Business strategy for housing and urban development holdings

LIST OF ABBREVIATIONSASEAN Association of Southeast Asia Nations EBIT Earnings Before Interest and Tax HUD Housing and Urban Development HoldingsIFE Internal Factor Evaluation ISO Intern

TABLE OF CONTENTS

ii

TABLE OF CONTENTS ii

LIST OF ABBREVIATIONS v

LIST OF TABLES vi

LIST OF FIGURES vii

INTRODUCTION 1

CHAPTER 1 4

1.1 WHAT IS A BUSINESS STRATEGY? 5

1.1.1 Definition 5

1.1.2 Roles 5

1.1.3 Classification 6

1.2 PROCESS OF BUILDING A BUSINESS STRATEGY 6

1.2.1 Defining Vision, Mission and Objectives 6

1.2.2 External Environment Analysis 6

1.2.2.1 The PEST Analysis 6

1.2.2.1 The PEST Analysis 6

1.2.2.1 Industry Analysis 9

1.2.2.1 Industry Analysis 9

1.2.3 Internal Environment Analysis 11

1.2.4 Setting up Strategies 13

1.2.5 Strategy Analysis and Selection 14

1.2.5.1 SWOT 14

1.2.5.1 SWOT 14

1.2.5.2 Internal – External (IE) Matrix 15

1.2.5.2 Internal – External (IE) Matrix 15

1.2.5.3 Quantitative Strategic Planning Matrix (QSPM) 16

1.2.5.3 Quantitative Strategic Planning Matrix (QSPM) 16

1.2.6 Strategy Implementation 17

1.2.7 Strategy Evaluation 17

CHAPTER 2 18

2.1 AN OVERVIEW OF HUD HOLDINGS 19

2.1.1 History and Development 19

2.1.2 Business Activities 20

2.1.3 Vision, Mission 20

2.1.3 Competitive Advantages and Core Values 21

2.1.4 Organizational Structure 22

2.2 EXTERNAL ASSESSMENT 23

2.2.1 Macro Environment using the PEST analysis technique 23

2.2.1.1 Political Factors 23

2.2.1.1 Political Factors 23

2.2.1.2 Economic Factors 25

2.2.1.2 Economic Factors 25

2.2.1.3 Sociocultural Factors 25

2.2.1.3 Sociocultural Factors 25

2.2.1.4 Technological Factors 26

2.2.1.4 Technological Factors 26

2.2.2 Micro Environment 26

2.2.2.1 Rivalry among competing Firms 28

2.2.2.1 Rivalry among competing Firms 28

2.2.2.2 Potential entry of new Competitors 29

2.2.2.2 Potential entry of new Competitors 29

2.2.2.3 Potential development of substitute products 29

2.2.2.3 Potential development of substitute products 29

2.2.2.4 Bargaining power of suppliers 29

2.2.2.4 Bargaining power of suppliers 29

2.2.2.5 Bargaining power of costumers 29

2.2.2.5 Bargaining power of costumers 29

2.2.3 External Factor Evaluation Analysis 30

2.2.4 Competitive Profile Matrix 30

2.3 INTERNAL ASSESSMENT 33

2.3.1 HUD Culture 33

2.3.2 Financial position 33

2.3.3 Products 34

2.3.4 Marketing 34

2.3.5 Research and Development 35

2.3.6 Organizational Structure 35

2.3.7 Human Resources 35

2.3.8 Internal Factor Evaluation Analysis 36

CHAPTER 3 37

3.1 HUD’S OBJECTIVES 38

3.1.1 General Objectives in the period 2011 - 2015 38

3.1.2 Specific Objectives in 2011 and 2012 38

3.2 STRATEGY ANALYSIS 39

3.2.1 IE Matrix 39

3.2.2 SWOT Matrix 39

3.3 STRATEGY SELECTION USING THE QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM) 41

3.4 RECOMMENDED STRATEGIES FOR HUD HOLDINGS 44

3.5 STRATEGY IMPLEMENTATION 44

3.5.1 Vertical Integration Strategy 44

3.5.2 Product Development Strategy 46

3.5.3 Market Penetration Strategy 46

3.5.4 Re-structuring Strategy 47

3.5.4.1 An ISO system 47

3.5.4.1 An ISO system 47

3.5.4.2 Training 48

3.5.4.2 Training 48

3.5.4.3 Staff Rotation 48

3.5.4.3 Staff Rotation 48

3.5.4.4 Downsizing 49

3.5.4.4 Downsizing 49

3.5.5 Taking part in Making Legal document Strategy 49

3.6 STRATEGY EVALUATION 50

3.6.1 Strategy Timeline 50

3.6.2 Procedures for strategy review and evaluation 51

3.6.2.1 Reviewing Bases of Strategy 53

3.6.2.1 Reviewing Bases of Strategy 53

3.6.2.2 Measuring Organizational Performance 53

3.6.2.2 Measuring Organizational Performance 53

3.6.2.3 Corrective Actions 54

3.6.2.3 Corrective Actions 54

CONCLUSION 55

REFERENCES 56

LIST OF ABBREVIATIONS

ASEAN Association of Southeast Asia Nations

EBIT Earnings Before Interest and Tax

HUD Housing and Urban Development HoldingsIFE Internal Factor Evaluation

ISO International Standards Organization

PEST Political, Economical, Social, TechnologicalQSPM Quantitative Strategic Planning Matrix

SWOT Strengths, Weaknesses, Opportunities, Threats

LIST OF TABLES

Table 1.3 Influences of opportunities to enterprise 11

Table 1.6 Reasonable selections for each strategy 14

Table 2.2 HUD and three of its direct competitors 32

Table 3.2 QSPM for Vertical Integration and Market and Product Development

Table 3.3 QSPM for Outsourcing Marketing Unit and Developing Marketing Unit

LIST OF FIGURES

Vietnam has officially joined the international Arena by becoming a Member

of the World Trade Organization (WTO) in January 2007 Therefore, Vietnameseenterprises are facing fierce competition both domestically and internationally As aresult, they must build long term business strategy to survive and develop

The Market is always fluctuated and demands of the consumers changecontinuously Thus, if an enterprise does not have a solid business strategy, theywill not have right directions and not able to adapt to new circumstances.Additionally, building business strategy is to combine strengths and orient to goals

of all members within the organization

Business in fields of investment and development for housing, real estate,residential areas and urban areas promises many opportunities with positivedevelopment potentials Reasons of changing accommodation, increase in income,uncontrolled migrants to urban areas, demands of living standard improvement, newhouses in urban areas are very highly desired, especially in big cities like Hanoi, HoChi Minh and Da Nang

Besides, this is also an area having fierce competition with many suppliers inthe market In Hanoi, there are many new urban area projects They mainlyconcentrate in Ha Dong such as Duong Noi new urban area of Nam Cuong Group,

Le Trong Tan new urban area of Vietnam International Urban Development JointStock Company, the new urban area along Le Trong Tan Way of Geleximco, Nam

An Khanh new urban area of SUDICO, Bac An Khanh new urban area ofVinaconex, Thanh Ha A urban area, Thanh Ha B urban area of CIENCO5 Whenthese projects have completed, it not only creates large supply on housing but alsocreates the strong competition in price, quality and product trademark

Housing and Urban Development Holdings (HUD Holding) is a state ownedEconomic Group which operates in accordance with the form of parent – subsidiarycompany The Group operates in multi sectors including investment and

development for housing, real estate, residential areas, urban areas, industrial parks.

In order to have high efficiency and mark solid position in competition as well asdevelop available resources, HUD Holdings needs to pay great attention to buildingbusiness strategy, defining long term goals and a clear roadmap to reachpredetermined goals

Although the name “Holdings”, like many other state economic Groups, theestablishment of HUD Holdings is still in its “Pilot” stage which means that theGoverment have not decided on the exact model for development At the moment,HUD Holdings are still operating both as a real estate developer and a traditionalHolding Company

In this assignment, our group select the topic of “Business strategy for

Housing and Urban Development Holdings in period of 2011-2015”, with the

focus on HUD’s business as a real estate developer We will carry out our researchbased on the theoretical foundation obtained from all the courses of the GlobalAdvanced MBA Program The methodologies used are collecting information fromthe library and the internet, interviewing HUD leaders and employees, and regulargroup discussion Even though this is a very wide and difficult subject, after longdiscussion, we still decided to choose because of a number of reasons as follows:

- Two members of the group have worked at HUD for a long period of timeand they know about Corporation very well Therefore, we have decided onthe subject with the ambition is to offer solutions that are specific, practicalstrategies for the Group to recommend to the leaders of the HUD forapplication This is one of the leaders’ wishes when sending us to join thiscourse

- HUD Holdings was established in March 2010 with an important task tobecome a powerful tool of the state to regulate the real estate market inVietnam So far, after 18 months of operation, the organizational structure

as well the specific development strategies of the Holdings are still being

developed Thus, proposing a development strategy for the Holdings at thistime will have high realistic and applicable chance of being used.

- According to the Oriented development of the Holdings, strategy of themember companies will depend on the strategy of the Holdings Therefore,developing strategies for member companies before the Holdings’ strategieshas not been passed is not appropriate and do not have high applicability

Besides the Introduction, the Conclusion and supplementary sections, thisCapstone Report consists of three main chapters:

- Chapter 1 – Review of The Literature: A brief review of the theoreticalbackground that is directly relevant to this research

- Chapter 2 – Analysis of Business Environments: Detailed analysis ofexternal and internal environments that HUD Holdings is in HUD’sstrengths, weaknesses, opportunities and threats are identified

- Chapter 3 – Strategy Analysis and Selection: Combining the information inChapter 1 and Chapter 2, using analysis tools and our group’s judgments torecommend strategies for HUD Holdings; Discussing the implementation,evaluation, measuring performance and contingency plans for therecommended strategies

CHAPTER 1

REVIEW OF THE LITERATURE

1.1 WHAT IS A BUSINESS STRATEGY?

1.1.1 Definition

There are many definitions of a business strategy, we think the following is themost suitable “Business strategy is a series of commitment and actions used by anenterprise to gain competitive advantage by making use of core capacity in a certainmarket” A business strategy has the following typical features:

- It defines basic goals and business orientation of enterprise

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

- It ensures the maximum mobilization and optimal combination in exploitingand using resources of enterprise at present and in the future It also upholdsadvantages, catches opportunities to hold competitive initiative in market

- It is shown in continuous process from forming to conducting, assessingand adjusting the enforcement of predetermined targets

- It always has idea to fight against and win in business market

- It is always built in long term (3 years, 5 years or 10 years)

1.1.2 Roles

The roles of a business strategy can be succinctly summarized as follows:

- It helps enterprise define their orientation in each specific period of time It

is the guideline for all production and trading activities of enterprise

- It helps enterprise catch and make use of opportunities, promote strengthsand have initiatives to overcome weaknesses, avoid or respond to mitigatedamages from external threats in competitive market

- It significantly contribute to the effect of using resources, promotes position

of enterprise and ensures the continuous as well as sustainable development

- It creates solid foundation for enterprise to make decisions It also createssolid foundation for research and deployment, development investment,human resource training, market expansion and product development

1.1.3 Classification

There are three main types of business strategy, namely:

- Cost leadership strategy;

- Differentiation strategy;

- Concentrated strategy;

1.2 PROCESS OF BUILDING A BUSINESS STRATEGY

1.2.1 Defining Vision, Mission and Objectives

The first step of strategy management is to define mission and objectives forthe organization This provides a context to build strategies

A Vision statement answers the question “What an organization wants tobecome?” A clear vision statement provides the foundation for developing acomprehensive mission statement

Mission states the existence reason of an organization and what they have to

do A mission statement is a declaration of attitude and outlook For example,mission of a national airline is to meet traveling demand with high speed forcustomers with reasonable price Similarly, mission of Yahoo is able to “connecteveryone to anyone and anything”

The objectives define the expectations of organization in medium and longterm period Almost of organizations pursue earnings, set the goals to havepredominant capacity to hold up the leading position The secondary objectives arethe ones that enterprise sees necessary if they want to gain predominant capacity

1.2.2 External Environment Analysis

1.2.2.1 The PEST Analysis

The PEST analysis looks at factors that affect an organization in a large environment The factors that are considered include Political - legal (P), Economic(E), Socio-cultural (S) and Technological (T) Changes in macro-environment canhave direct influences to any force in industry Therefore, it changes relativestrength to other sources as well as changes the attractiveness of an industry

macro-Political - legal factor (P)

Political – legal factors have significant influences to opportunities and threatsfrom environment The main thing in this factor is the way that enterprises possiblyaffect to Government and the way Government affects them The continuouschange of this factor will have remarkable impact to competitiveness

Economic factor (E)

The state of macro-economic environment defines the healthy and wealthy ofthe economy It always causes influences to enterprises and sectors Therefore,enterprises must analyze and research economic environment to realize changes,tendencies and their strategic implications

Socio-cultural factor (S)

Socio-cultural environment here can be understandable as a system oflanguage, value and attitude, behavior, customs, material, art, education, populationscale, age, gender, ethnic and job It relates to social attitude and cultural value.Since cultural values and social attitude create foundation of society Therefore, itleads changes and conditions of technology, political-legal, economy anddemography

Technological factors (T)

Technological factor – is forces creating new technologies, new products andmarket possibilities The matters of concern when researching technologicalenvironment factor are: the introduction of new technology, invention andapplication of new technology, encouragement and fund of Government forresearch and development activities, intellectual property rights, literary property,technology transfer law, pressure and cost for development and transfer of newtechnology

Figure 1.1 Macro-environment

In summary, the main objective of macro-environmental analysis is to identifythe expected changing trends from the elements of the external environment Withthe focus on the future, analyzing the external environment allows enterprises torealize the opportunities and threats We can summarize the analysis of the macroenvironment in the following table:

Political-legal

factors

Anti-exclusive law Tax law

Adjustment principles

Labor law Educational policies and philosophies

Economic

factors

Inflation rate Interest rate Commercial balance /budget

Individual saving rate Saving of enterprises GDP

Socio-cultural

factors

Female labor Labor diversification Attitude about working quality

Concern about environment Working transfer and like Changes about notion with products

Technological

factors

Product improvement Knowledge application

Focus of private and support of Government about R&D

Table 1.1 Macro-environment factors

Bargaining power of suppliers

Threats of potential rivals

Political-legal

Threats of substitute products

Competition of Current enterprises

Bargaining power of buyers

Economic

1.2.2.1 Industry Analysis

A sector is a group of enterprises providing products or services that canreplace each other closely During the competition, the enterprise is affecting otherbusinesses Overall, the sector includes a diverse mix of strategic and competitivestrategies that enterprises have been pursued to higher levels of average income

We can use the Competitive Profile Matrix (CPM) to identify an organization’smajor competitors and its particular strengths and weaknesses as shown in Figure1.2

Table 1.2 Competitive Profile Matrix

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 are fiveforce orienting competitiveness within industry regarding as:

1) Rivalry among competing Firms

2) Potential entry of new Competitors

3) Potential development of substitute products

4) Bargaining power of suppliers

5) Bargaining power of costumers

Figure 1.2 Porter’s five force model

Porter pointed out that the stronger the force is, the more limited ability ofexisting firms to raise prices and earn higher profits In the framework of Porter, astrong competitive force can be seen as a threat, because it would reduce profits.The power of the five forces can change over time as industry conditions change

Efficiency from analyzing external environment factors (EFE)

The final step in assessing external environment factors is to assess and rankopportunities and threats

Opportunities and opportunity ranking: After analyzing macro- environment

factors and sector environment; we need to introduce comprehensive evaluationabout opportunities for enterprise The steps are conducted as following:

Step 1: List opportunities in regard to enterprise

Step 2: Make up the table for assessing influences of opportunities to enterprise

Threats from new entrants

Threats from substitute products

Competitiven ess of rivals within industry

Bargaining power

of buyers

Bargaining

power of

suppliers

Opportunities The importance Influences Score

Table 1.3 Influences of opportunities to enterpriseBased on influence assessment of the opportunities for enterprises, we canprovide a ranking list of opportunities in order of priority Businesses should takeadvantage of the opportunities with higher priority, and opportunities in the mediumand low priority only when they fully utilize the resources The priority is used tofill data for the SWOT analysis

Threats and threat ranking: The steps of assessing and ranking threats are

conducted as following:

Step 1: List threats in regard to enterprise

Step 2: Make up the table for assessing influences of threats to enterprise

Table 1.4 Influences of threats to enterpriseBased on the above table, we can make a ranking list of threats in order ofpriority The threats in higher priority are undertaken by the supreme leader For thethreat at a lower priority level, the fewer measures to be adopted Combining theInfluences of Opportunities and Threats to enterprise will give us the ExternalFactor Evaluation matrix

1.2.3 Internal Environment Analysis

In addition to broadening vision out to detect threats and seek opportunities, thestrategy must also assess the strengths and weaknesses within organization

Awareness of the internal strengths and weaknesses in enterprise can help thembuild an effective business strategy In fact, we cannot evaluate all the factorswithin the enterprise since the number of it is enormous Therefore, to assess theenvironment within the enterprise, it is necessary to point out the major factorswithin the enterprise Furthermore, their presence may represent the operations ininternal enterprises The main factors used in analysis of environmental assessmentwithin the enterprise are the value chain of enterprise and its core competencies

Strength is the things that business is doing well or feature to help businesses

improve their competitiveness

Weakness is something that businesses are missing, poor or a condition

pushing enterprises in disadvantage

The internal weaknesses are deficiencies in the resources of the enterprise.Another weak point could cause or not cause damage to the enterprise, that depends

on the degree of influence on the market and whether the company can pass by theresources and strength or not

Analysis of strengths, weaknesses, opportunities and threats (SWOT) can bebased on the principle that the strategic efforts must aim to create the best fitbetween the resources’ ability of enterprise and external situation However, it isimportant to be able to build competitive advantage and maintain it in a sustainableway And the enterprise is required to understand the nature and origin ofcompetitive advantage

Hence, administrators will have more positive awareness of internal situationthanks for analyzing the following main factors: Human Resources, Research andDevelopment, Production and Operation, Finance/Accounting, Marketing

In order to identify which internal strengths and weaknesses influence anorganization the most, we use the Internal Factor Evaluation matrix below The IFEmatrix provides important information for strategy formulation

Table 1.5 IFE Matrix

1.2.4 Setting up Strategies

The competitive strategies have to be based on sources of competitiveadvantage for gaining success Every business is able to automatically create forthem a competitive advantage If they operate steps logically; they will win the topposition in attracting customers in comparison with rivals within industry The steps

or routes that every business can make different, even they chose any of them tocreate a competitive advantage, it is essential that customers feel outstanding valuecompared to the ones that competitors supply for

Thus, each firm will try to create their specific strategies matching to analysis

of internal strengths, weaknesses, values that they can provide; externalenvironment factors as well as demand of customers Although there are manydifferent competitive strategies, in general, there are three basic approaches tocreate competitive advantage, namely: (1) cost leadership strategy;(2) differentiation strategy; (3) concentrated strategy

Cost leadership strategy

Differentiation strategy

Concentrated strategy

Create the product

differentiation

Low (mainly equal price)

High (mainly by original ideas)

Low to high (good and original price)

Research and development, sale and marketing

Any capacity to create differentiation

Table 1.6 Reasonable selections for each strategy

1.2.5 Strategy Analysis and Selection

Successful selection of a business strategy means high concentration on allfactors of competition Enterprises in an industry can pursue many differentbusiness strategies that the difference among them relates to factors such as marketsegment, product quality, leading technology, customer service, pricing policy andadvertising policies If applicable, almost industries will have strategic groups inwhich enterprises pursue similarly general ones

In general, successful management for jointly competitive strategy requiresadministrators to pay attention to two main issues At first, they must ensure thatdecisions on product, market, differentiation possibilities orienting to specificcompetitive strategy The second, they must keep on track of environment and theycan connect their competitive advantages to changes in opportunities as well asthreats

1.2.5.1 SWOT

A SWOT analysis is a tool, used in management and strategy formulation tohelp identify the strengths, weaknesses, opportunities and threats of an organization.The SWOT matrix is the combination of the EFE and IFE matrices From these,strategy alternatives can be formulated Four types of strategy can be generated as

in Figure 1.3

Figure 1.3 SWOT Matrix

1.2.5.2 Internal – External (IE) Matrix

The IE Matrix is based on two key dimensions: the IFE total weighted scores

on the x-axis and the EFE total weighted scores on the y-axis as shown in Figure1.4

Figure 1.4 IE MatrixThe IE Matrix can be divided into three major regions that have differentstrategy implications First, if the prescription of an organization that fall into cells

I, II or IV can be described as grow and build Intensive strategies can be most

appropriate for this organization Second, if an organization falls into cell III, V, or

VII, it can be managed best with hold and maintain strategies Third, if an

organization falls into cell VI, VIII, or IX, the best strategies to choose can be

harvest or divest Successful organizations are able to achieve a portfolio of

business positioned in or around cell I in the IE Matrix

1.2.5.3 Quantitative Strategic Planning Matrix (QSPM)

After combining the strategic plan using the SWOT and IE matrices, we have aseries of proposed strategies The next step is to determine the attractiveness of eachstrategy The strategy has the highest score of attractiveness will be most likely to

be selected To do this, the most popular tool is the Quantitative Strategic PlanningMatrix (QSPM) A framework of the QSPM is presented in Table 1.7

Table 1.7 The QSPM

1.2.6 Strategy Implementation

The strategy implementation is the translation of strategy thoughts intostrategic actions In other words, the implementation stage will outline the specifictasks for each unit in the organization to make the strategy a success

The strategists will have to look at all the internal units (Marketing, Financeand Accounting, Research and Development, Production and Operation ) duringthe strategy implementation stage

1.2.7 Strategy Evaluation

Finally, the best formulated and implemented strategies become obsolete as anorganization’s external and internal environments change It is essential, therefore,that strategists systematically review, evaluate, and control the execution ofstrategies

The evaluation stage normally consists of three activities: Review bases ofstrategies (external and internal factors); Measure performance (compare planned toactual progress toward meeting stated objectives; and Take corrective actions (ifany of the planned factor changes or stated objectives is not met)

CHAPTER 2

ANALYSIS OF BUSINESS ENVIRONMENTS

2.1 AN OVERVIEW OF HUD HOLDINGS

Name: Housing and Urban Development Holdings

Address: M5 Building, 91 Nguyen Chi Thanh, Ha Noi

Housing and Urban Development Holdings (HUD) is a state ownedCorporation, organized and operated under the Decision Number 54/QĐ-TTg datedJanuary 12th 2010 by the Prime Minister of Vietnam

After 20 years of operation, the Corporation’s position has grown stronger andexpanded in both domestic and foreign markets The brand name “HUD” hasbecome one of Vietnam’s top brands in developing new residential and urban areas.HUD has been an important contributor in the country’s industrialization andmodernization over the years

Since 2005, the Corporation has fully equitized its member companies andstarted to operate under the mother-child company model HUD has over 20member companies, which are subsidiaries, affiliated companies and five stateowned limited liability companies providing a wide range of services includinginvestment, construction, consultancy, construction material production and urbanand recreational services

The primary mission of the Corporation and its member companies is todevelop new residential and urban projects The subsidiaries are joint stockcompanies located at important regions, big cities and urban areas nationwide Therelation between the Corporation and its member companies are equal, built on theeconomic contracting principle for the overall development plan of the Corporation.Implementing the principle of “Combining business and public service andService being the basis for development”, HUD has developed many differentprojects in a variety of sizes with Linh Dam, My Dinh, Dinh Cong, Van Quan newurban areas to name a few All HUD projects create harmonized, civilized and

modern new urban areas with green and clean environment and for the peace ofmind of its residents.

With over 20 years of development and results achieved in the reform era,HUD Holdings has proven to be Vietnam’s leading enterprise in developing newresidential and urban projects

It should be noted that although the name “Holdings”, like many other stateeconomic Groups, the establishment of HUD Holdings is still in its “Pilot” stagewhich means that the Goverment have not decided on the exact model fordevelopment Therefore, HUD Holdings are still operating both as a real estatedeveloper and a traditional Holding Company which only invests capital in membercompanies It is expected that the transition in to a fully holding company will becompleted in 10 years time In this report, only the real estate development sectorwill be analysed

2.1.3 Vision, Mission

Housing and Urban Development Holdings’ vision is to be the market leader indeveloping new houses and urban areas

HUD will play its leading role of a state owned Corporation in regulatingVietnam’s real estate market, meeting the demands for housing of the people ofvarious social classes HUD’s trademark products are modern and synchronous newurban areas.

2.1.3 Competitive Advantages and Core Values

Currently HUD is the investor of a number of projects at convenient locations

in central districts of Hanoi and Ho Chi Minh City Currently, HUD is one of thereputed organizations in the real estate business to have high competitive strengthand efficient operation HUD’s main competitive advantages can be considered as:

- A reputed developer with great successes in the real estate industry

- Big land capital in all parts of the country

- Renowned housing supplier for low to medium income customers

HUD’s Core values are:

- Profitability is the required factor for development;

- People are valuable assets who give HUD power;

- The teamwork spirit, discipline & industrial working style create thebusiness culture of HUD;

- Best and better quality of goods and services are to meet the customer'srequirements;

- Profit is vital to the existence and development of HUD;

- Social responsibilities must be paid due attention in every action of HUD

2.1.4 Organizational Structure

Figure 2.1 HUD’s Organizational Chart

2.2 EXTERNAL ASSESSMENT

In this modernized and globalized era, almost all organizations are influenced

by trends and events that are beyond their control In this section, an externalassessment is carried out to identify opportunities and threats confronting HUDHoldings The results of the assessment will be used to formulate strategies forHUD in Chapter 3 to take advantage of the opportunities and avoid or reduce theimpact of the threats

2.2.1 Macro Environment using the PEST analysis technique

The PEST (Political, Economical, Socio-cultural, Technological Factors)

analysis has proven to be a flexible and easy to understand tool in the context ofstrategic planning It provides a summary of the driving forces in the macroenvironment

2.2.1.1 Political Factors

The political factors affecting the construction real estate industry in generaland HUD in particular and mostly consists of documentations and permits that has

to be obtained during the various phases of developing a new project and its sale

- Being a state owned Corporation, HUD’s major objectives and strategiesare significantly influenced by important personnel from the Governmentand related Ministries and Committees

- HUD is the State Economic Group established by the Government Hence,HUD has political duties that other organizations do not have such asdeveloping new urban areas in remote regions which are planned fordevelopment by the Government As a result, HUD has projects at 40 out of

60 provinces in Vietnam, including Bac Kan, Cao Bang, Quang Ngai, KienGiang, Can Tho where the profit margins are very low

- The recent approval of the Master Plan for Hanoi to the year 2030 hasclearly shaped up HUD’s strategies in Hanoi area in the next 20 years

- The list of legal documents that affect the day to day operation of HUDincludes Construction Law, Bidding Law, Business law, Tax Law Besides,Regulations, Policies, Decrees, Circulars and Indicators from theGovernment, Ministries and People’s Committees also have significantimpacts on HUD’s existence and development.

- Acceptance of Investment Certificate is the first legal document that HUDmust obtain before commencing a project The People Committee issues it,with the assistance of the Department of Planning and Investment

- The design of the project will then be carried out The design then must bechecked and accepted by the Ministry of Defense, the Ministry ofConstruction and the Department of Planning Architecture

- Meeting all the Land Responsibilities is the next step that a developer likeHUD must carry out This includes reclaiming land (paying the currentoccupiers for relocation to a new place), paying Land Use Fee, andobtaining Certificate of Land Use Right The People Committee issues theseAcceptances with the assistance of the Department of Natural Resourcesand Environment, Department of Finance, Department of Tax, Department

of Construction and the local authority where the project is carried out

- Building Commencement Certificate must be obtained before constructioncan be taken place In Vietnam, it is the Department of Construction whogives the Commencement Certificate

- Occupation Certificate must be secured after the completion of the project,without which the flats in the building cannot be occupied for residential orcommercial purposes This is issued by the Department of NaturalResources and Environment

- Flow of Foreign Direct Investment (FDI) affects HUD’s operations on jointventure projects

- Policies and Regulations in Cuba, Myanmar, Laos and Cambodia also affectHUD’s projects in these countries