Building business strategy in vietnam – italy steel joint stock company in period of 2015 2020

MBA THESIS BUILDING BUSINESS STRATEGY IN VIETNAM – ITALY STEEL JOINT STOCK COMPANY IN PERIOD OF 2015 – 2020... Quantitative Strategic Planning Matrix QSPM:...16 CHAPTER 2...17 TRADING AN

MBA THESIS

BUILDING BUSINESS STRATEGY IN VIETNAM – ITALY STEEL JOINT

STOCK COMPANY IN PERIOD OF 2015 – 2020

TABLE OF CONTENTS

COMMITMENT i

ACKNOWLEDGEMENT ii

INTRODUCTION 1

CHAPTER I 4

THEORETICAL BASE OF BUILDING BUSINESS STRATEGY OF ENTERPRISE 4

1.1 Concept and process of building business strategy 4

1.1.1 Concept about business strategy of enterprise 4

1.1.2 Typical features of business strategy 5

1.1.3 The role of business strategy 6

1.2.1 Step 1: Planning strategy, defining mission and orientated goals of enterprise 8

1.2.2 Step 2: Analyzing environment 8

1.2.3 Step 3: Defining long term target and building development strategy for enterprise 12

1.2.4 Step 4: Defining action plan and conducting solutions 12

1.2.5 Step 5: Supervising and adjusting strategy 13

1.3 Tools used for evaluating and selecting business strategy 13

1.3.1 Internal – external factor evaluation matrix (IE) 13

1.3.2 SWOT matrix (Strengths, Weaknesses, Opportunities, Threats): 14

1.3.3 Quantitative Strategic Planning Matrix (QSPM): 16

CHAPTER 2 17

TRADING AND PRODUCTION ACTIVITY AND BUSINESS STRATEGY OF VIETNAM – ITALY STEEL JOINT STOCK COMPANY 17

2.1 Overview about Vietnam – Italy Steel Joint Stock Company 17

2.1.1 Foundation and development 17

2.1.2 Organization structure of Vietnam – Italy Steel Joint Stock Company 19

2.1.3 The main trading sectors 21

2.1.4 Vision and mission 21

2.1.5 The situation of steel market 22

2.2 Analyzing business environment of Vietnam – Italy Steel Joint Stock Company – External environment 23

2.2.1 Analyzing macro-environment of VISCO 23

2.2.2 Analyzing micro-environment of VISCO 27

2.3 Analyzing internal environment of VISCO 31

2.3.1 Analyzing basic activities of VISCO 31

2.3.2 Analyzing supporting activities of VISCO 35

2.4 Forming strategic projects 38

2.4.1 SWOT matrix and combination solutions 38

2.4.2 External Factor Evaluation Matrix – EFE matrix 39

2.4.3 Internal Factor Evaluation Matrix – IFE matrix 40

2.4.3 Internal – External Factor Evaluation Matrix (IE) matrix 42

CHAPTER 3 43

SELECTING BUSINESS STRATEGY AND STRATEGIC SOLUTIONS OF VIETNAM - ITALY STEEL JOINT STOCK COMPANY TO 2015 43

3.1 Goals and development orientation of Vietnam – Italy Steel Joint Stock Company 43

3.2 Foundation for selecting strategy 43

3.3 Forecast on market demand 44

3.4 Planning business strategy for Vietnam – Italy Steel Joint Stock Company to 2015 45

3.4.1 Analyzing the main strategic projects 45

3.4.2 Selected strategy 47

3.5 Strategic solutions for Vietnam – Italy Steel Joint Stock Company to 2015 48

3.5.1 Solution on marketing 48

3.5.3 Solution on human resource 50

3.5.4 Solution on production and operation 51

3.6 The roadmap for implementing strategy 54

3.7 Recommendations 54

3.7.1 To State 54

3.7.2 To Sector 55

CONCLUSION 56

REFERENCES 57

LIST OF TABLES Table 2.1 GDP growth rate of Vietnam in period of 1998-2010 22

Table 2.2 GDP per capital of Vietnam in period of 1998-2010 22

Table 2.3 Foreign Direct Investment to Vietnam in period of 2007-2010 23

Table 2.4 Main competitors of VIS 26

Table 2.5 Summary of competitors of VISCO 28

Table 2.6 Opportunities and threats of VISCO 31

Table 2.7 Trading and production result from 2007 to 2010 (Prospectus of Vietnam - Italy Steel Joint STock Company - http:// www.vis.com.vn ) 32

Table 2.8 Strengths and weaknesses of VISCO 37

Table 2.9 SWOT matrix and combination solutions 38

Table 2.10 External Factor Evaluation Matrix – EFE 40

Table 2.11 Internal Factor Evaluation Matrix - IFE 41

Table 3.1 Some criteria of Vietnam - Italy Steel Joint Stock Company to 2015 43

LIST OF FIGURES Figure 2.1 : Logo of Vietnam – Italy Steel Joint Stock Company 19

Figure 2.2 Big board of Vietnam – Italy Steel Joint Stock Company 19

Figure 2.3: I.E matrix 42

LIST OF CHARTS, DIAGRAMS Diagram 1.1: Process of building startegy 7

Diagram 1.2: Michael E.Porter’s value chaine 9

Diagram 1.3: Michael E.Porter’s five force model 10

Diagram 1.4 : Michael E Porter’s Competitive Advantage model 11

Diagram 1.5: SWOT matrix 16

Diagram 2.1: Organization structure of Vietnam – Italy Steel Joint Stock Company .20

Chart 3.1: Growing rate of Vietnam’s steel sector 44

Chart 3.2: Market share of Vietnam’s steel sector 45

INTRODUCTION

1 Preface

Over the past years, Vietnam economy always reached the high and stablegrowth rate After Vietnam joined the World Trade Organization, Vietnameseenterprises have had opportunities to expand market, production scale and marktheir position Apart from opportunities, they also face many threats Marketfluctuations are quicker and more complicated and sale becomes more difficult Thereason for this condition is that enterprises are supplying more and diversifiedgoods for market Correspondingly, market requires products with higher andhigher quality As a result, the competition to have customers is more and moreviolent Therefore, if enterprises want to have success in business, they are required

to process new trading methods and new thinking Besides, they also must usesupporting means to grasp and process information flexibly, apply scientifictechnology as well as propose suitable projects for each period If applicable,enterprises will take advantages in competition Enterprises also must understandthe rules of market to be able to produce and sell more products, have quick capitalturnover Besides, production reinvestment helps enterprises expand size widely anddeeply In which, analyzing business environment and defining target market andbuilding business strategy are matters of concern since they are core issues andcontrol all of activities in enterprises Additionally, these issues are foundation forbusiness administrators to make useful decisions with higher and higher economicefficiency as well as sustainable development In other words, strategy for tradingand production is vital to enterprises

Together with the growth of national economy as well as Song DaCorporation, Vietnam – Italy Steel Joint Stock Company (VISCO) has gained

achievements and had significant contribution to Song Da Corporation in the pastand Song Da Group at present in new level.

Nevertheless, during the process of deep integration to the regional andworld economy, business environment will change much with quick speed Ifbasing on advantages and production – trading experience in the past, VISCO willnot survive and develop With the desire to have contribution in finding outorientation to maintain and enhance position of VISCO in the future; Based ongained knowledge from Global Advanced Master of Business AdministrationProgram and working process in VISCO, our group selects the topic in line with the

theme “Building business strategy in Vietnam – Italy Steel Joint Stock Company

in period of 2015 - 2020”.

2 Object and target of the study:

Based on the analysis of microenvironment, macro environment andproduction and trading activities in VISCO, the group will find out suitable businessstrategy to develop market and enhance competitiveness of products in market.From that, VISCO will remain their position and ceaselessly develop to becomeleading steel production company in Vietnam as well as in the region in the future

3 Scope of the study:

- Studying space: Vietnam – Italy Steel Joint Stock Company and steelconstruction market in Vietnam

- Studying time: This project focuses on researching production andtrading of Vietnam – Italy Steel Joint Stock Company within 4 past years (from

2007 to 2010)

4 Methodology of the study:

We mainly use the statistics, survey, methods to collect data, generalizationand analysis

5 Source of data:

- Data of Vietnam – Italy Steel Joint Stock Company

- Data of Vietnam Steel Association

6 Implication :

- In theoretical aspect: applying theories of building business strategy andcompetition theory for specific product in enterprises

- In real aspect: being foundation to develop business, enhance

competitiveness of VIS product

- This topic can be used as reference for building business strategy of otherindustrial – commercial enterprises in the same sector

- This capstone project will build business strategy for VIS product inVietnam – Italy Steel Joint Stock Company in period of 2010 – 2015

9 Structure of capstone project:

Apart from the introduction, conclusion and references, the main content ofthe capstone project consists of three chapters:

Chapter 1: Theoretical base of building business strategy of enterprise

Chapter 2: Trading and production activity and business strategy of Vietnam– Italy Steel Joint Stock Company

Chapter 3: Business strategy of Vietnam – Italy Steel Joint Stock Company

in period of 2011 - 2015

CHAPTER I THEORETICAL BASE OF BUILDING BUSINESS STRATEGY OF ENTERPRISE

1.1 Concept and process of building business strategy

1.1.1 Concept about business strategy of enterprise

The concept of “strategy” has been presented for a long time and itoriginated from military field At present, there are many concepts about strategy:

According to Pred R David: “Strategy contains means reach to long-term goals”.According to Haroid Kooniz and authors of the book “The main issues inmanagement”, strategy is defined as an action program reaching specific objectives.Main strategies of an organization contain goals and commitments in resources toreach these goals as well as main based policies when using resources

According to Alfred Chandler: “Business strategy covers definition of longterm basic target of enterprise, selection of method or action program and allocation

of resources to implement that target”

In general, if an enterprise wants to exist and develop, they have to payattention to not only short term and mediate operation project but also activities

in many incoming years as long term operation project Furthermore, enterprisesneed to understand and mitigate influences from external environment, promotestrengths, overcome weaknesses and catch up with opportunities to takeadvantages Such long term thinking is called as strategic thinking Strategy is aplan orienting for future, is the spine for administrators to make decisions Inwhich, business strategy imagines and describes activities of enterprises as well

as maps out positive prospect for them Strategy contains targets, policies and avariety of actions Strategy solves unprecedented and unknown problems

In the market economy, the existence of each enterprise is connected withmany targets to implement mission and mark position in market In a nut shell, itorients to following basic three targets:

- Corporate level strategy is comprehensive goals of enterprise in all aspects

to ensure success in different sectors and areas

- Business unit level strategy is the ones ensuring success for the enterprise (orbranch) which that enterprise (or branch) only specializes on one sector or one area

- Functional level strategy: is the one defining each operation area Functionlevel strategies have functions as solution strategies to implement comprehensivelystrategic target of enterprises

1.1.2 Typical features of business strategy

Business strategy defines goals and orientation of enterprise in relativelylong term from 3 to 5 years

Business strategy only drafts long term orientation, in practice; enterpriseshave to combine strategic goals with situation goals

Every important decision in process of building, making decision, andorganizing, monitoring, evaluating and adjusting strategy is concentrated by themost senior leaders of enterprise

Business strategy is always built, selected and enforced based oncomparable advantages of enterprise This requires enterprise to have accurateevaluation about their trading and production reality before building strategy

Business strategy is introduced mainly and firstly for business sectorsregarding as specialized, traditional and strong business sectors of enterprises As aresult, enterprises have to build business strategy with thorough preparation

1.1.3 The role of business strategy

Business strategy is the foundation to determine specific production and tradingcriteria and measure trading result In general, strategy includes three factor groups:

- Factor group relates to business environment of enterprise

- Factor group relates to reality and solutions of enterprise

- Factor group relates to activities of Administration apparatus of enterprise

We can say that, business strategy has particularly important role It decidesfailure and success of enterprises such as:

- It helps administrators have a long term view

- It is foundation for administrators to make accurate and in time decisions

- It helps enterprises make use of available strengths, opportunities in thefuture to face up with, mitigate threats, recover weaknesses, maintain and enhanceposition of enterprises

1.2 Process of building business strategy

Diagram 1.1: Process of building business strategy

Defining vision and mission for organization

Analyzing external

environment

Analyzing internal environment

Defining strategic goals

Forming strategy:

- Corporate level strategy

- Business level strategy

- Functional level strategy

1.2.1 Step 1: Planning strategy, defining mission and orientated goals

of enterprise

- Planning strategy: is the cooperation and mutual support between strategists

with participants in implementing strategy to:

+ Participants in strategy planning will understand more clearly aboutpossibilities of built strategies with easy and simple implementation

+ Strategy implementers will understand more clearly about strategy whenconducting strategy

+ Enhancing feasibility of introduced strategies

- Defining mission of enterprise: Mission is understood as the existence

reason, meaning of foundation and existence of enterprise Mission of enterprise istheir declaration with respect to society Normally, mission includes contents ascustomers, products or services, market, technology, philosophy, interest tocommunity and officials Furthermore, mission demonstrates general prospect in thefuture of enterprise Mission is important base for selecting goals and developmentstrategy for enterprises

- Defining goals of enterprise: goal is the concretizing of content, as the

mean to implement declaration about mission of enterprise

1.2.2 Step 2: Analyzing environment

Business environment of enterprise includes internal and externalenvironment with direct or indirect influences to the existence and development ofenterprise Therefore, researching internal and external environment is imperative inplanning strategy of enterprise

1.2.2.1 Analyzing internal environment

Internal environment of enterprise includes factors which enterprise cancontrol certainly as: management, production, finance, accounting, materialsupplying, marketing, public relationship, human resource and information system.Internal environment factor analysis will make enterprise define strengths, weaknesses

to introduce suitable strategy with implementation capacity in near future

Diagram 1.2: Michael E.Porter’s Chain value model

1.2.2.2 Analyzing external environment

1.2.2.2.1 Analyzing macro-environment

External environment factor analysis helps us recognize opportunities andthreats, from that, enterprises will introduce suitable strategies Externalenvironment factor analysis bases on environments relating to existence anddevelopment of enterprise, regarding as:

- Economic factor: identifies trend of demand for consuming products and

supplying capacity of material, human resource for production and management inwhich, it mainly identifies economic growth rate as: gross domestic product, GDPper capita, currency policy, tax interest of related products and services,international economic integration policy, increase (decrease) of population.Therefore, enterprises need to understand thoroughly and evaluate socio-economicplanning and development of Government and locals

- Political and legal factor: Enterprises must understand political trend,

Domestic and foreign affair of Party and law of state which affect to development

of enterprises

Firm infrastructure Human resource management Research and development

Supplying

Purchasing material Production

Distribution Marketing Customer

serves

Value chain – comprehensive strength

- Technical and technological factor: There are more and more new

technologies creating opportunities as well as threats for enterprises Newtechnology will help enterprises with lower price, more competitive as well asreduce life cycle of products

- Socio-cultural factor: consuming characteristic, customs, life style or

culture of each local and ethnic will affect demand and taste of consumers

- Population factor: Population size, population increasing rate,

population structure also affect to enterprises in consuming demand andsupplying human resource

1.2.2.2.2 Analyzing micro-environment

\

Diagram 1.3: Michael E.Porter’s five force model

New entrants: when new entrants present in sector, they will reduce market

share and earnings of enterprise To protect competitive advantage, enterprises have

New entrants

Substitute products

Competitors

Competitiveness

Threats of new entrants

Bargaining power

of suppliers

Threats of substitue products

to increase penetration barriers as product diversification, making use of availableadvantages in production scale, market share, geographic location and trade mark.

As a result, if competitors want to take part in sector, they have to have big initialinvestment, slow capital recovery, reduce competitiveness

- Substitute products: Quick development of scientific-technology is the

condition of appearance of substitute products Substitute products will threatenmarket share and control potential earnings for enterprises Therefore, enterpriseshave to ceaselessly apply scientific technology to improve labor productivity,reduce cost price, and improve quality and features of products

- Buyers: The reliability of buyers have important role for enterprises.

Nevertheless, when buyers have advantages, they will create pressure for enterprises

- Suppliers: include units supplying input factors as material, machine, and

finance and labor source When suppliers have advantages, they will causedisadvantageous pressure on enterprises as high price with short payment time

- Competitors: This is frequent pressure and has direct threats to enterprises,

when competitions among enterprises increase; it threatens position and existence

of enterprises

According to Michael E Porter, there are two basic competitive advantagesas: advantages about low cost and advantage about differentiation of products

Diagram 1.4: Competitive advantage model of Michael E Porter

Enterprises use their resources (including: brand name, prestige, technology,

Resources

Possibilities

Advantage about low cost

Or

Advantage about differentiation of products

customer data base, reputation) and capacity to use resources effectively to createspecial capacity and improve value for products from competitive advantages onlow cost or differentiation of products

1.2.3 Step 3: Defining long term target and building development strategy for enterprise

- Long term target is expected result of enterprises given in relatively long term.The time of implementing long term or strategy implementing lasts more than 2 years.During the process of implementing strategy to obtain long term target, enterprises candivide into many short term targets corresponding with each shorter period

- Defining the main target is consideration process combining with forecast

on product demand as well as sold turnover, total cost and resources of enterprises.Demand forecast helps enterprises determine the types of product and amount ofproducts and services which enterprises manufacture and provide in the future.From demand forecast administrators can decide production scale or activities ofenterprises as foundation to project finance and human resource

- There are many forecast methods Normally, enterprises use line basedmethod to forecast demand of market in the future from data in the past

- Besides, in forecast, we should pay attention to another issue as life cycle

of product It is important factor needed considering carefully in forecastingprocess, especially long term forecast

- When target is built suitably, it will be both motivation and measurement ofstrategy implementing process Normally, targets have to ensure feasibility,flexibility, specific, unification and possibly define specific time

1.2.4 Step 4: Defining action plan and conducting solutions

This is a process establishing mechanism, introducing resource allocationplan for enterprises to implement selected key strategic solutions Basing on that, itwill make use of resources and competitive advantages of enterprises createcomprehensive strength for enterprises to gain achievements in trading

1.2.5 Step 5: Supervising and adjusting strategy

Since the quick changes of environment factors and forecast for the futurehave difficulties in obtaining absolution During process of implementation,enterprises must continuously check, evaluate and adjust strategy to gaindetermined targets

1.3 Tools used for evaluating and selecting business strategy

To plan business strategy, enterprises can apply many different strategyplanning methods and tools This capstone project only selects and uses some toolsmentioned below which we consider them possibly help for planning strategy inVietnam – Italy Steel Joint Stock Company

1.3.1 Internal – external factor evaluation matrix (IE)

External factor evaluation matrix (EFE)

External factor evaluation matrix is the tool assessing the main influences ofexternal environment factors to enterprises External factor evaluation matrix isimplemented according to five steps:

Step 1 : Listing main external factors which affect to activities of enterprises Step 2: Classifying the importance from 0,0 (indirect, least important) to 1,0

(direct, the most important) for each factor This classification reveals thecorresponding importance of factors with respect to success in trading sectors ofenterprises

Step 3: Classifying from 1(respond, less influence) to 4 (respond, positive

influences) for each factor It shows the way which current strategies of enterprisesrespond to these factors

Step 4: Multiplying the importance of each factor with its corresponding

classifying score to define important score

Step 5: Adding the important score of factors with respect to trading sector of

enterprise The average score is 2,5 If total important score smaller than 2,5 we seeweak response capacity, bigger than 2,5 we see positive and good response ofenterprise

Strong points: it forms the general picture about external factors affecting to

competitiveness of enterprise

Weak points: marking each factor as well as defining its importance has

subjectiveness

Internal factor evaluation matrix (IFE):

Similar to steps and score for external factor evaluation matrix, internalfactor evaluation matrix is tool to assess strengths, weaknesses and importance ofavailable resources in enterprise

Strong points: it forms the general picture about internal enterprise with

strengths, weaknesses which these factors have influences on competitive capacity

of enterprise

Weak points: Similar to EFE matrix.

Internal – external factor evaluation matrix (IE):

Internal – External Matrix puts different SBU (Strategy Business Unit) of anenterprise in to 1 table with 9 cells This matrix is based on two main aspects:

- Total important score of IFE matrix is demonstrated in X axis

- Total important score of EFE matrix is demonstrated in Y axis

- Each SBU has to establish IFE and EFE matrix as well as IE matrix for the enterprise

1.3.2 SWOT matrix (Strengths, Weaknesses, Opportunities, Threats):

- SWOT matrix assesses strengths, weaknesses, opportunities and threats.Objective of researching environment is to consider threats, opportunities as well asstrengths and weaknesses which enterprise has been and will facing during theprocess of their production and trading to make foundation for setting up strategies.SWOT analysis technique is a tool for summarizing environment research result andproposing strategy

- Main opportunities: are factors which product among influences toenterprise when it makes use of and probability enterprise has opportunities is big

- Main threats: are factors which product among influences to enterprise

when threats happen to enterprise and probability for threat reaches themaximum value

- Defining core strengths and weaknesses: process of evaluating andanalyzing for internal factor of enterprise can conclude many factors Theimportance as it can conclude core factors affecting to competitive advantage andstrategy enforcement of enterprise Here, we need to consider factors with theposition of activities in system and compare with general standards of sectors andother main competitors

- Combining internal factors and external conditions: after defining basicfactors of external and internal condition, we must apply a procedure includingbelow steps to analyze and propose strategies:

Step 1: Listing main factors of internal and external condition to cells of

SWOT matrix

Step 2: Making logical combination Setting up S/O, S/T, W/O, W/T

combination strategies

+ S/O: Using strengths to make use of external opportunities the best

+ S/T: Using strengths to deal with external threats

+ W/O: Overcoming weaknesses to create favorable conditions for makinguse of external opportunities and enterprise needs making use of whichopportunities to fulfill weaknesses at present

+ W/T: Recovering weaknesses to mitigate threats

Step 3: Combining among four factors S+W+O+T this creates the resonance

among 4 factors to form strategies From that, enterprise can use strengths to makeuse of opportunities, fulfill weaknesses and mitigate threats

Step 4: Summarizing and re-considering strategies Classifying strategies and

coordinating strategies into supporting system

Diagram 1.5: SWOT matrix Strong points:

- Pointing out strengths, weaknesses of enterprise as well as definingopportunities and threats from external environment

- Proposing strategies by specific combination from strengths weaknesses,opportunities and threats for enterprise to have solutions

Weak points: SWOT matrix introduces possibly feasible strategies; it does not

introduce the best option or strategy Therefore, selection of strategy to developenterprise is not mentioned here

1.3.3 Quantitative Strategic Planning Matrix (QSPM):

This analyzing technique will show the best alternative strategies objectively.Quantitative Strategic Planning Matrix uses input factors from EFE and IEFanalysis, after that, it receives essential information to establish QSPM matrix fromSWOT matrix

In general, among tools planning strategy mentioned above, each one hasstrong points and weak points Therefore, when applying them in to reality, we have

to be flexibly select matching to specific situation and condition

Diversification strate

WO strategy:

Recovering internal weaknesses by making use of advantages from external opportunities

SO strategy:

Using internal force to create advantages before external opportunities

WT strategy:

defense strategy is used

to mitigate internal weaknesses & avoid external threats

ST strategy:

Using strengths of the company to avoid or mitigate influences of external threats

CHAPTER 2 TRADING AND PRODUCTION ACTIVITY AND BUSINESS STRATEGY OF VIETNAM – ITALY STEEL JOINT

STOCK COMPANY

2.1 Overview about Vietnam – Italy Steel Joint Stock Company

2.1.1 Foundation and development

On the basis of maintaining and developing the traditional specialty of Song

Da Corporation as the hydroelectric, industrial and civil projects in the wholecountry, Song Da has been implementing the long-term policy as diversifying thespecialty, products, developing industrial manufacturing plants fast and finallycontributing Song Da Corporation into a powerful economic group

Series of projects have been carried out, which are on industrialmanufacture, facility investment to strengthen executing capacity In 2000,Song Da 12 Company set up a project on constructing a high quality factorylaminating steel placed in Pho Noi A industrial zone The productivity of thefactory was 250.000 tons/year

The target is: Providing stably high quality steels to the projects which theCorporation invests or is the contractor The rest will be sold in the outside market

to enrich the steel products in Vietnam partly This project will also help part ofemployees of the Corporation and Company get the jobs

Viet-Italia Steel Factory was established under the decision number19/TCT-VPTH dated 02, January 2001 approved by the General Director ofSong Da Corporation

The head office of the factory is located in Pho Noi A industrial zone – Yen

My district – Hung Yen province (next to the highway 5)

Observing the policy of the State about waiting in front for moderntechnologies, especially in the field of heavy industry and high technology, theCompany just selects the facilities made from G& countries After putting out to

tenders, Danielli firm in Italia became the official tender for the whole designs andtechnical equipments of the factory.

In January, 2003, the factory officially operated The products of the factoryare the high quality steels from the wire rod steels D6, D8 to the deformed bar withdiameter from D10 to D40 under the standard of Vietnam (CII, CIII, and RB500W),Japan (SD390, SD490, and SD295A), the US (Gr60), and Britain (BS)…

The manufacturing capacity of the factory: 1.000 tons of every kind per dayand 250.000 tons of products per year

The factory has 420 employees and cadres who all are master and skillfulengineers, workers in regular training inside and outside the country They are inmajors as mechanics, steel lamination, metallurgy, industrial automation,electrification, economics, commerce, foreign trade, construction

Viet-Italia Steel Factory is the member under directly Song Da 12 Company.Its functions and duties are just purely manufacturing without concerning aboutproduction effectiveness All the stages like material transaction or selling price andselling policy are decided and implemented by Song Da 12 Company

In 2003, the factory produced about 100.000 tons of steels in all kinds, andthe result was loss of 23 billion VND

Implementing the State’s policy on privatizing the State enterprises, in June,

2003, Song Da 12 Company carried out the essential steps to transferring thefactory to joint stock company, and in the end of February, 2005, all the procedureswere completed The Viet-Italy Steel joint stock Company was issued the businesscertificate and officially operated since February 20th, 2005 according to theEnterprise Law

On 25/12/2006 the company was official posted up in the Ho Chi Minh stockexchange floor with the code as VIS

Product brand name which Vietnam – Italy Steel Joint Stock Company isprotected and using:

Vietnam – Italy Steel

Figure 2.1: Logo of Vietnam – Italy Steel Joint Stock Company

Figure2.2 Big board of Vietnam – Italy Steel Joint Stock Company

2.1.2 Organization structure of Vietnam – Italy Steel Joint Stock Company

Board of Directors has 05 members and Inspection Unit has 03 members.Governing machinery has General Director, 04 Vice-General Directors, and ChiefAccountant The company has 07 functional departments, 01 Project managementunit, 01rolling mill, 01 electric mill, 01 coal gas station, 02 ( in Da Nang and tay

Bac) and one representative office in Hanoi

Diagram 2.1: Organization structure of Vietnam – Italy Steel Joint

Stock Company

Shareholders Meeting

Board of Directors

General Director Inspection Unit

Vice General Director

Vice General Director

Vice General Director–

Material Im- Export Dept

Financial & Accounting Dept

Sales Dept

Investment & Planning Dept

§a Nang Branch

Tay Bac Branch

Representative Off In Hanoi

Rolling - Mill

Electric - Mill

Public Relations Dept.

Coal Gas Station Project management

Unit

2.1.3 The main trading sectors

VISCO manufactures and trades construction steel, imports material andequipments for steel industry as well as trades freight transport

2.1.4 Vision and mission

Vision

Perceiving experience and promoting traditional strength in 50 years ofSong Da Corporation, Vietnam – Italy Steel Joint Stock Company has hadsignificant contribution to modernization, industrialization, integration to globaleconomy of Vietnam in approximately past decade Although the company alwayshas to face up with challenges incidents of inflation and global economic recession,VISCO still asserts a strong internal force, a solid foundation, a right direction tothe general development of sector and the country

In the roadmap of formation and development, we always have created andoriented development with ambition to become a region and world-class steel producerand trader We are patient and consistent to overcome challenges of global economicintegration Human and technology provide us with stability and growth Solution andcommitment make our dream come true Earnings bring true value for shareholders

Mission

Our mission is to bring interest and true value for society.

Customers are all, interest of shareholders is always paid attention interest oflabor is particularly strong attached; contribute efficiency to the development ofsector and the country

2.1.5 The situation of steel market:

According to Vietnam Steel Association, in 2008, Steel sector fell about5% (global economic crisis, fluctuation in interest rate, foreign exchange rate), in

2009 raising 32% in comparison with 2008 This increase was resulted fromstimulus packages of Government as interest rate support, private engineeringenhancement, so on In 2010, the sold amount fell 14% against 2008 (fluctuationabout interest rate, foreign exchange rate, price increase of input material) Wecan see that, Vietnam Steel sector has tendency to increase without stability and

been affected by the world micro and macro economy

Chart 3.1: Growing rate of Vietnam Steel Industry

Growing rate of Vietnam Steel Industry

(Source: Vietnam Steel Association)

In Vietnam, there are 11 main steel suppliers with respectively marketshare as: Vietnam Steel company (Pomina): 16,60%, Thai Nguyen Iron and SteelCompany (Tisco): 12,60%, Hoa Phat: 12,00%, Southern steel Company (VNS):7,60%, Vietnam – Italy Steel Joint Stock Company: 5,4%, Vietnam – KoreaSteel Company (VPS): 5,00%, Vietnam – Australia Joint Venture Company(Vinaustel): 5,00%, Vietnam – Japan Steel Company (HPS): 2,30%, Vietnam –Germany Steel Company (VGS): 1,50%, 27,00% is market share of nationalsmall enterprises

Chart 3.2: Market share of Vietnam Industry

Market share of Vietnam Industry

Thép khác 27.00%

Pomina 16.60%

TISCO 12.60%

Hòa phát 12.00%

VNS 7.60%

SSE 5.50%

Viêt ý 5.40%

VPS 5.00%

Việt Đức 1.50%

HPS 2.30% Vinausteel

5%

Pomina TISCO Hòa phát VNS SSE Viêt ý VPS Vinausteel HPS Việt Đức Thép khác

(Source: Vietnam Steel Association)

2.2 Analyzing business environment of Vietnam – Italy Steel Joint Stock

Company – External environment

2.2.1 Analyzing macro-environment of VISCO

2.2.1.1 Economic factor

+ Economic growth rate

Economic growth rate of Vietnam has been remarkable from 1998 with thegrowth rate of GDP and GDP/ capita This is a positive factor for enterprises inVietnam in general and Vietnam – Italy Steel Joint Stock Company in particular.The growth rate of GDP is higher than the increase of population; therefore,GDP/capital is raised

Table 2.1 GDP growth rate of Vietnam in period of 1998-2010

Data about growth rate of GDP over years

Years 1998199920002001200220032004200520062007200820092010Growth rate % 5,8 4,8 6,8 6,9 7,1 7,3 7,8 8,4 8,2 8,5 6,2 5,3 6,7

( Source: Asia Development Bank – ADB)

Table 2.2 GDP/capita of Vietnam in period of 1998-2010

From above data we see that GDP/capital increase equally over years but thegrowth rate is not noticeable On the other hands, if comparing with countries inregion, the available income of people is in low level And it is considered asconvenience for enterprises

+ Foreign direct investment to Vietnam

Economic growth rate and GDP/capita especially FDI have influences todemand on using steel When the economy has significant growing as well as wants

to attract more FDI capital, infrastructure of Vietnam has to be invested more tomeet requirements and demand of investors and enterprises, System of electricity,water, traffic road, sea port, external infrastructure of industrial parks and technicalinfrastructure have big demand on using steel

Table 2.3 Foreign Direct Investment to Vietnam in period of 2007-2010

(billion USD)

Disbursement FDI (billion USD)

(Source: Asia Development Bank – ADB)

+ Vietnam has been integrating the world economy:

- Vietnam is official member of World Trade Organization and has to reduceimport tax according to committed roadmap with WTO Specifically, there will be36% of tax in tariff cut down tax interest, import duty in comparison with current.The road map for cutting down lasts from 5-7 years And sectors having the mostdown rate are garment, fishery, popular equipment manufaction, automobile andauto component, steel, so on

- Together with cutting down import duty according to WTO commitment,Vietnam still has to enforce commitment to cut down tax following regional FAT

and this down rate is definite to the rate of 0- 5% This has significant influences todomestic production if the country does not have adjustment since partners havestrengths about production and export

- Deep and further integration to the world economy of Vietnam createsnot only favorable conditions for domestic enterprises to expand market, access toadvanced technology and enhance management level but also competitiveness forthem These enterprises have to re-establish activities, reduce price to adapt to new

condition and more particularly, Vietnam Steel industry is neighbor of Strong nation having steel industry ranked the third position in the world as China

2.2.1.2 Political and legal factors

- The stable political situation in Vietnam gets a significant meaning toward

economic development, employment and increasing income as well as higherconsuming demand of the society This also affects positively Vietnam enterprises ingeneral and VIS in particular to form and perform strategies

- In the trend of integrating regional and global economy, the NationalAssembly has promulgated and completed the laws like Trade Law, Business Law,Investment Law, Taxation Law…in order to speed up the economic reformingprocess in Vietnam

- The State has encouraged the activities of all economic types andenterprises operating in the fields allowed by the law This leads to the strongercompetition, which asks enterprises to consistently enhance their capacity andoperating result if wanting to exist and develop

- It can be said that steel and iron are the backbone industries of theeconomy, so the steel-iron industry, especially rough draft refining will receive a lot

of good treatment from the Government, in detail, they are preferential treatment inlanding tax, corporate income tax, and machine and equipment importing tax.…TheState now is applying protectionism toward domestic steel industry, encouraging toproduct rough draft At present, rough draft still has to be imported for domesticproduction The tax level on steel rough draft – the main material for steelproduction is 5-8%, while the tax on imported ones is 10-25% According to the

commitment of Vietnam State with other nations, the State will continuously protectdomestic manufacturing sectors in general and steel industry in particular within theroute until 2018.

- However, the steel industry is suffering a great affect from the unstablefinancial policy on interest, exchange rate Because for the steel firms, the demand

on foreign currency and finance to import the raw steels is uninterrupted

- The legal requirements toward the steel industry mainly relate to quality ofproducts and the right of consumers They are the issues VISCO has paid muchattention to for many years and considers as long-term strategy

- When joining the global market, VISCO is affected by the factors likepolitic, legal issues, and policies of the nations in the world Therefore, it is soimportant and urgent to increase spirit, professional level and skills of theemployees

2.2.1.3 Social factor

- The move from agricultural to industrial and service economy has led to themove of a part of inhabitants from rural to urban areas They are the objects whohave high demand on housing and buying the products supplied by VISCO

- In other hand, the infrastructures in our country are concentrated to investlike a lot of high buildings, bridges or roads Hence, the demand on steel is ratherconsiderable

2.2.1.4 Technological factor – International factor

- The fast revaluation in science and technique recently has made the existing

cycle of technology shorter It forces enterprises to continuously renew theirtechniques if they do not want to lag behind The paradox here is that in such seriouscompetition, it is so hard for enterprises to develop production, accumulate forinvestment and growth

- However, in such current integrating situation, it has created manadvantages for VISCO to approach new technologies and modern machines in theworld easily in order to enhance its status in the global arena.

- Vietnam steel industry is so young, most of companies are in debt due tojust invest, so international integration is a big challenge

- Since most of domestic factories have not yet manufactured the steel roughdraft – the main material for production on their own, so they have to import fromforeign countries, especially China As a result, Vietnam steel industry has to suffer

a lot of effect from the taxation policy of China on the steel rough Moreover,recently, Vietnam steel industry has to face up the cheep steel products (mainly wirerod) made in China and imported to Vietnam with a huge volume

2.2.2 Analyzing micro-environment of VISCO

2.2.2.1 Analyzing competitiveness among available competitors

- Competition is objective factor and survival one with respect to enterprises

- Although Vietnam Steel Industry is quite young, Vietnam – Italy Steel JointStock Company has to burden the violent competition from other, especially bigcompetitors running out of depreciation or having been manufactured mill

- We can classify steel enterprises into following two groups:

Table 2.4 Main competitors of VIS

Project Hoa Phat, Vietnam – Korea (VPS), Vietnam - Germany (VGS),

Shengli, Pomina, SHS

Civil Hoa Phat, Vietnam – Korea (VPS), Vietnam -Australia, Australian

steel (SSE), Thai Nguyen (Tisco)

- Medium and large scale project market segment: Since product quality

is stable prestigeous with good marketing and relationship with big contractors,with respect to project market segment, VISCO still makes up noticeable marketshare as well as VIS product is the first choice of national key projects regarding as:Son La Hydroelectric power plant, Ba Dinh assembly room, Thanh tri Bridge, so

on At present, Hoa Phat, VPS and VGS are the strongest competition brand name