General background and rationale of the assignment topic
Globalization and international economic integration, fueled by advancements in science and technology, present significant opportunities and challenges for businesses To thrive in this competitive landscape, companies must develop effective business strategies that leverage their unique advantages and translate international commitments into actionable plans This involves optimizing internal resources, closely aligning production and business operations, continuously innovating technology, and enhancing product quality and competitiveness to solidify their position in the global market.
The cement and construction material manufacturing industry is currently experiencing intense competitive pressure from both domestic companies and imported cement This challenging landscape necessitates that enterprises, particularly PVC12/9, adopt effective business strategies to maintain their market position and foster sustainable growth.
Starting from the above fact, the group 12-VO11 has chosen the topic:
From 2011 to 2020, the focus was on developing effective business strategies for PVC 12/9, aimed at enhancing the company's operational efficiency and achieving short-term objectives while laying the groundwork for future success.
Purpose and object of the study
- To analyze and assess the state of the whole production and business of PVC 12/9
- To select and propose business strategies for the company in the period of 2011-2020.
Internal and external environment of PVC 12/9; business strategies of the company in the period of 2011-2020.
Methodology
This study employs qualitative research methods such as observation, interviews, and group discussions to analyze and compare both primary and secondary sources regarding the business environment and operational conditions of PVC 12/9.
- The quantitative methods such as statistical analysis, comparison, and synthesis, etc are based on the analysis of primary data and secondary data.
Secondary sources were gathered from a variety of entities, including PVC 12/9, PVN, the Ministry of Construction, the Ministry of Industry and Trade, the Ministry of Planning and Investment, the Nghe An Statistical Department, reports from Anh Son district in Nghe An, and relevant press information.
Primary sources were gathered through meetings and interviews with PVC leaders and staff on December 9th, aiming to uncover information not disclosed in annual reports and to gain insights into the company's strategic direction for the upcoming years.
The assignment is divided in to 3 main chapters as follows
Chapter 1: The theoretical background to corporate’s strategy
Chapter 2: An Analysis of business environment and internal environment of PVC 12/9
Chapter 3: Recommendation of strategy and solutions for PVC 12/9.
THEORETICAL BASIS TO BUILD CORPORATE’S BUSINESS STRATEGY
The concept and the role of corporate strategy
In economics, the definition of strategy varies among authors, with Chandler's 1962 definition emphasizing that strategy involves determining an enterprise's long-term goals and objectives, as well as adopting necessary actions and allocating resources to achieve them.
Chandler was a pioneer in the development of strategic management theory, laying the groundwork for the field By 1980, as strategic management matured, Quinn provided a broader definition, describing strategy as a cohesive plan that integrates an organization’s key goals, policies, and actions Building on this, Johnson and Scholes defined strategy as the long-term direction and scope of an organization, emphasizing how it achieves competitive advantage by effectively configuring resources to meet market needs and fulfill stakeholder expectations.
In other words, business strategy is:
- Where is the business trying to get to in the long-term (direction)
- Which markets should a business compete in and what kind of activities is involved in such markets? (Markets; scope)
- How can the business perform better than the competition in those markets? (advantage)?
- What resources (skills, assets, finance, relationships, technical competence, facilities) are required in order to be able to compete? (resources)?
- What external, environmental factors affect the businesses' ability to compete? (environment)?
- What are the values and expectations of those who have power in and around the business? (stakeholders)
1 [] Chandler, A (1962) Strategy and Structure Cambrige, Massachusettes MIT Press
A business strategy outlines the long-term goals and growth trajectory of an organization, typically spanning three to five years or more It is essential for ensuring the continuous and stable development of the enterprise amid the dynamic and unpredictable market economy.
A business strategy serves as a long-term roadmap, guiding an enterprise towards its goals while integrating strategic objectives with situational realities Effective implementation requires a harmonious blend of strategy, tactics, and operational plans Crafting a strategy involves establishing a framework for future business activities, grounded in thorough analysis and forecasting of relevant information.
Strategic decision-making within an enterprise is primarily the responsibility of its top leaders, who oversee the processes of building, organizing, implementing, evaluating, and controlling strategies While consultants play a crucial role in providing valuable information and insights, the ultimate authority for significant decisions rests with the enterprise's leadership.
- A strategy is guaranteed the secrets of business information in the market economy
A successful business strategy is primarily designed for specific industries, leveraging the unique traditions and strengths of an enterprise This foundation enables businesses to effectively develop, select, and implement strategies that enhance their market participation and capitalize on their inherent advantages.
1.1.2 Role of business strategy to the corporate
In any filed of management, a business strategy is still confirmed the important role in the following sides:
A clear and well-defined strategy is essential for guiding long-term activities and providing a solid foundation for operational implementation Without a strategic framework, organizations risk losing direction, focusing solely on short-term goals while neglecting the bigger picture This lack of clarity can lead to fragmented efforts that fail to align with overarching objectives.
Establishing a strong foundation for research and development activities, investment, and human resource training is crucial for enhancing the competitive edge of enterprises and ensuring their sustainable growth Many negotiation errors in investment and research implementation stem from unclear or incorrectly defined strategic objectives.
Enterprises can establish a solid foundation for growth by strategically navigating their business directions in response to environmental factors This involves leveraging opportunities, mitigating risks, and enhancing their competitive advantages to drive success in the marketplace.
Strategy at Different Levels of a Business
Strategies exist at several levels in any organization - ranging from the overall business (or group of businesses) through to individuals working in it.
Corporate strategy defines the overarching goals and scope of a business to fulfill stakeholder expectations, making it a critical component influenced by investors It serves as a guiding framework for strategic decision-making across the organization and is typically articulated in a mission statement.
Business Unit Strategy focuses on how a company effectively competes in its specific market It involves strategic decisions regarding product selection, addressing customer needs, gaining a competitive edge, and identifying or creating new opportunities.
An operational strategy is essential for organizing various business components to align with corporate and business-unit strategic goals It emphasizes the effective management of resources, processes, and personnel to ensure optimal performance and achievement of objectives.
How Strategy is Managed - Strategic Management
Strategic management involves making critical decisions that define a business's strategy This process typically consists of three key components, which are essential for effective strategic planning and implementation.
Particularly, strategic management process includes the following steps and tasks:
Developing a strategy involves outlining the necessary actions for the company, conducting analyses to identify key internal and external environmental factors, establishing long-term objectives, and choosing from various strategic alternatives.
Strategic decision-making requires enterprises to concentrate on particular products, markets, resources, and technologies within a defined timeframe These strategies highlight the benefits of sustaining a competitive edge in the long term.
The process of building up strategies for an enterprise as follows: (Textbook of Business Strategy Management and development of business of Thai NguyenEconomy and Business Administration university )
1.2.1 Determining the function, mission and the strategic objective of the corporate
A company's success hinges on its clear understanding of its objectives and responsibilities When businesses lack a thorough grasp of these elements, they may pursue misguided strategies, leading to ineffective outcomes To achieve their goals, it is crucial for companies to first identify and comprehend their essential duties.
Identifying tasks and strategic goals is crucial for effective business administration and successful strategy implementation Clearly defined objectives play a vital role in driving business success.
Strategic functions, tasks, and objectives of enterprise are often summarised through The mission statement, including the following 3 aspects:
An enterprise's primary tasks include clarifying the existing reasons and objectives of its business activities, prioritizing customer orientation, and identifying key fields and industries As noted by D Abell, defining business fields should address critical questions: Who are the customers that need to be satisfied, and what specific needs must be fulfilled?
Analyze and forecast business environment
Analyze and forecast corporate environment
Form optim un strate gic soluti ons
Comp aring price and selecti ng optim um strate gy
Deter minin g task to carry out strate
Corporate’s duties gies and strategic target demands of customers), How to satisfy the demands of customers? (Unique competences).
- Strategic Objective: The strategic vision and objective showed in the
Mission statement is a clear and ambitious statement which enterpeises pursue.It is the specificialization of objectives of an enterprise about direction, scale, structure and process of implementation over time
System of strategic objectives of an enterprise is classified according to the following foundations:
- The hierarchical position of an objective: The top objective and the secondary objective.
- Time: Long-term, medium term, and short term.
- Different departments and groups of an enterprise: including objectives of shareholders, Board of Directors; objectives of employees, labor union…
- According to correlative types of strategy: General objective of the whole enterprise, objective of each segment of a strategy.
A business philosophy is essential for defining the core values of an enterprise, serving as a framework for actions and behaviors within the organization These values should align with the interests of employees, customers, owners, and society, ensuring a holistic approach to business practices that fosters positive relationships and sustainable growth.
Vision: Claims of enterprise on their position in business environment in a certain period of time – is guidelines for company’s action in all the times and circumstances.
A business's mission encapsulates its essential tasks within the business environment, often articulated through concise philosophies This mission clarifies the purpose and rationale behind the company's existence While businesses may adapt their strategies to fulfill their mission, the fundamental reasons for their existence typically remain unchanged.
Objective: is the final goal the enterprise wants to achieve Objectives show the directions for all the decisions and forming criteria for measuring performance in practice.
The assessment of the external environment aims to identify and summarize key opportunities that an enterprise should seize, as well as potential risks that could pose challenges, which the company must mitigate.
1.2.2.1 Macro environment – National business environment (using PEST model)
To effectively analyze the national business environment, our group employs PEST analysis, which evaluates political, economic, societal, and technological factors This method helps identify both opportunities and threats for businesses operating within that context In particular, the political and policy factors play a crucial role in shaping the landscape for firms, influencing their strategic decisions and overall success.
Political and policy factors serve as the cornerstone of the business environment, shaping its legal and institutional framework A stable political landscape and well-defined policies create opportunities for businesses, while instability can hinder growth Additionally, economic factors play a crucial role in influencing business operations and strategies.
Economic factors significantly influence business operations, including economic growth rates, exchange rates, inflation rates, interest rate policies, and overall economic policies A high economic growth rate, stable inflation, favorable exchange rates, and appropriate interest rate policies create opportunities for businesses Conversely, unfavorable conditions in these areas can pose significant challenges for companies operating within that economy.
These factors impact slowly on business environment but has a strong impact on market demand as changes of customs, consumption habits. d Technological factor -T
The technological factor increasingly shapes the business environment and directly impacts enterprise strategies As technology evolves rapidly, numerous innovations are integrated into products and services It is essential to examine how technological influences affect various sectors by considering aspects such as the pace of technological development and government investment.
To effectively analyze the micro-environment of an industry, we can utilize Michael Porter’s Five Forces Model, which identifies five key forces that present both opportunities and threats for businesses These forces include the bargaining power of suppliers and the intensity of current competitive rivalry.
The competitive landscape of an industry is shaped by five key forces: potential competitive rivalry, buyer power, and the threat of substitutes Each of these forces is affected by various factors, which must be thoroughly researched to gain a comprehensive understanding of the competitive dynamics at play.
Bargaining power of suppliers a The bargaining power of supplier
Developing strategic planning
To develop effective strategies grounded in a thorough analysis of the business environment, companies should utilize the SWOT Matrix, which identifies and evaluates opportunities, threats, strengths, and weaknesses.
The SWOT Matrix is a strategic tool that categorizes a business's strengths and weaknesses alongside its opportunities and threats during a specific period It helps formulate strategic ideas to leverage strengths, capitalize on opportunities, mitigate threats, and address weaknesses This matrix is developed based on a prioritized analysis of internal and external factors, with the key elements organized within its columns and rows for clarity and focus.
Use strengths to utilize opportunities
Use strengths to avoid threats
Overcome weakness by utilizing opportunities
Overcome weakness to avoid threats
Develop SWOT model based on strategic planning
SWOT analysis is a crucial component of strategic planning for businesses, as it evaluates both external factors, such as opportunities and threats, and internal factors, including strengths and weaknesses This analysis is essential for businesses aiming to establish and solidify their brand identity while pursuing growth.
Analyzing data on environmental changes—such as economic, financial, political, legal, social, and competitive factors—enables businesses to identify potential opportunities and threats in their current or target markets.
Opportunities for businesses may arise from market development, access to raw materials, and the availability of affordable skilled labor However, companies also face threats such as market contraction, intensified competition, policy changes, political instability in key markets, and advancements in technology that may render their production methods outdated.
Internal business analysis focuses on identifying an organization's strengths and weaknesses Strengths may include skilled managers, advanced technology, a strong brand reputation, ample cash flow, positive customer perception, and significant market share Conversely, weaknesses can manifest as an ineffective distribution network, poor labor relations, inexperienced international management, or outdated products compared to competitors Understanding these factors is crucial for enhancing competitive advantage.
A comprehensive SWOT analysis should yield concrete, accurate, and practical results, as these insights are essential for businesses to develop effective strategies, set strategic goals, and implement both internal strengths and external controls By identifying and addressing external threats and minimizing or overcoming internal weaknesses, companies can enhance their overall performance and competitiveness.
Analysing and selecting stategy
Strategic selection is one of the important steps of business making process.
The process of selecting a strategy involves using appropriate tools to develop strategic solutions aligned with specific objectives, significantly impacting strategy deployment and related activities like investment, organizational innovation, and personnel training To ensure the chosen strategy aligns with market demands, businesses must follow a structured strategy selection process.
- Assuring longterm effectiveness of the business process.
- Assuring continuaness and inheritance of the strategy.
- The strategies must be comprehensive and clear.
- Assuring the consitency and feasibility
- Assuring to fulfil prioritized target
Main factors to select strategies
- Sector and corpartate’s strengths : this factor have strong influence on selection of strategy of the corporate
- Targets, behavior of the Managers and qualification
The chosen target affects directly on selection of strategy therefore the target system must be analyzed and set to be one of the basis to form the strategy
The Manager’s behaviour affects directly on how the strategy is made
Financial capacity serves as a crucial foundation for developing and implementing strategies A self-sufficient corporation conducts its own research and formulates strategies independently, highlighting the importance of financial conditions in strategic planning.
- Response of related objects : whether the strategies are feasible depends so much on the exact forecasting of the related objects’ response
- Determining the right time to deploy the strategies : this is one of the important factors because the sucess of the strategy depends on the time of deployment.
Business strategy is made at 3 levels: corporate, business units and functional division
Companies that opt for corporate level diversification strategy expand beyond a single sector to operate across multiple industries This approach enables them to leverage their core competencies while capitalizing on opportunities present in the external environment.
Competitive strategy outlines how businesses engage in competition, while corporate-level strategy focuses on identifying the sectors in which companies will operate and how to leverage diversification to gain a competitive edge.
Concentrated growth strategies focus on enhancing existing products and markets by emphasizing key corporate factors during a specific strategic period This approach includes strategies such as market access, market development, and product development Additionally, growth strategies through integration involve consolidating business sectors in various directions, including positive, inverted, vertical, and horizontal integration, to foster overall business expansion.
Diversifying business sectors is a crucial strategy for enhancing revenue and profits while strengthening a company's competitive position This approach involves offering a variety of products and services across different markets Key types of diversification include concentric diversification, which focuses on related products; horizontal diversification, which introduces new products to existing markets; and mixed diversification, which combines elements of both strategies to maximize growth opportunities.
1.4.2 Selecting product strategy - business base strategy
With the purpose to be antagonistic with 5 market force, Michael Porter determined three generic strategies which can apply at business level to create competitive advantages.
This is a series of actions to produce goods and services with the features pleasing customer with the lowest price.
This strategy focuses on achieving the lowest production costs in the industry while maintaining a certain quality standard Companies can either price their products at the sector's average to maximize revenue or offer lower prices than competitors to capture a larger market share.
The successful businesses in implementing cost leadership strategy often have the following characteristics:
- Power of approaching good capital to invest in producing devices This is also the barrier that many other companies can not overcome.
- Capacity of designing products to increase production effectiveness, create more a small detail to shorten assembling process.
- Have high level of production.
- Production differentiation strategy is a series of necessary actions to produce goods and services (at an acceptable price) with the differences valuable for target customers.
This is a strategy of product and service development so that these products and services have unique characteristics and be highly appreciated by customers compared to competitors.
The uniqueness of products enables businesses to command higher prices without risking customer backlash This strategy aims not only to offset the additional costs associated with delivering these distinctive products but also allows companies to pass on price increases to consumers Since customers face challenges in finding suitable substitutes, businesses can effectively transfer the costs of price hikes to their clientele.
The successful businesses in differentiation strategy often have the following advantages:
- Ability to research and access to leading scientific achievements
- The research and product development (R & D) team has high skills and creativity.
- Positive sales team with the ability to communicate the strength of the product to the customer successfully.
- Reputation for quality and innovation capability of enterprises.
Centralized strategy is a series of actions to do to produce goods and services to focus on serving the needs of a targeted competitive market segment targeted.
A business using centralized strategy often keeps higher loyalty of customers and this loyalty discourages competitors that make them do not want or dare to confront directly.
The specific characteristics of building business strategy of PVC 12/9
- Being a joint stock company listed on stock market, in addition to the regular funding channels, PVC 12/9 has capital funding channel through the stock exchange (UPCOM)
PVC 12/9 is a member of PetroVietnam, which is part of The Vietnam National Oil and Gas Group Consequently, the development strategy for PVC 12/9 is guided by the overarching strategies of both PVC and The Vietnam National Oil and Gas Group.
Cement is a crucial material in the construction industry, yet its market is primarily local, as experts suggest that a cement factory operates effectively within a 300km consumption radius This limitation arises from the significant consumption of national resources and fuels like stone, coal, oil, and electricity in the manufacturing process Additionally, if not properly preserved, cement can quickly freeze and require regeneration Rising costs of electricity and coal further elevate production expenses, making high transportation costs detrimental to profitability.
Planning strategies for PVC 12/9 must be comprehensive and meaningful, reflecting the significance of the cement industry as a whole and the specific investments and developments of the company Additionally, the business strategies of PVC 12/9 should align with the overarching strategies of Nghe An province to ensure cohesive growth and development.
BUSINESS ENVIROMENT ANALYSIS AND INTERNAL
Functions and duties
The company is dedicated to producing and supplying high-quality cement for construction projects across the country Additionally, it plays a vital role in delivering cement to local regions under the oversight of the Vietnam National Oil and Gas Group, contributing to market stabilization.
- Moreover, the company will have to work well to use capital and labor resource reasonably, effectively, manage and train the employees to meet the production requirements in the company.
- Ensure working safety, environmental sanitation, good security and politics.
- Improve material and moral life of laborers.
- Plan strategies and orient to organize business in excess of the proposed plan
- On the other hand, the Company has to submit the budget; execute policies, regulations and laws of the State; protect environment; protect social properties and do charitable duty.
Organizational Structure
Structure model of company management
Vision and Strategic Mission of the Company
PVC 12/9 is committed to fostering unity and collaboration to enhance development, drive breakthroughs in technological and scientific applications, and innovate leadership and business management practices This initiative aims to accelerate project implementation, boost production efficiency, and facilitate company growth, integration, and competitiveness in the market.
MANA GING DE and stand firm on the market Build the brand of PVC 12/9 become a strong brand in the cement industry.
Business philosophy
Listen and find the best solution to serve customers, a professional working environment with rules, encourage the creativity, enhance the loyalty and responsibility to the community.
The major business areas
Business sector: PVC 12/9 operates under the business license No.
The Department of Planning and Investment of Nghe An province issued registration number 2900325156 on December 29, 1992, with its seventh amendment recorded on April 27, 2010 The company primarily focuses on the production of building materials.
Produce cement, adhesive and uncalcined materials;
Exploit, process, buy, sell stones, sand and gravel;
To maximize its membership in the Vietnam National Oil and Gas sector, the company has developed civil projects, industrial facilities, transportation infrastructure, and irrigation systems for enterprises within the industry, while also engaging in real estate ventures.
Analysis of elements affecting business performance of 12/9 PetroVietnam
In line with the macroeconomic stability policy aimed at fostering production and societal stability, the government is implementing strategies to promote investment, stimulate growth, and control inflation while ensuring the safety of financial and banking systems These measures create a favorable environment for both domestic enterprises and foreign investors to engage in business development PVC 12/9 has also benefited from these advantageous conditions.
The cement industry plays a crucial role in Vietnam's economic development strategy, prompting the Prime Minister to approve a comprehensive plan for its growth through 2020 This initiative aims to meet domestic cement demand and establish export capabilities under favorable conditions, positioning the industry as a competitive force with modern technology The government prioritizes investment in expansion projects across the southern and central regions, as well as in the northern mountainous provinces By implementing advanced and highly automated technology, the industry seeks to produce high-quality, stable, and affordable cement products while diversifying its offerings, with plans to phase out blast furnace technology by 2020.
To maximize the mobilization of both domestic and foreign capital for cement investment, it is essential to leverage various financial instruments such as credit, bonds, equity capital, and venture capital Encouraging investments from all economic sectors, including foreign investors through joint ventures or joint stock arrangements, is vital The government supports the development of cement projects, particularly in mountainous and remote areas, by implementing favorable policies that facilitate growth in this sector.
The Vietnamese government has recently implemented a new import tax policy, reducing clinker import tariffs to 0% and cement import taxes to 5% This significant change poses a considerable challenge for domestic enterprises, as they now face increased competition from imported clinker and cement.
The economic landscape significantly impacts Vietnam's cement industry, particularly PVC 12/9 As a developing nation, Vietnam is experiencing rapid urbanization, with the Ministry of Construction reporting an increase in the urbanization rate from 33% in 2010 to an anticipated 45% in 2015 This surge in urbanization is driving an immense demand for housing, which in turn will lead to a substantial increase in cement requirements for construction in the coming years.
However, in short term, in the past year, Vietnam economy has faced with many problems which affect negatively the cement industry.
In 2010, experts predicted that Vietnam's inflation rate would reach 17-18%, significantly impacting the cement industry due to rising input material costs, such as clinker and gypsum Consequently, market prices surged, and wages for employees increased to support their livelihoods However, the wage growth did not keep pace with rising prices, leaving many workers struggling to make ends meet.
The rising prices of petrol and oil are significant contributors to inflation, negatively impacting production units Oil is a crucial fuel for cement production, and its price hikes lead to increased production costs When combined with the rising costs of input materials, cement prices escalate; however, market demand prevents proportional price increases, resulting in substantial losses for businesses.
Electricity productivity has been unstable, leading to rising electricity prices In 2010, severe electricity shortages resulted in widespread power cuts, significantly impacting cement factories that rely on electricity to operate their production lines Prolonged power outages forced production units to halt operations, causing substantial financial losses due to the high costs of technology investments Ensuring continuous operation of cement factories has become a top priority, especially as the cost of running these facilities remains high Although power failures decreased in 2010, electricity prices continued to rise, with a new average price officially announced by Vice Minister of Trade and Industry Hoang Quoc Vuong on February 19, 2011.
2011 increasing 15.28% compared to that in 2010 Therefore, the production cost of cement is on the rise again.
Fourthly, implementing 11/NQ-CP Government Resolution issued on February
24, 2011, many basic construction projects are halted, and thus the demands of cement reduce,
In Vietnam, homeowners across the northern, southern, and central regions are increasingly opting for robust reinforced concrete structures, utilizing materials such as bricks and cement However, the demand for glass-based construction remains relatively low.
The demand for cement is primarily driven by market segments such as public works and office buildings While glass and reinforced concrete are commonly used in construction, cement remains an essential material As housing demand continues to rise, the importance of cement in the construction industry will only grow.
Anh Son is a mountainous district in western Nghe An, located along the Lam River and Highway 7 It is bordered by Do Luong district to the east, Tan Ky and Quy Hop highland districts to the north, Con Cuong highland and Laos to the west, and Thanh Chuong district to the south, approximately 100 km from Vinh city The region primarily relies on road transport; however, the challenging topography and frequent natural disasters have severely degraded road quality, posing significant challenges for local enterprises in transporting materials and goods.
Anh Son District is rich in mineral resources, particularly limestone, with reserves estimated at up to 1 million cubic meters, alongside numerous sand and gravel deposits along the river This abundance of resources presents significant opportunities for industrial and cottage industry development Additionally, the district contains other minerals such as iron and lead However, the cement manufacturing process encounters challenges due to the relatively low percentage of gravel, necessitating the transportation of coal and gypsum from the plains, complicating raw material logistics.
Over the past two decades, Vietnam's cement production industry has experienced significant growth, with experts noting that the technology and equipment used in cement manufacturing now align with global standards Several factories in Vietnam have reached modern international levels, indicating a positive trend for the country's cement sector.
In the past decade, many cement factories have adopted advanced equipment and technology, bringing the country's cement production capabilities in line with global standards While some factories are on par with modern international facilities, ongoing innovation and technological advancements are essential to maximize production efficiency and minimize environmental pollution.
The quality of cement is largely consistent, with minimal differences among various types Advances in science and technology significantly enhance the production and trade within the cement industry Modern cement factories leverage these technological advancements to lower investment costs, optimize resource consumption, and decrease production expenses This efficiency is crucial for new cement projects aiming to remain competitive in the marketplace.
Sector environment analysis
In cement production, key supplier factors include input characteristics, pricing strategies, and supply volumes For PVC 12/9, most input materials are sourced locally, with the exception of gypsum imported from Laos and Thailand, as well as coal from Quang Ninh The Laos government has authorized Vietnamese enterprises to extract and supply gypsum for cement production, and VICEM operates a subsidiary that provides this gypsum to cement companies.
The abundant availability of raw materials for PVC12/9 encourages suppliers to invest in their extraction, leading to competitive pricing and a stable supply Consequently, the impact of suppliers on the company remains minimal.
The cement industry is currently facing a significant crisis due to an oversupply caused by the rapid establishment of production factories in the region This surplus has led to an abundance of cement, resulting in increased pressure on businesses within the sector as customer demand struggles to keep pace with supply.
Oriented customers of PVC12 / 9 are organizations as large projects, constructions and individual customers as retailer The company distributes cement through main distributors nationwide
The consumption structure of PVC12/9 reveals that organizational customers account for approximately 30%, while individual customers make up about 70% Due to the multitude of options available in the market, customers possess significant power to negotiate prices.
As for the nature, the cement industry is the natural monopoly with great barrier to entry
The cement industry in Vietnam faces significant capital requirements, particularly for the adoption of rotary kiln technology, which is being prioritized over shaft kilns Investing in rotary kiln systems is costly, with factories producing 1.5-2 million tons per year needing up to USD 200 million, provided that the necessary materials are accessible This substantial financial barrier poses challenges for many companies in the sector.
Obtaining permission to exploit natural resources poses a significant challenge for newcomers in the cement industry, which is vital to the nation's economy Consequently, local authorities, along with relevant ministries and departments, must grant the necessary permits to facilitate production.
Moreover, in the condition of cement abundance, the Ministry of Construction has submitted the document and is accepted to stop issuing permission for cement project until 2020
In short, in the short-term, it can be said that the threat of potential rivals is small.
Currently, Portland cement remains irreplaceable in the construction industry, with two primary types used: Portland and slag cement Slag cement, derived from the byproduct of cast-iron production, matches Portland cement in quality However, its availability is constrained by the productivity and technology of steel and cast-iron manufacturing Therefore, Portland cement is the preferred choice for future construction projects.
2.3.5 Analysis of competition intensity of the current rivals
The Ministry of Industry and Trade has identified the cement industry as facing significant competitive pressure, with a total of 59 companies operating 105 cement production lines across the country.
Nghe An province is home to several prominent cement companies, including PVC 12/9, Hoang Mai Cement Joint Stock Company, and Cau Duoc Cement Joint Stock Company, collectively producing around 12.9 million tons of cement annually.
Chart: Cement project in the period of 2010 – 2030 of Vietnam Cement
Corporation (for companies in Nghe An)
Vietnam's deep integration into the international market, particularly through AFTA and WTO, presents significant opportunities for cement companies to expand their consumer base and access advanced human resources and management systems from developed nations However, this integration also exposes local cement producers to intense competition from foreign companies, particularly those from China, Thailand, and India.
When market supply surpasses demand, companies face intense competitive pressure, leading to significant challenges Excess inventory can result in substantial financial losses, particularly for cement companies that must manage high operational costs.
=> In short, the current structure of Vietnam cement industry can be described by Porter model as follows
Chart: General Matrix assessing business environment of Vietnam’s cement industry
Analysis of internal PVC12/9
PVC 12/9 currently employs around 500 individuals, with 15% holding university degrees or higher This workforce composition effectively meets operational needs while minimizing resource waste The company's Board of Directors consists of five members, all graduates of top Vietnamese universities, bringing extensive management and technological expertise in the cement industry Their qualifications, capacity, and long-term vision reflect a strong commitment to establishing PVC 12/9 as a leading cement brand in Vietnam.
The dedicated workforce at PVC 12/9 is characterized by enthusiasm in production and business activities; however, the majority of workers are local and lack specialized skills, resulting in relatively low productivity levels With a workforce of 500 employees and an annual output of 0.6 million tons, the average output per worker stands at just 1,200 tons, which is significantly lower than that of competitors like Hoang Mai Cement Company.
The company's Board is responsible for directly assessing performance outcomes and guiding production and business activities They continuously monitor the company's status to establish timely guidelines, resolutions, and decisions that facilitate the Executive Board's execution of production tasks while ensuring project timelines are met All resolutions and decisions are made through consensus among members, aligning with company regulations and legal standards.
After one year of operation, the company has navigated various challenges and changes, leading to significant improvements under the Board's leadership The PVC 12/9 brand is steadily gaining recognition, while the rights and benefits of shareholders are being prioritized Additionally, employee income, benefits, and working conditions are gradually improving The Board remains committed to addressing shortcomings and learning from experiences to effectively implement the resolutions of the Congress Party and the objectives set by the shareholder General Assembly.
On 01/12/2010, the share of the PVC 12/9 officially joined in trading floor (UPCOM floor), stock code PX1.
Opening- KLBQ 10 days (CP) 100 EPS (TTM) -
High - KLBQ 30 days (CP) 130 P/ E (TTM) (Times) -
Low- SLCP issue 20.000.000 BV (MRQ) -
Quality (CP) - Charter capital(million VNĐ) 200 P/ B (MRQ) (Times) - High 52 Week 15,9 Capitalization (million VNĐ) 290 ROA (TTM) (%) - Low 52 Week 14,5 Rate of dividend/market price (%) - ROE (TTM) (%) -
Note: TTM: 4 latest quarters, MRQ: The most recent quarter, Price unit:
(Sources: Information of PX1 share code-on trading floor on 15/9/2011)
In 4 th quarter of 2010, the company has not counted the payment of dividend for shareholders yet, because after the equitization to now, the business results of the company have not had profits, therefore, not counting the targets of PM, ROA, ROE.
In 2010, the company's financial situation showed limited positive signs due to various objective factors During this year, the company took significant steps towards joining the stock market and held its annual general meeting, resulting in an increase in charter capital through share issuance Despite these challenges, the long-term profitability potential remains substantial, as PVC 12/9 holds several advantages over competitors, including strong support from partners like PetroVietnam National Corporation and contracts with key projects in the petroleum industry However, entering the volatile Vietnamese stock market amid global economic fluctuations poses considerable risks for the company.
Number Financial index Method of counting Target
1 Rate of Sales (ROS) Profit before tax/net sales 0,0022
2 Profit margin (PM) Net interest of public shareholders /
Profit before tax, Interest/ Total assets
Net profit of public shareholders -
5 (ROE) Net profit of public shareholders/
Total capital of share of public shareholders
The company's profitability for the year is notably low, as indicated by the financial criteria of Rate of Sales (ROS) and basic earnings power.
Early year The end of period Difference Value
It can be found that PVC 12/9 is interested in investing in the technology line.
The Vietnam National Petroleum Corporation has invested 1,000 billion VND in a "Technology Innovation Project for Cement Production," utilizing advanced European technology to achieve a capacity of 1,500 tons of clinker per day This initiative aims for sustainable development while ensuring a steady supply of cement for both the domestic market and Laos It is a crucial strategy that enhances employee living conditions, boosts local budget revenues, and fosters the growth of the local industry in Nghe An province, aligning with the government's "Economic and Social Development of the West of Nghe An" project.
In 2010, the company focuses on investing in the project of constructing a new factory which has the capacity of 1,500 tons of clinker/day with a total capital of 814 billion VND.
It can be commented objectively that the technology line of PVC 12/9 are now relatively advanced, and modern compared to that of cement companies in the country.
The PVC 12/9 cement factory features kilns measuring 4.5m x 70m, equipped with a two-branch, five-floor heat exchange Cyclon system and a user-friendly Canciner system that allows for easy temperature adjustments With an impressive capacity of 4,000 tons of clinker per day, the kilns underwent improvements in 2006, increasing their capacity to 4,400 tons per day They are designed utilizing ROTAELAM multi-channel coal nozzles for enhanced efficiency.
PILAR brand, provide 100% burning anthracite coal, oil is only used in case of the dry or when the kilns are not stable.
The modernist burning spout features advanced capabilities, including easy operation, quick ignition, and efficient burning In the Canciner process, 55-60% of the total fuel is utilized, while the remainder is combusted in a kiln Once the clinker exits the kiln, it is placed on the BMH SA cooling rig, which boasts high-efficiency heat recovery with air temperatures exceeding 9000°C This rapid cooling process ensures the consistent quality of the clinker.
Clinker, gypsum, and additives are transported from storage to the mills using a conveyor system and bucket lift The clinker is then fed into the preliminary mills, specifically the CKP 200, through automatically adjusted material balances This preliminary cement mill is a product of the TECHNIP firm.
Cement produced from the grinding mill is combined with gypsum and additives in a marble grinding mill, which operates in a closed-loop system This two-section mill achieves a productivity rate of 240 tons per hour and a cement fineness of up to 3,200 cm²/g The finished cement products are then automatically transported to four silos, each with a capacity of 10,000 tons, using an efficient tray system and lift bucket.
* System of packing and shipping
From the bottom of the silo container, through door, cement is moved to the storage tanks of the packing machine or the parts exporting bulk cement.
The cement export system features two automobile spouts with a productivity of 150 tons per hour Additionally, it includes a packing system equipped with four BMH packing machines, each with eight spinning spouts and an automated quantitative scale, achieving a productivity of 120 tons per hour Cement bags are efficiently transported via a conveyor system.
* System of managing and testing production’s quality
The QCX quality management system ensures that materials and fuel used in production, as well as exported products, are automatically and periodically sampled These samples are analyzed in the laboratory using advanced equipment, including the ARL9800-XP X-ray machine from Switzerland, which offers quick and highly accurate results Complemented by various high-sensitivity devices such as electric kilns, thermal analysis tools, and quantitative measuring instruments provided by FCB contractors, the system adheres to international standards, delivering rapid and precise analysis results.
Efficient production processes enable timely adjustments in distribution compositions and decision-making regarding burning and mixing additive modes during cement grinding, ultimately enhancing product quality.
* Technology for producing some key goods
SWOT matrix
2.5.1 Strengths, Weaknesses, Opportunities and Threats of PVC 12/9
PVC 12/9 is focused on facilitating production and business activities while ensuring compliance with regulations and social security policies for employees, as supported by the Vietnam Petroleum Corporation, PetroVietnam Construction Joint Stock Corporation, and PetroVietnam Nghe An Construction Joint Stock Corporation.
S2- The company has just completed the project of building the technological producing line with 1.500 tons of clinker/day.
S3 emphasizes the importance of unity, consensus, and solidarity in leadership to effectively execute production and business tasks This approach aims to enhance the operational efficiency of the company by refining the machinery from leadership down to various divisions and factories.
S4- Team of staff and employees are experienced, responsible, and enthusiastic, love working, have long-term attachment to the company.
Vietnam's economy is significantly impacted by the global financial crisis, leading to inflation and fluctuating market prices These factors contribute to slow economic growth and diminished purchasing power, which in turn affect the production and consumption of products within companies.
The company is facing challenges due to changes in key leadership and a reorganization of its structure and staff As a result, there has been a lack of proactive engagement with new tasks and job responsibilities Additionally, the workforce is overly large yet lacks experienced and qualified technology workers, leading to a high proportion of unskilled labor This situation has contributed to decreased productivity and efficiency in production.
W3- Some debts before equitization in 2010 has not solved: tax debt before
In 2005, local governments, enterprises, customers, and individuals faced significant debt levels, with many debts lacking clear origins and proper documentation for verification The operating capital for companies largely relied on high-interest bank loans, contributing to financial strain.
The W4 production lines and equipment are suffering from significant degradation and damage, leading to a substantial reduction in their remaining value due to high depreciation Consequently, the production costs are elevated, resulting in higher market prices for products, while the overall market competitiveness remains low.
Vietnam is increasingly integrating into the global economy, providing its enterprises with opportunities to engage with international businesses, attract investment, and gain insights into modern technologies and management practices This integration particularly enhances access to the expanding markets of East Asia.
O2- At present, the cement price in Vietnam is about 20% lower than that in the area This is very beneficial to export.
The Ministry of Industry and Trade, along with the Government, is focused on developing the cement industry as a vital sector for the country To boost domestic cement demand, the Ministry of Construction has recommended the Government implement strategies such as the construction of cement concrete roads, including highways.
O4 - The production and business location of PVC 12/9 is very near to the
The government's reduction in infrastructure investment has significant implications for the cement industry, which has the potential for substantial expansion According to the Department of Building Materials under the Ministry of Construction, there are currently 105 cement production factories in the country, leading to increasing competitive pressure within the market.
T3 - The enterprises in the cement industry have to face with the
In 2010, the cement industry marked a significant turning point by not importing clinker for the first time, yet it simultaneously encountered an overproduction crisis With a total production capacity of 61 million tons per year, the industry planned to produce 53 million tons that year However, the estimated demand for cement in the country was only around 50 million tons, resulting in an excess of over 3 million tons of cement.
The Vietnamese cement industry, particularly PVC 12/9, faces significant challenges due to anticipated increases in the prices of petroleum, coal, and electricity As a result, many factories may operate below their capacity, leading to substantial losses for kilns that lack adequate fuel during the burning process.
S1- PVC 12/9 is steered and supported by PVN,
PVC and PVNC to implement the task of production and business as well as product consumption, regulations, policies, social securities for labors.
S2- The company has finished the project of constructing production technological line of 1.500 tons clinker/day PVN has steered investment and assembly of new technological line.
Consistency, agreement, and solidarity among the leadership team are crucial for effectively steering the implementation of production and business tasks This unified approach enhances the operational efficiency of the company, ensuring seamless communication and collaboration from the leadership board down to divisions, offices, and enterprises.
S4- Cadres, labors have experiences, duty, enthusiasm, attachment to the company.
The Vietnamese economy is significantly affected by the global financial crisis, leading to inflation, fluctuating market prices, and a slow growth rate These factors contribute to decreased purchasing quantities, which can adversely impact production and product consumption for companies.
The recent leadership changes and organizational restructuring have hindered the company's ability to effectively manage new responsibilities Although the workforce is abundant, there is a significant shortage of qualified and experienced technical personnel This reliance on a predominantly unskilled labor force is contributing to decreased productivity and overall production efficiency.
W3- Some debts before privatization by
As of 2010, several unresolved financial issues persist, including stagnant tax debts from before 2005, significant receivable debts owed by local authorities, enterprises, and individuals, and unclear debts lacking proper documentation for verification Additionally, businesses face challenges due to high-interest lending capital, hindering their production and operational activities.
W4- Equipments and machines are degraded, damaged; the remaining value must extract high depreciation; production cost is still high; competitiveness is low.
O1 - Viet Nam is integrating into
- S1O1: make use of the support from PVN; attract investment; association with domestic and foreign enterprises.