Building the development strategies of Tri An hydropower company stage from 2010 to 2015

GRIGGS UNIVERSITY

GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM





BUILDING THE DEVELOPMENT
STRATEGIES OF TRI AN HYDROPOWER
COMPANY STAGE FROM 2010 TO 2015

Group 8:
Vo Tang Ly
Vo Tan Nhan
Phan Van Khuyen
Tran Duc Minh










HO CHI MINH CITY, JAN. 2010

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PREFACE

First, our group would like to thank Pr. JONH VONG who has taught us the
knowledge of management strategy and the valuable experiences in management in
general and strategic management in particular and Dr. Hoang Lam Tinh who has
guided us implementing the subject.

We sincerely thank the lecturers of the professional group - Griggs University in
Vietnam who have contributed to complete the subject.

We sincerely thank the lecturers who have been communicating the useful
knowledge throughout the course to use in this thesis.

We respectfully thanks the leaders, the colleagues in the Tri An hydropower
company (TAHPC), the experts in the electricity sector and the members of the
GEMBA01.E04 class have enthusiastically cooperated during the survey
assessment of the internal force of the TAHPC.

We sincerely thanks the supervisors who have supported our class in the process of
subject implementation as well as during the course.

We sincerely thank Electric Power College Ho Chi Minh City that has given us the
best facilities and equipment during the course.

This is an exercise showing full knowledge that we have been digested in the
learning process. This is a scientific research of our group. During the process of

writing this scientific research, we also used the references that have been
presented in the reference part.

Sincerely,
GROUP 8


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TABLE OF CONTENTS
CONTENTS

PAGE

Extra cover page
i
Preface
ii
Table of contents
iii
List of symbols and abbreviations
ix
List of tables
ix
List of pictures
x

OVERVIEW OF THE THEME
1
Chapter 1:
BASIS OF METHODOLOGY OF MANAGEMENT STRATEGY
4
1.1 STRATEGIC MANAGEMENT
4
1.1.1 The concept of strategy
4
1.1.2 Tasks of strategic management
5
1.1.3 General strategy
5
1.1.4 Company Strategy and Competitive Strategy
5
1.2 COMPETITIVE ADVANTAGE
9
1.2.1 The nature of competitive advantage
9
1.2.2 The Origin of sustainable competitive advantage
11
1.2.3 Value chain of company
14
1.3 STRATEGY OF LEADING COST
15
1.3.1 Implication of strategy
15
1.3.2 The Strategic Options
16
1.3.3 The advantages of strategic of leading cost

16
1.4 EXTERNAL ENVIRONMENT ANALYSIS
17
1.5 THE BASIC MATRIX OF STRATEGY FORMATION
19
1.5.1 Matrix assessment of external factors
19
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1.5.2 Matrix assessment of internal factors
20
1.5.3 Internal-External factor matrix ( IE)
21
1.5.4 SWOT Matrix
22
1.6 ORGANIZATION TO IMPLEMENT THE STRAGY
23
1.6.1 Total quality management TQM
23
1.6.1.1 Concept
23
1.6.1.2 The basic content of total quality management TQM
24
1.6.2 Design of organizational structure
25
1.6.2.1 Overview

25
1.6.2.2 Horizontal Assignment
25
1.6.2.3 Disadvantages of funtional structure
26
1.6.3 Controlling
26
1.6.3.1 What is the strategic control?
26
1.6.3.2 The importance of strategic control
26
1.6.3.3 The control system
27
1.6.3.4 The steps of strategic control
27
1.6.4 Organizational culture
28
1.6.4.1 What is the organizational culture?
28
1.6.4.2 Culture and strategic leadership
28
1.6.4.3 The adaptable and stagnant culture
28
1.6.5 System of remuneration and rewards
28
1.6.6 Human resource management
29
1.6.6.1 Function
29
1.6.6.2 Working Analysis

29
1.6.6.3 Training and development
30
1.6.6.4 Personnel rating
30

Conclusion of chapter 1
30
Chapter 2:
THE CURRENT OPERATION OF THE COMPANY
31
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2.1. PROCESS OF FORMATION AND DEVELOPMENT OF THE
COMPANY
31
2.1.1 Establishment history
31
2.1.2 The organizational structure
32
2.1.2.1 Characteristics of the organizational structure of the
company
32
2.1.2.2. The Organizational chart of the company
33

2.1.3 Functions and scale of operation
34
2.2 OPERATION ANALYSIS
34
2.2.1 Operation management analysis of the company
34
2.2.2 The value chain analysis of TAHPC
35
2.2.2.1 Main activities for increasing the value chain
35
2.2.2.1.1 Equipment operating
35
2.2.2.1.2 The maintenance and repairing
36
2.2.2.1.3 The input operation
36
2.2.2.1.4 The output operation
36
2.2.2.1.5 Marketing and Services
37
2.2.2.2 The supported activities
37
2.2.2.2.1 Structure of infrastructure
37
2.2.2.2.2 Human Resource Management
37
2.2.2.2.3 Financial activity
39
2.2.2.2.4 Technology Development
41

2.3 MACRO ENVIRONMENTAL ANALYSIS
41
2.3.1 Economic Environment
41
2.3.2 Science and technology factors
43
2.3.3 Social Factors
43
2.3.4 Natural Factors
43
2.3.5 Political and legal factors
43
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2.4 ENVIRONMENTAL ANALYSIS OF 5 PRESSURES IN
COMPETITION
44
2.4.1 Enterprises in the industry
44
2.4.2 Substitute products
48
2.4.3 The pressure from customers
49
2.4.4 The pressure from suppliers
49
2.4.5 The pressure from potential competitors

49
2.5 ASSESSMENT SURVEY OF THE COMPANY‟S INTERNAL
FORCE
50
2.5.1 Survey Objective
50
2.5.2 Survey Design
50
2.5.3 Qualitative research
50
2.5.4 Quantitative research
54
2.5.4.1 Information demands
53
2.5.4.2 Questionnaire and scale use
53
2.5.4.3 Model description
53
2.5.4.4 Method of data analysis
54
2.5.5 Research results
55
2.5.5.1 Survey sample characteristics
55
2.5.5.2 Testing Cronbach's ANPHA liability
56
2.5.5.3 Analysis of descriptive statistics variables
57
2.5.5.4 Factor analysis
60

2.6 MATRIX EVALUATION OF INTERNAL FACTORS
62
2.6.1 Strengths
62
2.6.2 Weaknesses
63
2.7 MATRIX EVALUATION OF EXTERNAL FACTORS
64
2.7.1 Opportunities
65
2.7.2 Theat
67
2.8 IE MATRIX
68
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2.9 SWOT MATRIX
69
2.10 CONCLUSION
70
Chapter 3:
BUILDING THE DEVELOPMENT STRATEGIES
OF TRI AN HYDROPOWER COMPANY STAGE FROM 2010 TO 2015
72
3.1. THE DEVELOPMENT STRATEGIES OF THE COMPANY
STAGE FROM 2010 TO 2015

72
3.1.1 Vision
72
3.1.2 Mission
72
3.1.2.1 Core Values
72
3.1.2.2 Company mission
73
3.1.3 Strategic objective
73
3.1.3.1 Long-term objective
73
3.1.3.2 Short-term objective
74
3.1.3.3 Economic objective
74
3.1.3.4 Social objective
74
3.1.3.5 Political objective
74
3.1.3.6 Basis for company strategies development
75
3.2 COMPANY‟S STRATEGIES DEVELOPMENT
75
3.2.1 Period 2010-2013
77
3.2.1.1 Objective
77
3.2.1.2 Strategies use to achieve the goals

77
3.2.2 Period 2013-2015
80
3.2.2.1 Objective
80
3.2.2.2. Strategies to achieve the goal
80
3.3 SOLUTION FOR STRATEGY IMPLEMENTATION
82
3.3.1 HR solutions
82
3.3.1.1 Recruiting and training human resources
82
3.3.1.2 Policy for motivating employees
82
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3.3.2 Organizational solution
83
3.3.3 Solution of information system
84
3.3.4 Solution to work toward competition strategy leading cost
84
3.3.5 Financial Solution
85
3.3.6 Solution of marketing

87
3.3.6.1 Solution on price
87
3.3.6.2 Product and service solution
89
3.3.6.3 Distribution solution
90
3.3.6.4 Promotion solution
90
3.4 CONTROL STRATEGY
91
PROPOSAL, CONCLUSION
92
References
96
Appendix 1: Table of evaluation survey
98
Appendix 2: List of customers using large power in Dong Nai province
100
Appendix 3: List of customers using large power in Binh Duong province
103
Appendix 4: Implementing schedule of building center for consulting,
maintenance and repairing services.
105

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LIST OF CHARACTERS AND ABBREVIATIONS

Symbols,
abbreviations
Full Text
TQM
Total quality management
EVN
The electricity of Vietnam corporation
TAHPC
Tri An Hydropower Company
BSC
Balanced Scorecard

LIST OF TABLES

No.
Name
Page
Table 1.1
Tangible resources
12
Table 1.2
Intangible resources
13
Table 1.3
Criteria for determining core capability
13
Table 1.4

Result of combination of sustainable criteria
14
Table 1.5
Matrix pattern of external factors
20
Table 1.6
Matrix pattern of internal factors
21
Table 1.7
The total significance mark in the IE matrix
21
Table 1.8
SWOT Matrix
22
Table 1.9
14 articles of Deming (TQM)
24
Table 2.1
Current human recources of the company
38
Table 2.2
Cost and output statistic (by year)
39
Table 2.3
Production cost of electricity (by year) of TAHPC
40
Table 2.4
Capacity of electric power plants in Vietnam (years 2008 and
2015)
44

Table 2.5
Information of units making an offer in the competitive
electric market
46
Table 2.6
Number of surveysample
54
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Table 2.7
Characteristic of sample surveys
55
Table 2.8
Results of Cronbach‟s Anpha reliability test
56
Table 2.9
Response capacity of the company through the experts‟
evaluation
57
Table 2.10
Table of factor analysis
60
Table 2.11
Matrix of internal factor evaluation ( IFE )
62
Table 2.12

Matrix of external factor evaluation ( EFE )
64
Table 2.13
Power consumption structure and GDP structure
65
Table 2.14
SWOT Matrix
69
Table 3.1
Matrix of response strategy
76
Table 3.2
Personnel planning of the company to year 2015
83
Table 3.3
Company „s Planning budget to 2015
87

LIST OF FIGURES
No.
Name
Page
Figure 1.0
Overview of TAHPC
1
Figure 1.1
Model of 5 competitive forces
6
Figure 1.2
Model of total strategic management

9
Figure 1.3
Foundation of the customer value
10
Figure 1.4
Basic features of competitive advantage
11
Figure 1.5
Steps of designing control system
27
Figure 1.6
Functions of human resource management
29
Figure 2.1
Water intake of TAHPC
31
Figure 2.2
Organizational chart of the company
33
Figure 2.3
The Value chain of TAHPC
35
Figure 2.4
Process of survey and research
52
Figure 2.5
Frame plan for responding descriptive statistics
59
Figure 3.1
Plans for strategy implementation

76
Figure 3.2
The combined strategy period 2010-2013
79
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Figure 3.3
The combined strategy period 2013-2015
81
Figure 3.4
Chart of defining electricity market price
89
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BUILDING THE DEVELOPMENT STRATEGIES
OF TRI AN HYDROPOWER COMPANY STAGE FROM 2010 TO 2015

Figure 1.0: Overview of TAHPC

OVERVIEW OF THE THEME:
 General background of the theme:
In order to achieve growth rate of 1% in total national income (GDP) we need to
increase about 2% in electric power. The power industry has been under high pressure
from increasing the demand of electricity from 13 to 15% every year. This is difficult
to do, especially for investment capital mobilization. Currently, the demand for electric
capacity is 12,000-13,000 megawatt (MW), while the ability to provide all types of
power plants is only about 12,000 MW. Because there isn‟t enough reserve capacity,
the nationwide shortage of electricity will be about 1,000MW in peak hours every day.
Therefore, the happening stress of power is unavoidable.
In this situation, maintaining the existing electric resources stably is also an urgent
solution to maintain the system stability. Although TAHPC is only a plant of small
capacity comparing to the electric system (400MW/12,000MW), but it plays an
important role in maintaining a stable power system, is a plant compensating reactive
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power mainly in the South. Operating four generating units effectively, safely, stably
is an extremely important task of TAHPC.
On 1 July 2010, the Law on State Enterprise will be unvalid, all State Enterprises

will have to convert existing forms to act in accordance with the provisions of the
Law. TAHPC is a state-owned enterprise directly under the EVN. According to the
route and the structure of the EVN, TAHPC will become a 1 member limited liability
company in 2010 and this is an intermediary preparation step for equitization that‟s
expected to implement in 2013.The economic structure continues towards increasing
the proportion of industry, services and decreasing the proportion of agriculture,
etc…This is an opportunity and a challenge for the company. Development strategy of
the company must be appropriate to the change of environment. In this situation, we
choose the theme:
“Building the Development Strategies of Tri An Hydropower Company
Stage from 2010 to 2015”
 The significance of the theme:
From now to 2015 EVN in particular and the state-owned enterprises in general
will undergo large fluctuations in the business structure, it is indispensable for the
development of market economy. If you want to survive and develop, you must
change business mind. Building the development strategies of the company will mean
extremely important, this can create a good foundation for the development of the
company in the market economy.
 The purpose of the theme:
Building the development strategy in the company is to exploit optimally the
available resource, improve reliability, safety and efficiency in electricity production;
diversifying of types of services such as consultancy, installation and maintenance;
exploit , conserve and develop the capital after equitization and make high profits for
shareholders.
 Research method:
Analyze the impact of macro and micro environment to determine opportunities
and challenges for the company.
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Analyzing the actual operation to determine strengths and weaknesses for the
company.
Survey assessing the response of the company to clients, using the SPSS to
analyze and assess strengths and weaknesses.
Analysing the activities to increase the chain of value of the company.
Surveying and determining the original structure of electricity system and demands
for services in the future.
Since then building the development strategies of the company to promote the
company strengths, take full advantage of opportunities to overcome weaknesses and
limit the threats to the business environment of the TAHPC.
Structure of the exercise:
Chapter 1:

BASIS OF METHODOLOGY OF STRATEGIC MANAGEMENT
Chapter 2:
THE PRESENT OPERATION OF THE COMPANY

Chapter 3:
BUILDING THE DEVELOPMENT STRATEGIES
OF TRI AN HYDROPOWER COMPANY TO YEAR 2015


PROPOSALS, CONCLUSIONS

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Chapter 1:

BASIS OF METHODOLOGY OF STRATEGIC MANAGEMENT

1.1 STRATEGY MANAGEMENT.

1.1.1 The concept of strategy.
Strategic management is the science and art to build direction and business
objectives and implementing short and long term plans based on the available
resources to help each organization achieve its long-term goals.
What is strategy?
Strategy is the direction and field of activity of an organization for long-term
target to achieve business advantage through the determination of resources in
business environment to satisfy the market needs and ensure benefits for all agents
involved (stakeholders, personnel, customers,…)
A more specific strategy is to:
 Achieve long-term business goals (business and social responsibility) in a
sustainable manner.
 Market or market segment that the company will operate and business
strategies will be used.
 Business should know how to dominate against competitors in the market with
specific customers.
 What resources need to use (people, skills, assets, finance, technology secrets,

etc…) to achieve that goal.
 The outside threats can affect the strategic performance such as environment,
competition, politics, resources and plans for risk prevention.
 The values that the enterprise will bring the owner and society as a member.
In terms of process, strategic management is regarded as a management process
including the establishment of a strategic vision, setting goals, drafting strategy,
implementing strategy and adjusting appropriately.
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1.1.2. Tasks of strategic management .
1. Identifying objectives and business purposes
2. Strategy and scale of business strategy
3. Strategy and business morality standards
4. Culture and basic values of business
5. Commitments to community, society and shareholders
At least there are three types of strategies in the business world. They are strategy or
normal strategy, company strategy and competitive strategy.








1.1.3 General strategy.

A common strategy will reflect how to achieve goals. Therefore, a normal
strategy will relate to the relationship between the ultimate goal and ways to perform.
Strategies and tactics will be perform exactly to gain specific objectives. In most cases,
the strategy was set up with available resources. Anyway, strategy is a combination
between the achieved goals and ways of implementation.
1.1.4. Company strategy and competitive strategy.
An enterprise will operate with the cooperative strategy of identifying market
and business areas. Competitive strategy or business strategy is a way of determining
basis of doing business for competition. Company strategy is a kind of plan in the
context of the specified mission and vision of the company. This means to introduce
who you are, reason for establishment, and trend of development. Competitive strategy
focuses on business capacity, strengths, weaknesses relating to market features and
its potentials, strengths and weaknesses of the competitors.
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According to Prof. Michael E.Porter in Harvard University and his
colleagues when analysing the competitive strategy, competition starts from 5
factors:

Figure 1.1 Model of 5 competitive factors (Michael E.Porter )
The potential competitors
According to Michael E.Porter, the potential competitors are businesses affecting to
the industry in future. Pressures from potential competitors to the industry depend on
these following factors:
 The attraction from the industry.
The attraction from the industry: this factor can be expressed by these figures such as
profitable ratio, numbers of customers, numbers of businesses.
 Barriers for entering in this industry: these are factors which affect to the industry
entrancing.
 Technology and capital.
 Business factors: distribution system, brand name, customer system, etc…


Negotiation
ability of
suppliers



Negotiation
ability of
buyers

Threats from substitute
products
Threats from the
potential competitors

INDUSTRIAL INTERNAL
COMPETITION
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 Specific potentials: materials, degrees, inventions, human resources, government
protection.
Competition in the industry
The businesses will compete directly to create high competitive pressure in the
industry. In each field, competitive pressure among competitors can be based on these
factors:
 Condition of the industry: demand, speed of growth, numbers of competitors,
etc…
 Structure of the industry: concentrating or spreading.
 Exit Barriers: like entering barriers, exit barriers are the factors affecting to the
retired businesses seriously.
Negotiation ability of buyers
As a competitive threat when they suggest lower price or a better service
(increasing the cost of operation).
 When the buyers are low, the company can increase price and get high profit.
 The buyers are the most powerful in these cases:

 The industry including many small companies and there are not many buyers.
 The buyers charge with a large quantity.
 The industry depends on customers.
 The buyers can change the supply with the low cost.
 The buyers don‟t have to spend much money when they buy from several
companies at the same time.
 The buyers can have the vertical amalgamation .
 The relative power of the buyers and suppliers can be changed in future.
Negotiation ability of the suppliers
The suppliers have to encounter with the pressure of raising prices or the input quality.
 Opportunities for decreasing prices and high quality requirement.
The suppliers are the most powerful when:
 The products of the suppliers are not capable to replace and they play an
important role in the company.
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 The company is not a main customer to the suppliers.
 The suppliers‟ products are different and these can not be economical for the
company.
 Integration threatening and the direct competition with the company.
Substitute products
Substitude products and services can be satisfied the demand of products and
services in the industry. These are very sophisticated and diversified. These can create
price competition to the former product. The most important factor of substitute
products is scientific-technological progress.
In order to deal with 5 above-mentioned factors, the competition strategy can use the

following elements: (1) cost, (2) differentiation, (3) focus.
In short:

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Feedback













Feedback
Establishment Operation


Figure 1.2 Model of total strategic management

1.2 COMPETITIVE ADVANTAGES

1.2.1 The nature of competitive advantages:
The value that the customers can be recognized goods or services and
manufacturing cost.
External evaluation to
determine
opportunities and
threats
Setting
objectives
annually

Vision,
Mission,
Objective
Selecting
trade
strategy

Natural
resources
disitribution
Measuring and
evaluating
performance
Implementing internal control,
examining,analizing strengths
and weaknesses
Policy

proposal

Solutions of
strategic
implementation


Strategy

valuation

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Figure 1.3 : Foundation of the customers’ value

Ways to have competitive advantage:
1. The company will try to give more advantages to the customers to satisfy their
expectation They will to try to make an effort to create high quality product for the
customers. The customers will enjoy great value (V)and offer higher price(P).
2. The company will work effectively to reduce cost. As a result, the marginal profit
increase competitively.
“Creation is the main value of competitive advantage”
1

“Therefore, having potential ability or competitive advantage are to meet competitive
demands and create the value of the customers.”
2
According to Michael E.Porter, “ the competitive advantage (higher profit) to any
companies can create dominated value, reduce business expense and make different
products, so the customers will accept and offer a higher product.”
3



1: P.Ghemawat(1991), commitment the dynamic strategy, Free Press, New York.
2: R.R. Wiggins & T.W Ruefli, 2002, Organization Science, 13: 82-105.
3: M.E.Porter (1980), Competitive strategy, Free Press, New York.
V; customers‟ value
P: Price
C: Cost
V-P : consumers surplus
P-C : marginal profit
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Fugure1.4 The basic models of competitive advantage
1.2.2 The origin of sustainable competitive advantage:
“In the broad sense, the resources consist of organizational, technical, human
resources, materials, financial factors of the company. These can be divided in 2 types:
visible and tangible resources”
1
.

1:B.Wernerfelt (1994), “Aresource Base of the firm”, Strategy Management Journal, 5
(1994) 171-180
Quality
domination

Meeting the
customers‟
demand

Innovation
domination
Effectiveness
Domination

-Competitive
advantage
-Low cost
-Difference
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Table1.1 Tangible resources
Resources
Contents
Financial resource

 Debt ability
 Self finance ability
Organizational resource
 Structure of official statement,
planning system, controlling,
official coordination
Material resource
 complicacy and plant layout
allocation, machine
 approachingMaterial resource
Technical resource
 Technical resource such as :
copyright, trademarks, patent,
business secret
“ In the progress of creating the basic capacity, in comparison with visible resources,
tangible resources are more effective and dominant”.
1

“ The achievement of a company depends on the intelligence and resources
systematically. These are more important than its property. Moreover, understanding
the intelligence and using it as services successfully are becoming the managerial skill
nowaday”
2
.

1: Brush & Artz “Toward a contingent resource-base theory”
2: J.B.Quinn, P.Anderson, & S.Finkelstein, 1996 “Making the most of the best”
Harvard business review, 74(2): 71-80.
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Table 1.2 Intangible resource

Resource

Contents
Human resource
 Knowledge
 Reliability
 Managerial skill
 Organizational habit
Initiative resources
 Ideas
 Scientific ability
 Innovation ability
Reputation resources
 Reputation to customers
 Brand
 Awareness of stability, quality, product
reliability
 Reputation to suppliers: validity, effectiveness,

support, interactions and beneficial relations

The sustainable competitive advantage is a way to evaluate the potential and is
difficult to imitate and replace.
Table 1.3. Standards for determining basic capacity
Standards
Contents
Evaluation ability
 Helping the company recover threats and exploit
opportunities
Rare ability
 Not have in many competitors
Difficult imitated
ability
 History: Culture, valuable and original brand.
 Unclear causes and effects: causes and function of
an unclear ability
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 Social complicacy:
Internationarelations,reliability, relations among
managers, staffs, suppliers and customers
Unchangeable ability
 Not have equivalent strategy

Table 1.4. Results of combination of sustainable standards

Valuable
Scare
Easy to
intimate
Unchangeable
Result
Implementing
implication
No
No
No
No
Disadvantages of
competition
Below average income
Yes
No
No
No/ yes
Equality
Below average income
Yes
No
No
No/ yes
Temporary
competitive
advantage
Average income to
over average income

Yes
Yes
Yes
Yes
Sustainable
competitive
advantage
Over average income

1.2.3 Value chain of company
The term of value chain shows that the company is a chain of many activities to
change the inputs into the outputs to create the values for the customers. This changing
process consists the main activities and the mutual activities.
Values chain is an academic creation of Prof. Michael E.Porter, a famous
marketing scholar. This term was first used in 1985 in the book of analysing the
competitive advantage when he researched the production systems, trade and services.
This research has a great effectiveness in the USA and other developed countries. This
is a initial stage in the Rostow model of economic growth, the highest stage.