Building the business stratergy for ialy hydro-power company in the period 2010 - 2015

Strategies and solutions which are presented here are results of examination of methodology, and current business situation of Ialy Hydro Power Company as well as external service market

IN THE PERIOD 2010 - 2015

Group No.: 4 Student’s name:

Nguyen Le Duc Chuong

Ta Van Luan - Group leader

Nguyen Ngoc Minh

Dinh Van Son

Class: GeMBA01.E04

TP.HCM, 2010

PLAGIARISM STATEMENT

In order to successfully complete the assignment of Masters of International Business Administration, our group have studied different sources of materials such

as textbook, newspapers, magazines and Internet, etc Besides we have managed to collect data of Ialy Hydro-power Company With those sources, we have spent time and effort summarizing data, analyzing, evaluating and developing this comprehensive research

We hereby certify that this dissertation is original and in truth, our own All provided information and data we have collected and analyzed are accurate Strategies and solutions which are presented here are results of examination of methodology, and current business situation of Ialy Hydro Power Company as well

as external service market by members of our group /

Students Group 4 – Class GeMBA01.E04

ACKNOWLEGEMENTS

After more than one year following course Masters of International Business Administration – Griggs University, we have been provided with valuable knowledge from our enthusiastic teachers, who have continuously guilded us to complete this MBA course Therefore, we take this chance to express our sincere thank to all your monumental support

In particular, we want to thank the Steering Committee of Ialy Hydro Power Company; departments and workshops here for substantial help and favourable conditions they have created for us We wish all Company’s staff health and happiness; and obviously success will come to Ialy Hydro Power Company so Company’s position will be strengthened more and more in Vietnam Electricity Industry

Last but not least, we would not have the opportunity to follow this MBA course and attempt to achieve our dream without Vietnam Electricity (EVN) support, which we highly appreciate and wish to send our special thank to them

We are grateful to all your time and support which should deserve beyond a mere thank

Students Group 4 - Class GeMBA01.E04

TABLE OF CONTENTS

INTRODUCTION 11

1 Rationale 11

2 Objectives and scope of the capstone 12

2.1 Objectives 12

2.2 Scope of the capstone 12

3 Methods of research 12

3.1 Method of collecting data 12

3.2 Method of research 12

4 Scientific significance and merit of this capstone 13

4.1 Scientific significance of this capstone 13

4.2 Merit of this capstone 13

5 Organization of the capstone 13

CHAPTER 1: REVIEW OF LITERATURE 15

1.1 DEFINITION AND CLASSIFICATION OF BUSINESS STRATEGY 15

1.1.1 Definition of business strategy 15

1.1.2 Classification of business strategy 15

1.1.3 Business-level strategy 16

1.2 BUSINESS STRATEGY PLANNING PROCESS 17

1.2.1 Identification of mission and core objectives 18

1.2.2 Analysis of external environment 18

1.2.3 Analysis of internal environment 21

1.2.4 The formation of business strategy 23

1.2.5 Methods for the implementation of business strategy 23

1.2.6 Evaluating the efficiency of established business strategy 24

1.3 SOME MATRIX CAN BE PURSUED FOR BUSINESS STRATEGY

PLANNING 24

1.3.1 External Factor Evaluation (EFE) Matrix 24

1.3.2 Internal factor evaluation (IFE) matrix 25

1.3.3 Competitive profile matrix 26

1.3.4 SWOT Matrix 27

1.3.5 Internal – External matrix (IE) 29

1.3.6 QSPM matrix (Quantitative strategic planning matrix) 30

1.3.7 Experience in planning business strategy for enterprises 32

CHAPTER 2: ANALYSIS OF CURRENT SITUATION OF IALY HYDRO POWER COMPANY 34

2.1 INTRODUCTION OF IALY HYDRO POWER COMPANY 34

2.1.1 History of establishment and development 34

2.1.2 Company’s current organizational structure: 38

2.1.3 Fields of business of the Company 42

2.2 EXTERNAL ENVIRONMENT ANALYSIS 43

2.2.1 Macro-environment 43

2.2.2 Micro-environment 49

2.3 INTERNAL ENVIRONMENT ANALYSIS 59

2.3.1 Analysis of power production and business period 2000 – 2009 59

2.3.2 Analysis of cost for production and business 64

2.3.3 Analysis of production business of services period 2007 – 2009 66

2.3.4 Company’s available resources 69

2.3.5 Production capacity of the Company 70

2.3.6 Company’s financial status 70

2.3.7 Quality management 70

2.3.8 Company’s culture 71

2.4 ANALYSIS OF STRATEGIC ISSUES AND COMPANY’S MANAGEMENT PERIOD 2000-2009 72

2.4.1 Strategic objectives period 2000-2009 72

2.4.2 Analysis of strategic issues and management of Company 72

2.5 OBSTACLES OF CONSTRUCTING AND IMPLEMENTING THE COMPANY’S STRATIGIC GOAL 77

2.6 SUMMARIZE EXISTING PROBLEMS AND ANALYZE THE CAUSES 79

CHAPTER 3: ESTABLISHMENT OF BUSINESS STRATEGY FOR IALY HYDROPOWER COMPANY IN THE PERIOD 2010 – 2015 81

3.1 OBJECTIVES OF BUSINESS 81

3.2 VISION 81

3.3 MISSION 81

3.4 SOME MATRIX CAN BE PURSUED IN BUSINESS STRATEGY PLANNING 82

3.4.1 Internal factor evaluation (IFE) Matrix 82

3.4.2 External factor evaluation (EFE) matrix 83

3.4.3 Competitive profile matrix 85

3.4.4 Internal – External matrix (IE) 86

3.4.5 SWOT Matrix 89

3.5 DEVELOPMENT OF BUSINESS STRATEGY 91

3.6 SELECTION OF BUSINESS STRATEGY 92

3.6.1 QSPM matrix 93

3.6.2 Priority of business strategy implementation (see Table 3.9) 100

3.7 SOME SOLUTIONS FOR THE IMPLEMENTATION OF SERVICES

BUSINESS STRATEGY FOR IALY HYDRO POWER COMPANY IN THE

PERIOD 2010 - 2015 106

3.7.1 Human resources and organization management 106

3.7.2 Marketing the service business 111

3.8 REVENUE SCHEME OF SERVICES BUSINESS 116

3.8.1 Total investment capital and financial strength 116

3.8.2 Calculation of annual revenue 117

3.9 DEVELOPMENT OF ORGANIZATIONAL STRUCTURE OF REPAIR SERVICE CENTER 120

3.9.1 Structure (see organization Diagram 3.3): 120

3.9.2 Human resources: 121

3.9.3 Rights and responsibility of Director and Deputy Director of Center 122

3.9.4 Relationship of Center and Company 124

3.9.5 Operation budget 124

3.10 PLANNING TO DO THE STRATEGY 125

3.10.1 Restructure based on roadmap of enterprise privatization 125

3.10.2 Establishing a repair service center in form of Ialy Hydro Power Company’s subsidiary 127

3.11 SOME RECOMMENDATIONS 130

3.11.1 Recommendation to Government 130

3.11.2 Recommendation to Vietnam electricity (EVN) 130

3.11.3 Recommendation to Ialy Hydro Power Company 130

CONCLUSION 131

REFERENCE 132

Appendix 2.1: List of small and medium Hydropower plant in Gia Lai 134

Appendix 2.2: List of small and medium Hydro power plants in Kon Tum 139

Appendix 2.3: List of small & medium Hydropower plants in Quang Nam 147

Appendix 2.4: Performance of external service business for the year 2007 149

Appendix 2.5: Performance of external service business for the year 2008 151

Appendix 2.6: Performance of external service business for the year 2009 153

Appendix 2.7: The accounts of the big repairing construction of 2007 156

Appendix 2.8: The accounts of the big repairing construction for the year 2008 158

Appendix 2.9: The accounts of the big repairing construction of 2009 160

Appendix 3.1: List of devices and equipment for activities of repairing, testing and correction 163

Ialy Hydro Power Company Office

LIST OF ABBREVIATIONS

LIST OF CHARTS, DIAGRAMS AND TABLES IN THIS ASSIGNMENT

1 List of diagrams:

2 List of charts

Chart 2.3 Schedule and annual power production period 2000 - 61

2009 (million kWh)

Chart 3.3 Market for service in 3 provinces of Western – Highlands 119

3 List of Tables

Table 2.5 Revenue and labor cost of service business and internal

repair

67

Table 3.2 External Factor Evaluation (EFE) Matrix 84

Table 3.11 Summary of market for services of operation and

maintenance

119

Flood Spillway – Ialy Hydro-Power Company

INTRODUCTION

1 Rationale

Ialy Hydro-Power Company, previously known as Ialy Hydropower Plant was established on 28/02/2000 with Decision No 10/2000/QĐ-BCN by Ministry of Industry (now Ministry of Industry and Trade) In 2007, Ialy Hydropower Plant was officially renamed Ialy Hydropower Company, which is a dependent accounting unit of Vietnam Electricity (EVN) Over the past years, the Company has obtained great achievements in power production and business; substantially contributing to national grid and developing electricity industry in particular as well as national industrialization, modernization in general

However, Government and Vietnam Electricity is now planning to restructure Electricity industry in line with market economy and economic integration in the region and the world It is scheduled that power-generating facilities will be restructured and reorganized in 2010, including Ialy Hydropower Company Because Company is currently a dependent accounting unit of Vietnam Electricity (EVN), therefore Company own business strategy is not explicit and dependent on Parent Company’s strategy All business activities are assigned by Vietnam Electricity (EVN) in order to ensure electricity production and other technical and economic characteristics; business efficiency is not appropriately paid attention to Therefore, to prepare for the reorganization of power-generating facilities and coming equitization, Ialy is recommended to develop its own business strategy Besides, Company will not be able to succeed in today market economy without an effective business strategy to improve business performance A business strategy thus is considered as an essential and indispensable task of every enterprise during this transition process In these contexts, our group has come to an agreement to select this capstone of:

Building the business strategy for Ialy Hydro Power Company in the period 2010 -

2015

2 Objectives and scope of the capstone

2.1 Objectives

The objective of this capstone is analyzing, evaluating the current business situation

of Ialy Hydro Power Company; and factors which influence on Company’s business development Then we can find its strengths, weaknesses, opportunities and threats

in order to develop an effective business strategy for Company in the period; and propose suitable solutions for strategy implementation We have together selected the year 2015 because this time is stated in National Electricity Development Plan period 2006-2015 (Electricity Development Plan VI) which is being implemented; and the Electricity Development Plan VII is being developed from now to 2020, considering 2025

Besides, this capstone also attempt to help Ialy Hydro Power Company to operate more efficiently after organizational restructuring in today market economy

2.2 Scope of the capstone

Ialy Hydro Power Company is licensed to do business in different fields Therefore, this capstone will made research into business strategy of enterprises in general Then, based on those research, we will develop specific business strategy for Ialy in the period, while strategy of service business will be first consideration

3 Methods of research

3.1 Method of collecting data

Data used in this paper includes secondary data from internal sources of Ialy Hydro Power Company, Vietnam Electricity (EVN), Internet information; and primary data by face-to-face interview with Company’s Steering Committee

3.2 Method of research

Based on collected data, we have processed data with following methods: comparison, analysis, summation and statistics Establishment of strategy selection matrix is implemented with expert method, which means consulting experts experienced in service business such as repair and maintenance services; consulting

and training human resources for new hydropower plants; besides consulting experts about external service market situation of our country to propose criteria and evaluation This method is simple and convenient, but less accurate than site survey because it is expert’s subjective point of view However, this method is popular and sufficient to develop a good business strategy for enterprises

4 Scientific significance and merit of this capstone

4.1 Scientific significance of this capstone

In the context of market economy today, a business strategy is one of the most important factors to success or failure of one enterprise It is essential not only to private but also state-owned enterprises Therefore, the top priority of each enterprise should be building one effective business strategy

There are different methods which can help to develop a good business strategy for enterprises Regarding scientific significance, this capstone summarizes different sources of methodology and based on those findings to develop a business strategy which is most concise and practical for Company

4.2 Merit of this capstone

One general business strategy planning process is employed to develop business strategy for Ialy Hydro Power Company in the period In fact, State-owned companies have not paid much attention to the development of business strategy since the date of establishment because their annual business targets are always assigned by higher authority Therefore, in order to successfully operate during transition into privatized company in near future, a good and effective business strategy is repeatedly emphasized for all enterprises

This capstone is implemented with purpose of providing valuable resources for development of business strategy for enterprises with similar characteristics of Ialy Hydro Power Company

5 Organization of the capstone

Besides Introduction, Conclusion and enclosed Appendix, the capstone is divided into three main parts as follows:

CHAPTER 1: Review of Literature

This Chapter will present theories of strategy and strategy planning for enterprises; including basic concepts of strategy, strategy planning for enterprises and necessary instruments for analyzing and building strategy

Besides, this chapter describes some matrix which can be pursued during strategy selection; and experience from research into enterprises’s business strategy planning

CHAPTER 2: Current situation of production business of Ialy Hydro Power Company

This Chapter introduces briefly Ialy Hydro Power Company, evaluates Company’s situation of production business over the past time

Analyzing Company’s strategies and management over the past time; limitations to Company’s development and implementation of strategic objectives; summarizing weakness and analyzing its causes Then based on those analysis, developing a business strategy for Company in Chapter 3

CHAPTER 3: Building the business strategy for Ialy Hydro Power Company in the period 2010-2015

This Chapter presents Company’s strategic objectives by 2015; analyzes internal and external factors in order to develop external factor evaluation matrix, internal factor evaluation matrix; competitive profile matrix, SWOT matrix Besides, the Chapter proposes and analyze those proposed strategies for Company in the period 2010-2015 Lastly, we will develop solutions for the implementation of those proposed strategies; and some recommendation to higher authority, State authority and Ialy Hydro Power Company

CHAPTER 1: REVIEW OF LITERATURE

1.1 DEFINITION AND CLASSIFICATION OF BUSINESS STRATEGY

1.1.1 Definition of business strategy

Since the very beginning of this world, different military analysts such as Sun Tzu, Alexander, Clausewitz, Napoleon, Douglas MacArthur have discussed about

strategy The basic concept of strategy is that one party may defeat its competitor(s) – even stronger one with more soldiers – if they can control the battle and lead their competitor into a battlefield which includes advantageous conditions for their operation

Nowadays, strategy is applied not only in military but also other fields, especially business There are different definitions of strategy depending on author’s point of

view Chandler (1962) defined strategy as ”the identification of basic goals and objectives in the long run of each enterprise and the application of suitable activities as well as the distribution of necessary human resources to achieve those goals and objectives”(1)

Besides, Quinn defined: ”strategy is a model or plan which combines core objectives, policies and series of activities into a well-linked structure”

According to those popular definitions, we can see that business strategy is involved

in defining goals, making plan to achieve those goals on the market at present and

 Business-level strategy: is concerned with effective competition methods on certain market segments

 Functional-level strategies: aimed at supporting business-level strategy and corporate-level strategy to operate effectively with different components such

as resources, human process and necessary skills

 Free strategy: This strategy doesn’t focus on core factors, but it discovers relevant factors of the core one

1.1.3.1 Michael E.Porter’s competitive forces:

Porter has mentioned competitive factors which an enterprise emphasizes to gain competitive position in the market Michael E.Porter’s generic types of strategy include:

 Cost leadership: Each enterprise attempts to produce and distribute goods or

services at lower cost than its competitors This strategy help enterprises to

gain cost-advantageous position with other players on the market, so they can provide customers with more cost-attractive goods and services, achieve larger market share and bigger revenue for their enterprise

 Differentiation: The generic type of differentiation means providing new and

unique goods and services to attract more and more customers and take competitive advantages against enterprise’s competitor

 Cost leadership and differentiation: In the context of technology

development, enterprises can see that they will get more benefit when combining strategy of cost leadership and differentiation

1.1.3.2 Competitive strategies for market-challenger:

These strategies are applied for enterprises which are currently ranked at second or third position on the market, but they are potential to overtake other enterprises and gain larger market share In order to successfully implement this strategy, enterprises should clearly define their goals, competitors and select a suitable strategy

1.1.3.3 Strategies for market-follower:

This strategy is selected by weak enterprises which can’t confront with other strong enterprises These weak enterprises have no other choice of following strong ones Some strategies in this type include: complete imitation of strong enterprises, partial imitation, or imitation combined with improvement

1.2 BUSINESS STRATEGY PLANNING PROCESS

According to Harvard’s business manual, process of business strategy planning can

be described in following diagram:

Diagram 1.1: Business Strategy Planning Process 1.2.1 Identification of mission and core objectives

This is the first step of strategy management process; mission and core objective of each enterprise is the context on which strategies are developed

Mission defines enterprise’s purpose of existence In other words, mission answers the question What will enterprise do? Therefore, each enterprise has its own mission For example, mission of Vietnam Airlines is satisfying customer’s demand

of express traveling with suitable price; or mission of a commercial bank is capital mobilization and lending It is noted that business strategy must be developed based

on enterprise’s mission; and objective of business strategy is fulfilling that identified mission

Core objective of enterprises is involved in identifying medium and long-term expectation It is the target of each enterprise and the first and most important consideration for business strategy development Enterprise’s mission is generic while objective is specific

Objective is developed based on enterprise’s mission; external factors; internal factors and should be suitable with subjective and objective conditions

1.2.2 Analysis of external environment

The second step of business strategy planning is analyzing enterprise’s external environment The objective of external environment analysis is to understand

opportunities and threats from this environment

To understand possible opportunities, we have to analyze every external factors which may bring about opportunities for enterprise Besides analyzing and evaluating possible opportunities, we should evaluate the best opportunities to timely take advantage of them

To analyze threats, we have to summarize every external factors which may cause threats for enterprise Besides analyzing and evaluating possible threats, we should consider the worst threat and immediately find solutions to prevent them from happening or to overcome them, as well as the other equally serious threat after that

We can divide into two different sectors when analyzing external factors, including macro-environment factors and micro-environment factors

 Macro-environment factor:

In fact every enterprise is influenced by changes in macro- environment factors, which included six segmentations: Economics, technology, social culture, demographics, politics and the globe Enterprise’s production and business therefore will be impacted accordingly

 Micro-environment factor:

Analyzing impacts of micro-environment factors is one important task in analyzing external environment factors Major micro-environment factors include competition in today market environment and the globalization Michael E.Porter, professor at Harvard Business School has created a model to help executives timely identify possible opportunities and threats, which is called the five competitive factors shown in diagram 1.2 below:

Diagram 1.2 Michael E.Porter’s five competitive factors

According to E.Porter, there are five competitive orientations in each industry, namely (1) threats from new competitors; (2) existing competition; (3) pressure from Customers; (4) pressure from supplier; (5) threat from alternative products

 Threat from potential new competitors

This force include current non-competitive enterprises which is able to compete if they want Therefore, these potential competitors may enter market and create threats for enterprises

 Competition of existing comptitors

The second factor in five competitive forces of Porter is competition among currently existing enterprises in one industry Because enterprises in one industry are closely linked, certain activities of one enterprise will induce response of another enterprise Factors which influence on competition among existing enterprise in one industry include: number of competitors, industry growth rate, competition level, fixed cost and stockholding cost, product differentiation and

conversion cost, diversification of industries, barriers of entering into and withdrawing from one industry

 Pressure form Customer

Enterprise’s customers may be end-users or its distribution agents such as retailers

or wholesalers Customer is one integral part of each enterprise They always demand best goods and services with lowest price from suppliers Therefore, enterprises will have to undergo bargain pressure from their customer Whether customer may request special conditions from suppliers or not, it is upon their relative power over the enterprise

 Pressure from suppliers

During production and business operation, company always need suppliers for input sources such as materials, equipments, labor, etc Suppliers may be considered as one threat to their buyers when they tend to increase selling price or decrease input quality, which will reduce enterprise’s profitability Like Customer, supplier’s ability to request also depends on their relative power over the enterprise

 Pressure from alternative products

Alternative products are goods or services of other industries, which however can satisfy Customer’s similar demand as goods or services of one certain industry Existence of alternative products on market is one threat to enterprises because they restrict price increase, and in turns reduce company’s profit In other words, if the Company have products which are rare on market and other factors are favorable, they will have chance to increase price and obtain larger profit Therefore, a Company’s business strategy is developed to seize competitive advantage based on the above-mentioned fact

1.2.3 Analysis of internal environment

Internal environment factors are objective These factors may influence positively and negatively to enterprises and enterprise’s production and business Analyzing internal environment is the third step in business strategy planning process in order

to identify enterprise’s strengths and weaknesses, by which we attempt to find

method for enterprises to achieve competitive advantage and role of distinguished capacity

In order to identify enterprise’s strengths, we will summarize every positive factor, which are enterprise’s strengths such as skillful and professional staff; modern equipment and technology; plentiful financial resources, strong brand, etc Those factors then can be analyzed, evaluated and compared with enterprise’s competitors; possible advantageous level for enterprise should also be evaluated

In order to identify enterprise’s weaknesses, we will summarize every negative factor, which are enterprise’s drawbacks such as old-fashioned technology equipment; small financial resources, etc to analyze, evaluate and compare with competitors; possible negative impact to enterprise should also be evaluated

Major factors of internal environment can be mentioned as:

 Human resources: Human resources play an important role in the success of

one enterprise One enterprise’s business strategy may be excellent but it will not effective if its implementers are not proficient Human resources factor include several aspects such as organizational structure of human resources, quality of human resources, policy of maintaining and developing human resources, etc

 Production management and operation: include all activities of converting

input materials into enterprise’s goods and services Production and operation include design of production process, selection of production technology line, production scale, location choice, site organization, quality of goods and services and production cost, etc

 Financial status: includes enterprise’s financial capacity, financial

management, finacial accounting, etc

 Management: includes activities which aim at achieving business

performance as planned such as capacity of human resources management, production management, quality management, materials management, financial management, sales management, etc

 Marketing: Marketing is described as a process of identifying, predicting,

establishing and satisfying consumer’s demands for goods and services Marketing management includes: marker research and development (R&D), determination of target market, distribution channel system, after-sales services, etc

1.2.4 The formation of business strategy

Based on enterprise’s objectives, external environment and internal environment of each enterprise, a business strategy can be established with following contents:

 Identify and seize opportunities which can help enterprises to achieve business objective

 Select target market

 Select suitable goods and service to distribute in target market

 Develop Marketing-mix strategy for selected market, goods and services + Product strategy: aim at well satisfying target market in terms of product variety, number, dimension, design, quality, and price to help enterprises to achieve their objectives

+ Price strategy: Decide a suitable price policy to meet customer’s requirements

+ Distribution strategy: Develop an effective distribution channel system to provide goods and services to target market in the fastest manner

+ Promotion strategy: this strategy aims at building, improving brand name for enterprises to attract more and more customers

1.2.5 Methods for the implementation of business strategy

In order to effectively implement established business strategies, enterprises are supposed to process solutions in production management, business management; in human resources and finance, etc… to implement their strategies Enterprises have

to appropriately organize, arrange their resources to successfully perform selected business strategy, specifically:

 Arrange organizational structure approriately

 Suitably assign, maintain and develop human resources

 Allocate financial resources

 Develop scientific and effective production management and operation

1.2.6 Evaluating the efficiency of established business strategy

Evaluation of a business strategy efficiency is one important task A business strategy will be considered as effective if it is suitable with enterprise’s current situation and social condition; and can take full advantage of possible opportunities

to achieve planned objective Evaluation of a business strategy include following steps:

 Checking business strategy’s suitability before the implementation

 Evaluating production & business efficiency of enterprise after certain periods of the implementation of business strategy in order to find shortcomings, drawbacks in the business strategy so that timely correction, amendment and supplement can be made

1.3 SOME MATRIX CAN BE PURSUED FOR BUSINESS STRATEGY PLANNING

1.3.1 External Factor Evaluation (EFE) Matrix

1.3.1.1 Concept:

The development of external factor evaluation (EFE) matrix will help us to summarize and quantify impacts of external environment factors to enterprise, enterprise’s production and business, including opportunities and challenges to enterprise

1.3.1.2 Method of developing external factor evaluation (EFE) matrix

In order to build this kind of matrix, we list all external factors which may influence

on Company’s performance (as mentioned in evaluation of macro-environment)

We can evaluate the significance of each factor by giving it a weight point; total weight point of all factors is 1 The classification will reflect its corresponding significance to the success of Company’s business

Evaluating the importance of each factor is done by classifying factors from 1 to 4,

of which level 4 shows that Company is implementing best response, level 3 is above-average, level 2 is average and level 1 is the lowest one These levels are evaluated based on Company’s business strategy efficiency

Then we determine the importance point of each factor by multiplying its importance with corresponding classified point After that, we take the sum of important point of each variable to calculate total importance point for enterprise; the highest mark is 4 and the lowest one is 1, the average level is 2.5

If total importance point is 4, this figure shows that enterprise is making full opportunities of external factors and well manage or minimize external threats to enterprise If total importance point is 1, Company doesn’t take good advantage of its opportunities and can’t manage to mitigate threats of external factors

Table 1.1 External factor evaluation matrix External factors Importance Classification Importance point

List of external factors:

1.3.2.2 Method of developing internal factor evaluation matrix

In order to develop this kind of matrix, we will list every internal factor which influence on enterprise’s production and business activities (as mentioned in the evaluation of enterprise’s internal factors) We can evaluate the significance of each

factor by giving it a weight point; total weight point of all factors is 1 The classification will reflect its corresponding significance to the success of Company’s business

Evaluating the importance of each factor is done by classifying factors from 1 to 4,

of which level 4 shows that Company is implementing best response, level 3 is above-average, level 2 is average and level 1 is the lowest one These levels are evaluated based on Company’s business strategy efficiency

Then we determine the importance point of each factor by multiplying its importance with corresponding classified point After that, we take the sum of important point of each variable to calculate total importance point for enterprise; the highest mark is 4 and the lowest one is 1, the average level is 2.5

If total importance point is 4, this figure shows that enterprise is having various strengths, and well control weaknesses In contrast, if total importance point is 1, Company doesn’t have strengths and too many weaknesses which is irresolvable

Table 1.2 Internal factor evaluation matrix Internal factors Importance Classification Importance point

List of internal factors:

-

1.3.3 Competitive profile matrix

The development of competitive profile matrix help enterprise to identify its competitors, as well as enterprise’s strengths and weaknesses so that they can build

up a suitable business strategy

This matrix include all internal and external factors of enterprise which play important role in the enterprise’s success In the competitive profile matrix, enterprise’s competitors are considered and evaluated with importance point Then

we compare importance point of this competitor with another sample competitor

This way will provide us with much information to develop effective business strategy for enterprise

Table 1.3 Competititve Profile Matrix

Table 1.4 SWOT Matrix

STRONG (S)

Combination of S-O:

Develop internal strength

to take full advantage of opportunities

Combination of S-T:

Develop internal strengths to prevent enterprise from external threats

1.3.4.1 Internal environment factors:

Internal environment factors include strengths, weaknesses of enterprises,

 Strong: These factors create enterprise’s strengths in production and

business such as modern technology equipment; experienced human resources, etc Based on these strengths, we will identify what and where is enterprise’s core capacity?

 Weak: Besides strengths, enterprise has is own weaknesses such as

old-fashioned technology, inexperienced human resources, weak management, etc Because of these very weaknesses, enterprise operates ineffectively; less competitively than other competitors in the industry From the analysis and evaluation of these weaknesses, we determine the most serious weakness which may influence worst to enterprise to find suitable solution

1.3.4.2 External environment factors:

External environment factors include objective factors which influence on enterprise and may cause risks and threat during enterprise’s production and business

 Opportunity: includes advantageous factors for enterprises to develop

business such as State policies, technology development and customer’s increased demand, etc

 Threat: are disadvantageous factors from external environment which may

threaten enterprise’s business development such as state changed policies, increased price of input sources, more serious competition among competitors, etc

From SWOT matrix, we have four types of strategy:

 Strategy of Strength-Opportunity: Develop internal strengths to take full advantage of available resources

 Strategy of Weakness – Opportunity: Overcome internal weaknesses and timely seize opportunity

 Strategy of Strength – Threat: Develop internal strengths to prevent external threats

 Strategy of Weakness – Threat: Overcome internal weaknesses to prevent external threats

1.3.5 Internal – External matrix (IE)

The analysis of the IE matrix is to assign company’s external or internal factor to one suitable square among following nine ones (see table 1.5):

Table 1.5 Internal – External Matrix (IE Matrix)

TOTAL IMPORTANT POINT OF THE IFE

MATRIX

Strong 3,00 – 4,00

Medium 2,00 – 2,99

Weak 1,00 – 1,99

Medium 2,00 – 2,99

Low 1,00 – 1,99

The IE matrix is developed based on two major factors:

 Total importance point of the internal factor evaluation (IFE) matrix

 Total importance point of the external factor evaluation (EFE) matrix

The interpretation of this matrix is specified as:

 If the total importance point is from 1,00 to 1,99: signal of weaknesses

 If the total importance point is from 2,00 to 2,99: signal of medium performance

 If the total importance point is from 3,00 to 4,00: signal of strength

The IE matrix includes following factors:

 Building and development (yellow squares: square I, II, IV): suitable

strategies include concentrated growth (market penetration, market

combination, backward combination and horizontal combination)

 Understanding and maintaining (green squares: square III, V, VII): suitable

strategies are market penetration and product development

 Increase and decrease (red squares: square VI, VIII, IX): reduce and remove

ineffective parts of the Company

1.3.6 QSPM matrix (Quantitative strategic planning matrix)

QSPM matrix is to evaluate and give a suitable level to strategic plan, based on which we can select the best strategy for the Company

This matrix uses all information and data we have analyzed in above matrix, namely IFE, EFE, competitive profile matrix, SWOT matrix,

To build and develop a QSPM strategy, we have to implement following six steps:

Step 1: Make a list of internal strengths, weakness (recommended to be at least 10 factors) and external opportunities, threats (recommended to be at least 10 factors) in the left column These information can be taken from EFE and IFE matrix

Step 2: Give each internal and external factor an importance point The categorization is similar to the procedure of EFE and IFE matrix

Step 3: Develop alternative strategies (more options) for the Company to consider and implement These strategies are developed and made into separate group

Step 4: Calculate the attractiveness score (AS), or the quantification of the relative attractiveness of each strategy in groups of alternative strategies The attractiveness score is determined based on the influence of each internal and external factor to the strategy which is being evaluated Each strategy is given an importance point which will be the basis for comparing the attractiveness of a certain strategy to others The attractiveness score can be interpreted as follows: 1 – unattractive, 2 – little, 3 – rather attractive, 4 – very attractive If any factor has no influence on the selection, give no mark and leave the square blank

Step 5: Calculate the total attractiveness score (TAS) Multiple the importance point with the attractiveness score of each row If we are evaluating the influence of each internal or internal factor, TAS shows the relative attractiveness

of each strategy and the higher TAS is, the more attractive the strategy is

Step 6: Calculating the sum of TAS for each strategy The sum of TAS of each strategy demonstrates the most attractive strategy in the group

Table 1.6 Quantitative strategic planning matrix (QSPM) matrix

Important

factors

Strategy options

Importance point

Attractiveness score

Total score

Attractiveness score

Total score

Attractiveness score

Total score

Note: Importance point of external factor: 1 – little influence, 2 – average influence,

3 – more-than-average influence, 4 – highest influence Importance point of internal factor: 1 – weakest, 2 – rather week, 3 – rather strong, 4 – strongest

QSPM matrix has many strong points, for example the method consider both suitable internal and external factors in the decision-making, strategy group can be analyzed continuously or simultaneously, number of evaluated strategies is not limited However it remains some drawbacks such as: The QSPM matrix requires intuition and experience The discussion among managers and staff to analyze and select the best strategy may incur disagreement

1.3.7 Experience in planning business strategy for enterprises

Development of an effective business plan for enterprise is not a simple task because it depends on different factors not only in the past, at present but also in the future Besides, business strategies vary with different industries and enterprise’s field of business During the process of research and analysis of business strategy planning materials, we can withdraw some lessons and experience in business strategy planning as follows:

 Firstly we have to develop suitable procedure for business strategy planning

 The objective of business strategy must be suitable with enterprise’s situation and external environment

 Collecting and analyzing information to identify enterprise’s strengths which should be exploited and weaknesses which should be prevented

 Evaluate opportunities and threats of enterprises on the market

 Concentrate on most effective strategies for enterprises; and ensure the consistency among business strategies and implementation methods

Reservoir in Ialy Hydro Power Company

CHAPTER 2: ANALYSIS OF CURRENT SITUATION OF IALY HYDRO

POWER COMPANY

2.1 INTRODUCTION OF IALY HYDRO POWER COMPANY

- Main fields of business: Power production and supply

- Consumption market: Production as requested by National Load Dispatch

Center and contribute into Vietnam electric power system

2.1.1 History of establishment and development

SeSan river is one of big river arms of Mekong river downstream basin On Vietnam territory, Sesan River is merged with two main arms, namely Krongpoko

to the right and Dakbla to the left and run from North-East to South-West of Truong Son mountain range This river runs through two provinces of Gia Lai and Kontum Total length of mainstream is 237km with basin area of 11.450km2

River’s upstream is located on low mountainous area with average topographic angle of slope To the North East of the upstream, the revise adjoin the watershed between the North and the West of Truong Son mountain range Regarding the lowland, river valley is located between valley of high mountain with considerable topographic angle of slope Being aware of those characteristics and advantages of

natural conditions, water flow, slope, and basin, Sesan River has been planned to build 6 cascade hydropower plants with total capacity of 1768 MW, annual output

of 8.5 billion kWh, including:

(1) Ialy Hydropower (720MW); (2) Sesan 3 Hydropower (260MW);

(3) Pleikrong Hydropower (100MW); (4) Sesan 3A Hydropower (108MW); (5) Sesan 4 Hydropower (360MW); (6) Upper Kontum Hydropower (220MW)

Figure 2.1: Cascade hydropower system on Sesan River

Of six mentioned plants, 03 plants have been put into operation (Ialy, Sesan 3, Sesan 3A), two plants are being completed (Pleikrong, Sesan 4) and one plant is being constructed (Upper Kontum)

Sesan River is ranked the third after Da River and Dong Nai River in terms of hydropower potential Ialy Hydropower Company has the second largest power production, following Hoa Binh Hydropower at this time

Since officially putting into operation the first plant unit (12/5/2000) Ialy Hydropower Company have continuously developed and strengthened its position ands reputation as the leading plant in terms of production scale, water and basin regulation, etc

The development of Ialy Hydropower has been further strengthened when “Ialy Hydropower Plant” was renamed “Ialy Hydro Power Company” (June 2007) Being one member unit of Vietnam Electricity, Ialy Hydro Power Company has responsibility of managing and operating three cascade hydropower plant on Sesan

River, including: Ialy, Sesan 3 and Pleikrong with total capacity of 1080MW, annual output of 5 billion 310 million kWh

Ialy Hydropower: has power of 720MW, include 04 plant unit, power of each plant

unit is 180MW Design average capacity output: 3 billion 680 million kWh/year Ialy Hydropower is the largest construction of cascade hydropower system on Sesan Rive

 The construction began on 04/11/1993

 First plant unit merged into national electric power system on 12/5/2000

 The plant was launched on 27/4/2002

 Total investment is 8.760 billion dong

Sesan 3 Hydropower: has power of 260MW with two plant unit, power of each

plant unit is 130MW Design average capacity output: 1 billion 221 million kWh/year This construction is the third largest one in cascade hydropower system

in Sesan River

 The construction began on: 15/6/2002

 First plant unit merged into national electric power system on: 23/4/2006

 Total investment: 2.714 billion dong

Pleikrong Hydropower: has power of 100MW with 02 plant unit, power of each

unit is 50MW Design average capacity output: 417 million kWh/year However, the construction is especially important because it increases water reserve in resevoir, mitigate floods for lowlands in rainy season and increases water flow for power generation, increase capacity output for downstream hydropower plants

 The construction began on: 23/11/2003

 Power: 100MW with two plant units

 First plant unit merged into national electric power system on: 12/05/2009

 Total investment: 2.260 billion dong

After nearly 10 years of development, Ialy Hydro Power Company has achieved considerable success, especially in power production and supply for national electric power system – to which Ialy Hydro Power Company plays an important role

2.1.2 Company’s current organizational structure:

2.1.2.1 Organization diagram (see diagram 2.1)

Diagram 2.1: Company’s organization structure

2.1.2.2 Functions of Company’s executives, departments and workshops

- The Director of the Company

Manage and supervise all activities of the Company in accordance with the Decision of Director Appointment and Company’s Operation Regulation, ratified

by Vietnam Electricity

- Operation Deputy Director

 Be responsible for power production operation of three workshops

 Manage technical issues of IT department;

 Training operation jobs for the Company and partners;

 Manage reservoir (protect and exploit water source) of power production on Sesan River;

 Be accountable for every assigned responsibility

- Repair Deputy Director