8/12/2019 Binh Phat Mechanical Joint Stock Company
1/21
8/12/2019 Binh Phat Mechanical Joint Stock Company
2/21
2
CONTENTS
Figures and Tables .......................................................................................................... 3
I. Introduction to the Company ..................................................................................... 41.1. The history of the company ................................................................................. 4
1.2. The companys structure ...................................................................................... 4
1.3. The companys salesand profit .......................................................................... 5
II. Business Mission and Vision ...................................................................................... 7
2.1. Mission................................................................................................................. 7
2.2. Vision ................................................................................................................... 7
III. External and Internal Assessment........................................................................... 8
3.1. External assessment ............................................................................................. 8
3.2. Internal assessment .............................................................................................. 9
IV. Strategic Analysis and Choice .................................................................................. 11
4.1. Longterm objectives ........................................................................................ 11
4.2. Shortterm objectives ........................................................................................ 11
4.3. Business strategies ............................................................................................... 12
V. Strategic Performance ............................................................................................... 15
5.1. Shortterm operating plans ................................................................................ 15
5.2. Longterm business plans .................................................................................. 16
5.3. Compensation plans ............................................................................................. 17
VI. Conclusion and Recommendation ........................................................................... 18
6.1. Conclusion ........................................................................................................... 18
6.2. Recommendations ................................................................................................ 19
References ......................................................................................................................... 21
8/12/2019 Binh Phat Mechanical Joint Stock Company
3/21
3
FIGURES AND TABLES
Figure 1: The management structure
Figure 2: Sales and profit over five years
Table 1: Sales and profit from 2008 to 2012
Table 2: SWOT analysis
Table 3: Operations in the year of 2013
Table 4: Business plans in the next three to five years
Table 5: Compensation selection
8/12/2019 Binh Phat Mechanical Joint Stock Company
4/21
8/12/2019 Binh Phat Mechanical Joint Stock Company
5/21
5
Figure 1: The management structure
1.3. The companys sales and profitBinh Phat has operated rather well with positive sales and profits during the recent five
years. The company gained over VND 4,400 million sales in 2008, which sharply
increased 137.89% in 2009. However, the sales decreased considerably 58.73% in
2010 due to the bad effect of the economic recession. Since receiving more contracts
from partners and delivering products for old transactions, the firms sales went up
dramatically to nearly VND 14,000 million in 2011, and rose more 17.77% in 2012
comparing to the previous year.
Table 1: Sales and Profit from 2008 to 2012
Unit: VND
2008 2009 2010 2011 2012Sales 4,420,592,422 10,456,481,438 4,340,469,089 13,825,811,476 16,282,100,868
Profit 436,803,690 639,844,867 298,926,757 371,534,532 557,749,625
Regarding the companys profit, it fluctuated over the years. The net income grew
from about VND 436 million in 2008 to VND 639 million in 2009, then suddenly
declined 53.28% in 2010. In constract, it went up again to over VND 371 million in
2011, and continued increasing substantially 50.12% in 2012.
Director
Deputy Director Deputy Director
Business
Deparment
Technical
Deparment
Accounting andFinance Administrationand Personel Material Unit andWarehouse Factory andWorkshop
8/12/2019 Binh Phat Mechanical Joint Stock Company
6/21
6
Figure 2: Sales and Profit over five years
According to those figures, the companys profitmargin declined dramatically from
9.88% in 2008 to 3.43% in 2012, especially in 2011 the profit margin reached the
lowest point which was 2.69%. In the year of 2010, Binh Phat came up against general
economic difficulties that made its administrative and interest expenses rise 31.89%
and 56.74% respectively. As a result, the net income decreased sharply. From 2011 to
2012, the company accomplished several big contracts, so both sales and profit went
up again, but sales rised with a bigger percentage than profit. Because of the inflation
of the material prices, the cost of goods sold increased considerably which also caused
to the reduction in the profit margin of the company.
0
2,000,000,000
4,000,000,000
6,000,000,000
8,000,000,000
10,000,000,000
12,000,000,000
14,000,000,000
16,000,000,000
18,000,000,000
2008 2009 2010 2011 2012
Sales and Profit of the Company
Sales
Profit
8/12/2019 Binh Phat Mechanical Joint Stock Company
7/21
7
BUSINESS MISSION AND VISION
2.1. Mission
We are in the business for the purpose of manufacturing and installing high quality
industrial architectual structures with professional integrity, dedication, and expertise
in order to ensure our Southern customers from large corporations, local organisations
to small startup businesses complete satisfaction.
With stateoftheart technology and mechanical systems, we strive to provide the
society many steel construction which can be utilized and appreciated throughout the
life of the buildings. We also design engineering solutions that generate economic
development for the communities and the country.
2.2. Vision
We aim to build our reputation for excellent value and superior performance as well as
play a preeminent leadership role in the mechanical manufacturing industry. Our
commitment is to provide costeffective solutions to our customers, which will make
us become one of the finest pioneers in the engineering field in the future.
8/12/2019 Binh Phat Mechanical Joint Stock Company
8/21
8
EXTERNAL AND INTERNAL ASSESSMENT
3.1. External Assessment
3.1.1. Remote envi ronment:
The sustained industrial growth is put into a new context which have some significant
features such as rapid technological progress, crucial international competitiveness,
and increasing production effectiveness. Because of the prolonged economic recession
since 2008, hundreds of big and small mechanical companies has had to shut down
their activities or go bankrupt. In addition, the interest rate was too high, especially it
reached to 20% per year in past times as well as the credit procedures were difficult
and complicated. That resulted to not any firms can borrow money from the banks. In
2009 and 2011, the inflation escalated alarmingly, so the goverment had to propose
tightening policies for investment and consumption. The loosely managed regulalions
on investment such as the government do not mention product origin, domestic
equipment percentage, etc. in an auction sale which makes local enterprises hardly
compete with foreign companies.
3.1.2. Industry envir onment:
No barrier to entry, so there are around 3,100 mechanical companies nationwide, of
which about 156 companies are 100% foreign invested corporation. As a result, the
competitive rivalry level is really high, and substitute products are always available,
particularly the good quality products of overseas competitors. In addition, the
shortcomings of market control enable products with unclear origin, insufficient
quality, and low price to spread out the mechanical market. This causes to unfaircompetitiveness, especially for internal enterprises. On the other hand, with respect to
big projects which are owned by the government, buyer power is extremely significant
that leads bidding companies to bring out as low price as possible.
3.1.3. Operating environment:
Many companies are in undercapitalized because of the high interest rate. In other
words, this is a problem from the lack of financial resources. The result is that the
investment in high value added products is inefficient. The unreasonable level of
8/12/2019 Binh Phat Mechanical Joint Stock Company
9/21
9
inventory and the shortage of demand make the production meet many difficulties.
Moreover, the resources for research and development from consultancy, technology
and manufacturing design to leading experts as well as skilled workers are deficient
and weak in capabilities. The quality of training courses for mechanical engineers is
still low and not satisfy the market demand. The next issue is that if the customer is the
government, the manufacturing contracts will be very big so that the project must be
divided into several smaller packages. Therfore, the competitiveness could be
increasing fiercely.
3.2. Internal Assessment
3.2.1. Strengths:
The company has experiences and prestige in providing high quality products. The management structure is simple and flexible as well as the board of director
is proactive, creative, and dedicated.
The managers and workers have close solidarity. The company has good traditional relationships with customers and suppliers.
3.2.2. Weaknesses:
The demand of business and investment capital is rather large, meanwhile, thefirms own funds and credit capital are still limited.
The size of the company is still small as well as restricted resources ininnovation, research and development.
Machinery and equipment is in poor condition and not applied moderntechnology following international standard.
Most of the workers have no professional skills.3.2.3. Opportuni ties:
The economy is recovering after the recession in 2008, and the loan interest isgetting lower during the years.
Domestic investment has increased in recent years, especially the investment inmechanical industry.
8/12/2019 Binh Phat Mechanical Joint Stock Company
10/21
10
In a rapidly changing economy, demand for mechanical engineering productswill be soaring.
There are many chances to learn new technology through cooperating withforeign companies.
3.2.4. Threats:
The high level of competition in the mechanical industry, not only domesticenterprises but also big foreign companies.
Government policies are too unspecific to support the industry in general andsmall domestic companies in particular.
Table 2: SWOT Analysis
Helpful Harmful
InternalOrigin
S (Strength) W (Weakness)
+ Experiences and prestige in providing
high quality products
+ Simple and flexible management
structure as well as proactive, creative,
and dedicated board of director+ Close solidarity between managers
and workers
+ Good relationships with customers
and suppliers
+ The firms own funds and credit
capital are still small and limited
+ Small size, restricted resources in
innovation, research and development
+ Machinery and equipment is in poorcondition
+ Most of the workers have no high
professional skills
ExternalOrigin
O (Opportunity) T (Threat)
+ The economy is recovering and the
interest is getting lower
+ Domestic investment has increased,
especially in mechanical industry
+ The demand of mechanical products
and services is climbing
+ Chances to learn new technology
through foreign cooperation
+ The high level of competition in
mechanical industry
+ Government policies are too
unspecific to support the industry and
small domestic companies
8/12/2019 Binh Phat Mechanical Joint Stock Company
11/21
11
STRATEGIC ANALYSIS AND CHOICE
4.1. Longterm Objectives
Develop Binh Phats prestigious brand name by diversifying fairly pricedproducts and building long term relationships with customers for which we
can contribute strategic services and maintenance priorities.
Utilize capital employed effectively to increase 20% of employeess salaries,gain 50% more on returns for shareholders, and contribute to the development
of the country.
Accept low, but stable profit margin. In 2011, the companys profit margin was2.69%, which increased to 3.43% in 2012. Therefore, we expect the profitmargin will remain 5% in the next five years.
Invest in new modern machinery and equipment to enhance the quality of theproducts; develop mechanical products that foreign companies do not have
advantages to foster the core competencies.
Improve management skills to advance the companys business efficiencyandcompetitive strengths. The personel department need to provide managerial
development training for 5 supervisors per year over the next five years.
Increase labour productivity as well as reduce production costs, especiallyintermediary costs, to lower product prices. Each contract normally lasts from
one to two years, which causes to the increase in inventory. We aim to fulfill
the contract within one year to minimize the risks from fluctuating material
prices and high inventory.
4.2. Shortterm Objectives
o Develop a wider range of products which will meet the demand of individualcustomers. We intend to increase the sales from this new market to 1% of the
companys total revenue in 2013.
o The sales and profit of the company are expected to achieve VND 18,000million and VND 900 million respectively. In other words, the sales will rise
10.55% and the profit will go up 61.36% compared to the year of 2012.
8/12/2019 Binh Phat Mechanical Joint Stock Company
12/21
12
o Reduce the operating costs by 3% to support a product price decrease of 1% atthe end of 2013.
o Create good conditions for the employees to buy shares to refine theircontrolling roles to the company. The expected percentage of total shares that
the employees will own is 24% in this year.
o Attract working people with high technical knowledge, good capability,professional skills, and promote excellent individuals to management positions.
In addition, the company will send 2 or 3 core workers studying abroad with
short term traing courses to help them operate new production line with
modern technology effectively.
4.3. Business Strategies
4.3.1. Core competencies:
+ Be transformed from a stateowned company which was established in 1989, Binh
Phat has long term experiences and good capabilities in production as well as
competition in the mechanical engineering industry.
+ The company can manufacture and install mechanical products with lower costs than
its main competitors with the same quality.
+ The factory covers an extensive area of 500 square meters that plays an important
role in expanding the firms operations in the future.
4.3.2. Long term strategies:
Lowcost leadership:
The key product of Binh Phat is hydraulic seals which is mainly produced by about 12
companies in the whole country. This is a mature industry, so the company need to
focus on lowcost strategy to compete successfully. With good engineering abilities,
our company should emphasis on operational efficiencies and process innovation in
product design, manufacturing methods, and distribution synergy. Since both the
product is likely standardized in the markets and the rate of change is slow, the
company can minimalize delivered costs by requiring customers to take charge oftransportation by themselves. Another better way is that the company may accept to
8/12/2019 Binh Phat Mechanical Joint Stock Company
13/21
13
buy a new truck to deliver products for customers instead of hiring outside services.
The expense will be rather high at the beginning but transportation costs may reduce a
lot in the long run, especially when the company intends to expand its business.
On the other hand, because of traditional relationships with the suppliers, the company
can have sufficient control over inbound supplies and logistics. The most important
thing which needs to be paid attention is effective cost control system. That means we
must implement cost cutting technologies, stress reduction in administrative and
overhead expenses as well as take full advantage of maximizing economies of scale.
Finally, the firm should have positive acitivities to motivate its employees so that they
can perform in their full potential to increase productivity and revenue without
increasing costs.
Speedbased strategies:
Binh Phat can hold existing market share and build customer loyalty quickly with a
rapid response policy either to their needs or to market and technological changes. The
company has some merits when applying this strategy including a number of technical
people in sales and customer service, flexible manufacturing capabilities, strong
cooperation from suppliers of major components of the products, and corporate
reputation of closeness to the key customers. The main activities must be done is that
providing current products quicker, accelerating product improvement and production
processes as well as making decisions quickly. To implement these ones successfully,
the firm needs to do several things following:
Improve coordition among fuctional departments in research and development,production, marketing, and sales. In other words, an information processingsystem is necessary to be highly develop automated and integrated so that the
communication between the departments would be better than before.
Establish self managed operating teams and delegate powers to them todevelop decision making at the lowest levels to increase responsiveness.
Build one more warehouse and set up customer facilities in the Mekong Delta,which is the vital market of the company, to minimize delivery time and speed
up technical services.
8/12/2019 Binh Phat Mechanical Joint Stock Company
14/21
14
Create a company website and email to receive customers orders and contactwith them during delivery time. This website will be considerd as the main
effective information channel between the company and its customers, which
will save a lot of transaction expenses because it helps the firm shorten the
order process and sales cycle.
Concentrated growth and market development strategies:
The further strategies for Binh Phat are concentration and market development, which
are based on the internal emphasis for growth and profit with a desire to maximize its
strengths. On the basis of low cost leadership and quick response policy, the
company has an opportunity to increase its market share of the present products in the
present market. To hold key customers as well as to attract competitorsones, our firm
can establish brand differentiation by giving price incentives for the increasing
percentage of purchase size, initiating low prices so as to win government contracts
through bidding, building good relationships with start up businesses, advertising
more on our new website and applying special promotional programs.
In addition to the concentrated growth, Binh Phat is able to develop its business to new
markets, especially individual customers. At the present, the company already has big
factory and modern technology to manufacture and install civil architectural structures.
It is a crucial advantage that helps our firm succeed with this strategy. The first thing
we need to do is that restructuring to expand our operations to resolve the demands for
individual customers. The business department should be divided into two small units
with each will focus on corporate customers and individual ones. The human resources
is required to recruit more skillful workers who will perform separate tasks for each
division. The technical department plays a supporting part to develop product versions
to appeal to new market. Second, the company can add more channels of distribution
including buying new truck as mentioned ealier or transporting by motobike with
regard to small and light structures. Finally, by changing the content of advertising,
our company may put up advertisement in newspapers, posters, and leaflets in local
areas. Futhermore, the promotional appeals are very vital with interesting programs
like big discounts at the three first times, free distribution, long warranty period, etc.
8/12/2019 Binh Phat Mechanical Joint Stock Company
15/21
15
STRATEGIC PERFORMANCE
5.1. Shortterm Operating Plans
Table 3: Operations in the year of 2013
This years Objectives Time Period (2013) Activities
The increases of sales and
profits are 10.55% and
61.36% respectively
02/0531/12
Speed up obtaining contracts from
small and start up businesses
which will complete in less than
or equal one year
01/0730/09
01/1031/12
Increase sales to 3% and profits to
16% for the two last quarters
Product price decrease of
1% due to the reduction
in operating costs
02/0531/12
Reduce administrative cost and
costs from suppliers as well as
transporters by embracing close
partnerships
Sales from individual
market cover 1% of total
revenue
02/0531/07
Penetrate new market through
advertising campaigns, website,
and product introduction at each
house in local areas
01/0631/12
Plan to restructure the company
which will take place in one and a
half years
Employees total shares
are expected to 24%01/0630/11
Provide stock options for the
employees so that they can buy
shares with low prices
Workers technical skill
enhancement
02/0530/06Encourage the employees to
increase their English skills
01/0731/12
Send 2 or 3 qualified workers
studying abroad
8/12/2019 Binh Phat Mechanical Joint Stock Company
16/21
16
5.2. Longterm Business Plans
Table 4: Business plans in the next three to five years
Longterm Objectives Time Period Activities
The development of Binh
Phats brand name and the
steady growth of the profit
margin
20132018
Increase the key products market
share through fairly low prices, quick
services, good relationships withtraditional customers. At the same
time, strengthen the position in the
individual market by increasing public
awareness
Employeess salaries and
shareholders returns rise
20% and 50% respectively
20152017
Utilize long term capital employed
effectively in manufacturing new
products and extending a variety of
investment. After the restructure of the
company completes at the end of
2014, the salaries and returns will
hopefully go up in the next 3 years
Investment in new modern
machinery, and in research
and development
20142016
Invest about 5% of total capital in new
machinery which applies international
technological standards and set aside
2% of total sales for technical services
Improvement in managerial
and organisational skills of
key employees
20152018
The personel department will select 3
or 5 supervisors per year to take part
in managerial development training
courses for the next five years
The increase in labour
productivity and reduction in
production costs
20132018
Reduce intermediary costs like trading
and transporting, etc. as well as fulfill
most of the contracts within one year
to minimize the risks from fluctuatingmaterial prices and high inventory
8/12/2019 Binh Phat Mechanical Joint Stock Company
17/21
17
5.3. Compensation Plans
To motivate key value organisational members who can probably link strategic goals
and operational actions successfully, Binh Phat Company will improve incentive
compensation in a balanced with benefit policies.
Table 5: Compensation Selection
Strategic Goal Bonus Compensation Explanation
Take full advantage of
growth opportunities
Stock options
Provide the excutives with the
right to purchase stocks at VND
10,500 compared to the current
price of VND 12,000 per stockdue to risks associated with
growth strategies
Improve operational and
production efficiencyCash
Award a bonus of 10% of the
managers total salaries and 5%
of salaties for each related
employees every quarter. This
plan will come into effect from
the fourth quarter of 2013
Restructure organisation Stock options
Offer organisational members
10% discount from the current
price of the companys stocks at
a future time period after the
restructuring is completed
Streamline operations Restricted stock plans
Extend the reselling period of
the executives intially gifted
stocks one year longer. It can be
seen as long term rewards on
efficiency and cost control
8/12/2019 Binh Phat Mechanical Joint Stock Company
18/21
18
CONCLUSION AND RECOMMENDATION
6.1. Conclusion
Be privatized from the stateowned mechanical engineering company, Binh Phat has
gained several achievements including the average increases of sales and profit from
2008 to 2012 are 78.87% and 16.90% respectively, the scale of production is expanded
and the employees living conditions are much better than before. The company has
built its brand name in manufacturing highquality products with fairlylow prices,
and good relationships with traditional customers and suppliers. This is such an
advantage that the company can utilize to compete and develop along with many
external opportunities such as recovering economy, increasing domestic investment,
climbing demands for mechanical products, etc. However, because of its limited
capital, weak research and development activities, old fashioned machinery and
equipment, and unskilled professionally workers, the company has to face a number of
difficulties in survival and growth, especially in the context of intense competition and
the governments loosely managed regulations.
In addition, Binh Phatscore competencies that are long term experiences and good
capabilities in production with lower costs play an important role in implementing its
business strategies. In the short term, the company intends to develop a wide range
of products to meet the demand of new individual market, increase sales and profit as
well as reduce operating costs, and attract more skillful workers with highly technical
knowledge. Our firm aims to achieve stable growth and development of its prestigious
brand name, invest in new modern machinery, increase labour productivity, enhance
managerial skills for key organisational members, and make our shareholderswealthier in the next three to five years. To accomplish these long term goals, the
company will perform some main strategies that are low cost leadership, quick
response, concentrated growth, and market development. The activities that need to be
given priority are increase the key products market share, strengthen the position in
the individual market, utilize capital employed effectively, extend investment activities
into various porforlios, reduce intermediary costs like trading and transporting, and try
to fulfill most of the contracts within one year to minimize risks from high inventory.
8/12/2019 Binh Phat Mechanical Joint Stock Company
19/21
19
6.2. Recommendation
6.2.1. Budgeting:
In 2012, the company has total debt of VND 5,200 million in which long term debts
cover 48.56%. The capital that finances for its operations is about VND 11,500 million
with 54.78% of shareholdersequity. Therfore, the ratio between total debt and capital
is 45.22%, which is not bad but not so good as well. The purpose is to reduce the
borrowings from banks to VND 4,650 million in 2013 that causes to the above ratio
will fall to 42.5%. This belongs to gradeA scale according to Standard&Poors.The
expected short term debts are VND 2,390 million which percentage will be set for
each activity is 50% of working capital, 35% of operating and advertising expenses,
and 15% of developing the employees skills.
With respect to long term financing, the borrowings could be increased to support
technology and fixed assets (machinery, truck, etc.) investment, increase in public
awareness of the companys products, managerial capability enhancement for
managers. However, the ratio between longterm debts and total capital should not be
exceeded 40%. This ratio can fluctuate from 28% to 35% which would be the best.
The company also needs to spend at least 5% of total borrowings for restructuring the
business and 10% for incentive compensation funds. Finally, the most important thing
to be most focused on is that the capital must be utilized effectively by all levels of
managements and functional departments in order to make sure that the company can
implement the business strategies and achieve its promising goals.
6.2.2. Control li ng:
After carrying out the above mentioned strategies, we need to do the performance
review process periodically to ensure that timely preventive and corrective actions are
taken to keep the company on track. First of all, we should control our activities
systematically against some premises about environment and industry factors such as
the economy has good signs for recovering, the investment in mechical industry is
likely to increase, the interest rate will fall during this year, the traditional suppliers
probably maintain relationships with us, or the trend of new local competitors is
emerging, etc. Second, an implementation controlling program has to be executed
every three months towards short term objectives and every six months or nine
8/12/2019 Binh Phat Mechanical Joint Stock Company
20/21
20
months for long term goals. This action will help the company determine whether
the strategy is continuously progressing as beginning schedule or needs any major
adjustments by giving feedbacks from actual performance. Some criteria that need to
be managed are budgets, operating costs, product quality, employee evaluation, and
customer satisfaction. Finally, the corporate managers must usually reconsider the
firms strategies to respond with unexpected events such as spreading bad rumours
from competitors, suddenly breaking off relations by suppiers, or rapidly declining
demands of customers, etc. Regular forecasts could be very necessary to predict that
kind of events as well as to propose corrective actions timely so that the company can
thoroughly solve predicted problems. We will perform the strategies successfully if all
of the business operations are controlled effectively.
8/12/2019 Binh Phat Mechanical Joint Stock Company
21/21
REFERENCES
1.Binh Phats financial statements from 2009 to 2012, Internal documents. 2.John A. Pearce II, Richard B. Robinson, Strategic Management: Planning forDomestic and Global Competition, 13th Edition, International Edition, 2013.
3.Grigore Ana-Maria, Bagu Constantin, Radu Catalina, The strategic performancemanagement process, JEL Code, 2008.
4.ASME Strategic Issues Committee, 2028 Vision for Mechanical Engineering, TheInstitute for Alternative Future, Global Summit, July 2008.
5.Industrial Competitiveness Group (ICG), Viet Nam Industrial CompetitivenessReport 2011, The Ministry of Industry and Trade of Vietnam and The United Nations
Industrial Development Organisation (UNIDO), 2011.
6.The Ministry of Transport of Vietnam, Vietnams mechanical engineering industrydevelopment strategy until 2010 and vision to 2020, published online at
http://chinhphu.vn,accessed on 8th April, 2013.
7.To Tuan, Vietnams mechanical engineering industry targets industrialization by2020, published online athttp://vovworld.vn,accessed on 8th April, 2013.
http://chinhphu.vn/http://chinhphu.vn/http://vovworld.vn/http://vovworld.vn/http://vovworld.vn/http://vovworld.vn/http://chinhphu.vn/