Business strategy of Thac Mo Hydro Power Plant Joint Stock Company stage 2010-2020, vision 2025

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT BUSINESS STRATEGY OF THAC MO HYDRO POWER PLANT JOINT STOCK COMPANY STAGE 2010 - 20

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT

BUSINESS STRATEGY OF

THAC MO HYDRO POWER PLANT

JOINT STOCK COMPANY

STAGE 2010 - 2020, VISION 2025

Nguyen Thanh Phu Nguyen Van Thu Tran Le Minh Huynh Van Khanh

Class GaMBA01.D0109

HO CHI MINH 2010

Thac Mo hydro power plant

Without a strategy, an organization is like a ship without a rudder, going around

in circles It’s like a tramp; it has no place to go

JOEL ROSS AND MICHAEL KAMI

Theories and empirical data used in this capstone project report were collected by ourselves and quoted partly from English and Vietnamese references such as textbooks, journal papers, newspapers, internet and other materials Data used for analyses of Thac Mo were collected directly at Thac Mo Hydro power plant Joint- stock Company, data for the other competitive companies such as Can Don, Ham Thuan-Da Mi, Ba Ria were gathered from announcements stored in their websites Basing on these data and the approved research proposal, we have completed this capstone project report All the recommended business strategic solutions to Thac

Mo in this capstone project report are based not only on theories but also on our experiences and intuition Through this research, we have gained some valuable experiences in formulating a real strategy for a company

Galccd) Capstone project report GaMBA01.DI09-Group N0.6

In addition, we would like to give thanks to our tutors for supporting us enthusiastically, leaders of Thac Mo for valuable data and information

Finally, we would like to give special thanks to our employer and families for giving us time, financial aids and energy to accomplish the course

Please receive the deepest and the most sincere thanks from us

Authors Group 6 - Class GaMBA0I.DI09

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5 Academic and practical significanes “ca ẽ so 14

CHAPTER I:_ THEORETICAL BASIC 555522cccccccccsreree l6

1 Basic definition of business sfraf€gy - S2 1 2211121122211 trg 16

2 Classification of business sfraf€gy 2c S212 2221112211132 re 17

Huệ 0U UV VÌ HỘI sang seasebirotiibndbsuerdisslisddtesieslatlorkikavseisstbieslirsstokiik4suspilitExiAið 17

BA | UNEDWVWMHED WI seisee.sesnsiandodeesesasLnodioisasdibltsuecaaplEsusoslisegsosdiniteek l7 Bade, NI recesses ott nlnernind iin helenae rn tubes lines ess 18 Disses ` FUNÔLHDI| BUHNIUIEE eiensuisiokiieieniiiiioebrokesinesskrekskeesbatie 19 3 ẨWfWfØÏ1GIMNGBBBEBHIEHÍ WfGĐGSH s ŸŸ 2 ŸSBẰ-ŸiỶỶYii =eee 19 Ñ.i.( :, VMhkiqiplltiele(GUEHNHE u eaaaiiioiiianraindnndieieianaiiuy-e 20 3.1.2 ExXlerndlenviioimeitevilusfoH, 21 3.1.3 — Internal environment evaluafion ¿+ + +2 2z 2+ £zverrrzrerree ae 3.2, Husinessstrafesv fofmmiailion 23 3.3 _ Business strategy Implemenfation -5- +52 +Scs‡cxvsvcsxeses 24 đất — TPUSÌHSS SHHE6DV HRSEBSHNGHỦ ei cecnineoieeenooanndideandddeoaiea 24 3.5 _ Tools and experlences to select business strategy - 24 3.5.1 _ External factors evaluaflon mafrIX .: ccc c2 svsreerxes 24 3.5.2 _ Intemail factor evaluation matfrIX - i5 St sneierrrsrrrxee 26 3.5.3 _ Competitive profile matrix (CPM) 0 S1 22x22 2srrrsrrrrrses 27

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3.5.5, Strategic position and action evaluation matrix- SPACE 28 3.5.6 Internal-Extermal matrix 0 00 00cc ccc ccceecceecceeeceeeeseecsesteeeseensetees 30 3.5.7 Grand Strategy Matrix cece cece ceecessceeeeeeseeeeeecseeeeeeeeeseees at 3.5.8 | Quantitative strategic planning matrix (QSPMI 32 3.5.9 Experiences to choose busines strafegy 2222222 sse 34 CHAPTER Il: ANINTRODUCTION TO VIETNAM ELECTRICITY:

STATUS QUO AND DEVELOPMENT 35

N11 NsllaaaaẳaẳaẳaiiiiiẳiäáäẳắẳiẳiẳỎ.ẳđđá 35 I.I _ Vietnam power generating StruCfUTe ¿+ 2222 2223122211 E225c2zxxxs2 36 1.2 Electricity production ofFEVN from 01/2010 to 09/2010 38 I.3 — E]eCtTICIfV DFIC€ 2 2.0222 2111222112 2 1112k 38

131 —— ElsctrleiiyftleeinMtÌHH e« 38 1.3.2 _ Electricity price in developing counfrI€s -. 5 55555 2-<c+<ss2 39

2 Future development of electricify sources to 2020 55525 5<ss+52 4I Beh _ GB] [UCUHHRHSHESEsesssssenanenbtpabadrobsierabaasidetisssddiitsagyssdfSsagSiSZi30s4200351 4I 2.2, Electricity dđemend foreoastin2008-2025 4] 2.3 Electricifty sources development program -+s+s+s+sszxss+2 43 2.4 Hydro power developmert - - LG 2211222111221 11 12211128111 re 44 2.5 Coal fired thermal power development - ¿+55 + sssssxsssszvree 45 2-6 a8 IrbiiepOWerdEV€lopUIDE-e ee.eseessieesieeseiodeaaire 45

mí NƯỢIGHF DOWT [SVEIDTMIEW 46 2.8 Renewable energy resoures developmenI - ¿55c scc s2 46 CHAPTER Ill THAC MO JSC STRATEGY - 2222222221122 2E2Eexvs 47

l 5 ANTNTIRODUCTIION TOTHÁC MỌẶẶGC 47 1,, THOUNGỦOEEueseesesssnseninnnnddetrrreoibndkeorrrskoHiottkscisopiotbenagayolevabkeuSiaei 47 1.2 Foundation and development biography - 5522525225 s<s52 47 1.2.1 Company introducfIon 22+ 3223221232 22x xxx rreg 47 1.2.2 Foundation and development blography ¿52s ccsc cv 48 1.2.3 Organizational StruCfUr€ - - 2-2 2221222111211 111 11115112 se 49

UNIVERSITY

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1.2.4 Business flelds ẰẶ22 S222 Ằ 52 1.3 Business situation of Thac Mo hydro power JSC - 54

THÁC MO JSC STRATEGY FORMULATION TO 2020 57 2.1 Business missions and obJeCfIV€S - c1 2212221222212 22212 eres aT

2.2 _ External and internal environment analySIs 25 222cc S52 58 2.2.1 External environment anaÌySIS - 5-2 2c 2211211521121 set 58

2.2.3 Company business performance 2-22 2213221332112 122222xe2 69 2.2.4 — FiHaHiclalr€§OUfG c.eeceoenoieroenoriddiinnirosnaeierrrarsoese 70

2 — THỈẾNNHHUUHfETBSÓVGE ẰŸŸŸSb.iSee 7] m.ản6 ` PTNT FỮSOHTDEWE xeereseensreseersdinoordeeribrreserdsresrdinuesetkbebirddseebbvbbkeos 71 2.5 Business strategy 1OrmulatioMn, .cccscsaccesccxcsavawoseucssssscisnreeiesisvaeedinecersaseds 72 2.3.1 Exilernal factor evaluatign matix(EFE) T2 Aedes TETHAI [3 Cbðf ©evaluHoH'HHWÉEE seeeeeseeeeesedeeiineceansreedhiddrirtoryvi 73 2.3.3 — Competitive profilermatrx(CPMI) 74 2.3.4 Internal-Extertial facfors mátrix 76 2.3.5 SWOT matrix for Thac Mo JSC Scc s2 series 76

Tơ ` BI ri Tra s SacesLeh le yodieasaorEiiedskscesdlkeddLidteidliioddebtirdsEioeodicrkotkg 79

ch ,l, ' PB RfNITEEV HT ereeroadeioessaeatiesldelLsvkedanoprlerliidtS dt 81 2.3.8 | Matrix QSPM for Thac Mo JSC ecececeeceeceeeetteeeeeteenteeesens 82

24 - Company business sirafegy to 2020 86 ZAA, Gemeral strate tess ooccisccsnsiesasscnascssisseuakerssxeccastisecweusresimastiaesuvos 86

«= RET En ein dammepmnnainnn tel ins konnih niniaenml 86 2.5 Solutions to implementing company business strategy 87 2.3.1, HUY Resources MlanapetnenlL 87

i, - NHI EBEE ueereneeose=iedereeiremdkeeebedrsdienssskesiikeeppsdmeseet 9] 2.5.3 _ Financtal strategles c2 ee 91

Capstone project report GaMBAO1!.D109-Group NO0.6

2.5.4 Operations managemein c c2 c2 nhanh 92 2.5.5 Corporate CuÏ{UT© ò 2222222222122 1n ynyyn 93 2.0 Strategic communIicafion SVySfem c cc c2 12 22k sesssee 95 aad RiSk TIE(HEGITEHE ác So gen enieeiiadvinnaunesusnsiiueaneanse 96 2.6 CONCLUSION 2 000 re erse 96

PE A sss stats otcsmiithnsiihtgtaiily nein int tnmnblt 98

Fa Leet x scans eh se esa Ses A Roh PR NL Oe a a 107

FIGURE INDEX:

Figure I-lI: Comprehensive strategic management model . -ss- xxx ssx s2 19 Figure I-2: Strategy formulation proC©$S L2 21 2211122 122111 nye 20 Figure I-3: Porter”s Five-Forces mod©lL - + cv 1321111112151 5811 555515 nyen Za FIfHiIm bi NHÀ CC cceeosieeieiaiiiiLilkdLEekugLdeedekieosidsudeocecliSiekevoElEEerendgrieikao 29 EIPIIfE L: BC BE seoeniseeeesendennnudiesiuiurbtusbtiislttvirosieEpuoirrtixdtstrrbitevdlsortadeoriisblosens 30 Figure I-6 : The Penstock of Thac Mo hydro power plant - con se 30 Fligtre 1-7: Irterrial-Extorrral mafrix (THỊ sec x40 x6 x00 ereeesiee 31 Figure 1-8: Grand Strategy WSUS sssicsicsnasssictexasancansinernarananvnnseundvnsennnstavoanntsiaesasvedne 32 Figure I-9 : Inside of powerhouse of Thac Mo hydro power plant 34 Eipure H-1: Electricity productoni 2000-2009 , co eeieieeisee 36 Figure II-2: Viet Nam power generating structure by own€rS .+cccsc: 37 Figure II-3: Viet Nam power generating Structure by types a Figure I]-4: Electricity production growth rate 22c 212 32x xe esseexei 42 Figure HII-I: Thac Mo hydro power pÌant - c1 2122 221211121112 11x nà 48 Figure HI-2: Orpanizational stTuCfUf€ c con 24x 1sxe 49 Figure II-3: Electricity production 2000-2009 - (c2 2c 2212 xscvxssxks 69 Figure IH-4 : Matrix SPACE for Thác Mo JSC c các 80 Figure IH-5 : Overhaul in Thac Mo hydro power? .00.00.0cccccccccscceesccseeeeeeeeseeees 88 Figure 0-1 : Spillway of Thac Mo hydro pOW€T c2 2n reeeese 98 Figure 0-2 : Reservoir of Thac Mo hydro DOW€T s22 2121 stress 104

GRIGG UNIVERSITY Capstone project report GaMBA01.D109-Group N0.6

TABLE INDEX

Table II-I: External factor evaluation mafrIX c2 c1 2212113222222 2sx+2 25 Table [-2: Internal factor evaluation mmafTIX c2 2 1112252222222 crsxee 26 Table H-3: Competitive Profile mafrIx - - 22222232221 121 11 2521522555255 12x55 27

Table I-Š: QSPM mafrIX Ỏ 2 2522221111211 111211 111111120111 201 1110211122111 1 E2 1112 11 ng 33 Table III-1: Electricity consumption 1990-2009 ooo - Q2 2111211112511 1511 12x 35 Table HHI-2: average electricity sale price in 2007-2009 - 2222221222 c2 czzxs2 38 Table HI-3: Electricity price at poWer pÏanfs - - 52c S1 12112112212 rreerrrei 39 Table III-4: Electricity demand growth and maximum capacity of three regions 09281992) 0/09//Ý/A 54s: 0v.) nn` -.-®^"”.- 42 Table IH-ŠS: Electricity sources development program period 2010-2020 43 Table III-6: Pure coal mining quantity: basic case (PAI) -: 52c 2x <2 45 Table IV=1: Brusatess TIGNIS ss.cscscosnxccwaantnacaswnssncnsiuassensasnienasadsesstansasunedsebamineansenadansas 55 Table TY-2: Elecwietty production 1995-2008 cic nnncnecnnnnenenvnnsnansinaraedinndtiimenansndinbe 54

18016 1V HUSIH@WS TGIHIHNINEE csc ncn cenenirro seneawranechdininvetesderorcsduwenveriehworeseivnksterit 55 Table IV-4: Annual goods and services value .00 00ccccceeeccseeeseeccsssetesseeessees 56

TT EG I tc acces sic wl nce tne pln elidel eden bn n7 1ãBI€ TY -G:HleCtiieitV DIOdUGEOHEoeiaaaeseenaesiuasnroaiielnaderddsrsasbblsssbkisdzlzasgsssaSsi 68 Table TY-7- HusiHess perfotrtanog 2006 TUÌỔ .Ÿ ki iii-Ỷsee 69 Table IV-8: Disposable cash flow 2008-2010 - 2 22222222212 2tsrerrrerrei 70 The LÝ-2 Exiorripnl facbor evaliinitoi THỦ vua he kuniiindieioieoddaoioakassaosssrel 72

Hi LÍ": C/00 )00 TP NGẽẽ 6U 73 Table IV-I 1: Competitive Profile Matrix for Thac Mo JSC 75 Tabl[e TV-12: riermal actor matrix fur Thao Mo TSC co -niieo 76 Table IV-13 : Matrix SWOT -1 for Thác Mo JŠC LH eeieeekẰ 77 Table IV-14 : Matrix SWOT-2 for Thac Mo JSC ccecceceeccecceeeeeeceeeeeeeeeeneeees 78 Table IV-15 : Matrix SPAC3- Score table for Thac Mo JSC - 79 Table IV-16: Grand strategy matrix for Thac Mo JSC -.¿ 55-2222 x22ccxrrss 82

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Table 1V-17: Matrix QSPM for Thac Mo JSC o.oo ccecceccecceeceecceee ee eeeeteseeeeettes 84 Table [V-18 :Training and budget Schedule in 2010-2015 oo 89 Table 0-1: Revenue and cost of Thac Mo JSC 2008-2009 52: 2 2222 xsc2 98 Table 0-2: Revenue and cost of Thac Mo JSC 2010-2020 25222522252 <522 99 Table 0-3: DISPOSABLE CASH FLOW 2008-2009 0 22222222 ee 100 Table 0-4: DISPOSABLE CASH FLOW 2010-2020 0000 ooccc eee eeeetetteeneee 101 Table 0-5: Revenue and cost of services in 2008-2010 .5 2 2c scxcscccsee2 102 Table 0-6: Overhaul cost period 2008-2010 À - 2-11 12215 52251115211 182211 1221111221 xe+ 102 Table 0-7: Revenue and cost-Ba Ria JSC 2008-2009 20000 221 21225122122 103 Table 0-8: Revenue and cost-Can Don JSC 2008-2009: - 2 222cc s22 103 Table 0-9: Revenue and cost-Ham Thuan-DaNhim JSC 2008-2009, plan for 2010-

FN wei erond cpp cnetnseraceiaecemsam ry tinmnanidmgnpcnanecsneentiderrasand-vaedederasatnrt crap iailmerestematihny esr 104 Table 0-10 : Electricity prices for industry in OECD countries - 105 Table 0-11 : Electricity prices for households in OECD countrles 106

Griccs) Capstone project report GaMBAO1!.D109-Group N0.6

From the very first days, a huge investment and national energetic security in most countries have made the production and trading of power a natural monopoly

Vietnam’s power sector from production, transmission and distribution, with no

exception, are within the control of the country for a long time

In the early stages of development, the Electricity Corporation of Vietnam (EVN) has successfully completed its mission as a representative of monopoly in power sector From the small grid and power scattered in different locals, Vietnam power system is connected into the unified national grid through the construction of 500kV

transmission lines, which are associated with the power scales like Tri An, Yaly,

Pha Lai, Hoa Binh, Phu My However, with continuously high growth of Vietnam’s economy and the annual electricity demand growth of 15-20% per year,

it is essential to build more large power plant s with total capacity of over 2000MW per year with suitable synchronous transmission systems Despite of the assistance

of national petroleum corporation of Vietnam (EVN) and Securities Group of Vietnam Coal (TKV), EVN could not ensure electricity supply for the economy Vietnam The electricity prices, which are controlled by the Government to keep out

of inflation, have not stimulated investment in electricity generation process Under these circumstances, Vietnam government has decided to restructure the electricity industry and market-oriented electricity sector with the schedule of three levels To sustain and develop in this competitive environment, the power companies need to determine their business strategy in the coming years

Griccd) Capstone project report GaMBAO1!.D109-Group NO.6

Thac Mo hydro power joint stock company was established on the basis of stocking

Thac Mo Hydro power Company, with a Vietnamese trade name: CONG TY CO

PHAN THUY DIEN THAC MG The company officially works with ancient forms

from 01/01/2008, for stakes of EVN To survive and develop in the present trend,

this joint stock company needs to build appropriate business strategy based on its advantages

From the demands of the allegation, we have chosen "Thac Mo Hydro power Joint- stock Company: Business strategies to 2020" as our topic for graduate assignment

2 RESEARCH OBJECTIVES

Research objectives are

- Assess Vietnam’s macro-economic development, government policy on electricity generation business as well as power competitive environment

in Vietnam and other competitors to identify opportunities and connections threatening

- Make a general assessment on business activities of Thac Mo Hydropower JS Company and resources from the within to help us identify its strengths and weaknesses

- Propose suitable business strategies for Thac Mo hydropower JS Company based on internal strengths/weakness and external opportunities/threats, and also construct different solutions to support the implementation of effective business strategies outlined

The company’s principal lines of business: Produce and trade electricity, invest in building power projects and implement the national grid (vital mission of the Thac

Mo hydro power JSC) However, the subject is limited to the scope of research

on the production and trading of the Company on the basis of comparison with competitors

Capstone project report GaMBAO!.D109-Group N0.6

- Primary information: The construction of matrix strategic choices was made

by expert methods to identify the environmental factors inside and outside, which affected business activities of enterprises, and to determine the importance of these factors

While this method is simple to make, its disadvantage is that stem from the

subjective assessment should be limited to the level of precision However, the

opinions from leading, practical experience experts that I invited to comment in this capstone project report is more than enough to build a good business strategy

5 ACADEMIC AND PRACTICAL SIGNIFICANES

Academic significance:

In market economies, business strategy is crucial to the success or failure of one’s business To survive and sustainably develop, one enterprise needs a good business strategy and performance

There are many approaches to build a business strategy for any business This is a significant academic theory that has been synthesized from various sources to build

a business strategy in a most basic, easy to understand and to use

Practical significance:

Thac Mo Hydro power Joint Stock Company is now operating under JSC model This topic will analyze strengths and weaknesses of this company to identify the core competencies which could create competitive advantage for companies, as well

Griccd) Capstone project report GaMBAO!.D109-Group N0.6

¬ Capstone project report GaMBA01.D109-Group N0.6

The concept “strategy” appeared very early from researches on historical wars The earliest definition of strategy was belonging to Greek Historian Xenophon in sixth century BC In this time, Sun Tzu, a Chinese military theorist also wrote “The Art

of War” which analyzed military strategies

Till the middle of twentieth century, researches and development of business strategy did actually start to occur From scholars such as Drucker, Chandler, Ansoff, Andrew studied the successes of American economic corporations before

and within World War II, to nowadays managers, economists such as Michael E Porter, Fred R David, Rudolf Grunig, Richard Kuhn there have been many

different approaches to business strategy These are some of them:

“The determination of the basic long-term goals and objectives of an enterprise and the adoption of the course of action and the allocation of resources necessary for carrying out these goals”.- Chandler (1962)

- Strategy is a mediating force between the orginization and_ its environment: consistent patterns of streams of organizational decisions to deal with the environment (Mintzberg, 1979)

- Strategy is a framework or plan to integrate main objectives, policies and sequences of actions into a strong and robust combination - Quinn (1980)

- Strategy is about being different It means deliberately choosing a different set of activities to deliver a unique mix of value - Michael E

Capstone project report GaMBAO!.D109-Group N0O.6

Although there have been many different approaches and definitions, a business strategy consists of the following contents:

- Identifying basic long-term objectives of company

- Establishing general action programs

- Choosing courses of action, deploying and allocating resources to achieve those objectives

There are many different types of strategies within a company, depends on level, approaches business strategy can be divided by two categories:

2.1 STRATEGY LEVEL

According to level, a company has at least three levels of strategy:

- Corporate strategies: Strategies towards general purposes and extent of the organization

- Business level: Relating to sucessful competitive methods on specific markets

- Functional strategies: Strategies which help corporate and business strategies implemented effectively by components built on resources, human process and necessary skills

In a highly competitive and globalized environment, borders between nations were almost abolished; as a result there was a fourth level of strategy called global strategy

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According to Michael E Porter, there are three general competitive strategies at business level:

- Cost leadership strategies (the best and lowest price)

- Differentiation strategies

- Focus strategies

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2.2.3 FUNCTIONAL STRATEGIES

Functional strategies are strategies of functional units such as marketing, finance,

human resource, etc These strategies help to enhance operational efficiency of company and support to business and corporate strategies implemented effectively

Strategic management process consists of three stages:

- Strategy formulation stage

- Strategy implementation stage

- Strategy evaluation stage

Figure I-1: Comprehensive strategic management model

Grigcd) Capstone project report GaMBAQO!.D109-Group N0.6

strategic objectives; analyzing external factors to identify opportunities and threats; analyzing internal factors to recognize the strengths and weaknesses of company; basing on these previous information, company identify business objectives and establishes long-term objectives and chooses strategies to implement Strategy implementation stage consists in allocating resources to set up annual objectives and policies The final stage is strategy measurement and evaluation

Strategy formulation process

According to Fred R David, strategy formulation process consists of three stages:

Figure [-2: Strategy formulation process

External factor Competitive profile matrix Internal factor

(EFE)

Phase 2: Combination

weaknesses, position and consulting external Strategy opportunities and = action evaluation group matrix matrix(IE) matrix threats matrix matrix (SPACE) (BCG)

This is the first stage of strategic management process, mission and basic objectives

of company provide a cirumstance to build up strategies A mission presents reasons for the existence of company and points out what will company do Each company has a specific mission

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Basic objectives of company identify what company expect to meet in medium and long term; target which company will develop to They are the first and the most important foundation to formulate business strategy Mission of company is a general concept, objectives break it down into details

Objectives are built on the foundation of mission; external and internal factors of company Objectives must be appropriate to objective and subjective conditions

Purposes of external environment evaluation are to develop a limited list of opportunities that will benefit to company and threats that company should avoid to mitigate negative impacts from external environment There are many different external evironmental factors (macro and micro), external environment evaluation just covers factors that have impacts on company

Macro environment include:

- Economic environment,

- Political and legal environment,

- Social and cultural environment,

- Demographic and geographical environment,

- Technological environment,

- Global environment

Micro environment is competitive environment or the so-called industrial environment, is the environment affect directly to company, most of operational and competitive activities of company take place in this exvironment

Michael E Porter, Professor of business strategy, Harvard University created Five-

forces model illustrated in figure I-3:

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Figure I-3: Porter’s Five-Forces model

Threat

of New Entrants :

Bargaining Among | Bargaining

Suppliers Competitors Buyers

+

Threat of Substitute Products or Services

Source: Five Competitive Forces That Shape Strategy- Michael E Porter

In each company, there are always different strongs and weaknesses at business units Internal strongs and weaknesses in associate with external opportunities and threats, and companion with mission statement are foundations to formulate objectives and strategies of company

Internal environmental factors:

( IRIGG Capstone project report GaMBAO1.D109-Group N0.6

hen

Marketing:

Marketing is described as a process of identification, forecast, establish and satisfy consumer’s demand to goods and services Marketing management include: Market development research; target market selection; distributional channels system; after-

sale services,

Personnel:

Human resources play a critical role to corporate performance Despite a right strategy, it can’t bring anything to company without effective workers Human resources include: human resoureces organizational structure, human resoureces quality, maintain and development policies

Operations management:

Include all the activities in order to bring inputs to goods and services of company Operations management process consists of: Production procedure design,

technological production line selection, production scale, production position, area;

product quality, services, manufactured price

Basing on corporate objectives; external environmental factors and _ internal circumstance, to formulate business strategy with the following components:

- Identifying and selecting opportunities which could help company obtain business objectives

- Selecting target markets

- Selecting goods and services for target markets

- Building and analyzing strategy matrix to choose appropriate strategies

- Building up marketing-mix strategy for selected goods and services market: Product strategy, price strategy, distribution — strategy, advertisement strategy

Capstone project report GaMBAO|] 1D109-Group NO.6

In order to implement effectively formulated business strategies, company must have solutions to operations management, business management; human resources, finance to carry out these strategies That is, organizing and allocating corporate resources to implement sucessfully selected business strategies, 1.e.:

- Organizing an appropriate organizational structure

- Allocating properly, maintaining and develop human resources

- Allocating financial resources

- Building up operations management model scientifically and effectively

- Bulding corporate culture matching with selected strategies

- Building strategic communication system, PR etc

Evaluating whether a business strategy effective or not is very important A business strategy is effective when that strategy fits to real circumstances of company and socio-economic status around it; and utilize as much as possible opportunities to obtain proposed objectives Business strategy evaluation include the following steps:

- Examining and testing effecitiveness and fitness of business strategies before put in operation

- Evaluating operational and business performance of company period by period

of strategy inplementation process in order to detect mistakes, disadvantages

of strategy and creating timely regulations, repairments and supplements

STRATEGY

Estabishing a Matrix assesing External factors will help us to summarise and quantify influences of external environment factors on businesses, it affects

Assesing the importance level of each factor by classifying factors from | to 4; namely: level 4 means the company has the best reaction; level 3 is above average;

2 is average and | is the least Those levels depend on the effects of business strategy

The next step is determining weighted score of each factor by multiplying the the weight of factor with the corresponding rating Then, add sum of weighted scores with each variable to determine the total weighted score for a business; the highest

is 4 and the least is 1 and average is 2,5 point

The total weighted score is 4 revealling that the company is taking advantage of external opportunities and controlling very well or minimizing external threats to the company

The total weighted score is | revealling that the company doesn’t seize the opportunities and minimize external threats

Table I-1: External factor evaluation matrix

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——— een RA seb Asa 6 SSR ry oR ae ELT REE re Es SERRE —

Source: Strategic management concept-Edition 12, Fred E David

Building internal factor Matrix will help us to summarize and asses the important strengths and weaknesses of function business department, it affects manufacturing and business operation of businesses

To build a Matrix we manage to set a list including all of the external factors affecting operation of a business as mentioned in internal business assesment part Assesing the importance level of each factor by scoring weights; sum of scoring weights of all factors equals 1 Classification reveals the corresponding importance

of those factors in business success

Assesing the importance level of each factor by classifying factors from 1 to 4; namely: level 4 means the company has the best reaction; level 3 is above average;

2 is average and | is the least Those levels depend on the effects of business strategy

The next step is determining weighted score for each factor by multiplying the weight of factor with the corresponding rating Then, add sum of weighted scores with each variable to determine the total weighted score for a business; the highest

is 4 and the least is 1 and average is 2,5 point

The total weighted score is 4 revealling that the company is having strengths; and can overcome weaknesses On the contrary, the total weighted score is | revealling that the company doesn’t have strengths and has too many weakness to overcome

Table I-2: Internal factor evaluation matrix

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Source: Strategic management concept-Edition 12, Fred E David

3.5.3 COMPETITIVE PROFILE MATRIX (CPM)

Building competitive matrix help companies to identify rivals, pros and cons which help companies to have appropriate business strategy

This matrix including all of the internal and external factors of businesses plays an important role in the business success In the competitive image matrix, the competitors are also considered and calculate the weighted scores After that, we compare the total weighted scores of those companies with the prototype competitors Thereby, we will have a lot of information to build business strategy Table I-3: Competitive Profile matrix

Weight Sample company Competitor 1 Competitor

Rating Weighted Rating Weighted Rating Weighted

( IRIGGS Capstone project report GaMBAO0I 1)109-Group NO.6

de

Table [-4: SWOT matrix

j

| |

Strategy ST Xin

Strategy SỐ”

STRONG (S) Promote internal strengths to Promote internal strengths

take Opportunities advantage of to avoid external Threats |

| WEAK (W) Overcome internal Weaknesses Overcome internal |

to take advantage of Weaknesses to avoid

Capstone project report GaMBAO!.D109-Group NO.6

earlier in the firm’s EFE and IFE matrix shall be considered in developing Matrix SPACE Steps to develop a SPACE matrix:

Step 1: Choosing a group of variables represent for FS, CA, IS and ES

Step 2: Assessing from +1 to +6 for variables of FS IS and from -1! to -6 for variables of ES CA, which are worst and best respectively Basing on FS and CA to make comparision with competitors, ES and IS to make comparision with other industries

Step 3: Take average score for FS,CA, IS and ES

Step 4: Plot these score into SPACE matrix

Step 5: Plus two average value on horizontal and plot this number on horizontal axis Similarly for vertical axis With these two number, we have a new point on the matrix

Step 6: Connect original point to this new point we will have a vector, this vector present the strategy of the evaluated company

Figure I-4: Matrix SPACE

Market development ia Market penetration

Product development 43 Market development

Related diversification +2 Product development

+1 Diversification (related or unrelated )

CA 6 s8 A BB at 1 +1 42 +3 +4 +§S +6 IS

-3

Retrenchment A Backward, forward, horizontal integration

Divestiture -5 Market penetration

Conservative -6 Market development

Liquidation " ES Product development

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Irce: Strategic management concept-Edition 12, Fred E David

Where: FS (financial strength), CA (competitive advantage), IS (industrial strengths) and ES (environmental stableness)

IE matrix analysis is to put every parts of company in the below figure:

IE xay matrix is built upon two main factors:

- Total weighted score of IFE

- Total weighted score of EFE

The value of the matrix:

Capstone project report GaMBAO!.D109-Group NO.6

Figure I-6: Internal-External matrix (IE)

Total weighted score IFE

Strong = Average = Weak

- Hold and maintain (area Ill, V, VID): Appropriate strategies are access new market and develop new product

- Harvest or devest (area VI, VIII, IX): cut, liquidate and abolish

ineffective units

Grand strategy matrix is used to set up feasible strategies All organizations and theirs units can lie in four parts of the matrix This matrix bases on two assessment criteria: Competitive position and market growth rate Appropriate strategies for company are listed according to their attractiveness

GRIGG Capstone project report GaMBAO1.D109-Group NO.6

position

Retrenchment Related Diversification Related Diversification Unrelated Diversification Unrelated Diversification Joint venture

Horizontal Diversification Devestiture

Liquidation

Weak market growth Source: Strategic management concept-Edition 12, Fred E David

QSPM is used to rank strategies to find the best strategies for company This matrix

use all the information from: IFE, EFE, SWOT

To develop a QSPM, there are 6 steps:

Step 1: List strengths and weaknesses (at least 10 factors) and opportunities and threats (at least 10 factors), these factors should be taken from IFE and EFE

Step 2: Assign Weight for these factor, as did in EFE and IFE matrix

Step 3: Identify a set of alternative strategies, organize them into specific groups Step 4: Set attractive score (AS), quantify attractiveness of each alternative strategy This score depends on the impacts that strategy have on the above internal and

Step 5: Count total attractive score (TAS) Plus weighted scores with equivalent

AS High TAS, high attractiveness of the strategy

Step 6: Summarize total attractive score for each strategy This score show the attractiveness of each strategy

Table I-5: QSPM matrix

Weight Strategy 1 Strategy 2 Strategy 3

AS TAS AS TAS AS TAS

Economic, political, social,

Griccs) Capstone project report GaMBA01.DI09-Group N0.6

3.5.9 EXPERIENCES TO CHOOSE BUSINES STRATEGY

It is not simple to build up a strategy for a company because it depends on many

factors in past, present and future; furthermore, it also depends on sector, business

fields There are some experiences in formulating a business strategy:

- Firstly, we need to have an appropriate process

- Business objectives must be suitable with company’s circumstance and external environment

- Collecting and analyzing information to find out strengths to enhance and weaknesses to improve

- Evaluating opportunites and threats on the market

- Focus on the most effective strategies of company and ensure the unity between implementing activities

Figure I-8 : Inside of powerhouse of Thac Mo hydro power plant

ELECTRICITY: STATUS QUO AND DEVELOPMENT

The 500KV ultra-high-voltage transmission lines, which was operated in 1994, has linked a power system in North, Central and Southern of Vietnam to form a electrical system Since 1996, the renewal economics reform of Vietnam

Government has led the continuously growing of the economy over many years Along with its growth, electricity demand is also developed at high speed

Table U-1: Electricity consumption 1990-2009

: he Weight | Age = Weight oe Weight Services | Weght ee - Perpason Loss

(Gah) (4 GAH (4 (*) (GMh) (*) (Gh) ne (*) 0B ) %

1991 | 300 48 , 86 122 | #2 | 3 65 % Œ 64 7 25 1l | 3g | %d | Ø5 | tA | 238 | 31 a mf Bl 53 10 Z6

| 2008 152902 +48 3618 16 139633, 47 31014 a9 349067 155 452 127

Capstone project report GaMBA01.D109-Group N0.6

Source: EVN source and Master Plan VI

The consumption of electricity in 1990 — 2008 has shown that power consumption

in 2009 was 12 times higher than in 1990, with an anually average growth rate of

14 The 2000 — 2009 growth rate of average load demand was about 12.8%

Figure II-1: Electricity production 2000-2009

Until July 2010, total available power of the plant s in Viet Nam was just 18.400MW, largely lower than master diagram VI which has been approved was 21.062MW Because of the late in process of the important electricity sources such

Chapter IT: An introduction to VietNam power industry Page 36 of 107

G L apstone )FOICC{ report GaMBAO!.D109-Gi1 up NŨ.6 Griccd)

as Hai Phong thermal-electricity, Quang Ninh, Mao Khe, Dong Nai 3 hydro power plant

Figure [1-2: Viet Nam power generating structure by owners

GRIGG Capstone project report GaMBAO!.D109-Group N0.6

1.3 ELECTRICITY PRICE

1.3.1 ELECTRICITY PRICE IN VIET NAM

Current retail price of electricity sold to consumers remains the Government's price controls, this make negative affects in the negotiation of electricity sale price between electrictity producer and EVN

According to EVN report, average electricity price saling to consumers in 2007-

The following are some electricity price that EVN buy from power plants:

Chapter II: An introduction to VietNam power industry Page 38 of 107

Grice) ipstone project report GaMBAO1.D109-Group N0.6

Table II-3: Electricity price at power plants

Average price |

NO Name of Power plant Price unit (VND/Kwh;

USD/Kwh)

L 4 Formusa Thermal Power USD 0.090

ES 5 Hiep Phuoc Thermal Power USD 0.186

13 Hydropower Se San 3A ; VND 496

14 Hydropower Srok Phu Mieng VND 620

22 O Mon 1 Thermal Power VND 3.687

24 Ninh Binh Thermal Power VND 929

27 Vinh Son — Song Hinh Hydropower VND 428

28 Ham Thuan- Dami Hydropower VND 251

30 Uong Bi Thermal Power VND 754,6

31 Can Tho Thermal Power VND 5.328

32 Thu Duc Thermal Power VND 4.177

34 Hai Phong Thermal Power VND 385

35 Quang Ninh Thermal Power VND 462

13.2 ELECTRICITY PRICE IN DEVELOPING COUNTRIES

OECD:

GRIGG Capstone project report GaMBAO1!.D109-Group NO.6

UNIVERSITY

As attached in APPENDIX, electric price in developed and developing countries and countries in OECD in 2008-2009 is so higher than in Viet Nam

Average electricity price for industry: 0,133 USD/kwh

Average electricity price for household: 0,199 USD/kwh

Metropolitan ectricity Authority (MEA) 2.503 2.478 1.01

Provincial Electricity Authority (PEA) 2.510 2522 (0.48)

Standby power supply 4.15 2.498 69.53

Other minor customers 1,587 1.721 (7.79)

Jverall Average Sales Price 2.508 2.508

Source: EGAT REPORT-2009

In comparison of Viet nam electric sales price of 0,0485 USD with sales price of ).0845USD in Thailand and OECD, we realized that electricity sales price in Viet Nam is still so low and not exactly reflect production cost According to recent Feasibility study for import coal fired thermal power plants such as Long Phu 1, Song Hau, electricity sales prices have to be over 0,07 USD/kwh

Thus, once reaching competive electricity market in Viet Nam, it is necessary to put power plants having high production cost suc as coal fired , electricity sale price will at least approach to Thailand level

Chapter II: An introduction to VietNam power industry Page 40 of 107

Ratification of national planning for electricity power development period

2006 -2015 with due consideration till 2025 — Decision No 110/2007/QD - TTg

Announcement No 106/TB-VPCP on 04/28/2010 about Conclusions of Deputy Prime Minister Hoang Trung Hai at the State Steering Committee meeting for the Electricity Planning VI

The across country electricity system connection planning for thermal power centers version 04/2009 by the Energy Institute

Statement to Prime Minister No 4011/BCT-NL of the Ministry of Industry and Trade on 05/5/2009 on electricity centers connection planning to the national electricity system

ELECTRICITY DEMAND FORECAST IN 2008-2025

Based on a legal basis has been presented, the load demand plan during the period

2010 - 2015 annual average growth of 17% per year (basic case)