valuating & adjusting strategy for construction installation & industrial material company limited

NATIONAL ECONOMICS UNIVERSITY SOLVAY BUSINESS SCHOOL
FINAL THESIS
Valuating & Adjusting Strategy
For Construction Installation & Industrial
Material Company Limited
Instructor: Associate Prof. Ngo Kim Thanh
Student: Duong Ngoc Khanh– MBM7
Hanoi, March 2010
Valuating & Adjusting Strategy for Cim Co., Ltd
Acknowledgements
I would like to express my deepest gratitude to my research supervisor, Mrs. Ngo Kim
Thanh, for her intensive support, valuable suggestions, guidance and encouragement
during the course of my study.
I would like to express my sincere gratitude to all of my teachers at Solvay Business
School and National Economics University for their teaching and guidance during my
course.
I would like to extend my thanks to the CEO of Cim Co., Ltd who trusted me and shared
his information and ideas about the company operating.
I am very thankful to all individuals for providing me with the necessary information and
supporting me with advice during the period of my data collection for this research
study.
Last but not least, I would like to express my loving thanks to my parents, my wife and
son for their love and encouragement throughout my studying.
Table of content
Acknowledgements 2
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Valuating & Adjusting Strategy for Cim Co., Ltd
Table of content 2
Executive Summary 4
Table 1: Corporate strategy formulation process 11

Table 3: SWOT/ TOWS matrix 17
III.3. Opportunities and Threats 27
Table 4: Strengths and Weaknesses of CIM CO., LTD 34
Table 6: SWOT/TOWS matrix of MSA VN 38
To choose Strategy applied for Cim, the author use pointing method with criteria
above. The scale point is 03 in which: 3 - Sure; 2 - Maybe; 1 - Not 39
Chapter 6: Conclusion, limitation and further researches 45
Appendix: Finance Report years 2002 - 2008
Business Result year 2002 -2008
List of Figure
Figures 1: Revenue of Cim co., Ltd from 2002 to 2009……………………… 08
Figurers 2: Tariff on foil & rebar from 2001 to 2009………………………… 19
Figures 3: Imported quantity 2009…… ……………………………………… 23
Figures 4: Top 20 hot plate importers in 2008……………………… ………….24
Figures 5: Price of Steel in 2007 (Source: Vietnam GSO) …………………… 25
Figures 6 : Revenue structure of Cim Co., Ltd…… ……………………………29
Figures 7: Leverage & liquidity ratios of Cim Co., Ltd……………….…………30
Figures 8: Revenue & liabilities growth of Cim…………………………………34
Figures 9: ROE of Cim from 2002 to 2008…………….……………………… 35
List of table:
Table 1: Corporate strategy formulation process… …………………………….11
Table 2: SWOT model……………………………. …….………………………16
Table 3: Opportunities and Threats…………………………………………… 17
Table 4: Strengths and Weaknesses of Cim., Ltd……………………………… 34
Table 5: Threats and Weakness……… …………………………………………35
Table 6: SWOT/TOWS matrix of Cim, Ltd……………………………………. 37
Table 7: Choosing Strategy……………………………………………….…… 38
Table 8: BCG Matrix…… ……………………………………………….…… 39
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Valuating & Adjusting Strategy for Cim Co., Ltd
Executive Summary
Steel industry takes a very important part for any economy, especially for Vietnam - a
developing country where begin to build its new cities, infrastructure, shipping, heavy
industries… According to statistics of Vietnam Steel Association, Vietnam nowadays
has discovered & located over 216 iron ore mines in which 13 mines with the capacity
over 2 million tons distribute conceptually in the North. However, investments focus on
easier & more quickly making money field. Lacking of planning from Government from
the beginning, social resources has dropped foil & iron ore processing industries. In
many years from 2000 to 2007, domestic foil producers just supply only around 20% of
demand. This rate rose up to 50% in year 2008 with new factories but they themselves
facing the same problems of finished-good factories: lacking of input materia. This
problem shall be solved by developing iron ore exploiting & processing industry.
Because of lacking input material, the only solution of Vietnam steel industry is expected
to outside supply - exporting countries such as India, Russia, Korea, Japan, Australia,
South Africa and China, the biggest producer and consumer in the world. Input material
depending on foreigner resources, the market strongly affected by outside factors not
only international supply-demand but also policies of exporter countries.
Beside outside factors, Vietnamese market itself affected by internal conflicts between
infant policy & monopoly situation.
With an unstable environment like above, Construction Installation & Industrial Material
Company Limited (Cim Co., Ltd) was born in 2002 with only one business line, it was
importing to distribute in domestic market. Its clients are domestic trading companies,
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Valuating & Adjusting Strategy for Cim Co., Ltd
mechanic manufacturers, construction contractors, shipping manufacturers…etc. In eight
years, the company has amazing growth rate in revenue: 21 times with average growth
rate of 140%. The source of this hot growth came from dept. Until 2005, 100% revenue
belonged to trading activities. In this very year, Cim Co., Ltd has stood on the edge of

bankrupt because of a strongly changing in business environment. This hot growth
originates from what and why just in 04 operating years the company has faced to such
serious problem. Did the problem come from external or internal factor?
Firstly, this study aims to review company’s business, finance statement and
organization, to evaluate suitability of the current strategy in context of unstable &
changing environment.
Secondly, base on technical of Strategy Formulation process including SWOT and BCG
analysis this study shall give out the suggestions to adjust CIM Co., Ltd strategy in order
to improve Weakness to reduce Threats from changing environment and to take full
advantages of Strengths to catch Opportunities.

Chapter 1 – Introduction
I.1. Background
I.1.1 Industry overview
Steel is a strategic industry in Vietnam economy, which under early construction
process. Its history started in wartime with the first complex in Thai Nguyen province
what had small capacity and few kinds of products. In general, steel industry can be
described simply as a chain of products as the diagram bellow:
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Mines
Iron ore
Sifting
Crude material
Refining
Mild foil
Rebar
Plates
V-shaped
Construction

Shipping
Mechanical
Shipping
Electric
transportation
Roll
Pipe
Roofing
Mechanical
End usingFinished - good
Semi-product End using
Valuating & Adjusting Strategy for Cim Co., Ltd
Diagram1: Steel industry product chain
Iron ore in mine, which contains other impurities, after sifting becomes input material for
iron refining factories. Through cleaning, chemical, heat processing it shall become
crude material for mild foil laminating factories. This processing requires big investment
in fixed assets, equipments & technologies. It also takes long time to revoke investment
capital than finished-goods processing. There are several types of mild foils in different
shape or size for each production. After heat & shape formed - processing, output
products are rebar, plate, roll or v-shaped rod.
Domestic foil producers just supply 28% of mild foil demand so in many years finished-
goods producers must depends on imported material, which was a factor creating an
unstable market. This problem shall has been analyzed more detail in Chapter III of this
study.
I.1.2 Current background
Although the year of 2009 is regarded as a difficult year for VN economy after crisis but
2010 is really harder time when Government support policies comes to end. Especially,
the State Bank allows banks to loan in medium and long term with negotiable interest
rate. The interest rate shall increase from ceiling rate of 12% to 18%-20%. This strong
change in 2010 surely causes very bad effects to the companies that using much more

dept than equity as the case of Cim Co., Ltd.
Furthermore this year is the first year Vietnam shall export 500.000 tons steel products
whose input materials come from iron ore exploited & proceeded in domestic factories
(according to the Development Planning of VN Steel Industry in 2007-2015, considering
up to 2025 signed by Prime Minister). In five years from now, when huge steel
production complex projects come to operating, Vietnam is going to be a steel exporter
instead of being importer currently. The market share of import companies shall narrow
by the time.
In 2010, CIM Co., Ltd has a strong change in organization from the top. The CEO has
been instead of his father to be the Chairman of company, who retired in 2009. This has
a deeply meaning to the company in changing the decision making process in direction
of power concentrated.
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Laminate
Valuating & Adjusting Strategy for Cim Co., Ltd
The movements of environment and their influences to the business structure of Cim Co.,
Ltd shall has been more detail analyzed in the “Problem Statement”
I.2. Operational Definitions
Here below are some explanations of terms in steel industry that using within this thesis:
- Civil steel pipe: Steel pipe used for civil construction with diameter 14 to 100 mm
- Pre-fabricated steel structure: This kind of building is fabricated in factory and
combined at site, which is used for industrial building.
- Steel foil: Steel rod with section 100x100 or 120x120 mm were used as input material
for many kind of steel product such as: rebar, V-angle rod
- Rebar: Steel rod with circle section from 6mm-32mm used in concrete structures.
- Cutting line: Machine divides bigger steel coin in to smaller steel coins what to be used
as input material for pipe production.
- Sifting: Process exploiting iron ore as input material for iron refining industry
- Refining: processing which from iron ore to make crude material for foil laminating

process.
- Laminating: Processing which makes mild foil from crude material.
- VSA: Vietnam Steel Association
I.3. Problems Statement
Currently, Cim Co., Ltd has mainly two business lines including Importing &
distributing steel product (Trading) & Steel pipe manufacturing (manufacturing). Here
under is the revenue of the company from 2002 to 2009:
Figures 1: Revenue of Cim Co., Ltd from 2002 to 2009
Trading revenue grew so fast, especially in duration from 2002 to 2004. In three years
from establishment, the company revenue increased from 25.9 billions to 513.4 billions,
nearly 20 times bigger. The chart above shows that how much “hot” growth was through
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Valuating & Adjusting Strategy for Cim Co., Ltd
time going. Revenue grew with amazing speed while equity contribution increasing was
not equivalent. In 2004, company equity was 16 billions and the liability was 110.
Therefore, dept-equity ratio was 6.8. These figures pointed a thing that revenue grew
base on increasing of liabilities.
In 2005 affected by changing environment, revenue deeply decreased 40% down to 304
billions. This year, the company got a negative benefit of 41 billions while its
contributed capital was only 16 billions.
In sort term, depending on dept made the company frequently be in stressful finance
statement and faced to solvency losing damages when environment changes in bad trend
or a sudden event happens unexpectedly. Besides, burden of loan interest took away
most profit.
In long term (over five years), the market share shall has been narrowed by two factors:
- Harder competition
- Imported goods be instead of domestic products which made by huge projects under
construction according Government plan.
Therefore, Cim Co., Ltd should consider reviewing its business, developing plan under

strategy view. The targets that company is directed forwarding are worthy in such risky
statement as analyzed above? That are the problems this study aims to solve through
answering questions raised in part “Research Questions”
I.4. Research Objectives
Objectives of the study listed as bellow:
- Identify current missions, objectives, strategies of Cim Co., Ltd and valuate the
suitableness of strategy in new phase of company life in context of changing
environment
- Analyze external & internal environment for the company.
- Base on the result of above researches, the study will suggest a suitable corporate
strategy for the company in the period 2010-2015.
I.5. Research Questions
Below are the research questions that the study tries to answer
1. What is the current strategy of Cim Co?
2. Dose the company has clear vision, mission and value?
3. Is the existing strategy suitable for company’s development currently and in the
future?
4. Is it necessary to adjust the strategy and if yes how the strategy shall be adjusted?
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Valuating & Adjusting Strategy for Cim Co., Ltd
5. How dose the company implement the new strategy?
6. How is a schedule of the implementation?
I.6. The importance of the research
Depending deeply on liabilities, the company’s leaders seem to ignore serious problems
at the strategy level to flow target of growth as fast as possible. Therefore, the outcomes
of this study aim to warn them about the future risks as well as to support them to adjust
the company’s strategy for more safe & stable statement in a changing environment.
I.7. Scope of Limitation
Because limitation of time and ability to approach update company’s information, this

study just focus on business activities of Cim Co., Ltd in the North in duration from 2002
to 2008.
Steel is a very wide industry including exploiting, processing crude material, semi-
product manufacturing, finish-goods manufacturing. In this study, the concept of
industry juts is narrow in fields that the company’s business concerned: crude materials
what are inputs for finish-goods manufacturing.
Concept of market and competitors also are limited in the North of Vietnam.
I.8. Structure of Thesis
Chapter 1 describes background, industry concept definition, statement problems,
objectives, research questions and scope of limitation.
Chapter 2 describes theory framework and model used in the study.
Chapter 3 describes analysis external environment using PEST and 5-force model to
identify Threats and Opportunities which company must to face or could catch at the
present and in the future.
Chapter 4 describes analysis internal factors such as finance resource, human resource,
management process, technology, business line, manufacturing effectiveness, investment
activities, relationships to identify Strengths and Weakness of company. This chapter
also analyzes the current strategy of company, point out current vision, mission and
value.
Chapter 5 describes adjusted strategy for the company and implementation plan
Chapter 6 Conclusion, further researches and thanks words
Appendices and Bibliography/ references are listed at the end of the report
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Valuating & Adjusting Strategy for Cim Co., Ltd
Chapter 2 – Theory review
II.1. Theoretical framework
The concept of strategy is not a new one. It appeared from ancient history and strongly
adhered to wars, where strategy meant to win over the enemy, to keep the land from
invasion, or even to expand the country successfully. Later on, strategy has not only

become a war terminology but also been well connected to many other fields including
economy, politics and society. In economy, strategy has become very important to
business organizations.
II.1.1. Corporate strategy & role of corporate strategy in organization
- Corporate strategy
Corporate strategy is mainly about broad decisions for the total organization's scope and
direction. When creating corporate strategy, managers should consider what changes
should be made in the company’s growth objectives and strategy for achieving those
objectives, the lines of business that company plan to involve, and how these lines of
business cooperate together. Corporate level strategy includes three components: (1)
growth or directional strategy (what should be the growth objectives, ranging from
retrenchment through stability to varying degrees of growth and how the company
accomplish this), (2) portfolio strategy (what should the portfolio of lines of business
with regard to how much concentration or diversification we should have), and (3)
parenting strategy (how the company allocate its resources – where should the company
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Valuating & Adjusting Strategy for Cim Co., Ltd
put special emphasis, and how much does the company integrate to different fields of
business).
- Roles of corporate strategy in organization
Many people start their business with a small amount of money but become successful
thank to a correct strategy. However, there are a lot of big firms but due to applying a
wrong strategy, become bankrupt in a short period. It is obvious that nowadays, strategy
become more and more important in organization.
- Corporate strategy could be seen as the direction for organization in the long term and
the sound basis for all activities of organization. Firms operate without corporate strategy
or unclear corporate strategies will loose the direction easily. They cannot link the
current issues with the long-term view and see the business in one side, not overall
activities of enterprise.

- Corporate strategy helps the organization to see and utilize the opportunities as well as
prepare to deal with threats in business environment.
- Corporate strategy is the key for organization to best employ the resources, enhance the
position of enterprise and sustain development.
- Corporate strategy assists the board of managers to make decisions in accordance with
the move of market. It will be the basis for RD & D, humane resource, product
development…
II.1.2. Corporate strategy formulation
It is useful to consider strategy formulation as part of a strategic management process
that comprises three phases: diagnosis, formulation, and implementation. Strategic
management is an ongoing process to develop and revise future-oriented strategies that
allow an organization to achieve its objectives, considering its capabilities, constraints,
and the environment in which it operates. Within the scope of this thesis, the author will
only concentrate on Diagnosis and Formulation phase which are summarized in table 3.1
below:
Table 1: Corporate strategy formulation process
COMPONENT DIAGNOSIS FORMULATION
Basic question Where are we? Where do we want to be?
Output Understanding of the organization & its
environment, therefore, address the
critical issues
Corporate strategy
recommendations to ensure
success & address the
critical issues
Process 1. Identify current mission, objectives
and (especially) strategies
1. Identifying directional
strategy (grand strategy) for
the company

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Valuating & Adjusting Strategy for Cim Co., Ltd
2. Analyze data about external & internal
environment to evaluate performance and
identify SWOT
* External: competitive environment (5-
force model), societal environment
(political/legal, technological, economic,
socio-cultural) -> identify opportunities
and threats
* Internal: financial, marketing,
production/operations, technology,
organizational -> identify strengths and
weakness
3. Address critical issues: SWOT
analysis
2. Identifying portfolio
strategy for the company.
3. Define new mission,
goals for the company
II.1.2.1. Diagnosis
Diagnosis phase include
- Reviewing the current key objectives and strategies of the organization.
- Performing analysis of the internal environment of the organization including financial
resources, physical resources, human resources, technological resources… to identify
major strengths and weaknesses;
- Analyzing the organization's external environment, including macro factors (political,
economic, social technological factors) and micro factors (rivalry level, threat of
substitute, buyer powers, supplier powers, barrier to entry) in order to identify major

opportunities and threats.
- Identifying the major critical issues, which are a small set, typically two to five, of
major problems, threats, weaknesses, and/or opportunities that require particularly high
priority attention by managers.
- Reviewing current missions, goal and strategy of firm
Before formulating a new strategy for the company, it is necessary to check whether the
firm has any strategy or not. In case company already have a business strategy, should
evaluate the current strategy: its strong points, weak points and the necessity to formulate
a new strategy.
- External environment analysis
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Valuating & Adjusting Strategy for Cim Co., Ltd
A scan of external environment in which the firm operates can be expressed in term of
societal environment analysis (political, economic, social technological factors) and
industry analysis (rivalry level, threat of substitute, buyer powers, supplier powers, and
barrier to entry)
* The Societal Environment Analysis
The societal environment composes of general forces that influence the long-run
decisions of the organization. They are economic, technological, political-legal socio-
cultural forces. Therefore for a garment firm, its societal environment is the situation of
economic, technological, social and political force in Vietnam and in customers’
countries
 Political factors include government regulations and other legal issues and define
both formal and informal rule in which the firm must operate. The political
factors can be tax policy, labour law, environmental regulations, trade restriction
and tariffs, political stability. For a garment companies, above factors have a very
strong influence on company’s operation and development.
 Economic factors affect the purchasing power of potential customers and the firm
cost of capital. Economic factors are economic growth, interest rates, exchange

rates, inflation rates… Managers must consider the state of the economy when
formulating strategies. In 2010, with the recover of the world economics,
Vietnam garment companies can expect to increase the exporting turnover.
 Social factors include the demographic and cultural aspect of the external macro
environment. These factors affect customer need and size of potential markets.
Some factors include: health consciousness, population growth rate, age
distribution, career attitude, emphasis on safety… Each of these influences how
management accomplishes its job. Changes in social environment can have major
impact upon managerial decision making.
 Technological factors can lower barrier to entry, reduce minimum efficient
production levels and influence outsourcing decision. Some technological factors
include R & D activities, automation, technology incentives… In garment firms,
management must decide the appropriate level of technology for the company
and how new level of technology should be introduced.
* Industry Analysis: Analyzing Task environment
Porter (1985) states that corporation concerned mostly on the intensity of competition
within its industry. The level of intensity is determined by major competitive forces as
threat of new entrant, rivalry, threat of substitutes, bargaining power of supplier and
bargaining power of buyer.
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 Rivalry is the intensity of the competitive environment consists of those whom an
organization must "compete" in order to obtain resources. Hamel, (1993) stated
that knowing your rivals is a key ingredient in building effective strategies, and
analyzing the competitive environment is a underlying challenge to management,
In the traditional economic model, competition among rival firms drives profit to
zero. The intensity of rivalry is different in each industry. In garment business,
the intensity of rivalry is influenced by the following characteristics: (1) A large
number of firm increase rivalry because more firm must compete for the same

customers and resources. The rivalry intensifies if the firm have similar market
share, leading to struggle for market leadership. (2) Slow market growth causes
firms to fight for market share. In a growing market, firms are able to improve
revenues simply because of the expanding market. (3) High fixed costs result in
an economy of scale effect that increases rivalry. When total costs are mostly
fixed costs, the firm must produce near capacity to attain the lowest unit costs.
Since the firm must sell this large quantity of product, high level of production
lead to a fight for market share and results in increased rivalry. (4) Low switching
cost increases rivalry. When a customer can freely switch from one product to
another, there is a greater struggle to capture customers. (5) Low level of product
differentiation is associated with higher levels of rivalry. Brand identification, on
the other hand, tends to constrain rivalry. (6) High exit barriers place a high cost
on abandoning the product. High exit barrier cause a firm to remain in an
industry, even when the venture is not profitable. A common exist barrier is asset
specificity. When the plan and equipment required for manufacturing a product is
highly specialized, these assets cannot be sold to other buyers in another industry.
 Threat of substitute: In Porter’s model, substitute products refer to products in
other industries. To the economist, a threat of substitutes exists when a product’s
demand is affected by the price change of a substitute product. A product’s price
elasticity is affected by substitute products – as more substitutes become
available, the demand becomes more elastic since customers have more
alternatives. A close substitute product constrains the ability of firms in an
industry to raise price. - The threat of substitute comes from products outside the
industry. The price of paper bag is constrained by the price of poly bag. The poly
bag is substitute, yet they are not rivals in the poly bag industry.
 Buyer power: The power of buyers is the impact that customers have on a
producing industry. Buyer affect an industry through their ability to force down
the prices, bargain for higher quality or more service, and play competitors
against each other. Buyer are weak if buyers are fragmented (no buyer has any
particular influence on product or price) or producer threaten forward integration

(producer can take over own distribution/ retailing) or producer supply critical
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portions of buyers’ input or products not standardized and buyer cannot easily
switch to another product.
 Supplier power: A producing industry requires raw materials, labour, components
and other supplies. This requirement leads to buyer-supplier relationships
between the industry and the firms that provide it the raw materials used to create
products. Suppliers, if powerful, can exert an influence on the producing industry,
such as selling raw materials at a high price to capture some of the industry
profits. Suppliers are powerful if suppliers are concentrated, credible forward
integration threat by suppliers or significant cost to switch suppliers. Suppliers
are weak if there are many competitive suppliers while product is standardized,
credible backward integration threats by purchasers or concentrated purchasers.
 Barrier to entry/ threat of entry: It is not only current rivals that pose threat to a
firm in an industry but also the possibility of new firm enter the industry. In
theory, any firm should be able to enter market and if free entry and exists then
profit should always be nominal. In reality, however, industries possess
characteristics that protect the high profit levels of firms in the market and inhibit
additional rivals from entering the market. These are barrier to entry. Barrier to
entry are unique industry characteristic that define the industry. Barriers reduce
the rate of entry of new firms, thus maintaining a level of profits for those already
in the industry. From a strategic perspective, barriers can be created or exploited
to enhance a firm’s competitive advantage. Barrier to entry arise from several
sources: government regulations, patents and proprietary knowledge, economies
of scale
Internal environment analysis
The elements within the organization that are available to be used in the accomplishment
of its goals are organizational resources. They are physical, human, technological and

financial resources.
 Financial resources: All organizations require resources to provide for ongoing
operations and to fund growth. Retained earnings refer to the portion of net
income which is retained by the corporation rather than distributed to its owners
as dividends. This source of funds is often inadequate to fund the desired level of
growth so other source must be utilized. In order to secure needed financial
resources, management can look outside the organization for sources of funds.
There are 2 general sources for business: debt and equity. Debt is the money that
company borrows to fund its businesses. Debt can include bank loan, lines of
credit and corporate bonds. Equity is the money company get from selling the
stock. When selling its stocks, the company is giving out its ownership. In
general, the major financial task confronting management are to acquire
necessary funds by some combination of retained earnings, debt and equity and
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allocate the acquired financial resources for organizational use. The accounting
profession, through its record and procedures, provide management with a
financial perspective on how funds are being used and strategy indicate the needs
for financial resources for operation in the future.
 Physical resources: The physical resources of company include plant and
manufacturing equipment, distributing facilities and raw material. Management
periodically evaluates the manner in which the physical resources of company
being acquired and utilized. These resources are the tools for management to
improve productivity and ensure profitability.
 Human resources: The people who work in the organization are its human
resources. In order to have effective business, company should recruit and
develop necessary skilful workforce. It is very important for any company to
manage well this resource. The first task of human resource management is to
acquire the necessary workers through recruiting or training. The second task is

to place the correct employee in the right jobs. The third task is to motivate
effective performance which will lead to the high productivity. The final task is
evaluating correctly the employee performance.
 Technological resources: Technological resources refer to the level of applied
technology within the firm. Management must decide the appropriate level of
technology for the company in term of its goals and workers’ skill. From internal
analysis, internal factors to the firm can be classified in to strength (S) and
weakness (W). A firm’s strength is its resources and capability that can be used
as a basis to develop the company’s competitive advantage. The strengths can be
a strong brand name, good reputation among customer, cost-advantage from
propriety know-how… The absence of certain strengths can be viewed as
weaknesses. For example, each of following can be considered as weakness: lack
of paten protection, a weak brand name, poor reputation among customer, high
cost structure
SWOT analysis
A firm should not necessarily pursue more lucrative opportunities. Rather, it may have a
better chance at developing competitive advantage by identifying a fit between the firm’s
strength and upcoming opportunities. In some case, the firm can overcome a weakness in
order to preparing itself to pursue an opportunity
Table 2: SWOT model
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STRENGTHS
- Relationships
- Finance resources
- Advantages on price
- Loyalty clients
- Assets
- Experiences
- Excellent sale team

- Trust
- Human resource
- Management
- Dept
- Process
- Lack of research
- Backward tech
- Inside conflicts
- Lack of planning
WEAKNESS
Valuating & Adjusting Strategy for Cim Co., Ltd
Table 3: SWOT/ TOWS matrix
External Opportunities
(O)
External Threats
(T)
Internal Strengths (S) SO
"Maxi-Maxi" Strategy
Strategies that use strengths
to maximize opportunities
ST
"Maxi-Mini" Strategy
Strategies that use strengths
to minimize threats
Internal Weaknesses
(W)
WO
"Mini-Maxi" Strategy
Strategies that minimize
weaknesses by taking

advantage of opportunities
WT
"Mini-Mini" Strategy
Strategies that minimize
weaknesses and avoid
threats
II.1.2.2. Formulation
Formulation, the second phase in the strategic management process produces a clear set
of recommendations, with supporting justification, that revise as necessary the mission
and objectives of the organization, and supply the strategies for accomplishing them. In
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- Industry growing trend
- Market share
- Export market
- Recover after crisis
- Cheap asset price
- Support policy
- Construction business.
- Environment effects
- Domestic competitors
- Sustainable finance
- Bad dept (receivable)
- Loss of key persons
- New technology
- Safety
THREATS
OPPORTUNITIES
Valuating & Adjusting Strategy for Cim Co., Ltd
formulation, we are trying to modify the current objectives and strategies in ways to

make the organization more successful. This includes trying to create "sustainable"
competitive advantages although most competitive advantages are eroded steadily by
the efforts of competitors.
A good recommendation should be: effective in solving the stated problem(s), practical
(can be implemented in this situation, with the resources available), feasible within a
reasonable time frame, cost-effective, not overly disruptive, and acceptable to key
"stakeholders" in the organization. It is important to consider "fits" between resources
plus competencies with opportunities, and also fits between risks and expectations.
There are three primary steps in this phase:
Identifying the directional strategy (grand strategy) for the company
It should be either (1) growth strategy: company can be promoted internally by investing
in expansion or externally by acquiring additional business divisions or (2) stability
strategy (pause strategy): the organization wants to remain the same size or grow slowly
and in a controlled fashion or (3) retrenchment strategy: the organization goes through
period of forced decline by either shrinking current business units or selling off or
liquidating entire business.
Identifying the portfolio strategy for the company
After having the clear direction, it is the time to decide the portfolio strategy of the
company which pertains to the organization’s mix of SBUs and product lines that fit
together in such a way as to provide the corporation with synergy and competitive
advantage.
Define new mission, goals for the company
After analyse all aspect of the business and select which businesses the company should
develop, it is necessary that the new corporate strategy should have a new mission and
goals.
Mission Statement
The new mission statement is the organization's new vision translated into written form.
It makes concrete the leader's view of the direction and purpose of the organization. This
mission statement should be a short and concise statement of goals and priorities.
Setting Goals

The major outcome of strategic road-mapping and strategic planning, after gathering all
necessary information, is the setting of goals for the organization based on its vision and
mission statement. A goal is a long-range aim for a specific period. It must be specific
and realistic. Long-range goals set through strategic planning are translated into activities
that will ensure reaching the goal through operational planning.
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Valuating & Adjusting Strategy for Cim Co., Ltd
Chapter 3 – Environment analysis
III.1 The societal environment (PEST Analysis)
Political forces
 Infant industry policy: Steel in general and steel products for construction and
shipping industry in detail are strategy material for a country especially developing
one like Vietnam. Government naturally always tries to protect domestic production.
Before 2004, steel industry in Vietnam mainly concentrated on finished-good
manufacture, which served construction industry. The input material for this
manufacturing was mild foil. Almost kind of the foil was imported from outside, up
to 90% of demand. Government implemented infant industry policy through tariff
tool. Bellow is the table that describes movement of tariff policy from 2001 to 2009
Year 2001 2002 2003
200
4 2005 2006
2007
- Dec
2008
Nov-
2008 2009
product March July
Foil 10%
5-

10%
3-
5% 0% 10% 10% 2% 5% 0% 8%
Rebar 40%
5-
40%
5-
20% 0% 20% 20% 10% 10% 15% 15%
Figurers 2: Tariff on foil & rebar from 2001 to 2009
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Valuating & Adjusting Strategy for Cim Co., Ltd
(Source: Gathered by author through VSA website)
The unstable tariff policy shows very clearly on the table. Rates changes from year to
year or even increases and decreased in the same year. Especially in 2004 the tariff rates
was down to zero percent in March and rose up again 10% for foil and 20% for rebar in
July. The same story happened in November 2008 when tariff rate on foil decreased from
5% to 0% and increased to 8% in 2009, just one month after.
There are 03 situations leading decision of Government to increase or decrease tariff on
foil and rebar
- a) Shortage foil or domestic price higher: reduce tariff to encourage import (this
normally lobbied by finished-goods manufacturers)
- b) Surplus imported foil or cheaper price: increase tariff to protect domestic foil
manufacturers (lobbied by foil manufacturer)
-c) Shortage finished-good because a “fever” rebar and too high domestic foil price:
decrease both of tariffs.
The unstable situation above caused by depending on outside resources and by conflicts
between domestic manufacturers. The unstable tax policy strongly effected to market
price and of course effected to trading companies. It brings opportunities of super profit
and brings serious threats to a company like Cim Co whose revenue almost came from

import and distribution activities.
 Steel industry development policy: The orientation to export:
As said above, according to the Development Planning of VN Steel Industry in the year
from 2010 to 2015 duration, Vietnam shall become steel export country. As planed in
2010, Vietnam shall export the first 500.000 tons steel products, which manufactured
from domestic iron ore exploiting & processing industry.
Currently there are three huge complex projects on sifting - refining -laminating
processes under construction in Vietnam: Thach Khe with capacity of 2.2 million tons,
Van Phong 8 million tons, Vung Tau 2 million tons. When these projects fully come to
operation with 100% capacity, domestic demand on input materials shall be sanctified.
Therefore, if the imported product price is not competitive, market share of importers
shall be narrow strongly. Cim Co., Ltd with over 90% revenue from trading shall face to
a threat of fierce competition. In addition, in long term, infant industry policy of
Government shall really uphold because domestic producers supply enough crude
material for inputs.
Economic forces
 Monetary policy: In the year 2009, State Bank used primary interest as a tool to
control monetary supply. The Bank issued ceiling loan rate equal 150% primary rate.
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Valuating & Adjusting Strategy for Cim Co., Ltd
In the first quarter of 2009, the rate was 7% it means commercial bank can not loan
with rate over 10.5% and mobilizing rate was in range from 7% to 8%. This rate was
not enough attractive to encourage people to deposit their saving money. From June
commercial banks started a rising rate competition, at the end of the year mobilized
rate maximum at 10.5% and bank system has to face with solvency problem. State
Bank has reacted by increasing primary rate up to 8% from the first January 2010.
This dynamic aimed to improvement the ability of mobilizing of banks. After this
action, in February State Bank issued a document allowed commercial banks to loan
with negotiable rate for medium and long term period and in March the Bank has

shown its intend of remove primary rate regime. Immediately, loan rate on the market
rose up to 18-20%. With this high rate, enterprises use the more loans will take the
more burdens from capital expense. Cim Co., Ltd is a company which use high
finance leverage; higher interest brings more difficulties for its business and
investments.
 Exchange rate: Right before the Traditional Holiday of Tet (February 2010), State
Bank has issued an unexpected decision: Increasing exchange rate from 17.941
VND/USD to 18.544 VND/USD , this was the second time the Bank increased the
rate and widen adjustment range for commercial bank within 6 months. The free
market rate at April 2010 shall be around 19.400 and seem to have an up trend in
2010. This dynamic of State Bank shows quite clearly the trend of free exchange rate
policy in the near future, which is the hot topic during years. This trend shall effect to
whole economy in two aspects: Increasing press to inflation & burdens of national
dept.
Being importer Cim Co., Ltd shall get more difficult in competition with domestic
producers about price in long term and in sort term it must pay more for payables in
USD.
 Inflation: In the two months at beginning of the year CPI indicator was 3.35 %,
increased 8.04% compared same period last year. This increasing was not much
worried because of in these months CPI was influenced strongly by Tet holidays. CPI
in March can effect to Government for adjust policy but the Government, in term of
reliving investor’s mind, has announced that inflation still be in its controlling. In the
positive scenario, CPI March shall be around 0.5 %, in the negative one it shall be
nearly 1% or more. But even the negative scenario happens; it is very difficult for
Government to implement again credit tightening policy. Instead of that Government
probably will try to control inflation by decreasing common expenditure and closely
control pushing expenses.
 GDP growth: GDP target designed by Government for 2010 modestly is 7% but
according to Goldman Sachs, GDP of Vietnam can reach 8.2% this year. A positive
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Valuating & Adjusting Strategy for Cim Co., Ltd
fact supported this forecast is that GDP in the first quarter firmly increases 5.7-5.9%
compared the same period last year, much higher the growth of first quarter 2009.
FDI was estimated to increase 10% this year. Total number shall be in range from
USD 22 billons to 25 billions in 2010. After crisis global investment shall again
increase while Vietnam has been appreciated as an upstart economy in South East
Asia.
Increasing FDI shall bring more works opportunities for construction industry not
only in real estate but also in manufacture field. The more FDI capital flow in to
economy the more factories, buildings have been constructed as well as more jobs
have been created.
Cim has advantages to join construction market (detail analysis in Chapter 4). The
growth of this industry shall be a support factor for Cim to develop its new business
line in construction field.
Socio-cultural forces
Investment & accumulation asset through real estate is a traditional wish of Vietnamese
people. Real estate market has been in the first steps of development from year 2000.
This industry is the biggest consumer for steel product. Habit and traditional wish of
people on real estate owning was an important support in long time development of
construction and steel industry.
Technical forces
Technology is the key for Vietnam steel industry to compete with foreign competitors.
Steel industry requires big investments, large scale and high technology. As the
Diagram1 in the first Chapter, there are many sub-industries in steel production field and
each steel product requires a specific technology. A remarkable character of steel
industry in Vietnam is that all equipments & technologies are imported. Beside the first
complex in Thai Nguyen province, which has used Russian technology, almost
technologies imported from three countries: China, Italia and Australia. Technology
from China has cheaper price but it produced lower quality products. Furthermore,

second hand equipments & backward technologies have been used popularly in small
private companies. This strongly affects domestic competition capacity and the
development of the industry in long term.
Vietnam is rich in steel resource (iron ore mines) but the problem is how to exploit and produce
itself finished-good products from its resources with competitive price compared foreign
products. The price would be competitive if technology satisfies conditions on capacity &
expense. Choosing technology to balance capacity, quality & expense is very difficult for
Vietnam manufacturers who have litter experience, just in around 10 years of development.
Three huge steel complexes projects in Thach Khe, Vung Tau and Van Phong with modern
technologies will improve the background of technology for steel industry in the near future.
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Valuating & Adjusting Strategy for Cim Co., Ltd
III.2 Steel industry analysis
In this part of study, the author shall analyze highlight characters of steel industry
through collected data what were published from different sources but mainly from
internet and press. The statistic figures and information are quoted from VSA and online
source of Commercial & Industrial Ministry. The various usages of secondary data from
online-newspaper enable researcher to access quite numerous amount of data that
otherwise, may difficult to obtain due to the limitation of time and budget.
The 5-forces model of M. PORTER shall be used in this part to analyze the industry.

III.2.1 Industry Competitors
In this part, analysis focuses on import market because import & distribution are still
being main business line of Cim, which took over 90% of revenue.
 Trading:
- Competition structure: Bellow is the quantity of imported steel products in 2009.
Three biggest amounts belong to hot mill plate used for ship building industry &
industrial construction, hot mill thin plates used in electric equipment & light
industrial industry, hot mill roll used in pipe producing & machinery industry.

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Valuating & Adjusting Strategy for Cim Co., Ltd
Figures 3: Imported quantity 2009
Using hot mill plate product market as an example to analyze competition structure in
the industry, we can see that this industry competition is non-concentrated. The table
bellows show the market share of each company in top 20, which imported hot mill plate
most.
No
Company name Quantity %
Total quantity industry
652,53
7 0.05%
1
Hoang Dat trading &
Manufacturing JSC
47.062 0.007%
2
Trading JSc
35.159 0.005%
3
Vinashin import-export
26.053 0.004%
4
Hong Ha JSC
16.134 0.002%
5
Truong An Trans & Trading Ltd
14.314 0.002%
6

Trading & Manufacturing Viet
Steel
16.071 0.002%
7
Trading & Commercial Anh Tuan
15.375 0.002%
8
State Own Kien Port Ltd
11.96 0.002%
9
Kim Dai Vuong metal Co., ltd
13.355 0.002%
10
Tan An Trading & Sealine Tan
An
12.213 0.002%
11
Metal & Material Hai Phong JSC
11.68 0.002%
12
Construction materual No 1
12.186 0.002%
13
Thanh Binh HTC Co.,Ltd
11.806 0.002%
14
Dung Hai Trading Co., Ltd
10.467 0.002%
15
Ha Long Ship building

7.931 0.001%
16
Hai Yen Commercial
9.876 0.002%
17
An Hai Ship building
8.935 0.001%
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Valuating & Adjusting Strategy for Cim Co., Ltd
18
Thanh Long Ship
7.343 0.001%
19
Nam Trieu ship building
8.396 0.001%
20
Kien Trung
9.606 0.001%
Figures 4: Top 20 hot plate importers in 2008
The total hot mill plate imported quantity of whole market was 652,537 tons. Top 20
companies took only 0.05% imported quantity. It shows that there is no monopoly in the
market.
- Industry demand:
According to VSA statistics, in 2009 Vietnam has imported around 6 millions tons of
various steel products. Except rebar used for construction, other steel products used in
shipping, infrastructure, heavy industry, electric industry were from outside resources.
In about 5 years, until three huge complex projects said above operating, demand for
imported goods is still increasing, especially the economy is in recovering phase.
However, under long-term view, demand for imported steel products will decrease

because of importers must face to strong competitive from domestic producers.
- Withdraw barrier: Facing with threat of future decline in import market, if a company
make a strategy plan to withdraw it shall get such kind of barriers: fixed asset investment
(warehouse, transportation equipments ), direct expense for leaving, relation between
strategic business unit, company value and history, social expense (manpower fire, re-
education…). With Cim, the most difficult barrier is relationship between strategic
business units. At present, trading bring almost revenue and cash flow to fund not only
long-term investments (new business lines) but also to finance daily operating activities.
Before new business lines come to operating and create cash flow enough, Cim cannot
quickly narrow down size of import business or withdraws out of the import market.
III.2.2 Supplier power
China is the biggest exporter and consumer in worldwide steel market. In 2009, the
output of China was 586 million tons, increasing 13% than 2008 output. To be a
neighbor of China, Vietnam naturally strongly effected by its economy policy. Each
change in export tax, output or demand of this country quickly & deeply effect to
Vietnam market. In other word, China is the most important supplier for Vietnamese
market. The year 2007 is the typical evidence for China policy’s influence on steel price
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