developing strategy of danhim ham thuan dami hydro power joint stock company after equitizing 2010 2015 pdf

2011 GLOBAL ADVANCED MBA PROGRAM GaMBA.D0109 CAPSTONE PROJECT REPORT DEVELOPING STRATEGY OF DANHIM – HAM THUAN – DAMI HYDRO POWER JOINT STOCK COMPANY AFTER EQUITIZING (2010-2015) Class: GEMBA01.E02 Group 6: Pham Thi Hong Ha Vu Thi Hao Group 06 Nguyen Thien Vu Duy Hieu Ho Dao Phuoc Nguyen ACKNOWLEDGEMENT From the depth of our heart, we would like to give all best words to thank all staffs and Professor of Educational Technology & Career Development - Vietnamese National University, Hanoi, who have a great enthusiasm, knowledge and guidance to help us finish this capstone project To achieve the result today, we never forget to present our thankfulness to The Management Board of Da Nhim - Ham Thuan - Đa Mi Hydro Company, who give us several worth advises during establishing DHD’s developing strategy For financial support, we thank Electricity of Vietnam (EVN) The scholarship from EVN has made our dream of study master program to be fulfilled Moreover, EVN has given us an opportunity to study in an International environment which gives us much more confidence for our work in future Finally, we are grateful our family for all material and mental supports that they have given us during the time of studying i TABLE OF CONTENTS Page Additional cover page Acknowledgements i Table of contents ii List of Abbreviations v List of tables vi List of figures, graphs and diagrams vii INTRODUCTION .1 Chapter 1: CORPORATION STRATEGY THEORY .5 1.1 Overview of strategy and strategic management 1.1.1 What is strategy? 1.1.2 Strategic management determination 1.1.3 Strategy at Different Levels of a Business 1.1.4 The components of strategic management 1.2 Benefits and limitation of strategic development to corporate 17 1.2.1 Benefits .17 1.2.2 Limitations of strategic management 18 1.3 Strategy planning process 19 1.3.1 Strategy formulation 19 1.3.2 Strategic implementation 20 1.3.3 Strategic evaluation .20 1.3.4 Strategic management model 21 1.4 The strategy hierarchy 22 1.4.1 Corporate strategy .22 1.4.2 Business unit level strategy 24 1.4.3 The functional strategy 26 ii 1.5 The tools for strategies formation and selection 31 1.5.1 External factor evaluation (EFE) 31 1.5.2 Internal factor evaluation (IFE) 31 Chapter 2: ACTUAL SITUATION ANALYSIS OF DA NHIM – HAM THUAN – DA MI HYDRO POWER COMPANY .33 2.1 Da Nhim – Ham Thuan – Da Mi hydro power company introductions 33 2.1.1 Da Nhim hydropower plant 33 2.1.2 Song Pha hydropower plant 34 2.1.3 Ham Thuan hydropower plant 34 2.1.4 Da Mi hydropower plant .35 2.1.5 Business fields 36 2.2 External environment analysis 37 2.2.1 Macro environment analysis .37 2.2.2 Present situation of Vietnam electricity market 41 2.2.3 Electricity competition analysis 42 2.2.4 External factors evaluation matrix (EFE) 55 2.2.5 Determine opportunities and threats 56 2.3 Internal enviroment analysis of DHD 58 2.3.1 Results of the manufacturing business of the company over the years 58 2.3.2 Resources and potential ability analysis, identify core values 60 2.3.3 Identify company value chain .64 2.3.4 Internal factor evaluation matrix 66 2.3.5 Determine strengths and weaks of the company 67 2.4 Customer survey about quality of electricity supply 70 2.4.1 Survey target .70 2.4.2 Survey design 70 2.4.3 Qualititive study 73 iii 2.4.4 Quantitative study .73 2.4.5 Study results 75 2.5 Equitization plan of the Company 86 Chapter 3: DEVELOPING STRATEGY OF DANHIM – HAM THUAN – DAMI HYDRO POWER JOINT STOCK COMPANY AFTER EQUITIZING (2010-2015) 90 3.1 Define vision, mission and objectives of DHD 90 3.1.1 DHD’s slogan: DHD Lighting Highland 90 3.1.2 DHD’s view 90 3.1.3 DHD’s mission 90 3.1.4 Targets of DHD 90 3.2 Build up developing strategy of Danhim – Ham Thuan – Dami hydro power Joint Stock Company after equitizing (2010-2015) .91 3.2.1 Electricity production strategy 91 3.2.2 Service products: provide technical services by Da Nhim technical service center 102 Chapter 4: CONCLUSION 107 REFERENCES APPENDICES iv LIST OF ABBREVIATIONS A0 National dispatching Center BOT Build- Operate- Tranfer DCS Distributed control system DHD Da Nhim-Ham Thuan-Da Mi Hydro Power joint stock Company EVN Vietnam Electricity IPP Independent Power plan JPY Japanese Yen WTO World Trade Organization ODA Official Development Aid Pc Price in power purchase contract Qc Quantity in power purchase contract SPSS Statistical Package for the Social Sciences v LIST OF TABLES Tables 2.1 Title Economy development and power consumption createria in 16 Page 38 nations in 2020 and assumption for Vietnam in 2020 from EVN 2.2 Electric generation capacity of EVN plants and outside EVN plants in 2008 45 2.3 Competitors in competitive electricity market 49 2.4 External factors evaluation Matrix (EFE) 55 2.5 Business results from 2006 to 2009 58 2.6 Structure of qualification in the company 62 2.7 2.8 Internal factor evaluation matrix Summary the SWOT matrix and competitive strategies 66 69 2.9 The number of samples 75 2.10 Sample survey characteristics 76 2.11 Verificating reliability Cronbach's alpha results 77 2.12 Descriptive statisticsthe importance of the company to the criteria for the assessment of experts in the industry 78 2.13 Descriptive statistics the levels of satisfy criteria of the company through the evaluation of experts in the industry 79 2.14 Factors analysis results 82 2.15 Financial indexs forcase for 2010-2015 86 3.1 Available cash flow 100 3.2 The potential customers 103 3.3 Expected revenue and cost 106 vi LIST OF FIGURES, GRAPHS AND DIAGRAMS Figure 1.1 1.2 1.3 1.4 2.1 2.2 2.3 2.4 2.5 2.6 Title Strategic management processes PEST analysis Five competitive forces model SWOT analysis model Da Nhim hydro power plant Song Pha hydropower plant Ham Thuan hydro power plant Da Mi hydro power plant Five competitive forces in electricity sector Value chain of company Page 10 15 33 34 35 35 55 64 Graph 2.1 Market share in 2008 and 2015 46 2.2 Structure of power system in 2008 and 2015 47 3.1 Graph of loading and mobilizing in rainy season 95 3.2 Graph of loading and mobilizing in dry season 96 3.3 Rule diagram to determine market price 98 1.1 The processes and activities in strategic management 19 1.2 Comprehensive strategic management model 21 2.1 Research process 72 2.2 Expectation frame according to descriptive statistics assessment 81 Diagram vii INTRODUCTION General context According to national electricity network development strategy period 2006-2015 considering to 2005 (Electricity plans VI) which was approved by Prime minister’s decision No 110/2007/QĐ-TTg on 18/7/2007: Loading forecast: Adapt to economical and social development demand of national wide with GDP increases at about from 8.5 to 9% in 2006-2010 period and more According result of electricity forecast, electricity using demand will increase at rate nearly 17%/year (basic plan) and about 20%/year (advanced plan) in 2006-2015 In these plans, advanced plan is considered as operation plan which prepare for 22% of development incase economic increase suddenly Target of electricity development The development of electricity has to adapt to load demand above Ensure to fulfill execute project process of building hydro power plants with such benefits as: flood defense, water supply, electricity production, develop thermal electricity from gas Encourage to build thermal from coal, invest in small capacity hydro power plant, new energy and recycle energy for remote areas such as urban, mountain and boundary area Exchange energy with neighbor countries to ensure national power source for stable development Above information show that demand of using electricity in Vietnam has grown continuously along to the development of society The supply electricity ability of EVN still has some limitation due to shortage of source, investment capital, shortage of spare source and shortage of electricity at rush hour As a result, EVN has to apply policy to cut power in shift at most of area leading to negative affect significantly to social development The main reason of this situation is the tardy Page most of new power projects which lead to unequal status between supply and demand in electricity Therefore, the urgent duty of Vietnam is speeding up building power sources not only for high capacity but also medium and small capacity power plants in styles IPP and BOT Furthermore, several companies outside EVN also have right to invest in electricity production such as hydro power and wind power which can help EVN adapt to load demand This also opens opportunities for companies which supply technical services for small scale hydro power plants in the region When the competition electricity market is put into operation, electricity generation companies have to consider bidding the reasonable price per kWh to achieve highest profit The necessary of this topic Vietnam has become a member of WTO, and Vietnam’s economic is in stage of integrating to the World economic Enterprises from Vietnam are facing to not only opportunities but also challenges which affect to their remaining and development Therefore, each company has to build a development strategy which based on its competitive advantage These advantages will contribute to perform competitive advantage of the nation The difficult in economic today give negative affect to all fields in society including electricity branch However, electricity branch is suffered less than other fields due to its monopoly position Due to shortage of electricity in Vietnam, Da Nhim – Ham Thuan – Da Mi HPP still works effectively with stable of output consumption However, in order to open business ability and to ensure stable development, a business strategy to obtain the best profit in future is necessary This also is a reason that we choose this topic for our research project Research target Determine strengthen and weakness of DHD to research the vital ability which causes priority of the company in comparison to others Page management, execute projects, bidding, checking document, designing, training technical staff, install equipments and so on At current time, there is not any company or organization in highland of Vietnam can supply the same services as Da Nhim center Therefore, Da Nhim center can get more opportunities to achieve so many customers in this region Most of techncal staff of Da Nhim center are well trained and they have accummulated much experience in installing and repairing generators and electrical equipments Therefore, this labour force can carry out installation equipment for small HPP with several kinds of generators at several capacity in the region Customers that Da Nhim pay much attention to include on running hydro power plants, investors who are building hydro power plants, power substation and industrial zone in some provinces at higland of Vietnam such as Dac Lac, Dac Nong, Lam Dong, Ninh Thuan, Binh Thuan, Phu Yen, Khanh Hoa and Dong Nai DHD has cooperated and suppled technical services with some customers as follow: Table 3.2 The potential customers No Customers Dai Plants Hai Training operation staff investment and Srepok development joint Suppling services hydro No.4 Repairing, maintenancing power facilities Schedule Right plant operating the of year stock plant (80MW) 2010 Trung Nam Dong From 2010 joint stock No.2 Company Company power (70MW) Nai Consult and supervisory hydro and install facilities plant Training operation staff Repairing and maintenancing facilities Central hydro A Luoi hydro Training repairing staff Page 103 From 2010 power power Company (13,5MW) Board plant Consult , supervisory and of Dong management N.3&4 unit power install facilities Nai Training operation staff hydro Repair and maintenance plant facilities Right plant operating the (MW) to 2012 of year 2012 VRG Bao Loc Bao Loc hydro Training operation staff From 2007 to joint 2009 stock power Company plant Consult, supervisory and (13,5MW) install facilities Right plant Repair and maintenance operating 2009 facilities The hydro south Dasiat power power Company hydro Training operation staff plant Installation facilities (13,5MW) From 06/2008 Repairing, maintenancing now facilities The hydro south Da Dang No.2 Training operation staff From 2010 power hydro Company power Installation facilities plant (34MW) Repairing, maintenancing facilities Krong hydro Pha Ha Song Pha Consuting joint hydro stock Company for project From 2010 power managements plant (12MW) Installation facilities Repairing, maintenancing facilities Plant operating Page 104 to In all of services above, Da Nhim center determines mainternancing works for HPPs is an important service which take a long time Besides, the center also provides some shortterm services such as consulting customers to perform tender document, supervisoty installation equipment and training operation staff to get more experience The competitive advanced of Da Nhim center in comparison to other organizations is Da Nhim can provide both mainternance and consult services in stead of one of two above services at other competitors 3.2.2.2 Marketing strategy Marketing strategy: Da Nhim center focus on three major sections:  Providing technical service for power source construction projects: consult, supervisory installation equipment, installation electrical machines, consult to evaluate documentation and technical drawing, supply project management services  Execute operation, mainternace and repair for HPP and enterprise in the region  Training operation and mainternance staff and compling operation procedures, technical documents in HPPs Price of services: Basing on advantage of geographic location on highland, DHD decides to supply service with low cost to get more customers on the market Service price of DHD may be lower than the average price on the market due to DHD uses its free ability such as spare equipments, working means, workshop, and transportation means which are used for electricity production Advantage of business scale: Most of HPPs not want to maintain a mainternace staff for it own because this staff is not only short of experience but also causes complication in personel management Therefore, technicals of DHD Company can catch most of customers’s demand and they can choose some suitable services 3.2.2.3 Financial Plan Revenue of the center based on operation and maintenance cost of power plants issued by Ministry of Industry and Commerce for the electricity field Operation Page 105 and maintenance cost have the rates from 0.5 to 2% over total investment depending on capacity of this plant They’re aslo belong to the ability to DHD negotiate with customer Table 3.3 Expected revenue and cost No Interpretation 2010 2011 2012 2013 2014 2015 Revenue 18,009 22,044 25,925 27,852 29,670 31,203 Cost 16,936 19,733 22,508 24,059 26,638 27,246 Results of business operations 1,073 2,311 3,417 3,793 3,032 3.957 3.2.2.4 Personnel Plan One of the weaknesses of DHD’ professionalism maimtenance staff is low Although there are various and having experience but has long working in the state enterprises, lack of professionalism However, DHD is standing before the new market opportunities, large, potential strategic options, he has choosen a combination of the weaknesses and external opportunities to re-arrange the organizational apparatus of the company DHD forcuses on training knowledge management, training mainers, promulgated rules of behavior in company, enhancing spiritual support in working groups DHD selected WO strategies in SWOT anslysis to capture markets and improve competitive position Page 106 CHAPTER 4: CONCLUSION All companies are working in globalisation environmet Business activities must be linked to global economic, intergrated to regional and international by searching and presenting private advantage to obtain business opportunities on the market In this concept, each enterprise besides has new opportunities to exploit also face to many challenges which needs to overcome Therefore, enterprises should build own flexible business strategy which adapt to business environment to achieve much profit and success in a long-term In order to achieve above target, companies should focus much on strategy management plan Actually, strategy management has been applied by organizations and companies in developed countries for a long time This is considered as an important tool which helps them to obtain much success and effect in long term development For Vietnam enterprises, strategy management aims to adapt to business environment and this is a vital demand especially in globalization and integration environment today In this situation, Da Nhim-Ham Thuan-Da Mi hydro power joint stock company identifies its core value, which base on four criterions including: valuable, rare, hard to imitate and not easily replaced The first core value is facilities and convenient geographic location of four hydro power plants with high efficiency These resources are more valuable than other competitors The second core value also important is the powerful, experienced and enthusiasm human resource Finally, DHD has a strong financial resource When become a joint stock company, DHD has an opportunity to self financing, investing in other projects such as wind power, small hydro power plants and providing technical services to other small power plants in the region Once DHD have identified the core values and consider them as sustainable competitive advantage, DHD builds business strategy base on these core values and Page 107 try to create a difference in supplying electricity and services in comparison to other competitors DHD always tries to response customer’s demand in the best way However, in other to make above strategies to be success, DHD should use these resources reasonably All functional departments in the company have to coordinate together to fulfill their responsibilities This capstone project only aims to build business strategy This is the first step in strategic management process To choice and implement this strategy successfully, it requires skillful management capabilities of the Board of Directors and determination of all employees working in DHD Company./ Page 108 REFERENCES Vietnamese: Đào Cơng Bình (2007), “Triển khai chiến lược kinh doanh”, Nhà xuất Trẻ Fred R David (2003), “Khái luận quản trị chiến lược”, người dịch Trương Công Minh, Trần Tuấn Thạc, Trần Thị Tường Như - Nhà xuất Thống kê Garry D.Smith, Danny R.Arnold, Boby R.Bizzell (2003), “Chiến lược sách lược kinh doanh”, người dịch Bùi Văn Đông, Nhà xuất Thống kê Hoàng Trọng, Chu Nguyễn Mộng Ngọc (2005), “Phân tích liệu nghiên cứu với SPSS”, Nhà xuất Thống kê Lê Thị Bích Ngọc (2008), “Quản trị chiến lược”, chương trình PTIT, Học viện bưu viễn thơng Nguyễn Hữu Lam, Đinh Hoàng Thái, Phạm Xuân Lan (1998), “Quản trị chiến lược phát triển vị cạnh tranh”, Nhà xuất Thống kê Nguyễn Hữu Thắng (2008), “Nâng cao lực cạnh tranh doanh nghiệp Việt Nam”, Nhà xuất Chính trị Quốc gia PGS.TS Lê Thế Giới, TS Nguyễn Thanh Liêm, ThS Trần Hữu Hải (2007), “Quản trị chiến lược”, Nhà xuất Thống kê Phạm Lan Anh (2007), “Quản lý chiến lược”, Nhà xuất Khoa học Kỹ thuật 10 Phạm Thị Thu Phương, “Quản trị chiến lược kinh tế toàn cầu”, Nhà xuất Khoa học Kỹ thuật 11 Phan Thăng (2006), “Quản trị Marketing bản”, Nhà xuất Thống kê 12 Quyết định số 6540/QĐ-BCT ngày 12/12/2008 Bộ Công Thương Ban hành qui định thị trường phát điện cạnh tranh thí điểm 13 Số liệu kế tốn, thống kê Công ty thuỷ điện Đa Nhim – Hàm thuận – Đa Mi qua năm English: Besanko, David, David Dranove, Mark Shanley, and Scott Schaefer: “Economics of Strategy”, 2004, 3rd ed John Wiley & Sons Donald R.Cooper, Pamela S.Schindler (2001), “Business Research Methods”, Mc Graw Hill International Edition Grant, Robert M., “Contemporary Strategy Analysis: Concepts, Techniques, Applications”, 2005, 5th ed Blackwell Publishers Michael E Porter(1996), “What is Strategy”, Harvard Business Review, November – December 1996 Thomas L Wheelen, J David Hunger (2004), “Strategic Management and Business Policy”, 9th Prentice Hall APPENDICES Appendix CAPACITY OF POWER COMPANIES IN ELECTRICITY INDUSTRY No I Power companies EVN’s Subsidiaries Capacity Ratio 10,135.50 64.9% 1,920 12.3% 400 2.6% 1,080 6.9% 108 0.7% 642.5 4.1% Hoa Binh Hydro power Company Tri An Hydro power Company Yaly Hydro power Company Thac Ba Hydro power J.S Company Đa Nhim-Hàm Thuận-Đa Mi Hydro power J.S Company Quang Tri Hydro power Company 64 0.4% Dai Ninh Hydro power Company 300 1.9% Tuyen Quang Hydro power 342 Company Thac Mo Hydro power J.S 0.9% 405 2.6% 1,040 Company Ninh Binh Thermo power J.S 13 136 Company Pha Lai Thermo power J.S 12 1.0% J.S Company Uong Bi Thermo power J.S 11 150 Company Vinh Son-Song Hinh Hydro power 10 2.2% Company 6.7% 100 0.6% 14 Ba Ria Thermo power J.S Company 399 2.6% 15 Thu Duc Thermo power Company 276 1.8% 16 Phu My Thermo power Company 2,588 16.6% 17 Can Tho Thermo power Company 185 1.2% II Viet Nam Petrolimex 1,968 12.6% Ca Mau Thermo power Company 1500 9.6% 18 0.1% Company 450 2.9% Vietnam coal and mineral 445 2.8% Cao Ngan Thermo power Company 115 0.7% Na Duong Thermo power Company 110 0.7% Son Dong Thermo power Company 220 1.4% Song Da Construction Corporation 78 Can Don Hydro power J.S Company 78 0.5% V IPP/BOT 3,078 19.7% Cai Lan Thermo power Company 39 0.2% Formosa Thermo power Company 150 1.0% 375 2.4% Dam Phu My Thermo power Company Nhon Trach I Thermo power III IV 0.5% Hiep Phuoc Thermo power Company Phu My 2.2 Thermo power Company 733 4.7% Phu My Thermo power Company 733 4.7% Se San 3A Hydro power Company 108 0.7% Srokphumieng Hydro power Company 51 0.3% Ve Dan Hydro power Company 72 0.5% Diesel small hydro power Company 454 2.9% 10 IPP small hydro power Company 363 2.3% 15,626.50 100.0% Total Data source: Genco establish plan of EVN Appendix 2: INTERVIEW QUESTION QUALITATIVE In other to generate electricity on requirements? national grid, DHD need to meet any When fault occur, which elements will be interested? To evaluate the operation ability of a hydro power plant you usually base on which elements? Which elements of the repair, maintenance affect to operating quality of a hydro power plant? Besides, which element of the hydropower plants you interest when evaluating the quality of power supply? (Example: the quality of machinery and manpower, the rate of electricity loss, spare parts ) Appendix 3: INTERVIEW QUESTIONNAIRE Dear Sir/Madam, We are researching about quality in supplying electricity of Da Nhim-Ham ThuanDa Mi hydro power joint stock company Please save your time to help us to complete this questionnaire Your reply will help DHD to improve its electricity supplying to satisfy your demand better Please, feedback this questionnaire to us directly or via email Thank for your concern! A SURVER QUESTIONS Please, evaluate important and responsible level of below criterions in supplying electricity of DHD, by marking X or O in appropriate number Convention: Number of scale Important level scale Not important Less important Normal Important Very important Important level 1 1 2 2 3 3 4 4 5 5 1 1 2 2 3 3 4 4 5 5 Responsible level scale Less Rather less Normal Good Very Good Evaluating criterions Responding time of integration into grid Good performance in mobilized capacity Provision break-down ration Ability to handle the problem quickly, correctly Devices available time Operating process properly Professionalism of the operating force Repair and maintain on schedule Suitable repairing schedule Responsible level 5 5 1 1 2 2 3 3 4 4 5 5 3 4 5 1 1 4 4 5 5 2 2 3 3 Quality of repair and maintenance Professionalism of the repairs, maintenance forces Provide provision equipment Safety for operational devices and labor Quality of devices Electricity cost price Rate of electric loss 5 1 1 2 2 3 3 4 4 5 5 B Additional question Please write your own opinion about supplying electricity task of DHD C Contact information Your company Working time in electricity field  from 10 to 15 years  over 15 years Your position - -Thank you and best wishes to your work Appendix DHD ORGANIZATION CHART CONGRESS SHAREHOLDERS BOARD OF MANAGEMENT CONTROL BOARD GENERAL DIRECTOR VICE TECHNICAL GENERAL DIRECTOR ĐA NHIM SONG PHA OPERATION DEPARTMENT HAM THUAN ĐA MI OPERATION DEPARTMENT VICE BUSINESS GENERAL DIECTOR MANAGER OF DA NHIM TECHNICAL SERVICE CENTER PLANNING AND MATERIALS DEPARTMENT PERSONNEL DEPARTMENT OFFICE FINANCIAL AND ACCOUNTING DEPARTMENT MECHANICALELECTRICITY DEPARTMENT TECHNICAL DEPARTMENT AUTOMATIC DEPARTMENT GENERAL DEPARTMENT VICE MANAGER OF DA NHIM TECHNICAL SERVICE CENTER CONSULTANT AND DESIGN DEPARTMENT ... 75 2.5 Equitization plan of the Company 86 Chapter 3: DEVELOPING STRATEGY OF DANHIM – HAM THUAN – DAMI HYDRO POWER JOINT STOCK COMPANY AFTER EQUITIZING (2010- 2015) 90 3.1 Define... SITUATION ANALYSIS OF DA NHIM – HAM THUAN – DA MI HYDRO POWER COMPANY 2.1 Da Nhim – Ham Thuan – Da Mi hydro power company introductions Da Nhim – Ham Thuan – Da Mi hydro power company has been... 3.2 Build up developing strategy of Danhim – Ham Thuan – Dami hydro power Joint Stock Company after equitizing (2010- 2015) .91 3.2.1 Electricity production strategy 91 3.2.2 Service products: