Market development strategy for real estate business of FPT corporation in the south east of Vietnam during 2012 to 2016.

This study used SWOT matrix and concept of generic strategy Michael Porter, 1985 to formulate alternative market development strategies for real estate business of FPT Corporation from n

(PART-TIME)

Tutor’s Name: Assoc Prof Lê Nguy n H u

Ho Chi Minh City

(2011)

ACKNOWLEDGMENT

MBA is a challenging journey but interesting one This program inspires me to touch and enrich my knowledge At the end of this program, I understand that MBA is just a new starting point in my life and my study career

To complete this project, I have received a lot support from many people who are professors of program, my colleagues, my classmates, my partners and my family I would like to acknowledge the help of all

First and foremost, I would like to thank my family, especially my daughter because of giving me a great encouragement and support to complete not only 2-years journey of this MBA program but also all struggles I have met in study as well

as work

I would like to express my deeply thanks and full of respect to my supervisor, Assoc Prof Lê Nguy n H u, for all challenges, enthusiastic encouragement and precious comments By the advice of Professor, I completed not only my final project but received a lot of knowledge and improve my experience in solving problem of business also

I would like to express my thanks to my all colleagues in FPT Corporation; Mr Hoàng Nam Ti n, Mr Lê ình L c, Mr Ph m Tùng Lâm, Dr Nguy n ình Hùng, Mrs Nguy n Th H ng Hà, Mr Nguy n V n L c and many others By your support to me

in group discussion and in-depth interview, your great opinions and ideas in appropriate strategie formulation for real estate is helpful for me in this final project

I also would like to express my thanks for Mr Phan Vu An, who not only helped

me to collect secondary data and useful reference documents but reviewed this report and corrected my English and gave valuable comments also

Last but not least, I would like to take this change to present my thanks to Solvay program, Open University, all professors, all coordinators and all classmates

at MBAVB4 who have accompanied me in this journey

HCMC, February 20 th , 2012

Framework of study – The study is constructed based on a comprehensive strategic-management model (David, 1988) Based on this model, the study applied Michael Porter’s five force model (Michael Porter, 1985) to analyze external environment factors of real estate industry By this analysis, the opportunities and threats were figured out and evaluated The study analyzed internal environment factors of FPT also By analysis of internal environment factors the strengths and weaknesses of FPT were figured out and evaluated Based on result of analysis external and internal environment factors, the matrix of strength; opportunities; weakness and threats (SOWT) was formulated This study used SWOT matrix and concept of generic strategy (Michael Porter, 1985) to formulate alternative market development strategies for real estate business of FPT Corporation from now to

2016 For more objectively and feasibility of strategy, this study used Quantitative Strategic Planning Matrix (QSPM) to evaluate strategies and chose the best one for the firm

Key Findings – Focus on South-East region, that is the most dynamic economic region of Vietnam this study found that real estate market in Vietnam is in downturn but it is promising and profitable industry in coming years Because of dynamic urbanization trend and high demand of housing, development new township

in suburban or vicinity town of Ho Chi Minh City is tendency in South-East Two major recommendations are (1) FPT should build townships that focus on ICT life FPT towns will convergence of ICT enterprises and ICT training centers, (2) the new way

to acquisition land and compensation, which saves time, eliminates conflicts and avoids a large part of financial pressure

Originality/Value – This study helps to figure out the opportunities, threats, strength and weakness of FPT in real estate business It also defined three alternative strategies to market development to real estate business of FPT

Key words – Strategy, real estate, Michael Porter’s five forces, Resource base view, SWOT, QSPM, Housing demand, Construction Vietnam and South-East

TABLE OF CONTENT STATEMENT OF COMMITMENT I ACKNOWLEDGMENT II TUTOR’S COMMENT III ABSTRACT IV TABLE OF CONTENT V LIST OF ABBREVIATION VIII LIST OF TABLES IX LIST OF FIGURES IX

CHAPTER 1: INTRODUCTION 1

1.1: RATIONALE OF STUDY 1

1.2: PROBLEM STATEMENT 2

1.3: SCOPE AND LIMITATION OF STUDY 3

1.4:STUDY FRAMEWORK 4

1.5: STRUCTURE OF RESEARCH 4

CHAPTER 2: LITERATURE REVIEW 5

2.1: STRATEGY AND STRATEGIC MANAGEMENT 5

2.2: TYPE OF STRATEGIES 5

2.3: STRATEGIC MANAGEMENT PROCESS 7

2.3.1: VISION AND MISSION 8

2.3.2: EXTERNAL ENVIRONMENT ANALYSIS 9

2.3.2.1: Macro Environment Analysis 10

2.3.2.2: Micro Environment Analysis 10

2.3.3: INTERNAL ENVIRONMENT ANALYSIS 13

2.3.4: LONG-TERM OBJECTIVE 13

2.3.5: STRATEGY FORMULATION AND STRATEGIC CHOICE 14

2.3.6: STRATEGY IMPLEMENT 17

CHAPTER 3: ANALYSIS OF FPT’S REAL ESTATE BUSINESS’S EXTERNAL ENVIRONMENT 19

3.1: MACRO ENVIRONMENT ANALYSIS 19

3.1.1: POLITICAL AND LEGAL ENVIRONMENT 19

3.1.2: SOCIAL ENVIRONMENT 21

3.1.3: ECONOMIC ENVIRONMENT 28

3.1.4: TECHNOLOGY ENVIRONMENT 30

3.2: MICROENVIRONMENT ANALYSIS 31

3.2.1: REAL ESTATE MARKET OVER VIEW 31

3.2.2: INDUSTRY COMPETITIVENESS AND COMPETITOR ANALYSIS 38

3.2.2.1: Barrier of entry 38

3.2.2.2: Substitute of products 40

3.2.2.3: Bargaining power of buyer 41

3.2.2.4: Bargaining power of supplier 41

3.2.2.5: Competitor analysis (rivalry among Industry) 42

3.3: SUMMARY OF COMP ANY’S OPPORTUNITIES AND THREATS 44

3.3.1: OPPORTUNITIES 44

3.3.2: THREATS 45

3.4 EXTERNAL FACTOR EVALUATION MATRIX 46

CHAPTER 4: ANALYSIS OF INTERNAL ENVIRONMENT OF REAL ESTATE BUSINESS OF FPT 50

4.1: INTRODUCTION TO FPT CORPORATION 50

4.2: ORGANIZATION STRUCTURE OF FPT CORPORATION 52

4.2.1ORGANIZATION CHART 52

4.2.2 CORPORATION STRATEGY AND MANAGEMENT SYSTEM 54

4.2.3 HUMAN RESOURCE AND CORPORATE CULTURE 57

4.3: FINANCIAL ANALYSIS 60

4.4: OPERATION OF REAL ESTATE BUSINESS OF FPT CORPORATION 63

4.4.1: GOAL OF REAL ESTATE BUSINESS 63

4.4.2: MARKET SEGMENTATION 64

4.4.3: MAJOR SUPPLIERS 65

4.4.4: INTERNAL SERVICES 67

4.4.5: INVESTMENT ACTIVITIES 67

4.5: SUMMARY FPT’ SWOT OF REAL ESTATE BUSINESS 68

4.5.1: STRENGTHS 68

4.5.2: WEAKNESSES 68

4.6: INTERNAL FACTORS EVALUATION (IFE) MATRIX 69

CHAPTER 5: FORMULATING MARKET DEVELOPMEN T STRATEGY FOR FPT’S REAL ESTATE BUSINESS IN SOUTHERN VIETNAM 72

5.1: SWOT ANALYSIS 72

5.2: SWOT STRATEGY 75

5.3: STRATEGY FORMULATION AND CHOICE 76

5.3.1: VISION AND MISSION UNTIL 2016 76

5.3.2: MARKET DEVELOPMENT STRATEGY FOR FPT’S REAL ESTATE IN SOUTH-EAST REGION OF VIETNAM 77

5.3.2.1: Cost Leadership Strategy 77

5.3.2.2: Differentiation Strategy 79

5.3.2.3: Focus Strategy 80

5.4: STRATEGY EVALUATION – QUANTITY STRATEGIC PLANNING MATRIX 81

5.5: IMPLEMENT STRATEGY 85

CHAPTER 6: CONCLUSION AND RECOMMENDATION 89

REFERENCE 90

APPENDIX 92

APPENDIX 1: LIST OF COUNTRIES RECOGNITION VIETNAM HAS MARKET ECONOMY 92

APPENDIX 2: LIST OF INTERVIEWEES FOR SWOT MATRIX 93

APPENDIX 3: SAMPLE OF INTERVIEW FOR WEIGHTED SCORE OF EFE MATRIX 94

APPENDIX 4: SAMPLE OF INTERVIEW FOR WEIGHTED SCORE OF IFE MATRIX 97

APPENDIX 5: RESULT OF INTERVIEW FOR WEIGHTED SCORE OF SWOT MATRIX 99

APPENDIX 6: LIST OF PARTNERS OF FPT IN ICT FIELD 103

LIST OF ABBREVIATION

BOD : Board of Directors

BRVT : Ba Ria Vung Tau Province

CBD : Central Business Districts

EU : Europe

exFPTer: Person, who worked for FPT and stop now FDI : Foreign Direct Investment

FPTer : Person, who are working for FPT

GSO : General Statistic Office of Vietnam

HCMC : Ho Chi Minh City

ICT : Information Computer Technology

MOC : Ministry of Construction

NA : National Assembly

PPP : Public Private Partnership

QSPM : Quantitative strategic planning matrix

REB : Real Estate Business

REM : Real Estate Market

SRV : Socialist republic of Vietnam

UN : United Nation

VCCI : Vietnam Chamber of Commercial and Industry VNR500: List of top 500 biggest enterprises of Vietnam WTO : World Trade Organization

LIST OF TABLES

Table 2.1: The SWOT Matrix 15

Table 2.2 Quantitative strategic planning matrix 16

Table 3.1: Demography density of South-East region 25

Table 3.3: The net immigrant rate of Provinces in South –East 27

Table 3.4: The growth rate of population of Provinces in South-East 27

Table 3.5: Contribution of real estate industry to whole economy of Vietnam in nine years at the beginning of 21 century 34

Table: 3.6: Index of housing price/personal income 36

Table 3.7: Estimate Need of Urbanite construction area of Vietnam 37

Table 3.8: Estimate Need of Urbanite construction area of South-East region in the year 2020 37

Table: 3.9 External Factor Evaluation (EFE) Matrix of FPT 46

Table 4.1: FPT’s revenue in last five year 60

Table 4.2: FPT profit before tax in last five year 60

Table 4.3: Brief of Cash flow of FPT in last five yeas 62

Table 4.4: Internal factors evaluation matrix (IFE Matrix) 69

Table 5.1: Benchmark key requirement of overall cost leadership strategy 79

Table 5.2: Benchmark key requirement of differentiate strategy 80

Table 5.3: Quantitative Strategic Planning Matrix 82

Table 5.4: Summary of strategy evaluation 85

LIST OF FIGURES Figure 2.1: A Comprehensive Strategic management model 7

Figure 2.2: Forces driving Industry competition 11

Figure 2.3: The strategy formulation analytical framework 14

Figure 2.4: Applied framework of study 15

Figure 3.1: History of legal about Land and REB in RSV 21

Figure 3.2: Urban population divided to geographic region (in million) 22

Figure 3.3: The ratio of urban population in regions of Vietnam 23

Figure 3.4: Scale of urbanite in provinces of South-East Vietnam 24

Figure 3.5: Household and House Ownership in South-East 25

Table 3.2: Growth rate of household in South-East during 1999-2010 26

Figure 3.6: Basic factors of macro economy of Vietnam 28

Figure 3.7: 20 years development of real estate market in Vietnam 33

Figure 3.8: Number of real-estate enterprise from year 2000 to 2009 33

Figure 3.9: Structure of demand of residential place in HCMC 36

Figure 4.1 Changing of identification factors of FPT 51

Figure 4.2 Organization chart by business field of FPT 53

Figure 4.3: A typical organization chart of subsidiary company of FPT 54

Figure 4.4: One FPT strategy and milestones 55

Figure 4.5: One FPT Diagram 56

Figure 4.5: Growth of personnel 58

Figure 4.6: Goals of Real estate Business of FPT 63

CHAPTER 1: INTRODUCTION

1.1: Rationale of study

FPT Corporation has been one of the top five biggest private companies in Vietnam for recent years Started as a government company in 1988, FPT was equitized in 2001 and listed in Ho Chi Minh Stocker Exchange (HOSE) in 2006 FPT

is well known as ICT Company in Vietnam with core competences as below:

- Software development outsourcing services: Focus on Japanese market and

EU, America recently FPT is the biggest player in this area in Vietnam today

- Informatics System Integration: Provide system integration for domestic market (Government Agency and B2B business) This is very strong competence of FPT and FPT is market leader

- Telecommunication services: Provide Internet and ADSL services, IP Phone, Game online, social network as www.banbe.vn, online magazine as

www.vnexpress.net or www.ngoisao.net , etc

- Education: FPT University especially focuses on Informatics science

- Informatics and telecom equipment Trading: One of important business sector

of FPT, which is contributing a largest portion of annual corporate revenue This is one of traditional business of FPT Corp

After over a decade of development, FPT obtained many achievements in its core business in 2006 In period from 2002 to 2006, the average annual revenue growth rate of FPT was about 60%-70% per year In term of profit, the growth rate was the same By good developing stage of firm, FPT accumulated amount of surplus capital and decided to diversify its business to some new business sectors Besides, after many years invested to provide short-term service, FPT had uncertain financial position in long-term perspective There was lack of long-term investment or long-term asset in balance sheet of FPT This image of financial structure of company can bring bad point of view from investor when they are concerning about opportunity of increasing market value of company

Therefore, FPT joined into real estate market in the end of year 2006

Likewise, in year 2006, FPT invested to a big real estate project in Da Nang city, which is known as FPT city Da Nang This is a mega real estate project with total

areas of land is about 181 hectares square This scale is typical medium town in Viet Nam

Year 2007 was the prosperous year of Vietnamese real estate market Nevertheless, unfortunately, from 2008 until now, real estate market was recessionary and many new comers in this market were stuck FPT real estate business was unexceptional case

Now, FPT still perseveres in pursuing real estate business to keep real estate

in FPT business structure However, this business future has been poor image Exception FPT City Da Nang, FPT real estate business is still standby, waited and sees, and seeks opportunities in Hanoi and HCMC, which are two main real estate markets in Vietnam Eventually that, the annunciation of FPT city Da Nang is important mile stone of FPT on the way it enters into competitive and very risk market

in Viet Nam

The question that “Can FPT success in real estate market?” still be a big

and difficult question for the FPT Corporation There was no any concrete planning or idea for this business sector, FPT still continue feeding this business with inexplicit return in the near future Hence, this study is necessary for FPT to make decision for its own real estate business

1.2: Problem statement

According to Vietnam’s legal, Land belongs to nation Because it is limited resource and by the state of legal, in Vietnam, obtains land as a kind of businesses resource is important with most of Vietnamese companies The firm, which obtains proprietary of land, can have great opportunity and threat certainly In case of increasing market, it can give the chance to increase value of firm very quickly but in case of crisis or reaccessioning market, it can give disaster However, investment to real estate in Vietnam still important and profitable investing channel if we determine

in medium term or long-term aspect

Go along with trend on the market, FPT diversified their business to real estate

in the end of year 2006 This time, market was very animated and almost players on real estate market can seek huge money by the dynamic market At that time, FPT joined to real estate market as a new player but they had lack of direction of main business and very poor determination about their core competence in this

playground In other hand, the economic crisis had influenced to real estate market and made it downsizing in last some years Therefore, FPT had been being standstill with their real estate business now

In summary, real estate business is very important and new business of FPT but FPT seems not considered or prepared enough before lunched This situation leads to problems that FPT must face very big questions about real estate business

as “what can FPT do with real estate business?” and “How can they do that in near future to maintain and develop their new business?”

The Southern of Vietnam or HCMC and vicinity are the prominent hub of economy and dynamic areas of Vietnam FPT had deployed their real estate business activities in HCMC since year of 2007; FPT expected that this branch can brought out some pilot opportunities by advantage of dynamic market of HCMC and its vicinity Until now, because of economic crisis, real estate market in Southern was

be fall in silent but this market still potential to growth again If FPT want to success in real estate business likes they did with other business, they should examine the real estate market in the Southern of Vietnam

Therefore, this study project is to formulate the market development strategy for FPT real estate business in period 2012 – 2016 in South-East of Vietnam

Specially, this study is to concentrates:

- To evaluate External and Internal environment of FPT Land

- To create Strategy options and defined suitable one for FPT Land

- To recommendation idea to successful in implementation strategy

That is reason why this study needs to answer question as below:

- How can FPT enter to these emergent areas?

- What are kinds of real estate product that FPT should invest?

- What are core concepts of products that FPT should determines to coherence with

strategy of FPT in corporation level?

1.3: Scope and limitation of study

This study focuses on analysis and evaluation the current environment of FPT From there, the study aims to formulate a suitable market development strategy for

real-estate business of FPT Corporation in next five years However, only concentrating on the South-East area is the limitation of this study

1.4:Study framework

This study is to solve business problem Thus the chosen methods must comply with objectives of study as formulating strategy in the 1.2 The study framework formulated as below:

- Collect second data and analysis

- Conduct in-deep interview with experts and managers of company

Base on analysis secondary data about micro and macroeconomic environment, this paper uses Michael Porter’s five forces model to evaluate external factor evaluation (EFE) matrix and uses Resource Base View method to evaluate internal factor evaluation (IFE) matrix

After building EFE and IFE matrix is combination of EFE matrix and IFE matrix into SWOT matrix and evaluate factors of SWOT matrix

Last step of this research is use Quantitative Strategic Planning matrix to evaluate strategies and make a choice of suitable strategies for the firm

All above step flow to framework of comprehensive strategic management model by David (1988)

1.5: Structure of Research

This study is organized into six chapters Chapter 1 introduces the research including rationale of research, research problem, research objectives and research questions Chapter 2 provides literature review, include definitions and concepts of strategy formulation Chapter 3 is analysis external factors affecting to real-estate business of FPT in South-East market, Vietnam Chapter 4 introduces FPT Corporation and its owned real-estate business, then analysis of internal factors of this business and SWOT analysis Chapter 5 discusses about appropriate strategy for FPT in develop its market in South-East Vietnam The content of this chapter is suggested strategy for FPT in South-East Vietnam The last chapter of this study is the summary and recommendation to be succeeded on implementation of strategy

CHAPTER 2: LITERATURE REVIEW

2.1: Strategy and strategic management

Nowadays, there are many definitions of strategy and strategic management In general term, “strategy is long term action plan for achieving a goal” 1

or other simple definition is “strategy is a method or plan chosen to bring about a desired future, such

as achievement of a goal or solution to a problem ” 2

Strategies of organization are things related to actions of organization that aims to pursue firm’s targets

Strategic management incorporates major changes of direction for the whole business of companies Every company has their owned objectives Company keeps running because these are some of its existent objects While objects of company exist as a plan of destination of company along the time, the environment of company and business activities of company are changeable All these elements affect to the company and this affection forces company moves to adapt with the change of business condition elements

Companies succeed if their strategies are appropriate for the circumstance they face, feasible in respect of their resource, skills and capability and desirable to their stakeholders – those individuals and groups, both internal and external, who have stake in and influence over the business Simply, strategy is fundamentally about fit between the organization’s resource and the market it targets – plus, of course the ability to sustain fit over the time and in changing of circumstances.3

In summary, strategic management does not only aim to establish and build strategy of company but must drive strategy in coherence with the business circumstance also

3 John L Thomson; Frank Martin (2005), Strategic management the 5 th

edition, Thomson Learning,

UK

forward integration; backward integration; horizontal integration; market penetration; market development; product development; related diversification; unrelated diversification; retrenchment; divestiture and liquidation

Forward integration, backward integration and horizontal integration are sometime collectively referred as vertical integration, which support firms expand its business by increase control over suppliers or distributors or firm’s competitors Market penetration, market development and product development are sometime collectively referred as intensive strategies which support for the firm in gaining market share from its competitors

Related diversification and unrelated diversification are two category strategies

of type of diversification strategy This refer to the way that the firm expanse their scale of business or diversify risk of business

The three last one include retrenchment, divestiture and liquidation strategies referred to defensive strategy of the firm It support to the firm avoids threats from market or weakness of organization or restructure of organization and make it better

in competitiveness

In other way of category, Michael Porter (1985) based on idea that competitive advantage of organization come from three difference bases: Cost leadership, differentiation and focus Therefore, Michael Porter categorizes strategies in to three types of strategies (referred as Generic strategies) as cost leadership strategy; differentiation strategy and focus strategy

Cost leadership strategy is pursuing to supply low unit-cost of product to for customers who are price-sensitive The scale of business comes from volume of sale-out Base on this concept, there are two alternatives strategy as low-cost strategy and best-value strategy

Differentiation strategy aims at producing something that considered as unique product or services in the market and difficult to imitate This strategy directed at customers who are relatively price – insensitive

Focus strategy means producing products which serves for demand of group of customers There are two types of focus strategy as low-cost focus strategy and best-value focus strategy This category of strategy is most effective when customers have distinctive performance or requirement about products and competitors are not

trying to jumping into market segment Focus strategy is advised to companies, which want penetrating or developing market

In this paper, generic strategy concept was applied to formulate alternative strategies for FPT

2.3: Strategic management process

There are 2 main types of approach in strategic management, prescriptive approach and emergent approach The fundamental thought of prescriptive approach strategy is to determine a fit between a company’s external situation and internal capabilities in order to strengthen the company by focusing on relation between its market, product and internal organization The basic concept of emergent approach strategy is that the final object is unclear and that elements develop as the strategy proceeds (Tsutomu Mishina, 2004)

One of popular prescriptive approach model of strategic management process

is a comprehensive strategic-management model (David, 1988)

Figure 2.1: A Comprehensive Strategic management model

Source: Fred R David, “Strategic Management concept and case” (2009): page 47

In accordance with this model, there are seven steps to formulate and implement a strategy for the firm (1) audit performance of external environment factors to figure out and evaluate opportunities and threats in the industry; (2) audit performance of internal resource and environment factors to figure out and evaluate strengths and weaknesses of the firm; (3) set up long-term objectives for the firm; (4) build up alternative strategy for the firm and select the most appropriate; (5) implement strategy and management issues when implementation; (6) implement strategy at function of firm such as Marketing, Finance, Accounting, R&D, etc (7) Measure and evaluate performance of chosen strategy The Figure 2.1 shown the framework of comprehensive strategic management model

This paper applied this model to solve problems of study In this model, two step of audit external and internal environment ate so important Base on audit of these environments, the SWOT matrix of firm is formed and it is basement for alternative strategies for the firm

2.3.1: Vision and Mission

It is not definite that the clear and suitable vision can bring out the right orientation of organization’s business but inappropriate vision brings out the wrong direction of organization’s business definitely Especially, it is very important for managers and executive in any organizations to agree on the vision that the firm strives to achieve in the long term A vision statement of company is good answer for the question of “What does company want to become?” Company needs to have

a clear vision because a clear vision helps them to build the company’s foundation for developing a comprehensive mission of company

In term of theory, the mission statement of organization is not only perfect

answer for question o f “What is organization’s business?” but this is answer for

question of “What are values that organization wants to bring out for its stake holder?”

The clear vision and mission statement of organization can generate benefits for organization They are fundamental literature document for strategic management Base on the purposes of organization and the destination that organization wants to achieve, the targets in specific period are set up and the ways

to achieve targets are defined

Creation of a vision and mission are strongly needs consideration and concentration of founders and leaders It is not only founders or leaders and managers of organization need to understand organization’s vision and mission but either do every firm’s members Understanding deeply about organization’s vision and mission is fundamental element to help everyone belong to organization sharing the common responsibility, dream, passions, belief…etc among them This sharing combines parts of activities of organization and keep them focus on targets of organization

Vision and mission statement of company can be a long-term determination of company but they are not kept forever ever The mission and vision statement of company can fall in backward and they must be revised or changed to adapt to contemporary economy In fact, companies have to revise or change their visions when they fall in recession time but it should be rethought in successful time

In summary, building vision and mission of company are first responsibility of strategists Company needs vision and mission which is like the sailor needs compass Vision and mission statement are the first glance of company as well as the first message that company shows to stakeholders and differentiate them with others

2.3.2: External Environment Analysis

The companies do their business in certain economic and social environment Company is a part of that environment and affected by environment itself Enterprise’s environment is divided in-to internal and external environment Analyzing environment of company is process to audit each elements of environment, which influence company’s business

The purpose of external audit is to develop a finite list of opportunities that could benefit a firm and threats that firm should avoid As the term finite suggest, the

external audit did not aim to developing an exhaustive list of every possible factors that could affect the business; rather than that, it aims to identify key variables that offer actionable responses Firms should be able to respond either offensively or defensively to the factors by formulating strategies that take advantage of external opportunities or that minimize the impact of potential threats (David, 2009)

There are five key external factors in external force (David, 2009) (1) economic force; (2) Social, cultural demographic and natural environment forces; (3) political, governmental and legal force; (4) technological forces; and (5) competitive forces These five factors can be group to two categories as macro environment element and microenvironment The first four forces belong to macro environment and the last one belongs to microenvironment One of the consequences of external environment analysis is list of opportunities and threats of business in external factors evaluation matrix

2.3.2.1: Macro Environment Analysis Economic factors: This mentions about behavior and certain market interest

rate; inflation; money exchange rate; taxation changes and economic growth These elements affect to profitable; economic benefit and expected growth of organization business

Social, cultural, demographic and natural factors: All elements about social

changes can influence to size of demand of company’s products, behavior of customer and work force The social factors can be positive or negative influence to competitive of company

Political, government and legal factors: These factors refer to state of stable

political and intervention of government into economy It is the more stable political and legal system, the more advantage for company to plan its business The more priority of government of certain business, the more opportunity for the company, which does that kind of business, can obtain to develop

Technology factors: Technology factors refer to change in technology and

characteristic of changing New technology generates new version of product and new process to produce products The new process can be creates higher benefit than old one To apply new technology can keep and enhance competitive of company but it is challenge for company also because of high investment on new technology Nowadays, revolutionary of technological changes and discoveries are having a dramatic impact on organization

2.3.2.2: Micro Environment Analysis

Microenvironment mentions about competitive factors in economy The most appropriate model that used to audit competitive factor is Porter’s five forces model

Michael Porter proposed this model and he is proponent of Industrial Organization view (I/O view), which approach to competitive advantage advocates that external (industry) factors are more importance than internal factors in a firm achieving competitive advantage

Figure 2.2: Forces driving Industry competition

Source: Michael Porter (1985),

There are five factors in Porter’s five forces model and they are present in Figure 2.2 Porter’s Five Force model of competitive analysis is widely used approach for developing strategies in many industries According to Michael Porter, the nature

of competitiveness in a given industry can view as combination of five forces:

- Rivalry among competing firm

- Potential entry of new competitor

- Potential development of substitute product

- Bargaining power of suppliers

- Bargaining power of customer

Rivalry among competing firms:

Rivalry among competing firm is usually the most powerful of the five competitive forces (David, 2009) This force mentions about situation of completion in given industry likely differentiation of product, supply chain, price, enhancing quality, extending warranty policy; added value…etc In theory, perfect competition can drive profit of rivalry to zero but competition is not perfect and firm used to fall in price battle To avoid failure in competition in given industry, firms pursue to competitive advantage over their rivals

Rivalry among competing firm is main determinant of industry’s competitiveness Rivalry comes from composition of three elements (1) price policy; (2) quality of product and (3) Innovation of technology Companies hold the properties right of technologies can have advantage in technology, hence can charge higher price and generate higher profit until the rivals introduce new technologies which instead of old one or imitate the technologies

Potential entry of new competitors:

The easier a firm enter the industries, the higher competition inside of industry

is Potential entry of new competitors refers to barriers to enter the market How is difficult to become a new player in given playground of market? This force used to concern as threat of new competitor entry In such situation, entrance of new competitor impacts to expected market share of current player and behavior of newcomer can force old players change the rule of game and their strategy as well The threat of new entries depends on the extent of current market and measure by typically elements below:

- Economic of scale

- Proprietary learning curve

- Cost advantage

- Access to input (access to raw materials, technology know-how)

- Government policy (Support or not, permit or not, limited or unlimited)

- Capital requirement

- Brand identity and customer loyalty

- Enter into distribution’s channel

- Counterattack of current rivals

- Market saturation

- Possession of patent

Potential of substitute products

Substitute products are threat of a business A threat of substitute products exists when there is existent of alternative products with suitable with current demand and payable ability of customer In many industries, firms are in close competition with produces of substitute products in other industry because their product can satisfy the same demand of customer It means that, threats of competition not only come from rivals in same industry but from widely market as well

Bargaining power of Supplier

The higher bargaining power of supplier is, the lower advantage of competitiveness that company has

Bargaining power of suppliers depends on numbers of supplier for same kind of materials, switching cost of supplier and existent of substitute material The common rule is the easier company choose their suppliers, the lower of bargaining power of the supplier is

Bargaining power of customer:

Bargaining power of customer mentions about customer’s pressure when they become a buyer of company The more competitive market is, the higher bargaining power of customer is

2.3.3: Internal Environment Analysis

Internal environment analysis is next step after external environment analysis to formulate strategy framework of Fred R David Internal environment audit is process

of defining what are strong and weak forces inside of company It is large covering, which includes many different areas, such as marketing, finance, accounting, management, and management of information system, operation and production, human resource, etc Base on characteristics of industry, internal environment analysis process should focus on key areas and their sub-areas, which play major role of success in that industry

The result of internal environment analysis is profile of strengths and weaknesses of company

2.3.4: Long-term objective

Company need to set up its long term objectives clearly before consider to its strategy The long-term objectives are consequence of integration of company’s vision and mission, external opportunities and threats and internal strengths and weakness

Like statement of vision and mission, the objectives of company must be clear and concrete enough “Objectives should be quantitative, measurable, realistic, understandable, challenging, hierarchical, obtainable and congruent among organization units” (David, 2009)

2.3.5: Strategy formulation and strategic choice

Strategy formulation is a process of determination or buy and sale with objectives and the way to achieve objectives According to David (2009), Figure 2.3 below shows the framework of strategy formulation and strategic choice

Figure 2.3: The strategy formulation analytical framework

Source: Fred R David (2009) Strategic management concepts and case - thirteen edition, Pearson Education, New Jersey, page 2009

The conceptual framework consists of three stages of formulating process The first stage defines clearly all key factors of external opportunities and threats, internal factors of strengths and weaknesses All information generated in the first stage will

be input data to the second stage

Boston consulting Group (BCG) Matrix

Internal - external (IE) Matrix Grand strategy Matrix

STAGE II: THE MATCHING STAGE STAGE I: INPUT STAGE

STAGE III: THE DECISION STAGE

Quantitative Strategic Planning Matrix (QSPM)

The second stage focuses on analyzing all information provided by first stage There are five techniques used to examine information and critical success factors to build alternative strategies They are SWOT matrix analysis, SPACE matrix analysis; BCG matrix analysis; Internal – external matrix analysis and Grand strategy matrix analysis In this paper, SWOT matrix analysis in Table 2.1 is preferred to use in matching stage to generate alternative strategies

The last stage in this framework is working with quantitative strategic planning matrix (QSPM) The QSPM is unique technique to determine which alternative strategies are best

Table 2.1: The SWOT Matrix

WT Strategies

Minimize weaknesses and avoid threats

This paper choses some of matrix among matrixes in the frame work to apply because of their appropriateness with given sources of information and simple understand

Figure 2.4: Applied framework of study

The last stage in this framework is working with quantitative strategic planning matrix (QSPM) The QSPM is unique technique to determine which alternative strategies are best

Conceptually, the QSPM determines the relative attractiveness of various strategies based on the extent to which key external and internal critical success factors are capitalized upon or improved (David, 2009) There are six steps to build completed QSPM

Table 2.2 Quantitative strategic planning matrix 8

8

Adapted from Fred R David Dr (2009), Strategic management concepts and case, Pearson

Education, New Jersey, page 225

External Factor Evaluation (EFE) Matrix Internal factor evaluation (IFE) Matrix

STAGE III: THE DECISION STAGE Quantitative Strategic Planning Matrix (QSPM) Strengths - Weakness - Opportunities - Threats (SWOT) Matrix

STAGE I: INPUT STAGE

STAGE II: THE MATCHING STAGE

Key External Factors

Research and Development

Computer Information Systems

Strategy 1 Strategy 2

QSPM

Step 1: Make a list of the firm’s key external opportunities/threats and internal strengths/weakness This list is put in the left column of the matrix This list is picked

up from factors which are consequence of external factor evaluation (EFF) and internal factors evaluation (IFE)

Step 2: Assign weights to each key external and internal factors These weights

are identical to those in EFE matrix and IFE matrix The column of weights is next to column of key factors

Step 3: Record the alternative strategy in the top row of the QSPM

Step 4: Determine the Attractive score (AS): AS is defined as numerical values

that indicate the level of attractiveness of each strategy in given set of alternative Attractive scores are determined by examining each key external and internal factor The range for AS is 1 = not attractive, 2 = some that attractive, 3 = reasonably attractive and 4 = highly extractive

Step 5: Compute the Total Attractiveness Scores (TAS): The TAS is computed

by multiple the weights by the AS of each element

Step 6: Compute the Sum Total Attractiveness Scores (STAS) Add total TAS

in each strategy column of the QSPM and the result of adding is STAS It is the higher STAS the more attractive of strategy

The positive of the QSPM is that sets of strategies can be examined sequentially or simultaneously The other positive point of this technique is that it requires strategist to integrate the key external and internal factor also However, one

of the limitations of this technique is intuitive opinions when strategist rating the attractiveness scores of each element in list of key factors

2.3.6: Strategy Implement

After choosing firm’s strategy in fifth step of strategic management’s framework, the next step is the implementation chosen strategy Implementation of strategy is complicated process in organization and the successful of strategy depend in this step Leader and managers must be in charge of evangelist to encourage everyone

in firm share the mindset of the strategy and follow it

Each functional manager in organization must be in responsibility, which is coherence with objectives of function The company should design controlling system

to measure performance and control the actions of functional In case of unfitted

current structure of organization with chosen strategy, the structure of organization should be change to enhance effectiveness of strategy

CHAPTER 3: ANALYSIS OF FPT’S REAL ESTATE BUSINESS’S EXTERNAL

ENVIRONMENT 3.1: Macro environment analysis

This section analyzes macro environment of real estate business of FPT Following topics will analyze deeply macro environment factors affecting to this business of FPT

3.1.1: Political and legal environment

Vietnam’s politic state is stable for some last decades The stable state of politic

in Vietnam is advantage factor for long-time investment within real estate business Vietnam converted its form of economy from centrally – planned economy into market economy in 1986 Vietnamese government call the period from 1986 to now

is transitional period It is over 25 years of transitional period but Vietnam’s economy

is still considered as non-market economy status According to statistic of VCCI, there are 23 countries in over the world recognized that Vietnam has market economic10, even so Vietnam continuous moves forward to market economy quickly

in year by year

Real estate business is economic sector that Vietnam government is interested

in and concentrates to manage within last 2 decades This market is one of important parts of economy because it is impact strongly to investment activities of economy When Vietnam had decided to reform economy in 1986, there was lack of change in land property before Two years later, in 1988, the first Law of Land of Social Republic of Vietnam was approved by National Assembly This version Law of land concentrated to governing the right to use agricultural land as a resource of agricultural production Five years later, in 1993, National Assembly of the socialist republic of Vietnam had ratified the successive version Law of Land (known as Law

of Land 1993) By the Law of Land, the private land property had identified and this was a first time that property right of land was considered as a good on the market officially

In 2003, the Law of Land amended and had been effective until now

10

See appendix 1: List of countries that recognized Vietnam as market economic until 10/2011

On 29th November 2005, the Vietnam Law on House was approved by National Assembly and took effect on 1st July 2006 To go along with procedure of housing law, on 21st June 2006, Vietnam National Assembly passed the law of real estate business and this law took effect on 1st January 2007 Under this law, individuals, organizations, foreigners and overseas Vietnamese (the Vi t ki u) are authorized to offer real estate services including brokerage and agency, appraisal, marketing, and consultancy Last but not least, on 18th June 2009, the Law on house and the Law of Land were amended by National Assembly These amendments are important with the real estate market in Vietnam because they open more for overseas Vietnamese

to have change to own hose and use residential land in Vietnam Things did not happen in the past of Vietnam (in Socialism Republic) officially The conditions to have the right to own house of overseas Vietnamese became easy and clearly and the right to use residential land of them were established This was first time that the right to own house and use residential land of overseas Vietnamese are non-discrimination beside domestic citizens

The trend of establishment of Laws that connected to real estate business in Vietnam within last two decades shows that Vietnam Government has focused on the role of real estate market strongly The Government favors the development of this kind of market and endeavors to create an enough system Law to encourage this market The Figure 3.1 in below shows the brief of history of legal about land and real estate business in Vietnam Nowadays, Vietnam has enough kind of law to govern the Real Estate Market but forces of laws and adaptable capability are not high enough By the state of low enforcement and low effect laws, the law system about real estate market and real estate business will continuous to change in near future

Figure 3.1: History of legal about Land and REB in RSV

Source: Collected information from NA of SAV: www.na.gov.vn

In summary the Law of Land and law of Real estate business is incomplete state now Because of many existing debate about Land properties right of people, the Law of Land and Laws that related to Real estate business could change in coming years This is threats of real estate business because real estate is long-term

business and depend on stable state of Law a lot

3.1.2: Social environment

This section regard to demography, urbanization, housing and trend of migrant

in both Vietnam and South-East

According to Vietnam National Statistic in 2009, Vietnam is country of young demographic, which has population of 87 million There are approximate 23 million of household in Vietnam In term of urbanization, the urban population had increased rapidly within last decade The Figure 3.2 shows the number of Vietnamese urban population which was divided to 6 regions in Vietnam

Figure 3.2: Urban population divided to geographic region (in million)

(Source: Population statistic of Vietnam 2009-2010, www.gso.gov.vn )

The Figure 3.2 shows that South-east of Vietnam (includes HCMC) is the region, which has highest urban population in Vietnam for many years This is the most dynamic region in Vietnam in last many years and still keeps the role of leading market for Vietnam economy in the future continuously The population growth in this area comes from immigration mostly

South-East of Vietnam consists of six provinces In term of politic and economy point of view, HCMC is the central of South-East and three provinces which included HCMC, Dong Nai, Binh Duong are shaped as triangle zone of economy in South of Vietnam It is not only important triangle market in the Southern but substantial zone

in country as well

For a long time, South-east of Vietnam is region of Industrial parks and center

of financial market of Vietnam Industrial parks in HCMC, Dong Nai province, Binh Duong province are the earliest one, which was established in Vietnam after the

5.2 5.6 5.8 5.9

1.2 1.2 1.3 1.4 1.4 1.4 1.5 1.5

1.6 1.6 1.6 1.7 1.7 1.8 1.8 1.8 2.8 2.9 3.1 3.3

years of 1986 Manufactories in industrial zones generated a lot of job opportunity for young labors in Vietnam Industrial parks became magnets that attract young people come to seek opportunities for their job By this trend, people from other provinces of Northern, Central or Mekong Delta have moved to HCMC and its vicinity The immigration into South-East of Vietnam had occurred for over 20 years and it contributed to urbanization in this region almost

The scale of urbanite of South-East is increasing rapidly year by year, whereas the proportion of urbanite in this region is quite stable within last 15 years The trend

of demography scale and ratio of urbanite in the Figure 3.2 and 3.3 shows that the population in South-East has increased fastest in Vietnam and rate of urbanization of this region is highest in last decade among regions of Vietnam

Figure 3.3: The ratio of urban population in regions of Vietnam

(Source: Population statistic of Vietnam 2009-2010, www.gso.gov.vn )

The first prominent point of demographic in this territory is unequal distribution between six provinces Although HCMC area occupies 9% area of South-East only, it occupies 51% population of region and there is 74% urbanite of South – East is HCMC citizens

Y95' Y96' Y97' Y98' Y99' Y2K Y01' Y02' Y03' Y04' Y05' Y06' Y07' Y08' Y09' Y10'

The second prominent point of South-East population is differentiation of urbanization motion of each province in this region Urbanite of HCMC has grown fast and the size of urbanite in HCMC is dominant in area Urbanite in HCMC grows rapidly because of not only developing infrastructure but the wave of immigration of people from other provinces to HCMC

Figure 3.4: Scale of urbanite in provinces of South-East Vietnam

(Million People)

(Source: Population statistic of Vietnam 2009-2010 www.gso.gov.vn )

Because of high density and growth rate of urbanite in HCMC, infrastructure here has been being overloaded and cannot serve for living well There are a lot of challenges, such as traffic jam, pollution (included dirty environment, air, water and noise), healthy service, education service, housing service…etc The overloading of infrastructure is influencing to social in HCMC negatively This situation of HCMC leads to trend to invest to HCMC suburban and vicinity province like Thu Thiem, District 9, Binh Duong, and Dong Nai New satellite cities of HCMC will share the pressure to HCMC in problems of urbanizations within last decade The Table 3.1

below shows the demography density of each province in South-East region and this

is description more about pressure of demography and infrastructure issue of HCMC

Table 3.1: Demography density of South-East region

(01/04/2009)

Density (persons/km²)

(Source: Population statistic of Vietnam 2009-2010 www.gso.gov.vn )

South-East of Vietnam has area about 7.13% total area of Vietnam, therein resident area of South-East about 10% of total resident area of Vietnam Even that, the number of household in this region occupied 16.5% total number of household in nationwide It is the same situation with the number of household, which have house Inside of South east region, large part of households are in HCMC and either is ownership of house (See Figure 3.5)

Figure 3.5: Household and House Ownership in South-East

Duong

HCMC is not only most crowded city with large part of urbanite and household

in Vietnam but also it is city, which has high growth rate of household in period of

1999 to 2010 Table 3.2 shows that the number of houses in HCMC in 2010 had increased 78% compete with 1999 while the rate of nationwide is 33% only

Exception Tay Ninh provinces, all of other provinces in South-East have higher growth rate of housing than nation wide’s Even that, Binh Duong is province has the highest growth rate of housing in that period This province has increased 188% houses in within 10 years, especially in kind of permanent houses In fact, Binh Duong is province has highest rate of urbanization There are many new downtowns, which are building in this province and Binh Duong has become a prominent destination of real-estate investment in recent years

South-East is the most dynamic region in urbanization in nationwide and it still keeps developing rapidly in next years There are 89 industrial parks in South-East, concentrating in HCMC, Binh Duong and Dong Nai Province This accounts for 35%

of numbers of industrial parks of Vietnam The total area of these industrial parks is approximately 44,000 square hectares which is approximate 64% area of industrial land in Vietnam11

Table 3.2: Growth rate of household in South-East during 1999-2010

Provinces Total

Perma-nent

permane

Semi-nt

permanent Simple

Table 3.3: The net immigrant rate of Provinces in South –East

13 million square meters This is potential housing market, includes house for rent and low price housing

South-East is not only center of industrial park but it is center of education service also There are about 320,000 students in HCMC only Many students come from other provinces and many of them still stay in HCMC and vicinity after graduation This is one of other important pressure to urbanization and household for HCMC

Table 3.4: The growth rate of population of Provinces in South-East

Table 3.3 and Table 3.4 show that Binh Duong, Dong Nai and HCMC are regions, which growth rate of population is higher than nations and other regions- The main reason is immigration trend to this area One more time, this point means that the population growth of triangle zone of Economy in South-East is strong pressure to social infrastructure and social security in this region

Briefly, South-East of Vietnam is the most dynamic region in Vietnam in term of demography and social Current infrastructure of HCMC is disadvantage and need to invest more and more The trend of urbanization to suburban and vicinity town of HCMC is grate change for real estate business in South-East This is stable opportunity for real estate enterprise in many coming years

3.1.3: Economic environment

Vietnam has had high growth rate of economy for last 15 years and became one of fastest growing economies in Asia and the world The average growth rate of GDP of Vietnam in last 15 years is about 7%

Figure 3.6: Basic factors of macro economy of Vietnam

Source: Consolidation form IMF review and outlook on Vietnam (2011 to 2016 are estimation)

Although Vietnam had high GDP’s growth rate within last decades, it had still deficit of Balance of Trade account In other hand, Vietnam had high rate of deficit of

$500 $1,000 $1,500 $2,000 $2,500

national budget This rate was about 5% in average in period from 2005 to 201112 High national budget deficit rate in long time leads to high national debt situation The inflation rate of Vietnam had increased from about 7% per year from 2007

up to double digits rate in period from 2008 up to now High national debt, high deficit

of national budget and high inflation lead to high cost of capital for Vietnamese market That is why this is difficult period for Vietnam economy and investors in Vietnamese market also

The sanguine point of Vietnam economy trend is inflation rate will be able to drop down to 5% or 6% in period of 2013 to 2016 and the GDP growth rate is predicted about 7% in the same period So the period of 2013 - 2016 can be determined as economic recovery period of Vietnam

In the trend of Vietnamese economy and base on the role and geopolitics of South-East region, the goals of economic development of this economic zone in the period 2011-2020 are impressive The GDP of zone (includes six provinces) in 2020 will increase at least 2.2 times which is higher than 2010 By 2020, the processing industries sector, constructions sector and services sector account for 96-97% of GDP, of which the service accounts for 41-42%, higher than the national average GDP growth rate of the region is about 8.2% in the period of 2011-2020 while growth rate for the period of 2011-2015 will at 7.9% to 8.5% and growth rate in period of 2016 to 2020 is about 8, 4% in average The GDP per capita in 2015 will about 97 million VND, in 2020 about 175 million VND By 2020, the region's population of about 15-16 million people, the urbanization rate will reached 80%13

In summary, the trend of Marco Economy of Vietnam up to 2016 and the goals

of economic development of South-East region favor for long-term investment activities in this region The trend of economy is attractive point for many investors including both of local investors and foreign one By this trend, there is opportunity for local enterprises cooperate with foreign investors who have advantage of capital and technology However, high inflation rate is threat of real estate industry because of tightened credit policy and high cost of capital in the market Tightened credit policy leads to threats of scarceness of capital and high cost of capital leads to threats of

12 Source: Ministry of Finance of Vietnam

13 Source: Ministry of Planning and investment

high cost of products and low liquidation on the market Both of threats are existence

in the real estate industry in Vietnam now

3.1.4: Technology environment

Construction technology is world-old techniques in human life For a long time

of development and changing concept of living, construction technology becomes a complicated technique including many sub technical areas The development of construction technology in each country or region depends on the history of infrastructure built of the country or region

Construction technology in Vietnam developed rapidly in last 15 years, especially with civil construction technology Civil construction technology has moved fast in company with development of urbanization trend of Vietnam Nowadays, it is easy to apply new technology of construction for tectonic projects in Vietnam It is nearly no any restriction to apply new construction technology but there are many standard of technology that every constructional project must be follow consistently

Although construction technology in Vietnam has moved fast, it is inhomogeneous among many aspects There is lack of creative and realty of architecture design and master planning technology included government of this domain In other hand, the constructional project management technology, which includes quality control and structural supervision in Vietnam, is at lower-middle-level The know-how of constructional project management of domestic Vietnamese company is only able to adapt simple project Many international constructional services companies have established in Vietnam to gain the segment of high-complicated technology or high building construction or vast project in real estate business They provide services of management, architecture design, and master planning for new city project Many of them are well-known or top brands in the world like Turner Construction Company; Kumho Asian, Appave; Bachy Soletanche; Bureau Veritas; SOM Architecture Design and consultant, etc After some years of corporate between local companies and international companies, Vietnam company can obtain new technologies and Known-how of high level in management of construction Coteccons Construction Join Stock company and Hoa Binh Construction Join Stock company are two typical companies which have got known –

how of construction technologies and minimized the gap of maturation of techniques versus international construction companies from developed countries

In summary, technology environment of construction and real estate business in Vietnam keeps developing rapidly It is advantage for real estate developers who always want to apply and choose suitable technology to reduce cost but keep standard quality

3.2: Microenvironment analysis

3.2.1: Real estate market over view

According to the Vietnamese law system, land and the right to use land had just become exchangeable goods in market since 1993 officially Although land or the usage rights of land were considered as goods officially by law in recently, the unofficial market were exist for a long time before 1993 The Law of Land 1993 and successive versions are ratified by National Assembly to recognize real estate market

in Vietnam

By the effect of recognition of law system, not only scale of real estate market in Vietnam in period of 1993 – 1995 grew so fast but housing price and price of residential land also This was a first booming of real estate in Vietnam The booming

of real estate market led to bad structure of investment in economy and potential troubles in bank and monetary system In last, government issued administrative policies to tighten the market The Government policies and Asia financial crisis in 1997-1998 affected to investment activities in Vietnam They were reasons why from

1996 to the end of 2000, the real estate market was frozen The time from 1990 to

2000 was ten years of rudimental phase of real estate market of Vietnam Until year

2000, there were approximate 200 real estate companies in whole market only (see Figure 3.8)

Three years from 2001 to 2003 is period of second booming of real estate in Vietnam Because of recovery of economy after crisis in 1997 and influence of commercial convention between Vietnam and American in 2001, investing flow came back and affected to real estate market In other hand, the Law of Land 2003 had recognized more real estate property right to people so it actuated market growth up However, this growing period was not positive phase of real estate market Almost of successful transaction in the market was speculating transaction The main