Five-Forces-Analysis Nui Beo Coal JSC

5. INDUSTRY ENVIRONMENT ANALYSIS (Five Forces Analysis)
Threat of New entrants
The project and the investment capital for the coal industry do not require a large amount of
capital for technology, fast execution time, so the coal mining has been very strong recently
with the involvement of many spontaneous businesses or individuals. Scattered throughout
Vietnam, there are many open-cast coal mines, so coal mining is very easy, so there is an
increasing situation of illegal coal mining, and there are many new businesses joining the
industry because of huge profit opportunities. According to a survey by the Vietnam
Development Consultancy Institute (CODE), the number of enterprises operating in the field
of minerals increased rapidly, by 2007, there were 1,692 enterprises participating in this field,
an increase of 4 times compared to 2000 (427 enterprises), an average increase of 21.7% /
year. Investment of the private economy is on the rise and increasingly accounts for a high
proportion of total investment capital (increasing from 10% in 2000 to 75.2% in 2008). (As
cited in Tô Thị Hường& Hoàng Kiều Nga& Nguyễn Thị Mười, 2010)

Moreover, the reserves as well as the technology level of Nui Beo Coal company in particular
and companies of the Mineral Coal Group in general are outdated so the productivity is low,
if the exploitation is not enough. Domestic demand will lead to Vietnam having to import
coal, so the pressure to compete with foreign companies is huge. However, with the
government's preferential tax policy, the coal industry has many advantages compared to
other industries, so it will attract the attention of many businesses in the mining industry that
want to expand their business. (according to V.Vũ, 2013)

Bargaining Power of Suppliers


Because coal is an irreversible mineral, mining depends on the country's reserves. The coal
potential of Vietnam is forecasted to be huge, the Northeast coal basin is about 10 billion tons
and the Red River Delta coal basin is about 210 billion tons, but the exploration volume so
far is very small. Over the past 60 years, Vietnam has invested in coal exploration of about
5500 boreholes with a total of more than 2 million meters of deep drilling (mks),

concentrated mainly in Quang Ninh. Thus, in the Northeast coal basin has proved that more
than 2.5 billion tons of coal is real (out of about 10 billion tons of forecast). (As cited in Tô
Thị Hường& Hoàng Kiều Nga& Nguyễn Thị Mười, 2010)

According to the International Energy Organization, Vietnam has not yet been named on the
world coal map and out of about 929 billion tons of reliable coal reserves of the world as of
January 2006, Vietnam is only included among countries. The rest of Asia is not in the OECD
group with a total reserve of only 9.7 billion tons. (as cited in Dautuphaisinh.com, 2017)

Mining business contains many risks, many dangers, hard. Obtaining one ton of open-cast
coal must remove 7 to 10 cubic meters of rock. Getting 1,000 tons of coal in the pit must dig
for kilns, must pass stone milling, mud milling, sand milling and lots of water bags hanging
over the head. For nearly 40 years after the liberation of the Mining Region, although the
Soviet Union designed and provided aid to the most advanced production line, the output of
three open mines Deo Nai, Coc Sau and Ha Tu was only reached. one million tons / year. For
underground mines, the average output is only 200,000 to 300,000 tons / year - including well
mines. Mong Duong cost nearly 1 billion rubles (that period was equivalent to 1 billion
USD). Now the big open mines have surpassed the output of 3 million tons, the underground
mines have the output of more than 2 million tons. Not only that, the large open mines also


extend the service life by 25 years, boldly exploiting down from minus 150 to minus 350
meters above the sea. (as cited in Petrotimes, 2013)

Bargaining Power of Buyers
Nui Beo’s products are all kinds of coal, so the company's main subjects are people, and the
companies use coal for production and business such as thermal power plants, cement
companies. The recent economic growth has caused the coal demand of plants to increase.
Coal industry is tending to increase coal prices to ensure to cover production costs, but the
coal price increase has affected many operations of the plants, so many businesses have

reacting to this move of the industry. Although coal price for electricity in 2009 has increased
by 27% compared to 2008 and this year continues to increase by at least 28% compared to
2009 as announced recently, but coal industry still thinks that is not enough and needs to The
increase is due to the fact that the starting point of coal price before rising is low. Not only
that, the additional amount of Vinacomin from the coal price increase for electricity is also
considered by Vinacomin to be "overtaken" because the cost of production of coal mining
units is also increasing. significantly due to the increase in gasoline prices. If petrol price is
still high, Nui Beo JSC has to spend money for this expense, so the gain from raising coal
price to electricity is not enough to compensate. (as cited in Vietnambiz.vn, 2019)

Intensity of Rivalry Among Competitors
Vietnam National Coal-Mineral Industries Group is mainly responsible for the development
of the coal industry, supplying domestic coal and acting as a focal point in coordination with
major coal consumers to import coal for development needs socio-economic of the country.
Currently, most of the coal companies listed on the stock exchange are subsidiaries of


Vietnam Coal and Mineral Group (Vinacomin holds 51% of the shares) so the competition
between companies on the exchange is zero.
Coal industry is a key economic sector, so it is adjusted and regulated by the State's
development policies and strategies. Depending on the situation of the world market and the
demand for domestic coal, the State has directed the activities of Vietnam Coal and Mineral
Industry Corporation. As a subsidiary of Vietnam National Coal - Mineral Industry Group,
the Nui Beo’s output, revenue, and output plans are governed by the Group through the
annual Contract of Contract for Mining. Therefore, the exploitation policies and the general
development strategy orientation of Vietnam Coal - Mineral Industry Group will create
favorable conditions or create difficulties for the Company's development. (as cited in
Vinacomin, 2018)

Threats of Substitude products

The purpose is to generate heat energy, so there are now many products that can replace
petroleum coal, electricity, wood, solar energy, and especially nuclear power. If coal prices
are too high, many businesses will also switch to other sources of energy, so competition
between industries is very high. However, the use of these alternative products requires
factories to have advanced technology levels, while at present, the technological level of our
factories is backward so in the coming time, switching to alternative products is a bit difficult.
(according to Nguyen Trong Binh, 2009)

References
Tô Thị Hường& Hoàng Kiều Nga& Nguyễn Thị Mười (2010, July 30), Coal Industry
Analysis. Retrieved from />

V.Vũ (2013, September 3), Too many incentives for the coal industry. Retrieved from
/>Dautuphaisinh.com (2017), Coal Industry Report. Retrieved from
/>Petrotimes (2013, August 19), Coal industry: Difficulties are too urgent! Retrieved from
/>Vietnambiz.vn (2019, October 9), The pressure on the coal industry is getting higher.
Retrieved from />Vinacomin (2018, January 10), History of formation and development. Retrieved from
/>Nguyen Trong Binh (2009, February 10), Diversification of energy sources - Development
trend of the future. Retrieved from />fbclid=IwAR1qUYoLyA2UQ4PVRQUWGwQuQuued7WK4rVSTmxYuondzlaV7x5Ct_bhC8