Luận văn chiến lược kinh doanh giai đoạn 2011 2020 của công ty cổ phần công nghệ EDH

Luận văn Chiến lược kinh doanh giai đoạn 2011-2020 của
công ty cổ phần công nghệ EDH

Thesis topic
BUILDING BUSINESS STRATEGY IN 2011-2020
PERIOD FOR EDH TECHNOLOGY DEVELOPMENT
JOINT STOCK COMPANY

1


TABLE OF CONTENTS
Page
INTRODUCTION
1. General context, the necessity and implication of the research project
2. Objectives of the study
3. Methodology of the study
4. Structure of the Capstone project
Chapter 1: THEORETICAL BACKGROUND TO BUSINESS STRATEGY
1.1. Business strategy
1.1.1. Concept and role of business strategy
1.1.2. Basic characteristics of business strategy
1.1.3. System of enterprise’s strategies
1.2. Factors affecting business strategy
1.2.1. Institution - politics
1.2.2. Economy
1.2.3. Socio-culture
1.2.4. Technology
1.3. Building business strategy for enterprise
1.3.1. Vision, mission and main goals
1.3.2. Analyzing affecting factors to business strategy

1.3.3. Methods to evaluate business environment
1.4. Implementing business strategy
1.4.1. Checking goals of business strategy
1.4.2. Rechecking business environment conditions and selected strategies
1.4.3. Organizing implementing apparatus
1.4.4. Resource allocation and adjustment
1.4.5. Forming deployment plan
1.5. Summary and evaluation
Chapter 2: REAL SITUATION OF BUSINESS ACTIVITIES AND
BUSINESS STRATEGIES OF EDH TECHNOLOGY
DEVELOPMENT JOINT STOCK COMPANY IN
2

6
6
7
7
7
8
8
8
9
9
10
10
10
10
11
11
11

12
13
14
14
14
15
15
15
16
17


2010-2020 PERIOD
2.1. Overview of EDH Technology Development Joint Stock Company
2.1.1. Process of establishment and development of the Company
2.1.2. Organizational structure of the Company
2.1.3. Business functions and missions
2.1.4. Awards of the Company
2.2. Business activities of EDH in 2008-2010 period
2.2.1. Business performance of EHD in 2008-2010 period
2.2.2. Analyzing production capacity and products of EDH
2.3. Auditing the Company’s position
2.3.1. Analyzing business environment
2.3.2. Analyzing customers and customer segments
2.3.3. Analyzing sectorial environment and competitors
2.3.3.1.Analyzing industrial environment
2.3.3.2. Analyzing competitors
2.3.4. Analyzing internal capacities and SWOT analysis
2.4. Vision and goal of the Company’s business strategy
2.4.1. Mission

2.4.2. Vision
2.4.3. Core value
2.4.4. Strategic objective
2.5. Business strategy of EDH Technology Development Joint
Stock Company
2.5.1. Business strategy orientation of the Company
2.5.2. Production strategy and product development of the Company
2.5.3. Marketing and sales strategy
2.5.3.1. Product policy
2.5.3.2. Price policy
2.5.3.3. Product distribution and consumption policy
2.5.3.4. Promotion and sales support policy
2.5.3.5. Advantages in developing strategy and forming thinking
strategy within the Company
2.5.3.6. Some shortcomings in developing business strategy of
the Company
2.5.4. Training and human resources strategy
2.5.4.1. Stabilizing and maintaining the existing personnel
3

17
17
18
20
20
21
22
28
31
31

34
35
35
38
41
44
44
45
45
46
47
47
48
51
51
52
52
53
53
54
56
57


2.5.4.2. Training and developing human resources
2.5.4.3. Talented people - retaining policy
2.5.5. Operation and quality control strategy
2.5.6. Financial strategy and budget estimate for doing the business
strategy
Chapter 3: SOME SOLUTIONS AND INITIATIVES TO

IMPLEMENT BUSINESS STRATEGY OF EDH TECHNOLOGY
DEVELOPMENT JOINT STOCK COMPANY
3.1. Summary of chapter 2
3.2. Some solutions and initiatives to implement business strategy of
EDH Technology Development JSC
3.2.1. Promoting market research and forecast
3.2.2. Increasing financial resources, improving infrastructure and
building the factory manufacturing electric equipments
3.2.3. Selecting strategic products, reforming the sale method and
developing target customers of the Company
3.2.3.1. Selecting strategic products
3.2.3.2. Identifying strategic customers to establish suitable policy
3.2.3.3. Improving sale
3.2.3.4. Solutions about organization and human resources
3.2.3.5. Solutions about technology
3.2.3.6. Intensifying checking and monitoring strategy implementation
CONCLUSION
REFERENCES

57
58
58
60

63
63
64
64
65
66

66
66
67
69
71
71
73
74

LIST OF TABLES AND FIGURE IN THE CAPSTONE PROJECT

1. LIST OF TABLES
Page

Table 1.1- Strategic vision and historic mission
4

12


Table 1.2- Structure of capital stock on December 31, 2010

19

Table 1.3- Balance sheet

22

Table 1.4- Summary of the Company’s income statement

23

Table 1.5- Cost of goods sold

24

Table 1.6- Analyzing financial indicators

25

Table 1.7- SWOT matrix

43

Table 1.8- Projected balance sheet

62

Table 1.9- Projected income statement

62

2. LIST OF FIGURE
Figure 2.1- Management apparatus of EDH

19

Figure 2.2- Some images of Golden cups and symbols of EDH

21

Figure 2.3- Customer segments

34

Figure 2.4- Market share

38

3. LIST OF ABBREVIATIONS
EDH

EDH Technological Development Joint Stock Company

GDP

Gross Domestic Products

EVN

Electricity of Vietnam

FDI

Foreign Direct Investment

IEC

International Electrotechnical Commission

ODA

Official Development Assisstance

WTO

World Trade Organization

INTRODUCTION
1. General context, the necessity and implication of the research project
According to the development plan of electricity industry in 2015- 2025
period approved by Ministry of Industry and Trade, average growth rate of
5


production value of this industry is about 17%-18%/year and the growth of
electric export 18%/year to make Vietnam’s electric industry reach an advanced
level in the region in the technology for producing transformers, electric motors,
generators, medium-voltage (MV) and high-voltage (HV) electrical instruments,
electric wire & cable, multi-tariff meters for domestic consumption and export.
Electricity and electrical equipment manufacturing industry is one of the most
attractive industries.
After joining WTO, a big market is opened but competition is tougher. WTO
is a playing field in which competitors are foreign companies, Multi-national
Corporations with many years of experience, and strong resources; therefore,
domestic enterprises need to be reinforced and need to have suitable “Business
strategies” to meet the requirements of the new market.
At present, most enterprises in this industry of Vietnam have the same
weaknesses which are developing and growing from a very specific context of the
market - centrally planned, not pursuant to the demand-supply regulation of the

market, having no competitive factors, and most companies do not have methodical
“business strategies” to make the most use of opportunities and overcome
challenges to enhance the competitiveness in a new business environment and
optimize the work performance.
After 15 years of establishment and growth, EDH Technology
Development Joint Stock Company has made strong progress such as winning
projects worth billions of VND. Nonetheless, in the current deep international
integration process and fierce competition, if the Company does not upgrade
itself fully and does not have good “business strategies”, it will go backwards
and lose market share in Vietnam.
With that idea, our group has chosen the topic “Building business strategy in
2011-2020 period for EDH Technology Development Joint Stock Company” to
complete the MBA course - GAMBA and also made contribution to the sustainable
development of EDH Technology Development Joint Stock Company.
2. Objective of the study

6


The study “Building business strategy for EDH Technology Development
Joint Stock Company” aims at clarifying the strengths (core capacities),
weaknesses of, opportunities and threats awaiting the Company. Applying theories
to build, analyze, and select competitive strategy, at the same time put forth
necessary solutions to implement those strategies in 2011 - 2020 period to help the
Company develop sustainably and become a leading enterprise in producing
electrical equipments in Vietnam.
3. Methodology of the study
Method of approach: Dialectical materialism and historical materialism.
Primary documents include original document on enterprise management,
financial statements, annual review reports and regulations of the Company;

Secondary documents such as annual document (copy versions) of Vietnam
Trade Association, documents from the Government and relevant agencies,
information from newspaper, website, etc.
Conducting direct interviews with the Board of Directors and heads of
Departments
Method of analyzing and processing data: Analyzing, summarizing and
comparing.
4. Structure of the Capstone project
Apart from the introduction, conclusion and references, the contents of the
capstone project is divided in to three main chapters as follows:
Chapter 1: Theoretical background to the development and business strategy
for EDH Technology Development Joint Stock Company.
Chapter 2: Real situation of business and business strategies of EDH
Technology Development Joint Stock Company in 2010-2020 period.
Chapter 3: Some solutions to implement business strategy of EDH

Technology Development Joint Stock Company.

7


Chapter 1
THEORETICAL BACKGROUND TO BUSINESS STRATEGY
1.1. Business strategy
1.1.1. Concept and role of business strategy
Strategy
The term “strategy” originated from Greek and was initially used in the field
of military to imply big and long-term plans which were set out based on the
certainty about what the opponent could and could not do.
Strategy is a plan consisting of long-term (3;5;10 years, etc.) goals to point out

the development orientations of an organization in the long-run, big and important
policies to attract, allocate resources and make the most use of those resources; and
major decisions to realize those goals.
There are different definitions of strategy, but in the most general way,
strategy is defined as “a series of complex actions aiming at mobilizing resources
so that an organization can attain a certain purpose”.1
Business strategy
According to D.Bizrell and the group of author, “Business strategy is a
general plan leading or orienting enterprises to the expected target. It is the basis to
work out policies and procedures of operations”. 2
In enterprises, “Business strategy is an art of designing, organizing means to
achieve the long-term goals of an enterprise and has a relation with the changes in
business and competitive environment”.
Role of business strategy
Helping enterprise to be well-aware of their purposes and orientations to set the
basis and the guideline for all business and production activities of the enterprise.
1

Source: Document of “Strategic Management”, Global Advanced Master of Business Administration
Program (B1 - T1)
2
Source: Document of “Strategic Management”, Global Advanced Master of Business Administration
Program (B2 - T1)

8


Helping enterprises grasp and make use of opportunities and take active
measures to overcome risks and threats in the competitive market.
Contributing to raising efficiency of resource use, enhancing competitive

position to ensure the sustainable development of the enterprise.
Providing firm bases for mapping out appropriate policies and decisions on
business with the changes of the market.
1.1.2. Basic characteristics of business strategy
Business strategy helps define the basic goals and business orientations of
enterprise in each period.
The characteristic of orientation of strategy ensures that enterprise can
develop continuously and sustainably in the changing business environment.
Maximally mobilizing and optimally exploiting and using resources of the
enterprise at present and in the future, promoting its advantages and grasp
opportunities to gain competitive advantages, having emulative thought and
achieving success.
Business strategy of enterprise is reflected during a continual process and
often formed in a long period (3; 5; 10 years, etc.).
1.1.3. System of enterprise’s strategy

Level of business strategy in an enterprise
Functional level strategy: it is the strategy aiming at improving the efficiency
of basic activities in the Company such as production, marketing, material
management, research & development of human resource.
Business level strategy: it is the overall commitments and actions helping
enterprise gain competitive advantages by tapping its core capacities into value of
specific products and reflecting the belief of enterprise in the destination and the
modes that it can gain competitive advantages compared to its competitors.
Global strategy: it is the strategy in which Company sells its products or
services to the outside of its domestic market. The expansion into the global market
allows the Company to raise profitability by new methods which domestic
companies do not have.
9

Corporate level business strategy: determines actions that Company
implements to gain competitive advantage by selecting and managing a group of
different business strategies in some sectors and markets of products.
Types of enterprise’s business strategy
The system of enterprise’s business strategies includes growth strategy of
enterprise, business strategy of SBUs and functional strategy.
Three main business strategies that are often used include cost-leadership
strategy, product differentiation strategy and centralization strategy.
Growth strategy consists of concentrated growth strategy (market penetration
strategy, market development strategy, product development strategy); Integration
growth strategy (Merging strategy, acquisition strategy and joint venture strategy);
Strategy for diversifying activities of enterprise (concentric diversification strategy,
horizontal diversification strategy, mix diversification strategy).
1.2. Factors affecting business strategy
1.2.1. Institution - politics
Political stability is the foundation for economic activities to develop, creating
an attractive investment environment for business sectors with the engagement of
both national and international investors.
1.2.2. Economy
The underdeveloped or developed economy has a strong influence on business
operations of enterprises. It decides the purchasing power (demand) and via that,
more or less affecting supply. The developed economy also helps enterprises grow
and vice versa, underdeveloped economy constrains the development of enterprises.
1.2.3. Socio-culture
The population, structure, age, custom, standard and income have a significant
influence

on

the

development of enterprises.

Vietnam’s population

is

approximately of 86 million people with the average income per capita of 1.200
USD/person/year. GDP of Vietnam over the past years had high growing rate with
the average growth rate of 7-8%; therefore, the demand for using electrical
10


machines, equipments and facilities has increasingly required substantial and
diverse sources of supply.
1.2.4. Technology
The world is in an industrial revolution. A series of new technologies have
been introduced and integrated in services and products. Vietnam is rated as one
of nations having quick growing rate in applying technology for human,
especially in areas of information technology and telecommunication. Besides, we
should also mention the influence of information technology such as the Internet
and globalization-related factors that have become a macro affecting factor to
electricity industry.
1.3. Building business strategy for enterprise
1.3.1. Vision, mission and main goals
Vision of an organization is particularly important for managers to set the
basis for setting long-term goals as well as defining specific functions for
implementing them. Vision can be introduced or stated under the form of a slogan
or a guideline.

The common features of enterprises’ goals are expressing the expectation to
reach certain results and associated with a specific period in a strategic period.
According to Philipte Lasserre, strategic goals include all things relating to the
workload such as scale, growth rate, market share, etc. and all related to interest
such as revenue, cost, and profit, etc.
To determine the functions of strategy: Enterprises have to answer the
questions such as: who wants to be satisfied? When and how?
Strategic goal of business is the particularly important opening phase in
implementing business administration. That goal is defined obviously and
specifically is an important factor bringing success for enterprises.
Given goals must be adjustable to suit the changes of environment to avoid
threats and make use of opportunities. Nevertheless, when changing goals, we need
11


to be cautious as these changes have to be in line with corresponding changes in
strategies as well as in action plans.
Table 1.1- Strategic vision and historic mission
- Strategic vision refers to business - Mission declaration of almost
orientation in the future of the Company companies focuses on current business
“Where will we go?”
activities “Who are we and what are
we doing?”
- Markets needed catching up with

- Current products and services

- The future central is technology,
service or customers

- Customers’ demand

- The expected model

- Technology and business capacity

1.3.2. Analyzing affecting factors to business strategy
Analysis of external environment factors
External environment is a system of complicated factors always having
opportunities and threats to enterprise. The fluctuation of these changes is out of the
control of the enterprise and they have mutual influences to business management.
Therefore, to make use of opportunities, control threats, raise efficiency and reduce
damages in strategy management process, businesses have to analyze carefully
environment factors including: micro environment and macro environment.
Macro environment includes five factors as: politics, law - government;
economy; socio-culture; technology and nature (PESNT analysis).
Micro environment includes the analysis of new entrants; rivals; buyers;
suppliers; and substitute products.
Internal environment factor analysis
Internal environment factor analysis is the foundation for business to
understand their own strengths and weaknesses in comparison with competitors;
furthermore, it also helps managers catch up with opportunities in each phase. In
the other words, internal environment factor analysis is to “understand yourself and
other”, from that strategy managers have foundation to define mission, propose
12


goals and form strategies adapting to internal and external environment of
organization.
The analysis of strengths and weaknesses of internal environment is

implemented by means of following basic contents: analyzing and evaluating
resources as human resources, material resources as production capital, workshop,
machines, material and information about business environment; Invisible
resources include guidelines in business; business strategy and policy adapting to
environment; effective organization structure; prestige of managers; prestige of
business in development process; the confidence and faithfulness of customers;
Analysis of functional departments in organization includes: marketing
department; human resources management department; finance-accounting
department.
All enterprises have strengths and weaknesses in sectors. Internal strengths and
weaknesses together with external opportunities and threats are the basic features
which enterprises need to pay attention to when building strategy. If business wants
to define strengths, weaknesses; they have to compare with others in the same
industry and base on the working results. Strengths of business are the better features
than competitors which competitors are not easy to own. Furthermore, strengths
create the competitive advantages for business. Weaknesses are shortcomings of
enterprises needing to be corrected when enterprises want to build strategy.
1.3.3. Methods to evaluate business environment
Methods are usually used
-

The summary table about business environment

-

Internal and external factor evaluation matrices

-

SWOT matrix analysis

-

Opportunities and threats

SWOT analysis

13


Internal environment factors of an enterprise can be classified as Strengths (S),
Weaknesses (W), external environment factors is classified as Opportunities (O) and
Threats (T). This analysis in strategic environment is call as SWOT matrix analysis
SWOT matrix analysis provides useful information in balancing resources and
capacity of the Company with respect to competitive environment. Therefore, it is a
tool to select strategy.
Strengths: Strengths of an enterprise are resources and capacity used as
foundation in raising competitive advantages.
Weaknesses: if enterprise does not have strengths mentioned above, enterprise
will have weaknesses
Opportunities: The external context can create new opportunities to grow and
develop.
Threats: The changes of external environment can bring threats to the
enterprise.
SWOT analysis
S-O strategy: Pursues the most suitable opportunities with strengths
W-O strategy: Overcomes weaknesses to pursue opportunities
S-T strategy: Defines the ways which enterprise can use their advantages to
mitigate damages with respect to external threats
W-T strategy: Establishes a defensive plan to prevent weaknesses of

enterprises from the influence of external environment.
Competitive capacity evaluation: Evaluates competitive capacity of business,
we usually use MC KINSEY matrix.
1.4. Implementing business strategy
1.4.1. Checking goals of business strategy
The Company needs to consider and evaluate selected strategic goals whether
suitable or not and the capacity to deploy it.
1.4.2. Rechecking business environment conditions and selected strategies
14


In the current phase, there are many changeable environmental factors
affecting a sector and businesses in sector such as demography, economy, politics,
culture, science and technology, and globalization.
With more and more competitive markets, value chain is an important tool to
improve competitive capacity of each business. Globalization and free economy
brings a lot of uncertainties which strategy planning has to analyze.
1.4.3. Organizing implementing apparatus
Organizing implementing apparatus is the process of defining the needed
tasks; establishing departments, divisions and assigning for units and individuals;
creating the relationship in internal organization to implement the strategic goals
effectively. Efficient organization is to ensure the good implementation of
management capacity and serving for general targets of business.
Depending on functions of business, organization model will be selected to
establish as: on line model, functional model and complex model. After that,
managers will implement the organization of machinery including 7 steps: defining
target of business; analyzing jobs; founding departments; appointing officials;
allocating mission; cooperating to formulate functions; assessing and reorganizing.
1.4.4. Resource allocation and adjustment
Resources are a Company’s assets including tangible and intangible ones such

as capital, machine, skill, trade mark, human capital, finance, manager with relations.
Therefore, enterprises have to adjust human capital suitably and scientifically.
Enterprises should also define criteria which are rare, value and difficult to imitate.
Core capacity is resources and capacity bringing competitive advantages for a
Company. It creates the competitive differences and shows characteristic of them.
As a result, the Company will know how to balance challenges and make use of
opportunities in the future.
1.4.5. Forming implementation plan
15


Comprehensive business strategy of enterprises has the orientation for all of
activities and it contains following steps:
Strategy planning: defining mission, vision and core value; analyzing and
forming strategy.
Strategy concretizing: defining strategic target and key ideas; defining targets
and measurement tools as well as strategic initiatives.
Planning: Improving operation process, sale, resource capacity and budget
providing
Deploying: Action plan of functions
Monitoring and evaluating: evaluating strategy and deployment work
Testing and correcting strategy
Analyzing strategies: using the analysis model of factors of strategy
1.5. Summary and evaluation
Enterprises have to sum up and evaluate the process of setting up and
implementing business strategy annually to find out factors for the success as well
as limitations for necessary adjustments.

16

Chapter 2
REAL SITUATION OF BUSINESS ACTIVITIES AND BUSINESS
STRATEGIES OF EDH TECHNOLOGY DEVELOPMENT JOINT
STOCK COMPANY IN 2010-2020 PERIOD
2.1. Overview of EDH Technology Development Joint Stock Company
2.1.1. Process of establishment and development of the Company
General information
Name in Vietnamese: Công ty cổ phần Phát triển kỹ thuật công nghệ EDH,
abbreviated name: EDH3
International transaction name: EDH Technology Development Joint Stock
Company
Number of employees

: 250 people

Equity

: VND 126 billion

Address of production factory: Ngoc Hoi Industrial Zone, Thanh Tri District,
Hanoi
Tel

: 043 7830058 Fax: 04 3 7830059

Email

:

Website

: www.edh.vn

Logo

:

Process of establishment and development
The Company was established with the first name of Hoang Ha 1 Co., Ltd
established on July 15, 1995 with the charter capital of VND 1.2 billion and 10
employees working in the field of officially trading and distributing low-voltage
(LV) electric equipment of Siemens and Schneider firms.
3

Source: www.edh.vn

17


In 1997, producing and launching first panels to Vietnam market, at the same
time building 450m2 of factory on the area of 1300m2 in Thanh Xuan, Hanoi to
install panels and substations.
In 1998, the number of employees rose to 40 people, income was over US$ 1
million and it was the first year when the Company implemented from designing,
supplying equipment to producing panels and installing a big project: The System
of electricity supply of 04 MBA 1000kVA and 02 current generators 750kVA of
Vietnam Television.
In 2000, the Company was renamed EDH Technology Development Joint Stock
Company, raising the charter capital to VND 10.2 billion, producing and supplying

primary equipment, secondary equipment and installing electric works up to 110kV.
The Company implemented the quality control under ISO 9001:1994 Standard issued
certificate by AFAQ ASCERT (France).
In 2005, The Company built a factory for producing electric equipment over the
area of 6,600m2 and invested in new production and outsourcing line of light sheet
mental and EDH Electric Equipment Factory on the area of 14,000 m2 in Ngoc Hoi
Industrial Zone, Thanh Tri, Hanoi and signed contract with Siemens Group
(Germany), Siemens Sales Region, licensed to use information and intellectual
property right to manufacture SIVACON type tested panels in Vietnam, raising
annual income to US$ 7 million.
In April 10, 2007, the Company was equitized, raising the charter capital to
VND 126 billion, the number of employees to 250 people and revenue in 2010 to
over US$ 25 million.
2.1.2. Organizational structure of the Company
EDH is operated under the form of a joint stock Company. The Company’s
charter was approved by the Shareholders’ General Assembly for the Company’s
establishment in April 30, 2007.
18


Table 1.2- Structure of capital stocks on December 31, 2010
(Source: Accounting Department of EDH)

Volume of
stocks

Value
(VND)

Proportion

Founding shareholders

6,624,901

66,249,010,000

52,58

Stocks of external shareholders

4,050,000

40,050,000,000

32,14

Stocks of internal shareholders

1,925,099

19,250,990,000

15,28

Total stocks

12,600,000

126,000,000,000

100

Criteria

(%)

Figure 2.1- Management apparatus of EDH
(Source: General & Administration Dept. of EDH)
SHAREHOLDERS’
SHAREHOLDERS’
MEETING
MEETING

BOARD
BOARDOF
OFDIRECTORS
DIRECTORS

EXECUTIVE
EXECUTIVE BOARD
BOARD

GENERAL
GENERAL DIRECTOR
DIRECTOR

VICE GENERAL DIRECTOR
VICE GENERAL DIRECTOR

VICE GENERAL DIRECTOR
VICE GENERAL DIRECTOR

Manager of
General &
Administrat
ion Dept.

Manager of
Materials
and Importexport

Manager
of
business

Manager
of
Project

Chief
Accountant

Director
of Lab

Technical
Director

Factory

Director

R&D
Director

(Source: EDH TECHNOLOGY DEVELOPMENT JOINT STOCK COMPANY)
19


2.1.3. Business functions and missions
Main business lines of the Company are as follows:
Producing and trading in machines, equipment, cables and wires;
Producing, trading and distributing electric, electronic and refrigeneration
electric equipment;
Producing and trading in machines, equipment and materials of agriculture,
construction and traffic;
Installing electric works up to 110kV; Consulting and investing in electric
works;
Designing power lines and substations for electric works;
Producing, outsourcing, installing and repairing mechanical and electric
products;
Trading real estate, leasing offices, housing and yards;
Purchasing, selling and installing equipment for construction works.
2.1.4. Awards of the Company
ISO Golden Cup 2007 awarded by Vietnam General Confederation of Labor
and Ministry of Science and Technology.
Golden Lotus Cup 2007 awarded by Vietnam Union of Science and
Technology Associations.
Golden Cup "Trademark - Brand" 3rd time in 2008 awarded by Vietnam
Fatherland Front, Vietnam association of small & medium enterprises; and Radio

the Voice of Vietnam.
Golden Cup of "Talented and Moralistic Businessmen” Prize, 2nd time in
2008 awarded by Vietnam Fatherland Front, Vietnam Association of Small &
Medium Enterprises and; Radio the Voice of Vietnam.
Golden Cup of “Vietnam Typical Enterprises” Prize 1st time, Golden Cup of
“Outstanding leader” Prize 1st time, Golden Cup of “Outstanding leader” Prize 2nd
time in 2009 awarded by Ministry of Trade and Industry, Ministry Health, MoLISA,
Ministry of Culture, Sports and Tourism; and Radio the Voice of Vietnam.
20


Figure 2.2: Some images of Golden cups and symbols of EDH

2.2. Business activities of EDH in 2008-2010 period
The company specializes in
trading in electric equipment including super high voltage, high voltage,
medium voltage, lower voltage, digital relays, electronic meters;
manufacturing switchboards, panels, and substations at all voltage levels for
interested sectors and industries;
supplying automatic monitoring system for electric industry and other
domestic and foreign electricity producers;
manufacturing mechanical products and processing thin metal plates;
manufaturing single and three-phase electronic meters;
21


2.2.1. Business performance of EHD in 2008-2010 period

The evaluation of the Company’s achievements is implemented via
calculating and considering some important financial ratios. Based on the data

collected from the balance sheets and income statements of the Company in 20082010 period, some important financial targets are determined to generally evaluate
financial capacity of the Company as follows:
Table 1.3- Balance sheet
(Source: Accounting Dept. of EDH)
Currency unit: VND million
No.
1

Criteria

2008

2009

2010

TOTAL ASSETS/CAPITAL

265.828

356.793

428.336

Short-term assets

171.664

192.580

225.751

2.782

12.417

12.756

135.909

114.203

141.098

Inventories

25.686

29.787

33.245

Other assets

7.287

36.172

38.651

Long-term assets

94.164

164.213

202.586

Fixed assets

48.535

81.010

84.266

Long-term financial investments

45.609

81.305

116.304

20

1.899

2.016

Cash and cash equivalents
Accounts receivable

2

Other assets
A

LIABILITIES

119.611

198.062

263.340

I

Short-term liabilities

119.611

187.522

220.450

1

Short-term loans and liabilities

25.686

29.787

142.123

- Other loans from credit institutions

78.434

119.930

142.123

Payable to seller

25.417

39.574

47.512

Deferred revenue

12.133

20.062

21.002

3.552

2.656

4.002

-

2.042

2.551

75

3.259

3.259

Taxes and payable to state budget
Payable to employees
Other payable
II

Long-term liabilities

-

10.540

42.890

1

Long-term intercompany payable

-

-

25.931

2

Long-term provisions for payables

-

10.540

16.959

22


No.

Criteria

2008

2009

2010

RESOURCES

146.217

158.731

164.996

I

Equity

145.547

158.061

164.226

1

Paid-in capital

126.000

126.000

126.000

2

Share premium

15

15

15

5

Differences upon asset revaluation

922

922

922

6

Foreign exchange differences

-

(188)

(396)

7

Investment & development funds

1.925

1.925

2.725

8

Financial reserve funds

1.006

1.006

1.006

10

Undistributed earnings

15.679

28.383

33.955

II

Other funds

670

670

770

1

Bonus & welfare funds

670

670

770

Table 1.4- Summary of the Company’s income statement
(Source: Accounting Dept. of EDH)
Currency unit: VND million
No.

Criteria

2008

2009

2010

381.683

448.642

561.598

520

-

1

Sales

2

Revenue deductions

3

Net income

381.683

448.122

561.598

4

Cost of goods sold

322.451

378.364

479.311

5

Gross profit

59.231

69.757

82.286

6

Financial activities income

1.703

7.418

5.242

7

Financial activities expenses

13.595

16.166

18.022

In which: Interest expenses

8.517

8.089

13.222.

8

Selling expenses

15.440

16.406

19.001

9

General & administration expenses

10.225

13.277

16.201

10

Net profit from business activities

21.674

31.325

34.303

11

Other income

4.790

74

1.242

12

Other expenses

4.940

825

2.565

13

Other profit

(149)

(750)

(1.322)

14

Profit before taxes

21.524

30.575

32.981

15

Current business income tax charge

1.885

3.561

4.993

16

Deferred business income tax charge

17

Profit after business income tax

19.639

27.013

27.987

23


Analyzing the income statement
Revenue in 2008 of the Company was VND 381.6 billion. Revenue in 2009

reached VND 448.6 billion, up 17% compared to 2008. Revenue in 2010 of the
Company was VND 561.5 billion, up 25% compared to the same period in 2009.
Especially, 2008 was a very difficult year owing to the great influence of financial
changes on the operation of enterprises. However, with the experience of the Board
of Directors as well as the staff, the Company’s operation was still stable and
developed. The growth of revenue year-by-year showed that the market of the
Company has been expanded. Average income in 2010 was nearly VND 47
billion/month.
Cost of goods sold
Table 1.5- Cost of goods sold
(Source: Accounting Dept. of EDH)
Currency unit: VND million
Criteria
Cost of goods sold
Cost of goods sold/Gross
revenue

2008

2009

2010

322.451

378.364

479.311

84%

84%

85.0%

The cost of goods sold in 2008 and 2009 accounted for 84% of revenue. In
2010, the cost of goods sold made up 85% due to the rise in prices of the input
materials; however, the cost of goods sold increased insignificantly and profit after
taxes rose year-by-year. In 2008, profit after taxes of the Company was VND
19.639 million. In 2009, profit after taxes of the Company reached VND 27.013
million thanks to the efforts and market expansion. In 2010, the Company still
sustained a growth in revenue; however, its profit after taxes only grew by 3.6%
compared to 2009, profit in 2010 of the Company was VND 27.987 million
(because in 2009, the Company was supported with 4% of the short-term interest
rate, so financial activities expenses decreased significantly and profit after taxes of
the Company rose).
24


Financial activities expenses
Other expenses apart from the cost of goods sold were mainly financial
activities expenses, making up 3.5% in 2008; 3.3% in 2009 and 3.2% in 2010 in the
structure of revenue. In financial activities expenses, the majority was interest
expenses. It is reasonable because when the Company’s structure of working
capital is mainly loans from banks. Overall, expenses in the Company’s revenueprofit structure are reasonable and grow stably in line with the growth in revenue.
Analyzing indicators
Table 1.6 - Analyzing financial indicators
FINANCIAL INDICATORS

2008

2009

2010

17%

25%

Growth rate
Revenue
Gross profit

0%

18%

18%

Profit before taxes

0%

42%

8%

Profit after taxes

0%

38%

4%

Total assets

0%

34%

20%

Equity

0%

9%

4%

Cost of goods sold/Revenue

84%

84%

85%

Selling expenses/Revenue

4%

4%

3%

General & Administration expenses/Revenue

3%

3%

3%

Financial activities expenses/Revenue

4%

4%

3%

Gross profit/Revenue

16%

16%

15%

ROS (Profit after taxes/Revenue)

5%

6%

5%

ROE (Profit after taxes/equity)

13%

17%

17%

ROA (Profit after taxes/Total assets)

7%

8%

7%

Average accounts receivable turnover ratio

6.5

4.0

5.4

Average collection period (day)

56

90

67

25.4

11.6

11.0

Structure of expenses

Profitability

Performance

Average accounts payable turnover ratio
25