COMPETITIVE STRATEGY FOR ASPHALT CO PETROLIMEX PERIOD 2011 2015

Thesis Title COMPETITIVE STRATEGY FOR ASPHALT CO PETROLIMEX PERIOD 2011 - 2015 ACKNOWLEDGEMENT We would like to express our deep gratitude to all those who have contributed to and who gave us the possibility to complete our Capstone Project Report named “COMPETITIVE STRATEGY FOR ASPHALT CO PETROLIMEX PERIOD 2011 - 2015” We are deeply indebted to our lecturers … Nguyen Thanh Hung, MBA Sandy Ewart and The Advisory Board whose communicate valuable knowledge as well as help, stimulating suggestions and encouragement helped us in all the time of research for and writing of this project report We want to thank the Asphalt Co Petrolimex for giving us permission to commence this project in the first instance, to the necessary research work We are bound to the and all the lecturers for their stimulating support and encouragement Last but not least, we would like to give our special thanks to our family, our friends and colleagues whose patient love enabled us to complete this work Commitment We commit that the Capstone Project Report on “COMPETITIVE STRATEGY FOR ASPHALT CO PETROLIMEX PERIOD 2011 - 2015” is our own study implementing under the scientific instructions of Associate Professor, … Nguyen Thanh Hung This is the result of independent study and has not been copied from any part or all of any works Figures and facts herein are true and extracted from legal and reliable sources Study results in the Capstone Project Report have not been made public in any works so far TABLE OF CONTENTS Acknowledgement ……………………………………………………………… Table of Contents ……………………………………………………………… List of Tables …………………………………………………………………… List of Figures & Graphs …………………………………………………………5 INTRODUCTION …………………………………………………………… Chapter 1: THE BASIS THEORIES OF STRATEGY AND COMPETITION ……… 1.1 Concept of strategy ……………………………… 1.2 Overall strategic management process …………………….… ………… 1.2.1 Concept of strategic management ………………….………………… 1.2.2 Strategic Management process ……………………………………… 10 1.3 Competition and competitive process ………………………………………11 1.3.1 What is competition ………………………………………………… 11 1.3.2 Competitive advantages …………………………………………… 11 1.3.2.1 What are competitive advantages …………………… …… 11 1.3.2.2 Factors affect competitive advantage …………………… 12 1.3.2.3 The root of competitive advantages ……………………… 13 1.4 Core competencies of the enterprise ……………………………………… 13 1.5 Competitive strategy ……………………………………………………… 14 1.5.1 Command competitive strategy……………………………………… 14 1.5.2 Competitive strategy …………………………… ………………… 14 1.5.2.1 Low cost strategy ……………………………………… … 14 1.5.2.2 Product differentiation strategy …………………………… 15 1.5.2.3 Core strategies…………………………………………… 15 1.5.2.4 Combining optimal cost strategy and differentiation …… 16 Chapter 2: SUMMARY ABOUT PETROLIMES ASPHALT CO, LTD …………… 17 2.1 Summary about Petrolimex Asphalt Company ………………………… 17 2.1.1 The establishing and developing ………………………………… 17 2.1.2 Organization structure ………………………………………… 18 2.1.3 Key business operation of the Company …………………… … 19 2.1.4 Technical facilities ……………………………………………… 20 2.2 Business situation in Petrolimex Asphalt Co in the recent years ……… 21 2.2.1 The basic data reflects the situation and business results of the Company from 2007 to 2010…………………………………… 21 2.2.2 Situation and the capital assets of the Company from 2007-2010………………………………………………… 23 2.2.3 Market share…………………………………………………… 24 2.3 Situations of Competitive Company …………………………………… 25 2.3.1 Analyze the business environment ……………………………… 25 2.3.1.1 External environment ………………………………… 25 2.3.1.2 Internal environment ………………………………… 31 2.3.2 SWOT of Company………… …….…………………………… 36 2.3.2.1 Opportunities and Threats (O-T) ………………… … 36 2.3.2.2 Matrix of external factors evaluation (EFE) …………… 36 2.3.2.3 Strengths - weaknesses (S - W) ………………………… 37 2.3.2.4 Matrix of internal factors evaluation (IFE) …………… 38 2.3.3 Overall assessment of the competitiveness of the Company ….… 39 2.3.4 The company’s core competencies …………………………… 42 Chapter 3: SOLUTIONS TO IMPROVE THE COMPETITIVENESS OF THE COMPANY DURING 2011 – 2015 ……………………………………… 43 3.1 Strategic objectives of the company in 2011-2015 ………………………… 43 3.1.1 Basis of the strategic objectives……………………………….…… 43 3.1.2 Vision - Strategic objectives during 2011-2015 ………………….… 43 3.1.3 Business plans of the company during 2011-2015 ………………… 43 3.2 SWOT Matrix …………………………………….………………………… 43 3.3 Solutions to implementing strategy ……………………………… ……… 48 3.3.1 Solutions to organizational structure……………………….…….… 49 3.3.2 Solution to human resources………………………………………… 50 3.3.3 Marketing solutions………………………………………………… 52 3.3.4 Solution to financial resources …………………………………… 55 3.3.5 Solution to technology …………………………………………… 56 3.4 Recommendations ………………………………………………………… 57 3.4.1 Recommendations for state management agencies…………….…… 57 3.4.2 Proposals to Vietnam Petrolimex Group…………………………… 58 3.4.3 Proposals to the owners ( PLC)…………………………………… 59 CONCLUSION …………………………………………………………………… 60 LIST OF TABLES No Table No 10 11 12 2.1.4 2.2.1 2.2.2.a 2.2.2.b 2.3.1 2.3.2.a 2.3.2.b 2.3.2.c 2.3.3.2 2.3.3.4 2.3.4.a 13 3.2 Table’s Name Area and storage tank capacity of the Company Business results of the Company from 2007-2010 Property - the capital of the Company Capital structure in recent years Asphalt market share over the years Business and financial situation over the years Capital situation and liabilities over the years Area and capacity of the Company Matrix of external factors evaluation (EFE) Matrix of internal factors evaluation (IFE) Matrix of competing images of Petrolimex Asphalt Co before the competitors: 03 Appendix attached SWOT matrix of the company LIST OF FIGURES, GRAPHS No Figure, Graph No 1.1 1.2.2 2.3.1.1.2 2.3.2.d Figure & Graph’s Name Competitive strategy Strategic managing process Market share of asphalt product Capacity of the Company and its competitors INTRODUCTION The necessity and importance of the Capstone Project Report For over two recent decades, Vietnam's economy has transformed from centrally planned economy to the market - socialist oriented economy After 20 years of innovation, Vietnam has made great achievements Owing to the innovation, Vietnam has escaped from poverty, economy has developed fast, infrastructure has been strengthened and people’s living standard have been continuously improved In the subsidy time, Vietnamese economy had only two main economic sectors: state and collective All of the economic operations followed the ordinance and were not under any pressure Because at that time, demand was greater than supply, goods on the market were scarce It has changed a lot now There have been more economic sectors, in which the State owned sector keeps the leading role The collective and private sectors are encouraged to develop without any restrict The participation of many economic sectors has created a competitive business environment This new economic mechanism has really opened up many opportunities for businesses but also put them under many challenges On November 7th, 2006, Vietnam officially became the 150th member of the World Trade Organization (WTO) This marked a major turning point in the history of Vietnam, opening a chance for Vietnam’s development and also challenges For Vietnamese enterprises, this event is also open for them a new era with many opportunities and challenges Being the member of WTO means that we are playing the equal games with many competitors; if we want to survive and develop businesses, we need to find a proper direction to compete with other enterprises (domestic and foreign enterprises) Petrolimex Asphalt Company (Petrolimex Asphalt Co) is not an exception Petrolimex Asphalt Company (PAC) has faced many difficulties Nowadays, there are six asphalt suppliers in Viet Nam, which included three foreign enterprises: - ADCo Company of Colas Group - Caltex Limited Company - Shell Limited Company And three local companies: - Petrolimex Asphalt Company - ICT Asphalt Company - Tratimex Joint Stock Company However, asphalt market is now potential in VietNam so more and more suppliers want to join It is very significant for PAC to determine an appropriate competitive strategy to maintain the advantage and for the sustainable development To acknowledge the problem of PAC, our group choose the subject "Building a competitive strategy for Petrolimex Asphalt Company from 2011 to 2015" for our final assignment in Business Administration Program Research purposes and applications Based on our study about theoretical problems and implement the competitive strategies in the enterprise, we will apply the theoretical issues in the formulation of competitive strategic of Petrolimex Asphalt Co After evaluating the business situation of PAC, we can figure out the shortcomings and causes of limited implementation of business strategy and competitive business Besides, we will analyze factors affecting the business environment in order to develop competitive strategies for the researched company from 2011 to 2015 Methods Documentation research method: information, documents, articles on the Internet, survey results, research on the competitors, statistics, summary report of PAC and related topics Qualitative research method: interviews and viewers of leaders and managers at all levels of PAC as well as outside experts and managements that have relationship with PAC The contents of discussions focus on the fundamental issues of PAC’s strategic management Statistical method, analysis method, synthesis and comparative method to analyze the business operations The layout of the project: is divided into five sections as follows: - Introduction - Chapter 1: The theoretical basis of strategy and competition - Chapter 2: Reality of Petrolimex Asphalt Co - Chapter 3: Strategy chosen, solution and recommendations - Conclusion CHAPTER 1: THE BASIS THEORIES OF STRATEGY AND COMPETITION 1.1.Concept of strategy: There are many definitions of strategy by different authors And overall, strategy is a complex series of actions to mobilize resources of an organization to achieve a certain goal However, there are many levels of strategy In this Capstone Project Report, we will mention three main levels of strategy: - Corporate-level strategy: is toward general purpose and scope of the organization - Unit level strategy: is related to competitive success in specific market - Operational strategy (or functional strategy): that enables corporate level and unit level to work effectively 1.2.Overall strategic management process 1.2.1.Concept of strategic management Strategic management is very important to business and it is the guideline for all the activities of an organization According to Fred R Davit "Strategic Management is an art and science to establish, implement and evaluate decisions for organizations to achieve those objectives." 1.2.2.Strategic managing process Internal environment Quy tr.nh Input Strategy Intention Strategy Mission 10 => Selection strategy: According to the above analyzing strategies from the SWOT table and with the vision - the strategic objectives of PAC by 2015, our group decide to select combined strategy of low costs (T1 + S1 + S3) and differentiation (W3 + W4 + W5 + W6 + W7 + T1 + T2) According to M.Porter, company can select only one of the above strategies, no combination But in fact, the combined strategy can be used The choice must be in accordance with the reality of each company The low costs and differentiation strategy can not be mutual exclusive and there must be relationship between them The relationship between low costs and differentiation strategy in this case: - PAC needs to take full advantages of the storage network to overcome the challenges on price competition By lowing the costs (as a result), PAC can minimize the fundamental weaknesses, improve the quality of all kinds of services and bring the customers more and more differences One of the differences is: Low cost of goods and high quality services 3.3 Solutions to implementing selected strategy: The overall strategy is very important That is the basis for the building and implementing constituent strategy The implementation of strategies needs to be flexible, appropriate to each period, the real situation of the company as well as the requirements of the market In some points of time, PAC needs to simultaneously perform two or more strategies to achieve overall objectives To implement the chosen competitive strategy, the solutions should focus on promoting the advantages and overcome weaknesses The advantage of the technical facilities network is absolute and will be maintained in the next years Thus, the strategic solutions primarily focused on overcoming the fundamental weaknesses Strategic solutions include: 48 3.3.1 Solutions on organizational structure: With the current organizational structure, PAC has a wide system of sales representatives across the country However, it should have timely solutions to meet the requirements of development in the next few years, specifically as follows: * Quickly set up unit in charge of commercial services and technical support Asphalt is a product that requires strict quality for using And when using, it requires the strict technical procedures That’s why PAC needs to have specialists to take part in the customers’ using asphalt process to ensure that: Product of PAC is used in proper procedure - Provide guidelines to customers who require expert advise Providing guidelines will contribute to improving service quality and relationships with customers - Monitor the using process of PAC’s product to settle disputes arising - Besides, in 2012, PAC plans to supply polymer asphalt Polymer asphalt is a new asphalt derivation and it will be used for road - construction using the advanced technology Therefore, the establishment of this unit is even more necessary * Establish department that specializing in managing transportation team Currently, PAC has a strong team of transportation with over 50 specialized vehicles scattering across the country There is a fact that quality of delivery service is below the average level, due to the attitude of the drivers Another reason for that fact is lack of managing and supervising system Late, wrong - destination deliveries still often occurs The inappropriate attitudes of the drivers have not been recorded and that have affected the delivery schedule and services quality The establishment of this department will closely monitor the delivering routine, the amount of goods on the way It will help to reduce loss of goods 49 transported, help to supervise the drivers’ attitudes,…and contribute to improve the quality of delivery services * Establish division specializing in building and developing the company’s trademark Trademark of each company is considered an asset, which always draws the interests of companies in building and expanding Since its establishment, PAC is a member of the Petrolmex group so it could inherit Petrolimex brand However, as a member of the Group, PAC needs to build brand for Petrolimex asphalt, which is also the company's brand In fact, PAC’s managing board has paid attention to locating and developing trademark in the last two years The managing board has directed plans and implement and there is no department designated to take main responsibilities It makes the building and development fail to meet expectation The establishment of this division with experts in trademark building will speed up the trademark development process, thereby contribute to improving the PAC’s position Implementing this strategic solution, PAC will improve the service quality and reach to new height 3.3.2 Solution on human resources: The current human resource is a weakness of PAC, especially focus on two groups: sales team and delivery team (drivers), who always have direct contact with the customers To overcome this weakness, suggested solutions are listed below: * Training and retraining to improve skills in sales and in sales support: As noted above, sales team shows shortcomings in professionalism, insufficient of supporting knowledge for sales Over 50% of this team is inherited from the state enterprises Even newly recruited staffs are not qualified Thus, retraining is considered one of the most imperative requirements to equip basic knowledge on market, customers and marketing for the sales team In addition, it is 50 necessary to provide sales team with knowledge in dealing with arising issues in the sales process * Building standard of specific job titles for sales team Not having standard system of job titles for sales team could be counted as a cause affecting the quality of sales team Without this standard system, there are no specific bases to build training plans Sales team themselves also not have bases for self-training to improve professional qualification Thus, it is almost impossible to implementing evaluation on the sales team Just because there is no standard system, so when recruiting new sales employees, PAC has just based on general criteria such as level of education, professional skills, knowledge of asphalt products, knowledge of the company, etc The building of standard system of job titles also contributes to the building of managing system * Training driving team Training driving team, especially focusing on communication skills and attitudes to customers is also put forward as for the sales team Furthermore, one of the main duties of Asphalt truck driver is delivering on time, safely with adequate quantity to the customer’s warehouse This task also requires performing with the proper procedure * Building set of rules on communication for the driver Generally, driving team of PAC is a labor force with low level of education, thus, attitudes sometimes are not proper Therefore, with this team, along with improving education level, communication skills and working attitudes, it is necessary to build a set of rules on communication as a basis for this team to obey The implementation of regulations in general and set of rules on communication of drivers in particular will be not effective without the supervision The PAC should develop and strictly implement policies on reward and punishment to enhance selfawareness of this team 51 Implementing this solution, the quality of human resource and professionalism will be improved, thereby contributing to strengthen the trademark of PAC Trademark plays an important role in creating differences from other competitors * Salary solution PAC should also pay more attention to the employees’ salary This will help to stable employees’ income and thought 3.3.3 Marketing solutions: Marketing is an important solution in competitive strategy Marketing issues should be mentioned including: Production, Price, Place and Promotion In fact, PAC does not have any specialized division undertaking marketing strategy This task now belongs to sales department in coordination with other departments to resolve issues related to 4P mentioned above Thus, the resolution for marketing is still passive and lack of systematic characteristic To strengthen the competitiveness, following solutions should be considered: * Establishment of marketing division: Marketing is an art based on science in term of products, market and customers The establishment of specialized marketing division will contribute to build marketing strategy in each period Along with specialization, recruiting marketing expert is put in priority * Solution for products: As mentioned above, asphalt is a product, which require strict standard as doing business in Vietnam, thus, the competition on this product quality is not considerable The suppliers compete in developing new product with proper standard and selling to the market earlier Road construction technology in the world is changing in direction of using polymer asphalt to cover the surface of the road This layer will increase elasticity, fractures of the road, anti-slippery, and reduce water dust for vehicles on roads in the wet weather This technology is now considering to apply in Viet Nam 52 This application is usually applied to big road projects with large amount of asphalt When a company becomes the first asphalt supplier of a road construction project, favorable conditions will be given to that company to hold most of the market share for the whole project Therefore, PAC needs to consider the implementation of solutions with the following requirements: Be the first supplier capable of providing proper standard asphalt for the road construction projects with new technology Being the first supplier means holding more advantages than other competitors * Solution to Asphalt price: Due to the characteristic of asphalt, there are no differences in the asphalt products price between the competitors Asphalt suppliers often use cost-based method to determine the prices As shown in the competitive matrix, cost is the most important factors determining the competitiveness of the company Solution for prices should be implemented in both following methods - Stable price: Currently, the PAC has many big customers and they expect to receive a stable price level for a long time (for one or two month), thereby they can develop the business strategy with stable input PAC should offer them a stable price level and commit to supply enough stock in the period of stable price Price stability will inevitable have certain risks toward the increase of costs and that could decrease PAC’s profit However, implementation of price stability will reasonable and appropriate with strategy of building big and regular customers system Besides, price stability policy also contributes to plan for long-term import, thereby stabilizing business situation Price stability also enhances PAC’s position in the market, especially in the period of asphalt price fluctuation - Flexible price: 53 Along with competition in service quality and credits for customers, the price competition happens intense Beside the implementing of price stability, PAC should implement flexible price policy There should have flexibility for individual market areas and each type of customers (including prepaid customers, customers with guaranteed deferred payment, deferred payment mortgage customers, etc) For stronger competitors such as Shell and Caltex, the PAC should apply flexible price policy and the price must be lower than these suppliers With the lower price and reasonable level of profit per unit, productivity and bigger market share will help to seek profit in the market * Solution for distribution: With storage network over the country, PAC has advantage in distribution channel However, it is necessary to have solutions to improve the efficiency of distribution channel - Solution for distribution channel of Petrolimex: Presently, Petrolimex accounts for a big system of distribution and retailers across the country However, the exploitation of this channel is now only discovering and testing To achieve full exploitation, PAC should follow steps as listed below: + Building and implementing business mechanism through Petrolimex channel to encourage the agencies and petroleum shops to participate in asphalt distributing + Along with implementing the mechanism, building the process and monitoring mechanism is required * Solution to sales promotion: Based on the competitive matrix, PAC’s competitiveness of customer services is left behind by Adco and ICT, thus affecting the overall competitiveness of the company In fact, PAC’s customer service is rather good On the other hand, it is still spontaneous and lack of planning To improve the quality of customer service, solution to sales promotion should be implemented as follows: 54 + Building annual plans on sales promotion: PAC should build annual sales promotion plan as a basis for the implementation Sales promotion plan should include a description of the forms of sales promotion, specific customers, time and funds for implementation + Develop and implement after-sales policy with high commitment and diversified forms Currently, PAC implements traditional after-sales policy such as periodic visit, promotional gifts, etc PAC should diversify the forms of after-sales promotion such as oversea study tour, customer conferences to offer customers opportunities to exchange knowledge In addition, raising the expenditure for these activities should be considered Marketing solution cannot be neglected as implementing lowest-cost strategy At the lowest cost, PAC can develop competitive prices However, price advantages can only bring about benefit if the company should take marketing solution effectively 3.3.4 Solution for financial: Financial potential (capital) is one of the weaknesses of the company in the competitive matrix Capital directly affects the competitiveness, the ability to mobilize funding, and the ability to implement investment projects to upgrade facilities and technology PAC needs to implement the following specific solutions: - Increase equity for PAC; ensure the ratio of equity / total assets at the rate of 30% - equal to the rate of commercial business enterprise in general - Search for other financial assistance from businesses in the Petrolimex Group: At present, loans of PAC all come from banks and financial institutions The borrowing will arise pressure on debt, interest rates PAC needs to find the source of idle capital in Petrolimex corporation, this will help to reduce the pressure on debt - repayment 55 Implementing capital solution aims to maintain the advantages of PAC on the market This solution is the condition for successful implementing of other strategies 3.3.5 Solution for technology: To improve the competitiveness of PAC, it is necessary to carry out two groups of technology solutions as follows: - Group of storage solutions: Currently, storage technology is in backwardness, leading to higher operating cost: losing oil of heating to raise the temperature of asphalt to the required level This directly affects business opportunities as well as business results In addition, the technology in goods measuring and controlling has not been applied yet Thus, PAC should: + Improve the overall old technology of storage to resolve the heating efficiency This innovation will considerably reduce the cost of storage operation + Quickly apply other technologies in measuring and controlling inventory, including: Install automatic system of tank measure, automatic valve system, balancing system and camera tracking system This application will decrease losses in the process of importing goods from ships to storage (terminal), storing and delivering - Group of managing technology solution: Incompetent informating managing technology system has limited the ability to control and analyze the business data PAC should: + Develop a consistent informating managing system, which is in line with the actual situation of PAC, including software for financial accounting, employee managing, production statistics and business analysis + Develop system to monitor and manage transportation team The implementation of these solutions directly contribute to improve the quality of delivery service, help the management to make timely decision and contribute to build, expand and strengthen Asphalt Petrolimex brand 56 This solution is the most important and direct way to implement low-cost strategy 3.4 Recommendations: The purpose of the study is to provide solutions and recommendations to improve the competitiveness of researched company All those solutions outlined above are our recommendations for PAC The recommendations presented here are put forward for state managing agencies, Petrolimex group and their owner (Company PLC) 3.4.1 Recommendations for state management agencies: - Recommendation for the use of inadequate asphalt according to the standard criteria set by the Ministry of Transportation Currently, the enterprise selling asphalt 60/70 must comply with the standard set by the Ministry of Transport of Vietnam Big companies (listed in the competitive matrix of PAC) are strictly complied with this regulation Besides, there are some small businesses import asphalt from Iran with the inadequate quality (the higher penetration index or unstable quality) This quantity has been used for constructing some roads This, to some extend has affected the market share, simultaneously affected the reputation of the big enterprise in the market So, the Ministry of Transportation should strictly ban to import inadequate asphalt - Recommendations for the disbursement of road constructing projects: Currently, one of the very problematic issues in the investment for road constructing is the disbursement Time for disbursement has usually lasted, even for several next years after the using of the road In fact, there are many large projects at national level but has not yet completed the settlement, disbursement while the project has finished for several years (such as national highway 1A North-South, highway Saigon - Trung Luong, Highway 18A) 57 Lasting of settlement and disbursement is mostly due to the tardy consideration of the state managing agencies Contractors - the customers not being paid by schedule will inevitably lead to the debt in asphalt purchase As a result, financial pressures are put on asphalt businesses, especially businesses with weak financial potential To address this issue, the Government should be explicit and decisive in carrying out the regulation on settlement and disbursement of road projects - Proposals for support for essential commodities imported into Vietnam: As mentioned above, Asphalt is an indispensable material in road constructing today, and by 2015, Vietnam has not been able to produce asphalt, so all asphalt consumed still has to be imported With the current investment policy of the State, demand for asphalt in Vietnam is increasing, forecasting an average annual increase of 10% Vietnam's economy from now to 2015 is also expected to be in instability, especially the system of monetary and the foreign exchange market Vietnam is a deficit country, thus, the source of foreign currency (USD) for payment of imports is now and will be in the scarcity, and real buying rates will continue be higher than published rates by State Bank With this situation, the Government and State bank should have a policy to ensure foreign currency source for essential commodities for the economic development, including asphalt 3.4.2 Proposals to Petrolimex Group - Support for capital: Company is now doing business in a state of imbalance and lack of capital Thus, the Petrolimex group should have policy to fund capital companies within the group This will help to reduce the dependency on banks and other financial institutions - Support in development and navigation of the trademark 58 Currently, Petrolimex is underway to rebuild and promote Petrolimex brand and provides guidance for Petrolimex’s members in building their own brand based on Petrolimex brand PAC is now buliding strategies for the period of 2011-2015 PAC propose the direct support from Petrolimex in developing trade – mark (including support for ideas, consultation, inherit the design ) in order that Petrolimex asphalt will be strong enough to compare with Shell and Caltex 3.4.3 Proposals to the owners ( PLC) - Proposal for the regulation on facilities investment: Currently, President of PAC has rights to make decisions for the invested projects valued below 10 billion Vietnam Dong However, the implementation process is still under the old regulations This leads to being slow in implementing Besides, a number of investment proposals (for example upgrading information system, investing advanced technology system to control goods, means of transportation, etc) have not been approved Therefore, the investment process usually takes long The owner should approve of the investment plan timely, especially plans for applying new technology - Proposals for increasing the capital: PAC is currently in the capital shortage and imbalance of funding Company PLC owns 100% of capital invested in PAC and have full authority with PAC’s equity With stronger financial potential, Company to be ready to cope with the challenges in the market So PLC should early review and supplement capital for PAC, ensure the reasonable ratio of equity/total assets of 30% 59 CONCLUSION Petrolimex Asphalt Co is a new established business and in operation for years They are now trading in a very stiff competition They have some outstanding strengths comparing to the others (wide – range of facility network, and at the convenient location of terminals…) Besides they still reveal fundamental weaknesses (quality of services, storage technology, human resources, financial potential…) Right from the first year of business, they have rapidly dominate and become the market leader with over 30% of market share, overtaking competitor ranked second ( ICT: 20%) However, it can be seen that last years is the too fast – developing stage of PAC and lack of stability One of the indications that shows unstability is the competitive position in the market They might have sustainable development if with the current market share, they are one of two strongest competitiveness in the market With the strategic objectives set for the period from now to 2015, it is necessary to set up a competitive strategy in order to maintain, improve competitive position so that it can ensure for the sustainable development PAC should choose a strategy combining cost - leadership and differentiation To implement this strategy, they should carry out some strategy solutions, as stated above To successfully implement the proposed strategy, PAC should develop specific action plans to improve its position in the market and ensure the sustainable development and enhance enterprise value To ensure for the success, there should have support from the state managing agencies, Petrrolimex Group and the owner Therefore, we also propose some recommendations and hope that these recommendations will be satisfied / 60 Appendix 01: ORGANISATIONAL STRUCTURE OF PETROLIMEX ASPHALT COMPANY MANAGING BOARD CONTROLER Board of director Technical dept Importing dept dept Sales Accounting and finance dept dept Administrative Vice director Banches: terminals 1-Hai phong 2-da nang 3- binh dinh 4-sai gon 5-can tho 1-thuong ly 2-tho quang 3-quy nhon 4-nha be 5-tra noc 61 Appendix 02: PAC’s business plan for the period of 2011-215 (Unit: Ton and VN Dong million) NO 2.1 3.1 3.2 3.3 4.1 5.1 5.2 6.1 6.2 7.1 7.2 7.3 Planned figures Output quantity Sales Sales of Asphalt: Profit Before Tax Profit (BTP) After Tax Profit (ATP) Ratio of APT/Equity Equity Owner’s Equity Investment value Investment value by Equity Investment value by long term loan Total fix assets by Equity by long term loan Employees and salary Average number of Employees Total salary source Average salary/month/Employee 2010 TH +/- 2011 KH +/- 2012 KH +/- Plan for 2011-2015 2013 KH +/- 2014 KH +/- 2015 KH +/- 176,353 1,942,492 1,933,958 99% 126% 126% 160,000 2,000,000 2,000,000 91% 103% 103% 180,000 2,419,000 2,419,000 113% 121% 121% 200,000 2,889,000 2,889,000 111% 119% 119% 220,000 3,416,000 3,416,000 110% 118% 118% 230,000 3,839,000 3,839,000 105% 112% 112% 20,026 15,020 30.04% 50,000 50,000 33,290 34,415 (1,125) 55,089 50,000 5,089 40% 36% 36% 100% 100% 219% 382% -18% 121% 127% 82% 20,000 15,000 15.00% 100,000 100,000 73,680 22,769 50,911 116,000 61,000 55,000 100% 100% 50% 200% 200% 221% 66% 211% 122% 1081% 25,000 18,750 18.75% 100,000 100,000 62,103 18,631 43,472 161,000 69,000 92,000 125% 125% 125% 100% 100% 84% 82% 85% 139% 113% 167% 35,000 26,250 17.50% 150,000 150,000 48,650 14,595 34,055 189,000 74,000 115,000 140% 140% 93% 150% 150% 78% 78% 78% 117% 107% 125% 40,000 30,000 20.00% 150,000 150,000 53,100 15,930 37,170 218,000 80,000 138,000 114% 114% 114% 100% 100% 109% 109% 109% 115% 108% 120% 50,000 37,500 25.00% 150,000 150,000 67,600 20,280 47,320 256,000 87,000 169,000 125% 125% 125% 100% 100% 127% 127% 127% 117% 109% 122% 202 18,954 110% 98% 89% 213 22,984 105% 121% 115% 220 24,926 103% 108% 105% 225 26,768 10 102% 107% 105% 235 30,753 11 104% 115% 110% 240 34,548 12 102% 112% 110% -4525% Source: Petrolimex Asphalt Co 62 [...]... two kinds of competitive advantage that they can have: low cost or differentiation Two types of competitive advantage combined with the company’s basic operation will allow creating three competitive strategies In agreement with Michael Porter, there are three competitive strategies which are: optimal/low cost strategy, differentiation strategy and focus strategy Competitive strategy Cost Unique level... Macro Target Scope Leading cost Differentiation Leading cost in a Differentiation in a certain market certain market of competition Micro Target Figure 1: Models of competitive strategy Source: Competitive Strategy by M.Porter 1980 1.5.2 Competitive strategies 1.5.2.1 Low cost strategy This strategy enables company to lower their prices while still remains quality This strategy requires major conditions... no equivalent 14 1.5 Competitive strategies 1.5.1 Common competitive strategy For Professor Michael Porter, competitive strategy is a combination of final result that businesses are looking for and the policies by which companies try to achieve their goals These policies include product research, development, production, distribution, consumption, marketing, finance and control A company can have many... customer loyalty, company reputation and brand - The ability of the company: is the efficient use of the above resources to create a competitive advantage 1.4 Core competencies of the enterprise Core competencies are the resources and capabilities of a company that are used as sources of competitive advantage Core competencies associating with the market position of the product are the basic competitive. .. Strategic Competitiveness Above average Returns Outcomes Strategic H_p tác Sáp nhap và Feedback Tái câu trúcQu(n tr) Source: Strategic Management teaching material – Competitiveness and Globalization: Concept and cases 1.3.Competition and competitive strategy 1.3.1.What is competition ? According to economic dictionary, competition is the struggle between opposing individuals, groups or nations Competition... technology So this strategy rarely accompanies with low-cost strategy 1.5.2.3 Centralizing strategies For this strategy, we should focus on a specific market segment, specific customer group, specific product type… Thus if the low - cost strategy and differentiation strategy aim at market with large scope, this strategy will be suitable for market with narrower scope With this strategy, the company will... investment cost, cement concrete is more expensive from 2.5 to 5 times than asphalt concrete In terms of vibration resistance, asphalt concrete has more advantages So now, most roads are made of asphalt concrete In the future, people will manage to use cement concrete instead of asphalt concrete in case the asphalt prices are higher 28 - Replace asphalt with other materials to make asphalt concrete:... Challenge: is one of the conditions in a common environment that can interfere with a company - Opportunity: is a necessity in a common environment of that if a company exploits well, they can achieve strategic competitive advantage - Competitors: Rivals collect and analyze information on rivals, understanding of the competitive environment will help us understand better about information from the research... exchanging information through human resource; Ability is often developed in specific areas - Core competency: The activities that a firm is conducting superior to rivals, activities by which companies create value for all kinds of unique products and services for a long time 1.3.2.3 The root of competitive advantages According to Michael Porter, origin of competitive advantage usually comes from two... chiênMôi trư@ngbên trong Ý ñ)nh chiên lư_chiem v_ Strategy Formulation Strategy Implementation chiên lưc Business level Corporate level Corporate Xây d9ng chiênCompetitive lư_c Th9c thi chiên lư_c strategy Dynamics strategy Governance Structure and Control Chiên lư_c câp Strategic Action doanhAcquisition nghiepand Restructuring International Strategy Cooperative Strategy Strategic Leadership Entrepreneurship ... three foreign enterprises: - ADCo Company of Colas Group - Caltex Limited Company - Shell Limited Company And three local companies: - Petrolimex Asphalt Company - ICT Asphalt Company - Tratimex... this work Commitment We commit that the Capstone Project Report on COMPETITIVE STRATEGY FOR ASPHALT CO PETROLIMEX PERIOD 2011 - 2015 is our own study implementing under the scientific instructions... us the possibility to complete our Capstone Project Report named COMPETITIVE STRATEGY FOR ASPHALT CO PETROLIMEX PERIOD 2011 - 2015 We are deeply indebted to our lecturers … Nguyen Thanh Hung,