Enhancing the competitive advantage of Cavicoec CAPSTONE PROJECT REPORT ENHANCING THE COMPETITIVE ADVANTAGE OF CAVICOEC H 1 Enhancing the competitive advantage of Cavicoec GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT ENHANCING THE COMPETITIVE ADVANTAGE OF CAVICOEC Group No.3: Nguyen Trong Duc Nguyen Dac Huan Ha Thanh Trung Hoang Anh Minh 2 Enhancing the competitive advantage of Cavicoec GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINEES ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT Enhancing the competitive advantage of Cavicoec Group No.: 3 Nguyen Trong Duc Nguyen Dac Huan Ha Thanh Trung Hoang Anh Minh HANOI, 2009 3 Enhancing the competitive advantage of Cavicoec TABLE OF CONTENT LIST OF ABBREVIATIONS.4 LIST OF TABLES.5 LIST OF GRAPHS.8 4 Enhancing the competitive advantage of Cavicoec CHAPTER I: THEORETICAL BACKGROUND ON COMPETITIVE ADVANTAGE. THE CONCEPT OF COMPETITIVE ADVANTAGE.2 THE THEORIES AND MODELS OF COMPETITIVE ADVANTAGE.1 Fundamental theory system.2 Michael Porter’s Theory.3 Value chain and competitive advantage.5 Boston Consulting Group (BCG). 27 CHAPTER II: CURRENT SITUATION OF CAVICOEC AND ITS COMPETITIVE ADVANTAGE.1 Vietnam economic development situation.2 The current situation of the energy construction industry.Current situation of hydro-electric construction companies.3 CAVICOEC’S CURRENT ORIENTATION FOR DEVELOPMENT.1 The overall competitive strategy.2 Assessment of current competitive advantage. DETERMINANTS TO COMPETITIVE ADVANTAGE.
Motives for the development of the hydro-electric industry. Structural analysis to identify opportunities and threats. Fundamental activities: Based on common characteristics of competition CAVICOEC’s activities are divided into following :. Resources of the company.
Corporate analysis to identify strengths and weaknesses. KEY FACTORS INFLUENCING COMPETITIVE STRATEGY. SWOT matrix summary: Strengths, Weaknesses, Opportunities and Threats. Factors having positive impacts on competitive advantage.
Factors having negative impacts on competitive advantage.52 CHAPTER III: SOME MEASURES TO IMPROVE THE COMPETITIVE ADVANTAGE OF CAVICOEC. ASSESSMENT ON COMPETITIVE ADVANTAGE OF CAVICOEC. Assessment on the expected diversification strategy of CAVICOEC. Assessment of investment and business activities of CAVICOEC.
Sources of differentiation. Coping with substitutes. SUSTAINABLE STRATEGIC ADVANTAGE OF CAVICOEC. Analysis on the differentiation focus of CAVICOEC.
Motives for uniqueness. Costs of differentiation focus. Customer value and differentiation focus. Recommendations on sustainable competitive advantage for CAVICOEC.4 CONCLUSION AND RECOMMENDATION.62 LIST OF REFERENCES.
64 5 Enhancing the competitive advantage of Cavicoec LIST OF ABBREVIATIONS SWOT: Strengths, Weaknesses, Opportunities and Threats BCG: Boston Consulting Group SBU: Strategic Business Unit EVN: Vietnam Electricity Corporation ODA: Official Development Assistance IPP : Independent Power Plant BOT: Build-Operation-Transfer B-T: Build-Transfer VAT: Value Added Tax VINACONEX: Vietnam Construction and Import-Export Joint Stock Corporation HABUBANK: Hanoi Building Commercial Joint Stock Bank ERP: Enterprise Resource Planning EPC: Engineer – Procure – Construct IT: Information technology EPS: Earning per shares HNX: Hanoi Stock exchange IC: Internal Control 6 Enhancing the competitive advantage of Cavicoec LIST OF TABLES Unit: VND N Reporting Accumulate Items o period d Turnover from sales and service 130,625,965,3 85,300,167,80 1 provision 15 0 2 Exemption - - Net turnover from sales and service 130,625,965,3 85,300,167,80 3 provision 15 0 (124,378,382,0 (74,944,191,6 4 Cost of fund for sale 29) 32) Profit from sales and service 5 6,247,583,286 10,355,976 provision 6 Turnover from financial activities 1,044,195,418 3,138,883,494 (1,300,601,049 7 Financial costs (445,547,926) ) 8 Sales costs - - (5,026,278,713 (4,223,960,28 9 Administrative costs ) 5) 10 Net profit from business activities 964,898,942 8,825,351,451 11 Other income 1,570,000,000 3,347,465,630 (1,229,339,215 (2,917,328,43 12 Other costs ) 6) 13 Other profits 340,660,785 430,137,194 14 Total before-tax profit 1,305,559,727 9,255,488,645 (1,787,565,38 15 Corporate income tax (151,113,243) 6) 16 Total after-tax profit 1,154,446,484 7,467,923,259 17 Profit per stock 355 1,677 Table 2.1: Business activity results of CAVICOEV No Indicators Unit Previous Reporting period period (2007) (2008) 1 Assets structure - Long-term assets/Total assets % 46.53 - Short-term assets/Total assets % 53.47 2 Source of funds 7 Enhancing the competitive advantage of Cavicoec - Accounts payable/Total source % 76.92 of funds - Equity/Source of funds % 23.08 3 Payment capacity - Quick payment time 0.05 - Current payment capacity time 0.76 4 Profit ratio - After-tax profit ratio/Total % 4.53 assets - After-tax profit ratio/Net % 8.88 turnover - After-tax profit ratio/equity % 18.2: Basic financial indicators 2007, 2008 Ref.order Targets Units 2010 2011 2012 2013 2014 1 After tax revenues Bil 200 240 300 350 420 VND 2 After tax profits Bil 12,5 20,0 25,0 25,0 30,0 VND 3 Registered Capital Bil 50,0 80,0 100,0 100,0 100,0 VND Table 3.1: Future business activity results of CAVICOEV 8 Enhancing the competitive advantage of Cavicoec LIST OF GRAPHS Graph 0.1: The content and structure of the capstone project.2: The strategic process models as the linkage between the company and the environment.3: The five competitive forces affecting profit in the industry.4 : Factors of the industry structure.5: The three competitive strategies.6: The value system.7: The overall value chain.10: The BCG matrix.11: Overall competitive strategies of CAVICOEC.12: The 5 competitive forces determining industry profit.13: SWOT analysis in CAVICOEC.14: COMPETITIVE ADVANTAGES OF CAVICOEC.15: COMPETITIVE ADVANTAGES OF CAVICOEC.16: The BCG matrix( Position’s CAVICOEC).56 9 Enhancing the competitive advantage of Cavicoec INTRODUCTION Since the early decades of the 20th century, energy sources have been considered one of the decisive factors to the economic development of the whole society. Once people have yet to find substitute sources of energy, continuous wars on the rights to exploit energy sources still prevail all over the world. In the energy security campaign of Vietnam, hydro-electric energy is at the top priority. This industry is facing rapidly increasing challenges stemming from the shifts in government policies towards allowing powerful and potential enterprises to invest in the energy industry.
This policy shift aims to solve global issues such as population growth, scarcity of resources, ecological environment and natural environment. Therefore, competition in the overall energy market is becoming more and fiercer. Successful players in the market are those with application of modern technology and advanced management model. During the early days of the reform process in the 1990s, the Vietnamese Government identified 2 important missions for the coming decade, which are boosting the industrialization and modernization process and stabilizing the economy.
These missions require the government have a strategy for energy, which encourages the mobilization of national and international resources to develop different sources of energy, meeting the demand for energy of the socio-economic development as well as national and regional energy security. Vietnam Electricity Corporation and Song Da Corporation are 2 important state- owned enterprises in this process. However, for a long time before 2000, the energy market is controlled by these two corporations. The negative sides of this monopoly status is the cumbersome structure, ineffective business and investment activities, high price and low service quality of the industry.
In addition, the domination of these corporations have hindered the mobilization of investment capital from different sources in the society as well as the rapid social development. “The Government has identified the overall objective for 2010 is to focus all efforts, attain higher economic growth rate compared to 2009, sustain rapid and sustainable growth in 2011 and the following years; maintain macro-economic stability; ensure social welfare; sustain political stability, social order and safety, strive to achieve the objectives and targets of the 5-year plan for 2006-2010. In this objective, the basic 10 Enhancing the competitive advantage of Cavicoec initial targets for 2010 are: GDP growth at approximately 6.5%; consumer price index below 7%, national budget overspending at about 6,5% GDP”. Vietnam is expected to attain average economic growth of 7.
Therefore, the demand for electricity is expected to increase rapidly. Meanwhile, the Government has proposed measures to mobilize other sources of energy. Since the early 21st century, the Vietnamese Government has developed the necessary legal framework for successful implementation of the above-mentioned electricity development plan, which is then concretized in Decision 40/2003/QĐ –TTg dated 21 st March 2003 and Decision No. 176/2004/QĐ-TTg dated 5 th October 2004 with the aim of creating a more competitive and active electricity market.
Realizing encouraging signals from the Vietnamese government, a series of investors have actively engaged in investment in the industry. These investors include not only state-owned corporations but also privately-owned economic corporations and individual investors. Realizing the huge opportunity in investment in hydro-electric construction works, a large number of hydro-electric investment joint stock companies have been established. Consequently, CAVICOEC was established to meet the demand of constructing the hydro-power plants and set the foundation for the future development.
The role of CAVICOEC is to ensure the quality and effectiveness of the investment, as well as to apply modern technology to support business activities of CAVICOEC and other investors in the hydro-electric field. The research purpose of this capstone project is to conduct a thorough analysis on competitive advantage of CAVICOEC and then propose solutions to enhance the competitiveness of the company. The capstone project will conduct the following tasks: - Study the theoretical background on competitive advantage - Investigate the current situation of competitive advantage of CAVICOEC - Propose measures to improve the competitive advantage of CAVICOEC The scope of this study is within CAVICOEC, which is established in 2005 and with the available database of CAVICOEC. In addition, the authors will try their best to include in this capstone project data and information on related issues retrieved from the mass media (official documents, industry websites, journals and guidebooks) and to analyze from the perspective of the overall electricity industry to provide a more comprehensive assessment.
11 Enhancing the competitive advantage of Cavicoec The research methodologies adopted are: To achieve the research purpose mentioned above, we use the following research methodologies: Experience and observation methodology, descriptive analytical methodology, listing and comparative methodology, combination of theory and practice; holistic approach based on related references. The structure of the capstone project is as below: Chapter I. Theoretical background on competitive advantage Chapter II. Analysis on current situation of CAVICOEC Chapter III.
Measures to enhance the competitive advantage of CAVICOEC The authors have made efforts to solve the current issues by proposing some measures for formulating competitive strategies for CAVICOEC in order to improve the competitive advantage of the company. The authors aim to vision the prospects of CAVICOEC in the future socio-economic trend with regards to investment models, globalization and possible changes in macro policy environment and specific conditions of the industry. The content and structure of the capstone project can be summarized in the following graph: 12 Enhancing the competitive advantage of Cavicoec 5 COMPETITIVE FORCES OVERALL COMPETITIVE STRATEGIES External assessment DATABASE AND DATABASE AND ANALYSIS INSTRUMENTS INFORMATION INFORMATION SWOT, BCG matrix Socio-economic From CAVICOEC and its competitors system VALUE CHAIN AND RESOURCES Internal assessment Finding s FORMULATIN G COMPETITIVE STRATEGIES Enhance competitive advantage Graph 0.1: The content and structure of the capstone project 13 Enhancing the competitive advantage of Cavicoec CHAPTER I THEORETICAL BACKGROUND ON COMPETITIVE ADVANTAGE 1. THE CONCEPT OF COMPETITIVE ADVANTAGE When the world turns to the first decade of the 21 st century, companies witness many changes in their operations.
The rapidly changing world means that today’s winners may soon become outdated and lose in near future. This is also the time of fierce competition both at national and global scale. The result of this situation is that companies have no choice but to “compete”. In fact, failures of many companies result from their lack of capacity to translate competitive strategies into concrete actions to improve the competitive advantage of the Company.
The definition of competitive advantage is not a new topic for discussion. It roots from traditional business when an enterprise tries his best to excel his competitors in direct and indirect ways in order to attain long-term stable and sustainable profit. In modern business practice, managers of a company take into consideration all activities of the company such as marketing, production, finance, human resources, renovation, organization etc. in order to compete with its competitors.
Specific measures may include: Adopting better policies for price and costs; attract customers through enhancing customer satisfaction; providing unique and distinct products. Competitive advantage has been discussed a great deal in many economic materials.