Developmental strategy of Gia Lai cane sugar thermoelectric joint stock company period 2011-2015 c

GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION CAPSTONE PROJECT REPORT DEVELOPMENTAL STRATEGY OF GIA LAI CANE SUGAR THERMOELECTRIC JOINT STOCK COMPANY PERIOD... UNDERTAKING The Gradu

GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION

CAPSTONE PROJECT REPORT

DEVELOPMENTAL STRATEGY OF GIA LAI CANE SUGAR THERMOELECTRIC JOINT STOCK COMPANY PERIOD

UNDERTAKING

The Graduation Capstone Project with the theme of “Developmental strategy

of Gia Lai Cane Sugar –Thermoelectricity Joint Stock Company, period 2011 – 2015” is the researching work by Group 12

We undertake that the contents of report are true and have not been published

in any scientific work

The data used in this report have been consented by Gia Lai Cane Sugar – Thermoelectricity Joint Stock Company All documents in use are specified the citing sources in the List of Reference

HoChiMinh City, March 15 th , 2012

Implemented by Group 12 – Class GaMBA01.C0310

THANKS

The author group of Graduation Capstone Project for the training program of Global Advanced Master of Business Administration by Griggs University, Andrew USA, school year 2010 – 2012, would like send to the Teachers, the Management Board

of Class and the class-fellows who assist us to make this Thesis

We sincerely thank the ETC Center – Hanoi National University for facilitating us during the process of MBA course under the training program by Griggs University, Andrew USA

We are deeply grateful to the Teachers who have wholeheartedly taught and imparted the very precious knowledge to us so that we can apply it into our works

Finally, we would like to express our deep gratitude and love to our all family members for encouraging and creating the best conditions for us to complete this courses

Thanks with sincerity!

CONTENTS

FOREWORD 1  

1 THE NECESSITY OF RESEACH 1 

2 OBJECTIVE OF RESEARCH 2 

3 OBJECT AND SCOPE OF RESEARCH 2 

4 METHOD OF RESEARCH 3 

5 SCIENTIFIC AND PRACTICAL MEANINGS OF THE THEME 3 

6 STRUCTURE OF THESIS 3 

CHAPTER 1 LITERATURE REVIEW OF BUSINESS STRATEGY 4  

1.1.LITERATURE REVIEW OF STRATEGIC MANAGEMENT 4 

1.1.1.Definition 4 

1.1.2.Advantages of strategy 5 

1.1.3.Strategies 5 

1.1.3.1.Strategic levels 5

1.1.3.2.Types of strategies 6

1.1.4.The process of strategic administration 7 

1.1.4.1.The formation of strategy 8

1.1.4.2.The stage of strategy implementation: 10

1.1.4.3.Stage of strategy assessment: 10

1.2.THE THEORY OF STRATEGIC MATRIX 11 

1.2.1.External Factor Evaluation Matrix 11 

1.2.2.Internal Factor Evaluation Matrix 11 

1.2.3.Competitive Profile Matrix 11 

1.2.4 SWOT Matrix 11 

1.2.5.BCG Matrix 13 

1.2.6.SPACE Matrix 16 

1.2.7.Selection of Quantitative Strategic Planning Matrix – QSPM 17 

CHAPTER 2.GIA LAI CANE SUGAR – THERMOELECTRICITY JOINT

STOCK COMPANY 19  

2.1.Ntroduction Of Gia Lai Cane Sugar-Thermoelectricity Join Stock Company 19 

2.1.1.Overview: 19 

2.1.2.The company’s background and development history: 20 

2.1.3 Business lines: 21 

2.1.4.Mission and vision of strategy: 22 

2.1.5.Organizational structure: 22 

2.1.6.Customers and partners: 23 

2.1.7.Business results within 3 years (2009 – 2011): 24 

2.2.ANALYSIS OF THE INTERNAL ENVIRONMENT IN THE COMPANY 29 

2.2.1.Overview: 29 

2.2.2.Management: 30 

2.2.3.Control 31 

2.2.4.Management and development of the material zone 32 

2.2.4.1.Management of the material zone: 32

2.2.4.2.Development of material regions: 33

2.2.5.The plant’s production 34 

2.2.6.Marketing and management of customers system 36 

2.2.6.1.Brand marketing 36

2.2.6.2.Distribution channel and customers system 36

2.2.7.For financial accounting 36 

2.2.8.Management of risks 37 

2.3.Factors From External Environment 38 

2.3.1.Analysis of macro factors, industry factors to the company 38 

2.3.1.1.Analysis of macro factors on economy and society 38

2.3.1.1.1.Policies 38

2.3.1.1.2.Economy 39

2.3.1.1.3.Economy, society – consuming tastes 39

2.3.1.1.4.Production technology 39

2.3.1.1.5.Trend of globalization – International commitment of CEPT and WTO 40

2.3.1.2.Global sugar market in the crop 2011 - 2012 43

2.3.1.3.Current status of Vietnam cane-sugar industry 45

2.3.1.4.Michael Porter Five Forces Model 52

2.3.1.5.Competitive pressure of materials will change in the fierce direction 52

2.3.1.6.Internal competitive pressure is not serious among sugar plants in Vietnam (currently.) 53

2.3.1.7.Competitive pressure from substitutes is not significant 53

2.3.1.8.Distribution system affects mainly to speed of sugarcane consumption at plants 54

2.3.1.9.Major competitive pressure is derived from rivals in ASENAN when CEPT/AFTA is effective completely 54

2.3.2.Analysis of competitors 55 

2.3.2.1.Bourbon Tay Ninh - SBT 55

2.3.2.2.Ninh Hoa Sugar - NHS 56

2.3.2.3.Bien Hoa Sugar - BHS 57

2.3.2.4.Quang Ngai Sugar - QNS 58

2.3.2.5.Kon Tum Sugar - KTS 59

CHAPTER 3.GIA LAI CANE SUGAR - THERMOELECTRICITY JOINT STOCK COMPANY, PERIOD 2011 -2015 60  

3.1.BUILDING THE STRATEGIC TARGETS 60 

3.1.1.Prospect of the global sugar-cane industry 60 

3.1.2.Developmental orientation of SEC in the period of 2011- 2015 62 

3.2.OBJECTIVES OF SEC IN THE PERIOD OF 2011 – 2015: 63 

3.3.APPLICATION OF MATRICES IN THE CONSTRUCTION OF BUSINESS STRATEGY FOR SEC IN THE PERIOD OF 2011-2015, AND VISION 2020 63 

3.3.1.External Factor Evaluation Matrix (EFE) 64 

3.3.2.Evaluation of competitive ability 65 

3.3.2.1.Position and evaluation of SEC’s competitive ability within the trade 65

3.3.2.2.Comparison and evaluation of SEC’s competitors such as KTS and NHS 68

3.3.2.3.Competitive Picture Matrix (CPM) 71

3.3.3.Internal Factor Evaluation Matrix (IFE) 73 

3.3.4.SWOT Matrix 74 

3.3.5.SPACE Matrix 77 

3.3.6.Quantitative Strategic Planning Matrix (QSPM) 79 

3.4.ORGANIZATION OF STRATEGIC IMPLEMENTATION 83 

3.4.1.Solution for marketing distribution, implementing “strategy C” 83 

3.4.2.Solution for developing sugarcane material zone, implementing “strategy B” 84  3.4.3.Solution for raising plant capacity, implementing “strategy A” 86 

3.5.FINANCIAL TARGETS EXPECTED TO IMPLEMENT PERIOD 2011-2015 88  3.6.RECOMMENDATIONS 90 

CONCLUSION 93  

REFERENCES 95  

APPENDICES 96  

LIST OF FIGURES

Figure 1.1 Overall strategic administration 8  

Figure 1.2 The model of five competitive forces of Michael E Porter 9  

Figure 1.3 SWOT matrix 12  

Figure 1.4 BCG Matrix 15  

Figure 1.5 QSPM matrix 18  

Figure 2.1 Image of Gia Lai Cane Sugar Thermoelectricity   Joint Stock Company 20  

Figure 2.2 Organization chart of SEC 23  

Figure 2.3 Sales structure by customers 24  

Figure 2.4 Outputs of finishes products have grown over years 25  

Figure 2.5 Revenue structure ratio 25  

Figure 2.6 Revenues and profits 26  

Figure 2.7 Chart of profit targets 2007-2011 27  

Figure 2.8 Targets of utilization effect 27  

Figure 2.9 Financial targets 28  

Figure 2.10 Target of capital structure 28  

Figure 2.11 Area of the material regions 33  

Figure 2.12 SEC’s logo 36  

Figure 2.13 The supply and demand of the global sugars 43  

Figure 2.14 Sugarcane outputs during1990-2009 47  

Figure 2.15 Sugar output in Vietnam - Thailand and Philippines 47  

Figure 2.16 Sugarcane area over years in Vietnam and the world 48  

Figure 2.17 Chart of sugarcane cultivation by region in Vietnam 48  

Figure 2.18 Chart of production cost by regions 51  

Figure 2.19 Sugar output of the factories in the crop of 2010-2011 58 

Figure 3.1 The world sugar price from Jan, 2010 to August, 2011 62  

Figure 3.2 Images of cautious strategy of SPACE Matrix 78  

Figure 3.3 Strategy for stable growth: forward, backward combination 83  

LIST OF TABLES

Table 2.2 Business lines of the SEC 21  

Table 2.3 Suppliers of materials for SEC 24  

Table 2.4 Expansion of material regions 34  

Table 2.5 Form of sugarcane in the crop of 2010/2011 34  

Table 2.6 Production activities 2009-2011 35  

Table 2.7 Import tariff under WTO commitments 41  

Table 2.8 Rate of tazation under committments 41  

Table 2.9 Schedule of tax imposition 42  

Table 2.10 Schedule of tax reduction 43  

Table 2.11 Criteria for evaluating Vietnam’s sugarcane industry 45  

Table 2.12 Sugarcane area targets 46  

Table 2.13 Performance of pressed sugarcane 49  

Table 2.14 Capacity for pressing 49  

Table 2.15 Capacity of sugarcane factories in Vietnam 50  

Table 2.16 Statistics of sugar production cost in regions 51  

Table 3.1 External Factor Evaluation Matrix of SEC 64  

Table 3.2 Comparison of the leading sugarcane enterprises in Viet Nam 67  

Table 3.3 Comparison of financial targets of SEC’s competitors such as KTS, NHS 69  

Table 3.4 Comparison of business outcome and capital structure of SEC, KTS, NHS in 2011 70  

Table 3.5 Comparison of developmental plans of SEC, KTS, NHS in the period of 2012-2020 70  

Table 3.6 Competitive Picture Matrix 72  

Table 3.7 Internal Factor Evaluation matrix 73  

Table 3.8 SWOT Matrix 75  

Table 3.9 SPACE Matrix 77  

Table 3.10 QSPM Matrix 80  

Table 3.11 Increasing plant capacity from 2011 to 2015 87  

Table 3.12 Revenue – expenses expected in 2011-2015 89  

Table 3.13 Key indicators expected to reach 2011-2012 periods 90  

LIST OF ABBREVIATION

ASEAN : Association of Southeast Asian Nations

AFTA : ASEAN Free Trade Area (according to Preferential Tariff agreement) CEPT : Common Effective Preferential Tariff (Tax breaks within 0-5%)

SEC : Abbreviated name of Gia Lai Cane Sugar – Thermoelectricity Joint Stock

Company

KTS : Abbreviated name of Kon Tum Cane Sugar Joint Stock Company NHS : Abbreviated name of Ninh Hoa Cane Sugar Joint Stock Company LSS : Abbreviated name of Lam Son Cane Sugar Joint Stock Company

BHS : Abbreviated name of Bien Hoa Cane Sugar Joint Stock Company SBT : Abbreviated name of Bourbon Tay Ninh Cane Sugar Joint Stock

Company

RE : Refined Extra

RS : Refined Standard

Tons/day : Ton of sugarcane/day

UBCKNN: State Securities Commission

OECD : Organization of Cooperation and Economic Development

GDP : Gross Domestic Product

ISO : International Sugar Organization

WTO : World Trade Organization

FOREWORD

1 THE NECESSITY OF RESEACH

Sugar is an essential product item for consumption All countries which specialize

in manufacturing and processing sugar have their own policies for the trade in order

to ensure the stability and satisfy domestic consumption demands Many countries all over the world have great advantages of sugar production and processing such as Brazil, Thailand, India, etc…

There are some countries with high sugar consumption such as India, China and European countries, etc When their policies of supply and demand have been changed, the sugar industry of the world is also influenced and governed very much, this causes the fluctuation about supply and demand, prices, reserve Most of countries make sugar from canes with high productivity In addition, the European countries manufacture and process sugar from beets, this also contributes to the global sugar supplying sources

Demand of sugar consumption is higher, especially demand for medical production, soft drink, confectionery industries, is considerable However, the variation of prices and the competition between the factories, the nations in the flat world are more and more fierce while the resources are less and less; development of sciences and technology is not an exclusive strength for any country; the world economy is

in recession; inflation and interest rate are in the high level Facing with those challenges, the nations are required to have policies for food security, community health In the face of fierce competition at home and abroad, the companies of manufacture, processing and commerce in the market economy are required to have the long-term strategies for coping with the challenges and utilizing the opportunities

Gia Lai Cane Sugar – Thermoelectricity Joint Stock Company (SEC) is one of the sugar cane companies of developmental potentiality with large and stable raw material zone It is a great advantage as well as a ground for planning long-term

strategies for companies of sugar cane industry so that they can develop their companies under the orientation of competition and stability

The objectives and the tasks of SEC currently and in the coming stage, are: keeping the area of raw material zone in stable; developing effectively and raising the quality of products from canes; satisfying market demands; ensuring ultimate benefits of the sugarcane planters, benefits of shareholders, division of profits and parties association to make sure that it is harmonious and steadfast; and many issues are posed that should be handled in the company’s developmental strategy, period

2011 – 2015

2 OBJECTIVE OF RESEARCH

Researching and evaluating the economic- political - social situations and policies

of the State, national strategic objective for cane-sugar industry

By analyzing the impacts from the factors and the company’s operation real status, from that point, lay out the strategies and solutions for effective implementation of company development in the period 2011 – 2015, vision 2020

3 OBJECT AND SCOPE OF RESEARCH

Researched object of the Thesis is the real status of business and production operation in Gia Lai Cane Sugar – Thermoelectricity Joint Stock Company The thesis focuses on the practical theory of the Company’s operation status and developmental strategy, raising the efficiency of raw material zone, quality of product from sugarcanes, using and ultimately promoting the resources (capital, workforce, technology ) in order to strengthen the competitive ability of the company, contribute to the socio-economic development of Kon Tum province in particular and development of Vietnam cane-sugar industry in general

Scope of research: the theme is placed in the context of Vietnam cane-sugar industry coming up against the competition of imported sugar product; the sugar production technology of Vietnam is almost obsolete and backward How to increase competitive ability and survive in the world with full of variations is a great challenge

4 METHOD OF RESEARCH

Method of analysis and aggregation: the members of research group will analyze, aggregate the information sources from inside the company and external factors, information from competitors to put forward the strengths and weaknesses in the business and production process from there, evaluate the competitive ability of the company in the current time as well as developmental plan in the future

Method of comparison and matching: Matching the theory and reality to find out and solve the difficulties and challenges in expanding production scale of new service types and raising the product quality Comparing SEC’s competitive ability and other cane-sugar companies’ in the same area to find out the difference, thereby

we can evaluate the current ability of SEC

Additionally, we have applied statistical method, collect and analyze the quantitative data to make clear the related contents in the Thesis

5 SCIENTIFIC AND PRACTICAL MEANINGS OF THE THEME

We go deeply into researching the real status of business and production operation

in Gia Lai Cane Sugar – Thermoelectricity Joint Stock Company, from that point; help the Leadership of Company have a general view on cane-sugar market, competitive ability and developmental plan in the future

6 STRUCTURE OF THESIS

Apart from foreword, conclusion and list of reference, the Thesis will be presented

by three chapters as follows:

* Chapter 1 : Literature review of strategies

* Chapter 2 : Business and production operations of Gia Lai Cane Sugar –

Thermoelectricity Joint Stock Company

* Chapter 3 : Building Business strategy for Gia Lai Cane Sugar – Thermoelectricity

Joint Stock Company, period 2011 – 2015

CHAPTER 1 LITERATURE REVIEW OF BUSINESS STRATEGY 1.1 LITERATURE REVIEW OF STRATEGIC MANAGEMENT

There are different definitions of “Strategy” as follows:

“Strategy is to determine long-term and primary objectives, targets of an enterprise and the adoption of a series of actions and the allocation of essential resources in order to obtain these objectives” - Chandler (1962)

“Strategy is the coordinating factor between the enterprise and business environment: the consistent model of decisions of the enterprise in accordance with the business environment”- Mintzberg (1979)

“Strategy is a model or plan tightly integrated with primary objectives, policies and actions” - Quinn (1980)

“Strategy is the difference It indicates the selection basing on series of different action forming unique value”- Michael E Porter (1996)

“Strategy is mean to achieve long-term targets” - Fred R David (2003)

“Strategy is to orient the administration and ensure primary objectives and targets of the enterprise are completed for a long-term period”- Rudolf Grunig and Richard Kuhn (2003)

Therefore, though there are different ways to define “Strategy”, a business strategy includes the following key contents:

Determining primary and long-term objectives of the enterprise

Adopting general program of action

Selecting the action plan, deploy and distribute resources to achieve these objectives

1.1.2.Advantages of strategy

Business orientation: Strategic administration is advantageous in helping

enterprises to generate better business orientation through a more systematic, reasonable and logic approach to the strategy selection

Financial administration: Strategic administration helps enterprises

manage their financial situation more efficiently thanks to the process of analyzing and forecasting micro and macro economy in the future The study of Cook and Ferris has shown that 80% of 101 studied companies have been able to improve their profit through the change in their business strategy

Identifying opportunities and risks: Strengths and weaknesses of the

company are identified through the external conditions so that strengths are developed, weaknesses are minimized and measures are applied to prevent outside threats

Improve the competitive advantages: Analyze and select feasible strategies

via tools and information so as to improve competitive advantages and avoid risks

Classification of strategies: There are many different types of strategies in a

company, depending on the level, approach… Business strategies can be classified

Functional strategies: (departmental strategies) those help company-level strategies and business unit-level strategies effectively implemented through their components in terms of resources, human-based processes and required skills

In the globalizing conditions of fierce competition, borders between countries have been removed, resulting in the coming of the forth-strategic level – that is the global strategy

1.1.3.2.Types of strategies

a Corporate level strategy

Corporate strategy aims to long-term and primary goals; therefore, there are many types of corporate strategies in different names According to Fred R David, there are 14 types of primary corporate-level strategies as follows:

b Business unit level strategy

Business unit level strategy concerns about how to successfully compete in a specific market Business strategy includes the competition measures of company, the ways which companies determine in order to gain competitive advantages and the different strategies used in the context of business

According to Michael E Porter, there are three key competitive strategies of business level as follows:

9 Cost leadership strategy: (The lowest and the best cost)

9 Strategy of product difference

9 Focus strategy

c Functional strategy

Functional strategy is strategy of functional division like Marketing, Finance, Human resource….These strategies help to improve the operating efficiency of an enterprise and to support business unit strategy and corporate strategy

1.1.4.The process of strategic administration

According to Fred R David, strategic administration consists of three steps: The formation of strategy, the implementation and the evaluation of the strategy

(Source: Fred David – Outline of strategic administration)

Figure 1.1 Overall strategic administration

1.1.4.1.The formation of strategy

The formation of strategy is the process of forming business goals, investigating and studying to identify internal and external weaknesses, so that long-term goals are set out and there are substitutive strategies

a Analyze the external conditions

External conditions are analyzed aiming at developing a lists of things restrict opportunities of company and threats which should be avoided in order to minimize negative impacts of external conditions There are many different external factors (micro and macro factors); therefore, only external factors which strongly affect company should be analyzed

Macro conditions include:

9 Economic condition,

9 Politic and legal conditions

9 Cultural and social conditions

Allocate  resourc

es 

Redetermine  business  goals

Analyze internal  goals. Identify the strengths and weaknesses

Select appropri ate strategy

Adopt  policy 

Formation of strategy Implementation

Measure  and  evaluate  the  implement ation of the  strategy 

Set out  long  term  goals

Set out  annual  goals

9 Population and geographical conditions

9 Technological conditions

9 Global conditions

Micro conditions: are external factors affecting the company, determining

the nature and extend of competition in business field

Michael E Porter, Professor of business strategy of Harvard, has given a model of five competitive forces as Figure 1-2

(Source: Griggs University – Strategic administration textbook)

Figure 1.2 The model of five competitive forces of Michael E Porter

a Analyze the internal conditions

There are strengths and weaknesses in business units of a company Internal conditions are:

9 Finance: Includes factors in term of financial capacity, financial

administration, financial accounting

9 Management: Includes management activities to ensure performance of

the actual production and business in accordance with expected plans: Management capacity of human resource, material, finance, and sales

9 Marketing: Marketing is the process of identifying, forecasting, building

and satisfying demands of customers to products and services Marketing administration includes the research of market developing, selection of target market, the system of distribution, the after-sales service

NEW POTENTIAL  COMPETITORS

COMPETITOR OF THE  SAME INDUSTRY 

9 Human resource: The human resource plays a key role in the success of a

company In spite of a proper business strategy, it will not bring the efficiency without the effective performance of human resource Human resource factor includes: Structure, qualification, policy and development

of human resource,

9 Production administration and implementation: Includes all activities

to alter inputs into goods and services of a company The process of production and implementation includes: The design process of production, the selection of the technology, scope of production; the location, layout; the quality of products, service and cost of production

9 The information system: The system is to link all business functions and

provide the basic of administrative decisions It receives raw data from the external and the internal conditions An effective information system will help improve understandings of business functions, improve the communication, supply more information for the determination, analyze obstacles, and consolidate the operation

1.1.4.2.The stage of strategy implementation:

Enforcing the strategy is often called the action stage of strategic management, which is shown through mobilizing all the members of the company

to implement the developed strategy

The implement the business strategies effectively, the corporation need:

9 Establish the short-term target

9 Adjust the organizational structure

9 Make the policies

9 Set up budget

9 Develop corporation's culture

1.1.4.3.Stage of strategy assessment:

Assessing the effectiveness of a business strategy is very important A business strategy is considered to be effective in case it is compliant with the actual

situation of the corporation and the socio-economic status as well as it can make the most of opportunities to achieve the objectives set out by the corporation Assessing the business strategy include the following steps:

9 Reviewing and checking the appropriateness of business strategies before implementation

Assessing the effectiveness of production and business activities of the corporation at each implementation stage in order to timely find out defects of the strategy whereby to adjust, correct and supplement

1.2 THE THEORY OF STRATEGIC MATRIX

1.2.1.External Factor Evaluation Matrix

EFE matrix is a tool used to summarize and assess the external information of the corporation such as macro-economic factors: policy, law, society, science, and nature

1.2.2 Internal Factor Evaluation Matrix

EFE matrix is a tool used to summarize and assess the strengths and weaknesses of the business sections, and it also supplies the basis to determine and assess the relation among these sections

1.2.3.Competitive Profile Matrix

Competitive Profile Matrix identifies the major competitors and their advantages and disadvantages This matrix is the extension of EFE matrix in case the importance, classification and total important points have the same meaning The total assessed points of the competitors are compared with the sample companies The special classification of competitors can be compared with the classification level of the sample companies This comparative analysis gives important strategic information

1.2.4 SWOT Matrix

SWOT matrix is a very useful tool for understanding and making decisions

in any situation for any corporation SWOT stands for Strengths, Weaknesses, Oppotunities and Threats Strengths and Weaknesses are the internal factors of

the Corporation and Opportunities and Threats are the external factors of SWOT which allows to analyze different factors with relative impacts on the competitiveness of the Corporation

SWOT often sets out 4 basic strategies: (1) SO (Strengths - Opportunities): the strategies usually base on the advantages of the company to take advantage of market opportunities (2) WO (Weaks - Opportunities): the strategies usually base

on the ability to overcome the weaknesses of the company to take advantage of market's opportunities (3) ST (Strengths - Threats): the strategies base on the company's predominance to avoid the market's threats (4) WT (Weaks - Threats): the strategies base on the ability to overcome or minimize the company's weaknesses of the company to avoid the market's threats

Figure 1.3 SWOT matrix

SWOT Analysis is suitable with assessing actual situation of the company through analisis of internal situation (Strengths and Weaknesses) and external

situations (Opportunities và Threats) of the company SWOT screens information

- Copyright and trading secretes

External factors need be analyzed are: customers, competitors, market tendency, supplier, partners , society's changes., new technology, economic environment., political and legal environments

The quality of SWOT analysis depends on quality of the collected information The informaton should be collected from all aspects: directorate, customers, partners, suppliers, strategic partners, consultants etc SWOT is somewhat limited in organizing information with summary tendency This may put the information in inappropriate position with the matter's nature Many titles may

be neutralized or confused between S-W and O-T at the analyst's discretion

1.2.5.BCG Matrix

Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2

matrix) developed by BCG, USA It is the most renowned corporate portfolio analysis tool It provides a graphic representation for an organization to examine

different businesses in its portfolio on the basis of their related market share and industry growth rates It is a two dimensional analysis on management of SBU’s (Strategic Business Units) In other words, it is a comparative analysis of business potential and the evaluation of environment

According to this matrix, business could be classified as high or low according to their industry growth rate and relative market share

Relative Market Share = SBU Sales this year leading competitors sales this year

Market Growth Rate = Industry sales this year - Industry Sales last year

The analysis requires that both measures be calculated for each SBU The dimension of business strength, relative market share, will measure comparative advantage indicated by market dominance The key theory underlying this is existence of an experience curve and that market share is achieved due to overall cost leadership

BCG matrix has four cells, with the horizontal axis representing relative market share and the vertical axis denoting market growth rate The mid-point of relative market share is set at 1.0 If all the SBU’s are in same industry, the average growth rate of the industry is used While, if all the SBU’s are located in different industries, then the mid-point is set at the growth rate for the economy

Resources are allocated to the business units according to their situation on the grid The four cells of this matrix have been called as stars, cash cows, question marks and dogs Each of these cells represents a particular type of business

10 x 1 x 0.1 x

Figure 1.4 BCG Matrix

1 Stars- Stars represent business units having large market share in a fast

growing industry They may generate cash but because of fast growing market, stars require huge investments to maintain their lead Net cash flow

is usually modest SBU’s located in this cell are attractive as they are located

in a robust industry and these business units are highly competitive in the industry If successful, a star will become a cash cow when the industry matures

2 Cash Cows- Cash Cows represents business units having a large market

share in a mature, slow growing industry Cash cows require little investment and generate cash that can be utilized for investment in other business units These SBU’s are the corporation’s key source of cash, and are specifically the core business They are the base of an organization These businesses usually follow stability strategies When cash cows lose their appeal and move towards deterioration, then a retrenchment policy may be pursued

3 Question Marks- Question marks represent business units having low

relative market share and located in a high growth industry They require huge amount of cash to maintain or gain market share They require attention

to determine if the venture can be viable Question marks are generally new goods and services which have a good commercial prospective There is no specific strategy which can be adopted If the firm thinks it has dominant market share, then it can adopt expansion strategy, else retrenchment strategy can be adopted Most businesses start as question marks as the company tries

to enter a high growth market in which there is already a market-share If ignored, then question marks may become dogs, while if huge investment is made, and then they have potential of becoming stars

4 Dogs- Dogs represent businesses having weak market shares in low-growth

markets They neither generate cash nor require huge amount of cash Due to low market share, these business units face cost disadvantages Generally retrenchment strategies are adopted because these firms can gain market share only at the expense of competitor’s/rival firms These business firms have weak market share because of high costs, poor quality, ineffective marketing, etc Unless a dog has some other strategic aim, it should be liquidated if there are fewer prospects for it to gain market share Number of dogs should be avoided and minimized in an organization

1.2.7.Selection of Quantitative Strategic Planning Matrix – QSPM

QSPM matrix using input data from the analysis from the EFE and IFE Matrixes to help the Directorates of companies to make objective decision of the strategy which is likely to replaced which is the most attractive solution for the company The development process of QSPM matrix includes 6 steps: (see table below)

- Listing external big opportunities/ threats and internal important strengths/ weaknesses in column (1) of the matrix These factors are taken directly from EFE and IFE matrixes

- In column (2) of the matrix, filling in figures respective to each factor in the classification column of EFE and IFE matrixes

- Studying matrix of SWOT, BCG, Hofer and determining the strategy which possibly will be replaced by the company Recording these strategies in the topmost row of QSPM matrix The matrixes are arranged separately into groups (if any)

- Determining the attractive score (column A): unattractive = 1, less attractive = 2, quite attractive = 3, very attractive = 4 These numbers show the attractiveness of each strategy compared with other strategies of the same replaceable groups

- Calculating attractive scores of each strategy separately reviewed for each important successful factor stated in column (1) by multiplying the classification number with attractive scores in each row (putting into column B)

- Accumulating attractive scores show total attractive scores of each strategy (considering all appropriate internal and external factors that may impact on the strategic decisions) The higher total scores are, the more appropriate the strategies are and more worthy being selected

Classification Selected strategies Basis of

the attractive score Key important

a same group

CHAPTER 2 PRODUCTION BUSINESS OPERATION OF GIA LAI CANE SUGAR-THERMOELECTRICITY JOINT

STOCK COMPANY 2.1 INTRODUCTION OF GIA LAI CANE SUGAR THERMOELECTRIC JOIN STOCK COMPANY

2.1.1.Overview:

town, Gia Lai

(Source from the share execution committee _SEC)

(Source from the share execution committee _SEC)

2.1.2.The company ’ s background and development history:

Figure 2.1 Image of Gia Lai Cane Sugar Thermoelectricity

Joint Stock Company

GiaLai Cane Sugar Thermoelectricity joint-stock Company was Gia Lai Bourbon Limited Company previously, it was founded on the basis of a joint venture between Gia Lai Cane Sugar Company (under the People's Committee of Gia Lai province) and Grouped Des Societies De Bourbon (France) under the investment license number 195/GP on July 18, 1997 by the Ministry of Plan & Investment with the design capacity of 1,500 tons cane/day In 2007, Bourbon Group transferred all contributed capital to Gia Lai Cane Sugar Company, on Oct

19, 2007; Gia Lai Bourbon Cane Sugar Limited Company was converted into Gia Lai Cane Sugar Thermoelectricity Joint Stock Company on the basis of equalization

of Gia Lai Bourbon Cane Sugar Limited Company

The company was issued the business license number 3903000148 on Aug 2,

2007, and on July 21, 2009 secondly, by the provincial Department of Planning and Investment provincial Currently, the company is an independent accounting entity, under the Corporate Law, and the legal provisions concerned Shares of Gia Lai Cane Sugar Thermoelectricity JSC has currently listed and traded on the HCM City Stock Exchange (HOSE) with the stock code: SEC (starting from Jan 06, 2010)

2 Production, transmission and distribution of power

3 Wholesale of agricultural machineries, equipment’s and spare parts

4 Processing of agricultural products (except for rubber latex)

5

Wholesale of agricultural and forestry materials (except for wood, bamboo, rubber latex)

6 Trade and transport of commodities

7 Processing of mechanical equipment’s

8 Construction of other civil works

9 Restaurants and mobile food services

10 Hotels, fertilizer production

11 Production of Tunnel bricks

12 Plantation and investment of sugarcane varieties

(Source from the Prospectus _ SEC)

Table 2.2 Business lines of the SEC

In particular, production and business activities of the SEC focus on production and sales of products made from sugarcane, including RS sugar, molasses, electricity, dregs, bacterial fertilizer and drinking water

2.1.4.Mission and vision of strategy:

- Become one of the leading enterprises of the cane sugar industry in

Vietnam on the aspects of production and business efficiency, increase the value of the production from sugar canes

- Focus on producing cane sugar products, and eventually manufacture high quality products such as RE sugar to meet the market

- Improve the interests of stakeholders, including investors, shareholders, sugarcane farmers, workers and partners, customers

- Continue to expand and improve the effectiveness of the intensive raw materials

- Re-arrange the organizational structure of the company effectively through the application of advanced management standards of the developed countries such

as ISO, ERP production management model

- Strive to complete, maintain the steady and sustainable growth with an average rate of 10%-20% / year

2.1.5.Organizational structure:

The organizational structure of SEC shall comply with the Corporate Law, as follows:

The organization chart in SEC, applied from June 23, 2011

(Source: Regulation on organizing activities of SEC Company)

Figure 2.2 Organization chart of SEC

2.1.6.Customers and partners:

As a member of Thanh Cong Group, the company’s consumers are mainly major companies in the same system such as Dang Thanh Co., Ltd, Thanh Cong JSC, moreover SEC has also diversified group of other customers with average consumption such as Minh Tam Co., Ltd, Toan Phat Co., Ltd, Trang Hiep Phat Co., Ltd,

Assembly of Shareholders

Internal Auditing Department

Sales Dept

Factory

Technical- Financial Dept

Related Units

The structural chart of sales by customers:

Hy Thanh Co., Ltd (Dang Thanh) Other

(Source from the financial statements_SEC)

Figure 2.3 Sales structure by customers

Suppliers of materials, agricultural chemicals primarily for the SEC include:

2 T.T.C Service Trading Co., Ltd Chemicals Nha Trang

(Source from the financial statements_SEC)

Table 2.3 Suppliers of materials for SEC

Materials in manufacturing shall be selected by the company from time to time in the form of public bidding to select any qualified supplier timely, low cost, secure economic efficiency of the company

For the cost of sugarcane purchase accounted for the largest proportion, SEC has conducted to invest, support and sign any contract of purchase directly from farmers in the range of substitutes instead of through the purchasing agents as competitors

2.1.7.Business results within 3 years (2009 – 2011):

Outputs of finishes products have grown over years

(Source from the financial statements_ SEC)

Figure 2.4 Outputs of finishes products have grown over years

The volume of the SEC's product lines has grown in the period of 2009-2012 along with the expansion and increase of production capacity of the plant The volume

of RS sugar in the crop of 2011-2012 is expected to reach 42.000 tons, increase by 153% over the same period in the crop of 2009-2010, corresponding to the production

of molasses and commercial electricity into the national grid and other byproducts such

as dregs, bacterial fertilizers have achieved the same growth rates

RS sugar plays an important role in the revenue structure

(Source from the financial statements _SEC)

Figure 2.5 Revenue structure ratio

With a focus on core business activities is to manufacture and trade in sugarcane items, the SEC's revenue is contributed by two main product lines, including RS sugar and molasses, more than 90% total revenue each year The favorable impacts of market performance within 3 years from 2009- 2011 have also

RS sugar (ton) Molasses (ton)

Power (Mwh)

Revenue structure

Sales of sugar Sales of molasses Others

contributed greatly to increase surplus value of sugar and molasses items in 2012, total revenue of product lines shall be expected to reach around 750 billion VND

Revenue growth and outstanding profit in the period of 2006-2011

(Source from the financial statements _ SEC)

Figure 2.6 Revenues and profits

In 5 years in the period of 2006 to 2011, the SEC achieved a strong growth rate in revenue with an average growth rate of 52%/year, from 68 billion in 2006 to

553 billion in 2011 Along with revenue and profit growth from business activities

of the SEC also achieved an average growth rate of 74% / year, profit after tax of the company grew 83% /year, EPS increased from 519 VND / share (2006) up to 5.672 VND / share (2011) This suggests that orientation of strategy is right, performance is constantly being improved by the SEC recently, continues to develop strong premise for the SEC in the near future

Performance is maintained at a high level

Net revenue

Profits from business

Initial price Profits after tax

(Source from the financial statements_SEC)

Figure 2.7 Chart of profit targets 2007-2011

The performance of production and business activities of the SEC shall be still maintained at high rate high compared to other companies in the industry although it was affected by the difficulties caused by the financial crisis in 2008 and the situation of high interest rates continued to increase in 2011, namely, the gross profit margin averaged 26%, the net profit margin reached 19% in the period of 2007-2011 In an effort to fall down in the future interest by the Government, the SEC's interest expenses will decrease slightly, this will improve the SEC's net profit margin in the next seasons

Financial performance is maintained and continued to improve

(Source from the financial statements_SEC)

Figure 2.8 Targets of utilization effect

During 2007-2011, the SEC developed its investment, improved and expanded the scale of plant, so the company's total assets have increased sharply from 146 billion (2007) to 620 billion (2011), besides Return of total assets (ROA)

Gross profit margin Profit before tax: Revenue

Net profit margin Profits of business activities: Revenue

ROA

ROE in the ending period

improved from 13% (2006) up to 15.9% (2011), this is an important basis to help the SEC achieve a strong growth in revenue and profits In addition, instead of using equity to finance from the business activities, from 2009, the SEC expanded strongly the use of debt leverage, which helped SEC increase the rate of return on equity (ROE) from 14% (2007) up to 38% (2011), raise the investors' performance

Efficient use of assets to maintain stability

(Source from the financial statements_SEC)

Figure 2.9 Financial targets

Although total assets have been increased many times recently, the efficiency

of the SEC's assets has been remained relatively stable and improved over years, the system of properties; especially equipment’s are used effectively, contributed significantly to the business results of the SEC, particularly the impressive growth

in net revenue and profit

Financial structure has shifted strongly into expansion of debt leverage

(Source from the financial statements_SEC)

Figure 2.10 Target of capital structure

With the orientation of production development, enhancement of competitiveness, since 2009 the SEC has boldly used the financing leverage of

Turn of fixed assets Turn of equity Turn of total assets Turn of inventories

Total liabilities/total assets Long-term loans/Equity Long-term loans/total assets

expansion projects, plant upgrades, this has played an important role to support the SEC achieve speeds of high growth recently Despite the widespread use of debts at

a high interest rate have pushed the SEC's interest expenses up to 38 billion (2011), this has decreased partly the business result of the SEC during 2 years in 2010 -

2011 but controlled and used appropriately this leverage, which will be key to maintain and expand the SEC’s production capacity in the near future

2.2 ANALYSIS OF THE INTERNAL ENVIRONMENT IN THE COMPANY

The analysis of the internal environment within the company through analysis

of the governance, execution and control functions; bodies, departments of the company will help administrators identify their weaknesses and strengths, thereby make any optimal decision

2.2.1.Overview:

Looking to the professionalization of corporate governance, the SEC has issued and promulgated regulations of the corporate governance to clearly define the roles, functions and responsibilities of the Managing Board and Executive Board Regulations of the corporate governance shall be built on the most advanced principles of corporate governance under the guidance of the Organization for Economic Cooperation and Development and cooperation with Vietnam’s Securities Commission of Agriculture

Regulations of the SEC’s corporate governance focus on 5 key issues as follows:

- The corporate governance framework has been secured effectively: The contents of the SEC’s corporate governance regulation are to promote transparency and efficiency of the company itself, in accordance with the legal provisions and it

is required to clarify the responsibilities of supervisory agencies, management and enforcement bodies

- Rights of shareholders and the basic functions of ownership: Regulations of the SEC’s corporate governance aim to protect and facilitate the implementation of shareholder rights as well as security of ownership registration; Transfer of shares;