Buiding the business strategy of Hoàng Anh Gia lai joint - stock company

GRIGGS UNIVERSITY
GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM


CAPSTONE PROJECT REPORT


BUIDING THE BUSINESS STRATEGY OF
HOANG ANH GIA LAI JOINT-STOCK COMPANY

Group No.: 7
Student’s name:
1. Cuong Nguyen Quang (C)
2. Khanh Phan Doan
3. Phuong Nguyen Van
4. Quyen Le Ba


HO CHI MINH CITY, 2009


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THANKS AND PLEDGES
First of all, we, all members of group 7, class GeMBA01.E04 have an honour to
give our gratitudeS for:
- PhD. John Vong and PhD. Hoang Lam Tinh who have provided knowledge of

strategic management for us.
- Lecturers of subject Strategic Management – University of Griggs in Vietnam who
have guided and advised us for completing te contents of our project.
- All Lectures of Global advanced Master of Business Administration Programme -
University of Griggs have enthusiastically transmitted necessary knowledges for us,
which creates a base for us to complete our project.
- Board of Leaders, functional offices and subsidiaries of Hoang Anh Gia Lai Joint-
stock Company who have helped and advised us during the time of researching for
project completion.
- Managing cadres of class GeMBA01.E04 who have enthusiastically supported for
us during the time of studying and researching for project.
- Electric Power College of Hochiminh City who has supported us with the studying
place and related equippments, and fully served us during the time of studying.
Secondly, we pledge that this project has been researched and written by group 7,
subject Strategic Management. In this projects, we have used some projects as
references which are indicated in References at the back.

Your faithfully,
Group 7, Subject Strategic Management
CLASS GEMBA01.E04


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CONTENTS IN FULL
CONTENTS IN FULL 2
LIST OF DATA TABLES 4

GENERAL INTRODUCTION 5
1. General situation of the project 5
2. The necessity and significance of the research: 5
3. Researching Aims: 7
4. Implementing Methods: 8
5. Structure of the project: 9
Chapter I: PHYLOSOPHY BASE 10
1.1 AN OVERVIEW OF THE BUSINESS STRATEGY 10
1.1.1 Conceptions of business strategy: 10
1.1.2 Classification of business strategy 10
1.1.2.1 Pursuance to strategic scope 10
1.1.2.2 Pursuance to nature of trategy 11
1.1.2.3 Pursuance to level of strategy 11
1.1.3 Strategies of business units 11
1.2 PROCESS OF STRATEGY PLANNING 12
1.2.1 Defination of a goal 13
1.2.2 Analysis of external environment and internal situation 13
1.2.2.1 Macro-environment 14
1.2.2.2 Micro-environment 14
1.2.2.3 Matrix of external factor assessment 16
1.2.3 Internal Environment 17
1.2.3.1 Input supply activities 19
1.2.3.2 Producing Operation 19
1.2.3.3 Output activities 19
1.2.3.4 Marketing and sale 19
1.2.3.5 Post buying service 19
1.2.3.6 Enterprise‟s infrastructure 20
1.2.3.7 Human resource management 20
1.2.3.8 Research and Development (R&D) 20
1.2.3.9 Finance 21

+ Indexes of payment ability: 21
+ Assessment of operating effectiveness of assets 21
+ Coefficient of Financial Lever 22
+ Return Ratio : 24
+ Growth Rates 24
+ Market value Coefficients 25
1.2.3.10 Framework of The enterprise‟s value chain 2 29
1.2.3.11 Matrix of internal factor assession 29
1.2.4 Matrix of competitive image 30
1.2.5 Matrix SWOT 31
Chapter 2: ANALYSIS OF ACTUAL SITUATION OF CORPORATION’S COMPETITIVE
CAPACITY 33
2.1 AN OVERVIEW OF HOANG ANH GIA LAI CORPORATION 33

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2.1.1 General information 33
2.1.2 Operating fields of the company including: 34
2.1.3 Summary of establishment and development process 34
2.1.4 Organizational structure of the company 35
2.2 ANALYSIS OF CURRENT SITUATION AND OPERATING RESULTS 35
2.2.1 Products, goods and services provided: 35
2.2.2 Operation: 40
2.2.3 Financial situation and operating activity results in 2006, 2007, 2008 and the first 9 months of
2009 of the company. 42
2.2.4 Core capacity of HAGL: 63
2.3 BUSINESS ENVIRONMENT ANALYSIS: 64

2.3.1 Macro-environment: 64
2.3.2 Micro-environment: 67
2.3.2.1 Power of suppliers: 68
2.3.2.2 Customer Power: 69
2.3.2.3 Hidden competitors: 70
2.3.2.4 Replicable products: 70
2.3.2.5 Current Competitors: 70
2.3.2.6 Matrix EFE: 71
2.3.3 Internal environment: 73
2.3.3.1 Activities supplying inputs: 73
2.3.3.2 Producing operation: 73
2.3.3.3 Output activities: 75
2.3.3.4 Marketing and sales: 76
2.3.3.5 Post-selling service: 78
2.3.3.6 Infrastructure of the company: 78
2.3.3.7 Human resource management: 80
2.3.3.8 Research and Development (R&D): 83
2.3.3.9 Finance: 83
2.3.3.10 Matrix IFE: 86
2.3.4 Matrix of competitive image 88
2.3.5 Matrix SWOT 89
2.4 LIMITATIONS - CAUSES 91
Chapter III: SOLUTIONS AND SUGGESTIONS 94
3.1 SUMMARY ON ACTUAL SITUATION OF THE COMPANY 94
3.1.1 Point of view of company‟s development 94
3.1.2 Business philosophy 94
3.1.3 Vision of HAGL 94
3.1.4 Mission of HAGL 94
3.1.5 Some dominant operating results and threats 95
3.2 SOLUTIONS AND RECOMMENDATIONS 96

3.2.1 General solutions: 96
3.2.2 Real Estate business 100
3.2.3 Wooden products and Granite Investment and Trading Business 102
3.2.4 Hydroelectric Investment & Operation Section 104
3.2.5 Field of rubber investment 104
3.2.6 Field of hotel, resort investment 105
3.2.7 Field of football 107
3.2.8 Some functional solutions: 107
 Combined Marketing Strategy 107

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 Financial Management: 109
 Human resource management: 110
CONCLUSION 115
REFERENCES 118
APPENDIX 120
Appendix 1: Organizational Structure of HAGL Joint-stock Company 120
Appendix 2: Organizational structure of managing machine of the company 121
Appendix 3: List of great shareholders possessing over 5% of share capital 121
Appendix 4: List of founded shareholders until August 31st, 2008 122
Appendix 5: List of child companies of HAGL 122
Appendix 6: List of Jointed companies of HAGL 123
Appendix 7: Real Estate Projects in construction and going to start in 2010 124
Appendix 8: Revenue and Profit Plan for Wooden and Granite production for 2009 -2013 125
Appendix 9: Construction Glide Path For Hydroelectric Projects 127
Appendix 10: Rubber Plantation Plan By Unit and Site 128

Appendix 11: Revenue And Profit plan For Four Rubber Projects Year 2013 -2043 129
Appendix 12: Revenue And Profit Plan In Hotel & Resort (2009-2013) 129

LIST OF DATA TABLES

Table 1: Sample Matrix of external factors 17
Table 2: Sample Matrix of internal factors 30
Table 3: Sample Matrix of competitive image 31
Table 4: Sample Matrix SWOT 31
Table 5: Regulatory Capital Increase Process of HAGL 42
Table 6: Annual Balance Sheet from 2006 to December 30th, 2009 44
Table 7: Company‟s bbusiness and production activity result from 2006 to 30/9/2009 47
Table 8: Income statement according to trend 48
Table 9: Income Statement comparing to Scale from 2006 to 30/9/2009 48
Table 10: Cashflow statement from 2006 to 30/9/2009 50
Table 11: Short-term payment ability of the company 52
Table 12: Effectiveness of using assets of company 52
Table 13: Criteria related to financial lever of the company 55
Table 14: Criteria related to company‟s profitability 56
Table 15: Criteria related to growth rate of the company 57
Table 16: Criteria related to market price coefficient of the company 59
Table 17: Revenue, costs and gross profit of all business fields 60
Table18: Comparison as scale, revenue, cost of goods sold and gross profit 61
Table 19: Matrix assessing external factors EFE of HAGL 72
Table 20: Revenue and profit of HAGL from 2006 to 9/2009 76
Table 21: Business Results of HAGL from 2006 to December 2009 84
Table 22: Matrix assessing internal factors IFE of HAGL 87
Table 23: Matrix of competitive image 88
Table 24: Matrix SWOT 89
Table 25: Matrix of reactive strategies 96

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GENERAL INTRODUCTION

1. General situation of the project
Competition in business is an attribute of market economy, an objective
indispensability and a vital requirement of any corporation. The aim of making
profits has pushed up a corporation to compete through methods of enhancing
capacity, quality and effect of business activities. In the competitive environment,
the strength of a corporation is measured by not only its internal energy but also the
correlation of many factors and competative advantages in the market.
The competitive advantages of a corporation always change together with the
development and improvement of science, technology and consuming needs.
Competitive capacity of a corporation is displayed by operating management
ability, technological potential, human resource quality, financial capacity and
marketing strategy. In order to effectively operate and stablely develop, the
corporation has to build up a long term, suitable production and business strategy,
and consider the brand name as the most valuable asset of the corporation.
Our country is still poor and in the innovating process. Hence, it is extremely
essential and necessary to find out a right and suitable way to push up economic
growth. Becauce the developing potential of a nation comes from corporation‟s
strengths, Vietnamese enterprises should actively discover and exploit all
comparative advantages, and enhance competition for firmly positioning in market
and affirming its position in the international integration process.
2. The necessity and significance of the research:

Competition is, for any corporation, not only a motive to find out all optimum
solutions which include creating products suitable for consumer‟s needs with costs
socially accepted but also a race in which the rank of the corporation is expressed.
Moreover, competition is considered as a challenge which puts great pressures on a
corporation. If the corporation does not have enough power to overcome, it has to
burden consequences such as market loss, stagnated goods, loss, capital loss and

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even bankruptcy. In a condition of “flat world” together with fast development of
informative technology and global commercialization nowadays, competitive
advantages in market play a decisive role in assuring the existence and development
of a corporation. The practical requirement for a corporation is finding out the way
to increase labour capacity and labour‟s income, and at the same time, decrease
costs and reduce product‟s price in order to make profit increased. Especially, the
corporation should build a strategy of attracting and using talent labours, form up
the hard working, faithful, dynamic and high capacity managing force to maintain
and strengthen its competitive advantages.
The reality that small, scattered productive economy, long-lasting budget subsidized
regime and weak, inadequate micro and macro management has raised many
problems needed to be solved by Vietnamese enterprises. However, as a country of
young market economy development, Vietnamese enterprises obtain opportunities
of learning from successful or lost experiences of other country‟s enterprises in
order to limit mistakes and losses as the guideline “know yourselves to know
others”.
The country prospering cause has required Vietnamese enterprises to establish
development strategy based on potentialities and advantages comparing to the world

market scale and suitable for their specific characteristics. Most of our enterprises
are small, use backward technology and the managing capacity is still inferior
comparing to the top enterprises in the world. Moreover, they have not completely
exploited their potentialities and invested in searching information of market and
competitors yet to figure out correct investment decision from which they can win
in competition.
Thus, there is no way to develop an enterprise except building the business strategy
it. Considering the correlation in market, an enterprise which has stronger growth
will occupy the owned market share or the future one of other enterprise. The ones
which know how to renovate and effectively manage can set up their position in

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market; the others which slowly renovate will gradually leave market. This process
makes the economy continuously move to the more effective target.
Structuring enterprises in the economy is carried out through building business
strategy which, however, basically depends on the strategy of each enterprise.
Learning from experiences of successful enterprises in the world, no enterprise has
enough power to cover all of advantages of an industry except joint-venturing,
cooperating and reasonably using human potentiality to create cooperative energy
and competitive power.
Hoang Anh Gia Lai Corporation (abbreviated HAGL) was securitized since 2006
from a private enterprise. With strategic vision and relevant evolution, it has
actively joint-ventured, cooperated to many domestic and foreign enterprises. As a
result, it has concentrated a powerful capacity and expanded the productive scale to
become a great capitalized corporation with multi-industry business which enables
to rank itself and affirm its brand name in market. It is remarkable that Hoang Anh

Gia Lai Corporation has marked daring steps in jointing social activities and careers
to advertise its image, stimulate creation, hence, it has received all organizational
and legal support in different business environments.
Researching and building business strategy of Hoang Anh Gia Lai Corporation has
practical significance for the corporation, and at the same time, it creates
opportunities to reinforce and complete the enterprise management theory relevant
to realistic characteristics and conditions in the process of integration and
development process in Vietnam.
3. Researching Aims:
The project is deep reseach, analysis and assessment about actual situation of
competitive capacity in business strategy of Hoang Anh Gia Lai through its
operating managing tools, marketing strategy, human resource management and
financial management. From that, it can figure out the weak points and suggest the
most fearsible solutions which are able to joint all resources to create the synthetic

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energy in order to perfectly build business strategy for Hoang Anh Gia Lai
Corporation.
The project is a practical value reference for Hoang Anh Gia Lai Corporation. It
concurently contributes to provide a methodology to solve the practical competition
problems in Hoang Anh Gia Lai Corporation. By suitable solutions, Hoang Anh Gia
Lai Corporation can perfect organizational structure and operating regimes and
further upgrade the key values of brandname, which enable to create progressive
strength assuring for its rapid and stable development.
4. Implementing Methods:
Competitive analysis is general look and assessment of the main competitors to

correlatively compare them in both important internal and external elements.
Analizing corporation‟s factors of competitive capacity is a complex work because
each researching aspect does have a great deal of subjects interacting and
continuously changing with space and time. Hence, it is required to flexibly and
creatively apply many methods to analyse and relevantly assess for each
components of competitive power and each factors effected competitive capacity.
The analysed results will provide important proofs to position the enterprise in the
strategic matrix from which the business strategy plan of an enterprise will be
made.
In the project scope, the key methods are flexibly and mutually used, concluding:
+ The systematic theory method.
+ The comparative and statistic method.
+ The projective method.
+ The synthetic analysis method (qualitative and quantitative ).
+ The survey, experimental method


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5. Structure of the project:
Besides the openning and conclusion parts, the main contents of the project are
organized into three chapters as following:
Chapter 1: Phylosophy Base
Chapter 2: Actual situation analysis and assessment
Chapter 3: Solutions and suggestions
This research is implemented based on business management theory. Due to the
large amount of information needed to process while the allowed time is limited,

mistakes cannot be avoided, the assessment may be subjective or the suggested
solutions may not as very practical as they should be in the corporation, which may
decrease scientific content and confidential rate of the project. However, with
accumulated knowledge and experiences, careful guide of lecturers and the help of
the Board of leaders, functional departments and subsidiaries of Hoang Anh Gia Lai
Corporation, our group can meet the requirement and expectation of those who are
interested in this project.

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Chapter I: PHYLOSOPHY BASE
1.1 AN OVERVIEW OF THE BUSINESS STRATEGY
1.1.1 Conceptions of business strategy:

Strategy is a terminology appearing for long time ago. It was used in military field at
first and is considered as means for long term goals.
Business strategy closely relates to economic field and it is understood in variety ways
among which the following ones are popular:
- According to Fred David, strategy is means to reach long term goals.
- According to Alfred Chadler, strategy is defining of basic and long term goals of
an enterprise and planning an acting process and distributing necessary resources
to reach those targets.
Thus, people can say that business strategy provides “a vision” of an expected
development process and consistency in implemeting methods. A strategy can be a
foundation for short and medium term overall development plan, or an overview
recognition without a dependence on concerned people at that time about prospects,
challenges and an expected supply.

Generally, it consists variety differences in definitions of business strategy,
however, its definition basically includes following contents:
 Defining short term and long term goals of an organization.
 Planning out and selecting solutions to reach goals.
 Carrying out nad distributing resources to implement targets.
In competitive environment nowadays,people can say that business strategy is
defining business target, planning out and distributing resources of an enterprise
to create competitive advantages in order to reach business target in the best way.
1.1.2 Classification of business strategy
1.1.2.1 Pursuance to strategic scope
 An overview strategy: mentions long term and corest problems which play a vital
role to an enterprise.

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 Partial strategy: are product strategy, price strategy, marketing strategy, post-
selling strategy, etc.
These two strategies closely relate together and paralelly exist to solve important
targets of an enterprise.
1.1.2.2 Pursuance to nature of trategy
- Product strategy
- Market strategy
- Investment strategy
- Competitive strategy
1.1.2.3 Pursuance to level of strategy
 Strategy at company level: relates to overall target and scale of an enterprise to
meet the expectation of shareholders. This is an important level because it is

effected by investors in an enterprise and simultaneously, it guides the process
of giving strategic decisions in the whole enterprise. The business strategy is
usually displayed clearly in “missionary declaration”.
 Strategy at business unit level: severely relates to how an enterprise can
sucessfully compete in a specific market. Moreover, it also relates to strategic
decisions of product selection, customer need meeting, obtaining competitive
advantage comparing to other competitors, new opportunity exploitation and
creation, etc.
 Strategy at functional level: relates to organization of each department in an
enterprise to implement strategic plan at company level and department level.
Thus, acting strategic concentrates on problems of resources, processing and
people, etc.
1.1.3 Strategies of business units
Competitive strategies of Michael Porter:
 Cost Leadership: is a competition by creating products or services with possibly
lowest cost. At that time, an enterprise can sell large amount of goods with average
price and earn great profits.

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 Differentiation: is a competition by creating differentiation which other enterprise
is difficult to compete. This differentiation can be product quality, delivery time,
brand name recognition, wide distribution system.
 Concentration: is a competition by concentration of resources and energy to a
product, a segment or a special customer group.
Michael Porter has stressed that if an enterprise does not choose one of strategies
above, it will not have competitive advantage.

1.2 PROCESS OF STRATEGY PLANNING
Process of strategy planning consists of following periods:
- Period of shaping strategy
- Period of implementing strategy
- Period of assessing strategy
Each period has different work, however these period closely relate and supply
together.
According to the business handbook of Harvard, the process of strategy planning is
shown as below diagram:












Diagram 1.1: Diagram of process of business strategy planning

A strategis plan is usually started from business mission which is defined clearly.
Mintzberg defined of mission as following: “A mission indicates basic functions of
an organization in society basing on the field of goods and services produced by
Mission
Goals
Strategy Planning

Solutions
Result assession
Internal environment
External environment

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that organization to meet the need of its customers.
1.2.1 Defination of a goal
A goal is an expected result of an organization after a defined time. A strategic goal
includes following characteristics:
 A goal must be qualified.
 A goal must be fearsible: operating result of an enterprise has to implement and
complete in practice.
 Goals must be consistent. They must have a relative relationship. Completion of
this goal does not effect the others. Moreover, they must have an interrelation to
create an united block in an organization in order to get common target of the
enterprises.
 A goal must be reasonable. Human is an important factor. It is the subject as
well as the object. Hence, it has to ensure reasonability.
 A goal must have flexibility which indicates adjustability to changes of
environment.
 A goal must be specific. This is a special characteristic of a goal. Hence, a goal
has to attach to an organization and have private characteristics. Each unit has its
private goal to endevour.
1.2.2 Analysis of external environment and internal situation

Enterprise is an open system existing and tightly relating to the environment and
being effected by it. An external environment analysis helps enterprise managers
have an overall view of objective conditions which can bring advantages or
disadvantages for business activities of an enterprise. All enterprise‟s business
strategies are built up in a specific environment condition basing on maximally
taking use of advantages and minimizing disadvantages that may have. An
enterprise‟s external environment is divided into two types depending on characters
and influent level to the enterprise:

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1.2.2.1 Macro-environment
Macro-environment indirectly influences to many fields, industries and enterprises.
Clearly understanding it will help an enterprise know current facing problems,
opportunities and challenges in the future.
Factors belonging to the macro-environment that enterprise should concern as
planning relevant competitive strategies:
+ Economic factors: An overview of economy, growth rate, growing trend;
Monetary policy, credit, foreign exchange rate, import-export, tax; Price control
policy, salary policy, income.
+ Legal and political factors: Political situation, stability of political system,
regimes, diplomatic policy; Legal system in general and laws related to business
activities, environment protection, copyright law.
+ Cultural and social factors: Inhabitant‟s living quality, cultural tradition, social
habits, moral standards and lifestyle; Situation of human resource quality and
quantity, population growth rate and inhabitant structure.
+ Natural condition factors: Climate and land condition, water resource, mineral

resource, forestry resource, ecological environment protection, material resources.
+ Technological factors: Development investing policy, applied science and
technology, mind right protecting policy.
1.2.2.2 Micro-environment
1

Micro-environment consists of external factors affecting directly to an enterprise
and deciding characters and competitive rate in that business and production
industry. According to model of five competitive forces of Michael Porter, intensity
of competition in market in a industry is affected by five competitive forces: (1) Power
of a supplier; (2) Power of a customer; (3) Threat of coming of potential competitors;
(4) Threat of replicable products; (5) Rate of competition among companies in a
industry. This relationship is displayed in following diagram:

1
Michael E. Porter, Youth Publishing House ( 2009) Competitive strategy.

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 Competitive Pressure of suppliers:
It consists of quantity and scale of suppliers, product replaceable ability of suppliers
and information about suppliers. Because suppliers provide raw materials and input
equipments for a company, they can threat of forcing to rise price or reduce input
requirement. We only have opportunity as we can force to reduce price or require
higher quality.
 Competitive Pressure from customers:
Customer is a competitive pressure which can directly affect to all business and
production activity in a industry. They usually put a pressure of price, product
quality, attached service on a company. They are the ones who control competition
in an industry through decision of buying.
 Competitive Pressure from hidden competitors:
Hidden competitors are enterprise which have currently entranced in a industry yet,
however, it may affect to a industry in the future. The fact that hidden competitors
are more or less, their pressure put on a industry strong or weak depends on
following factors:
+ Attractiveness of an industry: This factor is shown through criteria such as: Rate
Hidden competitors
Internal industry
competition




Competiton among
enterprises already
appeared in market

Customer,

Distributor
Supplier
Replacable product
Threat from hidden competitors
Negotiated
Power
Threat of replacable service

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of earnings, quantity of customers, number of companies in an industry.
+ Entrance Barriers.
 Competitive Pressure from replaceable products
Replaceable products and services are things which can satisfy the need equivalent
to that of products and services in a industry. Appearances of replaceable products
are diversified and complex, which can create threat of tough competition of price
to the former products. The factor which strongly urges replaceable products is
renovation of science and technology.
Competitive Pressure in a industry
Companies which are operating in a industry will directly compete together and
create a pressure on an industry, which leads to competition becoming tougher. In
an industry, following factors will increase competitive pressure on competitors:
+ Actual situation of an industry: needs, growth rate, number of competitors, etc.
+ Structure of an industry: concentrative or scattering.
+ Exit Barriers: they are similar to entrance barriers. They are factors which makes
exit of an enterprise difficult.
1.2.2.3 Matrix of external factor assessment

Matrix of external factors allow strategic planners to summary and assess
economic, social, cultural, inhabitant, geographical, political, governmental, legal
technological and competitive information.
There are 5 steps to develop a matrix of external factor assessment:
 Step 1 – Set up the list of external factors which play decisive role to enterprise‟s
success including opportunities and threats for the company and its business
industries.
 Step 2 – Classify important level from 0.0 (not important) to 1.0 (very
important) for each factor. This classification expresses a relative important role
to the success of enterprise‟s business industry.
Opportunities usually have higher classified level than threats. Hence, threats
can gain high classified level if they are severely dangerous to the company.

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Total classified levels are set for these factors must be equal 1.0.
 Step 3 – Classify from 1 to 4 for each factor of successful decision to show the
method that current strategy of the company reacts to it. Among that, 4
expresses the best reaction, similarly, 3 for higher than average reaction, 2 for
average reaction and 1 for the least reaction. These levels are based on the
effectiveness of enterprise‟s strategy. Thus, this classification relies on the
enterprise.
 Step 4 – Multiply important level of each variation with its class to get the score of
importance.
 Step 5 – Add total scores of importance for each variation to get total scores of
importance for an organization.
Not taking any notice of key opportunities and threats including in matrix of

external factor assessment, total of the highest score of importance, which an
organization may have, is 4.0 and lowest one is 1.0 and medium is 2.5.
 Assession: Total score of importance of 4 means that the organization is very
well reacting to current opportunities and threats in their environment. Total
score of importance of 4 means that the enterprise‟s applying strategy cannot
make use of the opportunities of avoid outside threats.

Table 1: Sample Matrix of external factors
External
environment factors
Level of Importance
(weight)
Classification
Score of
Importance
Listing external
environment factors



Total
1.00



1.2.3 Internal Environment
Classification of Internal environment is to find out strong and weak points of an
enterprise.

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Strong point is the fact that the company is effectively implementing or the
characters that helps the company enhance competitive capacity. The strong point
can exist in following forms:
- A skill or an important experience – a secret production with low costs, a secret
technology and non-mistake production, an experience of excellent customer
service provision, a product renovating skill, product commercialized skills in
large scale and special buying encouraging advertisement.
- Valuable material assets – modern factories, attractive location, natural resource
reserve and global subsidiaries system.
- Valuable human resource assets – a quality control system, technological
possession, copyright, exploiting right, customer‟s faith, credit value, etc.
- Valuable intangible assets – image, brand name, fame, high faith of customers,
etc.
- Competitive capacity – product development and commercialization in short
time, creative capacity, agency system, power suppliers, etc.
- Achievement or effect which put the company in beneficial position in market –
Low costs, leading position in market, owning better products.
- Ally or cooperation – participating in allies or joint-ventures of experienced and
able counterparties.

A weak point is something that the company have a shortage or a not good one or a
condition that put the company in disadvantage condition. Internal weak points of a
company may include:
- A shortage of important competitive skills and experiences.
- A shortage of competitive vital intangible assets, material assets, organizations,
human resources

- A shortage or a weakness of competitive capacity in key fields.
- Internal weak points are shortcomings of enterprise‟s resources. A weak point
can or cannot hurt the company that depends on effected level in market and that
weather the company can overcome it with its power and strength or not.

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In order to define strong and weak points of the company, a ring of its values, which
are all related activities of the company that increases values for customers, needs to
be analyzed. It consists of:
1.2.3.1 Input supply activities
- The soundness of the control system of goods in stocks and materials
- Effectiveness of raw material stocking activities
1.2.3.2 Producing Operation
- Capacity of equipments comparing to that of main competitors.
- Relevance of producing automaticalized process.
- Effectiveness of the control system to upgrading quality and reducing costs.
- Effectiveness of production place arrangement and working step design.
1.2.3.3 Output activities
- Timeliness and effectiveness of product and service distribution.
- Effectiveness of finished product stocking activities.
1.2.3.4 Marketing and sale
- Effectiveness of market research in identification of needs and customer
segmentation.
- Estimating the price for different distributing channels.
- Encouraging and capacity level of sale labor forces.
- Renovation in buying encouraging activities and advertisement.

- Development of image, quality and fame.
- The faith level to brand name of customers.
- Market reining level in a market segment or in the whole market.
1.2.3.5 Post buying service
- Means attracting customer‟s contribution to perfect products.
- Readiness and rapidness for notice of customers‟ complaints.
- Relevance of insurance and assurance policy.
- Capacity in supply of replaceable parts and repairing services.

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1.2.3.6 Enterprise’s infrastructure
- Capacity of identification of new product business opportunities and potential
threats of environment.
- Quality of strategy planning system to meet the company‟s target.
- Co-ordination and integration of all activities related to the value chain among
department of the organization.
- Capacity to reach capital sources with low price.
- Level of the information system supporting to make daily and strategic
decisions.
- Information is exact and on time for general and competitive environment
management.
- Relation to the policy makers and beneficial groups.
- Image in community and attachment to the company.
1.2.3.7 Human resource management
- The compatibility of organizational structure and human resource strategy with
strategy of SBU and the general strategy of the company.

- Effectiveness of procedures of recruitment, training and promotion to all levels
of labors.
- Relevance of bonus system for encouraging and challenging workers.
- Working environment to minimize absence and keep moving rate at expected
rate.
- Relations to the Trade Union.
- Enthusiastic participation of professional persons.
- Level of encouragement and satisfaction of labors.
1.2.3.8 Research and Development (R&D)
- Success of research and development activities (in renovation of process and
products).
- Quality and working relation between staffs of research and development
department and other departments.

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- Timeliness of technology developing activities in meeting the core deadline.
- Quality of laboratory of scientists and technicians.
- Capacity of working environment in creative and renovating encouragement.

1.2.3.9 Finance
Researching financial situation is one of the most important consideration about
enterprise‟s competitive position. Financial indexes provide us an overview look of
power and competitive capacity of an enterprise.
- Development of various input resources is to minimize the dependence on a
suppliers.
- Purchasing raw materials based on the exact time, the lowest costs or an

excellent quality level.
- Procedures for purchasing factories and building machines.
- Development of criteria for leasing or purchasing decisions.
- Good and long-lasting relations to good suppliers.
Assessment of enterprise‟s competitive capacity through some key financial criteria
as following:
+ Indexes of payment ability:
- Current payment coefficient = Short-term assets / short-term debts
This index shows payment ability for short term debts by money transferable assets
during the period of time before the due date of debts.
- Fast payment coefficient = (short-term assets – inventories) / Short-term
borrowings
This criteria shows the ability of paying short-term debts without waiting until
selling up inventories.
+ Assessment of operating effectiveness of assets
- Ratio of receivable turnover: indicates the transferring rate of receivables of the
company into cash.

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Ratio of receivable turnover = Sales Revenue/ Average receivables
-Average days receivables: indicates if the company can be paid for debts quickly or
not.
Average days receivables = Receivables * 360 / Sales Revenue
- Ratio of inventories turnover: indicates how effective the company use
inventories.
Ratio of inventories turnover = Cost of goods sold / Average inventories

- Average days inventories:
Average days inventories =( Inventories * 360)/ Cost of goods sold
Rate of using fixed assets: indicates how much revenue that 1VND of fixed asset
can bring for the company. The higher is this rate, the higher the effectiveness of
fixed assets.
Rate of using fixed assets = Sales Revenue / Fixed assets
- Rate of using total assets : indicates how much revenue is created if 1VND is
invested in business and production. The company is highly deficient due to low
total assets turnover.
Rate of using total assets = Sales Revenue / Total assets
- Mobile Capital on Revenue: indicates the rate of transferation of short term
working capital.
Mobile Capital on Revenue = (Short term assets – Short term debts)/ Sales Revenue
- Payable Debts on Revenue : indicates how much payable debts that a company
uses to create 1VND of revenue.
Payable Debts on Revenue = Payable Debts / Sales Revenue
- Rate of using shareholders capital: This is an useful criteria to analize financial
aspects of the company. It measures a relation of revenue and shareholders capital.
Rate of using shareholders capital = Sales Revenue / Shareholders capital
+ Coefficient of Financial Lever
- Coefficient of bankruptcy threat (Zscore):

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It indicates rate of risks in operation of the company. It is calculated formation
written by Professor Altman (School of Business Management, University of New
York):

Z score = 1.2xA1+1.4xA2+3.3xA3+0.6xA4+1.0xA5
When:
A1 = Mobile capital ( Short term assets - Short term liabilities)/Total Assets
A2 = Undistributed Profit / Total Assets
A3 = EBIT (Earning before Interest and Tax)/ Total Assets
A4 = (Market value of a share*Number of shares)/Total Liabilities
A5 = Rate of using assets = Revenue/ Total Assets
Defination of actual financial situation of a company as following:
2.99<Z : A company has a healthy finance
1.81<Z<2.99 : A company has no problems in short term. However, it needs to
carefully consider financial condition.
Z<=1.81: A company has serious problems of finance and it may be bankrupt
However, this comparison can only implement if these criteraa are annually
calculated.
- Ratio of debts on assets: indicates the percentage of debt used to finance company
assets.
Ratio of debts on assets = Total Liabilities / Total Assets
- Ratio of debts on shareholders capital:
Ratio of debts on shareholders capital = Total Liabilities / Shareholders capital
- Ratio of long term debts on shareholders capital:
Ratio of long term debts on shareholders capital = Long term debt / shareholders
capital
- Ratio of total assets on shareholders capital: is used for calculating the rate of
borrowing (financial risky) endured by the company.
Ratio of total assets on shareholders capital = Total assets / Shareholders capital

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- Ability for interest payment: is used for measuring the rate of earning due to using
capital to pay annual interest.
Ability for interest payment = Earning Before Interest and Tax (EBIT) / Interests
+ Return Ratio :
- Ratio of Return on Revenue: indicates how much earning is created from 1VND
of revenue.
Ratio of Return on Revenue = Earnings / Sales Revenue
- Ratio of Return on Total assets (ROA) : is used for measuring earning ability on
1VND of capital investing in the company.
Ratio of Return on Total assets = Profit after Tax / Total assets
- Ratio of Return on Equity (ROE): This is a criteria essensially concerned by
investors because it indicates earning ability of a capital unit put in a company.
Ratio of Return on Equity = Profit after Tax / Shareholders capital
- Rate of Return on long term capital (ROCE): indicates profitability of long tern
capital.
Rate of Return on long term capital (ROCE) = EBIT/(Total Liabilities – Short term
Debts)
Ratios of Return above are criterias generally indicating financial situation and
effectiveness of business and production activities of a company. The higher these
ratios are, the more effective is company‟s operation and vice versa. In the case of
low ratios, the company needs to have solutions for difficulties.
+ Growth Rates
The growth rates indicate the growth and expansion of scale of a company. They
shows annual growth of revenue and profit of a company. The ideal case is that the
growth of revenue parallelly goes with growth of profit.
- Rate of Revenue Growth :

Rate of Revenue Growth = (Revenue of later year / Revernue of former year) –
100%