Thesis topic BUILDING BUSINESS STRATEGY FOR TOAN PHAT CONSTRUCTION INDUSTRY JOINT STOCK COMPANY TOPACO IN 2011-2015 PERIOD AND VISION TO 2020... METHODOLOGY OF THE STUDY To achieve the o
Trang 1Thesis topic BUILDING BUSINESS STRATEGY FOR TOAN PHAT CONSTRUCTION INDUSTRY JOINT STOCK COMPANY (TOPACO) IN 2011-2015 PERIOD AND VISION TO 2020
Trang 2VERIFICATION AND ASSESSMENT OF TOAN PHAT CONSTRUCTION
INDUSTRY JOINT STOCK COMPANY
(TOPACO)
1 Contribution of the research project
The research project of group 10 - class GaMBAM0709 not only introduces suitable scientific theoretical points but also makes practical contribution to building business strategy of Topaco
Scientific implication: In the market economy, business strategy has a
decisive role to the success or failure of an enterprise Business strategy is important
to all enterprises rather than a typical one If wanting to exist and develop, first of all, there must be a good and effective business strategy
There are many approaches to build business strategy for an enterprise The research project has a scientific implication that is summarizing the existing theories from many different sources to form a process of building business strategy for an enterprise in the most basic, easy-to-understand and easy-to-use manner
Practical implication: Rooting from the formation of business strategy that
is vital to an enterprise, the research project contributes to assert the importance of building business strategy, providing enterprises in general and Topaco in particular
an approach on building business strategy
In the current market economy with fierce competition, building a successful business strategy will be a difficult and complicated task There are many approaches to build business strategy; however, building an appropriate and effective business strategy is not simple
This research project has introduced a new approach to establish a process of building suitable business strategy to the current situation in Vietnam, not only applicable to Topaco but also has implication to the formation of business strategy for many other enterprises Basic factors involved in the process of building business strategy include:
Trang 3Identifying the goals of the enterprise; evaluating environmental factors to the enterprise; finding opportunities and threats to the operation of the enterprises combining with the assessment on the strengths and weaknesses of the enterprise to form matrix for selecting strategy and form a full business strategy
To Topaco, this research project is very valuable to the Company’s Board of Leader in making business strategy, especially in reinforcing and promoting the brand image via raising productivity and effectiveness of sales and customers care services, bringing about high effectiveness for Topaco
2 Shortcomings of the capstone project and orientation for later researches
Because the conclusion of the research is drawn from the real situation at Topaco, so according to Topaco, the application of these measures and conclusions into other companies will need further researches
On behalf of Topaco’s Board of Leaders, I would like to express our sincere thanks to members of group 10 for the research project./
GENERAL DIRECTOR OF THE COMPANY
Nguyen Ngoc Vinh
Trang 4To help us complete the capstone project of Global Advanced Master of Business Administration Program (GaMBA), members of group 10- class GaMBA.M0709 has received a lot of support and contributed ideas of the lecturer and staff of GaMBA Program ad Board of Leaders of Toan Phat Construction Industry Joint Stock Company
We would like to express our sincere thank to the Board of Leaders, Teaching and Study Managing Department, Class Management Division, etc of GaMBA Program We are very grateful to the Board of Leaders and the staff of center for Educational Technology and Career Development (ETC) - Vietnam National University, Hanoi and Griggs University (USA) Thanks to your support,
we can study in the most favorable conditions
We are grateful to lecturers of GaMBA Program and Griggs USA Thanks to your enthusiasm and conscience in teaching, we have gained useful knowledge for our current jobs
University-Last but not least, we are in debt to our families’ members and classmates in M0709 class Thanks to their support and encouragement, we have finished the course without encountering any obstacles
Although the group has tried a lot but due to the condition of work-study, the quality of the capstone project is still limited We do hope and will try to study and develop the research project both in theory and in application in the real situation of Topaco with the expectation to make a small contribution to the sustainable success and development of Topaco in competing in the coming integration environment
We have tried to complete the capstone project in the best way with our knowledge and capacity; however, shortcomings are unavoidable, we do hope to receive valuable contributions from our teachers and classmates./
MEMBERS OF GROUP 10
Trang 5.
CONCEPT AND CLASSIFICATION OF BUSINESS STRATEGY 13
1.1.3 Basic characteristics of business strategy 14 1.2
.
1.2.1 Analyze internal and external environment 15
1.2.1.1
5 1.2.1.2
9 1.2.2.2
.
0 1.2.2.3
.
1 1.2.2.4
4 1.2.3.2
Trang 6JOINT STOCK COMPANY
2.1
.
2.1.1 The process of establishment, organizational structure and
2 2.2.1.2
2 2.2.2.2
.
7 2.2.2.3
.
9 2.2.2.4
External-Internal factor evaluation matrix 5
2 2.2.3.2
.
5 2.2.3.3
5 3.1.1.2
Trang 73.2.1 Building business strategy 67
3.2.2.1
0 3.2.2.2
.
4
3.3
.
3.4
.
LIST OF TABLES
page
Table 1.1: External factor evaluation matrix ……… 20
Table1.2: External factor evaluation matrix ……… 21
Table1.3: Competitive Profile Matrix ……… 21
Table 1.4 SWOT Matrix ……… 22
Table 1.5 Table of selecting strategy ……… 23
Table 2.1: Performance of Production and Buisness in 2008, 2009, and 2010 29 Table 2.2: List of main supplier of material for Topaco ……… 40
Table 2.3: Table of comparison of competitors ……… 50
Table 2.4: External Factor Evaluation Matrix of Topaco (EFE) ……… 52
Table 2.5: Topaco’s matrix of internal factor evaluation (IFE) ……… 53
Table 2.6: Several socio-economic targets ……… 61
Table 3.1: SWOT matrix of Topaco……… 67
Table 3.2: comparison of feasible strategies ……… 71
Trang 8Table 3.3: GREAT Model to select strategy ……… 72
Table 3.4: Total production cost of 1m3 of concrete construction
………
16
Figure 2.1: Model of Organizational structure ……… 27Figure 2.2: Chart of Revenue, Profit Target ……… 30Figure 2.3: Chart of density structure of products and service as per revenue 41
Trang 9International economic integration creates conditions for Vietnam’s construction enterprises to have a more dynamic business environment Vietnam also becomes a new market to foreign enterprises When foreign enterprises invest
in Vietnam, there will be a competitive environment; therefore, Vietnam’s enterprises need to build a concrete and long-term business strategy
Trang 10Toan Phat Construction Industry Joint Stock Company (Topaco) is a newly established Company which has ceaselessly developed in organizational scale At present, Topaco has been participating in constructing many key industrial projects
of the country such as hydroelectric power plants, bridges and roads, civil construction, etc Therefore, setting targets and plans as well as operating strategies for the Company to set the long-term development orientation really plays an important role in the development orientation, creating competitive advantages to the Company in the coming time More importantly, the leader of Topaco is also a member of group 10 – that is the Chairman of Management Board and General Director of the Company – Mr Nguyen Ngoc Vinh
Therefore, we, group 10 decided to select the topic "Building the business strategy of Topaco from 2011 to 2015, Vision up to 2020" as a capstone project The topic will demonstrate the importance and practical significance of building a business strategy if the Company really wants to have sustainable development At the same time, the subject also provides businesses and business owners with strategy-building process, analysis and assessment of the real situation of current business of the Company, analyses of both objective and subjective impacts on the production and business activities of the company Since then, we will make recommendations to choice the best business strategy to the Company in 2011 -
2015 period and vision toward 2020
2 OBJECTIVE AND SCOPE OF THE STUDY
Trang 11- Build strategic business objectives for the Company from date to 2015, vision up to 2020 and propose the plan to implement the strategic objectives in order to help the Company develop sustainably in competitive environment and integration.
- To us, members who conduct the project, this is the application of theory learnt from MBA program to solve job-related problems in the reality
2.2 Subject and scope of the study
- Subject of the study: Toan Phat Construction Industry Joint Stock Company (Topaco) However, in order to analyze and clarify the content studied, the research subject is expanded to other competitive companies in the construction sector
- Scope of the study: includes problems related to the business strategy of Topaco in execution and installation
- Research duration through statistical data from 2008 to 2010 and factors affecting the business of the Company up to 2015 to analyze and assess the business
of the Company
3 METHODOLOGY OF THE STUDY
To achieve the objective and meaning as mentioned above, research method selected by us is applying synthetically a lot of qualitative and quantitative research methods, including:
- Method of dialectical analytical: We have analyzed the data and documents
on the development history of Toan Phat Construction Industry Joint-stock Company (Topaco) as well as resource management of the Company for the past years, especially three recent years (2008, 2009 and 2010) to analyze the strengths and weaknesses of the Company and focus on researching opportunities as well as challenges in order to make the best business development strategies for the Company in 2011-2015 period We also considered the research subject in a logical and dialectic relation with other problems to make the essay more highly applicable
Trang 12- The statistical and method combines theory and practice to build matrices
in order to select the appropriate business strategy for Topaco The advantage of this method is simple to implement, but this method also has disadvantages, that is, the accuracy is often not at high level compared to the actual survey because it comes from the subjective opinions of those who implement the project However, this method is enough to build a good business strategy
4 STRUCTURE OF CAPSTONE PROJECT
Apart from the introduction, conclusion, the capstone project consists of three chapters and the summary of each chapter is presented as follows:
Chapter 1: Basic rationale of the research project
This chapter presents most basically the definition of business strategy and process to program a business strategy, at the same time, present matrices to help select the business strategy
Chapter 2: Analyzing the real situation of business of Toan Phat Construction Industry Joint Stock Company (Topaco)
Introduce the establishment and development of the Company, key business products and make brief assessment about the business of the Company in recent time Analyze external environment as well as internal environment, strengths and weaknesses, and establish matrices like IFE, EFE and BCG The conclusion of the chapter makes assessment of the implementation of business plan, shortcomings and necessity to build a business strategy in 2011 – 2015 period
Chapter 3: Solutions and recommendations
Determine the objective, vision, mission, core value to propose and select business strategy in 2011-2015 period, solutions to deploy the strategy and some recommendations to solve shortcomings and enhance business production effectiveness of Toan Phat Construction Industry Joint Stock Company (Topaco) in the up-coming time
Trang 13Chapter 1 BASIC RATIONALE OF THE REAEARCH PROJECT 1.1 CONCEPT AND CLASSIFICATION OF BUSINESS STRATEGY 1.1.1 Concept of business strategy
The concept of business strategy was introduced a long time ago This is the science of planning and controlling activities Accordingly, the basic theoretical point of strategy is that a party can crush their rival that is even stronger and more crowded if they can lead the situation and put their rival into a favorable battlefield for the deployment of their capacities When the exchange of goods became more and more developed in the society, strategy started to be used more in business with the general model as follows:
Figure 1.1 Business strategy
Scholars viewed business strategy under different angles According to Michael Porter (1996), a well-known scholar of strategic management at Harvard University, the business strategy is considered the art of competition in the
marketplace and development because: "Strategy is the art of building firm
competitive advantages to defend.” In view of management category, business
strategy is a plan; G Arlleret thought that "Strategy is the determination of the ways
and means to achieve the set objectives via policies ".
Strategy
Strengths
Weaknesses
Opportuni ties
Threats
Applying, sustaining
Finding
Overcoming
Preventing
Trang 14At least, there are three levels of business strategy that identified In which, the corporate level aims at the purpose and overall scale of the organization; business unit level is the overall commitments and actions to gain competitive advantages by exploiting their core competencies on the market of specific product; functional strategies are strategies that enable business-level and corporate level strategies to be effectively implemented by the components related to resources, processes, people and necessary skills.
The concept of business strategy in the textbook of MBA course of Griggs
University is "a series of commitments and actions that a company uses to win a
competitive advantage by exploiting the core competencies on a certain market.”
1.1.2 Role of business strategy
Business strategy helps a company identify its purpose and direction to set the base and the guideline for all business activities It also helps the company capture and take advantage of business opportunities, and has proactive measures to overcome the risks and threats in the competitive market Building business strategy contributes to improving the efficient use of resources, strengthening competitive position and ensuring the sustainable development of the company Business strategy creates a solid basis for working out business policies and decisions that are
in line with market fluctuations
1.1.3 Basic characteristics of business strategy
Business strategy clearly defines the basic objectives and directions of the company's business in each period The orientation of strategy ensures the constant and solid growth in the changeable business environment On the other hand, the business strategy ensures the maximum mobilization and optimal combination of the exploitation and use of company resources at the present and in the future to promote the advantages and seize the opportunity to gain advantages in the competitive world With the specific characteristic of being reflected throughout a continuous process, business strategy always contains a emulative thinking and winning success on the business world and is often developed in a period ranging
Trang 15from 3, 5 or 10 years or further
1.2 PROCESS OF BUILDING BUSINESS STRATEGY
Process of building business strategy is described according to following steps:
1.2.1.1 Analyze internal environment
- Analyzing sustainable competitive advantages: through the analysis of financial resources including facilities, human resources, production capacity, research and development, technological assets such as trademark, patents; value chain analysis; major activities of the enterprise; analysis of relation management; analysis of sustainability and strategic assets
- Analyzing strategy: includes the analysis of a company’s strategy to review
Mission or the goal of the enterprise
Analyzing internal
environment (S, W)
Analyzing external environment (O, T) Selecting strategy
Implementing the strategy
Checking and assessing the result
Feedback
Trang 16current business units and geographic scope of the enterprise’s operation, the analysis of product-customer strategy to define the focus of the enterprises in terms
of product -consumer segment; viewpoint of competitive strategy to understand the competitive mode being applied by the enterprise; the analysis of functional strategies consider whether the enterprise can implement those strategies on its own
or need to link the implementation of those functions; ultimately the suitability assessment of the above-mentioned strategies
- Analyzing financial performance: The fundamental purpose of this section
is to evaluate the financial performance of an enterprise in creating profit Analyzing parameters directing to four main categories, namely profitability, liquidity, financial leverage and operating parameters
1.2.1.2 Analyze external environment
Trang 17characteristics and consists of demographic, economic, political / legal, cultural, technological and global factors, etc Changes in the general environment can have direct impact on any certain forces in the industry, altering the relative power to other forces and to it and ultimately changing the attractiveness of an industry Therefore, the analysis of external environment helps organizations be aware of challenges and opportunities confronting them to attain the right orientation.
socio-Economic factors: socio-Economic environment indicates the nature and
orientation of the economy in which the enterprise is operating
Political-legal factors: Are factors showing the stability of political
institutions, constitutions and government’s policies that directly affect the production and business environment of the industry or the enterprises
The socio-cultural factors: Are factors related to social attitudes and cultural
values because they form the foundation of the society That is the change in viewpoint on life, living standard, consumer habit, career expectations, population growth rate, population shifts, the diversity of the workforce, traditions, beliefs, customs, etc The changes of these factors will create opportunities, challenges or threats to the industry or the enterprise
Demographic factors: Demographic segment in the macro environment
related to population, age structure, geographic distribution, ethnic communities and income distribution These factors need to be analyzed on the global scale because their potential impacts are beyond the national borders and there are many enterprises competing in the global scale
Technological factors: Technology is a critical factor to the competitive
advantage of an enterprise, it is the driving force in globalization Technology allows products and services to be produced at a lower cost and higher quality standards New technology changes the distribution of products in the business system
Global factors: Global segment includes related global markets, current
markets which are changing, the important International political events, and basic
Trang 18institutional and cultural characteristics on the global market Due to globalization, business market creates both opportunities and challenges, so enterprises should be well aware of different characteristics in cultures, societies and institutions of the global market
* Sectorial environment:
Michael Porter has modeled businesses and supposed that all businesses have
to bear in the impact of five competitive forces Strategists who are searching for the outstanding advantages compared to their competitors can use this model to better understand the environment of their business This model is considered a useful tool to find out the source of profits More importantly, the model also provides competitive strategies to maintain or increase profits or enterprises can use the model to analyze whether they should join or operate in a certain market or not
The intensity of competition in the market of any industry is affected the five competitive forces as follows:
Figure 1.4 Five forces model
Bargaining power of buyers
Threats of having new competitors
Competitive rivalry within an industry
The competition of existing enterprises
Threat of new entrants
Ability to generate pressure of suppliers Ability to generate pressure of
customers
Threats of substitute products
and services
Trang 19Threats of new entrants: Potential rivals of an enterprise are enterprises that
prepare to enter the industry and may have influence on the structure of the industry
in the future
Bargaining power of suppliers: The power of suppliers is the ability to
determine the conditions for their transactions with the enterprise The determinants
of suppliers’ power is expressed via the concentration of suppliers, the standardization level of input, the expense for changing suppliers, the threat of strengthening the consolidation among suppliers and productions units and power of purchasing units
Bargaining power of buyers: is the influence of the buyers on a certain
industry Customers have great bargaining power when they are highly concentrated; in other words, there are a small number of customers accounting for
a large market share Customers who buy a large quantity of products in the context that distribution channels or products have been standardized or likely to be merger
or even an acquisition of the producing firms
Threat of substitute products: Substitute products are referred to products of
another manufacturing industry The threats of substitute products occur when the demand for a product is affected by changes in the price of an alternative product Price elasticity of demand of a product is affected by changes in the price of the substitute product
Intensity of competition in the industry: Not only current rivals in the
industry can create threats to enterprises in an industry, but the capacities of new entrants of the industry can also affect the competition
In a nutshell, the main goal of the macro-environment analysis is to identify
the changes and the projected trends from the factors of the external environment to identify opportunities and threats to help an enterprise orient its strategy in the future
1.2 2 Building matrix to select business strategy
1.2 2.1 External Factor Evaluation Matrix
Trang 20External factor evaluation matrix aims at evaluating external factors having influence on the Company’s operation, including opportunities and threats of Toan Phat Construction Industry Joint Stock Company
Method of building the matrix: Establishing a list of all external environmental factors that affect the Company's activities, assessing the influence
or the importance of each factor marking weights, total marks of weights of all the factors equal to 1 or 100%
Assess the Company's response to these factors by sorting the factors from (1) to (4), in which (4) is the strongest response by the Company and (1) is the weakest Next, mark the importance of each factor by multiplying the weight with the corresponding points of classification, then add up the points again to find out the total mark of the importance of the Company The highest, average and lowest marks of importance are (4), 2.5 and (1), respectively
If the total mark of importance is (4), it shows that the Company is best capturing opportunities and best controlling threats from external environment If total mark is (1), it shows the company cannot grasp opportunities and control threats from the external environment
Table 1.1: External factor evaluation matrix
External factors (listing)
Levels of importance (weight)
Classification Important point
1.2.2.2 Internal Factor Evaluation Matrix
Internal factor evaluation matrix is the matrix for evaluating internal factors influencing the Company’s operation, including strengths and weaknesses of the Company
Method of building the matrix: Setting up a table to list all the internal factors influencing the Company’s operation, evaluating the influence or the importance of each factor by marking weights
Assess the Company's response to these factors by sorting the factors from
Trang 21(1) to (4), in which (4) is the strongest response by the Company and (1) is the weakest
Next, mark the importance of each factor by multiplying the weight with the corresponding points of classification, then add up the points again to find out the total mark of the importance of the Company
The highest, average and lowest marks of importance are (4), 2.5 and (1), respectively
Table1.2: External factor evaluation matrix
Internal factors (listed
Level of importance (weight)
Classification Important point
Total
1.2.2.3 Competitive Profile Matrix
Of external factors, competition is the most important one Competitive profile matrix helps us recognize major competitors as well as their strengths and weakness to help the Company has a more appropriate strategy Competitive profile matrix is represented in the following table:
Table1.3: Competitive Profile Matrix
Impor tant point
Classi ficati on
Impor tant point
Classi ficati on
Impor tant point
Classi ficati on
Important point
Table 1.4 SWOT Matrix
Trang 22Using all strengths by making use
of opportunities
Strategies WO
Overcoming weaknesses by making use of all opportunities
Using strengths to avoid threats
Strategies WT
Minimizing weaknesses and avoiding threats
S-O strategy: Pursuing the most suitable opportunities with the Company’s
strengths, orienting business in the market (Attacking)
W-O strategy: Overcoming weaknesses to pursuing opportunities
(Competing)
S-T strategy: Clearly defining the methods that the Company can utilize its
advantages to reduce losses caused by external threats (Being careful)
W-T strategy: Forming a defense plan to prevent the Company’s weaknesses
from the threats of external environment (Defending)
On the basis of summarizing the strategies identified by combining strengths-opportunities, strengths-threats, weaknesses-opportunities, weaknesses-threats, using GREAT model to outline the basic features of selecting key business strategy that the Company can pursuit:
Table 1.5 Table of selecting strategy
Trang 23Step 1: Considering, selecting and working out factors related to the
development plan of the Company for analysis in the first column, which is listing the criteria for analysis (First column)
Step 2: To assess the impact of these factors to the overall strategy, we use
the impact indicators implying the importance and influence of factors to strategies This coefficient is calculated by marking from 0 to 1 and the total mark of weights
is always equal to 1 (Second column)
Step 3: In this step, implementing the assessment and marking for in each
analyzed factor of each strategy Assessing marks are calculated by marking from
10 to 50, the lowest is 10 and the highest is 50 (corresponding to levels: low, average, pretty average – concentrated, quite good and good) These assessing marks show the completion level of the analyzed target (Third column)
Step 4: Converting coefficients which are the products of the two columns
(the second and the third columns) of each strategy, then accumulating those results
to find out the final result which is the sum of above products Selecting about 03 strategies with highest total marks for implementing
1.2.3 Select business strategy
Cost-leadership strategy: is all activities to supply products or services
having characteristics accepted by customers with the lowest cost in the industry It
Trang 24means that the Company has known to make full use of its capabilities to supply products or services with lower cost than its competitors Since then, the Company can gain significant advantages compared to its competitors It is a tool to attract customers to occupy greater market share This strategy brings the Company advantages of low prices compared to its competitors, but it still has the same profit level, even higher and the Company will have a firmer position in the fierce competition with rivals in the industry, including new entrants and not being affected much by the bargaining power of suppliers, bargaining power of buyers as well as substitute products To achieve this, the Company may have advantages in terms of high technology, preferential in approaching input materials, good production capacity, appropriate policies, etc
Product differentiation strategy: That is the Company seeks for
opportunities to become the only enterprise in supplying the unique products or services in the eyes of the buyers under a certain aspect This strategy chooses one
or several attributes of the products that buyers assess important and then position the Company itself as unique in meeting that demand
Concentrated growth strategy: Is built on the basis of selecting narrow
competitive scale in the industry By optimizing the strategies aiming targeted segments, enterprises having concentrated growth strategy concentrate on seeking and attaining competitive advantages right in the target segment, although generally they do not hold any advantage
1.2.3.1 Organization and implementation
When business strategy is build, organizing and implementing the strategy is reviewing the goals of the strategy and the base to build strategy, annual goals, system of policies and plans; work out programs, suitable budget and procedures; allocate resources (human resource, finance and infrastructure); select and complete
a suitable organizational structure with the strategy; establish steering board and management mechanism;, commit to implement the strategy; gradually implement the strategy and finally, check, control and adjust the process of implementing the
Trang 251.2.3.2 Evaluate the effectiveness of the strategy
+ Checking the suitability of business strategy before officially deploying it
As mentioned above, business strategy is a decisive factor the success or failure of the Company
+ Assessing the work performance of the Company in each period of implementing business strategy to find out weaknesses and shortcoming of the strategy to timely revise and supplement
+ Process of checking and evaluating the effectiveness of the strategy includes determining the content of the checking and assessing, working out standards and criteria for the checking and assessing, quantifying the results of strategy implementation, comparing and evaluating the results and identifying the reasons for the differences to find out measures for improving
Chapter 2 ANALYZING REAL SISTUATION OF PRODUCTION AND BUSINESS OF TOAN PHAT CONSTRUCTION INDUSTRY JOINT STOCK COMPANY
Among issues mentioned in Chapter 1, we provide theoretical concepts and basic terminology as the basis of building business strategies for the company These are the concepts of business strategies of scholars for a comprehensive view
of business strategy ; giving roles, characteristics of business to understand why the company should build business strategy ; providing the process of building business strategy, including these steps : identify the company’s mission and objective, make analysis of internal and external environment, offering measures to build matrix to select business strategy, the ways to implement business strategy, and lastly implementation evaluation
Our group has applied these above theories and methods to make analysis of operational environment and build business strategy for Toan Phat Construction Industry Joint-Stock Company (Topaco)
Trang 262.1 GENERAL INTRODUCTION OF THE COMPANY
2.1.1 The process of establishment, organizational structure and
apparatus
Nhat Minh Design Consulting, Construction and Trading Joint-Stock Company is the predecessor of Toan Phat Construction Industry Joint-Stock Company, set up on August 3rd, 2005 The company is founded by a group of shareholders of experienced, competent individuals with enthusiasm, and maturity from Song Da Corporation The company renamed as Toan Phat Construction, Industry Joint-Stock Company on November 18th, 2007 International transaction
name : TOAN PHAT CONSTRUCTION INDUSTRY JOINT STOCK COMPANY, Abbreviation: TOPACO Headquarter : Room 1003B, Ha Thanh
Plaza, #102 Thai Thinh Str., Trung Liet Ward, Dong Da Dist., Hanoi Chartered capital: VND 15 billion
The administration apparatus of the company is organized as the model of online function Head of the company is General Director, responsible to General Assembly of Shareholders and Board of Directors of the business performance of the company Functional Directors do the task of supporting General Director with operating The company consists of 5 Departments, and a geodetic team: Department of administration-Human Resources; Department of Economics-Planning; Department of Technical Management; Department of Finance-accounting; Department of Material-Equipment; and Geodetic team Branches, Subsidiary company and associated company include: Topaco-Urban Development Joint-Stock Company (Topaco – UDC); David Duc Real Estate Trading Joint-Stock Company (David Duc Land); Someco 1 Energy Joint-Stock Company; TOPACO Tay Bac Branch; TOPACO Dong Bac Branch; TOPACO Ha Giang Branch; TOPACO Central Region Branch All staff of the company is 364 persons, including: MA of 1.9%, Engineer of 10.9%, BA of 4% and others
Trang 27(Source: Topaco)
Figure 2.1: Model of Organizational structure
Since its establishment and development, the company has continually developed and completed in all aspects such as: organization scale, function, tasks,
General Assembly
of Shareholders
Administration Board
General Director
Representative of capital of Cooperation Company
Board of
Control
Topaco Urban Development Joint-Stock Company
David Duc Real Estate Trading Joint-Stock Company
Someco Energy Joint-Stock Company
Director of Human Resources
Director of Business Director of Finance Director of Technique
Tay Bac Branch
Dong Bac Branch
Ha Giang Branch
The Central Branch
Department of Administration and
Human Resources
Department
of Economics and Planning
Department
of Accounting and Finance
Department
of Material and Mechanism
Department of Technical management
Mechanism
construction
team 1:3
Booming team 1:5 team 1:3Drilling
Industrial Construction team 1:3
Plaster Mixing Station
Stone workshop 1:2
Installation
and
construction
team 1:11
Trang 28structure of sector, scope of activities, etc Along with development of business activities, the company is very keen on training, building a team of qualified engineers, technicians, and management staff good at all fields, and high-skilled workers with intensive technique In the past years, the company has hired consultant of professors, doctors, local and foreign managers in the fields of financial management, human resource management, building strategy, building and developing the trade name, etc to improve the quality, efficiency of business and production, and create professional working environment to attract talented persons, etc To date, the company has created strong competence in constructing medium-sized, and small-sized hydropower plants, industry, civil works, transportation, infrastructure works, etc
Identifying the importance of technology, machinery and equipment, the company is also interested in investing in machinery, equipment imported from renowned firms in Europe, and Asia to serve as construction for labor reduction, cost savings, increased productivity, quality, and ensuring the progress of the work
Currently, the company is applying ISO 9001:2008 quality management system, the infrastructure for management The company always takes socio-economic efficiency, quality of works as key gauge for sustainable development and always wants to be trusted partner in operating fields
2.1.2 Situation and business performance from 2008 to 2010
According to Business license No 0103008652 granted by Division of Business Registration -Hanoi Department of Planning and Investment, TOPACO operates in the fields such as: Design Consulting of general site planning, architecture, interior and exterior for and industrial and civil construction works; management consultancy of Construction Investment Project; Constructing civil and industrial works, works of transportation, irrigation scheme; Topographic and geological survey of construction works, general site construction; procurement consultancy, construction supervision of equipment installation; processing of installation of water equipment, non-standard steel structure; Producing, trading in
Trang 29construction materials, interior and exterior decoration equipment; Trading, leasing machinery, equipment of spare parts for construction, industry, and agriculture; trading handicraft, fine art, and garment; goods transport, passenger transport; exporting and importing goods of associated companies; building transmission line and up to-35KV transformer; making construction investment project of hydropower works, industrial urban area; Trading School equipment; investment trust; consulting quality management system, internal control system; consultancy
of marketing, business strategy, selling and distributing goods; Researching and developing organizational structure and leadership in the enterprises; assessing real estate; real estate business In 5 years of development, Toan Phat Construction Industry Joint-Stock Company has made changes in business sectors to suit the trend of social development and market economy
Since its foundation, the company has already participated in construction many national key works such as: Son La, and Ta Co Hydropower Work (Sop Cop District, Son La Province), Nam Chien 1 &2 Hydropower Work, Bac Giang 1 Hydropower Work (Lang Son province), Nam Ly 1 Hydropower Work (Ha Giang province), Bac River Hydropower Work, Da River kindergarten, Jimex Refrigerator Plant project-Quang Minh industrial zone, Model Factory Fancy Creation Vietnam-Pho Noi industrial zone-Hung Yen province, Road of Xa La urban area in
Ha Dong-Hanoi, Administration Office-Thanh Hoa paper factory, etc
Table 2.1: Performance of Production and Business in 2008, 2009, and 2010
Trang 30Revenue analysis shows that 2010’s revenue increases by 128%, compared with 2009, but profit does not grow The reason is that the company invests much in machinery, equipment in 2010 which are much depreciated to a quick capital recovery; however, workers’ average income rises 131%, so the workers keep their mind on the work and work long-term with the company Nevertheless, 2010 is a pivotal year for great development pace of TOPACO, ensuring resources: human resources, equipment, and job.
(Source: Topaco)
Figure 2.2: Chart of Revenue, Profit Target
Chart of Revenue, Profit Target of TOPACO shows that in two years of 2009 and 2010, there is a dramatic increase in revenue, and no change in profit, which explains development strategy set for the company by Board of Directors even though the world is entering a serve currency crisis (economic downturn), State-owned bank tightens credit for lending at this time However, TOPACO has the advantage of key product which is located in Hydropower Works of Ta Co, Bac Giang, Bac River, main product of the company gaining the most revenue The company allocated its capital to invest in real estate, electricity, marketing of
Trang 31construction of urban transportation infrastructure, a future-oriented product of the company’s development These above data show that Production and Business of TOPACO has developed strongly, effectively, and has the development trend in future.
2.2 ANALYZING SITUATION AND BUSINESS SITUATION OF TOPACO COMPANY
When TOPACA was newly formed, it is only a sub-contractor, responsible for constructing supplementary items Nevertheless, with the commitment to ensure the progress, quality, engineering- art of the works, the company has gradually gained prestige, and its trade name, and become the main contractor, responsible for constructing big hydropower works In addition, the company heavily invests in some works, takes, Bac Giang Hydropower in collaboration with Song Da Someco Joint-Stock Company, with Dai Viet Dien Duc Limited Company to establish David Duc Real Estate Trading Joint-Stock Company (David Duc Land), establishment of Topaco Urban Development Joint-Stock Company-Topaco’s subsidiary company Currently, on the basis of contract signed with customers in 2010, TOPACO’s commitment value of the progress to customers is VND 331 billion, together with its efforts to look for its jobs; the company is aiming at revenue target of VND 400 billion in 2011 Besides, in 2010, the company has already built business & production direction toward 2015 Nevertheless, planning of the company heavily depends on market impact factors If the company do not make situation analysis of the company during current period, and market impact to build specific business strategy, it will be likely to be taken market share by competitors
Using strategic tools (SWOT analysis) to find out strengths and weaknesses of TOPACO:
2.2.1 Analyze external environment
2.2.1.1 Macro environment
* Economic environment
Trang 32- Pace of economic growth: international integration tendency, or called
globalization, is an indispensable development one, which no country cannot take part in Vietnam’s economy is developing according to this tendency In recent years, Vietnam’s economy takes place significant development with annual growth
of about 8% This is a favorable factor that has great impact on nationwide common development of all economic sectors, causing high demand of development of transportation, infrastructure, and construction As a result, Vietnam’s construction
in general and Topaco in particular is having bright prospects of employment resources
- Interest: In Vietnam interest is very high compared with in region and the
world Because in general, customers of construction mostly use high proportion of loans to invest, investment efficiency of many projects is low As a result, local private investment is stalled On the other hands, the field of installation of hydropower works often accounts for high rate of loans capital of the company in business capital This is generally basic characteristic of installation sector in operating process Therefore, fluctuations in interest always have direct impacts on current cost of business, and production of enterprises At the point of increasing interest rate, costs of growing loans will probably decrease business performance of the company during operating period
- Inflation rate: According to General Statistics Yearbook, inflation rate in
2007, 2008 was respectively 12.63% and 19.89% Average Consumer Price Index (CPI) in 2009 only increased by 6.88%, compared with average CPI in 2008, and
inflation was controlled fewer than 7% in 2009 When input cost grows due to
inflation, output price will grow respectively Therefore, when signing construction contract, the company always focus on factor of modifying input cost of material Thus, the inflation impact on production & business will be a certain level, and can
be controlled
- Exchange rate: Fluctuations in exchange rate always have direct impact on
enterprises in the field of construction because fluctuations in exchange rate will
Trang 33affect prices of key material such as steel, cement, fuel, etc, main materials of enterprise in construction field Therefore, they will have effect on increasing production cost of these enterprises.
* Science, technology environment
Dramatic development of science and environment has made enormous impacts on construction field in the past few years The introduction of modern machinery, and equipment, and advanced construction technology gradually replace labor of human beings A lot of new materials with more preeminent features are researched and manufactured replacing old materials The explosion of information technology and internet create favorable conditions for management of enterprises Significant development of science and technology both is an opportunity for dynamic enterprises catching up with technology, and a threat for enterprises that are backward, and have little renovation Topaco, particularly, leaders and key labors are young, enthusiastic, and usually promoting the spirit of creativity, dynamism to catch up with global technology, taking technology as one of spearheads to achieve breakthrough for the company
* Political and legal environment
Vietnam has prominent strength as stable political environment, national defense luring investment for economic development Vietnam is creating a level-playing environment of investment in business by improving legal framework, especially finance, land, labor, and simplifying administrative procedures and reforming state-owned enterprises However, Law system on construction investment of Vietnam continues changing, affecting much local and foreign investors
Moreover, Vietnam’s legal system has not tightened yet Enterprises can flexibly applied stipulations, used relationship with authorities to create favorable conditions for development Topaco is also one of the entities maintaining a good relationship with authorities and government agencies
* Social and Cultural
Trang 34The highlight of Vietnam’s consumer culture on real estate is to keen on property Psychology of Vietnamese people is that they want to own a private house, generating high demand of infrastructure This is an excellent opportunity for enterprises operating in construction in general and Topaco in particular On the other hand, Vietnamese people also have psychological dominance, and like differences Therefore, this is an opportunity for Topaco to make breakthrough if Topaco identifies target of product strategy as making difference
*Global environment
Thanks to the outbreak and development of information technology, especially internet, globalization under the impact of advance in science, & technology, relationship among regions in the world is much closer, and an increasing in exchanging information, and mutual understanding, along with development cooperation relations among countries, creating a global civilization
Besides, Vietnam has official jointed WTO since 2006 This is a condition for foreign enterprises in the field of construction increasingly penetrating into Vietnam market, causing a threat of severe competition in construction field in Vietnam, and it is probably to be defeated in local playing field if enterprises do not select a right strategy Nevertheless, Vietnam’s integration into WTO is a good opportunity for calling for foreign investment capital, opening up opportunity to penetrate into foreign markets
2.2.1.2 Sectorial and competitive environment
* Competitive rivalry within the industry
Construction field is currently considered as one of the fiercest fields In recent years, there have been enterprises investing in new technology of machinery, equipment to promoting products which have competitive advantages, and then obtaining trade name of enterprises For example, SONG DA brand name is always associated with constructing hydropower works, or LICOGI with building infrastructure, transportation, or VINACONEX with civil construction What is TOPACO associated with? It is a young company growing up with Son La
Trang 35Hydropower In 5 years of development, it has become a well-known company in the field of constructing hydropower since an unknown company TOPACO is famous for progress, quality, engineering- arts of works and a commitment to satisfy customers’ demands This is a foundation for development of hydropower works, urban transportation infrastructure With these abilities, TOPACO can make analysis of some competitors capable of competing in the field of hydropower, urban transportation infrastructure at the region that the company is expected to promote all of its resources, strengths to see strengths and weaknesses of competitors and TOPACO
Specifically, we have selected 04 enterprises with similarities of operating field, products, time frame, etc to compare:
- Ha Giang 1 Construction Joint-Stock Company
Name: Ha Giang 1 Construction Joint-Stock Company; Address: No 310, Tran Phu Str., Tran Phu ward, Ha Giang Town, Ha Giang Province; Telephone: 02193
860 967; Fax: 02193 868 829; Chartered capital: VND 28.800.000.000
Construction Company is the precursor of Ha Giang 1 Construction Stock Company, founded on July 1st, 2005 under Certificate of business Registration and joint-stock company registration No 1003000014 issued by Ha Giang Department of Planning and Investment dated 1/7/2005 (Currently with enterprise code number of 5100100800) The company operates mainly in the fields such as building civil works, housing, transportation, irrigation scheme, housing renovation, up-to 35KV transformer, constructing small and medium-sized hydropower works, exploiting and processing mineral for export
Joint-Total employees on the payroll of the company: 91 persons
Strengths of Ha Giang 1 Construction Joint-Stock Company:
- is a joint-stock company mainly operating in Ha Giang Province, taking advantage of constructing civil works and transportation
- Have a long-term relationship with authorities, banks, suppliers at communities
- Its precursor is a state-owned company, with many years of experiences in
Trang 36constructing civil and transportation works
- Great capacity of machinery, equipment The quality of machinery, equipment
of the company is high, and can be mobilized any time to serve with construction
Weaknesses of Ha Giang 1 Construction Joint-Stock Company:
- Finance: Return on equity capital is low; the company’s operation is not really efficient
- Workforce: thin The company has few numbers of employees on the payroll, mainly hire outside, causing difficulties for the company in mobilizing work force to meet immediate demand of big projects that the company received
- Construction capacity: not high Recently, the company mainly takes part in constructing civil & transportation works with low contract value
Area of operation, a long-term relationship with authorities, banks, suppliers at communities, etc are competitive advantages of Ha Giang 1 Construction Joint-Stock Company However, when penetrating into Ha Giang market, Topaco will focus on competing with Ha Giang 1 Construction Joint-Stock Company in management capacity, long-term vision, and construction experiences In addition, in future, it is likely that Ha Giang 1 Construction Joint-Stock Company is not a competitor worthy worrying of Topaco
- LICOGI 13 Joint-Stock Company:
Headquarter Licogi 13 Building - Khuat Duy Tien Str - Nhan Chinh ward - Thanh Xuan Dist - Ha Noi LICOGI 13 Joint-Stock Company is formed and developed from the cradle of Union of mechanized executing enterprises now Infrastructure Development and Construction Corporation (LICOGI) The company specializes in constructing foundation works, infrastructure, civil and industrial works Currently, LICOGI 13 has over 700 staffs, engineers, employees with passion, rich experiences, and system of modern machinery and equipment of construction, Local and oversea customers know LICOGI 13 as a leading unit in the fields of foundation, urban & industrial technical infrastructure Concurrently, it is a professional contractor
in constructing industrial, civil, and hydropower works It participated in constructing
Trang 37key national works such as Ho Chi Minh Mausoleum, National Conference Centre, Pha Lai I & II Thermal Power Plant, Bat Chat Hydropower Plant, Song Chanh II Hydropower Plant, Lai Chau Hydropower Plant, etc
Strengths of LICOGI 13
+ With a long history and experience of over 50 years of construction and development, Licogi 13 has gained its strengths and is considered as a leading unit in the field of foundation construction in current period
+ Licogi 13 has lots of qualified management staff, technical staff, and skillful workers capable of inheriting and developing to take over management and implement large-scale projects with special nature of national importance
Weaknesses of LICOGI 13
+ Machinery, equipment of LICOGI 13 is currently underdeveloped, and old, heavily affecting conditions, construction progress and quality of these works
+ Executive management is not peremptory with low consent, affecting the system, and consistency in managing
+ Work of self-employment, exploiting and expanding market of the company are limited
- Song Da 19 Joint-Stock Company:
Song Da 19 Joint-Stock Company is previous Factory of construction and interior decoration, under Da Nang Construction & Installation Material and Cement Company, a state-owned company, founded in 1997 under General Cement Company-Construction Ministry In 1997, it was transferred to Song Da General Company, and renamed Song Da 19 Company under Song Da General Company
On July, 2003, it carried out equitization, turning into Joint-Stock Company operating under Decision No 869/QĐ- BXD of Enterprise law by Ministry of Construction dated June 18th,2003, with traditional sector of constructing works of transportation, and hydropower In recent years, Song Da 19 Joint-Stock Company has been constructing national key great works such as Ho Chi Minh Street work,
Trang 38An Khe-Da Nang Road, Se San 3 hydropower Work (290MW), Se San 4 hydropower Work(320MW), Nam Chien 2 Hydropower Work, Binh Dien hydropower work, Xekaman3 hydropower Work –in Lao People’s Democratic Republic, etc.
Strengths of Song Da 19
+ Having experiences in constructing
+ Having advantage of trade name and works assigned by Song Da Holdings
+ Excellent capacity of finance
Thanh Son Construction Joint-Stock
Address: No.170 Ngo Quyen – Dong Kinh ward– Lang Son Province; Telephone: 025.3 717.884; Fax: 025.3 717.885
It was formed on November 18th, 2003 issued by Lang Son Department of Planning and Investment
Operating fields: Constructing civil and industrial works, transportation, irrigation scheme, transmission line and up-to 35kv transformer, and clearing construction ground, interior and exterior decoration, producing and trading construction materials, installing electricity system in house, trading refrigerator and electronic equipment
Thanh Son Construction Joint-Stock Company is currently considered as a good contractor in constructing in Lang Son
Strengths of Thanh Son Construction Joint-Stock Company:
- is a joint-stock enterprise operating mainly in Lang Son Province, having advantage of constructing civil housing
Trang 39- Has a good relationship with provincial and local banks, and Provincial Bank’s Project Management Unit of constructing infrastructure
- Workforces: has a team of good key technical workers, high-skilled staff taking over up-to VND 30-billion infrastructure projects
- Finance: excellent capacity of finance, high revenue
- Product price is one of strengths of Thanh Son Construction Joint-Stock Company in procurement, looking for job Currently, it won civil construction projects, especially Lang Son Province State Treasury Project: State Treasury of Lan Quang District, Cao Loc District, and Lang Son Province Bank of Agriculture and rural development
Weaknesses of Thanh Son Construction Joint-Stock Company:
- Construction machinery and equipment of Thanh Son Construction Joint-Stock Company is backward, mostly old used since 1994 The number of equipment is small, especially equipment of road construction, needing to hire equipment
- Progress of road construction is delayed, and the quality is not guaranteed The quality of some items of civil work is low
- Few well-trained staff in road construction
- Its capacity only takes over district-and commune-level works
With strengths of reducing product price, and the quality of works is not good,
it is said that Thanh Son Construction Joint-Stock Company has not been a competitor
of TOPACO in the field of transportation, urban infrastructure in near future
Table 2.2: List of main supplier of material for Topaco
1 Thai Thanh Tung Trading and Service
Joint-Stock Company C Building, Electricity Design and Survey Company Collective – Trung All kinds of steel
Trang 40Tu ward - Dong Da District – Ha Noi
2 Hong Trang Material Trading limited Company Ta Co Commune - Sop Cop District – Son La Province sand, stone
3 Someco 1 Energy Joint-Stock Company Binh Gia District – Lang Son Province sand, stone
4 Hoa Phuong Trading & Service Co-operative Na chi Commune – Xin Man District – Ha Giang Province sand
5 Thanh Vuong Mineral Service Joint-Stock Company Quang Binh District – Ha Giang Province stone
6 Cao Son Transport Factory Bac Quang District – Ha Giang Province Cement
7 Thanh Tien Limited Company Tam Diep District – Ninh Binh Province Cement
8
Viet Nam Industrial Construction
Joint-Stock Company- Quang Son Cement
Factory
Quang Son District – Thai Nguyen
9 Kim Chau Trading & Service Limited Company Hoan Kiem District – Ha Noi Cement
10 Son La Petrol Branch Sop cop District – Son La Province Petrol
11 Hong Phuc Private Enterprise Binh Gia District – Lang Son Province Petrol
12 Ha Giang Petrol Company Quang Binh District - Ha Giang Province DO, FO Petrol
(Source: Topaco)
* Bargaining power of buyers
Customers of Topaco are Bac Minh Development Investment Joint-Stock Company, Dai Duong corporation, Someco Joint-Stock Company Gaining the trade name, Topaco is paid attention to and invited to construct hydropower works However, big and small-scale hydropower plans were planned and constructed If counting hydropower plant to 2012 in Vietnam, Lai Chau Hydropower Plant is the biggest, ensuring most of jobs of Topaco during the period 2012-2015 After 2015,
it is very difficult for the company to sign a contract of constructing a hydropower plant because there are not many construction of hydropower Plants Nevertheless, the trade name is increasingly gained, capacity of finance and equipment is increasingly improved The progress, quality, commitment to customers of works which the company has been constructing is asserted With qualified personnel staff with enthusiasm, especially dynamism of Board of Directors, General Director in the past time, the company has continually won improved works in different fields
* Threat of new entrants