Electrical energy business development strategy of Ho Chi Minh City power corporationin the period of 2011-2015, vision 2025

GaMBA01.D0109 Group GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUISINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT ELECTRICAL ENERGY BUSINESS DEVELOPMENT STRATEGY OF HO CHI MINH CITY POWER CORPORATION IN THE PERIOD OF 2011-2015, VISION 2025 Group No 1: Nguyen Anh Vu Tran Van Toan Pham Chi Nghia Dai Nguyen Vinh Batch: GaMBA01.D0109 Ho Chi Minh 2010 GaMBA01.D0109 Group TABLE OF CONTENTS COVER PAGE LIST OF ABBREVIATIONS LIST OF TABLES LIST OF FIGURES Chapter INTRODUCTION Chapter ARGUMENT BASIC 1.1 THE CONCEPT OF STRATEGIC MANAGEMENT 1.1.1 Concept of strategy 1.1.2 Strategic management 10 1.1.3 Alternative strategies defined 10 1.2 BASIS FOR FORMULATING BUSINESS STRATEGIES FOR FIRM 11 1.2.1 Analyzing the enterprise’s external environment 11 1.2.1.1 General environment 11 1.2.1.2 Industry environment 12 1.2.2 Analyzing the enterprise’s internal environment 15 1.2.2.1 Personnel 15 1.2.2.2 Finance 15 1.2.2.3 Marketing 15 1.2.2.4 Management 16 1.2.2.5 Information system 16 1.3 TOOLS FOR PLANNING AND CHOOSING STRATEGIES 17 1.3.1 Tools for planning strategies 17 1.3.1.1 Internal Factor Evaluation matrix (IFE) 17 1.3.1.2 Boston Consulting Group matrix (BCG) 18 1.3.1.3 External Factor Evaluation matrix (EFE) 19 1.3.1.4 Competitive Profile Matrix (CPM) 20 1.3.1.5 Strengths-Weaknesses-Opportunities-Threats matrix 21 1.3.2 Tools for choosing strategy – QSPM 22 2/75 GaMBA01.D0109 Group Chapter ANALYZING THE RECENT STATUS OF HO CHI MINH CITY POWER CORPORATION 23 2.1 OVERVIEW OF HO CHI MINH CITY POWER CORPORATION 23 2.1.1 Introduction 23 2.1.2 Summarize the situation and business operation results of Ho Chi Minh Power Corporation in stage 2005 - 2009 25 2.1.3 Forecast the demand for power in Ho Chi Minh City in 2011-2015 26 2.1.4 Strategic tasks and objectives of 2011-2015, vision 2025 28 2.1.4.1 Tasks 28 2.1.4.2 Strategic objectives 28 2.2 BUILDING POWER BUSINESS STRATEGY OF HO CHI MINH CITY POWER CORPORATION IN 2011-2015 29 2.2.1 Analyzing external environment 29 2.2.1.1 General environment 29 2.2.1.2 Industry environment 34 2.2.2 Analyzing the internal environment of Ho Chi Minh City Power Corporation 37 2.2.2.1 Human Resources 37 2.2.2.2 Finance 38 2.2.2.3 Marketing 39 2.2.3 Building and choosing business strategies 48 2.2.3.1 SWOT analysis 48 2.2.3.2 The bussiness strategies formed from SWOT matrix 49 2.2.4 Choosing strategies – QSPM 51 2.2.4.1 QSPM (Quantitative Strategic Planning Matrix) 51 2.2.4.2 Choosing strategies 53 Chapter THE SPECIFIC SOLUTIONS TO IMPLEMENT STRATEGIES 54 3.1 SOLUTIONS TO DEVELOP GRID IN 2011-2015, VISION 2025 54 3.1.1 Objectives and requirements 54 3.1.2 Using technology 55 3/75 GaMBA01.D0109 Group 3.1.3 Implementation of the specific content 56 3.1.4 Mobilizing investment capital for renovation and construction of power grid 57 3.2 SOLUTIONS TO IMPROVE THE QUALITY OF SERVICES 57 3.3 SOLUTIONS OF DESIGN TO IMPROVE POWER CONSUMPTION MEASUREMENT SYSTEM 59 3.4 SOLUTION OF DEVELOPING POWER BUSINESS SERVICES 59 3.4.1 Services of maintenance and repairing substations belong to customer's asset 59 3.4.2 Services of consultancy for civil electrical design - using of electricity savings, safety and efficiency 59 3.4.3 Development of electrical mechanics, electrical equipment manufacturing 60 3.5 SOME OPERATION MODEL SHOULD BE CONSIDERED IN THE FUTURE 60 3.5.1 Privatizing the Corporation 60 3.5.2 Operating in a competitive market 61 Chapter CONCLUSION 64 REFERENCES 65 APPENDIES 66 4/75 GaMBA01.D0109 LIST OF ABBREVIATIONS EVN: Electricity of Vietnam EVNHCMC: Ho Chi Minh City Power Corporation EVNSPC: Southern Power Corporation EVNHANOI: Ha Noi Power Corporation GDP: Gross domestic product ODA: Official development assistance IFE: Internal Factor Evaluation matrix BCG: Boston Consulting Group matrix EFE: External Factor Evaluation matrix CPM: Competitive Profile Matrix SWOT: strength-weaknesses- opportunities- threats QSPM: Quantitative Strategic Planning Matrix AS: Attractiveness Scores TAS: Total Attractiveness Scores SAIFI: System Average Interruption Frequency Index SAIDI: System Average Interruption Duration Index AMR: Automatic meter reading AMI: Advanced metering infrastructure QMS: Queue management system SCADA: Supervisory Control and Data Acquisition GIS: Geographic information system GIS: Gas insulator system 5/75 Group GaMBA01.D0109 Group LIST OF TABLES Table 2.1 Some indicators of business results (unit: million USD) 25 Table 2.2 Estimated power demand each year of 2010-2015 27 Table 2.3 Forecast the power demand of HCM City in 2015, 2020 27 Table 2.4 Coefficient of elasticity of power demand in the period of 2009-2020 by GDP 27 Table 2.5 Competitive Profile Matrix 35 Table 2.6 External Factor Evaluation matrix (EFE) 36 Table 2.7 Power consumption structure throughout the City 41 Table Internal Factor Evaluation matrix (IFE) 47 Table 2.9 Matrix of strength-weaknesses- opportunities- threats 48 Table 2.10 Quantitative Strategic Planning Matrix (QSPM) 51 LIST OF FIGURES Figure 1.1 Strategic management process 10 Figure 1.2 The Five forces model of Michael E Porter 13 Figure 2.1 The organization chart of EVNHCMC 24 Figure 2.2 Power loss rate 2000 - 2010 26 Figure 2.3 GDP growth rate .30 Figure 2.4 GDP per capita .32 Figure 2.5 Power supply reliability index 40 Figure 2.6 Point delivery chart 43 Figure 2.7 BCG matrix 46 6/75 GaMBA01.D0109 Chapter Group INTRODUCTION  Overview, the necessary and the significance of subject: Currently, at the end of 2010, Vietnam in general and Ho Chi Minh City in particular are in the process of economic development heading for the trend of global economic integration, in which power is such a vital energy resource to serve the needs of this development Directly under Electricity of Vietnam (EVN), one of the leading economic corporations in Vietnam, Ho Chi Minh City Power Corporation (EVNHCMC) is currently operating mainly in the electrical energy business, is in charge of distribution and energy sales in the city area, is responsible for ensuring adequate power supply with stable quality for the needs of socio-economic development of the city Since its establishment and development, the Corporation has completed the above tasks However, with demand for electricity is increasing as the socio-economic development of Vietnam together with the need to provide quality service to customers have become increasingly complete, the Corporation should have appropriate business strategies to meet those needs On the other hand, with the policy of restructuring state enterprises in the direction of equalization and development of competitive retail electricity market in the future, the corporation should also have good preparation in the business strategy in response to fulfill these goals Therefore, realizing the necessity and importance of a business strategy to meet the above requirements, the group has chosen a research topic: "Electrical energy business development strategy of Ho Chi Minh City Power Corporation in the period of 2011 - 2015, vision 2025”  Purpose of research and practical possibility: The research aims to evaluate the Corporation’s operation in recent years and identify the current strengths and weaknesses of the Corporation Since then, 7/75 GaMBA01.D0109 Group the identification of opportunities and challenges analyzed in the coming time for corporation which enables it to build business strategies accordingly This is an opportunity for members of group to have further study on strategic management, linked to the knowledge learned from the GaMBA program of Griggs University – the United States to apply to a specific firm Members of group are currently working in Ho Chi Minh City Power Corporation, having advantage conditions to collection necessary data so that we will surely have a more accurate analysis The research results will be very close to the orientation of Corporation Therefore, the topic is likely to have practical use for the corporation further  Research methodology: Group uses the method: study rationale premise to have base in order to collect statistical data needed to perform analysis, make remarks or evaluation in oder to have appropriate solutions from them  Project outline: Beside acknowledgement, recommendation and conclusion, the project contains these following sections: - Chapter 1: Argument basic, which presents definition of strategic management, tools for planning strategy will be supplied in the following chapters - Chapter 2: The overview of EVNHCMC, related statistic data attached and detail analysis on the Corporation’s background, EFE, IFE, CPM, BCG, SWOT matrices analysis, build up business strategies and selection strategies based on QSPM - Chapter 3: Strategies for power trade of Ho Chi Minh City Power Corporation in the period of 2011 – 2015 and vision 2025, based on analysis in Chapter and recommendations for implementation - Chapter 4: Conclusion 8/75 GaMBA01.D0109 Chapter Group ARGUMENT BASIC 1.1 THE CONCEPT OF STRATEGIC MANAGEMENT 1.1.1 Concept of strategy In 1962, strategy was defined as "determining the objectives and purposes of the long-term business and the application of a series of actions as well as the allocation of resources necessary to implement this objective” by Alfred Chandler Then, Johnson and Scholes defined the strategy of environmental conditions to have many changes quickly: "Strategy is the direction and scope of an organization over the long-term: which achives advantage for organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholders expectations" Strategies exist at several levels in any organisation - ranging from the overall business (or group of businesses) through to individuals working in it - Corporate strategy is concerned with the overall purpose and scope of the business to meet stakeholder expectations This is a crucial level since it is heavily influenced by investors in the business and acts to guide strategic decision-making throughout the business Corporate strategy is often stated explicitly in a "mission statement" - Business unit strategy is concerned more with how a business competes successfully in a particular market It concerns strategic decisions about choice of products, meeting needs of customers, gaining advantage over competitors, exploiting or creating new opportunities etc - Functional strategic is concerned with how each part of the business is organised to deliver the corporate and business-unit level strategic direction Functional strategy therefore focuses on issues of resources, processes, people etc Currently, with the trends of globalization, companies are fast diversifying their activities beyond national borders Since then, global strategy is the choice to confront the problems with international business 9/75 GaMBA01.D0109 1.1.2 Group Strategic management Strategic management is the process of study and analyze environment (internal and external) at present and in the future, planning for the organization’s missions, implementation and controlling the implementation of decisions, adjusting in oder to achieve these missions at present and in the future with the aim to boost the enterprise’s trading position (Prof Lê Văn Bảy’s slides) In fact, the process of strategic management includes steps described as the chart bellow (according to Fred R David): Feedback Carry out external control to realize threats and opportunities Define ojective, mission and strategy at present Setting longterm goal Redefine business missions Conduct internal control to realize strengths and weaknesses Setting annual goal Distribute resources Choose strategic for development Measure and evaluate results Make policy Feedback Strategy Formulation Strategy Implementation Strategy Evaluation Figure 1.1 Strategic management process 1.1.3 Alternative strategies defined According to Fred R David (2009): alternative strategies that an enterprise could pursue can be categorized into 11 actions: - Forward vertical integration: Gaining ownership or increased control over distributors or retailers - Backward vertical integration: Seeking ownership or increased control of a firm’s suppliers 10/75 ... meet the above requirements, the group has chosen a research topic: "Electrical energy business development strategy of Ho Chi Minh City Power Corporation in the period of 2011 - 2015, vision 2025? ??... ANALYZING THE RECENT STATUS OF HO CHI MINH CITY POWER CORPORATION 23 2.1 OVERVIEW OF HO CHI MINH CITY POWER CORPORATION 23 2.1.1 Introduction 23 2.1.2 Summarize the situation... master the trend of political diplomacy of the government, the political developments at home and abroad These factors affect the formation and development of the business Natural environment: These