Building of development strategy for Se San hydropower development company in the period of 2013-2018

Table 2.4 Capacity, output, cost and product price VND/kWh of the hydroelectric plants in the sector in 2011 46 Table 2.5 The group investing in the field of energy production from 2013

GLOBAL ADVANCED MASTER OF BUSINESS

Group 4:

1 Chau Thanh Can

2 Đinh Van Nhan

3 Nguyen Viet Tho

4 Ho Mong Đoi

Class: GaMBA01.D0111

HCM City, 2013

ACKNOWLEDGEMENT

During the time of attending to Training Program on Master of International Business Administration, all of teachers have enthusiastically taught, imparted knowledges that are very useful to us and we have applied them to our organization effectively We would like to express our sincere gratitude to all of teachers who guided us to complete this MBA program

We also thank the Board of Directors, the departments and workshops of Se San Hydropower Development Company about enthusiasm, enabling for us on studying, data collection to complete topic

Finally, we would like to thank the Electricity of Viet Nam, College of Electric Power Ho Chi Minh City in making the best conditions for us to complete MBA course

Our team is pleased to assure that this topic is the study of us All data and contents in this topic are found out, studied and built by team of ourselves All data collected is completely true

CONTENTS

ACKNOWLEDGEMENT 1

INTRODUCTION 7

1 Why choose the topic 7

2.The goal of topic 7

3 The scope of study 8

4 Methodology 8

5 The layout of topic 8

CHAPTER I: THEORETICAL BASIS 9

1.1 The concept of strategy and strategic management 9

1.1.1 Strategy 9

1.1.2 Strategic Management 9

1.2 The views of strategy and strategic management 9

1.3 Building strategy 10

1.3.1 Process building strategy 10

1.3.2 Determination of base for building strategy 11

1.3.3 The targets of strategy 12

1.3.4 Analysis external environment 12

1.3.5 Models of five competitive pressures 14

1.3.6 Analysis of internal environment 17

1.4 Stages of Strategic Management 23

1.5 Points to note in the process of strategic management 24

1.6 The matrix strategic form 26

1.6.1 SWOT Matrix 26

1.6.2 CPM Matrix (Competitive Profile Matrix) 28

1.6.3 IFE Matrix (Internal Factor Evaluating) 29

1.6.4 QSPM matrix (Quantitative Strategic Planning Matrix) 31

1.7 Conclusions of Chapter I 32

CHARTER II: 34

ANALYSE THE ACTUAL PRODUCTION AND BUSINESS OF SESAN HYDROPOWER DEVELOPMENT COMPANY 34

2.1 Establishment and development 34

2.1.1 Historical establishment 34

2.1.2 Organizational structure 35

2.1.3 Funtions, tasks and line of business 36

2.2 Analyze of the producing activity management of the Company 36

2.3 Analyze the value chain of the company 37

2.3.1 The principal activities increase value chain 37

2.3.2 Analyze supporting activities 40

2.4 Analyze of the macro environment 45

2.4.1 Economic environment and demographic environment 45

2.4.2 Science and technology environment 45

2.4.3 The social and cultural environment 45

2.4.4 Political, law environment 46

2.5 Analyze the five competitive pressures of environment 46

2.5.1 The corporates in the industry 46

2.5.2 Products for replacement 47

2.5.3 Pressure from the customers 47

2.5.4 Pressure from the suppliers 48

2.5.5 Pressure from competitors 48

2.6 Survey of the council on the internal resources of the company 50

2.7 Matrix IFE -Matrix EFE 51

2.7.1 Evaluation of the internal factors (Matrix IFE) 51

2.7.2 Assessment of external factors (Matrix EFE) 60

2.8 SWOT matrix 70

2.8.1 Strengths and weaknesses of the internal environment 70

2.8.2 Opportunities and threats of the external environment 71

2.9 Competitive Profile Matrix (CPM) 75

2.10 Aspects of corporate culture for the selection and implementation of strategy 76

2.11 Conclusion of chapter II 76

CHAPTER III 78

DEVELOPMENT STRATEGY OF SESAN HYDROPOWER DEVELOPMENT COMPANY IN THE PERIOD OF 2013 – 2018 78

3.1 Development strategy of the company in the period of 2013-2018 78

3.1.1 Vision: The Company will be leading in low costs in electricity supply 78

3.1.2 Mission: Continuous power supply with better quality 78

3.1.3 Core values: Trust - Devoted - Wisdom - Collaboration – Share 78

3.1.4 Strategic goals 78

3.2 Building strategies for the company 79

3.2.1 The “leading in low costs” strategy 79

3.2.2 The “advantage in offering in the electricity market” strategy 79

3.3 QSPM matrix (Quantitative Strategic Planning Matrix) 80

3.4 Select strategy for the company 91

3.5 Solutions for strategy implementation 91

3.6 Strategy controlling 94

3.7 Recommendations and conclusions 95

3.7.1 Recommendations 95

3.7.2 Conclusion 95

REFERENCES 97

DIRECTORY

Figure 1.2 The relationship and the meaning of the vision, mission and

values

11

Figure 1.5 Effect of five pressures on the attractiveness of the industry 17

Company

37

Table 2.3 Report production and business activities of 3 years (2010,

2011, 2012) of the Company

43

Table 2.4 Capacity, output, cost and product price (VND/kWh) of the

hydroelectric plants in the sector in 2011

46

Table 2.5 The group investing in the field of energy production from

2013 to 2018

49

Table 2.7 Evaluation of the company's strategic building council on

how important of the inside elements

53

Table 2.8

Evaluation of the company's strategic building council

on classification (points earned) of inside elements - Matrix IFE

63

Table 2.11

Assessment of the members of the company‟s strategic building council on classification (points earned) of external factors- Matrix EFE

attractive scores of the "Leading in low costs" strategy

88

INTRODUCTION

1 Why choose the topic

Se San Hydropower Development Company was officially put into operation

on 01/04/2010, with the function of operational management on the Se San 4 Hydropower plant which consists of 03 units at total capacity of 360MW Annual electricity output is about 1.4 billion kWh Se San 4 Hydropower plant was started upon construction in 11/2004 on Se San River lying on the territory of 02 provinces

of Gia Lai and Kon Tum

Activities of Se San Hydropower development Company is now steady, achieve business plans, but possibility and potential of the company are still more The question in setting up the development strategy for the company is how to exploit fully ability, potential of the company in future

Annual electricity demand is increasing by average of about 12% The direction of our research is to build competitive strategies by that how Se San Hydropower Development Company output power is greater than the other competitors We determine the level of strategy for the company is the business level We wish this topic is the base to help the leaders of Se San Hydropower Development Company put out relevant decisions in order to achieve targets most effectively That's why we chose this topic

2.The goal of topic

The goal of this topic is to analyze and assess the current status of production and business activities of Se San Hydropower Development Company; opportunities and threats from the external environment; strengths, weaknesses from the internal environment of company From then, the development strategy suitable for the company is built and the solutions of strategic implementation are

proposed Name of subject that we study is "Building of development strategy for

Se San Hydropower Development Company in period of 2013-2018"

3 The scope of study

The scope of study is to build a theoretical basis for development strategy of

Se San Hydropower Development Company in period of 2013-2018, in which we study in depth to promote the advantages of Se San hydropower plant to compete with other Hydropower plants in the electricity sector

4 Methodology

Method of study is date collection from internal of Se San Hydropower Development Company then analysis and apply the strategic matrixes to build a development strategy for this company

The scientific and practical significance of the subject can be used as a value reference to build business strategy for other businesses with similar characteristics

as Se San Hydropower Development Company

5 The layout of topic

In addition to the introduction, conclusion and appendices attached, the contents of the topic are divided into three main sections as follows:

Chapter I: Theoretical basis

This chapter presents the theory of formulating strategies, application some matrixes to help strategic choice and issues in strategic management

Chapter II: Situation Analysis of Se San Hydropower Development Company

This chapter introduces an overview of the Se San Hydropower Development Company, analyze the business situation of the company in the past

Chapter III: Building of development strategy for Se San Hydropower Development Company in period of 2013-2018

This chapter analyzes the inside and outside environmental factors from which the matrixes as SWOT, IFE-EFE, QSPM to choose development strategy for this company in period of 2013-2018 are built and proposal solutions for strategy

implementation is issued

CHAPTER I: THEORETICAL BASIS 1.1 The concept of strategy and strategic management

1.1.1 Strategy:

Strategy is a series of work setting in order to create competitive advantage

of the business compared to other competitors The strategy represents a unique value creation, the selection, the rating for in competition When building business strategy, we have to determine where the business is , where and how the business wants to reach

1.1.2 Strategic Management:

Strategic Management is implementation and evaluatation of the decisions related to various activities which allow a business to achieve the set-out strategic goals Strategic Management focuses on consolidated management of all operational fields of the business to achieve success

1.2 The views of strategy and strategic management:

- In Michael Porter's point of view, strategy is creating out an unique position and valuable including different activities Strategy is selection, staying or retreating

in competitionbut the importance is to choose what should be done and what shall

be omitted Strategy is creation of the compatibility from all business's activities Competitiveness is obtained from the activities system rather than from its component parts Compatibility from the activities occurs when this action contributes consolidation and strengthening the effectiveness of the other activities

in the value chain of the business (Source: "What is the strategy", Harvard Business Review, 1996)

- By Fred David, "Strategic Management is terms of art and science that establish, implement and evaluate decisions related to various functions which allow organizations to achieve the set-out goals." (Books: "The concept of strategic management", Labor Publisher, 2012)

1.3 Building strategy:

1.3.1 Process building strategy:

Process building strategy is described as Figure 1.1 below

Figure 1.1: The process building strategy

Evaluate the effectiveness

Define vision and mission

Analysis internal

environment

Identify the strategic goals

Implement solutions

1.3.2 Determination of base for building strategy:

Vision, mission, values are the foundation of strategy A business without a vision will not go to the destination; without mission will not has the goal; without values will not has the guiding principles of operation

1.3.2.1 Vision:

When building of strategy, strategic planners must answer the question, "our business will look like in the future?" So, saying about the vision is saying about the future scenarios of the business For example, the vision of the Electricity of Viet Nam: Leading economic group in the power sector in Vietnam and the region, keeping a leading role in the task of ensuring national energy security

1.3.2.2 Mission:

When building strategies, strategic planners must answer the question "Why

do we exist?" The mission of a business shows business exists to do what and do what to exist For example, the mission of the Electricity of Viet Nam: Fully meet power demand for customers with quality and service better and better

Values: What important that

we have always done?

Mission:

Why do we exist?

making to bring success to business For example, the core values of the Electricity

of Viet Nam: Quality - Trust; Devotion - Intellect; Cooperation - Share; Creative - Efficiency

1.3.3 The targets of strategy:

The targets of strategy is the destination that business will go to The targets

of strategy need to ensure specific, quantified and a clear deadline Target selection must be consistent with the factors inside and outside of the business A business selects high profit, target of strategy is reduce the cost However, select a mismatch target of strategywill lead business to the wrong way and unsustainable development

1.3.4 Analysis external environment:

The goal of external environment analysis is awarness of opportunities and threats from external environment that affects to operation of the business

1.3.4.1 The three levels of the external environment:

The external environment has three levels: the macro environment (including factors of economy; culture, society; globalization; technology; law, politics; demography), sector environment and competitive environment Figure 5 below shows the three levels of the external environment

Social and cultural environment

Global environment

Competitive environment

Sectorial environment:

- The threat of new entry

- The power of suppliers

- The power of buyers

- Alternative products

- Intensity of competition

1.3.4.2 Macro Environment:

- Economic Environment: The macro economic environment has always

caused impact to the business, can alter the ability to create incomes and value of the business Four important factors in the macro economic environment are the growth rate of the economy, bank interest rate, exchange rate and inflation rate These four factors is both of opportunity and challenge for the business administrators So, through the information resources, the business must always monitor, update and analyze macro economic environment to promptly adjust strategy goals of the business

- Technological environment: Technological environment both creates

opportunities and threats to the enterprise It is also the barriers to enter and reshape the structure of business activities As digital technology has been strongly developing, Kodak was too slow in recognizing the threat from the outside, still conservative in unchanged technology that led Kodak to the verge of bankruptcy Whereas, many manufacturers have passed the height of barriers to enter and succeed such as mobile phones and tablet PCs of Apple, Samsung with superior technology than any other manufacturer

- The cultural, social and demographic environment: The changes in

culture, society and demography importantly influence to the products, services and consumers For example, talking about the population, migration, average income per capita, lifestyle, urban environment, Vietnam society in 1980s was so big different from the one nowaday These changes create opportunities and challenges for the businesses in strategy building Decision where to build a factory and distribution center, what area to effort marketing products and services poses to the strategist before changes about cultural, social and demographic environment

- The political and law environment: Political instability, new policies

issuance are factors that have a major impact on business operations of the businesses So, it is required that businesses have to forecast changes of political,

law environment, including domestic and international law to identify the opportunities and threats for building and implementation strategies of business

- Global environment: Globalization makes the social nature of production

expanding on a global scale However, international business requires a deep understanding of the regulations, international laws, trends, market needs, otherwise the business will be difficult to survive before fierce competition from the other countries This is not only the challenge, but also the opportunity for local businesses looking for new business environment

1.3.4.3 Sectorial Environment:

Sector is a group of businesses that provide the substitutional products or services The goal of competition in a sector can be: price, product quality, product design, features of the product, customer servicing The attractiveness of sector derived from goal competition between the businesses in sector in order to maintain

or increase profits What business now has the most powerful position, who will rise

to replace in the future is a challenge for all enterprises in the sector

1.3.4.4 Competitive environment:

The competitive environment is a collection of competitive actions of businesses in the same sector Competitive environment analysis is the process of collecting and analyzing all the information about the businesses that we are competing with them

1.3.5 Models of five competitive pressures:

Michael Porter put out the model of five competitive pressures , to be published in the Harvard Business Review in 1979 According to Michael Porter, five competitive forces in the sector: (1) the intensity of competition between businesses in the sector; (2) negotiating power of buyers; (3) negotiating power of suppliers; (4) the threat of new entry; (5) threat of substitute products

1.3.5.1 Analysis of five pressures of competition :

a Intensity of competition between businesses in a sector: competitive

actions of a business usually bring about reactions from the other businesses Each competitor runs in a special type leading to fierce competition Intensity of competition may be strong, moderate, or weak, depending on the businesses efforts how to win competitive advantage Factors affecting competition between competitors in the sector include : the number of competitors (including potential competitors), the state of growth of the sector, the level of concentration of the sector, the cost of fixed, the difference between the products, the entry barriers to the sector and retreat from the sector

b The negotiating power of buyers (customers): Customers are always

requiring businesses to provide the best products with lowest price So, the business always face with pressure from the bargaining power of customers Buyers have the strongest power when: there are too many suppliers on the market; many substitutes products; customers who buy large quantities; buyers can switch suppliers at lower

Intensity of competition between businesses

in the sector

The negotiating

power of

suppliers

Figure 1.4: Model five pressure of competitive of Michael Porter

The negotiating power of buyers

Threat of substitute products

Threat of new entry

cost; they are "important customers" accepting the purchase price will increase the prestige of the business; customer has bargaining position when knowing the information about the product

c The negotiating power of suppliers: In the manufacturing process,

enterprises need theprovision of inputs such as: materials, equipment, spare parts, Businesses are under pressure when suppliers tend to raise prices or reduce the quality of input factors that they provide to the enterprise, thereby reducing the profitability of the business Supplier has the strongest power when: they provide different products to the extent can cause costly for businesses to convert and they are important to the business; the business is not an important customer of supplier; when supply is less than demand; the consolidated handshake between suppliers

d Threat of new entry: These forces included the current businesses no

competition in the sector, but they have the ability to enter the sector if they want to Therefore, potential competitors have the ability to appear and create pressure on existing the businesses Threat entering sector is reduced when the existing businesses in sector have the advantages: customers prefer products; customers loyal to the brand; government regulations on investment licensing difficulties, closely than before; high conversion costs, making the customers were kept by products of existing enterprise; fierce reaction of existing competitors will keep competitors can not enter the sector

e Threat of substitutional products: Substitutional products are products

that may be satisfy the demand equivalent to other products The more substitutional products, the more "efficient" for customers will be, then be difficult

to give high price and thus reduces the profitability of the business However, if the business has less substitutional products, then the business will has the opportunity

to raise prices and increase profits

1.3.5.2 Influence of five pressures on the attractiveness of the sector:

The attractiveness of the sector is the high or low profit potential, ultimately

substitute products are high, competitive intensity between the businesses in the sector are high, lead to low profit potential And vice versa is the high profit potential The impact of five pressures of competition in the attractiveness of the sector is illustrated in Figure 1.5 below

1.3.6 Analysis of internal environment:

Analysis of internal environment is about to identify the strengths and weaknesses inside the business Analysis of strengths to exploit core power and create sustainable competitiveness for the business Analysis of weaknesses is to assess level affect to the business and have corrective measures

- Identify the strengths and weaknesses of the enterprise: The strengths of

the business are the advantages of the business such as: team of excellent staff, professional; modern production lines; rich financial resources; advantage price; reputable products on the market, better customer service; compared with

Low competitive intensity in the sector

High barriers to entry

Suppliers have weak power

The buyers have weak power

Low pressure from substitute products

The buyers have

strong power

Figure 1.5: Effect of five pressures on the attractiveness of the sector

Attractive sector (High potential profit)

competitors Identification of strengths is to to exploit core power and promote sustainable competitive advantage for the business The weaknesses of the business

is the downside such as: equipment with outdated technology; poor financial resources; product poor quality; higher price; compared with competitors Identification of weaknesses is to propose measures to overcome

Exploitation of the strengths, overcoming and the weaknesses will create suggestions for the formation and strategy development of the business

- Identify core power of the business: The core power of business is capacity

of the business that can do better than competitors Those possibilities may be technology, technical know-how, close relationships with customers and distribution system, strong brand The standards defining core power are: (1) Value allows the business to stop threats and exploits opportunities from the external environment; (2) Rare is no or very little competitors; (3) Difficult to copy: the competitors can not copy or very expensive to copy; (4) Can not replace: the distinctiveness and uniqueness can not replace Core power create competitive advantage for business, to help reduce risk in goals building and strategic planning

- Identify competitive capacity of the business: Competitive capacity of the

business is shown throught the advantages of the business compared with the competitors in satifying the customer needs Determine competitive capacity on the basis of comparing the power of the business to competitors in the same field, the same market On the basis of comparison, the enterprise must establish a better advantage to attract customers

1.3.6.1 Analysis value chain:

To obtain a sustainable competitive advantage, the businesses must create a chain of value-added products Value chain is the series of activities that when products go through each activity will create a certain value Cutting a rough diamond with less costly will add more value to the diamond after cutting Set up the value chain is very flexible, can the value chain including suppliers and the

supplied by other business, thus Ford reducing inventory costs and space Figure 1.6 below shows the value chain of Michael Porter

Michael Porter's value chain consists of two groups of activities: (1) The major activities; (2) The support activities

1 The major activities: Includes needs input, production, needs output,

sales and marketing services

a Needs input: For manufacturing operations are materials for production,

inventory management and control Good management these activities will reduce costs

b Production: Includes activities such as production line operation,

inspection and maintenance of equipment in order to transform the inputs into the final products The good management of these activities will lead to higher production efficiency and produce quality products

c Needs output: Includes activities such as storage, management and

distribution of goods and orders solution to put products to the client on time The completion of these activities will increase the level to better customers service

Figure 6: Michael Porter's Value Chain

The major activities

Market ing and sales

Purchasing Technological development Human Resource Management Infrastructure of the enterprise

Needs input

Produc tion

Needs output

Serv ices

d Marketing & Sales: Marketing and sales mainly revolve around the

following activities: the decision to diversify or only one line of products putting on the market, this depends on the resources of the enterprise; price of products, this comes from the measure that the company has created value for customers; support work such as product packaging, advertising; evaluation of distributors compared to sales force direct and locate retail points If doing good these activities, we will dominate the market

e Services: Customer services include activities such as installation,

maintenance, repair and supply spare parts, respectful and quickly respond to customer complaints, guiding customers to use products Innovation, advanced to give excellent customer service is one of the competitive advantage of the business and create new barriers to entry

In summary, each stage in chain of major activities are closely linked to each other Any one stage in the major activity chain facing problems will affect the entire production and business activities of the enterprise For example, needs input being not respond in time for production materials cannot meet the delivery on time, leading to loss of customer confidence The strategists have to give solution to optimize the chain of major activities, for instance, we can apply the method JIT (Just In TME) to create a competitive advantage compared with competitors

2 Support activities: The support activities include: infrastructure of the

business, human resource management, technology development and management

of raw materials

a Infrastructure: The infrastructure of the business includes operations

such as finance, accounting, information systems and general management Competitive advantage can be achieved through effective financial management Information systems can be used to increase competitive advantage For example, to reduce the power of buyers by supplying information conversion costs for the customer and the customer will have to bear higher costs if they switch to other

competitors General management, including organizational restructure so that it can reduce intermediate layers, make staff more dynamic

b Human Resource Management: Human Resource Management includes

activities such as recruitment, training, development and pay for employees Good management of human resources shown by enhancing the skills of employees and maintaining good relationships will create value and reduce costs

c Technological development: Development of technology to improve,

enhance product quality and satisfy the increasing demand of customers Investment

in technology development to achieve long-term competitive advantage Investment

in technology is usually a huge investment, but there are risks such as changes in customer demand, rapid imitation by competitors So managers must consider when making decisions of best investment in technology development

d Purchasing: These activities include material purchasing, energy, water,

equipment, machinery, factory for use in the production process One thing to keep in mind is that the cost of these activities are fairly large, so the need to take effective measures is to save costs, reduce production costs and create competitive advantage for business

In summary, each stage in the chain support activities are also closely related

to each other For example, an enterprise with a good human resource management strategy, keep talent in research and development, which is necessary for technological development activities, and thus maintain a sustainable competitive advantage for the business

1.3.6.2 Raising the efficiency of the value chain:

In order to raise the efficiency of the value chain we have to make a good match between the activities in the chain to reduce costs We can use outsource, if necessary, to reduce costs, but also to note only outsource things that the business

do not make good, and core competencies of the business not taken out of which must investment to powerful over against our competitors

1.3.6.3 Analysis of the strengths, weaknesses based on specific success factors:

Specific success factors of sector are applied for the similar sector There are two groups of specific success factors: (1) Standard Group: factors to achieve a certain level (2) Excels Group: factors indicate the difference between businesses with competitors For example, the restaurant business, the factors of the standard group are food safety and food service equipment The factors of the excels group are the quality of food, clients serving This example shows that the restaurant business enterprises have to compare themselves to competitors through the factors

of the standard group and the excels group to feel stronger or weaker competitors However, should not invest too much on factors "standard group" because it is not effective, but to increase investment in the factors "excels group" to win the competitors It should also be noted that the specific success factors may change according to time, special are the factors of the excels group For example, previous customers require products to be durable, today is beautiful, fashionable and modern So invest in the "excels group" are necessary, but be careful because it changes according to time

1.3.6.4 The criteria for evaluation / comparison of success factors:

Three groups of potential success factors of the sector are: (1) Market position, (2) Market Coordination, (3) Resources of the business

- The market position includes of the following criteria: market share;

market share changes; business image and the ability to benefit

- Coordination of the market includes the following criteria: scope of

product categories; extensive in the product group; product quality; prices; additional services; speed order processing

- Resources of the business include the following criteria: Land,

buildings; assets; financial power; organizational structure; patent rights; business brand; marketing and sales, production capacityand raw materials; research

Based on the success factors, make table below to assess / compare our business with direct competitors and the strongest and then offering competitive strategy accordingly

1 The market position

1.4 Stages of Strategic Management:

Strategic management consists of three phases: setting strategy, strategy implementation and strategy evaluation

- Stage of set up strategy consists of the following tasks: identify

business tasks; investigation to determine the strengths and weaknesses from

environment;determine the long-term goals, choosing alternative strategies and select specific strategies to follow

- Strategic implementation phase: In order to successfully implement the

strategy, businesses must establish annual goals consistent with long-term goals; effective use of human resources, skills, assets, financial, technological know-how, information systems, environmental enterprise culture, policies encouraging reward

Enterprise A

Enterprise B

Enterprise C

Rating: Enterprise C is stronger than A, B

Table 1.1: Evaluate of corporates based success factors

etc to achieve objectives set Also need to pay attention to the potential risks from the outside can affect the performance of the strategy as the environment, competition, politics, resources, etc to have plan risk prevention

- Strategic evaluation phase: is the review process inside and outside

factors, including measurement, determine the achievement of individuals and organizations, at the same time, we have to adjust strategic and find solutions to adapt with new environmental circumstances, because the current success does not guarantee future success

1.5 Points to note in the process of strategic management:

- Strategic management to adapt to change: Currently, the process of

internationalization and integration is going very deep, the rapid development of information and communication technologies; competitive environment is increasingly global and very fierce A series of questions posed to expert strategic planning before the change of business environment are: The type of business we are suitable? Should we reshape business? What new competitors are entering the market sector? We should be pursued a strategy of? What technologies are being developed, it can make us bankrupt? To exist, the businesses must be able to timely acumen to recognize the change and adapt to that change

- Strategic management requires a combination of intuition and analysis: By experience, consideration, intuition is essential in making good

strategic decisions However, only use intuition without analysis will easily lead to mistakes in decision-making Although there are several successful businesses in the business due to the intuitive genius in management, but most of them are not successful like those So we need to combine intuition with analysis, which complement each other in making decisions

- Strategic management is a regular and continuous process: Figure 1.7

below shows the annual review of the strategy for adjusting targets to suit the new situation

- Strategic management is done at all levels: four levels of strategy

building for multidisciplinary enterprise are described as in Figure 1.8 below

When building strategy for a business, the very important thing is to define the strategic level of the enterprise which is consistent with the operation condition

of the business

a Strategy of company level: For multidisciplinary enterprise, the strategy

has four levels At the company level, set investment priorities (such as training, real estate, manufacturing, product consumer goods, passenger services .) and direction the resources of the company into selected business fields Create synergy strength of the business activities with criteria 1+1 = 3

b Strategy of business level: For a one-job business, while building

strategy has three levels, starting from the business level When building level strategy, necessary to outline measures to build competitive advantage (eg,

Strategic management of function level

Strategic management of operation level

Direction of influence

Strategic management of company level

Figure 1.8: The level of strategy of multidisciplinary company

Business level strategy

Functional level strategy

Operational level strategy

Company level strategy

competitive advantage in price) and integrated strategic actions of the functional level of the business

c Strategy of functional level: Provide support for business-level strategy

Need to specify the manner in which the goals of function is carried out as functions

of production, finance, human resources, marketing

d Strategy of operational level: Increases additional information for

strategy of function level and strategy of business level This is the narrow strategy

in operations management platform, so should clearly identify the responsibilities of the lowest-level managers in the implementation of strategy

- Strategy management requires the participation of many people: in all

the strategy level corresponding to the administrators at that level Activities at each strategic level are interaction, so in the strategy management requires the participation of all managers at each level The administrators at each level play the role as a driver, they communicate, lead their members implement common set-out strategic objectives Thus, strategy management requires the participation of all members of the enterprise

1.6 The matrix strategic form:

After collecting, analyzing and identifying factors to build strategic, put all these factors into the strategic matrix to analysis, strategy formulation and strategic choice suitable for the business Within the scope of this topic, we present the matrix of strategies such as SWOT matrix, IFE-EFE matrix and QSPM matrix

1.6.1 SWOT Matrix:

SWOT matrix links elements inside and outside and the formation of strategic groups

O: OPPORTUNITIES 1)

2)

T: THREATS 1)

2)

S: THE STRONG

POINTS 1)

STRATEGY S – T: Develop the inner strengths to minimize external threats

W: THE WEAK

POINTS 1)

STRATEGY W – T: Overcome the inner weaknesses to minimize external threats

Table 1.2: SWOT matrix

1.6.1.1 Strengths and weaknesses of the internal environment:

Study the factors of the internal environment to identify the strengths (S), weaknesses (W) inside the enterprise compared with other competitors

- S (Strong): The strong points are the ability to be used to develop a competitive advantage, including: excellent team of staff, professionalism; modern production lines; rich financial resources; price advantage; reputable products on the market, good customer service;

- W (Weak): Those out off the strengths are considered to be weaknesses, such as equipment with outdated technology; tight financial resources; poor product quality; higher price; little known brands;

The external factors

1.6.1.2 The opportunities and threats of the external environment:

Study the external factors to identify opportunities (O) have the ability to

develop business and make a profit, as well as threats (T) that businesses face

- O (Opportunity): Favorable opportunities from the external environment

that businesses can use to develop production, generate profits as: The policy of the State; development of science and technology; increased demand,

- T (Threaten): The unfavorable factors from the external environment can

create threats for the development business of enterprises such as: State policy changes; prices of inputs to increase; increased competition from competitors, the appearance of substitute products;

The SWOT matrix helps us to form four types of strategies:

- Strategy (S-O): Promoting inner strengths to take advantage of the

opportunity

- Strategy (W-O): Overcome weaknesses inside in order to take advantage

of the opportunity

- Strategy (S-T): Promoting inner strengths to minimize external threats

- Strategies (W-T): Overcoming weaknesses inside to minimize external

threats

The business always exists opportunities and threats from the external environment, the strengths but also the weaknesses unavoidable SWOT matrix form 4 strategies is the perfect combination helps businesses take advantage of opportunities, avoid threats, overcome weaknesses and take advantage of strengths

to develop production

1.6.2 CPM Matrix (Competitive Profile Matrix)

Used to sum the results of the competitive environment analysis, identification of opportunities and threats from competitive environment, assess the strategic fit of the current competitive at company

Competitive Profile Matrix (CPM)

Method of classification: 1 = weak, 2 = average, 3 = above average, 4 = strong

Table 1.3: Competitive Profile Matrix (CPM)

1.6.3 IFE Matrix (Internal Factor Evaluating)

1.6.3.1 IFE Matrix:

Used to sum up the results of the analysis and to consider the appropriateness

of the strategy with the internal environment, identify strengths, weaknesses and competitive advantages of the enterprise

4: biggest strengths

Important score:

<2.5: internal weakness

Table 1.4: IFE Matrix

The success factors

Signifi cant level (Pi)

company 1

Competitive company 2 Classifica

tion (Si)

Impor tant point (Pi x Si)

Classifi cation (Si)

Impor tant point (Pi x Si)

Classifi cation (Si)

Import ant point (Pi x Si)

How to build IFE matrix (Inside factors):

- Column (1): List all the inside factors that affect production and business

activities of the enterprise (from 10 to 20 factors)

- Column (2): Evaluate the importance of each factor by weight numbering

The sum of the weight numbers of all factors must be equal to 1

- Column (3): Evaluation of the importance of each factor by sorting 1 to 4,

in which, 1: biggest weakness; 2: smallest weakness; 3: smallest strengths; 4: biggest strengths

- Column (4): Identify the importance of each factor by multiplying the level

importance (column 2) by the classification (column 3), respectively Then, the total of the importance of each factor to determine the total score is important for business If total score <2.5: internal weakness enterprise; If total score > 2.5: internal strength enterprise

1.6.3.2 EFE Matrix:

Used to sum up the results of the analysis of external factors, consider the appropriateness of the strategy, identify opportunities and threats from the external environment Below is a table of the EFE matrix

4: very well reaction

Important score:

<2.5: poor reaction >2.5: average reaction

How to build matrix EFE (external factors):

- Column (1): List all the external factors that affect production and business

activities of the enterprise (from 10 to 20 factors)

- Column (2): Evaluate the importance of each factor by weight numbering

The sum of the weight numbers of all factors equal to 1

- Column (3): Evaluation of the importance of each factor by sorting 1 to 4,

in which, 1: poor reaction; 2: average reaction; 3: fair reaction; 4: good reaction

- Column (4): Identify the importance of each factor by multiplying the level

importance (column 2) by the classification (column 3), respectively Then, the total

of the importance of each factor to determine the total score is important for business If total score <2.5: poor reaction to the external environment; If total score

> 2.5: average reaction; If total score = 4: very good reaction to the external environment

1.6.4 QSPM matrix (Quantitative Strategic Planning Matrix):

Used to compare between the strategic plan in the same group For example,

the same group is: buying of financial company or steel manufacturing company; market penetration or market development; groups SO, ST, WO, WT in the SWOT matrix Matrix QSPM help enterprises select the most appropriate strategy from the factors inside and outside Here is an example of QSPM matrix of group S-O

The important

factors

Classifi cation

Strategies can replace

Basis of attractive score

Market penetration

Market development

Table 1.6: The QSPM matrix of group strategy S-O

How to build QSPM matrix:

- Column (1): List the internal and externam factors These information

should be got directly from the IFE and EFE matrix, including a minimum of 10 internal important success factors and 10 external important success factors

- Column (2): Classify each internal and external important success factors

Internal factors: 1: weakest; 2: less weakest ; 3: less strongest; 4: strongest The external factors: 1: poor reaction; 2: average reaction; 3: over average reaction; 4: very well reaction

- Column (3 and 5): Determination TAS score attraction AS of each factor

1: not attractive; 2: slightly attractive; 3: attractive; 4: very attractive

- Column (4 and 6): Calculate TAS attraction of each factor corresponding

to each strategy by multiplying the classification score (column 2) by TAS score (columns 3, 5) of each strategy Then, calculate the total score of TAS attractions in columns 4, 6 of each strategy Value of the total attraction score is high denote attractive strategy The difference between the total attraction score in a strategic group shows the relative attractiveness between this strategy compared to other strategy

uses the strategy matrix tool to select appropriate strategies for the operation of its business Strategic management process must be also interested in regularly for timely strategic adjustments to suit the new situation

CHARTER II:

ANALYSE THE ACTUAL PRODUCTION AND BUSINESS OF SESAN HYDROPOWER DEVELOPMENT COMPANY

2.1 Establishment and development:

Name of company: SESAN HYDROPOWER DEVELOPMENT COMPANY

Address: 114 Le Duan Street-Pleiku-Gia Lai

investment in Sesan 4 Hydropower project The Feasible Research Report of the Project was approved by EVN‟s Board of Director at Decision No 378/QĐ-EVN-HDQT on October 21st, 2004; the first phase technological design of the project was approved by Ministry of Industry at Decision No 3404/QĐ-NLDK on December

21st, 2004 The second phase technological design of the project was approved by Electricity of Vietnam Company (now is Vietnam Electricity Group) at Decision 730/QĐ-EVN-HĐQT on December 20th, 2005 The project was carried out in the form of general construction contractor in regulation in document No 797/CP-CN

on June 17th, 2003 and No 400/CP-CN on March 26th, 2004 of the Government Scale of building:

- Annual average electrical output: 1,402 Billion kWh/year

th

+ Watering reservoir: July 26th, 2009 + Generating unit No.1: September 28th, 2009 + Generating unit No 2: December 08th, 2009 + Generating unit No 3: March 20th, 2010

established at Decision No 43/QĐ-EVN of EVN On April 01st, 2010, the Company‟s business license was issued, and officially put into operation, with the main task is production and business of power and management of the Sesan 4 hydroelectric plant

2.1.2 Organizational structure:

2.1.2.1 Characteristic of the company’s organizational management

Sesan Hydropower Development Company is a unit within the structure of parent company – Electricity of Vietnam Corporation (EVN) According to this structure, director directly manages and takes charge of superior EVN about the process and the result of production of the company The company operates under assignment and authorization by the EVN

DIRECTOR

OFFICE SECURITY

CONTROL ROOM

ORGANIZA TION PERSONAL DEPARTME

NT

PLANING AND SUPPLIES DEPARTENT

FINABCIAL ACCOUTING DEPARTME

NT

SESAN HOTEL TECHIQUE

IC REPAIR WORKSOP

HYDRAULIC MECHANIC

AL REPAIR WORKSHOP VICE DIRECTOR

2.1.3 Funtions, tasks and line of business:

Main business fields of the company (under the registration certification

license number 0100100079078 issued by Department of Planning and Investment

- Production and business of power

- Repair, test electrical equipment, electrical accessories, concrete and steel components

- Consult on construction (monitoring of electricity work, electronics and power work, supervision of installation of the electrical and electronic equipment)

- Construct the electrical, industrial and civil constructions

- Purchase and sell, import and export of materials and electrical equipment

- Lease office, business hotels, and tourist services

- Mine, manufacture and trade of building materials

2.2 Analyze of the producing activity management of the Company Production management of Se San Hydropower Development Company

to achieve the following objectives:

- Produce and supply the electrical products for the national power system

as the plan assigned by EVN

- Create and maintain the company's competitive advantage is low cost

- Competitive advantage on the offered price

Production management of the company focuses on the issues:

- Production management

- Ensure safety for people and equipment in operation

- Maintain and repair of equipment to meet quality, ensure that the units is always ready to meet electricity demand of customer

Factors affecting on the current production management of the company:

- Produce power ensuring continuity, stability and quality

- The challenge of cost and inflation

- Discharge flood, maintain continuous downstream flow; border issues

- Responsibility for society such as environmental and charity responsibility

2.3 Analyze the value chain of the company

2.3.1 The principal activities increase value chain

2.3.1.1 The work of operating equipment

This work is directly operated by the Operating Workshop Operational shift

is 24/24 hours per day, with 3 shifts/5 crews The main task of the operation is:

- Ensure operating of equipment systems and technology in the plant in a safe, efficient on the basis of regulation, procedure, technical instruction systems were issued

- Meet the capactiy mobilization of the units as required by National Load Dispatch Center (also the representative offering the power price for the Company) through DIM software (Dispatch Instruction Management)

- Control all operating parameters of the equipment system, detect timely of abnormal conditions, defects, arising out of the equipment to prevent damage and

Picture 2.1: The value added chain of Se San Hydropower Development Company

Purchase materials and equipment

Strategic backup supplies, supplies for regular repair and overhaul

Technology development

Improve, replace equipment and information technology

Human recourse management

Recruit, train, evaluate, attractive policy

Company’s infrastructure

General management, planning, financial- accounting

Input activity

Operate, maintena nce, repair

Output activity

Service

incidents Coordinate with the repair workshops to find the cause, solve the problem, unusual damage; thereby improve the available coefficient of the units

- Regulate and discharge flood reservoir in the right process and the most efficiently and minimize damage at the downstream area as well as make the most advantage of the water in order to increase the output of generating electricity

- To meet well the trial operation of the electricity market under the guidelines of the EVN, to proceed to perform the perfectly competitive electric market in the future

- The supporting works: train professional operation, specialized study of equipment; equip the knowledge for the operators to access to new equipment, new diagram; renovate completely the electrical safety warning system; maneuver incident; monitoring the working team to ensure safely

2.3.1.2 Maintenance and repair:

There are two workshops to perform maintenance and repair activities which are Hydraulic engineering repair workshop and Electrical-Automatic repair workshop The maintenance, repair are implemented through the following forms: daily check processing defect; handling damage, unusual incidents; minor overhaul (once time per year for each item of equipment); medium maintenance (2 years per time for each item of equipment); overhaul (4 years per time for each item of equipment); upgrading equipment technology

The work, which increases the value chain, contributes to the basis for the leading in low cost strategy in the competitive electricity market, through:

- Make sure the technology equipment system, works always in ready condition to meet the operational mode when mobilized

- Limit, prevent the maximum damage, problems that may arise if no good and timely maintenance, and repair

- Cost for the repair, maintenance plans are determined to be lower than the cost to pay for the handling of damaged, problem if occurring due to bad

degree of damage is huge, including the loss of capacity due to not mobilizing units‟ generation, in addition to greatly affect on the stability, security of the national electricity system

- Contribute to increase the availability coefficient of the units, exploit all equipment at the most efficient level

- Reduce production cost through upgrading equipment by more modern technological lines

2.3.1.3 The input activities:

Input activities of the Company mainly provide supplies and equipment for regular repair, overhaul and backup strategic materials, this is an important step to ensure that the units are under the continuous, stable operation, with a capacity of 360MW Just a small problem without backup strategic materials, the Company's losses are enormous

2.3.1.4 The output activities:

The company‟s electric product is purchased by the Power trading company through power meter installed at the 220kV bus bar of the output of the units This meter system reaches the highest accuracy level (0.2%) and it is connected to network to read automatically the remote data to the Power trading company and EVN

Up to 31/12/2012 the company produced 4.38 billion kWh of electricity Particularly in 2011 reached 118% of design output, in 2012 reached 115% of design output

Power products of the company meet two criteria: availability according to the capacity mobilization of the system and meets the technical parameter, ie:

- Voltage range allows 15.75 KV ± 5% at the generator output and 220kV + [-5%, 10%] at the busbar

- Frequency: maintain and respond with modulation within 50 ± 0.5 Hz

- Quick response: starting time of unit <5 minutes