Strategy electrical equipment market penetration Vinasino electrical equipment joint stock company (VSEE) in the period from 2010 to 2015

Ho Chi Minh city, Dated December 22nd, 2009 To whom it may concern Subject: Comments of the VINASINO ELECTRICAL EQUIPMENT JOINT STOCK COMPANY VSEE on the capstone project report of the

Group No.2

Student’s name:

1 HA THANH PHONG

2 HOANG MINH DUNG

3 LUU NGOC MAI PHI

Ho Chi Minh city, Dated December 22nd, 2009

To whom it may concern

Subject: Comments of the VINASINO ELECTRICAL EQUIPMENT JOINT STOCK COMPANY (VSEE) on the capstone project report of the Group 2, GeMBA01 E02 Class – MBA in Finance, Griggs University

1 The students have closely followed up the current situation of business activities of VSEE to implement the project;

2 The content of "STRATEGY ELECTRICAL EQUIPMENT MARKET PENETRATION VINASINO ELECTRICAL EQUIPMENT JOINT STOCK COMPANY in the period from 2010 to 2015" project mentions the goals that VSEE

is trying to reach, and has high feasibility;

3 The display and content of the project is scientific

Deputy General Director

Tô Công Thanh Lộc

VINASINO ELECTRICAL EQUIPMENT JOINT STOCK COMPANY

Address: R4-52 Hung Gia 2, Bui Bang Đoan Street, Phu My Hung, HCM City

Telephone: +84 8 5410 3686; Fax: +84 8 5410 3685

Email: loctct@gmail.com Website:http://www.vinasino.vn

VINASINO ELECTRICAL EQUIPMENT JOIN STOCK COMPANY

(VSEE)

Page

1 The necessity of topics -1

2 Objective research -2

3 Scope of research -2

4 Research method -3

5 Layout of capstone project report -3

CHAPTER 1 - THEORY BASIS OF THE ENTERPRISE'S STRATEGY 1 The basic concept of strategy -5

2 Classification -5

2.1 Corporate strategy -5

2.2 Strategic Business Unit (SBU) -6

2.3 Functional strategy -6

3 Specific strategies -6

4 Base construction of business strategy for enterprises -7

4.1 External environment analysis -7

4.1.1 General environment -7

4.1.2 Sector environment -8

4.2.3 Marketing -12

4.2.4 Administration activity -13

4.2.5 Information System -13

5 Tools for strategic planning and selection -13

5.1 Tools for strategic planning -13

5.1.1 Internal factor evaluation matrix (IFE) -14

5.1.2 External factor evaluation matrix (EFE) -14

5.1.3 Competitive image matrix -16

5.1.4 Strength- weaknesses - opportunities – threats Matrix (SWOT) -16

5.2 Tool for strategic selection -17

CHAPTER 2 - THE REALITY ANALYSIS 1 Company Profile (VSEE) -18

2 General Environment -18

2.1 Investment Environment: -18

2.1.1 General of investment nation -18

2.1.2 Legal environment in Vietnam -19

2.1.3 Preferential tax policies in the industrial Zones -20

2.2 Sector environment -20

2 2.1 Economic characteristics of the industry highlights -20

2.2.2 Five forces of competitive position -21

2 2.3 Product stream projection -26

2.2.4 Competitors of each product stream -28

2.2.4.1 Electronic meters -28

2.2.4.4 The other kinds of products -33

2.2.4 Price -35

2.2.5 EFE matrix -37

3 Internal environment of VSEE -38

3.1 Reasons for establishing VSEE -38

3.2 Human, organization -38

3.3 Finance -40

3.4 Marketing -40

3.5 Management -42

3.6 VSEE’s partners -42

3.6.1 Introduction about corporations’ domestic capital -42

3.6.2 Foreign partner’s capital (ZPEIC) -43

4 SWOT matrix -44

5 Internal Factor Evaluation Matrix (IFE) -46

6 Specified Strategies -47

6.1- Market penetration strategy -49

6.2- Differentiated strategy -49

6.3- Backward vertical integration strategy -50

6.4- Horizontal strategy -51

7 Analysis of orientations -52

7.1 Orientation development of electrical equipment industry of the State 52

7.2 Electrical equipment market penetration orientation of VSEE -53

8 Threats -53

CHAPTER 3 - SOLUTIONS

1 Planning development stages of VSEE -57

2 Human resource development solution -58

3 Marketing solution -59

3.1 Product solution -59

3 1.1 Electronic meters -59

3 1.2 Current Transformer (CT) and dry medium-tension voltage transformer (VT) -61

3.1.3 Polymer insulation -62

3.2 Price solution -63

3.3 Distribution solution -63

3.4 Promotion solution -64

4 Business plan -65

4.1 Electronic Meter -65

4.2 Current transformer (CT), voltage transformer (VT) -69

4.3 Polymer insulation -72

5 Financial solution -75

RECOMMENDATION -77

CONCLUSION -79

- DNPC: Dong Nai Power Company

- EFE: External Factor Evaluation Matrix

- EMC: Thu Duc Electro Mechanical joint stock company

- EMIC: Electric measurement instrument Corp

- EVN: Vietnam Electricity Group

- HCMPC: Ho Chi Minh City Power Company

- IFE: Internal Factor Evaluation matrix

- KHPC: Khanh Hoa Power Joint Stock Company

- PC: Power Company

- THIBIDI: Electrical equipment Corp

- QSPM: Quantitative Strategic Planning Matrix

- VSEE: VINASINO Electrical equipment Corp

- VT: Voltage transformer

- ZPEIC: Zhejiang Provincial Electric Investment Power Company

- Table 2.2: Purchase situation of electrical materials – equipment in joint stock companies

- Table 2.3: The quantity, types of electric meter are used in 20 branches of PC2 that need replaced

- Table 2.4: Current transformer need up to the year 2015 of the PCs

- Table 2.5: Needs of Polymer’s electrical insulation until 2015 of PCs

- Table 2.6: The price of VSEE’s electrometers - electrons in comparison with other companies’ in Vietnam market

- Table 2.7: The price of VSEE’s current transformers in comparison with other companies’ in Vietnam market

- Table 2.8: The price of VSEE’s porcelain insulations in comparison with other companies’ in Vietnam market

- Table 2.9: EFE MATRIX

- Table 2.10: Rate and the amount of sum contributed (USD)

- Table 2.11: Internal factors evaluation matrix (IFE)

- Table 2.12: QSPM of VSEE (Group S-O )

- Table 3.1: The planned revenue of the electronic meters products in the first period

- Table 3.2: Sensitivity of NPV as changing the capacity and interest rates

- Table 3.3: The revenue and the plans of products CT-VT

- Table 3.4: Sensitivity of NPV as changing the capacity and the interest rates

- Table 3.5: The revenue and the plans of polymer insulator products (USD)

- Table 3.6: Sensitivity of NPV as changing the capacity and the interest rates

- Table 3.7 : Period of Contributed capital

- Figure 1.1: Michael E Porter's five forces of competitive position model

- Figure 1.2: The main contents of analysis competitors

- Figure 2.1: Purchase situation of electrical materials equipment in joint stock companies

- Figure 2.2: Organization chart of VSEE

- Figure 3.1: Type of meter is using in PC2

INTRODUCTION

Vietnam is currently in the stage of integration into the regional economy and the world This has made Vietnamese enterprises more favorable development In the fluctuating business environment, besides development opportunities, it also creates pressures for the Vietnamese enterprises that want to survive and develop must have business strategies consistently with the actual situation

Enterprises’ competitive capacity is the competitive foundation of the economy In recent years, Vietnam's accession to the WTO, along with the current tax cuts, a variety

of goods from the importing countries makes sure that there is a competitive increase in Vietnam market Moreover, after the global economic crisis, peaked in 2008, the countries’ economy has begun recovering at the present Countries have focused on the development of the enterprises’ products, creating conditions for their goods to penetrate into other countries’ market Vietnam is one of the very suitable markets for the penetration of this source of goods

Facing with great challenges, Vietnamese enterprises must address to the problem: Be competitive in the domestic market and penetrate into the world market step by step The only solution to this problem is that manufacturing enterprises in Vietnam must have a strategy to enhance their enterprises’ competitiveness

Business strategy has to determine the method of organization to complement and make competitiveness higher and stronger Practice methods improving factors of enterprises’ competitiveness These factors include ability to design new products, applying new production technology, quality control process, marketing, production capabilities and human resources Based on the theory, there is a close relationship between these competitive factors and enterprises’ performance

1 The necessity of topic

Electronic industry in Vietnam, especially the precise electronic industry is still very weak Enterprises producing electricity and electronics just stop at the assembly,

processing, components which are mainly imported from abroad - the main products are civil products- and there are a few kinds of electrical equipment used for the industry Therefore, Vietnamese electronic enterprises’ competitiveness is still quite weak

VSEE is a manufacturing enterprise and trading electrical equipment products This is a joint stock corporation, with capital contributions from the four power companies belonging to EVN (PC2, HCMPC, KHP, DNPC) and Zhejiang Electric Power (China) Currently, the corporation is in the process of implementing lines production in Vietnam This is a corporation specializing in producing specific products and providing for electricity sectors and these are strategic products in the development direction to have the target of digital services in providing for customers’ electricity use At the present, these products have to be mainly imported from abroad with high cost; so VSEE will bear great pressure due to the competition of these foreign products It is necessary for the corporation to map out directions to promote the advantages of availability, market penetration, and good preparation for their competitive capability in next time Since then, we would like to choose “Electrical equipment market penetration at the VSEE Corporation” is our great topic

2 Objective research

With this topic, we wish to achieve the following objectives:

- Building business strategies for VSEE Based on the basis of environmental analysis to identify VSEE’s current strengths and weaknesses as well as threats, and opportunities affecting the development of the corporation

- Proposing solutions to implement the issued strategies

3 Scope of research

Focusing on strategic planning for VSEE’s Vietnam electric equipment market penetration In the framework of the group’s research, we limit in the early stages of strategic management Strategy is built for strategic business units and solutions to support the implementation of the strategy

In the process of implementation, the methods are used as follows:

Method of gathering information:

Secondary information from:

- Internal resources of the corporation: records, statistics, archives, reports, business plans,

- External resources: Newspapers, radio, the statistics, internet

Primary information from:

- Getting opinions from the Board of Directors and experts of the corporation

- Getting opinions from customers through interviews, consultation

Method of information process:

Manipulating techniques, the strategic management tools make:

- Analyzing the business environment to identify VSEE’s opportunities, risks, strengths, weaknesses

- Manipulating SWOT analysis to combine the opportunities, risks, strengths, weaknesses to set out strategies for VSEE

5 Layout of capstone project report

Apart from the opening words, recommendations and conclusions Capstone project report is divided into 03 chapters:

 Introduction

 Chapter 1: Theoretical basis about competitive strategy of enterprises

 Chapter 2: The realities analysis

 Chapter 3: Solutions and recommendations

 Conclusion

 References

 Appendix

CHAPTER 1:

THEORETICAL BASIS ABOUT COMPETITIVE

STRATEGY OF ENTERPRISES

1 The basic concepts of strategy

The term “strategy” has been used in the military since the 1960s, the strategy has been applied in business and the term “business strategy” was born However, the strategic business administrators understand it in many different ways This means they approach

it in many different ways

According to Alfred Chandler: Strategy is the determination of the fundamental goals, long-term business, or choose the direction and allocation of resources needed to implement that goal

According to Fred R David (2003): Strategy is the means of the long-term goals

According to Rudolf Grunig and Richard Kuhn (2003): Strategy is a long-term, oriented management to ensure to finish the long-term goals and corporation’s essential purposes

In brief, whatever methods they approach, business strategy also encompasses as follows:

- Identifying the fundamental goals, long-term organization

- Issuing general action program

- Choosing action plans, implementing and allocating resources to carry out goals

2 Classification

2.1 Strategy for companies: As models of the corporation’s decisions, it is clearly

defined and outlined goals, the objectives of the corporation, identifying the business activities that the corporation is pursuing, creating policies and fundamental plans to achieve the objectives of the corporation In an organization with scale and extent of diversity, corporation’s strategy typically applies to all enterprises

Corporation’s strategy is set out to determine the business activities in which corporation will compete and distribute resources among the business activities

2.2 Strategic Business Unit (SBU): Business strategy is planned to determine the

selection of products or markets for private business activities in the internal corporation This strategy determining the way of each business unit will attempt to complete its goal and contribute to accomplishing the business units’ goals

2.3 Functional strategy: This strategy is focused on supporting the strategic

layout of the corporation and is concentrated on the areas of industrial cooperation and the business sectors

+ Vertical integration: looking for the ownership or control on suppliers

+ Horizontal strategies: looking for the ownership or control on competitors

+ Penetration market strategy: seeking to other markets for current products and services of resisting markets through more marketing attempts

+ Market development strategy: bringing current products and services to new segments

+ Product development strategy: improving sales through innovation or modification of current products or services

- Operational expansion strategy:

+ Concentric diversification: adding more new products or services which have relation

+ Conglomerate diversification: adding more new products or services without relation

+ Horizontal diversification: adding new products or services that appeal to current customers

- Other strategic groups:

+ Alliance strategy: two or more companies create an independent company for the corporative purposes

+ Narrow strategic activities: Restriction strategy: reconsolidating through cost and equity cutting to reserve decreased revenue and profits

+ Removal of less strategic activities: Cutting operation strategy: selling one subsidiary or part of the company

+ Liquidation strategy: selling all of tangible and intangible assets

+ Combined strategy: pursuing two or more strategies at the same time

4 Construction base of business strategy for enterprises

4.1 External environment analysis

External environment is a system of complex factors that there are always opportunities and risks affecting the business activities in different levels

Although the scale of potential resources is very large, enterprises does not react with all changes of the market So, when analyze the external factors , administrator want to identify list of investment opportunities in the environment that can give beneficial business and threats, from here, business needs measures to prevent or avoid

External environment includes: the general environment and sector environment

4.1.1 General environment

Elements of the general environment: Economic environment; political and legal environment; natural environment; social and population environment; and technological environment

Economic environment: The impact of this environment has more direct and dynamic

natures than some other factors of the general environment The evolutions of the macroeconomic environment always contain the different opportunities and threats for each enterprise in different sectors and have potential influence on enterprises’ strategy Some basic factors are most interested: the trend of gross domestic product (GDP) and

gross national product (GNP) and interest and interest trends; balance of international payments, levels of inflation; tax system and tax

Political and legal environment: Including the system of opinions, policies of the Party

and State, the current legal system Besides, also needing to master the trend of political diplomacy of the government and the domestic and foreign political evolutions These factors affect enterprises’ formation and development

Natural environment: Enterprises have recognized the impact of natural circumstances

on their business decisions for a long time The natural effects include: geographical location, climate, pollution, and lack of energy and wastage of natural resources together with the increase in the demand of resources provided by nature, society, and level of awareness and general education of society These factors affect enterprises’ business Therefore, enterprises should pay attention to these factors when planning business strategy

Technological environment: The impacts of technology create opportunities and risks

as well in the process of strategic management for enterprises Technological advances may create new markets, as a result, creating new products and making available products and services become out of date This environment strongly affects manufacturers relating to fields such as telecommunications, computing and information Therefore, enterprises in electronic products also need to mind these factors in the process of negotiating with good suppliers in order to create opportunities for themselves

4.1.2 Sector environment

Applying Michael E Porter's five forces of competitive position model (1985) to analyze enterprises’ sector environment (also called structural analysis in a competitive industry) The relationship among these factors is reflected in Figure 1.1

Figure 1.1: Michael E Porter's five forces of competitive position model

Source: Michael E Porter (1985)

(1) Competitors: The key contents of a competitive analysis are presented in Figure1.2

Potentiality

Both strengths and weaknesses

- What ability do competitors shift capital and strategic direction?

- What are competitors’

weaknesses?

- What could help competitors to work effectively?

Current business strategy

How is enterprise competing?

Figure 1.2: The main contents of analysis competitors

(2) Customers : Customers decide enterprise’s fate Customers’ prestige may be

enterprise’s best assets The prestige is achieved by knowing how to satisfy customers’

needs and tastes better compared to competitors Pressure from customers comes from the following conditions:

- The amount of goods buyers occupy larger than the volume of goods sold by the seller

- The purchase of switching to another without causing more costly

- Buyers give the signal of credible threats that they will integrate on the back (reverse)

to suppliers

- Goods that customers buy belong to a specialized low level

(3) Suppliers: Suppliers may assert their power by threatening to increase or reduce the

quality of products and supplying services Suppliers will have advantages if they meet the following conditions:

- Only a small number of suppliers sell to a large number of buyers in the same sector

- Goods substitutes are not available

- Suppliers’ goods or services are under the essential type and the highly specialized level

- Suppliers issue threatening signals reliably that they are going to integrate in forward direction

(4) Potential competitors: New competitors in the industry can be a factor reducing

profits because they have exploited new production capacities with the desire to gain necessary market shares and resources.Therefore, the protection of enterprises’ competitive position includes the maintenance of legal barriers prevents penetration from outside The main barriers are the advantage of large-scale production, product diversity, requirement of big finance resources, costs of high-qualified item conversion, the limited abilities in the penetration of the strong consuming channel and price advantage that competitors do not create

(5) Product substitutes : These product substitutes reduces the potential profitability of

the industry by imposing a ceiling with prices that the competition of prices compared to competed products; these industries have high profits, the product substitutes in the current market will increase competition in the industry and create a decrease of prices or

improve quality

The stronger competitive forces are, the more limited the abilities are in order that companies increase prices and get higher profits; or can be considered as a threat to reduce low-profit

The power of five forces can change over time when industry conditions change We need to recognize opportunities and risks because the changes of five forces will bring to

build suitable strategies

4.2 The internal environmental analysis of enterprise

Enterprise’s internal environmental analysis is the basis to help the enterprise know the strengths, weaknesses compared to its competitors; simultaneously it helps administrators know the ability to capture a competitive advantage in each period Factors of internal functions include: Personnel, finance, marketing, management activity, and information system

4.2.1 Personnel: In the fluctuating business environment, enterprise’s human resources

play an important role in the process of implementing strategies and decides the success

or failure of the enterprise If the strategy is right, promising and feasible but people in the organization do not have enough capacity to carry out, strategy will not be effective The main function of human resources is as recruiting, training, use, treatment, evaluation, encouragement and firing

4.2.2 Finance: Financial condition is generally considered an assessment method in the

best competitive position of the corporation and is the most attractive condition for investors In order to formulate effective strategies, it is necessary to identify the strengths and weaknesses of financial business It is shown through the analysis of some basic financial indicators such as liquidity, asset structure, capital structure, profitability rate This will make the construction of the corporation’ strategy to be feasible

4.2.3 Marketing: Marketing research to identify market opportunities, market

segmentation, target market selection and market position; simultaneously analyze

business designing, implementing organization and examine product, price, distribution network strategies and sales promotion

Understanding the marketing activities, administrators will determine the specific tasks

of these functions and the tasks can be performed in each period

4.2.4 Administration activity : Management includes four basic functions such as

planning, organization, leadership and control

- Planning: including all administrative activities related to preparing for the future Particularly, they are forecasts, goal establishments, strategy settings, policy developments and plan formations

- Organization: including all administrative activities to create the structure of the relationship between rights and responsibilities Specifically they are organizational designing, work specialization, job descriptions, work details, control expansions, order unifications, arrangement coordination, and job design and work analysis

- Leadership: including efforts to orient human activities, particularly they are leaderships, communications, joint working groups, activity changes, authorizations, the improvement of the work quality ,work satisfactions , need satisfactions , organizational changes, the spirit of the staff, and mental management

- Control: In relation to all management activities to ensure the results match reality, consistent with the results was planned The main activities: quality control, financial control, sales, inventory, expenses, analyze changes, payoff

4.2.5 Information System: Information links all business functions together and

provide the basis for all management decisions It is the foundation of all organizations Information expresses disadvantages or principal competitive advantages

Information system is an important strategic resource, monitoring the changes of the environment, recognizing the threat of competition, and supporting for implementation, evaluation and strategy control

5 Tools for strategic planning and selection :

5.1.Tools for strategic planning

Derived from the real situation in business preparation in VSEE, appropriate tools to plan strategy for the corporation as follows:

5.1.1 Internal Factor Evaluation matrix (IFE)

Internal Factor Evaluation matrix (IFE) is a tool that is used to summarize and evaluate

the strengths and weaknesses of key sales functions, and it also provides the basis to determine and evaluate the relationship among functions

According to Fred R David, IFE Matrix can be developed in five steps:

- Step 1: Listing factors that have been identified in the process of internal analyze Use from 10 to 20 internal elements, including the strengths and weaknesses

- Step 2: Assigning significance by classifications from 0.0 (not important) to 1.0 (most important) for each factor The importance assigned to each factor for certain relative importance of factors for the success of companies in the industry Total of all levels of this important right by 1.0

- Step 3: Classifying from 1 to 4 for each factor, representing for the biggest weakness (classified by 1), the smallest weakness (classified by 2), the smallest strengths (classified by 3), or the biggest strengths (classified by 4) Such classification is important to score each variable

- Step 4: Multiplying the importance of each variable with its type to determine the number of important point (step 2 x steps 3)

- Step 5: Adding all the important points for each variable to determine the total number of important points of the organization

Regardless of IFE matrix has how many factors, the total number of important points can

be classified from the lowest of 1.0 to the highest of 4.0 and the average score is 2.5

The total of important number is lower than 2.5 showing that the corporation is internally weak and the number is higher than 2.5, showing that the corporation is internally strong

5.1.2 External Factor Evaluation matrix (EFE)

External Factor Evaluation matrix (EFE) allows summarizing and evaluating on

economic information, society, culture, demography, geography, politics, government,

legislation, technology and competition

According to Fred R David, the development of an EFE matrix consists of 5 steps:

- Step 1: creating list of factors playing an decisive role for success like being identified during inspection from the outside elements Use from 10 to 20 factors, including the opportunities and threats affecting the corporation and corporation’s business fields

- Step 2: Classifying the importance from 0.0 (not important) to 1.0 (very important) for each factor The classification shows the factors are relevantly important

to success in the corporation’s business fields The appropriate level of classification can

be determined by comparing successful competitors with the unsuccessful ones or by discussing about this factor and obtain the consent of the group The total number of classification levels which is pointed for these factors must be equal to 1.0

- Step 3: Classifying from 1 to 4 for each factor Such classification is important to score each variable: 4 is a good response, 3 is responded higher than the average, 2 is responded on the average and 1 is a little response Levels based on the effectiveness of strategies in the corporation Thus, the classification is based on the corporation

- Step 4: Multiplying the importance of each variable with its type to determine the number of important point (step 4 = step 2 x step 3)

- Step 5: Adding the total number of important points of each variable to determine the number of important points for the organization

Regardless of the main opportunities and threats are included in the EFE Matrix, the total number of the highest important points that an organization can have is 4.0 and the lowest is 1.0

The total number of important average point is 2.5 The total number of important point

is 4 showing that organizations are responding very well to the present opportunities and threats in their environment The total number of important point is 1 showing that

strategies that the corporation has given out did not take advantage of opportunities or avoid outside threats

5.1.3 Competitive image matrix

Competitive image matrix identifies essential competitors together with their special advantages and disadvantages Competitive image matrix is an extension of the EFE matrix in the case that the levels of importance, classification and the total number of important points have the same meaning The total number of important points which is evaluated by the company's competitors is compared with the standard corporation The special categories of competitors can be compared with the classification level of the standard corporation The comparative analysis provides important strategic information

5.1.4 Strengths- weaknesses - opportunities – threats matrix (SWOT)

SWOT matrix is an important combined tool helping administrators develop four types of strategies as follows:

- The strengths - opportunities strategies (SO)

- The weaknesses – opportunities strategies (WO)

- The strengths – threatened strategies (ST)

- The weakness - threats strategies (WT)

To create a SWOT matrix undergoes eight steps:

- Step 1: Listing the key strengths in the internal corporation

- Step 2: Listing the weaknesses in the internal corporation

- Step 3: Listing the major opportunities in the external corporation

- Step 4: Listing the key threats in the external corporation

- Step 5: Combining the internal strengths with the external opportunities and fill in the result of SO strategy in the appropriate box

- Step 6: Combining the internal weaknesses with the external opportunities and fill

in the results of the WO strategy in the appropriate box

- Step 7: Combining the internal strengths with the external threats and fill in the

results of the ST strategy in the appropriate box

- Step 8: Combining the internal weaknesses with the external threats and fill in the results of the WT strategy in the appropriate box

5.2 Tool of strategy selection

We use quantified strategic planning matrix (QSPM)

According to Fred R David, QSPM matrix uses information from IFE matrix, EFE matrix, competitive image matrix, and SWOT matrix Six steps are necessary to develop QSPM matrix:

- Step 1: Listing opportunities / external threats and strengths / important internal weaknesses and 10 factors of external important success

- Step 2: Classifying each of the internal and external important factors The classification is also the same as IFE and EFE matrixes

- Step 3: Identifying replaceable strategies that the organization should consider carrying out Rewrite these strategies on the first row of the QSPM matrix Gather strategies into separate groups together if possible

- Step 4: Identifying the attractions of each strategy (AS) Attractive points assigned

to each strategy to indicate the relative attractiveness of each strategy compared with other strategies The number of attractive points is classified from 1 = not attractive, 2 =

a little attractive, 3 = quite attractive, and 4 = very attractive If the factors of the important success are not influential for the choice of strategies, it is not allowed to grade strategies in this strategic group

- Step 5: As the total number of attractions (TAS) Total attractions is the result of the classification of points (step 2) with the number of attractions (step 4) in each row

- Step 6: In total the total number of attractions It is the sum total of attractions in the columns of the matrix QSPM strategy Consideration of all factors inside and outside can influence the appropriate strategy is to attract higher score indicated more attractive strategy

CHAPTER 2: REALITIES ANALYSIS

1 CORPORATE PROFILE (VSEE)

VSEE was formed with the participation of capital contribution of Electricity Companies belonging to EVN and ZPEIC The purpose of the investment is that producing electrical equipment for power grid of the Power Company in Vietnam, and proceeding to export products abroad

- Date of establishment: 12th December, 2008

Members with capital contribution:

1 Power Company No2 (PC2)

2 Zhejiang Provincial Electric Investment Power Company (ZPEIC)

3 Ho Chi Minh City Power Company (HCMPC)

4 Dong Nai Power Company (DNPC)

5 Khanh Hoa Power Joint Stock Company (KHPC)

2 GENERAL ENVIRONMENT

2.1 Investment environment:

2.1.1 Overview of the investment country

Vietnam with 331,2 thousand square kilometers in area and a population of over 84 million is located to the East of The Indochinese Peninsula, bordered by China in the North, Laos in the West and in the South West by Cambodia To the East is the 3,260

kilometer-long beach Vietnam has a long and narrow terrain spreading 1,600 kilometers from North to South and the narrowest area has only 50 kilometers in width

Upon the 20-year process of reform, Vietnam has gained countless historic achievements The system of the market economy has basically completed and therefore the collective power has been further reinforced The national economy is developing fast, with the annual GDP rate increasing on an average of 7.5% from 2001 to 2007 Vietnam has officially joined in the World Trade Organization (WTO), opening its market relatively wider

Along with the development of the local works and especially the joint venture project with China and the foreign investment ones, power is popularly used and more and more important, resulting in the increasing demand for this kind of goods

2.1.2 The legal framework of Vietnam:

Nowadays, Vietnam has applied the following legal documents for joint-venture entrepreneurs:

- Law on Investment No 59/2005/QH11, dated 29th November 2005, valid from

Law on Investment contains some of the relevant points to the project as follows:

a Regulations in relation to business income tax: the business income tax rate for foreign investors and joint-venture entrepreneurs is 25% on business profit; 20% for the investment projects encouraged by Vietnamese government; 15% for projects with various incentive portfolios; and 10% for especially incentive ones

b According to the law, entrepreneurs who suffer losses after having paid taxes are allowed to transfer these losses till next year and are deducted from the business income tax But this cannot exceed 5 years (Clause 34)

c Transferring profit to another country: no fee charged

2.1.3 Tax incentives for Industrial parks:

The incentives for foreign investors are import-export tax, VAT, business income tax and fees for profit transfer to foreign countries

Table 2.1 Tax Incentive for Industrial Parks

Kinds of Tax Manufacturers

Export tax Tax-free

Import tax Tax-free (imported equipment such as enterprises’ fixed assets,

materials and goods used for production and operation)

Business Income

Tax

- Enterprises are given preferential tax rates during 12 years right after starting to operate its manufacture

- Tax-free for 3 years upon the earning year

- In the next 7 years: 7,5% over profit

- For the rest of the preferential period: 15% over profit

- After that period: 25%

Value Added Tax

- Tax-free for equipment not manufactured in Vietnam, such as fixed assets of entrepreneurs, imported tools in the assembly lines, special transporting tools, building materials

- Raw materials used for manufacturing exported goods

Fees for profit

Thus, VSEE subject of preferential tax policies applicable to enterprises with foreign investment in industrial parts VSEE will take advantage of this to build the appropriate business strategy to penetrate markets electrical equipment Vietnam successfully

2.2 Industrial Environment

2.2.1 Economic characteristics of the industry highlights

Threat of new entrants

Bargaining power of suppliers

Competitive rivalry within the industry

Bargaining power of customers

Threat of substitute products

Electrical equipment being used is very common in most production areas of the economy, from power plants, transformer stations, transmission systems, to the transmitters and engine power in industrial enterprises, agriculture, transportation, and

in both defense and security fields

Unlike consumer products, electrical equipment products focus on quality rather than design, absolute accuracy, time use of the product must be long, product durability less depending on weather climate Therefore, specialized applications to save time, improving productivity, intensive investment with advanced technology to quickly increase manufacturing capacity product quality is required

Cost of production equipment is usually higher due to concentration of power technology products should be affected more directly to the construction price of products, when higher product price, competitiveness of the product is low

2.2.2 Five forces of competitive position

- Threat of new entrants: It definitely happens when the

high quality electricity equipment market is still

open, especially after the elimination of

customs barriers, Vietnam performed the

open-door policy to encourage investment,

threat from foreign investors with strong

financial capability put a pressure on

VSEE

- Competitive rivalry within the industry:

Domestic electricity equipment companies which

are established before VSEE are more experienced,

have more customers and bigger market share than VSEE’ s In this period, VSEE should avoid competition against them by choosing a specific range of product that current rivals have yet produced or the production of this range is not their advantages Then, VSEE could hold a foot on this market

Today, Competitors of VSEE are manufacturing company of electrical equipment such

as measuring electrical equipment company: Electric Measurement Instrument Corp (EMIC), Voltage Transformers and Electric materials Hanoi Corp., Saigon Electrical

Equipment Joint Stock Company (SEE), Tuan An Group

EMIC is a state-owned enterprises with relatively large amount of capital, have strong

brand, high prestige, experience nearly thirty years in manufacturing electrical equipment, large domestic market share

EMIC's main product is the meter 1pha, 3-phase types, Current transformer in height, medium and low voltage; a leading company in the manufacture of electric meters in Vietnam should have a high competitiveness For electronic meters, EMIC is research to manufacturing production system, but not complete The weaknesses of the company's marketing team is not experienced, not tactical marketing relevant and effective, design work designers did not meet market demand Products exported mainly to the way assembly equipment and carry the names of foreign firms

EMIC very seriously the work of science and technology and quality management products, apply more advanced technologies such as processing and mold by cutting around electrical sparks, as detailed by ultrasonic cleaning, painting electrophoresis , equipped with automated machines help raise productivity, reduce costs, lower product price In addition the company has made the transfer of technology and how to target products company Landis & Gyr of Switzerland should the company's products have been exported in many countries such as Russia, USA, Philippines, Nicaragua, Myanmar, Cambodia , Laos, Banglades

Weaknesses of EMIC: Marketing team is not experienced, not tactical marketing relevant and effective, design work designers did not meet market demand Products exported mainly to the way assembly equipment and carry the names of foreign firms

VOLTAGE TRANSFORMERS AND ELECTRIC MATERIALS HANOI CORP

was established in 2005, on the basis of combined Hanoi Electrical equipment Joint

Stock Company and Hanoi Transformer Manufacturing Joint Stock Company Company shares with capital of 30 billion VND, of which the state holds 45%, the shareholders, the company also held 55%

The corporation's products are distributed type Transformer oil soaked, dried Transformer, Transformer Explosion proof silicone oil, various electronic devices such

as current Break, Fuse cut out, Anti-lightning Silicone Transformer valve cover line, measuring transformers, capacitor banks, distribution cabinets….Thus, although newly established, but the company has nearly 45 years experience in manufacturing power transformers, products branded with the company's quality, reliability Customers have been on the market throughout the country and begin implementation of exporting their goods to neighboring countries such as Laos and Cambodia

The corporation's strategy is to increase new investment, investment intensive voltage electrical equipment with advanced technology to quickly increase capacity manufacturing electrical equipment, improving the competitiveness of its products meet most domestic demand, replace the imported equipment, the exporting products to the market area and the world

high-SAIGON ELECTRICAL EQUIPMENT JOINT STOCK COMPANY: Previously,

SEE is a production base of business materials, accessories and equipment for power industry, was established in 1990 Developed by Vietnam's power sector and region, SEE has transformed business model and increase its chartered capital to establish Electrical Equipment Co., Ltd SaiGon in 1994 By 2006, our company once again increase its charter capital and transform business models and renamed the Saigon Electrical Equipment Joint Stock Company

Force personnel in full-member company is more than 160 people, including staff are university graduates and university graduates are more than 33 people SEE has designed, produced many successful product line of high quality

It from a product specialties original power, to present the company produced more than 1,000 categories of products offered and possible over 5,000 categories of products meet the timely needs of diverse and complex sector power

SEE able to provide equipment and accessories for the entire set of grid high, medium and low voltage Provide equipment package Substation capacity to 40MVA, 220kV voltage

TUAN AN GROUP: Tuan An was established in 1987 in Ho Chi Minh City To 1996 to

meet the needs of the Electricity Industry Vietnam Ltd, Manufacturing & Commercial Electrical Equipment TUANAN established To 2008 to integrate with the economic development of the country and meet the needs of Vietnam's power sector Tuan Printing

Co has increased charter capital to 80 billion and converted into Corporation Group TUANAN operating under the corporate model of how includes 12 Member companies operate throughout the country and build manufacturing plant in Long An area 31.600m2

Since it’s founding until now, Tuan An has provided quality products to market power, industry and creates high reputation in the market power sector

Commercial activities: Tuan An offer products of brands such as AB CHANCE, OHIO BRASS, BURNDY, SIEMENS, NU.LEC, G & W Electric in Vietnam, with products like FCO, LBFCO, LA, DS, cutter, Recloser, LBS, Loose insulating polymer suspension, and Fuselink…

Production activities, Tuan An provides low-voltage circuit breaker, MCB types, DS 1P and 3P voltage from 24kV to 35kV type of house, outside Fuse Cutout 100A, 200A voltage from 24kV to 35kV, lamping extreme types, Hotline clamp Accessories for transmission lines and distribution, Accessories for transformers, meters Housing bundle and low voltage distribution cabinet

- Threat of substitute producst: With a specific range as electronic galvanometer, dry

low and medium- voltage current transformers (CT) and voltage transformers (VT), it is

very difficult to find sudstitutues They just can be out-of-date technical products which may been equiped with some benefits but will definitely not meet management requiments on extra characteristics For instance, wave dispatcher and tote impulse are added in electronic meters

Pulse counter with the duty that recording numbers by counting electrical pulses, stored and transmitted data receiver receiving the signals as requested Now the broadcast capacity is very small, so it has short-range transmission, about 100m It will not be as convenient and accurate as electronic meters transferring data through the power line, which is soon launched by VSEE

- Bargaining power of customers: Initially, customers of VSEE are power companies,

then the pressure on price from buyers is very small However, the pressure on quality is very high since bad rumor can raise if the corporation can not assure quality of products Community and authority will intervene in this matter and the company’s prestige would

be seriously affected Besides, pressures on after-sales services is also high; such as good guanrantee system, modification and longer term of guarantee than others

According to market research results of the South, the electrical equipment now offered

to most Power Company (approximately 98%), the remaining 2% is offered to customers

as consumers Since the Electricity Law (2005), the Power Company must invest to build and install equipment to supply electricity to the customer

- Bargaining power of supplier: Because most of parts of electricity equipment must be

imported, it is difficult for VSEE to manage supplying resources well Besides, the present currency policy of Vietnam can make it very hard to buy foreign currencies and affects import process of parts; business and manufacturing plans of the corporation

2.2.3 Product stream projection

The market and demand for electrical materials – equipment are very potentially developing when EVN deploys its general chart period 6 with the forecast growth rate of commercial power about 20%-22% per year for 2006-2010 and keep retaining at a high rate until 2020, struggling for an industrialized Vietnam

Meanwhile, goods produced in Vietnam are still limited in types and quality Most of the electrical materials – equipment are bought from foreign countries through bidding

The electrical materials – equipment that 4 Vietnamese power companies purchase most can be arranged in the order of revenue from the highest down as in Table 2.2, Figure 2.1 (with reference to the companies’ purchase plan of electrical materials – equipment in 2008)

Table 2.2: Purchase situation of electrical materials – equipment in joint stock companies

Capital (USD)

Percentage (%) Note

1 Bare conductor and low voltage wire 74,500,000 42.82

3 Electromechanical and electronic meter 14,500,000 8.33

4

Low-voltage and medium- voltage

Current transformer (CT) and

medium-voltage transformer (VT)

9,700,000 5.57

Used for making small VT only

general use

6 Medium-voltage lightning- resistance 1,100,000 0.63

Figure 2.1:

Purchase situation of electrical materials –

equipment in joint stock companies

Low-voltage and voltage Current transformer (CT) and medium-voltage transformer (VT)

medium-FCO, LBmedium-FCO, Polymeric insulator

Medium-voltage resistance

lightning-Other kinds

Bare conductors and low-voltage wires have got a big quantity, nearly 43% of the purchase value of the companies The priority goal of VSEE is to dominate this important market, not only to PC2 but also to the other strategic partners in the joint-stock companies This kind of goods has strengths that are high revenue, low capital investment, simple process of producing and short payback period Vietnam now has plenty of local companies and joint-ventures meeting full demand for local consumers and export VSEE will not manufacture conductors in the first period due to high cost prices of the high relative quality products for the power companies’ consumption High cost prices will make it difficult for VSEE to compete with other entrepreneurs in the same area

Products with the second largest revenue are the oil immerged voltage transformer This kind of goods in the Southern market is almost supplied by only THIBIDI and EMC, which therefore results in tough competition among these companies However, it is vital

to set up a prudent business strategy, especially about quality and reliability of products

in order for them to be accepted by the market and keep their ground in the long- term In

the aspect of techniques producing voltage transformers, we should develop based on technical capacity of the product line CT-VT, manufacturing the single phase products with small capacity, and bigger ones in the next step of production

Electronic meters have got the third largest revenue, but sales can dramatically grow more than now when there is a policy to replace the present meters We will soon positively put this kind of product into production to take advantage of the market opportunity Also, as a request for the ratifying procedure and experience in operation,

we have to choose a partner with good technical and competitive prices so as to purchase

the technology of manufacturing meters or contracts for production association

The medium voltage CT- VT has obtained quite great quantity Besides, manufacturing companies in Vietnam are unable to meet the product quality It is advised to invest in producing this kind of product as there is a market nationwide We have clearly understood the technology of manufacturing CT-VT cores; we only need to buy resin casting technology to casting dry CT-VT We can use the technology of resin casting technology and making iron core VT to produce dry-type transformers, take advantage of the power of the assembly line

Polymeric insulators (suspended insulator, support insulator, FCO, LBFCO…) are also the ones having the high consumption market, simple technology of production; therefore we can buy equipment and materials to produce this product Mattering lightning –resistance, we can make lightning-resistors on the insulated manufacturing line with the polymeric mould machine accompanied However, due to the absence of the technology of making non-linear resistors and the type-test equipment, the lightning-resistant products will be launched next period

2.2.4 Competitors in each line of products:

2.2.4.1 Electronic meters:

Since 1999 the power companies directly under EVN have begun to make use of multifunctional electronic meters with various quotations to install for customers who

consume electricity for production, business, service… Most of the three-phase electronic meters are imported The single phase meters also start to be imported by large quantities The usage of electronic meters will integrate many support functions for the electrical system administration, better customer management, increasing working capacity

Nowadays, we only have EMIC making electromechanical meters nationally EMIC, University of Electricity, PC1, and PC3 have done researches on assembling electronic meters but have not sold well because the production line is not completed (Table 2.3)

Table 2.3: The quantity, types of electric meters are used in 20 branches of PC2 that need replacing

2.2.4.2 Dry medium-voltage Current transformer (CT) and Voltage transformer (VT)

As an increasing demand for customer development, specially, customer industrial production tends to increase rapidly after the recession period demand for low voltage CTs, CTs and medium-voltage VTs will be very high (Table 2.4)