Formulation of Tourism business strategy for Vinacomin Tourism and trading Joint Stock Company (VTTC) by 2017

CAPSTONE PROJECT REPORT FORMULATION OF TOURISM BUSINESS STRATEGY FOR VINACOMIN TOURISM AND TRADING JOINT STOCK COMPANY VTTC BY 2017 Group Number: 09 Students’ name: Pham Thi Tuyet Mai

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CAPSTONE PROJECT REPORT

FORMULATION OF TOURISM BUSINESS STRATEGY FOR VINACOMIN TOURISM

AND TRADING JOINT STOCK COMPANY (VTTC) BY 2017

Group Number: 09 Students’ name: Pham Thi Tuyet Mai (Group Leader)

Bui Duy Ruat Nguyen Ngoc Hai

Le Xuan Truong

HANOI 2012

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CONG TY CO PHAN DU LICH VA THUONG MAI - VINACOMIN

VINACOMIN - TOURISM AND TRADING JOINT STOCK COMPANY - VITC

'T Địa chỉ: Tầng 8, Tòa nhà VATOWER, Phố Duy Tân, Cầu Giấy, Hà Nội

Tel: (84.4) 3518 0079; 3518 0459; 35185358 ; 3518 0076 ; 3518 5226 ; 3577 2343 Fax: (84.4) 3851 0413 * E-mail: vttc@fpt.vn * Website: www.vinacoaltour.com.vn

Date: 22" June 2012

CONFIRMATION

To: - Master of Business Administration Program of Griggs-Andrew University

- ETC -— Vietnam National University, Ha Noi

Subject: Comment of Vinacomin Tourist and Trading Joint Stock Company (VTTC) about

Capstone Project of Group No.09 — GaMBA M0210 — Griggs-Andrew University

- VTTC has extended full support to Group No.09 — GAMBA.M0210 when they

praticed and studied about operation status, vision and strategy of VTTC

- Group members have shown their enthusiasm and creation as well closely

followed up current stituaton of the company and obtained good result during

their time at VITC

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CHAPTER 2.ANALYSIS OF BUSINESS ENVIRONMENT OF VINACOMIN TOURISM AND TRADING JOINT STOCK COMPANY

(VTTC) CS Tnhh 18

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CHAPTER 3: FORMULATION OF TOURISM — BUSINESS STRATEGY BY 2017 FOR VINACOMIN TOURISM AND TRADING JOIN STOCK COMPANY - SOLUTIONS FOR STRATEGY

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Gf6o9) Capstone Project — — Group No.09 GaMBA.M0210

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CONCLUSION mm —— sansawusenwewsevenes _ S7 11 75 REFERENCES ccssssssssoessssensssoesss ee ee EERE _- — 76 APPENDICES vccsexssenssexenncenosesnanerens 7.111 — 77

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Gíeo Capstone Project s- Group No.09 GaMBA.M0210

ACKNOWLEDGEMENT Group No.09 of GaMBA M0210 would like to sincerely thank the cadres and employees of Vinacomin Tourism and Trading Joint Stock Company (VTTC) for helpfully providing data and information as well as creating favorable conditions for the group members to meet and speak directly with the company s Management and officials of the related departments for better understanding and information to complete this Capstone Project

We wish to thank the teachers for dedicating the knowledge and management skills needed in business throughout the classes, which facilitate us to complete this capstone project More importantly, such knowledge and management skills will help us a lot in our work in the future

We also thank ETC Center of Hanoi National University, University of Griggs-

Andrew for creating conditions for us to participate in this course by which we are

not only provided with knowledge but also have more relationship and opportunities to share information and learn from our classmates, which is also one

of the targets that this master program in business administration is oriented

In the course of performing this Capstone Project, our group may not avoid shortcomings for which we hope to receive comments from the participating teachers and readers to help us completing this project better

COMMITMENT

We hereby commit that the content of this assignment is the effort of the Group’s members in researching, finding and choosing topics and analysing methods, which

is also based on some referential materials (references are included)

We also undertake that this project has not been submitted to any other research and training program

Hanoi -2012 Group No.09 of GAMBA M0210

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Griccs) Capstone Project _ Group No.09 GaMBA.M0210

LIST OF ABBREVIATIONS

INBOUND Doing business with foreigner customers in Vietnam

VINACOMIN Vietnam National Coal-Minerals Industries Group

OUTBOUND Doing business with Vietnamese customers abroad

USD American Dollar

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Taole 2.13, VTC srésotrces nở technlenl EHGIIES so ceccs=eemssmsradrroitrintangiisyosssagiSSNG 3ˆ

Table 2.14, V1I1TC's Intemal Factors Evaluation MNIBITD se ssssrenrnarnnsnnnsianntinsnl 56 Table 3.1.VTTC’s targeted revenue and profit in tourism sector by 2017 - 58 Table 3.2.5 WOT Matix To V 1 TẾ seeweeesssrrrsaroaadtiaiiiisedisesseoserveeosvovrsggiDDIEGEETSDIISEGIHSU 58 Table 3.3 Quantitiave Strategic Planning Matrix for VTTFC (QSPMI 62 Table 3.4, VITC’Ss traveling Objectives by 2017 cercnccssxcesnsnssis nanenoevaoneoevveneneenerenvenvenrrensess 65

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LIST OF FIGURES, GRAPHS

[igurc 1.1 lclaionships between Key Ï-xternal Forces and an Organization 10

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Chart 2.1 VTTC organizational chart by 31.12.20 1 .- 5-6 Sex E + EEEvEeErkrkrrrrree 20

Craph 2.1 Fluctuation of revenue and profit during 2009-20] 1 - ¿2 2 cs5s+scxe2 21

Gaphs 2.2 VTTC’s numbers of tourist during 2009-2011 by categories 46

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GRIGG! Capstone Project Group No.09 GaMBA.M0210

INTRODUCTION

1 Rationale of the study

Tourism is an important activity for human life Today, many countries including Vietnam have considered tourism as a key economic sector for the country's economic and social development

Tourism activities of Vietnam Coal Industry has been established since the 90s of the 20" century it began as some pleasure-houses for the employees to take rest treatment and health recuperation One step further is the construction of two joint venture hotels which are Heritage Hanoi and Heritage Ha Long to support the tourism activities

In October 1994, the Government has decided to establish Vietnam National Coal Corporation (which is now Vietnam National Coal-Minerals Industries Group- Vinacomin) including state enterprises with the primary mission of exploration, exploitation, production, processing and trading of coal After the establishment, Vinacomin has developed the multi-sectoral strategy based on coal production and

got approved by the government, in which tourism was identified as a great

potential industry For that reason, Vietnam Coal Tourism Company has been established and officially went into operation on October 1“ 1996 The key and throughout tasks of the company are to serve the needs of rest, health recuperation

to reproduce miners’ labor after hours of tiring work Besides, the company organizes for Vinacomin employees various domestic and overseas tours for visiting, market surveys, studying experiential and advanced science and technology

of foreign countries, etc

In 2002 to adapt the actual situation and ensure the sustainable development, the company expanded to trading business and changed its name to Vinacoal Tourism and Trading Company

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Andrews (4) University

Griccs) Capstone Project — — Group No.09 GaMBA.M0210

Implementing the policy to change the state-owned enterprises into joint stock companies by Decision number 104/2004/QD-BCN dated September 30" 2004 of Minister of Industry, the Company was equitized and converted into Vinacomin Tourism and Trading Joint Stock Company (VTTC)

With the ongoing effort, after 16 years of establishment and development, VITC has confirmed its position in the market in two key fields, namely trading and tourism sectors In trading sector, VI'TC has affirmed its position as one of the professional suppliers of coal mining equipments and machines; in the field of tourism, the company has completed the assigned tasks to provide tourism and health care services for employees of the coal industry, step by step expanded to compete with those companies outside Vinacomin

However, with the advantage of being a subsidiary of Vinacomin which is a large economic group with a strong labor force (over 130 thousand employees in 2011), does VTTC actually succeed in the field of tourism? The answer is "No" Thus, the question is how to develop the tourism business of the company to make it commensurate with the available potentialities and opportunities? In our opinion, the company needs an effective tourism strategy to well exploit their available

resources and take full advantages of current opportunities That is the reason why

Group 9 of GAMBA M0210 class decided to choose the subject "Formulation of tourism business strategy by 2017 for Vinacomin Tourism and Trading Joint Stock Company (VTTC)" We do hope this project will contribulte to support the company’s management to lead the company to further develop based on a stable and solid platform

2 Research objectives

As stated above VITC is currently operating on two main areas of trading and tourism in which trading sectors predominates and brings over 85% annual sales for the company Athough tourism is the traditional business field, it contributes onlw a modest rate of about 10% of revenue

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Grice) Capstone Project _ Group No.09 GaMBA.M0210

According to Group No.09 the company has plenty potentialities to further develop tourism business This is very important to help the company to have balanced and sistainable development when market conditions fluctuate drammatically, which nakes trading activities difficult Therefore in this report, the Group No.9 will focus on analyzing and assessing external business environment as well internal business environment of the company to identify the opportunities and threats that hive direct impacts on the company’s tourism business operation Thereby, we will pint out the company’s current strengths and weaknesses and propose business srategies in accordance with company's actual circumstances and conditions such

as using the strengths to take advantage of opportunities or overcoming the weaknesses obstructing the company to capture the opportunities

- Using acquired knowledge for researching, analyzing the internal and external bisiness environment of the company and formulating company’s tourism business stategy by 2017

4.Research scope

On the basis of applying the studied theory of business administration in the MBA program of Griggs — Andrew University and understanding of the team members on stategic issues and business strategy formulation we will focus on formulating

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Andrews (Y University

Gnloo3 Capstone Project Group No.09 GaMBA.M0210

tourism business strategy by 2017 for VI'TC in which we will mainly focus on travel service activities The company’s hotel business is considered as a supporting segment for travel service, therefore it will not be deeply analyzed and our group will only make general assessments and some basic proposals related to hotel services of VI'TC in this Capstone Project

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Gnf6o2) Capstone Project Group No.09 GaMBA.M0210

CHAPTER 1 BASIC THEORY ON BUSINESS STRATEGY AND STRATEGIC MANAGEMENT 1.1 Business strategy

1.1.1 Some concepts

There are many studies on strategy, so that there are many different views of

strategy

In view of the strategists Alain Threlart, M.Porter, Fred David: Strategy is the Art,

while in point of views of G Arlleret, Gluecl, D.Bizrell and the group of authors,

who stand on management perspective, business strategy is a form of planning

In short, business strategies are the means by which long term objectives of an

enterprise will be achieved OR a business strategy specifies the way how a firm

competes in an industry

In general, business strategy can be defined as: "A complex series of actions to mobilize the entire resources of an organization to achieve a specific objective" For businesses, "Business strategy is the art of formulating, designing enterprises’s basic long-term objectives as well as selecting actions and allocating necessary resources to implement such objectives"

1.1.2 Roles of business strategy

- To help enterprises to identify the objectives, directions as the basis and guidelines for all business activities of the enterprises

- To help enterprises to understand and take advantage of business opportunities and take the initiative in overcoming the risks and threats in the competitve market

- To contribute to improving the efficiency of resources’ usage, enhancing the competitive position of enterprises to ensure sustainable development

- To create solid basis for making policies and decisions on production and business

activities in accordance with the fluctuation of the market

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Capstone Project Group No.09 GaMBA.M0210

1.3 Types of business strategy

“here are different types of strategies which are briefly described here They are iitegration strategies intensive strategies, diversification strategies, defensive strategies and Michael Porter's Generic Strategies

.1.3.1 Integration strategies

A company can use integration strategies to improve the efficiency and effectiveness of its business activities, to save cost and to be independent from its suppliers or distribution channel, or to change its competitors into parts of its cperation to increase strength and reduce competition A company can apply

gy by gaining ownership or increase control over

=

Forward integration strate

astributors or retailers In the other direction, the company can gain the ownership

q@ control of its suppliers This is called Backward integration strategy The cjmpany can also apply Horizontal integration strategy by getting ownership or control over competitors by mergers, acquisitions, and takeovers

In general, these strategies can be applied when it is more profitable to do and the company must have enough resources and ability

11.3.2 Intensive strategies

When a company wants to improve its competitive position with existing products, irtensive strategies are good choices for them Intensive strategies include market penetration, market development, and product development strategies

A company can do Market penetration strategy to increase market share for its poducts or services in present market by intensive marketing effort like increasing nimber of sale staff, advertising expenditures, sale promotion The company can aso introduce its present product or service into new geographic area This is called Narket development stratergy The company can increase sales by improving or irodifying its present products or service This action is called Product development

strategy

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Gsf6o9) Capstone Project Group No.09 GaMBA.M0210

1.1.3.3 Diversification strategies

There are two general tvpes of diversifications strategies they are:

+ Related diversifications means adding new but related products or services

+ Unrelated means adding new unrelated products or services

Businesses are said to be related when their value chain posses competitively valuable cross-business strategic fit: businesses are said to be unrelated when their value chain are so dissimilar that no competitively valuable cross-business relationship exist

other activities This action is called divestiture which can be part of retrenchment

The company can chose liquidation which is selling all of company assets, in parts, for their tangible worth

1.1.3.5 Michael Porter’s Generic Strategies

According to Michael Porter, a firm's strengths ultimately fall into one of two kinds: cost advantage and differentiation Applying these strengths results in three generic strategies: cost leadership, differentiation, and focus These strategies are applied at

the business unit level

a Cost Leadership Strategy

The main reason for applying integration strategies is to gain cost leadership benefits Being the low cost producer in an industry for a given level of quality, a company can sell its products or services either at average industry prices to earn a

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b Differentiation Strategy

Applying differentiation strategy means developing of a product or service that offers unique features that are valued by customers and that customers perceive to

be better than or different from the competitors’ products With that differentiated

product or service a company can charge a premium price for it

c Focus Strategy

With the focus strategy a company concentrates on a narrow segment and within that segment attempts to achieve either a cost advantage or differentiation The result of this strategy is that the needs of the segment can be better met by focusing entirely on it The company now can gain a high degree of customer loyalty, and this loyalty discourages other companies from competing directly

1.2 Strategic management

1.2.1.Definition of strategic management

Strategic management is the art and science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve its objectives

1.2.2.Strategic management process

The strategic-management process consists of three stages:

+ Strategy formulation

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Gris) Capstone Project Group No.09 GaMBA.M0210

+ Strategy implementation

+ Strategy evaluation

In this study project, we will mainly focus on strategy formulation; other stages will

be sometime mentioned only

1.3 Strategy formulation process

Strategy formulation includes developing a vision and mission, identifying an organization's external opportunities and threats, determining internal strengths and weaknesses, establishing long-term objectives, generating alternative strategies and choosing particular strategies to pursue

1.3.1 Developing a vision and mission

1.3.1.1 Vision

Strategic vision answers the question "What enterprises want to become?" because strategic vision deals with the future business direction of the enterprises It represents the most general and highest aspirations and desires enterprises wish to achieve The determination of vision is particularly important because it focuses everyone's expectations in the organization and motivates people to strive for their

1.3.2 Identifving enterprise's external opportunities and threats

External business environment are the forces and institutions outside enterprises but affect business operations of the enterprises External business environment

includes macro environment and industry environment (micro environment)

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Distributors Creditors Customers

Employees

‘Communities Managers Stockholders Labor unions Governments Trade associations

Source: Adapted from Fred R David, Strategic Management Concepts & Cases [p94]

Special interest groups |

Products : _ Services

Markets Natural environment

1.3.2.1 Macro environment analysis:

Macro environment includes the following forces:

- Political, governmental and legal forces;

- Economic forces;

- Social, cultural, demographic and natural environment forces;

- Technological forces;

- Globalization forces

Macro environment creates opportunities or threats for enterprises and the impacts

on enterprises in the economy at varying degrees Enterprises hardly change the macro environment but can only find solutions to take advantage of the opportunities and minimize the impact of the challenges

1.3.2.2 Industry environment analysis:

These factors are another form of competitive forces and they can be analyzed under the Michael Porter’s five forces model This model is a framework for the industry analysis and business strategy development This model identifies and

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Griccs) Capstone Project Group No.09 GaMBA.M0210

analyzes five forces that determine the competitive intensity and therefore attractiveness of an industry or a market Attractiveness in this context refers to the overall industry profitability An "unattractive" industry is one in which the combination of these five forces acts to drive down overall profitability

These five forces include:

+ The entry of new competitors will eventually decrease profitability for all companies in the industry

+ The intensity of competitive rivalry is the major determinant of the competitiveness in most of the industry

+ Substitute products or services are the one outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives and thus can threat the revenue and profit of an industry

+ The bargaining power of customers is the ability of customers to put the company under pressure, which also affects the customer's sensitivity to price changes

+ The bargaining power of suppliers is another pressure over the company When there are few substitutes, suppliers may refuse to work with the company, or, e.g., charge excessively high prices for unique resources and thus put the company in a

difficult situation

1.3.3 Determining internal strengths and weaknesses of enterprise

The analysis of the internal environment helps enterprises recognize the strengths, weaknesses and choose the strengths to develop the competitive advantages Methods of analysing internal environment: Comparision of activities and elements which need analysis with the previous period, the firms’ planning targets, the average index of the industry the primary competitors, principles and commitments

There are many forces and indicators that internal assessment needs to look at in all fields of management marketing finance/accounting, production/operations, research & development management information systems Other resources are

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be taken advantage of to build competitive advantages

1.3.4 Establishing long-term objectives: The mission of the enterprises should be developed and outlined into specific objectives Therefore, setting objectives is to answer questions related to organizations, what the enterprises want to achieve and

at what time? Objectives must be linked to mission and must be settled based on careful and scientific analysis

1.3.5.Generating alternative strategies and choosing particular strategies to pursue

In order to come to a final strategy or strategies to achieve mission and objectives a company must complete internal and external assessments and match them with objectives and mission to achieve to generate and evaluate feasible alternative strategies This process includes 3 stages from input stage to matching stage and finally decision stage

1.3.5.1 The input stage

In this stage EFE Matrix, IFE Matrix and CPM are developed to provide basic input information for the matching and decision stages

1.3.5.2 The matching stage

In this stage, different tools are used to match external and internal critical success factors to generate feasible alternative strategies These tools can be SWOT matrix, BCG matrix and/or IE matrix and/or SPACE matrix In this Capstone Report, Group 9 will use SWOT matrix

1.3.5.3 The decision stage

After completing matching stage there are several feasible alternative strategies revealed These strategies should then be prioritized to identify the best strategy or

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Gn6o9) Capstone Project Group No.09 GaMBA.M0210

1.4.2.Michael Porter's five - forces model of competition

This is a simple and powerful tool for understanding where power lies in a business situation It helps us to understand both the strength of our current competitive position as well the strength of a position we're considering moving into

1.4.3.The External Factor Evaluation Matrix (EFE)

1.4.3.1 Significance of EFE Matrix

The External Factor Evaluation (EFE) Matrix is a strategic management tool used to evaluate the conditions of the external business environment of enterprises This is a useful tool for analysing and assessing the impacts of the opportunities and threats that businesses are facing

1.4.3.2 EFE Matrix formulation

- List the key external factors that include a total of 15 to 20 factors of both opportunities and threats

- Assign to each factors a weight that range from 0.0 (not important) to 1.0 (very important) The sum of all weights assigned to the factors must equal 1.0

- Assign a rating between | and 4 to each key external factor to indicate how effectively the firm’s current strategies respond to the factor (where 4 = the iresponse is superior, 3= the response is above average, 2= response is average, |= iresponse 1s poor)

~ Multiply each factor’s weight by its rating to determine a weighted score

~ The highest possible total weighted score for an organization is 4.0 and the lowest

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possible total weighted score is 1.0 The average total weighted score is 2.5

Figure 1.2.Example of a blank EFE Matrix

Weight Ratin Weighted score

Poor (1), below average (2), above average (3), superior (4

1 Source: Adapted from Fred R David, Strategic Management Concepts & Cases [p112]

1.4.4.The Competitive Profile Matrix (CPM)

The Competitive Profile Matrix (CPM) identifies a firm’s major competitors and its particular strengths and weaknesses in relation to a sample firm’s strategic position

The weights and total weighted scores in both a CPM and EFE have the same meaning However, critical success factors in a CPM include both internal and external issues; therefore, the ratings refer to strenghths and weaknesses, where 4 =

major strength, 3= minor strength, 2= minor weakness, 1= major weakness The critical success factors in a CPM are not grouped into opportunities and threats as they are in an EFE In a CPM, the ratings and total weighted scores for rival firms can be compared to the sample firm

The formulations of External Factor Evaluation (EFE) and Competitive Profile Matrix (CPM) are similar

Figure 1.3 Example of a blank CPM Matrix

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Grigcd) Capstone Project Group No.09 GaMBA.M0210

1.4.5 The Internal Factor Evaluation Matrix (IFE)

1.4.5.1 Significance of IFE Matrix

[FE Matrix summarizes and evaluates the major strenghths and weaknesses in the functional areas of a enterprise, identifys core competencies to develop competitive advantages for enterprises

1.4.5.2 IFE Matrix formulation

- List key internal factors as identified in the internal-audit process Use a total of from 10 to 20 internal factors, including both strenghths and weaknesses

- Assign a weight that ranges from 0.0 (not important) to 1.0 (all-important) to each

factor The sum af all weights must equal 1

- Assign a 1-to-4 rating to each factor to indicate whether that factor represents a

major weakness (rating = 1), a minor weakness (rating = 2), a minor strenght (rating

=3) or a major strength (rating =4)

- Multiply each factor’s weight by its rating to determine a weighted score for each

variable

- Sum the weighted scores for each variable to determine the total weighted score

for the organization The total weighted score can range from a low of 1.0 to a high

of 4.0, with the average score being 2.5

Figure 1.4 Example of a blank IFE Matrix

Weight Ra Weighted score

SWOT is a key tool to formulate strategic plans Each letter in the word SWOT

represents one strong word: S = strengths, W = weaknesses, O = opportunities,

T = threats

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1.4.6.2 SWOT formulation

- List the major Opportunities (O), Threats (T) Strengths (S) and Weaknesses( W)

in the appropriate cells of the SWOT Matrix

- Combine strengths with opportunities to give the strategic plan SO, weaknesses with opportunities to give the strategic plan WO, strengths with threats to launch the strategic plan ST and weaknesses with threats to formulate strategic plans WT

1.4.7 Quantitiative Strategic Planning Matrix (OSPM)

- Take from EFE Matrix 10 major Opportunities and Threats (external factors)

- Take from IFE Matrix 10 major Strengths and Weaknesses (internal factors)

- Assign rating for internal and external factors

- Put the strategic plans into QSPM

- Attractiveness Score (AS) of 1, 2, 3, or 4 is used to reveal each strategy’s attractiveness given the respective external or internal factor, where | is the least attractive, 2 is less attractive 3 1s quite attractive and 4 is attractive

- The total score for each alternative is a basis for strategic choices

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s* Address: Level 8, VA Tower Building, Duy Tan Street, Dich Vong Hau

Ward, Cau Giay District, Ha Noi

‹, ~~ Company type: Joint Stock Company

s* Owner”s Equity: 19,497,970,000VND, in which:

- Capital contributed by Vinacomin: 13,234,140,000VND = 67.9%

- Capital contributed by other shareholders: 6,263,830,000VND = 32.1%

“* Establishment and development history:

+26/09/1996: Vinacoal Tourism Company was established by decision 2778/QD-TCCB of the Minister of Industry with the primary business missions

are hotel and traveling tourism

+2002: To facilitate the situation of development and business expansion, the company has proposed to supplement the business sector as the basis for the company's stable development Such proposal has been approved by Vinacoal’s Board of Management by Decision number 1338/QD-HDQT dated December 13" 2001 The company’s name was changed to Vinacoal Tourism and Trading Company

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Guxiacs) Capstone Project Group No.09 GaMBA.M0210

+ Tourism activities: Maintain the position of the leading tourism company of Vinacomin, strive to keep the revenue growth and average profit of above 10-15%, improve market share outside Vinacomin

“* Value pursuit: Dynamic - Efficient - Sustainable

“* The principal business fields:

+ Providing domestic and international travel, hotel business, restaurants, rental apartments, transportation of tourists;

+ Immigration service and air ticket, train and ship agents;

+ Trading, export and import consignment and direct importation and exportation of materials, goods, machinery and equipment used in mining and other industries;

+ Customs clearance, receiving and transporting of equipments, machinery, production lines for the EPC contractor, construction projects, large industrial plants + Processing and trading of coal coal export services and oil and gas agent

services:

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Group No.09 GaMBA.M0210

2.1.2 Organizational structure

+ The company has 9 Departments (4 administration departments and 5 business

departments, which include 2 Tourism Departments, 2 Trading Departments and |

Training Service Department) In addition, VTTC has 5 branches based in Hanoi, Quang Ninh, Ho Chi Minh City, Lam Dong and Ha Tinh to exploit local market and promote products of the company

+ Total number of employees by December 31° 2011: 302

Adminis _Im/Ex Dep am : Ỉ Dept No.] cl ` HOTEL

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Group No.09 GaMBA.M0210

*Orientation of the target market: the company's customers are mainly subsidiaries, associated companies, the units under control of Vinacomin In addition, the company also focuses on expanding the outside market to improve competitiveness

of the company in the market economy, ensuring sustainable development and sustainability

2.1.3 Business result of VITC in the period of 2009-2011

Table 2.1 Report of business result of VTTC in the period of 2009-2011

services 152 787938 | 223 706 347 46.42% | 277292915 | 23.95% Financial cost 22 816 096 18 759 332 | -!7.78% 14 692 652 | -2/.68% Sales expense 97 363 430 | 173041213 77.73% | 226872700 | 31.11%

| Management expenditure 25 241 062 24 196 621 -4.14% 33779911 | 39.61%

Net profit from business acitivities 8 538 260 8 999 365 5.40% 12 158 890 | 35.11% Income before tax 9 344 272 10 192 585 9.08% 12 638 554 | 24.00% Income after tax § 326 649 7621 439 | -1062% 9 478916 | 24.37%

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Griccs) Capstone Project Group No.09 GaMBA.M0210

Comments:

-Revenue and income of VITC during 2009-2011 gradually increased, namely:

+Revenue in 2010 increased by 11.23% in sharply increased in 2011 by 77.03% - reach to 1,378 billions VND Income after tax decreased by 10.62% in 2010 and increased by 24.37% in 2011 to 9.47 billions VND VTTC keep an average divident percentage of 13-14% in the period of 2009-2011

- Gross profit has increased during 2009-2011 by 21.6%, 46.42% and 23.95%

respectively showing the fact that VITC’s business has been well expanded

- Income before tax increased by more than 9% in 2010 and by 24% in 2011

However, income after tax in 2010 decreased due to income tax from 8.75% in

2009 increased to 25% in 2010, everage EPS during 2009-2011 is 4000-4800 VND per share

- Ratio of gross profit/reverue is relatively high of about 20%

- Average salary of company’s employee increased throughout the years by about 15%, average salary in 2011 is 7.4 million VND per person per month

2.1.4 Revenue and profit breakdown by sector

Table 2.2 VTTC’s revenue and profit breakdown by sector 2009-2011

- Others 17 700 2.53% 16510 | 2.12% | -6.72% 15 199 1.10% | -7.94% 2-Income

after tax 8 526 100% 7846 | 100% | -7.98% 9 478 100% | 20.80% -Trading 6731 78.95% 6 140 | 78.25% | -8.79% 7613 | 80.32% | 23.99% -Tourism 1 783 20.91% 1688 | 21.51% | -5.34% 1848 | 19.50% | 9.53%

- Others 12 0.14% 19 | 0.24% | 58.33% 17 0.18% | -/0.53%

Source: VTTC report 2009-2011

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Gnf6o3) Capstone Project Group No.09 GaMBA.M0210

+ Tourism activity (includes travelling and hotel service): revenue accounts for 8 -

12°% of company revenue but profit accounts for 19-22% Revenue in absolute

value increased in 2009-2011 but decreased in relative ratio (percentage) because

trading activity of VITC has been expanded with higher speed

+ Trading acitivity: revenue accounts for 86 - 90% of company but profit account for only 79-81% Revenue for trading acitivity increased continuously during 2009-

2011 and especially in 2011 it increased by 1.85 times compare to 2010

+ Other activities: revenue just accounts for 2-3% company revenue and gained no profit

Thus VITC has specialized in 2 main sectors, namely trading sector -being the fundamental base and tourism sector accouting for just a piece of company

With the experienced and high qualification staff, WITC has provided good services on import/export activities, transportation of materials and equipment for major projects for EPC contractors

Business results of the company in 2011 has shown that the revenue from trading activity accounted for 90.86% net profit for 80.32% Thus, it can be said that main activity of the company is trading services and therefore it dominates the other activities of the company Trading activity has supported tourism activity in following fields:

- Creating good finance for the company

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- Forming company image

- Making advertisement through customer network

However, although the current business result of trading activities is positive but it mainly thanks to the mechanisms and policies of Vinacomin as mother company In Vinacomin Group’s development orientation, the group will step by step to carry out

"socialization" in coal production process, allowing coal producers to use contractors

in their producing process and will not need to invest machineries and equipments As a

result the trading activities of VTTC will definitely be affected Therefore, we propose that the company need to pay more attention on tourism activities for a balanced and stable business development Furthermore, VITTC needs to be more independent from

Vinacomin

2.2 Company’s external environment analysis

First, we will conduct an analysis to see how the changes of the macro environment impact on the tourism industry of Vietnam and VTTC, from which to determine the necessary actions to adapt those changes

2.2.1 Macro environment analysis (PEST++ model)

2.2.1.1 Legal, governmental and political factors

-Vietnam has always been considered as a safe destination of foreign tourists thanks to political stability in many years This is one of the first significantly importance factors for the choise "Where to go" because no one wants to choose an unsafe and fluctuated politic situation destination This is a great opportunity for the tourism industry in general and VITC in particular to develop their tourism

activities in the future

-Open diplomatic policy and the conscious recognition of the State of Vietnam are favorable factors paving the way for tourism development Since 2001, Vietnam's tourism sector has been identified as a key economic sector, it is well considered in terms of facilities as well as favorable conditions on the policy and development policy

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GriGcs) Capstone Project - Group No.09 GaMBA.M0210

-Program "ASEAN tourism development strategy by 2015" has been signed by Ministers of Tourism of 10 ASEAN countries in January 2012 including the content

"ASEAN visa Senghen" within 05 years allowing visitors from outside Asean region to "travel around ASEAN with only one visa" This is a positive factor to create favorable conditions to bring international visitors to Vietnam

-The current legal system of Vietnam is still incomplete Tourism Law was approved at 7" session of cource XI by the National Assembly of Socialist Republic

of Vietnam on June 14, 2005 effective from June 01, 2006 But till now the situation has much changed as the Vietnam was admitted to the WTO on July 11,

2006 and have many commitments with this organization in tourism sector Also in

2006 Vietnam has signed many agreements and treaties with other countries and international organizations such as WTO, APEC, AFTA, etc Since the

implementation of the Tourism Law, the Decrees, and the Circulars guiding the

implementation of the Tourism Law, there are many problems in practice requiring additional completion in accordance with the present and future circumstances as Vietnam integrates deeply to regional and international levels

-Positive viewpoint of the mother company (Vinacomin) in workers’ health care of "Workers’ health is company’s asset "so Vinacomin always take due regard

to the care and recovery for miners’ health after hard work This is reflected in the funding allocated for the health care tourism activities in Vinacomin’s subsidiaries, which has always been preferably oriented With the rapid and strongth development of Vinacomin in recent years, this funding in most subsidiaries of

Vinacomin tends to increase

-Descending the protection of Vinacomin: Previously VITC has the great advantage of being protected by Vinacomin toward its subsidiaries However, the relationship between parent company and VITC as well as other subsidiaries already have basic qualitative changes in recent years as a majority of companies-

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- Risk of divestment from Vinacomin:

Pursuant to Government instruction on divestment issue, in order to concentrate capital on

the core business of the Group, Vinacomin is implementing restructuring capital of about

44 billion VND in a number of companies such as transferring all shares in Dak Nong

tungsten factory, Ha Tinh Port JSC Ha Tay Real Estate JSC and Long Thanh

International JSC

At the same time, the Group is also carrying out procedures in the divestment process of

some other companies such as Aviation Insurance JSC, Hai Ha industrial zone, Vietnam Investment Fund, Song Ninh shipbuilding JSC with total capital of about 160 billion USD

In the coming time, Vinacomin will continue to consider withdrawing capital from those

companies specializing in other fields outside coal and minerals production However,

in case of VITC, we assume Vinacomin will still hold big stake in the company because of following reasons:

- VTTC’s business result during previous years is relatively good proven by the following results:

+ The ratio of ROE (Return on Equity) is 32.15%, 24,70% and 26.06% respectively in 2009-2010 and 2011 — a relative high ration

+ Annual dividend of about 13-14% per share

- More important reason is that VITC is a joint stock company which has been established aimed at serving Vinacomin, namely to help improving spiritual life and working environment for the miners who have to work in a very hard environment of coal mines by providing them with health care and relaxation tourism service It is very important as that is a supportive work, Which contributes to Vinacomin’s success 1n coal and minerals production

activities

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GriGcs) Capstone Project / Group No.09 GaMBA.M0210

Thus we assume that by 2017-2018 there will be no remarkable capital divestment

from VITC by Vinacomin And even if there is it will be a small one Further

more, VI'TC becomes independent gradually in its activities, especially in tourism sector This fact can be seen in the number of outside Vinacomin tourists tends to increase during previous years

2.2.1.2 Economic factors

As a company operating in the service sector, the business of VI'TC is deeply influenced by economic factors The influence of economic factors includes economic growth, inflation, economic cycles, the increase or decrease in interest rates, stock prices, the trend of the U.S Dollar value, tax system and taxes, etc, namely:

-Steady economic growth with a GDP growth rate of about 7% per year, Vietnam’s income per capita continuously improved: from 1063USD in 2009, the income per

capita of Vietnam has increased to 1153USD in 2010 and 1320USD in 2011 This is

a positive factor encouraging the needs of travel of the people increased

According to statistics of the Vietnam National Administration of Tourism, the

number of domestic and foreign tourists of Vietnam has tended to increase with an average of 10-20% The number of VI'TC’s tourist during 2009-2011 also increases from 9,668 people in 2009 to 11,954 in 2010 and to 12,325 in 2011 - an average growth rate of above 10% per year

-The average income of workers in Vietnam coal industry increases by 13.4%

in the last 3 years due to strong growth of Vinacomin: In the period 2008 to 2011, Vinacomin had a high growth rate, revenue and profit continuously increased with

an average increase of 21.1% and 8.3% respectively so the average income increased 13.4% Accordingly, the number of workers involved with the tours by company's budget also increased

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- The global economic recession in 2012: 2012 is assessed by economic specialists

to be a difficult for the world economy with common growth at rate under 4% Even the emerging economies such as China, Russia, Brazil has GDP in 2012 are forecasted to be lower than in 2011 China's GDP growth in 2012 is forecasted at just over 8% instead of 9-10% as before Russia's GDP growth rate also falls to around 4% in 2012 (it was 4.5% in 2011) Moreover, the world economy in 2012 still faces many risks such as public debt crisis, most seriously in Europe, America, Japan .This difficult situation is not only predicted in 2012 but also may drag on for years to come Thus, this is not a positive signal for travelling businesses in

2012 because the number of visitors can be reduced by the direct effect of economic

recession According to the Vietnam National Administration of Tourism, the

number of international visitors to Vietnam in May 2012 reached 456,749 people, a 25.8% lower than that of April 2012 and decreased 4.4% compared to the same period of last year

-Tightening monetary management policy: With a specific feature of being enterprise doing business of high value goods, capital of VITC is mainly formed from liabilities (about 70 -85%) so the company is directly and sensitively affected bby the state’s monetary policy

In years 2010 and 2011, the State could not well control the exchange rate in terms

of lacking foreign currencies the company has incurred losses arising from exchange differences which are 14.2 and 8.7 billion VND respectively

‘The monetary management policy, credit tightening of the State in 2012 such as lowering interest rates (in the first 6 months of 2012 interest rates were adjusted down 3 times from 14% to 12% -11% - 9%), tightening exchange rate management and stability, which have been helping VITC alleviate financial difficulties such as reducing interest paying amounts, reducing the risk of exchange rate differences in financial arrangements These factors are positive to the company

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-High inflation of Vietnamese economy: Vietnam's economy in 2012 is forecasted

to grow from 5.62% to 6.4796 and inflation can vary in the range forecasted from 7% to 12.4% depending on the ability to control of the Government However, in view of many economists, GDP may reach above 5% while it is difficult to control the inflation rate at one digit This can largely effects on VITC business Specifically, when inflation is high prices of input services of the company will increase (the cost of transportation, accommondation .) leading to increases in the cost of services However, the company can not adjust the price of contracts signed

by the end of 2011 or the principle long-term contracts signed on the basis of 1-2 years in which prices have been established with a certain rate adjustment This will negatively affect business operations of the company

2.2.1.3 Cultural, social, geological and demographic factors

-Vietnam has a potential tourism with many beautiful natural landscapes all over the country, a diverse culture with many unique cultural heritages which have been recognized by the world Moreover, Vietnam has gone through many wars in different periods so it attracts visitors to learn about the Vietnam’s history Those are very favorable conditions for tourism development in Vietnam

-The technical facilities, accommodation and tourism services system in Vietnam has been rapidly growing but generally the size, convenience and tourism products are small and not uniform and unprofessional Besides, transportation infrastructure in Vietnam is poor and lack of synchronization Currently, among the few international airports only Hanoi and Ho Chi Minh City airports are the two major gateways to welcome international visitors by air; no seaport is suitable to welcome tourist ships; road, rail and water way systems to tourism points are not synchronic, low quality and are not connected to be a concrete network

-Tourism changes toward unfavourable trend for travelling companies: Century XXI is considered to be the century for the development of self-service tourism types - meaning travelers choose destinations arrange travel route and

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or for short time For this reason, the demand for traveling through traveling companies will be affected in a downtrend

-Vietnam is currently in the periods of golden population structure with the rate

of people aged 15-64 years old is 70% - equivalent to 61.46 million people in 2010 This rate is forecasted to be at 71% - equivalent to 68.44 million people in 2020 This is an advantage for VITC not only about the human resources involved in but also the potential visitors for tourism companies

2.2.1.4 Technological factors

In recent years, the rapid development of information technology has brought many benefits to WITC in many activities such as executive management, service delivery, customer support, product and services promotion through the company’s website The application of information technology in operating activities has helped the company reduce communication costs and increase the remotely work efficiency

2.2.1.5 Globalization factors

As Vietnam has been deeply integrating into the world economy, VITC and tourism companies in Vietnam are experiencing a number of advantages and disadvantages follows:

+Adventages: Commitment to the WTO in the field of tourism allows tourism compenies to form joint ventures with foreign companies to exploit the inbound Services and provide domestic travel services for foreign visitors in Vietnam Thereby, the companies have opportunities to access and learn experiences of

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