Building business strategy for power engineering consulting joint stock company 3 (Pecc3) 2014 - 2018

Global Advanced Master of Business Administration BUILDING BUSINESS STRATEGY FOR POWER ENGINEERING CONSULTING JOINT STOCK COMPANY 3 PECC3 2014 - 2018 Group 1: 1/ Pham Van Tuan 2/

Global Advanced Master of Business Administration

BUILDING BUSINESS STRATEGY FOR POWER ENGINEERING CONSULTING

JOINT STOCK COMPANY 3

(PECC3)

2014 - 2018

Group 1: 1/ Pham Van Tuan

2/ Nguyen Hung Anh 3/ Nguyen The Vinh 4/ Ho Ngoc Quoi

ACKNOWLEDGEMENT

Having carefully and seriously studied and synthesized, our group have completed this topic We confirm that this is the research paper of our own effort The figures disclosed in the assignment are extracted from researches, reports and articles of organizations and individuals and are legitimately referred and used The results presented herein are trustworthy and have not been published in any other research paper

Our group would like to express our gratitude to Griggs University, Center for Educational Technology and Career Development (ETC) – Vietnam National University, Hanoi, professors who have enthusiastically instructed us We also would like to thank the staff of the Center for helping us during the course

The Group also would like to extend our sincere thanks to Power Engineering Consulting Joint Stock Company 3 (PECC3) that has helped us during the performance, has shared with us useful data and information to accomplish this assignment

Ho Chi Minh City, September 20th, 2013

GROUP OF AUTHORS

TABLE OF CONTENTS

INTRODUCTION 1

CHAPTER I . THEORETICAL BACKGROUND FOR FORMULATION OF BUSINESS STRATEGY OF ENTERPRISES 4

1.1 DEFINITIONS OF BUSINESS STRATEGY 4

1.1.1 Definition of strategy 4

1.1.2 The fundamentals of strategy 4

1.1.3 The role of a business strategy 5

1.2 DIFFERENT TYPES OF BUSINESS STRATEGIES 5

1.2.1 Corporate-level strategies 5

1.2.2 Business-level strategies 7

1.3 BUSINESS STRATEGY PLANNING 7

1.3.1 Macro environment analysis - PEST model 7

1.3.1.1 Political and legal environment 8

1.3.1.3 Socio-economic environment 9

1.3.1.4 Scientific, technical and technological environment 9

1.3.1.5 Natural environment 10

1.3.2 Analysis of industry environment – Porter’s Five Forces Model 10

1.3.3 Analysis of enterprise’s internal factors 14

1.3.3.1 Analysis of resources 14

1.3.3.2 Capacity for Research and Development (R&D) 14

1.3.3.3 Production capacity 14

1.3.3.4 Financial capacity 15

1.3.3.5 Marketing capacity 15

1.4 STRATEGY FORMULATION TOOLS 15

1.4.1 External factor evaluation matrix (EFE matrix) 17

1.4.2 Internal factor evaluation matrix (IFE matrix) 17

1.4.3 Competitive Profile Matrix (CPM) 18

1.4.5 QSPM 20

CONCLUSION OF CHAPTER I: 21

CHAPTER II . ANALYSIS OF BUSINESS SITUATION AND BUSINESS STRATEGY OF POWER ENGINEERING CONSULTING JOINT STOCK COMPANY 3 (PECC3 ) 22

2.1 OVERVIEW ON PECC3 22

2.1.1 General information on the company 22

2.1.2 Establishment and development history 23

2.1.3 Business lines 26

2.1.4 Organisational structure: 29

2.1.5 Business results of PECC3 in the stage of 2010 – 2012 29

2.2 ANALYSIS OF EXTERNAL ENVIRONMENT 31

2.2.1 Macro environment analysis under PEST model 31

2.2.1.1 Political and legal environment 31

2.2.1.2 Economic environment 31

2.2.1.3 Socio-cultural environment 35

2.2.1.4 Scientific, technical and technological environment 35

2.2.1.5 Natural environment 36

2.2.2 Analysis of industry environment 37

2.2.2.1 Analysis of competitive pressure from existing competitors 37

2.2.2.2 Analysis of threats from potential competitors 41

2.2.2.3 Analysis of customer’s pressure 42

2.2.2.5 Analysis of threats of substitues products 44

2.2.2.6 External Factor Evaluation Matrix – EFE Matrix 45

2.2.2.7 Competitive Profile Matrix CPM 47

2.3 ANALYSIS OF INTERNAL ENVIRONMENT OF THE COMPANY 50

2.3.1 Analysis of resources 50

2.3.1.1 Financial capacity 50

2.3.1.2 Infrastructure 55

2.3.1.3 Human resources 55

2.3.1.4 Technology, machinery, and equipment 57

2.3.1.5 The work procedures 57

2.3.1.6 Brandname 57

2.3.2.Analysing the capacity of service and product provision: 57

2.3.3 Analysis of the capacity of Research and Development (R&D) 58

2.3.4 Analysis of Marketing capacity 59

2.3.5.Internal factor evaluation matrix 60

2.3.5.SWOT Matrix 62

CHARTER III.PROPOSAL OF STRATEGY AND SOLUTIONS TO IMPLEMENT BUSINESS STRATEGY OF PECC3 IN THE PERIOD OF 2014 – 2018 65

3.1 VISION, MISSION AND STRATEGIC OBJECTIVE OF THE COMPANY 65 3.1.1 Vision 65

3.1.2 Mission 65

3.1.3 Core values 65

3.1.4 Strategic objectives of the Company 66

3.2 ANALYSIS AND SELECTION OF THE STRATEGIC OPTIONS THROUGH SWOT MATRIX 66

3.3 SELECT THE OPTIMAL STRATEGY BY MATRIX QSPM: 75

3.3.1 Select the optimal strategy 75

3.3.2 Analysis of the Thailand market and the competiveness of PECC3 79

3.3.2.1 Some characteristics of Thailand market 79

3.4 SOME SOLUTIONS TO PERFORM BUSINESS STRATEGY SELECTED 84 3.4.1 Solutions to develop products and services 84

3.4.2 Solutions on technology and working process 85

3.4.3 Solutions to develop human resources 86

3.4.4 Solutions on restructuring the organization 88

3.4.5 Solution on Marketing 89

CONCLUSION FOR CHAPTER 3: 94

CONCLUSION 96

REFERENCES 97

APPENDIX 99

Company 2

Company 5

Consultant Joint Stock Company

LIST OF FIGURE

Figure 1.2: Analysis Porter’s Five Forces Model 10

Figure 1.3: Model of strategy formulation 16

Figure 2.1: A analysic sheet by revenue period 2010-2012 28

Figure 2.2: Model of administration and management apparatus of PECC3 29

Figure 2.3: A analysic sheet by business results period 2010-2012 30

Figure 2.4: Domestic design and consultancy percent in 2012 40

LIST OF TABLE Table 1.1: SWOT Matrix 20

Table 2.2: Comparison of some criteria between PECC3 and competitors in 2012 39

Table 2.3: Gross profits of works of the company in the stage of 2010-2012 43

Table 2.4: Abridged financial statements of the company in the period of 2010-2012 51

Table 2.5: Some of the finance indices of the Company in the period 2009-2011 53

Table 2.6: The skill matrix of the Company’s staff 58

Table 3.1: Checklist of documents in accordance with norms 86

Table 3.2 Activity plan in period 2014-2018 89

Table 3.4 Estimation for sale volume in conducting new strategy compared with the previous strategy 92

Table 3.5: Budget and human resources plan of the company in the period of 2013-2014 93

INTRODUCTION

The demand for energy in general and electricity in particular energy for the socio-economic development in Vietnam and Indochina (including Laos and Cambodia) and Myanmar is very large Currently, Vietnam has hydropower plants such as Hoa Binh, Tri An, Son La, Yaly and Nghi Son Thermal Power Plant 1, Ca Mau along with hundreds of hydropower plants, thermal power plants distributed small Northeast weak (thermal), Northwest, Central Highlands, Dong Nai (hydropower) and Ca Mau (thermal)

Enter 40% power, Cambodia desperately for incidents in Vietnam

dien-campuchia-nhao-nhao-vi-su-co-o-viet-nam.html

http://tintuconline.com.vn/vn/thitruong/20130524065053345/nhap-40-nguon-As it can be seen demand for electricity consumption in particular Vietnam and other countries in the Mekong river region is very large, if the supply is enough not timely it will cause difficulties for people's lives and especially hindering socio-economic development of the country

Besides the demand for electrical energy use, demand for the design, build power projects and power transmission network infrastructure for the entire regoin

is also very large

PECC3 is a company operates in the field of energy consultancy in Vietnam and the Indochina peninsula region To fully satisfy the demand for electrical construction services consulting for clients with high quality and better price

Quality reliable PECC3 honored values with the aim of building confidence, trust in quality of service Honesty and sense of responsibility, PECC3 commitment with all partners to ensure consulting quality is the top target to satisfy the increasing demands of customers

PECC3 would like to create a typical style for PECC3 officers and employees are dedicated and have high sense of responsibility All members of PECC3 always

end strength and wisdom to solve tasks efficiently, serve

satisfaction to customers

consultation of hydroelectric power as well as heat away from residential areas, difficulties in storage devices

Developing consultancy market, enhancing brands PECC3 Strengthening capacity development to meet the needs of the domestic and region market During construction consulting, development and operation of power systems, PECC3 strive to use advanced technology

Interested consulting market to build power projects in Asia: Cambodia, Laos, Thailand, Myanmar

According to a survey of PECC3, potential electricity from renewable energy (RE) in Viet nam is very large, as every year: SHP potential 7,000 MW / year (800

MW new exploitable) biomass power potential of 800 MW (150 MW operators only); biogas power can reach 100 MW (currently untapped any 1 MW) solar power has potential kw/m2 4-5; wind power is only 31.5 MW extraction (feasibility projects will be implemented in the near future will have a total capacity of 2,000 MW) electricity from waste potential 220 MW (currently exploiting new 2.4 MW) Particularly the kind of tidal power from the 200 MW capacity /year and may geothermal 200-340 MW /year, but the two categories we have not exploited at all Not only is expected to increase the power output, renewable energy is to replace fossil NL contributes to reducing adverse environmental impacts Renewable

energy projects in the country have implemented mainly small-scale, often located

From that array elements on Power Engineering Consulting importance, and very attractive for businesses, investors at home and abroad in the field of energy production For these reasons we selected groups of subjects Strategy Consulting Construction Electrical Engineering of:

Power Engineering Consulting Joint Stock Company 3 of Electricity of Vietnam

1.1.2 The fundamentals of strategy

It was found that business strategy is a combination product that the market environment and what the business can provide Generally, the life of a business, strategy is the art of design and organizes various means to achieve long-term objectives (economic objective), the relationship with the environment and change competition

In a more specific look, a strategy aimed at:

• Outline a plan for synthesis and consistency of business

• Out of the growing trend for a long time, said the main objective of the enterprise

• Outline the basic resources of the business, indicating the mode to respond to unexpected changes that often face businesses in a competitive environment

1.1.3 The role of a business strategy

- Planning Role : Business Strategies helps businesses realize clear goals , direction of their own future , orientation activities for a long time , there is a solid basis for the implementation of business activities , and help managers know , take into account organizational direction and orientation to go , how to go , and if there are results

- Forecasts role: the trend of globalization, the business environment is always changing Therefore, analyzing the environment and building a business strategy that will help managers identify opportunities and threats, as well as find out the strengths and weaknesses of your business

- Control of the role: business strategy to help manage usage and allocate resources reasonably, to make a decision in respect of the conditions of the business environment, and strengthening connections attachment of the HR system, strengthen risk management capabilities and prevent potential threats

1.1.4 Mission and strategic objectives

The mission concept is to show the ultimate goal, the meaning of life and survival of businesses However, in each strategic period, it must be determined at the appropriate strategic objectives, consistent with the same period

Strategic Objective

Strategic objectives and milestones is a situation where businesses want to achieve during the different strategies It can be seen that the business strategy of the business is established on the balance of three factors, including:

- Strategic objectives (reflecting expectations of the business)

- Business environment (bindings shown outside the enterprise)

- The capacity of the enterprise (such as internal constraints)

1.2 DIFFERENT TYPES OF BUSINESS STRATEGIES

1.2.1 Corporate-level strategies

Adding new, unrelated products or services

Retrenchment Regrouping through cost and asset reduction to reverse

declining sales and profit

Divestiture Selling a division or part of an organization

Liquidation Selling all of a company’s assets, in parts, for their

tangible worth

1.2.2 Business-level strategies

Porter’s Five Generic Strategies

Type 1: Cost Leadership—Low Cost

Type 2: Cost Leadership—Best Value

Type 3: Differentiation

Type 4: Focus—Low Cost

Type 5: Focus—Best Value

Figure 1.1 Porter’s Five Generic Strategies

1.3 BUSINESS STRATEGY PLANNING

This aims at analyzing and synthesizing factors existing outside enterprises, having decisive impacts to the vitality and development of the enterprises Enterprises must find out opportunities and challenges brought by the objective environment

1.3.1 Macro environment analysis - PEST model

PEST is the model studying the impacts of four main factors in macro environment Such factors include:

 Technology

There are four factors that have direct influence on economic branches They are the external factors of enterprises and the industry, and the industry is subject to its impacts as an objective factor

1.3.1.1 Political and legal environment

+ Stability: the stability which is considered here is one of factors of political, diplomatic conflicts of legal institutions

+ Tax policy: policies on import and export duties, consumption taxes, income taxes, etc will affect revenues and profits of enterprises

+ Related laws: Law on Investment, Law on Enterprises, Law on Electricity, Labor Code, Law on Anti-trust, Law on Anti-dumping, etc

+ Other policies: Policies of the Government will affect to enterprises, they may create profits or challenges to enterprises For example, commercial policies, industry development policies, economic development policies, interest rate policies, competition regulatory policies, consumer protection policies, and so forth

+ Factors and elements having significant impacts and remarkable efficiency

to the economy: interest rate, inflation, etc

+ Economic policies of the Government: legal regulations on basic salary, economic development strategies of the Government, incentive policies for different industries: tax reduction, allowance, and so on, orientations, plans, and policies of

economic development according to economic sectors and region, 5-year plans, year plans and strategic vision

10-+ Economic outlook: growth rate, GDP growth rate, investment-to-GDP ratio, ability to attract foreign investment, the openness and integration in terms of economics, schedules for tax cut-down, and investment incentives, etc

1.3.1.3 Socio-economic environment

Besides cultural characteristics, social ones also attract the attention of enterprises when doing market research Social factors will divide the community into different groups of customers; each group has its own features, psychology, as well as income, etc.:

+ Average life-span, health status, nutrition regime, food and drink regime + Average income, distribution of income

+ Lifestyle, manner, qualifications, aesthetic viewpoint, psychological factors + Living conditions

+ Ethnicity group, sex, and so on

1.3.1.4 Scientific, technical and technological environment

The whole world is now still in the revolution of technology, a series of new technologies have come into being and have been integrated into products and services

+Policies and investment of the Government and enterprises to develop transportation infrastructure, technical infrastructure, to study and apply science and technology

+ Speed, cycle of technology, out of date technologies rate

+ Influences of information technology and the internet to business operation + Study and development of new technologies, new materials and application thereof into production and business operation

+ Ability to update and change technology, technologies friendly to the environment, etc

1.3.1.5 Natural environment

In addition to such basic factors as aforesaid, at present when studying market, enterprises must introduce the globalization factor as a macro factor influencing to the industry

+ Globalization causes competitive pressures, competitors come from all regions The integration process with make enterprises adjust correspondingly with comparative advantages, labor allocation of the region and of the world

+ The important thing in integration is that trade barriers will gradually be lifted, enterprises have opportunities to do the trading with partners far from them in terms of geographical distance

+ Exploiting advantages on geographical position is the significant opportunities in free trade in order to obtain a bigger market

1.3.2 Analysis of industry environment – Porter’s Five Forces Model

In any industry, each enterprise is subject to the competitive pressure in five aspects

The analysis of the Porter’s Five Forces Model which helps strategists to clarify such forces – industry competition structure, is summarized in the following diagram:

Figure 1.2: Analysis Porter’s Five Forces Model (Source: Lecturing material on Strategy Management – Griggs)

Competitive Rivalry within an Industry

Threat of Substitute Products

Bargaining Power of Suppliers

Bargaining Power of Customers

Threat of New Entrants

According to Michael Porter, the intensity of rivalry in the market within any production industry is influenced by 5 competitive forces as follows:

Bargaining Power of Suppliers, which is expressed through the following

features:

- Supplier concentration

- Importance of volume to supplier

- Differentiation of suppliers

- Impact of inputs on cost or product differentiation

- Switching costs of firms in the industry

- Presence of substitute suppliers

Currently the company is using the software to charge annually (Autodesk Building Design Suite Standard, Autodesk Building Design Suite Premium) as: Architect AutoCAD 2014, AutoCAD Structural Detailing 2014 Sketbook Designer, AutoCAD Raster Design, AutoCAD Recap, 3dsmax Design

In addition, the company also use an annual fund to reward employees up to the board software initiatives and assessment for companies to use in order to save the cost of an annual rental software, increase active and high precision: the blanket features reinforced tunnel anchors and open, software and the water surge tank, penstock thickness it is advantageous to avoid the other companies

Threat of Substitute Products, reflected in:

-Switching costs in products

- Substitute products consuming trend

- Comparision of Price and quality of substitute products

Products and services that replace the product or service can satisfy equivalent

to the products and services in the industry

In fact the demand for electricity is increasing, an annual increase of about 15% Equipment necessary for increasingly more modern, alternative energy product is not currently available

Threat of New Entrants, which are shown in:

- Absolute cost advantages

- Proprietary learning curve

Barriers to entry: the elements making entry into an industry more difficult and costly

Barriers to entry too large in terms of capital, technology should present only a few companies in the country working on, because it can not meet the manpower to participate in the project or the equivalent features and technology but the price is certainly cheaper entry barrier industry Consultant electricity is still a long way for advertising other businesses to other businesses

Bargaining Power of Customers, which is shown in:

- Buyer concentration in the industry

The customer is a competitive pressure can directly affect the entire business operations of the company

Customers are divided into 2 groups:

+ Domestic customers include: traditional customers, VIP customers with larger projects 0.5 billion

+ Foreign customers: Customers are indigenous enterprises, the Vietnamese overseas customers, VIP guests

Both groups are now pressuring on price, product quality, and related services

is they who control the industry through competition in a purchase decision

Competitive Rivalry within an Industry, which is expressed in:

Currently, many companies are established and working in power sector consultancy, otherwise foreign companies are also involved in the Vietnam market with a good level very quickly, but the economic crisis of 2009 account series decommissioning and company bankruptcy, suggesting that PECC3 is a reliable address of investors and address the convergence of talent

Although the barriers to entry for the industry is high, the pressure from significant customers, but many businesses are prepared to join the market With

this trend competitiveness within the industry will be growing

1.3.3 Analysis of enterprise’s internal factors

In order to have overall and comprehensive view, in addition to the analysis of external environment to help enterprises identify opportunities and threats from outside, strategists must study the internal environment to further understand themselves, i.e., identify key strengths and weaknesses within the organization

1.3.3.2 Capacity for Research and Development (R&D)

Efforts for research and development may help enterprises to keep the leading position in the industry or vice versa, make enterprises obsolete as compared to the leading enterprises in the industry Therefore, enterprises should regularly change and renovate technology in relation to technological works, products and materials

1.3.3.3 Production capacity

Production is one of the essential activities of enterprises closely attached to the production, strongly affects the success of enterprises The production of products of quite high quality with rather low cost price will bring about lots of benefits for enterprises as the products are more easily sold, which helps save financial sources and create positive attitude for personnel

The notable contents when analyzing production factor include price and material supply capacity, inventory turnover, the arrangement of producion means,

efficiency and expense of equipment, cost and technology capacity as compared to the whole industry and competitors, etc

1.3.3.4 Financial capacity

The function of finance division includes the analysis, making plan and examining the execution of financial plant and financial situation of enterprises Finance division has deep and wide influence to the entire enterprises When analysing financial and accounting factors, the administrators need to focus on such contents as ability to raise short term and long term capital; total capital source of enterprises; flexibility of investment capital structure; ability to take advantage of financial strategies; ability to control the cost reduction; accounting system which is efficient and serves the making of cost plan, financial and profit plans, etc

1.3.3.5 Marketing capacity

The function of marketing division includes the analysis, making plans, and inspection of the implementation of the set forth programs, maintenance of relationships and exchange with customers in the principle of mutual benefits Therefore, the mission of marketing administration in general is adjusting level, time and nature of demand

1.4 STRATEGY FORMULATION TOOLS

According to Fred R David, important techniques to establish a strategy include three stages, and tools employed for such process may be applied to all scales and types of organisations, they helps administrators determine, assess and select strategies, and are reflected through the following stages:

Figure 1.3: Model of strategy formulation Source: Fred R David, Strategic Management Concepts and Cases, Figure

6-2, P.222

Stage 1: Input stage contains EFE matrix, IFE matrix, Competitive Profile

Matrix This stage summarizes basic information input necessary for setting up a strategy

Stage 2: The matching stage renders feasible strategies which may be selected

by arranging, combining important internal and external factors In this stage we choose one of such matrices as SWOT, CG, IE,SPACE, and so on In this thesis, our group only uses SWOT Matrix, and combines with factors to set up appropriate strategies

Stage 3: Decisive stage only consists of a technique, that is using the

Quantitative Strategic Planning Matrix (QSPM) This matrix employs input information in Stage 1 to evaluate objectively feasible strategies which may be chosen in Stage 2, from that to select a suitable strategy

The input stage

External Factor Evaluation

Matrix (EFE)

Competitive Profile Matrix (CPM)

Internal Factor Evaluation

Grand Strategy Matrix

The decision stage

Quantitative Strategic Planning Matrix (QSPM)

1.4.1 External factor evaluation matrix (EFE matrix)

External factor evaluation matrix allows strategists to summarise and evaluate information on economics, society, culture, demography, geography, politics, the Government, legislation, technology and competition There are five steps to develop a matrix to evaluate external factors

Step 1: Gather a list of from ten to twenty main external factors into two

groups of opportunities and threats which play decisive role to the success of enterprises as identified in the process of examining external factors

Step 2: Assign a weight to each factor between 0.0 (not important) and 100

(most important) This assignment shows the corresponding weight of such factor to the success in business of enterprises The total value of all weights should equal 1

Step 3: Assign a rating from 1 to 4 to each factor deciding the success Rating

indicates how effective the enterprise’s current strategies respond to the factor, in which, 4 = superior, 3 = above average, 2 = the response is below average, 1 = the response is poor Such ratings are based on the efficiency of enterprise’s strategy

Step 4: Multiply each factor weight with its rating to determine the weighted score

for each factor

Step 5: Add all weighted scores of all factors to determine the total weighted scores of the matrix Total weighted scores will be between 1 and 4 point,

regardless of the number of factors in the matrix If the total weighted scores below 2.5 point show the internally weak business Scores above 2.5 indicate a strong internal position of enterprise

1.4.2 Internal factor evaluation matrix (IFE matrix)

Such tool for setting up strategy summarises and evaluate important strengths and weaknesses of functional business units, and it also provides fundamentals to identify and assess the relationship among such units IFE matrix may be developed according to 5 steps:

Step 1: Gather a list of from ten to twenty main internal factors into two

groups of strengths and weakneses which influence the development of enterprises

Step 2: Assign a weight to each factor between 0.0 (not important) and 1,0

(most important) The weight assigned to certain factor shows the corresponding weight of such factor to the success of enterprises in the industry The total value

of all weights together should equal 1.0

Step 3: Assign a rating from 1 to 4 to each decisive factor Rating indicates

how effective the enterprise’s current strategies respond to the factors, in which, 4 = superior, 3 = above average, 2 = the response is below average, 1 = the response is poor Such ratings are based on the efficiency of enterprise’s strategy So, the ratings in this step are company-specific while the weights in step 2 are industry-specific

Step 4: Multiply each factor weight with its rating to determine the weighted

score for each factor

Step 5: Add all weighted scores of all factors to determine the total weighted scores of the matrix Total weighted scores will be between 1 and 4 point,

regardless of the number of factors in the matrix If the total weighted scores above 2.5 indicate a strong internal position of enterprise

1.4.3 Competitive Profile Matrix (CPM)

The competitive profile matrix compares the enterprises with the major competitors of the industry based on critical factors to the competitiveness of the enterprises in the industry, which helps strategy managers identify their strong points and weak points relative to their competitors, determine competitive advantages for enterprises and weaknesses that the enterprises should overcome To set up the competitive profile matrix, it is necessary to carry out 5 steps as follows:

Step 1: Gather a list of about ten critical factors which influence on the

competitiveness of enterprises in the industry

Step 2: Assign a weight to each factor between 0.0 (not important) and 1,0

(most important) The weight assigned to certain factor shows the corresponding weight of such factor to the competitiveness of enterprises in the industry depending

on the influence level of such factor The total value of all weights together should equal 1.0

Step 3: Assign a rating from 1 to 4 to each factor The rating of each factor

depends on the capacity of enterprises to each factor, in which 4 represents superior response, 3 represents above average response, 2 represents below average response, and 1 represents poor response

Step 4: Multiply each factor rating with the weight to determine weighted

score value of factors

Step 5: Add all weighted scores of all factors to determine the total weighted scores of the matrix Compare the total weighted scores of the enterprise with its

major competitors in the industry to evaluate the competitiveness of the enterprise

1.4.4 SWOT Matrix

SWOT matrix is used to list all opportunities, threats, strengths and weaknesses within the enterprise, according to appropriate order and position Based on the relation between factors, analysts will make the selection of suitable strategic solutions through the combinations of: Strength – Opportunity strategy (S_O), Strength - Threat strategy (S_T), Weaknesses – Threat strategy (W_T), Weakness – Opportunity strategy (W_O) Depending on business lines of enterprises, administrators will use one or more SWOT Matrices to do the analysis and selection of solutions SWOT model often renders 4 groups of basic strategies: S_O: these strategies use the strengths within the company to take advantage

strengths of enterprises to take

Table 1.1: SWOT Matrix 1.4.5 QSPM

QSPM is the tool used to re-quantify information analysed in early stages, then it enables administrators to choose the optimal strategy, QSPM according to Fred R David includes 6 basic steps as follows:

Step 1: List external opportunities and threats and internal crucial weaknesses

and strengths of the enterprise

Step 2: Assign a weight to each crucial success internal and external factors,

this is similar to that in EFE matrix and IFE matrix

Step 3: Identify strategy alternatives that will be further evaluated

Step 4: Determine attractiveness score according to each strategy

Attractiveness score indicates the relative attractiveness of each strategy compared

to others, the range of score is between 1 and 4: 1 is not attractive, 2 is somewhat attractive, 3 is reasonably attractive, 4 is highly attractive

Step 5: Calculate the total attractive scores, this is defined as the product of

multiplying the weights (step 2) by the Attractiveness Scores (step 4) in each row The higher the Total Attractiveness Score is, the more attractive strategy is

Step 6: Calculate the Sum Total Attractiveness Score by adding all Total

Attractiveness Scores in each strategy column of the QSPM Regarding the difference between the sum total attractiveness score within a group of strategies, the higher scores point is, a more attractive strategy is

CHAPTER II ANALYSIS OF BUSINESS SITUATION AND BUSINESS STRATEGY OF POWER ENGINEERING CONSULTING JOINT STOCK COMPANY 3

(PECC3 ) 2.1 OVERVIEW ON PECC3

2.1.1 General information on the company

Vietnamese Name: CÔNG TY CỔ PHẦN TƯ VẤN XÂY DỰNG ĐIỆN 3

English Name: POWER ENGINEERING CONSULTING JOINT STOCK COMPANY 3

Abbreviated Name: PECC3

Logo:

Headquarters Co is located in:

- Office: 32 Ngo Thoi Nhiem street, Ward 7, District 3, HCMC

-Core value system:

As a member of the company we have to follow the rules of conduct to be considered as a core value of the company

1 "Professional, enthusiastic" with the client;

2 "Thinking win-win" partnership together;

3 "At the heart synergies" with colleagues;

4 "Innovation, Dedication" at work;

5 "Actively modest" in the community

We create the overall feel of all of the members together PECC3 to strive for

an ideal: "PECC3 the reliable consulting service provider to build power project

for option"

2.1.2 Establishment and development history

- Power Engineering Consulting Joint Stock Company 3 originated from Power

Design Department belonged to the Southern Power Company (1975) Due to the demands for development of power plants and power networks, on 13th February, 1979 Minister of Electricity and Coal had the Decision No 04/T/TCCB on establishing the Sub-institute of Power Design and Planning belonged to the Power Company 2; and on 7th May, 1986 Ministry of Energy had the Decision No 128/L/TCCB to rename the Sub-institute

of Power Design and Planning to the Energy Center

Right after the establishment of Electricity of Vietnam, the Energy Center directly belonged to Electricity of Vietnam at the Decision No 429/VNTCCB-L dated 4/6/1995

- On 7th April, 1999 Minister of Industry signed the Decision

No.17/1999/Q-BCN on reforming Energy Center to Power Engineering Consulting Company 3

On 26th January, 2007 Minister of Industry issued the Decision No 335/Q-BCN on equitizing Power Engineering Consulting Company 3 to Power Engineering Consulting Joint Stock Company 3

- Over 30 years of operation and development, Power Engineering Consulting Joint Stock Company 3 has continuously developed and always

completed all assigned tasks Consequently, the company was awarded one Class Independence Medal, One First-Class Labor Medal, one Second-Class Labor Medal by the State and many Certificates of Merit by the Prime Minister and Ministry of Industry

Third Transmission lines: survey, establishment of investment projects, technical design, cost estimates, bidding documents, detailed design drawings for construction of the 500kV lines such as: Da Nang - Ha Tinh (section of Da Nang - Hue 130km), Phu My – Song May (66km), Song May - Tan Dinh (40km), Quang

Ninh - Hiep Hoa (2x140km), Soc Trang

- O Mon (2x90km), Song May – Thu Duc Bac (2x30km)

establishment of investment projects, technical design, cost estimates, bidding documents, detailed design drawings

substations: Song May (600MVA), Long Phu (1200 MVA), Thu Duc Bac (2x900MVA), and 500kV feeder compartments: Song May, O Mon, Quang Ninh and Pleiku

Labor force of the company is young, qualified and dynamic force Up to now, the company has totally 608 people, more than 60% of which have qualifications of bachelor and higher as follows:

Labor force of the company is specialized in many fields such as electricity, hydro work, irrigation, and hydraulic power, construction, architecture, mechanics, topography, geology, hydrography, economics, finance, management business administration, laws, informatics technology, environment, etc The have trained from domestic and overseas universities such as in Russia, USA, France, Japan, Australia, Thailand, Czech and Slovakia…etc

The company has been awarded certificates of quality management ISO 9001 version 2000, 2008, in the year 2002 by the Organizations: TUV Rheinland (Germany) and QUACERT (Vietnam), and re-certificated in the years 2005, 2008 and 2010

In addition, the company has fully equipped with working facilities and many advanced design software, standards, procedures, norms of Vietnam and International

2.1.3 Business lines

Power Engineering Consulting Joint Stock Company 3 is one of four consulting companies under Electricity of Vietnam specialized in implementation of construction consultancy for power source and network projects such as: thermal power plants, hydro power plants, power transmission lines, power substations, renewable energy projects and other industrial projects, including:

- Investigation, survey on topography, geology, hydrometeorology for power plant and network projects

- Planning for power development in the provinces, cities, districts, towns, townships, industrial zones and power complexes

- Advisory for establishment of investment projects, technical design, investment cost, detailed design drawings and total cost estimates of power plants, transmission lines, and substations projects from 15kV to 500kV

A Lin Hydro power plant scheme

- Advisory for establishment of investment projects, design, cost estimates for renewable energy, civil and other industrial projects

- Advisory for establishment of bidding documents, organization and evaluation

of procurement, construction bidding documents in domestic and international

- Advisory for construction supervision, and project management of power plant and power network projects

- Advisory for appraisal of consultancy documents such as: planning, investment projects, technical design, cost estimate, detailed design drawings,etc Quality control and testing of construction materials

- Advisory for research and assessment of environment impaimpact to projects (EIA)

- Advisory for planning compensation settlement, resettlement action plan (RAP), ethnic minority planning framework (EMDP), master planning on resettlement and compensation for power plant and power networkprojects

- Advisory for fabrication of steel towers and concrete structures for power network and telecommunication & SCADA projects

- Advisory for monitoring the displacement of hydraulic works of hydro power plants, industrial and civil construction projects

- Measuring and drawing land boundary, establishment of cadastral maps for land clearance of construction projects

In three years 2010, 2011, 2012 PECC3 received more than 250 large and small works with the total project value of over 557 billion VND and allocated according

to expertise value as follows

ANALYSIS OF REVENUE FROM 2010 TO 2012

(Unit: VND)

Criteria YEAR 2010 YEAR 2011 YEAR 2012 2011/2010 2012/2011

Figure 2.1: A analysic sheet by revenue period 2010-2012

(Source: Finance department of PECC3)

- It can be seen that PECC3 is very strong in 2 deep expertise fields including Design consulting and Construction supervision with the proportion of more than 80% revenues earned in 3 years 2010, 2011, 2012

2.1.4 Organisational structure:

Figure 2.2: Model of administration and management apparatus of PECC3

2.1.5 Business results of PECC3 in the stage of 2010 – 2012

3 Gross profit from

sales and services 47,793,778,246 47,396,484,382 43,338,576,655 99% 91%

4 Financial income 743,417,804 1,248,900,767 1,134,684,817 168% 91%

5 Financial expenses -277,417,135 503,049,488 391,963,496 -181% 78%

- Of which: Interest

11 Profit before tax 22,519,696,244 19,800,015,872 16,138,072,086 88% 82%

12 Current income tax

expense -5,637,919,034 4,980,753,969 3,994,005,823 -88% 80%

13 Profit after income

tax 16,881,777,210 14,819,261,903 12,144,066,263 88% 82%

14 Profit after tax of

the parent company 16,881,777,210 14,819,261,903 12,144,066,263 88% 82%

15 Basic earnings per

Figure 2.3: A analysic sheet by business results period 2010-2012

(Source: Finance department of PECC3)

Business results of PECC3 had breakthrough in 2011 but sharply reduced in

2012 when the business targets significantly reduced compared with that of the same period of 2011 In 2012, although total revenue fell down 15 % compared with that of the same period which can be explained by the decline of the market and the economic crisis - but the net profit reduced up to 91% The administrative costs did not change significantly from 2011 to 2012, it can be seen that the loan interest is the main reason for this decline

The details will be analysed in the later parts of the thesis

2.2 ANALYSIS OF EXTERNAL ENVIRONMENT

2.2.1 Macro environment analysis under PEST model

2.2.1.1 Political and legal environment

Vietnam is one of the countries that is assessed by the world to have stable security and political situation Its international position has been being enhanced This is the key factor for attracting foreign direct and indirectly investment and is also the precondition for the development of production, trade and infrastructure

It has the open door policy and is willing to cooperate and make friends with all countries in the world on the basis of peace and friendship and cooperation This helps enterprises of many countries in the world have access to the Vietnamese market and also open for enterprises in the country as PECC3 opportunities to access to and construction companies and groups in many countries around the world to implement their business objectives Currently, developed countries such

as Japan, America, etc have a look of sympathy for Vietnamese enterprises

The legal system, the legal corridor for the activities of grey matter export enterprises also has been gradually perfected through the amendment of the Law on Enterprises (60/2005/QH11) and the Law on High Technology (Law No.: 21/ 2008/QH12) which creates favourable conditions for Vietnamese enterprises in producing technological products and services to provide the world market as and construction Power services

Another factor which is also considered the favourable opportunity for business from political aspect for PECC3 in the upcoming stage is the geopolitical crisis situation between China and Japan

less than 20%, increase the total means of payment at around 15-16%, reduce the outstanding non-production loan ratio to the end of the year to less than 16%

- The year 2012 saw the strongest exchange rate adjustment of the state bank, this can be considered as a "shock" in the foreign exchange market On 02/11/2011, the state bank increased from the exchange rate of 18,932 VND to 20,693 VND per

1 USD, and narrowed the trading band of exchange rate from 3% to 1% After only one night Vietnamese dong's value was down 9.3% against the U.S dollar This attracts foreign investment and stimulates the export of goods and services

(Source: extracted from ”10 prominent banking and financial events in 2011” – cafef – 12/26/2011)

Bank bad debt left by real estate loans caused bad consequences to the economic development of the country, especially in the construction industry Tight credit, difficult fund raising result in the fact that there will not be many more new buildings are built, and few resorts are constructed across the country because it is time of market saturation in the coming years This can be considered a very great challenge for companies operating in the field of and construction design and consultancy

11/2012 JSC Power Engineering Consulting 3 (PECC3) has officially

launched the project consultants Construction Restructuring and salary system to

motivate employees, improve efficiency sales of PECC3

Speaking at the Launch Conference, Mr Thai Tuan Tai, General Manager PECC3, expressed confidence that with more experience in implementing consultancy projects to restructure and build management system for Vietnamese businesses , OCD will support PECC3 complete the project on schedule and achieve the desired goals of PECC3

The project is divided into several phases including: research firm reality, building structure, standardize the system functions, titles, building policies and wage systems, building systems only objective evaluation results by BSC; implementation