Building Business Strategy of Vietnam Superintendence and Inspection Corporate in the period 2011 – 2016

ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT Building Business Strategy of Vietnam Superintendence and Inspection Corporate in the period 2011 – 2016 Group Number: 06 Student’s nam

ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT

Building Business Strategy of Vietnam Superintendence and Inspection Corporate

in the period 2011 – 2016

Group Number: 06

Student’s name: LE XUAN HOANG

NGUYEN MANH HUNG

DUONG VIET PHU BUI VAN UOC

CLASS: GAMBA 01 X0409

HANOI 2011

ACKNOWLEDGEMENTS

Thank you very much teachers of Global advanced master of business

administration program for teaching valuable knowledge and guide us to complete

the graduation assignment

Thank you chairman of the board Bui Duy Chinh, deputy personnel manager Tran

Van Tuan, head of marketing department Nguyen Huong Giang, chief executives of

Vinacontrol Assessment Corporation, SGS Company, BV Company, Quatest

Company and colleagues who willingly exchange, and providing feedback

information

With limited ability and time, the capstone project report would remain some

shortcomings, we are eager to receive remarks and contribute from you

Chapter 1 THEORETICAL BASIS OF BUILDING STRATEGIES 12

1.1.3 Role of business strategy for enterprises 13

Chapter 2 ANALYZE THE REAL SITUATION OF THE VIETNAM

SUPERINTENDENCE AND INSPECTION JOINT STOCK COMPANY

2.1.2 Functions, tasks 26

2.2.6 Analyze competition among businesses which are currently

2.2.6.1 Analyze competition among businesses in the same sector 43

2.2.8.2 Analysis of the financial situation of the Company 52

2.2.10 Analyze the matrixes: SWOT, SPACE, BCG, GREAT 67

2.2.10.1 Analysis of SPACE matrix of Vinacontrol 67

2.2.10.2 Analysis of BCG matrix of Vinacontrol 68

2.2.10.3 Select the strategy by GREAT matrix 70

2.2.10.4 Analysis of SWOT matrix of Vinacontrol 71

3.2.1 Continue to be the leading of the market, attack the competitors 72

3.2.2 Enterprise value has the growth of over 20%/year 72

3.5 Development strategy of distribution channel 75

3.10 Solution of the personnel and apparatus organization 77

LIST OF TABLES

Tables:2.1 Income statement of vinacontrol from 2006 to 2010 (financial

statements of Vinacontrol from 2006 to 2010) 30

Tables:2.2 GDP of Vietnam from 2001 to 2010 (report Vietnam’s GDP,

General statistics office from 2001 to 2010) 31

Tables:2.3 CPM competitive matrix of Vinacontrol, SGS, BV, Quatest 44

Tables 2.4 Labors, revenue, capacity (Source: The annual labors report of

Tables:2.5 Training from 2005 to 2010 (annual training report of

Tables:2.6 Accounting Balance sheet of Vinacontrol 2010 53

Tables:2.7 Report of Business results of vinacontrol 2010 55

Tables:2.8 Statement of monetary circulation (source Finance report of

LIST OF FIGURES

Figure 1.2 Competitive model of Michael Porter (source alan chapman 2005,

based on Michael Porter's Five Forces of Competitive Position

Model)

17

Figure 1.4 Space Matrix Model (source H.howe, R, mason and K.dickel

Figure 2.1 Organizational Chart of Vinacontrol (Vinacontrol company’s

Figure 2.2 FDI from January to April (IDF report of Vietnam from January to

Figure 2.3 CPI from January 2010 to April 2011 (CPI report of Vietnam from

Figure 2.4 Import and export from September 2010 to April 2011

(import-export report of Vietnam from September 2010 to April 2011

General statistics office

2010)

Figure 2.11 Assessment of the resource of Vinacontrol Company in 2010 50

Figure 2.12 Structures of assets (source: accounting balance sheet of

Figure 2.15 PM chart (source report of Business results of vinacontrol 2010) 56

Figure 2.16 BEP chart (source report of Business results of vinacontrol 2010) 57

Figure 2.17 ROA chart (source report of Business results of vinacontrol

Figure 2.18 ROE chart (source report of Business results of vinacontrol 2010) 58

PREAMBLE

 Background, the urgency of research topic:

The country’s economy has made great achievements for over 20-year

renovation The economy has gradually transferred to the market economy; it has

ceaselessly developed, expanded and integrated into the regional and world economy

Businesses have operated in the field of business in new environments Apart from

new opportunities, they are bigger difficulties, challenges than before, in both

domestic and international market The Viet Nam Superintendence and Inspection

Joint Stock Company (Vinacontrol) is also an exception Vinacontrol, whose

forerunner is the Superintendence and Inspection Company, is the first and largest

inspection organization with Vietnam’s top prestige If the Company previously had a

large exclusive market and protected by the State, since 1999 up to now there are 125

companies in the field of inspection to establish, so the company must face to bigger

competition How the business can grow uninterruptedly, have competitive strengths

and win victory in the market economy full of changes and competition is the regular

concern of most domestic businesses in economic management, in order to seek and

promote comparative advantage to maximum in a very severe environment but

including many both opportunities and challenges In such circumstance, knowledge

of advanced strategic management, economic theories are the guideline for business

operations of all level managers in running and organizing operations of business On

that basis, business strategy of the company plays an extremely important role in

deciding its existence and development As employees of the company, along with

the desire of applying earned knowledge into practice and contributing a partial

strength to build the company to become a strong economic group, our group selects

the topic: “Build the business strategy of the Vietnam Superintendence and Inspection

Joint Stock Company in the period of 2011-2016” for our capstone

 Purpose, significance of research topic:

The topic aims at building the business strategy of Vinacontrol including

Product strategy, price strategy, distribution strategy and promotion strategy Analyze

the reality helps us recognize advantages and disadvantages of the company, then put

forth several methods in order to minimize weaknesses, take full advantage of

opportunities and promote strengths

 Scope of research:

Analyze the business environment for the company’s services from 2006 to

2010 to build the business strategy until 2016 for its products in the Vietnamese market

 Method of research:

Source of data: Primary, Secondary

Analysis techniques: PEST, SWOT, Michael Porter’s competitive model,

SPACE matrix, BCG matrix, GREAT model, functional analysis

 The capstone’s structure:

PREAMBLE

CHAPTER 1: THEORETICAL BASIS OF BUILDING STRATEGIES

1.1 Theory of building business strategies

1.1.1 Concept of business strategy

1.1.2 Stages of strategic management

1.1.3 Role of business strategy for enterprises

1.1.4 Classify business strategies

1.1.5 Define missions, purposes of business

1.1.5.1 Missions

1.1.5.2 Purposes

1.2 Evaluate the external environment

1.2.1 Analyze PEST model

1.2.2 Competitive model of Michael Porter

1.3 Analyze the internal business

1.4 Analyze SWOT, SPACE, BCG matrix models

1.4.1 SWOT matrix

1.4.2 SPACE matrix

1.4.3 BCG matrix

1.5 Select strategy

CHAPTER 2: ANALYZE THE REAL SITUATION OF THE VIETNAM

SUPERINTENDENCE AND INSPECTION JOINT STOCK COMPANY

(VINACONTROL) 2.1.1 Introduction to Vinacontrol

2.1.2 History of establishment and development

2.1.3 Functions, tasks

2.1.4 Apparatus organization

2.1.5 Mission

2.1.6 Vision

2.1.7 Situation and business results

2.2 Analyze business environment

2.2.1 Economic environment

2.2.2 Social environment

2.2.3 Technological environment

2.2.4 Political – legal environment

2.2.5 Environment in business sector

2.2.6 Analyze competition among businesses which are currently present in the

2.2.7.2 Analysis of the financial situation of the Company

2.2.7.3 Technical material facilities

2.2.7.4 Analysis of the competitiveness

2.2.8 Strengths, weaknesses

2.2.9 Analyze the matrixes: SWOT, SPACE, BCG, GREAT

CHAPTER 3: SOLUTION, SUGGESTION 3.1 Strategic selection

3.1.1 Strategic 1

3.1.2 Strategic 2

3.1.3 Strategic 3

3.2 Strategic targets

3.2.1 Continue to be the leading of the market, attack the competitors

3.2.2 Enterprise value has the growth of over 20%/year

3.2.3 Become a strong economic group

3.3 Strategies of the parts

3.4 Strategy of products

3.5 Development strategy of distribution channel

3.6 Management solutions of the Company

3.7 Competitive solution in the market

3.8 Solution of products and services

3.9 Solution of the finance

3.10 Solution of the personnel and apparatus organization

CONCLUSION

CHAPTER 1:

THEORETICAL BASIS OF BUILDING STRATEGIES

1.1 Theory of building business strategies

1.1.1 Concept of business strategy

For existence and development, each business should define long-term

objectives and methods of operation to fulfill given objectives; in other words,

business managers should build their business a specific business strategy There

are many definitions of strategy; in the viewpoints of each author, definitions are

more or less different

According to Chandler, strategic management means, “define basic and

long-term objectives, purposes of a business and apply a chain of actions as well as

distribute necessary resources to implement those objectives”

Quinn put forth a concept more generally: “Strategy is an integrated pattern

or plan of main purposes, policies, and a chain of actions into a general which is

strictly united”

Johnson and Scholes defined that “Strategy is a long-term orientation and

scope of an organization in order to obtain competitive advantage for the

organization through identifying its resources in a changeable environment, for

satisfying the market needs and expectation of concerned parties”

Michael E Porter said, “Strategy is an art of building competitive

advantages Or Strategy is a chain of complex actions in order to mobilize resources

of an organization as possible, for achieving a certain objective”

Whatever approach is, the nature of business strategy is still to outline the

future image of business in its scope of operation Under this interpretation, the term

business strategy uses for three different meanings:

- Establish long-term objectives for business

- Release general action plans

- Select action methods, implement and distribute resources to carry out

objectives

1.1.2 Stages of strategic management

- Establish strategies: develop missions, define opportunities, challenges, strengths

and weaknesses; build long-term objectives

- Implement strategies: Set out annual objectives, release policies, personnel

encouragement, and resources distribution of business to fulfill given objectives

- Evaluate strategies: supervise achieved results and established operations, measure

and define achievements, and have necessary adjustments in accordance with the

real situation

1.1.3 Role of business strategy for enterprises

As a business manager, you must have a strategy to succeed Business

strategy looks at the distant future of the company The company managers are easy

to forget and ignore business strategy because they are very busy with their current

works In such case, it could not know how to define business works and where they

are With good strategic skills, set out practical objectives and clearly know how to

achieve them in the future As a business manager, we could not authorize others to

build business strategies

1.1.4 Classify business strategies

Cost of leadership strategy: Includes a mass of actions in order to produce

commodities or services with lowest cost may be acceptable for customers

Differentiation strategy: Include a mass of necessary actions in order to

produce commodities or services that customers think that those products are

different and this differentiation is important to them

Focus strategy: Is a mass of actions in order to produce commodities or

services for serving the needs of a specific competitive market segment

Cost-differentiation combination strategy: apply this strategy to create the

flexibility for business

1.1.5 Define missions, purposes of business

1.1.5.1 Missions: A mission shows basic functions of an organization in the

society; the organization produces commodities and services in order to serve its

customers A clear business mission must meet the following factors:

- Purpose: Why has the business existed? Has it produced wealth for shareholders?

Has it existed for satisfying all needs of founders and managers (including workers

and the society in general?)

- Strategy and scope of strategy: A mission statement delivered business theory for

businesses and therefore, should define two points: Products and services provided

by the business, the business’s capacity; then the business can try its competitive

methods

- Policies and behavior standards: A mission should be specified by daily activities For

example, if the business mission consists of providing the best services for customers,

policies and standards must be created and supervised to inspect services supply

- Values and culture: The business’s values are unsaid basic faiths of its employees

These values include principles of business, loyalty and commitment, instruction of

expected behaviors, a great significance of mission helps create a working

environment covering common purposes

- What has the role of mission statement played in making marketing plan? In fact,

a right mission statement could clarify 3 points as follows: It points out main

features of marketing plan, which should seek how to complete mission It releases

a method for evaluating and inspecting marketing plan, whether marketing

decisions suitable to that mission or not? It creates a motivation to implement

marketing plan

1.1.5.2 Purposes:

Purpose is a result gained in the future under given plan

Purpose conditions: must be specific, clear, measurable, workable, unified

Purpose classification: for long-term purposes, they often are related to the

ability of earning profits, capacity, competitive position, personnel development,

personnel relationship, technical guidance, social responsibility

Factors affecting purpose establishment:

- Internal conflict

- Excessively emphasize on fulfilling purposes causing reaction of different groups

when purposes achieves not as expected

- Relative authority among the company’s leaders

- Qualifications of managers

- The company’s resources

- Forces of the external environment such as owner, supplier, rivals

1.2 Evaluate the external environment:

1.2.1 Analyze PEST model

The external environment

consists of all factors outside the

business beyond the control of

managers; it has a great influence on

implementing the business’s purposes

It affects the company’s growth and

profitability Analyze these factors

helps the business define its position

and special characteristics of the

environment and age that it’s existing,

define impacts of the external

environment on the business and then release suitable decisions for strategic

planning The microenvironment consists of 6 main factors: political and legal,

economic, technological, socio-cultural, demographic and global factors

- Political – legal environment

The change in political and legal environment will have a big influence on

the process of implementing business strategy of business Businesses, which invest

in a domestic area or invest transnational pay much attention to the political

environment, their influence on the Government or the Government’s influence on

them Pay attention to the following factors: economic reform, administrative

reform, policy change related to sector, tax policies, environmental safety and

Figure 1.1 Microenvironment (Source: provenmodels.com)

protection, promulgation, amendment of regulations on resource use and natural

environmental protection Effectively settling environmental problems is an

essential condition for sustainable growth

- Economic environment

The microenvironment defines the healthiness, prosperity of the economy; it

always exerts influences on businesses and sector The economic environment

represents the nature and orientation of the economy where the business is running

Impacts of the economy on a company can change the ability of producing values

and revenue Four important factors of the macroeconomics are growth rate of the

economy, interest rate, exchange rate and inflation rate

- Technological environment

Technological changes affect many parts of the society, mainly through

products of technological process Including operations concerning create new

technologies, apply them to make new products and materials Change in technological

environment will bring the business both opportunity and threat Opportunity is

improve the ability of making new products with high competitive strength; threat is

make the life cycle of products reduce The most important impact of technological

change is affect-joining barriers and the sector’s re-structure

- Socio-cultural environment

Social changes also create both opportunity and threat A business wants to

exist along with time, partners, be accepted by the society; it is sure to attach much

importance to business culture Socio-cultural values create the society’s

foundation; therefore, it often leads changes in technological, political-legal,

economic and demographic conditions

- Demographic environment

Include problems concerning population, age structure, geographic

distribution, ethnic community and revenue distribution The viewpoint of goods

and services consumption of the local and regional people and the consumption

strategies as well Life style also affects the needs of goods and services including

type, quality, shape, and model The speed of population growth has a positive

effect on the contents of business and production strategy of business

- International, global environment

The tendency of integration and globalization in the world and in Vietnam

fosters businesses to pay attention to international factors when they plan a

long-term, highly integrated strategy, which has the ability to out-reach geographical and

political sphere Global segment includes related global markets, changing current

markets, important international political events, features of basic institution and

culture on global markets

1.2.2 Competitive model of Michael Porter

Figure1.2 Competitive model of Michael Porter (Source Alan Chapman 2005,

based on Michael Porter's Five Forces of Competitive Position Model)

Competitive pressure of suppliers

Quantity and scope of suppliers: Quantity of suppliers will decide their

competitive pressure, negotiation power for the sector and business If in the

market, there are only several large-scale suppliers, it will create competitive

pressure, influencing the whole production and business of the sector

Product substitution of suppliers: For such matter, we study the substitution

of input materials for suppliers and cost transfer of suppliers (Switching Cost)

Information of suppliers: At present, information is always a factor

promoting the commercial development, information of suppliers has a big

influence on selecting input suppliers for business

Competitive pressure from customers

Customers are a competitive pressure, which can directly affect the whole

production, and business activities of the sector, customers could be divided into 2

groups: Retail customers and Distributors

Both groups put pressure on business regarding price, quality of attached

products and services and they control the sector’s competition through purchase

decision Similar to pressure from suppliers, we consider impacts on competitive

pressure from customers on the sector Scope, Importance, Customer transfer costs,

Customer details

Competitive pressure from potential rivals:

According to M-Porter, potential rivals are businesses, which are not

currently present in the sector, but they can affect the sector in the future Potential

rivals, more or less, put pressure on the sector, strongly or weakly depending on the

following factors:

+ The sector’s attraction: This factor is expressed through targets such as

profitability, quantity of customers, and quantity of businesses in the same sector

+ Barriers when joining in the sector: are factors making participation in the

sector more difficult and costly

Competitive pressure from substitute goods

Substitute products and services are ones, which can meet the needs

equivalent to others in the same sector

Main competitive pressure of substitute products is the ability to meet the

needs compared to other products in the same sector; in addition, price, quality

factors and others of environment like culture, politics, and technology will also

affect the threat of substitute products

Competitive pressure from the internal sector

Businesses in the sector will directly compete with one another, creating

counter-pressure on the sector and producing a competitive intensity In a sector, the

following factors will increase competitive pressure on rivals

Decentralized sector is one in which many businesses compete with one

another but no business has the ability to rule over the remaining businesses

Focus sector: The sector only has one or several businesses holding

governing role (Competitive control – can be considered monopoly)

Exit Barriers: Similar to barriers when joining in the sector, exit barriers are

factors making exit of businesses become difficult

1.3 Analyze the internal business:

The internal environment consists of internal factors that businesses can

control Analyze the internal environment of business in order to recognize

strengths, weaknesses for building a system of purposes and suitable strategies with

the aim of taking full advantage of strengths and changing them to become special

abilities; vice versa minimizing weaknesses Main factors represent a chain of

values of business and its core capacity, including: Production process, Marketing

activities, management activities, accounting-financial activities, R & D activities,

system of information collection and processing

- Analyze production activities

Analyze production process aims at considering whether the process of

making products is suitable to the business strategy including: Analyze production

capacity, Analyze the situation of energy and auxiliary materials supply, Analyze

the situation of reasonableness in the process of production organization, Analyze

quality management works

- Analyze marketing and sales activities

Marketing strategy is functional strategy playing an important role in well

carrying out the company’s business strategy The company’s marketing helps create

values for some activities Through defining trademark and advertisement, marketing

functions can increase values that customers find in the company’s products Marketing

and sales can also create values by discovering the customers’ needs and give feedbacks

for R & D activities of the company to design products that are more suitable

- Analyze services

Means analyzing activities designed for improving or maintaining a product’s

values, including a mass of installation, replacement, training and repair services, etc…

- Internal logistics: Include activities, such as process inventory materials,

warehouses carry out to transfer from output materials to finish products

- External logistics: Include activities related to collect, store, preserve and

transport finished products to customers

- Technological R & D: Include necessary activities to improve the products’ value,

create products and services differentiation for improving competitive capacity

- Personnel management: Study matters of recruitment, labor quality, training,

salary payment, human resource maintenance and development, etc…

- Infrastructure: The business’s infrastructure includes both hard and soft parts:

Hard parts consist of works, technical infrastructure, workshops, machines, etc…

for production and business activities Soft parts consist of soft parts, tools for

management like accounting software, ERP, etc…

1.4 Analyze SWOT, SPACE, BCG matrix models

1.4.1 SWOT matrix:

It is a useful tool for catching and making decisions for all circumstances of

any business organizations SWOT is the abbreviation of 4 words: Strengths,

Weaknesses, Opportunities, and Threats SWOT provides a tool for analyzing

strategies, checking and evaluating position, orientation of a company or a business

project SWOT is suitable to work and analyze under group, designed for making

business plans, building strategies, evaluating competitive rivals, products and

services marketing, development, etc

SWOT analysis technique:

The technique widely applied is SWOT (Strengths, Weaknesses, Opportunities, and

Threats) analysis technique

SWOT matrix is used for forming strategic methods under the following steps:

- Step 1: Summarize the analysis result of business environment – Opportunities and Threats

- Step 2: Summarize the analysis result of the internal business - Strengths and

Weaknesses

- Step 3: Summarize the analysis result and SWOT matrix formation – Strengths

and Weaknesses - Opportunities and Threats

Group of strategic methods are established:

Figure1.3 Swot Matrix (Source: entrepreneurialsecrets.com)

WO STRATEGY Repair internal Weaknesses

by taking advantage of external opportunities

SO STRATEGY Use internal forces to create

an advantage prior to external opportunities

WT STRATEGY Minimize internal weaknesses and avoid external threats

ST STRATEGY Use strengths of company to avoid or minimize external threats

 S-O strategy aims at using the business’s strengths to take advantage of external

opportunities

 W-O strategy aims at repairing weaknesses to take advantage of external

opportunities

 S-T strategy aims at using the business’s strengths to deal with external threats

 W-T strategy aims at repairing weaknesses to reduce external threats

1.4.2 SPACE matrix:

SPACE matrix shows that a business should select the strategy: Offensive,

Careful, Defensive or Competitive

Figure1.4 Space Matrix Model (Source H.howe, R, mason and K.dickel strategic

management and business policy)

- FS: (Financial Strengths) - Financial Strengths of business

- CA: (Competitive Advantage) - Competitive Advantage of business

- ES: (Environment Stability) - Environment Stability

- IS: (Internal Strengths) - Internal Strengths

In order to analyze strategies under this matrix, we have to select criteria of

financial strengths, competitive advantage, environment stability, internal strengths

SPACE MATRIX Strategic Posturing & Action Evaluation

Internal attraction

Unstable growth of market

After selecting an evaluation organization for giving marks and adding average

marks of CA and IS as X, adding average marks of FS and ES as Y

Figure vector combining X and Y, we will select strategy if vector is located in

which area, select strategy in that area

1.4.3 BCG matrix:

BCG matrix or growth/share matrix was built at the end of 60s The basic

principle of this matrix is to mention the ability of creating money through

analyzing list of products of company and put it in the matrix

The name of four parts include respectively: Star, Question Mark, Cash Cow

and Dog Companies have to define the growth speed of each product as well as

market share of these products to put in the matrix

BCG releases 4 basic strategies:

• Build: Products of company should be invested to consolidate and continue to

grow market share

• Hold: This strategy is applied for products located in Cash Cow in order to

maximize profitability and money generating

• Harvest: This strategy focuses on profits for short-term through reducing expenses,

increasing price, although it affects the long-term purpose of products of company

• Divest: Divert products or unprofitable business section to gather resources on

products or sections with great profitability

Figure1.5 BCG Matrix Model (Source: netmba.com)

Star Question mark

Dog Cash cow

BCG matrix simplifies strategy through two factors: growth speed of products

and market share It has supposed that in order to obtain high-speed growth, must

use more resources (and cash) It not only applies products but also uses for

analyzing sections or subsidiaries of a company which is re-distributing its

resources

1.5 Select strategy

Based on synthesizing factors of the strategy: PEST, 5-FORCE and analyze

corporate business environment, analyze SWOT model to indicate groups of

strategic methods and then based on GREAT quantitative matrix, evaluate three

business strategies that business is capable of performing

Strategies

Evaluation mark

Conversion mark

Evaluation mark

Conversion mark

Evaluation mark

Conversion mark

Tables: 1.1 Great Model and select strategy (Source: Fred R.David

Strategic Management concepts and cases)

The strong point of this matrix is that strategies are studied continuously and

simultaneously, it is not limited in quantity, combines internal and external factors

suitably Reasonably evaluate key factors, fit for big organizations

CHAPTER 2 ANALYZE THE REAL SITUATION OF THE VIETNAM

SUPERINTENDENCE AND INSPECTION JOINT STOCK COMPANY

(VINACONTROL) 2.1 Introduction to Vinacontrol

2.1.1 History of establishment and development

Vietnamese name: Công ty cổ phần giám định Vinacontrol

Trading name: The Vietnam Superintendence and Inspection Joint Stock

Company

Abbreviated name: VINACONTROL

Address: No 54 Tran Nhan Tong, Hanoi

At time of establishment, important milestones during development

 24/10/1957: Minister of Agriculture released Decision No 514/BTN-TCCB

dated 24/10/1957 on foundation of VIETINSPECT directly under Ministry

of Trade (cum Inspection Department)

 16/7/1974: Minister of Foreign Trade released Decision No

513/BNgT-TCCB dated 16/7/1974 on splitting off Inspection Department from

VIETINSPECT and naming The Vietnam Superintendence and Inspection

Company (Vinacontrol)

 12/11/1988: Minister of Foreign Economic Relation released Decision No

420/KTĐN-TCCB dated 12/11/1988 on merging the Superintendence and

Inspection Company and VIETINSPECT into The Vietnam Superintendence

and Inspection Company (Vinacontrol)

 2004 and 2005: Minister of Ministry of Trade released Decisions No

1758/2004/QĐ-BTM dated 29/11/2004 and No 1525/QD-BTM dated

24/5/2005 on changing The Vietnam Superintendence and Inspection

company into The Vietnam Superintendence and Inspection Joint Stock

company (Vinacontrol)

VINACONTROL has a team of over 600 qualified and professional

managers, surveyors and staffs in different fields and branches and they are willing

to satisfy all proper needs and agreed ones of customers

VINACONTROL’s facilities have been continuous equipped to meet the

customer's requirements of inspection, testing, analyzing and modernizing which

are fully capable of inspection, testing and analyzing requirements of customers

There are 6 (six) laboratories certified in conformity with the national standard,

therewith VINACONTROL’s Quality Management System follows International

Management Systems and it is certified and recognized as follows:

 ISO 9001 certified by London BVQI (Bureau Veritas Quality International)

 ISO/IEC 17020 certified by BoA (Bureau of Accreditation) under the

Directorate for standards and quality for Inspection Organizations

 ISO/IEC 17025 certified by BoA (Bureau of Accreditation) under the

Directorate for standards and quality for six laboratories with modern

equipments

VINACONTROL has set up, maintained and developed the relation

co-operation; working as sub-contractor/agent of leading international inspection

companies in England, France, USA, Russia, Japan, Switzerland, Korea, China,

India, etc… Moreover, Vinacontrol is member of Vietnam Chamber of Commerce

and Industry (VCCI); The Grain and Feed Trade Association (GAFTA); Vietnam

Food Association (VFA); Vietnam Tea Association (VITAS); Vietnam Pepper

Association (VPA); Vietnam Cashew Association (VINACAS), etc…

2.1.2 Functions, tasks

+ Inspection of specification, quality, condition, number-quantity, packing, code,

etc… for all types of goods; means of transport; losses; agency of loss inspection,

loss distribution for insurance at home and abroad; measurable equipment

+ Supervision of goods during production, delivery, preservation, transport –

loading – unloading, supervision of equipment assembling process for production

lines; assessment

+ Services of sampling, analyzing and sample testing

+ Consultancy, evaluation, certification of management system application, goods

quality, commercial legal procedures; construction investment projects

+ Investigation of estimate document, final statement of civil, industrial, transport,

irrigational works

+ Services for state management: food safety, certification of fertilizers, safety

apparel fabrics are not concerned in this capstone project report

2.1.3 Apparatus organization

Organizational Chart of Vinacontrol

Figure2.1 Organizational Chart of Vinacontrol (Source: Vinacontrol company’s

Shareholders’ General Assembly Management Board General Director

Control Board

Deputy Sales General Director

Deputy Technical General Director

Certification Company

IDICO Inspection Company

Thang long Notarial Public’s Office

company

Subsidiaries, associates

2.1.4 Mission:

Attach special importance to build and develop staffs; apply achievements of

management science and technology into the company’s operations, to create best

products and services for customers

Ensure practical benefits for customers, employees, shareholders and community

2.1.5 Vision:

Vinacontrol strives for becoming a prestigious appraisal organization in the

world, coming to strong economic groups

2.1.6 Situation and business results

Basic interest rate per stock 0.2425 0.4312 0.2181 0.3183 0.4306

Tables 2.1 Income statement of vinacontrol from 2006 to 2010 (Source:

Financial statements of Vinacontrol from 2006 to 2010)

Complete beyond given economic targets at the annual meeting in 2010

Implement investment in new services approved at running terms in the previous

year Deploy new products in order to make up for competitive services Basic

economic targets are achieved by auditing:

Revenue: 213, 8 billion profit: 39, 7 billion dividend: 19%/year

Average income of the company’s official is over 7 million VND/ person/ month

Financial situation: revenue exceeds 43% compared to plan and reaches

134% compared to 2009 Profit exceeds nearly 55% so compared to plan and

reaches 139% compared to 2009

Continue to direct building the company towards the model of multi-sector

group, but still regard the field of inspection, appraisal, and assessment as key

services Promote research and focus on technological investment to develop

inspection and appraisal field with high technology

Big investments: supplement invested capital in building and inaugurating

operations of Testing and Analysis Center at Tan Thuan Industrial Park to expand

inspection services for food safety and hygiene and Figurean estimate to build

Testing and Analysis Center Complete procedures for land purchase in Da Nang to

implement head office swap Start constructing new head office in Da Nang

Maintain business strategy: further expand new scopes of business under the

form of direct investment or capital contribution with other businesses for relevant

services However, take appraisal service as core one

New markets/ customers: Increasingly attract many customers at traditional

services and new services; expand market both at home and abroad

2.2 Analyze business environment

2.2.1 Economic environment

Because customers of Vinacontrol are diversified, it serves all domestic

economic sectors, from people, domestic businesses and foreign ones, even to the

government, all level bodies; therefore, we analyze economic environment

domestically and globally

GDP growth speed of Vietnam during the period of 2001-2010

GDP 6,89 7,08 7,34 7,79 8,44 8,17 8,44 6,23 5,2 6.78

Tables 2.2 GDP of Vietnam from 2001 to 2010 (Source: Report Vietnam’s GDP,

General statistics office from 2001 to 2010)

Domestic economic environment:

During past time, the economic situation has had many changes due to the

impacts of global economic crisis From early 2011 to now, the Government has

taken many measures to adjust the domestic economic situation, fight with inflation,

tighten monetary policy, focus on production area, promote export, and reduce

import The above policies, more or less, affect the business situation of the

company because its main revenue is from ex-import goods and appraisal of

machines and equipments

Budget deficit until the end of April: 12.1 thousand billion VND, still under

the Government’s control Impacts from investment reduction policy of the

Government make some projects stagnated, or disbursement slow, affecting the

27.9% of the whole year

estimate Budget deficit

until the end of 15/4 is

about 12.1 thousand billion VND

compare to the same

Figure2.2 FDI from January to April (Source: IDF report

of Vietnam from January to April of General statistics

office

Figure2.3 CPI from January 2010 to April 2011 (Source:

CPI report of Vietnam from January to April of General

3205.4 million USD of 262 newly registered projects, additionally registered capital

818.7 million USD of 88 licensed projects from previous years

Goods retail and revenue of consumer services increased slightly Total

Goods retail and revenue of consumer services volume in 4/2011 reached 153.9

thousand billion VND, up 1.8% compare to previous month Total 4 months of

beginning year reached 605,6 thousand billion VND, up 22,7% compared to the

same period of last year, if excluding price factor, up 7,7% Consumer price in

4/2011 increased 3.32% compared to previous month, the highest level since

3/2008 CPI in 4/2011 compared to 12/2010 increased 9.64%; compared to the same

period of last year, up 17.51%

The latest statistical figures of General department of customs show that total

export-import volume of Vietnam in April/ 2011 reached 16.37 billion USD,

slightly up 0.4% compared to the previous month and up 34.8% compared to

4/2010 In particular, export turnover was 7.44 billion USD, slightly down 0.1%

compared to 3/2011; import turnover reached 8.93 billion USD, up 0.8% Trade

balance in deficit month was 1.49 billion USD, equivalent to 9.1% total

export-import volume of the whole country and up 5.9% compared to deficit in 3/2011

Export, import and deficit turnover from 10/2010 to 4/2011

Figure2.4 Import and export from September 2010 to April 2011 (Source:

Import-export report of Vietnam from September 2010 to April 2011 General statistics

office)

Thus, up to the end of 4/2011, total ex-import turnover of the whole country

achieved 59.38 billion USD, up 33.4% compared to the same period of last year In

particular, export volume achieved 27.25 billion USD, up 37.2% and import volume

achieved 32.13 billion USD, up 30.3% Trade deficit was 4.89 billion USD,

equivalent to 17.9% of total export turnover

Total ex-import volume of FDI businesses in the first four months of 2011

was 26.4 billion USD, up 34.7% compared to the same period of 2010 Accounted

for 45% total ex-import turnover of the whole country (export volume achieved

12.63 billion USD, up 35.1% and import volume achieved 13.77 billion USD, up

34.4% compared to the first four months of 2010)

Ex-import markets

In 4 past months, many traditional export markets of Vietnam have gained

high growth speed, above 50% compared to the same period of 2010 such as: EU:

4.76 billion USD, up nearly 51%; China: 2.98 billion USD, up 57.3%; Korea: 1.56

billion USD, up 99%; Malaysia: 873 million USD, up 59%; Indonesia: 746 million

USD, up 117%, etc… The quantity of Vietnam’s export markets achieving over 100

million USD are 35, 4 market higher than the previous year

Besides, in the first four months of 2011, there are eight markets that

Vietnam imported over 1 billion USD, including seven Asian markets The import

markets with high growth speed, specifically: China: above 7 billion USD, up

nearly 25%; Korea: 3.9 billion USD, up 46%; Japan: 3.1 billion USD, up nearly

21%; Taiwan: 2.8 billion USD, up 32%; Singapore: 2.2 billion USD, up 65.5%;

Thailand: 1.91 billion USD, up 22.5%; the US: 1.37 billion USD, up 21.6%;

Malaysia: 1.2 billion USD, up 26.2%

During 4 months of 2011, Vietnam had five markets with a deficit of 1

billion USD, in particular, China: over 4 billion USD, 1.36 times higher than the

whole country’s export volume to these markets Next to markets: Korea: 2,37

billion USD, up 24,6%; Taiwan: nearly 2,3 billion USD, up 33%; Thailand: 1,41

billion USD, up 18,6%; Singapore: 1,38 billion USD, up nearly 141%; etc…

Global economic environment:

The US economy grows slowly: The US Department of Commerce

announced GDP in Quarter 1/2011 grew 1.8% after growing 3.1% in Quarter

4/2010 The people consumption grew 2.7% in Quarter 1/2011 after growing 4% in

Quarter 4/2010 The petrol price increased having a bad effect on the consumers’

confidence The US unemployment rate in 3/2011 was at about 8.8% Fed will

finish QE2 program under the road that Fed declared is at the end of 6/2011,

reducing the forecast of the US economic growth in 2011 down 3.1% - 3.3%

compared to 3.4% - 3,9% in 1/2011

The EU economy: The German economy still leads the EU; The Federal

Labor Agency announced the quantity of unemployed people in Germany in 4/2011

decreased 37 thousand down 2.97 million, the lowest rate from 6/1992 The

unemployment rate in 4/2011 did not change, still 7.1% Spain is difficult to avoid

rescuing The unemployment rate of young group in Spain rose up to 40%, over

20% compared to the completely labor force The real estate market still needs the

support of the EU Central Bank The Spanish debts are low while its debts in

private sector are high

The Asian economy: The Japanese Central Bank believed the Japanese

economy declined; the Japanese Ministry of Finance announced goods export

volume in 3/2011 reduced 2.2% compared to the same period of last year, the

decrease is double compared to the forecast of experts The Japanese cabinet agreed

to reduce foreign assistance in the fiscal year 2011; i.e., 50.1 billion JPY (609

million USD) The Japanese officials said that ODA budget would be reduced only

in 1 year Standard & Poor’s lowered the Japanese credit prospect down from

“stable” to “negative” level Inflation could deprive 1.5% economic growth of Asia

ADB said that the Asian economic growth could reduce about 1.5% if the petrol and

food price maintain escalating like past time until the end of 2011 The Chinese

economic growth slows down in Quarter 1/2011; the Chinese economy grew 9.7%

lower than 9.8% of the previous quarter Inflation in 3/2011 grew most strongly

since 7/2008

The commodity market: Gold, silver: The world gold price set the record of

1.569,80 USD/ounce due to bad economic data of the US, USD is at the lowest

level for recent 3 years and inflation worry is growing increasingly In April, gold

price increased 8.8% Silver price increase 28% in April up to 50 USD/ounce due to

investment needs and practical needs Iron and steel: The price of finished steel,

wasted steel and billets reduced due to weak needs The US imposed 400% duties

on aluminum products imported from China Energy: The world crude oil price is at

the highest level within past 31 months; i.e., 113.93 USD/barrel because the needs

increased and geopolitics tense continued in petrol countries In April, petrol price

increased 6.8% and continued to increase in the 8th month – the longest increase

since 1993 China raised petrol retail price from 5 – 5.5% since 7/4 because the

world petrol price increased strongly The Chinese coal price increased up to 124

USD/tons – the highest level within 5 past months due to high demand of electrical

industry and manufacturing plants Food: FAO announced the world food price in

March decreased for the first time within 8 past months, mainly because grain and

sugar price reduced The world sugar price reduced 11% and at the lowest level

within 7 past months; i.e., only 22 cent/lb, mainly from the record supply of

Thailand and Brazil Sugar price reduced within 4 continuous months China

discovered 26.000 tons powdered milk contaminated to melamine Agricultural

products: Rubber price reduced 10% within 4 past months – strongly down since

11/2008 because demand decreased and supply seemed to increase The world

pepper price set the record in 26/4 due to speculation activities The Indian pepper

price was up to 6.300 USD/ton, Vietnam pepper price reached 6.000 USD/ ton The

Arabica coffee price exceeded 3 USD/lb for the first time since 1977 because USD

was weak and supply worry was tightened

2.2.2 Social environment

Vietnam now ranks the 13th position in the world about population size of

nearly 87 million people Over 30% Vietnamese people is now at young age (below

35 years old) The population quality is high, the average expectation of life is 72.8

years old in 2009, the average number of school years also increases 9.6 years in

2006

Figure2.5 Vietnam’s gold population structure

The structure of Vietnamese population is now within the stage of gold

population The opportunity of gold population has come, and will last and lost and

difficult to repeat According to statistics and forecast of population of many

countries, “gold population structure” has often lasted 20-40 years and the fact

shows that up to now, gold structure has just come to countries once According to

the forecast of General Statistical Department and General Office for Population –

Family Planning: Gold structure stage of our country will last about 35-40 years

(since 2006) if stabilizing birth rate below replacement rate in several decades

Vietnam has entered in the stage of “gold” population, that creating an advantage to

develop human resources for the home country in general, especially the company

GDP structure:

GDP structure

Service 39%

Agriculture 21%

Industry 40%

Figure2.6 GDP Structure in industries (Source: General Office

For Population – Family Planning)

Labor structure: 47.49 million

Labour structure

Service 33%

Agriculture 52%

Industry 15%

Figure2.7 Labor Structure in industries (Source: General Office

For Population – Family Planning)

2.2.3 Technological environment

Gather contexts of places happening technological activities Technological

environment is defined by 7 factors:

Socio-economic development level: Vietnam is now a country with

developing economy, so the economic development level is changing positively

Infrastructure level: Still in the development stage, annually it still should have

ODA to develop the country’s infrastructure Big city infrastructure has completed

but rural areas are inadequate

The actual state of technology in production: because there is a shortage of

source of capital during fast industrialization, most of production technology system

is imported from China, so the quality is bad, it affects the environment and

production efficiency is low because the longevity of technology is short

The actual state of science and technology education and training: Today,

the education method of Vietnam is too heavy in theory, while practice and

application have not paid attention or because there is not expenditure for modern

equipment investment Science and technology education of Vietnam is still limited,

in the field of high technology, Vietnam officials must be trained in oversea

Investment in technology: today, investment in technology in Vietnam is

mainly from the world top technological groups to take advantage of young human

resources of Vietnam However, in recent years, several big telecommunications

groups of Vietnam have also recognized the importance of investment in

technology; therefore, they caught and attached special importance to invest in this

field like FPT, Vietel, CMC, etc… The State also established some high

technological centers to attract investment in this field

Environment and policy for technological development: Environment and

policy for technology development have never favored as today, the Government

encourages domestic and international businesses to invest in high technology field

2.2.4 Political – legal environment

Political environment is now within the transitional period of new term The

country has just spent the election of People’s Council at all levels, members of the

National Assembly and the party congress Thus, the current political situation is

stable in macro aspect but in micro aspect, it needs more time re-arranging During

period of 2011-2015, the political situation will be more stable because the

Government has implemented resolutions of the Party Congress XI

All levels, branches should grasp thoroughly and consistently the direction

thought of Resolution of the Party Congress XI; purpose, mission of

socio-economic development plan in 2011 is attached to socio-socio-economic development

plan in 5-year period of 2011-2015: Control inflation, stabilize macroeconomics;

renew model, re-structure economy; ensure social security They are missions

having reciprocal relationship; should be grasped thoroughly, implement

comprehensively during development process

Give the top priority to control inflation; stabilize macroeconomics and

ensure social security; regard it as short-term urgent mission of 2011 and important

mission of subsequent years In 2011, and several first years of 5-year plan

2011-2015, the purpose of GDP growth of 2011 is higher than 2010 to avoid high

inflation, create a solid foundation for higher growth at ending years of 5-year plan