Building business strategy for thang long securities joint stock company from 2011 to 2015

DISSERTATION MBABuilding business strategy for Thang Long Securities Joint Stock Company from 2011 to 2015... Thang Long Securities Company TLS is one of the first securitiescompanies ad

DISSERTATION MBA

Building business strategy for Thang Long Securities Joint Stock

Company from 2011 to 2015

INTRODUCTION……….5

CHAPTER 1 7 1.1 Overview about business strategy of enterprise 7

1.1.1 Concepts 7

1.1.2 Typical features of business strategy 9

1.1.3 The role of business strategy in enterprise 9

1.2 Process of building business strategy of enterprise 10

1.2.1 Define Vision, Mission, Target, Policy and Core thinking 10

1.2.2 Analyzing external environment 11

1.2.3 Analyzing internal environment 14

1.2.4 Building business strategy 15

1.3 Tools used to analyze strategies 15

1.3.1 SWOT matrix 15

1.3.2 Quantitative Strategic Planning Matrix (QSPM) 16

CHAPTER 2 18

2.1 Overview about TLS 18

2.1.1 History of foundation and development 18

2.1.2 Trading sector 21

2.1.3 Organization structure 21

2.1.4 Vision and mission 22

2.1.5 Business principles 22

2.2 Analyzing external environment of TLS 23

2.2.1 Analysis of macro-environment 23

2.2.2 Analyzing sector environment of securities business 32

2.2.3 Opportunities and threats 39

2.3 Analyzing internal environment 39

2.3.1 General business result of TLS 39

2.3.2 Operations of department results 52

2.4 SWOT matrix TLS 61

CHAPTER 3 65

3.1 Orientation for business strategy of TLS in period of 2011 - 2015 65

3.1.1 Strategic targets of TLS 65

3.1.2 Building partial strategies 65

3.2 Selecting business strategy for TLS in period of 2011 - 2015 72

3.3 Solutions for implementing business strategy of TLS 74

3.3.1 Solutions on human resource 74

3.3.2 Solutions on Marketing 77

3.3.3 Solutions on capital 78

CONCLUSION 80

Appendix I ……… 82

Appendix II ……… 90

List of symbols and abbreviations

1. ABS An Binh Securities Joint Stock Company

2. ACBS ACB Securities Joint Stock Company

3. APEC Asia - Pacific Securities Joint Stock Company

6. BVS Bao Viet Securities Joint Stock Company

9. FPTS FPT Securities Joint Stock Company

11. HNX Hanoi Securities Trading Department

12. HSC Ho Chi Minh City Securities Joint Stock Company

13. HSX/HOSE Ho Chi Minh City Securities Trading Department

14. KEVS Kim Eng Securities Joint Stock Company

15. QSPM Quantitative Strategic Planning Matrix

16. SBS Sacombank Securities Joint Stock Company

17. SSI Sai Gon Securities Joint Stock Company

18. TLS Thang Long Securities Joint Stock Company

20. VNDS Vndirect Securities Joint Stock Company

List of table

Table 1.1 SWOT analysis 16

Table 2.1 Important milestones 19

Table 2.2 Comparison of some criteria in business of TLS against rivals 38

Table 2.3 Some item of bussiness result in 2009 - 2010 ……….40

Table 2.4 Total accounts receiable in 2009 - 1010 ……… 42

Table 2.5 Total liabilities in 2009 - 2010 ……….42

Table 2.6 Major financial ratio………43

Table 2.7 SWOT matrix of TLS 61

List of figure Figure 1.1 PEST model in analyzing macro-environment 13

Figure 1.2 Michael E Porter’s five force model 14

List of chart Chart 2.1 Top 10 brokerage market share in two trading departments 21

Chart 2.2 GDP growth rate of Vietnam in 2000 - 2010 26

Chart 2.3 Inflation rate of Vietnam in 2000-2010 28

Chart 2.4 Business result of TLS……… 39

Chart 2.5 Assets and Equity……… 39

Chart 2.6 Growth in management account of TLS in 2008 - 2010 46

Chart 2.7 Personnel structure of TLS basing on laborage……… 48

Chart 2.8 Revenue of IB Services ……… 66

Chart 2.9 Market share of issued value……… 66

Chart 2.10 Revenue of Securities of Brokerage……… 68

Chart 2.11 Revenue of Securities of Investment ………73

I The imperativeness of topic

The world economy has been in more stable phase after economic crisis and ishaving significant development Together with general development trend of theworld economy, Vietnam is gradually marking position in global economy Withthe open economy, demand on capital in regard to enterprises increases and becomediversified Securities market, by means of a part of market It is useful took tosolve demand on capital

After 11 years of foundation and development, securities market in Vietnam hasgained significant achievements and steps At present, there are more than 100securities companies and each of them self-drives to survive and develop after upsand downs in market The ups and downs of market in 2010 and first half of 2011have made some securities companies recognize efficiency and adjust their tradingactivities Thang Long Securities Company (TLS) is one of the first securitiescompanies adjusting their development strategy to be able to have improvement insecurities market

With open tendency of economy, TLS has to face up with more and more rivals notonly domestic ones but also foreign one with strong finance capacity The increase

of rivals reduces market share of TLS Although TLS has many competitiveadvantages namely strong finance capacity and trademark and over the past years,TLS always improves to increase prestige and product quality provided customers;TLS must have development strategy in the future against fiercely competitivepressure as present If applicable, the company can control risks, solid steps andmark position in Vietnam Securities market

Coming from above problems, our groups realized the particularly important role ofbuilding strategy for existence and development of a securities company Therefore,

the group decided to select topic in line with the theme “Building business

strategy for Thang Long Securities Joint Stock Company ".

II Researching objectives

 To systematize basic knowledge and theory of strategic management andstrategy building

 To initially approach to actual operations of securities company in particular andVietnam securities market in general

 To apply gained knowledge building strategy for Thang Long Securities JointStock Company

III Researching scope

Researching time: we conduct this assignment from 17 July 20011 to 15 August2011

Researching scope: Trading activities of Thang Long Securities Joint StockCompany, Vietnam securities market and some factors in currency market

IV Researching methods

 Analysis of data from books, newspaper and internet;

 Observation from reality of the company;

 Summary of appraisal about the company;

 Expert method

5 Structure of capstone project

 Chapter 1: Theoretical foundation about building business strategy forenterprise

 Chapter 2: Analyzing foundation for building strategy of Thang Long SecuritiesJoint Stock Company

 Chapter 3: Building business strategy of Thang Long Securities Joint StockCompany in period of 2011 – 2015

CHAPTER 1 THEORETICAL FOUNDATION OF BUILDING BUSINESS STRATEGY

OF ENTERPRISE

a Overview about business strategy of enterprise

1.1.1 Concepts

1.1.1.1 Concepts about strategy

From the past up to now, there have been many definitions about strategyaccording to different viewpoint groups We would like to introduce and analyzesome traditional and modern notions to have relatively entire and extensive viewabout strategy conception:

 According to Alfred Chander (1962): “Business strategy covers definition of

long term basic target of enterprise, selection of method or action program and allocation of resources to implement that target”.

 According to Ansoff H.I (1965): “We can consider strategy as “joint

connection” among activities of enterprise and market consuming products,

it contains four parts: market scope – product, growth rate (changes conducted by enterprise to match to market scope – definite products), competitive advantages and resonance”.

 According to school of Harvard Business University (1965): “Strategy is

system of goals, targets stated under the form of sectors/business activities that the company wants to, entry, size, position that the company wants to achieve and basic policies as well as plans to implement predetermined targets”.

 According to William Glueck (1980): “Business strategy is a united,

comprehensive and cooperative one designed to ensure the enforcement of basic targets in enterprise” or “Strategy is a united and general one drafted

to gain achievements”.

 According Michael Porter: “Strategy is the creation of unique and valuable

position including differentiation, exchanged selection to focus on resources; from that it brings advantages for organization”.

From above definition, we can see that strategy relates to long term and basicgoals of an enterprise Nevertheless, building and selecting the strategy orientedgoals are not enough; strategy must be defined as matching to vision, mission oforganization and methods as well as means to reach those goals the mosteffectively If applicable, it promotes strengths, overcomes weaknesses, makesuse of opportunities and mitigates threats from external environment

Thus, we can define strategy in general as following: “Strategy is a series of complex activities to mobilize resources of organization and gain certain objective.”

1.1.1.2 Concepts about business strategy of enterprise

As mentioned above, strategy related to goals of an enterprise and set forthstrategies must help enterprise gain predetermined goals Nevertheless, businessstrategy has connection to the methods for enterprise to be able to successfullycompete in specific market It relates to strategic decisions about productselection, meeting requirements from customers, holding competitiveadvantages in comparison with rivals, exploiting and creating new opportunities

According to Fred R.David “Business strategy contains means reach to

long-term goals”.

It can say that, business strategy is means helping enterprises reach long termgoals Business strategy is not to outline specific actions; it is compressiveprogram, the most effective mobilization solutions for resources with the aim atconducting predetermined goals

Business strategy in an enterprise can be defined in following general way:

“Business strategy is an art of designing and organizing means to reach long term goals of enterprise; it has connection to changes of business environment and competition”.

1.1.2 Typical features of business strategy

From viewpoints about strategy mentioned above, strategy still has the most typicalfeatures in any period of time It reflects the nature of business strategy in enterprisewith the most basic ones such as:

 Business strategy defines basic goals and business orientation of enterprise ineach phase

 The orientation of strategy is to ensure the continuous and stabledevelopment in fluctuated business environment for enterprise

 Business strategy ensures the maximum mobilization and optimalcombination in exploiting and using resources of enterprise at present and inthe future It also upholds advantages, catches opportunities to holdcompetitive initiative in market

 Business strategy of enterprise is shown in continuous process from forming

to conducting, assessing and adjusting the enforcement of predeterminedtargets

 Business strategy always has idea to fight against and win in businessmarket

 Business strategy is always built in long term (it may be 3 years, 5 years or

10 years)

1.1.3 The role of business strategy in enterprise

The role of business strategy in enterprise is demonstrated through following issues:

 Business strategy helps enterprise define their orientation in each specificperiod of time It is guideline for all production and trading activities ofenterprise

 Business strategy helps enterprise catch and make use of opportunities,promote strengths and have initiatives to overcome weaknesses, avoid orrespond to mitigate damages from external threats in competitive market

 Business strategy has significant contribution to the effect of using resources,promotes position of enterprise and ensures the continuous as well as

sustainable development.

 Business strategy creates solid foundation for enterprise to make decisions inaccordance with displacement of market It also creates solid foundation forresearch and deployment, development investment, human resource training,market expansion and product development

b Process of building business strategy of enterprise

1.1.4 Define Vision, Mission, Target, Policy and Core thinking

1.2.1.1 Vision

Strategic vision demonstrates the highest and the most general desires andwishes that organization wants to achieve We also consider vision as routine ofenterprise in which it shows the destination in the future and the way enterprisewill follow to reach that destination Or in other words, strategic vision is todraw a picture of destination together with reasons and means to do

Defining and stating vision have particularly important role since it gathersexpectations of all members in enterprise and encourages them making efforts togain goals, career and noble ideas

1.2.1.2 Mission

Mission or function is a statement having long term value in objective anddistinguishes this company to others Such statements are also called as businessphilosophy, business principles and belief of the company

The mission states the existence reason of enterprise According to Drucker, thebusiness mission statement gives answer to the question “What is our businessoperation?” “What would we do and how would we do to reach the visionstatement?”

1.2.1.3 Target

We can understand target as established achievements which enterprise finds out

all ways to gain while pursuing their mission The right definition of targets has

remarkably important role to the success of organization since targets map outdevelopment orientation and evaluation for gained results They also provide the

view about priority in allocating development resources, foundation to haveeffective plan as well as solid basis for assessing result

Target is considered as a factor if it contains enough measure factors and realitywith obvious apportionment It also reflects concentration, threats and feasibility

in term

1.2.1.4 Policy

Fred R.David said that: “Policy is tool to implement strategy as well as the

mean to gain target Policies include guidelines, principles, regulations and procedures established to support efforts to gain predetermined targets Policies are instruction to make decisions and show repeated situations or recycle situations”.

1.1.5 Analyzing external environment

External environment includes factors, forces and regulations happening out ofenterprise Enterprise cannot control them but they have significant influences toefficiency and operation of enterprise

Recognizing and assessing opportunities and threats from external environmentled enterprise define their mission and functions correctly and obviously.Furthermore, enterprise can build strategies and reach long term target as well as

policies to reach annual targets

External environment contains:

 Macro-environment or known as general environment;

 Sector environment or known as micro-environment or competitiveenvironment

1.2.2.1 Analyzing macro-environment

Macro-environment is the environment covering activities and having direct orindirect influences to all activities of enterprise

The main objective of analyzing macro-environment is to acknowledge changes

of anticipated tendencies from factors of external environment With theconcentration on future, analyzing external environment allows enterprise to

recognize and assess: Opportunities (O) of environment that enterprise can make use of and Threats (T) facing up enterprise From that, enterprise builds clear

business functions, defines feasible long term target and designs strategymatching to business goals

We can use PEST model to analyze macro-environment The model includes:

1.2.2.2 Analyzing micro-environment

In order to plan strategy, apart from analyzing macro-environment, researchingmicro-environment (sector environment) is particularly important Sectorenvironment has close connection to enterprise and most of activities andcompetitiveness of enterprise directly happen in this kind of environment

Five force model

In order to clarify competitiveness within industry, Michael E.Porter – professor

of Harvard Business Administration University pointed a frame that helpsadministrators realize opportunities and threats facing up enterprises or industry.The frame of Porter is called as five force model According to Porter, there arefive force orienting competitiveness within industry regarding as:

1.1.6 Analyzing internal environment

Internal environment of an enterprise includes its internal factors and system Tosurvive and develop, every enterprise has to implement management operationfor finance, human resource, trading and production, research and development

as well as marketing Additionally, they must have information system,management system, and functional departments in each sector Each of themhas strengths, weaknesses and defining these factors will help enterprise to buildand select suitable business strategy

Analyzing internal environment is to define strengths (S) as well as weaknesses(W) of enterprise

 Strength (S) is the things that business is doing well or feature to help

businesses improve their competitiveness Strengths can exist in thefollowing formats:

- An important skill or experience - the secret to manufacture with lowcost, technological secret, producing without defective products,experience in providing good customer service, product innovation skill,commercial skills for product in large scale and unique advertisingpromotions;

- Advantages in material facilities as rich capital, large distribution system;

- Strong human resource;

- Advantage in organization and management;

- The valuable physical property - modern buildings, attractive location,natural resources stocks;

- Keep interest position in market: lower cost and better products;

- Strengths in relationship;

- Predominant core capacity;

- Important competitive capacity

 Weaknesses (W) is something that businesses are missing, poor or a

condition pushing enterprises in disadvantage The internal weakness of the

business may present:

- Lack of the significant skills and experience in competition;

- Lack of resource: human resource, finance;

- Weak in management and organization ability;

- Do not have stable input material supplying source;

1.1.7 Building business strategy

In order to exist and develop in fiercely competitive environment, enterprisemust create competitive advantages The competitive advantage is shown underthe two basic forms: the lowest cost or product differentiation Combining thetwo basic forms of competitive advantage with operation scale of enterprise, wewill have three general competitive strategies such as:

 Cost leadership strategy;

position as well as direction of an organization, a company Furthermore, we cananalyze business proposes or any ideas relating to interest of enterprise In fact,application of SWOT in business plan, strategy planning, rival assessment,market research, product development and research report is selected by manyenterprises

SWOT analysis makes enterprise have through understand about:

Table 1.1: SWOT analysis

WT strategies

Overcome weaknesses toavoid threats

1.1.9 Quantitative Strategic Planning Matrix (QSPM)

QSPM is tool used to decide the best selection for enterprise QSPM matrix usesinput factors from analyzing EFE, IFE matrix and combination result of analysis

in SWOT matrix to have objective decisions in the best alternative strategies Inorder to develop a QSPM matrix, we have to implement following six steps:

 Step1 : List important external opportunities/threats and internal

weaknesses/strengths

 Step 2 : Classify internal and external important factors

 Step 3 : Determine alternative strategies that the company should consider for

implementation Collect them into specific groups if possible

 Step 4 : Define attractive score of each strategy The attractive score

demonstrates the relativeness of each strategy in comparison with other Weonly make comparison for strategies in the same group The attractive score

is classified as follow: 1= not attractive, 2= lightly attractive, 3= quiteattractive, 4= significantly attractive If successful factors do not affect tostrategy selection, we will not mark attractive score for these strategies

 Step 5 : Calculate total attractive score It is the result of multiply classified

score (step 2) with attractive score (step 4) in each line

 Step 6 : Calculate total attractive score for each strategy It is the addition of

attractive score in each strategic line The higher and higher score is, thestrategy is more and more attractive

CHAPTER 2 ANALYZING FOUNDATION FOR BUILDING BUSINESS STRATEGY OF

THANG LONG SECURITIES JOINT STOCK COMPANY

d. Overview about TLS

Thang Long Securities Joint Stock Company (TLS) was established in 2000 and

is one of the first five securities companies in Vietnam with charter capital ofVND 1.200 billion (in which MB has 61,58%) The company has about 600employees having been trained basically TLS is one of few companies havingcapacity to provide full of services about securities with high quality.Furthermore, TLS presents in almost big cities in Vietnam as Ha Noi, Ho ChiMinh, Hai Phong, Da Nang, Vung Tau, Thanh Hoa and Quang Ninh

Vision of TLS: TLS strives to become the leading investment bank in Vietnam,operating to the high standards of professionalism

Company name : Thang Long Securities Joint Stock Company Trading name in abbreviation : TLS

Head office : Floor 6, Toserco building, 273 Kim Ma, Ha

2.1.1 History of foundation and development

After ten years of development, TLS has grown into one of the premierbrokerage houses in the country Since 2009, TLS has become the number onebrokerage house in terms of market share on both securities exchanges, theHNX and HSX

Table 2.2: Important milestones

No Time Event

1 2000 Founded by Military Bank with chartered capital of

VND 9 billion

2 2003 Increased chartered capital to 43 bn VND

Opened Ho Chi Minh City branch

3 2006 Increased chartered capital to 120 bn VND

4 2007 Converted to a joint stock company

Increased chartered capital to 300 bn VND

5 2008 Increased chartered capital to 420 bn VND

6 2009 Increased chartered capital to 800 bn VND

Opened Haiphong branch Ranked No.1 in terms of market share for securitiesbrokerage service in the HSX and HNX

7 2010 Increased chartered capital to 1,200 bn VND

Opened branch in Thanh Hoa, Vung Tau and Da Nang Ranked No.1 in terms of market share for securitiesbrokerage service in the HNX, HOSE

Events in 2010

Although 2010 is a year with much fluctuation, with direction of managingcommittee and unity of all employees in the company, TLS has achieved manygoals, gradually grown, created a solid premise for the major breakthrough interms of profit in subsequent years The first is that TLS has been successfullyheld 10-year anniversary of incorporation with many exciting and meaningfulcontributions to create the image of a professional financial institution and therich nature in the stock market Vietnam Next is the brand of TLS is recognizedwith the award and the title of the year such as:

 Certificate of Merit” from Hanoi People Committee for achievements andcontribution to the development of Vietnam securities market in the period

2000 – 2010

 “Thang Long 2010” Cup Award granted by Hanoi People Committee

 “Outstanding enterprise” in program of “Thang Long – Ha NoiIntelligence”.

Securities Business (AVSB) and Vietnam Securities Magazine

 Ranked in Top 500 Vietnamese largest private enterprises (VNR 500) byVietNamNet in 2010

Besides the success in image, in 2010 TLS continued to mark the businessrecord: keeping leading position on the brokerage market share in bothExchanges: Hanoi Securities Exchange (HOSE) and Ho Chi Minh City SecurityExchange (HSX), completing model of investment banking; remaining thedevelopment foundation about size and organization completion considered assolid foundation for the company Although many indicators have not beenachieved, we can say 2010 was a successful year with TLS in both business aswell as creating a new image of a leading financial institution

Chart 2.1: Top 10 brokerage market share in two securities exchanges

2.1.2 Trading sector

From the first two stock professions as broker and investment consultant, at present,TLS has developed all business activities of a securities company and it is shown inthe diagram below:

2.1.3 Organization structure

2.1.4 Vision and mission

Core value

TLS is committed to building an operating environment of trust, respect,professionalism, efficiency and prudence This corporate culture is appliedconsistently to dealing with each client, business partner and employee in order

to generate premium returns to clients

Competitive advantages

 Leader in the investment industry in Vietnam;

 Well trained and professional talent pool with international experiences;

 Flexible and diversified financing products;

 State-of-the-art technology platform;

 High level of business ethics and professionalism; and

 Low cost structure

 Commit to put the customer interests first;

 Focus on attracting talents, nurturing well-qualified staff and make adifference in our activities;

 Encourage creativeness and collaboration between individuals;

 Be effective in predicting the changes in demands and provide appropriateservices;

 Be cautious at thoughts and actions to guarantee benefits of customers; and

 Be a responsible citizen by actively participating and organizing socialactivities including education and charity

e. Analyzing external environment of TLS

2.2.1.1 Legal factors

Before the integration movement, the Vietnamese enterprises have moreopportunities to develop and face up with difficulties If a business wants tostand on international markets, it is required to face with a various factorsbeyond their control Among those factors, politics and law are the two issues ofconcern The success or failure of enterprises in international business arenalargely depends on whether the enterprise understands the policies and laws ofthe host country or not Even where the enterprise is located, it has also beenaffected by the system of laws and policies of the government in that local

Therefore, we will consider the influence of politics and law to the operation ofTLS.

Influences of legal environment to operations of TLS:

 Create an environment of equality for company’s operations and protect thecompanies complying with the law with incentives

 Introduce the rules to allow or not allow, bind or require companies tocomply, so the company must strictly observe the rules of law and they willdevelop in the right direction

 TLS can have healthy competition with other companies

 Company takes advantage of opportunities and minimizes risk, captures theattitudes, rules, priorities, maybe even conducts lobbying where necessary tocreate a beneficial environment to their operations

Nevertheless, the law has such changes and addition that makes it has influencesmore or less to the company These new laws often give the new obstacles andchallenges Therefore, the company must always be ready to deal with newchallenges, new opportunities when having the new rules issued along with thefrequent and rapid changes in socio- economic criteria and legal standards Amarket is closed can be opened so suddenly due to the change of law

Influences of political environment to operations of TLS:

Stable policy is condition for development of the economy and on the contrary,the development of economy is important factor to make politics stable On theother hands, institution and political guildines decide orientation of economicpolicies Additionally, politics has influences to national enterprises througheconomy at first Vietnam is a country considered as having stable politic andVietnam wants to make friend with all countries around the world Indeed, it isfavorable condition for a company to be able to maximize their capacity andmake use of advantages When politics is stable, the company will attract moreinvestors We can say that, stable politics is one of the most concerned issue forinvestors Regarding to stable politics, enterprises will not have to deal with

conflicts and fluctuations, they only focus on development

2.2.1.2 Economic factors

 Economic growth rate:

In period from 2006 to the first half of 2008, Vietnam was one of thecountries having quite high and stable growth rate: the growth of GDP was7,8%/year in average Nevertheless, since 2008 up to now, economic growthrate of Vietnam has been slow down in comparison with 2009 because of theworld economy recession The rate for 2009 was 5,32%, and 2010 was6,58%; in 2010, it is anticipated as decrease more

Chart 2.2: GDP growth rate Vietnam in period of 2000 - 2010

The development of the stock market is strongly influenced by the growthand development of the economy The strong economy which has the highgrowth brings a lot of opportunities for growth and stability for all businessesand helps the shakeout in the stock market and boost investors participatemore actively in the market At the same time, the economic growth is also agood motivation to help all enterprises to expand production and businessactivities Furthermore, the economic growth also helps to mobilize financialresources in the stock market and makes the stock market become moreactive In the other hand, when the economy develops unstably or slowly, the

"health" of all enterprises and the optimism of investors will be certainly

GDP’s growth rate

reduced Therefore, the stock market in general and the business activities ofTLS in particular will be affected negatively and indirectly

Even though the global economic crisis has remarkably affected to thegrowth of the developing countries like Vietnam, according to the JapanBank for International Cooperation (JBIC), Vietnam still ranks third onthe development prospects of production and business activities in themedium term (ranking after China and India and ahead of Russia, Thailand,Brazil) for the reasons: It is a favorable location to diversify and investbetter, a cheap- salary labor force, a potential ability to develop the domesticmarket well, a professional and skillful human resource and a supply forassembly industry Thus, Vietnam's stock market will have the favorable andpotential growth prospects in the medium term

However, the good growth rate of Gross Domestic Product (GDP) comeswith the skyrocketing speed of inflation Therefore, it is a concern whichnegatively affects to the business operations of enterprises, especiallyfor securities companies

 Inflation: this is still the biggest risk in 2011

Vietnam's CPI rate has recently been rather unusual The main reason is due

to the factor of food and foodstuff (up to 39.93% of CPI) The main factorscontinue to put pressure on the CPI in the coming year, including the risingprices of commodity (together with the pressure of increasing commodityprices in the world) Furthermore, the adverse weather is one of the mainfactors which affect to food supply Thirdly, the route of rising coal andelectricity price will be implemented Finally, this is the most importantfactor affecting to inflation is that the import demand for production andconsumption continues to increase highly However, maintaining a stableexchange rate and regaining confidence in Dong Vietnam are also thechallenge for management agencies at the moment

Chart 2.3: Inflation of Vietnam in period of 2000-2010

Source: Central Statistical Office

Regarding fiscal policy, the Government has a clear direction which is tightpolicy For example, the reduction of the investment projects which are notnecessary Furthermore, the Government increases revenues and reducesexpenditures and tries to make the budget deficit below 5% It is said that thepublic investment is always an important motivation of growth rate It ispossible to confirm that tightening the fiscal policies is a strong step incontrolling inflation and it will affect to our overall growth of the nationaleconomy remarkably The tight monetary and fiscal policy will bring a lot ofchallenges which result in the growth of the national economy

Following the difficulties remaining of 2010, with the inflationary pressurescontinue to be in early 2011, the monetary policy will keep causing a lot ofchallenges to the plan of the economic growth set at 7-7.5% for 2011, with highrate of growth of GDP in 2010

It is said that the inflationary pressures are the challenges ahead; monetarypolicy is towards ensuring macroeconomic stability However, it is impossible topredict when the inflation rate will be kept stably to make a shift in policy If the

interest rate remains highly, the enterprises will be difficult to access the capitalresource to produce and invest Moreover, these enterprises will be subject tonot only a very high capital costs but also a rising price of commodity input Theproblem of growth cannot be given priority as before and inflation rate must not

be high in a long time or recur in the following year

The high interest rate will be maintained for a longer time and then it can bereduced However, the reduction level is still dependent of the measures of theState Bank of Vietnam, the overall situation of the banking system and theability of the Government in the implementation of all given cost-cuttingexpenditure plans

Exchange Rate: On February 11st 2011, the State Bank of Vietnam undertook toincrease the inter-bank average exchange rate VND/USD from 18.932 VND to20.693 VND, with the trading margin narrows from +/- 3% to +/- 1% The highlevel of control (over 9%) were considered as a bold step of the State Bank ofVietnam to make the official exchange rate close to the exchange rate of the freemarket which has been already stretched for two or three monthsbefore Thereby, it also helps the exchange rate in the official market to reflectsupply and demand as well as market expectations more closely

Therefore, from the beginning of this year, the exchange rate problem has beensolved partly to help to strengthen the confidence in VND and it is expected thatthis exchange rate will be still maintained stably in next time However, thetrade deficit continues to put pressure in the coming years The demand to pay

by USD by the end of the year and the ability to increase the foreign exchangereserves are macro problems which require the close monitor and control ofmanagement departments and agencies to make a strategic decision of adjustingthe exchange rate in the next year or not

However, the level of the trade deficit in 2011 could be less stressful thanks tothe expectation of support from the increase of overseas national currencyexchange and the increase of cash flow from the disbursement of ODA, FDI and

FII As for the trade balance, even though the trade deficit is continuing, theproducts of Dung Quat oil refinery factory are more widely used and the exportactivities are benefited from the weakened This makes the trade deficit fallslightly in 2011 compared to 2010 Moreover, the exchange rate adjustment willreduce the pressure on the balance of payments.

Interest rate: TLS spends a part of equity to invest in a portfolio of listed and

unlisted stocks (OTC) Therefore, fluctuations in interest rates may affect thebusiness results of the company by its direct effect on business results, financialsituation and level of attractiveness of the stocks of companies that TLS hasinvestment Simultaneously, bank deposits with high interest rates become amore attractive investment channel; the stock market will be negative andbecome less attractive to investors At that time, revenue from brokerageactivities of TLS will be affected

2.2.1.3 Cultural factors

In scale of human resource management in organization, culture has significantimpact to many stages as recruitment, training, socialization and integration ofnew members, performance assessment system and promotion Culture canimpact negatively and positively on the action of human resource management.Furthermore, changing cultural factors in a positive way is to help improveeffectiveness of human resource management

Realizing this, TLS has been gradually building their culture The company hasgradually improved the management machinery and attracted the managementteam with quality and good ethics Specifically, the company has built aprofessional code of ethics, clear business procedure for departments anddivisions In addition, the company also developed products for utility services

to investors, provided customers with a convenient, safe, fast, accurate, fair andtransparent trading system

In addition, the company has always focused on elements of training staff toimprove their professional skills The company also implemented preferential

policies to attract talent In 2010, the Company operated a policy of rewardingfor staff who had excellent performance to motivate the entire staff striving tosuccessfully complete the assigned tasks As a result, the company has built ateam of dynamic, enthusiastic and qualified professionals They are ready tomeet the requirements of the market in the future.

2.2.1.4 Technological and technical factors

Over the past decade, the world economy has increased at a steady rate due tothe extremely important contribution of science and technology It has createdcompetition for businesses in an era of globalization In particular, the explosion

of information technology, satellite networks, biotechnology, cloning and manyother fields have created opportunities to improve operations and enhanceefficiency of many enterprises Therefore, if enterprises at present want tosurvive and develop; they must have suitable investment policy and research not

to lag behind the rivals within industry and nation, even in the world

More specifically, with respect to securities companies, technology level isconsidered as particularly important factor

Having awareness of that importance, TLS always pays attention to equipadvanced and modern facilities such as network infrastructure: server systemand supporting equipments, datacenter system; professional softwares: humanresource, IT and other

2.2.1.5 Vietnam securities market in 2011: Face up with many threats and

fluctuations before being able to sustainably recover

In scenario with the highest probability, the basic assumptions are:

 The growth of Vietnam's GDP will likely not reach the expectations as setout early in 2011 Export will continue to grow at a gradually stable level.However, investment and consumption will be affected negatively bymonetary and fiscal tightening policies

 CPI is likely to remain high under the pressure of inflationary trends in the

world as well as the weakening of the VND.

 The action of foreign exchange rate adjustment from State Bank of Vietnam

is necessary but needs time for management agencies to close the gapbetween listed exchange rates and exchange rates on the free market

 The interest rates will continue to remain high in the first half, in the term, orientation of monetary policy and fiscal tightening is to ensureinflation growth considered only when stabilizing the macro economy Basing on above assumption, market predictions have been introduced asfollowing:

short- Average P/E of 2011 may be reduced from current levels of about 10x to 8x

It is estimated that after excluding a number of stocks with high marketcapitalization, the price has increased sharply because of the transaction’saffects from foreign index fund

 In 2010, sales of the company within the research (except banking andinsurance scale) increased by 38% compared to 2009 while profit after taxincrease of about 16% Expected growth of revenue and earnings after tax ofthese companies in 2011 continues to face many difficulties including thelargest input cost increases that affect the rate of return while the marketoutlets have not seen positively

 Vn-index will continue to fluctuate but have the ability to adjust into thedepth before it can bounce back

However, the situation may have more positive development than the abovescenario Specifically, the macroeconomic situation stabilizes after inflationgradually declines thanks for price of food and other commodities are decliningfaster than expected State Bank of Vietnam will maintain a higher level thanpresent and can look down over time Rate returns to stability, the gap betweenthe exchange rate in official and free market is shrinking

In case of above scenario happens, Vietnam securities market possibly step intorecovery tendency and maintain the growth rate of 20-25% against 2010

2.1.7 Analyzing sector environment of securities business

2.2.2.1 Pressure from suppliers

Human Resource: The objective of the company's recruitment is to attract the

skillful workers to work for the company and to meet the demand forbusiness Recognizing the importance of human factors, TLS has a reasonablepolicy to staff and personnel since the establishment of company to attracthighly qualified human resources who have a lot of experience to work for thecompany It is particularly focused on training activities to make each workerhave enough conditions to be equipped with knowledge and skills for theircareer At the moment, TLS is having an internal training center to foster andenhance the knowledge and skill for all workers in the company In addition, thecompany is also building and developing the appropriate policies related to thepreferred shares for workers and staff to attract and retain the talent workers and

to create the stability in terms of personnel, especially the resource of seniorpersonnel to work for a long term for the company

One of the most important factors which contribute to the success of TLS is thatTLS has the high qualified leadership The leadership is well trained abroad andexperienced in finance and securities For the brokerage activities, the Board ofTLS has outlined the company strategy of technology investment, marketing andsales effectively With the image of the active online service brokerage provider,TLS has gradually dominated and become the leading market share at both stockexchanges in Hanoi and Ho Chi Minh Financial consultation is a main scopewhich TLS determines to develop and make it play a pivotal role in businessactivities of Company since its establishment Therefore, TLS Company hasfocused on investing and gathering many consultants who are experienced andhave a lot of close relationships with a network of businesses through thecountry Up to now, the clients who are consulted on finance has been up tomore than 300 large and small businesses, including many large, successful andprestigious enterprises and groups in the market place as Viettel Group,

Vinaconex, and so on.

Capital resource: TLS has the charter capital up to 1,200 billion VND While

many securities companies are having difficulties and struggling to survive with

a limited capital of tens of billions after a long time when the market goes down.TLS has a advantage is that TLS has a support of Military Bank which has fullyimplementd 5 mutual banking (securities) businesses An abundant financialresource is a good opportunity in the context of the strong recovery of marketnow It is an advantage for TLS to attract a lot of good profits from theinvestment activities

Information system: Because of having been aware of the importance of

applying Information technology in securities activities, TLS has been incollaboration with Hong Kong Transaction Technologies Company Limited tobuild the customer transactions management software systems since itsestablishment This is the core software for the management activities of TLSwhich meets the demand of the processing speed and secreat-keeping capacity.This is an important factor in the field of securities The opacity of this software

is very high and it is capable of connecting to many other systems Moreover, it

is direct with many stock exchanges in the country and in the world All abovethings help TLS to have a lot of advantages when the stock market of Vietnamhas been integrating into the foreign markets all over the world

In addition to the management and operation software, TLS has beensuccessfully implementing some products which provide information and utilityservices for customers on the Internet via website, system of stock consultation

or service of checking balance via mobile phones These products are selfdeveloped and researched by the information technology division of TLS Thus,many experts appreciate highly about the content of provided information

Because of being aware of the importance of Information Technology insecurities, TLS pays a special attention to human factor The Informationtechnology division is one of the departments which were firstly established and

independently operated to serve better for operation, exploitation anddevelopment on information system of Company Every year, TLS sends theinformatics staff who are high qualfied to participate in the professional coursesheld by the famous organizations as Oracle, Cisco, Microsoft and HP With apowerful and skillful team of information technology staff, the Informationtechnology division of TLS has been operating well and effectively in theoperation, exploitation and information development These staff and workersare not only experienced and specialized in information technology but alsoknowledgeable of securities business Therefore, this division has developed alot of products related to the software of shareholder management, software ofshare auction, software of securities mortage management and some specializedsoftwares which are widely used in the field of securities.

2.2.2.2 Pressure from buyers

Along with the strong growth of national economy, after more than 20innovation years, the capital market of Vietnam has achieved the remarkable andstrong steps in both business scale and quality and attracted all social strata andparticipants and made them pay much more attention

The number of accounts of individual investors has increased rapidly from50,000 accounts in 2005 to 350,000 accounts in 2007 and reached up to 500,000accounts at the end of 2010 This figures show that the client source for thesecurities market of Vietnam is quite high, especially for the brokerage activities

of stock companies in Vietnam

The strong trend of equalization is promising a lot of development potential inthe future For the period of 2007-2011, Vietnam has conducted the equalizationwithin a number of big enterprises and corporations such as Vietnam InsuranceCorporation, Phu My Fertilizer, PetroVietnam Finance Corporation, and JointStock Commercial Bank for Foreign Trade of Vietnam (Techcombank), MekongHousing Bank (MHB), Petrolimex and so on However, the process ofequalization takes place very slowly compared to the plan and method of

equalization of State enterprises which demonstrate the commitment of Vietnam

to the transition process of economy and international integration

Along with the development of the share market, the bond market of Vietnamhas a lot of remarkable achievements In addition to the issue of public bond,since 2006, some big corporations such as Vietnam Electricity (EVN), Vincomand all commercial banks have released thousands billion Vietnam Dong ofbond to the market However, the bond market of Vietnam is not still diversifiedand has not developed strongly In the long-term future, this is the cheapestmethod of mobilizing capital for the enterprises compared to the issuance ofcommon stock in the past This is also an abundant client resource forinvestment banking service in Securities Companies

Therefore, the development potential of stock market in general and the clientresource in particular has been quite abundant However, to attract this clientresource, the securities companies need to strengthen and promote theprofessionalism in the operation process and enhance prestige in the future tonot only attract the domestic client resource but also foreign clients who want toparticipate in the stock market of Vietnam

2.2.2.3 Threat from substitute products

Trading in gold, foreign currencies, real estate and bank deposits can beconsidered as alternative investment channel for stock market

Investors are always looking to the investment channel for high profits and littlerisk as possible When the gold, foreign exchange and real estate market becomemore exciting, the cash flow to invest in the stock market also began to flow intothis investment channel

Moreover, when stock market is gloomy, enterprises will look to other sources

of capital such as bank loans instead of issuing shares and bonds

2.2.2.4 Competitiveness of rivals within industry

By the end of 2010, Vietnam's stock market has more than 500 Joint Stock

Companies and Fund Management Companies listed on the Ho Chi Minh and

Ha Noi Stock Exchange Meanwhile, the number of securities companieslicensed and operated soar to more than 100 and with more than 500,000 tradingaccounts in total, the competitive battle for market share is becomingincreasingly fierce In which:

 The competition to reduce brokerage fees, consulting fees to lure customershas significant influences to revenue of securities companies, especially newentrants

 The race of information technology and business ground, etc makeoperating costs and cost for investment and development in enterpriseincrease more and more

However, competition also creates incentives and opportunities to raise for thedynamic securities firms with suitable business strategy and human resourcepolicies

 Make comparison with some securities comapnies in Vietnam:

In relative comparison among stock companies, there are some big competitors

to compare to TLS such as Saigon Securities Incorporation (SSI), Ho Chi MinhCity Securities Corporation (HSC) and BaoViet Securities Company (BVS):

- SSI: is known as one of five securities companies which were firstly

established in the stock market of Vietnam Saigon Securities Inc (SSI) isthe leading financial institution in Vietnam, the largest securities firm interms of market capitalization and is listed on the Ho Chi Minh StockExchange Saigon Securities Inc Has developed and become one of theleading securities companies of Vietnam The first strength of SaigonSecurities Incorporation is the client brokerage service in both stock andbond For several consecutive years, Saigon Securities Inc has ranked thefirst position in the stock market of Vietnam The SSI’s team is well-knownfor the outstanding level of service provided to all its customers One of theremarkable strengths and typical features compared to other securities

companies is that the brokerage market shares of foreign investors are thehighest and most dominant market share Regarding the consultation service

of enterprise finance, SSI is known as one of the leading companies in thisfield in Vietnam Furthermore, Saigon Securities Incorporation has alwaysbeen a gateway for foreign investors looking to invest in Vietnam’s financialmarket

- HSC: Established in 2006, Ho Chi Minh City Securities Corporation (HSC)

is one of the leading investment and financial services providers in Vietnam.Although Ho Chi Minh City Securities Corporation has been established forover 5 years, HSC has developed and become one of the prestigiouscompanies having the well-known coporation consultation and securitiesbrokerage services The strength of HSC is the professional managementand executive Ho Chi Minh City Securities Corporation has a lot of theprestigious and wise experts, researchers and consultants with the skillfulstaff and workers who are trained methodically and profoundly Furthermore,HSC has a good foundation of modern information technology HSC’s wiseresearches and views on the stock market are highly appreciated by allinvestors Business Advisory services of HSC also make a lot of clientsbelieve, especially for the enterprises which have foreign investment capital.HSC is part of the large network of companies which have significantlycontributed to the rapid growth of the Vietnam economy

- BVS: Bao Viet Securities Company (BVSC) is one of the first securities

companies in Vietnam, with the founding shareholder being VietnamInsurance Corporation (Bao Viet) which operates under supervision of theMinistry of Finance The strength of BVS is that BVS has the abundantcapital resource and the support of parent company- Vietnam InsuranceCompany BVS was formerly known as one of the leading companies whichprovide enterprise consulting service in Vietnam with the consulting services

of equalization, listing and issuance for big enterprises and corporations The

securities brokerage services also have obtained the significant market share

up to the present In recent years, with the outstanding development of newsecurities companies and new changes in the innovative business strategies

of old securities companies, the position of BVS has dropped rapidly butBVS still remains in the top 10 of securities companies in Vietnam on thesecurities services and is one of the strong and prestigious band name atpresent

Table 2.3: Compare some criteria in business TLS against rivals

3 Consultancy service quality for

4 The amount/size of national corporate

5 The amount of consultancy contract

for large customers

7 Brokerage market share for foreign

(This is the result of more surveys A sample survey is attached in Appendix I)

Conclusion: In Vietnam, stock trading is a quite new area with typical features.

Factors in sector environment have significant influences to operations ofsecurities companies in particular and stock market in general Nevertheless, the

influences of those factors to each securities company are different With respect

to operations of Thang Long Securities Joint Stock Company, pressure frombuyers and competitiveness from rivals within industry are the most affectedfactors to their operations

2.1.8 Opportunities and threats

2.2.3.1 Opportunities

 Demand on mobilizing capital for economy coming time will increase;

 Securities market is gradually developed in sustainable direction andbecomes the effective capital mobilizing channel in regard to manyenterprises;

 The program of capitalizing state owned enterprises has been promoting andconducting quickly;

 Market for services of securities market has relatively high growth rate

2.2.3.2 Threats

 Size of securities market in Vietnam is small;

 Securities market has too quick development in short term, therefore, it willhave extraordinary displacements because of influences from many factors.From 2010 to the first half of 2011, index in securities market in Vietnam hasalways been decreased Consequently, securities companies have to face upwith many difficulties in all business sectors

 The management mechanism for securities market has been not closed andcompleted It loses belief of investors and has not created attractiveness withrespect to foreign investors;

 The amount of securities company increases in comparison with marketscale It leads fierce competition, especially in areas of enterprise brokerageand consultancy;

 Knowledge of enterprises and investors in financial and investment productsand services is quite limited

f Analyzing internal environment

2.1.9 General business results of TLS

Table 2.3: Some items of business results in 2009 and 2010

3 Net profit from operating activities 108,408,136,000 48,645,966,000 (55.13%)

4 Profit before tax 108,408,136,000 48,645,966,000 (55.13%)

5 Profit after tax 97,688,762,000 44,570,273,000 (54.38%)

-(Source: Thang Long Securities Joint Stock Company)

Abnormal movement of securities market in 2010 had a significant influence onbusiness results of securities companies in general and TLS in particular According

to data from the State securities commission of Vietnam, over 20 securitiescompanies suffered losses; many others operated with revenues which were onlyenough to offset expenses; and most securities were unable to realize their presetbusiness targets

Overcoming difficulties and challenges from the market, TLS has tried a lot to gainprofit At the end of 2010 fiscal year, revenue of TLS reached VND 1,307 billion(up 93.36% from 2009), and profit before tax of the Company was over VND 48billion (down 55.38% from 2009)