Analysis of strategic definition and enterprise’s administration in Viet–Lao company and recommend solutions to raise quality of business strategy definition

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT Analysis of strategic definition and enterprise’s administration in Viet–Lao company

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT

Analysis of strategic definition and enterprise’s

administration in Viet–Lao company and recommend solutions

to raise quality of business strategy definition

TABLE OF CONTENT Page

I / Definition, role and level of business strategy 6

1 Definition of business strategy and strategic administration 6

2 The role of business strategy for enterprise’s development 6

II / Construct business strategy of enterprise 7

1 Requirements and basis in constructing business strategy 7

2 Viewpoints of business strategy construction 8

Chapter II: Assess reality of defining strategy and enterprise

administration in Viet–Lao Ltd Company

15

1 Formation and development of Viet–Lao Ltd Company 15

2 Basic factors impact on strategic construction in Viet–Lao Ltd Company 16

II Analysis of strategic task and enterprise’s administration in Viet–

Lao Ltd Company

21

2 Target definition 33

III Reality of strategic administration machine 36

IV Reality of experts of strategic construction 37

V Achieved results and limitations in defining strategy and enterprise’s administration in Viet–Lao Ltd Company

1 Improve the process to build up business strategy 43

III Limitations of the process and future study 59

1

LIST OF ABBREVIATIONS

LIST OF TABLES

1 Table 2.1 Organizational diagram of Viet–Lao Ltd

3 Table 2.3 Machine for exploiting, processing raw plaster 19

4 Table 2.4 Financial data of Viet–Lao Ltd Company 20

5 Table 2.5 Opportunities and threatens of the company

within 2010 – 2015

27

6 Table 2.6 Financial norms of Viet–Lao Ltd Company 29

7 Table 2.7 Competitive profile matrix 32

8 Table 2.8 Strengths and weaknesses of Viet–Lao Ltd

10 Table 3.1 Process to construct business strategy 43

11 Table 3.2 Synthesis of external factors evaluation (EFE) 45

12 Table 3.3 Internal factor evaluation (IFE) 46

13 Table 3.4 BCG matrix of Viet–Lao Ltd Company 47

14 Table 3.5 MC Kinsey matrix of Viet–Lao Ltd Company 49

17 Table 3.8 SWOT matrix of Viet–Lao Ltd Company 51

19 Table 3.10 Some annual targets of Viet–Lao Ltd Company

within 2010 – 2015

57

3

PREFACE

1 Reason for topic choice

Since 1986, the Party and the State have got big policy to transfer subsidized economy into market economy according to socialism orientation, reduce protectionism policy and give many preferential treatments for individuals and organizations doing business and developing self-control economy

-Apart from innovation of domestic economic policy together with worldwide fast development of informatics technology and globalization…,Vietnamese economy has many positive changes However, Vietnamese economy in general and Vietnamese enterprises in particular just make use of advantage from 3 factors which are favorable business ground, material and cheap labor price; apply incomprehensively administration and management science in business administration

Vietnamese economy has deeply integrated into global economy via unilateral, multilateral treaties, commercial organizations such as AFTA, WTO, therefore, Vietnamese enterprises must not only compete with each other within domestic and foreign markets but also bear violent competition from worldwide enterprises with long term experiences of finance, personnel administration as well as defining long term development strategy To exist and develop in such environment, enterprises must apply administration and management sciences into business production which

is also an urgent requirement of Vietnamese enterprises

Via learning and studying global executive master of business administration program organized by Griggs University of the US and ETC of Ha Noi National University; via collecting information and data of business activities of Viet–Lao

Co Ltd., combining with knowledge of administration and management science that the program has provided, our group has realized that activities of the company recently have been rather good, however defining right long and medium term orientation with prediction of business environment… is the necessary thing to do

in current time With achieved knowledge via the program, via realistic analysis of business production of Viet–Lao Co Ltd., our Group has studied and chosen the

topic “analysis of strategic definition and enterprise’s administration in Viet–Lao

company and recommend solutions to raise quality of business strategy definition” to prepare capstone project report of Group 8

2 Study purposes

Applying common theory basis on defining strategy and business strategy we can analyze and assess reality of strategic definition and enterprise’s administration in Viet–Lao Co Ltd., within the period of 2007 until 6/2010 Based on common theory

of strategic definition, enterprise’s administration and appliance of such theories

into Viet–Lao Co Ltd., Group 8 will go to study and suggest scientific solutions to

apply into the company in defining business strategy within the period of 2010 –2015; at the same time, we can also draw experienced lessons for ourselves

3 Study method

3.1 Data collection

Collect primary data: directly work in the company; interview leader, main cadres; implement market survey such as investigation slip, realistic visiting of customers, and competitive opponents of the company

Collect secondary data: from reports, materials of the company, professional agencies; statistical directory, information on papers, TV, internet, books and related materials…

3.2 Comparison and synthesis

Compare a norm with the basis (planning norm, previous year, sector, .) for business data, common parameters of the market, average norms, other compared norms; comparison condition is that data must be suitable to space, time, economic content, measurable units, estimation method, scale and business condition

3.3 Statistical method by tables

We can use synthesis data via statistical tables to find out trend or common feature

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of directly analyzed factors

3.4 Appliance of models: PESTLE, SWOT, BCG, Five forces Porter, IFE,

4 Study scope

Analyze the task of strategic definition and enterprise administration in Viet–Lao company last time and give some recommendations to raise quality of business strategy definition within 2010 – 2015

Capstone Project report of Group 8 has three chapters:

Chapter I: Theory basis of business strategy and business strategy defining of enterprise

Chapter II: Assess reality of business strategy defining in Viet–Lao Co., Ltd.,

Chapter III: Some recommendations to raise quality of business strategy defining

in Viet–Lao Co Ltd.,

Chapter I: Theory basis of business strategy and business strategy defining of enterprise

I Business strategy and strategic levels

1 Definitions

There are many different definitions of business strategy and strategic

administration, but the current popular definition is that: “business strategy is the total long term targets, big policies and solutions of business and production, finance and human factor to make enterprise’s business develop to a higher quality status”

"Business strategy is a kind of commitment and action that a company uses to get a competitive advantage by exploiting essential capacity within a defined market "

"Strategic administration is the process to study present and future environments as well as define organizational targets, find out, implement and check the implementation of decisions to reach such targets in present and future environment; strategic administration is supposed to be an art as well as a science"

2 The role of business strategy for enterprise’s development

Firstly, the main function of business strategy is to create a consistent orientation for long and short term plans in the enterprise; in other words, business strategy can help enterprise to realize clearly purposes and orientations for all business activities Secondly, together with the fast change and development of business environment, opportunities and threatens will appear within the market; then business strategy can help enterprise to grasp and make use of business opportunities, find out adjusted solutions to overcome threatens

Thirdly, business strategy can raise effect of using resources of enterprise, increase competitive position, and ensure constant and sustainable development of the enterprise in long term

3.1 Strategy in enterprise level

This strategy will define operational sector of enterprise, position of enterprise in business environment and the role of each business sector in enterprise

3.2 Strategy in unit level

It will define position of business sector in the enterprise, position of sector in environment and define how to compete effectively in each sector

3.3 Strategy in functional level

It is the strategy to support implementation of strategy in unit level and in enterprise level, including the following strategies: research and development, production, marketing, personnel, finance

Each enterprise should have three distinctive strategy levels; however implementation of strategy must be comprehensive in three levels; at the same time, due to strategic orientation then strategy in higher level will play more important role

II Construct business strategy of enterprise

1 Requirements and basis to construct business strategy

- Enterprise must define target market; then define safe area in business and business scope and risky level

- Define clearly core targets and basic conditions to implement such targets

- Grasp information and build up information system of market, customers, providers and competitive opponents

- Define standby strategies to use in urgent cases to avoid passiveness to confuse system when strategic implementing gets stuck

- Grasp opportunities with determination

1.2 Basis

Important basis for constructing business strategies including:

- Customers: understand who is customer, what customer wants?

- Competitive opponents: strengths, weaknesses of opponents ,…

- Enterprise: strengths, weaknesses, competitive advantage of enterprise

Economic experts suppose that enterprise must base on these three strategies to construct business strategy for itself

2 Viewpoint of business strategy construction

- Business strategy construction must be based on exploiting essential factors of enterprise to get success ;

- Construct business strategy based on promoting advantages and comparing advantages;

- Business strategy is constructed based on exploiting new factors and creative factors ;

- Construct business strategy to exploit surrounding factors and essential factors

3 Process for business strategy construction

3.1 Define vision, mission and strategic targets

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Leader of enterprise must define vision, mission and strategic targets of enterprise

in long term then implement activities to analyze business environment, give strategic options and choose strategies to reach long term targets

3.2 Study and predict external environment of enterprise

Analysis of external environment can realize opportunities and threatens for business activities of enterprise

3.2.1 Macro environment (5 factors)

- Economic factors:

Economic growth rate can arise new demand for economic development; inflate rate can impact on interest, investment interest rate; unemployment rate, recruitment and dismissal; exchange rate impact on banking interest, financial policy, price and payment scale

- Political factor (this group of factor can play important role):

Stability of authority; regulations of tax, fees, charges; regulation of recruitment and dismissal of workers; regulation of environmental safety and protection

3.2.2 Micro environment (operational environment)

Operational environment including factors of sector and external factors for enterprise, deciding levels and competitive quality within such sector; there are 5 basic factors (5 market forces): customers; providers; replaced products; current competitive opponents and potential competitive opponents; enterprise must

analyze such factors to realize opportunities and threatens that enterprise must cope with

3.3 Study and predict internal factors of enterprise

This is to analyze reality and internal force of enterprise’s resources to realize strengths and weaknesses then to have methods to promote strengths, adjust weaknesses; the analysis focuses on the following problems:

3.3.1 Analyze enterprise’s resources

- Human resource: leader machine; qualification, morality and quality of cadres and employees; adaptable capacity in case of changes ;

- Financial sources: focus on the problems such as capital allocation, effect of using capital, financial norms ;

- Technological resource: factory; store, port, road, transportation media, equipments and machines ;

- Marketing analysis: this is an important content in internal analysis which allows assessing capacity to meet market’s demand of enterprise, focusing on the following problems: product type, product quality, market share, price, customers’ trust…

3.3.2 Analysis of organizational capacity of enterprise

Assessment of organizational task of enterprise is to answer two questions: is enterprise’s organization suitable to requirements of business strategy? Can it have enough force to implement given strategies? The content of this analysis is:

- Reality of organizational structure of enterprise including: organizational system and operational regulation;

- Adaptable capacity of organization with market’s changes and business condition

3.3.3 Analysis of competitiveness of enterprise

Competitiveness of enterprise is the capacity of enterprise to maintain and improve its own within the market sustainable

Factors impact on competitiveness of enterprise:

- Profitability of invested capital;

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- Labor productivity;

- Product price and capacity to lower product price of enterprise;

- Business experiences within the market;

- Flexibility, sensitivity of leaders in enterprise;

- Quality of product and service

- Working environment within the enterprise

3.4 Construct strategic options

Enterprise can have many ways to analyze and find out strategic options based on realistic business condition; however, the usage of scientific method such as appliance of matrix, models…to analyze will find out close and logical strategic options

3.5 Analysis and choice of strategic options

Based on strategic options, we can study and select strategic options; we can choose the better options within constructed options then choose the best option

After analyzing and choosing strategies, leading board will assess strategies for owners to make strategic decisions to concretize chosen strategies to be the basis for implementing the next steps of strategy

Strategic decision is the intelligence products of leader which must be based on the following grounds:

- Decision to follow common targets, long term targets of the system;

- Decision of the system must follow the law and social rules;

- Decision must be based on available resources of the system or ensure mobilization;

- Timely decision-making

3.6 Strategy implementation

This is the important phase to turn defined strategies into concrete actions

Strategy implementation can deeply impact on the whole enterprise then impact on divisions and functional offices; with regard to implementing strategy, individual

skills are very important; implementing strategies can include strategic development such as supporting budget, cultural programs of the company, connect with system

of encouraging and complimenting cadres and employees

Strategy implementation can succeed or fail which depends not only on strategic quality but also depends on capacity to promote cadres and employees of administrators

3.7 Assess and check strategic implementation

In the process of strategic implementation, we must organize to consider such strategies to be done as expected? There are many reasons which make a certain strategy not reach given targets Such reasons are due to the changes of environmental background or not attract human resource Then we must grasp system of feedback information and methods to check and monitor implementation

4 Models for strategic analysis

4.1 Models to analyze internal and external environment of the enterprise

4.1.2 The five-force model of the market

- Potential opponents ( threatens of new competitive opponents );

- Competitors within the sector;

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- O: opportunities;

- T: threatens

4.2 Model to define operational list of the enterprise

BCG Matrix diagram of increased market share: this is rather classical and simple matrix, which is suitable to define position of enterprise, relation between market share of enterprise and product growth rate;

MC Kensey matrix, I E F: set up table of assessment (or marking) for external and internal factors of the enterprise and compare with competitive opponents, sector’s mean…; define attraction level of business sector, competitiveness of enterprise to define list

4.3 Model of general strategy

4.3.1 Model of growth strategy

Target of growth strategy is to increase business scale, revenue, market share then increase profit in business and production; growth strategy can be done according to the following methods:

- Direct expansion;

- Diversification of business activities;

- Expansion

4.3.2 Stable strategy

Target of stable strategy is to ensure stability and existence as well as keep position

of enterprise within the market by:

- Centered and cautious investment;

- Maintain existing product list and go to deep specialization, raise prestige and expand scale

4.3.3 Strategy to narrow down or withdraw

Target of this strategy is to maintain force and focus strengths into main products to stand tall within the market

To do this, enterprise must find out strategic methods such as: reduce activities or reduce product list then reduce investment scale to maintain existing stability Besides, enterprise can implement the following strategy: studying to transfer business orientation, find out replaced products and markets

Solution in force majored is to go into liquidation or bankruptcy

4.3.4 Mixed strategy

Each organization and each enterprise often operates with many targets; then in each period it can implement some certain targets with relative independence then

we must combine above strategies to promote advantages and limit risks

4.4 Model of competitive strategy

Model of competitive strategy of Porter is defined by two basic factors which are competitive scope and competitive advantage of products; using the matrix of competitive images we can compare between company with main competitive opponents within the sector which is based on influences on competitive capacity of the company within the sector Then administrators will realize strengths and weaknesses of the company compared to competitive opponents, define competitive

advantage for company and adjusted limitations: Cost-oriented strategy, differential strategy and centre strategy

4.5 Model of functional strategy

After defining general strategy, enterprise will define functional strategies to implement general strategies including: Financial strategy; Personnel strategy; Marketing strategy; Technological strategy; Production strategy; Investment strategy;…

Common theory basis mentioned in this chapter will be the basis for analysis and evaluation of strategy construction reality of the company in chapter 2 and chapter 3

of the capstone project report

1 Formation, development of Viet–Lao Co., Ltd.,

In 2004 company was established under the joint venture form with full name of Viet–Lao joint venture company; in Viet Nam (Ha Tinh Minerals and Trading Corporation) occupies 85% stocks and Laos occupies 15%; Company signs contract

to exploit and construct factory of processing plaster with Laos Government; company is issued plaster mine with reserves of more than 22 million tons with exploited ground area of 700 ha; contract validity of 30 years with twice extension for each ten years;

In 2005 the company officially went to exploit; the first exploiting quantity reaches 50,000 tons raw ore/year Company has implemented activities to penetrate into consumption market in Laos and Viet Nam but still got many difficulties;

In 2006 the products are accepted by customers in Laos and Viet Nam; production quantity reaches 100,000 tons/year– sale quantity of 50,000 tons/year; company also opens representative office in Viet Nam;

In 2007 Laos suggested and Vietnamese investors accepted to buy stocks that Laos holds then company is transferred into Viet–Lao Ltd Company with 100% foreign-invested capital whose investor is Ha Tinh Minerals and Trading Corporation;

In 2007 the company invested in plaster grinding factory with invested capital of 1 million USD until 6/2008 the factory officially went to production and launched products to the market;

In 2009 quantity of exploited raw plaster reached 250,000 tons/year, consumption quantity reached 220,000 tons/year, mainly consumption in Viet Nam;

At the beginning of the year 2010, it has invested in production line of handicraft plaster in Laos

Information of Viet–Lao company:

Abbreviated name : VILACO

Address: Tung, Bunghoana, Xephangxay district, Khammuone province, Laos Representative office in Viet Nam : No 2 Vũ Quang, Ha Tinh city, Ha Tinh Pro., Tel/Fax : (00856)51.210.129

Website :www.thachcaovn.com.vn

2 Basic factors impact on business strategy construction in Viet–Lao Co., Ltd.,

2.1 Influence from business strategy of investor in Viet Nam – Ha Tinh Minerals and trading Corporation

2.1.1 The role of company in corporation’s development

Ha Tinh Minerals and Trading Corporation is a State-owned enterprise established according to Decision of Vietnamese Prime Minister which is directly under management of Ha Tinh Provincial people’s Committee; the corporation operates with many sectors including exploiting, processing and trading minerals with 28 member units;

Viet Nam – Laos Ltd Company is defined as one of important unit to develop corporation in long term; corporation can create all conditions in term of policies, human resource, and financial resource to support company in all activities;

Company has independent accounting with corporation which is suitable to regulations of Laos and Resolution promulgated by Corporation

2.1.2 Influence from business strategy of corporation

This is the unique unit of the corporation operating abroad then corporation will let the company to construct private development strategy which is suitable to the distinction of the unit and the Law of Laos and Viet Nam as well as regulations of international business;

Business strategy in long and medium term is established by the company and agreed and approved by company

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2.2 Products feature of the company

Currently, company provides products and services including: raw gypsum, plaster powder, gypsum ceiling and transportation; each product with technical quality and consumption market can impact on business strategy defining of the enterprise, as follows:

2.2.1 Raw gypsum (gypsum rock)

Raw gypsum is exploited from natural mines which are mainly used for cement production; this is also the main products to create main income for the company in recent time and within five coming years Currently, products are consumed by cement factories in Laos and Viet Nam; the products can prove its own quality and occupies 40% market share in Laos and 25% in Vietnamese market

2.2.2 Plaster powder

Products are used to be the patterns in producing porcelain and pottery, produce plaster partition, ceiling…the product is consumed in Laos and Viet Nam markets; company is focusing on raising product quality to meet customers’ demand

2.2.3 Gypsum ceiling

This is the new product of the company including gypsum ceiling and partition; currently the company is trying to produce handicraft plaster from Thailand technology and testing in the markets of Laos and Viet Nam

2.2.4 Transportation business

Company has trucks to transport commodities; however due to small quantity of trucks then it just focuses on transporting plaster of company to consume in Laos and Viet Nam

2.3 Features of organizational structure

Organizational structure of the company includes: member council, monitoring board, director board and divisions, offices

Member council includes 3 members, Chairman of member council is General Director of the Corporation (investor); Director of the company is one of three members;

Monitoring board: including 3 members, head of monitoring board is a managing cadre of the corporation (investor);

Director board: including one managing director and one deputy business director; Functional offices: accounting office; business office; office of administration and organization; exploiting team; transportation team; mechanic team; managing division of production factory and representative office in Viet nam

Table 2.1: Organizational diagram of Viet–Lao Ltd Company

2.4 Features of labors and salary

Total cadres of company include 105 people including 55 Vietnamese labors and

50 Laos labors;

Member council

Director

Business deputy director

Monitoring board

e

mech anic grou

p

exploiti

ng group

transpor tation group

powd

er facto

ry

Repr esent ative offic

e in Viet Nam

19

Table 2.2: Current human resource of Viet–Lao Ltd Company

(Source: provided by Viet–Lao Ltd Company)

Salary and current allowances:

Average salary of labors (million dong/person/month) has increased recently (in 2006: 1,7 million dong; in 2007:3,0 million dong; in 2008: 3,8 million dong; in 2009: 4,5 million dong); company also gives many allowances such as eating, traveling, social insurance…and implement policy of medical insurance, social insurance,… as defined by Viet Nam and Laos law Besides, company also has many reward policies by money or other forms such as tourism, reward accumulation at the end of the year ,…

2.5 Feature of machines, equipments and technological line

2.5.1 Machine for exploiting, processing raw plaster

Table 2.3: Machine for exploiting, processing raw plaster

9 Power station 1

10 Grinding station with capacity of 500,000 tons/year 1

(Source: prepared by Viet-Lao Ltd Company)

2.5.2 Machine and equipments to grind plaster powder

Equipments and machines are comprehensively imported from China with European technology, which automatically operate and meet production demand and customers’ requirements; capacity to produce plaster powder is 30,000 tons/product/year (investment level in period I is 1 million USD)

2.5.3 Machine and equipments to produce plaster planks

Equipments and machines are comprehensively equipped from Vietnamese producers, production technology is transferred from Thailand to produce high quality products

2.5.4 Truck for delivering commodities and market task

Currently, new group of truck has two tractors with tonnage of 80 tons which can meet a small demand of commodity delivery of the company; company has two 4-seat cars and one 7-seat car for market task

(Source: provided by Viet–Lao Ltd Company)

II Reality of business strategy construction in the company

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From the first year of operation (2004) the company has built up long term business plan (from 2004 to 2010), however, to be suitable to new situation, in 2007 company has built up short term plan (1 year) and long term plan (3 years, 5 years) Viet–Lao Ltd Company has no official documents to define clearly development strategy of the company and analyze the task of business strategy construction; long term plan is considered as business strategy of the company

The process of business strategy construction (long term plan) of the company is divided into three following steps:

Step 1: Analyze business environment;

Step 2: Define targets;

Step 3: Find out solutions

1 Analysis of business environment

Company has legal status, main office then activities to exploit, produce in Laos must follow law and regulations of Laos which bears impact of business environment in Laos; However, company has Vietnamese investor under the regulation of Vietnamese Law, besides products and services of company produced

in Laos are mainly consumed in Viet Nam which must bear impacts of business environment in Viet Nam; then analysis of business environment can mention both

of Viet Nam and Laos, especially macro environment

1.1 Analysis of business environment within 2007 - 2010

1.1.1 Macro environment

- Economic environment

Economy of Laos develops 5%/year on average in this current period, however, economy of Laos is an outdated agricultural and service economy; consuming products, tools, instruments, production materials must be imported; infrastructure system for economic development in Laos has been invested by Laos Government but not really comprehensive; current transportation system depends on road transportation with high cost

Vietnamese economy in this period is strongly impacted from global economic recession but can maintain rather high growth rate from 5-6%/year; infrastructure system for economic development is invested rather comprehensively; budget over-expenditure, inflate, foreign debt are controlled within safety limit which impact on growth positively Economic internal accumulation has reached above 15% GDP; density of GDP of industry increases 20%;…

Economic relation between Viet Nam and Laos in recent time is very good; two nations have created good conditions for enterprises to invest in business activities within territories; Viet Nam is one of the biggest investors in Laos

- Legal and political environment

Politics of Viet Nam and Laos are very stable in recent time; together with improved legal system, it is the good condition for enterprises to do business activities; two nations have many policies to attract foreign investment comprehensively which is suitable to new situation

- Social and cultural environment

Mental and spiritual life of people in Laos and Viet Nam are more and more raised; educational system is strongly invested then people’s qualification is raised; population is increased then people’s number in working age is high

- Natural environment

Laos is the nation with many high value minerals; however in recent time both Viet Nam and Laos have bad influences from floods, storm which badly impacts on business activities

- Technological and scientific environment

Science and technology of exploiting and processing is more and more developed, however in recent time Viet Nam and Laos have not really followed and grasped such development, especially in the field of production technology of mineral deep processing

1.1.2 Sector environment

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- Competitive opponents

The sector of exploiting and processing plaster within Asia has three big reserves of plaster which are China, Laos and Thailand plaster from Laos and Thailand has equivalent quality (China has higher quality plaster); within Vietnamese market (big market of the company) there are many strong opponents, however there are two direct opponents with equivalent conditions such as having plaster mine in Laos, join in the market for a long time, big market share in Viet Nam…which are IV Mineral Development company and Hue Cement Plaster Joint Stock company; in recent time, Hue Cement Plaster Joint Stock company occupies highest market share in Viet Nam with nearly 40%, the next is Viet Nam – Laos Ltd company with 25% market share

Products of plaster powder and plaster plank of the company have many competitive opponents which are mostly multinational companies operating within the market with good quality, brand name, large system of distribution channel; this

is also the big threaten for company

- Customers

Main customers of the company are factories of producing cement, porcelain, pottery, plaster planks and partition …in Laos and Viet Nam Demand of using raw plaster in cement sector in Viet Nam is 1,2 million tons/year, in Laos 100,000 tons/year which is assessed to have demand growth rate of above 20%/year in the coming years;

Vietnamese pottery and porcelain sector in recent time has used more than 30,000 tons plaster powder every year and increase rate of product demand is 15,5%/year Demand of using plaster plank and partition in Viet Nam increases nearly 18%/year, total estimated demand in 2009 is 23 million m2

- Suppliers

Providers of company are to provide fuel (coal, petroleum, oil), explosive and additives in production; recently company has directly imported from Vietnamese

and Thailand providers; quantity of providers in recent time is rather stable, however there is also price increase adjustment due to market change

- Replaced products

Recently there is the appearance of human made plaster and plaster which is formed from operational process of thermoelectric plants; however quantity is not considerable and quality is not as good as natural plaster; with regard to patterned plaster powder, there is also the competition of plastic pattern however according to assessment of producers then plaster powder stills has much more strengths

- New opponents

With the policy to attract investment of Laos and high demand of using plaster in Viet Nam, recently there are many Vietnamese units ask for mining certificate in Laos, however there has been no unit being issued certificated by now

1.2.3 Internal analysis of the company

- Capacity of machine and equipment

In recent time, company has not used all capacity of machine and equipments to exploit and process raw plaster due to low consumption; equipments for plaster powder grinding of the company are invested comprehensively, rather modernly however it cannot control technology then products cannot reach customers’ requirements; trucks to deliver products are so few (2 trucks) which cannot meet high demand of company then company must hire outside for loading and delivery

of products

- Cadres and employees

Cadres and employees of company include 105 people, out of which there are 11 people of university qualification, 6 people of college, intermediate schools, 50 skilled workers and 38 popular labors, which can meet requirements of the company

in recent time

- Financial situation

Although Laos will invest in infrastructure for economic development within 2010 – 2015 transportation system completely depends on roadway; it is predicted that within 2015 – 2020 there will be railway system for transportation

- Legal and political environment

Politics of Viet Nam and Laos are stable; legal document system is more and more improved via applying fully and exactly legal documents such as investment law, corporate law, tax law…especially credit institutions related to capital mobilization

of the company will be completed;

However, it is predicted that Laos will have adjustment of legal document system related to natural resource exploiting including minerals; there will be documents for deep processing and raw export limiting to increase added values of natural resources Gypsum rock (the main product of the company last time for turnover and profit) may be restricted to export, so company should prepare some solutions for this case like: transporting cargo to warehouse in Viet nam, finding right technologies to deep process gypsum rock,…

- Social and cultural environment

Living standards of people have been increased which leads to higher demand of products, services; besides, due to common economic development, then salary and reward will be increased

- Natural environment

Natural resource in Laos is still abundant which is favorable for investment in exploiting, processing many minerals for company in the future; natural disaster such as storm, flood…are still the factors to be cared for in the coming time

- Scientific and technological environment

Science and technology in general and technology to exploit and process minerals

in particular are more and more developed; currently technology of exploiting and deep processing of plaster have developed strongly; the good thing is that technology will be transferred with valuable values in case of having demand (mineral deep processing technology is very complex which is the private secret of producers; it will take much cost to transfer technology)

1.2.2 Economic environment

- Competitive opponents

Raw plaster source for markets (especially Vietnamese market) is from Laos, Thailand and China, however it is predicted that Chinese product will be reduced due to low quality and high domestic demand in China; supply source from Thailand is also reduced due to the policy to limit raw plaster export Thailand Government which will reduce quantity of opponents of company; besides, competitiveness of direct opponents which are IV Mineral Development Company and Hue Plaster and Cement Joint Stock Company will be reduced due to mines of small which are exhausted and meet difficulties in exploiting

- Customers

Demand of using raw plaster in cement sector of Viet Nam is 1,2 million tons/year,

in Laos is 100,000 tons/year This sector is predicted to have demand growth rate of above 20%/year in 5 coming years;

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Vietnamese pottery and porcelain sector in recent time has used more than 30,000 tons plaster powder every year and increase rate of product demand is 15,5%/year, besides, domestic demand of using plaster powder of Laos also increase strongly; Demand of using plaster plank and partition in Viet Nam increases nearly 18%/year, total estimated demand in 2009 is 23 million m2

Via analysis of macro environment and economic environment we can define opportunities and threatens of the company within 2010 – 2015

Table 2.5: Opportunities and threatens of the company within 2010 – 2015

1 Economy and politics of Laos and

Viet Nam are on high development and

stability;

2 Legal system and technical

infrastructure of Viet Nam and Laos are

more and more improved;

3 Technology to exploits and produce

has been highly developed; technology

will be transferred with suitable price;

1 There many be changes of policy for mineral export of Laos;

2 Quality of workers is low while requirements of salary and reward are higher and higher;

3 Increase price of input materials and fuels (petroleum, oil, coal, explosives,…);

4 Competition within the market is

4 Laos has many minerals with high

economic value;

5 Demand of existing products of

company in Laos and Viet Nam is high

which is increased higher

higher then there will be more direct competitive opponents in the market

(Synthesized and evaluated by the group)

1.2.2 Internal analysis of the company

- Analysis of resources

a) Technology and equipments

With existing machines and equipments, company can meet requirements to raise exploiting and processing quantity to 500,000 ton/year, more investment in machines and equipments when having requirements to raise capacity is rather easy; Production line of plaster powder is rather comprehensive with high automatics, then company must hire consultants to train employees to operate better to make plaster powder reach customers’ demand; system of production equipments of plaster plank currently is rather comprehensive; system of production factory is arranged scientifically; ownership of natural plaster mine with reserves of above 22 million tons, is the biggest plaster mine in Laos which has just exploited nearly one million ton;

Company also invests in increasing quantity of trucks but just to some extent, just meet 20 – 25% transportation demand of company to be active in product delivery; company should hire professional units of transportation to make use of strengths of specialization of partners

b) Cadres and employees

Leader and cadres of company have high qualification and rather long term experiences (mostly working from the time of company’s establishment), have strong will, enthusiasm in working However cadres have young age, lack of

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management experiences, especially experiences in market survey, prediction of

market change, commercial task…

c) Finance

Analyze some financial norms of the company in 2009 compared to 2008 to see

strengths and weaknesses of the company:

Table 2.6: Financial norms of Viet–Lao Ltd Company

Quick payment = ( mobile

asset-inventory)/total short term debt

interest/total asset

ROE- profitability on total owner capital =

net interest/stock capital

Profit margin = net interest of popular

shareholders/revenue

- Quick ratio: It is lower than 2008 of 0.33 time but short term payment capacity is

in rather high level (1.27 times), which shows that payment capacity of company

and capital supporting of company are good Company has used the whole short

term capital and a part of long term capital to support short term assets;

- Mobile ratio: in 2009 it was lower than 2008 0.22 time, which proves that company has raised loan rate to invest in mobile asset, however this ratio is in high level (1,51 times); this can show that business activities of company mainly use owner capital to invest in mobile asset (or most of mobile assets are formed from owner capital source) then it can limit risks and be active in using capital but economic effect is low due to using little lending capital then bear uneducated tax;

- Inventory circle: inventory circle in 2009 is lower than 2008 (12.15 rounds) which

is in low level (7.27 rounds), which will increase cost due to capital stagnant, storing cost, depreciation and product quality reduction;

- Debt payment term: in 2009 it increased 50 days compared to 2008, currently is

248 days; this can show that company is using debt tool to promote sale; this index

is high which proves that company is being occupied capital then increases capital cost;

- Circle of fixed assets: reduce 0.99 rounds compared to 2008, which can show that production effect (effect of using machines and equipments ) of the company in

2009 was lower than 2008, or company invests more new fixed assets then it cannot promote effect; such ratio is in high level (6.29 rounds) compared to other enterprises of processing minerals;

- Circle of total asset: reduce 0.24 rounds which is lower than 1 (0.95 round), then company is using assets ineffectively;

- ROA: Lower than 0.2% which shows that company has wasted total asset rather than 2008 Profit growth rate is not equivalent to growth rate of total asset;

- ROE: reduce 0,2% which proves that contributed capital increases higher, company mainly uses contributed capital (invested capital from corporation) then contributed capital will be slowly withdrawn;

- Debt ratio: higher than 9% which shows that company has increased loan structure and risks but business effect on owner capital will be better;