Building and selecting business strategy for Vinaconex Construction and Import - Export Joint Stock Corporation till 2015

GRIGGS UNIVERSITY
GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE

PROJECT REPORT

“BUILDING AND SELECTING BUSINESS STRATEGY FOR

VINACONEX CONTRUCTION AND IMPORT — EXPORT JOINT
STOCK COPORATION TILL 2015”
Group number: Group 2
Student’s name: X0610

1. Ms. Lan, Nguyen Thi Phuong (Team Leader)
2. Mr. Quy, Le Minh
3. Mr. Vu, Pham Anh

4. Mr. Chung, Nguyen Thanh

Ha Noi, Jan 2012


Andrews Q University

- =
GRIGGS!

Master of Business Administration

CAPSTON

PROJECT REPORT

CONFIRMATION
Date

: .3../01/2012

To —

: Master of business administration program — Grigg University
ETC — Vietnam national university, Ha Noi

Subject: Comment of VINACONEX about Capstone of Group 2 Gamba0l-

Grigss University:

“BUILDING

AND

SELECTING

VINACONEX

CONTRUCTION

BUSINESS

AND

IMPORT

STRATEGY
-— EXPORT

X0610-

FOR
JOINT

STOCK COPORATION TILL 2015”
We would like to commit that this report is group’s research result. Data and results
stated in the report are honest with a clear origin.

VINACONEX has done fully support for Group 2 — X0610 when they practiced and
learn in company about operation status, vision and stratergy of company.
Group members have expressed an enthusiastic and creative, have closely followed up
current

situation

of

company

and

receive

a

good

result

in

working

time

in

VINAVONEX.

luyện “y. Ähuý,:ùMg,..
Deputy Director of Finance - Planning Department

VINACONEX

Gamba 01.X0610 — Group 2


Andrews
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RIC

University
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a

Master

of

Business

Administration

ACKNOWLEDGEMENT
Firstly, we would like to express our great appreciations to lecturers, professors,
and doctors at Centre for Educational Technology and Career Development —

Vietnam National University and Griggs University who have brought helpful
and

interesting courses to all program

attendants, especially those who

have

enthusiatically supported us in the completion of this assignment.
During the performance of this assignment, we could have made some inevitable
mistakes and we do hope to receive your kind supportive opinion in order to
make the assignment of Team No.2 be more corrective and completed.

Throughout the execution of this assignment as well as discussions, we have
received kind supports from lectures, especially, Professor PhD Vu Thanh Hung
who has enthusiastically provided helpful ideas to support our team to complete
our assignment. We also express our appreciation to leaders of VINACONEX
Corporation who have supported us to access the firm’s data and information

and provided us with references so that we can complete our assignment.

Members of Team No.2 - GaAMBA X06.10

Hanoi, Nov 22™ 2011
Group Leader

LAN, NGUYEN THI PHUONG

Capstone Project Report —

Gamba01.X0610 - Group 2


Andrews
@

Sige

University

mồ

Master

of Business Administration

TABLE OF CONTENTS
ACKNOW LEDGEMEN T
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Capstone Project Report

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CHAPTER

University

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Master

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of

Business

II: ANALYSIS OF VINACONEX

Administration

CORPORATION’S

BUSINESS

SITUATION IN RECENT VAR commana

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2.1.3 ACMIOVOMENTS GNA DIGDICTIS ccccrscnpcecsmancecemnmancacammmmranneurcmnmeenets 31
2.2Analysis of current business strategy development at VINACONEX............... 33
2.2.1 The fundamental basis for business strategy development. ..............0000++ 23
2.2.1.1 Define the demand for strategy development cssescsscarviseevorcees 33
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Capstone Project Report

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Gamba01.X0610 - Group 2

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CHAPTER III: BUSINESS STRATEGY VINACONEX CORPORATION TILL
2015 AND SOLUTIONS FOR IMPLEMENTATION

60

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3.2 VINACONEX

Corporation’s Business Strategy development and selection..64

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CONCLUSION

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REFERENCE

Capstone Project Report

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Gamba01.X0610 - Group 2

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Master

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GENERAL
1.

Administration

INTRODUCTION

Reason for selecting the topic and the meaning of research

topic

At present, in the context of extreme competitiveness happening in every aspect
of business and the severe crisis on financial and monetary market, in order for

a firm to survive and grow, the most important and necessary task is to drive the
firm

toward

the right direction

that suits to fluent

and

sudden

changes

in

business environment so as to obtain high level of adaption and to ensure the

sustainable development for the firm. To achieve that goal, every firm has to
determine and develop nothing but its own suitable business strategy. It’s all
because business strategy means the foundation, the compass for every activity

of that firm.
Hence, this is the common and main issue of firms, including those engages in

construction sector — the sector that is growing rapidly in accordance with

consuming trend, the sector that satisfies one of the three fundamental needs of
human which are food, shelter and entertainment. Each firm needs to develop a
sound business strategy which is appropriate with continuously changing high
competitive environment and at the same time suitable with its own condition

and situation. This is the motivation for our research on the topic “Business
strategy development at Vietnam Construction and Import-Export Joint Stock
Corporation (VINACONEX Corporation) in the period 2012-2015” in order to
figure out the right direction for the firm in present context.

2. Objectives and Scope of the research
In this research, we - a team of class X0610 (Team No.2) — are comprised of
following members:
-

Lan, Nguyen Thi Phuong

-

Quy, Le Minh

-

Vu, Pham Anh

-

Chung, Nguyen Thanh

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hà

CRICK

Master

of

Business

Administration

On the basis of business environment analysis, the team applies the two models:
BCG and SWOT in developing business strategy for VINACONEX

for the next

period.
VINACONEX

comprises

one

wholly

owned

company,

35 subsidiaries

with

joined capital from 50% and above, 3 joint ventures, 17 associated companies.
The Corporation also invested capital into 19 other companies. In the scope of
this

assignment,

our

team

focus

on

analyzing

the

business

of

Vietnam

Construction and Import — Export Joint Stock Corporation - VINACONEX

and

its real estate business
At present, the operation of real estate business meets plenty of difficulties.
Despite of being a big company, the company has still made some wrong moves

that were not appropriate with the company’s

real capacity. Attending the

program has provided our team with important supplementary knowledge so
that we

have tools to analyze

and to evaluate the presenting

situation of

VINACONEX in order to obtain solutions to develop strategy that suits the real

estate operating market which is sinking into crisis so as for VINACONEX

to

grow stably in new period.
To

develop

the

business

strategy,

our

team

has

made

analysis

based

on

following basic issues:

-

Analysis of present real estate market;

-

Analysis

of the

actual

fact

of VINACONEX’s

strategy

development

activities;

-

Analysis of External environment

-

Assessment

on Strength,

Weakness,

Opportunities,

Threats

from

business

environment

-

Developing an appropriate business strategy for VINACONEX in the period
of 2011-2015
strength

on the basis of minimizing the weakness and improving the

in order

to

enhance

the

recent

achieved

results

and

keep

developing continuously and sustainably.
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Business

Administration

Research Methodology
SWOT analysis: is the key method in strategic management used to evaluate the
internal

factors:

Strength,

factors:

Opportunities,

weaknesses

Threats

that

of enterprises as well
make

great

impacts

as the external

to the

business

of

enterprises.
Besides, there are also different types of matrix used as analysis methods such

as: BCG

matrix, IFE matrix, EFE matrix.... These analysis methods will be

presented in Theory for strategic management
4. Structure of topic

Chapter I: GENERAL RATIONALE
FOR BUSINESS STRATEGY DEVELOPMENT
Chapter II:

ANALYSIS OF THE ACTUAL

SITUATION OF VINACONEX

CORPORATION’S BUSSINESS IN RECENT YEARS
Chapter

ITI: DEVELOPING

BUSINESS

STRATEGY

FOR

VINACONEX

CORPORATION FOR THE PERIOD 2012-2015

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CHAPTER

Administration

I

GENERAL RATIONALE FOR BUSINESS STRATEGY DEVELOPMENT
1.1

Overview of Business Strategy

Many

firms and enterprises in Vietnam, particularly small and media enterprises,

are often absorbed in a sprial of daily generated works (production, sales, customer
search, delivery, collection ...). Most of these tasks are solved seperately in the order
of arising demands, it means what happens first, solved first, not to be pre-planned
or given

a methodical

strategy, not to be systematically

managed

or effectively

evaluated in a scientific way. Senior managers are so inactively led by the works
that they lose their direction without recognition. They have no specific orientation,
they just move on the path they come across and they keep losing their direction.
This fact is what Vietnamese firms need to change in present trend of globalization
because the competitiveness between Vietnamese firms and international firms is
getting more and more intensive. The other reason for the demand of changing is
that firms and enterprise have to clearly identify their target, their orientation. They
have to find out a suitable path and to deploy their resources optimally in order to

ensure

the

objectives

within

given

time.

Strategic

Management

allows

us to

complete the whole process. So “What is strategy?”

1.1.1 The concept of business strategy
Strategy

is

“a coordinated series of actions

which

involve

the deployment

of

resources to which one has access for the achievement of a given purpose”

Strategies are the means to achieve long-term goals. Business strategy may include
the development

of network geographically, activity diversification, possession,

product development, market access, expense cutting, liquidation and joint venture.
Meanwhile

in a firm/enterprise,

the head of enterprise should

aware

that the

enterprise must have a specific business strategy to be addressed on the market.
The firm must have competitive advantage. Once the advantages lost, the expense

could not be recalled; therefore a firm must develop long-term and sustainable

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1!

advantages. A specific strategy itself provides the firm with sustained competitive
advantages
1.1.2 Characteristics of the business strategy
In specific business condition and different contexts, firms must have their own
strategies but there are 3 common things that help firms to implement their strategy
successfully.

The

three common

things

are concentration,

differentiation

and

a

slogan/ motto. Besides, there are also different features:
~

The business strategy must clearly identify the basic objectives for each period
of time and must be consistent in all aspects, at all level of the business.

Y

The

business

strategy

must

ensure

the maximum

mobilization

and

optimal

exploitation and utilization of the firm’s resources (labor, capital, technology,

technique...), take advantages, and grasp opportunities to obtain competitive
advantage on the market.

Y

Strategies are the tools to set up firm’s long-term goals

¥

Business strategy always contains the idea of attack for the success on market
Business strategy defines the scope of competition

Y

Business

strategy

opportunities

&

establishes

challenges

a

and

mutual

the

firm’s

relationship

between

strengths

weaknesses

&

external
which

generates the firm's competitive advantage.
Y

Business strategy must clearly define the economic/ non-economic benefits that
the firm tends to bring to its shareholders
1.1.3 The roles of business strategy

Every wise firm leader awares the fact that:

To obtain success, they have to strive

for the best outputs. These outputs put challenges on small business leaders and
employees.
demand.

However,

many

leaders

achieving

the

highest

level

of satisfying

the

customer’s

ignore the strategic vision and just focus on completing

short-term goals. This makes the business become stagnated and underdeveloped.
Hence,

business

strategy

plays

very

important

roles

in a firm’s

development

process, the most important roles in a firm’s development process are:
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v

Relationship generating

v

Communicating

v

Dicision making

1.2.

of

Business

Administration

Strategic development process
/.2.1 Organization’s missions and goals indentification

Every firm has its own mission, targets and strategy even when these factors are not
set up, in written form or officially publicized. A firm when managing its strategy is
fully aware of its targets in each period of time, which resource is strong or weak

and how to implement the actions to make the strategy effective.
Strategic management process involves the full set of

Commitments

Decisions

It us not easy for a firm to develop a

Actions

strategy. If just counting on strategy proposed

by a person with new ideas, not every member will approve. Once the strategy is
defined, every member must give commitments to bring strategy into life, avoiding
what people usually says NATO — No action, talk only
Strategy management process contains 3 stages

Stage H

Stage IH

Stage 1: Strategy formulation
This is the stage of setting up business tasks; perform investigations to determine
Capstone Project Report

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elements

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B

and

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outside,

Administration

working

out

long-term

goals

and

selecting among alternative strategies.
Stage 2: Strategy implementation

This is the stage of actions in strategy management process. In this stage, the firm
must conduct 3 basic activities in strategy implementation which are: annual goals
defining, policies making, and resources allocating. This is the most difficult stage

in strategic management process.
Stage 3: Strategy Evaluation (monitoring, evaluating, implementing)

The final stage in strategic management process is strategy evaluation. The 3 main

activities in this stage include:
o

Review the factors that are basis for current strategy

o

Results measurement

o

Perfomance

of adjustment operation. This stage is very important and

essential because the current success of a firm does not ensure the success
in the future.
1.2.2 External factors evaluation

1.2.2.1 General environment (PEST)
External

environment

is

a

system

of complex

factors.

There

are

many

opportunities as well as risks affecting the operation of the business at different
levels. The external factors focus on the identification and evaluation of trends

with events that go beyond the control of a single firm. The analysis of external
factors show the important opportunities and risks that a firm encounters in
order for leaders to draft a strategy to take advantages

of opportunities and

avoid or reduce the effects of threats
External factors that influencing a firm include Macro factors and micro factors
Macro factors: we use PEST model to analyze these factors.
Here are 4 factors that directly influence economic industries.
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Administration

Political
Political stability
Labor laws
Taxation laws

-

Economic

- Changes of GDP
- Interest rate, inflation..

Business

Social
- Population, demographic
- Incomes allocations
- Life styles

|
Technology

New technology development

Picture 1.1 : P.E.T.S Model
Influences of external

fators

Economic influences: Economic factors have a direct impact on the potential
attractiveness of the different strategies. Vietnam's economy
recover

quickly

from

the

global

crisis.

After

growing

continues to

5.3%

in

2009,

Vietnam's economy grew 6.8% in 2010, the highest in three years. GDP per
capita between USD

1,290 to 1,300 is one of the targets in the 2011

that the

Government has proposed to the National Assembly Standing Committee in
Parliament last meeting. The year 2011 is not the acceleration period for the
economy of Vietnam. Therefore, the economic growth of about 7% is in line
with current practice conditions. Besides, the monetary and credit balance
one

hand

ensure the macro

controling

inflation

enterprise

to mobilize

development,

limitation

especially

fund

economic
and

on

stability, especially
the

other

for investment

hand,

make

in production

the real estate sector.

National

the success

in

it enable

for

and _ business

foreign

debt and

government debt are limited at safe level. In case of high inflation, interest
rates at 22-25% / year, the business losses their benefit and unable to pay

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debts, the credit line for real estate is limited not exceeding 20% growth of
non-manufacturing sector credit. We can say both investors and investors are
bearing headaches looking at the cash flow to "evaporate" from the real estate

market as banks tighten the credit for non-manufacturing sector, and raise
interest rates up to 20%.

Social-cultural

influence:

Today,

our

lives have

been

changing

rapidly,

young population rate increase sharply that makes the life become modern.
The

young

people

have

their

own

demand

for

independent

lives,

not

depending on their parents. The demand for housing is also increasing when
an

apartment

becomes

shelter

for 4 generations.

The

trend

of living

apartments becomes more popular. Grasping this trend, VINACONEX

in
has

quickly made plan for new urban zones, providing houses for those in real
need.
Legal, political influences: The factors of politic, government, law show the

main

opportunities

and

threats

to

every

firm,

no

matter

small

or big.

Especially the real estate sector depends remarkably on regulations on real
estate trading. So even tiny change in government’s policies plays important
role. As in 2008, the year with skyrocketing real estate prices, the real estate

prices in Vietnam has increased to more than a dozen times just in a short
time. The price for high class apartment in early 2008 rose 3 times higher
than the price in early 2007, from USD

price for office leasing in HCMC
in 2007. HCMC
estate

price.

investment

when

the

in real estate sector,

Technological
opportunities

has increased from 30%, 50% of the price

and Hanoi are in the list of Top 10 cities with highest real
However,

VINACONEX

1,200 to 4,500 per square meter. The

Government

many

tightens

firms encountered

the policies

on

difficulties and

is not an exception.
influence:
and

threats

the
that

technological
need

to be

influences

considered

show
while

the

main

drafting

the

strategy. Changes in technology can reduce or eliminate the pricing barriers
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among firms, shorten the time of manufacturing operations, createa shortage
of technical ability that results in changing the values and expectations of

employees, managers and customers.
-

Competitiveness

influence:

Collecting

and

accessing

information

about

rivals are important tasks in order for a success strategy draft. Recognizing
main rivals is not always easy because many companies deploy competitive
units in different sectors.
1.2.2.2 Industrial factors

There

are always

giant rivals on market.

The

model

of competitiveness

comprise of 5 factors as follow

Diagram 1.2: 5 competitive pressures

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New entrants

Threats of new entrants

The power of

The power of

negotiation

negotiation

Industrial

Suppliers

Competiti

Buyers

veness

Threats of product
substitutes

Product

substitutes

Competitor analysis is one of important stage in strategic management process.
There is high competitiveness in real estate sector, especially at present time as
there are many suppliers while demands are sharply decreasing. Firms
change their sales policies in order to get quick returns. Hence,

always

competitor

analysis is very important in sales. Therefore, in order to stand and sustainably
develop
analysis,

on market,
keeps

VINACONEX

eyes

on

other

does

not ignore the stage of competitor

companies

such

as HUD,

HACINCO,

Group...
1.2.2.3 External Factors Evaluation

Capstone Project Report

~

(EFE)

16

Gamba01.X0610 - Group 2

VIN


Andrews
@
C

shi

University
af

Sy

Master

`)

of

Business

Administration

To formulate business strategy, a firm need to evaluate the oppotunities, threads
then EFE model is applied because:

Oppotunities
Once the firm can take full advantage of oppotunities, then the firm will gain the
competitive advantage over other competitors.

Threats
As one of the factors in general environment, threat may prevent a firm from
gaining strategic competitiveness advantage.

-

Due

to the

worldwide,

important

erratic
the

and

fluctuations

control

clear

in the

of external

task

in the

growing

factors

strategic

business

is increasingly

management

environment
becoming

process.

an

If an

enterprise fails to motivate and empower managers and their staff to identify,
monitor and predict and evaluate the important environmental

enterprise

will

happening,

fail

in predicting

the

oppotunities

and

effects, that

threats

that

are

as the result, the firm will fail in implementing the strategy,

loosing the oppotunites and make the organization collapse.

EFE Matrix - External Factor Evaluation Matrix is the model often used in

strategic management in order to summarize and evaluate the external factors.

Table 1.3. EFE matrix

Key external

Weight

factors

(1)
List out the
external
factors

Rating

(2)

the

more

important the factor is

~

1

=the response is poor

2

=the response is below

average
3

=

Capstone Project Report

score

(3)

From 0 to 1. The higher
weight,

Weighted

17

"

(4)

(4) = (2) x (3)

=the response is above

Gamba01.X0610 - Group 2


Noadrews

@

University
ÑN

\

Master

of

Business

Administration

average
4

=

the

response

is

superior
Total = 1

Total= Y

Similar to IFE, to develop EFE matrix, we carry out 5 steps
Step 1: Make a list of main opportunities and threats that influence the success of a
business (usually 10 to 20 factors)
Step 2: assign a weight that ranges from 0.0 (not important) to 1.0 (most important)
to each

factor.

The

weight

assigned

to a given

factor

indicates

the

relative

importance of a factor to the success of business in a specific industry. The total

value of all weights together should equal 1
Step 3: Assign a rating to each factor ranging from | to 4 (the rating may get higher

values in practice). Rating indicates how effective the firm’s strategies respond to
factor. The rating equals | when the response is poor, equals 2 when the response is
below average, equals 3 when the response is above average and equals 4 when the

response is superior.
Step 4: Score each factor by multiply the factor weight and its rating.

Step 5: calculate the total score for all factors listed in the matrix by summing all
weighted score for each factor.
The maximum total weighted score that a firm can get is 4 and minimum score is 1.

The average total weighted score is 2.5. If a firm get the total weighted score equals
4, it indicates that the firm’s strategy responses very well to current opportunities
and threats from environment.
1.2.3 Internal Factor Evaluation
Internal analysis focus on identifying and evaluating the strength and weakness in
the

firm’s

business,

including

management,

marketing,

finance,

accounting,

production, research and development, and information system.
1.2.3.1 Resourses analysis

Capstone Project Report

—~

18

Gamba01.X0610 - Group 2


Vndrews

@ Unis

Cah

AK

ersity

Master

sas

of

Business

Administration

To fomulate a business strategy, a firm need to base on its available resourses and
analize those resourses.

-

Resourses:

are what

a firm

intangible

possesses

such

as human

resources

(brand

name,

resources,
patients,

assets,

equipments;

or

relation,

management

capability — every firm has same resources but a change

in

management method will make a firm different.
-

The core competence of a firm is human resource: do not copy the idea of
people, this depends on ability of each people: IQ

-

Competitive advantage: VINACONEX

have better competitive advantage in

comparison

its brand

with

other

firms

due

to

name,

abundant

financial

resource, good ability of key persons, good procedure of management and
high security, clear organizational structure.
-

Financial
cost,

analysis:

sales,

basic

capital

structure,

financial

evaluating

indicators:

business

ROA;

ROE;

results through
ROI

(return

on

factory, machines

and

investment)
-

Physical resources

include: capital for production,

equipments, reserved materials, information about business environment.

e

The First: classifying the firm’s available physical resources: capital in

cash,

machines

and

equipments,

factory,

warehouse,

land, reserved

materials
e

The

Second:

determining the scale, structure, quality and features of

each physical resource.
e

The

Third:

evaluating

the ability to meet

the actual needs

of each

resource in action plan of each unit in specific period of time.
e

The Fourth: Evaluating and determining the strength, weakness of each
physical

resource

in comparion

with

other

main

competitors

in the

industry and on market and by geographic area. Depending on the type
of resource, the analysis should be conducted regularly or irregularly to
Capstone Project Report

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19

_

Gamba01.X0610 - Group 2