The development strategy of power engineering consulting JS company 2

The business strategy is built on the basis of analyzing and predicting the opportunities, risks, strengths and weaknesses of enterprises that help the enterprise obtaining the general i

GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT

THE DEVELOPMENT STRATEGY OF POWER ENGINEERING CONSULTING JS COMPANY 2

Group Number : 4 Students: Hồ Nam

Tạ Quốc Dũng

Nguyễn Chơn Hùng

Hồ Minh Quang

HOCHIMINH CITY, 2010

ACKNOWLEDGEMENT

To complete the Masters program and write this essay, we have received

guidance, help and enthusiastic suggestions from the Global Advanced

Master of Business Administration Program, which is the joint program

between Hanoi National University and Griggs University

First of all, we kindly thank the professors who have taught us

enthusiastically and helped us all along

Especially, we would like to express special thanks to Professor - Dr Le

Van Bay who has helped us tremendously in completing this essay

We also thank deeply the Board of Directors of the Power Engineering

Consulting Joint Stock Company 2, who has facilitated and allowed us to

investigate and conduct surveys to gather data for this essay

Although we were dedicated and tried hard to complete the essay, we

cannot avoid shortcomings Thus, we welcome comments from all

Professors and classmates

Hochiminh City, November 25, 2010

Group 4 Class D0109

TABLE OF CONTENTS Acknowledgement

List of Abbreviations

List of Tables

List of Figures

INTRODUCTION 1

CHAPTER 1 THEORETICAL BASIS 4

1.1 The basic concepts of strategy 4

1.1.1 Strategy 4

1.1.2 Strategic Management 4

1.2 Strategy Classification 5

1.2.1 Classified by strategic level 5

1.2.2 Classified by scope of strategy 6

1.2.3 Classified by the approach of strategy 6

1.3 The process of strategic business planning 6

1.3.1 Overview 6

1.3.2 Identify the tasks and objectives of the enterprise 7

1.3.3 Analysis and forecast the business environment 9

1.4 The tools of strategy formulation and choice 15

1.4.1 The matrix of external factor evaluation (EFE) 15

1.4.2 The matrix of internal factor evaluation (IFE) 16

1.4.3 The matrix of competitive profile 16

1.4.4 The matrix of SWOT 16

1.4.5 The matrix of SPACE 17

CHAPTER 2 ANALYSIS OF ACTUAL SITUATION AT PECC2 19

2.1 The formation and development of the company 19

2.1.1 The establishment and development of the company 19

2.1.2 The functions and duties of the company 19

2.1.3 Corporate Culture 20

2.1.4 The vision and mission of the company 22

2.2 The characteristics of power engineering consulting industry 23 2.2.1 The characteristics of products and services of power engineering consulting 23

2.2.2 Market characteristics 25

2.2.3 Criteria for evaluation of a consulting company 27

2.3 Organization and business practices of PECC2 28

2.3.1 Characteristics of the organization structure 28

2.3.2 The process of production organization 30

2.3.3 Financial features of the company 30

2.3.4 Overview of the production plan 31

2.3.5 Assessment of the plan implementation 31

2.4 The objective of PECC2 to year 2020 34

2.4.1 Criteria to build objective 34

2.4.2 The objective of the company to year 2020 38

CHAPTER 3 SOLUTIONS, RECOMMENDATIONS AND CONCLUSIONS 41

3.1 External environment analysis 41

3.1.1 Sector analysis 41

3.1.2 Competitive forces analysis 51

3.1.3 Analysis on the macro environment 52

3.2 Internal environment analysis 53

3.2.1 Specific capacity of the company 53

3.2.2 The value chain of the company 55

3.2.3 The competitive advantages 55

3.3 The strategies to achieve the objectives 56

3.3.1 Strategy formulation 56

3.3.2 Strategy analysis and choice 62

3.4 The solutions to carry out the strategy 64

3.4.1 The group of solution of human resourse 64

3.4.2 The group of solution of expand the business market 66

3.4.3 The group of organizational solution, management, business production 66

3.4.4 The group of solutions to improve product quality 67

3.4.5 The group of financial solutions 67

3.4.6 Other solutions 67

3.5 Recommendations 67

3.5.1 Recommendations towards EVN 68

3.5.2 Recommendations towards the ministries and government 68

3.6 Conclusions 68

REFERENCES

APPENDICES

LIST OF ABBREVIATIONS

LIST OF FIGURES

Figure 1-1: The elements of internal industry 11

Figure 1-2: Matrix of SPACE 18

Figure 2-1: A typical Project Engineering Cycle 24

Figure 2-2: Organization Chart PECC2 29

Figure 2-3: Chart of revenue in year 2009 33

Figure 2-4: Revenue from 2006 to 2009 33

Figure 3-1: Map of Vietnam and EVN/PECCs Location 43

Figure 3-2: Market share of PECCs in 2008 44

Figure 3-3: Market share of PECCs in 2009 45

Figure 3-4: Value series of the company 55

Figure 3-5: Import, purchase of area power 71

Figure 3-6: Zoning Power system until 2020 71

Figure 3-7: Connection of power system of the Three Indochinese Countries 72

LIST OF TABLES

Table 1-1: The 3-stages process of strategic planning 7

Table 1-2: The matrix of opportunities - threats / strengths - weaknesses 17 Table 2-1 : Consulting evaluation criteria 28

Table 2-2: Revenue and growth rates 32

Table 2-3: Electricity demand in the period until 2020 35

Table 2-4: Predicted results in accordance with scenarios 36

Table 3-1: Market share of PECCs in 2008, 2009 based on gross revenue 44 Table 3-2: Matrix of External Factor Evaluation (EFE) 56

Table 3-3: Matrix to evaluate internal factors IEF 57

Table 3-4: Matrix of competitive profile 57

Page 1

INTRODUCTION

1 The reasons for choosing the research topic:

Since our country made the change of the economy, from administrative

structure and centralized planning to market mechanism, enterprises have

started to polarize Some are adapting to the new mechanism to be

profitable and expand Conversely, some could not find a way out, incurred

losses, and eventually became bankrupt

Today, not a single successful business operates without paying attention to

their market The market mechanism makes the rigidity of the short-term as

well as long-term planning become the main cause that obstructs the

development of enterprises Therefore, enterprises need to plan and

implement a new planning tool that is fully flexible to respond to market

changes That is business strategy

The business strategy is built on the basis of analyzing and predicting the

opportunities, risks, strengths and weaknesses of enterprises that help the

enterprise obtaining the general information on external business

environment as well as internal resources of the enterprise Based on those

mentioned, they plan the strategic objectives, select the best strategy and

formulate policies to achieve those objectives and simultaneously inspect

and adjust the strategy to meet the changing business environment The

business strategy helps enterprises not to fall into a defensive situation, but

to always stand on the offensive side to be ready to face all changes of the

business environment Thereby, it has increasingly become the essential

role as a sharp competitive tool in the market economy

The work of planning, organizing and implementing a business strategy is

actually quite new for most Vietnamese companies The Power

Engineering Consulting Joint Stock Company 2 is one of them Planning

for the company is limited to the annual planning without a strategic vision

Therefore, the need to plan and implement long-term business strategy is

very important and urgent for the survival and development of the

company

Page 2

With that scientific and practical meaning, and the knowledge from the

Training Program of Master of Business Administration for Leaders

organized by Griggs University (United States) in collaboration with Hanoi

National University (Vietnam), our group decided to develope a business

plan for The Power Engineering Consulting Joint Stock Company 2

Our team hopes that our researched topics can become a reality when it is

presented to the Leaders of The Power Engineering Consulting Joint Stock

Company 2 and contribute to the future development of the company

2 Objective and scope of the research

Given our limited knowledge and experience concerning strategy

development, and considering the limitation of time, the group's objectives

are as follows:

 Systematize the theory basis of strategic planning

 Generalize estimations of the actual situation of production and

business operation of the company; find out the advantages, weaknesses, opportunities and threats which will be used to formulate a development strategy for the company until 2020

 Suggest some solutions to improve the planning and implementing of

the company strategy

Our team hopes that our study will be a premise for further studies to

amend the development strategy of the Power Engineering Consulting Joint

Stock Company 2 and contribute to the consolidation and development of

the company

3 Research method

The findings are based on information from primary and secondary data

collected from means of mass communication, units directly involved in

production and business operation of the company, and from the company

itself

The construction and research of the strategic choice matrixes are based on

the expert method, which consists of consultation with well understood

experts of the company's products, and market situation, in particular, the

general and electrical construction consulting industry From here, we can

establish features and evaluate those features The advantage of this method

is simple and easy to implement

Page 3

4 The structure of the report

Besides the general opening, this report is made in three chapters as

follows:

Chapter 1 – The theoretical basis

This chapter is a brief introduction of the theoretical basis that will be

applied in the research and implementation process of the project The

theoretical contents include: the concept of strategy and strategic

management, strategic planning process, and the tools for strategic

planning and choices

Chapter 2 – Analysis of the actual situation of the Power Engineering

This chapter includes: General introduction of PECC2, characteristics of

the power engineering consulting industry presentation, the actual

construction work and plans implementation at PECC2; and the objectives

of PECC2 from now to year 2020

Chapter 3 – Solutions, recommendations and conclusions

This chapter reviews the ex-internal factors; particularly those that may

affect the production and business operation of the company We then

create strategies and specific solutions to achieve the objectives On the

other hand, this chapter also makes some recommendations to policy

makers and EVN to help create favourable conditions for the development

of the power sector in general and electrical construction consulting

industry

Page 4

CHAPTER 1 THEORETICAL BASIS

1.1 The basic concepts of strategy

1.1.1 Strategy

It is a term which has the origin from the military field, from year 50 of the

20th century and it is used more widely in the business sector Over time,

the concepts of strategic are also changed upwardly Up to date, there are

many different concepts of business strategy, but there are two concepts are

used very popular as follows:

"Strategy is a draft of the future including objectives which the enterprise

has to achieve as well as the necessary means to implement those

objectives "

"Business strategy of a company is a combination of long-term goals,

policies and large solutions on production and business operation, financial

and human settlement in order to operate production and business operation

or company development to a new higher state of nature"

1.1.2 Strategic Management

The role of strategic management increasingly is expressed as an

orientation The effective management method is extremely important

mean for the success or failure of enterprises in the varied business

environment Today, it still exist many different concepts of strategic

management There the author thinks that strategic management of

enterprise is the art and science of the construction, implementation and

evaluation of collective decisions that helps enterprise achieving their

goals Some other authors define: Strategic Management is a method of

managing to orient the strategy and combine administrative functions in the

process of long-term development of enterprises that base on analysis and

forecast the business environment in a comprehensive way

Therefore, we can define the strategic enterprise management is a

combination of planned activities, organize to implement and checking,

adjusting business strategy that perform and repeat in accordance cycle or

Page 5

non-cycle of time to ensure that enterprise always take advantage of every

opportunity, good time as well as limit or eliminate the threats and pitfalls

on the path of implementing their goals

Moreover, strategic management helps enterprises to solve those problems

as follows:

Firstly, it helps enterprise answering the question: What are we trying to do

in the present to achieve development objectives in the long term

Development objective in the long-term of the enterprise is a competitive

advantage, the power of business and profitable capacity The basis of

competitive advantage is the key capacity of enterprise, the business

strategy of enterprise that plans the route to reach the objective

Secondly, it alerts administrators the changes in business environment,

opportunities and new challenges The changes in business environment are

always leading to review and adjust business strategy that make how

enterprise capturing the business opportunities for its development in the

long term and simultaneously creating appropriate precautions for the

challenge from the external environment

Thirdly, it provides the basis for administrators to estimate the demand of

capital, equipment and manpower, in other words, the allocation of human

resource of enterprise into the supporting areas of implementation strategy

in enterprise The recourse of enterprise is limited and should be invested

effectively

Business strategy is a basis of resource allocation for enterprise as most

effectively Thus, strategic management will help to unify the decisions of

implementation

1.2 Strategy Classification

1.2.1 Classified by strategic level

- The strategy of corporate level: The general strategy of the company

that arms to achieve the objective of the company

- The strategy of business unit level: The strategy of business unit of

the company The strategy of each unit will arm to achieve the

Page 6

objective of that unit and all strategies of units that arms to help the company achieve the company’s objective

- The strategy of functional level: The strategy is mentioned as

accurate function of the company

1.2.2 Classified by scope of strategy

- Common strategy: is the general strategy of the company

- Component strategy: is a second-level strategy such as marketing,

finance etc Common strategy and component strategy are closely linked together

that form a fully-done business strategy

1.2.3 Classified by the approach of strategy

- Focused strategy: Focus on the key points that have crucial mean of

the production and business operation of the company

- The strategy is based on absolute advantage: based on strength of

enterprise to make the foundation for strategic planning

- Innovative attacking strategy: based on new exploration to take

advantage

- Liberal strategy: not targeted at the key any factor that exploits the

factors surrounding the key factor that is the basis of business planning for enterprise

1.3 The process of strategic business planning

1.3.1 Overview

There are some different concepts of strategic business planning Some

Authors divide the strategic planning process into steps; also some authors

have the concept of only a few steps of the strategic planning process

Intrinsic differences of opinions are the determining scope of the work that

is needed for implementation to plan the strategy In this report, it will use

the three stages strategic planning process as present as follows:

Stage 1: Establishing information systems, data and status from the

external and internal business environment of enterprise as a basis for

Page 7

formulating strategy It may use technical analysis that has been

summarized as the matrix evaluation of external factors, evaluating the

matrix internal elements

Stage 2: Analysis and determine the combination at between of

opportunity, opportunities, risks of external business environment with the

strengths and weaknesses of enterprise to establish the combination that is a

basis of business strategy planning

Stage 3: Identify lay-outs, evaluate and select strategic decisions from the

combination of stage 2 Selecting and form the strategic plans Evaluate

and select according to the priority objectives

Table 1-1: The 3-stages process of strategic planning Stage 1 – The input stage

The matrix of external

factors estimating (EFE)

The matrix of competitive profile

opportunities,

threats (SWOT)

The matrix

of strategic location and operational estimating

The Boston Consulting Group (BCG) matrix

The internal – external (IE) matrix

The Grand strategy matrix

Stage 3 – The decision stage

The Quantitative strategic planning matrix (QSPM)

(Source: Strategic Management – Concepts and Cases, Fred R David)

1.3.2 Identify the tasks and objectives of the enterprise

Certainly, all enterprise is contenting its functions and duties at the time it

was established, although it has been said or not However, in practice,

"What business do we have?", or "What is our duty?" It is always a difficult

question to answer To answer this question, it needs to have a business

duty report It is a declaration of existed reason and distinguishes a business

Page 8

organization with other organizations The clear duty report is essential to

establish the objectives and drafting a strategy effectively

There is no specific template for a duty report, but according to experts of

strategic management that the effective report should answer the 9

questions as follows:

1 Customers: Who will consume the products of the company: people

have high, low or average income?

2 What are the main products, services of the company?

What is their strength?

4 Technology: Is the technology leading concern of the company or not?

5 The concern of vital issue, development and profitability

6 Business philosophy: What are the basic beliefs, values, aspirations

and priorities, the company's philosophy?

7 Self-assessment of yourself: special powers or major competitive

advantage of the company in comparing with competitors

8 The concern of the company on social responsibility: environmental

issues and society etc

9 Personnel policy: the interest of the company on material life

(guarantee income, increase income etc.), spiritual life (the reward

regime, promotion, improve higher level, ensuring hygiene and

working safety etc.)

The objective is most generally understood that is the destination to

achieve System of strategic objective reflects the desires to achieve exact

results in a certain period of the business strategy There are many ways of

objective classification but according of reviewing the time, we will

classify the entire objective system into long-term objective (strategy) and

short-term goals (tactics) Long-term objective is the desired results that is

set out in a relatively long period of time, usually over a year, and it often

objectives such as maximizing profitability, productivity and competitive

position of enterprise, the rising ability and develop employment, social

responsibility etc Shorter-term objective describes the desired business

results to achieve in the shorter term comparing to long term and it is often

Page 9

more specific long-term objective Normally, the system of strategic

objectives has to meet, satisfy the following requirements: specificity,

feasibility, consistency and flexibility Of course, the objective themselves

in the system of strategic objective of enterprise also in conflict with each

other so the system cannot have strategic objective that can satisfy

maximally to all the objectives that need a reasonable tolerance

1.3.3 Analysis and forecast the business environment

Business environment is understood as the overall factors, internal and

external factors are in the interactive campaign, affect directly and

indirectly to the production and business operation of enterprise

These factors constitute the business environment that is always active and

affect the production and business operation of enterprise under the

direction and at different levels These factors act upon actively and create

opportunities, business opportunities or create advantages, the strength of

enterprise comparing to competitors Conversely, the negative factors that

create pitfalls, threatening or weakness of enterprise comparing to

competitors so to plan business strategy, administrators have to research,

analyze and forecast the business environment

1.3.3.1 The external business environment

a) The international business environment

The influence of international policies: globalization issues; forming,

expanding or terminating of multilateral and bilateral alliance treaties; basic

conflict resolution around the world and regions; wars These factors may

impact positively or negatively with different levels to different businesses

The influence of regulations, national laws, international laws common

practice: In the trend of integration of the enterprises, to survive and

develop, they have to obligate the laws and international common

practices These regulations may be opportunities for enterprises (such as

Vietnam - U.S trade agreement creating conditions for garment, fisheries

enterprises exporting to the U.S.) but they can also cause risks for the

existence and development of enterprises (Joining the AFTA, most of

businesses face to blazing hot competition etc.) Laws of a nation would

Page 10

impact; control the business operation of enterprises participating in the

market of that nation

The influence of technical factors - technology: is the factor of strong

influence on competitiveness of enterprises as it directly affects the

productivity, quality, designs and prices …

The influence of social - cultural factors

b) National economic environment

Including five groups of basic elements:

Economic elements: The trend of GDP, rate of inflation, bank interest rates,

monetary policy, rate of unemployment, balance of payments and exchange

rates Each factor may be an opportunity or threat and different effects to

various different businesses so businesses need to identify selectively the

specific impact that will most directly affect the production and business

operation of enterprises

Elements of policies and laws: the taxes, the special treatment regimes, the

anti-monopoly provisions, the law on environmental protection,

advertising, the stability of government etc, these factors will create a

healthy business environment or not From that will impact positively or

negatively on business operation of enterprises, especially those doing

genuine business On the other hand, these factors also create an

opportunity or risk for enterprises in the sectors, certain economic areas,

such as: The increasing of tax in some industries and services (electronic

games ) that could threaten the profitability of these enterprises

Social elements: Traditional habits, educational level, religion, beliefs,

habits of consumption, population growth rate etc, these factors often

change or evolve slowly, but it is often difficult to identify and effect

deeply to the management operation and business of all enterprises

Natural elements: natural resources can be exploited (mineral mines,

forests, marine resources etc.), climate, land etc, depending on the

characteristics of every business enterprise so this factor influences

differently to the business operation of enterprises For example, if it is

beverages businesses that is heavily influenced by weather factor: hot

weather will be more consumption, in contrast, cold weather will be less

Page 11

consumption, if it is a mining company that is influenced by characteristics

of resource exploitation

Technologic elements: is a sharp tool for competitive of enterprises in the

economy of the trend of recent market integration Select an appropriate

technology with the ability of the enterprise that will help enterprise taking

advantage of their power resources and also not be left behind, loosing

competitive advantage comparing to competitors

c) Competitive environment of internal industry:

Including 5 elements as follows: The recent competitors, potential,

customers, suppliers of raw materials and goods of replacement and the

relationship between these factors are described in the following diagram:

Figure 1-1: The elements of internal industry

(Source: Michael Porter's Five Forces Model)

We alternately review the effect of each element :

i) Customers

Customers who create profit, generating a victory for business, customers

of an industry can differ about the need of purchasing; different customers

may have different requirements on levels of service, quality of goods etc

that leads customers to different rights of negotiation The following

customers will have less internal bargaining power compared to other and

they will be good customers in the customer list should be selected:

Page 12

Customers purchase small quantity comparing to the turn-over of the seller

Customers have the lack of supply with full standard for selecting

These customers have special difficulties in finding alternative products,

negotiation or implementation of transition (major cost )

Customers have no ability of opposite linking

Also need to consider the sensibility on price of customers If customers

use products and services of company, they almost sensibility on price

that's why the use of strategy of increased is not a good idea Even, it may

lose a part of the big market These big customers are not necessarily of

sensibility on price

Well satisfying the need of customers is the key to the success of the

enterprise But the demand of customers is not limited categories so

enterprises need to know how to operate and turn their needs into the needs

of the enterprise On the other hand, it is also necessary that the enterprise

must count the specific shopping needs of customers which match the

relative capacity of the enterprise or not? If there is a fit that will make the

enterprise achieving the differentiation of high product comparing to

competitors in front the eyes of customers and minimize the cost of

customer service

Thus, the selection of target customers becoming an important strategic

factor and businesses are not only interested in existing customers, but also

must consider the potential customers

ii) Supplier

The people who supply the input factors for enterprises: raw materials,

labour, machinery and equipment, capital, etc, the suppliers will have

different influence and pressure to enterprises that is depending on the

nature of the supplying market From then on, they will affect the business

operations of the enterprises such as: the speed of product supplying, price,

product quality etc According to Porter, The following factors will

influence and create pressure from suppliers to purchasing activities, as

well as reserve and labour employment of enterprises: The less or more

quantity of suppliers, the alternative nature of the input factors are difficult

Page 13

or easy, the ability of providers, important location of enterprises to

suppliers, the importance of specific input factors to enterprises

iii) Competitors:

Understanding of competitors is important mean for enterprises because of:

Firstly, the competitors decide the nature and competitive extent or

operation of advantage gaining in the industry

Secondly, helping the enterprises having strategy of relevant competitive

policy to attack the weaknesses of the competitors of both achieves such as

our objective and avoiding the conflict of basic objective of the competitors

and avoiding the heavy retaliation at all costs from the competitors

iv) Potential competitors

The enterprises will enter the market, the impact of those enterprises to

business operation of enterprises in the industry, how far where it is

completely depended on the competitive strength of those enterprises

According to M.Porter the factors effecting to the process of entering the

market of new competitors: barriers to access the market, scale of

economic efficiency, disadvantage on cost due to other causes, the

differentiation of products, switching costs, the policies of macroeconomic

management etc

1.3.3.2 The internal environment of enterprise

The internal situation of the enterprise is including all elements and

systems within the enterprise Enterprises have to try a thorough analysis of

internal factors in order to identify clearly the strengths and weaknesses

comparing to competitors In that basis, they must offer the measures to

overcome and limit the weaknesses and promoting the strengths to achieve

maximum advantage The internal factors mainly included as follows:

a) The impact of marketing activities

It is the sales promotion activities, distribution of goods, diversify or focus

of certain products, the ability to collect necessary information on market,

structure of products, pricing strategy, advertising , sales promotion and

service after sales etc, the goal of marketing activity is to satisfy the needs

and wishes of customers, ensuring products providing and stable services

Page 14

with quality and reasonable prices to help businesses achieve victory in the

competition and achieve profitability, high market share in the long term

In particular, the needs of human is increasing time by time, changing

tastes constantly so the marketing activities is more important for the

success or failure of your business

b) The influence of production capacity, research and development

Production capacity will affect production costs as well as time and meet

the demand of products and services The research and development help

businesses manufacturing new products and services to suit the market's

demand, accelerate the speed of innovation and product differentiation

As such, these activities will create and direct impact to the competitive

advantages of enterprises

c) The impact of human resources

Including the issues of labour structure, skill and ethics of employees, the

measures of working encourage, the level of transferring staff, quitting and

the forms of training and development of labour etc

All of properties, materials as well as spirit are all creation of human-made

Despite machinery and modern technology of how far and no man

operational control, it cannot do anything, the use of human resources

efficiently that depends on how the qualifications of the staff labour

Therefore, businesses should have the measures of attracting skill qualified

labour as well as facilitating the necessary technical - material conditions

and labour organizations to promote labour force working with their full

potential ability

d) The impact of financial accounting

All investment activities, procurement, research and development etc, all

depend on the financial situation of enterprises In estimating the financial

situation of our enterprises, we need to focus on the issues such as: the

ability of mobilizing short-term and long term capital, the cost of capital

comparing to the whole industry and the competition, the efficiency capital

allocation in general business and production of enterprise in each division,

the flexibility of capital structure, ability of liquidity, the situation of capital

flow etc

Page 15

e) The influence of organizational structure and enterprise culture

Enterprise organizational structure reflects the functional division of rights

and duties of each employee, department A compacted light, closed

organizational structure will help departments coordinating together in a

harmonious way, quick information, exploit and take advantage of all

ideas, not to ignore any opportunity

Environmental corporate culture: the concept of value qualities, rites,

rituals, the mirror model, business philosophy Environment healthy

corporate culture will create conditions to promote the development of

individuals, specially creating non-economic benefits for businesses That

is: there are many opportunities to select good labour force, creating the

trust, reputation with customers, with the input markets, especially labour

markets

1.4 The tools of strategy formulation and choice

Strategic choice is an important stage of the whole process of business and

development strategic planning To ensure the right strategic selection, in

line with the market as well as the capacity of enterprises, the process of

selecting business strategies for each specific period, to ensure some

specific requirements as follows: Firstly, guarantee the long-term

effectiveness of business process; Secondly, to ensure the strategic

continuity and succession; Thirdly, strategy must be comprehensive, clear;

orderliness; Fourthly, ensure the consistency and feasibility; Fifth, ensure

the implementation of priority objective

There are many models used for analysis and selection of business strategy

Here are some models for analysis and options of business strategy that

enterprises can apply

1.4.1 The matrix of external factor evaluation (EFE)

The EFE matrix estimates external factors, synthesize and summarize the

major opportunities and risks of external environment that affecting the

operation of enterprises Thereby, it helps business administrators can

estimate the level of response of enterprises to opportunities, risks and

generating judgments on the impact external factors that may be

advantages or difficulty for enterprises

Page 16

1.4.2 The matrix of internal factor evaluation (IFE)

Internal factors are considered very important in every business strategy

and objectives are set up by enterprises, after consideration of internal

factors, strategic managers need to establish a matrix of elements to

consider this response and recognize the advantages and disadvantages

Then, it helps enterprises of taking advantage of strengths maximally to

exploit and prepare domestic resources to confront the weaknesses and find

out how to improve this weakness

1.4.3 The matrix of competitive profile

Set this matrix to identify the comparative evaluations of company with the

major competitors in the industry, the comparison is based on the affecting

factors of company's competitiveness in the industry In which, the

managers can recognize the strengths and weaknesses of the company

comparing to competitors, identify competitive advantages for the company

and its weaknesses that should be overcome

1.4.4 The matrix of SWOT

Analysis the matrix of SWOT that helps enterprises to consider all the

opportunities those enterprises can take advantage And by understanding

the weaknesses of the enterprise in business, the enterprise will be able to

manage and eliminate risks that the enterprise is not aware yet Moreover,

by using a basis for comparison and SWOT analysis between enterprises

and the competitors, enterprises are able to craft a business strategy that

helps the enterprise differentiate enterprise with competitors, so that helps

enterprises to compete effectively in the market

The matrix of SWOT is an important tool to help strategists to develop the

four strategic groups as following:

 The strategy of strength - opportunities (SO): Using the internal

strengths of the company to take advantage of external opportunities

 The strategy of weaknesses - Opportunities (WO): Improving of

internal strengths - threats by taking advantage of external opportunities

Page 17

 The strategy of strengths - threats (ST): Take advantage of the

strengths of the business to avoid or reduce the impact of external threats

 The strategy of weaknesses - threats (WT): Defence of reducing the

weaknesses and avoid threats from the external environment

Table 1-2: The matrix of opportunities - threats / strengths -

weaknesses

* Strengths (S)

1 Relatively good finance

2 Abundant labor resources with low labor costs

3 Owning some modern techniques

* Weaknesses (W)

1 Non level management labour, low-skilled workers

2 Most equipment and technology are

strengths of the company

to take advantage of external opportunities

Improving of internal strengths - threats by taking advantage of external opportunities

1.4.5 The matrix of SPACE

The matrix of SPACE shows that a business should choose the following

strategy: attack, cautious, defence, or competition Those axes of the matrix

have the following meanings:

Page 18

FS

+3 +2 +1

0

-1 -2

-4

ES

Figure 1-2: Matrix of SPACE

- FS: (Financials Strengths) - financial strength of the business

- CA: (Competitive Advantage) - The competitive advantage of business

- ES: (Environment Stability) - The stability of the environment

- IS: (Internal Strengths) - The strength of the industry

Page 19

CHAPTER 2 ANALYSIS OF ACTUAL SITUATION AT PECC2

2.1 The formation and development of the company

2.1.1 The establishment and development of the company

In 1981, a team of engineers and workers of the Ministry of Energy were

mobilized in the South to survey, design and construct the Tri An

hydro-electric power, the first power project in the South after the unification day

of the country That is the origin of the Power Investigation Design

Company 2 (PIDC2) in July 1985 It is a unit under the Ministry of Energy

On 11/01/1999, the company was renamed Power Engineering Consulting

Company 2 (PECC2) Since 01/11/2007 the company has transformed into

the Power Engineering Consulting Joint Stock Company 2 (PECC2), in

which, the Vietnam Electricity (EVN) holds controlling shares

The shares of the company with the stock code PECC2 was officially listed

on the Hanoi Securities Transaction since 13/10/2009

The company's growth is closely tied to the success of dozens of power

projects Hundreds of the grid was put into operation, under construction

and preparing to start new projects: from Tri An to Thac Mo, Ham Thuan –

Da Mi, Dai Ninh, A Vuong, Buon Kuop, Srêpok 3, Dong Nai 3 – 4 - 5 The

Phu My Power Center, O Mon, Ca Mau, Nhon Trach, Vinh Tan, Duyen

Hai, Son My and Kien Luong ; 500kV North – South grids, Phu My -

Nha Be – Phu Lam, Son La – Hiep Hoa, Da Nang – Ha Tinh; Nha Be – O

Mon, Vinh Tan – Song May, 220kV underground cables Nha Be - Tao

Dan; 500kV electrical substations Phu My, Nha Be, Tan Dinh, O Mon;

220kV electrical substation in Cai Lay, GIS 220kV electrical substations in

Tao Dan, Hiep Binh Phuoc, etc

2.1.2 The functions and duties of the company

PECC2’S main businesses include surveying, design consulting,

consultancy of construction supervision and management of power

industrial and civil projects, manufacturing all kind of electric poles and

Page 20

steel structures for electrical and telecommunication industry; and

investment in building projects

The company does not only operate in the country of Vietnam but also in

other countries nearby such as: Cambodia, Laos, China, etc

2.1.3 Corporate Culture

2.1.3.1 PECC2 culture

PECC2 cultural patterns were formed since its early establishment and

have continued to be safeguarded and promoted to be taking a part of

creating the difference of PECC2 in comparison to other businesses

PECC2 is usually seen by its the dynamic spirit, the will and the

determination of facing difficulties and challenges, and the rising

aspirations It is also meantioned to have a high sense of responsibility in

the profession, professional working style, where the reliability of leaders

of the industry and customers to entrust the difficult tasks from the need of

development and integration

In the front of strong challenges on economic social development ,

professionalizing of business management, scientific - technological

progress and market competition, the intrinsic value of PECC2 cultural

patterns should be refined to maintain, at the same time to build, confirm

further the new value for the objective of sustainable development of the

company

The PECC2 cultural is including spiritual, material and knowledge values

of the group that impacts behaviour, attitudes, perceptions, beliefs in the

relationship between members of PECC2 and customers - Partners -

community The PECC2 cultural is promoted to contribute of boosting

working efficiency, working ability of group, leadership ability and growth

Each manager from unit level, department, centre, enterprise, company

should be model examples of ethics, responsibility at work and

implementation the company's culture

This cultural document of the Power Engineering Consulting Joint Stock

Company 2 announces the core values, ethical standards and PECC2

cultural commitments All for the objective of building a strong culture and

particular character of PECC2

Page 21

2.1.3.2 Slogan

“Intellectual solutions for sustainable success”

2.1.3.3 Strategy

Getting along with open-door policy and the diversification, investors

entering the electricity industry and beside the customers, there are the

units under EVN The company has been performing consulting services

for domestic and foreign investors

On the way of integration and industrialization and modernization of the

country, the company is fully aware of the difficulties and challenges ahead

and always setting the strategic mission that is always striving

continuously, updating technological knowledge, improving capacity that

arms to satisfying the highest requirements of customers of all products and

services that is offered by the company

2.1.3.4 Business philosophy

Providing to customers is not only products and services purely but also

the intellectual solutions to satisfy the timely increasing demand of

customers The trust of customer is the foundation of the company's

development Always understanding to meet the expectations of the

customers and consider the customers satisfaction is the objective in the

business and production operation of PECC2

Creating the added value is not only for the company itself but also for

community and customers Always put the interests of the company in the

interests of the community, the benefits of individuals in the interest of the

company The relationships with partners based on the principles of

cooperation, respect, mutual benefit

2.1.3.5 The core value

1 Quality - Efficiency - Profession

Ensuring the Quality and Efficiency is a top priority in all our products and

services, creating trust on the profession of PECC2

2 Intellectual - creative solutions

Page 22

The intellectual and working creative solutions are the basic characteristics

of the products and services of PECC2, contributing to the success and

sustainability of projects of the company itself

The positive change and finding better solutions are always encouraged in

PECC2 Thinking highly of the sensible spirit, initiative approach, learning

and effective application of scientific and technical achievements,

advanced business management

3 Being dedicated - honest

Each member of PECC2 has be dedicated, honest at work, with a sense of

responsibility, ready to bring all your strength and wisdom to solve the job

effectively, bringing satisfaction to customers and the common interests of

the community

4 The solidarity - cooperation

Manpower is the most valuable assets of the company Collective spirit of

solidarity, cooperation, sharing, respect is key to overcome all difficulties,

harmonious and sustainable development and sustainable of the company

PECC2 commits to cooperate with all member companies of EVN and all

other partners in a spirit of respect that is willing to share and grow

together for the advancement of society and enterprises

2.1.4 The vision and mission of the company

2.1.4.1 The vision

The Power Engineering Consulting Joint Stock Company 2 is a strong

brand of energy consultancy in the region, customers orientation, having

high quality human resources and modern management system, continuous

development in scale and field activity

2.1.4.2 The mission

 Providing service, products with its best and quality to customers,

that is suitable to regional and international standards

 Cooperating effectively with reliable partners, continuously

increasing the enterprise's value; interests of shareholders and income of workers etc

Page 23

 Always innovation the production and management processes,

modernization of technology to meet challenges in the timely increasing competitive environment

 Training, practicing, supplement and improving the capacity of

labour force, building a reasonable treatment system to maintain and develop human resources

 Protect and enhance the common benefits for the community and

society

2.2 The characteristics of power engineering consulting industry

2.2.1 The characteristics of products and services of power engineering

consulting

2.2.1.1 The products and services of power engineering consulting

When an idea of the power project existing, clients need consultants

implementing the project from the researched feasibility stage of a project

to the stage of preparing the drawings and details construction of a project

The specific periods will be depended on the characteristics of capital

resource and the nature project

In generally speaking, product of power engineering consulting is a series

designed schemes of power projects from an initial stage that is an idea

about the project, preliminary design and feasibility studies of projects etc,

to the last stage It is the detailed drawings for project construction

Besides, product and service of power engineering consulting is also

included warranty and customer care

Here is the typical process of producing a product of consulting service as

follows:

Got a Nominate

d Project Getting Order

Contract Signing

Equipment /

Material Catalogues /

Specification

Regulations / Standards / Legal Documents

Engineering Manuals / Handbooks / Instructions Engineering /

Design

Checking

OK Printing &

Delivery

Customer's Checking

OK End

Page 25

2.2.1.2 Characteristics of power construction consulting service

Power construction consulting service (hereinafter referred to as “service”)

have basic characteristics different from those of tangible products such as

intangibility, unstorability, inseparability from its origin and quality

instability

The service is sold or provided to customers before they can feel it’s real

benefits This makes customers feel risky when buying those services, thus

to buy a service or a product with accompanying service, customers should

be fully informed of what they will obtain during the whole process of

buying and using the service Thus, branding, communication and

advertising play a very important role to persuade customers to buy a

service

Service is basically non-specific, therefore it is easy to imitate This makes

competition become harsher and it is also a major challenge in service

marketing

A basic characteristic of service is its inseparability In most cases, the

service is produced and consumed at the same time and is only completed

with the completion of customer’s consumption If there is no customer,

there is no system for service creation

As the service is performed by various providers, at various time and

locations, with the intervention of customer in the creation of service, this

creates instability of service Therefore, it is difficult to pre-test the service

quality and this poses a challenge to management of service quality

2.2.2 Market characteristics

Power construction consulting is a sub-sector of power work construction

investment stage of power basic construction The consulting cost accounts

for 1% to 3.5% of the work value Therefore, attractiveness, profitability,

and growth potential are high However, the power consulting market is

demanding of consulting service quality

The power construction consulting market can be divided into the

following segments:

 Preparation of construction investment project and basic design;

 Preparation of technical design;

 Preparation of building drawings;

 Supervision

2.2.2.4 Based on geographical location of the project:

 Projects in the north;

 Projects in the central region;

 Projects in the south;

 Overseas projects

2.2.2.5 Based on customers:

Page 27

o Using state capital;

o Not using state capital

 Foreign customers

So we can see that the power construction consulting market has many

segments Companies can choose some segments as a base for its

manufacturing activities or if they have sufficient resources, they can cover

all segments

In terms of power construction consulting market in Vietnam, major

customers are major corporations such as Electricity of Vietnam, Vietnam

Coal and Mineral Industries Group, Petro Vietnam, Vietnam Machinery

Installation Corporation… Most of these customers have strong resources

and the government’s support, however, their working method is governed

by administrative procedures which usually slow down the implementation

time

2.2.3 Criteria for evaluation of a consulting company

Construction consulting companies in general and power construction

consulting companies in particular must duly comply with prevailing

standards in performance of tasks Consulting experts must be responsible

for the accuracy and appropriateness of their work

Consulting is usually rated basing on the following criteria:

 Consulting experience;

 Methodology;

 Human resources;

Each criterion is rated on a scale from 1 to 100 For example, Bank of

Japan estimates weights of Japan Bank for International Corporation

(JBIC) as follows:

Therefore, it can be said that human resource is very important in

consulting This criterion always has important weight in evaluation of

consulting This is the most important characteristics of construction

consulting sector in general and power construction consulting sector in

particular

2.3 Organization and business practices of PECC2

2.3.1 Characteristics of the organization structure

The company adopts vertical organization structure with organizational

diagram as follows:

Page 29

Figure 2-2: Organization Chart PECC2

(Source: www.pecc2.com)

CHIEF OPERATING OFFICER (COO) TRANSMISSION &

DISTRIBUTION PROJECTS

CHIEF OPERATING OFFICER (COO) THERMAL POWER PROJECTS

CHIEF OPERATING OFFICER (COO) INVESTMENT &

BUSINESS DEVELOPMENT

CHIEF OPERATING OFFICER (COO) HYDROPOWER PROJECTS

SUPERVISORY BOARD LABOR UNION

PARTY CELL

YOUTH UNION

CHIEF EXECUTIVE OFFICER

(CEO) BOARD OF DIRECTORS (BOD) MEETING OF SHAREHOLDERS

SOUTHERN

GENERAL INVESTIGATION

ENTERPRISE (SGIE)

ELECTRO- MECHANICAL ENTERPRISE (EME)

Engineering Technology Department

Civil Engineering Department Economic Planning Department Nuclear Power Engineering Department

THERMAL POWER ENGINEERING CENTER (TPEC)

Transmission Line Engineering Department

Administrative Department

Substation Engineering Department Civil Engineering Department Planning &

Cost Estimation Department

TRANSMISSION &

DISTRIBUTION ENGINEERING CENTER (TDEC)

Engineering Department 4

Engineering Department 2

Engineering Department 1

Hydro-Administrative &

Planning Department

Engineering Department 3

Hydro-Mechanical Equipment Department Telecom &

Electrical Equipment Dept

HYDROPOWER ENGINEERING CENTER (HPEC)

Water Energy Engineering Department Cost Estimation Department

Page 30

2.3.2 The process of production organization

The production process and quality control is implemented and complied

with ISO 9001 - 2008 standard

Some major characteristics of information processing and operation

decentralizing of the Company as follows

- Exchange and process information through the intranet of the company by the

management program, internal email system, internet, internal website and

internet, etc

- Organize coordination meetings and control the quality and progress for each

field and project

- Each department in the Company brings forward strategies and plans and then

submits them to strategic committee;

- Base on the plan of each department, the strategy committee choose and

submit to the Executive Committee (The General Director);

- The Management approves and submits them to the Board of Director for

consideration and strategy decision for the company

- Besides, the major production unit of the company including: 3 consultancy

centers of the hydroelectricity, thermoelectricity and electricity grids and 2

Investigation Enterprises and electromechanics are working under estimated

revenue structure

2.3.3 Financial features of the company

- Contract for the fixed costs of controlled production

- Develop financial plans in short, medium and long term to serve the business

plan which bases on profits maximizing, capital preservation and

development, solvency guarantee of the Company

- Develop internal control systems of accounting and financial management,

periodically check the compliance with financial accounting rules and

participate in inspection teams which are organized by the Company

- Company's capital structure is 100% equity

Page 31

2.3.4 Overview of the production plan

Annual plans of the Company are based on the actual situation of

production and business of the Company in prior years and the specific

market development of electricity sector is according to forecasts of the

authorities

In other words, the annual production and business plans of the Company

are established and based on statistical data on business results of the

previous years and the necessary capacity of EVN for the coming years

In most cases, PECC2 always plans business targets for next year at least

10% higher than achieved plan in the preceding year

2.3.5 Assessment of the plan implementation

October 2007, Power Engineering Consulting Company 2 officially

converted working model into Joint-Stock Company with the new name is

Power Engineering Consulting Joint Stock Company 2

Keep promoting the strengths of capabilities, PECC2 implemented and

built the planning very well In recent years, the Company's revenues are

steadily growing; plans of the next year are always build higher than the

previous year and achieved revenues are always in excess of the plan

This explains that the PECC2 always guarantee dividend rate is 20% per

year

Below are tables and graphs showing revenue growth in recent years

PECC2

Hydro-Thermal- power

Power Grid Survey

nical Total

Page 33

Figure 2-3: Chart of revenue in year 2009

Figure 2-4: Revenue from 2006 to 2009