Building business strategy for Gianh River Cosevco Cement Company within the period of 2010 -2015

GOLBAL EXECUTIVE MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTON PROJECT REPORT Topic: Building business strategy for Gianh River Cosevco Cement Company within the period of 2010 -20

GOLBAL EXECUTIVE MASTER OF BUSINESS ADMINISTRATION

PROGRAM

CAPSTON PROJECT REPORT

Topic: Building business strategy for Gianh River Cosevco Cement Company within the period of 2010 -2015

`TABLE OF CONTENTS

Page

List of abbreviations 5

List of tables, figures, diagrams 6

PREFACE 7

1 The need of study 7

2 Study targets 7

3 Study object 8

4 Study scope 8

5 Study method 8

6 Study significance 8

7 Assignment structure 8

CHAPTER I 9

1.1 Common knowledge of business strategy 9

1.1.1 Definition 9

1.1.2 Role 9

1.2 Process of building business strategy 9

1.2.1 Define vision and mission 9

1.2.2 Analysis of external environment 10

1.2.3 Analysis within enterprise 11

1.2.4 Analysis of strategy and choice 11

1.3 Some analysis tools 12

1.3.1 SWOT matrix 12

1.3.2 SPACE matrix 14

1.3.3 IE matrix 15

CHAPTER II: ANALYSIS OF BUSINESS ENVIRONMENT OF COMPANY 18

2.1 Introduction of company 18

2.1.1 Formation and development 18

2.1.2 Duties 19

2.1.3 Machine organization 19

2.1.4 Business situation 19

2.2 Analysis of external environment 21

2.2.1 Macro environment 21

2.2.1.1 Economy 21

2.2.1.2 Politics - law 25

2.2.1.3 Natural conditions 27

2.2.1.4 Culture and society 27

2.2.1.5 Technology products 28

2.2.2 Sector environment 28

2.2.2.1 Providers 28

2.2.2.2 Customers 29

2.2.2.3 Potential competitors 30

2.2.2.4 Replaced product 31

2.2.2.5 Competition among enterprises within the market 31

2.3 Analysis of internal environment 34

2.3.1 Analysis of human resource 34

2.3.2 Analysis of strengths and weaknesses 47

CHAPTER III: BUILDING BUSINESS STRATEGY BY 2015 50

3.1Target 50

3.2 Strategy construction 50

3.2.1 Build up strategic alternatives 50

3.2.2 General choice of strategy 53

3.3 Strategy choice 60

3.4 Solution to implement strategies 60

3.4.1 Stable penetration into current market 60

3.4.2 Low cost 63

3.4.3 Solution of stable input materials 67

CONCLUSION 70

REFERENCES 71 APPENDIX 72

7 IE : Internal – External Matrix;

9 IS : Internals Strengths

10 Km: Kilometer

11 SBU: Strategy Business Unit

12 SPACE: Strategic Position & Action Evaluation matrix

13 SWOT: Strength, Weakness, Opportunities, Threats

LIST OF TABLE, FIGURE, DIAGRAM

3 Table 1.2: Total importance point in IE matrix 15

4 Table 1.3: Table of external factors matrix 16

5 Table 1.4: Table of internal factors matrix 17

6 Table 2.1: Business and production results within 2007- 2009 20

8 Chart 2.2: Predict consumption demand and growth rate of Cement

period within 2005 – 2020

24

10 Table 2.3: Labor situation of the company in 2009 34

11 Table 2.4: Balance sheet - on 31/12/2009 37

12 Table 2.5: financial norms of Gianh river company in 2009 39

13 Table 2.6: sale price of Gianh river cement and some other kinds

of cement within the market in 2009

43

15 Table 3.1: alternatives to construct strategy (SWOT) 51

PREFACE

1 The need of study topic:

Cement is the important materials in construction Due to national economic development requirement, construction is more and more developed, therefore cement demand is very high Grasping such demand, together with State’s supporting, domestic and foreign enterprises have focused on investing and constructing many cement factories Viet Nam cement corporation has predicted situation of redundant cement compared to requirements, as follows: in 2010, it will get redundancy of 4.96 million tons, in 2011 redundancy of 5.76 million tons, in

socio-2015 redundancy of 4.62 million tons Besides, in integration trend with the role of member of WTO, Viet Nam must implement commitments of WTO in trading, non-tariff and tariff barriers are removed, which has created good condition for foreign commodity penetrated in Vietnam market, including cement Therefore, it has created violent competition among cement producing and selling enterprises in current period These enterprises must analyze reality of unit to find out strengths, weaknesses, opportunities to promote and exploit to exist and develop in such current competitive market; it means enterprise must build up business strategy to have suitable steps in its own development

Gianh River cement company is the unit which is newly established and has operated since 8/2006 Therefore, in such background, trading activities must cope with many difficulties In order to develop trading activities unshakably, company must have a trading strategy Originated from realistic requirements, our group has

chosen the topic “Building business strategy of Cosevco Gianh River Cement Company for the period of 2010 – 2015 ”

2 Study purposes:

Based on study on theory of business strategy, then we can apply business strategy of Cosevco Gianh River Company for the period of 2010 – 2015, to have suitable orientations to adjust limitations, weaknesses, avoid threatens, promote

strengths, focus ON resources, then maintain and stably develop trading activities

of company

3 Study object:

Study, analyze factors which impact on trading and production of enterprise

in current situation, define development orientation for company in coming time

…

Method of statistical analysis, synthesis, comparison, prediction and analysis

of matrix: SWOT, SPACE, EFE, IFE

6 Study significances:

Study process will help learners to apply learned knowledge into reality, supplement and prove scientific quality of learned theory Study results are the reference basis for company to choose suitable business strategy, which can ensure sustainable and long term development

7 Assignment structure:

Chapter 1: Theory basis of building business strategy

Chapter 2: Analyze business environment and company

Chapter 3: Build up business strategy

CHAPTER I: THEORY BASIS OF BUSINESS STRATEGY

1.1 Common theory of business strategy

1.1.1 Definition:

Business strategy is an art in designing, organizing medium to reach long term targets of enterprise and have relation with the change of business environment and competition

Business strategy can define clearly basic targets and business orientation of enterprise in each period which can ensure enterprise to develop constantly and firmly in constant variable business environment It can create thinking instruction frame for action which is applied for a long time from 3 to 10 years and analyzed constantly and expressed the thought of attack and win in business environment

Normal business strategy is defined by three levels: company level; business level and function level

1.1.2 The role

It can help enterprise to realize clearly purposes and orientation These will

be the basis, guidelines for all business activities of enterprise;

Raise effect of using resources, increase competitive position, ensure sustainable development of enterprise

Create firm basis for suggestions of policy and decisions on production and trading suitable to market activities

It can help enterprise to be active in grasping and exploiting business opportunities, simultaneously proposing business method to overcome threatens and risk in competitive market

1.2 Process to build up business strategy

Building business strategy is the first period in strategic administration process This process include 4 steps:

1.2.1 Define mission and targets

This is the first step of the process to build up strategy; mission and targets of organization can provide a background to build up strategy

Business mission of an organization is the purpose of business activities which is the reason for the appearance, existence and development of an organization Business mission of organization can answer the question: for what does organization appear and exist?

Targets are status, results that organization wants to reach in a defined time; most of organization follows profit, target to reach the leading position The second targets are the ones that organization will consider if they want to reach outstanding capacity

1.2.2 Analysis of external environment

The second division of strategic administration process is to analyze external environment of organization; Target of external analysis is to be aware of opportunities and threatens from external environment of organization; three types

of external environment can have mutual relation including: sector environment is the one in which organizations operate, national environment and macro environment

Analysis of sector environment needs the assessment of competitive structure

in the sector, including competitive position of centre organization and main competitors as well as period of sector development Many current markets have become global market; analysis of sector environment can assess impact of globalization in competition within a sector; sector environment (macro environment) including: competitive opponents, providers, potential opponents, replaced products

Analysis of national environment is to consider whether the background in which company is operating can create good condition to occupy competitiveness in global market or not If not, then company can consider transferring a part of activities to nation with favorable background for reaching competitive advantages Analysis of macro-environment including consideration of macro economic factor

(inflate rate, bank interest, policy of currency and finance …), political and legal environment (political stability, labour law, tax policy …), social and cultural environment (population, custom, tradition …), natural environment (problem of environmental pollution, influence of geographical condition, lack of energy….), technological environment (discover new technology, rate of technological transfer, market of technological products …)

Analysis of external factors will allow enterprises to realize what opportunity that enterprises can exploit and what challenge that enterprise must cope with Assessment of opportunities and threatens from external environment can help enterprise build up clear business duty and find out suitable policies to reach targets

Researchers have given EFE matrix to assess external factors

1.2.3 Analysis within enterprise

Internal analysis is the third division of strategy administration process, to find out strengths, weaknesses; methods to reach competitive advantage and the role

of different capacity (distinctive power of company), resources and capacity to create and maintain competitive advantage of company; such conclusion can create and maintain competitive advantage then company must reach effect, quality, improvement and duty with customers; Power of company can put it in dominance

in this field on the contrary, weaknesses can give less effect

Situation of enterprise will be analyzed based on functional activities such as : financial situation; human resource; management; organizational structure; development study; informatics technology

Internal analysis of enterprise can allow realizing strengths and weaknesses

of enterprise then we can build up strategies to promote strengths and limit weaknesses of enterprise

Researchers have given IFE matrix to assess internal factors

1.2.4 Analysis of strategies and choice

The next task is to define strategic method equivalent to strengths, weaknesses, opportunities, threatens of company Comparison of strengths,

weaknesses, opportunities, threatens is called SWOT analysis Basic purpose of SWOT analysis is to realize strategies that it orient, create suitability or equivalent among resources and capacity of company with environmental demand in which company is operating; according to current schools of strategic administration, this period must go further in realizing essence of competitive position based on analysis to find out resources, capacity and essential ability for development of choices

Organization must assess many alternatives equivalent to capacity to reach targets; strategic alternatives which are create can be included in level of business unit, function level, company level or global strategy which allows to exist in the most suitable way with fast change of global competitive environment as a feature

of most of modern sector

1.3 Some tools to analyze strategy

1.3.1 SWOT matrix:

SWOT matrix can help us to develop 04 types of strategies:

- Strategies of strengths - Opportunities (SO)

- Strategies of weaknesses – opportunities (WO)

- Strategies of strengths-threatens (ST)

- Strategies of weaknesses – threatens (WT)

Purpose of SWOT matrix is to find out feasible strategies, which can be chosen based on analysis, combination between internal and external environments, which cannot decide which the best way is; therefore, in development strategies in SWOT matrix, some best strategies are chosen to implement

Strengths and weaknesses often originate within your organization, opportunities and threatens are often related to external factors Therefore, we can consider SWOT as an important tool with highly general vision of organization It can help leaders to define market in sustainable way and consider all opportunities that enterprise can make use of By understanding weaknesses of enterprise in business, managers can manage and remove risks in enterprise; moreover, by using

comparison basis and SWOT analysis between enterprise and competitive opponents, leaders can draft a strategy that can help enterprise to compete effectively within the market

Table1 SWOT matrix

SWOT

Opportunities: list opportunities by importance order:

O1 O2…

Threats: list threatens by importance order:

T1 T2…

Strengths : list strengths

SO2…

ST strategy: use strengths to avoid threatens

ST1 ST2…

WO1 WO2 …

…

WT strategy: minimize threatens and avoid threatens

WT1 WT2…

Analysis quality of SWOT model depends on quality of collected information Therefore, we must avoid subjective view from one side by looking for information from all sides: director board, customers, partners, providers, strategic

partners, consultancy… SWOT can be also limited when arranging information according to reduction trend, which can make some information be limited into unsuitable position with essence of problems; many items can be neutralized or mistaken between two extremes S-W and O-T due to viewpoints of analysts

- Position of square 2: using cautious strategy: penetrate into market, develop market, diversify mixture (trading opportunity with enough resources and favorable condition )

FS +4 +3 +2 +1

0 0 +1 +2 +3 +4

4 3 2

-1

+1 +2 +3 +4

- Position of square 3: using defense strategy such as: limit, remove, liquidate and diversify mixture

- Position of square 4: using growth strategy such as: combine rearward and front combination horizontally, penetrate into market, market development (by competition of cost, difference of products), develop products and joint venture

1.3.3 IE matrix

Matrix of internal and external factors ( IE)

IE ( Internal – External Matrix) can set different SBU of an enterprise in square a table of 09 squares Such matrix can be based on 02 main aspects :

- Total importance point of IFE indicated on X axis

- Total importance point of EFE indicated on Y axis

- Each SBU must be established for IFE and EFE matrix, based on such basis for IE matrix of company

- X axis can express total importance point of IFE matrix

If total points from 1.0 – 1.99 then it is internal weakness

If total points from 2.0 – 2.99 then it is average

If total points from 3.0 – 4.0 then it is strong

- Y axis can express total importance point of EFE matrix, out of which:

If total point is from 1.0 – 1.99 then it is low

If total point is from 2.0 – 2.99 then it is average

If total point is from 3.0 – 4 then it is strong

Table 1.2 Total importance point in IE matrix

Total importance point of IFE

matrix

Strong 3.0 – 4.0

Average : 2.0 – 2.99

Low 1.0 – 1.99 Total

+ If a SBU located in squares of II, II, IV : should be developed and constructed

+ If a SBU located in squares of III,V,VII : should be held and maintained + If a SBU located in squares of VI,VIII,IX : should be harvested or removed

1.3.3.1 Matrix for external factors evaluation

After analyzing opportunities and threatens arisen from external environment, we can use EFE matrix to summarize and assess influence of such factors on the enterprise Development process of an EFE matrix including five steps:

 Step 1: List important factors for the success of enterprise

 Step 2: define importance from 0,0 (unimportant) to 1,0 (very important) for each factor Total classifying level is 1,0

 Step 3: classify from 1 to 4 for each factor to see the method that current strategies of enterprise reacts to such factors out of which 4 indicates good reaction,

3 indicates above average reaction, 2 indicates average reaction and 1 indicates bad reaction

 Step 4: multiple importance of each factor with its classification to define importance point

 Step 5: accumulate importance point of factors to define total importance point of each enterprise

Table 1.3: EFE matrix Main external factors Importance level Classification Importance point

The highest importance point of an enterprise can be 4,0 and the lowest 1,0 Total importance point is 4 which shows that enterprise has good reaction with current opportunities and threatens in the environment In other words, strategies that enterprise uses can bring high effect from current opportunities and minimize

negative influences of external threatens; total point is 1 which shows that strategies that enterprise recommends cannot make use of opportunities and avoid external threatens

1.3.3.2 IFE matrix

Using IFE matrix to summarize analysis, evaluate strengths, weaknesses of factors impacting on internal activities of enterprise The development process of an IFE matrix is similar to EFE matrix which is just different in step 3: mark 1 for the biggest weakness, mark 2 for the smallest weakness, mark 3 for smallest strengths and mark 4 for the biggest strengths

Table 1.4: IFE table

Main internal factors Importance level Classification Importance point

Regardless of IFE matrix having how many factors, total importance point can be classified from the lowest as 1,0 to the highest as 4,0 If total importance point is lower than 2,5, it shows that enterprise is weak internally and if it is higher than 2,5, it shows that enterprise is strong internally

CHAPTER II : ANALYSIS OF BUSINESS ENVIRONMENT OF COMPANY

2.1.1 Formation and development of company

Cosevco Gianh River Cement company is the member unit depending on Central Construction Corporation, which is established from Gianh River cement factory of Quang Binh province with private stamp and account suitable to payment form; Company is organized and operated according to organizational charter and corporation’s activities and charter of company approved by administration council corporation

COSEVCO CEMENT COMPANYAbbreviated name: GIANH RIVER COSEVCO

It is located in Tien Hoa commune, Tuyen Hoa district, Quang Binh province

Project to construct Gianh River Cement factory – Quang Binh province is approved by Prime Minister in Decision No.509/QĐ-TTg on 24/04/2001, is invested by Central Construction Corporation with total invested capital of 2,.877 billion dong Viet Nam, equivalent to 201.23 million USD (construction reality of nearly 3,200 billion VND, equivalent to 203 million USD) Place for building factory in Tien Hoa commune, Tuyen Hoa district, Quang Binh province, on the area of 33 ha Designed capacity is 4.000 tons Clinke/day, equivalent to 1.455 million tons/year (1,275,000 tons cement and 225,000 tons clinke), main products are: cement of PCB-30, PCB-400, PC-40, PC-

50 according to Vietnamese and international standards which can ensure consumption quality within the country and export

Factory had ground breaking on 13/01/2002 Via a time of preparation of financial investment procedure, factory has officially begun to be built on 05/7/2003 After three years of implementation, until 04/6/2006 the factory began to produce the first Clinke of cement, then produce cement products

To manage and put factory into production, on 25/6/2005 administration council of Central Construction Corporation had promulgated Decision No 234/QĐ-TCT-HĐQT, to establish Gianh River Cosevco Cement company directly under the Corporation In August/2006, management board of Gianh River Cement factory project has assigned factory to Gianh River Cosevco Cement company to manage operation

2.1.2 Duties

Based on Decision No 234/QĐ-TCT-HĐQT on 25/6/2005 of Central Construction Corporation and Business Registration Certificate No 2916000026 issued by Quang Binh Department for Planning and Investment with the following trading sectors:

- Exploit, process minerals to serve cement production;

- Produce and trading cements and Clinker, cement products;

- Trade in goods transportation;

- Trading cement packaging and implement other tasks assigned by corporation

2.1.3 Organizational structure

Total labors of company are nearly 800 managers and workers Organizational structure has 10 divisions and 6 workshops Company’s activities are under direct management of Director; divisions and workshops have strong relation with each other, ensure implementation of assigned tasks

Besides, company has system of political organizations: party’s organization, trade union, youth union, professional cadres for political organization

Diagram of organizational structure in appendix 1

2.1.4 Situation and trading results

After the factory officially began to produce and sell products to the market since 8/2006, company has coped with a lot of difficulties which can impact on business results of company such as: insufficient cadres, global economic crisis, natural calamity and flood (Storm No 02/2007 has damaged total asset of 15 billion and storm No 05/2007 has collapsed conveyor belt, damage value of about 20 billion, delayed seaway activities), capital mobilization is insufficient, power supply

of factory is not stable; financial management of corporation (Financial Decisions must have opinions of corporation)

However, leading board of company has focused on difficulties adjustment together with provincial supporting and support of related partners then trading results of company in recent time have increased constantly with rather high increase density

Annual revenue increase more than 30%, production and consumption quantity have increased quickly, until the year of 2009 it has produced 946,381 tons cement and 328,332 tons clinker (equivalent to 1.209046 tons cement) which reaches 83,1% designed capacity, especially density of cement has increased strongly, in 2009 it has increased 2.08 times compared to 2007

Table 2.1 Results of business activities during 2007-2009

Comparison rate (%)

(Source: report data of company)

In 2007 budget payment was 35.6 billion dong and until the year of 2009 company has paid budget of 47.5 billion dong, increased 33.43% compared to 2007, which ranks the second in paying tax for provincial budget; company has solved employment for nearly 800 direct labors in the province, annual average income increases strongly from 2 million/month in 2007, until the year of 2009 it was 3,400,000 dong/month; well implement all policy and regulations of labors: social insurance, medical insurance, periodic healthy examination, labor protectionism, poisonous and other welfares Besides, it has created employment for hundreds of indirect labors within the area By 31/12/2009 company has paid original debt of 539.128 billion dong, paid interest of 526.926 billion dong

Consumption market of products is more and more expanded; until now the market has expanded from Nghe An province to Ho Chi Minh city; out of which main market from Ha Tinh province to Quang Ngai province, with distributor quantity of cement in 2009 of 46 Therefore, in 2009 it has consumed 961,443 tons cement and 345,478 tons clinker (equivalent to 1,237,825 tons cement (equal to 85,1% production capacity)

However, trading results still get loss, but loss has been reduced, as follows:

in 2009 loss has reduced 52.75% compared to 2008

The reason for loss is due to production which cannot reach designed capacity (constant power-cut) then depreciation in price is still high (occupy high density of 18.4%), besides lending interest occupies high density in price ( 19.9%); transportation cost for product consumption ( 9.17%), meanwhile in term of seaway, due to undredged narrow passage of Gianh river then big ship (1,000 tons) cannot come to Len Bang port, just ship of 500 tons can enter Besides, Hon La port has implemented investment slowly then company must transfer to Vung Ang port

to transport products to market area II and III, therefore it has arisen cost of 10 billion dong/year which is also to increase cost

It is expected by 2010, company will have breakeven capital and from later years it will get profit; this is assessed in feasible project when making project to build factory

2.2 Analysis of external environment

2.2.1 Macro environment:

2.2.1.1 Economy:

In recent years, with the policy to develop economy in the right, our nation has reached good results; economic growth rate of Viet Nam is rather high and sustainable: GDP in 2005 it reached 8.4%, in 2006 it reached 8.17%, in 2007 it reached 8.48%, in 2008 it reached 6.18% and in 2009 it reached 5.32%/

Economic experts have supposed that after overcoming economic crisis, economic growth rate of Vietnam in 2010 will be 6.l8% and continue to maintain in the level of 7%-8%/year in coming years which can be completely feasible Based

on stable development of economy, together with fast urbanization rate, cities and towns, new towns have been built, housing market has been developed According

to data of Construction Ministry, Vietnamese urbanization rate has increased strongly; it is expected that in 2010 it will increase 33% and by 2025 it will increase 45% Therefore, in the coming years, demand of cement and cement products is high This can be a good opportunity for cement factories

Chart 2.1: Growth of GDP and CPI via years (source: statistical agency)

Besides, from Jan 2007, Vietnam has officially become a member of WTO; such important event can give Vietnam both opportunities and threatens Cement sector is not out of such impact Apart from opportunities such as: approach many capitals, modern technology and management qualification…cement sector must cope with violent competition of imported Clinke, cement and cement products from China, India, Thailand…

According to estimation, cement consumption quantity in the year of 2010 of Vietnam has reached 50 - 51 million ton, increased above 11% compared to 2009 Vietnam cement corporation has predicted in the coming years, although cement demand has increased with high rate of 11%/year by 2015, with capacity of cement factories project, supply of cement will be redundant However, to adjust above difficulties, related ministry and sector have made consultancy to Prime Minister to promulgate solutions to reduce supply and increase demand Construction ministry

has required provinces and cities not to issue investment certificate for new cement projects; especially suggested Prime Minister to stop some projects in master plan but slowly implemented with inconsiderable quantity, which is difficult to implement At the same time, use tariff and non – tariff tools to limit import of cement products, priority for cement to replace other materials (construct road, concrete…)

Chart 2.2 Expected consumption demand and growth rate of cement sector

during 2005 – 2020 ( source Ministry of industry and Commerce - cement – VCSC)

Gianh River cement company is the second factory of the province which ranks the second in term of income and occupies a high density in provincial industry; Cement sector is the first basis to create premise for developing provincial industry; Therefore, Resolution of Provincial Party’s assembly, legislature XIV had defined: focus on developing industries which can create motivation to promote economic structure transfer Out of which, it will give priority for industry of material construction especially cement This is an opportunity, good condition for company to do trading activities

Besides, together with common development of the nation, Northern Central area has rather high economic growth rate compared to the whole nation with strong urbanization Especially, Government has currently focused resources on socio-

Consumption Demand

economic development for this area; industrial zones, new urban centers, and projects are constructed such as: Vung Ang industrial zone – Ha Tinh province, Hon La economic zone – Quang Binh province, Chan May economic zone – Thua Thien Hue province, construction of Southern Ha Tinh province – Northern Quang Binh province by 2030 according to Decision No 1685/QĐ-TTg on 14/9/2010…Therefore, demand of using cement and cement products in this area is very high

Interest factors:

After escaping from crisis, capital demand for trading of enterprises is very high, interest for capital mobilization will increase (currently 9%/year) Therefore, lending interest can increase which cannot be avoided; this is a big barriers for the company in using capital

Besides, input price of production materials has increased and tended to increase (coal, power, Kraft…); this is the difficulty in promoting product price to increase

Exchange rate:

Exchange rate between domestic currency and foreign currency like USD and EURO has changed according to orientation in which domestic currency loses price; this is the good time for product export, but disadvantage for imported products including cement, clinke and input materials to produce

However, Gianh River cement company with the policy for diversification of input material, main material in nation with high activeness then it will not depend

on import Besides, company must improve techniques, do research to replace imported equipments by domestic equipments, then when having the change of risk

on exchange rate, it will not impact much on trading activities of enterprise

Then, domestic, foreign and provincial economic factors have shown Gianh River company opportunities and threatens that must be estimated to have suitable steps

2.2.1.2 Politics-law:

Political and social situation of Vietnam is very stable which is recognized

by nations in the world as one of ten safest nations in the world On the other hand, Government has actively implemented solutions to encourage investment stimulation method, inflate prevention, protecting domestic production and social security, poverty alleviation This is one important factor for national economic development, which is also the basis for other nations and foreign investors to increase investment, economic cooperation, create good condition for national development Out of which, increase investment in infrastructure and housing

Central and Tay Nguyen area has social and political stability This area bears big damages from war, economic development is weaker than other areas within the nation, then Government has implemented policies to encourage socio-economic development On the other hand, provinces within this area are also constructing a good investment environment including: publicize master plan, legal documents, implement administration reform, develope human resource, support necessary conditions for enterprises….to attract investors to investing in this area

Besides, legal system of Vietnam is more and more improved, which is suitable to international legal system and creates important legal basis for foreign economic activities There are no boundaries to distinguish and preferential treatments for enterprises with foreign-invested capital, which can create healthy competition and increase trust for foreign investors in Viet Nam

Cement sector is one of sectors that is cared by the State because it has produced important product for constructing houses and infrastructure It is the sector that Vietnam has advantages and it can create many employments for people

To make cement sector developed quickly, on 16/05/2005 Prime Minister has Decision No.108/2005/QĐ-TT on approving master plan of cement industry development of Vietnam by 2010 and orientation by 2020: development targets of Vietnam cement industry are to meet the domestic demand of cement consumption (both quantity and type), which can be exported when having condition; put Vietnamese cement sector as a strong industrial sector with modern technology,

competitive enough to compete with domestic and foreign markets in integration process This is the opportunity for Gianh River cement company to use all capacity and materials for production and trading, product diversification, market expansion

On the other hand, the factory is located on favorable position, on National Road No 12, away from Chalo international bordergate of 130 Km, away from KhamMuon province of 270 km (away from Thailand a river) connecting provinces of Northern East of Thailand via Huu Nghi bridge III ( which will be finished in 11/2010); away from 1A national road 17 km, away from Le Son railway 3.5 km, which can transport by railway conveniently Near Gianh river; in the coming time, vessels of 1,000 tons can deliver coal and receive products ( currently port is constructed to be put into using) Hon La seaport has been in use and implemented the second phase for vessels of 15,000 tons to shelter Currently, government has decided to open straight way from the factory to Hon La port with the first capital of nearly 1,000 billion dong

We can say that, geographical and natural condition of Quang Binh in general and Gianh river cement company in particular is the opportunity for producing cement in the coming time, especially expanding export market to Laos and Northern Eastern provinces of Thailand

2.2.1.4 Culture and society

To make the nation stably developed, in the coming time, apart from strengthening investment to develop economy, projects, cultural and social

development programs must be focused to develop such as: constructing schools, welfare and community projects, cultural projects….to raise people’s awareness and living standards On the other hand, with current increase rate of population (86 million people) the demand of housing will be high Besides, abnormal change of climate, appearance of flood and storm - especially Central area is the area which bears much damages from flood and storm- has changed viewpoint on living temporarily as before

From above cultural and social factors, it has arisen high demand of cement

in the coming time; this is big chance for cement factories nationwide, especially cement factories in Central area

2.2.1.5 Technology

Cement industry is one of long term industries which plays important role in the process of national construction and development Until now, there have been many new technology and modern equipments that have been put in production to reach high economic effect

Development and technological appliance into cement sector have created good condition for raising capacity and quality, saving materials, cost and protecting environment, which can meet the consumption demand of cement of the market and limit negative impact on environment

Besides, such process can bring defined difficulties for small and medium companies in improving technology, quality management of products and environmental problems to follow companies of sector

2.2.2 Sector environment:

2.2.2.1 Providers

Cement product is the connection of many input materlas which are processed and mixed with each other according to a define rate and condition To make cement production stable with high quality, suitable price, producers must ensure suitable input material production It means producers will depend on input material providers With regard to Gianh river cement company, as above analysis,

most of main materials to produce cement are provided actively by company (the province has issued certificate for material mines to be used and exploited by company) Some other materials depend on providers such as: plaster, coal However, company is located on National road No.12 which is via Chalo bordergate to Laos where has a big plaster mine that Vietnam has exploited and transported to Vietnam via Cha Lo bordergate Therefore, supply resource is plentiful with many providers, which can create competition in providing such materials

With regard to coal mine, company has used a rather big quantity of coal together with favorable seaway transportation which allows providers and company

to build up purchase relation from producing cement till now; then it has priority, prestige which can create cooperation to provide materials and fuels

Then, material supply sources for company has high stability; bargain capacity of provider is low, and this is the advantage of Gianh river cement

company;

2.2.2.2 Customers:

Customers who collaborate with company will be divided into following groups: distributors, small agencies, consumers Features of each group are as follows:

Group 1: distributors this group can consume stable quantity of products with quick payment, which can ensure capital safety, fast capital rotation – The type oc customers that is always connected closely with the company

Group 2: Retailed agencies These are the customers that have direct relation with consumers This group has important role in introduction, advertisement and provision of products to consumers However, the stability of this group on selliing quantity is not high depending on season To this group, company must purify, choose customers with high credibility of payment and capital safety

Group 3: consumers who directly buy products from the company with quick payment Advantage of this group is capital safety but quantity depends on construction season, and quantity for each time of buying is not high

However, to assess bargain capacity of consumers with products of company

we can divide customers into two main groups:

Organizational customers ( enterprises buy to implement projects): these customers have good knowledge of quality and price of cement products then bargain capacity of this group is low According to statistics of consumption office then this group can consume about 60% total products of company

Individual customers including: retailer agency and individuals who directly use products: this group has not good knowledge of quality and price of products then bargain capacity for cement products of company is rather high; this group can consume about 40% total annual product consumption of the company

Then, via above analysis, bargain capacity of buyers with Gianh River cement

products is on average level

2.2.2.3 Potential competitors:

Due to the features of cement production, it can depend highly on natural condition of input materials Therefore, to make an enterprise enter the sector then geographical advantage is very important Enterprises, which are not near material mines can enter sector but after that it will have troubles in solving arising related cost, especially transportation cost, which can impact on business effect and reduce competitive advantage of the products Currently, in places, which have condition to produce cement products nationwide-especially at the market of company- many factories are built

On the other hand, in front of predictions of foreign and domestic researchers

on the redundancy of supply, Construction Ministry has submitted to Government not to approve cement projects from now until 2020 to promote all designed capacity of cement projects which are operating and being invested to construct

then ensure cement industry to develop strongly So, this will be the big barriers for enterprises which expect to enter the market within 2010 – 2020

Besides, investment cost for cement factory project is very high, which make

it very difficult for an enterprise to withdraw out of the sector

Therefore, Gianh River Cosevco will have to cope with threatens of potential opponents in low level

2 2.2.4 Replaced products

Cement is the main material for construction then we cannot find out any perfect replaced products Although there are some replaced products currently in the market such as: sheet, steel or glass to replace wall made by brick and cement, due to natural condition, cultural features then such replaced products can not compete with cement It can just replace cement in some rare cases Then cement is

the material with low replacements

2.2.2.5 Competition among enterprises within the market

Gianh river cement company is a new unit, depending on corporation then financial mechanism is lack of flexibility and activeness Meanwhile competitive opponents are companies with independent financial capacity which has competitive advantage then promote production to reach designed capacity; some companies are leading units which invest to expand capacity Therefore, in the coming time competition within the market to keep and expand market is very strong; therefore, company must exploit strengths and adjust weaknesses of itself; out of which, company must raise prestige, product quality, reduce cost to have suitable sale price, then raise competitiveness

Via analysis, we can see one of strengths of Gianh River Company is to have abundant material zone with stable quality which cannot use out of capacity then in the coming time company must increase capacity to reach and exceed designed capacity to meet consumption quantity, reduce depreciation on each product unit, lower cost compared with current cost These will the the strength

Quality of company’s cement is quite stable and high, which is highly appraised by the customers This is a strength of the company It’s expressed via data and consumption result at each market which is shown through appendix 2

Moreover, with lower sale price than opponents in Northern Central area, for example: The product price of Gianh River company is 150.000VND/tons less than that of Bim Son, 50.000VND/tons less than that of Hoang Mai This can be considered as one factor to help the company to compete with opponents within the area, then it must have suitable alternatives to raise marketing, advertisement, to increase buying of customers to expand market share within the area

Quang Binh is a developing province, under the attention and supporting of local authority, Gianh River Company must grasp opportunity to keep target market, traditional customers to occupy market in this area by raising prestige and product quality

Apart from strengths, company should also adjust passiveness in activities with: recommendations, projects to submit to Chairman of Administration Council

of Central Construction Corporation to raise financial power, classify financial sources for the company to cope with some situations, grasp opportunities to make suitable decisions and raise competitiveness

According to analysis of external environment, Gianh River cosevco cement Joint stock company is coping with opportunities and threatens as follows:

3 Developed economy, demand of people of urbanization is higher

4 Favorable geographical and economic position

5 The change on demography, natural condition and development of social and cultural demand of people

Threatens (T):

1 Competitive pressure within the sector is high

2 Imported cement products

3 Inflate has made input price increase which can impact on competitiveness

4 Banking interest tends to increase which can create many threatens for companies with high debt like Gianh river

5 Cement supply is higher than demand

Table 2.2 Table of external factor evaluation (EFE matrix)

The highest total point is 4 and the lowest total point is 1, average point of 2,5 Important point is high then enterprise can react with external factors

External factors

(1)

Importance level (2)

Classification (3)

Points (4) = (2) x (3)

1 Expand market to Laos, Thailand after traffic system

is completed

2 Stable politics, government and locality also have

preferential treatments for cement development

3 Economic growth, demand of people on urbanization

is high

4 Natural and economic position is good 0,05 1 0,05

5 The change of demography, natural condition and

development of social and cultural demand of people

6 Competitive pressure within the sector and cement

import

7 Besides, in global economic integration then foreign

companies will import cement to compete

8 Inflate can make input price increase, impact on

competitiveness

9 Bank interest tends to increase, which can create

many threatens for companies with high debt like Gianh

river

10 Cement supply is higher than demand, which is a

threat for Gianh river company in orientation

the changes of external environment is in average level

2.3 Analysis of internal environment of company

2.3.1 Analysis of company’s resources

2.3.1.1 Human resource

The task of recruiting, training and nurturing human resource has been cared

by corporation and company Since it began to implement the project, corporation has coordinated with Da Nang encyclopedic University to open 1 class with 50 learners training on cement; at the same time appoint 7 engineers of technology to Polysius corporation of Germany to learn and study modern technology of cement production Quality of human resource is indicated in table 2.2

Table 2.3 labors of company in 2009

Managers of company currently including 50 cadres (from head, deputy head

of office, divisions and workshops) out of which 48 people of university graduation (engineer: 32, Silic: 10, mechanic and automatic: 13, electric: 9; economic bachelor: 13, other bachelor: 3, college: 2, average age of 38 Rate of good manager 27/50 (occupy 54%) Director board includes experienced managers with more than

20 years who were transferred from other companies of corporation

Via above general information we can see the rather high quality of human resource which can meet the demand of management and production in present and in the future, especially cadres are very young who are basically trained

However, leaders of divisions, workshops are young with little experiences while board of directors are seniors but most of them were leaders of construction

companies, therefore they are lack of experience and major knowledge in cement

In addition, managing, controlling a cement company with high capacity and modern technology, equipment, with many deferent divisions and works are very hard Therefore, management has quite a lot of difficulties at the beginning On the other hand, cadres and technological workers are talented but too young; enthusiastic but lack of professional experience; low professional skill All of these lead to lacking of activeness in coordinating in working All the above reasons affect the productivity and quality of the company’s products Specifically: the productivity of the company is lower than that of other competitors In 2009, average productivity of Gianh River is 1,591 tons/person, of Hoang Mai is 1,740 tons/person and of Bim Son is 1,810 tons/person

On the other hand, company has just come to operation, then leaders of company and corporation have been changed for many times (company has 4 times

to replace director, corporation has two times to replace general director) then it can impact much on leadership of company Besides, arrangement of cadres and workers in some division is still wasted, especially administration division of company and workshops Company has classified A, B, C for every month but criteria are not concrete then assessment is sometime inaccurate with subjectivity, which can impact on the encouragement of cadres and workers Organizational activities to raise experiences, skills for cadres are not constant, not build up reward regulation to encourage employees to study and improve techniques; not build up labor norms to make basis for production assessment of each division On the other hand, the company has just starting producing but there were heavy storm and flood

in this province every year (Storm No 2 and No 5 in 2007) Besides the loss over 35 billions VND, this disaster also broke producing lines, factories and seaway transporting came to a stop Those were the reasons that affected the productivity of the company

2.3.1.2 Finance:

Via Table 2.3 balance sheet of company is in brief form and Table 2.4

financial norms of Gianh river cement company and some other cement companies

in 2009, we can have some following ideas:

- Group of assessment norms of short term payment capacity: short term

payment capacity of company is lower than Hoang Mai and Bim Son cement company Payment capacity is in suitable level which is often 2, then Gianh river cement company just reaches 0.038, meanwhile Bim Son and Hoang Mai are 4.279 and 0.6884

Payment capacity of Gianh river company just reaches 0.013, lower than sector of 1 and Bim Son, Hoang Mai are 0.3348 and 0.3631 Index can indicate that payment capacity of company is low but acceptable to a big production companies which has just been in operating in 4 years

- Effect of using capital: circle of company’s inventory has reached 12.048

circles which is higher than Hoang Mai company of 5.56 circles, Bim Son company has 1.1 circles Then, it can prove that company has store low level of materials, unfinished products and products, which can save cost of inventory but if we cannot create supply reasource for input material, it cannot ensure constant trading in case

of abnormal events that company cannot predict such as flood, storm…

Table 2.4 BALANCE SHEET (summarize form)

- Short term receivables 38,862 66,631