Building business strategies in Minh Hieu Construction and Trading Joint Stock Company for period 2013-2017, with vision to 2020

Trang 1

GRIGGS UNIVERSITY

GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT

BUILDING BUSINESS STRATEGIES IN MINH HIEU CONSTRUCTION AND TRADING JOINT STOCK COMPANY

FOR PERIOD 2013 -2017, WITH VISION TO 2020

Intake Gba.M0310, Group 01 Names of Students:

: 1- Le Duy Hieu

| 2- Ngo Xuan Ha

Trang 2

Building Business Strategies in Minh Hieu Construction and Trading Joint Stock Company

SOCIALIST REPUBLIC OF VIET NAM Independence - Freedom - Happiness

CERTIFICATION Attention:

- ETC Management

- Peer Review Council

This is to certify that Group 1, Intake Gba.M0310, the Master of Business Administration Program of Center for Education Technology and Career Development (ETC) - Viet Nam National University and Griggs University - the United States is permitted by Minh Hieu Construction and Trading Joint stock Company to use its materials and data as inputs for the thesis titled “Strategic business planning at Minh Hieu Construction and Trading Joint stock Company in the period 2012-2015”

[Koni July 2012 VN, C "GA

7, coDIRECTOR _

Trang 3

TABLES OF CONTENTS

INTRODUCTION 6

1 Background and the necessity of the Capstone 6

2 Objectives, Scope and Applicability 7

3 Methodology 7

CHAPTER | THEORIES OF BUSINESS STRATEGIES DEVELOPMENT 8 1,1 DEFINITION AND ROLE OF STRATEGIC MANAGEMENT 8

1.1.1 Definition 8

1.1.2 The Role of Strategic Management 8

1.2 STRAREGIC MANAGEMENT AND PLANNING PROCESS 9

1.2.1 Strategic Management Process 9

1.2.2 Business Strategy Classification 9

1.2.2.1 Overall Corporate Strategy 9

1.2.2.2 Business Unit Strategy 10

1.2.2.3 Divisional or Functional Strategies 10

1.2.3 Overall Environment Analysis using PEST Model 10

1.2.3.1 Economic Factors 1]

1.2.3.2 Cultural and Social Factors 11

1.2.3.3 Political and Legal Factors 12 1.2.3.4 Global Factors iz 1.2.3.5 Technological Factors lệ 1.2.4 Industry Environment Analysis using Michael Porter’s 5 Forces 13 Model 1.2.4.1 Buyers 14 1.2.4.2 Suppliers 13 1.2.4.3 Existing Rivals 15 1.2.4.4 Potential Entrants 16

1.2.4.5 Substitute Products and Services 16

1.2.5 Corporate Internal Environment Analysis 16

1.2.5.1 Corporate Culture 16

1.2.5.2 Productive and Trading Capacity L7

1.2.5.3 Finance and Accounting Capacity lý

Trang 4

1.2.5.4 Management Capacity 18

1.2.5.5 Information Systems 18

1.2.6 SWOT Matrix 19

1.2.7 Quantitative Strategic Planning Matrix (QSPM) 19

CHAPTER 2 BUSINESS ENVIRONMENT ANALYSIS OF MINH

HIEU CONSTRUCTION AND TRADING JOINT STOCK COMPANY S

2.1 OVERVIEW OF THE COMPANY zi

2.1.1 Development History 2]

2.1.2 Business Areas, Tasks and Functions, and Core Competencies 2)

2.1.3 Organizational Structure có

2.1.4 The Company’s Business Performance for 2009 -2011 23

2.2 THE COMPANY BUSINESS ENVIRONMENT ANALYSIS 24

2.2.1 Macro Environment (PEST) Analysis 24

2.2.1.1 Economic Factors 24

2.2.1.2 Political and Legal Factors 26

2.2.1.3 Cultural and Social Factors 28 2.2.1.4 Technological Factors 28 2.2.1.5 Global Factors 30 2.2.2 Industry Environment Analysis using Michael Porter’s 5 Forces 33 Model 2.2.2.1 Buyers (Investment Owners) 33 2.2.2.2 Suppliers 34 2.2.2.3 Existing Rivals a3 2.2.2.4 Potential Entrants 36

2.2.2.5 Substitute Products and Services nơ

2.2.3 Matrix of External Factor Evaluation (EFE) 38

2.2.4 Analysis of Internal Factors a9

2.2.4.1 Corporate Culture Ee

2.2.4.2 Available Resources and Productive Capacity 40

2.2.4.3 Accounting and Finance Capacity 42

2.2.4.4 Human Resource Management 43

2.2.4.5 The Company’s Existing IT System 45

2.2.4.6 The Company’s Internal Factor Evaluation (IFE) Matrix 45

Trang 5

CHAPTER 3 SELECTION OF STRATEGIES AND MEASURES 47 3.1 Strategic Objectives to 2015 47 3.1.1 The Company’s Targeted Strategy 47 3.1.2 Implementation Roadmap 47 3.2 Formulating and Selecting Optimal Strategies 48 3.2.1 SWOT Matrix 48 3.2.2 Selecting an optimal development strategy for Minh Hieu in the period 2012-2015 °

3.3 Measures io realize selected strategies es fs

3.3.1 Measures on organization and human resource administration ae

3.3.1.1 Organizational Structure a2

3.3.1.2 Human Resource Management 54

3.3.2 Business Management Measures 54

3.3.2.1 Strengthening Monitoring and Supervision on Works and 54

Service Quality

3.3.2.2 Enhancing Business Management Efficiency a

3.3.2.3 Applying Science and Technology Xã

3.3.3 Financial Measures 30

3.3.4 Strategy Implementation Planned Budget 56

Trang 6

LIST OF TABLES AND FIGURES

1 Figure | Corporate Strategic Planning Process

b2 Figure 2 Michael Porter’s Five Forces Model

3 Figure 3 Minh Hieu Construction and Trading JSC’s Organizational

Structure

4 Table 1 Summary of the Company’s Key Financial Indicators for 2009 —

2011

Table 2 GDP Growth Rates and Inflation Kates for 2005-2011

Table 3 - List of technological properties currently used in the Company Table 4 Summary of the Company’s Business Environment

Table 5 The Company’s Competitive Profile Matrix (CPM)

=

es

Py

Table 6 The Company’s Opportunities and Threats 10 Table 7 The Company’s EFE Matrix

11 Table 8 The Company’s Completed Projects

12 Table 9 The Company’s Invested Equipment and Machinery as of 30/6/2012 13 Table 10 The Company’s Business Operation Growth Rate for 2009-2011 14 Table 11 List of the Company’s key technical staff and executives

15 Table 12 The Company’s Internal Factor Evaluation (IFE) Matrix 16 Table 13 The Company’s SWOT Matrix

Trang 7

ACKNOWLEDGEMENTS

We would like to convey our since thanks to lecturers, tutors and staff of the Center for Education Technology and Career Development (ETC) - Viet Nam National University as well as the Management of Minh Hieu Construction and Trading Joint stock Company for their creating favorable conditions to the study and completion of this graduation thesis

Trang 8

INTRODUCTION

1 Background and the necessity of the Capstone 1.1 National and global context

In Viet Nam, since the launch of the State’s open-door policy in 1986, marked by the country’s WTO admission in 2007, the national economy has achieved rapid and substantial pace of growth and integration with the global economy The country’s GDP continuously achieved high and sustainable growth rate of the average 6-8% in 2001-2010 Even during the global early economic recession in 2008, Viet Nam economy sustained its growth rate of 6.5%

Since 2009, however, as the global economic picture has been marked with

varied patterns such as the record high unemployment rate in the US and the public debt crisis in the Euro zone countries, the country economy was pulled into the world-spread recession The country’s economic growth rate for the first half of 2012 stood at modest 4.38% The imports of input materials for the key commodities in the country’s export turnover such as garment, footware declined sharply in the early 2012, which reveals the difficulty in finding markets for the exports in the coming period Notably, the gloomy picture of local firms’ 2012 performance is spreading throughout the country In each locality, the number of firms in various business areas and of different sizes, facing with difficulties, dissolution, temporary holdup in operations or operations without turnover, operations at a loss, bankruptcy, etc is on dramatic increase Many of these firms are in huge debts and have to downsize their operations with huge inventories while the export markets become narrower and their domestic market shares shrunk It is common that many firms commit tax evasion, or cannot afford to pay taxes and duties, which have cast adverse impact on both the macro and micro socioeconomic situation of the country

Trang 9

To overcome such crisis, it is essential that each firm take the correct and appropriate actions in their operations to flexibly adapt to the changing business environment Minh Hieu Construction and Trading Joint Stock Company, a small local private firm is no exception

2 Objective, scope and applicability

The Capstone’s objective is to study and “Build business strategies in Minh Hieu Construction and Trading Joint Stock Company for period 2013-2017” to put forth measures and recommendations to the Company to seiect the best-fit business strategies to overcome the immediate obstacles, and maintain its sustainable operations and growth in medium and long terms

3 Methodology

- Data: use the Company’s financial figures for period 2008-2011;

- Use a methodology mix of analytical, statistical, synthetic, comparative and selective approach

Trang 10

CHAPTER 1 THEORIES OF BUSINESS STRATEGIES DEVELOPMENT 1.1 DEFINITION AND ROLE OF STRATEGIC MANAGEMENT

1.1.1 Definition

Strategic management is a set of management decisions and actions to determine long-term business efficiency of a firm

Business strategies steer a firm’s operations, and determine the products or services that it deals in, its business scope, productive resources, profitability and growth prospects

1.1.2 The Role of Strategic Management

Business strategies are vital to the existence and operations of a firm They define the goals to be achieved by mobilizing appropriate short and long-term resources They ensure that the business plans do not deviate from the set direction Well-designed business strategies will gain a Company more profits, sustainable operations, and make it highly responsive to the external business environment

A business strategy is considered a comprehensive and unified plan of a firm that provides long-term development orientation, confirms the firm’s goals, outlines its major resources and suggests measures to tackle the unexpected changes that it may face in the competitive environment Thus, a business strategy is foundation to

determine (identify) and unify resources, and concentrate these resources on the

corporate goals and utilize the firm’s power to achieve them

Competitive strategies enable commercial firms to grasp market opportunities by utilizing their constraint resources and high outcome to achieve their set goals These strategies also assist firms to select the right direction of their operations

Trang 11

1.2 STRATEGIC MANAGEMENT AND PLANNING PROCESS 1.2.1 Strategic Management Process

A strategic planning process of a firm is demonstrated in the chart below: Select strategies Analyze internal corporate ¬ environment gl Identify corporate strategic goals Analyze business —————*|_ environment

1.2.2 Business Strategy Classification 1.2.2.1 Overall Corporate Strategy Implement "| strategies Figure 1: Corporate Strategic Planning Process Review and adjust strategies

An overall corporate strategy sets standards for all the decisions made in a firm It defines the purpose, goals and business objectives that the firm is pursuing It creates key policies and plans to achieve the set goals and objectives

An overall corporate strategy is featured by the followings:

e It steers a firm’s overall goals and tasks, including defining its business objectives, type of business operations that it will deal in, and the approaches to manage and coordinate its different business activities e It directs a firm’s competition by identifying markets or market segments

in which the firm will compete

Trang 12

Building Business Strategics in Minh Hicu Construction and Trading Joint Stock Company

e It administers individual business activities and their relations: an overall corporate strategy targets developing and exploiting the resonance between these activities by dividing or combining resources of independent units or separate activities

e Business administration practice: Corporate-level strategies allow identifying approaches to manage different units of business or groups of activities A firm can administer its business operations through direct interventions in the centralized approach, or empower its business units in the decentralized approach on the basis of trust

Thus, it is required that a firm create more added values through the portfolio management of all of its business activities, and ensure long-term success of each activity and harmonized synergy of all of them

1.2.2.2 Business Unit Strategies

A strategic business unit can be a component of a firm, a product line or a market segment and is independently planned At this level, it is essential that each unit strives to fulfill its goals to contribute to achieving the overall goal of the firm

1.2.2.3 Divisional or Functional Strategies

The divisional or functional units of a firm or an organization refer to the operational units in it Strategies at this level are associated to the operational procedures of the business activities and units of the chain of values Functional strategies like marketing, financial, human resources or research and development target developing and combining resources through which business unit strategies can be efficiently implemented

Functional strategies are dependent on higher-level strategies in a firm or an organization These strategies are inputs for business unit level strategies and the overall corporate strategy Once higher-level strategies are in place, they will be translated into detailed action plans and implemented by the functional divisions to ensure achieving the overall corporate strategy

Trang 13

1.2.3.1 Economic Factors

Economic factors often have direct impact on the business environment and strategies of firms Therefore, it is essential that they attend to both short-term and long-term economic factors and the Government’s interventions:

- Future economic outlooks: the country’s GDP growth rate, the ratio between GDP and invested capital that reflects the pace of growth of the country’s economy, and per capita income These allow forecasts of the market volume of cach industry and market share of each firm

- Factors that influence the economy: interest rates, inflation rate, monetary

market ratio, unemployment trends, etc are those factors that cast direct impacts on the trends of investment and tightening expenditure

- The Government’s economic policies: The Law on base salary, the Government’s economic development strategies, tax policies and other incentives

for the industries

1.2.3.2 Cultural and Social Factors

Each country or territory has its own typical cultural values and social

factors, which decide the features of the local consumers Cultural values formulate

a society and nurture its existence and development Cultural factors, especially mental cultural values, therefore, are tightly and largely protected Apart from

cultural factors, social features are centered to firms’ interest in their market

research Social factors categorize a community into different groups of customers

with various features, sentiment and levels of income and include:

+ Population distribution and typical customs and culture; + Average income, and distribution of income;

+ Life style, education, aesthetic viewpoints and psychological style; + Living conditions, security and social welfare schemes;

+ Viewpoints on the State investment programs;

Trang 14

Building Business Strategies in Minh Hiecu Construction and Trading Joint Stock Company

1.2.3.3 Political and Legal Factors

These factors influence all the industries in a territory Institutional and legal factors can pose threats to existence and development of any industry When doing business in an administrative unit, firms are obliged to comply with the local legal and institutional regimes In studying these factors, therefore, it is necessary to attend to the following aspects:

+ Stability: it is essential to examine stability of the political and diplomatic conflicts of the local legislative regimes Those highiy stable regimes will be favorable to business operations while those unstable and conflicting will adversely impact business operations in that territory

+ Tax policies: import and export duties, consumption and income taxes, etc will influence firms’ turnover and profits

+ Relevant laws and regulations: Investment Law, Corporate Law, Labour Code, Anti-Monopoly Law and Anti-Dumping Codes, etc are key examples of laws and regulations that firms should study

+ Policies: State policies on areas like commercial, sectoral development, economic development, taxation, competition regulation, and consumer protection also affect firms’ operations They can enable profit generation or pose threats to

firms

1.2.3.4 Global Factors

Globalization is currently a prevailing trend for development worldwide With Viet Nam’s 2007 admission to WTO, such trend creates both opportunities and threats to local firms in their integration, and production and business development Thus in developing business strategies, it is essential for firms to attend to the following issues:

Trang 15

+ Trade barriers will be gradually removed in the integration process, and local firms will have opportunities to trade with distanced partners Their customers

are not just limited to those in home markets, but also include those from other

regional global markets

1.2.3.5 Technological Factors

The whole world is undertaking the technological revolution, which has invented a wide range of new technologies already integrated into various products and services In the information technoiogy area in particular, advanced communications technologies have bridged the geographical distance and improved transmission means The effects of technologies help identify opportunities and threats for firms ‘considerations in their business strategies development Technological advances can cast profound impacts on products, services, markets, Suppliers, distributors and firms’ market positions To design effective strategies out of these factors, it is essential that local firms answer the following questions:

+ Which technologies are being used in their business operations? How important are they to each of their activities?

+ What is the speed, life cycle of the technologies, and percentage of out- dated technologies in their operations?

+ What investments have been made by the firms in the essential technologies over the past time?

+ What are the costs and structure of the added values of the firms’ divisions, units, products and business activities?

+ How attractive is each of their business activities in terms of investment and growth opportunities? How potential are they to increase the firms’ profitability and to dominate the technologies?

+ How does information technology and the internet affect their business operations?

1.2.4 Industry Environment Analysis using Michael Porter’s 5 Forces Model

The industry environment is comprised of those macro factors, forces and institutions external to firms and beyond administrators’ control but have impact on

Trang 16

their operations and business performance Industry environment analysis helps firms to assess risks and opportunities that they may face, and define models to pursue and issues to tackle, the key processes essential to their further business successes Risks can affect their achieving the assessed strategic goals and the plans to be implemented to deal with these risks

Michael Porter’s five forces are: Buyers; Suppliers; Competitors; Potential

Entrants; and Substitute Products or Services Potential Entrants Threats of New Entrants Ỳ : I ] Supplie : OER Competitors Buyers TS ———————— Bargaining me Riva lry among existing firms Xistin Bargaining nerd suppliers buyers A Threats of substitute products or services Substitutes Figure 2: Michael Porter’s Five Forces Model 1.2.4.1 Buyers

Buyers are drives and objectives of every firm’s existence and development Buyers are a competitive force that can affect directly the overall business

Operations of an industry

Buyers fall into two groups: State budget users and non-State budget users, both of whom pose pressure of price and associated product and service quality on firms It is they that control competition in an industry through their buying

decisions Buyer research, therefore, is vital to help firms get to know their

Trang 17

- What scale of targeted customer base to be considered?

- What are the substantial differences between the different groups of buyers? - How, when and how many products do buyers buy?

- What are the costs of transfers to new buyers? 1.2.4.2 Suppliers

Quantity and scale of suppliers: the number of suppliers decides the degree of competition, their bargaining power to the industry and firms in it If there are a few sizable suppliers in the market, competitive pressure wiil appear and affect the business operations of the whole industry

Possibility of substituting products of suppliers: in this aspect, it is essential to study the possibility of suppliers’ substituting input materials and the costs of transfers to new suppliers

Suppliers’ information: In the contemporary context, information is always the

drive of trade development Information of suppliers largely influences firms’

Choice of suppliers of their production inputs

Suppliers always pose certain pressure on all industries if they have scale, mobilize and own scarce resources Firms should, therefore, choose appropriate suppliers, who are closely connected and market leaders in their supplies

1.2.4.3 Existing Rivals

Rivals are those firms who share the same customer base of a firm Studies of rivals or competitors help a firm identify the degree and nature of existing rivalry, based on which they can take suitable measures to sustain their market position and increase pressure to their competitors The key issues to rival studies include:

- What are the future objectives of their rivals? - What are their rivals’ current strategies? - What is the effect of rivalry to the industry? - What are their rivals’ strengths and weaknesses?

- Their rivals’ possible strategic transfers or transformation? - What is their rivals’ business performance?

Trang 18

Building Business Strategics in Minh Hieu Construction and Trading Joint Stock Company

a

1.2.4.4 Potential Entrants

Potential or possible entrants are those rivals who currently do not pose any threats to a firm, but may do so in the future These entrants, though yet powerful in the industry, have strong technological or development advantages It is, therefore, advisable that existing firms in the industry study be prepared for rivalry from these entrants Once they enter the industry, they can cause the existing firms’ market shares or profits to shrink, or adversely affect their strategies The existing firms thus need to create barriers to new enirants by:

- strengthening their advantages through technology, equipment and

products

enhancing their capacity and finances

differentiating through their prices and quality advantages strengthening their prestige to their regular customers taking lead in their entrance to new markets

1.2.4.5 Substitute Products and Services

Substitutes are outcome of the technological boom and threats to increasing costs and trimming profits of a firm The pressure of substitutes limits profits of each industry by setting ceiling prices at which firms can do profitable business It

is, therefore, essential that business administrators identify their firms’ substitutes

by seeking those products with similar functions to the industry’s products 1.2.5 Corporate Internal Environment Analysis

1.2.5.1 Corporate Culture

Corporate cultural identities are the quintessence drawn from a firm’s managerial and trading practice They are formed and developed along the life and growth and of a firm Strong corporate cultural identities contribute to enhanced image of a firm, and can attract, develop and retain talents for it

Corporate culture significantly influences a firm and every of its members It

is, therefore, essential that firms be well aware of their crosscutting corporate

Trang 19

they can develop their own typical identities and highly appealing images to both their members and customers and partners

1.2.5.2 Productive and Trading Capacity

Production and trading are the key activities of a firm, and associated closely to the generation of its products and profits They have strong impact on the degree of success that a firm can achieve In analyzing business operations of a firm, it is essential to take into account their business processes, status of equipment,

unfinished products and inventories, and the labour force involved Some of the

issues to be considered in such analysis include:

- Degree of input supplies, and relations with suppliers; - Equipment and facilities setups and their efficiency;

- Advantages of production of scales;

- Systems to check inventories, and inventories transfer cycles;

- Measures to check operational performance, to examine equipment, to schedule work progress and control quality;

1.2.5.3 Finance and Accounting Capacity

Finance and accounting are vital functions in a firm Thus, in developing a firm’s business strategy, it is essential to look into its financial strengths and weaknesses Financial factors can alter on-going strategies and the implementation of other objectives of a firm Analyzing financial indicators is mostly used to identify strengths and weaknesses of a firm’s investing and financing capacity In such analysis, the following aspects should be considered:

- Its capacity to mobilize short and long-term finances; - The ratio of loans on its overall capital structure;

- Status of its mortgaged loans, and ability to utilize alternative financial

Strategies such as lease, sale or sub-lease;

- Recurrent working capital, and flexibility of investment capital structure;

- Current financial scale of the firm;

- The firm’s capital expenditure compared to that of the whole industry and

its rivals

Trang 20

1.2.5.4 Management Capacity

Management is approaches and strategies to help a firm or an organization with limited resources achieve its set objectives Managers are those who well manage resources and time, foresee opportunities and make use of them Management is comprised of four basic functions:

- Planning: includes all the activities that are associated with the future growth of a firm These activities are assessing resources and organizational structure; setting achievable objectives; formulating action pians to achieve objectives in a set timeframe; proposing plans to make use of available opportunities and limit threats

from the external environment

- Arranging: is a management activity to create structures, and connections between authorities and responsibilities in a firm This function includes developing a favorable internal environment to achieve a firm’s set objectives; establishing an

organizational structure and authorities for divisions, individuals, and matrix

coordination in the organization

- Leadership: is managing the human factor to enable a firm or an organization to achieve its set objectives Leadership includes assigning the right resources and supplying an effective supporting system Leadership requires advanced communications skills and ability to motivate people One of the decisive factors of effective leadership is to strike balance between human resource requirement and business efficiency of the firm

- Examining: is the function to evaluate quality of performance and identify possible or existing deviations from the organization’s plans This function is aimed to ensure efficiency while maintaining corporate discipline and a trouble-free environment Examining involves information management It evaluates the efficiency of the achieved outcome, and proposes timely responsive measures

1.2.5.5 Information Systems

Trang 21

codifies, archives, synthesizes and provides the information answerable to the strategic questions Due to increased complexity, and wide-spatial distributions of organizations and firms, the development of efficient and effective information systems is essential

1.2.6 SWOT Matrix

To design business strategies that can bring about practical efficiency for firms in the future, it is essential that administrators analyze their firms’ past and present strengths and weaknesses, and opportunities and threats

SWOT matrix is an important and useful tool to administrators to select the best-fit strategies for their future business growth To establish a SWOT matrix, one needs to take 8 following steps:

e Step 1: List out the key opportunities offered by the external environment (Ol, O2, etc.)

e Step 2: List out the major threats posed by the external environment (T1,

T2, ete.)

e Step 3: List out the key strengths of the firm (S1, S2, etc.)

e Step 4: List out the major weaknesses of the firm (W1, W2, etc.)

e Step 5: Combine the identified strengths and opportunities for the formulation of strategies (SO)

e Step 6: Combine the identified weaknesses and opportunities for the formulation of strategies ( WO)

e Step 7: Combine the identified strengths and threats to the formulation of strategies ( SO)

e Step 8: Combine the identified weaknesses and threats to the formulation of strategies (WT)

1.2.7 Quantitative Strategic Planning Matrix (QSPM)

QSPM is a tool that allows strategists objectively evaluate the replaceable strategies based on the identified internal and external success factors Like other analytical tools for strategy formulation, QSPM requires sound intuitive forecasts

Trang 22

A QSPM is formulated through 6 steps:

vé Step 1: List out the major external opportunities/ threats and internal strengths/ weaknesses of the firm in the left column of the QSPM, which is comprised of a minimum 10 factors This information is extracted from the EFE and IFE matrices

Y Step 2: Categorize internal and external success factors Such categorization is similar to the practice in the EFE and IFE matrices

v’ Step 3: Study the phase 2 (combined) matrices and identify the replaceable strategies that the firm needs to consider for implementation

v Step 4: Evaluate the attractive score (AS) 1 = weakest, 2 = least weak, 3 = least powerful, 4 = most powerful

Y Step 5: Calculate the total attractive score (TAS) by multiplying the categorization score and the AS

Trang 23

CHAPTER 2 BUSINESS ENVIRONMENT ANALYSIS OF MINH HIEU CONSTRUCTION AND TRADING JOINT STOCK COMPANY 2.1 OVERVIEW OF THE COMPANY

2.1.1 Development History

Minh Hieu Construction and Trading Joint Stock Company (called short the Company) was established by merging Minh Hieu Trading Joint Stock Company and Minh Khanh Construction Joint Stock Company in 2005 The Company currently has a total working capital of VND 51,373 million

In its nearly 7 years of operations, the Company has faced with numerous difficulties and threats from the home economy full of fluctuations and severe competition, specifically:

- Soon after Viet Nam 2007 WTO membership, the country’s economy experienced high inflation and shrunk growth in early 2008

- The national economic recovery did not last long when in late 2010 and early 2011, the country fell again in an economic downturn associated with persistent inflation, and rising interest rates, while the Government started to tighten credits to curb inflation and stabilize the macro-economy, and cut down on public investments

The Company has survived and prospered out of such crisis thanks to its correct and determined orientation, and well-set objectives and strategies By far, the Company’s market share in the province has been scaled up, with prestige enhanced to investment owners It has also attracted a large labour base, and contributed to increasing local per capita incomes

2.1.2 Business Areas, Tasks and Functions, and Core Competencies 2.1.2.1 Business Areas

e Construction of technical infrastructures, site clearance and filling;

e Construction of traffic works, irrigation systems, civil and industrial

works;

Trang 24

Urban planning and construction and construction of high-rise apartment buildings;

e Construction of low voltage power structures;

e Manufacturing and trading educational equipment;

e Trading computers, office machinery, and other office equipment;

2.1.2.2 On-going Tasks and Functions

e Construction of technical infrastructures, site clearance and filling;

e Construction of traffic works, irrigation systems, civil and industrial

works;

e Urban planning and construction and construction of high-rise apartment buildings;

e Construction of low voltage power structures;

e Manufacturing and trading educational equipment;

e Trading computers, office machinery, and other office equipment; 2.1.2.3 Core Competencies e The Company’s corporate culture highly respected and effectively promoted; e Close relationships with investment decision-making authorities established; e Differentiated executing and implementation arranging styles; 2.1.3 Organizational Structure

Trang 25

| Chairman of the Board of Directors | Director \ Vice Director — Ỳ \ Accounting Sales Purchasi , Construction Teams of : 7 urchasin P l Fimancial Department D ersonne Planning and construction 2 rtment Ty Tee Architecture workers, fleets Planning Department of construction Pepiartment machines and vehicles

Figure 3: Minh Hieu Construction and Trading JSC’s Organizational Structure

2.1.4 The Company’s Business Performance for 2009 — 2 11

After 7 years’ operations and development, with dynamic innovation in the management process, the Company has started and been implementing a number of important projects in Thanh Hoa province, especially in the remote and specially difficult areas It has achieved considerable growth over the past three years:

—{[_[_—=£—Z{Z{[_———Z—{—{_{_———

Trang 26

Building Business Strategies in Minh Hieu Construction and Trading Joint Stock Company Table 1 Summary of the Company’s Key Financial Indicators for 2009 — 2011 Unit: VND million No, Items 2009 2010 2011 € | Termes 41,300 49,560 76,818 3 | tated eaets 36,344 42,622 64,527 L Fixed costs 2,908 3,410 5,807 § —— 33,436 30,212 58,720 _ Š Ínlslaswete 18,808 42,239 51,373 | lngntussdis 12,091 27,674 30,824 lioiisanh 6,717 14,565 20,549 | 43 | Tex Bability 982 1,308 1,892 | 5 | Net income 3,974 5,630 10,399 a | Total casted 18,808 42,239 51,373

Source: Financial Statements publicized by Minh Hieu Construction and Trading JSC

2.2 THE COMPANY BUSINESS ENVIRONMENT ANALYSIS

2.2.1 Macro Environment (PEST) Analysis

2.2.1.1 Economic Factors

- Economic outlooks: Viet Nam economy has been gravely affected by global economic crises such as the European sovereign debt crisis, economic downturns in the United States, and earthquakes and tsunami in Japan, which have resulted in the decline in economic growth as well as increased inflation and unemployment all over the world Viet Nam’s 2011 economic indices were lower compared to 2010: the GDP growth rate decreased from 6.78% to 5.89%, the CPI increased from 18.13% to 18.58% while the inflation rate rose from 11.75% to

18.13% In 2011, however, Viet Nam saw a breakthrough in exports, which were 32

Trang 27

growth rate of modest 4.38%, shows certain positive signs Hyper imports dropped in the first four months of 2012 and stood at USD 176 million, or roughly 0.53% of the country’s total export turnover, a figure much lower than that of the recent years The country’s attracted FDI has been improved in both the quality of the fund (with increased share from developed industrial countries) and content (with growth in FD] in processing industries and drop in real estate projects) The positive signs of the national economy has good impact on the Company’s business performance

- Economic factors affecting the Company’s business performance are:

i) Macroeconomic policies: at present, the whole country and Thanh Hoa province, in particular, are implementing Resolution 11/NQ-CP on the key measures to curb inflation, stabilize the country’s macro economy, and ensure social welfare such as tightened fiscal policies, trimmed public investments and reduced State budget deficit Despite these efforts, the local high inflation trends have cast substantial impact on the life quality of the Company’s employees, whose income largely relies on their salary Although the Company has made several salary adjustments to their employees, such moves cannot catch up with the pace of the local currency devaluation Stabilizing life quality for their employees is, therefore, a big headache for the Company The Government’s trimmed public investments and tightened credit policies does not seem to affect the Company’s performance as most of the Company’s completed and on-going contracts are small and medium in

value, and related to the National Target Programs on education and social welfare,

whose fund has been well committed The Company, thus, always has fund allocated from contract advance, which amounts up to 80% of the contracts’ value to revolve among its different projects

ii) Government incentives to domestic firms: To support small and medium sized domestic enterprises (SMEs) in line with the goal stated in

Resolution 11/NQ-CP, the Government enacted Decision 21/2011/QD-TTg dated

06/4/2011 on deferred payment of corporate income tax for one year The recent Resolution 13/NQ-CP issued on 10/5/2012 is also aimed at giving support to business, production, and the market by allowing enterprises whose corporate

Trang 28

income taxes have to be paid by 2011 but have not been paid yet to defer the payment for 09 months, allowing enterprises to defer payment of value-added taxes in April, May, and June of 2012 for 06 months, and reducing the corporate income tax in 2012 by 30% for SMEs Besides, there has been a policy to reduce the lending interest rate to 15% per annum This is a timely measure of the Government to remove obstacles for normal operations of the whole economy and provide incentives to local firms’ growth, especially the SMEs

As a firm operating mainly in the remote and difficult areas of Thanh Hoa province, the above Government supports are vital to the Company, thus it can:

+ improve its physical capacity and accelerate projects’ implementation progress;

+ attract more free local labour, and help improve income of local community in their operational location, which contributes to ensuring security,

curbing social evils and stabilizing life of local ethnic minority people, in line with

Thanh Hoa’s instructions;

+ afford to improve welfare scheme and life quality for its employees, thus make them feel more secured and loyal to their jobs Examples of these improvements are 10% salary subsidiary, cell phone charge allowance to its key executives, and outstanding engineers and technicians, 15% monthly or quarterly bonus increase Table 2 GDP Growth Rates and Inflation Rates for 2005-2011 Year 2005 2006 2007 2008 2009 2010 2011 GDP 8.44% | 8.23% | 8.46% 6.31% 5.32% 6.78% | 5.89% Year 2005 2006 2007 2008 2009 2010 2011 ~ Inflation 8.71% | 6.57% | 12.75% | 19.87% | 6.52% | 11.75% | 18.13%

Source: Reports of General Statistics Office of Viet Nam

Trang 29

Some legal documents such as the Corporate Law, the Construction Code, the Law on Investment, the Bidding Law, and the Competition Law have been enacted to govern trading and construction activities towards eliminating discrimination to create a fair business environment for construction companies The legal system of Viet Nam has been improved and more compatible with the international practices, making the country a more attractive investment destination The open-door diplomatic policy has been proved effective, fostering the improvement of the construction investment situation in Viet Nam Thus, there are more and more large construction investment projects in Viet Nam

The Government enacted Decree 56/2009/ND-CP on June 30, 2009 on

policies on supports and management of supports for SMEs development The Government has enforced 8 key policies on supports for SMEs, including policies on financial supports, supports of business premises, innovation supports to enhance technological capacity, market expansion supports, participation in government purchase plans and supplying public services; information and consultancy supports, and business incubators

To attract investments and create an enabling business environment for local firms’ development, its has been grasped by Thanh Hoa province that the local business community is an integral player of the province’s socioeconomic growth The province has taken a detailed support action plan to local firms by promulgating the Economic Development Action Strategy No 45/KH-UBND dated 5 August 2011 on the implementation of Resolution 02/NQ-TU dated 27 June 2011 of the provincial Party Committee on improving business and investment environment for penod 2011-2015 and implemented supportive measures to help businesses maintain operations For example, there have been some programs such as trade promotion, market information search, outlet supports, human resource training supports, reduction of costs of market penetration, capital mobilization supports, anc supports for enterprises in tax refunding, tax reduction, and tax deferment

+ Incentives for investments in industrial zones, clusters and handicraft

villages: to attract investments, Thanh Hoa province has planned and invested in

Trang 30

physical capacity building for many industrial zones, clusters and handicraft villages Priorities for investments are granted to those firms that can employ from

300 laborers through such incentives as 50% land tax reduction in 5 years, VAT

exemption in 3 years and exempted payment of the physical capacity investment fund

+ Incentives for investments in infrastructural development: Thanh Hoa calls for investments from all firms in and outside the province in its transport and irrigation infrastructure, schoois, clinics through modalities like BOT or PPP, especially investments in the mountainous and extremely difficult areas of the province To motivate firms to invest in these areas, Thanh Hoa has provided supportive legal framework to grant to participating firms preferential loans of up to 75% of the project value, and help them get contracts in the province’s other projects to create their income, which will be reinvested in the infrastructural projects trough BOT, PPP modalities

In summary, the above incentives are foundation for Minh Hieu Company to take active actions in implementing the expanded investment strategy, developing businesses in its target markets, in period 2013-2017

2.2.1.3 Cultural and Social Factors

As a company operating in the field of construction, implementing a number of projects in relation to social welfare programs in remote, mountainous areas and areas with special difficulties of Thanh Hoa province, the Company has attached importance to the understanding and assessment of cultural factors in the local area in achieving the Company’s goals In the system of cultural values, spiritual and intangible cultural values have strong effect on the selection of business strategies and target markets and the establishment of overall goals of an enterprise Such cultural values include the level of applying technological innovations; educational level, level of education generalization, language, religious symbols, conceptions towards friendship, psychology, lifestyle, traditions or customs, taboos, and living standards of local people and government investment projects in the locality

Trang 31

In the context of the integration into the World Trade Organization (WTO)

of Viet Nam, technological innovation is of great importance as technology 1s the most powerful weapon for competition Technological innovation will help produce better quality products, improve production efficiency, and minimize production

costs, cutting the prices as a result by minimizing inefficient manual labour Hence,

the competitiveness of the Company in the market will be strengthened

In Minh Hieu Construction and Trading Joint Stock Company, future technological development orientation is a top priority Therefore, information updates, incentives to encourage new ideas, training the human resources to apply new technologies, and investment in technological-innovated equipment for production activities are focused by the Company’s management This is because the Company views that technological innovations not only help improve construction quality, save costs of materials and fuels, improve working conditions for labour and equipment, and reduce negative effects on the environment but also help the Company earn better reputation and more sustainable growth

Table 3 - List of technological properties currently used in the Company

¬ TT Name of properties ‘ Quantity Purchase year

Ả Application software for new investment and

R annual updates:

1 | Human resources management software 01 2006

2 | Corporate accounting software 01 2007

3 | Construction cost estimate breakdown software 03 2009

4 | Project management and monitoring software 01 2010

5 | Document management and search software 01 2012

B_ | Key equipment and facilities:

| Office equipment and facilities are upgraded

Trang 32

Globalization and global integration is a universal trend Since the integration of Viet Nam into ASEAN, AFTA, and the WTO, Viet Nam in general

and Thanh Hoa in particular have seen both advantages and disadvantages in the

trend of global economic integration Advantages

e The trend of globalization and global or regional integration has created an advantage in attracting investment, expanding International

cooperation relations in the field of business and production, and

generating jobs to improve income;

e High economic growth rates and increased market demands for various

types of products are favorable for enterprises to promote and scale up production and investment and improve product quality;

e Provincial enterprises have a wide network of product supplies and

distribution; as a result, production inputs are available while products are stably sold in both domestic and foreign markets;

Disadvantages

Trang 33

qualified human resources, which are the cause of sluggishness in application of technological innovations;

e More and more enterprises from other provinces or foreign ones are

competing with enterprises in the province and taking their positions in the local market

In response to globalization, enterprises in Thanh Hoa in general and Minh Hieu Company in particular should set appropriate overall goals, encourage employees to

devote attach much importance to talents, build corporate culture, and innovate

leadership to adapt the globalization-driven business environment Conclusion: Summary of Opportunities and Threats

Table 4: Summary of the Company’s Business Environment Assessment Factor Opportunities Threats/ Threats - High growth rates of export, - When the whole country is implementing Resolution 11/NQ-CP on curbing

inflation, cutting down public causing reduced trade deficits, and

the government policy on

intensifying construction investments and expenditure,

investment; and projects and programs in

- Increased per capital income, development area are

3 downsized, many rivals will

leading to the increase in the ‘

transfer to the business areas

demand for construction; and market, which compete

- Decision 21/2011/QD-TTg and | directly with the Company

Resolution 13/NQ-CP of the - Increasing inflation causes

the prices of input materials

Economic

Government on helping and fuels to gro Ww

enterprises deal with difficulties - Salary and labour cost

and demand stimulation increase causes the Company’s

- Target programs for the profits to shrink

mountainous areas, specially

disadvantaged areas and programs

Trang 34

ps:

to implement social welfare for

Thanh Hoa province are not in the Government list for trimmed public investments

Political/ legal

- Fair competition and bidding ensured by the Law on

Enterprises of Viet Nam

- The importance of construction in national economic development strategies; - Decree 56/2009/ND-CP enacted by the Government on June 30, 2009 on supportive policies for small and medium- sized enterprises

- Thanh Hoa promulgated incentive policies to economic sectors and players to invest in the local economic development for period 2011-2015, through its detailed action plan 45/KH- UBND, which was initiated by Thanh Hoa province on August US, 2011s

5)

- The qualifications of the staff in the State agencies at district level in Thanh Hoa province, especially those in the

mountainous districts are inconsistent and poor Some

have bureaucratic behaviors,

which causes problem to the Company in dealing with Government administrative procedure

- Application-approval

mechanism and protection of local interests has not been solved in almost all the

mountainous districts of Thanh Hoa province The preferential policies on ethnicity and religions have influence on the justice in biddings, and cause

quite substantial costs for the Company when participating in projects

- The Company is facing with many more powerful

competitors in all terms when

the Province’s investment

Trang 35

Cultural

- Priority of construction investment given to mountainous areas and areas with special difficulties by the Government and Thanh Hoa province to

implement social welfare policies,

which fits with their goal and

development strategies of the Company Technological | policies are taking full effects

- Some limitations related to educational level, language,

traditions and customs, and

lifestyle of the local people in remote areas and lower living standards in remote areas

compared to the average level | of the whole province;

- Harsh natural and geographical conditions;

- The main transport

infrastructure is inadequate and mobility is difficult

- Unqualified manual labour

and lack of labour

- Direct effect of global

technological development on domestic construction and operations of Minh Hieu

Company;

- The existing equipment, machinery and software used in the Company are relatively modern and in good conditions

- Technological advancement is updated frequently at rapid progress

Trang 36

The company’s main customers are State administrative and business units and institutions such as schools, provincial line departments, communal and district people’s committee in Thanh Hoa province

The main products offered by the Company in the market are mainly through the implementation of project contracted with investment owners:

+ Trading: the Company implements projects that provide and install computers, school equipment, office facilities and other accessories for vocational training

+ Construction: The Company implements mainly projects on infrastructure building, environmental treatment and small civil works

In order to get the favor and trust from the buyers on its products and services, the Company always looks for solutions to improve products and work quality, accelerate progress and provide effective and fast maintenance service

2.2.2.2 Suppliers

In the construction and trading activities, suppliers of services, materials, equipment and technology, consulting, design and credit (banks, credit organizations) play an important role in ensuring product quality and project implementation progress as well as the works quality

In its partnership, the Company always keeps the prestige at the top Therefore, in its 7 years of development, Minh Hieu Construction and Trading JSC has built up partnership with customers in and outside the province on the basis of loyalty and trust Its main suppliers include Thanh Hoa mountainous trading company, Thai Nguyen-Thanh Hoa Steel distribution Company; POMIHOA-cement and steel distribution company; Cam Truong construction material company, Thanh Hoa; Tien Son joint stock company, Thanh Hoa; FPT joint stock company, Hanoi; Le Bao Minh Joint stock company-Hanoi; Hoa Phat furniture company; Fami furniture company;

Xuan Hoa furniture company; BIDV bank; Viettinbank; and Maritime bank

Trang 37

2.2.2.3 Existing Rivals

Currently, Minh Hieu Construction and Trading JSC is facing tough competition from numerous reputed enterprises in Thanh Hoa market, in the same

mountainous districts of the province, such as:

- Dong Bac construction JSC: started operations five years before Minh

Hieu By the end of 2011, Dong Bac JSC has had 50% of the overall market share of the seven mountainous districts of Thanh Hoa, and relatively strong equipment and financial capacity Dong Bac’s present market share, however, is shrinking as their product quality fails to meet the project beneficiaries’ expectations In addition, their experienced technical staff has shrunk as well, 50% of their technical and executive staff have resigned and worked for other firms as the Company’s compensation scheme is unsatisfactory to their staff

- Mien Tay construction JSC: is located in the Western mountainous areas of Thanh Hoa province, thus it has received priority and preferential treatment from the local authorities in terms of employment and income generation policy for the ethnic minorities as they are the tax payer to the local State budget Mien Tay JSC is considered a comparable competitor to Minh Hieu and Dong Bac JSCs than other rival companies

Other competitors of Minh Hieu Company include Thanh Trung construction

JSC, No.68 constructions JSC, No.42 construction JSC, which entered the market later

Trang 38

Building Business Strategies in Minh Hiceu Construction and Trading Joint Stock Company Table 5: Summary of the Company’s Competitive Profile Matrix (CPM)

ee ae Dong Bac Mien Tay const

Level trade JSC const JSC JSC of

Factors ; = " =

impor | Classi 200 Classi vn Classi vn,

tance | ficati impor ‘ ficati impor | ficati | import on on on ba as tance tance ance Equipment capacity 0.2 4 0.8 + 0.8 5 0.6 | Market share 0.15 3) 0.45 4! 06 2! 03 Price competitiveness 0.10 a 0.30 4 0.6 2 0.3 Works quality 0.15 4 0.60 Z 0.3 Z 0.3 Financial resources 0.15 3 0.45 3 0.45 2 0.3 Customer satisfaction 0.10 3 0.3 2D 0.2 2 0.2 Price competability 0.10 3 0.3 4 0.4 2 0.2 Relations with 0.10; 3| 03 4l 04| 4| 04 investment owner Managerial personnel 0.05 3 Lo 1 0.05 l 0.05 Relations with investors 0.05 3 0.15 4 0.20 4 0.20 Total 1.0 3.35 3.20 2.35

Accordingly, the importance point of 3.35 indicates that Minh Hieu Construction and Trading JSC respond effectively to external and internal factors

2.2.2.4 Potential Entrants

Construction, particularly the infrastructural construction area is the one of the highly developed and profitable industries compared to the average growth rate of the economy Therefore, more companies, including specialized firms and those with investments outside the industry, joint ventures or partnership companies are attempting to enter this market segment

Trang 39

the attention to Vietnamese enterprises in the sectors The introduction of many new socioeconomic development policies of the Government and Thanh Hoa province has

enabled the development of many industries Thus, in the future, many potential entries

are expected, and the competition will become fiercer To cope with this, it is essential that the Company develop long-term development strategies and implement action plans of these strategies annually The Company also should try to make full use of its available resources, take better care of its customers, enhance productivity, and take

customers centered to all of their business activities It is essential that it

always take product and service quality centered in all of its business

activities;

- strengthen its relations with all parties concerned and reinforce its prestige among the project investment owners and beneficiaries;

- take regular good care of the material and spiritual life of their staff;

- develop appropriate training, mentoring policies to their staff and attract qualified staff on annual basis;

- pay attention to updating technology and applying advanced technology in

the Company’s operations for enhanced business efficiency;

- develop specific strategic options for market expansion when needed; 2.2.2.5 Substitute Products and Services

Basically almost all products have their substitutes In case of construction products, they are construction works As the products have characteristics of particularity, single item, specific design and utility, in narrow concept there are a few alternative products However, in the extended concept of providing products to meet customers’ and investors’ need, alternative products can be here understood as the difference in the products provided by an enterprise which brings about the products having specific characteristics but still making end of customers’ and investors’

demand

Conclusion: Synthesis of opportunities and threats:

Trang 40

Building Business Strategies in Minh Hicu Construction and Trading Joint Stock Company Table 6: The Company’s Opportunities and Threats 5 forces Evaluation Solution 1 Customers Strong

- The company always puts product and service quality and implementation progress at the top - The company needs to renew itself by creating the differences to get the loyalty from

customers and investors

2 Suppliers Weak

- The company needs to look for partners as suppliers with siable finance resource and loyalty to reduce burden of pay:ng in cash for the company in the project implementation

process

Current

competitors Strong

- Promote monitoring and supervision of the project implementation to improve the project output quality to meet project owners’ and beneficiaries’ expectations - Strengthen prestige and relationships with

project owners and beneficiaries;

- Provide appropriate compensation and training schemes to the Company’s employees;

- Strengthen staffing and attract qualified and experienced staff for each year;

Potential

competitors Strong

- Enforce the trust in traditional customers - Invest more equipment and technology and

strengthen financial capacity

Alternative

5 products and

services

Very few - The important differences are created to correspond to the changes from customers - Customers are always considered at the top and fully satisfied with necessary demand

Định dạng
Số trang	66
Dung lượng	39,87 MB