Business strategy of Hanoi housing development and investment company No.5 - Handico 5 - period 2011-2015

4 LIST OF FIGURES 1 1.1 Emergent Strategies and deliberate strategies 7 1.2 Components of strategy establishment process 10 1.5 Model of Michael Porter of 5 competition forces 16 3 3.

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TABLE OF CONTENTS……… 1

LIST OF FIGURES/TABLES……… 4

FOREWORDS……… 5

CHAPTER I : THEORY FOUNDATION CORE OF STARTEGY AND STRATEGY PLANNING PROCESS… 6

1.1 Core of strategy 7

1.1.1 Strategy viewpoints 7

1.1.2 Definition of types of strategies ……… 8

1.1.3 Features of business strategy ……… 9

1.1.4 Strategy establishment process ……… 10

1.2 Strategy planning ……… ……… 11

1.2.1 Analyzing external environments …… ……… 13

1.2.2 Analyzing internal environment of enterprises ……… 19

1.2.3 General model of internal and external analysis (SWOT)…… 21

CHAPTER II : ANALYZING THE SITUATION OF HANDICO5… 29

2.1 Introduction on HANDICO5……… 29

2.1.1 General information ……… 29

2.1.2 Organizational structure and management structure 31

2.1.3 Business results period 2008 – 2010 32

2.1.4 General commnets on the business situation 33

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2.1.5 Business situation via projects in progress 35

2.2 Analyzing the external environments ……… 36

2.2.1 Analyzing macro - environment (PEST)……… 36

2.2.2 Analyzing branch environment (Five forces)……… 43

2.2.3 Building matrix of external factor evaluation (EFE Matrix)… 51 2.3 Analyzing internal environment under value chain model 53 2.3.1 Supporting activities ……… 53

2.3.2 Main activities ……… 56

2.3.3 2.4 Setting up matrix of internal factor evaluation (IFE Matrix)

I – E Matrix………

58 60 CHAPTER III: BUSINESS STRATEGY PLANNING FOR HANDICO5 (PERIOD 2011 – 2015)……… 61

3.1 Definition of missions, visions and operation principles…… 61

3.1.1 Missions……… 61

3.1.2 Vision……… 61

3.1.3 3.1.4 Operation prinples

Influence of Handico Strategy on Handico5………

61 61 3.2 Targets up to 2015……… 62

3.3 SWOT Matrix – Selected business strategies……… 62

3.4 Selection of the optimal business strategies 64

3.5 Some solutions for the performance of the selected business strategy……….… 66

3.5.1 Definition of the target markets……… 66

3.5.2 Solutions on technology ……… 67

3.5.3 Solutions on finance and sales ……… 69

3.5.4 Developing brand name ……… 70

3.5.5 Solutions on human resources ……… 71

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3.5.6 Groups of solutions for internal organization during the strategy

performance ……… 72

3.6 Limitation of the research and the orientation of the research in the future 73

3.6.1 About the geographical position for reseach 73

3.6.2 About references 73

3.6.3 Analyzing time 74

3.6.4 Targets 74

3.6.5 The following reseach trennds 74

CONCLUSION AND RECOMMENDATIONS ……… 75

REFERENCES ………… 76

APPENDICES ……… 78

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LIST OF FIGURES

1 1.1 Emergent Strategies and deliberate strategies 7 1.2 Components of strategy establishment process 10

1.5 Model of Michael Porter of 5 competition forces 16

3 3.1 Simulation of savings level of shaped concrete technology 68 3.2 Orientation of organizational structure of HANDICO5 period

2011-2015

73

LIST OF TABLES

1 1.1 Matrix of external factors of enterprises (EFE) 15

1.5 Sources of competition advantages and basic competition

strategies

27

2.2 Some criteria of business operations of HANDICO5 2008 -

2010

32

2.3 Some financial index of HANDICO5 period 2008 - 2010 33 2.4 Some projects in progress by HANDICO5 2008 - 2010 35 2.5 Comparison table of some business criteria of HANDICO5 with

its existing competitors

45

2.6a Customer objects of HANDICO5

Classification of Customer objects

47

2.6b Customer objects of HANDICO5

Customers’ features of HANDICO5

48

2.8 Matrix of external factor evaluation on HANDICO5 (EFE) 52

2.11 Table of analysis and comparison of HANDICO5 with

competitors

57

2.12 Matrix of internal factor evaluation of HANDICO5 (IFE) 59

3 3.1 Business criteria of HANDICO5 period 2011-2015 62

3.3 Quantitative matrix under GREAT criteria 65

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Forewords

Strategy planning is a process to define the huge direction for an enterprise on its changes, improvement, development and setting up its competitive advantages Application of strategy is mostly the “individual story” of large enterprises There are a lot of researches show that strategy planning has a close relation with the financial efficiency of small and middle sized enterprises (SMEs) but up to now, many small and middle sized enterprises has ignored their attention in this issue Over nearly 20 years performance of economic innovation policies, SMEs have archived wonderful successes, step by step stated their roles in the economy However, every year, there are hundreds of SMEs coming the bankrupts or

“disappearance” in the market There are a lot of reasons for this, but one of them is lack of strategic thinking, which starts by the shortage capacity of business strategy planning and ends by a failure in the development of a control system to remain their business success

This research is targeted to give a new plan in the business policy of an enterprise working in real estate in Hanoi The selected enterprise is Hanoi Housing Development and Investment Company No 5 – HANDICO5, an enterprise in Joint Stock Company (a popular form of enterprises now), which is a SME and started by

a State owned one The research tries to analyze the general situation of the economy, development trend and changes in the market, strengths and weakness of HANDICO5 and the relation with other enterprises, applying suitable theories of administration, especially strategic administration to give the directions and orientations for the business strategy of HANDICO5 period 2011-2015, to meet the continuous development of the competitive and affective factors By this way, the performance of the optimization of benefits of shareholders as well as of customers shall be made By the practical situation of the enterprise and limitation in time, the research only takes into the planning process of the business strategy from 2011 to

2015 of HANDICO5 in which it concentrates to define the targets and the most

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suitable market segment should be followed by HANDICO Therefore, the enterprise image shall be built as well as business development shall be set up clearly

The shortages in this research can not be ignored and they are not expected We hope that we will receive more instructions of Professions, teachers and researchers and colleagues for the completion of the research and for the development of HANDICO5 in the future, and further it shall be for the construction and development of the real estate, and improvement of our knowledge, the members in this research

Hanoi, September 2011 Group 7, GaMBA01.N06

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CHAPTER I THEORY FOUNDATION 1.1 Core of strategies

1.1.1 Strategy viewpoints

According to Alfred Chandler [2], strategy: “is the establishment of basic long-term targets of an enterprise, and the performance of action programs as well as the distribution of necessary resources to meet such targets” The most impressive ideology expressed in the Chandler’s definition is the rational planning, the enterprise is descibed under the form that it can select its owned purposes, define its action programs (strategy) to complete these purposes, distribute respecitve resources Similarly, James B.Quinn [12] defined strategy as “the model or plan of an organization to combine main targets, policies and action schedule in an uniform way” Even though there are many attractive points, planning – based definitions still get some opposite feedback that this approach impliedly accepts an incorrect asumption

as strategy is the expected result of a plan The definitions focus on aspects of a plan However, they leave out that strategy of a company can be raised from the company not via any formal plans (refer to figure 1.1) That means, Company’s strategy can be proposed by a staff, even it is not planned In fact, Company’s strategy can be given by unforecasted conditions By this way, Company’s strategy

is a model in the flow of decisions and action programs Models can be resulted by any strategies – designed strategies or unplanned strategies which bring success and become more suitable than the planned ones

Figure 1.1 - Emergent Strategies and deliberate strategies

(Sources: H Mintzberg, J Lampel, J.B Quin, S Ghoshal, The strategy process, Pearson Education Limited, 2003, P.5.)

Realized strategies

Deliberate strategies

Unrealized strategies

Emgergent strategies Planned

strategies

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To sum up, Strategy is a series of decisions for the development and changes in internal essences of an enterprise This view makes the real value of the strategy in clarity: Strategy not only supports for the success of the enterprise in its competition

but also it pushes the enterprise in its development

1.1.2 Definitions of kinds of strategies [4]

a) Corporate-level strategy

Corporate-level strategy defines the business line (or business lines) being taken or

shall be taken by the Company, how each line shall be taken (e.g incorporation with other branches of Company or taken in the independent business, or in capture

or new investment, which lines shall be remained, which lines shall be leaved out and which new lines should be taken) and its relation with the society, or in other

words, Corporate-level strategy is the selection of business lines Thereof, the

Company should give the development trend for single business units or multi

business units

b) Business-level strategy or Business strategy

Business strategy: is the determination of an enterprise to compete in an identical

sector or a defined line For sustainable development in any sectors, it is necessary

to set up its competitive advantages in comparison with other competitors, therefore, business strategy shall be considered as the competitive strategy Competitive strategy of an enterprise is the way to set up its valuable position in this sector It covers a wide vision (including actual meaning and implied meaning) in customers in its service and how to bring its value to customers However, a competitive strategy is not only a vision but also it is the combination of certain actions and detailed processes in the operation of an enterprise, which creates special values for customers Therefore, strategy shall regulate operations of an

enterprise and efforts of the enterprise shall push the potential advantages

Corporate –level strategy defines how the enterprise complete its functions (so, it shall help for the completion of Company’s strategy) in its business sector

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Business –level strategy plays the same importance with single sector enterprises as well as specific enterprises in multi-sector enterprises

c) Function-level strategy

Function –level strategy shall support for Company’s strategy and business strategy

For single sector enterprises and each business of multi-sector enterprises, function – level strategy is similar Function-level strategy shall create the foundation for others such as marketing strategy, financial strategy, R&D strategy, operation strategy to improve the competitive strategy of the enterprise and define actions and process to get advantages given by this competitive advantages

d) Global strategy

Nowadays, on the global market and global competitions, in order to get the competitive advantages as well as optimize the operation results of a company, it is necessary to enlarge its operations over the local boundary It means that Company should consider other global strategies which it can follow Benefits and expenses to widen the market over the local countries shall be evaluated and considered to select the strategy

1.1.3 Features of Business strategy [4]

Strategy viewpoints have not found the common points However, in any aspects, in any periods, strategy has remained its typical features which reflect the core of the strategy of an enterprise The main features of strategy as follows:

 Business strategy should define the main targets should be caught in each period and applied in all aspects, all levels of business and production activities

of an enterprise

 Business strategy of an enterprise should be reflected in a continuous process from the construction to implementation, testing and evaluation, adjustment and performance of each planned target

 Business strategy should mobilize and develop the use of enterprise’s resources (labor, capital, techniques, and technologies, etc), develop all advantages, catch changes to get the competitive advantages in the market

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 Strategy is a tool to set up long-term targets of enterprises Business strategy should define the competition range of an enterprise

 The key issue of this feature is the definition of business range of an enterprise

It is an important step in business environment analysis, orientation of strategy, resource allocation, and portfolio management The two basic questions are

raised including: What is in our business? And what we should make business?

 It is a complex issue during the market segment which affects the definition of structural organization of an enterprise

 Business strategy creates a mutual relation between opportunities and threats out of an enterprise, strengths and weakness of an enterprise and makes the competitive advantages

This feature generates a key issue of strategy is that it shall generate long-term and sustainable competitive advantage in comparison with the main competitors of the enterprise in its business range It is a modern approach to research the competitive advantages of enterprise

1.1.4 Strategy establishment process

In order to set up a process of a business strategy, should image a general establishment process for Company According to the common model of strategy management, the strategy establishment is the core step covering the components as stated in the table 1.2 below

Figure 1.2 – Components of strategy establishment process

(Source: Hill W L Ch & Jones R G (1995), Strategic management, Houghton Mifflin Company, p.5)

Define strategy missions and

targets

Analyzing and selecting SWOT strategy

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Definition of mission and targets of strategy

The first component of strategy establishment process is the definition of the strategy visions and missions The Strategy visions and mission of Company shall make the conditions to form the planned strategy and give evaluation criteria of the emergent strategy

Missions state the reasons why the company remains and what Company should do For example, missions of a national airway are to satisfy the high tech transportation demand with reasonable price for individuals and organizations of all large population areas In consideration of missions, the statement of missions given

by Company shall be formed by the following factors: (i) Business lines of company; (ii) philosophy of Company; (iii) aspirations of the Company’s senior leaders (refer to Figure 1.3)

Figure 1.3 – Foundations of company mission formation

(Source:: Hoang Van Hai (Chief author), (2010), Strategy management, P 19)

What are business lines

of Company?

What are aspirations of Senior leaders

of Company ?

What is business philosophy of Company?

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Strategy targets state long-term and short-term aspirations of Company Most of profit organizations always set up systems of targets to optimize the benefits of shareholders

Setting up strategy targets is to make strategy missions and orientations in results, to reach the expected achievements Targets are considered as the commitments of leaders for identified results in a certain period They are expressed in types of success, how many successes are and when successes are reached They pay attention and concentrate their capacity in the targets should be completed

Selection of strategy

After the internal and external environment analysis is made, it is required to give alternative strategies on the strengths and weakness of the Company as well as its opportunities and threats of analyzed external environment Comparisons between strengths, weakness, opportunities and threats are called SWOT analysis SWOT analysis is purposed to set up the Company’s strengths to exploit possible opportunities, response threats and adjust weakness In order to select the best strategy among ones given by SWOT analysis, it is required to evaluate each strategy meeting the capacity of missions and targets Alternative strategies should cover levels and function one, business level one, and general one for the company

as well as global one Selection of strategy requires the collection of strategies at any levels for the best development in the global competitive environment with the changes of almost modern industries

Company strategy shall define the competitive way in a certain business line It shall be formed by 3 factors: Company strategy, analysis results of business lines and internal analysis of Company Therefore, strategy establishment process of company shall be stated as in Figure 1.4

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1.2 Strategy planning

1.2.1 Analyzing external environments

External environment is factors which can affect the target performance of an enterprise Analyzing the external environment covers the analysis of macro-environment and micro-environment By analyzing these factors, enterprise can define its position and features of the environment, conditions as well as give effects of the external environment on the enterprise and the enterprise targets for decisions and directions

a) Analyzing macro-environment (PEST) [8]

Figure 1.4 – Strategy establishment process

 Strengths and weakness

Leading in expenditures

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On the fact, sectors and enterprises are kept in a macro-environment which are classified into 4 segments: Economy, technology, society and culture, law and politics Changes in the macro-environment can directly affect any factors of the sectors; therefore, they shall modify the relative strength of others or affect it and result the attraction of the sector

 Analyzing the economic environment

Economic environment defines the essence and orientation of an economy in which there are the presence of the enterprise, 4 key factors of the economic environment are :

 Growth rate of the economy

 Interest and exchange rate

 Inflation rate

 Analyzing the technological environment

Technology segment covers the institution, operations relating to the creation of new knowledge, knowledge transfer to output, products, processes and new materials

Changes in technology can make existing products outdated after one night, at the same time it can generate a series of new products Therefore, changes in technology shall cover both creativity and damages, both opportunities and threats

 Analyzing the social and cultural environment

Social and cultural segments relate to the social attitude and cultural values because cultural values and social attitude are formed by the social foundation, it shall direct the changes and technological conditions, legal and political conditions as well as populations

Similar to changes in technology, changes in society cover both opportunities and threats Diversity of culture and ethics raise a lot of opportunities and threats relating to the combination ways of traditional management of male and female for the enterprise benefits

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 Analyzing the political and legal environment

Political and legal factors affect the levels of opportunities and threats given by the

environment The most important factor of this segment is the way enterprise affects the Government and vice versa

Enterprises should analyze carefully new philosophies and policies relating to the State Management Law on antitrust, law on taxes, selected sectors for preference or adjustment, law on labor are in State management policies which affect the operations and benefit generation of the sectors or of the enterprise

Therefore, in consideration, evaluation of external factors affecting directly the business operations of enterprises, should define the importance of each factor and segment from 1-4 for the evaluations of peripheral factors in the effects on the enterprises and give the matrix of external factor evaluation (EFE) to select the enterprise strategy

Table 1.1 – Matrix of external factors of enterprises (EFE)

ion

No of key points

b) Analyzing the branch environment and competitive environment [9]

According to M Porter, there are 5 forces directing the competition in a sector including: (i) Risks of participation of potential competitors; (ii) competition among existing companies in the sector (iii) Power of suppliers; (iv) Power of customers;

(v) Threats of alternative products

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Figure1.5 – Model of Michael Porter of 5 competition forces

Risks of potential competitors

Power of suppliers

Threats of alternative products

Power of customers

Competition among competitors

in the sector

(Source: M Porter (translated by Nguyen Phuc Hoanh),Competition advantages, Tre

Publishing House, 2008)

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 Potential competitors: This force includes companies not in the competition of

the sector but they have enough capacities to get their targets Finding new competitors participating in the sector is an important role because they can thread the market share of existing companies of the sector One of reasons to consider competitors who want to participate in the sector as a thread is that they can bring new production power for the sector

Power of competition given by potential competitors is a function of integration

barrier Integration barrier is a factor which creates difficulties and cost for competitors in their integration into the sector, and even in the penetration, they shall meet difficulties

 Competition among competitors of the sector: the second force given in the

Porter’s model on fire competition forces is the competition among companies

of a sector Enterprises operating in the same sector should be depend on each other, operations performed by a company shall be responded by others The strong competition shall be reached if a company is in the challenges of others

or an opportunity for their position enhance on the market

 If the sector competition is weak, companies in this sector shall have changes to increase prices On the other hand, if the sector competition is strong, it shall appear a price race Competition shall prevent the benefit generation capacity because revenue based marginal profit Hence, the competition intensity among companies in a sector shall make a dangerous threat toward benefit generation

In general, competition levels among companies in a sector shall be formed by a function with 3 main factors including: (1) Sector competition structure; (2) Conditions of demands; (3) High barriers to leave out of the sector

 Power of customers: the 3rd

force of the five competition forces is the capacity

of negotiation of Buyers Buyers of a company are either end-user of this product or distributors of the products for end-users such as retailer or agents Buyers can be considered as a threat of competition when they require lower

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price or better services (which cause higher expenses for operations) On the other hand, if buyers are weak, company can raise price and get more profit Buyer can require companies or not shall depend on their relative power with companies

 Power of suppliers: the 4th

force in the model of 5 competition forces given by Porter is the negotiation capacity of suppliers Suppliers are considered as a threat when they enhance prices or reduce the input quality requirements supplied for companies, so it can reduce the profit generation capacity of the companies On the other hand, if suppliers are weak, it is a change for companies to reduce prices and improve the quality Similar to Buyers, capacity

of suppliers given to companies depends on their relative power with the companies

 Alternative products: the final forces given in the Porter’s model is alternative

products Alternative products are products of a sector serving for the customers’ demand which is similar to that for analyzed sectors Presence of alternative products shall be a threat of competition, prevent higher prices which cause the prevention of higher profit However, if Company’s products have few alternative ones (in the case of weak alternative products) and other factors are in normal states, Company can push the price and receive higher profit As the result, its strategy shall be designed to get the competition advantage by this factor

By studying 5 competition forces, enterprises can understand the requirements of sector attraction foundation on the potential changes of higher income by good

investments To sum up, the stronger competition forces are, the lower the capacity

of profits for enterprises is

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1.2.2 Analyzing internal environment of enterprises [9]

Careful analysis of internal environments of an enterprise is to define the advantages and disadvantages of this enterprise When this analysis is made, the most important thing is to define sectors in attention, issues in research and consideration, and criteria in evaluation By this way, recommendations shall be given to define which sector the enterprise is advantageous, and which sector the enterprise is weak Recommendations and solutions shall be given to cut off disadvantages and promote the advantages for the best results As the results, managers shall have better recognition and understand on the internal conditions by analyzing the main following factors:

a) Resources

Analyzing resources shows the reserve of resources, capacity and availability of existing assets for a business unit or for the whole company Analysis should be concentrated in the financial resources (funds, capital and capacity of loans); physical assets (land, equipments and machines, workshops – both in quality and quantity) human resources (skill and the faithfulness of labors and management board) intangible properties (reputation, brand, financial reputation, strategic reputation, and cultural values of Company); technology properties (such as copyright, patents) and long-term contracts (such as long-term sources)

b) Research and development (R&D)

Efforts in R &D help enterpreses play the leading position in the sector or in the contrary, it shall push the enterprises back from the leading ones Therefore, enterprises should change their technologies relating to technological works, products and materials regularly

c) Production

Production is one of the main activities of enterprises which is resulted in products Moreover, production affects the success of enterprises Production with high quality and reasonable price shall bring large benefits for enterprises because it shall

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push the sales revenue, save the financial sources and create a better attitude of staffs During the analysis of production, should pay attention to price, supply of materials, cycles of inventories, arrangement of equipments and machines, efficency and consumption of equipments, costs and capacity of technologies in the sectors and key competitors

d) Financial factors

Financial department is in charge of analyzing, preparing plans and checking the performance of financial plans, financial state of an enterprise Financial department presses a wide effects on the whole enterprise During the financial and accounting analysis, administrators should pay attention to the following contents: capacity of long-term and short term capital mobilization, flexibility of investment capital structure, capacity of use of financial strategies, capacty of control for price reduction, effeciency of accounting systems serving for the preparation of price plans, financial plans and profit plans etc

e) Marketing factor

Marketing department is in charge of analyzing, preparing plans, performing and inspecting the planned programs, remaining relations with customers under the princples of mutural benefits In general, marketing management should be responsible for adjusting the levels, time and features of demands raising between customers and enterprises for the completion of targets

f) Model of internal analysis: Value chain

(Refer to figure 1.6)

Main

activities

Internal logistic (materials , input materials)

Manufacture and fabrication

External logistic (export)

sales, Marketing

After sales services

in value chain shall make favorable conditions to inspect cost and performance results of each activity It also makes favorable conditions to improve activities as well as makes a better combination among them, respectively each strategy for certain values of products as well as of the enterprise Moreover, via intelligence information collected from competitors on their results, it shall be the foundation of

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comparison for the enterprise, which helps it set up outstanding values from its competitors

Activities support for the main ones shall be detailed as follows:

 Material management function, controlling the flow of materials via value chain

from the supply to the production and distribution Efficiency of this flow shall create values which support for the control of input quality during the fabrication, thereof increasing the input quality and raising price;

 R&D function, developing new products and fabrication technologies

Developing technologies shall reduce production costs, create more attractive products and get higher prices Hence R&D shall affect the production and marketing;

 Human resources, “Human resources is called for power of labors of an

enterprise, it is the most valuable property of the enterprise Human resource is

a high level factor and is a decisive factor for the efficiency of the enterprise structural organization which makes the success of the enterprise” (Institute of Management research and training (2005) “Building and performing business strategy – way to success”)

 Infrastructure of enterprises is different from other supporting activities This is

the general frame for the whole enterprise in which all value generation activities shall happen Infrastructure consists of structural organization, control system and culture of the enterprise Senior management shall base on its power to form the enterprise infrastructure and by this way all value generation activities shall be performed

In summary, upon the consideration and evaluation of strengths and weakness of

factors impacting the business operations in the enterprise, based on the business and production results, should define the most important internal factors which affects the success of the enterprise in present and in the future via internal factor evaluation (IFE) matrix

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In this matrix, effects of factors shall be evaluated according to their importance level from 0,0 point (not important) to 1,0 point (very important), total of points in the evaluation list is 1,0; at the same time, the response of the company for this factor shall be evaluated from 1-4 (excellent response: 4 points, good response 3 points, average response 2 points, weak response 1 point) These contents are presented in table 1.3 below and results shall be the foundation to select enterprise strategy

Table 1.2 – Internal factor evaluation matrix (IFE)

ce level

Classifica tion

No of important contents

SWOT analysis provides useful information to connect resources and capacity of company with the competition environment in which the company’s operations happen This is a tools forming and selecting strategy The following analysis shows

us the relation of SWOT analysis with the research of internal and external environment of the enterprise

Table 1.3 – Diagram of SWOT matrix

Strategy applies strengths of

enterprises with external

Strategy recovers weakness of

enterprises for good use of external

opportunities

WT strategy

Strategy recovers weakness of enterprises to minimize external threats

b) Definition of strategy based on SWOT

A company is not required to follow its best opportunities; it can be replaced by capacity for competition advantage generation with suitable combinations among its

 W-O strategy is used to come over weakness to catch new opportunities

 S-T strategy is used to define the way to use the company strengths to minimize damages and loses caused by outside factors

 W-T strategy is used to create a prevention plan from the company weakness which makes it vulnerable by external threats

After preparing SWOT analysis and building strategies, Company should select a suitable strategy on GREAT criteria under the table 1.4 below

Table 1.4 –Quantitative matrix with GREAT criteria

Criteria Weight

Strategies

Evalu ation point

s

Conve rted points

Evalu ation points

Conve rted points

Evalu ation points

Conve rted points

Evalua tion points

Conver ted points

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 Step 1:

Recognize the main criteria should be analyzed, select and give factors relating

to the plans and targets of development of the enterprise for analysis in the 1stcolumn (column 1)

 Step 2:

In order to assess the impact of the factors on the general strategy, impact coefficient showing the importance and effects of factors on the strategy shall

be applied This coefficient is calculated by marking from 0 to 1 and its total is

1 (column 2) When certain variables are collected with the important role of strategies, the 3rd step shall be made

 Step 3:

Evaluating, giving points for each analysis factor of each strategy, the evaluation point is calculated by points from 10 to 50, the lowest point is 10, the highest point is 50 (for respective levels of weak, average, average-fair, fair and good) Evaluation points show that for each analysis factor, there is one achievement level of a strategy (column 3)

 Step 4:

Converting coefficient as the 2 digit analyzing results (column 2 and column 3)

of each strategy, accumulating these results is the total of the above stated compositions Round or highlight from 1 to 3 digits whose total is highest to select strategies should be concentrated in building and performing of the company

c) Common competition strategies [10]

There are 3 basic strategies often selected by enterprises: leading in expenses, distinction, and concentration

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Table 1.5 – Sources of competition advantages and basic competition strategies

Leading in expenses Distinction Concentration

Distinction of

products

Low (mostly by price)

High (mostly by unique feature)

From low to high (price or the unique feature) Segments of

market

Low (market on the large scale)

High (with a lot of market segments)

Low (one or some market segments) Distinction

capacity

Material production and management

R&D, sales and marketing

Any distinction capacity

d) Expense leading strategy

is the strategy for goods production and services at lower expenses than that of

competitors This strategy contains 2 basic advantages Firstly, with lower expenses,

the lower price than that of competitors shall be given but the profit amount is same

If enterprises in a sector can get the same value for their products, the leading one in

lower expenses shall get higher profit Secondly, if higher competition of a sector is

set up, there are competitions in price among enterprises, the leading one in expenses shall keep its position during the competition than others for their lower expenses

e) Distinction strategy

Distinction strategy is purposed to get the competition advantage by producing products, goods and services as unique featured ones by customers Capacity of an enterprise on product distinction to satisfy the customers’ demands which can not

be performed by other competitors, shall help the enterprise increase price Capacity

of higher revenue by higher price (not by reducing expenses as the leaders of expenses) helps enterprises with product distinction work better than their competitors and get higher benefits

g) Concentration strategy

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Concentration strategy is different from the two above strategies because it is orientated to serve for limited groups of customers or a market segment Enterprises following concentration strategy should pay attention to serve a certain market segment, which can be defined by geographic criteria, types of customers and a type

of products In the nature, enterprises concentrate in the distinctive features of products or become leaders in expenses

Another feature is that enterprises focus on the competition with ones having distinction strategy in one or some market segments to develop the product quality because they have skills and knowledge in a small group of customers or a small area Moreover, the concentration in small chains of products helps enterprises give better improvements than that made by large chains

of selection of the best solution via suggested models such as PEST (macro environment analysis), Five forces (analysis of competition environment), value chains model (analysis of internal environment), SWOT, analysis, evaluation of strengths, weakness, opportunities, and threats on enterprise operations and quantitative model under GREAT to select the optimal strategies These theory foundations shall be applied to plan the business strategies of Handico5 and shall be detailed in chapter 2

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CHAPTER II

ANALYZING THE SITUATION OF HANOI HOUSING DEVELOPMENT

Business lines :

1 Business in real estate;

2 Establishing, organizing to perform and manage investment projects on building houses and urban areas, business projects on developing houses and others;

3 Building and installing works: civil works, industrial works, traffic works, irrigational works, infrastructures, and interior decoration;

4 Business in houses, warehouses, storages, hotels, restaurants, commercial

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centers and entertainment centers;

5 Advanced construction technique and technology acceptance and transfer;

6 Construction and installing lines and transformers up to 35KV,

underground electrical cables;

7 Services of keeping cars and motorbikes

8 Consulting construction investment in population areas, new urban areas for domestic and foreign investors (not including services of design for works);

9 Consultancy and services of site clearance;

10 Consultancy and services of sales and business in real estate, procedures in name transfer, execution of houses and land (not including legal

consultancy services);

11 Design consultancy of general premises of interior and exterior of civil works and industrial works;

12 Supervision consultancy of civil and industrial works;

13 Making production and business in construction materials;

14 Making import-export business;

15 Services of real estate trading floor;

16 Services of real estate brokerage;

17 Services of real estate valuation;

18 Consultancy services of real estate;

19 Service of real estate advertisement;

20 Services of real estate auction;

21 Services of real estate management

Sources: Certificate of business registration - Handico5

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2.1.2 Organizational structure and management structure of Company

Organizational structure and management structure of Company are performed

under regulations stipulated in Law on enterprises and Company’s Charter as the followings

Figure 2.1 – Organizational structure of HANDICO5

Sources: Administration Department - Handico5

Vice Director in charge of technique

Investment

Department

Project Management

Technical Dept

Administration Department

PMU of Thanh Xuan

PMU of Long Bien

Construction enterprise

No 5.2

Construction enterprise

No 5.3

Business Department

PMU of

Ba

Dinh

PMU of Hai Ba Trung

PMU of Hoan Kiem

Construction enterprise

No 5.1

(Sources:Report of operations of HANDICO5 , April 2011)

2.1.3 Business result of HANDICO5 period 2008 – 2010

Table 2.2 – Some criteria of business operations of HANDICO5 2008 - 2010

5 Before tax profit 13,976,124,417 7,908,441,904 55,047,811,250

6 After tax profit 12,050,745,955 6,891,283,968 41,285,858,437

Sources: Financial report of HANDICO5 2008 - 2010

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2.1.4 General comment on business situation of HANDICO5

Table 2.3 – Some financial index of HANDICO5 period 2008 - 2010

ROS (After tax profit / revenue) 14.28% 6.01% 16.65% ROE (After tax profit / Owner equity) 30.44% 16.09% 47.58% ROA (After tax profit / Total of assets) 5.65% 2.72% 7.72%

Leverage coefficient (liabilities/equity) 4.39 4.91 5.16 Seft financing ratio

Via the above stated analyzing table, it shows that the business state of 2009 of HANDICO5 decreased sharply with the profit index (in comparison with that of 2008) However, it was improved in 2010 The main reason for this state was the

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price fluctuation at the end of 2008, which caused the increase of input, the decrease

of business efficiency, the failure of the planned growth rate

 In consideration of index of 2010, HANDICO5 reached the good growth rate

which reflected its good preparation on response to the market changes, especially relating to relations with suppliers and customers In 2010, by the recovery of the real estate market, (in particular quarter I, quarter II and quarter III) HANDICO5 got the merging revenue It is therefore concluded that growth depends mostly on market factors

 In consideration of expenditure structure, it is found that goods cost accounts a

large amount and should give adjustment solutions to increase profitabilities Although this index reduced in 2010 (from 85.74% to 79.54%), however, it mostly depended on revenue scope, it did not bear from input costs, optimize production process and capacity of negotiation with suppliers Management costs

of 2008 and 2009 kept at high levels, accounting 8.97% and 10.2% revenue, but

in 2010 it reduced to 2.9% This is a good signal showing the effeciency of the management board and management measures as well as effects of revenue increase which pushed the maximum capacity of the exisiting administration system of HANDICO5

 In consideration of profitability In 2010, a good profitability was reached

(47.58%) for real estate, but as stated above, should give reasonable solutions to remain the stability, avoiding the dependance on the market changes Efficiency

of asset use was at low level (7.7%), which is a weakness needed to be come over For the financial leverage use, depending on the features of real estate business of larger investment than equity rate (currently, according to the laws, Investors should remain at least 15%-20% their capital in total investment of projects), but most of enterprises often use financial leverage in the “active” market which often leads to the disadvantages in case of frozen market and depression of macro-economy Therefore, in this case, the financial leverage index of HANDICO5 is kept in safety and reflexed the stability and suitability of

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the investmest structure, strategic orientation with the stable growth, such financial leverage index shall be suitable and can be adjusted in certain period relying on demands and short-term investment decisons In particular, analyzing debt structure of HANDICO5, mostly liabilities stated in contracts of house sales capital contribution under the advance payment method, such debt structure raise neither credit risks nor interest, but it reduces remarkably profit efficiency

 In consideration of profit index: in comparison with other enterprises in the same

sector, index such as ROE, ROA of HANDICO5 are remained at the average level Improvement in use efficiency of assets and profit maximization are focused in mission target maximum of enterprise value of HANDICO5

2.1.5 Business situation of HANDICO5 via projects in progress

Table 2.4 – Some projects in progress by HANDICO5 2008 - 2010

Some projects in progress by HANDICO5

capital Houses Offices Others

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General comments on real estate projects in progress by Company: Competitive

advantages cover positions, but in small and average scope, the value of real estate and high land price, limit of space caused by urban infrastructure and social infrastructure Hence, in consideration of orientations for profit maximum should base on advantages and restrict disadvantages which affect the project profit

2.2 Analyzing external environments

2.2.1 Analyzing macro-environment (PEST)

a) Economic environment

Overview on the Vietnam economy of 2010

 The 1st time, GDP excesses 100 billion USD in 2010; growth rate is 6.78%

 GDP of the 4th

quarter increases 7.34% in comparison with that of the same time

of last year has regular increase of the quarters

 GDP per one is estimated at 1,160 USD; is considered as an average income nation

 Registered FDI reaches 17.2 billion USD; performed capital is 11 billion USD, 10% at increase

 Inflation and price: Inflation of 2010 keeps at 2 digit rate of 11.75%, 5% higher than that given by National Assembly Average increase of CPI is over 11% The reason for high inflation is effects of Gods, increase of goods in the world, depreciation of the currency and significant increase of currency supply Gold price increases nearly 35%; USD price increases 10%

 A series of tight momentary policies has been applied enhancing the increase of interest during 2010 During early months, interest was kept at 14 - 17%, mobilization interest rate of 12% At the end of 2010, a race of interest was bloomed again under the pressure of inflation and regulations of Circular No 13 Mobilization interest rate of later months was 14 -16%, even some banks applied

at 17 -18%, loan interest applied at 19 -20%

(Quoted from Report on Real estate of Vietnam – Café land - 01/2011)

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However, according to many economic experts, inflation was at peak and shall be decreased in recent time, which shall support for the recovery of the real estate market In 2011, the Vietnam economy has been in effects of changes in the global economy, mostly the fevers of gold price and USD price

Picture of the real estate market of Hanoi:

In the evaluation of Hanoi Department of Construction, to 2010, the demand on houses of Hanoi is about 7 million m2, equal to 120.000 houses While the market demand is raised by more population movement to the city and the wish of their living space enlargement, the price increase speed of housing mostly depends on the supply and investment selections

From the middle of 2009, the most active market segment is middle houses and economy houses This is the segment which is very easy to realize with practical demand given by end-users The range of 800 million VND to 2 billion VND per one, most of such apartments were sold rapidly upon offers Even though, apartments of this segment have remained at high price but it is not received suitable attention of investors

At the end of 2010 and at the beginning of 2011, the apartment market of Hanoi is featured with the followings:

 Secondary price increase well in all the 4 market segments, after the 3rd

quarter, there have been a lot of changes

 The market demand is directed to middle and economy outputs Most of high class and luxurious outputs are sold with low consumption

 Apartments for hire are remained stably though the hire price has reduced but the range of decrease and increase can be ignored Capacity of apartments for hire always remains at 91% and more, in which the highest level was made in the quarter III of 2010 with 95 % for stable hire demand while there are no new supply available in the 3 later quarters of 2010

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 Market of ground land of 2010 in Hanoi is generally in “hot” state because it is mistaken that the national administration center is moved to Ba Vi foot mountain which leads to a higher land price of Ba Vi as well as the Western area It is only in reduction when the information source is corrected and the general plan is approved and published However, land price of some suburbs has increased significantly at the end of 2010 and at the beginning of 2011 for the speculation of investors which leads to the market manipulation

According to the report made by CBRE, the apartment market of Hanoi in quarter IV/2010 as below:

Corporative housing Luxurious

class

High class

Middle class

Economy class

Total of the market

Total of supply

Average offer in the

Source: Report of quarter IV/2010 of CBRE Vietnam New supply

New supply of quarter 4/2010 is 2.850 apartments, increasing 50% in comparison with quarter 3 Upon the waiting time for effects of Decree No 71/NĐ-CP and Circular No.16/TT-BXD, investors are ready to provide their products to the market A half of newly offered projects are under Capital contribution contracts, limited at 20% offers of total project apartments A large supply of 2011 shall be

Rate of rooms in free (%),

Average offered price (excluding

service taxes and VAT) in

Q4/2010

Source: Report of quarter IV/2010 of CBRE Vietnam

b) Technological environment

Continuous development in science and technology sector of the world and the open for penetration of large construction corporations into Vietnam have changed strongly the science and technology in construction, especially in building houses

A lot of modern technology equipments have been applied in civil works of Vietnam such as cast-in-place technology, piles and beret walls, skyscraper technology with sliding formwork core construction, floors and early pre-stressing tension steel beams, later pre-stressing tension steel beams, Top-Down technology, precast concrete, new high-intensity materials, calculated working load reduction for works Advanced construction technologies can support for investors to reduce construction cost, construction progress, work quality not only following construction standards but also increasing the load capacity and prevention of Gods