Luận văn thạc sĩ quản trị kinh doanh quốc tế MBA (13)

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT FORMULATING DEVELOPMENT STRATEGY FOR PHA LAI THERMAL POWER JOINT- STOCK COMPANY (PPC) CHAPTER I: THEORETICAL BACKGROUND ON STRATEGIC MANAGEMENT12 C CONCLUSION 80 81 REFERENCES .82 82 Note 88 Descript 88 Less deductions .88 Note 89 Descript 89 Note 90 Descript 90 LIST OF ABBREVIATIONS EVN : Vietnam Electricity G7 : Group of developed industrial countries GDP : Gross Domestic Product ODA : Official Development Assistance PPC : Pha Lai Thermal Power Joint Stock Company LIST OF TABLES Table 2.1: A comparison between PPC and other electric companies 46 Table 2.2: Some key statistics of the PPC’s Human Resources 51 Table 2.3:An analysis of the indicators reflecting the operational capacity 55 Table 2.4: SWOT analysis 61 Table 2.5: Analysis of income statement 86 Table 2.6: A balance sheet comparison 88 Table 3.1 :Long-term production and business planning from 2009 to 2012 68 LIST OF FIGURES Firgure1: Strategic management process 17 Figure 1.2 Porter’s generic strategies 19 Figure 1.3: The external environment 21 Figure 1.4: Industry environment analysis model 24 Figure 2.1 The map of the Company 32 Figure 2.2 :Organizational structure of PPC 39 Figure 3.1 Diagram for development of the company from now to 2015 67 A INTRODUCTION After ten years of implementing the renovation policies, Vietnam has achieved significant progresses, which acts as the basis for a new phase of development The economy obtains the high and continuous growth with average GDP about 7% in the period of 2001 - 2007, stable political - social conditions, remarkably improved living standard and the extended international cooperation on all aspects The 10th Communist Party Congress continued to affirm the cause of renovation with the orientation of promoting industrialization and modernization to move Vietnam to an industrial country in 2020 Doimoi is also hoped to push Vietnam actively into integrating in the international economy, strengthening the renovation in the state-owned enterprises, developing the collective economy, encouraging the private sector and boosting the multi-sectored economy In order to achieve the goal of sustainable economic growth, the spearhead economic sectors must precede all others and act as the driving force for the development of others Power industry is seen as the key infrastructures sector that stimulates other economic sectors to develop In the trend of the market economy and international integration, the competition among enterprises is becoming increasingly fiercer Enterprises must compete with not only other domestic ones but also many foreign invested enterprises which are more experienced in the market economy An actually important factor behind any competition is that each enterprise has to find their own way and build themselves a long-term, medium-term and short-term strategy in order to set the suitable business solutions On the basis of the medium-term and long-term strategy, enterprises will form the long-term investment plan, find the sensible steps for highly effective business and gain the sustainable development The market economy brings about many opportunities and challenges for enterprises In the general trend, it is essential for each enterprise and individual to keep moving forward in order not to be left behind or even dismissed because the technological achievements, the science progress as well as new ideas and business strategies changes hour by hour Vietnam is facing with the remarkably emergence of economic powers and must adapt itself to catch up with the general development Each enterprise should be able to contribute to the success of Vietnam's economy as well as survive in the severe international competition It is common knowledge that enterprises may be negatively affected or even bankrupted if they cannot choose a right strategy of development When enterprises make a decision to invest in a new industry, they may make some mistakes such as underestimating the competitors, unsuitable organizational structure, high cost of administration etc which may easily lead to loss or even bankruptcy In recent years, as a result of the economic development and population growth, the demand for electricity in the world is growing significantly The primary energy sources such as coal, gas, oil and water are gradually used up On the other hand, the electric industry requires the increasingly high investment, which causes an extreme difficulty for the enterprise These reasons result in the booming demand for power in the world In the current international context, the demand for power in Vietnam has increased remarkably In 2007, self-generated electricity and purchases from other sources reached more than 66,738 billion kWh; commercial electricity is 58,4 billion kWh In 2008, self-generated electricity and purchases obtain over 74,22 billion kWh; commercial electricity is more than 65,59 billion kWh which grows 11,2% in accordance with the figures of 2007 In 2009, self-generated electricity and purchases obtain over 81,2 billion kWh; commercial electricity is 72,32 billion kWh, which rises 9,69% in comparison with the figure of 2008 The electricity generated by EVN is 54,875 billion kWh and the one purchased from external resources is 26,325 billion kWh Electricity of Vietnam (EVN) is one of few enterprises belonging to the spearhead industry of Vietnam which contributes to the infrastructure construction, improving the living standard, ensuring the national security Up to now, EVN has increased significantly in the investment and the usage of both advanced technology and the ones from last generations Besides, EVN gets the growth of electricity consumption and meets the higher demand to support the development goals of Vietnam Like other economic organizations, Pha Lai Thermal Power Joint-stock Company in particular and EVN in general is facing with a huge challenge in the integration in term of technology, capital, products and human resources etc If EVN does not rapidly enhance its competitiveness, it will lose its market share as more foreign corporations enter the electricity industry and so does the domestic corporations such as Vietnam National Coal, Mineral Industries Group, Vietnam Oil and Gas Group etc A level playing filed means fair opportunities for all players Electricity industry is also an appealing and attractive area in the near future In order to gradually integrate and become a modern, competitive enterprise, Pha Lai Thermal Power Joint-stock Company needs to change their critical thinking, operation as well as business administration Besides, setting a good business strategy is very necessary to direct and promote the development of the company In the fiercely competitive market, it is complicated to build a successful business strategy Gaining competitiveness becomes more and more difficult It takes a long time for the research with the orientation of putting the theory of business administration into practice of Pha Lai Thermal Power Joint-stock Company The project makes an attempt at providing the proper and objective assessment of the company’s situation, on which the company may base on to set the goals and build the business strategy in the phase of 2010 – 2015 heading toward 2020 with the orientation of moving Pha Lai Thermal Power Joint-Stock Company to one of the leading companies in the electricity industry  Research purposes  Apply the methodology of strategic management with the orientation of proposing the proper business strategies for Pha Lai Thermal Power Jointstock Company  Develop the development strategy for the company in the next five-year period, which is adequate to the national demand for energy and the enterprise’s interests  Investigate the current situation of production and business in Pha Lai Thermal Power Joint-stock Company, proposing and selecting the appropriate management tools to enhance the capacity for production management  Apply the theory of strategic management into the company’s business  Supplement the solutions of promoting the company’s production and business  Make a research on the need of electricity in the phase of 2010 – 2020 and set the development plans for the period of 2010 - 2015 as well as find out the enterprise’s opportunities and challenges  Analyze the enterprise’s current situation and propose the strategic direction in the period of 2010-2015  The object and methodology of research Research object: the project concentrates on formulating the business strategy of Pha Lai Thermal Power Joint-stock Company Scope of research: Conduct a thorough analysis on the current situation of production and business in Pha Lai Thermal Power Joint-stock Company as well as the enterprise’s products and services in order to make a proper business strategy The research methodology adopted is the quantitative methodology For example:  Qualitative  Figure collecting methodology (in the power development of Vietnam, EVN and Pha Lai Thermal Power Joint-stock Company)  Comparative methodology  Analytical methodology  Methodology of colleting the information on the reports, mass media, local economic-social development plans, other industries and the State  Model methodology which uses analytical models such as SWOT, five competitive forces, internal and external environment analysis etc to set the goals and direction for the enterprise Data: collecting customers’ ideas, summarizing the plans board’s reports on the customer conference (especially customers’ feedbacks, processing reports of functional departments), financial reports etc Processing tools: Analysis, comparison and summary  Project’s contributions  Systemize the basic theories of business strategy  Propose the superior solutions for production and business of EVN in general and Pha Lai Thermal Power Joint-stock Company in particular  Demonstrate how to apply theory on business strategy in practice  Contribute to the theoretical background of business strategy in Vietnam as well as the world  The structure of project is as below: Regardless of the introduction and conclusion, the project includes chapters with the following key contents: Chapter I: Theoretical background on setting the enterprise’s business strategy in the phase of 2010 - 2015 This chapter deals with the theoretical matters of business strategy It includes the concepts, features, history and theoretical background of business strategy Chapter II: Current production and business situations in Pha Lai Thermal Power Joint-stock Company This chapter conducts a analysis on the current operation of production and business in Pha Lai Thermal Power Joint-stock Company by analyzing and applying the strategic analytical models and five competitive forces one Based on the analysis, the project draws the assessments and problems of production and business in the enterprise 3.3.4 Solutions to build communication system Organizing well activities of direct communication to introduce, promote products, business image Improving the quality of articles, news, pictures not only to provide for information sheet, website but also for mass- media Communication activities and brand development must be mounted closely with business development strategy of PPC, as well as business plan every year The communication has been identified as one of the first tasks which should be prioritized in the overall development strategy of PPC to 2015 Communication activities and brand development need be in the professional direction, toward standards Completing early organization model, then proposing the clue of communication activities in PPC Maintaining and developing agreement of cooperation with newspaper, local television stations, have plans to propagate every year and calendar for specific posts Make impression and memorable point in customers’ mind 3.3.5 Solutions for JPY exchange rate risks - Paying back the JPY loans as soon as possible within the company’s capacity According to loan bond between PPC and Viet Nam (EVN) electric power cooperation this loan is terminable pay is 22 in the year month If it is the annual 2.25 billion JPY However in 2007 the PPC has to pay JPY 8.9 billion This action is one of two reasons for deductions backup rate of PPC 2007 is 232 billion VND 2008 PPC pay only JPY 1.8 billion, plus the depreciation of the Vietnam too quickly making deductions reserve soared 1500 Negotiable Looking at the fund cash and investments, the Investment Trust PPC has very large cash flow Cash and cash equivalents in the third quarter of 2009 of PPC is 1310 billion VND, the short-term financial investment is 2445 billion VND Long-term financial investment is 1142 billion VND PPC can fully repay the loan faster JPY to reduce risk when the Japanese yen gained Because all investments not offset by the sliding price of the yen plus the devaluation of the Vietnam dong The decide payment before a date of time to be depends on EVN - Buying JPY as the exchange rate is low, and using it as an investment capital to hedge against its short JPY loans status Annual PPC has two time repayment is on 20 of March and 20 of September , accounting and exchange rate used to calculate the reserve is known in the end of year If the yen exchange rate in the agitated Left PPC money is plentiful in the purchase at a low rate will be opportunities for PPC offset losses caused by exchange rate should For example at the March of 2009 rate is 180VND/1JPY if PPC buying thats time the interest reserve price slide is (200 -180) / 180 = 11% to compensate for losses (200-184 ) / 184 = 8.7% Basically loan losses JPY (short JPY) will be offset by a state to buy JPY (long JPY) 3.3.6 Solution limit the risk of supply and price of coal: Long-term strategy of the company to supply coal is negotiating to buy coal from abroad while domestic coal resources scarce Plan to buy and invest in mining exploitation and transportation will be active and low price of coal About domestic coal PPC will actively negotiate long term contracts with coal corporation or company with large reserves of coal have technical standards in accordance with technical conditions of Pha Pha Lai 1&2 buy coal mine and transport to actively and low price of coal There are plans for strategic investments involved with coal mining joint venture, association, joint stock company for coal mining coal resources and stability to share risk by coal prices change Risks in business than the price increase End of 2009 the coal industry requires increasing coal supply for electricity sector in general and PPC in particular In principle, the price of coal increased the electricity price increases and price increases as power Electricity price increases will affect people's lives, so the government must also regulate the price of coal and electricity prices Therefore the use of coal in the country and has no market power will not be competitive on price than risk Only when the coal was floated by the state and the market price of electricity rates, the government will be PPC risk 3.3.7 Recommendations for EVN and the Ministry of Industry and Trade To improve the efficiency of electricity production and business activity, EVN and the Government should consider to early resolve the following major problems: Firstly, proposing to the government to promulgate soon policies on synchronous market, create a legal framework for electricity bidding in trade competition Secondly, expanding and improving the training of electricity market, especially computing, analyzing skill and electricity bidding Thirdly: At this time, the price of petroleum fuel, materials and machinery equipment on the market increase while electricity price doesn’t because of difficulties in production and business of the company, so we propose the government to increase electricity price or have appropriate policies to support the company Chapter III Summary: Based on the analysis above, the key point to build a effective PPC is to be aware that success acquires not only just change in factors such as the material of the PPC, human factors or technological factors but also adapting to the them once they have changed, how they will be combined together to achieve the common goal of the EVN and the PPC From strategic objectives and solutions to successfully implement the strategies set out, we completely trust in PPC to become a leading power generating company of our country in the future C CONCLUSION How to survive and grow in a competitive environment with increasingly fiercer competition of potential and experienced competitors is a big question posed to businesses in general and PPC in particular One answer is quite simple but not easy to implement for all businesses is that power generation companies in or outside EVN must attempt to improve competitive capacity and strengthen cooperation to integrate successfully There are many different methods to improve competitive advantage With the ultimately profit goal, all businesses must recognize that building business strategy is the first task which is indispensable to survive and grow In fact, business strategy is to create a strategic perspective which describes image in the future of companies, show clearly where companies want to become, set targets to turn the strategic perspective into detail implementation results that companies must achieve Building the strategy to improve competitive capacity Market mechanism is the mechanism of competition Moreover, with the current guideline of the government, competitors are not only just companies inside or outside EVN power company but also strong competitors in the international arena So power generating companies have to build strategies to create difference in their service to make a competitive advantage needed However, the fact that our efforts aimed at creating competitive advantage, dominating the market are only effective when competitors haven’t had the same actions or level of satisfaction of actions is lower Therefore, business strategy should not only research on customers, but also analyze its competitors Based on understanding of potential of opponents, the administrator will have prediction on the reactions and strategies of opponents and have measures to cope Thus, through researching strategies on the basis of previous calculations about the strength of competitors, PPC is always proactive to compete and sustain its competitive advantage Product and business strategy to minimize risk: In any production activities, there exist risks So, to succeed in this area the managers of production and trading must accept certain amount of risks The issue here is how to know which level of risk is acceptable Thus, production and business strategy is indispensable in every electricity production to create the competitive advantage For each integration step towards a business full of power - competitive capacity to survive and sustainably develop, building the true long-term brand image, PPC must change the mind, activities and change in business management executive management to create a breakthrough as momentum of development, building business strategy is a very important task for the success of the company In the market economy full of fierce competition nowadays, building a successful business strategy is a difficult and complex task Achieving business advantage becomes more difficult So businesses have to invest in researching the market, competitors and have proper strategies Limitations of the graduation report and the direction to continue the research Because the research conclusions are drawn on the basis of the actual situation in PPC So application of the solutions, conclusions to other financial institutions will need to have follow-up research Despite great efforts, our capstone project can’t avoid certain limitations We sincerely hope to receive the further comments and suggestions from all the readers to better improve our writing REFERENCES Vietmamese Documents 1-Activity Management textbook ( internal circulation) 2- reports before Annual Shareholders’ meeting of Pha Lai Thermal Power Joint-stock Company 2008, 2009 3- Financial report accounted of Pha Lai Thermal Power Joint-stock Company for 2006, 2007, 2008 4-The resolution reports of the 30th, 31st, 32nd, 33rd, 34th, 35th to determine shortterm and long-term business strategies of the company 5- Ognanizing and operating DA textbook 6- Leadership In Organizations ( internal circulation ) 7- Nguyen Minh Kieu – Financial report analysis, Statistics Publishing House 8-Strategic management, Statistics Publishing House 9- Financial Analysis of ARTEX on December 28, 2009 English Documents 10- Kolter, Philip “What’s marketing”, Management magazine, 1998 11- Gary Yuki, 5th editions, Prentice Hall, Leadership In Organizations 2002 12- McShane and Von Glinow, McGraw-Hill Leadership ADDENDUM - Table 2.5 The analysis table of income statement -Table 2.6: A balance sheet comparison - Incom statement of PPC For the period to 31 December 2006 ended - Incom statement of PPC For the period to 31 December 2007 ended - Incom statement of PPC For the period to 31 December 2008 ended Table 2.5 The analysis table of income statement Unit: x 103 VND Item FY 2008 FY 2007 FY 2006 3.607.073.582 3.607.073.582 % 2006/ 2007 105% 105% % 2007/ 2008 102% 102% Sales Net Revenue 3.881.915.350 3.881.925.350 3.807.068.101 3.807.068.101 from sales Cost of goods 2.798.492.740 2.692.753.061 2.397.184.156 112% 103,8% sold Gross profit Financial 1.083.422.609 293.005.863 1.114.332.533 125.400.447 1.209.888.903 11.719.740 92% 1070% 97% 233% income Financial 1.795.578.679 409.020.513 189.169.826 216% 438% expenses General and 61.718.954 58.405.672 68.885.228 85% 105% (480.869.160) 772.307.795 963.553.589 80% (162%) activities Extraordinary 16.915.697 18.457.709 2.986.065 618% income Extraordinary 4.099.462 12.943.912 1.108.181 expenses Extraordinary 12.816.234 5.514.465 1.877.884 293% 232% gain (loss) Profit before (468.052.926) 777.821.592 965.431.431 81% (160%) tax Deferred 255.269.266 (46.531.994) (13.908.101) (212.783.660) (654) 824.353.586 2.528 979.339.575 3.152 84% 80% (125%) (125%) Administrative expenses Net profit from operating business income tax expenses Profit after tax Basic earnings per share Table 2.6: A balance sheet comparison Unit: x103 VND Item At the end of December 31/12 FY 2008 FY 2007 FY 2006 % change FY FY 2007 Current 2008 4.738.663.610 2.307.029.478 3.534.498.941 65% 205% cash 512.800.801 312.797.706 59% 164% equivalents Short term 2.735.647.725 1.030.000.000 assets Cash and 528.618.413 265% Item At the end of December 31/12 FY 2008 FY 2007 FY 2006 % change FY FY 2007 2008 financial investments Accounts receivables Inventories Other current 931.920.868 494.195.498 2.652.598.454 18% 188% 557.197.978 469.444.770 353.033.026 132% 118% 1.096.237 591.503.371 249.046.493 237% 185% 6.058.645.918 7.375.255.251 7.070.314.004 104% 82% 5.502.035.705 6.215.532.632 7.056.102.254 88% 88% 239.200.000 1.098.307.000 317.410.212 61.352.618 assets Noncurrent assets Fixed assets Long-term financial 21% investments Other noncurrent 14.211.749 434% 520% assets Total assets 10.797.309.528 9.682.284.730 10.604.812.945 91,3% 111.5% Liabilities 7.361.025.009 5.857.297.061 6.894.208.086 84% 125% Short-term 1.006.054.442 701.804.092 611.638.168 114% 143% borrowings Short-term loans and 343.423.050 264.288.695 306.419.185 86% 130% 69% 37% borrowings Tax Payables 24.005.036 25.276.020 81.307.749 for 14.313.944 38.435.981 55.575.567 6.354.970.566 5.155.492.969 6.282.569.918 82% 123% 3.431.985.636 3.821.703.799 3.697.499.575 103% 89% expenses Long-term loans Owners’ Item At the end of December 31/12 FY 2008 FY 2007 FY 2006 % change FY FY 2007 2008 104% 100% 102% (120%) equity Contributed legal capital Treasury stocks Investment fund Financial provision fund Retained earnings 3.262.350.000 3.262.350.000 3.107.000.000 (65.004.299) (62.834.383) 309.600.000 19 600.000 52.500.000 45.000.000 45.000.000 (127.460.064) 557.588.182 545.499.575 Financial Statement For the period from 26/01/2006 to 31/12/2006 ended PHA LAI THERMAL POWER JSC Pha Lai Town, Chi Linh District, Hai Duong Province INCOME STATEMENT For the period to 31 December 2006 ended Form B 02 - DN Unit: VND Code Note 01 Descript 18 2006 3.607.073.060.582 - Sales Less deductions 02 Net sales 10 Cost of sales 11 Gross profit 20 Financial income 21 21 11.719.740.119 Financial expenses 22 22 189.169.826.341 Selling expenses 23 167.302.511.556 General and administration expenses 25 118.557.089.786 10 11 19 2.347.512.365.318 1.259.560.695.264 ───────── 963.553.589.256 Operating profit Net other income Net other expenses 3.607.073.060.582 31 32 2.986.065.580 1.108.181.283 12 Net other profit 13 Net profit before tax 14 15 Business income tax Postponed business income tax 16 Net profit after tax 17 Net profit per share CEO Nguyen Khac Son 40 23 1.877.884.297 50 965.431.473.553 51 52 24 24 (13.908.101.603) 60 60 979.339.575.156 70 3.152 Chief of Accounting Dept Le The Son PHA LAI THERMAL POWER JSC Pha Lai Town, Chi Linh District, Hai Duong Province Made by Nguyen Quang Huy Financial Statement For the period to 31 December 2008 ended INCOME STATEMENT For the period to 31 December 2008 ended Form B 02 - DN Unit: VND Code Note 01 Descript 20 2008 3.881.915.350.482 Sales Net sales Cost of sales 11 Gross profit 20 Financial income 21 23 293.005.863.348 Financial expenses 22 24 1.795.587.679.099 General and administration expenses 25 10 11 10 3.881.915.350.482 21 1.083.422.609.671 61.718.954.616 Operating profit/loss Net other income Net other expenses Net other profit 2.798.492.740.811 (480.869.160.696) 31 32 40 25 16.915.697.144 4.099.462.646 12.816.234.498 12 13 14 15 16 Net profit/loss before tax 50 Business income tax Postponed business income tax 51 52 Net profit/loss after tax Net profit per share CEO Nguyen Khac Son (488.052.926.198) 26 26 60 70 (212.783.660.031) 27 Chief of Accounting Dept Le The Son PHA LAI THERMAL POWER JSC Pha Lai Town, Chi Linh District, Hai Duong Province 255.269266.167 (654) Made by Nguyen Quang Huy Financial Statement For the period to 31 December 2007 ended INCOME STATEMENT For the period to 31 December 2007 ended Form B 02 - DN Unit: VND Code Note 01 Descript 20 2007 3.807.068.101.594 Sales Net sales Cost of sales 11 Gross profit 20 Financial income 21 23 125.400.962.447 Financial expenses 22 24 409.020.843.513 General and administration expenses 25 Operating profit/loss 10 11 Net other income Net other expenses Net other profit 31 32 40 Net profit/loss before tax 50 12 10 3.807.068.101.594 21 2.692.735.194.061 1.114.332.907.533 58.405.947.672 772.307.078.795 25 18.457.858.709 12.943.392.912 5.514.465.797 777.821.544.592 13 14 Business income tax Postponed business income tax 15 Net profit/loss after tax 16 Net profit per share 51 52 26 26 60 70 46.531.676.994 824.353.221.586 27 CEO Chief of Accounting Dept Nguyen Khac Son Le The Son 2.528 Made by Nguyen Quang Huy