Rationale
The telecommunications sector in developing countries has experienced rapid growth due to the rise of internet and wireless services, which have facilitated the entry of competitive service providers This liberalization of the telecom market has led to enhanced international trade in telecom services, driving higher growth and improved service quality As a result, significant advancements have been made in telecommunications networks and overall performance.
Over the past two decades, Vietnam's telecom market has evolved from a monopoly to a competitive landscape In 2007, the International Telecommunications Union recognized Vietnam as the world's second fastest-growing telecom market Currently, there are around 70 telecom companies operating in the country, with about 47% licensed to offer telecommunications services, while the remainder focuses on network infrastructure These reforms have significantly enhanced the competitiveness of the telecom sector in Vietnam.
Vietnam's telecommunications sector was initially dominated by the Vietnam Post and Telecommunications General Corporation (VNPT Group), which held a monopoly for many years However, a significant shift occurred following a governmental decree in October 2003 that allowed multiple telecom providers to establish networks and offer services, leading to increased competition As a result, VNPT's monopoly ended, and various service providers emerged, challenging its leading position The commitments made in Vietnam's Bilateral Trade Agreement with the US and within the ASEAN framework further facilitated the entry of foreign companies like Telstra, Alcatel, and France Telecom Currently, VNPT is among the top five domestic telecom companies in Vietnam, but its market share has dwindled to 17.5%, significantly lower than competitors like Mobifone at 31.8% and Viettel at 43.5%.
To maintain its status as a leading telecommunications company in Vietnam, VNPT must focus on enhancing its performance and competitiveness in the market A key strategy for achieving this goal is to improve financial performance, which is crucial for strengthening its competitive edge.
“Improving the competitiveness through financial solutions: A study of Vietnam Posts and Telecommunications (VNPT)” has been chosen for this master dissertation.
Literature review
There are broad and varied definitions of competitiveness concept based on different schools of thought and the level of analysis
1 Five major service providers in Vietnam market are currently Viettel, Mobifone, Vinaphone,
Michael Porter (1990), a prominent expert on competitiveness and competitive strategies, defines competitiveness as a company's capacity to capture market share and achieve profits exceeding its average In contrast, Krugman (1994) views competitiveness, under mercantilism, as synonymous with productivity, emphasizing the growth rate of one enterprise relative to its industry peers.
Competitiveness is defined as the ability to deliver the right goods and services at the appropriate quality, price, and timing, according to the UK Department of Trade and Industry (2001) Additionally, Chikan (2008) emphasizes that an enterprise's competitiveness lies in its capacity to sustainably meet customer demands while generating profit.
Reiljan, Hinrikus & Ivanov (2000) explored the conflict of interest approach to competitiveness, identifying three distinct levels: (i) ability to survive, (ii) ability to develop, and (iii) superiority The ability to survive represents the lowest level, characterized by a passive adaptation to the competitive environment without significant changes The medium level, ability to develop, indicates that an enterprise is competitive when it actively responds to environmental changes, enhancing its qualities and efficiency Finally, superiority is the highest level of competitiveness, where an enterprise outperforms its competitors through more efficient operations, faster development, or superior quality, thereby shaping the competitive landscape.
Regarding the determinants of corporate competitiveness, Buckley, Pass & Prescott (1988) indicated that competitiveness has 3 dimensions including potential, process and performance, whereas Waheeduzzaman and
Competitiveness, as identified by Ryans (1996), is a complex construct that integrates various disciplines such as comparative advantage, price competition, and strategic management, while also considering historical and socio-cultural factors Vlachvei et al (2017) highlight that dynamic capabilities—including flexibility, agility, speed, and adaptability—are crucial sources of competitiveness in today's business landscape Anca (2012) underscores the interconnectedness of competitiveness across different analytical levels, such as product, firm, and industry, noting that product quality is vital for a company's survival in competitive markets, while firm performance influences the international competitiveness of industries and countries Michael Porter (1990) outlines five types of competitive advantage that firms can leverage: human resources, physical resources, knowledge resources, capital sources, and infrastructural resources.
Competitiveness is a multifaceted concept widely recognized by researchers, despite ongoing debates regarding its definitions and measurement methods It primarily revolves around three key aspects: first, various entities, including individuals and organizations, engage in competition to enhance their market standing; second, this competition seeks to secure specific advantages such as market share, customer segments, and increased profits to maximize organizational value; and third, competitors employ diverse strategies—ranging from pricing and product differentiation to branding, marketing, and resource management—to outmaneuver each other in the marketplace.
Regarding the competitiveness in the telecommunications sector, there is also a number of studies from various perspectives Trauth E & Pitt D
(1992) traced the movement towards competitions in two different telecom markets (the United States and the United Kingdom), and found out there are
The telecommunications industry faces three significant pressures for change: technological, industrial, and economic Research indicates that the competitive dynamics within the sector remain robust, underscoring the need for countries to adopt tailored telecommunications policy approaches that align with their unique circumstances and challenges.
A study by Fletcher & Kolle (2017) identifies four key competitive trends in the telecommunications industry The first trend is the shift towards digital customer service, where companies invest in technologies that minimize the need for human staff and utilize bots for routine tasks The second trend focuses on enhancing security and encryption services, leveraging digital trust as a competitive advantage while also investing in billing and payment platforms The third trend emphasizes selling services rather than data, with companies exploring value-added services through device connectivity in smart homes and offices Lastly, the fourth trend is content exclusivity, where telecoms offer various digital services at reduced or zero rates, while being mindful of net neutrality erosion and potential negative brand perception.
According to Wilson P & Gibbons (2014), successful enterprises consistently seek innovative ways to create new value, emphasizing that this value is rooted in processes and growth rather than price They outline three key principles for achieving long-term competitive advantage in the telecommunications sector: prioritize quality over cost by competing on value instead of price; focus on revenue generation through increased volume and pricing rather than cost reduction; and adhere strictly to these principles without exception.
In a different approach, Grzybowski (2004) used panel data for the 15
From 1998 to 2002, research on EU countries revealed that the competitiveness of the mobile telecommunications industry is greatly affected by regulatory policies enacted during the liberalization of fixed telephone lines Additionally, the introduction of number portability for mobile services has positively enhanced industry competitiveness.
Numerous studies have been conducted on corporate competitiveness in Vietnam, with Tran Van Tung (2004) focusing on the economic and national competitive advantages as well as corporate strategies Vu Trong Lam (2006) further developed the concept of corporate competitiveness within the context of Vietnam's international economic integration, proposing various solutions to enhance the international competitiveness of Vietnamese companies.
Research on the competitiveness of Vietnam's telecommunications industry has been conducted by various scholars, including Bui Xuan Phong (2007), Nguyen Dang Quang & Tran Xuan Thai (2008), Nguyen Duc Kien (2011), Tran Thi Anh Thu (2012), and CIEM (2006) Most studies have assessed the overall competitiveness of the industry or specific telecom companies, offering general solutions for enhancement However, there is a notable lack of in-depth research focusing on financial approaches to evaluate performance improvements in competitiveness This gap highlights the need for further investigation in this area, particularly within the context of financial solutions.
Research objectives
The existing literature indicates that competitiveness in telecommunication services has been widely discussed; however, there is a notable scarcity of research focusing on the financial solutions aspect within the telecommunication industry This gap presents an opportunity for further investigation into the financial strategies that can enhance competitiveness in this sector.
In this dissertation, first of all, the study aims to clarify basic theories on corporate competitiveness and financial solutions for improving competitiveness of enterprises
This study assesses VNPT's competitiveness by comparing it with other enterprises in the industry, emphasizing the effectiveness of financial solutions in enhancing its performance.
Third, some financial solutions for improving competitiveness of VNPT in the future will be analyzed and recommended.
Research scope
This dissertation primarily investigates the competitiveness performance of VNPT and explores financial solutions to enhance this competitiveness The study emphasizes the analysis of evaluation criteria and the various factors influencing VNPT's competitiveness Additionally, it includes comparative analyses among major service providers The research covers the period from 2014 to 2018.
The research basically uses secondary data from official annual reports, financial statements of companies, General Statistics Office, and other topic-related articles, journals and academic research.
Research methods
This dissertation utilizes a traditional qualitative approach to examine theoretical concepts, while also incorporating statistical methods, comparison, analysis, synthesis, interpretation, and induction It evaluates the competitiveness of selected companies and demonstrates how financial solutions can enhance their performance and competitiveness.
Structure of the dissertation
The dissertation consists of 3 chapters:
BASIC THEORY ON FIRM’S COMPETITIVENESS AND
CORPORATE COMPETITIVENESS
1.1.1 Theories of competitiveness and competitive advantage
Competitiveness is a crucial aspect of the market economy, encompassing diverse definitions influenced by various schools of thought and analytical levels.
The surplus value theory posits that competition among capitalists aims to secure advantageous conditions in the production and consumption of goods for super profits K Marx's in-depth analysis of capitalist competition reveals that its essence lies in equalizing the average profit rate across sectors, with high-profit industries attracting more investors Samuelson (1948) highlighted the competitive dynamics between market presence and product consumption, where businesses vie for market share to establish dominance Under mercantilism, competitiveness is synonymous with productivity, reflecting the growth rate of one enterprise relative to its peers in the same industry (Krugman, 1994).
Competition refers to the struggle among businesses within the same environment to enhance their value, while competitiveness signifies the capacity to succeed in this rivalry and establish a competitive edge Michael Porter (1990), a prominent authority on competitiveness and competitive strategies, defines competitiveness as a company's ability to capture market share and achieve profits exceeding the industry average Consequently, this competitive dynamic leads to an overall increase in the profitability of the industry.
Competitiveness is defined as the ability to deliver the right products and services with optimal quality, pricing, and timing, according to the UK Department of Trade and Industry (2001) Additionally, Chikan (2008) emphasizes that an enterprise's competitiveness lies in its capacity to consistently meet customer demands while maintaining profitability.
Reiljan, Hinrikus & Ivanov (2000) approached competitiveness through the lens of conflict of interest, identifying three distinct levels: (i) ability to survive, (ii) ability to develop, and (iii) superiority The lowest level, ability to survive, refers to an organization's capacity to passively adapt to its competitive environment without significant changes In contrast, the medium level, ability to develop, signifies that a competitive enterprise actively responds to environmental shifts, enhancing its qualities and efficiency.
Superiority represents the pinnacle of competitiveness, where a business is deemed competitive if it demonstrates greater operational efficiency, quicker development, or superior quality compared to its rivals, ultimately impacting the competitive landscape.
Competitiveness is widely recognized as a complex concept, with researchers acknowledging varying definitions and measurement methods It primarily encompasses three key aspects: first, individuals and organizations engage in competition to enhance their market position; second, this competition seeks to secure specific advantages, such as increased market share and customer acquisition, ultimately driving higher profits and maximizing firm value; and third, participants employ diverse strategies—ranging from pricing and product differentiation to brand development and resource optimization—to outperform their rivals.
Competitiveness can be divided into 4 levels, depending on the circumstances, they are: (1) National level; (2) Industry level; (3) Enterprise level; (4) Product level
National competitiveness refers to a country's ability to produce goods and services that sustain and enhance real GDP while satisfying long-term international market demand The World Economic Forum (2018) identifies eight key determinants of national competitiveness: (i) trade openness, including tariff and non-tariff barriers, import and export policies, exchange rates, and foreign direct investment; (ii) the government's role, encompassing governance, government size, fiscal policy, tax systems, and inflation; and (iii) financial stability, which involves credit ratios, financial risks, and investment and savings levels.
Key factors influencing economic development include technology capacity, technology transfer, and research and development (R&D) Additionally, robust infrastructure, encompassing transportation, telecommunications, electricity, and water supply, is essential Effective management practices in business and human resources also play a critical role Furthermore, the labor market's characteristics, such as the number of workers, efficiency, and flexibility, significantly impact productivity Finally, a strong legal institutional framework is vital for fostering a conducive environment for growth and innovation.
Industrial competitiveness refers to the ability of a sector to generate and sustain profits and market share both domestically and internationally This competitiveness can manifest within a specific industry, among various industries within the same country, or between the same industry across different nations.
Competitiveness at the enterprise level refers to a company's ability to maintain and expand its market share and profits According to Fafchamps (1995), this involves creating products with average variable costs lower than market prices The OECD Competitiveness Outlook Report (2018) emphasizes that competitiveness is linked to generating relatively high income through effective use of production factors This highlights the connection between enterprise competitiveness and competitive advantages related to technology and product quality In summary, competitiveness at the enterprise level is defined by a company's exceptional ability to utilize production factors, reduce costs, and enhance product quality to achieve greater market share and profitability.
Product-level competitiveness refers to the superiority of goods and services within an industry, evaluated by consumers based on quality, innovation, and customer service Four key factors influence this competitiveness: comparative advantage, national economic growth, the economic environment, and business activities.
The interconnectedness of various competitiveness levels is crucial; product-level competitiveness serves as the foundation for enterprise and national competitiveness When customers trust a product or service, companies experience increased profits, which in turn enhances product-level competitiveness and contributes to overall enterprise, industry, and national competitiveness.
Competitiveness can be analyzed at various levels, but this dissertation specifically focuses on assessing enterprise-level competitiveness The aim is to provide targeted solutions to enhance the competitiveness of telecommunications enterprises, with a particular emphasis on VNPT.
1.1.2 Methods of measuring and analyzing competitiveness
Assessing the competitiveness of enterprises involves various criteria, as highlighted by Pass & Prescott (1988), who identified three key dimensions: potential, process, and performance Waheeduzzaman and Ryans (1996) expanded this view, suggesting that competitiveness is a culmination of multiple disciplines, including comparative advantage and strategic management Vlachvei et al (2017) noted that dynamic capabilities such as flexibility, agility, speed, and adaptability are crucial for competitiveness in today's business environment Anca (2012) emphasized the interconnectedness of different levels of competitiveness analysis, indicating that product quality is vital for an enterprise's survival in competition, while a firm's performance impacts its industry's or country's international competitiveness Furthermore, Michael Porter (1990) outlined five types of competitive advantage that firms may leverage: human resources, physical resources, knowledge resources, capital sources, and infrastructural resources.
THE ROLE OF FINANCE IN IMPROVING ENTERPRISES
Finance is crucial in shaping policies and decisions within enterprises, directly impacting their competitiveness and profitability Key financial factors encompass taxation, government investments in industry support, enterprise financing and budgeting, as well as distribution strategies.
Taxes play a crucial role in business investment, significantly impacting business policies and enterprise performance A well-structured tax system can provide businesses with substantial financial resources, enabling them to outperform competitors in the long term The effects of taxation on production costs and goods sold can influence selling prices, ultimately affecting the competitiveness of enterprises in the market.
High tax rates on a company's products and services lead to increased costs of goods sold, resulting in higher selling prices To remain competitive in the industry, the company may need to keep prices low, which can reduce profit margins Conversely, raising prices could hinder the company's ability to compete, ultimately impacting revenue and profitability.
1.2.2 State investments on supporting industries
The supporting industry is crucial for enhancing the competitiveness of enterprises, particularly in Vietnam's telecommunications sector, which relies heavily on technology and logistics Many businesses lack the resources to invest adequately in supporting industries, making government investment essential to encourage participation This support can significantly alleviate cost pressures for companies in the industry.
Capital sources are crucial for the survival of enterprises, as they directly impact production and business efficiency From the outset, businesses must secure and effectively utilize capital to maximize its potential Increased capital turnover enhances profitability, enabling companies to gain a competitive edge in the market.
Capital structure is a crucial aspect of financing policy, reflecting the balance between short-term and long-term assets Over-reliance on long-term capital for short-term assets can lead to unnecessary long-term debt interest expenses, as short-term assets typically do not enhance business value Conversely, financing long-term assets with excessive short-term capital poses significant risks, given that long-term assets require more capital and a longer investment horizon Short-term loans, being temporary, may not adequately support the needs of long-term assets, potentially resulting in short-term debt and financial distress.
Capital sources are categorized into internal and external types Internal sources, including shareholders' equity and self-raised funds, have limitations, whereas external sources can be obtained from various parties within the economy External capital is essential for supporting production and business processes when internal resources are insufficient.
The choice of financing sources for enterprises is primarily influenced by the financial performance of the company and the characteristics and strategies of its financial manager Variations in the cost of capital and accessibility of these sources can significantly impact the company's financing policy.
Investment policy is crucial for business success, determining a company's competitive edge It encompasses the allocation and utilization of capital across various business areas, guiding decisions on the types of goods and services to produce and the activities to prioritize.
Each enterprise develops a capital utilization plan tailored to its specific conditions and business needs A common strategy involves aligning the duration of capital sources with investment timelines, ensuring that long-term assets and operational activities are supported by long-term capital For short-term assets, despite their brief usage and frequent renewal, it's crucial to maintain a certain level of financing through net working capital to ensure uninterrupted business operations Essentially, net working capital represents a portion of long-term capital resources allocated to support short-term assets.
Net working capital = Long-term capital - Long-term assets where long-term capital sources include long-term debt and equity
Positive net working capital indicates that long-term assets are financed appropriately, while excess funds support short-term assets, crucial for maintaining stable business operations Conversely, negative net working capital suggests that short-term capital is being used to finance long-term assets, which poses a risk to the company's financial stability.
A well-defined distribution policy aligns the interests of shareholders, employees, and managers within a business, fostering a collaborative environment This strategic approach not only motivates shareholders to invest but also encourages employees to contribute effectively to the organization’s success.
Effective profit distribution not only guarantees a reasonable return for reinvestment, facilitating business expansion without incurring extra costs or time for funding, but also allows for the establishment of a dedicated R&D fund This fund is crucial for developing new products and improving product quality, which is essential for maintaining a competitive edge Companies that implement a strong distribution policy gain significant advantages over their competitors.
CHAPTER 2 ANALYSIS OF VNPT COMPETITIVENESS AND ITS CONTEMPORARY FINANCIAL SOLUTIONS FOR IMPROVING
BRIEF OVERVIEW OF VNPT
2.1.1 History and development of VNPT
VNPT, or Vietnam Posts and Telecommunications, is the pioneering provider of services in Vietnam's Posts and Telecommunications sector With over 70 years of experience in the telecommunications market, VNPT has significantly contributed to Vietnam's ranking among the top 10 countries with the highest growth rates in the telecommunications industry.
VNPT, originally a state-owned corporation, transitioned into the Vietnam Posts and Telecommunications Group in January 2006 following the establishment decision by the Prime Minister This restructuring marked a shift from an old corporate model to a state-owned key economic group, characterized by a holding-subsidiary company structure that enhances the connectivity among its member units.
VNPT is prioritizing the enhancement of telecommunications and IT network infrastructure, alongside the development of mobile and broadband products, which play a crucial role in driving Vietnam's economic growth As highlighted in the 2018 VNR 500 report, VNPT ranks as the 19th largest enterprise in the country.
VNPT activities are diversified, focusing on:
(i) providing telecommunications and information technology products and services;
(ii) providing media products and services;
(iii) providing site survey, consultancy, design, construction, installation, maintenance services for telecommunication, information technology and media buildings;
(iv) manufacturing, importing, exporting, and supplying telecommunication,
IT and media materials and equipment
However, there are 2 main activities, including telecommunications and information technology, and posts
VNPT offers a wide range of IT products and services in Telecommunications and Information Technology, including voice, data, and internet solutions, all supported by advanced network infrastructure and additional value-added services.
VNPT stands out as a leading postal service provider in Vietnam, offering a comprehensive network that spans the entire nation The company is well-regarded by consumers for its diverse range of postal services, which include mail delivery, parcel shipping, consignment, and both domestic and international Express Mail Service (EMS), as well as newspaper and magazine distribution.
VNPT operates as a holding company with a subsidiary structure, where it serves as a one-member state limited liability company fully funded by the government The parent company supports its subsidiaries by leveraging its resources to reduce operating capital costs Additionally, VNPT holds over 51% of the capital in its subsidiaries, ensuring significant control and influence over their operations.
Figure 2.1 Organization chart of VNPT
2.1.3 Business performance of VNPT in comparison with its competitors a Market share
In 1994, the Vietnamese postal service market saw a significant shift with the end of the monopoly, allowing foreign express delivery companies to enter the market To reclaim its market share, the Vietnamese government permitted Viettel and SPT to offer postal and telecommunications services in 1995 By 1997, the landscape evolved further, with five companies authorized to provide internet services, intensifying competition and raising concerns for VNPT about the growing competitive pressures.
VNPT has established specific annual development goals focused on network advancement, service enhancement, and technological innovation Nevertheless, the company primarily concentrated on adjusting to the competitive landscape shaped by the ASEAN Trade in Services Agreement (AFTA), the Vietnam-US Trade Agreement, and Vietnam's commitments to the World Trade Organization.
(WTO) without intensive evaluation on their competitors However, the disagreement in the vision of the enterprise’s leader has limited its competitiveness
VNPT remains one of the largest telecommunications and postal companies in Vietnam; however, its market dominance has diminished The current market share of VNPT compared to its competitors reflects this changing landscape in the industry.
Figure 2.2 Market share of postal providers by revenue 2016
Source: Ministry of Information and Communications (2018) 2
Figure 2.3 Market share (by subscriptions) of terrestrial fixed-line telephone service providers 2016
Source: Ministry of Information and Communications (2018)
2 Latest data available on the Ministry of Information and Communications (2018) is only updated to 2017
Figure 2.4 Market share (by subscriptions) of terrestrial mobile-cellular telephone
Source: Ministry of Information and Communications (2018)
Figure 2.5 Market shares (by subscriptions) of terrestrial fixed (wired)- broadband service providers 2016
Source: Ministry of Information and Communications (2018)
Figure 2.6 Market shares (by subscriptions) of terrestrial mobile- cellular broadband service providers on generated voice, SMS, data traffic (3G) 2016
Source: Ministry of Information and Communications (2018)
Figure 2.7 Market shares (by subscriptions) of terrestrial mobile service providers on generated voice, SMS, data traffic (2G and 3G) 2016
Source: Ministry of Information and Communications (2018)
Figure 2.8 Market shares (by subscriptions) of terrestrial mobile and fixed (wired) service providers 2016
Source: Ministry of Information and Communications (2018)
According to the pie charts, VNPT holds a significant market share in terrestrial fixed-line telephone services at 73.3% and in terrestrial fixed (wired) broadband services at 46.1% Despite this, VNPT has ceded its leading position in other service categories to Viettel, which is now the top provider in the market.
Since its establishment, the financial capacity of VNPT has been significantly improved, economic relations and financial management have also been enhanced This is reflected in the following financial indicators
In 2018, VNPT grew with a profit growth of up to 25% compared to
In 2017, the group marked its fifth consecutive year of profit growth exceeding 20%, with an impressive average growth rate of 24.7% over the past five years This performance significantly outpaces MobiFone Telecommunications Corporation, one of the market's top three competitors, which reported a modest profit growth of just 7.5% during the same timeframe.
Source: Author’s collection However, compared to other leading providers in the industry, its financial performance is still limited
Figure 2.10 Comparison between VNPT and FPT in profitability 2014 -
Viettel has retained its leading position in the telecommunications industry, despite experiencing a decline in consolidated revenue and profit since 2017 The company accounts for 60% of the total revenue and over 70% of the industry’s total profits and budget, solidifying its dominance in the market.
At the same time, Viettel continues to be the leading brand in terms of value in Vietnam, with a valuation of 3.178 billion USD, an increase of 23.7% compared to 2017 c Product Quality
VNPT's telecommunication network is a modern, fully digitalized system that has transitioned to next-generation (NGN) technology, enabling the provision of advanced services This extensive and contemporary network plays a crucial role in enhancing the national IT and communication infrastructure (ICT) by delivering high throughput, speed, and quality It serves as a vital foundation for the country's IT development, industrialization, and modernization efforts Furthermore, VNPT is committed to accelerating the integration of IT and software technology into production and business, exemplified by the swift deployment of networks to high-tech parks, which effectively reduces operational costs.
When comparing service providers like VNPT, FPT, and Viettel, all offer comparable transmission speeds that ensure smooth performance without lag or disruptions Notably, VNPT stands out with superior bandwidth for international transmission, although its performance can be impacted by issues related to the AAG cable.
VNPT has developed a robust domestic backbone telecommunication network utilizing NGN/ATM/IP structures and SDH optical & WDM wavelength multiplexing, catering to diverse user needs across various services, including voice, video, television, and data transmission The company is committed to enhancing subscriber connections through wired access technologies such as FTTC, FTTH, and xDSL, while effectively launching and utilizing Vietnam's telecommunications satellites as directed by the government With the strongest infrastructure among providers, VNPT offers superior stability compared to its competitors.
THE COMPETITIVENESS OF VNPT DURING 2014 - 2018
The post and telecommunications market is currently experiencing intense competition, not only among established companies but also with a surge of new entrants, significantly impacting VNPT's performance To assess VNPT's competitiveness, this study will utilize the Pyramid Model and Porter's Five Forces for a comprehensive analysis Additionally, it will focus on key products and services offered by VNPT, including mobile phone services, fixed telephone services, and ADSL broadband internet, comparing them with major competitors like Viettel and EVN Telecom.
2.2.1 Evaluation of VNPT’s competitiveness using Pyramid Model
Assoc Prof Dr Hoang Dinh Phi (2006) identifies four key indicators for assessing a business's competitiveness annually: first, profit; second, market share; third, a combination of productivity, quality, price, and value; and fourth, essential competencies in governance, technology, human resources, finance, production, marketing, sales, and corporate culture.
Figure 2.11 The pyramid of firm's sustainable competitiveness
The pyramid of a firm's sustainable competitiveness, as outlined by Assoc Prof Dr Hoang Dinh Phi (2006), identifies 17 key factors that impact a company's competitiveness, with finance being a crucial element A firm's financial capacity encompasses several components, including the ability to manage capital and net assets, develop effective financial strategies and plans, control cash flows, costs, taxes, and profits, arrange low-interest capital sources for investments and daily operations, and engage in financial investments.
2.2.1.1 The first group of competitiveness indicators: Profit
VNPT has demonstrated significant commitment to sustaining a robust growth trajectory, achieving a consolidated profit of VND 5,010 billion in 2017 This marks a 21% increase from 2016 and represents the fourth consecutive year of profit growth for the VNPT Group.
Market Share (Domestic, Exp., Brand)
Product/Service & Value for Users (Productivity, Quality, Price)
Invest & Develop Fundamental Capabilities (Corp governace, security, technology, finance, human, marketing, train, culture, etc.)
20% Total revenue reached 144,747 billion VND, up 7% compared to 2016
Up to now, VNPT has become a strategic partner in telecommunications - IT with many provinces / cities across the country
Table 2.3 VNPT’s business result 2014 - 2018 (Unit: Million VND) Indicators 2014 2015 2016 2017 2018
Net sales of goods and services
Current corporate income tax expense
According to the VNPT Financial Report (2014-2018), VinaPhone Corporation, a subsidiary of VNPT, was ranked 63rd among the Top 500 most profitable enterprises in Vietnam in 2018 (Brand Finance, 2019) As one of the three largest network operators in the country, VinaPhone is recognized for its exceptional customer care, high-speed fixed Internet services, and reliable mobile broadband Internet offerings.
In 2018, VNPT added another company to its roster of top-performing enterprises, with VNPT Technology, the Telecommunications Industry Technology Joint Stock Company, recognized among the Top 500 most profitable businesses in Vietnam VNPT Technology serves as the core unit of VNPT, specializing in industrial technology.
2.2.1.2 The fourth group of competitiveness indicators: Basic competencies in terms of finance a VNPT’s capacity of capital and net assets
VNPT, a state corporation, boasts a robust financial position with a significant growth rate in total assets and equity The increasing proportion of equity in its total capital sources highlights VNPT's enhanced self-financing capabilities Additionally, the company's ability to meet short-term obligations and manage long-term debt has been rated positively in recent years Financial experts predict that VNPT will continue to thrive in the near future, thanks to its strong experience and effective financial management.
Table 2.4 VNPT’s Accounting Balance Sheet 2014 - 2018 (Unit: Million
VNPT, alongside Vietnam Oil and Gas Group, Electricity of Vietnam, and Vietnam Airlines, ranks among the largest enterprises in the country, demonstrating a robust annual growth rate in total assets exceeding 10% The asset structure reveals that cash constitutes a significant portion of current assets, while tangible fixed assets dominate long-term investments, making up 73% of their total value.
VNPT's capital structure reveals a significant reliance on liabilities, driven by substantial investment needs, with many of its assets financed through loans However, there is a noticeable trend of increasing equity in the overall capital resources, indicating that equity is growing at a faster rate than total debt Additionally, VNPT demonstrates strong capacity in managing cash flows, costs, taxes, and profits effectively.
VNPT always focuses on balancing capital for investment and production, thoroughly utilizing re-invested capital, without arising commercial credit loans, in order to improve capital efficiency
VNPT has experienced significant growth in its total assets and capital resources over the years The company's asset-capital structure reflects a balanced and stable financial position, with increasingly robust equity that supports its fixed assets This strength enables VNPT to invest in high-quality facilities and maintain a sound business strategy.
In a highly competitive landscape, strategically investing in fixed assets is crucial for enhancing overall capital efficiency and optimizing fixed capital utilization Proper investments not only boost labor productivity and product quality but also help reduce raw material costs and mitigate the intangible depreciation caused by technological advancements This approach enhances product reputation and strengthens the company's market competitiveness To maximize returns, firms must choose suitable depreciation methods that facilitate quick capital recovery while keeping costs manageable Additionally, organizing scientific labor, effectively utilizing specialized or general teams, and leveraging economic incentives can further improve capital efficiency VNPT’s ability to secure low-interest capital sources for investment projects and operational needs plays a vital role in this process.
VNPT demonstrates strong short-term liquidity management, effectively balancing accounts receivable and short-term payables to leverage customer capital safely The company prioritizes the supervision and management of outstanding and bad debts, ensuring full debt recovery while enhancing capital turnover and utilization Additionally, VNPT conducts thorough reviews and prompt settlements of outstanding debts between both dependent and independent accounting units.
VNPT demonstrates high-quality business activity, as evidenced by strong performance indicators for fixed assets and total assets, with net sales reflecting consistent growth over the years This indicates that revenue growth outpaces asset growth, showcasing VNPT's effective asset utilization in supporting its business operations The company's ability to achieve such high asset efficiency on a large scale highlights its capacity for formulating robust financial strategies and plans.
In a market economy, the ability to raise capital is closely tied to a business's reputation, and VNPT, with its strong brand in the post and telecommunications sector, enjoys significant capital-raising opportunities To optimize capital mobilization, VNPT should focus on maximizing internal capital potential, exploring diverse capital mobilization methods, selecting appropriate strategies based on its production and business characteristics, and ensuring compliance with legal regulations Currently, VNPT can tap into both internal and external capital sources to support its growth and operations.
To optimize capital within the enterprise, it is essential for firms to effectively utilize fixed assets and fully integrate them into production and business operations In recent years, VNPT has prioritized investments in modern technologies, highlighting the need to maximize the use of these advanced assets and equipment Additionally, for assets that are no longer suitable, it is crucial for the firm to liquidate or sell them promptly to facilitate reinvestment and enhance operational efficiency.
EVALUATION ON VNPT FINANCIAL SOLUTIONS FOR
To enhance competitiveness, VNPT has focused on three groups of financial solutions, including: (i) Investment restructuring, (ii) market expanding, (iii) comprehensive domestic and international cooperation
VNPT is leveraging its internal resources and restructuring investments to prioritize modern technology The group is actively aligning with the emerging trends in Telecommunications, Informatics, and Multimedia By utilizing internal capital and seeking new funding sources, VNPT aims to advance its technological development, enhance network infrastructure, and expand its service offerings.
VNPT is actively expanding its market share by introducing value-added and new services, which boosts both corporate and product competitiveness To achieve this, VNPT has transformed its business mindset and approach to competitiveness, while also enhancing service management, marketing, and customer care activities.
VNPT is committed to enhancing both domestic and international cooperation Domestically, the company has engaged in strategic partnerships with ministries and public committees to deliver modern, synchronized services to a broad customer base To boost operational efficiency in a competitive landscape, VNPT has invested in advanced technology and infrastructure, as well as innovative customer services On the international front, VNPT has refined its cooperation strategy by analyzing its capabilities and competitiveness, establishing a roadmap for collaboration, and diversifying its methods to strengthen the position and reputation of the Vietnamese telecommunications industry in the global market.
The effectiveness of financial solutions remains ambiguous, as the corporation aims to optimize its capital through investments in infrastructure, technology, and research and development However, limited competitiveness results from inadequate management practices.
EXTENDING THE ANALYSIS
Overall, VNPT has successfully exceeded their own targets in terms of revenue, profit, and number of subscribers, and contribute significantly on the post and telecommunications sector of the country
VNPT's competitive strength lies in its extensive enterprise and network scale, allowing it to effectively leverage its traditional networks and nationwide customer base This advantage is reflected in the consistent appreciation of VNPT's competitiveness, positioning it as a leading player in the industry The company continuously invests in and expands its network to meet growing customer demands while maintaining stable service quality Additionally, VNPT actively develops new services to cater to diverse customer needs and offers flexible tariff adjustments with a variety of attractive packages aligned with market demand.
Although achieving significant results in business operations, standing firmly in the competitive environment, VNPT still cannot avoid some limitations
The company’s investment and technological innovation lag behind its competitors due to its status as a state-owned enterprise, which requires government approval for all business and financial decisions before implementation.
Secondly, the company’s network, operating structure and management have not kept up with its development scale and modern technology level
The corporation operates under a parent-subsidiary model, leading to slow changes in its management and administrative systems Its internal accounting practices for various services are yet to be developed, and the inspection and supervision processes are irregular and ineffective Additionally, there have been instances of the company violating regulations related to state capital and asset management.
In the face of intensifying competition, VNPT is gradually adjusting to rapidly declining service prices, which has led to a market share reduction as they contend with other competitors While operating costs continue to rise, revenue growth has not kept pace, resulting in a declining profit growth rate for the company.
The labor force is abundant in numbers but lacks sufficient expertise, particularly among senior professionals Efforts in training have not produced the desired outcomes, and existing policies aimed at attracting and retaining skilled labor have proven ineffective.
The collaboration and business synergy among subsidiaries are lacking, leading to subpar advertising, marketing, promotion, and customer care compared to competitors As a result, the market share for some essential services has declined.
Seventhly, some subsidiaries have not followed the corporation’s financial discipline strictly The debt ratio was also high
These limitations can be explained by several reasons as follows:
The rapid expansion of the network has outpaced the strength of its management and operations, leading to a lack of adequate management tools As a result, some enterprises have overlooked essential network management principles to meet development demands.
Despite improvements in staff levels, VNPT still faces challenges due to a shortage of leadership, particularly in economic management Although the workforce is substantial, the quality of employees does not align with market demands, hindering the company's competitiveness.
The distinction between postal and telecommunications services remains ambiguous and subjective, impacting economic relationships This lack of clarity affects the efficiency of production and business operations, as well as employee motivation.
Fourthly, the process of organizational innovation, transforming from the original traditional model to the parent-subsidiary, has been slow and not keeping up with the trend of market
Fifthly, there are shortcomings and inconsistencies in the internal economic management at the parent company and its subsidiaries of VNPT
VNPT has shown inflexibility in adjusting its tariff and service prices, leading to a lack of focus on promotional activities Despite the rising demand for network and market development, VNPT has faced increased expenses without a corresponding rise in revenue This imbalance is the primary factor contributing to the decline in its profit growth rate, which adversely impacts its overall financial performance.
