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GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT BUILDING BUSINESS STRATEGY OF SAO VANG RUBBER JOIN STOCK COMPANY PERIOD 2011-2015 Group No: 02 Student Name: Pham Tuan Anh Ngo Xuan Ty Nguyen Thi Anh Nguyet Bui Duy Quang Nguyen Huu Nhan Hanoi, 2011 Capstone Project - GaMBA01.X0409 - Group 02 COMMITMENT We commit that the content of this capstone project has not yet been submitted to any master program as well as any other academic program We also commit that this capstone project is the effort and hard working of the members of our group The analysis, findings, conclusion in this capstone project (apart from the reference) is all done by our own work GROUP MEMBERS SIGNATURE i Capstone Project - GaMBA01.X0409 - Group 02 ACKNOWLEDGEMENT We would like to express our sincere thankfulness to the Educational Technology & Career Development Center of Hanoi National University, the managers and the staff who have created the program and supported us since the beginning to the finishing of the program at GaMBA01.x0409 We sincerely thank to the teachers of GaMBA program who have taught, created the conditions so that we have been enjoyed the good learning environment With the well organizing of the program, we have learned academic knowledge as well as practical method to apply that knowledge to our business We are grateful to the Sao Vang Joint Stock Company The company has strongly supported us with the data, survey of realistic situation so that we have completed this capstone project Last but not least, we highly esteemed the encouragement and the sharing of our families and classmates who gave us invisible but essential support in our studying Many thanks! ii Capstone Project - GaMBA01.X0409 - Group 02 CONTENT PREFACE CHAPTER I CHAPTER 20 SAO VANG RUBBER JOINT STOCK COMPANY (SRC) ANALYIS 20 CHAPTER 62 BUILDING BUSINESS STRATEGY FOR COMPANY IN THE FOLLWING YEARS AND THE IMPLEMENTING SOLUTIONS 62 3.1 IDENTIFY COMPANY TARGETS IN THE FOLLOWING YEARS AND VISION TO 2020 62 3.2 BUILDING THE BUSINESS STRATEGY FOR SRC 2011-2015 68 3.3 SOLUTIONS TO IMPLEMENT THE STRATEGY 75 3.4 SOME PROPOSED COMMENTS .83 CONCLUSION 86 iii Capstone Project - GaMBA01.X0409 - Group 02 LIST OF ABBREVIATION SRC: Sao Vang Rubber Joint Stock Company DRC: Danang Rubber Company CSM: Southern Rubber Company VAMA: Organization of automobile makers of Vietnam GDP: Gross domestic product ROS: Return on sales ROA: Return on assets ROE: Return on equity IE Internal – External Matrix IFE Internal Factor Evaluation FDI Foreign Direct Investment iv Capstone Project - GaMBA01.X0409 - Group 02 List of Tables and Figures Figure 1.2.1.1.2: Five Forces Model of Michael Porter .8 Figure 1.2: Michael E Porter Competitive Advantages Model Table 1.1: External Factor Evaluation Matrix 11 Table 1.2: SWOT Matrix .14 Chart 2.1: Organization structure of SRC 28 Table 2.2: Economic Growth of Vietnam over years 30 Table 2.3: Rivals’ Information 37 Figure 2.2: Revenue in 2007, 2008, 2009 and 2010 38 of SRC, DRC and CSM .38 Table 2.4: Main financial ratios of rubber companies over 2007-2009 38 The key performance indicators of the company in recent years 47 Table 2.1: Operation Result of the Company 47 Table 2.5: Fixed Assets of SCR over recent years 48 Table 2.6: Human resource status of company in recent years 52 Table 2.7: Assets and capital structure of company 55 Table 2.8: Main financial indicators 56 Table 2.9: External factors evaluation matrix of SRC 58 Table 2.10: Internal factors evaluation matrix of SRC .59 Evaluating the competitive position of the company 59 Table 2.11: SWOT Matrix of SRC 60 Table 3.1: Forecast the GDP of Vietnam, period 2011-2015 62 Table 3.2: Revenue of SRC from 2000 to 2010 64 Table 3.3: Establish the equation to forecast the revenue 65 Table 3.4: Forecast SRC revenue according to the math model to 2015 65 Table 3.5: Forecast the revenue up to 2015 for SRC 66 Table 3.6: Forecast the profit level of SRC up to 2015 66 Table 3.7: Main targets for SRC, period2011-2015 67 v Capstone Project - GaMBA01.X0409 - Group 02 PREFACE The Necessary of the Project In the market economy with the globalization trends nowadays, the priorities of the enterprises are enhancing the competitiveness of their products and maintaining as well as broadening the market share In order to be successful, the task of planning, building and implementing the business development strategy is the top and inevitable task This will help the enterprise to catch the signals of the markets, control risks which determine the existence and development of that enterprise Especially, in the severe competition period or the economy crisis period, the future of an enterprise totally depends on the fact that whether or not that enterprise has right business strategies Nowadays, all most of the enterprises in the world are putting the task of building business strategies as the top priority Sao Vang Rubber Joint Stock Company is the first company in the rubber industry of Vietnam After 50 years of development, the brand name of Sao Vang Rubber () has improved the confidence from the consumers all over the country SRC is now one of three companies that have the biggest market share in the domestic market of rubber inner tubes, tires However, in the market economy and rapid international integration as current status, especially after Vietnam joined WTO, the task of maintaining and broadening the domestic market share are facing many difficulties The challenges come from direct domestic competitors and the high quality imported products which are gradually dominating the market Besides that, input material prices are increasing when Vietnam is implementing the policy of eliminating subsidy, gradually building the real market economy To exist and develop, the Company needs an appropriate and long term strategy, so that the Company can face the changes in the current embedded threats – business environment Because of the above reasons, Group has chosen the capstone project named “BUILDING BUSINESS STRATEGY OF SAO VANG RUBBER JOIN STOCK Capstone Project - GaMBA01.X0409 - Group 02 COMPANY PERIOD 2011-2015” We are seeking the solutions for the most appropriate business strategy for Sao Vang Rubber Joint Stock Company in the 10 years period The Objective of Research Researching on this project has helped the group member understand the theoretical basis of building business strategy The research also helped the group members the skills to implement the business strategy in Sao Vang Rubber Joint Stock Company The research has helped SRC acknowledging the opportunities, threats, strengths and weaknesses and indentifying business strategy in the period of 2011-2015 and vision to 2020 The Scope of Research The scope of research is the business environment of Sao Vang Rubber Joint Stock Company in recent years The Methodology of Research The research used the following methods: Material dialectical and analytical method: analyze the data from financial reports, compare periods and integrate to give the comments Method of analysis through matrix to assess the research results of business environment which helped the Company selects the strategy scientifically Statistical method: research on tables, graphs, figures and numbers to get conclusions and trend to evaluate the operating status of the industry and the company Capstone Project Structure Besides the introduction, conclusion, the project is divided into three chapters: Chapter 1: Theoretical basis of building business strategy Chapter 2: Business environment assessment of SRC Capstone Project - GaMBA01.X0409 - Group 02 Chapter 3: Building business strategy for SRC in the following years and solutions to implement the strategy Capstone Project - GaMBA01.X0409 - Group 02 CHAPTER I THEORETICAL BASIS OF BUILDING STRATEGY 1.1 DEFINITION OF STRATEGY AND ROLE OF BUSINESS STRATEGY 1.1.1 Definition of Business Strategy The word “Strategy” has the Greek origin which is combined by words “stratos” (military) and “agos” (leading, control) with the meaning to indicate the big and long term plans which base on the analysis of advantages and disadvantages of the enemy This term firstly use in the military area Since then the term of “business strategy” has been used According to traditional point of view, strategy is the task of identifying the main and long term objectives of an organization, and then identifying the detail action plans together with use the resources appropriately to reach the targets Over many periods of development in academic area, the definition of strategy has changed many times and not come to the agreement yet There are still many points of view about business strategy According to Michael E Porter, “Strategy is the art of making competitive advantages” “Strategy is a type of comprehensive and general plan which is designed to ensure the achievements of organization’s objectives”, Gluecl Chandler is one of the first people to initiate strategic management theory which defines strategy as “Determining targets, basic long-term purpose of enterprise, the applying a sequence of actions as well as allocating necessary resource to complete these targets” The text book of Strategic Management subject in the MBA program Griggs University defined: “Strategy is a range of sophisticated actions to mobilize resources that an organization may have in order to gain a certain goal” Capstone Project - GaMBA01.X0409 - Group 02 allocation in the workshops in order to save production time, improving performance in each area, and each stage of work Should not implement low price for the high quality products Taking advantage of consumer psychology that high quality product will have high price and vice versa The price of these products is not lower than products with similar quality of competitors With the types of products targeted at low-income market: the more lowering the price in comparison with the competitors (such as tires and inner tubes of Casumina, DRC, Inoue) * Mix promotion: Promotion mix: Investment strongly on the advertising and sales promotion activities with the aim of introducing the SRC products, especially new products Specifically as follows: Advertise on television and radio more often The company has no activity, while this is the means of promoting products commonly used and highly effective Because of it, the company can achieve the purpose of introducing SRC products to potential consumers On the other hand, the consumers only think about new product when their tires are broken Their needs are so passive they have no attention to the situation of the new products on the market Meanwhile the lifetime of a tire is least two years, so if not advertising regularly customers will quickly forget the product and see no change of the company in meeting their needs Hence, company need to make this activity regularly Advertising content must be directed to the specific product Hence, companies should consider carefully which products to promote Promote the high quality tires is most appropriate at this time For example, carry advertisements for Leopard inner tubes and tires Advertising for a product should last at least two months The company just switched to other products if it has the different characteristics with previous advertisements This makes consumer think company has innovative products and they will gradually notice changes in business of the 79 Capstone Project - GaMBA01.X0409 - Group 02 company Only by doing so, the consumers who previously left SRC will reconsider their choice as they believe the quality has been improved and once again chose SRC products Implement strongly local advertising activities about changing in product quality because local advertising is cheaper and high efficiency The company trust in product quality, compares to competitors, but because of the fact that many customers turn away from company product so that the company product not have the opportunity to interact with customers to demonstrate the progress in product quality The target now is to make the SRC products are used as much as possible by promotion to end users on special occasions Promotion will be done by large maintenance center, and company must appoint a supervisor to the implementation of these promotions When preparing the promotions, company must notify consumers through leaflets or posters to be distributed to families Combine with the television advertising program to inform these activities For inner tubes and tires, can doing promotions in specific forms such as buy one get one free, or buy one get one half price, buy the front tires get the back tires and vice versa; or promotion with another product, or organized games with prizes and lotteries Increase the budget for advertising and sales promotion activities Manage the activities of advertising and mix promotion closely by making a list for each activity Specify cost, time and person in charge to evaluate the performance of each activity 3.3.2 Financial Solutions * Financial solutions for Radian tires project: Base on the strategic orientation on developing the company from 2010-2015 with the key project is the Radian tire 80 Capstone Project - GaMBA01.X0409 - Group 02 production, estimated capacity from 300,000 to 600,000 units/ year, total investment to the project is $ 150 million Financial solutions to ensure capital investments are: The estimated capital of company is 30% equals to USD 45 million, sourced from: • Retaining profit every year to increase its capital, develop funds and basic depreciation of the company • Consider the appropriate time, when market is favorable, issue new shares, raising capital from investors to serve the project The remaining 70% equals to USD 105 million, using the outside finance source including long term bank borrowing and financial leasing and collateral mortgage by the assets from the fundamental construction that bank lending to provide capital of company’s projects * Financial solutions for the conversion of use and exploit the advantages of land at 231 Nguyen Trai: mobilize long-term venture capital in the form of jointly invested and distributed profits according to the level of contribution * For short-term capital to ensure continuous company business, the financial solutions are: - Use a capital contributed by shareholders and the capital increase from retained earnings to supplement working capital - Selection of the prestigious banks with a reasonable interest rate to supplement short-term loans for working capital - Borrow form the Group and some units within the Group to supplement working capital 3.3.3 Human Resource Solutions To attract higher technical level workers with (experienced engineer or young talent in universities, technical and skilled workers) This is not only to serve the 81 Capstone Project - GaMBA01.X0409 - Group 02 current needs of the company but also the long-term investment, the preparation of human resources for acquiring and developing modern technologies Manufacturing inner tubes and tires contains harmful elements to the health of direct workers in production Hence machine and workplace must be safe and reduce air pollution The direct production workers must be protected and allowanced to be toxic Training to all staff the awareness of how important the product quality to the benefit of the whole company as well as indirect effects to their personal benefit Besides, there must have policies to encourage the employee to work: rewards for innovative ideas, the performance fulfill the plans that benefit the business of the company 3.3.4 Production Solutions The rearrangement of production must be seen as bold and necessary solutions The using of the company resources in a most efficient way to reach the growth target and lower production costs, improve efficiency and income for workers Maximize the capacity of machines to improve productivity and promote efficiency of investment Implement production plans that have been approved with the timely adjustment of market demand Planning for the reasonable using of labor in the lacking quantity and weak of quality or labor market conditions Adjust of production planning in the company towards product structure of technology, machinery and equipment and the skilled workers More specific on the task of eliminating the waste and saving energy in the company to strive to reach saving rate of 4-5% / year, especially electricity saving in the circumstances the government adjust the electricity price closer to the real price 82 Capstone Project - GaMBA01.X0409 - Group 02 Enhance the inspection and control of the discipline, work hours, awareness of observing the safety rules First of all, implementing on the land that company has; product structure of technology, machinery and equipment and the human resource rearranged toward the high specialization Move some products to produce in Xuan Hoa and Thai Binh branch according to the reasonable schedule to ensure the development of production and stable employment for workers, creating a breakthrough in labor productivity 3.4 SOME PROPOSED COMMENTS 3.4.1 Proposed comments to SRC The company should change the method of leadership: remove centralized, orders leadership style and replacing by the flexible creative leadership style Equitization in the company has created a favorable environment for the implementation of this leadership style Company must create the friendly work environment and enable employees to work hard for the company The leaders should see that the success or failure of the company depends heavily on the spirit, the will and determination to work of employees The company should combine the management theory in specialized method of Taylor with the Kaizen theory of Masaakiimai into practice corporate governance, namely: Applying the theory of Taylor with the following main contents: + Improving the relationship management: A fundamental goal of management is to solve the severe conflicts between owners and workers; not only by a system of technical solutions but also by management practices that both owners and workers can be attached to work together in an organization to common goal of improving efficiency and productivity Taylor also found the motivation of labor - is 83 Capstone Project - GaMBA01.X0409 - Group 02 also the concern of both parties - the economic benefits, the reasonable compensation system + Standardization of work: through observations, analyzing the movements of workers, Taylor found that there are overlap movement and loss of power that labor productivity is limited; from which to draw conclusions that need to rationalize the labor on the basis of specific norms for the quantitative criteria as the optimal way to divide the work into phases, stages, impose the standard to evaluate the work results + Specialization of labor: labor in the sense that science requires specialization in the division to reach the "best" and "cheapest" requirement This depends firstly to managers in the organization Organize toward production lines as a result of the direction of specialization of labor, in which each worker made only one regular, continuous simple operation Taylor stressed to find the "best" man in the direction of depth, specialization of labor The specialization request the improvement of working tools according to their specialization which is easiest to use, takes less effort and highest productivities Applying the Kaizen theory of Masaakiimai can be summarized as follows: + Kaizen in Japanese means "improve, improve.", the essence of Kaizen is small improvements, improved gradually Work is improving every day + Through the Kaizen improvement, the Japanese often take advantage of available resources such as manpower, materials and equipment without cost However, in case of necessity they are willing to invest large sums of money for improvements + Kaizen focuses on the implementation of work, improving the implementation process for better results Moreover, Kaizen is towards people and the efforts of human 84 Capstone Project - GaMBA01.X0409 - Group 02 + Kaizen emphasizes the role of managers in supporting and encouraging the efforts of workers to improve work processes 3.4.2 Proposed Comments to the Government To implement the strategy of industrial development in general, the strategic development of rubber industry in particular, the state should have adequate policies in the following areas: - Policies on growing and processing of natural rubber in Vietnam - The policy of formulation and development of petrochemical industry These sectors can provide synthetic rubber, an important raw material of rubber industry - The policy against smuggled goods, fake goods, including the products made from rubber 85 Capstone Project - GaMBA01.X0409 - Group 02 CONCLUSION Business strategic planning is vital for every business and also an effective method for businesses to use resources efficiently, and correctly determine the direction in the development process In the nowadays rapid changing environment, if solely base on the previous advantages but not promptly adapt to the changes of the environment, it is difficult to survive and thrive In fact, a few Vietnam enterprises undertake the strategic planning for their development in the appropriate and scientific way Base on the analysis of the internal and external factors to determine the strengths, weaknesses, opportunities and challenges, we present the strategy for the Sao Vang Rubber Joint Stock Company as follows: - Improve product quality and SRC brand name - Strengthening relationships with suppliers The company strives to become a big client in order to create a stable and long term source of material - Strengthening the relations with traditional customers to maintain and expand markets - Focus on developing domestic market and expand to export markets - Perform joint venture, connection to the trading and services area We have analyzed and chosen the basic strategies that the company should implement in the coming periods are: - Period 2011-2015: Implementation the product differentiation strategy - Period 2016-2020: Implementation the business diversifying strategy From the actual operating environment of the company, we presented solutions for company to well implement the above strategies The flexible and comprehensive implementation of the proposed solutions will contribute to bring positive results, enhance the brand, the market shares to SRC However, during the 86 Capstone Project - GaMBA01.X0409 - Group 02 implementation process, the company should regularly inspect, evaluate and promptly adjust in accordance with the specific conditions of business Business strategic planning is a complicated issue With us, time and ability to research is limited, so that the research cannot avoid the shortcomings We look forward to receiving the comments of the teachers, and classmates to have more completed work 87 Capstone Project - GaMBA01.X0409 - Group 02 ANNEX: Balance Sheet and Income Statement Financial Statements 2010 Audited SSSAO VANG RUBBER JSC FINANCIAL STATEMENT 2010 BALANCE SHEET At date 31 month 12 year 2010 Unit: VND Assets CURRENT ASSETS Cash and cash equivalents Cash Cash equivalents Current receivables Trade receivable Advance to suppliers Receivables from related parties Other receivables Provision for doubtful debts Inventories Inventories Provision for obsolete inventories Other current assets Value added tax deductibles Tax and other receivables from the State Other current assets Non-current assets Long term receivables Fixed Assets Tangible fixed assets - Cost - Accumulated depreciation Leasing tangible fixed assets 88 31/12/2010 01/01/2010 371.264.189.395 352.143.603.404 27.681.302.639 41.959.981.628 21.681.302.639 6.959.981.628 6.000.000.000 35.000.000.000 64.127.264.177 73.240.517.394 56.501.728.022 72.969.606.088 8.612.704.127 3.907.463.326 1.038.473.792 764.208.966 (2.025.641.764) (4.400.760.986) 272.135.072.657 233.262.807.419 272.135.072.657 233.262.807.419 7.320.549.922 3.680.296.963 3.769.204.224 1.376.026.823 112.043 3.551.345.698 2.304.158.097 199.458.705.274 229.672.558.489 190.044.774.189 227.342.208.693 136.093.040.814 172.385.391.710 490.449.878.290 489.154.516.046 (354.356.837.476) (316.769.124.336) 49.932.589.950 51.027.223.483 Capstone Project - GaMBA01.X0409 - Group 02 - Cost - Accumulated depreciation Intangible fixed assets - Cost - Accumulated depreciation Construction in progress Real estate investment Long term finance investment Invest into joint ventures Other long term investment Other long term assets Long term prepaid expenses TOTAL ASSETS 76.435.109.073 69.702.137.889 (26.502.519.123) (18.674.914.406) 3.661.786.147 3.677.140.522 3.703.723.022 3.703.723.022 (41.936.875) (26.582.500) 357.357.278 252.452.978 9.174.375.448 1.749.753.280 9.174.375.448 1.716.503.780 33.249.500 239.555.637 580.596.516 239.555.637 580.596.516 570.722.894.669 581.816.161.893 LIABILITIES LIABILITIES Current liabilities Short term borrowings Trade payables Advance from customers Tax and payables to the State Payables to employees Accrued expenses Payables to related parties Other payables Short term provision Bonus and welfare fund Non-current liabilities Long term payables to related parties Long term borrowings Losing job provision Unimplemented revenue OWNER’S EQUITY Owner’s equity Capital of owners 31/12/2010 333.094.422.096 307.507.888.017 226.672.481.495 40.213.261.629 4.668.394.860 2.051.923.483 16.756.892.313 5.585.922.615 1.008.449.114 5.561.134.981 4.989.427.527 25.586.534.079 23.772.260.441 1.747.519.092 66.754.546 237.628.472.573 237.446.232.974 162.000.000.000 89 01/01/2011 346.439.907.147 310.200.655.387 195.532.927.082 53.947.257.105 4.356.240.931 11.473.335.525 25.641.717.836 10.272.964.980 3.248.254.401 5.727.957.527 36.239.251.760 34.735.059.542 1.469.374.037 34.818.181 235.376.254.746 235.152.995.888 108.000.000.000 Capstone Project - GaMBA01.X0409 - Group 02 Share surplus Other capital of owners Foreign exchange difference R&D fund Finance provision Other fund of owner capital After tax undistributed Finance source and other funds - Bonus and welfare fund - Finance source - Finance source for fixed assets Total Liabilities 3.605 1.001.031.559 (78.669.739) 29.645.153.027 5.665.327.914 39.213.386.608 182.239.599 20.430.233.605 1.001.031.559 (979.677.303) 26.781.815.241 5.665.327.914 74.254.264.872 223.258.858 14.454.547 167.785.052 570.722.894.669 (454.545) 223.713.403 581.816.161.893 INDICATORS OUTSIDE BALANCE SHEET INDICATORS Leasing assets Bad debt has released (VND) Foreign currency (USD) 31/12/2010 1.509.172.439 2.660,01 01/01/2010 946.677.743 45.556,24 INCOME STATEMENT Unit: VND INDICATOR Revenue from sale of goods and rendering or services Revenue deductibles Gross revenue from sale of goods and rendering of services Cost of goods sold Gross earnings from sale of goods and rendering or services Revenue from finance activities Finance expenses Including: interest expenses 90 2010 2009 1.153.299.054.488 1.096.404.134.443 1.152.807.556 3.374.999.635 1.152.146.246.932 1.093.029.134.808 1.041.988.602.369 888.071.975.456 110.157.644.563 204.957.159.352 1.673.140.827 43.247.022.135 30.285.888.682 1.429.934.547 27.774.509.680 23.539.753.823 Capstone Project - GaMBA01.X0409 - Group 02 Sales expenses Management expenses Gross profit Other income Other expenses Other profit Total earnings before tax Current corporate income tax Deferred corporate income tax Earnings after corporate income tax Earnings per share 25.151.187.627 27.481.571.380 15.951.004.248 1.532.727.016 138.163.956 1.394.563.060 17.345.567.308 2.863.337.786 26.686.234.982 35.456.450.341 116.469.898.896 1.040.770.719 214.690.937 826.079.782 117.295.978.678 14.827.303.895 14.482.229.522 1.149 102.468.674.783 9.488 ACCOUNTING MANAGER Date 28 month 02 year 2011 COUNTRY MANAGER (signed) (signed) Đào Thị Hoa Lê Công An 91 Capstone Project - GaMBA01.X0409 - Group 02 REFERENCES: Strategic management overview Author: Fred.David Strategic management Author: PGS.TS Lê Giới TS Nguyễn Liêm Th.s Trần hữu Hải MBA within hand –Marekting topic Author: Cherletd Schewe Alexander WatsonHiam MBA – Strategic management slides- Griggs University Finance management basis Author: TS.Nghiêm sỹ Thương Production and services management Author: GS.TS Đồng thị Phương Thanh Sao Vang Rubber JSC financial reports (year2007, 2008, 2009, 2010) Political report of Board of management of Sao Vang Rubber JSC, XIX edition 92 ... supported us since the beginning to the finishing of the program at GaMBA01.x0409 We sincerely thank to the teachers of GaMBA program who have taught, created the conditions so that we have been... Capstone Project - GaMBA01.X0409 - Group 02 Chapter 3: Building business strategy for SRC in the following years and solutions to implement the strategy Capstone Project - GaMBA01.X0409 - Group... o Foreign Account: 220-110370.569 at Vietcombank o Business Registration Certificate No 0103011568 dated on 3rd April 2006 20 Capstone Project - GaMBA01.X0409 - Group 02  Key trading sector