Establishing the business strategy in the period 2011 2015 of ninh binh construction consultant joint stock company

CHAPTER II: ANALYSIS OF BUSINESS ENVIRONMENT OF NINH BINH CONSTRUCTION CONSULTANT JOINT STOCK COMPANY 2.1.. Analysis of SWOT and formulation of strategic scheme groups: SELECTION OF ST

BASIC THEORIES ABOUT STRATEGY ESTABLISHMENT

APPLIED IN THE RESEARCH TOPIC.

1.1 Concept and process of strategy establishment:

1.1.1 Concept of strategy:

1.1.2 Business strategy establishment process:

1.1.3 Some specificities of construction Consultant:

1.2 Sequence of business strategy establishment.

1.2.1 Determination of functions and duties (determination of

business mission) and objective of business strategy.

1.2.2 Analysis of external environment:

1.2.2.1 Macro environment with construction Consultant (PEST

model).

1.2.2.2 Micro environment.

1.2.2.2.1 Competitive pressure from suppliers

1.2.2.2.2 Competitive pressure from buyers.

1.2.2.2.3 Competitive pressure from potential entrants.

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1.2.2.2.4 Competitive pressure from substitute products.

1.2.2.2.5 Competitive pressure from industry competitors

1.2.3 Analysis of internal environment.

1.2.4 Analysis of SWOT matrix.

1.2.5 Selection of business strategy.

CHAPTER II:

ANALYSIS OF BUSINESS ENVIRONMENT OF NINH BINH

CONSTRUCTION CONSULTANT JOINT STOCK COMPANY

2.1 Overview of Ninh Binh Construction Consultant Joint Stock

Company

2.1.1 Formation and development.

2.1.2 Vision, mission, core value, main business lines:

2.1.3 Organizational structure of the Company.

2.1.4 Some main targets of business result.

2.2 Analysis of external environment:

2.2.1 Analysis of macro environment:

2.2.1.1 Institutional environment:

2.2.1.2 Economic factor:

2.2.1.3 Cultural and social factor:

2.2.1.4 Technological factor:

2.2.1.5 Some other factors in macro environment:

2.2.2 Analysis of environment in construction Consultant.

2.2.2.1 Competitive pressure from suppliers.

2.2.2.2 Competitive pressure from buyers.

2.2.2.3 Competitive pressure from potential entrants.

2.2.2.4 Competitive pressure from substitute products.

2.2.2.5 Competitive pressure from industry competitors.

2.2.2.6 Competitive pressure from closely related parties.

2.2.3 Evaluation on opportunity and threat for the enterprise.

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2.3.3 Evaluation on strength and weakness.

2.4 Analysis of SWOT and formulation of strategic scheme groups:

SELECTION OF STRATEGIES AND SOLUTIONS FOR

STRATEGY IMPLEMENTATION IN THE PHASE (2011-2015)

FOR NINH BINH CONSTRUCTION CONSULTANT JOINT

STOCK Co.

3.1 Business objective of the company to 2015:

3.1.1 General objective:

3.1.2 Specific objective to 2015.

3.2 Determination of business strategy:

3.2.1 Summary of strategy groups.:

3.2.2 Selection of business strategies for period 2011 – 2015

3.3 Solutions to performing strategy:

3.3.1 Solution to developing human resources:

3.3.2 Solution to product:

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3.3.3 Solution to Marketing:

3.3.4 Solution to technology and equipment:

3.3.5 Solution to restructuring the organizational apparatus.

1 Ninh Binh Construction Planning Institute

2 Nhat Minh Company Limited

3 Dong Duong Consultant and testing Company Limited

REFERENCE

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ABBREVIATIONS

- ADB: Asian Development Bank

- LAS: Laboratory Automation System

- ODA: Official Development Assistance

- VND: Vietnamess Đồng

- WB: World Bank

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For nearly 20 years, Vietnam has led its independent and separated economy

to gradually integrate into the region and the world This is an opportunity andchallenge as well for the government, for Vietnamese enterprises to join the globaltrade ground

To meet the demand for integration and development, over the past years,Vietnam has worked out appropriate socioeconomic development policies includingpolicy for enhancing investment in infrastructure, building and developing urbaninfrastructure, rural infrastructure Most recently, the 11th Resolution adopted by theParty Congress on the country development objective in 5 years from 2011 to 2015

pointed out main tasks, including: “mobilize and optimize resources; gradually build modern infrastructure” concurrently putting forth the main targets: “Average economic growth rate in 5 years from 2011 to 2015: 7.0 - 7.5%/year Average added value of industry and construction increases 7.8 - 8%; average added value

of agriculture increases 2.6 - 3%/year GDP structure: agriculture 17 - 18%, industry and construction 41 - 42%, service 41 - 42%”.

Ninh Binh is a province in the Northern Delta covering 1,400km2 and havingnearly 900,000 people Over the past years, Ninh Binh economy has kept increasing

at 2-digit level In 2010, provincial competition index ranked 11/63 Ninh Binh is

As such, macro environment of the construction in general and constructionConsultant in particular for the enterprises has many opportunities for development.Over the past years, because the demand for building urban and rural infrastructure

is developed strongly, the construction Consultant has developed vigorously In

2005, Ninh Binh construction Consultant market had only two enterprises togetherwith several Consultant enterprises of the Ministries and sectors So far, there are 10units of the province and about 5 Consultant units of the Ministries and sectorsinvolved in construction Consultant in Ninh Binh province

However, apart from the above opportunities and advantages, Ninh Binhconstruction Consultant has a lot of difficulties When joining the global economy,competitive pressure comes from the enterprises from the countries with advancescience, technology and management Besides, in the present context of Vietnam,slowly developed economy and high inflation have led to many other macropolicies in order to adjust the economy including the Resolution No 11/NQ-CP onmain solutions to controlling inflation, stabilizing macroeconomics, ensuring socialsecurity with focus on the strict and prudent monetary policy and tight fiscal policy,public investment reduction, State budget deficit reduction All of these things havegreat influence on the construction investment in general and competitiveness of theconstruction Consultant enterprises in particular

To maintain and develop in the present context, each construction Consultantenterprise is required to bring into full play its core capacity in order to enhance

competitiveness in the market, minimize risks, thereby establishing an appropriatebusiness strategy for them

On that basis, we have discussed and unanimously chosen the topic:

“Establishment the business strategy in the period 2011-2015 of Ninh Binh Construction Consultant Joint Stock Company” with a view to establishing,

analyzing and choosing business strategy, concurrently putting forth practicalsolutions to carry out strategies for Ninh Binh Construction Consultant Joint StockCompany in the period 2010 - 2015 in order to enhance competitiveness andbusiness efficiency to help sustainable development of the Company

2 Object and scope of research:

Object of research is the production and business strategy of Ninh BinhConstruction Consultant Joint Stock Company

Scope of research: Establishment of business strategy of Ninh BinhConstruction Consultant Joint Stock Company in 5 years from 2011 to 2015 in theconstruction Consultant market of Ninh Binh province

3 Purpose of research:

Research and analyze to know clearly about key capacity, strength,weakness, opportunity and threat of Ninh Binh Construction Consultant Joint StockCompany in the present period, thereby establishing, analyzing and choosingbusiness strategy, concurrently putting forth necessary solutions to carrying outsuch strategies in the period 2010 - 2015 in order to enhance competitiveness andbusiness efficiency, help Ninh Binh Construction Consultant Joint Stock Company

to maintain and develop in a sustainable and efficient manner and become one ofthe leading enterprises in the construction Consultant market of Ninh Binh

4 Method of research:

The assignment of the group uses three methods of research:

+ Researching documents from secondary information sources such asnewspapers, magazines, reports, production and business plans on design surveyConsultant, supervision Consultant, inspection Consultant and verification

Consultant for construction works

+ Conducting qualitative research

+ Surveying and investigating: conducting survey on main buyers of NinhBinh Construction Consultant Joint Stock Company through questionnaires anddirect interviews; However, due to limited time, at the time of reporting theassignment, the group fails to collect full questionnaires to analyze Therefore,method of document research and qualitative research is primary

5 Main structure of the assignment:

Apart from the foreword and conclusion, our assignment is comprised of 3chapters:

Chapter I: Basic theories about business establishment applied in the

research topic

Chapter II: Analysis of business environment of Ninh Binh Construction

Consultant Join Stock Company

Chapter III: Selection of strategies and solutions for strategy

implementation in the phase (2011-2015) for Ninh Binh Construction ConsultantJoin Stock Company

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CHAPTER I

BASIC THEORIES ABOUT BUSINESS ESTABLISHMENT

APPLIED IN THE RESEARCH TOPIC.

1.1 Concept and process of business establishment:

1.1.1 Concept of strategy:

The concept “Strategy” dates back to ancient Greek period, starting frommilitary field with basic argument in which one party can crush rivals, includingmore crowded, stronger rivals if they can lead the battle position and take the rivals

to the battlefield inure to their advantage deployment

At present, there are various definitions about strategy for which the mainreason is there are different viewpoints about the organization in general anddifferent approaches in strategy of the organization in particular

Ontologically, depending on viewpoint of positivism or constructivism, thenature of strategy is determined under natural law or significant impact of thesubject In fact, strategy is often defined in practical direction to make it easy forpractice processes in the organization

In the present competitive business environment, the concept of strategykeeps being researched and developed but focuses on four main categories: plan,model, position and vision

As such, it is possible to introduce some concepts of strategy as follows:

According to Quinn, J.B (1980) (Strategy for Change: Logical incrementalism Homewood Illinois Irwin): Strategy is a model or plan of a

organization to coordinate key objectives, action policies and orders in a unifiedgenerality

According to Lawrence R Jauch & William F Gluek (1989) (Business Policy and Strategic Management): Strategy is a unified, comprehensive and

coordinated plan designed to ensure that basic objectives of the enterprise arecarried out successfully

advantage of other organizations in the market” (Porter, M.E (1996) What is strategy?, Harvard Business Review) The long-term operation of an organization is

aimed at achieving business advantage through determining available resources touse in the defined business environment, in order to meet the market demand andensure interests for all related factors

Depending on level, there are at least three levels of strategy: Strategy atcompany level, strategy at business unit level and functional strategy

- Strategy at company level: dealing with general objective and scope of the

organization Company strategy must show the correlation between generalobjective and scope of the enterprise to meet the expectations of the capitalcontributor It is greatly affected by the investors in the company and responsiblefor guiding the strategic decision making process throughout the company.Company strategy is often presented clearly in the “mission statement”

- Strategy at business unit level: mainly interested in competition ways in a

specific market Strategy at business unit level indicates what should be done for abusiness unit to compete successfully in a specific market It is related to strategic

decisions on choosing products, meeting the buyer’s demand, gaining competitionadvantage compared with competitors, exploiting and creating new opportunities

- Functional strategy: Shifting company strategy and strategy at business

unit to the divisions of the organization in respect of resources, processes, peopleand their skills Functional strategy shows how each division of the enterprise will

be organized to carry out strategic directions at company level and each division inthe enterprise Therefore, functional strategy focuses on resources, processing andpeople

1.1.2 Process of business strategy establishment:

Business strategy is outlined based on the statement of vision of theenterprise, directional for all activities of the enterprise and thereby strategic in thelong term It includes the following steps: Mission and Vision Statement

- Mission: Mission is the message showing the core value of the enterprise It

expresses important things, contributions by the enterprise in terms of business andlife It indicates business motto of the enterprise, position of the enterprise in theworld and commitments by the enterprise Mission should be concise but inclusive

of background, encouraging and stable in the long term

- Vision: Vision is a message of concretizing Mission Statement into an

encouraging objective It points out the necessity for vital improvements for theenterprise It creates the confidence in the future of the enterprise and it is aimed atmaking impossible things possible

- Business objective: Business objective of the company is often financial

objective of the enterprise It is specific objective in cash companied by a specifictimeline For example, “achieving how much profit in 2010”, or “starting to makeprofit before the end of 2011”…

- Situation analysis: Situation analysis table with general researches and

evaluations on business environment Including:

+ External environment of the enterprise: Micro environment (political,social, economic, cultural, scientific and technological)

+ Micro environment: competitive pressure in the industry market(competitive pressure from suppliers, from buyers, from potential entrants, fromsubstitute products, from existing competing enterprises and closely related parties)

+ Internal environment of the enterprise: analyze resources and managementfunction of the enterprise

Then, find out strengths, weaknesses, opportunities and threats of theenterprise to establish and choose business strategy

- Business strategy: Business strategy of the enterprise is to orientate

development and establishment of competitive advantage of the enterprise based onknowledge and evaluations as above The enterprise may have a lot of strategicchoices such as:

Most creative technology

Lowest price

Focus on only one market

Focus on only one group of products

- Implementation schedule: Defined as action plan for the activities to be

carried out by such enterprise enclosed with achievements by milestones needed bysuch enterprise to achieve the general objective

1.1.3 Some specificities of the construction Consultant:

Business in construction Consultant products is a service business Apartfrom similar characteristics to other kinds of business in general and servicebusiness in particular, there are some specificities that we want to clarify beforeanalyzing and establishing the strategy

- Because of service business, product value is formed mainly from scientificknowledge of technicians in the industry Therefore, the enterprises don’t have tosuffer too great pressure in capital

- Product of service business has no goods in stock

- Product price is regulated as percent of total estimate of the approvedproject and works under the laws (the preparation of bid for packages is sometimes

- Some construction Consultant products have high risk, even it is impossible

to collect money although the product has been delivered to the buyers

- In construction consultant business, as stipulated in Decree No.85/2009/ND-CP dated 15/10/2009 of the Government guiding the implementation

of the Procurement Law and Construction Law, the construction consultantpackagages that cost less than 3 billion or urgent and works related to nationalsecurity and other special cases regulated by the Prime Minister, are subjected to be

in bidding In actual construction activities in Ninh Binh, most packages aresubjected to be in bidding, therefore, in this thesis, we only mention the research onthe performance of construction consultant bidding

1.2 Sequence of business strategy establishment.

1.2.1 Determination of functions and duties (determination of business mission) and objective of business strategy.

- Business mission: The first step of strategy management is to determinemission and main objectives of the organization Mission and main objectives of theorganization provide a background for establishing strategies

Mission presents the existence reason of the organization and points out whatwill be done For example, the mission of Ninh Binh Construction Consultant Joint

Stock Company is: “Providing full construction Consultant services with high quality, best meet the diversified demands of the buyers”

- Strategic objective: Main objectives determine what the organizationexpects to meet in the medium term and long term Most of the organizationspursuing profit and objective to achieve outstanding capacity take the leading

position Second objectives are those deemed necessary by the company if theywant to achieve outstanding capacity

1.2.2 Analysis of external environment:

1.2.2.1 Macro environment with construction Consultant (PEST model).

PEST is the model of researching impacts of four main factors in the macroenvironment These factors include:

- Political: This factor exerts great influence on all business lines in a

territory, a locality with political factors, law, regulations that may threat existenceand development of any industry For construction industry, when doing business

on an administrative unit, construction consultants must comply with political andlegal factors in such areas

+ Stability: Let’s consider stability in the conflicts of politics, diplomacy oflegal institution Institution with high stability may create good conditions foroperation and vice versa, unstable institutions with conflicts will have bad influence

on the operation in its territory

+ Tax policy: Import duty, export duty, consumption tax and income taxpolicies will affect revenue and profit of the enterprise

+ Related laws: Investment Law, Corporate Law, Labor Code,Antimonopoly Law, Antidumping Law

+ Policy: State policies will affect the enterprise They may create profit orchallenges for the enterprise For example, trade policies, industry developmentpolicies, economic development policies, tax policies, competition regulationpolicies and consumer protection policies

- Economics: The enterprises should pay attention to short-term and

long-term economic factors and the interference by the Government, local authoritieswith the economy Normally, construction Consultant enterprises will base oneconomic factor to decide investment in specific Consultant products

+ Economic situation: Any economy has cycle In each certain period of theeconomic cycle, the enterprise will make appropriate decisions for them

+ Factors affecting the economy: Interest rate, inflation

+ Economic policies of the government: Basic salary law, economicdevelopment strategies of the government, incentives for industries: Tax reduction,allowance, etc

+ Economic prospect in the future: Growth rate, GDP growth rate, GDP toinvestment ratio

- Socio-cultural: Each locality has specific cultural values and social factors.

These factors are the characteristics of the consumers in such areas and creatediversity with design Consultant products for each area

Apart from culture, social features also attract the attention from theenterprises when studying market Social features will divide the community intogroups of buyers, each group has different characteristics, psychologies andincomes

+ Average life expectancy, health state, nutrition and dietary

+ Average income, income distribution

+ Lifestyle, knowledge, aesthetic viewpoints, life psychology

+ Living condition

- Technological: In the technological revolution, a wide range of new

technologies are introduced The application of modern equipments and advancedtechnologies will create impressive breakthrough for most enterprises specialized inconstruction Consultant, especially in survey Consultant and quality inspectionConsultant

+ Investment by the government, enterprise in research and development:The combination between the enterprises and the government aimed at researchingnew technologies and new materials will exert positive influence on the economy

+ Technological speed, cycle, backward technological rate

+ Influence of information technology and internet on business

Figure 1.1 PEST model (Source: http://ebrandium.com/thu-vien/marketing)

Foregoing are four factors directly affecting economic sectors in general andconstruction Consultant industry in particular These factors are external factors ofthe enterprise and the industry and the industry must bear its influences as anobjective factor The enterprises will base on such influences to work outappropriate business policies and activities

The present PEST model has been expanded into matrixes such as PEST(Including Legal factors) and STEEPLE (Social/Demographic Factors,Technological, Economics, Environmental, Policy, Legal, Ethical Factors) andincreasingly perfect to become an indispensable standard when studying externalenvironment of the enterprise

judgment on the competitive forces in all fields of production and business

According to Michael Porter, competitive strength in the market in a certainproduction industry is affected by 5 competitive forces as follows:

Threat of new entrants

Bargaining power Bargaining power

of suppliers of buyers

Threat of substitute products

“Five forces of Michael Porter” are regarded as a useful and effective tool tofind out profit origin More importantly, this model provides competitive strategiesfor the enterprise to maintain or increase profit

1.2.2.2.1 Competitive pressure from suppliers: The number of suppliers will

decide on competitive pressure, their negotiation power over the industry andenterprises If in the market there are several suppliers with large scale, there will becompetitive pressure, affecting the entire production and business of the industry

Supplier’s ability to substitute products: In this regard, let’s research ability

to substitute input materials due to suppliers and switching costs

Information about suppliers: In the present period, information is always thefactor that promotes the trade development, information about suppliers exerts greatinfluence on choosing input suppliers for the enterprise

For all industries, suppliers always cause certain pressures if they have scale,collection and ownership of rare and precious resources For this very reason,suppliers of single input products (Farmers, artisans) will have little negotiationpower over the enterprises Although they have great quantity, they lackorganization

In short, strength of the suppliers is shown in the following characteristics:+ Level of concentration of suppliers

INDUSTRYCOMPETITORS

Rivalry among Existing Firms

BUYERS SUPPLIERS

Substitutes

+ Importance of quantity of products for suppliers

+ Difference of suppliers

+ Influence of input factors on cost or product differentiation

+ Switching cost of the industry competitors

+ Existence of substitute suppliers

+ Threat of enhanced consolidation of suppliers

+ Supply cost compared with total revenue of the industry

1.2.2.2.2 Competitive pressure from buyers:

Buyers are a competitive pressure that may directly affect all production andbusiness activities of the industry Buyers are one of the factors that cause pressure

to the enterprises in terms of price, quality of product, attached service and they arethose who control competition in the industry through buying decision

Like the pressure from suppliers, the impacts on competitive pressure frombuyers for the industry are viewed from the following factors:

+ Scale

+ Importance

+ Switching cost

+ Buyer information

1.2.2.2.3 Competitive pressure from potential entrants:

According to Porter, potential entrants are the enterprises that are not yetavailable in the industry but may affect the industry in the future Quantity ofpotential entrants and their pressure on the industry will depend on the followingfactors:

+ Attraction of the industry: This factor is shown in such targets asprofitability ratio, quantity of buyers and quantity of enterprises in the industry

+ Barriers for industry joining: These are the factors that make joining anindustry more difficult and expensive such as technique, capital and trade factors(Distribution system, trademark and buyer system), Typical resources (Inputmaterials, Qualifications, inventions, Human resources, protection by thegovernment)

1.2.2.2.4 Competitive pressure from substitute products:

Substitute products and services are those that can meet demands equivalent

to the products and services in the industry

Availability of substitute products is shown in:

+ Switching costs in using products

+ Trend of using substitute goods by the buyers

+ Correlation between price and quality of substitute goods

1.2.2.2.5 Competitive pressure from industry competitors.

The enterprises operating in the industry will compete directly with eachother to create pressure to the industry and thus giving rise to competitive strength

In one industry, the following factors will increase competitive pressure oncompetitors

+ Barriers if desired to “escape from” the industry

+ Concentration of the industry

+ Fixed cost/added value

+ Growth state of the industry

* Pressure from closely related parties.

This pressure is not mentioned directly in the matrix but in the book titled

"Strategic Management & Business Policy" by Thomas L Wheelen and J DavidHunger, there are remarks on the pressure from closely related parties

+ Government

+ Community

1.2.3 Analysis of internal environment

Analysis of internal environment is aimed at finding out strength andweakness of the organization Let’s find out the way the company achievecompetitive advantage and role of distinct capabilities (unique strength of thecompany), resources and ability to create and sustain competitive advantage for thecompany We can reach a conclusion that in order to create and maintaincompetitive advantage, the company is required to achieve prominent efficiency,quality, improvement and responsibility to the buyers Strengths of the companylead it to the prominence in this field On the contrary, weaknesses can bring aboutworse efficiency

There are various approaches to analysis internal environment of theenterprise However, due to limited time, we only use the approach to analysis byresources and by functions and fields of management of the enterprise to find outcore resources of the enterprise:

- Analysis of resources of the enterprise:

+ Material and technical infrastructure

+ Human resources

+ Finance

+ Production capacity

- Analysis by functions of management and fields of management:

+ Functions of management: Planning, organization, control, coordination,inspection

+ Fields of management: Logistics, production, marketing, human resources,finance

1.2.4 Analysis of SWOT matrix:

SWOT analysis model is the result of a survey over 500 companies withhighest revenue elected by Fortune Magazine and conducted at Standford ResearchInstitute in the 1960s and 1970s in order to find out the reason why manycompanies fail to carry out their plan The research group includes Marion Dosher,

Ts Otis Benepe, Albert Humphrey, Robert Stewart and Birger Lie

After a period of testing and completion, so far, SWOT model has been usedsuccessfully for many times in many enterprises and organizations in differentfields In 2004, this system was developed fully and proved its ability to solve awide range of problems in establishing and agreeing practical objectives every year

of the enterprises without recourse to outside consultants

SWOT analysis is objective evaluation on the data arranged in the form ofSWOT in a logic, easy-to-understand, easy-to-present, easy-to-discuss and easy-to-decide logic order that may be used in all decision-making processes SWOTsamples allow stimulating thinking other than basing on habitual or intrinsicreactions

SWOT analysis sample is presented in the form of a matrix, divided into 4parts: Strengths, Weaknesses, Opportunities, and Threats SWOT model often putsforth 4 basic strategies: (1) SO (Strengths - Opportunities): strategies based on thestrengths of the company to take advantage of market opportunities (2) WO(Weaknesses - Opportunities): strategies based on the ability to surpass weaknesses

of the company to take advantage of market opportunities (3) ST (Strengths Threats): strategies based on the strengths of the company to avoid market threats.(4) WT (Weaknesses - Threats): strategies based on the ability to overcome orminimize inside weaknesses of the company to avoid market threats

-SWOT analysis model is shown in the following matrix: (Figure 1.2.)

SWOT analysis is one of five steps forming business strategy of anenterprise including: establishing vision of the enterprise, analyze SWOT, definingstrategic objective, formulating strategic objectives and plans, identifying strategycontrol mechanism It is not only important to the enterprise in formulatingdomestic business strategy but also quite significant in formulating internationalbusiness strategy to meet the demand of development of the enterprise Once theenterprise wants to develop, gradually establishes prestige and trademark in a stableand sustainable manner, SWOT analysis is an indispensable step in the businessstrategy planning of the enterprise

Figure 1.2 SWOT analysis model

- Strengths: Strengths of an enterprise include resources and their availability

such as infrastructure and background to develop competitive advantage, forexample:

+ Patent

+ Famous brand name

+ Good standing as evaluated by the buyers

+ Low cost advantage due to own production secret

+ Easy access to high grade natural resources

+ Easy access to distribution networks

Use strengths to avoid

threats

WT strategiesMinimize weaknesses and avoid threats

- Weaknesses: Absence of strengths is regarded as a weakness The following

characteristics may be regarded as weaknesses:

+ No patent

+ Unknown brand name

+ Bad standing as evaluated by the buyers

+ Costly operation structure

+ Little access to natural resources

+ Little access to main distribution channels

- Opportunities: The analysis of external environment may suggest new

opportunities to create profit and development, for example:

+ Buyer’s demand not fully met

+ New technology

+ Loose regulations

+ Removal of international trade barriers

- Threats: Changes of the circumstance and external environment may create

threats for the enterprise, for example:

+ Buyer’s taste changed from the company’s product to other product

+ Appearance of substitute products

+ New legal regulations

+ Stricter international trade barrier

Analysis quality of SWOT model depends on the quality of collectedinformation The information should avoid one-sided subjective view but seek fromvarious sides In fact, it is not totally necessary to pursue the best opportunities butcreate ability to develop competitive advantage by studying the relevance betweentheir strengths and potential opportunities In some cases, the company mayovercome its weaknesses to seize attractive opportunities

1.2.5 Selection of business strategy.

Strategy selection is an important content in the strategy establishment ofeach enterprise Although the world has had a lot of experiences in planning andselecting strategy, research and creative application into Vietnam enterprises,

Implementation steps to carry out the method of standard marking are asfollows:

+ Determine evaluation criteria For example: profit, influence, safety,position in competition, degree of risk

+ Determine mark of each evaluation criterion Mark shows the degree ofcompliance with the set standard of the strategic schemes in the order of low to high(for example, the highest mark is 5, the lowest mark is 1) Degree of compliance:Weak = 1; under average = 2; average = 3; good = 4; high = 5

+ Analyze and mark each strategic scheme Give mark by each criterion toall strategic schemes Then, determine total number of marks of each strategicscheme

+ Compare and select strategy Each product strategy is separately calculated

in a table and total number of respective marks is calculated Finally, compare andselect the product strategy with highest total mark

In principle, the selected strategy is the one with highest total mark.However, in some cases, the strategy with highest total mark is still not selectedbecause such scheme achieves only under average Therefore, upon selection, it isnecessary to consider the following situations:

- The first situation: Among the above comparative strategies, there is onestrategy with highest total mark and above average In this situation, the selection istoo easy

- The second situation: Among the above comparative strategies, there aretwo or more strategies with average total mark but equal mark This means that thestrategies are equal to each other and it is possible to select one among them If onestrategy has highest important evaluation standard mark, such strategy will beselected Yet, it is still necessary to consider political and cultural factors of theenterprise upon selecting strategy

- The third situation: Among comparative strategies, there is one strategywith highest mark but just at average level This shows that such business strategy isestablished on an unstable basis The enterprise should reestablish strategies fromthe beginning

- The fourth situation: If no strategy achieves average, it means that allstrategies fail to achieve the target In this case, the enterprise must restart from theprocess of establishing business strategy by seeking new business opportunities orconsider reducing the set targets When new reestablished strategies are still underaverage, the enterprise should not try to do but seek another opportunity orparticipate in a new business sector

CHAPTER II

ANALYSIS OF BUSINESS ENVIRONMENT OF NINH BINH

CONSTRUCTION CONSULTANT JOINT STOCK COMPANY

2.1 Overview of Ninh Binh Construction Consultant Joint Stock Company

2.1.1 Formation and development:

- General information:

+ Company’s name: Công ty Cổ phần Tư vấn xây dựng Ninh Bình

+ Transaction name: Ninh Bình Construction Consultant Joint StockCompany

+ Add: Km 2, Tran Hung Dao street, Tan Thanh ward, Ninh Binh city, NinhBinh province

+ Email: cptvxdnb@ninhbinhpt.com.vn

- Formation and development:

Ninh Binh Construction Consultant Joint Stock Company was established in

1996 under the Decision No 1352/QD-UB dated 23/9/1996 by the People'sCommittee of Ninh Binh province based on consolidating for survey and designunits:

- Ninh Binh Irrigation Construction Consultant Company

- Ninh Binh Traffic Survey and Design Company

- Ninh Binh Institute of Construction Design

- Division of Industrial Design - Ninh Binh Department of Industry

In July 2004, the Company was equitized and became Ninh BinhConstruction Consultant Joint Stock Company under the Decision No 1538/QD-

UB dated 30/6/2004 by the People's Committee of Ninh Binh province

The company is now a member of Vietnam Association of ConstructionConsultant The company has been admitted by the State Department ofConstruction Quality Inspection as a member of Vietnam inspection network,approved by the Ministry of Agriculture and Rural Development in the short list asone of 15 domestic Consultant companies to participate in preparing technical

The unit has experienced and qualified scientific and technical staffs withseniority and modern equipment for survey, design, project documentation in thephases from Feasibility study report to shop drawing and especially ability toadvance 100% of capital for survey and design of the project when winning the bid

2.1.2 Vision, mission, core value and main business lines:

- Vision:

Maintain the leading position and biggest market share in the constructionConsultant in Ninh Binh province; Bring to the customers the satisfaction andassurance when using Consultant services of the enterprise

- Mission:

Provide full construction Consultant services with high quality in accordancewith national standard; Best meet diversified demand of the customers

- Core value:

+ Assure leading quality and efficiency in surveying and designingconstruction works based on the scope and scientific and technical staff of theenterprise

- Main business lines:

+ Consultant in surveying construction

+ Consultant in preparing construction investment project

+ Consultant in design, estimate, total estimate for irrigational, traffic, civiland industrial works and technical infrastructure

+ Consultant in verifying design documents, estimate, total estimate,Consultant in supervising construction, Consultant in supervising survey,Consultant in preparing bidding documents, analyzing and evaluating bids,Consultant in managing projects for irrigational, traffic, civil and industrial worksand technical infrastructure and other Consultant services

+ Consultant in preparing master and detailed plans (industrial park, urbanarea, agriculture, tourism - convalesce, natural protection, forestry)

+ Consultant in works quality inspection, testing targets for design andconstruction of for irrigational, traffic, civil and industrial works and technicalinfrastructure

+ Works foundation treatment

Charter capital of the Company is 2,920,000,000 VND, divided into 29,200stocks with par value of 100,000 VND/stock In which:

+ State shareholders hold 51%, equivalent to: 1,490,000,000 VND.+ Company shareholders hold 49%, equivalent to: 1,430,000,000 VND

2.1.3 Organizational structure of the Company.

+ Traffic Construction Consultant Factory

+ Civil and Industrial Construction Consultant Factory

+ Geotechnical Construction Consultant Factory

Company apparatus:

- Management Board includes 7 members

- Company Director (and Chairman of the Management Board)

- Company Vice Director (and Vice Chairman of the Management Board),and Director of Traffic Construction Consultant Factory

- Company Vice Director and Director of Civil and Industrial ConstructionConsultant Factory

- Company Vice Director and Director of Geotechnical ConstructionConsultant Factory

- Chief accountant and chief of the office

Organizational structure and apparatus of the Company are presented in Figure 2.1.

Figure 2.1 Organizational structure and apparatus.

Management Board

Vice

Director

Vice Director Vice Director

Director

Irrigational Construction Consultancy Factory

Traffic Construction Consultancy Factory

Civil & Industrial Construction Consultancy Factory

Besides, assistant to the Management Board and Board of Directors, there

are Vice Directors of Factories, Vice Chief of the Office appointed by the CompanyDirector Under the Factories and the office, there are groups and teams assigned

with specific and suitable works

2.1.4 Some main targets of business result:

Business result of Ninh Binh Construction Consultant Joint Stock Company

in three years, namely 2008, 2009 and 2010 through main targets is as follows:

Table 2.1 Comparison of some targets of business result

(Source: Financial Statements by Ninh Binh Construction Consultant Joint Stock

Company)

2009 vs.

2008 (%)

2010 vs.

2009 (%)

Total revenue (VND) 17,043,274,862 20,386,768,547 29,660,601,947 119.62 145.49 Post-tax profit 1,033,648,385 776,737,845 1,739,228,922 75.15 223.91 Payment to State budget (VND) 353,833,833 164,762,573 579,742,973 46.56 351.87

Over the past three years, business result of the Company was reducedsharply in 2009 but recovered strongly in 2010 The year 2010 versus 2008: Totalrevenue, post-tax profit and payment to the State budget were 174.3%, 168.26% and163.85%, respectively As such, the targets gained outstanding growth, reflectingbusiness efficiency of the Company

2.2 Analysis of external environment:

2.2.1 Analysis of macro environment:

Use PEST analysis model to analyze macro environment affectingproduction and business of Ninh Binh Construction Consultant Joint StockCompany

the economy into the region and the world In Ninh Binh, political and legalenvironment is relatively stable The guidance and operation by the PartyCommittee, People’s Council and People's Committee of Ninh Binh provincetowards various levels in the province are always serious, unified and ordered,which has enabled the Company to gain advantages for development Over the pasttime, under the “Administrative reform” policy all over the country, Ninh Binh hassucceeded in implementing the “One stop” and “One uninterrupted stop” model.This has created favorable conditions for the activities of the enterprises, especiallyfor Ninh Binh Construction Consultant Joint Stock Company

- In terms of tax policies: Tax policies of the Province are applied andconducted similarly to other localities, thus they don’t have big influence on thebusiness of the Company However, after the People's Committee of Ninh Binhprovince promulgated the investment incentive and attraction policy (including taxincentives), the demand for construction in the province is increased strongly Assuch, this policy has indirect influence on the business of the company, providingmore opportunities to the construction Consultant of the Company

- In terms of related policies and acts: Over the past years, the Resolutionsadopted by the Party Committee and the People’s Council of Ninh Binh provinceconcerning development planning, infrastructure construction of the province andworks and projects approved by the People's Committee of Ninh Binh provincehave created a broad market for the construction in general and constructionConsultant in particular In terms of typical socioeconomic development policieswith positive influence on Ninh Binh Construction Consultant Joint StockCompany:

+ Decree No 15 - NQ/TU dated 13/7/2009 by the Executive Committee ofthe Provincial Party Committee on tourist development to 2010, orientation to 2030.The Resolution pointed out orientation in infrastructure construction for Tourism -key economic sector of the province to 2020

+ The People's Committee of Ninh Binh province approved the urbanconstruction plan, rural traffic construction plan for all 8 districts and cities in theprovince

+ Approve construction projects for infrastructure, traffic road, irrigation anddyke, especially the project for construction of infrastructure for Trang Anecological tourist resort with total approved capital of nearly 9,000 billion VND

+ Promulgate investment incentive and attraction policies in the province,thereby providing opportunities to the investors to do business in the province andmaking the construction develop strongly

However, apart from the favorable conditions in the political environment,the Company is encountered some difficulties:

+ Whenever the personnel work of the province changes, the Company mustreestablish the relationship with the leaders of related sectors to create favorableconditions for the operation of the Company (this issue will be analyzed morecarefully in the marketing analysis)

+ Approved works and projects are carried out in a long time, thus there arealways adjustments and amendments in scope, which makes the constructionConsultant of the Company sometimes not active

2.2.1.2 Economic factor:

This factor exerts great influence on the construction Consultant of theCompany The change in the factors of the economy makes the enterprise change itsproduct orientation in accordance with the market demand

Over the past years, Ninh Binh economy has kept growing at 2-digit level In

2010, provincial competition index ranked 11/63 Ninh Binh is continuouslyincluded in the group of leading provinces in the North Vietnam Ninh Binh is one

of the provinces that attract great foreign investment in Vietnam; In 2010, theprovincial budget income achieved 3,100 billion VND whereas its area andpopulation rank 56/63 and 43/63 respectively

However, also included in the general trend of the whole country, Ninh Binheconomy now faces increased inflation that leads to tight financial and monetarypolicies In Ninh Binh, some key projects are decompressed and reduced sharplywith annual allocations, which makes new construction stagnant, Consultant insurveying for planning and project minimized, debts of Consultant productdelivered by the company to customers increased remarkably, causing manydifficulties in employment, income and especially solvency of the Company

2.2.1.3 Cultural and social factor:

Each locality, each region has typical cultural values and social factors.These factors will directly affect Consultant products and services of the Company

Ninh Binh is a province in the Northern Delta covering 1,400km2 and havingnearly 898,459 people Over the past years, Ninh Binh economy has kept increasing

at 2-digit level In 2010, provincial competition index ranked 11/63 Ninh Binh iscontinuously included in the group of leading provinces in the North Vietnam NinhBinh is one of the provinces that attract great foreign investment in Vietnam; In

2010, the provincial budget income achieved 3,100 billion VND whereas its areaand population rank 56/63 and 43/63 respectively

Ninh Binh is a small province in which Kinh people occupies the greatestpart in the ethnic structure (only small quantity of Muong people) Besides, othertypical factors such as quick urbanization rate, income and living conditions arerelatively even Therefore, civil and traffic works in each region create manyfavorable conditions for the construction Consultant The most typical example isthe “tubular building” design product (the buildings by the road) - a most typicalproduct created from urbanization that makes the works of this type relativelyidentical There are often some changes in the outside details that don’t greatlyaffect the construction structure

2.2.1.4 Technological factor:

The application of modern equipments and advanced technologies willincrease labor productivity, increase product quality, enhance economic efficiency,

especially in the construction Consultant Such technical equipments as electronictheodolite, computer, electronic sounder, inspection equipment of LAS laboratory,technical drawing software, mapping software and estimate software have increasedlabor productivity remarkably Moreover, the accuracy of figures is also ensuredand can be stored once digitalized, creating distinct quality and efficiency in eachproduct of the Company

2.2.1.5 Some other factors affecting macro environment:

Apart from the aforesaid macro factors, globalization environment andintegration trend also exert great influence on the construction Consultant of theenterprise when international Consultant companies have modern technology,abundant concept, especially rich experience in design Consultant for works withlarge scale A typical example is that when the package for design Consultant forBai Dinh Pagoda - A pagoda with scale at the Southeast Asia level is taken for bidwith big value, the Company has formed a joint venture with some other Consultantunits but could not meet the demand of the employer in spite of price advantage.The key point that made the Company impossible to overcome other competitors isSite Consultant Company of France had a wide range of abundant concepts, richexperience and broad understanding in design, architecture of cultural and religiousworks with large scale in India, China where Buddhism develops quite strongly Assuch, globalization environment will pose a very strong competitive pressure on theCompany

2.2.2 Analysis of environment of construction Consultant.

In the present fiercely competitive business environment, competitivepressure always create a big pressure for each company, especially in a smallmarket like Ninh Binh market To analyze the competitive environment inconstruction Consultant in the province to find out opportunities and threats of theCompany, it is necessary to identify competitive pressures inside the industry based

on the model of 5 competitive pressures of Micheal Porter as follows:

2.2.2.1 Competitive pressure from suppliers:

It can be said that, in the construction Consultant business, value of productshave great content of technique and working experience of engineers and

As such, most of the input equipment and materials have quite smallinfluence on the cost or the product differentiation and quantity of suppliers isrelatively big in the market, which makes the Company rarely suffer competitivepressure from suppliers.

2.2.2.2 Competitive pressure from buyers:

For any other common field of business, buyers are always the mostimportant factor for the success of the Enterprise Ninh Binh ConstructionConsultant Joint Stock Company always views competitive pressure from thebuyers as one of the competitive pressures that directly and mostly affect allproduction and business activities of the Company

Buyers are classified by the Company into the following groups:

- The most important group of buyers targeted at by the Company includesagencies and organizations currently carrying out infrastructure constructionprojects such as the Department of Transport, Department of Culture, Sports andTourism, Department of Agriculture and Rural Development, Department ofEducation and Training, Department of Health, People's Committee of districts andcities in the province These units are carrying out traffic, tourist and culturalinfrastructure projects from the State budget with total expenditure of hundredstrillion Vietnam dongs This group of buyers has good solvency with relatively bigexpenditure Therefore, price (mostly calculated at percent as fixed by the State),even product quality is sometimes not the top target of this group of buyers.Therefore, the establishment of good relationships with this group of buyers is a bigpressure for the Company

- The second group of buyers includes the enterprises investing in fields ofbusiness now building the works and workshops in Ninh Binh province This is alsothe group of buyers with good solvency and great expenditure Yet, the top concern

of this group of buyers is product price and quality Thanks to its advantage inscope and diversified products, the Company suffers no big pressure from thisgroup of buyers

- The third group of buyers includes buyers with Consultant in small andsingle works Main product of this group of buyers is housing design Consultant,works foundation treatment This group of buyers has received little attention fromthe Company over the past years Therefore, the Company suffers no big pressurefrom this group of buyers

2.2.2.3 Competitive pressure from potential entrants:

Main products of the construction Consultant business include: Consultant insurveying and preparing construction plan, project, shop drawing design, Consultant

in inspection, Consultant in supervision and Consultant in quality inspection, worksfoundation geological treatment To analyze competitive pressure from potentialentrants, it is necessary to determine products based on profitability and barriers injoining the industry The products targeted by potential entrants are classified asfollows:

- The first group of products: Consultant in surveying and preparingconstruction plan, project, shop drawing design, Consultant in quality inspectionand works geological treatment: This group of products needs great investment intechnical equipment, capacity and many technicians but face big joining barrierswhereas profit is lower Moreover, the quantity of enterprises trading in theseproducts is relatively considerable in Ninh Binh market, thus the competitivepressure from potential entrants regarding these products is inconsiderable

- The second group of products: Consultant in verification and Consultant insupervision This group of products needs little investment in technical equipments,few technicians, small joining barriers whereas profit is high Therefore,competitive pressure from potential entrants involved in this market of theseproducts will be relatively big

2.2.2.4 Competitive pressure from substitute products:

Pursuant to the Construction Law No 16/2003/QH11, most of theconstruction Consultant products must be available when building the works,especially the works with large scale Therefore, substitute products in theconstruction Consultant are unavailable, thus this factor will not be analyzed

2.2.2.5 Competition pressure from the enterprises in the sector

As we mentioned above, Ninh Binh Construction Consultant Joint stockCompany was established in 1996 on basis of marging four survey and designentities in the fields: Irrigation, traffic, construction and industry At that time, theCompany held mostly all the technical staffs and machineries, technologies inconstruction Consultant For construction Consultant packages of constructionworks from the state budget, the Company all received bidding direction by theprovincial People’s Committee or Investor units belonging to the Departments andSector in the province Construction Consultant products by the Company arealmost monopolized in construction Consultant market of Ninh Binh; but at thattime, construction market in Ninh Binh has not yet developed, there were not manyconstruction works with large scale, the profits were quite high but the barrier wasrather huge

After about 5 years of operation since 2000, construction operation in NinhBinh province developed strongly Construction Consultant market became moreand more eventful Some Departments and Sectors have established their ownspecialized Consultant units such as: Irrigation Construction Consultant Center ofthe Department for Agriculture and Rural Development, Construction planningInstitute of Construction Department Some private enterprises were established,sharing the market with one ore some Consultant products such as: Consultant indesign survey, inspection, testing, etc., competing directly with the Company Andsince that time, the Company began to participate in a strong competition marketwith tens of construction Consultant entities in the province and some constructionConsultant entities from other locals, and even foreign Consultant units

Construction Consultant is an operation not requiring much capital both forfixed cost and material cost, without special requirements for entering and exiting,

so there is mostly no barrier; the growth rate of the sector is now quite high;construction Consultant products are hardly different; the distinction of the brandsare not clear, so many units etering into the sector and compete strongly with theCompany

So as to make clear about the Company competition ability and competitionpressure of the enterprises within the sector in construction Consultant market ofNinh Binh province, our group define some units currently competing directly withthe Company and compare basing on some criteria as below:

Table 2.1 Comparison on competition strength of direct competitors

Nr Comparison criteria

Ninh Bình Cons.

Center

Quality testing center

Dong Duong Comp.

Nhat Minh Comp.

+ Our group use quantatiative method with scale of 100 points.

+ Competitors have diversified fields of operation, however in the table above, we only compare among the products in construction Consultant market.

- General introduction about direct competitors:

+ Construction planning institute (CPI): Public carreer unit specialized insurvey for making region, city planning

+ Irrigation construction Consultant center (ICCC): Public carreer unitspecialized in carrying out survey, design Consultant packages for irrigation works