Building business strategy for PVV Investment and Materials Joint stock Company in the period of 2013-2017

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT BUILDING BUSINESS STRATEGY FOR PVV INVESTMENT AND MATERIALS JOINT STOCK COMPANY IN

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT

BUILDING BUSINESS STRATEGY FOR

PVV INVESTMENT AND MATERIALS

JOINT STOCK COMPANY IN THE

PERIOD OF 2013 - 2017

Group Number: 2 Student’s name: Duong Thi Thu Ha

Pham Thanh Thuy Pham Tien Dung Nguyen Duy Truc

HANOI: 2013

“o full fill this project, we would like to express our deep gratitude for the favor apport of Griggs University, Center for Educational Technology and Career Development (ETC) of Hanoi National University and especially to the lecturers who lave enthusiastically taught, guided and provided us with the valuable knowledge We ancere thanks also to the support and assistance of the leaders and staffs PVV company limited They have spent highly valuable time on organizing surveys, jroviding data and discussing with us about the relation between the project contents

ad practical situations at the Company; from that, helping to create a close connection tetween theory and practice and resulting in a highly feasibility in the future

Ve, the Group 2’s members, would like to receive the continual support of the lectures

v help us completing the course with the highest results Particularly, the support of all

!VV’s leaders and staffs will be an indispensable motivation for this project coming nto the Company’s practice

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CHAPTER 3: CHOOSING BUSINESS STRATEGY AND SOLUTIONS TO APPLY STRATEGY FOR PVV INVESTMENT AND CONSTRUCTION MATERIALS IN THE PERIOD OF ZOU S201 ss scssaszxusiss0sieuittttnsmannevcenarancsenenemananstilicineantiisiiinnnesitiSeanensatiibn 53 3.1 Development objectives of PVV until 2017 .- c2 s3 Esvverreesrrrerreeee 53 3.2 Choosing business strategy for PVYV until 2(]7 - ¿5c + + x12 ssesereeeessees 54 3u DI LÁT THMÍTTX, SHTTITBFY ces 0sn.sn 208 s3i66.60ustictmnennnnnnnenaneisannnonanaswnnamiitdvimenmits titi A003 Samadi 8834 54 3.2.2 Choosing business strategy Via QSPM .cccceccccssssscssceseeseceecesecaecaeeeeseeaeeaeeseesens 56 3.3 Solutions to apply strategy 1n the period of 2013-20 17 - -s -s++s£+sx+exseees 58 3.3.1 Production management SỌUtIOT c1 201221121 1 23 011v ng nghe 58 3.3.2 Improvement of technology and CapaCIẤY ác 3c x31 9x esxererrrri 59 3.3.3 Financial SOLON sence cxccesnsrasexsanesavnnnanseanaesa anscnasusansws css saauszsunanersvaasenannaxenioasuncexexens 59 3.3.4 Product different strategy by idea from consultants and employees 60 3.3.5 Marketing ImprOV€IN€TIẨ - - G2 1t 12112 1231 11 111 1 11 1 1 1 g1 th gàng hp 61 3.4 Roadmap to apply strategy for PVV until 20 17 - - <5 55+ Ss + #vvxseeseerserekes 63 CONE UISTOIN sessssusaxsnannasuannnsn ennwsnion scenes ais ehh Sein i i NCO NNT HES TE OCS 65 FRE PER BCE ios cct.ani 0a cinsassaasattetndnttninnnsibnogensabditemencomnsnreneunsionysyyyocnnneanuisinemuibeniionsan cenmnsmnsitibe 66

GRIGGS UNIVERS' ITY IQ

LIST OF ABBREVIATIONS

7 PEST Political, economic, social and technology

12 | QSPM Quantitative Strategic Plan Matrix

Figure 2.4: PVV’s labor stTuCfUTC€ ¿c1 2c 1112112111131 81111 011011 1g ng ng 45

Figure 2.5: Income structure of PVV from 2010-2012 ccesccssccesesetceteceeeessesteeesees 48

Figure 2.6: ROE and ROA ofPVV from 2010-20 122 . .- 5-27 S2 sS<sserssessses 48

SWOT matrix cccccccccccccccsceccccscseccccccssessccceeccucccescccecescccssucececcceeautsecensees 21

Quantitative Strategic Planning Matrix .: :.s.sssversoseesssenaveasersossopseasnacnononss 23 List of Fresh concrete production and distribution in the North of Vietnam32 CPM matrix ofPVV, Thinh Liet and Viet Nga cà sec 34 Production and distribution of fresh concrete equipmens . 36 External factor evaluation matrix for PV .ccscsscossseussesceonssseorensnesonsoons 39 Average income and training budget for employees of PVV 44 Internal factor evaluation matrix Of PV 5 ngưng 51 PVV’s growth index in the period of 2013-20] 7 - - << se mã SWOT matrix Of PVV oo 54

Roadmap to apply business strategy for PVV until 2017 - 63

Deriving from below situation, building business strategy becomes of the most important activity to a company Business strategy creates a clear business orientation and guides all departments, employees to company’s general goal then avoids localization and decentralization Business environment change quickly, international competition require company always be active and creative to adapt to these changes

In the process of industrialization and modernization, heavy industry in general and construction industry in particular plays an important role in deciding the success

of this process Vinaconex group is the biggest group in construction industry and the company has created huge contribution to this process One of major contribution to success of Group is the role of its business unit, in which PVV is an example As all other companies, PVV_ is also facing many opportunities and challenges in this period So building business strategy for a particular period becomes the determining factor to company’s expansion and country industrialization

Realizing the importance of building business strategy for construction companies in particular and the whole industry in general, there are many significant projects and studies of domestic and international researchers on this topic Some significant projects are:

Topic: “Vietnamese construction industry in 2010”, Ministry of Construction’s report The topic shown out observation identifications about recent activities of Vietnamese construction industry in 2010: achievements and limitations From these

the context of industrialization, modernization and integration

Both of below topics have significant practical meaning to development of Vietnamese construction industry in exploration and production, and they are macro research, the data and conclusion in these research will be very useful tools for enterprise in setup its business strategy but it needs a more specific and profound project to apply these conclusion to activity of a particular company From below reasons, researchers choose the topic: “Building business strategy for PVV Investment and Materials Join Stock Company in the period of 2013 to 2017” with the objective of giving out a more specific and profound for building business strategy for the key industry for industrialization progress in Vietnam

2 Purposes of project

Base on practical understanding about construction sector in general and production and business of PVV in particular and knowledge of strategic management subject, the project shown out a comprehensive and clear picture about strategic building and business of PVV_ in Vietnam market Throughout practical analysis of production and business of PVV in integration, the project affirmed explicitly the role

of building business strategy for Vietnamese company in modern time

The project not only stopped at practical analysis but also gave out specific solution for each section in each period for PVV In chapter 3 the project will show out forecast of construction market trend until 2017 These solutions and forecast will also be guide line for other companies in construction industry

3 Scope and objective of project

as company profit in both short term and long term

Data and information in this capstone project were collected from actual production and business of PVV_ in these 5 years The project also gave out some forecasts about construction market to 2017 and business orientation for PVV_ in the period of 2013 to 2017

4 Methodologies

The project is the combination of a great theory “strategic management” on practical business strategy building of a big corporation To be successful in applying this theory on production and business of PVV , researchers used both qualitative and quantitative method in studying These methods are:

- Collecting and analyzing method

- Comparative analysis method

- Specialist analysis method

- Economic statistic method

The project also use kinds of models for analyze such as: SWOT matrix, QSPM

and CPM matrix, etc

A wide variety of academic researches, market report, journals are utilized to bring out the best understanding of the subject The source's of data are listed clearly in the reference

5 Project’s structure

Besides forewords, conclusion and list of table and abbreviation the capstone project includes three chapters as following:

Chapter 1: Overview of strategic planning and strategic management

Chapter 2: Analyzing business environment for PVV

Chapter 3: Choosing strategy for PVV in the period of 2013-2017

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CHAPTER 1: OVERVIEW OF STRATEGIC BUILDING FOR ENTERPRISE 1.1 Definition and roles of strategy for enterprise

1.1.1 Definition of strategy and strategic management

"Strategy" is a concept having been presented and widely used in many areas for

a long time “Strategy” was first used in military filed, then moved to politics Since 50-60s of the 20 century, the concept of strategy was used in socio-economy area

"Strategy" is usually understood as the way and methods solving given tasks in comprehension, overall and long term United Industry Development Organization (UNIDO) said that: "Normally, a development strategy may be described as a draft for development process in order to gained defined goals for a term from 10 — 20 years; it drives strategy planners in mobilizing and distributing resources In general, we can say that strategy provides a vision of an expected development process and consistency

in methods of implementation Furthermore, strategy may be foundation for comprehensive development plan in short term, midterm or a general recognition without binding of insiders in that term about outlook, challenges and satisfaction”

Generally, concepts and definitions about strategy, despite being different in expression, always cover following contents:

+ To define short term and long term goals of enterprise

+ To propose and select predetermined plans

+ To conduct and distribute resources aimed at implementing those goals

In addition to the understanding about strategy, leaders in company also need to know to manage it and make right decisions If applicable, their company will well do strategy known as strategic management In general way: "Strategic management is defined as a collection of decisions and actions implemented via results of planning, enforcing and evaluating strategies It is designed to gain long term."

1.1.2 Roles of building business strategy for enterprises

1.1.2.1 Gains

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Many researches show that: if enterprises have obvious business strategy, they will have more feasible action program rather than the ones not having strategy or obvious one Business strategy is guideline for action of enterprise As a result, enterprise will gained predetermined goals Furthermore, business strategy is bridge to make short term goals deviated from long term ones The development of enterprise is compatible and comprehensive Thus, gains of strategy and strategic management have been surveyed in many nations, industries and the new companies with different size In summary, we have following three features:

- Business strategy and strategic management help enterprise have specific action program to gained predetermined goals

- Business strategy helps enterprise define central goals

- Business strategy helps enterprise have specific and in time measures meeting changes in business environment

Nevertheless, in order to achieve above gains, it is a must for enterprise to have thorough analysis about their position, role, internal features as well as opportunities and threats coming from business environment

Enterprise always has different goals, only strategy cannot help enterprise gained all achievements Therefore, enterprise applies different strategies at the same time Sometimes, these strategies have certain exclusive For instance, in order to implement lower cost strategy, enterprise will affect to product quality improvement

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1.2 Process to build business strategy

1.2.1 Analyzing external environment

1.2.1.1 Macro environment

Macro environment factors include: Economic, political, social and

technological ones Each macro environment factor mentioned above may affect to operations of company independently or in relation with other factors In regard to

banking sector, the factors are shown as following:

Economic: This factor is important because the economic environment has remarkable influences to the bank's activities The main impacts of economic factors

include interest rates, economic cycle, CPI inflation, GDP, balance of payments, fiscal

and monetary policy Since these factors are relatively wide, enterprise should select to identify the specific impact with the most direct way on their activities

Political: The nature of the bank is a financial intermediary and its activities have an important influence to the national financial system Thus, the bank is subject

to strict control of the state than other sectors The political factors have more and more affect to operations of banks, including the point system, the policy of government, legal system, diplomatic trends of government and the political happenings in the country, regional and worldwide

Social: Socio — cultural environment includes norms and values accepted and respected by a society or a particular culture The changes of socio-cultural factors are part as consequence of long-term impact from other macroeconomic factors, so it

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fluctuates more slowly than other factors Some features that administrators need to pay attention are: the impact of socio-cultural factors society have long-term and more subtle than other factors, sometimes it is difficult to identify On the other hand, the scope of the impact of socio-cultural factors is large society: "it determines how people live, work, produce and consumer products and services."

Technological: This is one of active elements, containing many opportunities and threats for banks The pressure and threats from technological environment may be: the introduction of new technologies leads and strengthens competitive advantage

of the alternative product as well as threatens the traditional products of existing industries The explosion of new technologies makes existing ones out of date and creates pressure for banks to innovate technology promoting competitiveness Furthermore, the introduction of new technology increases the pressure threatening the existing banks in the industry The explosion of new technology, making the technology life cycle tend to shorten, thus increases pressure to shorten the depreciation period than before

- Interest rate, inflation demography i

Technological Development of new technologies

Source: Strategic Management, Fred, David

Figure 1.1 PETS model

1.2.1.2 Microenvironment

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Rivals: In the current integration trend, competition among banks as well as financial institutions such as insurance, finance company is increasingly fierce The understanding of the competitors has a significant importance for banks for many reasons The first, rivals decide the nature and extent of competition or tips in gaining advantages

Intense level of competition depends on the interaction among such factors as the number of banks participating in the competition, the industry’s growth rate, and fixed cost structure and diversification level of product The existence of these factors tends

to increase the demand or desire of banks to achieve and protect their market share So, they make the competition fiercer and fiercer

Buyers: buyer is inseparable part in competitive environment The trust from buyers may be the most valuable asset of bank That trust is resulted from satisfying demands and tastes of customers in comparison with rivals

Suppliers: Banks must have relationship with organizations supplying different resources such as material, equipment, labor and finance

New entrants: the new entrants in industry may be factor declining profit of bank since they make use of the new production capacity with expectation to gain market share and essential resources It is noticeable that re-purchasing other with intention to build market share is symbol of new entrant

Substitute products: Pressure from substitute products controls earning potential

of industry since the highest price is under control Most of the new substitute products are resulted from technological break out In order to have success, banks must pay attention and spend suitable resources to develop or apply new technologies into their

strategy

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| Bargaining power of Rivalry among

Source: Strategic Management, Fred, David

Figure 1.2: Michael Porter’s five forces model

1.2.2 Internal environment

Analyzing internal environment is the analysis of factors and system inside the bank that can control, mobilize and determine whether banks can do, and the feasibility

of their strategies The internal factors of bank include human resources, facilities and

technology, organizational structure, policies, services, finance, In order to ensure

feasibility of strategy, when building strategy, we have to assess the situation, identify the strengths and weaknesses then the ability to distinguish or competitive advantages

of bank Internal analysis of the bank’s activities is carried out on following aspects:

Human resource: This factor is extremely important and indispensable in any organization Competitiveness of human resources is reflected in such factors as: the level of training and qualifications of professional expertise, motivation and connection

to enterprise, public awareness and working style Additionally, human resources play the key role in all stages of the process from building, implementing and monitoring

strategy

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Finance:

Financial status, financial indicators reflect the effectiveness and capability of organization Financial condition of bank reflects not only the capacity of banking activities in the past but also the ability of banks to develop in the future The financial indicators are often interested in performing the financial analysis in the strategy include the current ratio (total fixed assets / liabilities), quick liquidity (Current assets- inventory) / Current Liabilities), indicators of leverage (debt), operational indicator (the total turnover of total capital and floating capital) and indicator reflecting profit capacity

Infrastructure and technology:

The facilities include transaction office and transaction point system, equipments serving customers, internal equipments such as payment system and computer network system

Technology is the most important factor among needed infrastructure in bank The automated machinery and equipment shorten operation time; improve accuracy, convenience of banking services Furthermore, technology provides foundation for banks to deploy modern services Technology in ban includes management information system and risk reporting system within bank

Culture and reputation

Organizational culture plays an increasingly important role in the formation of each organization Each bank should make its members understand the goals and action viewpoint That will boost the bank’s members strive to achieve common objectives set

out

The reputation of bank also has significant contribution to the successful implementation of objectives of the bank Reputation is an invisible value that bank has been forming during the process of long term development A bank having more reputation in market will be more accessible to new markets and introduction of new

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After analyzing the internal capacity of the bank, strategic planners make meaningful comparisons That is comparison reflecting the development of bank and its strengths in the relation with rivals within industry

Comparisons done under the three basic ways:

- Time based comparison: that is the comparison of banking activities in different terms associated with its history context

- Industry’s standard based comparison: that is comparison about banking activities against standards of industry and the main rivals It shows the position of bank in industry

- Recognizing the core successful factor of industry: that is some factors with significant influences to success of bank in industry

1.3 Support tools for strategy selection

The analysis and selection of strategy is making subjective decision based on subjective information to define possibly selected operation process Thanks for those; the bank may fulfill functions and goals with the most effect The current strategies,

objectives and mission of bank, plus internal and external information control will

make foundation for forming and assessing strategy with feasible selection

At present, there are many popular matrixes in analyzing strategy such as

BOSTON matrix, G.E matrix, Internal and External evaluation factor matrix (I.E), GS

matrix and SWOT matrix Nevertheless, in this capstone project, we would like to

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focus on analyzing based Internal and External evaluation factor matrix (I.E) and SWOT matrix

1.3.1 External Factor Evaluation matrix (EFE)

External Factor Evaluation Matrix (EFE) helps us summarize and quantify influences of environment to enterprise Similar to the step of analyzing Internal factor evaluation matrix IFE, in order to analyze EFE we also follow five steps:

Step 1: Make a list of factors crucial to the competitiveness of enterprises in an industry (usually from 10 to 20 factors)

Step 2: Assign the a weight from 0.0 (not important) to 1.0 (most important) for each factor It should be noted, the importance assigned to the factors show relative importance of those for the success of the enterprises in industry Total importance of factors listed is 1

Step 3: Assign a rating from | to 4 for each factor (actually point to a wider range) Mark the biggest weakness when sorting by one, the smallest weakness when sorting by 2, the minimum strength as classified by 3 and biggest strengths when sorting by 4 So, this is the point of reflecting the adaption of enterprise to threats and opportunities from environment

Step 4: Calculate score for each factor by multiplying the importance of that factor with the corresponding classification scores

Step 5: The total weighted score for all factors in the matrix is given by summing the number of relevant factors of each enterprise

Accordingly, if the total weighted scores of all factors to be included in the IFE matrix are 4, the enterprise’s competitiveness is absolute If it is between 2.50 and above, it shall be absolutely competitive on average In contrast, the total number of points in the IFE matrix is smaller than 2.50, the absolute competitiveness of enterprises is lower than average

1.3.2 Internal Factor Evaluation Matrix (IFE)

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Internal evaluation factor matrix (IFE) summarizes important strengths and

weaknesses of business departments as well as overall enterprise IFE matrix is developed in five steps:

Step 1: Make a list of factors crucial to the competitiveness of enterprises in an industry (usually from 10 to 20 factors)

Step 2: Assign a weight from 0.0 (not important) to 1.0 (most important) for each factor It should be noted, the importance assigned to the factors show relative importance of those for the success of the enterprises in industry Thus, for enterprises

in the industry, the importance of factors listed in step 1 is the same

Step 3: Assign a rating from 1 to 4 for each factor (actually point to a wider range) Mark the biggest weakness when sorting by one, the smallest weakness when sorting by 2, the minimum strength as classified by 3 and biggest strengths when sorting by 4 So, this is the point of reflecting competitiveness of each factor in enterprise against rivals’

Step 4: Calculate weighted score for each factor by multiplying the weight of that factor with the corresponding rating

Step 5: The total weighted score for all factors in the matrix is given by summing the number of relevant factors of each enterprise The total score shows that, this is the absolute competitiveness of enterprises

Accordingly, if the total weighted scores of all factors to be included in the IFE

matrix are 4, the enterprise’s competitiveness is absolute If it is between 2.50 and above, it shall be absolutely competitive on average In contrast, the total number of points in the IFE matrix is smaller than 2.50, the absolute competitiveness of enterprises is lower than average

1.3.3 SWOT matrix

SWOT is the abbreviation of: Strengths, Weaknesses, Opportunities and Threats SWOT analysis model is the result of survey from more than 500 enterprises

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having the largest revenue selected by Fortune and carried out in Stanford research

institute in 60-70 decades This is to find out t

he reason why many enterprises failed in implementing plan The research group had Marion Dosher, Ts Otis Benepe, Albert Humphrey, Robert Stewart and Birger Lie SWOT model introduces the four basic strategies named: (1) SO (Strengths

- Opportunities): strategies based advantages of enterprise to make use of market

opportunities (2) WO (Weakness - Opportunities): strategies based capacity overcome

weaknesses of enterprise to make use of market opportunities (3) ST (Strengths - Threats): strategies based advantages of enterprise to avoid threats of market (4) WT (Weakness - Threats): strategies based capacity overcome or control weaknesses of enterprise to avoid market threats

Table 1.1: SWOT matrix

Source: Strategic Management, Griggs University

1.3.4 CPM matrix

Competitive profile matrix is an essential strategic management tool to compare the firm with the major players of the industry Competitive profile matrix shows the

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clear picture to the firm about their strong points and weak points relative to their

competitors The CPM score is measured on basis of critical success factors, each

factor is measured in same scale mean the weight remain same for every firm only rating varies The best thing about CPM that it includes your firm and also facilitate to add other competitors make easier the comparative analysis

IFE matrix only internal factors are evaluated and in EFE matrix external factors are evaluated but CPM include both internal and external factors to evaluate overall position of the firm with respective to their major competitors

1.3.5 OSPM matrix

The Quantitative Strategic Planning Matrix is a strategic tool which is used to evaluate alternative set of strategies The QSPM incorporate earlier stage details in an organize way to calculate the score of multiple strategies in order to find the best match strategy for the organization

The QSPM comes under the third stage of strategy formulation which is called

“The Decision Stage” and also the final stage of this process The best thing about

QSPM is that it never insist the strategist to enter the information on assumptions, it

extract the information from stage 1 The Input Stage and stage 2 the the matching stage The input stage is based on EFE Matrix, IFE Matrix and CPM and stage 2 made

up of TOWS matrix, SPACE Matrix, BCG Matrix, IE Matrix, Grand Strategy matrix

The QSPM combine the intuitive thinking of managers with the analytical process to decide the best strategy for the organization success

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Source: Strategic Management and Competitive Advantage: Concepts, Prentice

There are four main columns in QSPM, the left column list down the key internal and external key factors which are same as in EFE and IFE matrix Adjacent column to key factors is Weight (relative importance of the factor) which hold the numeric value obtained from EFE and IFE matrix weight column The next to weight is

AS stands for attractive score assign priority to key factors using the numeric value 4 for most importance and 1 for least importance and the last column TAS (Total attractive score) is the value calculated by multiplying weight by AS One thing important to note for each strategy separate AS and TAS value added in the table, weight remain same for all set of strategies mentioned in QSPM The topmost shows the strategies are compared in the QSPM matrix, below mentioned table illustrate the structure of QSPM matrix

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1.4 Strategy building and choosing key strategies

Strategy is a system which includes list of policies and great solutions to deploy and coordinate action routines help the company get the best way to archive its targets Each enterprise can create a competitive advantage for itself And they also have them all way routine and steps operate, for example, the best quality, the best service, lowest cost or focusing on target market, etc

A company can apply many different strategies in a period The company can pay much attention to development in this area while cut down others Those activities aim at implementing successfully the company’s general objective during the strategy implementation period

The strategic choice out of strategies above depends on the company’s capability and related environment factors From the result of analysis of SWOT matrix, QSP matrix the company will choose for itself the best business strategy

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CHAPTER 2: ANALYSIS BUSINESS ENVIRONMENT OF PVV

INVESTMENT AND MATERIALS JOIN STOCK COMPANY

2.1 Introduction about PVV Investment and materials join stock company

2.1.1 Establishment and development history

PVV Investment and Materials Join Stock Company is a state company under the management of Vinaconec — PVC was established under the business registration

No 0104259254 issued by Hanoi Investment and Planning Department on 17” November 2009

International name: PVV Investment and Materials Join Stock Company

Head office: 10" floor, CT3-1 building, Me Tri Ha urban area, Me Tri, Tu Liem,

Ha Noi

Thanks to the support of mother company Vinaconex — PVC in both finance and human resource PVV had a stable basic for its development Although the company has just established for 3 years but the company still has been building its brand name and market position by wide-knowledge and experienced human power

PVV is a new member in construction area but the company is trying its best to catch company annual business plan In 2011, total production amount was 138.396 billion dong and total revenue was 119.449 billion dong In 2012, the company set its target to reach the total production amount 350 billion dong and revenue is 300 billion dong

2.1.2 Business scope

2.1.2.1 Construction sector

In the period of industrialization and modernization, demand for construction of

infrastructure is very high, especially, construction of transportation, industrial zone, condominiums and offices With new organization structure together with the modern management control system, experienced and qualified human resource, the company

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is continuing in expand market share to all over the country to improve employees

living standard as well as their knowledge The company also focuses on investment

for human resource development, infrastructure and experience collection to improve

company’s production capacity and ability for long-term development strategy In 3 years of development the company has proved that it’s a professional bidder in these

below construction segments:

- Construction of civil and industrial structures

- Completion of civil and industrial structures

- Construction of water supply system

- Construction of transportation works

2.1.2.2 Production and distribution of fresh concrete

With the same characteristic as other construction material, quality of fresh concrete depends on supply and mix of raw materials as well as distribution channel PVV is famous brand in production and distribution of fresh concrete in Vietnam with the experience in all types of concrete: ultra high concrete, durable concrete and concrete in hot weather condition

Controlling of raw materials such as sand, stone and cement as well as mixing process are key factor to keep high quality of fresh concrete In PVV’s laboratory, they can test strength of concrete, composition and moisture of finish goods The test frequency is applied for each lot of production, each customer and recorded in automatic system

Recently the company has 5 concrete mixing plants, 3 in Hanoi (capacity i80m°/h), | in Thanh Hoa (capacity 60m°/h and 1 in Hai Phong (capacity 60m”/h) Then with total capacity reaches to 660m? /h the company can provide its product to all provinces in the North of Vietnam In future this range will be expanded to all over the country

2.1.3 Organization structure

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With total employee 150 people and most of them were transferred from Vinaconex-PVC then employees are experienced in production of fresh concrete and construction Each member in company well understands that “Customer is the First” then try them best to bring customers most perfect products and services To achieve this target the company organizes its structure suitably as the figure 2.1 below:

Source: Human resource subsection, Administration Dept, PVV Jsc

Figure 2.1: PVV organization structure With a scientific and flexible organization structure the company has well implemented the target and responsibilities provided by parent company The organization structure is also the key factor which helps to implement the business strategy in the next five years

2.2 External environmental analysis

2.2.1 Macro environment (PETS model)

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2.2.1.1 Political and legal system factors(P)

After six years of becoming official member of World Trade Organization — WTO (from 07" Oct 2006), Vietnam is now step by step applying its commitments with all members of WTO Moreover, Vietnam is improving the country competitive position when assigned to be the non-permanent member of the UN Security Council

in 2007 Government is continuously in improving economic, political and social policies The stable in political condition is the key factor for business development of all enterprises in Vietnam

About legal system, our legal system is not complete and its application is not highly rated There are some conflictions between different regulations Although the Government has some improvements for administration procedure but it still contains complex and trouble For regulations which affect to business operation of PVV can be pointed out as below:

Real estate credit has met many difficulties when No 13" Circular came to effect from 01/10/2010 This circular mentioned the risk ration for all real estate credit

is 250% This is considered as new barrier for real estate sector The Government is also set up the rule for all commercial banks to use maximize 30% total capital for long and middle-term credit It’s also the challenge for real estate investors

Most of our regulations and laws have not much changes in these years for example Investor law, Construction Law and Accommodation law but the changes of Real estate and Personal tax income has many effects to investors

The development trend of legal system for construction sector in general and construction material in particulars has some impacts to PVV’s operation as below:

+ Legal system can provide a better business condition for competition of enterprises in industry

+ Legal’s system is the tools for development of construction sector and helps to increase in demand of construction’s material

2.2.1.2 Economic factors

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According to the report of Economists in Legatum Insitute (Head office in London), Vietnamese economy has got the giganic development in these 10 years The report also mentioned that Vietnam can become the 3“ biggest economy in Asia behind China and India But the development process is affected by the world financial crisis and the impact is indicated via the decreasing in GDP growth rate and increasing in inflation rate

GDP growth rate is slow down but the share of industry and construction is still highest with 41% total GDP in compare with 38% of service and 21% of agriculture

Source: Statistic yearbook from 2001-2011, Statistic publisher

Figure 2.2: GDP and CPI grow rate from 2001-2011 GDP growth rate was stable from 2001-2007, from 2008 to 2011 due to the impact of the world financial crisis the GDP growth rate is down and unstable In 2009, the growth rate was only 5.32% in comparison with 8.48% of 2007 and this number was 6.78% in 2010 and continue down to 5.89% in 2011, in 2012 the economic growth rate is about 6% and cannot be recover as before crisis

Inflation ration was very high these years, in 2007, inflation ration was 12.75%,

in 2008 was 19.87% and in 2009 this ration down to 6.52% but it increased to 11.75%

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in 2010 and 2011 the credit ration from 22-24% for enterprises The race of interest rate has caused many difficulty for companies in both production operation and

management

For economic condition, the fluctuation of the whole economy lead to the frozen

of real estate sector then demand for construction decreased these years Then demand for PVV’s products has met some difficulty The increasing in inflation and interest rate lead to financial difficulties for PVV in control cash flow as well as decide to get credit from banks

2.2.1.3 Technology factor

Production technology: To production technology, in heavy industry Vietnam has opportunity to expand the investment of both state and private, especially the interfering of technology among WTO members help to improve our production method The development of technology is the key factor to improve capacity and quality of PVV products

Information technology: According to the survey in 30 countries (Include Vietnam), the report of " Impact of Internet to developing country" showed that: In Vietnam, the development of Internet help small and medium enterprises increase 19% business operation capacity, Internet also contributes 0.9% in total GDP to Vietnam economy and 1.6% in 14.4% GDP growth rate of Vietnam in 2 years The impact of information technology development and investment of Government to this sector helps to improve PVV improvement and expansion strategy in future

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2.2.1.1 Social factor

About social condition now in Vietnam has improved much in recent time If the ration of poor people was 58% in total population in 1990s, this number in 2010 was only 9.5% About living standard, in 2011, Vietnam has 61th ranking in prestige board of Legatum Institute (head office in London)

About dynamic development index, Vietnam is one of top 10 country in the world The high position is the result of the country industrialization and modernization In which, the Seekingalpha website with indicated that with more than

90 million of population and the middle level is increasing fastly In recent years, Vietnam has attracted the investment of large investor in the world With young structure of population (more than 50% of population is less than 30 years old) And the power of labor strength will continue to attract more big country to invest to replace for bigger and bigger salary level in labor countries Besides, the creation ability of Vietnamese labor is considered as higher and higher The social condition is creating suitable opportunities for PVV to have more solid resource for further development

2.2.2 Micro environment (Michael’s five forces model)

2.2.2.1 Density of rivals

Recently there are about 12 companies who produces fresh concrete for Hanoi and North provinces These 12 companies have different capital capacity, history of development and they hold about 70% total market share for fresh concrete in the North, the remain share belongs to small plants with no business registration certificate The big company in fresh concrete sector such as Logico, Song Da Vietnam Germany, Tan Viet Construction but their production is mostly for internal construction works To PVV, 2 biggest direct competitors who has same business scale, target market and development objectives are Viet Nga fresh concrete, Thinh

Liet Concrete

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l Song Da Vietnam Germany Investment 2007 90

4_ | Tan Viet Investment and Construction 2002 50

5 | Vietnam Korea Concrete 2006 12

6_ | An Quy Hung Co 2002 0.3

7| Viet Nga Fresh Concrete 2003 30

§_ | Hanoi Construction Concrete 2005 85

9 | A&P Construction Concrete 2007 10

II | Thinh Liet Construction and Concrete 2006 12

12_ | PVV Investment and Construction Materials 2009 7

Source: website-betongthuongpham.com.vn

Viet Nga fresh concrete: Viet Nga was established in 2003 with charter capital was 30 billion dong The comparative advantage of Viet Nga is the capacity of production Recently, the company has 2 big concrete mixing plants with total capacity more than 530m3/h Production equipment and machines are modern with clear target market help the company to have stable production capacity and sale volume Viet Nga has warranty with customer to ensure their construction schedule smoothly and it's the key factor helps to attract customer to Viet Nga

Thinh Liet Concrete: Thinh Liet is a member of UDIC, the company was

established under the decision No 3359/QDUB on 22/12/1992 and in 2006 the company changed to join stock company operation Objective market of Thinh Liet coves all over Vietnam, especially, the North and the middle provinces such as: Bac

Ninh, Bac Giang, Hanoi, Hai Phong, Nam Dinh, Ninh Binh, Thanh Hoa, Nghe An The

comparative advantage of Thinh Liet is the high quality product with special warranty condition The company has established the quality control section follow the standard

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of Ministry of Construction with the quality control system follow ISO 9003 issued by Quacert Vietnam and QMS- Australia To expand its production range in 2004 the company gained ISO 9001-2000 standard These factors help Thinh Liet to become one

of biggest competitor for PVV in the next years

To PVV, the company’s motto is: “Satisfy all customer’s needs, bring customers the best quality products with the best quality services”, company’s comparative advantage can be shown as below points:

- Labor resource: With the total employees 150 people and most of them was transferred from Vinaconex — PVC and they are have long term experience in production of fresh concrete because they had long term in using concrete as construction material for works implemented by Vinaconex — PVC

- Equipment capacity: Recently, PVV has 5 concrete plants, 03 plants in Hanoi,

01 in Nghi Son Thanh — Thanh Hoa and 01 in Dinh Vu — Hai Phong with total capacity 300m3/h To satisfy customer’s requirement the company invested to buy 26 special concrete trucks, 02 pump vehicles and 02 static pumps The location of mixing plants

in different area and next to customer location help the company to be flexible in providing materials for construction works in most provinces in the North of Vietnam Moreover, the company can ask for support from concrete trucks of Vinaconex — PVC

in urgent case to ensure the best services to customers

Quality of fresh concrete: PVV is always trying its best to improving quality control system and the company get the certificate to follow TCVN ISO 9001-2008 With concrete mixing method designed by long experienced engineers in studying and using fresh concrete In production process, concrete mixing is controlled strictly from material providing to the last process to transport the products to customer

To evaluate the competitive ability of all three companies in providing fresh concrete to the North and Middle market the CPM matrix will help to show out position and advantages of each company

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