cement production

- Production and sales of cement and clinker, products from cement

- Freight business

- Business production of cement packages and performs other tasks when the Corporation assigns

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1.3 Organizational structure

- Total number of employees: 800 employees

- Organizational structure: 10 departments, 06 workshops (attached organizational chart)

- Management: CEO of Central Company manages directly all activities COSEVCO Song Gianh Cement Company, director of COSEVCO Song Gianh Cement Company operates only as a production manager; financial and business activities are managed by a financial deputy general manager and business deputy general manager of the Central Corporation Joint Stock Company

- The social and political organizations in the company include: The basis Organization of the Vietnamese Communist Party, trade unions, the Ho Chi Minh Communist Youth Union

1.4 Vision, mission, core values

- Vision: To build and develop COSEVCO Song Gianh Cement Company became a leading cement production enterprise in Vietnam with famous brands

- Mission: To provide the best cement products for the market, giving the highest profits to shareholders of the Joint stock Company Central Corporation, operating to create a good working environment and high income for employees

- Core Values: Modern technology, high quality products, stable, high-quality human resources, modern business culture

1.5 Situation and business results of the company in the recent years

* Business Production results:

Fixed assess liquidities 205.639 182.672 83.921

Profit before depreciation

– fixed asset -34.217 179.607 - 48.550

Implementation capacity

(ton) 1.274.713 1.138.760 1.304.647

(Source: Financial report: COSEVCO Song Gianh Cement Company)

Table 1–business operation of the Company

By 2011, the implementation capacity reached 93% of design capacity in 2010 due to damaged equipments thereby reducing the output of the company Production and business results of the Company were consecutive losses since the plant began to product; by 31/12/2011 accumulated loss was about 580 billion Revenue and profit over the years has not yet changed In 2010 accounting losses value was 3,065 million, actual losses was about 180,000 million, the reason for the difference between the actual loss and the accounting loss in 2010 was that all interests amount

of the Cosevco Song Gianh Cement Company were not recorded in the Company's cost but is recorded in the financial statements of the parent company – Mien Trung Corporation Consider the target "profit before depreciation of fixed assets" <0 shows that in recent years the company is in production stopping point Losses business result due to many reasons including: USD rate compared to the VND rate increased rapidly in 2009, 2010, 2011, leading increase financial costs for investment loans in U.S dollars, the price growth speed of input factors is half as much to 2 times the product price growth, loans interest rate from 2008 to the present is always at a high level in terms of sales volume has not reached 100% of design capacity This is a huge weakness for the Cosevco Song Gianh Cement Company

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2 Analysis of the external environment

2.1 Macro Environment:

2.1.1 Economic factors

a) The economic situation in Viet Nam and economy in Quang Binh province in

2011, 7 months in 2012 Development Strategy by 2020

The economic situation in the country:

Entering 2011, the first year of implementing the plan of socio-economic development five years 2011-2015, our country has fundamental advantages: a stable political situation; socio-economic recovery in 2010 after more than a year was effected by high inflation and global economic recession

However, after that, the potential difficulties and challenges in the world economy with debt problems, economic growth slowed Commodity prices, oil prices and the prices of some raw materials are mainly high and complicated Domestically, high inflation and interest rates put pressure on production and people's life

In response, the National Assembly and the Government has focused on leadership, direction regulally for industries, levels, local and economic groups and people throughout the country in the spirit of initiative, creativity, overcome difficulties, determined to make good targets Many important texts has been promptly issued by the Congress and the Government to implement the top priority is to curb inflation, stabilize the macro economy and ensure social security In which, the key is the National Assembly's Resolution No 59/2011/QH12, Resolution No 02/NQ-CP 09 December 01, 2011 and Resolution No 11/NQ-CP February 24, 2011 of the Government on solutions focused on limiting inflation, stabilize the macro economy and ensure social security

Gross domestic product (GDP) in 2011 increased by 5.89% compared to 2010, lower than the 6.78% growth rate in 2010, but in the difficult production conditions and the country focus priority on curbing inflation, stabilize the macro economy, the growth rate is quite high and reasonable Compared with the same period last year, gross domestic product quarter I increased 5.57%; quarter II increased 5.68%; quarter III increased 6.07% and the fourth quarter increased by 6.10% In 5.89% of the general

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GDP 8,4 8,17 8,48 6,18 6 6,78 5,89

CPI 6,8 5,1 7 21,67 5,32 9,19 18,58

(Source: annual Governmental report)

Table 2- Economic Growth situation

Demonstrated by the graph

Figure 2- GDP Growth rate and CPI index over years

Early in 2012, the world economic situation continued instability, the monetary tight policy, the Government's cuts in public investment to fight inflation have an effect on the economy, but the consequences of prolonged inflation since 2010 has made the production capacity, finance of enterprise system severely reduced, stagnated production, the purchasing power of the economy declined, the consumption of goods was difficult, especially is the construction materials industrial goods supplying for public investment to build infrastructure Under these circumstances, the Government issued Resolution No 13/2012/NQ-CP dated 10.05.2012 on a number of solutions to solve difficulties for business and marketing support, there have been effects on enterprises

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On the basis of the economy real situation assessment and forecast in the coming years, the Congress has built the Vietnam's economic development strategy period

2011 - 2020 with the following main points:

- To strive for growth of gross domestic product (GDP) on average 7-8% / year, GDP

in 2020 with prices is about 2.2 times compared to 2010; GDP per capita at real prices is about $ 3,000

- Ensuring the macro-economic stability, economic structural building of industry, agriculture and services modernly effectively The proportion of industry and services accounted for 85% of GDP The value of high-tech products and high-tech application products reached about 45% of GDP The value of industrial products made up about 40% of total industrial production value Agriculture is developing in

a modern, efficient, sustainable way, many products with high added value Economic restructuring associated with the labor restructuring; agricultural labor rate

is about 30 - 35% of social labor

- Synthetic productivity factor contributed growth about 35%; reduced energy consumption per GDP of 2.5 - 3% / year Saving is practiced in the use of all resources

- Infrastructure is relatively uniform, with a number of modern works Urbanization rate reached over 45% Number of communists gained new rural standard of 50% Out of which the Government has constructed the plan for the period of 2011-2015 as follows:

Table 3 : macro economic norms within the period of 2011-2015

2015/ Average within the period of 2011-2015

1 GDP growth rate % 6-6,5 6,5- 7

Then the Government is managing macro economic norms according to the

sustainable, stable orientation with high growth rate

In term of Economy of Quang Binh province

Economy of Quang Binh province in the period 2006 - 2011 increased by an average

of 10.7%, that is a period with the highest economic growth until now, economic restructuring and the internal structure of each economic sector continue to have a positive change: the proportion of agriculture, forestry, fisheries decrease, ascending proportion of industry - construction and service industries; increasing the proportion

of livestock in agriculture, agricultural production gradually add market and processing GDP per capita has grown significantly and gradually narrowed the gap with GDP per capita of the country

However, economic growth is not commensurate with the potential, economic restructuring conversion has been slow The ratio of the products, crops, livestock productivity, high quality, processed products is low; economic efficiency is generally low and not really solid GDP growth rate was pretty, but the economy is still small-scale, GDP per capita in 2011 was only 64.8% compared with the national average The value of industrial production period 2006-2011 increases annual average of 19.0% / year, which is the highest level ever Industry was initially confirmed as key industry with quite clear progress in the restructuring of production and innovation of modern technology A number of key industries have been

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established such as: manufacturing of construction materials, which focus on cement, bricks, beer production, wood processing etc Infrastructure of industrial zones - handicraft are invested quite synchronous Industrial production structure has conversed suitably, the state proportion of industry decreased, the proportion of non-state industrial increased, industrial facilities outside the state are encouraged to develop

Provincial People Commitee continues to focus drastically on solutions to remove difficulties for enterprises, boost production, and facilitate industrial projects on schedule

On the basis of the assessment results 2006-2011 and forecasts for the coming years, the Prime Minister has approved the master plan for socio-economic development of Quang Binh in Decision 952/QD-TTg 23/06 / 2011 with the following basic contents

Table 4 : Economic norms of Quang Binh within the period of 2011-2020

2011-2015

Period of 2016-2020

2 GDP per capita USD 1.400-1600 3.500-3.700

3 Density of industrial sector %/GDP 43 45

4 Export turnover Million

7 Annual growth rate of agricultural,

forestry and aquacultural production

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9 Growth rate of service production

value

% 12-12,5

10 The rate of communes to reach the

new rural standards

% 20

(Source: Decision no 952/QĐ-TTg dated 23/06/2011 of Prime Minister for

approving economic master plan of Quang Binh province by and socio-economic development plan within 5 years of 2011-2015 of Quang Binh provincial people’s committee)

Development orientation of building materials production industry Period 2010-2015

of Quang Binh province are: consolidate and improve the quality, efficiency of Song Gianh cement plants, Ang Son cement I, II ; accelerate progress to put in cement production plants: Van Hoa, Phong Hoa, Song Gianh Period 2 Striving to 2015, the cement capacity is 8 - 8.5 million tons / year Promote production, operation capacity

of refined kaolin processing plant Developing manufacture of all kinds of building materials, decoration and finishing materials, such as: advanced tile, building ceramic, ceramic art, ceramic tiles, ceramic tiles focus on manufacturing all kinds

of other advanced products to serve domestic and exports demand (Re: Report on Socio-Economic Development Plan 5-Year 2011-2015 Quang Binh Provincial People's Committee)

Via analysis it has shown that Quang Binh province gives priority for industrial and service development which strives to reach the high growth rate with 12-23%/year

b) The industrial production situation and cement production enterprises

The industrial production index in December/2011 increased 4.8% compared with the previous month and increased 7.5% compared to the same period in 2010 The industrial production index in 2011 increased by 6.8% over the previous year, particularly in the cement industry increased by 6.8%;

The consumption index of processing and manufacturing industry, in November,

2011 increased 15% compared to the same period last year, cement production increased by 3.9%

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Inventory index at the time of 01/12/2011 of the whole processing and manufactory industry accounts for 23% compared to the same period last year, in which the branches with rising stock indexes are: Manufacture of pottery ceramic refractory (except ceramics used in construction) increased by 96.8%; production of cement, lime, mortar increased by 64.1%;

The production index of entire industrial branch in July / 2012 increased 3.2% compared with the previous month and up 6.1% compared to the same period last year In the first seven months, the production index of entire industrial branch increased by 4.8% compared with the same period last year Some branches have low-increasing speed increased or decreased compared to the same period last year related to cement production as: production of building materials from clay, cement production decrease by 8%; producing concrete and products from cement decreased 11.9%; quarrying stones sand, gravel, clay and kaolin decreased by 22.9% The index of industrial production in some provinces and cities has large industrial scale

in seven months of 2012 compared with the same period last year, as follows: Bac Ninh increased 30%; Binh Duong increased by 8.2%; Dong Nai 7, 1%; Hai Phong by 6.4%; Ho Chi Minh City increased by 5.6%; Da Nang 5.1%; Hanoi 4.7%; Can Tho 2.3%; Hai Duong 1 , 1%; Vinh Phuc decrease 5.6%

Consumption indicators of the processing industry in first six months of the year increased 5.9% compared to the same period last year Concrete production and industries used cement products have increases or decreases consumption index as following: Concrete production and other cement and gypsum products, decreased 5.9%

Inventory index at the time of 01/7/2012 of the processing industry increased by 21% compared to the same period last year, the increasing level continued to decline compared to the previous month However, the cement industry still has increasing inventory index: 49.2%; In Quang Binh province, the index of industrial production

in July / 2012 increased 7.9% compared to the previous month and increased 20% compared to July 2011 Overall, industrial production in the area has no sign of recovery, consuming market had difficulties, high inventory product, the enterprise suffers pressure to pay loans interest of bank for a long time

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The cement production and consumption in 2011 and 7 months in 2012 has faced many difficulties, the price of coal has increased more than twice compared to 2008, the price of electricity, fuel and labor also increased, high credit interest rates period 2008-2011, an average of 18 to 20% / year leading increasing in production cost and cement product consuming marketing, while the price of cement in the market did not increase significantly about 15% , depending on the area and plant Besides, the reduction of public investment under Resolution 11/NQ-CP February 24, 2011 of the Government and the plummeted real estate market since September 2011 has made the demand for cement dramatically decreased

According to forecasts, in 2012 the cement consuming demand reaches 60 million tons (not increase compared with 2011), but the first 7 months of 2012, cement consumption only reached 31.9 million tonnes, equal 93.7% output of first 7 months

in 2011 and reached 53.2% of the plan in 2012 So, with the global economic turmoil, the Vietnamese economy was suffering the consequences of a long process

of inflation, low growth, the government is the application of monetary and fiscal policy solutions cautiously to prevent inflation back, now the cement producers are faced with a series of difficult challenges to survive and grow In short term, the total

of production capacity of the cement enterprises is very large excess compared to the consuming demand for the current and subsequent years Specifically:

Table 5: balance of capacity and cement consumption demand

Unit: Million Ton Target In 2009 In 2010 In 2011 Dự báo năm

2012 Production capacity 56 62,5 69,4 69,4 Consuming output 49,6 56 60 60

( Source: Report of Ministry of Industry and Trade)

Table 3 –Capacity balance and Cement consuming demand

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Thus in 2012 the production of excess cement is about 8 - 10 million tons, this is a major challenge for enterprises producing cement

With difficult situation of the economy in general and cement production enterprises

in particular, Resolutions 13/2012/NQ-CP dated 10/05/2012 of the Government on a number of measures to remove difficulties for business production and market assistance with fiscal policy to support for enterprises, the cautious and flexible monetary policy and adjusting some contents of public investment policies have created conditions for cement enterprises overcome financial difficulties, reduce production costs and product prices, freeing inventory production, recovering production and restructuring the company

On the basis of status assessment of Vietnam's cement industry and cement demand forecast for the development, the Prime Minister issued Decision No 1488/QD-TTG 29/08/2011 approving development plan of the cement industry for the period 2011

to 2020 and orientations to 2030

In addition, from January /2007, Vietnam officially became a member of the World Trade Organization (WTO) The important event also gives Vietnam both opportunities and challenges, for the cement production enterprises will have the opportunity which is: access to cheap capital source, employ good technical expertise and managers, easy access to new technology and having the opportunity to export cement products, but also have to face with stiff competition of Clinker resources, and products derived from imported cement of China, India, Thailand, etc

The Song Gianh Cement Company has capacity of 1.4 million tons / year, which is the largest power plant went into operation in Quang Binh province, generating large revenues for the budget and create jobs for local labor and is currently the leading industrial establishments in Quang Binh province Therefore, Resolution XIVth of Party Congress identified: concentrate on developing industry, creating driving force

of economic restructuring, in which development priority of the building materials manufacturing industry, concentrating on the cement production Thence, Quang Binh province has adopted many preferential policies for Song Gianh Cement

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Company as: favour the land rent and local investment fund with low interest rates, with encouragement policy for projects using Song Gianh’s products

c) The effect problems of interest and foreign exchange rates:

Deploying resolutions 13/2012/NQ-CP dated 10/05/2012 of the Government on a number of solutions to solve difficulties for business production and market support, the State Bank of Viet Nam has had flexible and cautious monetary market operation sollutions towards strictly controlled capital markets and support manufacturing enterprises, especially the tight input rate control of the commercial banks, to ensure stable and healthy acapital market for enterprises The solutions of the State Bank of Vietnam has gradually taken short-term capital mobilization rates of commercial banks from 20% / year to a maximum of 9% / year since 11/06/2012 (according to

No 19/2012/TT-NHNN dated 08.06.2012 of the state Bank of Vietnam)

On the basis of deposit capital mobilization interest rates of commercial banks tends

to reduce, the supply of deposits on the interbank market over time is relatively abundant at reasonable interest rates, banks have good liquidity status, so, the commercial banks have cut loans interest rates, providing stable capital with increasing interest for enterprises Working capital of the Song Gianh cement Company is mainly bank loans capital with large account outstanding scale, so the loan interest rate reduction would be a very good opportunity for the Company to reduce financing costs , reduce production costs and improve competitiveness in the market

For investment loan contract in U.S dollars was signed with commercial banks by sibor interest + bank fee adjusted every 6 months / time and do not exceed the agreeed maximum interest rate, steady SIBOR interest rate and the USD exchange rate against the stable VND, the Company is not affected by interest rate factors for long-term investment loans in USD

During the investment period and the first years in operation, the Song Gianh Cement Company has been effected by strong exchange rate shocks, first of all, that is the

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exchange rate shock from contract payment period for the equipment import due to the euro increase price against the dollar, the company has to increase the total payment amount of $ 6 million In period of 2010, price of USD increased than VND

of 12% had increased the investment loan of the Company to more than 12% / year excluding interest arising under the credit agreement From early 2012 the USD against USD was relatively stable, according to forecast exchange rates remained stable in the long run, this is a favorable condition to ensure company active in the process of planning the financial cost and calculate production costs On the other hand, the input costs of the Company are mainly purchased in the country so direct production costs of the Company are not subject to the impact of exchange rate factors However, this is also a detrimental factor to the Song Gianh Cement company in case of export of cement to be paid in U.S dollars

The assessment process of economic environment state shows that the instability of the world economy, the economic situation in Vietnam in general and Quang Binh economy in particular and the Government's policies have had a major impact for production and business activities of the Song Gianh cement Company, the company should have optimal strategies to overcome these challenges, take advantage of these opportunities to bring the company to sustainable development

2.1.2 Political and legal factors

Politically, Vietnam has determined to build and complete modern and synchronous market economy, creating an important premise to promote the process of economic restructuring, growth model transformation, macro economic stability The social and politic situation of the Vietnamese is stable, good security, the national objective programs such as hunger elimination and poverty reduction, new rural development, with important achievements which are highly appreciated in the world, these are important factors confirmed a safe environment to attract investors in the world In addition, the Viet Nam Government is actively applying policies to encourage investment and creating conditions for domestic manufacturers to increase product consumption and having more cooperation opportunities with foreign enterprises with available advantages and potentials for development

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Vietnam continues to implement the renovation, construction and law enforcement to ensure fair competition and transparency among enterprises of all economic sectors, ensuring the safety and sustainable development of economy Continuing to improve the the tax policy and system, price and law management mechanism on competition and monopoly control in the business, consumer protection, the policies of income, salary or wages Complete system of laws and policies on land to ensure the harmonized interests of the state, of person who using land, and create favorable conditions for the effective use of land resources for development Ensure business freedom right and equality among the economic components

With the target of developing the cement industry in the direction of industrialization, modernization and sustainability with advanced technology, ensure product quality standards, meet market demand, material and fuel savings and low energy consumption, natural landscape environmental protection, contribute to socio-economic development, ensure material for infrastructure construction development the country and oriented to export Prime Minister issued Decision No 1488/QD-TTG on 29/08/2011 approving the development plan of the cement industry for the period 2011 to 2020 and orientations towards 2030

Market economic mechanism has increasingly been finalized, legal systems continue

to be innovated and developed to ensure fair competition, transparency, fair competition is a great opportunity for Song Gianh Cement Company that has been transition from state ownership to stock ownership The cement industry has been planned by the Government to facilitate for Song Gianh Cement Company in building development strategy but the biggest challenge is the increasing competition among enterprises producing cement

2.1.3 Natural condition factors

Song Gianh Cement Company has very favorable natural conditions for the products production and consumption activities The main raw materials such as limestone, clay, iron ore, stone, silicon are supplied from mines with large reserves, stable quality, near transport distance and Quang Binh Provincial People's Committee licensed for company in mining to serve the company's cement production and sales

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in the market, especially limestone raw material components account for over 90% of raw materials for cement production that mined near the factory, from limestone exploition mines is put directly into the production, this is a huge advantage of lower raw material prices for Song Gianh Cement Company

Song Gianh cement factory is located in Tien Hoa commune, Tuyen Hoa District, Quang Binh province has favorable geographical position on traffic creating condition to transport inputs materials and outputs product consumption The factory

is located on the national highway route 12, far from the international border Cha lo

130 km, from the center of Kham muon provinces of 270 km (far from Thailand a river), linking the northeastern provinces of Thailand via the Huu Nghi Bridge; far from national Highway 1A of 17 km, Le Son train station 3.5 km, close to the Gianh River, from Hon La and Vung Ang port about 45 km Thus, we will have the advantage of gypsum transportation costs from Laos to the factory, using the means

of transport by barge with low cost to provide the ship with 1,000 tons of coal along Gianh River, at the same time, it can use a variety of means associated waterways, road and rail to transport products to consumers, in which the wharf at the plant on Gianh River with the 1000 tons ship, Hon La port, Vung Ang port with ship 15,000 tons In terms of export, the company can export products to Laos, Thailand by road

at a closer distance than other plants

On the other hand, most of the cement plant with large capacity was located from Quang Binh to the northern provinces, therefore, for the large consuming markets in the southern provinces, Song Gianh Cement Company will have the lowest shipping costs of the cement plants with a capacity of 1 million tons But this also shows that the Company will have the transportation distance of coal from Quang Ninh province longer than most other plants

2.1.4 The socio-cultural factors

According to socio-economic development strategy orientation of Vietnam 2011 -

2020, the Government will increase the State's investment in the socio-cultural sector, and to promote mobilization of the social resources for socio-cultural development Completing policy system, incorporating the goals and economic policies with the objectives, social policies; made good progress, social justice in

Comprehensive and synchronous development of cultural fields, both promoting good values of the nation and absorbing the essence of human culture, handle well the relationship between economy and culture to culture really is the spiritual foundation of society, is a motivation of social-economic development and international integration

Improving the quality of systems of information, the media, internet, publishing Ensure the right to information and access opportunities to information of the people, especially in remote areas and ethnic minority areas

With the strategic and policies direction on the state's cultural and rapid urbanization speed combined with the new rural construction program will create construction demand for works and facilities in the field of cultural education as schools, cultural buildings, infrastructure in general With the goal of social policy is to raise people's income will also generate large demand for housing, this is a good opportunity to cement producers to increase production and product consumption Quality of information systems is improved to facilitate the enterprise to give information’s enterprise, information on products to consumers, even in remote areas

However, the society is development, environmental protection requirements is more and more stringent, this is a challenge for the Company

2.1.5 Technological factors

Step into the 21st century, we can say the world's cement production technology reached its peak, many new inventions are applied, many devices, new techniques are modernized Vietnam's cement industry has acquired and applied the achievements of the world in cement industry Until now, there are many new technologies,

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techniques, modern equipment and went into production with high economic and technical efficiency We can see the effect by applying new technology, modern equipment shown on each stage of the production line:

- The processing of raw materials and uniform distribution: using rounded stock to replace long stock, using new generation vertical roller grinding device to grind coal and materials

- Two pedestals burning phase replacing three pedestals furnace helps to reduce the consumption of refractory materials, equipment weight and cost of construction, installation, and maintenance; using 5-floors heat exchanger tower, high-performance Calcinner system

- Clinker cooling phase: using clinker devices with the new generation roller

- Cement Grinding Technology: use roller grinder 2 +2, 3 +3, Horomill grinder to grind cement allowing to reduce to 20 - 30% energy consumption compared with ball grinder (Horomill grinder consumes 24kWh/tan cement, roller grinder consumes

20kWh/tan cement) and improve the fineness of cement up to 3600cm2 / g

- Packing phase: using silo containing two barrel cement with fully automatic

bagging machine with high productivity, ensures cement weight accuracy less than 0.25kg/ pack, using cement pack output device, high capacity clinker output with accuracy test device

* It can give substantial benefits due to applying of technology, new techniques, modern equipments including:

- Power consumption reduced to 85 - 90kWh/ton cement

- The cement quality is significantly improved, the free lime content in the clinker is less than 1%, clinker reached grade at PC50, sometimes reached near PC 60;

- The ecological environment is improved due to dust concentration at the release of the chimney is low, reaching under 30mg/Nm3

The application of new technology, modern techniques over time in a number of cement plants has brought high-tech economic efficiency and turn the technology standard of the Vietnamese cement industry into new development step

Song Gianh cement plant is invested according to the newest manufacturing technology, meeting the standards of the most modern cement production technology

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of the world, here is an opportunity for Song Gianh Cement Company to cooperate with other agencies for research improvement, technological innovation, product quality improvement and production efficiency

2.2 Industrial Environment:

2.2.1 Suppliers

For the operation of the cement plant, the necessary conditions is to have enough input suppliers to meet the requirements of production and product consumption The Song Gianh company has built a stable input factors supplying channel, the main suppliers of inputs including: main raw material suppliers, suppliers of fuel and energy, suppliers of auxiliary and additives materials, suppliers of capital and financial services, telecommunications, suppliers of transport service, repair and spare parts Specifically:

- For limestone materials: The Company is licensed by the Ministry of natural resources to mine limestone that is very close to the factory, having enough qualified and quality guarantee for the plant capacity of 3 million tons / year, operation of 30 years, the limestone mines of the company are assigned to qualified mining contractors to ensure timely supply source of limestone for cement production Currently, the mining contractor provides limestone for Song Gianh Cement Company is Construction and materials production company COSEVCO I, an associated enterprise by JSC Central Corporation owns 40% of the charter capital, so there is very close cooperation in the process of providing limestone for cement production:

- Clay material: Clay material of the Company is licenced by Quang Binh provincial People's Committee to mine clay at the Mai Hoa commune, Tuyen Hoa district, Quang Binh province with large quality and reserves, ensure to adequate supply for the operation of the plant with maximum capacity at minimum time of 30 years, clay materials also assigned to contractors to mine and ensure timely supplying for production demand, the current Company that supplying clay is Development and Investment Joint Stock Company COSEVCO that is an enterprise with strong

- Water supply: water source used for the production factory is exploited directly from streams in Tien Hoa commune, Tuyen Hoa district, the location is near the plant

by pipeline to the production water supply system of the factory

- For suppliers, fuel and energy: Fuel and energy are mainly coal, oil, and electricity Fuel and energy resources of the Company made by major suppliers through long-term cooperation contract that is the Vietnam Coal and Mineral Corporation saling through branches in Quang Binh, Quang Binh Petroleum Company and Electric Company 3, the suppliers of fuel and energy are the main enterprises of the state, the state is tasked to ensure energy production so the output will meet for the needs of the Song Gianh Cement Company However, materials and energy prices change frequently in the direction of increase will be a big challenge for the company

- Supplier of capital and financial services, telecommunications: Song Gianh Cement Factory is co-financed by Vietinbank, BIDV, Agribank and VDB to invest in building projects with a total investment rate of 3.000 billion, when going to operation, BIDV has supplied working capital with credit limit of 280 billion and provides the best services to meet the financial activities of the Company Besides, the Company is guaranteed by Viettel, Mobiphone, Vinaphone for information activities of the Company

- Other inputs factors such as additives, packages, transportation services, repair services and spare parts provided by the qualified experience and reputation suppliers

Thus, the Song Gianh Cement Company has built cooperation relationships with a system of suppliers to ensure the inputs factors served for production and