Luận văn thạc sĩ xây dựng chiến lược kinh doanh của công ty cổ phần xi măng thăng long

Luận văn thạc sĩ Xây dựng chiến lược kinh doanh của công ty cổ phần xi măng ThăngLong MAKE THE BUSINESS STRATEGY FOR THE PERIOD OF 2011- 2015 OF THANG LONG CEMENT JOINT STOCK COMPANY...

Luận văn thạc sĩ Xây dựng chiến lược kinh doanh của công ty cổ phần xi măng Thăng

Long

MAKE THE BUSINESS STRATEGY FOR THE PERIOD OF 2011- 2015 OF THANG LONG CEMENT JOINT STOCK

COMPANY

CONTENTS

Page

Acknowledgment………1

Contents……….……… 2

List of tables………5

List of figures/ diagrams……….6

OVERVIEW………7

CHAPTER 1: ARGUMENT ……… ………… 8

1.1 Argument about business strategy for the enterprise ……… 8

1.1.1 Some definitions about strategy ……….………8

1.1.2 Nature of the business strategy……… ……… 9

1.1.3 Characteristics of business strategy ……… …………10

1.2 Process of making strategy……… 10

1.3 Model – analysis of the external environment ………11

1.3.1 Model – macroscopic analysis (PESTLE model)………… ………….11

1.3.2 Model of 5 forces of Michael – sector analyis ………… ……….12

1.4 Model of internal analysis of the enterprise……… ……….13

1.4.1 Value chain……… … ……… 13

1.4.2 Internal Factor Matrix- IFE……… … ……….13

1.4.3 External Factor Matrix- EFE……….………14

1.4.4 Total IFE point………14

1.4.5 Matrix of strategic space of the enterprise ………14

1.4.6 Sustainable competitiveness advantage of the enterprise ……….14

1.5 Model of general analysis (SWOT)……….………… 14

1.6 General competitiveness strategies……… ……….15

1.6.1 Cost Leadership strategy ………15

1.6.2 Differentiation Strategy ……… …15

1.6.3 Focus strategies ……… ………….15

1.7 Model of analyzing and selecting strategy under weight method……… 16

CHAPTER 2: ANALYSIS OF REAL SITUATION OF THANG LONG CEMENT JOINT STOCK COMPANY ……….18

2.1 Overview of Thang Long Cement Joint Stock Company ……… 18

2.1.1 Process of establishment and development……… 18

2.1.2 The fields of business production activities of the company………18

2.1.3 The structure of management machine of the company………19

2.1.4 Results of business production in 2008 – 2010: ……….19

2.2 Analysis of external environment of Thang Long Cement Joint Stock Company ……….…… …… 22

2.2.1 Analysis of macroscopic environment (PESTLE model)……… 22

2.2.2 Analysis of the environment of cement sector (model of 5 forces): ………23

2.3 Analysis of the internal environment of Thang Long Cement Joint Stock Company ……….… 29

2.3.1 Model of value chain………29

2.3.2 Internal Factor Matrix- IFE of Thang Long Cement Joint Stock Company 33 2.3.3 External Factor Matrix- EFE of Thang Long Cement Joint Stock Company 34 2.3.4 Total IFE point of Thang Long Cement Joint Stock Company ………….…35

2.3.5 IE Matric……….35

2.3.6 Matrix of strategic space of Thang Long Cement Joint Stock Company ….36 2.3.7 Sustainable competitiveness advantage ……… 37

2.4 Total SWOT matrix of Thang Long Cement Joint Stock Company ….40 2.5 Limitations, existing reasons in Business strategy ……… 41

2.5.1 Limitations……….41

2.5.2 Reasons………42

CHAPTER 3: SOLUTIONS, SUGGESTIONS AND CONCLUSION…… 43

3.1 Business strategy of the company in the period of 2011 – 2015 ………….43

3.1.1 Vision……… 43 3.1.2 Mission……… 43 3.1.3 Targets for the period of 2011 – 2015 ……… 43 3.1.4 Selection of business strategy for Thang Long Cement Joint Stock Company for the period of 2011 – 2015 ……… ……44

3.2 Some solutions to implement successfully the selected strategy … …… 52

3.2.1 Change of the financial management method of the company ……….………52 3.2.2 Re-developing the Marketing activity, in which respecting the system of distribution channel; activity of customer services……… …….54 3.2.3 Establishing the Research and Development Department………57 3.2.4 Applying the operation method of the Factory under international regulation for a modern cement factory……….57 3.2.5 Development of human resource ……… ………58

3.3 Roadmap of implementation of business strategy of Thang Long Cement Joint Stock Company in the period of 2011- 2015 ……… 59 3.4 Supervision of implementation of business strategy in the period of 2011-

2015 ……… ………59 CONCLUSION……… …….61

REFERENCE……….…………62

LIST OF TABLES

Page

TABLE 2-1: Business achievements in the period of 2008- 2010……….… 19

TABLE 2-2: Summation table of the internal factors of Thang Long Cement in comparison with competitors ……… ……33

TABLE 2-3: Summation table of the external factors of Thang Long Cement in comparison with competitors ……….…… 34

TABLE 2-4: Summation table of the internal - external factors of Thang Long Cement in comparison with competitors ……….…………35

TABLE 2-5: IE Matric……… 35

TABLE 2-6: Summation table of formation factors of SPACE matrix of Thang Long Cement ……….………… 36

TABLE 2-7 Total competitiveness image of Thang Long Cement Joint Stock Company ……….………….40

TABLE 3-1: Targets of Thang Long Cement ……… 43

TABLE 3-2 SWOT matrix of Thang Long Cement Joint Stock Company ….…….44

TABLE 3- 3 Select suitable strategy under weight method ……….50

TABLE 3-4: Summation table of strategy selection ………51

Table 3-5: Summation table of cost and labor productivity in year 2010……… 51

TABLE 3-6: Roadmap of increasing the chartered capital……….53

TABLE 3-7: Level of support for sales in rainy season……….… 56

LIST OF FIGURES/ DIAGRAMS

Page

Figure 1-1 Model of the process of strategic management……… ……11Figure 1-2 Diagram of structure of sector competitiveness ………12Figure 2-1: Diagram of organization………19Figure 2-2: Revenue structure of Thang Long Cement under products …… ……20Figure 2-3: Market structure of Thang Long Cement in Vietnam………21Figure 2-4: Market share of Thang Long Cement in the period of 2008 – 2010… 21Figure 2-5: Situation of cement consumption in the period of 2008 – 2010 and theforecast for 2015 ……….………24Figure 2-6: Process of cement production……… ……….30Figure 2- 7 Value chain relating to the operation of Thang Long Cement Joint StockCompany ……….…………32Figure 2- 8g: SPACE matrix of Thang Long Cement ………37

Vietnam’s economy has had the growth of 6,78% in 2010 and forecasted tocontinue the higher growth in coming years; and the construction sector will havethe growth level twice in comparison with that of GDP However, it is differentwhen considering in each sector, the demand for construction materials is increased,but according to the forecast of Ministry of Construction, from 2011, the supply ofcement could be redundant over 10 million tons and higher than in next years whenmany factories will come into operation

Thang Long Cement Joint Stock Company was established in 2001, passed

by the construction process, in 2008, the factory came into operation For thechallenges of the cement redundancy as the forecast, making a long-term business

strategy is the most important Therefore, our group selects the topic “Developing

the business strategy for the period of 2011 – 2015 of Thang Long Cement Joint Stock Company”.

Research purpose is to make the suitable business strategy for Thang Longcement so that the Company could have the sustainable development With building

a comprehensive and feasible strategy, it will be submitted for General Assembly ofthe Shareholders which will have the meeting held dated April 1st 2011 for theapproval

Implementation method: approach the learned theories about strategicmanagement; survey to collect the data in Thang Long Cement Joint StockCompany and gather, summarize the data from State management bodies,websites…

Structure of the Assignment includes 03 chapters: Chapter 1 – Argumentfoundation; Chapter 2 – Analysis of real situation of Thang Long Cement JointStock Company; Chapter 3 – Solutions, suggestions and conclusion

Because of the limited time, collection and analysis of the data are restricted.Writers’ group would like to receive the contribution opinions of the teachers,students and the people who are interested in the cement sector so that the topic will

be better

CHAPTER 1: ARGUMENT FOUNDATION1.1 Argument of business strategy for the enterprise

1.1.1 Some definitions about the strategy

According to normal definition, strategy is a military term used to show the

plan of disposing the troops in battle formation and distribution of the force with thetarget of winning the enemy or reaching its military target Carl von Clausewitz –

the artist of the war of the 19th century – described the strategy as “making the plan

of war and making the operation campaigns Those campaigns will decide the participation of each individual” Historian Edward Mead Earle described the strategy as “the art of supervision and using the resource of a country or an alliance of the countries, aiming at ensuring and increasing the effectiveness for its essential rights”

Nowadyas, definition of strategy is used popularly and considered as thefoundation for the operation of the business enterprise There are many definitions

of the strategy such as Strategy is the model of targets, destinations and plans to reach those targets (Kenneth, 1965 Strategy is the plan of controlling and using the resource of the organization like as human resource, assets, finance aiming at improving and ensuring its essential rights Kenneth Andrews is the 1st person to make the outstanding ideas in the classic book The Concept of Corporrate Strategy.

According to him, strategy is what an organization must implement basing on itsstrengths and weaknesses in the context including the opportunities and eventhreats

1.1.2 Nature of business strategy

- Business strategy of the enterprise is the business method of the enterprise, interms of Business strategy, it is the operation rule of the enterprise; method of usingthe resources; foundation to solve every problem of the enterprise

- Business strategy is the expression of the concept of the enterprise’s value,improvement spirit, strong willing of the enterprise’s leader, reflecting evaluation ofthe leader about the objective situation, subjective condition of the enterprise

1.1.3 Characteristics of business strategy

Comprehensiveness: Comprehensiveness of Business strategy requires considering

all parts of the enterprise, analyzing the situation of the whole enterprise, thesituation of the whole country and of the world

Visionariness: A success strategy often is a strategy basing on exact forecast.

Competitiveness: Business strategy must do research on how the enterprise has the

competitiveness advantage rather than the competitors and thus reaching the victory

in the competition

Threats: Threats of Business strategy require the enterprise to stand highly, be

visionary, and observe carefully, objectively to have the right strategy

Professionalism and creativity: Suitable specialization and technical creativity are

the important methods to ensure the existence and development of the enterprise.That is also the important characteristic in Business strategy of the small andmedium enterprise

Relative stability: Business strategy of the enterprise must have relative stability in

a certain period

1.2 Process of making the strategy

In order to make the strategy, it requires having strategic thinking and

answering 03 questions “Now where are we? Where do we need to go to? And how

do we come there?” through 7 steps

1 Current evaluation: Mission, targets, strategies

2 Analysis of business environment: Market structure, development situation,analysis of competition and position of the enterprise

3 Analysis of macroscopic environment: environment of demography, economy,society, technology and politics

4 Internal analysis of the enterprise: structure, resources, process, human resourceand enterprise culture

5 Analyze strengths, weaknesses, opportunities and challenges (SWOT)

6 Analyze and select the strategy: share or according to the sector

7 Evaluate and implement: requirement of resource, threats and benefits

Process of strategic management include: With process of strategic management

which is described as in Figure 1-1 below

Figure 1-1 Model of the process of strategic management

Source: Document of the lecture of strategic management

1.3 Model – analysis of external environment

1.3 1 Model – macroscopic analysis (PESTLE model)

Factors of macroscopic environment are expressed through following model

- Analyze the environment of demography:

- Analyze the environment of politics and law:

- Analyze the environment of economy:

- Analyze the environment of technical science and technology

- Analyze the environment of social culture

+ Microscopic: model of

5 competitive forces

Make and select strategy (SWOT)

Selected strategy

Cost Leadership DifferentiationFocus

Mission, vision

Implementation and adjustment of strategy

- Global environment

Macroscopic analysis allows the enterprise to evaluate the macro-economicfactors which have strong influence on the activities of the enterprise and basicchanges in competitive environment Macroscopic analysis can be illustrated asfollowed:

1.3.2 Model of five forces of Michael (Five force )1- Sector analysis

Model of analyzing 5 forces of Michael Porter, helping strategists to analyzethe above forces – completive structure of the sector, is summarized in the followeddiagram:

Figure 1-2 Diagram of structure of sector competition

Source: Michael E Porter- 1980

- Threats of potential competitors: the enterprise which has newly participated in

the market could be an enterprise that has just been established or an enterprisethat did business on other products in the past, now does business on manyproducts

Threats of potential competitors

Negotiation

capacity of

supplier

Competition of existing

companies

Negotiation capacity of buyer

Threats of substitution products

- Threats of substitution products: substitution products are the products with the

similar use If the benefit of substitution products is big, the pressure of thecompetition is large (pressure of the price) and making the enterprise to fall intothe defensive If the producer which produces the substitution products quicklydevelops production, that sector will be influenced strongly

- Negotiation capacity of the buyer: customers of the enterprise could be the

direct consumers for the consumed goods, when the consumers require the price

to be cheaper, the quality of the goods to be better, and the service of after-sales

to be better; they are also the pressure for the sector But the customers are alsothe distributors or agents

- Competition of existing companies: Competition among the enterprises in the same

sector is expressed through the form and characteristic of the competition

- Negotiation capacity of the supplier: suppliers of materials have the capacity to

increase the price or lower the quality of the products or both increase the price andlower the quality of the products

Analysis of real situation, tendency, collection intensity of 5 above forces decides thesevere level of the competition, ability of reaching the victory of the enterprise andscale, characteristic of the enterprise in that sector

1.4 Model of internal analyis of the enterprise

1.4.1 Value chain

Value of an enterprise is measured by the quantity which the buyer is ready

to pay for the product or service The enterprise has the profit if the created value islarger than the cost

Michel Porter, originated from analysis “each company is the collection ofactivities to implement, aiming at designing, producing, selling, delivering andsupporting for the products” Each operation increases the value of the product

“Value chain” is divided into main activities and support activities

1.4.2 Internal Factor Matrix- IFE

Using this matrix in analyzing the internal factors of the enterprise incomparing with the competitors From calculating the score of the company,analyzing and defining the position in comparison with the competitors by theinternal force

1.4.3 External Factor Matrix- EFE

Using this matrix in analyzing the external factors of the enterprise incomparing with the competitors From calculating the score of the company,analyzing and defining the position in comparison with the competitors from theinfluence of external factors

1.4.4 Total IFE point.

Summation from analysis of internal – external factors

1.4.5 Matrix of strategic space of the enterprise (Space matrix)

From calculating about financial potential, strengths of the sector,competitive advantage and stability of environment to make score of defining theposition of the enterprise

1.4.6 Sustainable competitiveness advantage of the enterprise

Sustainable competitiveness advantage of the enterprise has 04characteristics:

Firstly, it has the value, possible to help the enterprise to create the value, reduce the price, improve the business effectiveness Secondly, it is original, combining with the resource by an original method Thirdly, it is endogenous; its

generation is the result of mutual influence among units, individuals in theorganization, through combination and organization of technical resources of the

enterprise Fourthly, competitive advantage of the enterprise is formed in the

process of learning, accumulating of the enterprise, which is impossible to bebought in the market, other people are difficult to imitate

1.5 Model of general analysis (SWOT)

SWOT analysis: Strengths, Weakness, Opportunities and Threats SWOTanalysis is the key of strategic development, making clearly the internal strengths of

the organization; Weaknesses and opportunities, threats from the externalenvironment.

SWOT model is used to analyze the strengths, weaknesses, opportunities andchallenges of an enterprise to define suitable Business strategy This businessstrategy will promote the strengths of the enterprise; resolve the weaknesses intaking advantages of the business opportunities and overcoming the challenges ofexternal environment

1.6 General competition strategies

1.6.1 Cost Leadership Strategy

Is strategy to produce the goods or services with lower cost than the

competitors This strategy has 02 basic advantages: Firstly, with lower cost, leader of

the cost can make the lower price than competitors but still collect the profit same tothe competitors If the enterprises in a sector reach the similar values for their products,

leader of the cost can collect the higher profit because it has the lower cost; secondly, if

the competition in the sector is increased and the enterprises compete with each other

by the price, leader of the cost has the ability to stand more firmly in the competitionthan other enterprises because of its lower cost

1.6.2 Differentiaton Strategy

Purpose of strategy of the distinction of the products is to reach the competitiveadvantage by creating the products, goods or services which are recognized by theconsumers to be the most original The capacity of an enterprise with the distinction

of the products to satisfy the demand of the consumers under the way which thecompetitors are impossible to have, it means it could set up the remarkable higherprice than average level of the sector The capacity of increasing the revenue byreaching higher price (but not by reducing the cost like as the leader of the cost)allows the enterprise with the distinction of the products to operate better than itscompetitors and receive higher profit

1.6.3 Focus strategies

Concentrative strategy is different from 02 above strategies mainly because it isoriented to serve the demand of a limited group of the consumers or market segment.The enterprise which pursues the concentrative strategy focuses on serving a specificmarket segment, that segment can be defined basing on the criteria of geography, type

of the customers or a branch of product line through distinction of the products or lowcost Nature of concentrative enterprise is an enterprise with the distinction of theproducts or the leader of the cost

1.7 Model of analyzing and selecting the strategy under weight method

Weight method selects a strategy in a series of the made methods basing onevaluating the selection criteria such as value of the enterprise, revenue, profits,investment level, competitive advantage, suitability level with current culture of theenterprise, time… to look for the best strategy in made strategies This methodincludes 04 below steps:

Step 1: Select some most important, suitable criteria with the characteristic of the

enterprise to evaluate the competitive strategies such as value of the enterprise,revenue, profit, threats level, investment level, competitive advantage…This issubjective step of the selector

Step 2: Add the weight to the criteria to define the importance of the criteria which

have the bigger influence on the final decision

Step 3: Make score for each strategic method under each criterion

Step 4: Calculate total product to define which strategic method has the highest

score that will be the selected method

All in all, Chapter 1 makes clearly argument method to design Business

strategy Firstly, introducing the concepts, nature, characteristics of Business strategy; secondly, introducing the models of analysis of internal and external

environment of the enterprise including: model of analysis of external environment,model of 5 forces, model of value chain, analysis of sustainable competitive

advantage and summation model – SWOT; thirdly, analyzing basic competitive

strategies and selecting Business strategy under weight method Moreover, in theanalysis part, writers’ group will also use the tools of Marketing theory

CHAPTER 2: ANALYSIS OF REAL SITUATION OF THANG LONG

CEMENT JOINT STOCK COMPANY 2.1 Overview of Thang Long Cement Joint Stock Company

- Established on May 28th 2001, certificate of business registration No 2203000011issued by Division of Business Registration – Department of Planning andInvestment of Quang Ninh province

- Factory and office are located in Le Loi commune, Hanh Bo district, Quang Ninhprovince; grilling station is located in Hiep Phuoc industrial area – Nha Be – Ho ChiMinh City

- President of Executive Board: Mr Tien, Vu Van

- General Director: Mr Do, Le

- Established by shareholders: Hanoi General Export Import Joint Stock Company(GELEXIMCO), Vietnam Machine Installment Corporation (Lilama) and somenatural persons

- Chartered capital at December 31st 2010: 1,500 billion VND

- This is the first private Company which produces the cement and is guaranteed bythe Government to borrow foreign capital

Slogan: Foundation of the success

2.1.1 Process of formation and development:

- 2001: Establish the Company;

- 2002: Prime Minister approves the investment into Thang Long Cement Factoryunder Decision No.627/QĐ-TTg dated July 29th 2002 of Prime Minister investinginto the project of Thang Long Cement Factory;

- 2005: Start building;

- 2008: Complete the Factory and go into operation

2.1.2 Fields of business production activities of the company:

Production and doing business on cement with main products: Separate cement/packed cement PC 40, PCB40; Clinker (semifinished product)

2.1.3 Structure of management machine of the company

Figure 2-1: Diagram of organization

Source: Administration area of the Company

Total personnel of the whole company at December 31st 2010 is 709, inwhich main factory in Quang Ninh and Hanoi office are 619 people, office in theCentral is 09 people, HCMC branch is 81 people About knowledge degree, there is

01 doctor, 05 masters, 239 graduated people, and the left are graduated from theColleges, secondary schools, technical workers The structure of labor age is 20 –

25 years old for the most: 42%; then 25 – 30 years old: 36%, 30 – 35 years old:13%

2.1.4 Achievements of business production in the period of 2008- 2010:

TABLE 2-1: Achievements of the business in the period of 2008- 2010

BOARD OF GENERAL DIRECTOR

GENERAL ASSEMBLY OF SHAREHOLDERS

EXECUTIVE BOARD

BOARD OF CONTROLLING

Source: Financial area of the Company

From table 2-1, it shows the business results of the Company are not goodbecause the Factory has just gone into operation, having to pay for the cost from theinvestment period According to calculation, from 2011 and later, the factory willnot be at a loss and from 2012, the Company will collect the profit and 2017 will bethe time to take back the invested capital The operation capacity of the factory in

2010 is 88%, evaluated as the success about operating the factory; the product hasreached the relevant quality with the cement factories operating for a long time

According to the financial analysis, accumulated profit of the factory isaround 30% of revenue, the post-tax profit is negative because the financial cost isinfluenced strongly by interest rate and exchange rate due to loan of foreigncurrency from foreign bank, adding to high cost for sales because the factory mustpay for marketing, establishing distribution channel in first years

Figure 2-2: Revenue structure of Thang Long Cement under products

Source: Collection of writers’ group

From Figure 2-2: shows the main income of sales of Thang Long cement isfrom cement, Clinker is fluctuated around 30% This is the income resource withstable structure within 03 last years

About the market, Thang Long cement is expressed as follows:

Figure 2-3: Market structure of Thang Long cement in Vietnam

Source: Calculation and collection of writers’ group

From figure 2-3, it shows, the market of Thang Long cement in Vietnam isstill concentrated in the North, however market share was partly decreased in 2009,

2010 because of gradual increase of market share in the Central, the South

In order to have the overall picture about business results in the period of

2008 – 2010, writers’ group collected, summarized the data about the market share

of Thang Long cement in comparison with Vietnam Cement Corporation (Vicem),joint venture cement companies, joint stock cement companoes and separatedmarket share of Thang Long cement

Figure 2-4: Market share of Thang Long cement in the period of 2008 –

2010

Source: Calculation and collection of writers’ group

Through figure 2-3, it shows market share of Thang Long cement wasincreased gradually through years from 2, 5% in 2008 to 3, and 7% in 2010, making

up high rate is still Vietnam cement corporation (Vicem) where there are manymember factories

2.2 Analysis of external environment of Thang Long Cement Joint Stock Company

2.2.1 Analysis of macroscopic environment (PESTLE model)

2.2.1.1 Economic environment: Forecast in the plan of socio-economicdevelopment in 5 years of 2011- 2015 approved by Vietnam’s Government, annualGDP growth is over 7%, this shows an economy will develop strongly in the future

In order to reach this, the contribution of construction sector is very big, cementindustries also open a lot opportunities in joint targets of construction sector.Urbanization rate is quick, forecasted from 2011- 2015, Vietnam’s urbanization rate

is around 30-35%, together with developing and completing the infrastructure.Demand of the cement for economic development is very large, from serving forcivil construction, industrial construction, and transportation

2.2.1.2 Environment of politics, law: stability of politics is the 1st decisivefactor for the development of Vietnam’s cement System of related documents tothe sector of construction, transportation issued by Vietnam’s National Assembly:Construction law; Housing law; Law of Business on Real estates; Law of roadtransport…creating legal corridor for these sectors On May 16th 2005, PrimeMinister issued Decision No.108/2005/QĐ-TTg about approving Planning forexploring, exploitation and using the mineral for cement in Vietnam to 2020

2.2.1.3 Environment of demography: According to the data of GeneralDepartment of Statistics, in 2010, Vietnam’s population is 87 million people,forecasted in 2011, population is over 88 million people; evaluated to be young

population, the demand for the housing every year is still high, then the demand forconstruction When there is the growth of construction, leading to the demand ofconstruction materials, including cement This is also the best opportunity forVietnam’s cement now

2.2.1.4 Environment of technology: In the world now, modern technology ofcement production has been applied widely for reverter furnace cement; there are 2technological centers for producing the cement including Japan and Europe.Currently, Vietnam has also been applying 02 these technologies into producingcement The factories are built under joint venture form, mainly Japan’s technology;and other factories mainly import the equipments from Europe, from countries:France, German, Switzerland… Technology of Thang Long cement factory is fromPolysius Group – Republic of German

2.2.1.5 Global environment: development of construction sector in the world

is in the boom period The demand for the cement is very large, currentconcentrating on the market of Arab, Africa This is also good opportunity forVietnam’s cement factories participating in the import In 2009, Cam Pha cementexported to Africa with 20.000 tons At the beginning of 2011, Thang Long Cementexported to Africa with 25.000 tons for the export plan of 50.000 tons

2.2.1.5 Environment of social culture: In construction, besides the materials

to make the project to be firm such as iron, steel, stone, sand, cement is theindispensable factor It could be said that when mentioning the constructionmaterial, it means the cement

2.2.2 Analysis of environment of cement sector (model of 5 forces):

2.2.2.1 Internal competition of the sector: internal competition of the sector

is happening strongly; total the cement factories which have been operating andlicensed are 61 factories including: Vietnam’s Cement Corporation and 7 membercompanies, 48 Cement companies of mixed ownership, 05 joint venture cementcompanies Cement factories which have been operating for a long time are HoangThach Cement, Bim Son Cement, But Son Cement, Ha Tien Cement

Unit: million tons

Figure 2-5: Situation of cement consumption in the period of 2008 – 2010 and forecast to 2015

Source: Ministry of Construction - Vietnam

From Figure 2-5, it shows the supply and demand of the market from 2010and earlier were less strained, but from 2011 and later the situation is different,estimated that the supply will be far from the demand, over 20 million tons/ year,this shows the strong competition happening in the cement sector

In 2010, Vietnam had 11 cement projects invested newly or expanded foroperation with the more increased supply resource by 10 million tons/year;forecasted to be similar in next years Therefore, annual cement cupply resource isincreased by over 20% While the demand for the cement has the slower growth by20%, leading to the cement redundancy The warning of the cement redundancywas made from the 2007s, but the localities followed the achievement, breaking theplanning in the cement sector, approving the excessive investment This is also thegeneral consequence of Vietnam’s cement industries when the local benefit is stillheavy in economic development

Besides that, shortage and redundancy also happen in Vietnam’s provinces.

In the North, redundancy is for both Clinker and cement because there are so manycement factories concentarted here, including provinces: Quang Ninh, Hai Phong,

Ha Nam, Ninh Binh; while in the Central provinces, it is lack of cement, balancewith clinker; in the South, it is lack of clinker, redundancy of cement Theconsumption rate of the cement in the North is 50%, the Central is 18%, the South

is 32%

In next time, Vietnam’s cement could have to compete with the importdcement because of opening the door under WTO’s commitment when the price ofimported cement is cheaper than the price of cement produced in Vietnam

Enterprises in the cement sector compete with each other mainly about theprice because the quality of the cement could be similar, the distinction of thecement is not clear In order to compete, the enterprises must lower the productionprice, implement the policies for preference, after-sales, customer service Thiscompetition happens among the enterprises of Vietnam’s Cement Corporation andother private cement enterprises; between domestic enterprises and foreign investedcement production enterprises However, competitive advantage is still for theenterprises directly under Vietnam’s Cement Corporation with over 40% ofproduction factories and 30% market share because they are near material resource,the machines, equipments came to an end of depreciation period, but they meet thechallenge that is backward equipment technology and mostly originated fromChina, thus the production price is high, loss in production process is much.Advantage of the cement production enterprises with private ownership is because

of new investment, modern technology, low production price and equal quality tothe cement of Vietnam’s Cement Corporation

2.2.2.2 Power of the supplier: strongly affect because of the input price

including coal, electricity, and limestone;

The input materials of cement production are limestone, coal, electricity andadditive In which, supply of limestone, coal, electricity has influence on the

production price, the profit of the enterprise The suppliers for cement factories arethe State management bodies, enterprises

The State with the management role in licensing the limestone exploitation.Reserve of the limestone for cement production is very rich, mainly in the Northernprovinces In order to have production reserve for 20 years for a factory, permissionfor limestone exploitation is over 100 billion m3 Requirement for the permission isnot simple because it must be implemented by many administrative procedures ofVietnam’s bodies from Department of Natural Resources and Environment,provincial People’s Committee, Ministry of Natural Resources and Environmentand many other bodies The investors of the factory besides spending a lot of timealso must pay for the high costs to have the exploitation permission But for havingthe exploitation permission for limestone, it decides 30% of the success of thefactory

Electricity and coal are two exclusive sectors affected by the State-ownedenterprises Annual increase of electricity price causes the difficulty for production,and electricity cut-off in relays also has the big influence on production processbecause of kiln halt Cement factories must buy electricity of Vietnam’s ElectricityGroup (EVN), except some factories built the attached thermo-electric factory Coal

is the important and indispensable material because now 100% of cement factoriesoperate by the coal and the operation by the coal is cheaper for 3 – 4 times than theoperation by the gas Cement factories must negotiate with Vietnam’s Mineral CoalGroup to buy the coal with type of 4A for production That the coal price hasincreased twice within 4 last years has made the production price of the cement to

be increased strongly The coal suppliers have been having the trend of coal export

in stead of selling the coal to the cement factories because the price of selling exportcoal is higher by 30 – 50% Affect power of suppliers of coal, electricity for thecement factories is the price

Suppliers of the additive for cement production also have the high power inproviding the input: they have the right to select the cement factories to provide

because there are many factories and exploitation of the additive is not simple forthe cement factories Because the suppliers of the additive own many oreexploitation areas and the additive is indispensable component in cementproduction The additive is catalyst, deciding the quality and the price of cementproduction.

The suppliers also include the enterprises participating in transportationbusiness to carry the cement, including road and rail transport Forwarders oftenhave the big teams of the ships, a lot of lorry teams Strength of the forwarders forthe cement production enterprises is not much because now there are so manyforwarders that can participate in cement shipment

From analysis of the power of the suppliers above, it shows the strongestpower belongs to the suppliers of the coal, electricity because these sectors areexclusive and affected about the price by the State

2.2.2.3 Power of the buyers: Customers of the cement production enterprises

are often 02 types of customers, including households, organizations (projects).Cement producers often establish the distribution channel through the agents oflevel 1 or level 2 The agent of level 1 will have to be the organizations with legalentity; the agents of level 2 could be households Therefore, besides customers asfinal users including organizations (projects) and households, the distributors arealso the customers of the cement companies In structure of consumption output,70% are for the organizations, 30% are for the households With the situation ofredundant supply of the cement in current period, selection of the customers aremore and more various, the power of the buyers is expressed highly

For households, cement consumption is through the agents of level 1 or level

2, not buy directly from the company The households will after use in building thehouses with the medium quantity of 1 – 10 tons Pressure for the sellers is not highbecause the quantity is not much, in comparison with the customers asorganizations; power of the buyers as the customers of households is not high

For the customers as the organizations, power of the buyers is very high.Cement factories must be studying a lot of methods to approach this customerresource This customer group is the projects, the enterprises (participating onbehalf of the agent of level 1) Customers as organizations often consume with thelarge quantity for a long time, the shipment is dependent on each position of theproject/ distributor.

2.2.2.4- Substitution products: cement is the input of the construction sector

with the main materials including iron, steel, sand, gravels, cement…The cementitself is also another factor to create the input for the construction such as concrete.Therefore, cement is the indispensable material in the construction process.Together with development of construction sector, it has created the sector of newmaterials, but for the cement product in terms of physical-chemical structure isimpossible to be changed, the change thing is the feature, creation of the cementwith high force-resistant intensity to meet the construction of the projects in thecomplicated conditions of the weather or of specific structure In short, withavailable cement products in the market, the competitive pressure for thesubstitution products is mostly zero;

2.2.2.5 New member of the sector: From 2008, Vietnam’s Government did

not issue the permission to build the cement factories or expand the capacity.Because permission of investment into building the cement factories or expandingwith the approved projects under estimated design has made the supply to increaseover the demand about the cement from 2011 and later

This is the beneficial sector because of economic effectiveness under thescale: because the cement investment requires the big capital, in order to reach theeffectiveness, cement factories need to have the minimum capacity of 1 million ton/year, and then the investment for such a factory is also over 160 million USD Theinvestment into the factory with the capacity of below 1 million ton/ year isconsidered as ineffective In recent years, investors themselves and the Governmentapprove the cement projects with the capacity of from 2 million tons/ year and

more It requires financial potential of the investors to be strong enough adding tothe capacity of preparation of the credit capital This shows no enterprise could alsoparticipate in investment into building the cement factory.

Therefore, in cement sector, the competitive pressure from new enterprises

of the sector is zero The biggest challenge is the competition with the renownedcement trademarks with a long time such as CHINFON, But Son, Tam Diep, Nghi

Son, Bim Son, Hoang Thach

In short, from analysis of the model of 5 competitive forces of Vietnam’scement sector now and forecast until 2015 as the foundation for building thestrategy of Thang Long Cement Joint Stock Company, it shows the internalcompetition level of the sector is strong, deciding the success of each cementproduction enterprise

2.3 Internal analysis of Thang Long Cement Joint Stock Company

2.3.1 Model of value chain

2.3.1.1 Main activities

 Customer relationship, partnership

By January 2011, Thang Long Cement Joint Stock Company has established 45distributors of level 1 which are the organizations meeting the standards to becomethe agent of level 1 of Thang Long cement, these are main customers of ThangLong Cement

Partnership: Vietnam’s electricity group is the electricity supplier for thefactory; Vietnam’s Mineral Coal Industrial Group is the coal supplier

 Management of materials:

Input materials of cement production process need the big inventory quantityincluding limestone, coal and additive, Thang Long Cement Joint Stock Companyhas established the process of purchasing, storage and preserve the materials

Cost of limestone, coal, electricity accounted for more than 50% of productioncosts Therefore, the management of inputs will help Thang Long cementmanufacturing cost reduction For the limestone to make the material near the rock

For coal, regularly check the level of consumption, coal use 4A, actively negotiatingwith suppliers for coal reserves and price stability Need to install backup generators

to avoid outages, reduce costs and restart furnaces

According to calculations of the Accounting Department of Thang LongCement, with reduced consumption of coal, electricity prices down 10%, the cementproduction will fall from 690,000 VND / ton to 660,000 VND per ton This willcontribute to increase profit per unit of tons of cement With reducing cost ofproduction is the foundation for Thang Long Cement competive with other similarproduct on the market, is the basis for formulating strategies based on cost

Implementation of production process:

Process of cement production includes 11 steps

Figure 2-6: Process of cement production

Source: Department of Technique

1- Exploit and smash the materials;

2- Temporary storage and mix the materials;

3- Define the quantity;

4- Grind the materials;

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