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I would like to express my deepest gratitude to my research supervisor, Mrs. Ngo Kim Thanh, for her intensive support, valuable suggestions, guidance and encouragement during the course of my study.
Website: http://www.docs.vn Email : lienhe@docs.vn Tel : 0918.775.368 NATIONAL ECONOMICS UNIVERSITY SOLVAY BUSINESS SCHOOL FINAL THESIS Valuating & Adjusting Strategy For Construction Installation & Industrial Material Company Limited Instructor: Associate Prof. Ngo Kim Thanh Student: Duong Ngoc Khanh– MBM7 Hanoi, March 2010 Valuating & Adjusting Strategy for Cim Co., Ltd Acknowledgements I would like to express my deepest gratitude to my research supervisor, Mrs. Ngo Kim Thanh, for her intensive support, valuable suggestions, guidance and encouragement during the course of my study. I would like to express my sincere gratitude to all of my teachers at Solvay Business School and National Economics University for their teaching and guidance during my course. I would like to extend my thanks to the CEO of Cim Co., Ltd who trusted me and shared his information and ideas about the company operating. I am very thankful to all individuals for providing me with the necessary information and supporting me with advice during the period of my data collection for this research study. Last but not least, I would like to express my loving thanks to my parents, my wife and son for their love and encouragement throughout my studying. Written by Duong Ngoc Khanh MBM7 2 Valuating & Adjusting Strategy for Cim Co., Ltd Table of content Acknowledgements .2 Table of content 3 Executive Summary 4 Table 1: Corporate strategy formulation process .11 Table 3: SWOT/ TOWS matrix .17 III.3. Opportunities and Threats .26 Table 4: Strengths and Weaknesses of CIM CO., LTD .34 Table 6: SWOT/TOWS matrix of MSA VN .37 To choose Strategy applied for Cim, the author use pointing method with criteria above. The scale point is 03 in which: 3 - Sure; 2 - Maybe; 1 - Not 38 Chapter 6: Conclusion, limitation and further researches 44 Appendix: Finance Report years 2002 - 2008 Business Result year 2002 -2008 List of Figure Figures 1: Revenue of Cim co., Ltd from 2002 to 2009……………………… .08 Figurers 2: Tariff on foil & rebar from 2001 to 2009………………………… 19 Figures 3: Imported quantity 2009…… .……………………………………… 23 Figures 4: Top 20 hot plate importers in 2008……………………… ………….24 Figures 5: Price of Steel in 2007 (Source: Vietnam GSO) …………………… 25 Figures 6 : Revenue structure of Cim Co., Ltd…… ……………………………29 Figures 7: Leverage & liquidity ratios of Cim Co., Ltd……………….…………30 Figures 8: Revenue & liabilities growth of Cim…………………………………34 Figures 9: ROE of Cim from 2002 to 2008…………….……………………… 35 List of table: Table 1: Corporate strategy formulation process… …………………………….11 Table 2: SWOT model……………………………. …….………………………16 Table 3: Opportunities and Threats…………………………………………… 17 Table 4: Strengths and Weaknesses of Cim., Ltd……………………………… 34 Table 5: Threats and Weakness……… …………………………………………35 Table 6: SWOT/TOWS matrix of Cim, Ltd……………………………………. 37 Table 7: Choosing Strategy……………………………………………….…… 38 Written by Duong Ngoc Khanh MBM7 3 Valuating & Adjusting Strategy for Cim Co., Ltd Table 8: BCG Matrix…… ……………………………………………….…… 39 Executive Summary Steel industry takes a very important part for any economy, especially for Vietnam - a developing country where begin to build its new cities, infrastructure, shipping, heavy industries… According to statistics of Vietnam Steel Association, Vietnam nowadays has discovered & located over 216 iron ore mines in which 13 mines with the capacity over 2 million tons distribute conceptually in the North. However, investments focus on easier & more quickly making money field. Lacking of planning from Government from the beginning, social resources has dropped foil & iron ore processing industries. In many years from 2000 to 2007, domestic foil producers just supply only around 20% of demand. This rate rose up to 50% in year 2008 with new factories but they themselves facing the same problems of finished-good factories: lacking of input materia. This problem shall be solved by developing iron ore exploiting & processing industry. Because of lacking input material, the only solution of Vietnam steel industry is expected to outside supply - exporting countries such as India, Russia, Korea, Japan, Australia, South Africa and China, the biggest producer and consumer in the world. Input material depending on foreigner resources, the market strongly affected by outside factors not only international supply-demand but also policies of exporter countries. Beside outside factors, Vietnamese market itself affected by internal conflicts between infant policy & monopoly situation. Written by Duong Ngoc Khanh MBM7 4 Valuating & Adjusting Strategy for Cim Co., Ltd With an unstable environment like above, Construction Installation & Industrial Material Company Limited (Cim Co., Ltd) was born in 2002 with only one business line, it was importing to distribute in domestic market. Its clients are domestic trading companies, mechanic manufacturers, construction contractors, shipping manufacturers…etc. In eight years, the company has amazing growth rate in revenue: 21 times with average growth rate of 140%. The source of this hot growth came from dept. Until 2005, 100% revenue belonged to trading activities. In this very year, Cim Co., Ltd has stood on the edge of bankrupt because of a strongly changing in business environment. This hot growth originates from what and why just in 04 operating years the company has faced to such serious problem. Did the problem come from external or internal factor? Firstly, this study aims to review company’s business, finance statement and organization, to evaluate suitability of the current strategy in context of unstable & changing environment. Secondly, base on technical of Strategy Formulation process including SWOT and BCG analysis this study shall give out the suggestions to adjust CIM Co., Ltd strategy in order to improve Weakness to reduce Threats from changing environment and to take full advantages of Strengths to catch Opportunities. Chapter 1 – Introduction I.1. Background I.1.1 Industry overview Steel is a strategic industry in Vietnam economy, which under early construction process. Its history started in wartime with the first complex in Thai Nguyen province what had small capacity and few kinds of products. In general, steel industry can be described simply as a chain of products as the diagram bellow: Written by Duong Ngoc Khanh MBM7 5 Mines Iron ore Sifting Refining Mild foil Rebar Plates V-shaped Construction Shipping Mechanical Shipping Electric transportation Roll Pipe Roofing Mechanical End usingFinished - good Semi-product End using Valuating & Adjusting Strategy for Cim Co., Ltd Diagram1: Steel industry product chain Iron ore in mine, which contains other impurities, after sifting becomes input material for iron refining factories. Through cleaning, chemical, heat processing it shall become crude material for mild foil laminating factories. This processing requires big investment in fixed assets, equipments & technologies. It also takes long time to revoke investment capital than finished-goods processing. There are several types of mild foils in different shape or size for each production. After heat & shape formed - processing, output products are rebar, plate, roll or v-shaped rod. Domestic foil producers just supply 28% of mild foil demand so in many years finished- goods producers must depends on imported material, which was a factor creating an unstable market. This problem shall has been analyzed more detail in Chapter III of this study. I.1.2 Current background Although the year of 2009 is regarded as a difficult year for VN economy after crisis but 2010 is really harder time when Government support policies comes to end. Especially, the State Bank allows banks to loan in medium and long term with negotiable interest rate. The interest rate shall increase from ceiling rate of 12% to 18%-20%. This strong change in 2010 surely causes very bad effects to the companies that using much more dept than equity as the case of Cim Co., Ltd. Furthermore this year is the first year Vietnam shall export 500.000 tons steel products whose input materials come from iron ore exploited & proceeded in domestic factories (according to the Development Planning of VN Steel Industry in 2007-2015, considering up to 2025 signed by Prime Minister). In five years from now, when huge steel production complex projects come to operating, Vietnam is going to be a steel exporter instead of being importer currently. The market share of import companies shall narrow by the time. In 2010, CIM Co., Ltd has a strong change in organization from the top. The CEO has been instead of his father to be the Chairman of company, who retired in 2009. This has a deeply meaning to the company in changing the decision making process in direction of power concentrated. Written by Duong Ngoc Khanh MBM7 6 Crude material Laminate