Grice) Capstone Project Report
GRIGGS)
GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION
CAPSTONE PROJECT REPORT
DEVELOPMENT STRATEGY FOR PETRO CAPITAL AND INFRASTRUCTURE
| INVESTMENT JOINT STOCK COMPANY
| (PETROLAND) IN THE PERIOD OF 2011 - 2015 |
Group No.: 6
Member : | Bui Minh Chinh 2 Nguyen Thien Loi 3 Nguyen Van Quan 4 Dang Thi Tam 5 Ho Thi Thanh Thao 6 Nguyen Duy Thinh 7 Nguyen Van Tuan
Class : GaAMBAO01.C0609
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ACKNOWLEDGEMENT
After two years of learning and researching, with experience in working with many lecturers, classmate, and with the objective of highest grasp of knowledge, our group has gained various useful knowledge those we can used in our work
We would like to send our gratitude to all the lecturers those have devotedly given us with useful knowledge, company’s management for their best condition provided to us to complete our graduation assignment
Best wishes are sent to Petroland
Representative
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Table of contents
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Trang 4Griccd Capstone Project Report Chapter 2 Introduction about Petroland and current state of its production and HS ND vesnpnudtoisoiiittGiS82605 612413448 iãnganoGsiPErgpyESII011490101G1L00300000/0014000/5/603060I0840/016866 lĩ
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2.5.3 Matrix of external {actor Cvalugiion = LOPES sua deoaensdbdddiaaaaaoedaguisoaa 37
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24,0 Matric Of internal factor CVAINGIOR IPE, simnsnnscnomnncncaxinmacnavesiancxnaressiies 44 2.2, Analysis of mairices to stratepically ĐBÍHHHNĐ-seseaugasebeaayiisiadsssdrasso 46
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2.5.4.1 Market expansion sirategy and business diversification strategy 50 2.5.4.2 Low expense strategy and product difference-making strategy J2 Chapter 3 Planning business strategy and solutions for Petroland .00000 34 FB 00] NỈ VOTED wc wsisccarsy essai a a nce seacoast 34 3.1.1 Forecasting the demand oƒ Real Estate Market - c5: Sccscsccssxee2 4 3.4.2.4 Croland 's Mission Gnd Vision 1OWONAS LUD và aadebeddiadsiaasasaasueoase Sf 3.1.3 Overall and specific objectives of Petroland in the period of 2011-2015 57 Phot dy ERA ORICON MIG DIO ICES voriisinsceccces mesnemennicceananmenion semioetnaias 58 Sid eas LOPGEIS JOP POVCIING HN PROT saadeeeitiditiibialGấbiilbasassotenbdgssasssgkagkonirai 73 3.1.4 18106fGd tdFkol GIỗ CH§ÍGIIĐIE c«seeesasaaniidiekoieiooaridssrrorrSE0E144048818000 400 74
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List of tables
lable 2.J d0me basis aneiil data OF Poland poncnseswcccsanumaemnirveior wiacennunnonvoaver 19 Table 2.2 Some financial ratios oƒ Petroland - s55: =7 Tabhle 3 Ï The objcctive oƒrevenue, projfìts and dividends in the period oƒ 2011-2015
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Financial statements of Petroland in 2008, 2009, and 2010 ccccccccccccccesscescecssssesseeees 96
List of figures, graphs
Figure 1.1 Model of five competitive SOPCES OF MUTE POPP ccnsnseinnsasersensrccecreveaveves 1]
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INTRODUCTION
“Tf we understand our situation and the competitors, we can always win victory;
otherwise, defeat is a certain result” Sun Tzu
A company, an organization, an individual, a family that desires to gain success in a final objective is required to identify a road Market is like a battlefield, especially for every company with responsibility to shareholders and employees Therefore, all companies should develop a proper business strategy as the basis for their business
operation in current time and future
Business ts like fighting "Sometimes it is as rapid as wind; sometimes as slow as forest; sometimes aggressive as fire but sometimes as defensive as mountain” Therefore, we must know how to orient, grasp the change, predict possible variations and changes in the market; how to satisfy customers, keep loyal customers All such issues are contained in the business strategy of the company
With the hope that our assignment can be applied in practice, we would like to develop the assignment “Development strategy for Petroland in period of 2011-2015”
This is the first research conducted by us; therefore, there maybe some
shortcomings So we hope that the university and Company’s management board will give us constructive ideas for our improvement
Representative
Trang 8Griccs) Capstone Project Report Chapter 1 Theoretical basis on business strategy and real estate business strategy 1.1 Definition, planning and implementation of strategy
1.1.1 Definition
According to Fred R David, “Strategy is a series of the complicated action plans to mobilize the resource of an organization to achieve a specific objective Business Strategy may consist of development in geography, activity diversification, capitalization, product development, market penetration, spending cut-down,
x (hh liquidation, and joint venture”
1.1.2 Strategy planning and implementation‘
The strategy management is comprised of 03 stages:
+ Strategy establishment is a process of establishing the business tasks; carrying out the research to determine the internal and external limitations; setting long-term objectives; and selecting alternative strategies and typical strategies for
pursuit
+ Strategy implementation requires company to establish the annual objectives, proposal of policies, encouragement of personnel and distribution of resources to implement the established strategy Implementation of strategy is comprised to development of a culture to support strategy in the establishment of effective structure,
orientation of activities, preparation of funds, development and use of information
system, encouragement of personnel’s operation
+ Strategy evaluation will monitor the comment on results of established activities and strategy implementation including the measurement of personal and organizational achievements, and the actions to be adjusted
(1) Fred R David, translators: Truong Cong Minh, Tran Tuan Thac, Tran Thi Tuong Nhu (2006),
Trang 9Gaiccd) Capstone Project Report 1.1.3 Some matrices commonly used in strategy planning `
1.1.3.1 External factor evaluation Matrix - EFE
EFE matrix is often used for assessment of external factors to enable strategists to summarize and evaluate economic, social, cultural, demographical, geographical, political, governmental, legal, technological and competitive information Therefore, Strategists can summarize the main opportunities and risks of external environment affecting the operation of the enterprises in order io evaluate the response with such opportunities and risks by the enterprise and determine if external factors impose positive or negative impacts on the company
1.1.3.2 Internal factor evaluation Matrix - IFE
Internal factor evaluation (IFE) matrix is a strategic management tool for auditing or evaluating major strengths and weaknesses in functional areas of a business IFE matnx also provides a basis for identifying and evaluating relationships among those areas The IFE matrix is used in to use and promote strengths and find the solution to mitigate the weakness
1.1.3.3 Competitive picture Matrix - CPM
Competitive picture matrix is an essential strategic management tool to compare the firm with the major competitors of the industry based on the factors affecting competitiveness of the company in the industry This help to provide the managers with clear picture to the firm about their strong points and weak points relative to their competitors; identify the competitive advantage of the company and the weakness to
be overcome
1.1.3.4 SWOT Matrix
Strengths — Weaknesses — Opportunities — Threats matrix, SWOT provides a the company to understand its weakness in business Therefore, company can manage
David, translators: Truong Cong Minh, Tran Tuan Thac Tran Thi Tuong Nhu (2006) Statistics Publisher, Ha Noi city, VietNam
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Griccd - SỐ Capstone Project Report and eliminate risks those are not aware by the company In addition, by using comparison tool, and SWOT analysis between companies and competitors, company can draft a strategy to distinguish company with the rivals, which facilitates company to compete effectiveness in the market
1.1.3.5 SPACE Matrix
SPACE matrix helps company to identify the what strategy is the most suitable with the company among aggressive, conservative, defensive, competitive The axis of SPACE matrix represents two internal aspects of the organization (Financial strength (FS) and competitive advantage (CA) and two external factors including environmental stability and industry strength These four factors are the most important factors deciding the strategic position of the organization
1.1.3.6 OSPM Matrix
The Quantitative Strategic Planning Matrix is a strategic tool which is used to evaluate alternative set of strategies QSPM identifies the attractiveness of various strategies by making use of or improving key external and internal successful factors A QSPM matrix may consist of any quantity of strategies However, only strategies in a specific group must be evaluated together For example, a group of strategies may include backwards combination strategy, upwards combination strategy, and associating combination strategy, while another group of strategies may include the issue of share and sale of an unit of company to increase a necessary capital These two groups of strategies are completely different and QSPM only evaluates the strategies in their group
1.2 Model of five competitive forces of Michael Porter”
According to Michael Porter, a leading strategy and competition planner, competition intensity of the market of any production sector is under the impact of 5
forces as follows:
Trang 11GgíGo3 Capstone Project Report Potential competitors
Threats from new entrant
Negotiating
power Competitors in the Price pressure
Supplier P P Buyer
- sector `
Of supplier of buyer Threats | Alternative
from products and services Alternative products
Figure 1.1 Model of five competitive forces of Michael Porter
Source: http /nqcenter wordpress.com’ 2008 /04/22/mo-hinh-5-ap-luc-canh-tranh-michael-
porter
(1) Supplier power: supplier power is shown in following characteristics including supplier concentration, importance of volume to supplier, differentiation of inputs, impact of inputs on cost or differentiation, switching costs of firms in the industry, presence of substitute inputs, threat of forward integration, cost relative to total purchases in industry
(2) Threat of substitute is shown in: switching costs, buyer inclination to substitute, price performance trade-off of substitutes, relationship between price and quality of
substitutes
(3) Potential competitors:
According to M-Porter, potential rivals are the firms those are not present in the industry but may affect the sector in the future The quantity of rivals, their pressure on the industry will depend on following factors:
+ Attractiveness of the industry: this factor is expressed through indicators including profit rate, quantity of customers, quantity of enterprise in the industry
‘ i YANG AA 7 es j 1 ere š ak Bais
Trang 12Gricad Capstone Project Report + High entrance barrier is expressed in following factors including absolute cost
advantage, understanding in market fluctuation, approach to input factors, policy of government, economic characteristic by scale, capital requirements, typical
characteristicsof commodity brand, switching cost of business industries, accessibility
to distribution channel, pay-back ability, exclusive products
(4) Power of customer is shown in: bargaining leverage, buyer volume, buyer information, brand identity, price sensitivity, threat of backward integration, product differentiation, buyer concentration vs industry, substitutes available, buyer’s
incentives
(5) Degree of rivalry: exit barrier, industry concentration, fixed costs/ value added, industry growth, intermittent overcapacity, product differences, switching costs, brand identity, diversity of rivals, corproate stakes
1.3 Overview about real estate business in Vietnam
“Real estate business is the provision of investment capital to establish, buy,
receive transfer, lease, real estate lease and buy for sale, transfer, leasing, re-hiring to
gain profit.’"”
Since 1986, Real estate market has experienced three up and down periods including 1993-1999 (growth in 1993-1996, decrease in 1996-1999); 2000-2006 period (growth in 2000-2003 and decree in 2004-2006), and since 2007 up to now (growth: 2007- 2008, decrease since early 2008).'”’
1.3.1 Office for lease market‘
Office for lease segment is facing with price reduction for competition as the supply source is increasing in the market
(3) Tran Tien Khar (2011), Real Estate Principle, Society Labour Publisher, Ho Chi Minh city, Viet
Nam
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At the end of 2010, this segment in Ho Chi Minh suffered from sharp reduction in output and rental This situation has not been improved in the early months of 2011
Currently, many buildings are built and operated In following period, offices for lease will gain high increase in quantity; however, the actual leasing demand is stopped at the moderate level compared with previous years
1.3.2 Housing market” High-class housing
Many high-class apartment projects will be finished in 2011 including Belleza project, Duc Khai project in District 7, Tulip Van Phat Hung project, Riverside Residence — Phu My Hung and many other projects Moreover, apartment investors try to sell the apartments to return capital This results in surplus in housing It is predicted that owners will reduce the price to avoid capital stagnation Some projects will be extended in progress pending more advantageous time
House for medium-income people
Apartments for medium-income people is a segment of real demand since its price is suitable with most of people The statistics of Dat Lanh Real Estate Company shows that the apartments are transacted at high rate in the market at the price of 500 million
to 5 billion VND, in which the apartments of less than | billion (about 15 million/m”)
represents about 80% of all transactions
Today, high-class apartments are excessive; therefore, many enterprises including domestic and foreign enterprises gradually shift to products for medium-income people to increase the liquidity and rapid capital pay-back According to real estate experts, apartments of less than | billion VND (60m? to 100m”) in new urban areas will be the segment of the most interest in the near future
6) Reference from http: vnexpi ict wl kinh-doanh bat-dong-san/2011/04/thi-truong-nha-thu-nhap
-binh-nhicu-trem-nany
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1.3.3 Trade center market
There will be additional supply of retail business sites to be launched in the market In the meanwhile, some previously-opened trade centers still face with difficulties in lessees This means the more and more violent competition in this sector Moreover, the policies to reduce inflation of the government impose negative impact on retail market in current period However, according to representatives of CB Richard Ellis Vietnam Company (CBRE), trade center lease market in Vietnam is very potential,
since the shopping demand of domestic customers is potential Vietnam is currently a
promising destination of many brands in the world 1.3.4 Tourism real estate market “”
According to representative of CBRE, by quarter III/2010, the supply of the market
was about 11,000 villages and 10,000 resort apartments The price of these villages
decrease from 1-1.5 million USD/villa to 200,000 — 800,000 USD/villa About 85% customers those buy tourism real estate products are Vietnamese; 10% overseas
Vietnamese, remaining percentage is foreigner Among them, only 30% are the ones with actual demand (apartment segment) at the average age of 38
Vietnam is always an attractive site of tourism real estate investment thank to its typical characteristics of Asia Tourism and resort real estate market in Vietnam is prospected to gain developing opportunities in the future, since it is a capital maintenance channel of relatively high safety, especially in the period in which the economy of Vietnam and the world is still impacted by global economic crisis and increasing inflation
7) Reference trom http://dddn.com.vn/20110322043924849catl73/cho-thue-trung-tam-thuong-mal-
neng-banh-khong-de-xoi.htm, and http://vietbao.vn/Kinh-te/Cho-thue-tung-tam-thuong-mat-dat-
10936751 87
an U
=
8) Reterence trom http.//vnbusiness.vn articles baldong-san-du-lich-va-nghi-dudng-bat-dau-am-len
Trang 15Griccd Capstone Project Report 1.3.5 Competition in real estate market —
Real estate market in 2011 is evaluated to suffer from violent competition, especially price competition The investors with weak financial capacity will withdraw
from the market, and the market will not be attractive to non-professional new
entrants
In the recent period, the investors normally implements project development before adjustment made in acordance with the market To ensure more effective project investment in the future, the owner needs to carry out intensive market research prior to the design of products suitable with the need of buyers and market In addition, the owners should implement good control of cost and propose proper sale and competitive price strategics
1.4 Necessity to make business strategy of Petroland
Globalization has created lots of opportunities for enterprises as well as fiercer and fiercer competitiveness In order to survive and develop, enterprises must be aware of its position in the market, its destination and way to get there That is reason why enterprises need to make its strategies, and Petroland is not exception Strategy planning helps Petroland be aware of and take advantages of opportunities, minimize negative impacts of adverse changes, and utilize its human resources most effectively
Currently, real estate is making high profit, and has great growth potential Therefore, real estate enterprises have lots of opportunities to develop However, demand for capital of real estate is very great, thus it is much influenced by macro economic factors With great fluctuation of the economy, capital arrangement, selection of market and products, activeness in adapting to changes in the market are critical to survival of real estate businesses Thus, strategy planning is very significant
to Petroland
(9) Reterence trom http: /www.cecoS07.com.vn/Nam-201 | gia-bat-dong-san-se-canh-tranh-quyet-liet
Trang 16Giao) Capstone Project Report Chapter 2 Introduction about Petroland and current state of its production and business
2.1 Introduction about the Company 2.1.1 Establishment and development
Petroland has been established and come into official operation since 1‘ November 2007 in accordance with Business Registration Certificate issued on 29” October 2007 by Ho Chi Minh City’s Department of Planning and Investment, 4" registration for changes on 7" August 2009 with charter capital of 1.000 billion dong which is
contributed from 6 shareholders, namely: PetroVietnam Construction Joint Stock Corporation (PVC), PetroVietnam Finance Corporation (PVFC), PetroVietnam Oil
Corporation (PVOil), Ho Chi Minh City Infrastructure Investment Joint Stock Company (CII), Bank for Investment and Development of Vietnam (BIDV) and PetroVietnam Trade Union Finance Investment Corporation (PVFI) By 31“ March 2010, shareholders of the Company have contributed enough registered charter capital In accordance with business license, the Company is permitted to operate in some fields and provide different products and services Main products and services are: - Invest in construction and trading in new urban zones, residential zones, office for
lease; commercial centers, finance, hotels; urban technical infrastructure and
relevant services;
- Invest in construction, management the operation and trading and exploiting petrol
industrial zones; industrial zones using natural gas and other industrial zones;
- Invest in construction and trading seaport, river port; storage of petrol, gas, and
chemical;
- Consult in investment into construction, consult in project management; management and exploitation of projects;
- Trade in real estate, materials and construction equipments;
- Carry out financial investment, sell and buy holdings, joint venture with domestic
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and foreign companies to implement investment projects;
- Perform in other business fields in accordance with legal legislation if Board of Management see that it is beneficial for the Company;
Over the past time, the Company has been focusing on two main products and services which are construction investment and providing consultant services in construction Since its establishment to the end of 2010, the Company has made lots of achievements in business, it has been carrying out many big projects, products and services of the Company are accepted by customers Efforts and achievements in its business have been recognized and commended by PCV, Petro Vietnam Group and Ministry of Industry and Trade
Trang 18Grice) Capstone Project Report 2.1.2 Organizational structure
Figure 2.1 Organization Chart of Petroland
(Issued in attachment with the Decision no 846/OD-PETROLAND dated 29" March 2011 of
the Board of Directors of Petroland)
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2.2 Overview about business activities of the Company 2.2.1 Business results of the Company
Table 2.1 Some basis financial data of Petroland
Item Year 2008 Year 2009 Year 2010
Total net revenue 1,172,443,332 47,687,568,864 934,600,026,640
Compare with previous
year 3967.37% 1859.84%
Net Profit 29,032,948,052 | 24,087,406,704 | 173,042,714,518
Unappropriated profits | 28,782,948,052 45.674.617.742 215,526,436,340
A Working asset and
Short term investment | 618,700,185,851 | 706,693,128,841 1,601,398,030,962 B Long - term assets 370,422,735,490 | 384,922,687,321 741 837,055,555 Total asset 989,122,921,341 | 1,091,615,816,162 | 2,343,235,086,517 A Payable Debts 22,719,973,289 105,442,903,614 1,123,553,997,003 I Short term debts 22,719,973,289 105,093,903,614 790,633,03 1,520 II Long term debts - 349,000,000 332,920,965,483 B Capital Sources
of Shareholders 966,402,948,052 | 986,172,912,548 1,219,681,089,514 Paid — in capital 937,620,000,000 | 937,620,000,000 1,000,000,000,000 Total Capital 989,122,921,341 | 1,091,615,816,162 | 2,343,235,086,517
Source: Financial Statement of Petroland in 2008,2009 and 2010
Table 2.2 Some financial ratios of Petroland
No Item Unit | Year 2009 | Year 2010 I Liquidity capability
Lgl Current Ratio times | 6.72 2.03 Le Quick Ratio times | 3.01 1.57 Lue Interest cover ratio (EBIT/interest) times 31.07 H Financial leverage
Self-financing ratio
2.1 (Equity/Total capital) % 90.34% 52.05%
Lid Debt ratio (Total debt/Total assets) % 9.66% 47.95%
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Capstone Project Report IH Operational capability if Assets turnover
Sil (Net revenue/ Average total assets) cycle | 0.05 0.54 3.2 Net revenue / Average fixed assets cycle | 0.28 3.10 a Stock days days 1,974 192 3.4 Debtor's payment period days | 559 189 a0 Creditor's payment period days | 580 126 IV Growth possibility
4.1 Rate of revenue growth % 3967.37% | 1859.84% 4.2 Rate of profit growth % -17.03% 618.39% V Profitability
ah Gross profit Margin % 25.19% 24.79% a Profit Margin % 50.51% 18.52% 15.3 Return on assets (ROA) % 2.32% 10.08% 5.4 Return on equity (ROE) % 2.47% 15.69% a Return on investment (ROT) % 2.57% 13.99% 5.6 EBIT/Net revenue % 56.13% 25.11% Di Earning per share (EPS) VND | 257 1,730 5.8 P/E 4.98
Source: Financial Statement of Petroland in 2008,2009 and 2010
Time to search, promote and invest in a real estate project is quite long (from 2 to 3 years) Therefore, during the first two years of operation, Petroland had almost no revenue from selling real estate products Majority of revenue in 2008 and 2009 was from consultancy, project management and from financial activities (interest on
deposit in banks and investment trust) However, in 2010, with efforts of Board of
Leaders as well as staffs and officers of Petroland, together with retailing policies in real estate trading floors, Petroland had gained revenue of 934.6 billion dong and after- tax profit of 173 billion dong This is an admiring achievement for a newly established real estate company, especially in the context of freezing real estate market and unstable economy
The increase of revenue in 2010 had made profitable effect, thus ROE, ROA and
ROI strongly increased in comparison to previous years
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The Company has used debt and advance deposit of customers to increase efficiency of ownership utilization Currently, debt ratio is 47.95% This is quite safe level and lower than companies operating in the same sectors (50%-70%) _ Interest cover ratio is quite high, 31.07 This shows that Petroland has quite low financial risk
Liquidity of the Company is also at safe level In 2010, current ratio and quick ratio is 2.03 and 1.57 respectively
In general, financial situation of Petroland is quite good Currently, financial indicators of Petroland are at safe level Although profitability of Petroland is lower
than average level of the sector (ROE of the sector is about 20%)’, with reasonable
investment and sales policies, together with available potentials, Petroland has great potentials for development upcoming years
2)
2.2.2 Situation of project implementation"
By the end of 2010, Petroland carried out many activities at the same time: investment promotion, investment preparation, project investment, investment capital contribution and providing consultant services — project management The Company is seeking for new projects and new investment opportunities Below is situation of promotion and implementation of projects
® Projects directly invested by Petroland:
- Phu My Hung Petrol Commercial and Financial Center (Petroland Tower) has 3 basements and 30 levels (1° to 3% floor will be for commercial center, 4 to 24"
floor will be for offices and 25" to 30" floor will be for hi-end apartments), total
floor space of over 57,000 square meter, total investment of 1,003.68 billion dong Body structure, completion, fire prevention system and M&E system of the project have been finished The tower is estimated to be inaugurated and taken into
t 4
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operation on 19" May 2011
- Office Building 16 Truong Dinh The Building has | basement and 10 levels with
total floor space of 2.800 m2, total investment capital of 42 billion dong The project
has been completed and 1s being utilized
- Apartment Building Petroland in District No 2 The Apartment Building has 2
blocks, 18 floors, total area of 54,000 m2 with 380 apartments of which area from 70
-139 m2/apartment, total investment of 700 billion dong The project was
commenced on 21“ March 20!0 By 21° December 2010, execution of body
structure to 10" floor wili be finished, 8 floors will be completed and M&E will
reach 70% of volume
* Projects in which Petroland contributes its capital:
- My Phu Apartment Building This Apartment Building has 22 floors, was commenced on 16'" July 2010 In 2010, the execution of pile and foundation of the
basement was finished
- Vung Tau new urban area The Company has completed the planning and get approval for the planning scale 1/500 The project is on the process of carrying out procedures of compensation for resettlement The project is on the stage of basic design and establish investment project
- In addition, the Company also invests into some work scheduled projects such as: +Commercial — Services Center, Offices and hi-end apartments in Street 30/4 Vung
Tau city
+Golf yard and Cam Ranh eco villas The project has compensated and supported for 50/66 households and hand over site according to new boundary of the project +duynh Tan Phat Apartment Building: Cooperation contract has been signed between
<hang Thong Company, PIV Long Son, PVFC Land and Petroland The project was :ommenced on August 2010, execution of fence and test pile are completed
+Thang Long Apartment Building The Company has signed contract with Vu Anh
Trang 23Grice) Capstone Project Report General Hospital Company Ltd and cooperate to establish a construction investment and cooperation joint stock company with charter capital of 500 billion dong, in
which Petroland contributes 79.9%
+Tuong Binh Hiep Commercial Housing — Binh Duong The Company has signed 3- lateral cooperation contract with PetroVietnam Song Hong Investment and Trading Corporation and PIV Long Son to invest in construction commercial housing with total area of 30.6ha
* Projects on the stage of investment promotion:
Xuan Thoi Son urban area project Watching detailed plan 1/10.000, after being approved, the Company will consider whether to invest or not
Ring road No 2 and land funds project The Company is working with Department of Natural Resources and Environment of HCMC, Land fund development center to submit documents about land lots requested by Petroland
Hiep Phuoc Port project: In 2010, The Company continues to carry out its investment promotion in the Hiep Phuoc Petroland Port project
Consultancy — project management:
- Projects of which consultancy has been completed Vung Tau Hotel project and Anh Dao Kindergarten project
- Projects on the process of consulting for project management and supervising: (1) Dragon Tower Hi-end Office Building (investor is PVGas); (2) Complex of
Apartment and officer No 2 Nguyen Huu Canh — Vung Tau (investor is PVC MS); (3) working place of Construction and Erection enterprise and Service Enterprise - Vietsopetro (investor is Vietsopetro); (4) Investment in technical infrastructure for
residential areas for 2 and 3 areas Vi Thanh — Hau Giang (investor is PVC SG); (5)
Improve Guest House of Petro Vietnam (investor is Petrosetco); (6) Complex
Petrosetco Tower (investor is Petrosetco); (7) Commercial — Services Center, Offices
and hi-end apartments in Street 30/4 Vung Tau city (investor is PVC-IC); (8)
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Improve Holiday Mansion — Vung Tau (investor is Petrosetco); (9) My Phu
Apartment Building (investor is Petromyphu); (10) Site aggrading in Soai Rap — Tien Giang petrol services industrial zone (investor is PVC); (1) Steel pipe of straight welding factory — Tien Giang (investor is PV-PIPE); and (12) Other projects have been promoted, introduced to investors
2.3 Analysis of external environment 4.3.1 Macro environment
Impacts of macro economy on reai estate enterprises in Vietnam is very great
State’s policies such as tax, profit, foreign investment, population, economic activities
and people’s income have direct influences on supply and demand in real estate market Most of construction works of Petroland are located in Ho Chi Minh City, thus
indicators, policies and data relating to this area will be focused Below are analysis of
influences of macro economy on business activities of Petroland 2.3.1.1 Economic environment
Gross domestic income (GDP)
General Statistics Office has just announced official data about economic growth of Vietnam’s economy in 2010 Accordingly, GDP by practical price reached 1.98 million billion dong, equivalent to 104.6 billion In comparison in term of basis period
(1994), growth rate of GDP in Vietnam in 2010 reached 6.78% against 2009 '
Regarding foreign direct investment, by 21° December 2010, there were 969 projects in Vietnam with total registered FDI of 17.23 billion USD `”
In Ho Chi Minh City, average economic growth rate for 5 years (period 2005 — 20100 reached 11% Economic scope of the city by 2010 were 1.7 times more than the
year 2005, GDP per capita in 2010 was estimated to be 2,800USD, 1.68 times more than the year 2005 ’ GDP of the whole year 2010 reached 418,053 billion dong,
growth rate of 11.8%
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GDP Per capita (USD)
1400 1200 H00 1130 a 1024 1000 835 800 vo O39 600 192 "3 4o2 413 HO 400 200 i i Ĩ 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Figure 2.2 GDP Per Capita in VietNam in the period of 2000-2010
Source -hitp.//www.msb.com vn/g-tin-tuc-su-kien/b-tai-chinh-ngan-hang/tong-quan-kinh-te- viet-nam-nam-2010-ya-trien-vong-nam-2011/
Chart and Figures about GDP growth in Vietnam in general and in HCMC in particular show that people’s income have been more and more improved
For the period 2011 — 2015, it is estimated that the world’s economy will be recovered and Vietnam’s economy will reach growth rate of 6-7%/year''“’ Therefore,
real estate market will come back to its track
Opportunity: People’s income have been more and more improved, economy will be recovered and growth will be at high level period 2011 — 2015
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Economic structure
HCMC is the motive force in Vietnam’s economy This city accounts for 0.6% of area and 8.34% of population of Vietnam, but it accounts for 20.2% of total products, 27.9% of industrial production value and 34.9% of foreign projects In sectoral
economic structure of the city, service sector accounts for highest proportion — 51.1%
Industry and construction account for 47.7%, agriculture, forestry and aquaculture account for only 1.2% Construction output in 2010 was estimated to be 109,883 billion dong, an increase of 23.2% against 2009 `
Services and construction account for high proportion in economic structure of HCMC This means that HCM is developing towards a modern city and spending more capital in these sectors In 2010, growth rate of investment capital for construction was very high in comparison to 2009 This is an opportunities for
Petroland to make plan for key investment development in HCM '”’
Opportunity: Construction in general and real estate in particular have high growth rate
2.3.1.2 Political environment, policies and law
Political environment of Vietnam is stable, without insecurity which may affect economic development in general and real estate business in particular This will create trust with domestic and international investors in the long run This is one of favorable conditions to attract foreign direct investment This helps Petroland have opportunities to cooperate with foreign enterprises to learn experiences, technologies and carry out big projects However, it also creates fiercer and fiercer competitiveness
State’s policies on macro regulation of real estate and credit finance in period of
2009-2011 were not consistent, they are local, and in the short run, sometimes loosen,
sometimes tight which creates knots affecting operation of enterprises
Currently, the Government regulates transaction in real estate must be done on Floors and the State levy a tax on real estate transaction, this exerts an influence on
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demand for buying houses for business It is estimated that demand for business houses will not be recovered in early period 2011-2015
Many documents and relevant regulations in real estate are not consistent and remain many problems Procedures and documents relating to real estate must be through many levels, many sectors and quite complicated and time consuming In addition, regulations about compensaticn and site clearance and other regulations also
have influence on real estate business
Creating land fund to develop projects are stuck due to Decree No 69/CP on planning and using land, land price, land revocation, compensation, supporting and resettlement In order to avoid speculation and risk for people buying apartments, the Government has promulgated Decree No 71/CP However, this indeliberately creates a
legal knot for investors who like “surfing” in real estate market In addition, the
Decree also creates risks for real estate enterprises in project development as the time
to release products into market will be longer and product cost will increase
The State is seeking for some solutions to help real estate market to stand up One of such solutions are to allow overseas Vietnamese to buy houses and to clear up
procedures However, this solution will not help to attract overseas Vietnamese and
foreigners to buy houses in Vietnam
Opportunity: cooperate with foreign companies Threats:
- Demand for buying houses for business will not recover in first half of 2011-2015 - Competitiveness become fiercer
- Inconsistent policies make releasing products into market more difficult and more ume consuming
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2.3.1.3 Socio-cultural environment
According to forecast of Ministry of Construction, proportion of Vietmam’s urbanization in 2020 will be 40%, equivalent to population living in urban areas of more than 45 million people The objectives set for areas per capita is 100 m2/person
If so, Vietnam needs to have 450.000 ha of urban Jand, however, currently urban land
area of Vietnam is only 105.000 ha, be 4 of requirement
Rapid growth makes contribution to stimulate development of real estate In 2010 —
2015, new traffic routes have been established (East — West Highway, Tan Son Nhat —
Binh Loi Ring road ) This will create favorable conditions for development of real estate in areas such as District 9 — Thu Duc — District 2 — District 7 — Binh Chanh — Nha Be However, currently, infrastructure and welfare services in areas far from citics are underdeveloped which makes distant urban zones less attractive and have low price
Population environment
Total population of Vietnam at 0.00 on 1° April 2009 was 85,789,573 people
According to result of the census on 1° April 2009, HCM had 7.162.864 people’ ”’
Population in Vietnam in general and in HCM in particular is high and most of them are at working age Moreover, strong migrant from rural areas to cities makes
population in cities increase at average rate of 3.54%/year » Therefore, their demand
for houses are very great In addition, this also helps to increase demand for other real estate products such as commercial centers, office for lease
Opportunities:
- Demands for real estate products will increase
- Some infrastructure projects will be finished in 2010 — 2015 creating favorable
conditions for real estate business
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Threat: Infrastructure and livelihood services in areas far from city’s center are inderdeveloped
2.3.1.4 Technological environment
Technology is more and more developed, helping staffs in real estate to access into system every time and everywhere, facilitate their daily works Regarding management, apart from utilities, the company can save their personnel cost
Regarding customers, all diversifying demands, from most basic to most complicated
demands are promptly satisfied
In addition, a series of technology in construction have been applied such as top — down execution helping to reduce execution time; quick floor pouring technology without formwork helping to reduce execution time and increase load capacity;, Bubbledeck technology helping to reduce weight of the construction work, increasing load capacity, save about 50% of materials, reduce transporting cost, reduce execution
time, increase work life ; Use centrifugal prestressed concrete pile, light concrete
brick ACC helps to reduce production cost, speed up work progress of the project In general, application of new technologies in construction helps to reduce cost, execution time, improve work’s quality, bring high economic efficiency These are factors contributing greatly to competiveness of the company Therefore, Petroland very focuses on application of new technologies
Opportunity: apply new technologies to improve competitive capability
2.3.2 Micro economy (1) Competitors
Due to influences of macro economic factors as well as demands of real estate market, there are more and more enterprises shifting to invest in housing projects for the medium income people — a product bringing main revenue for Petroland This creates fiercer and fiercer competitiveness pressure for Petroland Companies having competitiveness advantages in this segment and having projects of direct
Trang 30Grice) Capstone Project Report competitiveness with on-going projects of Petroland are Khang Dien Housing Investment and Trading Joint Stock Company (KDH), Van Phat Hung Joint Sitock Company (VPH), and Thu Duc Housing Development Corporation (TDH)
Van Phat Hung Joint Stock Company (VPH)
Van Phat Hung was started in 1999 and became a joint stock company in 21006 Van Phat Hung Joint Stock Company is acknowledged a prestigious trademark thanks for superior design, high quality projects and living environment of international
standards
Currently, charter capital of VPH is 277,148,160,000 dong, total equity of
461,478,849,000 dong (financial statement of VPH in 2010)
Strong point of VPH is the trademark which has been confirmed, long experiemces
in constriction and real estate business, and great land fund to implement projjects
especially projects on housing for the median income However, in financial structure of VPH in 2010, we can easily see overextended investment which is shown through
debt ratio accounts for 69.46% of total asset (financial statement of VPH in 2010) In the context of tightened monetary market, free fall securities market, real estate of low
liquidity, with current financial capacity, it is difficult for VPH to implement projects upcoming time and is facing high financial risks
Khang Dien Housing Investment and Trading Joint Stock Company (KDH) The Company was established on December 2001 and officially transformed into Joint stock company on May 2007 KDH has many years of experience in project investment and development Healthy financial situation with total equity of 1,204
billion dong and total asset of 2,451 billion dong (financial statement of KDH in
2010) KDH 1s also considered as one of big real estate companies
Currently, KDH is specially focusing on development of projects in District 2 and 9, where is considered as potential areas for planning residential areas with advantages
Trang 31Ggí6o3 Capstone Project Report such as near Administrative zone of city’s center with fresh air, be spacious, quite and newly constructed infrastructure
Thu Duc Housing Development Corporation (TDH)
The Company was established in 1990 and called Thu Duc District Housing
Management and Development Corporation On 24" November 2000, the Company
was transformed to a Joint Stock Company In 2010, TDH is considered as one of 500 biggest enterprises in Vietnam with total asset of 2,338 billion dong and total equity of 1,378 billion dong (finical statement of TDH in 20!0) TDH has quite good financial situation Thu Duc’s trademark is quite well-known because of many years of operation in real estate, together with quite rapid growth rate and good marketing
Currently, TDH has great land fund Business trend of TDH upcoming time will be towards projects on housing for the median income to increase liquidity and reduce time for turn of capital TDH is also studying to shift to segment of low income people by taking advantages of available land fund by industrial zones to build houses of cheap price to sell or for hire Target customers will be workers, officials, students This is very potential market as it has great demand but has not been focused by other real estate companies Apart from that, to overcome capital difficulties in such unstable economic condition as today, TDH will focus on Real
Estate investment trust as one of financial solutions (2) Customers
Currently, main customer group of Petroland are people having demand to buy house for living and real estate trading floors
According to survey of Dat Lanh Company, people having demand to buy house for living are one who have quite good income and relatively high (11-30 million dong/month) and quite good income (3-10 million dong/month) Currently, only 10% of intellectuals aged no more than 30 years old with salary from 2 — 10 million own a house, 60% hire house to live and the remaining live in houses of their parents or relatives Those customers only buy houses having small area
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People are more and more concerned to their living quality They pay attention to
living environment and convenient livelihood Their demands, hobbies in terms of
color, pattern, size and interior are very diversified and it is not easy to meet these
demands
According to experts, customer group buying house to live have specific requirements: firstly, selling price must be reasonable, about 15 — 17 million dong/m2 (price of apartment from 600 million to 1.5 billion dong); secondly, most suitable area is 50 - 70 m’; thirdly, payment method must be suitable (many families can pay in cash but some need assistance from investors te help them borrow money from banks); fourthly, living environment and other utilities; fifthly, transposition must be convenient When infrastructure is more and more improved, then location is not an
important factor.''~’
Products of Petroland target customer’s demands and have competitive price Thus,
it is quite favorable for Pctroland to negotiate with real estate trading floor as well as
directly delivery to customers through real estate trading floor of Petroland In
addition, Petroland also has great potential customers in Petro Vietnam Staffs in the group are permitted to borrow money with low interest rate from the Group to buy houses of Petroland Furthermore, projects of the group also bring considerable revenue from consultancy and project management
Opportunities:
- Demands for real estate products, especially average real estate products in some districts surrounding HCMC are very great
- Policies to bring into full play of internal force and improve service development of
Petro Vietnam
Threat: customer’s requirements become higher and higher
Internal Documents of Petroland (2010), Ho Chi Minh city VietNan
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(3) Supplier Land fund
For real estate sector, land plays an important role in establishing product value and creating surplus value Although Petroland was established in a difficult stage of the economy in general and of real estate sector in particular, during 2008 -2009, Petroland has quickly grasped opportunities to create clean land fund in positions which are suitable to develop average rea! estate products, including land Icts in District 2, 7, 9, Nha Be Especially, Petroland has gained the !and lot to build the high- class complex in the core of Phu My Hung urban zone, creating a lever in expanding
its trademark
However, land lots good for new urban zone development and real estate business
in HCM city are more and more scare and have high price Most of them are owned,
remaining lots must be put to tender at high price Land lots for development of new urban zone of large scale are often at far distance and with inconvenient transportation It is also not easy to get land lots in Dong Nai, Binh Duong, Ba Ria — Vung Tau and Can Tho In addition, demands and price in these areas are much lower than in HCMC
Currently, there are many real estate business having good land lots but having
weak financial potential In current economic situation, it is difficult for them to
mobilize capital to carry out projects This is a good opportunity for Petroland to cooperate with such enterprises to develop business, increase competitiveness and
share risk In addition, with strong finical potential of Petro Vietnam Group, less
capital localities are willing to cooperate with Petro Vietnam in general and Petroland in particular in development of new urban zones and infrastructure construction
Opportunities:
- Growing demand for business cooperation
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- Cooperation demand between HCMC and other localities with PetroVietnam and Petroland in development of urban zones and infrastructure construction
Threat:land fund is more and more narrow, land cost is higher and higher Companies providing services
- Construction companies
According to policies of PetroVietnam, Petroland select members of the Group to become contractor even though there are more competitive contractors in the market However, Petroland has qualified staffs and officers who can control technology, require contractors to use most reasonable execution manner for each circumstance to ensure work progress and quality of the construction work
- Design consultant and construction work management companies
For an architecture work, selecting a competent consultant company in architecture, construction and project management will bring high efficiency in utilities as well as economic efficiency for investors Thus, Petroland pays much attention to selecting companies providing those services Some famous design companies in Vietnam selected by Petroland are SWA Design company, NQH Design Company These companies have foreign architects who have had unique designs and been highly appreciated
Petroland has strength in offering consultancy, project management, supervising work This will help Petroland to save production cost and increase value in value chain However, in order to create conditions for staffs in Petroland to enquire experiences from foreign companies as well as improve competitiveness in term of quality, Petroland has connected with some consultant and construction work management companies with much experience and being trusted by many domestic investors such as APVE, Meinhard Company
Opportunity: Learn from foreign companies operating in design, consultancy, and
project management
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Threats:
- Limit in selecting construction companies having higher competitiveness capability - Cost of selecting foreign companies operating in design, consultancy, and project
management is higher Capital suppliers
For real estate sector, using equity in capital structure of a project accounts for 30% - 40%, the remaming will be supported from many other channels, most of which are through banking system or from custemers of that product
The Company who is owner of the project will directly borrow one part to sponsor for the project, the rest will combine with banks to grant a loan for customers and mortgage by the products which they buy with guaranty of investor
Petroland has established its relationship with many banks such as Techcombank,
Vietcombank, Baovietbank, Vietinbank, BIDV Each bank has its own service and
strength Therefore, transaction with different banks will increase choices for
customers in capital assistance, making customers of Petroland more satisfied In
addition, Petroland has been listed in HOSE floor, thus it can mobilize capital from securities market
Opportunity: Can mobilize capital from different channels
Threat: There remain some unstable factors in the economy, strong fluctuation of bank’s interest rate and securities market make cost for capital mobilization increase
This even threatens profitability of projects
(4) Alternative products
Real estate products in general are special products and have no alternative products However, for apartments, its alternative products can be ground base or private house Customers can buy land and build their house by themselves or buy a private house However, competitiveness pressure from this alternative product is not high due to competitiveness in price and utilities provided by apartments to customers
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(5) Barrier from penetration into sector
According to legal legislation, minimum legal capital to establish a real estate company is 6 billion However, Decrees and Circulars guiding new urban zone investment or infrastructure in industrial zone clearly specify financial capacity of enterprises, for example equity must be minimum at 20% of total investment capital of the project; for housing projects of 20 ha, minimum equity must be at 15% of total investment capital
For rea! estate products, preparation time fer a project is very long (from 2 to 3 years) and sponsor capital is also very high In addition, Company must be really aware and understand this field so as to meet market’s demands This creates a great barricr for penetrating into real estate market
Profit of this sector is quite high Moreover, demand for real estate in Vietnam is
very high and diversify market segments Thus, multi-national companies and foreign investment funds have been penetrating into the market These companies have strength in capital, experience, technology, design capacity and project management However, for them, legal procedures to complete a project will be a barrier Therefore, they will carefully put their feet in the market and only pay attention to some segments which have not been sufficiently concerned by domestic companies Most of foreign companies choose ways to make joint venture with domestic enterprises when they penetrate into real estate in Vietnam
In general, barrier for penetrating into real estate is quite high
Opportunity: Establish joint venture with foreign real estate companies to learn their experience in project implementation, management experience and new techlology accept
Threat: Fiercer and fiercer competitiveness due to more and more potential rivals in the country and in foreign countries penetrate into the sector
Trang 372.3.3 Matrix of external factor evaluation — EFE
Capstone Project Report
Importance | Classification | Mark of No | Main factors level importance
| Quite high economic growth rate 0.1 4 0.4 2 Growing demand for houses of | 0.1 4 0.4
people with medium income
3 Policy on bringing into full play of | 0.05 3 0.15 internal force of Petro Vietnam
Group
L4 Demand for business cooperation in | 0.05 3 0.15 real estates
5 Cooperation between provinces and | 0.1 3 0.3 cities with Petro Vietnam in general
and Petroland in particular in real estate development
6 Demand for buying houses for 0.1 3 0.3 business has not been recovered
Đ Infrastructure for livelihood is 0.1 2 0.2 underdeveloped
8 Real estate policies are inconsistent | 0.05 2 0.1 9 Requirements of customers become | 0.1 3 0.3
higher and higher
10 | Land fund is more and more narrow, | 0.1 4 0.4 land cost is higher and higher
II | Strong fluctuation of interest rate in | 0.05 2 0.1 the market
12 | Fierce competitiveness 0.1 3 0.3 Total 1 3.1
Level of classification shows ways strategies of the company react with each
factor, level 4 shows good reaction, 3 shows above medium level reaction, 2 is medium level and | is less reaction
strategies of Petroland react effectively with external environment
we OF x
Trang 38Go) UNIVERSITY Capstone Project Report Analysis of external environment shows that Petroland has following opportunities
and threats:
Main opportunities:
People’s income is higher and higher, economy will be recovered and growth rate will be at high level during period of 2011-2015
Some infrastructure projects will be finished in period of 2010-2015, creating favorable conditions for development of real estate business
Demand for real estate products, especially medium real estate products in some districts in HCMC upcoming time is great
Policies of PetroVietnam to bring into full play of internal force and intensify services development
Growing demand for business cooperation
Cooperation between HCMC and other locality with Petro Vietnam and Petroland in urban zone development and infrastructure construction
Main threats:
Demand for buying house for business has not been recovered in the first half of 2011 — 2015
Policies are inconsistent, thus releasing products to market is difficult and time consuming
Infrastructure and livelihood services in areas far from city’s center is underdeveloped
Requirements of customers are higher and higher
Land fund is more and more narrow, land cost is higher and higher
Priority to select construction companies belonging to Petro Vietnam (Policies of PetroVietnam to bring into full play of internal force)
Economic situation is unstable, bank’s interest rate and security market strongly fluctuate, causing high expense of capital mobilization This even threatens profitability of projects
Fiercer competitiveness due to more and more potential rivals in the country as well
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2.4 Analysis of internal environment 2.4.1 Financial capacity
With charter capital of 1,000 billion dong, Petroland is considered as one of real estate companies of large scale Currently, financial situation of the company is very good Financial indicators are at safe level and financial risk is quite low However, as it is a newly established company, one of main activities of the company is to seck new projects and promote investment Therefore, in 2008 — 2010, its expenses were high, but revenue and profit is not high Thus, capital from retained profit to re-invest is limited
Petroland can mobilize capital from difference sources (capital of partners and customers, borrow from banks, issue stock mobilizing capital) to implement projects In addition, Petroland can get support from Petro Vietnam and member companies in the group This helps Petroland avoid capital difficulties when the expense for capital mobilization from financial market is high as well as allows Petroland to implement big projects
Strength: financial capacity of Petroland is quite strong 2.4.2 Business capacity
Petroland is still young and was established in the context of economic crisis and recession of Vietnam’s economic, freezing real estate market, strongly decline price of houses and office buildings Those factors exert great influences on business activities of the company
However, Petroland has been implementing some good projects such as Phu My Hung Petrol Commercial — Financial Center (Petroland Tower), Office Building 16 Truong Dinh, Apartment Building Petroland in District 2, My Phu Apartment, Vung Tau new urban areas Apart from that, Petroland also offers consultancy in management, supervising for series of projects such as Vung Tau Petrol Hotel, Anh
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Dao Kindergarten, Dragon Tower Office Building This proves good business capacity of Petroland
One of weaknesses of Petroland is capacity in participating in design, building new models of house, less attractive house interior Petroland lacks collection of typical house models, and apartments in Vietnam, and in other countries to design and construct attractive houses for customers This restricts the company to participate into designing process of a consultant, at the same time reduce its ability to consult for customers when they want to change or rearrange their interior structure of their
houses
In spite of this, Petroland always strive its effort to target its customer’s demands Therefore, despite of freezing real estate market, Petroland still gained revenue of 946 billion dong in 2010 Beside better meet customer’s demand, Petroland gains positive and effective support of PetroVietnam and member units in the group Many companies in the group are partners of the Company Companies in the group are important customers of the Companies and side by side with the Company during its development
Besides, Companies in the group have capital supporting policies at low cost for staffs in the group to buy houses of Petroland This greatly contributes to development of Petroland’s business, especially in such a tighten credit stage like present
In addition, PetroVietnam is a famous trademark in Vietnam This trademark helps its business be more convenient Close attachment with trademark of the group will contribute to help the Company attract partners, customers and work with local authorities more conveniently
PetroVietnam signs cooperation agreements with many localities in the country This creates initial favorable conditions for Petroland to promote cooperation with cities and provinces PetroVictnam can bring customers who are members of Petro Vietnam who will lease offices of Petroland and bring some projects for the Company