Chiến lược cạnh tranh cho công ty xuất nhập khẩu petrolimex

Chiến lược cạnh tranh cho công ty xuất nhập khẩu
Petrolimex
“COMPETITIVE STRATEGY FOR ASPHALT CO. PETROLIMEX
PERIOD

1


TABLE OF CONTENTS
Acknowledgement..……………………………………………………………… 1
Table of Contents ……………………………………………………………… 2
List of Tables ……………………………………………………………………. 5
List of Figures & Graphs …………………………………………………………5
INTRODUCTION ……………………………………………………………... 6
Chapter 1:
THE BASIS THEORIES OF STRATEGY AND COMPETITION ……….. 9
1.1. Concept of strategy ………………………………..................................... . 9
1.2. Overall strategic management process …………………….…...…………. 9
1.2.1.

Concept of strategic management ………………….…………………
9

1.2.2.

Strategic Management process ………………………………………
10

1.3. Competition and competitive process ………………………………………11
1.3.1.

What is competition ………………………………………………….
11

1.3.2.

Competitive advantages ……………………………………………...
11
1.3.2.1. What are competitive advantages …………………… ……. 11
1.3.2.2. Factors affect competitive advantage …………………….. 12
1.3.2.3. The root of competitive advantages ………………………..13

1.4. Core competencies of the enterprise ………………………………………. 13
1.5. Competitive strategy ………………………………………………………. 14
1.5.1.

Command competitive strategy………………………………………
14

2


1.5.2.

Competitive strategy ……………………………..………………….
14
1.5.2.1. Low cost strategy ………………………………………..… 14
1.5.2.2. Product differentiation strategy ……………………………. 15
1.5.2.3. Core strategies……………………………………………... .15
1.5.2.4. Combining optimal cost strategy and differentiation ……... .16

Chapter 2:
SUMMARY ABOUT PETROLIMES ASPHALT CO, LTD ……………. 17
2.1 Summary about Petrolimex Asphalt Company ………………………… 17
2.1.1. The establishing and developing ………………………………… 17
2.1.2. Organization structure …………………………………………... 18
2.1.3. Key business operation of the Company ……………………..… .19
2.1.4. Technical facilities ………………………………………………. 20
2.2. Business situation in Petrolimex Asphalt Co in the recent years ………. 21
2.2.1. The basic data reflects the situation and business results of the
Company from 2007 to 2010…………………………………….. 21
2.2.2. Situation and the capital assets of the Company
from 2007-2010………………………………………………….. 23
2.2.3. Market share……………………………………………………... 24
2.3. Situations of Competitive Company ……………………………………. 25
2.3.1. Analyze the business environment ………………………………. 25
2.3.1.1. External environment …………………………………... 25
2.3.1.2. Internal environment ………………………………….... 31
2.3.2. SWOT of Company………… …….…………………………….. 36
2.3.2.1. Opportunities and Threats (O-T)..…………………..…. ..36
2.3.2.2. Matrix of external factors evaluation (EFE) ……………..36
2.3.2.3. Strengths - weaknesses (S - W) ………………………… 37

3


2.3.2.4. Matrix of internal factors evaluation (IFE) …………….. 38
2.3.3. Overall assessment of the competitiveness of the Company ….… 39
2.3.4. The company’s core competencies ……………………………... 42

Chapter 3:

SOLUTIONS TO IMPROVE THE COMPETITIVENESS OF
THE COMPANY DURING 2011 – 2015 ………………………………………. 43
3.1. Strategic objectives of the company in 2011-2015 ………………………….. 43
3.1.1. Basis of the strategic objectives……………………………….…….. 43
3.1.2. Vision - Strategic objectives during 2011-2015 ………………….… 43
3.1.3. Business plans of the company during 2011-2015 …………………. 43
3.2. SWOT Matrix …………………………………….…………………………. 43
3.3. Solutions to implementing strategy ………………………………...……… 48
3.3.1. Solutions to organizational structure……………………….…….…. 49
3.3.2. Solution to human resources………………………………………… 50
3.3.3. Marketing solutions…………………………………………………. 52
3.3.4. Solution to financial resources ……………………………………... 55
3.3.5. Solution to technology ……………………………………………... 56
3.4. Recommendations …………………………………………………………. 57
3.4.1. Recommendations for state management agencies…………….…… 57
3.4.2. Proposals to Vietnam Petrolimex Group…………………………… 58
3.4.3. Proposals to the owners ( PLC)…………………………………….. 59
CONCLUSION …………………………………………………………………… 60

4


LIST OF TABLES
No

Table No.

1
2
4

5
6
7
8
9
10
11
12

2.1.4
2.2.1
2.2.2.a
2.2.2.b
2.3.1
2.3.2.a
2.3.2.b
2.3.2.c
2.3.3.2
2.3.3.4
2.3.4.a

13

3.2

Table’s Name
Area and storage tank capacity of the Company
Business results of the Company from 2007-2010
Property - the capital of the Company
Capital structure in recent years

Asphalt market share over the years
Business and financial situation over the years
Capital situation and liabilities over the years
Area and capacity of the Company
Matrix of external factors evaluation (EFE)
Matrix of internal factors evaluation (IFE)
Matrix of competing images of Petrolimex Asphalt Co
before the competitors: 03 Appendix attached
SWOT matrix of the company

LIST OF FIGURES, GRAPHS
No.

Figure,

1
2
3
4

Graph No
1.1
1.2.2
2.3.1.1.2
2.3.2.d

Figure & Graph’s Name
Competitive strategy
Strategic managing process
Market share of asphalt product

Capacity of the Company and its competitors

5


INTRODUCTION
1. The necessity and importance of the Capstone Project Report
For over two recent decades, Vietnam's economy has transformed from
centrally planned economy to the market - socialist oriented economy. After 20
years of innovation, Vietnam has made great achievements. Owing to the
innovation, Vietnam has escaped from poverty, economy has developed fast,
infrastructure has been strengthened and people’s living standard have been
continuously improved. In the subsidy time, Vietnamese economy had only two
main economic sectors: state and collective. All of the economic operations
followed the ordinance and were not under any pressure. Because at that time,
demand was greater than supply, goods on the market were scarce. It has changed a
lot now. There have been more economic sectors, in which the State owned sector
keeps the leading role. The collective and private sectors are encouraged to develop
without any restrict. The participation of many economic sectors has created a
competitive business environment. This new economic mechanism has really
opened up many opportunities for businesses but also put them under many
challenges.
On November 7th, 2006, Vietnam officially became the 150th member of the
World Trade Organization (WTO). This marked a major turning point in the history
of Vietnam, opening a chance for Vietnam’s development and also challenges. For
Vietnamese enterprises, this event is also open for them a new era with many
opportunities and challenges. Being the member of WTO means that we are playing
the equal games with many competitors; if we want to survive and develop
businesses, we need to find a proper direction to compete with other enterprises
(domestic and foreign enterprises). Petrolimex Asphalt Company (Petrolimex

Asphalt Co) is not an exception. Petrolimex Asphalt Company (PAC) has faced

6


many difficulties. Nowadays, there are six asphalt suppliers in Viet Nam, which
included three foreign enterprises:
-

ADCo Company of Colas Group

-

Caltex Limited Company.

-

Shell Limited Company.

And three local companies:
-

Petrolimex Asphalt Company.

-

ICT Asphalt Company.

-

Tratimex Joint Stock Company.

However, asphalt market is now potential in VietNam so more and more
suppliers want to join. It is very significant for PAC to determine an appropriate
competitive strategy to maintain the advantage and for the sustainable development.
To acknowledge the problem of PAC, our group choose the subject "Building a
competitive strategy for Petrolimex Asphalt Company from 2011 to 2015" for our
final assignment in Business Administration Program.
2. Research purposes and applications
Based on our study about theoretical problems and implement the competitive
strategies in the enterprise, we will apply the theoretical issues in the formulation of
competitive strategic of Petrolimex Asphalt Co. After evaluating the business
situation of PAC, we can figure out the shortcomings and causes of limited
implementation of business strategy and competitive business. Besides, we will
analyze factors affecting the business environment in order to develop competitive
strategies for the researched company from 2011 to 2015.
3. Methods
Documentation research method: information, documents, articles on the
Internet, survey results, research on the competitors, statistics, summary report of
PAC and related topics.

7


Qualitative research method: interviews and viewers of leaders and managers
at all levels of PAC as well as outside experts and managements that have
relationship with PAC. The contents of discussions focus on the fundamental issues
of PAC’s strategic management.
Statistical method, analysis method, synthesis and comparative method to
analyze the business operations.

The layout of the project: is divided into five sections as follows:
- Introduction
- Chapter 1: The theoretical basis of strategy and competition.
- Chapter 2: Reality of Petrolimex Asphalt Co.
- Chapter 3: Strategy chosen, solution and recommendations.
- Conclusion.

8


CHAPTER 1:
THE BASIS THEORIES OF STRATEGY AND COMPETITION
1.1.Concept of strategy:
There are many definitions of strategy by different authors. And overall,
strategy is a complex series of actions to mobilize resources of an organization to
achieve a certain goal.
However, there are many levels of strategy. In this Capstone Project Report,
we will mention three main levels of strategy:
- Corporate-level strategy: is toward general purpose and scope of the
organization.
-

Unit level strategy: is related to competitive success in specific market.

- Operational strategy (or functional strategy): that enables corporate level
and unit level to work effectively.
1.2.Overall strategic management process
1.2.1.Concept of strategic management
Strategic management is very important to business and it is the guideline for
all the activities of an organization. According to Fred R Davit "Strategic

Management is an art and science to establish, implement and evaluate decisions for
organizations to achieve those objectives."

9


1.2.2.Strategic managing process
Internal
environment

Quy tr.nh
Input

Strategy Intention
Strategy Mission

qu_n tr_

External
environment

Môi trư@ng

chiênMôi trư@ngbên trong

Ý ñ)nh chiên lư_chiem v_

Strategy Formulation

Strategy Implementation

chiên lưc
Business level
Corporate level
Corporate
Xây d9ng
chiênCompetitive
lư_c Th9c
thi chiên lư_c
strategy
Dynamics
strategy
Governance

Structure and
Control

Chiên lư_c câp
Strategic Action

doanhAcquisition
nghiepand
Restructuring

International
Strategy

Cooperative
Strategy

Strategic
Leadership

Entrepreneurship
and Innovation

C_nh tranh
năng ñong
Chiên lư_c
Strategic Competitiveness
Above average Returns
Outcomes

Strategic

H_p tác

Sáp nhap
và

Feedback

Tái câu trúcQu(n tr)
Source: Strategic Management teaching material – Competitiveness and
Globalization: Concept and cases.

10


1.3.Competition and competitive strategy

1.3.1.What is competition ?
According to economic dictionary, competition is the struggle between
opposing individuals, groups or nations. Competition arises when two parties try to
win something that not everyone can win.
And Michael Porter (1980) sad that: Competition is to win market share. The
nature of competition is looking for profit, higher profit than the average profit that
enterprises have. Result of the competitive process is: The profitability of the
industry is level and prices can be reduced.
Competition plays a very important role and is one of the most powerful forces
to boost production development. The producers need to be dynamic, sensitive and
willing to improve skills, motivate technology, so productivity can be improved.
The less competition is, the more manifested stagnation and underdevelopment are.
Competition is no longer actions of a certain situation or not just the action at a
point; it is the constantly ongoing process, then the business is on the race with
other rivals to serve customers best. It means that no value can exist forever and
only variation remains.
In shortly, the competition makes enterprises serve customers better and better.
Any business who satisfy with its position in the market will quickly be left behind
and will be eliminated. "The world is changing with tremendous speed. If We do
not run quickly to overcome ourselves, then others will leave us behind with the
speed the we can not have chance to look at their faces. " – M.Porter 1980.
1.3.2.Competitive advantage
1.3.2.1 What is competitive advantage?
Competitive advantage is the possessing of the particular values that we can
used to "seize the opportunity" to gain profit in business. When we mention
competitive advantage, it refers to an advantage that a country or an enterprise have
comparing to others. Competitive advantage is a concept in both the micro meaning
(company level) and macro meaning (national level).

11

According to Michael Porter, "competitive advantage stems essentially from
the value that an enterprise can create for buyers and it is bigger than the costs of
the enterprise."
The competitive advantages to be achieved are:
- Strategic competitive advantage: an advantage when a company has been
formulating and implementing a strategy to increase the company’s value.
- Sustainable competitive advantage: an advantage when a company has
developed a strategy that rivals don’t have; Create the advantages that the current
and potential rivals could not have.
- Above-average profit: Profit exceeds what investors expect to get from other
investments with similar risks.
1.3.2.2. Factors that affect competitive advantage
Factors of external environment are market, customers, competitive pressure;
Factors of internal environment are internal forces, capabilities of the enterprise
and are factors that affect directly to the competitive advantage.
Analyze the external environment to identify challenges, opportunities and
threats for the companies, comparing to rivals in the current and in the future.
-

Challenge: is one of the conditions in a common environment that can
interfere with a company.

-

Opportunity: is a necessity in a common environment of that if a
company exploits well, they can achieve strategic competitive
advantage.

-

Competitors: Rivals collect and analyze information on rivals,
understanding of the competitive environment will help us understand
better about information from the research on environment and industry
environment.

Analyze internal environment to identify strengths and weaknesses of the
enterprises and then, determine resources, capabilities and core competencies of
the enterprises.

12


-

Resources: Is the main strength of a company. There are two types of
resources: tangible resources (financial, material and organizational)
and intangible resources (human resources, innovation and reputation)

-

Ability: the ability to mobilize resources to achieve the final target;
Ability appears through the process of complex interaction between
intangible and tangible resources; usually based on building and
exchanging information through human resource; Ability is often
developed in specific areas.

-

Core competency: The activities that a firm is conducting superior to
rivals, activities by which companies create value for all kinds of unique
products and services for a long time.

1.3.2.3 The root of competitive advantages
According to Michael Porter, origin of competitive advantage usually comes
from two sources as follows:
-

Resources of the business such as patents, trademarks, tricks of
technology, customer loyalty, company reputation and brand ...

-

The ability of the company: is the efficient use of the above resources
to create a competitive advantage.

1.4. Core competencies of the enterprise
Core competencies are the resources and capabilities of a company that are
used as sources of competitive advantage.
Core competencies associating with the market position of the product are the
basic competitive advantage of a company. Core competencies are the basis for the
company's strategic choices.
Therefore, enterprises need to build the core competencies. The core
competencies must ensure four criteria:
•

Valuable: the ability to allow companies to exploit opportunities and
address the threats from the external environment.

13


•

Rare: the rare capacity means the ability that rivals may not have or
have a few.

•

Difficult to imitate: capabilities that rivals do not easily develop it.

•

Irreplaceable ability: there is no equivalent.

1.5. Competitive strategies
1.5.1 Common competitive strategy
For Professor Michael Porter, competitive strategy is a combination of final
result that businesses are looking for and the policies by which companies try to
achieve their goals. These policies include product research, development,
production, distribution, consumption, marketing, finance and control .
A company can have many business strengths but in general, there are two
kinds of competitive advantage that they can have: low cost or differentiation. Two
types of competitive advantage combined with the company’s basic operation will
allow creating three competitive strategies. In agreement with Michael Porter, there
are three competitive strategies which are: optimal/low cost strategy, differentiation
strategy and focus strategy.
Competitive strategy
Cost

Unique level
Macro Target
Scope

Leading cost

Differentiation

Leading cost in a

Differentiation in a

certain market

certain market

of

competition
Micro Target

Figure 1: Models of competitive strategy.
Source: Competitive Strategy by M.Porter 1980
1.5.2 Competitive strategies
1.5.2.1 Low cost strategy
This strategy enables company to lower their prices while still remains quality.
This strategy requires major conditions such as mass production of large lots, large
market share; stable input ... and it is easy to be applied to large companies, the

14

market leader. Companies that have recently participated in the market will have
difficulty to apply this strategy. There are advantages and disadvantages when
applying this strategy:
- Pros: high competitiveness, easily negotiate with powerful suppliers; well
compete with substitutes; create entry market barriers.
- Risks: The technology to achieve low cost is expensive, risky; easily be
imitated . Customers’ need are not paid attention to.
1.5.2.2 Differentiation strategy
The second strategy is: differentiating the products and services, making
products and services to be unique. Characteristics of products, services will
impress consumers.
Differentiation strategy will enable the company to get higher profit and will
create a more solid position in the market.
Product differentiation helps to deal easily with competitive pressures.
Customers have less chance to compare products so there is no pressure to reduce
prices. However, when applying differentiation strategy, enterprise should note the
following points:
- Priority to research - developing, designing products and services; focus on
advertising and marketing.
- Applying this strategy, the enterprise will need to invest more on design
work, research the individual characteristics, higher standard technology. So this
strategy rarely accompanies with low-cost strategy.
1.5.2.3 Centralizing strategies
For this strategy, we should focus on a specific market segment, specific
customer group, specific product type…
Thus if the low - cost strategy and differentiation strategy aim at market with
large scope, this strategy will be suitable for market with narrower scope.

15


With this strategy, the company will achieve differentiation better by meeting
the needs of customers with lower costs because it focuses on a certain group of
customers. Advantages and disadvantages of applying this strategy:
- Pros: The ability to provide unique products or services. Understand the
market segment that we serve.
- Risks: Have no advantage in dealing with suppliers; high production costs,
technology depends on customers’ tastes.
1.5.2.4 Combining low cost and differentiation strategy
With the development of technology, companies have found that can easily get
the benefit by both strategies: optimal/low cost and differentiation.
When the product reaches the level of high quality, it will help us to eliminate
some costs such as rework, repair, recycling, maintenance, ... and as a result, the
product with cost reduced differs from the rivals’ one. Thus, companies can demand
a higher price for products, in comparison with the prices in case companies pursue
the low – cost strategy.
If a company combines two strategies successfully (called combined strategy),
they will have better market position because:
- Adapt quickly to environmental change.
- Learn new skills and technologies more quickly.
- Make good use of their potential to compete with rivals.
Combined strategy is beneficial because it can enhance customers’ satisfaction,
lower costs. However, the company cannot have lowest price products with
differentiation.

16

CHAPTER 2
REALITY OF PETROLIMEX ASPHALT CO, LTD
2.1 Summary about Petrolimex Asphalt Company
2.1.1 The establishing and developing
Petrolimex Petrochemical Company (formerly Petroleum Corporation of
Vietnam) was established on 1/9/1994, with the main task of doing business
petrochemical products including three main kinds of product (sector): Oil, asphalt
and chemical.
During the innovation process, Viet Nam government has equitized a number
of large enterprises in order to develop Vietnam's economy. Petrolimex
petrochemical company was one of those equitized enterprises.
By a decision number 1801/2003QD-BTM dated on December, 23rd, 2003 of
the Minister of Trade on the "equitization of State enterprises," Petrolimex
petrochemical Company was transformed into Petrolimex Petrochemical join –
stock Corporation (PLC) and officially come into operation with new model since
March, 1st, 2004.
In 2005, due to the organizational restructuring demand of PLC with the aim
of enabling each sector to develop, make the image of PLC on the market as a
leading domestic trading petrochemical company, PLC Managing Board decided to
establish 2 subsidiaries with 100% capital owned by PLC, specializing in separate
product as follows:
- Petrolimex Asphalt Company specializing in Asphalt.
- Petrolmex Chemical Company specializing in chemical.
- The left product managed by PLC.
Petrolimex Asphalt Co. (PAC) was established in the process of restructuring
of PLC, inherited the entire technical infrastructure, labor and commodity, market
of the asphalt business of PLC and officially come into operation since 2006 with
the following business fields (according to the business license of PAC):

17

- Trading, import and export bitumen/asphalt and other products in the field
of asphalt.
- Business services relating to asphalt: Transportation rental, warehouse rental,
lease preparation, analysis, testing, consulting and technical implementation
services.
Over the past 4 years, Petrolimex Asphalt Co have had remarkable
achievement: Productions, sales continuously increased, profit has been
accumulated, the employees’ income increased and especially, market share and
position of the Company continued to increase compared with rivals.
2.1.2 Organizational structure
PAC is a national scale company, with headquarters in Hanoi, five branches
and five asphalt terminals.
-

Headquarters at 195 Kham Thien – Hanoi.
Asphalt HaiPhong branch at Hai Phong.
Asphalt Danang branch at Da Nang.
Asphalt Binh dinh branch at Binh Dinh.
Asphalt Sai Gon branch at HCM city.
Asphalt Can tho branch at Can Tho.
Thưong Ly terminal – Hai Phong.
Tho Quang termina l– Da Nang.
Quy Nhơn terminal– Binh Dinh.
Nha Be terminal – HCM City.
Tra Noc terminal – Can Tho.

The headquarter of company plays a key role in finance, directly import goods
for business, orientates, supports and direct business of all the branches.

The Asphalt Branches function as sale - representatives, directly sell asphalt
to the assigned market.
Total number of current employees (as of December 31, 2010) is 202, which
includes:
- Male 141 ; Female: 61
- The level of the Master: 7
- University Level: 54
- College level: 40

18


- Technical Workers: 101
Model of PAC’s organization are summarized through the following diagram:
Diagram 2.1.2. Organizational chart of the company - Appendix 01 attached.
2.1.3. Key business operation of PAC:
Currently, the main business of PAC is trading and the main trading
commodity is 60/70 Asphalt (hot liquid) and a number of products derived from
asphalt 60/70, of which:
- 67/70 is standard of needle deflection of asphalt.
- Condensed, heat is the existing situation of asphalt. Asphalt, before
consumed can exist in the form of dense, cold (store in drums with a capacity of
200 liters) and liquid, hot (in storage tanks).
- Derived products (derivative) are the other kinds asphalt with the main
ingredient of asphalt 60/70 with some additives. The derivatives have a number of
other uses in road construction. Asphalt is the main ingredient (45% of the cost and
6% by weight) of each ton of finished products) and is irreplaceable in road
construction with the current technology. Now, Vietnam has not yet been able to
produce asphalt inland so we have to import 100%. In addition, investment in
building infrastructure and roads is an essential requirement for the development of

each country. So demand for asphalt is now increasing, especially for developing
countries like Vietnam.
The technical property of Asphalt 60/70 is as following:
- Asphalt is a binder and it is obtained from petroleum distillation. It is
condensed in

natural form. It consists mainly of high molecular hydrocacbua

(CnH2n, CnH2n +2, hydrocacbua aromatic ring and a heterocyclic oxygen, nitrogen and
sulfur).
- As for storage condition, asphalt can be classified into two groups: liquid
asphalt (stored at temperatures from 100 - 150 C) and asphalt drums (stored at room
temperature).

19


- General characteristic of Asphalt is: when it is heated and becomes liquid, it
can used to mix with sand and stone materials, forming the mixture and after a short
time, it will adhere to the surface of the sand and stone materials to form a mixture
of artificial stone (also known as asphalt concrete). This stone has strength and
sustainability in environmental temperature and high stability in water and air.
Thus, the business of PAC is included:
- Import 60/70 asphalt, stored in tanks in order to supply to the customers
(mostly).
- Pouring 60/70 asphalt into the drums with the capacity of 200 liters to give
customers as asphalt drum.
- Prepare certain derivatives such as asphalt Emulsion, asphalt Polymer .
And with the current model of the company, the market of the company is
mainly inland and stretches across the country. PAC also provides asphalt to some

provinces in Laos and Cambodia, near the border with Vietnam.
2.1.4. Facilities.
Due to the nature of the asphalt and current PAC’s business, capacity of
stock/storage (in each terminal) is the most important indicators to assess the
production capacity. Terminal area and storage capacity (until 31th, December,
2010) are followed:

Table 2.1.4. Terminal area and storage capacity of PAC:
No
1

Storage’s name
Thượng Lý

Square (m2)
Capacity (ton)
10,000
5,200

20


2
3
4
5

Thọ Quang
Quy Nhơn
Nhà Bè

Trà Nóc
Total

17,000
6,000
6,000
2,500
12,000
6,500
8,000
2,700
53,000
22,900
Source: Petrolimex Asphalt Co in report at

the end of 2010.
Besides, at each terminal, PAC has a warehouse for pouring asphalt with a
capacity from 160 to 500 tons per day and a preparing line of asphalt emulsion
with a capacity of 50 tons per hour, a mixing line of polymer with capacity of 25
tons per hour, both of which are placed in Thuong Ly Terminal.
2.2 Business situation of Petrolimex Asphalt Co in the recent years
2.2.1. The primary data reflects the situation and business results of PAC from
2007 to 2010:
Table 2.2.1. Business results of PAC from 2007-2010
Unit: million VND
No.
1
2
3
4

5
6
7
8

Target

Implemented data
2007
2008
2009
2010
Consumption (tons)
121,293
112,889
178,706
175,742
Sales
728,523
935,850 1,529,237 1,933,957
Cost of goods sold
617,834
836,220 1,315,960 1,747,052
Gross profit
110,689
99,630
213,277
186,904
Total Cost
78,919

58,287
128,712
116,438
Financial benefits
-6,930
-25,384
-35,081
-51,494
Other profits
243
1,342
605
1,054
Profit before tax
25,083
17,301
50,089
20,025
Source: Financial reports of Petrolimex Asphalt Co.

Looking at the table, we can seen that the business situation of PAC in four years
with irregular growth in output, but due to inflation and the increased price of
asphalt, level of revenue growth is greater than the level of output increases.
PAC's profit also increased over the years. In particular, profit in 2009
increased sharply compared with 2008, we can say 2009 was the peak year of PAC

21


since its inception. One of the reasons is: the Government has made positive moves

to recover the economy after the crisis in 2008, such as a stimulus package, interest
rate support (4%) for short-term loans, exemptions, tax expansion to boost
production ... With such policies, PAC promptly seizes advantages of the
opportunity, so that in 2009, business activity of PAC was remarkably effective.
However, in 2010 PAC's profit dropped dramatically to only 40% as in 2009. For
2008 and 2010, the reason of the profit decline is objective factors of the macro
economy, as follows:
- In 2008, profit is 17 billions, only 68% as in 2007. 2008 is marking the
unprecedented crisis of the world – economy, worst since the economic crisis of the
year 1929-1930. Vietnam’s economy was not out of this trend. As being an
developing economy, so the consequences of the crisis impacted on businesses have
been heavier. The first months of 2008 was a time of crisis with inflation, and last
months marked devastating deflationary period.
- 2010 was a year of recovery in Vietnam but was marked by unprecedented
turmoil of financial and monetary markets. Exchange rate between U.S. dollar and
the VN Dong continued to increase and demonstrated the unprecedented
devaluation of Vietnam dong. In 2010, Vietnam Dong depreciated more than 10%.
In 2010, the State Bank of Vietnam has twice adjusted the exchange rate, which has
direct impacted on the financial performance of enterprises. The import businesses
which include PAC are most affected because they must use U.S. dollars to pay for
imported products. Each time the rate increases, PAC’s accounts payable in foreign
currency increases.
- Especially, in the fourth quarter of 2010, when the official exchange rate of
U.S dollar and VND Dong that businesses have to buy is higher than announced by
the State Bank. To buy foreign currency for payment of imports, the importing
enterprises must pay a fee of 5-10% of the purchase price, so the financial cost of
doing business rise. If not affected by exchange rate factors, PAC would have
higher profit margins compared to previous years.

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2.2.2. Situation and the capital assets of PAC from 2007-2010
Table 2.2.2.a. Assets - capital of PAC:
Unit: Million dong
Name
ASSETS
A. Short- term assets
I. Cash and cash equivalents
II. Short-term financial
investment
III. Short- term receivables
IV. Inventories
V. Other short-term assets
B. Long-term assets
I. Long-term receivables
II. Fixed assets
III. Investment properties
IV. Long-term financial
investment
V. Other long-term assets
Total assets
Capital
A. Liabilities
I. Current liabilities
II. Long-term liabilities
B. Owner’s Equity
I. Owner’s Equity
II. Other funds
Total capital

2007

2008

2009

2010

241,042
41,791

501,095
36,546

345,987
68,466

546,064
168,921

127,698
67,325
4,226
20,844

186,198
82,034
196,314
28,556

231,442
44,436
1,642
39,412

306,067
68,846
2,229
55,180

18,444

28,556

39,412

55,171

261,887

529,651

385,399

9
601,245

189,785
189,724

60
72,102
71,571
530
261,887

440,702
440,563
139
88,949
88,284
664
529,651

270,890
264,676
6,213
114,508
114,825
(317)
385,399

472,584
467,495
5,089
128,660
129,125
(465)
601,245

2,400

Source: Financial Reports of Petrolimex Asphalt Co.
PAC's total assets increased over the years and this is consistent with the growth of
business of PAC.
Equity of PAC increased over the years but the growth rate was lower than the
growth rate of total assets. Thus, the equity of PAC was not in comparison to the
needs of growth. As introduced above, company is a member of PLC Company
with 100% capital owned by PLC. Therefore, annual profits must be transferred to

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PLC Company. PAC are not entitled to raise, mobilize additional capital as well as
actively add capital from retained profit.
Company has to raise capital from lending and trading liabilities, inevitably
leads to the high rate of liabilities/total asset in 2010. Restructuring capital is
necessary for a sustainable development in the future.
Table 2.2.2.b.Capital structure in recent years:
Capital
A. Current liabilities
B. Owner’s Equity
Total capital
Rate of current liabilities/Total capital

Unit: Million VND
2007
2008
189,785 440,702
72,102

88,949
261,887 529,651
72%
83%

2009
270,890
114,508
385,399
70%

2010
472,584
128,660
601,245
79%

Source: Financial Reports of Petrolimex Asphalt Co.
2.2.3 Market share
Total demand for asphalt in Vietnam increased continuously during the past
years. This is because of Vietnam is a developing country; Vietnamese Government
are also interested in infrastructure investment , particularly infrastructure of roads.
This is a right policy of the Government because efficient investment in roads
would be very convenient premise for the development of sectorial and regional
economy.
Market share is the most important indicator evaluating PAC's position in the
market. Through the years, although the consumption varied year to year (increased
and decreased), market shares of PAC has maintained in high level. Hence PAC's
position has been gradually confirmed, from number three in 2006 to become the
leader in 2009 and 2010 (in terms of market share) So far PAC has become the

leading asphalt supplier in Vietnam.
Table 2.2.3. Asphalt market share over the years
Year
2007
2008

PAC
31%
30%

Shell
14%
13%

Caltex
16%
17%

ICT ADCO
20%
15%
21%
17%

Tratimex
0%
0%

Others
4%

2%

Total
100%
100%

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2009
2010

33%
32%

14%
10%

15% 19%
15%
2%
2%
100%
15% 20%
12%
9%
2%
100%
Source: Petrolimex Asphalt Co and collected by Group

3.
Through the above analysis, we can see that PAC has continuously developed
over the years. However, it shows the development of PAC has not been
sustainable; the financial index changed in the negative trend which was reflected in
the high – level remaining ratio of liabilities/total assets .... This has affected the
competitiveness of PAC presently and in the future.
2.3. Competitive situation of PAC:
2.3.1. Analyze the business environment
2.3.1.1. External environment
2.3.1.1.1. Macro environment:
•

Economic environment and Government’s policy

Government policy: In recent years, although the Vietnamese economy has
been heavily influenced by the crisis, Government still identifies: transport
investment is one of the most effective measures to combat economic decline.
With the policy of diversifying forms of investment to prioritize capital for
investment in road, the Government also encourage other forms of investment
such as BOT, BT, PPP… with incentives for each project. Therefore, a series of
road projects, especially the highway network, have been deployed. This is a great
opportunity for businesses in general and Asphalt Company in particular.
Moreover, in recent years, the mechanism and policies, especially fiscal policies
have been improved and accessed to the rules of market economy, helping
businesses to be more autonomy in business and to be proactive in prevention of
possible risks in business.
As a result, the demand of Asphalt has been increasing in recent years and it is
a very good chance for the companies who are doing business in Asphalt. But the
year of 2011 is considered very difficult for VietNam economy, so the demand
would not bee higher than the year of 2010.

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