BUIDING BUSINESS STRATEGY COWAELMIC FOR THE PERIOD 2011 2015

The company started interested in and develops in thisarea since 2003 when COWAELMIC started investing to build high-end apartmentand leasing office in Hanoi such as: Water Electrical Me

DISSERTATION MBA

BUIDING BUSINESS STRATEGY - COWAELMIC FOR THE

PERIOD 2011 - 2015

INTRODUCTION 1

CHAPTER 1: THEORITICAL BACKGROUND ON BUILDING BUSINESS

STRATEGY FOR ENTERPRISES

3

2.1.1 Overview on formation and development of COWAELMIC 10

2.2.1 Analysis on impacts of the macro environmental factor 132.2.2 Analysis on impacts of the industrial environment factor 28

3.4.1 Implement strategy S/O 513.4.2 Implement solutions of Human Resource Management 54

Appendix 2: Overview on production technology for steel structural types 58

We hereby acknowledge that this written project has not been collected by any otherstudying or training program

Ha noi, 20 August 2011 The Author group

CHAPTER 1: THEORETICAL BACK GROUND ON BUILDING BUSINESS

STRATEGY FOR ENTERPRISES

1.1 Definitions on strategy

Strategy is an orientation and scope of an organization in long term in order togain the competitive advantage for institution by defining all resources in a changingenvironment to meet the market demand and satisfy expectations of relate parties

Roles of strategy

- Create the relation between strengths and weakness of the company, the mutualsupporting relation between opportunities and challenges outside the company, andthen create the competitive advantage for enterprise

- Help the manager to see the opportunities and threats that may happen in current andfuture business in order to make analysis and forecast the future market, take fulladvantage of opportunities, reduce the threats, improve the competitiveness ofenterprise, and achieve great success

- Help the enterprises to create better business strategy via using systematic approach,creating base for and increase the connection among internal members in realizing thecommon target of the enterprise

1.2 Types of strategies

- Classification by strategy level:

+/Corporate strategy (General strategy)

+/Business strategy (sector)

+/ Functional Strategy

- Classification by the strategy content.

Regarding the strategy content, the managers can define strategy in different types: +/ Marketing, commercial strategy

+/ Financial Strategy

+/ HR Strategy

+/ Technology Strategy

1.3 Business Strategic Planning Process

The business strategic planning is regular task which requires the involvement of allenterpirse memebers It includes following steps

THE MANAGING THE STRATERGY PROCESS

Figures 1.1: Process of managing the strategy Source: Le The Gioi, Nguyen Thanh

Liem and Tran Huu Hai, “Strategic Management”, Statistical Publishing House, 2009)

1.3.1 Defining the mission and key goals

- Defining the organizational mission / Defining the strategic goals

1.3.2 Macro environment analysis

Figure 1.2: Macro Environment

Supplier power Rivalry Buyer power

Threats of substitutes

Threat from new entrants

Global

Demographical

Cultural SocialTechnological

(Source: « Strategic Management: Concepts and Cases: Competitiveness and

Globalization »’ Micheal Hitt and all, 2010)

1.3.2.1 Economic environment

1.3.2.2 Governmental, Legal, Political environment

1.3.2.3 Technological Environment

1.3.2.4 Natural environment.

1.3.2.5 Cultural and Social Environment

1.3.3 Industrial Environment Analysis

Industrial environment includes all internal factors close to the company that have a directimpact on the organizations strategy These factors are five forces demonstrated in thePorter Model of five forces

Figure 1.3: M.Porter Five Forces Model

(Source: Le The Gioi, …, 2009, Strategic Management, Model of 5 competitive forces

by Mr Porter, pg.106)

Michael Porter provided a framework that models an industry as being influenced by fiveforces The strategic business manager seeking to develop an edge over rival firms can usethis model to better understand the industry context in which the firm operates

The competition ofthe availablecompany

Negotiating

capacity of

suppliers

Negotiatingcapacity ofpurchasers

Threat ofsubstitute products

1.3.4 Internal Environment Analysis :

1.3.4.1 Production and Operation

1.3.4.2 Research and Development

1.3.4.3 Finance

1.3.4.4 HR and organization

1.3.4.5 Marketing and sales

1.3.4.6 Defining sustainable competitive advantage

1.4 SWOT Analysis Matrix

SWOT matrix is a strategic planning method used to evaluate the Strengths,Weaknesses, Opportunities, and Threats The SWOT analysis provides informationthat is helpful in matching the firm's resources and capabilities to the competitiveenvironment in which it operates As such, it is instrumental in strategy formulationand selection If the analysis target of SWOT is a business strategy, the researchobjective is improving the enterprise performance;

Figure 1.4: Simplified SWOT analysis FrameEnvironment analysis External environment

W-W-O:

overcome weaknesses topursue opportunities

W-T:

Prevent the firm'sweaknesses from making ithighly susceptible toexternal threats

(Source: « Essentials of Strategic Management », D.Hunge and T.Weleen, 2006)

SWOT can be understood as followed:

 Strengths: Maintain, develop, use as leverage

 Weaknesses: Improve attributes of the person or company that are harmful toachieving the objective

 Opportunities: Good anticipation of external conditions that is helpful to achievingthe objective

 Threats: external conditions which could do damage to the objective.

1.5 Generic business strategy

1.5.1 Strategy basis

Michael Porter defined three general strategies which can be applied at business unit level inorder to create competitive advantage Basis of competitive strategy:

(1) The demand of customer, what to satisfy;

(2) Target groups, who to be satisfied;

(3) Differentiation capacity, How to satisfy the customers’ demand

1.5.2 Types of Generic Strategies

Figure 1.5: Porter's Generic Strategies

(Source: « Essentials of Strategic Management », D.Hunge and T.Weleen, 2006)

1.5.2.1 Cost Leadership Strategy

1.5.2.2 Differentiation Strategy:

1.5.2.3 Focus Strategy

1.5.2.4 A Combination of Generic Strategies

1.6 GREAT model - Selecting the optimum strategy

The enterprise need to select an optimum strategy because they can not implement all strategies

at a time or each strategy by a random order It will cost time, efforts and resources

That’s why it’s necessary to do selection for a best strategy which will serve well thedevelopment objectives of the enterprise given its advantages and disadvantages

On the synthesis of all strategies which has been figured out through the SWOT analysis

S-O, S-T, W-S-O, W-T, we can use GREAT matrix to identify fundamental features of eachstrategy, which will help us to find out the desired strategy

Figure 1.6 : GREAT MATRIX

Criteria Weight

StrategiesStrategy 1 Strategy 2 … Strategy nRating Score Rating Score Rating Score

Step 3: Evaluate and Grade every criterion in each strategy The grade scale is 1-5, which isequivalent to 5 levels: poor, average, above average, good, and excellent

Step 4: Calculate the grades into equivalence by multiply column 2 with the responsiveweight, then we come up with the total grade for each strategy in the final row Finally, wehighlight 1-3 strategies with highest grades, which are strategies to be focus on

In conclusion:

In today's highly competitive business environment, budget-oriented planning orforecast-based planning methods are insufficient for a large corporation to survive andprosper The firm must engage in strategic planning that clearly defines objectives andassesses both the internal and external situation to formulate strategy, implement thestrategy, evaluate the progress, and make adjustments as necessary to stay on track.Given the information from the environmental scan, the firm should match itsstrengths to the opportunities that it has identified, while addressing its weaknessesand external threats A competitive advantage can be based on cost or differentiation.Michael Porter identified three industry-independent generic strategies from which thefirm can choose.

The selected strategy is implemented by means of programs, budgets, and procedures.Implementation involves organization of the firm's resources and motivation of thestaff to achieve objectives The way in which the strategy is implemented can have asignificant impact on whether it will be successful In a large company, those whoimplement the strategy likely will be different people from those who formulated it.For this reason, care must be taken to communicate the strategy and the reasoningbehind it Otherwise, the implementation might not succeed if the strategy ismisunderstood or if lower-level managers resist its implementation because they donot understand why the particular strategy was selected The implementation of thestrategy must be monitored and adjustments made as needed

CHAPTER 2: ANALYSING COWAELMIC’S BUSSINESS STRATEGY

2.1 Introduction to the enterprise

2.1.1 Overview on formation and development of COWAELMIC

Water Electrical Mechanical Installation and Construction Joint StockCompany (COWAELMIC) was formed from 100 Electrical Team under Nam Ha NoiArea Architecture Company on November 15th, 1975 Water and ElectricalMechanical Installation Factory was established when the country had just beenunified and the subsidy was still heavy In October, 1992, Ministry of Constructiondecided to merge two factories: Water Electrical Mechanical Installation Factory andHousing Development Construction Factory, in which the core was Water ElectricalMechanical Installation Factory into Water Electrical Mechanical InstallationCompany This merger met the necessities of the country economic renovation In

2000, Construction and Water Electrical Mechanical Installation Company was thefirst Company in the field of construction and installation to boldly pioneer a historicstep moving to the new enterprise model – Joint Stock Company The typical worksassociated with the this new period were: New urban zone project of Xuan Hoa ward

in Phuc Yen Town, Vinh Phuc Province, Phuoc An residential area in Long Thocommune, Nhon Trach district, Dong Nai Province, Nhan Chinh Building, D5 CayGiay, Vuon Dao, Nghi Son Cement Plant, Tan Water drainage project in Hoa – LoGom basin (TH4), etc Since the establishment, the Company’s operation scale andthe apparatus have been growing In comparison with the 90s when the force ofofficials and employees only included over 200 people, the total current number ofofficials and employees signing long-term labor contracts with the Company isapproximately 800 people, corresponding the increase of works with turnover of over

1000 billions In period of 2005 – 2009, the Company has developed very steadily andfirmly Many projects of urban zone, industrial park, buildings have been implemented

by the Company Especially, the Company has been investing in research andapplication of steel frame structure technology in the field of high-rise building

+ The main business lines COWAELMIC:

Construction activity is the traditional business of the Company Since equitization in

2000 Cowaelmic always be one of the leading contractors, prestigious domestic andinternational With a skilled staffs and workers, advanced machinery and equipment issynchronized, Cowaelmic has executed thousands of project, including many largeproject requiring high technical, art, complex, in many different industries such as Ba

Giang Post Office, Bac Ninh Post Office, National Conference Center, Nghi SonCement Plant…

Investment and development of urban and industrial zone is one of the mainbusinesses of COWAELMIC The company started interested in and develops in thisarea since 2003 when COWAELMIC started investing to build high-end apartmentand leasing office in Hanoi such as: Water Electrical Mechanical Installation andConstruction Joint Stock Company Bulding, Cau Giay D5 Apartment, Xuan DinhApartment…Since then, with the rapid development of economic and the real estatemarket, especially the development of new urban areas in cities and provincesthroughout the country, the field of urban and industrial development investment ofCOWAELMIC had boom Currently, COWAELMIC has been investing to expand thefield of urban an industrial zone development investment in the country Some typicalprojects such as Xuan Hoa new urban (Vinh Phuc), Phuoc An urban (Dong Nai),Vuong Dao-Tay Ho Building (Hanoi), Long Tan A urban (Dong Nai), Cali-Long Ducindustrial zone (Long An)… At this point, COWAELMIC is known as one of theprestige real estate corporation, the domestic and international customer confidence,appreciate

+ Vision and Mission: To develop the company becomes the consortium ofcontractors, the dynamic business investor, contributing to the development of HanoiConstruction Corporation - Vietnam Housing and Urban Development Group

+ The primary goal: “DIVERSITY DEVELOPMENT - SUSTAINABLE INVESTMENT” is the long-term goal of the company.

+ Development Orientation:

Figure 2.1: Achieving economic growth with high targets.

With the difficult situation of accommodation for workers, students, people with lowerincomes… in large cities due to migration from rural area to city, the application ofnew construction technologies helping reduce construction time and cost is aneffective measure Presently, Viet Nam has no factory that manufactures building steelstructure; this is a new construction technology While the needs and requirements forapplication of steel structure technology in high-rise buildings in the future arecertainly very high From this situation the company orients:

- Assembly apply new technology in high-rise buildings construction and other supersize, super weight products…

- Operate in manufacture of construction material for new construction technologyapplication

- To develop the research applied new construction technology

2.1.2 Organizational structure:

Figure 2.2 : Organizational structure

2.2 Cowaelmic’s business environmental analysis

2.2.1 Analysis on impacts of the macro environmental factor

The macro environment (PESTLE) is impacted by factors as follows:

Figure 2.3 : The macro environment (PESTLE) a) Social-cultural environnemental factor:

+ Population:

- The population explosion:

The average national population in 2010 is estimated at 86.93 million, 1.05%higher than in 2009 The increase in population and immigration is becoming achallenge The total number of migrants in the country within five years prior to thepopulation census in 2009 increased to 6.7 million Migration from rural to urban areashas significantly accelerated the urbanization process and thus put pressure on theinfrastructure system and social services in the urban areas Population growth is afactor increasing social needs and thereby increase demand for housing Real estatedemand is a quantity proportional to the population factor, especially the highermechanical population growth rate will cause spikes in real estate demand Elasticity

of demand for land and housing is strongly dependent on the variables: family size,income and prices A country is considered to be developed, ensuring social securityissues, it, in addition to ensuring adequate food, clothing for people, must solve themost important and urgent problem of housing, because "to settle to develop".Currently, the demand for housing of the people of our country is high pressing oursociety According to recent statistics by the Ministry of Construction, Vietnam has anaverage housing area per capita across the country of about 17.2 m2 Compared to

Law

Technology Politic

some countries in the region, the average housing area in Vietnam is still low as China

25 - 29m2 of floor / head, Thailand 22m2 of floor / head, Malaysia approximately31m2 of floor / head Notably, the area per capita in 2010 in Vietnam is 14.3 m² /head, especially Hanoi is a city having the lowest housing area per capita (7 to 7.5m2) But the supply to meet the huge demand on the average price housing is still verylimited At the moment, 40% of Hanoi's people have housing difficulties; Ho ChiMinh city needs 18 thousand shelters for workers, students, and low-income people Inparticular, according to a preliminary investigation on housing for officials and publicservants, there are still thousands of households living in housing conditions notguaranteeing a minimum standard The area has about 30% of state employeesdistributed with housing in which the percentage of the number of young familieshaving no house (living in transplant households, temporarily) account for a large, 4%rent in advance; for the level-4 private residence housing, over 30% of householdsneed improved housing Most industrial parks are lack of housing for workers as thenumber of employees increased, but in development planning of industrial parks; itexcludes the requirement of accommodation for workers Due to the reasons above, itmakes the current housing prices in Vietnam in the big cities higher than in many othercountries According to our survey, in a few years ago, in Hanoi, an average housecould be bought with about 1 billion, but now, it costs at least about 1.7 to 2 billion ormore Land price in a relatively favorable position with car parking space in somedistricts such as Ba Dinh, Dong Da, Cau Giay, Thanh Xuan, Hai Ba Trung currentlyranges from 60-400 million m2 And in the deep alleys, where two motorcycles areharder to avoid each other, the price is not less than 20 million m2 The apartments,including the old ones, buyers also have to spend between 25-50 million per m2 Withthis lofty price, despite of being in need, low-income people could not afford

From these situations, it can be seen that the segment on housing for and lower income people in provinces across the country is enormous According tostatistics of Ministry of Construction, in a short time, there have been about 190 low-income housing projects with a capital of nearly VND 30,000 billion being registeredwith the size of 7 million m2 of housing, equivalent to 170,000 flats Of these,approximately 37 projects have been constructed with investment of 3,600 billion,contributing to address accommodation for about 64,000 people For the projects on

average-housing for workers in industrial parks (IPs), 24 projects have also been started withtotal investment of 2,600 billion, upon completion; they will contribute to addressaccommodation for about 125,000 workers in industrial parks For projects on housingfor students, 94 projects have been started in 28 provinces with the total governmentbonds of 5,500 billion Upon completion, these projects will meet the accommodationneeds for 180,000 students across the country

The problem of social housing construction actually became active in thecountry in 2010 Many localities made efforts to promote the creation of the fund forlow-income people, workers, students, such as Hanoi, Ho Chi Minh City, Da Nang,Binh Duong, Thanh Hoa Particularly in Hanoi, the low-income housing projectswere started with about 25,000 apartments, including some projects such as Ngo ThiNham, Viet Hung began selling accommodation

According to Mr Nguyen Quoc Tuan, Deputy Director of HaNoi Department

of Construction, the city has put the target, by 2015, to meet 60% of students wishing

to be tenants in dormitory and 50% of workers in industrial parks in need to beaddressed with housing; basically solve shelters for low-income people in urban areashaving pressing needs for housing with about 15,500 apartments, corresponding toapproximately 1.5 million m2

In Ho Chi Minh city, 8,300 social housing units have been built, or more than1.2 million m2 of floor, contributing to solving the problems of housing for those whoare officials, employees, officers and professional soldiers in the armed forces

Danang city also has developed 127 blocks of apartments, expecting to allocate11,332 apartments, of which 66 blocks with 2,859 units were built and put into use,while 61 blocks with 8,473 apartments are be quickly constructed and completeddocuments to start construction

Ministry of Construction has published a draft Housing Strategy to 2020 andvision to 2030 to collect opinions of local people, scientists The draft sets out theobjectives to 2020 strive for the average housing area of the country reaching 25m2 offloor / head, the rate of permanent housing nationwide reaching 75%, about 70-80% ofstudents in need able to hire accommodation in dormitory and 60% industrial workers

in need able to be tenants in housing projects for workers

About Vision to 2030, housing will be developed towards increasing harmonybetween people and natural environment, strengthening exchanges, communityactivities and striving to have average housing area nationwide achieving 30m2 offloor / head, the rate of housing with high construction quality and comfortable of over80%

Understanding this reality on demand for housing in low and average-incomesegments, Cowaelmic company has developed research, applied new constructiontechnologies with outstanding features "sustainable structures, fastest constructiontime, most reasonable price.”

- Age structure of population decides needs:

According to report of General Department of Population, since 2006, annually,our country has supplemented about 1.5 million people to the workforce, currentpopulation at working age accounts for 62.7% Accordingly, Vietnam has entered thestage of "gold" population structure with a large rate of people at working age, lowrate of dependents This is truly one of a kind opportunity for the country’s socio-economic development If the Government has appropriate policies to develop humanresource and create employment opportunities, particularly focuses on young laborforce, it will contribute to economic growth, while income per capita increases, thedemand for housing will increase Results of deep analysis on migration survey dataalso show that, in the period 2004-2009, these were 6.6 million of migrants in andoutside the provinces in Vietnam; most migrants were young people, where thenumber of youth female migrants increased significantly This is also a cause ofincreased demand for housing in big cities

+ Culture, lifestyle, family:

The social factors also have a major impact on real estate values One areawhere population density is suddenly increased due to mechanical population growth,real estate values will increase as supply-demand balance is broken High populationdensity in many areas causes congestion and severe degradation; many old apartmentsare degraded, damaged As reported by the Hanoi Department of Construction, the cityhas more than 1,000 old apartments, especially, 11apartments in danger level D, forced

to be relocated and renovated and rebuilt in accordance with Housing Law Especially

in the ancient quarter, the population density is about 82,300 people per km2, which is

very high compared to the requirements of population density control planning for theancient quarter in 2020 of 50,000 people per km2 The implementation of Project on

“stretching population in ancient quarter " and " renovating old apartment" requiressupply of resettlement areas to ensure rapid progress of clearance

With the trend that the family size in Vietnam has been increased, it isaccompanied by demand for housing and land area in parallel However, thecoefficient of elasticity does not merely depend on the change of size, but depends onthe structure of the family The change of size associated with changes in familystructure (marriage of children, children entering into the adulthood, the presence ofelderly, of several generations living together etc ) will generate relatively largeelasticity of housing demand There is a new trend of young people "to separate fromhome" to enjoy the feeling independence for themselves and separate from themanagement of the family or a tendency of today’s couples is to separate aftermarriage, not living with family This is also a factor affecting the increase in housingdemand

Figure 2.4 : Demand house depending on Family size and structure

With the serious pressure of housing shortage and the needs to quickly buildnew urban areas as analyzed above have affected COWAELMIC’s businessorientation to implement "the revolution" in housing construction technology inVietnam Nam

b Economic factor analysis:

Figure 2.5 : Demand house depending on income

With an average GDP growth rate of 7.5% / year and GDP per capita alsohaving increased significantly, from less than $ 400 in 2000 to about $ 1,160 in 2010,

it brings Vietnam into the ranks of countries considered as "lower middle income."While housing prices in particular in big cities in Vietnam are now too high relative tothe income of the people, as well as beyond its real value Vietnam is a country whoseeconomy is growing, but housing prices tending to be located in the "top" highest inthe world is still a paradox High level of real estate prices affects the solvency of thepeople While the world’s experience shows that indicator for assessing the risks ininvesting in housing is the ratio between the amount of money that a family must payfor the mortgage on monthly income level For middle-class families, the ratio is about

1 / 3, i.e each family spends only 30% of monthly income to repay mortgages.Meanwhile, in Vietnam, this rate is about 80% for high income families And ifspending all of their income to buy a house, servants of other countries only take 4 to 5

years, but Vietnam’s officials take over 20 years This solvency in our country reflects

a high level of risk, ease the debt crisis

Explaining the irrationality, many people think mainly because the supply ofhousing in big cities is in the shortage compared to demand, mainly in low costhousing segment (approximately 10 triệu/m2) conforming to the income of mostpeople The low-income apartment projects will occupy the real estate market in thefuture This is the segment that COWAELMIC targets

+ Fund:

General Department of Statistics has released official data on economic growth

of Vietnam in 2010 Accordingly, the total domestic product (GDP), calculated atcurrent prices, reached 1.98 million billion This figure is equivalent to about $ 104.6billion (based on interbank exchange rate on 28/12), about $13 billion higher than in

2009 If comparing to the base period (1994), the growth rate of Vietnam's GDP in

2010 reached 6.78% compared to 2009 For the sector structure, the industry andconstruction has the largest increase (7.7%), service 7.5% while agriculture increases

by only about 2.8% Thanks to investment in real estate increased from 2000 to 2010,especially HCM City real estate market promises to be one of three developing realestate markets in Asia - Pacific in 2010

However, recent policies to limit real estate lending by the Government underResolution 11/NQ - CP made the real estate market throughout the country in generaland in Hanoi in particular in the first half of this year hardly exciting The creditcrunch impact on both buyers and sellers on the real estate market The real estateenterprises lend large amounts of investment capital, as banks tighten credit that they

do not have sufficient capital for construction, leading to delays and the project could

be "hang" In addition, the situation that the banks' interest rate increases (lendinginterest rates of many banks are high, between 18-20%) has become barrier to makethe capital poured into real estate reduced, the transaction is therefore darker, capitallending activity is also not very satisfactory because of the small loans Gloominess isthe state forecasted for the real estate market in 2011 and it could last into the year of

2012 This is the difficulty of the entire construction sector as well as COWAELMICcompany To cope with the difficulties, the company has reviewed to restructure

projects and reduce investment capital; focus on investment in low-cost housingprojects applying new technologies, this market segment is being interested.

In addition, the average but steady income earner having demand for housing isexpecting to be supported with funds from the banks with services for the mortgagerepayment, competitive rates But if the credit for loans to buy real estate istightened, the people themselves do not have opportunity to buy

Among the difficulties mentioned above, there are also a few bright spots, such

as policies to support low-interest loans from the Development Bank of Vietnam forenterprises investing in construction of social housing are considered as quite practical.This source of capital has created a shift in investment into the segment of low-incomehousing and real estate business enterprises including COWAELMIC company withthe application of new construction technology

+ Inflation:

Since the state bank adjusts to increase rates along with tight monetary policy tosolve the problem of high inflation for macro stabilization, it will make the real estatemarket in 2011 hardly recover Interest rate will be difficult to reduce even desirable,since it will be difficult to expect strong cash flow for real estate market

In addition, Vietnam's inputs to produce raw materials such as steel iron, steelare mostly imported so that when foreign currency exchange rates increase, it willcause the price increase, leading to the price of construction materials increase and thisaffects construction costs making business plans of the investors affected by priceincreases when they do not want to increase price to be able to attract customers in thecontext of rising interest rates This is also a major difficulty for COWAELMICbecause its new construction technology uses mainly imported materials such as steel

To cope with this difficulty, the company has focused on finding solutions to replacewith newer and more complex structures, but it can reduce the volume of steel.However, this solution will increase labor costs in the steel structure processing, butnot significantly

c Politics and law Analysis:

The political stability is one of integral factors which contribute to helpVietnam to be patient in economic development policies The political stability bringsback Vietnam the peace and prosperity In comparison with some countries in the

same region, it is easy to see that, since 1990, except for Singapore, almost countries

in the region have gone through political crisis Meanwhile, Vietnam’s politics isalways stable ensuring the close connection to perform the consistent economicalpolicies Many economics experts have said that the success of Vietnam’s innovationtasks is also based on the this politics stability

Vietnam legal system becomes more and more perfect with the stabledevelopment strategy In the recent years, the legal development task in Vietnam hasbeen gradually reinforced and improved in order to build one basic legal frame toserve the stable development of the country In which, the laws on the development ofeconomics, environment, poverty alleviation and gender are considered as the mostpriority fields to become the foundation for achieving development targets andstrategy

Since 1990, foreign investment under the manner of direct investment (FDI)and official development assistance (ODA) has been increasing in Vietnam’seconomy Over $ 14 billion of FDI capital has been disabursed in Vietnam for 10recent years About 50 % of total Vietnam’s oversea investment capital creating 90%

of GDP The FDI capital trend has signs to increase which has been supported bypolicies of creating more opening investment environment of Vietnam, politicalstability as well as good security State’s enterprises are arranged again according tothe trend of strong economical corporations, as the spine for the whole economics

Private enterprises were encouraged to develop that created many jobs,diversified goods for domestic and exporting markets The institution and policies forthe stability of Vietnam’s development brought into play advantages, made the process

of economical development become quickly, high growth rate, long growthmaintenance time, synchronous with environment’s stable development, the sign ofenvironment regression, natural resource exhaustion were initially prevented

The principle was not mentioned that the less production could ensure thestability, but different production could not only ensure the growth but also thestability of the development process that was tested in the Vietnam’s actualenvironment When the constitution in 1992 was issued, the promulgation of legaldocuments really came in the eventful stage With the confirmation “the Statedevelops the multi-sector commodity economy, following with market structure, with

the state’s management and Socialist orientations … Bring into play all advantages ofeconomical sectors: national economy, individual economy, and State capitalism,private capitalism… the individual has the right to do business following with thelaw… has the right to own life’s materials, production materials…” the institution

1992 really set up the legal foundation for the born of new economy’s legal system.Follow with the statistics, since the constitution 1992 until now, the national assemblyhas issued many laws and ordinances to adjust social relations on the economicalsector and other sector related directly to the economical development such as labor,land Only for the number of economical laws, they held about 60%, ordinances heldabout 30% of total laws and ordinances which were issued in the recent time This is agreat rate that shows the priority for focusing task of the legislation

Issued documents on the large scale created relative comprehensive legalcorridor for economic sectors, liberated all production capacity, attracted foreigninvestment, opened affair economic corporation, encouraged domestic investment,transferred strongly to the management of national economy by the law It can beassessed generally that during 10 recent years (from 1992 – until now) we had builtone relative completed legal document system on the economic sector Although therewere many shortcomings, basically they were so positive for the transferring ofeconomic management mechanism, enforcing production development, mobilizingand utilizing effectively resources, creating capital accumulation for the developmentinvestment and improving the living standards for the people

To contribute for the stable economic development, we must early have one legislativestrategy to complete legal system in general and economic system in particular, but inthe coming time there will be a program of law and ordinance development in thenational assembly – term XI in order to concretize steps closely following with thetargets “stable, high effective and quick economic growth, go together with the task ofsolving urgent matter about the society… improve people’s living standards, increasethe accumulation from internal economy, create strong premise for higherdevelopment stage in the beginning of next century

Vietnam’s social and economic development strategy proposed general goals whichare: bring the country out of the underdeveloped state; improve obviously physicallife, culture and spirit for the people, create the foundation for Vietnam in 2020 to

become the modern industrial country In the recent years, we achieved manyconsiderable results in the related sectors to the stable development, but still manytasks need to complete One of them is insufficient matter in the managementmechanism of real estate market The planning is not stable, scientific, does notforecast all demands, and then lead to many other insufficient matters.

Tax policies could not regulate the speculation, land holding, then made the price ofreal estate increase and hotter unusually At the present, we still have not publicizedthe demand, supply capacity for land, real estate Evenly, it could not be known aboutthe real demand capacity Thus, it led to many happening negative matters, control themarket and make the price increase so highly With the same consideration, real estateexperts said that there has not been any policy to adjust house market in order toensure the market to develop in the balance, specially adjust on the price, housesegment with many different types People who have really demand for the livingplaces, could not have the ability to own their houses, meanwhile investors have manyconditions to invest into the real estate market that made the price increase too highthrough many intermediary stages

Unstable real estate market, unreasonable price are important factors which impactednegatively to economic development, caused difficulties in the living house solutionfor the people, thus we need to improve the capacity, validity of the State’smanagement system about the real estate market The State needs to continue toimprove and concentrate the manpower for the development of commercial houses andmain social house projects, perform the method to increase the supply for the market.Concurrently, we need to strengthen to check and handle immediately the breach in theinvestment and business in real estate sector In order to solve the above absurdity, Mr.Nguyen Tran Nam said that it needs to complete legal frame of the real estate marketsuch as long term capital mobilization policy to develop the market, policy ontransactional tax, asset tax, house development policy for rent…

Real estate market development budget and assistance fund from the State’s budget,had effects in supporting for people belong to weak group in the society (the poor, lowincome, disabled people, people in social policy…) From 2008 until now,Construction Ministry and related organizations concentrated to choose the method for

increasing the supply for real estate market, especially urban apartment building,office and public projects, social house for low income people and labors.

After three times of adjustments, Land law in 2003 made the land reallybecome great resource of the country, create conditions for the development of realestate market However, there have been many shortcomings, remaining matters aswell as many out of date regulations In the seminar “land policy and real estatemarket” organized by Environment and resource Ministry in Ho Chi Minh City on 25th

September 2010, The Ministry not only assessed the work after 10 years of performingthe land law in 2003, took the ideas and suggestion of organizations, enterprises toprogress to adjust and change land law in 2013 “ in nearly 20 years, Ho Chi Minhcity’s real state passed through three high price waves (1991- 1992, 2001 – 2002 andend of 2007 – begin of 2008)

After each period of price waves, real estate market set up a new price level.Contributing for the land waves were continuous changes about policies.Shortcomings in the policy influenced strongly to the real estate market in the recenttime Mainly it caused by continuous changing land regulations that could not meet themarket’s development process Its results from the market fluctuation caused negativeimpacts to the society such as increasing land price too high, difficulties in theindustrialization and urbanization progress Especially, Land price increasing wave in2007- 2008 pushed up the price far from actual price Labors could not have enoughafford to have chance to buy houses The process of real estate development, the role

of the State is so important in balancing and preventing the speculation, ensuring thebalance of people’s house demand, if not, it can lead to unbalance in the society

The promulgation of the Decree 71/2010/NĐ-CP dated 23/6/2010 and thecircular 16 guiding for this Decree, disentangled the real estate market, forward to oneobvious and more advantageous real estate market Besides, only real estateenterprises which can prove the capacity and finance be able to compete in the market.Simultaneously, it can limit purchasing contracts on paper, reduce obviously thespeculation state Also following with this Decree, the investor will receive moreopening policies because they are allowed to sign the contract to corporate withpartners and investors, negotiate to distribute the profits by cash or house However,they are only allowed maximum for capital mobilization methods not mover 20% of

house number in the project without passing through real estate transaction floor.Moreover, this Decree also limits the capital mobilization, contracts which were notcompleted, could not be permitted for transactional license; make many investors face

to challenges and difficulties

d Technological analysis:

Hollow hole concrete (make floor lighter), steel net cement, prefabricatedconcrete (make partition lighter), shaped steel structure (column frame of multistorybuilding)… have been technologies used in the 90s until now in almost developedcountries The frame of multistory building likes human skeleton It loads all capacity

of the building and press the weight down to the foundation Now, Vietnam is makingthat frame by innumerable round steel line connecting with each other along thelength, and then cast concrete to cover the column, beam (whole block reinforcedconcrete), and build wall by spreading mortar on each brick…

The whole process of column manufacture in the site have many shortcomings suchas: low productivity, heavy load on foundation, limited quality, long time, wastematerials, much rubbish…, longer construction time, higher rate of loan from the bank

On the contrary, if the project is taken into the usage, the profit will increase more.Replacing for it by shaped steel (U, I shape…) is the nature of this technology, it canovercome disadvantages of old frame of the multistory building It should focus onmajor advantages such as: column of the multistory building will be manufactured byconcrete covering steel column, can construct in every weather conditions, sufferearthquake forces better than block reinforced concrete column, because it can sufferdeforming better, loading capacity down to foundation about 30-40%

Specially, this new technology helps the construction quicker, and then the pricewould be lower This is the technology which many countries in the world applied innearly a half of century Countries which passed the stage of urbanization process,really demand to construct quickly and huge number of apartments and other projects

in the urban area This new technology can satisfy the development speed It is knownthat in 1990 Union of Soviet Socialist Republics allowed Soviet people

……….coming back Israel (nearly 3 million people) This huge emigration enforcedthe government to immediately build houses for new citizens By moderntechnologies, they overcame such difficulties This technology was applied

successfully in many on going developed countries in Africa, Latin America, or ThaiLand in Asia South East area Vietnam also can be applied for because we are alwaysforced to build quickly (different from other countries which urban areas werecompleted)

e Natural factors analysis:

Numbers of people who have demand on housing have been continuouslyincreasing while land budget is limited The urbanization state gradually develops sogreat in many big cities In these areas, the population density is high; city’s landbudget is being given the priority for the development of multistory apartment buildingand limit to the lowest level for building private houses Following with theconstruction Ministry, until 2015, Vietnam will need more 1.9 billion m2 to build newhouses and satisfy enough demand for Vietnamese However, it is so impossible tohave this land area for private house construction Thus, we need to strengthen thedevelopment of apartment building, not only saving for land budget but also providemore chances for Vietnamese to own their houses

The development of apartment building is not only suitable with theurbanization rule but also ensure urban civilization The reason is that there issynchronous management system in the apartment building Moreover, in the recenttime many apartment buildings have been built in big residential areas where there areenough facilities such as school, hospital, shopping center… which can support betterfor people’s life, gradually become a good selection for low income people Thedevelopment of apartment building in the future will be indispensable and becomecommon trend as well as major structure in the country’s urbanization process This isalso major business trend of COWAELMIC

The replacement from whole block reinforced concrete to using shaped steel will notface to any challenge because input materials are shaped steel which is so available inthe market and standardized internationally Besides, it can overcome the exhaustion

of natural resources because when the project is out of date, will be unloaded andrecycled Projects which are executed by new technology can limit the environmentpollution because of not being mixed concrete in place, when they are unloaded,connection joints will be separated and transferred to manufacture factories

f International integration factor analysis.

In the recent years, FDI capital in the real estate market is ranked at the thirdposition in foreign invested sectors in Vietnam One of important things in real estatemarket in 2010 was enforcing the potentials of real estate market developmentinvestment, policies for foreign investors, specially from Singapore and policies forenforcing the house purchasing from Oversea people… Meanwhile, world’s real estatemarket has not still had any recovering signs after economic crisis; Vietnam stillattracts about 8 billion USD from FDI capital into real estate market, although itreduced so much in comparison with recent years, the capital resource still ranked atthe third position in the biggest foreign invested sectors in Vietnam.

Average investment capital of one project is about 145 million USD Recently,Emerging Markets Group (America) has proposed one project which has the scale ofinvestment capital up to 3 billion USD in Van Don, Quang Ninh in the real estate andresident sector ALLgreen Corporation, one of Singapore’s big real estate developmentcompanies came to Vietnam with the first project which is Regency park luxuryapartments in Ho Chi Minh City Capital Land Corporation said that in the comingtime, the corporation will continue to develop apartments in Vietnam Now, total value

of this corporation’s asset in Vietnam is 1,2 Billion USD… the doctor William H.Davidson – one consultant for investment funds said that currently fund resourcesfrom international investment funds are so plentiful and they also are so positive inseeking good projects in Vietnam for investment

However, almost investment funds considered that investors in Vietnam havenot still been ready to receive foreign investment funds Meanwhile, Real estatemarket in China attracted about 50% of foreign investment funds supporting for thedevelopment

Recently, because of difficulties in capital, many real estate projects of domesticenterprises were transferred to foreign investors through the method of capitalcontribution, purchase stocks One expert forecasted that this activity would be moreeventful in the coming time because now many project of domestic enterprises wereintroduced for sale Concurrently, many foreign investors consider this is a goodchance to catch more projects

2.2.2 Analysis on impacts of the industrial environment factor

Figure 2.6 : Industrial environment (5 forces Model)

2.2.2.1 Competitive pressure of the supplier:

The steel material used in the steel frame structure manufacturing industry andconstruction industry includes high-strength H-shaped steel, high-strength plated steel,rough plated steel, pipe steel, C-shaped steel, I-shaped steel, angle iron and round bar.Now input materials of high-strength H-shaped steel, high-strength plated steel andrough plated steel applied according to main standards such as JIS (Japan), ASTM(America), BS (England), DIN (Germany), GB (China), etc have not yet beenproduced in Vietnam , so they have to be imported from China, Japan, Korea, Taiwan,Russia, Ukraina, Malaysia, Thailand, EU, etc The import contract can be directlysigned with the distribution network of the producer or through domestic commercialcompanies operating in steel import business There are so many supplies of high-strength H-shaped steel, high-strength plated steel and rough plated steel in the worldand the different standards can be equivalently switched, so steel structuremanufacturing enterprises do not have to be worried about supplies The selection ofimport steel suppliers is decided by enterprises themselves through bidding, whichmeans negotiation power belongs to purchasing enterprises Pipe steel, C-shaped steel,I-shaped steel, angle steel and round steel have been produced by many domesticcompanies such as Thai Nguyen Iron and Steel Joint Stock Cooperation, VietnamGerman Steel Pipe Joint Stock Company, VSC - POSCO Steel Corporation, SongHong Steel Joint Stock Company, etc and many other steel laminating companies isnot only capable enough of meeting the demand of the whole construction steel and

Current competitive competitor

Potential competitor

Substitute products COWAELMIC

steel structure manufacturing industry but also redundant According to the statistics,the volume of steel in stock is over half one million tons while it is just being produced

at 50-60% of capacity

In addition, there are other subsidiary materials such as welding materials (KimTin Company, Viet Duc Welding Electrode Joint Stock Company, Nam TrieuWelding Material Industry Joint Stock Company, and welding materials importedfrom China, Korea, etc are available in the domestic market), gas, liquid oxygen,antirust paint, covering paint, etc These input materials are domestically producedwith plenty of suppliers

It can be seen from the analysis above enterprises in the steel framemanufacturing industry and the construction industry has the power in negotiating andselecting suppliers

2.2.2.2 Competitive pressure from the customer:

The customer is divided into two groups: retail customer and distributor Forthe steel frame manufacturing industry, it is mainly processed and manufacturedaccording to the orders signed beforehand Steel frame manufacturing enterprises with

a big size will have the network of representative offices in provinces in need of steelframe production Whether enterprises exist, it is due to their prestige and the effectiveoperation of the business department Normally enterprises in steel frame industriesthemselves have to find out the customers through customer channels they havecollected The customer will issue bidding documents for enterprises to take part inbidding Vietnam is an attractive market for steel producers because many investorsarrived in Vietnam at the international economic integration time Therefore, there is abig demand in the prefabricated steel building There are so many enterprisesoperating in the steel structure manufacturing industry, so the competition among themhas brought the right to negotiate for customers Customers will select the contractorwho can meet their needs best such as the highest construction quality, the mostsuitable price and the fastest construction schedule, etc

Currently employers in housing construction works is used to applyingtraditional construction technologies, so the application of the new technology requiresadvertising the dominant strengths of the new construction technology, which changethe thinking of employers and make them believe in it This is a pressure for

COWAELMIC Company, which pioneers in the revolution of constructiontechnologies in Vietnam and certainly avoids risks during the implementation.

2.2.2.3 Competitive pressure from the potential rival

Although we pioneer in the application of new construction technologies inVietnam, we cannot avoid the competition with foreign and domestic rivals Weresearched and preliminarily evaluated some potential rivals and realized that manyforeign and domestic investors constructed factories to produce steel structure Somefollowing companies can be listed:

- POLILAMA Company: Joint-venture between POSCO Company (Korea) andLILAMA to construct the steel structure manufacturing factory in Dong Nai, with thecapacity of 15,000 tons/year (in which 3,000 tons/ five tanks)

- HAVICO Company: Joint-venture between HANJUNG Company (Korea) withDuyen Hai Engineering Factory with the capacity of 12,000 tons/year

- KEC – Cam Pha: Joint-venture between Cam Pha Engineering Factory and Indiawith the capacity of 3,000 tons/year

- Hung Dai Dong Anh Steel Joint-venture Company with the capacity of 5,000tons/year

- Other domestic units produce the total of 120,000 tons/year (Constructionengineering companies such as COMA, LILAMA,etc.)

- The biggest in this field is ZAMIL STEEL Company – 100% foreign capital,producing structure at Noi Bai Industrial Park, with the capacity of 30,000 tons/year.+ With the need of fast housing construction, the application of the technology

“Skyscraper Steel Frame” is an feasible and effective solution applied in many quicklyurbanized countries such as china, Korea, Japan, Isarel, etc From the practice ofcountries which suffered from urban building, the attraction of the industry

“Skyscraper Steel Frame Manufacturing”, especially the tendency to race buildingskyscrapers to show the technical and economic power of the developed countries.Skyscrapers must apply the steel frame technology to reduce the building load Nowonly countries with advanced science and technology such as the US and Germany iscapable enough of designing skyscrapers

However, not all enterprises in the steel frame industry or construction industrycan also join the industry due to the following factors:

+ Technique:

- There are now very few or no business which have enough regularly trained humanresource in skyscraper steel frame design and suffer experience in this design field, so

it is obliged to hire designers from other countries such as Singapore (building below

90 story’s), France, the US, Germany, etc This reduces the competition in this newfield

- Most of the steel structure factories in Vietnam use asynchronous old equipment.Processing errors only meet allowable errors in the workshop and material storeconstruction and steel structure works which do not require high accuracy In the meantime, “skyscraper steel structure” requires high accuracy with the length tolerance ofabout 0.5 mm (prefabricated building with the allowable error of 2 mm), anddeflection of not over 1 mm (prefabricated building with the allowable error of 2 mm),etc because errors will be accumulated by directions, so the higher the building thegreater the error among bolt holes and beams deflect

- Require the staff that operates CNC controlling equipment to be well-trained

+ Capital: Due to the processing requirements with high accuracy, the project needs to

be invested with synchronous line system of CNC controlling equipment with highinitial investment cost

+ Commercial factors: The trademark of enterprises in the industry is also an obstacle

to participation Enterprises with the trademark of manufacturing cheap structure steelwith high errors will not be accepted by the market when joining the industry because

it requires high accuracy Enterprises in the construction field will have difficulties injoining the industry because they have not had the customer system in the constructionfield yet Construction enterprises directly under construction corporations willdominate in the application of new construction technologies because they areauthorized by government agencies

Of rivals surveyed above, only Zamilsteel Vietnam just took the first steps totry to know the skyscraper steel structure market with processing as the order This can

be the present rival

2.2.2.4 Competitive pressure from substitute products:

This new construction technology is the substitute product for the traditionalconstruction one which integrally reinforced concrete Most of investors have been