GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT DEVELOPMENT STRATEGY FOR PETRO VIETNAM EXPLORATION PRODUCTION CORPORATION 2011 - 2015 Group Number: 05 Student's name: Nguyen Dinh Duong Nguyen Thi Hong Minh Ngo Van Thang Dong Thi Thanh Thuy HANOI 2011 1 DECLARATION We hereby certify that this capstone project report represents the result of our own research. No other person’s previously published or written work has been used without due acknowledgement in the text. No material has been used in this report which has been accepted for the award of a degree or diploma in any tertiary institution. Group 5 - Class: GaMBA.X0110 2 LIST OF ABBREVIATIONS WTO: World Trade Organization OPEC: Organization of petroleum exporting countries PVEP: Petro Vietnam Exploration and Production TDTL: Exploration XDCB: Fundamental construction TDKT: Exploration and Production LIST OF TABLES Table 2.1: Operation record of PVEP 2006-2010 Table 2.2: New findings of petroleum 2006-2010 Table 2.3: Implementation of increasing reserves 2006 - 2010 Table 2.
Reserves of by 31/12/2010 Table 2. Implementation of production plan of PVEP 2006 – 2010 Table 2.6: Some basic financial items of PVEP and Petronas Carigali Overseas Table 2.7: Crude oil export market of Vietnam in the first 6 months of 2011 Table 2.8: EFE for PVEP Table 2.9: Structure model of PVEP Table 2.10: Training programs and participants from 2007 to 2010 Table 2.11: Business objectives of PVEP 2006 – 2010 Table 2.12: IFE matrix for PVEP Table 2.13: SWOT matrix for PVEP Table 2.14: IE matrix PVEP Table 3.1: QSPM matrix PVEP Table 3.2: Some specific objectives of development plan to 2025 3 LIST OF FIGURES Chart 2.1: Structure of oil export of Vietnam in the markets in the first 6 months.1 : International demand for crude oil 1990-2010 and estimate until 2025 Chart 3.2 : International demand for gas 1990-2010 and estimate until 2025 Chart 3.3: Oil and gas reserves and potentials in Vietnam Chart 3.4 : Oil and gas output 2007-2010 and estimate 2011-2025. Plan on developing human resources in 2011 – 2025 period 4 TABLE OF CONTENTS Introduction 8 Chapter I: Theoretical Rationale Of Business Strategy 10 1. Types of strategies 10 1.
Strategy building process 12 1. Setting business mission 12 1. Strategy Analysis and Choice 14 1. Tools to build business strategies 15 1.
Collecting and systemize information 15 1. Matching stage 17 Chapter II: Reality of oil exploration activities of PVEP. Briefing actual situation of PVEP 19 2.1 Overview of PVEP 19 2.2 Business situation of PVEP from 2006 to 2010 21 2. Analyze External factors to build the strategy for PVEP 26 2.
Evaluation of Opportunities and Threats 43 2. EFE Matrix for PVEP 44 2. Analyze Internal factors to build the strategy 45 2. Financial and accounting 51 2.
Research and Development 53 2. Information Technology and Information System 53 2. Evaluation of Strengths and Weaknesses 53 2. Developing SWOT matrix for PVEP 56 2.
Developing IE Matrix for PVEP 57 Chapter 3: Development Strategy of Petro Vietnam Exploration 60 Production Corporation 2011 - 2025 3. Analysis of possibly feasible strategies 61 3. QSPM Matrix analysis 62 3. Energy demand forecast 63 3.
International demand for oil 63 3. International demand for gas 64 3. Oil and gas reserves and potential in Vietnam 64 3. Oil and gas out put in 2007-2010 and estimate 2011-2025.
Strategies for PVEP from 2011 – 2025 67 3. Content of strategies 67 3. Objectives of strategies 68 3. Solutions for applying strategies 69 3.
Human resources development 69 3.2 Solutions on management 73 3. Solutions on science and technology 74 6 3.4 Solutions on investment and financial 76 3.5 Solutions on health safety and environment 79 3.6 Solutions on national security 81 Conclusion 82 INTRODUCTION Oil and gas industry is a key economic sector of the country and is greatly paid attention to by the Party and State. In the past years, Petro Vietnam has made an 7 enormous improvement with a total output of over 100 ton (ranks the third in Southeast Asia in exploiting crude oil). Petro Vietnam has conducted a comprehensive operation from explorating, exploitating to storing, processing, transporting, distributing refining and petrochemical products and service.
Initially operated on budgetary funds, Petro Vietnam has had a capital source for development, contributing a considerable sum to the National budget and has played an important role in getting the Nation out of crisis in the 1990s. However, gas and oil exploiting in the past years has shown a limited amount of oil deposit and poor conditions in exploiting oil and gas. Thus, there should be plans to increase the oil and gas deposit, assure the certain sum to the national budget and energy security of the country. Along with the exploration and extraction of oil and gas in the country, The implementation of investments in the field of exploration and exploitation of oil and gas overseas is to deploy large undertakings of the party and the State aiming at building Petro Vietnam into a strong economic Corporation with exploration and production of oil and gas both domestically and internationally, increasing oil and gas reserves as the basis for the growth of the sector and at the same time contributing to assure energy needs for the development of the national economy.
In order to implement the above strategy, Petro Vietnam has unified functions and tasks of each Department in the Corporation, assign entire work of exploration and production both domestically and internationally to PVEP. This is a proper and strategic vision of Corporation leaders to develop its activities in a professional manner. Assigning clear functions and tasks will create favorable conditions for each unit to give appropriate directions in accordance with the international business environment as well as its own potential. On the basis of practical knowledge during working, research, investigation process of petroleum exploration and production activities in PVEP, group 5 has chosen the title: "Development Strategy for Petro Vietnam Exploration Production 8 (PVEP)".
The purpose of the title is to propose long term development strategies for PVEP and solutions to implement these strategies properly on the basis of analysis of the practical situation inside or outside the Corporation and the competition within the sector. Major assignment includes three parts: Chapter 1.Theoretical rationale of business strategy Chapter 2. Reality of oil exploration of PVEP Chapter 3. Development strategy of PVEP for period 2011 - 2025 During study, we - group 5 have received a lot of valuable opinions of members who work in the Corporation as well as lecturers.
Due to limited time and understanding of the strategy, it is unavoidable to make mistakes. Therefore, any comments, feedbacks or suggestions to improve the practicality of the topic will be highly appreciated and enhance the practice of the subject. Sincerely thanks CHAPTER I: THEORETICAL RATIONALE OF BUSINESS STRATEGY 1. Concepts According to Chandler, strategy is "defining long-term objectives and purpose of a business and implementing a series of actions as well as allocating necessary 9 resources to achieve that goal.
According to Quinn, "strategy is the formula or plan combining the primary objectives of enterprise, policies and sequence in a unified manner" (James Brian Quinn-1980 Strategic for Change: Logical Incrementalism. Homewood, Illinois, Irwin). According to Johnson and Scholes "strategy is the direction and scale of enterprises in the long term to take advantage for the enterprise by changing and allocation of resources in a challenging environment to meet market demands and aspirations of its shareholders". In practice, application of the strategy is divided into three levels.
The first level is the strategy at company level (Corporate Strategy) towards the implementation of the common goals of the enterprise and meet the expectations of shareholders. The second level is strategy at business unit level (Business Unit Strategy) focusing more on how to succeed in competition in a market. Third-level strategy is strategy at operation level (Operational Strategy) focusing on organizing departments of an enterprise to implement Business Unit Strategies. This research puts main focus on Corporate Strategy but other strategies are also paid attention to because they are also very much related to the Corporate Strategy.
Types of strategies 1. Integration strategies The enterprise can use the integration strategies to increase the efficiency and decrease the dependency on the distributors or suppliers or make its competitors part of the enterprise. The enterprise can use forward integration, which gains ownership or increased control over distribution channels or use backward integration, which gains ownership or increase control over a firm’s suppliers or horizontal integration aiming at seeking ownership or increased control over competitors. 10 These integration strategies are applied if they are profitable to the company and the company is qualified to implement them.
Intensive strategies Intensive strategies are used in order to improve the competition of the corporation in the present products. Market penetration is applied to increase market share for the present products or services. Market penetration involves in increasing advertisement, the number of salespersons or promotions… The company can also introduce present products in new geographic areas, which is called Market development. The third strategy – product development aims at increasing sales by improving or modifying present products.
Diversification Strategies Concentration on one economic sector or business sector might be risky for an enterprise, so diversification strategies are applied to decline such risks. Diversifications strategies consists of concentric diversification – adding new but related products and services or horizontal diversification – adding new and unrelated products for present customers or conglomerate diversification – adding new and unrelated products to new customers. Defensive strategies Defensive strategies are applied when the enterprise encounters difficulties or seeks for a change in its concentration. The enterprise restructures itself by reducing costs and asset to deal with profits and sales reduction, which is called retrenchment.
The strategy is shown through selling facilities, factories closure or employees dismissal… The organization can also sells a division or part of the organization, which is called divestiture or use liquidation by selling all or part of company tangible or intangible assets. Michael Porter’s Generic Strategies 11 According to Michael Porter, the ultimate forces of an organization are cost advantage and/or differentiation. Applying these above mentioned forces create 3 sourcing strategies, namely cost leadership, differentiation and focus. These strategies are usually used in business units.
Cost Leadership Strategy This strategy aims at gaining profits by creating low cost products. Low cost results in higher profits if the price is the same or a miner loss is caused to the organization if same price competition is applied. Cost advantage can be attained by improving procedures, increase work efficiency, seeking for cheaper materials or vertical integration… b. Differentiation Strategy This strategy aims at producing unique products and services highly appreciated by customers and then the organization can offer a higher price than the competitors’.
Focus Strategy This strategy aims at producing products and services to serve a small market share in order to better fulfill customers and to get cost leadership, differentiation and the customers’ loyalty. Strategy building process 1. Setting business mission Mintzberg defined responsibilities “responsibilities described basic functions of an organization to the society on products and services the organization brings to customers” (Henry Mintzberg and JB Quinn The strategy process: concepts, contexts, cases, 3rd London: Prentice-Hall International, 1996). The statement indicates that an organization needs to identify the purpose of the company’s existence, strategy scope, policies, business value and culture 1.
Key external Forces 12 a. Macro environment factors These factors categorizes into 4 subfactors, namely Political, governmental, and legal forces; Economic forces; Social, cultural, demographic, and environmental forces; Technological forces or PEST. Industry environment factors These factors are analyzed basing on Michael Porter’s five forces model, including: - Potential competitors: reduce general profits of organizations in the same business line. - Competitive Rivalry - Substitutes - Power of Buyers/ Customers - Power of Suppliers 1.
The process of performing external assessment The first step is to collect information on political, economic, social, personal and environmental trends….