Development of strategic orientation for Power Company No. 3 during the period 2010-2020

Therefore, building up a right business strategy is of very importance, it also helps to create a strong competitive advantage for the company.. * Subject of the research: Issues relatin

Mr Tran Ngoc Chau

Mr Nguyen Duc Hung

Mr Vu Ngoc Minh

Mr Huynh Tan Thanh

Mr Dinh Chau Hieu Thien

eee

Class GeMBA01.E03

HANOI, JAN 2010

ACKNOWLEDGEMENT

We would like to express our gratitude to all the lecturers of Griggs University and Hanoi National University who gave us the valuable knowledge in business administration to conduct this capstone project We would like to thank Power company N°3, all PC3’s Staff and Departments for giving us necessary information, providing business data and giving us the chance to make a survey on the company’s activities which are foundation for our project

The capstone project report is by no means a perfect paper on the issues discussed here Due to limited time and knowledge, inappropriateness is unavoidable We would highly appreciate any comments from our professors,

colleagues and readers

Thank you very much

Group No 6

J = N@GESSIEY Of HE TOSCOP AN TOPICS s o ca inii.ca1814612.535ãsãg)58883<5351 48% 4ã 2885 158800088.1045588 1

ái m BI GIIv: ĐÔ BH UDT grnnnusnniinrootiittoiPIEEDNERIGGSUNDDNEENGSESIGDISSEOINGHGSIRGUVNGSSTEHHNSE-ESTPSDĐUESSSIEUDSED 2

3 - Main confeHfs Oƒ tÍh€ F€jDOFFÍL - - << <5 1 x99 Vi ng 3

dd = THEORETICAL BACKGROUND sswss cass sornapsnes seamarecenaa nas aeasan asus sarees seats 4

oh ok = ERENT RERHEDEW SueeriririnrentruirrstogtiidtdiiiottotiotdtsitGNEEENSIGIETNEVRNIESUISNDUIEHHIEEERSUDTGIEONGIEEGDSSUEEEGE 4 1.1.2 - Building up business strategy and the procedure of building up 10 1.1.3 - Procedure for building up business strat€g1€S: - 5 «s22 12

2.1.2 - CURRENT ORGANIZATIONAL STRUCTURE OF PC 3: 26 Zoto= PCS SCOPE OF ACTIV TIES: evcnconmasdgeeresercammeusaemamceenerans 29 2.1.4 - PROPERTIES, LABORS MANAGED BY THE COMPANY 30 2.1.5 - PRODUCTION AND BUSINESS RESULTS FROM 1995 - 2009: 33 2.1.6 - GENERAL EVALUATION OF BUSINESS ACTIVITIES OF PC3 IN

2.2 - ANALYSIS ON ENVIRONMENTAL INFLUENCES ON BUSINESS ACTIVITIES

EP Fe sitesi nee ni deưcc<edindgcohdo.ư2-T.-G20000TD07302-01ET87700007071171037177020721040170070017-Z8Ầ6rprrssierrrroe 42

Qidel = PUBS) Analy SiS! sss cassnssssncsnmessscarsescascnscsawanascascnase naswiseen cunanereammeacanas 42 2.2.2 - Porter’s Five - forces anaÌÏyS1S: - - - 5 2< S1 91 1 21 ng ng, 46

2u * TEE Wat NG sss cca snenassssancasvecs csnsnes sans ssaesceavianssaantssasaccswas amessannaveneeaasunnaaen 50

2.2.5 - S.W.O.T analysis: nh 52

3.1 - Vision and strategic objectives oƒ the Power COINIDđW 3: .-‹ «+ <<«: 61

SP A2) an 66 3.1.3 - Organization and Management Structure of the Parent Company -

OG) geă ceninainogrrorotiogititoiibiTD1010180000G1000101010380880G8H8000030Á380/.800/960001-0100009/0520050858101 67 3.1.4 - Fundamental functions and responsibilities of Parent Company -

Central Region Power COTPOrAfiOII: . - 6 nen ngư 68

3.1.6 - Organization and management structure of branch offices under the

Parent Company: - - - «ch HH cv 73 3.1.7 - Operation Mechanism of the Central Region Power Corporation 77 3.2 - Development of strategic orientations ƒor PC3 during 2010 - 2020: 82 3.3 - Basic solutions for implementation of PC3’s business strategy during 2010 -

3.4 - Recommendafions ƒor PC 3 iÍS€ [ƒ: - << sọ ng re 87

VN (200) /,//027(/9 000) Ầ 90

ABBREVIATIONS

EFE : External Factor Evaluation

EVN : Electricity of Vietnam Corporation

IFE : Internal Factor Evaluation

PEST : Politic - Economic - Socio - Technology

R&D : Research and development

SWOT : Strengths - Weakness - Opportunities - Threats

VND : Vietnamese dong

= ft:

LIST OF TABLES

Table 1.1 = External factors evelustion Matrix (ERE) sscssssicssasessssnsomasancarmeceneavacess 16 Table 1.2= Internal factors evaluation Matrix (FE) ssacsscscasccnemasssarsemcanmssonnsccciemanas 19 Table 2.1 - Fixed properties managed by Power Company 3 - «-<«- 31

Table 2.2 - Working capitals, actual value of Power Company 3 .- 32

Table 2.3 - PC3”s current situation of land using and workshops -.- 32

Table 2.4 - Human resources conditions of Power Company No.3 - 33

Table 2.5 - Electricity commercial activities of PC3 (1995 - 2009) ~«« 34

Table 2.6 - Telecommunications and IT business of PC3 (2006 - 2009) 34 Table 2.7 - FIve - force analysis model of Porter of PC2 . «<< «<< <<s+ 49 Table 2.8 - Internal factors evaluation Matrix (IFE) of PC . - «+5 50 Table 2.9 - External factors eveluation Matrix (EFE) of PC2 «<< << 51 Table 2.10 - SWOTT analysis of PC2 - Q1 ng ng ngàn 60

LIST OF FIGURES AND GRAPHS

Figure 1.1 - D.Abell’s Three - dimensional Framework 13 Figure 1.2 - M.Porter’s Five Forces framework 15 Figure 1.3 - Business strategy controlling model 22 Figure 2.1 - Current organization structure of PC 3 Zi Graph 2.2 - Graph for customer growth (households) of PC3 (1995 - 2009) 35 Graph 2.3 - Graph for commercial electricity growth (1995 - 2009) of PC3 a5 Graph 2.4 - Graph for Revenue growth (10? VND) of PC3 (1995 - 2009) 36 Graph 2.5 - Graph for portion of electricity consumed by power transmission activities

Graph 2.6 - Electricity retail sales (10°kWh) growth of PC3 (2004 - 2009) 37 Graph 2.7 - Ratio of electricity retails sale (%) of PC3 (2004 - 2009) 37

Figure 3.1 - Organization structure of Central Region Power Corporation 70

Gs6o3

PREFACE

1 - Necessity of the research topic:

Vietnam economy after the integration period has witnessed a great deal of positive changes From a Planned Economy which is inflexible, passive and lacks of the linkage between producers’ interest and consumers’ interest, Vietnam has shifted towards a market economy with the Government’s orientation Production grows, electricity consumption grows accordingly because almost all socio- economic activities need electricity Because of that advantage, there raise some issues in the organizational system of the electricity industry Are changes in business strategies necessary while there is only one supplier in the industry and the supply is always lower the demand? In addition, due to limitations of the old economic system, the supplying of electricity in Vietnam is monopolized by the

electricity industry in general and EVN in particular This leads to non-market

oriented way of thinking in many staffs within the industry

However, after Vietnam joined in WTO, according to Vietnam’s

commitment, economic activities monopolized by the Government must be

socialized and more than that, the Government have to be more open, creating a fair

playground for all the domestic and foreign forces Like tele-communication, finance, banking, insurance , the electricity industry is opening doors to welcome investors so that both domestic and foreign companies can produce and sell the electricity energy When the market is formed and goes into operation, the Government only control the main transmission gridline, the other activities are outsourced to any competent company To catch up with this trend, local large corporations in Vietnam like PetroVietnam, Song Da Corporation, Vinashin , started to produce and deliver electricity In addition, a lot of small companies also

invested money in generating electricity and then sell it to EVN or deliver it to

question is how to make good profit while meeting the whole national demand for

electricity and also how to compete successfully with other competitors?

The importance of business strategy has been recognized in real business operation A business will thrive and succeed with a right business strategy and a good vision On the contrary, without good strategy and vision, a business may suffer ineffectiveness or go into bankruptcy Therefore, building up a right business strategy is of very importance, it also helps to create a strong competitive advantage for the company

Originated from the real necessity, we have decided to conduct the research on:

“Development of Strategic Orientations for Power Company No.3 during the

end-users in the areas that the company is in charge of and also to other Power

companies in EVN Because of the industry’s history, the company’s operating area

is fixed in provinces and cities in the Central Region of Vietnam and the Central Highlands (Tay Nguyen) However, the operating area of other activities rather than electricity supplying is not limited Due to time and resources limitations, we only

focus on analyzing the business strategies for the company during the period from

2010 to 2020 With this research, we hope to help the management of PC3 have a clearer insight into their company, strengths and weaknesses This research is also

to answer questions: where is the company at this moment? Where it is going to? How to get there? After that, we can set up goals and objectives, build up more appropriate and effective business models for the company to face challenges and further thrive in the future

* Subject of the research:

Issues relating to building up a business strategy at Power Company No.3

* Methodology:

Desk study and collection of secondary information

Collect primary data at Power Company No.3 and EVN

Based on strategic management theories, we will analyze and examine the collected data to form our opinions and evaluations on the research topics

Both qualitative and quantitative studies are used

3 - Main contents of the report:

This report contains 3 key parts: Preface, Contents and Conclusion

The main body of our research is made up of the 03 chapters:

Chapter 1: Theoretical Background on Business Strategy

Chapter 2: Current situation of Power Company No.3

Chapter 3: Strategic orientations for PC3 and solutions

CHAPTER 1: THEORETICAL BACKGROUND ON

BUSINESS STRATEGY

1.1 - THEORETICAL BACKGROUND:

1.1.1 - Business strategy:

1.1.1.1 - Definitions of business strategy:

The notion of “strategy” stems from the Ancient Greek This term is long originated from military to imply big plans built on the basis of anticipations and

expectations of the opponent’s reactions in the future to achieve the final victory in wars Like military strategies, competitive strategies of an organization are towards the conformability between the company’s ability to differentiate and the external environment in which the company operates However, in comparison with military

strategies, business strategies are much more complicated

The term “strategy” has been used largely in many fields, especially in the economic field in both macroeconomic and microeconomic scale

In macroeconomic management, “strategy” means long-term and all-sided plans on main orientations of industries, fields or strategic geographic regions

In microeconomic, strategy aims at the development in a business approach Therefore, in enterprises by “strategy”, people often mean “business strategy” of enterprises

There are a lot of different definitions of business strategy, including:

* According to Porter:

Strategy is the art of building up strong competitive advantages to defense

* According to Alfred Chandler:

Strategy includes basic and long-term objectives of the organization as well as ways and action plans chosen to allocate resources to achieve those objectives

* According to Alain Charler Martinet:

An organization’s strategy describes solid and long-term development orbits, in which people arrange to make right decisions and take right actions

* According to William J.Glueck:

Strategy is a science of unification, generalization and coherence to make sure that

an organization’s basic objectives will be achieved

* According to General Ailleret:

Strategy is all about roads, ways employed to achieve objectives which have been identified through an organization’s policies

As can be seen from the above approaches, business strategy is something aimed to achieve in the long run, it is an organization’s compass It helps to determine market segments, related activities and how to do much better than competitors or in other words how to get competitive advantages It also determines which resources are needed including skills, properties, finance, relationships, technical competence and apparatus External factors that affect the company’s competitiveness are also defined Values and expectations by the company’s leaders are shown Business strategy enables a company to achieve main long-term objectives that is in accordance with the company’s development trend

It then can be concluded that business strategy is a big plan that includes:

- Main long-term objectives (5, 10, 20 years) which describe a company’s development orientation in the future

- Decisions on major solutions and ways to achieve objectives

- Significant policies to atiract and allocate resources for the company, maximizing the outcomes

All the above must be set up on the ground of competitive environment and external

changes are predicted

1.1.1.2 - Traits of business strategy:

Business strategy is of directivity, ensuring the company’s constant and stable development in an ever-changing business environment

Business strategy bears attacking approach to ensure wins in competition

Gaicss)

Therefore, on the completion of a business strategy, the constant advance and

feasibility are examined on the basis of conceiving clearly the company’s opportunities, competitive advantages as well as threats

Business strategy is only set up in industries of specialization or traditional crafts which give a company’s strong competitive edges because these industries are

stable in to some extent

1.1.1.3 - Types of business strategy:

Business strategies are divided into 3 main types: organization-level business strategy, industry - level business strategy and functional business strategy

1.1.1.3.a - Organization - level business strategy

Organization - level business strategy is formed by the highest level leaders It reveals the company’s concerns and activities Questions needed to be answered in this level include: in which field the company should operate? What are the company’s objectives in that field? How to allocate resources to maximize outcomes?

Organization - level business strategy is made of 3 types:

Growth strategy:

Growth strategies are described by 5 major components: product, market, industry, level of production, production process Changes in each of the above components may lead to variations in growth strategies

Focused growth strategy:

Aims of this strategy are to increase the company’s profit and market share by capitalizing on every opportunity gained by current products or the company’s

market This strategy guide the company to focus on the key products And 03

tactics of this strategy are:

Market entry strategy:

Push the sales of current products and services into new markets This is

manifested by the following techniques:

+ Find new target markets

+ Find out new utilities of current products

The company may increase its profit by further boost promotions and other marketing techniques including:

+ Find ways to raise the customers’ purchasing power

+ Scramble for competitors’ customers

+ Take over competitors

Integrative Growth Strategy

This is to reinforce the company’s strategic position, capitalize on its

technical and technological competencies

Forward integration: take ownership or the control over a company’s

distributors and distribution channels

Backward integration: take ownership or the control over a company’s suppliers This keeps the company active in making decisions on quantity, quality

as well as the timelines and schedules in business

Horizontal integration: this occurs when a firm is being taken over by, or merged with, competitors which are in the same industry and in the same stage of

production as the merged firm, with the purpose of increasing the efficiency and

maximizing the use of resources

Diversified Growth Strategy:

This is to sell different products in different market segments to

maximize the turnover, increase the company’s position and capitalize on the

to change It also seems to increase its market share by launching new products, services into new market segments which help the particular company to earn more profit

Horizontal diversification:

The company adds new products or services that are technologically or commercially unrelated to current products, but which may appeal to current customers In a competitive environment, this form of diversification is desirable if the present customers are loyal to the current products and if the new products have

a good quality and are well promoted and priced Moreover, the new products are marketed to the same economic environment as the existing products, which may lead to rigidity and instability In other words, this strategy tends to increase the firm's dependence on certain market segments This strategy is often exploited by multi-field corporations

Conglomerate diversification:

The company markets new products or services that have no technological

or commercial synergies with current products, but which may appeal to new groups of customers The conglomerate diversification has very little relationship with the firm's current business Therefore, the main reasons of adopting such a strategy are first to improve the profitability and the flexibility of the company, and second to get a better reception in capital markets as the company gets bigger Even

if this strategy is very risky, it could also, if successful, provide increased growth

and profitability

Ga6o3

Stabilized strategy:

This strategy is adopted when:

- A company wants to maintain the current production scale in case it cannot leverage any strong advantage

- Business environments are predicted to present a lot of difficulties and risks - Cost for market development or product innovation is unaffordable

- A small company operates in a niche market so the business expansion would bring many risks of out-of-controlled quality

Shrinking strategy:

Shrinking is to restructure, consolidate or cut costs after a long period of high growth This is to ensure the profitability and efficiency

Withdrawing capitals:

The company starts to dispose of some assets to get back some invested

money The returned money then would be reinvested in some other more lucrative projects

Cutting production costs:

This is only a temporary solution to eliminate inefficient parts to ensure the overall productivity, reduce prices and leverage competitive advantages and thus

help raise the profit

Dissolution: Once the above two solutions do not work, business dissolution

is the final choice

1.1.1.3.b - Industry - level strategy:

Industry-level strategies are often employed by multi-field corporations They are built up for different industries based on analysis of pros and cons of an industry during a strategic period An industry-level strategy is aimed at different

objectives but it still conforms with and is embodied in the company-level strategy

1.1.1.3.c - Functional strategy:

Functional strategies are supporting strategies for company-level strategy Functional strategies relate to different functions in a business, including marketing

strategy, Human resources strategy, R&D strategy, production strategy, financial strategy These may also be described in a different way by name, such as market strategy, product strategy, pricing strategy, placing strategy, promotion strategy, competitive strategy, Human resources allocation strategy, investment strategy, strategy of material buying and management, strategy of setting up internal information system and cooperation & development strategy

1.1.1.4 - The importance of business strategy:

Business strategy is viewed the most significant tool in business administration because it shows the company’s objectives and routes to achieve the objectives in the future

Business strategy keeps the company active and dynamic in doing business,

helping not only realize opportunities, take advantage of strengths but also block

and reduce threats, improve shortcomings

Business strategy on the one hand contributes to optimize the use of resources, on the other hand raises the company’s position in the market, enabling the sustainable development

Business strategy facilitates the decision making It guides through making medium and long-term plans, purchasing materials, renewing technology and apparatuses, business expansion, human resources recruitment and training, improving and renovating the company’s structure, renewing sales and financial activities

1.1.2 - Building up business strategy and the procedure of building up:

1.1.2.1 - Notions of building up a business strategy:

Building up a business strategy is a process which bases on the analysis and forecast of factors in the business environment as well as the use of proper models

to make decisions on market-related issues, finance and other resources,

relationships with stakeholders and the methods employed to achieve strategic objectives

appropriate methods, tools and techniques to set strategies for a business as well as for its functional departments in a fixed strategic period (According to LE VAN TAM, “Strategic Management”, Statistical Publishing House, 2007)

In essence, building up a business strategy is all about determining a specific strategy in a fixed period

1.1.2.2 - Requirements and principles of building up a business strategy: 1.1.2.2.a - Requirements of building up a business strategy:

Ensure the effectiveness of the business strategy:

This requires that the building up of a strategy plays the importance on the effective utilization of opportunities, resources and the management of those resources A strategic option should take the efficiency into account (including long-term and short-term outcomes, financial efficiency, partial efficiency as well

as the socio-economic efficiency)

Ensure the continuity and succession:

A strategy provides the orientation for the business’s growth and survival

over a period To ensure the sustainable development, strategies are needed to be continuous and successive, the subsequent strategies must inherit the outcomes and solve the problems of the previous ones Any disorder may lead to the business chaos and consequently the ineffectiveness and inefficiency in business

Focus on more prioritized objectives:

In a specific period, a business often focuses on more prioritized objectives which are the most important in that period A strategy must be determined in the consideration of prioritized objectives

Respect business culture:

Business culture is thought to be a set of human-related values, behaviors, traditions that form business behaviors Encouraged cultural components are vital factors affecting the implementation of or changes in business strategy

Consider political elements:

Political facts always play strong impact on the opting for a business

strategy Political relationship management is essential in the strategy implementation

1.1.2.2.b - Principles in building up a business strategy:

Principle 3: Balanced

This insists on the balance among business components, methods and processes

1.1.3 - Procedure for building up business strategies:

The Procedure for building up business strategies involves steps

1.1.3.1 - Determine the company’s functions and missions:

In the first step, the company’s major missions and functions which provide a context for strategy creation are defined This helps to set a foundation for the shaping of objectives and strategies and also contributes to give a clear vision

What is the company for? The answer will show what the company is going to do

Figure 1.1 - D.Abell’s Three - dimensional Framework

Every company has its own functions or the purpose for existence They are elso mentioned as the company’s missions which are shaped in a customer-oriented epproach After the missions are shared, the main field the business is going to join

n will be decided

The company’s missions may change over different business phases so it, in

~ specific phase, should clarify key functions, missions and the development (rientations which reveal its purpose, principles and business philosophy or more tian that convey its ideals and beliefs in the pursued cause, also shape nice image to customers and partners

Determining functions and missions sets a foundation for defining cbjectives, shaping right strategies and bringing about visions in the future

1.1.3.2 - Analyze and forecast external environment:

Gs6o3

phase External environment should be examined carefully in terms of both macroeconomic and microeconomic level

1.1.3.2.a - Macro environment:

Macro environment plays strong impact on every industry Examining the Macro environment gives answer to: what threats the company is facing?

Political-legal, economic, cultural-social, technological and natural aspects

should be reflected thoroughly

1.1.3.2.b - Micro environment:

Micro environment is determined for a specific industry and it affects all

businesses in the industry Micro components form the competition and the ways

businesses compete with each other within an industry According to Michael

Porter, there are 5 driving competitive forces:

- Threats of new entrants

- Competitive rivalry within an industry

- Bargaining power of customers

- Bargaining power of suppliers

- Threats of substitute products

environment changes accordingly Opportunities as well as threats brought about by

the changes in the five forces should be recognized in order to create appropriate

strategies Besides, there are also good chances for a firm to transform other forces’

competency into its strengths through strategic decisions

1.1.3.3 - Synthesize the result of Analyze and forecast external environment: Collected information on external analysis and forecast should focus on likely opportunities and threats within a strategic phase EFE Matrix is employed for analysis External Factor Evaluation (EFE) matrix method is a strategic-

matrix is a good tool to visualize and prioritize the opportunities and threats that a business is facing as well as their impacts on operations and ability to cope with the

situations of the business

EFE matrix: External factor evaluation matrix:

This matrix will allow strategy makers to evaluate the information related to economy, politics, society, geography, laws and regulations, technology and competitiveness

Table 1.1 - External factor evaluation matrix (EFE)

marks

Steps for EFE Matrix:

Step 1 - list factors: The first step is to gather a list of external factors that are important for the success of the business operations of the company, number of factors may range between 10 and 20

Step 2 - Assign weights: Assign a weight to each factor The value of each weight should be between 0.0 and 1.0 (equal to absolutely important) The total

value of all weights together should equal 1 This step allows to point out the importance of each factor to the business operations of the company in its sector

Step 3 - Rate factors: Assign a rating to each factor Rating should be between 1 and 4 Rating indicates how effective the firm’s current strategies respond to the factor 1 = the response is poor 2 = the response is below average 3

= above average 4 = superior

Step 4 - Multiply weights by ratings: Multiply each factor weight with its

rating This will calculate the weighted score for each factor The results indicate the company’s ability of adaptation to each external factor

Step 5 - Total all weighted scores: Add all weighted scores for each factor This will calculate the total weighted score for the company

The results will summarize:

If the company’s total weighted score equals 2.5, that means external environment is moderately response by the company The total weighted score is above 2.5, meaning that the external factors are advantageous for the company; the total weighted score of lower than 2.5 means that the external factors are disadvantageous for the company or it poorly responses to the external conditions 1.1.3.4 - Analyze, examine and forecast internal environment:

This step is to examine thoroughly internal components and find out good and bad points at the firm, giving solutions to reducing bad points and improving good points Factors should be considered include:

Human resources:

Human resources is of vital role in a firm’s success story Human resources

are those who collect data and information, make objective planning, chose implement and check strategies Best outcomes cannot be achieved without good

people Human resources must be viewed from many aspects like technical skills, experience, morality, human resource policies, competency, commitment and the

ability of the highest leaders

R&D:

Efforts in R&D enable a firm to be in the leading position in an industry On the contrary, inadequate investment on R&D may put the firm under troubles and

left behind in comparison with other competitors Therefore, technologies should be

regularly renewed and updated The R&D component should be researched from 2 approaches: marketing and production From the marketing aspect, R&D is for creating new products with new functions and increased usefulness to meet the customer’s demand From the production aspect, R&D means innovated process and technologies with the purpose of producing the highest quality products at the

lowest costs

Production factors which should be taken into account involve prices, ability

to supply materials, inventory turnover, arrangements of production facilities

Productivity and equipment cost, costs and technological competency in comparison with competitors’ and the industry’s average level, quality

management

Finance and accounting:

Finance and accounting department’s function is to make financial plans and check the implementation of those plans This department thus has a strong sphere

of influence within the firm

Financial contents which should be examined comprehensively include:

ability to mobilize long-term and short-term capital, total capital, the flexibility of

capital structure, the ability to control price reduction, the ability to take advantage

of financial strategies, whether the accounting system can support the price planning, financial and profit planning

Marketing:

This department’s duty is to make marketing plans and check the

implementation of those plans, keep good relationships with customers in a win-win

situation Marketing management means the adjustment of intensity, time and

properties of customer’s demand in order to achieve desired objectives

Marketing aspects which need considering include: product diversity, market share, distribution channels, advertising and promotion, customer care activities, before, during and after sales services

1.1.3.5 - Synthesize the result of Analyze and forecast internal environment:

Collected information on internal analysis and forecast should place keen focus on strengths, advantages as well as weaknesses, disadvantages especially in comparison with competitors’

IFE Matrix is used for analysis with input data are internal factors of the business, and outputs are strengths, weaknesses of the business in each level Calculating the total scores after all 5 steps, we will have the aggregate value of a company using the IFE matrix If the total score of an entity is 4, the company has absolutely high competitive capacity Any total point that equals 2.5 or above would indicate a moderate competitive capacity, and if the result is lower than 2.5, the absolute competitive capacity of the company is rated at below average

In combination with EFE matrix, in this step, a firm starts to assess and generalize

to make conclusions on the competitive factors through a competitive matrix (this matrix is a tool that helps determine a company’s competitive position in the marketplace)

IFE matrix: company’s internal factor evaluation

This matrix summarizes and evaluates the general internal situation of the company

Table 1.2 - Internal factor evaluation Matrix (IFE)

The IFE matrix is developed through 5 steps:

Step 1: List down the key factors that influence the competitive advantages

of a company in a given industry Normally, these factors range from 10-20

Step 2: Assign a weight of importance ranging from 0.0 (not at all importance) to 1.0 (most important) to each factor to determine their relative importance The weightings reflect the relative importance of a particular factor to the overall success of a company within the industry As a result, for companies that

operate in the same sector, each factor identified in step 1 has similar ratings

a

Step 3: Assign a rate from 1 to 4 to each representative Rating captures whether the factor represents a major weakness (rating = 1), a minor weakness (rating = 2), a minor strength (rating = 3), or a major strength (rating = 4)

Step 4: Multiply each factor's weight by its rating; we will have a weighted score for each factor

Step 5: Calculate the total score for each factor in the matrix by totaling all weighed scores of the components identified in step 4 above This gives us the absolute competition capability of the company

According to the above analysis on the strengths and weaknesses, we will come up with the IFE matrix In this context, if the total score of an entity is 4, the company has an absolutely high competition capability Any total point that equals 2.5 or above would indicate a moderate absolute competition capability, and if the result is lower than 2.5, the capability of the company is rated at below average

1.1.3.6 - Determine business strategy’s objectives:

Objectives are the future prospect that a company strives to achieve or in other words, they are outcomes of a string of planned activities People often mistake

Objectives for goals While goals are desired outcomes without any clear quantities and deadlines, objectives are quantitative and specific desired outcomes The

purpose of this step is to determine things that should be done to fulfill the mission

* Foundation for a strategy’s objectives

Business philosophy, objectives, functions, missions

Analysis on business environment (both internal and external environment)

Viewpoints, desires and opinions by the company’s leaders

* Requirements for strategic objectives:

Specification:

Objectives are required to be specific, relating to a specific unit The more

specific an objective is, the more likely it is achieved

Quantification:

Objects should be measurable This helps to make a clear action plan and

Unless objectives are feasible and achievable, strategies can make no sense

1.1.3.7 - Analyze, choose and implement business strategies:

This step is to produce strategic options and then decide which strategy is right for a strategic period The process of strategic management includes 3 parts as illustrated in the diagram

SaiGo9

STRATEGIC ANALYSIS

STRATEGIC ro STRATEGY CHOICE IMPLEMENTATION |

Figure 1.3 - Business strategy controlling model

Strategic analysis:

This is all about the analyzing the strength of businesses’ position and understanding the important external factors that may influence that position The process of Strategic Analysis can be assisted by a number of tools, including: PEST Analysis - a technique for understanding the "environment" in which a business operates

Scenario Planning - a technique that builds various plausible views of possible futures for a business

Five Forces Analysis - a technique for identifying the forces which affect the level of competition in an industry

Market Segmentation - a technique which seeks to identify similarities and differences between groups of customers or users

Directional Policy Matrix - a technique which summarizes the competitive strength of a business operations in specific markets

Strategic choice:

* Requirements for a strategic choice

+ Unification and coherence

+ Effectiveness

+ The completion of prioritized objectives

+ Succession and inheritability

+ Coherence and feasibility

* Tools used for strategic choice: Quantitative Strategic Planning Matrix

The good thing about this approach is that it can provide substitute options in case

the implementation of the chosen strategy encounters difficulties and problems Strategy Implementation:

This is often the toughest part in the process Once a strategy is analyzed and

chosen, the next step is to ensure its success

CHAPTER 2 - CURRENT SITUATION OF POWER

COMPANY N°.3

2.1 - OVERVIEW ON POWER COMPANY N’3 (PC3):

2.1.1 - HISTORY AND DEVELOPMENT OF PC3:

2.1.1.1 - Brief summary on PC3:

Vietnamese name: CONG TY DIEN LUC 3

English name: POWER COMPANY N° 3 - Abbr.: PC3

Address: 393 Trung Nu Vuong - Hai Chau District - Danang City

Telephone : 0511 2210281

Fax : 0511 2210241 - 0511 3625071

Email: PC3@PC3.com.vn - Website: www.crpc.com.vn

Charter capital: 707.607 billion VND

Legal status: PC 3 is an independent company with its own accounting system under the Electricity of Vietnam Corporation (EVN)

2.1.1.2 - Establishment and Development:

PC3 is formerly known as Central Region Power Company established after

the independence day of the South on July 10” 1975, consisting of power companies of Sai Gon Authorities (CDV), SIPEA of France, power stations of Vietnam Provisional Communism Government of the South, and Quang Binh

power station of government of Socialist republic of Vietnam PC3 is in charge of

administering electricity sources and power grid from Quang Binh to Khanh Hoa and provinces of Central Highland, which accounts for 30% in terms of Vietnam total area, and 25% of Vietnam population

To accommodate itself with facilities and business requirements, Management Board of PC3 has witnessed changes along with time

In 1981, according to Decision No.15 DL/TCCB-3 dated 9/5/1981 of the Ministry of Energy on changing names of ministerial agencies and units, Central Power Company changed its name into Power Company No.3; and Electricity management and distribution departments changed their name into Power Departments of the Provincial People Committee At that time, PC3 consisted of 10 units including 6 power departments (Binh Tri Thien, Quang Nam - Da Nang,

Nghia Binh, Phu Khanh, Dak Lak, Gia Lai - Kon Tum); one Power Construction

Company, 02 Construction Departments and 01 Technical Training School

In 1989, complying with the State’s guidance on provincial separation to facilitate economy and society, six power departments were established in

accordance with the reorganization of Binh Tri Thien, Nghia Binh, Phu Khanh, Gia

Lai - Kon Tum into power departments of Quang Binh, Quang Tri, Thua Thien

Hue, Quang Ngai, Binh Dinh, Phu Yen, Khanh Hoa, Gia Lai and Kon Tum which amounts to 17 subsidiaries including 11 provincial power departments, 02 factories,

02 centers (Power Testing Center and Power Design Center), Training Center, Power Hotel, and Agencies

In 1993, PC3 was reorganized according to Decision No.148 TTg dated April 7" 1993 into a subsidiary of Ministry of Energy including 24 subsidiaries with 11 power departments whose names was changed into 11 power companies in

1996, 02 distribution stations (Distribution Station No 1 and 2), 02 centers (Power Testing Center and Power Design Center), 02 factories, 03 hydropower project management boards (Yaly, Vinh Son, Song Hinh), Power Project Management

Board, Power Training School No.3, Power Hotel, Power Recovery Center and the

Company’s Office

In 1995, EVN was established based on Decree No.14/CP dated January 27th

1995 of the Government To comply with regulations on organization of EVN that

was determined by the Party and Government, PC3 became a subsidiary of EVN other than Ministry of Energy; at the same time, subsidiaries of PC3 was directly under management of EVN (which are Power Distribution Station No 1 and 2; 03

2.1.2 - CURRENT ORGANIZATIONAL STRUCTURE OF PC 3:

At present, PC3 is a member company of EVN Its current organization structure consists of 18 subsidiaries, 13 joint-stock companies and associated

companies, Company Offices, in which the Board of directors includes 01 general

director, 04 deputy directors, 01 chief accountant The Company has 14 offices and one representative office in Ha Noi, which is specifically described in the below graph:

* External Affair Department

* Construction Management Department

* Rural Power and Business Department

* Inspection Department

* Emulation and propaganda Department

* Telecommunications and IT Department

* Representative Office in Ha Noi

* Technical safety and labor protection Department

* Hydro power management Department

2.1.2.2 - Subsidiaries of PC 3:

* Quang Binh Power Company

* Quang Tri Power Company

* Thua Thien - Hue Power Company

* Quang Nam Power Company

* Quang Ngai Power Company

* Binh Dinh Power Company

* Phu Yen Power Company

* Gia Lai Power Company

* Kon Tum Power Company

* Dak Lak Power Company

* Dak Nong Power Company

* Central Region High-voltage Power Grid Enterprise

* Telecommunication and IT Center

* Electricity Testing Center

* Electricity Design Center

* Electricity Grid Project Management Board

* Central Region Rural Power project management Board

* Power recovery and assistance center

2.1.2.3 - Joint - stock and associated companies:

* Power Investment Joint-stock Company 3

* Gia Lai Hydropower JSC

* Dinh Binh Hydropower Joint - stock Company

* Central Hydropower Joint-stock Company

* Hydropower Joint - stock Company

* Song Ba Joint - stock Company

* Central Power Investment and Development JSC

* Central Region Power Material, Transportation and Construction JSC

* EVN Land Central JSC

* EVN International Hydropower JSC

made on June 4" 2007), business fields of PC3 include:

Power industry; repair, manufacture, and mechanical processing of mechanical and accessories for power industry; import and export electrical appliances, equipments, electronics, information technology products to serve power industry and mechanical products; transportation of equipments for specialized industry; Power import and export;

Evaluation of technical design for power projects up to 110 kV;

Agents of public telecommunications services;

Trading materials and electrical equipments, electrical accessories, civil electrical appliances;

Manufacturing and assembling electronic meters, producing composite

materials;

Construction of public telecommunications systems; management and operation of public telecommunications and information technology systems;

management, exploitation, repairing and maintenance of computers and computer

networks; design consultancy, construction supervision and installation of local telecommunications network and local computer networks; constructing, installing and developing for software applications for management and trading operations under the regulations and standards provided by the Electricity of Vietnam; arranging implementation for IT projects; training, improving the

telecommunications and IT knowledge of staffs and workers;

Hotel servicing business, real estate, office leasing and insurance agent

2.1.4 - PROPERTIES, LABORS MANAGED BY THE COMPANY:

2.1.4.1 - Fixed properties managed by the Company:

I | Lines and Stations

II_ | Hydropower plants and diesel power gensets

1 | Hydropower stations stations 6

2 | Unnecessary area of workshops mˆ 0

2.1.5- PRODUCTION AND BUSINESS RESULTS FROM 1995 - 2009:

2.1.5.1 - Electricity Commercial Activities: