Internship Report Song Con Sugar JSC

The current situation of application and development of related diversification strategy at Song Con Sugar JSC .... In such case, the business strategy becomes vital than ever before: “w

TABLE OF CONTENTS

PREFACE

CHAPTER 1: INTRODUTION TO SONG CON SUGAR JSC 1

1.1 History and development of Song Con Sugar JSC 1

1.2 Organizational structure 2

1.3 Overview of Song Con Sugar JSC’s business activities 5

1.4 Song Con Sugar JSC’s business performance from 2011 to 2013 5

CHAPTER 2: ANALYSIS OF RELATED DIVERSIFICATION STRATEGY AT SONG CON SUGAR JSC 8

2.1 The current situation of application and development of related diversification strategy at Song Con Sugar JSC 8

2.1.1 Implementation of related diversification strategy in recent years 8

2.1.2 Development of related diversification strategy by formulating new project in capacity increase 10

2.2 Evaluation of implementing related diversification strategy at Song Con Sugar JSC 12

2.2.1 Strengths 12

2.2.2 Weaknesses and causes 13

CHAPTER 3: RECOMMENDATIONS FOR RELATED DIVERSIFICATION STRATEGY IMPLEMENTATION AT SONG CON SUGAR JSC 15

3.1 Strategic business units’ development orientation 15

3.2 Recommendations for Song Con Sugar JSC 16

3.1.1 Human resources 16

3.1.2 Accounting system 17

3.3 Recommendations for Vietnam Sugarcane & Sugar Association (VSSA) 17

CONCLUSION AND SUMMARY OF INTERNSHIP 19

REFERENCES 21

PREFACE

As one of the investment policies of the Vietnamese government to develop the economy in Tan Ky, which was a poor mountainous district in the west of Nghe An province, Song Con Sugar Factory (today is Song Con Sugar JSC) was established to produce sugar from sugarcane in order to change the scattered, backward, self-sufficient thoughts of farmers and at the same time create job opportunities for local people Therefore, the exit and development of the company has not only an economic signification but also a remarkable social meaning However, in the present context when the globalization and integration bring a lot of opportunities and threats to Vietnamese enterprises, Song Con Sugar JSC has to be more careful to find out the most suitable direction to drive the enterprise to the common goals In such case, the business strategy becomes vital than ever before: “without a strategy the organization

is like a ship without a rudder, going around in circles” (Joel Ross & Michael Kami)

According to the schedule of Foreign Trade University, I spent a five-week

internship at Song Con Sugar JSC, which majors in producing and selling sugar and microbiological fertilizers Under the training of my direct instructor, Mr Nguyen Khanh Hung, as well as the condescension of the company’s staffs, I have been given a great opportunity to apply my academic knowledge to practical problems and compare with the theories I have learned at the university Based on my background knowledge and the experience I gained during my internship, I decide to choose the topic for this

report as “Related diversification strategy at Song Con Sugar JSC”

The report consists of three separate parts:

Chapter 1: Introduction to Song Con Sugar JSC

Chapter 2: Analysis of related diversification strategy at Song Con Sugar JSC

Chapter 3: Recommendations for related diversification strategy at Song Con

Sugar JSC

Due to my limitation of knowledge, skills and experience, mistakes and faults are

inevitable I welcome all comments, advices and suggestions that help me improve the

quality of the report

Finally, I would like to express my gratitude to my instructors and Song Con

Sugar JSC’s staffs for helping me complete my mid-course internship

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CHAPTER 1: INTRODUTION TO SONG CON SUGAR JSC

International transaction name: Song Con Sugar Joint Stock Company

Headquarter: Tan Ky Town - Tan Ky District - Nghe An Province

Tel: 0383 882 214 - Fax: 038 882 200

Song Con Sugar JSC was formerly known as a sugar production workshop of Song Lam Sugar Factory (Hung Nguyen - Nghe An) established in 1971 After that, because of war, it was moved to Tan Ky District, merged with Tan Ky alcohol production workshop in order to build Song Con Sugar - Alcohol Factory

In 2001, it was renamed as Song Con Sugar Company operating in accordance with Decision No 2466/QD-UB dated December 28th 1992 issued by People’s Committee of Nghe An Province; Business License No 106713 dated December 26th

1993 issued by Economic Arbitrator of Nghe An Province

According to Decree No 187/2004/ND-CP dated November 16th 2004 of the Government on transformation of state-owned companies into join-stock companies and Circular No 126/2004/TT-BTC dated December 24th 2004 providing guidelines for implementation of Decree 187/2004/ND-CP, People’s Committee of Nghe An Province issued Decision No 3724/QD-UBND-DMDN dated October 18th 2006 approving equitization: transforming Song Con Sugar Company into Song Con Sugar JSC, directly under the Vietnam Sugarcane & Sugar Association (VSSA)

In recent years, Song Con Sugar JSC has expanded its materials area, invested more capital in local farmers and provided new sugarcane varieties with high yield, good quality for the farmers

Besides expanding the materials area, Song Con Sugar JSC has also focused on machine investment in which company increased the capacity of production line gradually: 15 tons of sugarcane per day at the starting point, 30 tons/day in 1980, 100 tons/day in 1990, and 200 tons/day in 1995 In 1997, Song Con Sugar JSC implemented the new project constructing a modern production line, using synchronous equipment with the capacity 1,250 tons of cane per day from Spain, applying sugar production technology from Cuba which have longstanding reputation

in sugar production This project was under the program named 1million tons of sugar per year of Vietnamese Government, using the combination of Spanish ODA and OECD capital with VND 230 billion of the total initial capital In March 2001, this line was completely installed and upgraded every year and has reached 2,500 tons of sugarcane per day in 2009 This capacity brought high economic efficiency and has been maintained until now

Song Con Sugar JSC has developed for 43 years, completed all plans and duties well and positioned itself in the market Song Con Sugar JSC’s success has been recognized through some following significant rewards:

- Vietnam Association of Food Science and Technology (VAFoST) awarded the Gold Cup of food quality and safety in 2003

- Ministry of Agriculture and Rural Development rated as efficient company contributing a significant portion to sugar and sugarcane industry of Vietnam

- Song Con Sugar has applied quality management system ISO 9001 - 2000 since 2004 and now switches to ISO 9001 - 2008

The organizational structure of SONG CON SUGAR JSC is illustrated as follow:

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Chart 1.1: Song Con Sugar JSC’s organizational stucture

Annual General Meeting

Board of Directors

Executive Director

Deputy Director of Business

Planning

Department

Market Department

Deputy Director of Materials

Agriculture Department

Deputy Director of Technology

Technology Department

Deputy Director of Production

Sugar Factory Fertilizer Factory Microbiological

Board of Supervisors

Finance Department

Accounting-Human Resources

- Administration Department

Functions and duties of each department:

 Annual General Meeting: is the highest power position in the company, is held

annually Sometimes, it could be organized extraordinary meetings in compliance with the company’s charter

 Board of Directors: is a body of elected or appointed members by General

Meeting of Shareholders, has 5-year tenure

 Board of Supervisors: is body that operates objectively, honestly,

independently, and is responsible to General Meeting of Shareholders for its inspection contents and results

 Executive Director: is appointed by Board of Directors, is legitimate

representative of the company, manages and controls the company operation since the appointment decision comes into force; four Deputy Directors assist Executive Director and are responsible for providing leadership and direction for directly under departments These people are five members of Board of Managers

 Planning Department: is in charge of long-term and short-term business plans

and strategies for the whole company

 Market Department: is in charge of market research, marketing and deals with

problems arising from customers

 Agriculture Department: is in charge of sugarcane material areas, supports

farmers by providing them with capital, cultivation techniques, sugarcane varieties…

 Technology Department: is in charge of production line and technology

system which support other departments and factories

 Sugar Factory: produces cane sugar (sucrose) from sugarcane

 Microbiological Fertilizers Factory: produces microbiological fertilizers from

filter cake (the residual after finishing sugar processing)

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 Accounting - Finance Department: advises Executive Director on financial

management, is responsible for recording, codifying and processing financial information, preparing financial statements

 Human resources - Administration Department: advises Executive Director

on the organizational structure of business, arranges the human resources appropriately with the company’s business requirements

According to establishment decision, Song Con Sugar JSC was certified the business license No 2703000988 by People’s Committee of Nghe An Province Under that Decision, there are two main business sectors: producing sugar from sugarcane what has been deemed as the main raw materials and producing microbiology fertilizer from the byproducts of sugar processing

Because sugarcane is one kind of short-term industrial trees, the sugar production is highly seasonal Therefore, Song Con Sugar JSC has diversified its business by producing microbiological fertilizer for both utilizing the byproducts after producing sugar and creating more job opportunities for the local employees when finishing crushing seasons This related diversification also generates more revenue for the company and the workers

Table 1.1: Business performance of Song Con Sugar JSC form 2011 to 2013

288,684,812,690

262,569,634,847

265,213,927,640

288,647,312,690

238,546,426,670

210,712,101,993

254,913,096,917

24,023,208,177

54,501,825,647

33,734,215,773

1,499,608,808

1,849,840,356

1,416,423,732

7 Financial activities expenses

13,301,451,924

33,674,340,291

19,221,795,510

in which: Interest expense

-

7,154,070,483

8,391,688,610

2,220,554,198

2,139,998,441

1,040,881,791

9 General&administration expenses

7,954,088,270

11,857,060,386

13,236,270,675

2,046,722,594

8,680,266,885

1,651,691,529

194,690,972

1,424,683,218

162,672,201

(529,633,629)

1,424,683,218

124,619,072

1,517,088,965

10,104,950,103

1,776,310,601

15 Profit tax expense

-

689,585,792

222,038,825

1,517,088,965

9,415,364,312

1,554,271,776

Source: Song Con Sugar JSC’s Accounting - Finance Department

Total profit after taxes 520.6% -83.5%

Source: Song Con Sugar JSC’s Accounting - Finance Department

It can be seen that among three years from 2011 to 2013 Song Con Sugar JSC generated the highest profit in 2012 From 2011 to 2012, because total revenue increased and total expenses decreased, the profit climbed sharply by VND 7,898,275,347 (520.6%) The main reason of this significant increase was the considerable reduction of cost of goods sold, which resulted from the following context: 2011-2012 crushing season was evaluated as the most successful crop in five recent years thank to high quality and quantity of sugarcane in almost of cane material areas in Vietnam Nevertheless, high sugarcane yield lowers the cane’s price in the market At that time, in Tan Ky town, Nghe An, two big floods at the end of 2011 and early 2012 destroyed the sugarcane material areas dramatically, which leaded to the shortage of sugarcane in Tan Ky where Song Con Sugar JSC has committed to purchase sugarcane at high price (VND 900,000/ton) from January 1st 2011 to April

30th 2013 Therefore, Song Con Sugar JSC could buy a big amount of sugarcane at market price from other areas This helped the company to reduce the cost of materials remarkably

CHAPTER 2: ANALYSIS OF RELATED DIVERSIFICATION

STRATEGY AT SONG CON SUGAR JSC

2.1 The current situation of application and development of related diversification strategy at Song Con Sugar JSC

2.1.1 Implementation of related diversification strategy in recent years

Nearly ten years ago, Song Con Sugar JSC applied diversification strategy by producing and selling a bundle of products processed from sugarcane such as cane sugar (the main product), molasses, ethanol and microbiological fertilizers However, because of variety of products, company could not manage efficiently; the economic effectiveness of extra products was very low and affected negatively to the productivity

of sugar production

In that circumstance, a meeting of shareholders was held and the company decided to cut down the ineffective strategic business units, maintained only two divisions: sugar and fertilizers Song Con Sugar JSC gathered its resources and capacities to redesign its business operation, concentrated on two independent factories:

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Chart 2.1: Song Con Sugar JSC’s Strategic business units

Under the direct control of Board of Management, each factory has their own specification, technical system, duties and totally is responsible for its operation Besides that, these two factories have the interconnected relationship: Sugar factory’s output becomes microbiology fertilizers factory’s input Microbiological fertilizers factory uses products of the sugarcane processing except cane sugar (sucrose) as the materials to produce fertilizers The main raw material in microbiological fertilizers production is filter cake which is the final residual after sugarcane processing Moreover, bagasse, the residual dry fiber of the cane juice has been extracted, is used

as fuel source for the boilers in the generation of process steam in sugar plants and for the dryer in microbiological fertilizers processing

The combination of these two strategic business units helps Song Con Sugar to manage its resources effectively, make use of byproducts from cane sugar processing

in order to save the materials cost in microbiological fertilizers production

The operation results of these two factories in last three years are presented as follow:

Song Con Sugar

JSC

Microbiological Fertilizers Factory

Production Teams