Solutions to improve the profit at the Internayional Development and Discovery Company

Solutions to improve the profit at the Internayional Development and Discovery Company Bachelors thesis Solutions to improve the profit at the Internayional Development and Discovery Company Bachelors thesis

Table of Contents

ABBREVIATIONS 3

LIST OF TABLES, LIST OF FIGURES 4

INTRODUCTION 1

Chapter 1: The general theory of corporate profit 3

1.1 Overview about the corporate profit 3

1.1.1 Concept of enterprise and its activities 3

1.1.2 Definition of the corporate profit 4

1.1.4 The importance of the profit 7

1.2 Indicators to measure the profit of enterprises 9

1.2.1 Absolute indicators to measure profit 9

1.2.2 Relative indicators to measure profit 11

1.3 Factors affecting the profit of the enterprise 15

1.3.1 Subjective factors 15

1.3.2 Objective factors 19

Chapter 2: Current status of profit at the International Development and Discovery Company 21

2.1 Introduction about the International Development and Discovery Company 21

2.1.1 History of the International Development and Discovery Company 21

2.1.2 Main operating fields 23

2.1.3 Operating capacity 27

2.1.4 Organizational structure 29

2.1.5 The financial situation at the International Development and Discovery company 30

2.2 The current situation of the profit at the International Development and Discovery company 37

2.3 Assessment of the situation of the profit at the International Development and Discovery company 42

2.3.1 The achievements 42

2.3.2 The limitations 44

2.3.3 Causes of the limitations 45

Chapter 3: Solutions to improve the profit at the International Development and Discovery Company 49

3.1 Orientation about business operation in the next two years 49

3.1.1 Difficulties and advantages of enterprise 49

3.1.2 The orientation of business operation in the next two years 51

3.2 Solutions to improve the profit at the International Development and Discovery company 53

3.2.1. Solutions to increase the revenues 53

3.2.2 Solutions to control the expenses 57

CONCLUSION 61

REFERENCE 62

LIST OF TABLES, LIST OF FIGURES

Table 2.1 The liabilities and equity of IDD in the period from 2013-2015 30

Table 2.2 The assets of IDD in the period from 2013-2015 33

Table 2.4 The cash flow statements of IDD in the period from 2013-2015 36Table 2.5 The income statements of IDD in the period from 2013-2015 37Table 2.6 The absolute profit of IDD in the period from 2013-2015 39Table 2.7 The relative profit of IDD in the period from 2013-2015 41

Figure 2.3 Changes in liabilities and equity of IDD from 2013-2015 31

Figure 2.5 Revenues and earnings after tax of IDD from 2013-2015 38

 Rationale of the thesis

In the market economy, most businesses are aiming to making profit This is thefrequent and long-lasting target of the business entities Profit is not only the source ofincome of the owners but also the basis for extending production and business in themarket In addition, the profit is also an important indicator reflecting the businessperformance of the enterprise

In the specific case of the International Development and Discovery Company(IDD), the profit is more important Especially in 2014, this company had the negativeearnings after tax To be specific, the earnings after tax fell dramatically (222.18%) andeven IDD dropped in a loss of 775 million dong

Moreover, the earnings after tax of the company has gone up from 2015 to nowbut it still has many disadvantages if compare with some companies in the sameindustry For example, comparing with CMC – a well-known medium size company inthe same industry, IDD’s scale is about 1/8 but the profit is just about 1/12 Thereforethe imperative requirement at that time is to improve the profit

Coming from the importance of this topic as well as the urgency of this to IDD,along with the knowledge basis studying in the National Economics University, the

topic:”Solutions to improve the profit at the International Development and Discovery Company” had been chosen.

 Target of the thesis

The thesis synthetises the theory about the profit of enterprises and analyzes thespecific profit situation at International Development and Discovery Company (IDD).From that, the possible solutions can be given to improve the profit of IDD in the nextyears

 Objectives and scope of the thesis

Object of the study: Profit of the company

Scope of the study: Real situation of the profit at the International Developmentand Discovery company from 2013 to 2015

Chapter 1: The general theory of corporate profit

1.1 Overview about the corporate profit

1.1.1 Concept of enterprise and its activities

Enterprise is an organization where goods and services are exchanged for another

or for money Every enterprise requires some form of investment and enoughcustomers to whom its output can be sold on a consistent basis in order to make profit Businesses can be private owned, not-for-profit or state-owned

According to the regulation in Vietnam, enterprise is an economic unit, havingassets and own name, having stable transaction head office Enterprise must beregistered according to the law to conduct operating activities in the market

The enterprise has main activities as following: operating activity, financialactivity and other activity However, the profit of enterprise mainly comes fromoperating activities

Operating activities are company’s typical daily processes that generate income.

Operating activities pertain to a company’s core business activities such asmanufacturing, distributing, marketing and selling products or services Theseactivities should provide the majority of a company’s cash flow and will largelydetermine whether a company is profitable or not

Financial activities are any transactions or initiatives undertaken by a business to

further the fulfillment of economic goals Financial activities may include buying andselling of products or assets, organizing and maintaining accounts, issuing stocks orbonds, arranging loans or other business activities with specific monetary objectives

Other activities: extraordinary activity which occur infrequently such as the sale

of assets, receivables from partners breaching of contracts, bad debt processed,violations of breaching contracts; tax penalty, tax arrears; errors, confusion

1.1.2 Definition of the corporate profit

Historically, there are many different definitions about the profit:

In view of the classical economists before Marx, the dominant component in theselling price compared to the cost of production is profit

Karl Marx said that the surplus value or dominant component in the whole value

of goods, in which the surplus labor is the unpaid labor of the materialized workers, isprofit

Modern economists P.A.Samuelson and W.D.Nordhaus had the definition: theprofit is a dominant income, equaling the total income minus total outcome To bemore specific, the profit is the difference between total revenues and the total cost Today when studying about the profit, almost the economists have researched inthe view of Karl Marx The profit is seen as a synthetic indicator showing businessresults of the enterprises In view of the enterprises, profit is the difference between therevenues earned and the expenses spent

1.1.3 The sources of the profit

Based on the source of the activity making profit, the profit of the enterprise isdivided into 3 sources:

 Profit from operating activities : is the difference between the revenues from

selling goods and providing services to the selling price (selling price includes cost of

goods sold, selling expenses, administration expenses) This is the kind of profit whichaccounted for a large part in total revenues of an enterprise

Profit from

operating

activities

N et re ve

C ost of go

S el li n

A dministr ation expense

nu es

od s sol d

g ex p e ns es

s

In which:

 Net revenue from selling goods and providing services: is the difference

between the sales revenue with deduction (discount, reduced selling price, the value ofgoods returned, indirect tax, the export tax to be paid)

 Cost of goods sold in the period: the production cost of sold products

(including raw material costs, direct labor costs and general manufacturing costs) forthe manufacturing enterprise; or the input price for commercial enterprises This is thecost of raw materials, material and fuel used directly for the production of goods andservices of enterprises This item usually accounts for a large share of the cost ofproduction So that, the managers always pay attention to the use the materialsreasonably, minimizing failure rates

 Cost of direct labor: This item includes all salaries, bonuses, allowances,

insurance expenses, that pay for employees directly producing goods and services

In the industry like textile or construction, the cost of direct labor is high becausethey have to use more direct labor in the production However, in some industry likefinance or information technology, this cost is smaller

This kind of cost also depends on the development of machine In developedcountries, businesses are often equipped modern and advanced machinery, using lessdirect production workers Thus, the share of this item in the production cost is usuallysmall In the developing countries such as Vietnam, due to machinery and equipmentlevel is not high, using more direct labor, share in the cost of direct labor is oftenlarger

 Selling expenses: are expenses incurred during products, goods and

services consumption (cost of packaging, shipping, handling, advertising, of cost oftools, utensils, cost of out-sourcing, cost of warranties, wages, allowances for salesstaff ) This is a cost item that enterprises spend to serve for the goods, products andservices consumed such as market research costs, advertising, preservation, packaging,wages and benefits for workers sales,

Sales plays very important role in the operation of the business A business canachieve very high efficiency in the production of goods, but if there is no reasonablesales strategy, product consumption was slow inefficient, which means that businesscan absolutely still falling at a loss Especially in the market economy, there is a fiercecompetition between the competitors, the enterprise having good quality of sellingservice will dominate the market

Therefore, the cost for the sales of the business is also a very important type ofcosts, which should be focused on investment and allocation in a reasonable way,maintaining product sales network efficiently, enthusiastic sales team and the qualityassociated services

 Management expense: includes cost business management, administrative

management and general expenses related to business activities of enterprises (salariesand allowances for the Board of Directors and managers of each department, theexpenses of furniture and office materials, depreciation for business, taxes, charges,fees, insurance, out-sourcing expenses, seating, expenses for business trips, )

This item includes the cost of business management, administrativemanagement and other general expenses related to the operation of the entireenterprise, such as the cost of materials, office stationary, depreciation of the generalfixed assets, salaries and allowances for the board of directors,

Business management is an activity embracing all the other activities of thebusiness The suitable management strategic and policy will push all other activities

effectively, increasing profits for businesses Therefore, companies, enterprises oftenspend significant expenses for this work.

 Profit from financial activities : this is the difference between revenues fromfinancial activities and expenses from financial activities, including:

 Revenues from financial activities: the proceeds from investing activitiesand capital finance (income from joint ventures capital, interest from trading securities,the difference between interest income and interest expenses of bank loans, gains fromforeign currency sales, income from property leasing )

 Expenses from financial activities: are those incurred in financial activities(interest expense, costs of joint venture, joint venture losses, reduced of stock price, thecost of buying and selling securities, property rental costs, )

 Profit from other activities: is the difference between income from extraordinaryactivity (sale of assets, receivables from partners breaching of contracts, bad debtprocessed ) and expenses from extraordinary activity (cost of sale of assets, theresidual value of fixed assets liquidation or sale, violations of breaching contracts; taxpenalty, tax arrears; errors, confusion

In conclusion:

Total profit = Profit from operating activities + Profit from financial activities + profit

from other activities

1.1.4 The importance of the profit

Profit plays a very important role for the survival and development of theenterprises in the business as well as for the entire economy Especially in the marketeconomy today, the profit goal becomes a frequent and long lasting target of thebusinesses

1.1.4.1 The important of the profit to the enterprises

 The profit ensures the continuous business operation of a business

 Profit is an important source to compose the equity The use of this fundhelps businesses increase the level of financial independence as well as save the cost ofcapital compared with raising equity from issuing common stocks This source ofcapital is the basis for re-investment, business expansion, technological innovation inorder to improve labor productivity and product, service quality and save costs This,thus, helps enterprise have chance to improve competitiveness in the market.

 Profit is an important source of finance to ensure solvency for thebusiness The higher profit the enterprise has, the higher ability the enterprise can paythe debts Moreover, they can enhance the credibility when borrowing from creditinstitutions as well as misappropriated funds from business partners

 Profit is an important indicator to reflect the business efficiency of an enterprise.

This is one of the criteria for determining the success or failure of theenterprise Profit itself can say only about the business results of the business (profit orloss) But based on the calculation of financial ratios, they can show the relationshipbetween profits and investment capital, costs, revenues,… assessing the businessperformance of the enterprise Compare them with the data in the past and withindustry averages, with the objectives of the business, they can be concluded the level

of success or failure of any business enterprise in a period

In addition, through the profit and business performance indicators, we also canassess the competency of the management in the enterprise, assess the effectiveness ofmanagement cost and efficiency in the product sales From that, we can give somerecommendations for suitable with the actual situation

 High profit enhances the life quality for employees The enterprise will have more

money for wages as well as bonus and benefit fund As a result, the life of employees isimproved This is an incentive to encourage employees to stick with businesses andincrease labor efficiency, promoting business development

 High profit is a base for enterprise to set up corporate funds (such as investment

and development fund, financial reserve fund, unemployment funds,…)

 Profit brings the income for the enterprise owners Enterprises have a lot of

different goals Standing on financial management perspective, the goal of business is

to maximize the assets value of the owners Standing on value creation

perspective, maximizing the profit is the biggest target However, after all, this goal

also aims to continuously increase the value of assets for the owners

1.1.4.2 The important of the profit for the economy

 The profit for re-investment of enterprises is also a prerequisite for the growth of the entire economy Considering the scope of the entire national economy, profit is the

basic source of accumulation for expanded reproduction of the national economy,expansion of business, creating jobs and increasing incomes for workers

 A part of the profit of the business is an important income of the state budget in the form of corporate income tax Through the implementation of its obligations to the

State budget, the State can carry out investment activities for infrastructuredevelopment, increasing social welfare

 Profit is an important indicator to assess the overview of the level of development

or recession of an industry and the overall economy It also reflects the effectiveness of the macro-management policies of the State for the business activities of enterprises.

Suitable macroeconomic policies of the State will create favorable conditions forbusiness operations of the enterprises, thus allowing businesses improve their operatingprofit In contrast, the irrational policy will curb development of the business andadversely affect business profit

1.2 Indicators to measure the profit of enterprises

1.2.1 Absolute indicators to measure profit

Absolute profit is indicators reflecting the business performance of the enterprise

 Earnings before interest and tax (EBIT)

EBIT = Total revenue - Total variable costs - total fixed costs (excluding interest)

Revenue from selling goods and providing services is a key component to

generate the revenue of the business This index is defined by the formula:

TR = P * Q

In which: TR is the total revenue of the enterprise in a business period

P is the price one unit of goods and services

Q is the quantity of products, goods and services consumed in thebusiness period

EBIT is profit before interest payments and corporate income tax EBIT indicator

is widely used because it eliminates the effects of differences in capital structure andrate of corporate income tax between different companies

This is not only an indicator used to evaluate the possibility of obtaining thecompany's profits, but also often used to calculate the solvency ratio of the corporate

by creditors (TIE = EBIT/Interest expense)

 Earnings before tax (EBT)

EBT = Earnings before interest and tax (EBIT) - Interest payable during theperiod

EBT is profit before corporate income tax payment This indicator eliminates theimpact of differences in corporate income tax rate between different companies

EBT indicator is usually considered by tax authorities because it determines thecorporate income tax that the company must pay to the government

 Earnings after tax (EAT)

EAT = earnings before tax (EBT) - Corporate income tax payable in the periodOr: EAT = Profit before tax * (1 - tax rate of corporate income tax)

EAT is the net profit of the business, reflecting the profitability of the enterpriseafter deducting all costs incurred and corporate income tax This indicator is usuallyconsidered the most in all absolute indicator by the owners, as it pertains the most totheir interests (the income of the owners is taken from earnings after tax).

However, to evaluate and compare business performance of enterprises in the

same industry, the analysts are less interested in the absolute profit indicators becausethese indicators strongly influenced by the scale of the business Instead, they usuallyuse relative profit indicators

1.2.2 Relative indicators to measure profit

 Return on investment (ROI)

ROI= Earnings after tax

Averagetotal investment capital

Or

ROI= EBT (1−taxrate of corporate income tax)

Average totalinvestment capital

ROI is an indicator showing the efficiency of investment, showing with 1 dollar

of investment after a business period how much we will receive after tax There aresome ways to calculate ROI, depending on the views and the target of analysis

The higher this indicator is, the more efficient the business operates Maintaining

a high ROI in a sustainable way is not easy, requiring businesses to have the allocationand the use of funds to finance these assets in a reasonable manner as well as have wellorganization in product sales and cost savings

 Return on asset (ROA)

ROA= Earningsafter tax ( EAT )

Average total assets =

EBT (1−tax rate of corporate income tax)

Average total assets

Or

ROA= Net operating profit after tax(NOPAT )

Average total assets

In terms of value, ROA is similar to ROI However, in terms of meaning, ROAshows the efficiency of assets using, showing that for every 1 dollar assets of theenterprise after a business period how much earnings after tax or net operating profitafter tax will generate

Similar to ROI, using NOPAT or EAT depends on the views and the target ofanalysis EAT is usually used for measuring operation efficiency of enterprises whenstanding on the views of owners

However in some situations (such as businesses have high debt, high interest),EAT is not an indicator accurately reflecting the efficiency of business operations ifstanding on the view of the total capital According to this view, ROA is an indicatorreflecting the profitability of total assets while the assets are formed from equity andliability, which is the reason why interest expense after tax must be added to calculatethe efficiency of the business activities (not just include earnings after tax – the partowners receive)

The higher ROA indicator shows the more effective of using corporate assets Toachieve this, businesses need to organize the management and use the assets in areasonable manner, which helps to maintain high profitability while ensuringsustainable solvency for businesses

Moreover, analysts can analyze ROA into parts to assess clearly the reason ofchanges in ROA as following:

Totalassets=

EAT Total revenues x

Total revenue Total assets =Returnon sales x assets turnover

 Return on Equity (ROE)

ROE= Earnings after tax

Average total equity

ROE is to assess the effectiveness of the use of equity This indicator shows with

every dollar of equity after a business period how much of earnings after tax will

receive This indicator is considered significantly by the owners of enterprises because

it shows the profitability of the capital they gave

In general, the higher ROE shows the more effective of using equity However,

when analyzing in some specific factors affecting to ROE, we can see that a high ROE

may come from a high EAT or a low equity proportion To be more specific, ROE can

be rewritten as follow:

ROE= Earnings after tax

Total revenue x

Total revenue Total assets x

Totalassets Total equity=

Earnings after tax Total revenue x

Totalrevenue Totalassets x

11−Total liability

Total assets

1−FL( Financial Leverage)

Thus, there are cases where ROA is low but FL is high because of too much debt,

which is the reason why ROE is still high An enterprise having a high ROE because of

changing capital structure, not because of increasing operation efficiency is called the

virtual increase of ROE Whereas, when business meets problems, business owners

will face more and more risks

 Return on total cost (ROTC)

ROTC= Earningsbefore tax

Totalcost

ROTC shows that with 1 dollar of cost given, after a business period how many

dollars of earnings before tax will be generated The higher this ratio is, the more

effective the enterprise operates To achieve this, the enterprise should promote the

consumption of the products and save cost reasonably By doing that, the enterprise

will increase earnings before tax and reduce the cost, which is reason why ROTC will

go up

 Return on sales (ROS)

ROS= Earnings after tax

Revenues(¿ net revenues)

ROS shows that in 1 dollar of revenues, how many dollars are earnings after tax.Revenue just shows the level of products consumption of an enterprise However, thereare many enterprises which have high revenues but they have a low profit or even aloss So that, ROS is used to assess, compare about the relationship between therevenue and profit In general, the higher ROS indicates that the enterprise saves thecost well, increasing the efficiency of generating profit over revenue

New businesses often have a low ROS At the beginning phases, machinerycapacity utilization remains low, new products have low demand and low price in themarket (enterprises use sales promotion to attract the customers), which is the reasonwhy the revenue is low While in these period, some expenses like advertisement,depreciation, loan interest are so high So that, ROS is low or even is a negativenumber Those companies have a foothold in the market, by contrast, generally have ahigher ROS

In conclusion, the relative profit indicators are used to compare between the

profit and what enterprises have paid (or compare with revenue) These relativeindicators eliminate the effect of business scale to the analyzing results However,these indicators still have the characteristic of the industry To be more specific,different industry has different average level After calculating these indicators,analysts compare them with data in the past and the average data of the industry to givecomment about the operation efficiency of the enterprise This is an important base formanagers to give financial decisions in the future

1.3 Factors affecting the profit of the enterprise

1.3.1 Subjective factors

The profit of enterprise mainly is from operation activities, to the profits ofenterprises mainly profit from business operations, so while research on the factors

affecting revenues, mainly considering the factors affecting revenue from operating

activities.

 In terms of other factors remain, if the production and the consumptionincrease, the revenue will climb This leads to the increase the revenue in the operationperiod Conversely, if the consumption decreases, there will be a decline in the revenueand profit The group of these factors is subjective because the consumption reflectsthe volume, the quality of product as well as the efficiency of sales and management Factors affecting the consumption of the products may be mentioned are: thescale of production; product quality; sales and after-sales service; price policy,incentive and promotion compared to the competition; consuming market

 Different production scale leads to the differences in the profit Theenterprise with large scale of production will have higher ability to consume theproducts than small scale one On the other hand, large scale enterprises usually havethe advantage in the financial aspect so that they can easily solve the difficulties.Moreover, these enterprises have the reputation and advantages in negotiations withinvestors, lenders, as well as suppliers and customers All above factors make thelarge-scale enterprises often easily achieve higher profits than small-scale enterprises

 Product quality is very important factor affecting the revenue of thebusiness Good product quality will promote the sustainable consumption Conversely,poor quality makes the enterprise lose customers and this leads to the decline of therevenue

 Sales and after-sales service have a huge impact on customersatisfaction Especially in the market economy where the competition among firms wasvery fierce, so that sales and maintaining customer relationship after-sales areincreasingly focused Customer satisfaction is an important factor to ensure whethercustomers use the product in long-term or not That directly impacts product salesvolume of the business

 If price policy, incentives, promotion of the business is good, the enterprisewill attract more customers and increase the consumption However, these policiesshould stick with the goods and services quality This is a sustainable way to attractand retain customers in the long term.

 In the condition that other factors remain unchanged, the increase inthe selling price of product will increase the profit Conversely, when the pricedecreases, the revenue and profits will go down

In the market economy mechanism as now, the price is determined primarily bysupply – demand factor It is considered as a factor affecting objectively

However, in fact, the selling price of each business still differ and depend in part

on subjective factors such as product quality, business stage of enterprise, the businesstargets of the enterprise

 High product quality is a condition for the enterprise to improve the sellingprice compared with the rival businesses while ensuring customer satisfaction

 The selling price of products are also decided depending on each businessperiod's of an enterprise: in the early stages, the business sets prices at a low level inorder to attract customers After having a foothold in the market, enterprises willgradually increase the selling prices similar to those of competitors

 Business strategies of the enterprise also affect the decision of pricing forthe product For example, to achieve the objective of maximizing profit in the shortterm, business will set the price for the immediate benefit (for example when there is astrong demand for products, businesses sell products as high as possible) To achievethe objective of market leader or survival in the market, enterprises need to set thelowest price to attract customers and expand the size of market

In addition, the factors affecting revenue from financial activities and other

unusual revenue are factors affecting profit but not too much

 The reserves of raw materials

Determining the level of reserves of materials requires carefulcalculation Optimal level of reserves would ensure both full and timely response to theneeds of production, avoiding causing excess accumulation of capital and the cost ofstoring waste The goal of the research and identify appropriate reserves is to minimizethe total cost of ordering and warehousing costs, which will have a positive impact toincrease corporate profit.

 Policy about salary, bonus, pension for employees

Apart from the cost of raw materials, the cost of paying staff salaries is also anexpense item accounting for a large proportion of total costs Policy on payment ofwages to employees plays a very important role in the business operations of thebusiness Saving salary cost will help cut the total cost of the enterprise and createbasis to increase the profit However the decrease in the wage may reduce themotivation of the employees because the wage, bonuses tied to the interests ofemployees, thereby adversely affecting the quality of work and business performance

of the enterprise

Therefore, in order to save on labor costs, businesses need to build scientific andfair labor norms to every person, every department and synthetic norms consistent withstate regulations that guided and issued Enterprises must develop and regularly inspectlabor norms, wage, ensuring that the growth rate of labor productivity and the growthrate of the real income have a proportional relationship accordingly The salary fundmanagement must be based strictly on the management of quantity and quality oflabor; wage and business results of enterprises

 Labor productivity

If labor productivity of enterprises increases, businesses will save wage costs Atthe same time, the growth of labor productivity is the basis for enterprises to be able toincrease production and consumption, thereby increasing profits for businesses

The most important factor that helps increase labor productivity is the level oftechnology Applying consistent achievements of science and technology in production

is extremely an important factor that allows enterprises to reduce the cost ofproducts Business innovation and the use of advanced production technology, modernmachinery increases the cost of business in the short term but in the long term it willimprove labor productivity, boosting the profit

 Managing level and organizational structure of the management of thebusiness

This factor plays an important role in the entire production and of enterprises ingeneral as well as operational cost savings in particular If managing well, combiningthe inputs of the production process sensibly, businesses will develop production, savecost or in other words, businesses will efficiently use of materials, labor and capital.Well management activity also helps avoid the use of company funds forimproper purposes, avoid wasteful losses, especially for operational expenses forreceptions, trading or external spending

Appropriate management strategy and policy will push all other activities takingplace effectively, increasing profits for businesses Therefore, companies often spendsignificant expenses for management However, a management apparatus which is toocumbersome and complex is not only costly, pushing costs up, but also makesmanagement activities overlapping and inefficient, causing declining profits ofenterprises Therefore, the goal of every business in the management activity isbuilding a simple and scientific management apparatus This leads to managementefficiency, cost savings in management, having positive impact on the profit of thebusiness

1.3.2 Objective factors

This is a factor influencing objectivity In a market with many competitors andfierce competition, customers have more choices, so that business will have moredifficulty in consuming the product Conversely, in a market with few competitors, theenterprise will easily to consume the products, increasing the revenue.

To attract more customers, businesses need to understand their owncompetitors Need to review and evaluate information about competitors from manysources to understand their advantages and their weaknesses The analysis allowscompetitors predict the business development strategies of competitors From that,competitions direction can be given

 The input price of input materials and the average consumption of

material

Costs of materials and fuels often accounts for a large proportion of the total cost

of the enterprise The market prices of input raw materials and the level ofconsumption are factors directly impacting on this type of expense

Raw materials price mainly is decided by the demand – supply factor in themarket Besides, it also depends on the reputation and negotiation with the suppliers.Good negotiation helps enterprise buy input raw material with a low price, reducing theexpense and increasing the profit

In addition, the ability to save all kinds of material consumption is also animportant factor affecting the cost of enterprises The less consumption of fuels andmaterials of a unit of product, the more cost savings To save the expenses, businessesmust build the economical- technical norms being suitable with the characteristics ofthe enterprise

The marketer should consider various consumer factors while fixing the prices.The consumer factors that must be considered includes the price sensitivity of thebuyer, purchasing power

In certain products, government may announce administered prices, and thereforethe marketer has to consider such regulation while fixing the prices

 Economic conditions

The marketer may also have to consider the economic condition prevailing in themarket while fixing the prices At the time of recession, the consumer may have lessmoney to spend, so the marketer may reduce the prices in order to influence the buyingdecision of the consumers

 Channel Intermediaries

The marketer must consider a number of channel intermediaries and theirexpectations The longer the chain of intermediaries, the higher would be the prices ofthe goods

Chapter 2: Current status of profit at the International

Development and Discovery Company

2.1 Introduction about the International Development and Discovery Company

2.1.1 History of the International Development and Discovery Company

 General information

Company name: International Development and Discovery

International transaction name: International Development and Discovery

Date of establishment: 20 May 2005

Founded in 2005, International Development and Discovery company (IDD) hasspent more than 10 years of construction, development and expansion to become one

of the leading companies in the field of information technology - telecommunicationwith over 120 employees To gain the success today, IDD has experienced manymemorable landmarks marking for the efforts and development of the company fromtime to time

 2005: IDD was established with the initial investment capital of 8 billionVND

 2006: Providing communication infrastructure systems for financial sector

 2008: IDD implemented sucessfully many big products for financialsector

 2012: Becoming a member of Institute of Science and Technology.

 2015: Providing the most successful product ever: iEdu

Currently, the activities of IDD is specialized and constantly expanded into manyareas However, IDD always takes information technology - telecommunication as corecompetencies for all production, business activities and market development

IDD is rated as one of the leading technology companies in Vietnam with over 10years of construction and development Always strengthen the cooperation with jointventure and research institutions in Vietnam and many other countries around theworld such as VNPT or VASC, IDD has confirmed its own position in the domesticmarket and towards international market through the key business activities such assystem integration, software services, telecommunication - Internet and manufacturing

- distribution of ICT products

In Vietnam, IDD is known as a reliable and reputable partner in small-mediumscale IT projects about government, education, tax, treasury, customs, insurance ,electricity, banking, finance

Always stick to the orientation ICT core competencies, IDD have built anddeveloped a professional working environment for more than 400 employees IDDachieved many significant achievements in production and business activities Foryears, IDD keeps high growth rate and it is expected to continue to grow strongly in thecoming years

IDD strategy in the coming period is to continue to invest and vigorously developthe core business area ICT, while expanding into the European market, America,Japan, becoming competitiveness on regional and international markets

2.1.2 Main operating fields

The main operating activity of IDD is trading graphic cards, computers andcomputer components IDD works as a commercial company, importing products from

producers, assembling and selling for customers “ Product and trading” field accountsfor more than 78%.

Beside the main activity, IDD has also three other operating business: Systemintegration, software services and telecommunication - Internet

Figure 2.1 Main operating fields of IDD

Source: IDD

 Product and trading

IDD went into the distribution market in late 2007 Along with the orientation oflong term cooperation with the world’s leading ICT manufacturers, strong commitment

in expanding distribution channels, and support of retail agents through marketing,business and technical development, IDD has gain significant growth after 2 years ofmarket penetration

IDD has selected a list of products and services of world leading IT brands to giveits customers the best choice possible:

- Acer: Laptops, PCs, monitors

- 3Com: network devices, wireless devices, security devices and solutions,VoIP devides.

- HP: Laptops, destops, monitors and servers,

- Emerson: data center products, equipments,

- Sony Ericsson: Mobile Phone

- Toshiba: Laptops

- Lenovo: laptops, workstation and computer monitors

- Fuji Xerox: laser printers

Distribution Channel with over 250 ITC product distribution retailers and morethan 300 mobile phone distribution retailers in 63/63 provinces and cities of Vietnam.The entire procedure of management, distribution and services supply isdeveloped basing on a complete management system of supply chain in theinternational standard which successfully applied in many countries

- To consult and deploy the comprehensive IT solutions for governmentalagencies including portal, e-commerce portal, office automation, etc; and for enterprisesector such as ERP, CRM, etc.

- To consult, design and deploy financial – banking solutions such as cardmanagement solution, loan-lending, risk management, capital management, Internetbanking, Mobile banking, core systems for insurers To provide solutions for educationinstitutes (E-learning, research & training management, and so forth) andcomprehensive telecom solutions (billing solution, customer care and so on)

An example of an outstanding product of IDD: iEdu stands for IntelligentEducation System - School Management System intelligent iEdu management system

is the most comprehensive smart in today's schools With a full range of features of thestudent management, teacher management, manage scores, course management, exammanagement, online document library, system tests online, iEdu help schoolmanagement becomes simple iEdu used by nearly 200 schools across the country

 Software service

- Research and development of packaged products such as eDocman, iLib,

IU, non-life insurance solution such as CPC, SMSU, eDocman Plus, etc in whicheDocman, iLib and IU have been listed in Top 5 software companies with high revenuevoted by HCA for three consecutive years

- Provision of solutions such as ECM, BPM, Websphere Portal, eLearning,corebanking, etc and software on demand in banking, insurance, customs, government,education, telecommunication sectors from the world top IT companies including IBM,Microsoft, Oracle, SAP, 3i-Infotech, LG, Samsung, Hyundai IT, etc

- IDD Internet Security / IDD Antivirus for individual user, IDD InternetSecurity Enterprise solution for enterprise, anti-virus consulting service and IDDInfoSpeed, Pen Test service and Security Audit service

- To provide solutions including Filenet-IBM, ERP-SAP, Oracle, OracleEBS and software on demand in banking, insurance, customs, tax, government,education, telecommunication sector.

- To provide ITO and BPO for Japanese, Asian, European, Australian, andAmerican markets, etc

 Telecommunication – Internet

- One-connection ICT-Telecom infrastructure service: only using a speed connection, all of services such as GigaNet Internet, IP voice, IP CameraGigaCamera, data storage and management, IPTV, etc will be introduced to customers.This is an unique and outstanding service in Vietnam that only IDD can provide forcustomers

high Telecommunication infrastructure services: Internet leased line service,GigaWan domestic and international private leased line service, system managedservice, One connection for IT and telecom meeting the strictest requirements insecurity, stability and high speed

- Data center services: Hosting, co-location site, Dedicated Server, VPS, DCconnection, data storage, system management, back-up hosting, SaaS services, etc areprovided by a system of modern data centers in accordance with international standards

at the largest scale and highest security in Vietnam IDD is a member of the Asia DataCenter Alliance (ADCA)

- Added value services: Audio conferencing, Video Conferencing, VoIP,SMS/SMS Brand name, Virtual IP PBX/Virtual IPCC, IP Surveillance, MobileApplication, Mobile Content, e-business, online share and storage, master content, tele-marketing services, etc

- Managed services: In addition with telecommunication services, IDDTelecom is willing to provide management services as an integral value of the original

services: Network Managed Services, Data Center Managed Services, SecurityManaged Services and IT Managed Services

2.1.3 Operating capacity

- Strong software products and solutions in technology and application;

- Creative and knowledgeable staffs who have good knowledge inspecialized operation; professional consultants are experienced, intensively trained inVietnam and overseas, able to meet the requirements of all kind of large scope projects,including offshore projects and projects deployed in Vietnam

- Technological partners of Microsoft, IBM, Oracle, SAP, etc

- CMMI standard level 3, ISO 27001, ISO 9001:2000, ISO 9001 : 2008

- Hundreds of international certificates awarded by Microsoft (MCP,MCAD), IBM (WebSphere, InfoSphere, FileNet, Rational and Domino), PCLP, CLS’s,Oracle, SAP and SCJP;

- The latest technological applications in software development includingRational Unified Process, Agile development, OOAD, etc

- More than 16 years of experience in IT sector, especially in great projectswith high complexity in profession, technical Capability, technology and projectmanagement competence

- It makes a systematic investment in resources, relating to analysis andevaluation on trend of IT in general, and demand of customer in particular, especiallycustomers in the Finance-Banking, Government, Education and Enterprise sectors toprovide customers with the most proper solutions and services including technique,advanced technology, ensuring effectiveness in exploitation and investment efficiency,etc

- The human resources include hundreds of specialists who are trainedbasically in professional skills as well as management skills, issued the highestcertificates of top technology partners such as Microsoft, Cisco, IBM, HP, Oracle, etc.

- IDD SI is now the highest level partner of the leading technologycompanies such as Gold partner of Microsoft, Oracle, Symantec, APC, F5 Networks;Silver partner of Cisco; the highest system integration partner of IBM, HP, Eaton, etc;partner of SAP, Oracle and IBM in consulting and deploying software and applicationsolutions; Technological partner of specialized software and solution companiesincluding 3i-infotech, Banktrade, S1, etc

- IDD SI successfully passes the test on quality control system evaluation,monitoring and upgrading from ISO 9001:2000 to ISO 9001:2008 In addition, CSIalso has a high-tech lab of network infrastructure, data center, and security system, etc

- To apply FTTx, a new generation of telecommunication technology

- To build comprehensive capability in ITC sector with young and activebusiness and technical staffs

- To be partner of various big telecommunication companies includingVNPT, Viettel, EVN Telecom, SPT, IP Com, Singtel, Juniper, Hutchingson, etc

- To have a powerful financial capability with financial support fromfoundation members including SCIC and IDD Telecom, Bao Viet Group, Agribank,Geleximco; and significant assistance from IDD Corporation

- Quality management certificates including ISO 9001 and ISO 27001

Software

Computer and ICT items

Telecommunic ation - Internet System

Integration