Business strategy for Song Da Urban & Industrial Zone Investment and Development Joint Stock Company (SUDICO) for the period 2011-2015

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GRIGGS UNIVERSITY

GOLBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT

Business Strategy for Song Da Urban & Industrial Zone Investment and Development Joint Stock

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Gricos) GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION UNIVERSITY

COMMITTMENT

Our group would like to commit that content of graduation report (Capstone Project) presented in this research is research work of our group, absolutely not transcribed from other’s, data used in this research is truthfulness compared with the original, if there is any false we would absolutely take responsibility

Members of the group

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~ — cei

G09) GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION

ACKNOWLEDGEMENT

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Gricas) GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION UNIVERSITY TABLE OF CONTENTS CONTENT INTRODUCTION

CHAPTER I: BASIC THEORY ON MAKING STRATEGY 1 Mission and major objectives

2 Strategy making process

3 External environment analysis

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GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION GRIGG UNIVERSITY 5.2.3 External Evaluation (I.E) matrix 5.3 Strategy selection

CHAPTER II: BUSINESS ENVIRONMENT ANALYSIS OF SONG DA URBAN & INDUSTRIAL ZONE INVESTMENT AND

DEVELOPMENT JOINT STOCK COMPANY (SUDICO) I Introduction

1 Vision

2 Business line

3 Organizational structure of the company II SUDICO’s external environment analysis

I Macro environment analysis:

1.1 Analyze effects of Political —- Legal 1.2 Analyze effects of Economic factor 1.3 Analyze effects Culture Society factor 1.4 Analyze effects of Technological

2 Analyze industry environment of SUDICO

2.1 Trend of real estate market in period of 2011-2015

2.2 Analyze business environment of SUDICO

3 Assessing influence of outside environment on SUDICO 3.1 Summary of Opportunity and Challenge

3.2, Matrix of External Factor Evaluation (EFE) III Analyze internal environment of SUDICO

1 Analyze strength and weakness of SUDICO 1.1 Financial ability of Company

1.2 Value of projects held by SUDICO 1.3 Analyze advantage of SUDICO’s brand 1.4 Human resources and management ability 2 Analyze internal environment of SUDICO

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Griccd GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION UNIVERSITY CHAPTER III SELECTION BUSINESS STRATEGY OF SUDICO 61 IN THE PERIOD 2011 - 2015 I SUDICO’s objectives for period of 2011-2015 61 1 SUDICO’s mission 61 2 Main economic targets in 5 years from 2011 to 2015 61 3 Structure of business 62 4 Main duty 62

II Strategy of SUDICO in period of 2011-2015 63

1 SWOT Matrix Analysis 63

2 TE Matrix Analysis 67

3 SUDICO’s strategy selection for period of 2011 - 2015 68 Ill STRATEGY SOLUTIONS IN PERIOD 2011-2015

I Market solution 68

2 Solutions of Enterprise organization 68

3 Solution of investment 69

4 Finance solution 70

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GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION LIST OF FIGURES - TABLES - Figure | Chapter 1 | Figure 1.1 Table 1.2 Table 1.3 Chapter 2 Table 2.1 Table 2.2 Table 2.3 Table 2.4 Table 2.5 Table 2.6 Table 2.7 Table 2.9 Table 2.8 | Name M.Porter'y Five Forces of Competition Modei SWOT Matrix LE Matrix V, ietnamese economy overview Stock Exchange 2010 Gold Market

Population in 2009 with local area

Vietnam's population density in comparison with United Nations’ standard and China

Population density in Hanoi and Ho Chi Minh city

Summarize comparing advantages of SUDICO with HUD and BITEXCO Matrix of competitive graphic Power of 5 pressures Table 2.10 Diagram 2.12 Table 2.13 Table 2.15 Table 2.16 Table 2.17 Chapter 3 Table 3 2 Table A 3 Table 2.11 | Table 2.14 Table 2.18 Table 3.1 | Summary of Oppopunity and ‘Challenge ` EFE | Matrix

Structure of Ownership capital of S UDICO ` Details of SUDICO’s ownership invesment capital Comparison of financial indicators in 2009 of SUDICO _and some enterprises in branch

Payment ability of SUDICO Some typical projects of SUDICO

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INTRODUCTION

Real estate market in Vietnam has been officially formed since 1993, after Land Law allows transfer of land use right It is likely to confirm that real estate economics is a key component, accounting considerable proportion in the economy of developed countries Real estate market takes the role in initial financial accumulation of the industrialization process of the country It is demonstrated in practice of countries and territory region such as Singapore, Korea, Taiwan, Hong Kong

In Vietnam, this market attracted the more and more capital resources in the society and contributed considerably for the economic growth In the context of recent global real estate investment, Vietnam’s real estate market has proved its attraction from the domestic demand and recovery ability of the economy, supported by elements such as economic growth, fast urbanization process and forming of a new middle class Although investment environment remains a lot of challenges, Vietnam’s real estate market has been attracting interest of global investment organizations

Since the recession of the year 2008, there have been many projects starting in all fields, with the increase of supply source especially in markets and offices in Hanoi and Ho Chi Minh city, as well as housing and resort area Since the beginning of 2010, Vietnam’s real estate market has been gradually improved; it means continuously expanding the economy because domestic market’s orbit is connected to the economy With domestic and foreign economy's prospect, Vietnam’s commercial real estate and housing has positive momentum of development

Infact, enterprises participating in Vietnam’s real estate market are required to have specific, methodical business strategies and define business objective in proper Nowadays business environment has been changing rapidly, global competitiveness requires each enterprise to take initiative, creative and adapt to the daily and hourly change

1 Object and scope of research

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Song Da Urban & Industrial Zone Investment and Development Joint Stock Company (SUDICO) is a company trading in real estate, owns big projects, bringing a lot of profits to shareholders The company’s objective is to become one of the leading company trading reai estate, urban investment and development and industrial zone of Vietnam Therefore, research content should be focused on analyzing SUDICO’s environment making and selecting business strategy in the next few years

2 Research method

Using strategy analyzing techniques, SWOT matrix On the basis of collecting primary and secondary data, using direct investigation method, statistic method and economic analysis and using SWOT matrix, I.E matrix analyzes SUDICO’s strategy

3 Thesis lay-out

The thesis shall be structured as follows: Introduction

Chapter I BASIC THEORY ON MAKING STRATEGY

Chapter II BUSINESS ENVIRONMENT ANALYSIS OF SONG DA URBAN & INDUSTRIAL ZONE INVESTMENT AND DEVELOPMENT JOINT STOCK COMPANY (SUDICO)

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CHAPTER 1,

BASIC THEORY ON MAKING STRATEGY

In the competitive business world, sometimes people raise themselves question why some companies are successful but some others is unsuccessful? Each enterprise has its own way to survive and develop It is not imperative that all enterprises must compete against other enterprises while serving for a group of customers in a manner or must do action in the same manner with attempt to satisfy changes affecting its operation

“Strategy is orientation and scope of an organization in the long-term with attempt to achieve competitive advantages for the organization through formatting its resources in a changed environment, in order to meet market’s demand and satisfy related parties’ expectation”

Johnson, G Scholes K(1999) Exploring Corporate Strategy, 5" Ed Prentice Hall Europe 1 Mission and major objectives :

Mission and major objectives is for companies to make strategy Mission given shows reason of existence and duties of a company Major objectives determine what a company hopes to satisfy in the long-term

2 Strategy making process

Strategy is result of a planning process from senior executive levels of the company Consideration of planning process is deemed as a starting-point Strategy planning process can be divided into the major steps as follows:

- Select mission and major objectives of the company

- Analyze external environment in order to identify opportunities and challenges of the company

- Analyze internal environment in order to point out strengths and weaknesses of the company

- Select strategies on the basis of looking for esstential resources ability and capcity, develop in order to remove threats, take advantage of opportunities from the external environment

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- Execute strategy

Implementing internal and external environment analysis, then selecting strategy, normally it is considered as strategy-making Strategy-execution shall include designing structure oj the organization and suitable control system in order to put strategy in implementation

3 External environment analysis 3.1 Macro environment analysis

Objective of external analysis is to define opportunities and threats from the external environment of a company including review of macro economic elements, society, government, legal, international and technology possible to affect the company

3.1.1 Political-Legal

Legal and political elements have ifluence on all business sectors in the territory, institutional, legal emelements can overwhelm survival ability and development of any sector When trading in a administrative unit, enterprises shall have to conform institutional legal elements in that area

3.1.2 Economic

Economic elements affect directly potential attraction of different strategies Economic elements have influence such as: economic growth, inflation rate, economic cycle, interest rate increase/decrease, stock market, GDP growth, tax system and tax rates

3.1.3 Cultural - Society

Each country, territory region has its own cultural values and specific social elements Enterprises is required to review cultural elements, taking advantages as well as influences on business strategies Enterprises should pay attention to social elements while making market survey such as_ living style, income population, psychology, education qualification Change of these elements shall have important influence on decisions on products, services, market and consumer

3.1.4 Technological

Now advanced technology can be considered as opportunity or threat to enterprises when making strategy for development of the enterprise Progress of

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information technology, communication, transportation shortened distance of geography, transmission mean Development of traffic infrastructure, technical infrastructure, research, application of science and technology Affect of information technology, internet on business transactions

3.1.5 Demographic

Enterprises should recognize that natural elements have influence on business decision of each enterprise

3.2 Industry environment analysis

The Five Forces of Competition Model is considered as a useful and effective tool of the enterprise in searching and analyzing for the enterprise

Figure 1.1: M.Porter’s Five Forces of Competition Model Potential Entrants Threat of new entrants y Industry Bargaining Bargaining Competitors power of powe of Buyers suppliers Suppliers > (-) < Buyers Rivalry among existing firms 1 Threat of substitute products Substitutes

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Griccd GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION UNIVERSITY

Following is customer's selection ability Customers always require to buy a product at a cheap price but with good quality and perfect service This always creates pressure for each enterprise, easily causing increase in cost and threat of price competition However, customers are always vital element of each enterprise, its business strategy must aim to customers

3.2.2 Suppliers

Subsequently, it is negotiation ability of the supplier Supplier provides not only material, equipment, labor force but also most of input services for the enterprise

3.2.3 Potential Entrants

Implicit competitor includes companies participating in the sector with less competitiveness but with potential and may have competitive strength in the future Competitors desired to gain the market share are willing to invest in new technology for exploitation Enterprises are required to consider about threats rising due to joining in the sector from these implicit competitors

3.2.4 Substitutes

Final force is competitive force of substitutes In order to limit pressure of this danger, the company is required to review development trend of the market,

capacity and forecast of substitutes in the future

3.2.5 Industry competitors

In Micheal Porter’s model, existing competitors inherently have stable position in the market, therefore is more competitive Key factors forming competition level among companies of the same industry: competition structure, market demand, barriers

The importance is to identify all competitors and determine their advantages and disadvantages, threat, objective and strategy

Besides, in analyzing process it is necessary to pay attention to some other factors such as: distributor, shareholder in order to further determine opportunities and challenges to the company’s business activity

4, Internal environment analysis

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Internal analysis’s objective is to find out strong points and weak points of the company Analyzing industry environment is aimed to point out competition position of the company, major competitors as well as development history of the industry, impact evaluation of globalization within scope of the industry

The role of capacity, resources and ability of forming, maintaining stably competitive advantage for the company Forming, maintaining competitive advantage is a requirement given to companies The company’s strength make a dominant in this field, on the contrary the weakness is likely to bring less efficiency

4.1 Resource

It is existing resource under the company’s possession Based on existing resource of the company, an important point in order to define objective and business development in conformity with short-term and long-term strategic requirements

4.2 Financial capacity

Financial capacity is often considered as the best evaluation method for competitive position and a condition to attract investors Determination of strength of financial capacity is a condition for selection of a proper and effective strategy Functions of finance: ability to mobilize capital, profitability, solvency and risk management

4.3 Enterprise management

In enterprise management, the importance is to make decision, because handling an organization from simple daily works to long-term strategies are based on suitable decisions Requirements for decision in enterprise management must have scientific foundation, united, conform to regulations, general institution, must be oriented and specific in respect of time, and meet timely requirements

5 Business strategy selection

Each business unit must select a business strategy such as its competition method in a given market-product Companies of the same industry can pursue various business strategies which their difference relates to factors such as selection of market segment, product quality; technology Among company’s strategies,

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concentration strategy is the cheapest because it requires less resource for serving a segment compared with serving for the whole market

5.1 SWOT Matrix

SWOT is abbreviation from the first alphabets of words as follows: Strengths, Weaknesses, Opportunities and Threats It is a very useful tool helping us understand the matter or making decision in organization, management as well as in business SWOT is a theory frame, on that basis we can approve strategies, determine position as well as orientation of an organization, a company, analyzing business proposals or any idea in respect of benefit of the enterprise In fact, application of SWOT is for making business plan, strategy, evaluating competitor, making market survey, product development and for research reports

SWOT analysis model is applied for evaluation of a business unit, proposal or an idea It is a personal evaluation for data arranged logically with attempt to help us understand clearly the matter, since then discuss and make the most

reasonable and exact decision Below SWOT analysis frame will help us think

professionally and make active decision actively not depending on instict and or feelings SWOT analysis frame is presented in grid form, including 4 main parts shown in 4 major contents of SWOT

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GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION Table 1.2: SWOT Matrix Opportunities (O) Threats (T)

- Sl: List weaknesses as per

order of importance opportunities 1 Use strengths to develop

'- OL: List opportunities as per |- Tl: List threats as order of importance |per order of

SWOT Matrix _Q?: importance - T3: Strengths (S) SO Strategies ST Strategies 1 Use strengths to avoid threat order of importance - W2: - W3: - S2: 2: develop opportunities đu - 83: 3 su

Weaknesses (W) W0 Strategies WT Strategies

- WI: List weaknesses as per |1 Limit weaknesses to |1._ Minimize dangers

and avoid threats

Strategy analysis is a process including analysis of internal and external environment elements of the enterprise on the basis of mission and objective in the enterprise’s strategy This consideration and analysis shall help the enterprise have opportunity to use more adequate measures in order to improve operation efficiency of the enterprise, avoid obsolescence, inadequacy Objectives and strategies need to pay attention, develop and combine in order to complete the enterprise’s mission with the best efficiency

5.2 Establishment of summary table of internal-external factor 5.2.1 External Factor Evaluation (EFE) matrix

One of the tools that are often used in analyzing the external environment is

the EFE matrix EFE matrix combines, briefs and evaluates the major opportunities and threats of external environment affecting the company EFE matrix helps managers to assess the responsiveness of the company to opportunities and threats, deciding whether the external environment facilitates causes troubles for the company This matrix is built through five steps:

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- Step 1: Make a list of 10 - 20 major opportunity and threat factors that can

greatly affect the success or failure of the company and its business

- Step 2: Assign the weight from 0.0 (not important) to 1.0 (very important) to each factor The weight of each factor depends on the influence of that factor to the success or failure of the company in its sector Typically, the opportunities are have higher weights than the threats but some threats may get higher weights if it is has particularly serious and big impact on the company The weighting is determined based on comparison against competitors or experts, group discussions The total weight assigned to all factors must equal 1.0

- Step 3: Determine the rating from 1 to 4 for each factor, the rating of each factor depends on the responsiveness of the company to that factor where 4 is superior, 3 is above average, 2 is below average and 1 is poor The ratings are determined by experts based on the performance (the effectiveness of current strategy) of the company Thus, the weighting in step 2 is based on the industry while the rating step 3 is based on the current responsiveness status of the company

- Step 4: Multiply the weight of each factor with its rating to define the weighted score

- Step 5: Add the weighted scores of all factors to determine the total weighted score of the company

Evaluation: the highest total weighted score that and company can gain is 4.0 The lowest one is 1.0 and the average is 2.5

- If the total weighted score is 4, the company is responding very well to the

opportunities and threats from the external environment

- If the total weighted score is 2.5, the company is responding on the average

to the opportunities and threats

- If the total weighted score is 1, the company is responding weakly to the opportunities and threats from the external environment

5.2.2 Internal Factor Evaluation (IFE) matrix

IFE matrix combines briefs and evaluates the major strengths and weaknesses of the company The matrix shows the strengths that the company needs

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to develop and weaknesses to improve, enhancing its performance and competitive position IFE matrix is done by five steps:

- Step 1: Make a list from 10 to 20 factors including the major strengths and weaknesses influencing greatly the development of the company

- Step 2: Assign weight from 0.0 (not important) to 1.0 (very important) for each factor The weight of each factor depends on the influence of such factors to the success or failure of the company in its sector The total weights assigned to all factors must equal 1.0

- Step 3: Determine ratings from | to 4 for each factor, the rating of each factor depends on the strength of the company, in which 4 - very strong; 3 - strong; 2 - quite weak; | - very weak

- Step 4: Multiply the weights and the ratings of factors to define the weighted score

- Step 5: Add the weighted scores of all factors to determine the total weighted score of the company

Evaluation: The highest total score achieved by a company is 4.0 and the lowest is 1.0 The average one is 2.5

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GRIGG UNIVERSITY G69) GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION 5.2.3 Internal Evaluation (1.E) matrix

Table 1.3 (ILE Matrix)

EFE — External Factor Environment

Strong Medium Low Harvest and VI Harvest and Divest Vill IX

IFE — Internal Factor Environment

I.E Matrix is used as an analysis technique applied parallely with SWOT

Matrix and for comparison with SWOT Matrix It is a quantitative analysis

technique In order to set up I.E Matrix, it is usually based on analysis result of business environment and enterprise internal analysis, to form two element matrix:

EFE matrix and IFE matrix

Setting up competitive image matrix in order to make evaluation, comparison between the company with competitors in the sector, the comparison based on

elements affecting company’s competitiveness in the sector From that determining

competitive advantage of the company against competitors 5.3 Business strategy selection

Conducting analysis, selection and determination of a business strategy is necessary In order to ensure a feasible strategy, it requires the enterprise to make proposals, criteria as basis for selection of an optimum strategy

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Based on the principle and criteria, the enterprise compare projected proposals and strategies with attempt to find out a suitable business strategy for implementing Selected strategy must be an optimum strategy or the best suitable with condition, circumstance of the enterprise

When selecting a strategy, the enterprise should consider some elements affecting selection of strategy These elements include: strength of the industry and the enterprise Strategic target of the enterprise, attitude of General managing director, financial source, capacity and qualification of the management Strength of the industry and enterprise compared with competitors can affect process of selecting strategy Normally the enterprise with competitive position selects a growth strategy, which is different from a weak enterprise Leading enterprise of the industry often tries to connect and make use of its position, looking for opportunities in other industries with better growth potential

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GRIGG:

BUSINESS ENVIRONMENT ANALYSIS OF SONG DA URBAN & INVESTMENT AND DEVELOPMENT JOINT STOCK

COMPANY (SUDICO) I INTRODUCTION

Company name: Song Da Urban & Industrial Zone Investment and Development Joint-Stock Company

Abbreviation: SUDICO

Address: 1 & 2™ Floor, CT1 building- My Dinh Urban area- Me Tri Tu Liem- Hanoi

Website: www.sudicosd.com.vn

Charter capital: 1,000,000,000,000 VND (one thousand billion dong) Stock code: SJS- listed in Ho Chi Minh city Stock Exchange 1.Vision

SUDICO is striving to become a Vietnamese leading company trading in real estate, urban and industrial zone investment and development

SUDICO focuses and pays attention to develop product quality with its trade mark, special product with high quality, architecture closely to the nature, friendly with environment, to ensure the art, establish and maintain reputation under every circumstances All SUDICO’s products always meet customer’s requirement,

preferred by customers and obtain high appreciation from the authorities and are

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2.1 Scope of trading in real estate : This is the main business of SUDICO,

nearly 90% of total revenue, profits for companies

- Consultancy, investment, preparation and implementation of construction investment project, trading houses, urban area and industrial zone

- Trading and developing services of houses, urban area and industrial zone - Consulting technical design, detailed plan of urban area and industrial zone: consultancy and design of civil and industrial works

- Trading in real estate and other services - Trading in hotel, restaurant service

2.2 Scope of financial investment Financial investment: Investment delegation from organizations and individuals

2.3 Scope of construction, manufacturing and trading of construction materials This activity was only about 2% - 5% of company revenue

- Manufacturing and trading construction material, interior equipment - Trading, importing and exporting machineries and equipment

- Exploiting, processing mineral

3 Diagram on SUDICO’s organizational structure Organization Chart

BAN wae és coe

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II SUDICO’S EXTERNAL ENVIRONMENTS ANALYSIS

1 Macro environment analysis

1.1 Analyze effects of political —legal

Vietnam is one of countries with stable politics and safety in the world It makes Vietnam become an attractive investment environment in the region, encouraging foreign investors as well as domestic investors forcible to invest,

manufacture and do business in Vietnam

Real estate is a specific field greatly affected by policy, law especially government’s policies on land and real estate market management Vietnam is a new open market with asynchronous policy system, overlapped documents causing difficulties for application Apart from the fact law is continually revised, enterprises face with many difficulties in execution of the law due to inconsistent guidelines Our sub-law documents include decrees composed by the government, under decree there are Circulars issued by Ministries and detailed documents of

departments, committees It causes considerable impact on real estate investment

—trading enterprises

As per land law, land belongs to people’s ownership and is managed by the state on behalf of people, existing definition of land use right, organization, individual entitled to use land shall be allowed to use, exploit land in conformity with the plan, purpose of land use as per government’s licence and shown in Land use right certificate The Government shall be entitled unilaterally to revoke, change land us right of organization, individual in order to serve for socio-economic

policies, security and defence Therefore, investment and business decisions of

real estate trading enterprises shall be strictly managed by the government, and activities of investment, sales must be in conformity with socio-economic development plan, construction plan of each region, local and must be authorized from the government

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663) GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION In subsidy red tape centralized mechanism, definition of real estate market 1s

not established, regulations on rights and obligations of land user is not clear causing difficulties of user in exploitation and utilization of land transfer of commodities are shown by administrative decisions logether with process of integration, regulations of the government on land use right have been improved, more explicit, the user is entitled to transfer, convert, lease, inherit, mortgage land use right, therefore transfer of commodities have been shown through civil transactions verified by the government It is condition to set up real estate market

During the past few years, the government has especially paid attention to issue legal documents to create legal framework promoting real estate market in the right direction Vietnamese National Assembly did its best to build, amend, modify series of important codes with attempt to improve business environment, attract investment in line with the rapid development of the country such as real estate business law, investment law, bidding document, housing law contributing to make real estate business transaction more ready and transparent

* Land law 2003 and instruction documents stipulated rights and obligations of land user, procedures establishing rights, obligations and procedure of transfer, conversion, leasing, donation, succession, mortgage of land use right It creates legal framework for exchange of goods in the market

* Real estate business law No.63/2006/QH11 on 29/06/2006 stipulates business transaction of real estate; rights, obligations of organization, individual trading real estate and transaction relating to real estate trading

* Housing law No.56/2005/QH11 valid since 1/7/2006 stipulates ownership of houses, development, management of utilization, transaction of housing and state management of housing The law authorizes overseas Vietnamese to buy and own houses in Vietnam, it expands real estate market for overseas Vietnamese desired to

own houses in Vietnam

* Due to open policy of the Government, in period of 2000-2010, domestic real estate market has been established and developed rapidly, creating condition to

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develop economy, urbanization process occurs fiercely However, in operating process, the market demonstrates inadequacies: real estate transactions are still spontaneous, secret transaction accounts great ratio, information of the plan lacks of transparency, goods are not provided to end-users but speculators Price of house,

land does not reflect the real value

Recently, the government has made adjustments on the policy in order to control more strictly the market, regulations on project investment, compensation for site clearance, capital mobilization from customers Especially Decree No.71/2010/ND-CP on 23/6/2010 tightened capital raising from customers Capital raising from customers is the important capital raising channel of real estate investors Appearance of decree 71 limits risks for customers because as per new provision of decree 71, real estate project investor is only allowed to raise capital from individual and organization in order to invest in building house and receives profit distribution, or distribution of house product as per agreement and contribution ratio, not via the exchange, but this ratio is not more than 20% of total products of each component project At the same time Decree 71 confirms that investor is only entitled to raise capital buying house in advance from customers when completion of the foundation

Political and legal elements provide real estate trading enterprise in general and SUDICO in particular with opportunities and challenges as follows:

Opportunities

- Stable political situation creates condition for strategy to develop steadily and in the long-term

- The Government issues real estate business investment incentive policy, mechanism, policy stabilizing real estate market when fluctuation, to ensure benefit for investor and customer

Legal system is gradually completed to make real estate healthier

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Challenges

- Legal documents in land management, real estate investment and trading are not closed to the practice, overlapped causing difficulty for the enterprise when participating as well as exploiting

- Administrative procedures are still redundant, complicated with many levels obstructing operation and missing the company's opportunities

Land use, investment, real estate trading management mechanism is more and more tightened causing difficulties for development of land fund, compensation for site clearance and investors’ capital mobilization

1.2 Analyze effects of Economics factor

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Average economic growth rate obtained 7.02%/year for the period of 2007- 2010, of which meeting 8.34% for period of 2006-2007; average rate of 6.15% for period of 2008-2010 due to affect of high increase of inflation and the world

economy ’s recession

Social investment capital performed in 2010 on the basis of amount of 1994 increases 64.5% in comparison with the year 2006, average increase of investment capital in period of 2006-2010 is 13.3% State owned sector’s investment capital performed in 2010 increases 42% compared with the year 2006, average yearly increase is 9.3% for period 2006-2010 Private sector’s investment capital performed in 2010 increases 47.6% compared with the year 2006, average yearly increase is 11.4% for period of 2006-2010 FDI investment capital performed in 2010 increases 157.5% compared with 2006, average yearly increase is 25.7% for

period of 2006-2010

Foreign investment in 2010 decreases 18 projects and increases 54.9% in respect of registered capital in comparison with 2006 In period of 2006-2010, there are 1253 foreign investment projects authorized yearly with average registered capital of USD 29.4 billion

Only 2010 among USD 18.6 billion of committed FDI, there are USD 6.8

billion invested in real estate market This shows that Vietnam’s real estate market

has attracted a lot of foreign investors

Judgment -By above analysis it is shown that high growth of Vietnam’s macro economy is maintained, proving that Vietnam is an attractive market for foreign investors Where GDP and FDI in field of real estate, construction accounting high ratio, it means that real estate develop strongly and become a key industry in the economic development

Regarding inflation, due to pressure of external price increase because basic material price increases and pressure of internal price increase is rather considerable resulting from price increase of coal, petroleum, electricity and increase of basic

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salary In circumstance that purchasing power and income have not been improved, enterprises must adjust selling price in order to compensate increase of expenses

Regarding monetary policy, at the beginning of 2010 credit market automatically tightens more strongly desire of State Bank of Vietnam State Bank of Vietnam has began its action in order to partly restrict pressure of inflation, partly reduce number of enterprise making loan with too high interest rate With efforts of the State Bank of Vietnam, enterprises hope that credit market shall be stable with lower actual interest level than beginning of 2010 By the year 2011, credit growth can be maintained below 25% as the Government's target due to inflation pressure maintained at high level This affects business transactions of the enterprise when continuing to face with difficulties in approaching the Bank’s loans Credit given to real estate sector seems not to have positive signals

Risks of trade deficit and debit of balance of payments are maintained, however weakness of VND during the past time together with application of deposit ceiling interest rate of USD for economic organizations seem to be effective in stabilizing the situation In fact on 10/2/2011, the State Bank adjusted VND/USD exchange rate to 9% It is likely to see that, balance of Marco policy plays a key role in handling inflation issues, deficit of balance of payments, exchange rate and create foundation for high and stable growth in the long-term If the Government gives priority to stabilize macro issues, GDP growth can be lower than given target; it will help the economy return to the potential growth status more steadily

Judgment : Together with economic development is inflation and shortage of stability of monetary market, regulation on loan for real estate investment is more and more tightened It is a big challenge for real estate trading enterprise in finding investment fund from credit-banking channel

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WMINDEX - RSI = 68 12

Table No 2.2 — Stock Exchange 2010 ni ? K a ne hen no Lf SAL PONS en bạ ae ~“ VJ ` Spr \* Vy / A! Nự : qv -/NHHDEX - Da; 2711/2011 Open 52279 HÌ 52279 Lo E16 CloseEl098 00% 23132597040 TP 247138 MAT(CIoSẽ XỐ' z đội 1 7 fa ott ` 1 ‘ ⁄ là tụ, x XS i " q ow, N Ị : a Ngưu ộ \ \ ae 4 | ye 471.383 h h ! i), 1, I Wg iy 4 yi — 4 — 471 3839 là) hea 3 pÍ \ if 4400 wd " ' 4200

THar Tàpr Tun TJul Tâu? TSep TOct TNOw Bec T2011 Feo

VHINDE - ví i2 = 32.567 04000 MaCvolumac) 18) = 32432 548 00 Gul 100M 80M ki Lira, HHXINDEX E boo * i "Market: NYSE ` THÍ 7 ` - ull | MS he huy, ii Hite ie UMA Oct Nov IÌIIUllllUU II Dec 011 Fed “vì = 20 00 sg _HNXINDEX

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G69 GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION

When the world economy is in crisis, gold investment channel shall become the most attractive, because gold is more stable than stocks and quick liquidity than real state According gold price keeps going up since 2009 until now

Judgment: Stock exchange 's recession makes enterprises’ capital raising channel through issuing stocks, bonds face with difficulties On the other hand, stock exchange is not exciting and gold markets lacks of stability during the past time cause investors to move to real estate market, which is considered as a stable market with high profit, contributing to push up demand for real estate increasing

* Average per capita income in Vietnam

As per recent report of Prime Minister in the 8" National Assembly on 20/11/2010 declaration that “Average per capita income of the year 2010 in Vietnam obtains USD 1,160” if calculation in USD (pursuant to yearly average exchange rate), average per capital GDP increases from USD 730 to USD 1,160 in 2010, increasing 1.6 times, equivalent to USD 430

Also as per report “Human development in the year 2010” of UNDP it is recognized that during the past 4 decades average per capita income in Vietnam increased 5 times Vietnam has been ranking the 8" in the list of worldwide countries obtaining improvement of average per capita income

Judgment: When average per capita income increases, consumption demand also goes up The demand for housing, especially high ranking and medium housing segment shall increase as per common level of the social life It is a market opportunity for real estate trading enterprises

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GRIGG: UNIVERSITY Go GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION

Through above analysis, Vietnamese economy has many opportunities and

challenges for real estate trading enterprises Opportunities

- High growth of macro economy, average per capita income increase results in increasing demand for houses, offices for rent, industrial zones and tourism area

- High speed of urbanization together with demand for urban expansion, therefore the Government should pay attention to give preference to investment in new urban areas

- International integration and globalization trend create opportunities for development of real estate sector Attracting foreign investment, to create opportunity for cooperation, association and learning

- Stock exchange’s recession and gold market's instability make cash flows running into real estate market

Challenges

- Monetary, financial market remains unease, credit restriction, high interest rate causing difficulties for raising investment funds

- Global economic crisis and its impacts keep happening to affect enterprises

- Integration process forces domestic enterprises to face with foreign groups including qualified investors with experience and financial capacity

1.3 Analyze effects of culture — society factor

According to Report of Work Population 2010 of United Nations, Vietnam Population will increase to 111.7 million people in 2050 Now, Vietnam is the world’s fourteen-largest country by population Vietnam is one of the Asia’s youngest countries by population Of which, about 58 million people is at labor age (from 15 to 64 years old) Population Fund of United Stations (UNFPA) appreciates that “With changes of population structure, Vietnam is entering “period of gold

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population structure” This special period happens only one time in development history of any country.”

Vietnam is facing mass migration from countryside to city Despite making up 30% of total Vietnam’s population, number of urban’s inhabitants is accelerating with average speed of 3.4%/year Southeast Vietnam has the highest urbanization caused mainly by widening of labor market

According to Statistics Head Department, the population density in Vietnam has differential distribution and unequal growth For example, Red River Delta in the North Vietnam has the biggest population density of 25 million people while in highland density is only 5 million people In some provinces like Nam Dinh, Thanh Hoa ratio of population growth is insignificant because people immigrate to southern cities (mainly Ho Chi Minh city) for earning living It is estimated that in 2004-2009 9.1 million people emigrated

Table No 2.4: Population in 2009 with local area Average population Area (Thousand people) (km?) Whole country 86024,6 331051,4 The Red River Delta 19625 21063,1 Ha Noi 6472,2 3344,6 Northern middland and 11095,2 95338,8 highland

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Table No 2.5:

Vietnam’s population density in comparison with United Nations’

standard and China 300 250 200 100 a 150 re out | nà: Ee 50 United Nations’ Vietnam standard People/km2 Table No 2.6 : Population density in Hanoi and Ho Chi Minh city HCM Hà nội © People/km2 fo 3000 ei 3200 2600 2800 pa 3400 3600

Emigration from countryside to city on the one hand impulses urbanization process but on the other hand causes big pressure for system of infrastructure, social service, housing and environment in big cities More traffic jam and pollution happen in Ho Chi Minh city (the most populous place in Vietnam with over 7.1 million people) or in Hanoi (6.5 million people) The population density in two big cities of Ho Chi Minh city and Hanoi is too high; it is 2909 people/km2 in Ho Chi

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GRIGG UNIVERSITY G63) GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION

Minh city and 3490 people/km2 in Hanoi which is the biggest population density in whole country

One tendency in modern Vietnamese society is that young people early want to live independently As the result, private house or high-grade building is in vogue for young people with high income With big increase in economic development, academic standard and young people’s international working experience, amount of people with high income in Ho Chi Minh city or Hanoi is rising remarkably This is a chance for real estate service

In recent times thanks to general development of economy, hot development of stock-exchange in 2007-2008 and real estate market, a rich class with ability of buying houses in all big cities as well as famous resorts appears in Vietnam From

that point, there is a new service provided to this kind of customers

However, positive change of economy and society also puts more pressure on real estate enterprises because customers have more and more knowledge, experience and aesthetic knowledge Nowadays, a modern, convenient and spacious life in urban area is a goal of people Opportunities - Growth of population and urbanization speed increases demand of buying houses - Mechanical transfer of population to urban also increase demand of buying houses Challenges

- With position of the 14th-largest country by population and high population density, land fund for urban development is rarer and rarer

1.4 Analyze effects of technology

With trend of international economy and technological transfer from developed countries in the world, Vietnam promptly acquires and applies new construction technology; shortens execution time, improve work’s quality and

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Grid GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION UNIVERSITY

reduce construction cost A lot of new technology is applied such as: top-down execution method to decrease execution time, execution method of ground, walls, stake foundation, technology of ramming concrete, anti-corrosion technology for sieel composition, quick technoiogy of pouring floor without formwork to decrease execution time and increase ability of holding gravity

With economy development and cooperation of technical science, technological transfer from developed countries is enlarged This gradually improves management skills as well as professional skill for investors of big and modern urban and helps integration with global economy

Like other countries, Vietnam get benefit from information technology progress Number of internet —- and mobile phone users is increasing rapidly in comparison with not only region but also whole world In 2005, average rate of

Internet users in Vietnam was more than average rate of Asia (8.4%) In 2006, it

doubled and went beyond world’s average threshold Applications of information technology and telecommunication are brought into activities of production, service

and business to save cost for work force, communications and especially to

marketing products and services Opportunities

- Apply in construction technology, shorten investment time of project and increase turnover speed of investment capital

- Development of information technology makes customer approach and product marketing easier

Challenge

- Backward technological science makes Vietnamese enterprises lose advantages in competition with foreign enterprises

2 Analyze industry environment of SUDICO

2.1 Trend of real estate market in period of 2011-2015

Affected by crisis of world economy originated from broken Real estate in

USA, in 2008 real estate in many places over the world were frozen: Vietnam real

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` GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION GRIGG UNIVERSITY estate market had a rise and fall year with quiet trade and decreased price in many parts

In 2009 we witnessed remarkable gap for different market segment in real estate field Of which, redundant offices for rent pushed rental fee down in all items from 20 to 30% even at lowest level of 50% Many projects of new offices came into operation that created fierce competition; buyers had more chances to decide, choose and had power to negotiate, ask fos discount and give requirements of decreasing and high quality of products Similarly, with apartment medium, price of apartment of A and B level went down seriously; apartments with average and cheap price became light point in 2009 Ground for project and retail ground after recession time because of ecomomic crisis have recovered from middle of 2009 up to now

Recovery world economy and growth in country from the end of 2nd quarter

of 2010 created strong motive for real estate market Consequently, in Vietnam real

estate market classifies different segment, of which are widening of high-grade real estate market part in urban areas, combination of offices and apartments with high price and good quality locating in modern land areas, nice positions; and explosion of medium and cheap houses for low and medium income people

Rental fee of offices continues falling According to assessment of Richard Ellis (CBRE), tendency of decreasing rental fee of offices is still going on; rental

fee of ground is planned to go down from 10% to 25% in 2011

Apartment market: 2011 will be an important year and transition year of real estate market from part of high-grade apartments to medium apartments If in the past high-grade apartments make up 70% of market, at present the situation is contrary Part of medium apartments control market because it is more easily transferred, purchased

Projects of high-grade apartments will be more fastidious: projects in nice positions near city centre with pure atmosphere and services with reasonable price will attract more investors

Market of project land: limited law frame in Vietnam and land price frame continue to change in passing years increase big pressure in process of

kh

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compensation As a result, barriers of entering branch also increase Later enterprise

669) GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION

choose buying clean land of other real estate enterprises to develop projects In spite of higher price, they must not waste time for land clearing compensation Therefore, bottom land of project will be an active part in 2011 and later years

Market of retail ground: with high population density in commerical cities such as Ho Chi Minh city and Hanoi, demands of retail ground are planned to be active in some next years Many demand but little supply will push rental fee of retail ground and commercial centres up in 2011: especially in nice positions in centres of big cities where there are many inhabitants with per capita higher income than ones in other regions

However, some difficulty of real estate market in 2011 like approaching borrowing capital from bank difficulty, high interest of borrowings, growth of production fee (steel, cement ) affect development of real estate market remarkably

According to report of global real estate market of foreign Investors in Real Estate (AFIRE) in 2010 Vietnam stands on the 4th position of emergent markets in attraction level with foreign investors Survey of AFIRE is done for foreign investors who are holding over 627 billion USD of global real estate, of which 265

billion is in USA Of these emergent markets Brazil wins the Ist position from China China stands at the 2nd position which was of India before Last year

Vietnam was not ranked but this year it unexpected push Mexico to the Sth position and stands at the 4th position

Survey of AFIRE indicates interest of international investment for Vietnam’s real estate market, one tendency has been increasing remarkably from beginning of 2010 and can continue if Vietnam still grows well With the fact that market of commercial real estate and housing market are completing, foreign investsors’ long-

term care in Vietnam is more and more

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GRIGG UNIVERSITY

2.2 Analyze business environment of SUDICO

2.2.1 Analyze competitive power of current competitive opponents

With establishment and growth of rea! estate market, field of real estate trade is considered as an investment channel super profit and high attractiveness In period of 2000 — 2010 many Real Estate Companies were born and developed with dizzy speed and established super companies with big size, large market share and good relation In the North, there are:

* Vietnam House and Urban Development Corporation * Vinaconex Corporation

* Binh Minh Import Trade and Export Company Limited (Bitexco) * Wincom Joint Stock Company

In the South there are:

* Phu My Hung Joint-Venture Company

* Investment Joint Stock Company of Tan Tao industrial zone

* Him Lam Joint Stock Company

* Hoang Anh Gia Lai Joint Stock Company

Most of these companies began field of real estate trade a long time ago; therefore they caught big real estate projects in centre as well as accumulated strong financial source This is a big competitive advantage of these companies in comparison with new opponents

With its size and main market, now SUDICO have the most direct

opponents who are Vietnam House and Urban Development Corporation (HUD) and Binh Minh Import Trade and Export Company Limited (Bitexco)

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GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION Table 2.7 : Summarize comparing advantages of SUDICO with HUD and BITEXCO lu | No Competitive ae HUD ANH | BITEXCO : SUDICO | | factors

1 | Financial Very strong; | Stable revenue | Strong, revenue source

Charter capital: | Charter capital: | Charter capital:

4.922 billion dong 662 billion dong 1.000 billion dong

| projects

| with big size and nice | because of late start | fee for ground clearance

position (Although | fee of land plot is | and fee of using land is some projects are | high (buy and deliver | low that leads to low

early exploited, their | project), projects has | original price of goods

value is not high) not big area

3 Product Urban area andj Urban areas, trade | High-grade urban areas

housing area with | area, high-grade | with big size, modern

average quality, | offices, aesthetic | architecture, synchronous unremarkable architecture with | infrastructure, good

architecture, non- | breakthrough, quality of construction

synchronous synchronous and urban service

infrastructure and not | infrastructure, good Direct toward consumers ren quality quality kử with rather high income Loved by middle BETISUIBDLGD and because of good quality

urban service

class because of and reasonable price

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GR UNIVERSITY IGGS = GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION

| State | ` "

| | ¬ Have experience and | is prestigious with | care from State

| Guriscietion good relation with | Hanoi and HCM Implemented projects

agencies who | authorities of | power :

with good quality affirm

delivers provinces and cities Because of model | ability of SUDICO

projects) without state capital

so it meets difficulty when approaching

new areas

in its field Nevertheless, its in social _ activities trade mark is affected because of public

by some problems | SJS stock is appreciated related to | by market and always

commitment with | one of Blue-chip of consumers such as: | market parking conflict in ground in The Manor of Hanoi, fail in a suit with a consumer in The manor, Ho

Chi Minh city

6 Management | Operate with model | It is a company | Is a_ masses company

ability of Parent Company — | limited so it has neat | posted on stock exchange

subsidiary company | and effective system | so clearness is high Important decisions with clear operation | Company applies must be passed by Machinery has high | management standard State; beside profits concentration of |}ISO 9001 - 2000

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