Development of business strategy for song da 11 joint stock company in the period of 2018 2023 with visions to 2030

Therefore, business strategy planning must be considered with many external and internal, objective and subjective factors in combination with systematic data analysis to act as the basi

-

TRẦN THANH GIANG

FORMULATION OF BUSINESS STRATEGY FOR SONG DA 11 JOINT STOCK COMPANY

FOR THE PERIOD 2018 - 2023 AND ORIENTATION TO 2030

XÂY DỰNG CHIẾN LƯỢC KINH DOANH CHO CÔNG TY CỔ PHẦN SÔNG ĐÀ 11 GIAI ĐOẠN 2018 – 2023

VÀ ĐỊNH HƯỚNG ĐẾN NĂM 2030

LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

HÀ NỘI - 2019

KHOA QUẢN TRỊ VÀ KINH DOANH

-

TRẦN THANH GIANG

FORMULATION OF BUSINESS STRATEGY FOR SONG DA 11 JOINT STOCK COMPANY

FOR THE PERIOD 2018 - 2023 AND ORIENTATION TO 2030

XÂY DỰNG CHIẾN LƯỢC KINH DOANH CHO CÔNG TY CỔ PHẦN SÔNG ĐÀ 11 GIAI ĐOẠN 2018 – 2023

VÀ ĐỊNH HƯỚNG ĐẾN NĂM 2030

Chuyên ngành: Quản trị kinh doanh

Mã số: 60 34 01 02 LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

NGƯỜI HƯỚNG DẪN KHOA HỌC: PGS.TS HOÀNG ĐÌNH PHI

HÀ NỘI - 2019

DECLARATION

The author confirms that the research outcome in the thesis is the result of author’s independent work during study and research period and it is not yet published in other’s research and article

The other’s research result and documentation (extraction, table, figure, formula, and other document) used in the thesis are cited properly and the permission (if required) is given

The author is responsible in front of the Thesis Assessment Committee, Hanoi School of Business and Management, and the laws for above-mentioned declaration

Date………

of business and management (HSB)

Secondly, I am extremely grateful to all of the lecturers from the Department

of Business Administration - HSB for providing me with research methods and professional knowledge during the course, especially the active and creative research skills

My appreciation also goes to the teachers in the thesis review committee for giving me valuable ideas during my thesis completion process

My profound gratitude is also conveyed to my instructor for his helpful assistance and guidance This thesis could have never been completed without his enthusiastic counsel and support

Despite the efforts during the research period, there are still many limitations

in the thesis I would hope to receive valuable comments from the teachers and workers to make this essay more complete

Thank you very much./

Ha Noi, 2019

TABLE OF CONTENTS

DECLARATION i

ACKNOWLEDGEMENTS ii

LIST OF TABLES v

LIST OF PICTURES vi

INTRODUCTION 1

Chapter 1 : LITERATURE REVIEW ABOUT DESIGNING BUSINESS STRATEGY 5

1.1 Concept and classification of business strategy 5

1.1.1 Concept of business strategy 5

1.1.2 Roles of business strategy 6

1.1.3 Basic characteristics of business strategy 6

1.2 Business strategy planning process 7

1.2.1 Analysis of external and internal environment 8

1.2.2 Develop matrix to select business strategy 15

1.2.3 Select business strategy 20

Chapter 2: ANALYZE AND SELECT THE BUSINESS STRATEGY FOR SONG DA NO 11 JOINT STOCK COMPANY 23

2.1 Overview about the Company 23

2.1.1 History of development, organizational structure 23

2.1.2 Business performance in the period of 2015 – 2017 25

2.2 Analysis of external and internal environment 28

2.2.1 Analysis of external environment 28

2.2.2 Analysis of internal environment 42

2.2.3 Develop matrix to select business strategy 51

2.3 Select business strategy for SJE 64

2.3.1 Develop matrix to select business strategy 66

2.3.2 Select business strategy 69

Chapter 3: SOME POSSIBLE RECOMMENDATIONS TO LAUNCH SJE BUSINESS STRATEGY IN THE PERIOD OF 2018 - 2023 76

3.1 SJE's objectives to 2023 with visions to 2030 76

3.1.1 Objectives to 2023 76

3.1.2 Visions to 2030 79

3.3 Recommendations on implementation solutions 80

3.3.1 Solutions on strategy and plan management 80

3.3.2 Production management solutions 81

3.3.3 Marketing management solutions 82

3.3.4 Solution group on human resources management 83

3.3.5 Financial management solutions 85

CONCLUSIONS 87

LIST OF REFERENCES 88

LIST OF TABLES

Table 1.1 - External factor matrix 16

Table 1.2: Competitive Profile Matrix 16

Table 1.3: Internal Factor Matrix 17

Table 1.4: SWOT Matrix Table 19

Table 1.5: QSPM Matrix 21

Table 2.1: SJE’s business performance in the period of 2015 – 2017 26

Table 2.2: List of some outstanding suppliers of SJE 41

Table 2.3: SFE’s asset structure in 2015 - 2017 45

Table 2.4: SFE’s financial structure in 2015 - 2017 47

Table 2.5: SJE’s External Factor Matrix (EFE) 51

Table 2.6: Rival comparison table 52

Table 2.7: SJE’s Internal Factor Matrix (IFE) 53

Table 2.8: Some socio-economic criteria 61

Table 2.9: SWOT Matrix of SJE 66

Table 2.10: QSPM Matrix 70

LIST OF PICTURES

Figure 1.1: Business strategy 5

Figure 1.2 Business strategy planning process 8

Figure 1.3: Macro-environment 9

Figure 1.4: Five competition force model 11

Figure 1.5: Internal and External Factor Matrix (IE) 18

Figure 1.6: BCG Matrix 19

Figure 2.1: Organizational structure 24

Figure 2.2: IE Matrix 54

Figure 2.3: BCG Matrix 55

INTRODUCTION

1 Rationale

Technology development and increasingly cut-throat competitiveness are always driven by market globalization As a result, strategy becomes an extremely essential factor not only for enterprises but also a whole nation Submerging into the flow of economic integration and development, Vietnam has been gradually launching the country industrialization and modernization, improving the physical facilities and technical infrastructure to serve for the socio-economic development Thanks to the economic integration, Vietnamese enterprises are facilitated to operate in a dynamic business environment and increasingly cut-throat competition

is also caused by increased resource scarcity, the society’s ever-changing demand and consumption tastes are recognized Moreover, increased presence of foreign enterprises is recorded

With response to such difficulties and challenges, Vietnamese enterprises are required to design a sound, stable and sustainable orientation strategy in accordance with its intrinsic capacity and adaptability to the business environment changes to successfully archive the sustainable development and integration For this purpose, enterprises must identify and plan its objectives, develop a sound and feasible business strategy and launch a series of solutions to deploy the strategy in the most effective manner A good business strategy facilitates the enterprises to grasp the business opportunities, obtain the biggest profit, the reliable and safety market position, expand its market share and affirm the trademark Therefore, business strategy planning must be considered with many external and internal, objective and subjective factors in combination with systematic data analysis to act as the basis of the enterprises’ short term and long term operation plan

Former a Utility Team under Thac Ba Hydropower Corporation, Song Da No

11 Joint Stock Company was incorporated on 1st June 1961 In 1976, the entity moved to Hoa Binh town to build Hoa Binh Hydropower Plant and renamed as

“Power and Water Assembly Enterprise” under Song Da Corporation In 1989,

Power and Water Assembly Enterprise was upgraded as a Power and Water Construction Company in accordance with the Decision No 03/TCT-TCLĐ of Song Da Corporation dated 12th December 1989

In 1993, Power and Water Construction Company was renamed as “Energy Construction Company” under Song Da Corporation as decided by the Ministry of Construction On 11th March 2002, the Ministry of Construction promulgated the Decision No 285/QD to rename as Song Da 11 Company With response to the Resolution TW3 on renovation and restructure of the State-owned enterprises, the Ministry of Construction promulgated the Decision No 1332/QĐ-BXD on 17th August 2004 to transform Song Da 11 Company into Song Da 11 Joint Stock Company and operate under the Law on Enterprises since then

Thanks to its long history and extensive experience, it is the Company’s extremely big strength in the fields of electric construction and installation and a great strength to become a powerful company In order to successfully develop in the market in the economic integration and cut-throat competition against other SJE companies, it is required to setup the objectives of business plan and strategy so that

it is not only harmonized with the extrinsic context, compatible with the intrinsic capacity but also well matched with the long-term development orientation, creating the future competitive strength of the enterprise By determining the problem significance, the topic “Development of business strategy for Song Da 11 Joint Stock Company in the period of 2018 - 2023 with visions to 2030” is selected as the author’s research topics It is launched with the hope that the Company may be facilitated to successfully recover the available shortcomings and have basis to initiate the strategic plans in the coming time to obtain a further prosperity and development with the author’s recommendations and suggested solutions

2 Objectives, subjects and scope of the research

 Objectives

- Systematize the strategy management issues

- Conduct macro, micro and local environment analysis to recognize the opportunities and challenges as well as strength and weakness, directly affecting SJE’s development and competitiveness

- Setup the strategic objectives for SJE from now to 2023 with vision to

2030 and propose the solutions to fulfill such objectives

 Subjects and scope of the research

- Subjects of the research: Song Da No 11 Joint Stock Company However, in order to successfully analyze and clarify the research contents, the research subject

is expanded to the competitors in the same industry

- Scope of research: Focus on studying and recommending SJE’s business strategy in the key business lines, i.e., construction of power, water and power generation

- Qualitative and quantitative method

4 Significance

Vietnam witnesses the experience-based business of some construction players The strategic administration concept is relatively new and not practically studied and applied With this study, the author wishes to make a partial experience contribution to the strategic management in the civil engineering enterprises,

especially the power, water and power generation fields It is expected that the enterprises shall have sound viewpoint about the business strategy management

Under the perspectives of the author, this is to apply the theories acquired from the MBA program to solve the actual problems of strategy planning coped by the enterprises

5 Structure

In addition to the Background and conclusions, the study is structured with 3 chapters Each chapter is embodied with contents as briefly shown below:

Chapter 1: Literature review

Introduce overview about the business strategy concept and its roles and characteristics; procedure on strategic business strategy Give out the matrix as the basis for strategy selection

Chapter 2: Analysis of SJE's existing conditions and selection of business strategy for SJE

Introduce the history of development of SJE, its main offerings and brief summary of business performance in the period f 2015 - 2017 Analyze the internal and external environment as well as the strengths and weaknesses; design IFE, EFE,

IE matrices and BCG matrix, etc., to select the feasible business strategy for SJE

Chapter 3: Solutions and recommendations

Setup the objectives, visions, missions, core values, recommend and select the business strategy in the period of 2018 - 2020 with vision to 2030 and the strategy implementation solutions

Chapter 1 LITERATURE REVIEW ABOUT DESIGNING BUSINESS STRATEGY

1.1 Concept and classification of business strategy

1.1.1 Concept of business strategy

Each scholar is characterized by his own viewpoints on business strategy in various perspectives Michael Porter (1996), a famous strategy manager of Harvard University, revealed that the business strategy is regarded as the art of successful

market competition and development because: “Business strategy refers to the art

of developing reliable competitive advantages for defense” Under the perspective

of management category, business strategy refers to a plan form, G.Arlleret

assumed that “Strategy refers to determination of paths and vehicles to fulfill the pre-determined objectives via policies”

Nowadays, strategy concept is widely used and regarded as the background for business operations When the goods barter is increasingly developed in the society, the strategy is started to be largely applied in business with sketched model

as follows:

Figure 1.1: Business strategy

(Source: Strategy management - Statistical Publishing House, 2009)

Threats

Applicati

on, Maintena nce

Discovery

Overcome

Prevent

A concept of business strategy in MBA course books of Griggs University

is: “a series of undertakings and actions that are used by a player to obtain a competitive advantage by exploiting the core competencies in a certain market.”

At least, three business strategy levels are identified; (i) Corporate level strategy: aim to the organization’s purpose and general scope; (ii) Business unit level strategy: refers to a combination of undertakings and actions to obtain the competitive advantages by exploiting their core competencies into the specific product markets; (iii) Functional strategies: refer to the strategies to help the BU and corporate level strategies are successfully launched thanks to component departments in terms of resources, processes, human and skills

1.1.2 Roles of business strategy

 Business strategy helps the enterprise to recognize its purposes and orientations as the key guideline for any production and business activities of the enterprise The enterprise is facilitated to grasp and make use of business opportunities and take active measures to successfully overcome the challenges and threats in the marketplace

 Business strategy facilitates the performance of resources, enhancing the enterprise’s competition position in the market and ensuring the enterprise’s sustainable development The reliable background is created to design and develop the production and business policies and decision suitable with the market fluctuations

1.1.3 Basic characteristics of business strategy

- Generality: Generality is demonstrated in 3 aspects: (i) Suitable with the

general development trend of the enterprise, as the directing policy for the enterprise operations; (ii) Suitable with the national development trend on socio-economics and techniques in the certain period of time; (iii) Suitable with the world’s economic integration trends The good business strategy may not be available without general viewpoints

- Far seeing: Previously, success was not obtained by many enterprises because

no strategic plan was made; work was randomly conducted and flown to the movement

Enterprise's development trends were not successfully captured Therefore, in order to design a business strategy, the society's eco-techno forecast must be outperformed Generally, a successful strategy is a strategy based on sound forecast

- Competitiveness: Competitiveness is the most basic characteristics of business

strategy Nowadays, the competition market is involved by any enterprises Therefore, it

is important to sketch out the business strategy that facilitates the enterprise to obtain more competitive advantages than its competitors and become the winner

- Risk: Business strategy is recognized as an enterprise's future development

plan However, the enterprise’s future survival environment may be always varied The longer the strategy timeline is, the more the uncertainty of objective circumstances shall be The higher non-feasibility is, then the more risky the strategy shall be The strategy risk requires entrepreneurs to stand afar to have far seeing, carefully and objectively observe to obtain the sound strategy The enterprise’s macro environment is significantly changed Therefore, business strategy should not cover a too long time to ensure its flexibility and practicality

- Professionalism and creativeness: The enterprise's intrinsic forces may be

based to select the business line well matched with its strength to avoid the industry which is advantageous to the giants to maintain its exclusive position By doing so, most of concerned enterprises are successful, developed and prosperous The technical progress and market competition are unlimited, hence, the enterprises are required to ceaselessly develop the proper advanced techniques, specialize and create the techniques as the essential measure to ensure its survival and development This is an important feature of SMEs’ business strategy

- Relative stability: Enterprises’ business strategy must be supported by the

relative stability in a certain period of time The objective environment and practical activities of the enterprises are ceaselessly driven Business strategy is required to self-adjust to be well matched with the objective circumstances The business strategy cannot be fixed but relatively stable

1.2 Business strategy planning process

Figure 1.2 Business strategy planning process

(Source: Strategy management - Statistical Publishing House, 2009)

1.2.1 Analysis of external and internal environment

Analysis of business environment is the basis to plan or reaffirm the organization's functions and missions The organization's business environment includes external and internal environment

1.2.1.1 Analysis of external environment

 Macro analysis

Changes in macro environment may directly affect any task forces, varying the relative strength to other power and itself, and finally leading to changes in attractiveness of a industry Through external environment analysis, the enterprises may know which challenges and opportunities are faced to obtain the sound development orientation Macro-environment factors are illustrated in the following model:

Selection and development

of strategies

Functional strategy Mission and purpose

Adapt structure, organization and control

BU-level strategy Global strategy Corporate strategy

Strategy change

Figure 1.3: Macro-environment

- Economic factors: Economic environment specifies the natures and

orientations of economy where the enterprises’ operations are initiated Therefore, economy influences on an enterprise may change the value and profitability creation capacity of such enterprise Generally, the enterprise is often affected by critical factor groups in the macro-economic environment:

+ Interest rate and its trends in the economy, affecting the trends of savings, consumption and investment Therefore, the enterprise’s operations are directly affected Increased interest rate adversely limits the loan demand for business expansion, affecting the enterprise’s profit

+ Exchange rate: Change in exchange rate varies general business conditions, resulting in various threats and opportunities to the enterprise Particularly, the import-export relation may be adjusted

+ Inflation level: Inflation is recognized as the factor with huge influence on investment rate into the economy When inflation is climbing, the society’s buying power shall be significantly reduced, the economy is delayed and as a result, the

Economics

Culture and society

Globalization

Technology Politics/Legislation

Demography

Industry environment

Threats of new entrants Supplier power Buyer power Threats of substitutes

Competition environment

Rivalry

- Political and legal factors: Politics and legislation are factors having the

biggest influence on enterprises’ operations It includes the regulations or bindings

to be adhered by the enterprises Political and legal factors may exist in the form of Government policies and guidelines, applicable legislation system, domestic and international political development The advantages, difficulties, business opportunities are originated from the Government’s intervention into the economy In the business relation, the Government plays the roles as the controller, driving, defining the prohibitions, restrictions and the client for the enterprises The Government also plays the roles as the service supplier to the enterprises Accordingly, the opportunities or threats may be created from the Government activities, requiring the enterprises to early detect the new business opportunities or challenges to adjust its activities Thanks

to that, the big disorder may be avoided during operation, maintenance and the business objectives may be successfully fulfilled

- Culture and society factors: Such factors are closely related to the

society’s attitude and cultural values because it creates the social background It includes changes in living conception, living standards, consumption habits, professional expectations, population growth rate, population transformation, diversity of labor force, tradition, religion, customs and habits, etc When such factors are changed, a series of opportunities, challenges or threats shall be created for the industry or the enterprise

- Demographic factors: Demography segment in the macro-environment is

closely associated with population, age structure, geographical distribution, community of ethnics and income distribution Such segment should be globally analyzed because its cross-border potential impact is recorded and many enterprises operate in the global conditions

- Technology factor: This factor is one of very dynamic factors, embodying

a series of opportunities and threats for the enterprises Substitutes’ competitive advantage is enhanced by new technology appearance Therefore, the competitiveness and impairment of the enterprise’s business advantages may be affected For the managers, technology-related opportunities and threats are very important to control the external factors to impact the enterprise

- Global factor: The global segment includes the concerned global markets,

ever-changing available markets, the important international political events, basic institutional and cultural characteristics in the global market As both opportunities and challenges in business environment are generated by the globalization, it is critical to be aware of the difference in culture and society and legislation of the global markets

 Industry environment

Michael Porter modeled the business industry and assumed that any business industries are affected by five competition forces The market Rivalry in any production industry is affected by 5 competition forces as follows:

Figure 1.4: Five competition force model

(Source: Strategy management - Statistical Publishing House, 2009)

Strategists who are looking for more outstanding advantages than that of the competitors may employ this model to thoroughly understand the context of their ongoing business industry This model is considered to be the useful and effective tools to investigate the profit origin More importantly, the competition models are also provided by the model so that the enterprises may maintain or increase the profit Alternatively, the model may be used to analyze whether a market or market

Buyer power

Risk of new competitors

Competitors in the industry

Competition between the firms in the industry

Supplier

power

Threats of substitutes

Threats of new entrants

Pressure capacity of

Risks of substitute products and services

- Threats of new entrants: When new players involve in the business of the

same industry, the enterprises may be partially affected Accordingly, profit, market shares, input, output and necessary resources may be put under pressure To more or less, the potential competitors’ pressure on the industry is depended on the industry’s attractiveness (customer volume, number of enterprises or profitability, etc.) or difficulties in industry adhesion, including technical factors, capital, commercial factors (distribution system, trademark, customer base) or specific resources such as raw materials, human resources, patents or invention, etc Although new potential competitors are not always available, risk of new rival to penetrate into the market is embedded with big influence on the enterprise’s business strategy

- Supplier power: Provider strengths demonstrate the decision-making

capacity of their transaction conditions with the enterprises through: Provider's concentration, input standardization, costs of supplier changes as well as risk to strengthen merger between the supplier and manufacturer The Supplier power shall

be increasingly improved when:

+ Number of suppliers is insignificant and such suppliers’ large scale is originated from the quantity and scale, deciding its competition pressure and negotiation power against the industry and the enterprise

+ Provider is not recorded with high capacity of product replacement and he is required to transform to other products which are very time consuming and expensive

+ Provider’s products are essential to the clients

- Buyer power: Buyer is recorded with a great competition pressure which

may directly affect all business activities of the industry Buyer may put the great pressure on the enterprise in terms of price, product quality, and provided services

He acts as the competition controller through his purchase decision Supplier pressure and buyer power increase when:

+ Number of buyers is less and big clients:

+ Consume most of products, making up a large density in annual revenue of the enterprise

+ Cost of transforming to other products is relatively low

+ Full information of enterprise is provided

- Threats of substitutes: Substitutes refer to products and services which are

qualified with the demand, similar to the same products and services in the industry Key competition pressure of substitutes is the responsiveness, in addition to price factor, quality The threats of substitutes may be affected by other environment factors such as culture, politics and technology Threats of substitutes increase when:

+ Buyer is not required to pay for high cost when product is changed

+ Substitute price is lower

+ Substitute quality and performance are higher than that of products being used Substitute pressure restricts the industry’s profitability potential because the highest price is limited If the potential substitutes are not well noted, the enterprise shall be backward and its market share shall be lost

- Industry rivalry: Ongoing enterprises are directly competing each other,

creating a high pressure intensity In a industry, competition pressure against competitors shall be driven by following factors

+ Many competitors are available or competitors are equal

+ The industry’s growth is low or impaired

+ Fixed cost and storage costs are high

+ Opportunities to create the difference are unavailable or the transformation expense is low and the strategic benefit is high

+ When an ocean of difficulties are arisen, a player shall wish to withdraw

1.2.1.2 Analysis of internal environment

 Analysis of sustainable competitive advantage

- Sustainable competitive advantage of the enterprise is characterized by 4 straits as follows: Firstly, it is embedded with value It may help the enterprise to create the value, reduce price, improve the business performance Secondly, its unique feature in combination with the resources by an unique method Thirdly, it is intrinsic nature Its productivity is the mutual results between the units and

technical resources, creating the enterprise’s basic competences Fourthly, the enterprise’s competitive advantages are formed from study, accumulation without acquisition in the market and no one can imitate it

Under the short term perspectives, the enterprise’s competitive advantages include low price, good product functions, and good after-sales services Under the long term perspectives, the creative capacity is more important than the current advantage as no advantages may be extended forever It may be gradually impaired due to changes in techniques, market and rival’s imitation The enterprise’s competitive advantages are recorded as the strengths cemented with the organization It must be ceaselessly nurtured and developed to last long in the ever-changing and increasingly cut-throat market

- The enterprise’s competitive advantages are constituted by 4 factors: Firstly, knowledge and technical competence of the employees Secondly, the enterprise’s technical system, i.e., essential technical function system to successfully launch its business strategy Thirdly, the business administration system, all strengths of the enterprise are formed from the enterprise's treatments, regulations, organizational structure, HR management plan, management, encouragement, direction and the leadership art of the leaders Fourthly, it is the enterprise's value concept and cultural system

3 issues must be addressed by analysis of competitive advantages:

- What are the enterprise’s competitive advantages how is it? In order to address this problem, it is required to deeply analyze the enterprise’s resources, technical system, corporate management and culture

- What are impacts of competitive advantages against the enterprise’s strength? Generally, the more unique enterprise’s strengths are, the longer and more sustainable the competitive advantages and strengths shall be Vice versa, if the unique feature is poor, it shall be easily imitated and the time to maintain competitive advantages shall be shorter and position shall be underestimated

- How can we nurture and develop the competitive advantages? Nurturing and development of the enterprise's competitive advantages comprise of investment

and re-creation of human resources, ceaselessly improving the technical qualification of the employees, timely renovating the management organizational structure to facilitate the smooth operation in good harmony with the objective environment Moreover, it must be enhanced by continuously studying, creating and forming the enterprise’s unique technical strengths, nurturing the corporate culture, resulting in increasingly high capacity of the enterprise

 Financial performance analysis:

This section mainly aims to evaluate the enterprise's financial performance in creating profit Parameter analysis is targeted to four main types, namely: profitability; liquidity, financial leverage and operating parameters

1.2.2 Develop matrix to select business strategy

1.2.2.1 External Factor Matrix (EFE)

External Factor Matrix (EFE) refers to a matrix to evaluate the external factors affecting the Company’s operation How to develop matrix: Tabulate all external factors which may affect the company, evaluate the influence or significance of each factor by marking the weights, provided that total weight of all factors is equal to 1

Evaluate the Company’s responsiveness against the factors by classifying the factors from (1) to (4), in which (4) is the best response of the Company and (1) is the lowest response Next is to score the significance of each factor by multiplying with the corresponding classification marks, and then sum it to find out total significance mark of the Company Total highest critical score is (4) and the lowest one is (1), the mean is 2.4 score

In the event that total critical score is (4), it unveiled that the Company successfully grasps the opportunities and controls the external threats In case the total score is (1), it shown that the Company fails to grasp the opportunities and control the external threats

Table 1.1 - External factor matrix

External factors (list)

Significance (Weight)

Classification Critical score

1.2.2.2 Competitive Profile Matrix

Among external factors, the competitive factor is the most important Competitive Profile Matrix identifies the key competitors, their advantages and disadvantages and then helps the Company to obtain the proper strategy

Table 1.2: Competitive Profile Matrix

n

Critical scor

e

Classificatio

n

Critical scor

e

Classificatio

n

Critical scor

e

Classificatio

n

Critical score

1

2

3

Total 1.00

1.2.2.3 Internal Factor Matrix (IFE)

IFE aims to evaluate the internal factors, affecting the Company activities, including its strengths and weakness How to develop matrix: Tabulate all external factors which may affect the company, evaluate the influence or significance of each factor by marking the weights Evaluate the Company’s responsiveness against the factors by classifying the factors from 1 to 4, in which 4 is the best response of the Company and 1 is the lowest response

Next is to score the significance of each factor by multiplying with the corresponding classification marks, and then sum it to find out total significance

mark of the Company

Total highest critical score is 4 and the lowest one is 1, the mean is 2.4 score

Table 1.3: Internal Factor Matrix

Internal factors (list)

Significance (Weight)

Classification Critical score Total

1.2.2.4 Internal and External Factor Matrix (IE)

IE matrix is based on two material aspects, total critical score of IFE matrix

in X axis and total critical score of EFE in Y axis Total critical score of components is used to setup IE Matrix at joint-company level On X axis of IE matrix, total critical score within the range of 1 - 1.99 of IFE Matrix demonstrates the internal weakness, score of 1-2.99 is mean and score of 3-4 is sustainable On Y axis, total critical score within the range of 1 - 1.99 of EFE Matrix is low, score of 2.0-2.99 is mean and score of 3-4 is high

IE Matrix may be divided into 3 main sections; each section is comprised of various strategies First, players in cell I, II and IV may be referred to as

“development and construction” Focus strategies (market penetration, market development and product development) or combination (forward, backward or lateral combination) may be feasible for such Players Second, Players named in cells III, V or VII may be best managed by “Holding and maintenance” strategy; market penetration, market development and product development are two strategies often used for such Players Third, players named in cells VI, VIII, IX are categorized as “Harvesting and elimination” The successful players may obtain the portfolio into the enterprises operating surrounding cell I of IE Matrix

I II III

Figure 1.5: Internal and External Factor Matrix (IE)

1.2.2.5 BCG Matrix (Boston Consulting Group Matrix)

Difference between the components is vividly illustrated by BCG Matrix in terms of market share and growth rate of the industry BCG Matrix enables a player

to have many divisions to manage the “business investment portfolio” by studying the market share and industry’s growth rate obtained by each division against others

in the organization Figure 1.5 is an example of BCG Matrix Each circle represents

a separate division Magnitude of each circle corresponds to income of such business unit (BU) and bulb angle shows the profit of such unit

Average 2.0 - 2.99

Weak 1.0 - 1.0

Table 1.4: SWOT Matrix Table

S-O strategy: Seize the most feasible opportunities with the Company’s

strengths, market-based business orientations (Attack)

W-O strategy: Overcome weaknesses to seize opportunities (Competition) S-T strategy: Specify how the company may make use of its advantages to

minimize adverse impacts of external challenges (Caution)

W-T strategy: Setup a defensive plan to prevent the Company’s weaknesses

out of the challenges from external environment (Defense)

1.2.3 Select business strategy

- Cost governing strategy: Refers total actions to provide the specific

products or services with the lowest cost in the industry accepted by customers This means that the company knows how to make use of all possibilities to provide products or services with lower costs than that of the competitors Since then, the remarkable advantages are obtained against its competitors That tool attracts the customer to domain a higher market share This strategy makes the company take advantages as lower price but with the same profit, event higher and the company shall have more reliable position in the cut-throat competition of the competitors, including potential competitors without significant impact of negotiation capacity of supplier, customer capacity as well as substitutes This is caused by the company’s possession of high technology, preferences in receiving the input materials, good production capacity, suitable policies, etc

- Differentiation strategy: It refers to the Company’s looking for

opportunities to become the only unique product or service supplier in the industry under the perspective of the buyer in any aspects This strategy selects one or some product attributes that are evaluated to be important, then self-positions to be only supplier to satisfy such demand

- Centralization strategy: It is designed by selecting the industry’s narrow

competition scope By optimizing the strategy towards the target segments, the units with concentrated strategy focus on looking for and obtain the competitive advantages even in the target segments Generally, no advantages are held by them

1.2.3.1 Quantitative Strategic Planning Matrix (QSPM)

Strategy may be selected by using Quantitative Strategic Planning Matrix (QSPM) This matrix is a high-level strategic management approach for evaluating possible strategies in accordance with the pre-determined internal and external critical success factors

Table 1.5: QSPM Matrix

Criteria

Classi ficati

on

Replaceable strategies

Basis of attractive score

(AS- Attractive score, TAS- Total attractive score)

QSPM Matrix is setup by 6 steps, concretely:

Step 1: List the external opportunities are listed and threats and internal strengths in the left column Such information is derived from EFE and IFE matrix

Step 2: Classify each internal and external critical success factor Such classification is similar in EFE and IFE matrix

Step 3: Study the matrices and identify the replaceable strategies that could

be considered to launch Record such strategies in the first row of QSPM Matrix Collect such strategies into separate groups if nay

Step 4: Identify the attractive score that is figure value, demonstrating the relative attractiveness of each strategy in the group of replaceable strategies

Step 5: Sum attractive scores by multiplying classification score (step 2) with attractive score (step 4) in each row The higher total attractive score is, the more attractive the strategy shall be (only considering the critical success factors next to it)

Step 6: Sum attractive scores in the strategy column of QSPM Matrix Sum total attractive scores to demonstrate which strategy is the most attractive in each possible strategy group Then, refer to the matrix to select the strategy with the highest attractive scores

1.2.3.2 Organization and implementation

When the business strategy is designed, strategy organization and implementation are initiated by reviewing the strategic objectives and basis of the strategy, setting up annual objectives, developing the implementation plan and policy, figuring out the proper programs, budgets and procedures, allocating human resources (HR, finance and physical and technical facilities), selecting and perfecting the organizational structure in accordance with the strategy, establishing the Steering Committee and management rules, undertaking to launch the strategy, gradually launching each strategy steps and finally checking, controlling, coordinating and working during its strategy performance

1.2.3.3 Evaluate the setup strategy performance

- Check conformity of the business strategy before official launch As mentioned above, the company’s success is decided by the business strategy

- Evaluate the company’s operating performance in each phase of business strategy to find out the defects and errors of the strategy, then timely modify and supplement

- Procedure on checking and evaluating the strategy efficiency includes: determine the checking and evaluation contents, set out the benchmarks and criteria for testing and evaluation, quantify the implementation results, compare and evaluate the strategy results, find out the root causes to release the corrective measures

Chapter 2: ANALYZE AND SELECT THE BUSINESS STRATEGY

FOR SONG DA NO 11 JOINT STOCK COMPANY

2.1 Overview about the Company

2.1.1 History of development, organizational structure

Former a Utility Team under Thac Ba Hydropower Corporation, Song Da No

11 Joint Stock Company was incorporated on 1st June 1961 In 1976, it was renamed as “Power and Water Assembly Enterprise” under Song Da Hydropower Construction Corporation under the Decision of the Ministry of Construction In

1989, Power and Water Assembly Enterprise was upgraded as a Power and Water Construction Company in accordance with the Decision No 03/TCT-TCLĐ of Song Da Corporation dated 12th December 1989 In 1993, Power and Water Construction Company was renamed as “Energy Construction Company” under Song Da Corporation as decided by the Ministry of Construction On 11th March

2002, the Ministry of Construction promulgated the Decision No 285/QD to rename as Song Da 11 Company

With response to the Resolution TW3 on renovation and restructure of the State-owned enterprises, the Ministry of Construction promulgated the Decision No 1332/QĐ-BXD on 17th August 2004 to transform Song Da 11 Company into Song

Da 11 Joint Stock Company On 14th December 2006, Song Da No 11 Joint Stock Company’s shares were officially traded in HNX with ticker of SJE Transaction name in English: SONGDA 11 JOINT STOCK COMPANY; Abbreviated name: SJE Registered office address: 7th floor, Song Da Complex Building, Km10, Tran Phu, Ha Dong, Hanoi Currently, the Company’s chartered capital is: VND 115,531,050,000 (One hundred and fifteen billion, five hundred and thirty one million, zero hundred and fifty thousand Vietnam dongs)

It is possible to say that the Company’s history of development is always cemented with Vietnam key works such as Thac Ba Hydropower Plant, Hoa Binh Hydropower Plant, Yaly Hydropower Plant, Son La Hydropower Plant, Lai Chau

When the transformation was initiated to the renovation period, a series of great opportunities and challenges were faced by the Company It promptly changed the management, adopted and adapted with lean and dynamic production organization to successfully adapt, survive and develop in the cut-throat market mechanism

Figure 2.1: Organizational structure

GENERAL MEETING OF SHAREHOLDERS

FINANCE AND ACCOUNTI

NG DEPARTM ENT

INVESTM ENT PROJECT DEPARTM ENT

MECHANI CAL ENGINEER ING DEPARTM ENT

BRANCH OF

SONG DA 11.1 SONG DA 11.5 BRANCH OF SOUTHERN BRANCH

THAC TRANG PLANT

SONG DA 11

THANG LONG

CO., LTD

DAK DOA HYDROPOWE

R JSC

DAKGLEI HYDROPOWE

R JSC

2.1.2 Business performance in the period of 2015 – 2017

 Line of business:

According to the Certificate of Business Registration, some key business lines

of the Company are described as follows:

- Construction of Hydropower plant, irrigation, traffic and post office works, etc

- Construction and installation of electric wire lines and transformer stations

up to 500kV; construction and installation of urban and industrial park’s water supply and drainage system;

- Trading in construction of urban area, hi-rise buildings and industrial parks;

- Construction and installation of clean water treatment plants and wastewater treatment plants; Construction of hydropower plants;

- Management, operation and distribution of water and power to various works; management and operation of small and medium scaled hydropower plants, industrial park and city’s water plants; Management and operation of electric sales; Production and trading in commercial electricity;

- Installation of electro-acousto mechanical system, lighting electric, ventilation, communication, air conditioning and control systems of hi-rise buildings, urban areas and industrial parks;

- Mechanical processing; metal coating;

- Exploitation of sand, gravel and stone to build road and works;

- Supply, sales and installation of firefighting equipment and fire safety system;

- Trading in real estates and land use rights under the owner

 Implemented works:

Construction, installation, management and operation of power and water in the hydrdopower works where Song Da Corporation is the Project Owner or construction and installation of national important water supply works such as: Thac

Ba Hydropower Plant, Hoa Binh Hydropower Plant, Yaly Hydropower Plant, Son

La Hydropower Plant, Lai Chau Hydropower Plant, Sesan 3 Hydropower Plant, Sesan 3A Hydropower Plant, Sesan 4 Hydropower Plant, Pleikrong Hydropower

Plant, Sekaman 3 & Xekaman 1 Hydropower Plants in Laos, Bien Ho - Pleiku water supply system and Nha Trang water supply system, etc

Moreover, the Company has actively involved in bidding and become the bid winner of the main works, ensuring the requirements on progress and quality of the National key works where EVN is the Project Owner such as: Mong Duong Water System, 500kv Pleiku - My Phuoc- Cau Bong wireline, 500kV Son La - Hoa Binh Wireline, 500kV Son La - Lai Chau Wireline, 500kV Thach My transformer station, 500kV Quang Ninh transformer station, 220kV DakMi 4 wireline, 220kV wireline

of Xekaman 3 Hydropower Plant and other key works, etc Up to now, the Company has become one of TOP 5 construction contractors of Vietnam power transmission works

With strengths in hydropower construction and extensive experience in managing and operating the electrical system, intensive investment has been launched in the BOO form of Thac Trang Hydropower Plant, To Buong Hydropower Plant, Dong Khua Hydropower Plant, Dak Glei Hydropower Plant, stone exploitation production line has been invested in Luong Son- Hoa Binh stone mine, Solar Power, etc

 Recently implemented business performance:

Table 2.1: SJE’s business performance in the period of 2015 – 2017 Unit: VND million

(Source: Song Da No 11 Joint Stock Company)

Table 2.1 unveiled that:

+ 2016 revenue and other incomes was VND 791,956 million, reducing VND 152,816 million against 2015 (VND 944,772 million, corresponding to 16.17%) This was caused by the fact that a series of works were launched in 2015 and the delivery schedule of such works was ended in the year The works in 2016 were fewer because the bid award was not much 2017 revenue and other incomes was VND 510,615 million, reducing VND 281,341 million against 2016 (VND 2016 million, corresponding to 35.52%) The root causes included the public debts in

2017 were increasingly high, the State investment into constructing the power and water work was narrowed down Moreover, many new players were born, the increasingly cut-throat competition was recorded, market share was narrowed down, resulting in bid award of key works was impaired recently

+ the 2016 profit after tax was VND 51,572 million, reducing VND 34,154 million, corresponding to 39384% against 2015 (VND 85,726 million) The 2017 profit after tax was VND60,185 million, increasing VND 8,613 million, corresponding to 16.7% against 2016 The root causes included the revenues in the year were reduced and the company saved the management costs

+ Profit after tax percent (%) against total income and other incomes in years were 9.07%, 6.51% and 11.79%, respectively This was a relatively high percent against the same construction and installation enterprises The reason was that thee price management was applied with very good method statements, offering a high economic value

It is possible to see that the period of 2015- 2017 was recorded with the Company's effective business performance However, it was unstable, especially revenue was gradually reduced; instability of after-tax profit against total revenue and other income unveiled that the Company's management of business strategy orientation must be generally reconsidered so that it is well matched with the context to improve the competitiveness, maintain the stable growth rate, facilitating the high economic performance, improving the living standards of the employees

2.2 Analysis of external and internal environment

With the extensive history of development, 55 years in the construction of wireline and transformer station, water supply and drainage system, the Company’s brand and position in the wireline and station construction field has been successfully affirmed This is one of advantageous factors when the Company involves in bidding and looking for the projects Moreover, the intensive investments have been launch to the hydropower plant project Up to 2017, the Company invested into hydropower projects with total capacity of 44MW Particularly, the 42MW Solar Power Plant in Binh Thuan has been being invested

by the Company, generating jobs and promising to offer high investment efficiency from the dividend in the future

Currently, SJE's annual sales goals are set up with over VND 1 billion and VND 1,500 billion by 2030 in accordance with the contracts signed with the customer and its great efforts However, the Company’s planning is largely depended in market factors If the Company’s existing conditions and market impacts are not carefully analyzed in the current period to release a specific business strategy, the Company shall be easily dominated by its competitors

2.2.1 Analysis of external environment

2.2.1.1 Macro-environment

 Economic environment

- Economic growth: The last 5 years witnessed Vietnam average GDP

growth of approximately 6.22% The Statistics released by the General Statistics Office revealed that 2017 GDP was US$ 220 billion by actual price; GDP per capital hit US$ 2,385 According to the economic development plan of 2011-2015

in the documents of the 12th National Congress of the Communist Party of Vietnam, Vietnam targets to obtain the average GDP growth rate of 6.5-7%/year, by 2020, GDP per capita is US$3,200- 3,500, total average social investment capital in 5 years is 32- 24% of GDP, etc In order to fulfill the set development target, including improving quality of socio-economic structure construction plan, especially the traffic, electric, water, irrigation, education, health care network, etc.,

a high demand on constructing the power works and power transmission works, etc., is arisen Therefore, Vietnam construction industry in general and SJE in particular is facing with the abundant job opportunities

- Interest rate: In the past 05 years, the loan interest rate was relatively stable, varying within the range of 8%- 11%/year This was the great opportunity for Vietnamese enterprises to access to the very advantageous credit capital sources Many players had made loans for production investment and successfully launched the investment projects Like other players, SJE seized the opportunities to invest in expanding production, especially strengthening the ongoing investment projects on Hydropower Plant and Solar Power Plants which require a relatively high loan Such projects are the top priority of the Government

- Inflation rate: 2017 was recorded with Vietnam inflation rate of 3.53%

Currently, the 2018 inflation rate set by the National Assembly is 4% This is a great task of the Government, requiring to take a series of measures to control the inflation in accordance with the plan approved by the National Assembly It is possible to say that when the stable inflation rate is stable, the input cost shall be stable, resulting in less variation in construction costs Then, the price escalation factors may not be significantly concerned when construction works are tendered or the contract is signed

 Science and technology environment

Sharp development of science and technology is the great chance for the dynamic enterprises to go ahead to catch up with the technology, but also a threat for the partners who are not interested in renovation Electric works are currently applied with remote control technology SCADA to dispatch the national electric system The National grid works are installed with the cutting-edge digital equipment in the stations and power plants to protect and control in the semi-automatic and automatic modes, etc In the fields of power works construction, technological equipment facilitates the river-crossing cabling, non-grounding wiring, affirming the outstanding capacity against the history

The problem faced by electric construction enterprises is that how to successfully exploit the plants and equipment, satisfy the technical, quality and schedule requirements Therefore, if construction technology is renovated, SJE shall obtain higher advantages in quality improvement and construction price lowering for the demanding projects

 Political and legal environment

The 2014 Law on Enterprises, the 2014 Law on Investment, the Law on Corporate Income, the Law on Value Added Tax, etc., are the breakthrough in demonstrating the fair and autonomy viewpoints in business of the enterprises Vietnam is recorded with the stable political, national defense security and creating

a fair business investment environment when its legislation frame is being perfected, especially finance, land, labor and administrative procedure simplification However, the Law system related to investment and management of basic construction investment, Law on Land are changed, significantly affecting the domestic and international investors

During the works are executed in the areas, involving in the site clearance compensation for the works and adherence to the local regulations, SJE proves to be the good partner of the local authorities and the State competent authorities

 Culture and society

- Enterprise’s social environment:

The international economic integration trend in the coming time of

2018-2023 continues facilitating the exchanges of goods and services between Vietnam and its neighbors, resulting in demand of using the hi-tech utilities Accordingly, the electric construction and installation equipment shall be facilitated in terms of quality, aesthetics as well as high technology qualification, especially digital technologies This is a great chance for the construction enterprises in general and SJE in particular

- Cultural environment:

The society is now much more developed, civilized and subject to the international integration The transformation of human-centered social values is

launched, much considering the increasingly high demand of spiritual life The social environment shall be significantly changed by exchanging culture between Vietnam and countries The trends in increasing spending, improving the cultural and physical life are rising, resulting in sudden climbing demand of power use in peak hours However, the power is still seriously lack to provide to consumers

 Analysis of demography environment

The job trends in Vietnam unveiled that the labor market’s structure transformation is made from jobs in the agriculture with low productivity to higher added value industries and services invested with more technologies and finance

In the fields of power and water construction and installation, the great significance is assigned to the looking and attracting the talents who master the technology and obtain the extensive experience in electric work structures by SJE SJE is also required to seize the opportunities, attract and retain the talent experts to work, motivating the available HR to a new height

 Global environment

Vietnam’s adhesion to WTO is the great premise for the foreign enterprises involving in construction increasingly penetrating into Vietnam market This causes the cut-throat competition in the Vietnam construction field, risk of failure right in the home playground is completely available if the enterprises fail to select the smart strategy and orientation and SJE is not an exception However, Vietnam’s adhesion to WTO is also a good chance for the investors to pay more attention to Vietnam market, a good chance to appeal the foreign investment capital

2.2.1.2 Industry environment and competition (5-force model)

a) Business environment and prospects of the Company

 For electric construction and installation fields:

On 18th March 2016, the Prime Minister promulgated the Decision No 428/2016/QĐ-TTg on approving the National master plan for power development for the 2011-2020 period with vision to 2030 (hereinafter referred to as 7th Power Plan) to fully satisfy the domestic power demand, produced and imported power

and 572-632 billion kWh, respectively, strengthening development of solar power and wind power, etc Accordingly, the Rural, Mountainous Area and Island Enegerization Program is continued launching to ensure that by 2020 most of rural households access to electricity

To fulfill such objectives, in the period of 2016 - 2020, investment is made for new power energization from the national grid to 200,000 rural households, energization from the renewable energy is offered to approximately 231,000 rural households Total investment of power grid and source development (not considering the power source to be invested in BOT form) in the period of 2016 -

2030 is approximately VND 3,206,652 billion In the period of 2016 - 2020, approximately VND 858,660 billion is injected; approximately VND 2,347,989 is invested in the period of 2021 - 2030

It is possible to say that the demand on investing into the transmission grid development is relatively high For SJE, most of projects launched by the unit are under the management of NPT-EVN as the Project Owner The EVN report submitted to the Government unveiled that in 2018 EVN is planned to invest VND 117,842 billion, mainly for the power plants and power transmission system Therefore, it shall be the great chance for the Company to win the construction contracts from such investment source

* Characteristics of electric industry

The industry is put under the management of the Ministry of Industry and Trade with the coordination between the Construction Industry and the local authorities of the sites where the projects are launched; the electric industry development is closely associated with the general development of the society EVN is the focal contact to manage the projects on constructing and operating the electric system, nationwide EVN entities are obligated to consult and design such projects The construction units are qualified construction enterprises to be selected

by direct bid assignment or bidding

* Characteristics of the electric construction and installation market