RATIONALE
In today's rapidly globalizing economy, competition is essential across all sectors, driving societal development and enhancing production and business operations This competitive environment not only motivates growth but also boosts labor productivity and improves the efficiency of enterprises.
In today's globalized and technologically advanced environment, competitiveness is crucial for enterprises, as knowledge has become the most vital resource Businesses and policymakers face new challenges and opportunities, necessitating strategic planning to leverage the benefits of globalization, technology, and competition The central focus is on effectively creating, maintaining, and enhancing the competitiveness of products and businesses to ensure long-term success.
Vietnam Steel Corporation, a joint stock company in the steel industry, encompasses over 40 subsidiaries and affiliates across Vietnam, with a chartered capital of VND 6,780 billion, predominantly state-owned at 93.93% Established in the early 1990s as part of a government initiative to create robust economic corporations, the company has experienced remarkable growth over its 25 years of operation, marked by substantial increases in production capacity through focused investments and expansion efforts As a result, the competitiveness of Vietnam Steel Corporation has significantly improved.
In recent years, the influx of foreign direct investment (FDI) and the active involvement of the private sector in Vietnam's steel industry have significantly boosted production capacity This surge in new investments has led to a pronounced oversupply of steel products within the country By 2017, the total capacity for billet production had notably increased, exacerbating the challenges of market saturation in the steel sector.
12 million tons/year; the total capacity of construction steel rolling has reached over
12 million tons/year, while total consumption for construction steel of Vietnam in
In 2017, steel production reached 9.12 million tons, with private sector competitors like Hoa Phat and Pomina expanding rapidly in long products, while Hoa Sen and Dong A excelled in flat, galvanized, and pipe products Foreign investments, including projects from POSCO Vietnam, CSVC-Sumikin, and Formosa, have become increasingly active, dominating both long and flat product segments As a result, competition among steelmakers has intensified significantly.
The competition faced by Vietnam Steel Corporation has intensified due to the effects of international integration and trade liberalization, leading to reduced opportunities for its steel products As a result, the operating environment has become increasingly challenging, hindering the company's ability to expand its market share.
In a highly competitive business environment, domestic steel enterprises must continuously innovate and enhance their competitiveness to secure their market position To maintain market share, they must not only compete with local steel manufacturers but also prepare for the influx of foreign steelmakers entering the market soon.
Based on mentioned reasons and analyzing, the author decides to select the research topic "Improving the competitiveness of construction steel products of Vietnam Steel Corporation in the period 2018-2022".
LITERATURE REVIEW
As working on such topic, the author has studied some researches related to improving the competitiveness of product and service
The research conducted by Mr Tran Ngoc Anh in the EMBA program (2013) examined ways to enhance the competitiveness of petroleum products at the Military Petroleum Corporation The study established a theoretical framework for assessing the competitiveness of petroleum products, evaluated the current standing of the Vietnam Petroleum Corporation, and proposed strategic solutions to boost the competitive edge of Military Petroleum Corporation's offerings.
In 2013, Mr Truong Van Thai from the National Economics University conducted a study titled "Improving the Competitiveness of Vinaphone Mobile Telecommunication Services at Yen Thanh Telecom Center." The research focused on the competitive framework of mobile telecommunication services offered by telecom enterprises, evaluating the competitive capabilities of Vinaphone services at the Yen Thanh Telecommunications Center, and proposing strategic solutions to enhance the competitiveness of these mobile information services.
The research conducted by Mr Hoang Anh Tuan, an EMBA student from the class of 2014, focuses on enhancing the competitiveness of plastic pipe products at Dong Nai Plastic Joint Stock Company It establishes a theoretical framework for assessing the competitiveness of plastic pipe products within the industry, evaluates the current market position of Dong Nai's offerings, and proposes strategic solutions aimed at boosting their competitiveness by 2017.
A study conducted by Mr Pham Cong Danh from the EMBA class of 2016 focused on enhancing the competitiveness of stainless steel products at Nhat Quang Steel Co., Ltd The research identified five key factors influencing product competitiveness: human resources, financial capacity, technology, management systems, and marketing activities It also analyzed the current competitive position of the company's stainless steel products and proposed several solutions to improve their competitiveness.
The above mentioned studies have given the author more insight knowledge on such topic to start working on the thesis.
AIMS OF RESEARCH
This thesis aims to evaluate the competitiveness of construction steel products offered by Vietnam Steel Corporation by identifying the key factors that influence their market competitiveness.
The aims of research are following:
- Reviewing related theories of competitiveness to identify the basic factors impacting product competitiveness
- Evaluate the capability of basic factors impacting the competitiveness of construction steel products of Vietnam Steel Corporation
- Giving some recommendations to improve the competitiveness of construction steel products of Vietnam Steel Corporation
1 What is the current competitiveness of construction steel products of Vietnam Steel Corporation? And which factors affect competitiveness? Which aspects are advantages and disadvantages?
2 What should Vietnam Steel Corporation do to maintain and improve the competitiveness of construction steel products?
OBJECTS OF RESEARCH
This study investigates the competitiveness of construction steel products, emphasizing the key factors that influence their market position The author analyzes various elements that contribute to the overall competitiveness of these products in the construction industry.
SCOPE OF THE STUDY
This research aims to evaluate the competitiveness of construction steel products offered by the Vietnam Steel Corporation It identifies the strengths and weaknesses of these products, providing a foundation for proposing effective solutions to enhance their market competitiveness.
Research focus on the competitiveness and the major factors affect to the competitiveness of construction steel products of Vietnam Steel Corporation
- Location: The study focus on the case at Vietnam Steel Corporation Head Office and its subsidiaries and affiliates.
RESEARCH METHODOLOGY
To assess product competitiveness effectively, a comprehensive evaluation of various factors is essential, including technology, product diversity, pricing, distribution systems, promotional strategies, financial resources, human capital, management structures, security, and culture This thesis focuses on seven fundamental factors that significantly influence product competitiveness: technology, product pricing, distribution systems, promotional activities, financial capacity, human resources, and management systems The theoretical framework for this evaluation is structured around these key elements.
The author follows 6 steps which are described in the figure following:
This study utilizes secondary data gathered from a comprehensive literature review of previous research on the Vietnam steel industry Key sources include industry reports from the Vietnam Steel Association, World Steel Association, Business Intelligent Monitor, World Steel Dynamics, SEAISI, and Vnsteel's annual reports, providing valuable insights into the sector's dynamics and trends.
- Primary data: The author collects primary data through questionnaire survey and interview (if any)
The author uses several methods of analysis, synthesized as follows:
+ Composite analysis, time series comparison (Period 2015-2017)
+ Cross Comparative Analysis (comparable with other steel enterprises)
+ Comparative analysis with the potential of Vietnam Steel Corporation
+ Comprehensive analysis by problem group, target group.
THESIS STRUCTURE
Excluding the Introduction, Conclusion and Reference, the thesis includes three chapters as below:
Chapter 1: Basis theory on competition and product competitiveness
Chapter 2: Assessing the competitiveness of construction steel products of Vietnam Steel Corporation
Chapter 3: Propose solutions to improve competitiveness of construction steel products of Vietnam Steel Corporation.
BASIS THEORY ON COMPETITION AND PRODUCT
BASIS THEORY ON COMPETITION AND COMPETITIVENESS
In the view of political economy research, competition is a complex socio- economic phenomenon with many different approaches Therefore, there are many different concepts about competition
Two American economists P.A Samuelson and W.D Nordhaus in Economics (12th edition) stated that "Competition is the rivalry between companies for achieving customers or markets."
Competition in business, as defined by the Vietnam Encyclopedia, refers to the rivalry among producers, traders, and businessmen within a market economy This competition is primarily influenced by supply and demand dynamics, with the goal of achieving the most advantageous conditions for production, consumption, and market positioning.
Competition, as defined in the Marxist-Leninist political economics textbook, refers to the rivalry and struggle among entities engaged in production and business These entities aim to secure favorable conditions for producing and consuming goods and services, ultimately seeking to maximize their benefits and profits The primary objective of competition is to ensure the survival and growth of the participants involved.
Through the above concepts, the author found that competition includes some basic contents:
- Firstly, competition is rivalry and contests in order to win of participants
The primary aim of competition typically revolves around a specific target, such as a product, project, or customer Nevertheless, the overarching objective of all competitive endeavors is to enhance the advantages for the competing parties involved.
- Thirdly, competition always takes place in a specific environment with common constraints that all participants must comply with such as market, legal regulations, and business practices
- Finally, in the competition process, competing participants can use different competitive tools such as product quality and characteristics, selling price, sales art, sales service and payment tools
In essence, business competition refers to the economic dynamics where entities strive to employ various strategies and tactics to achieve their financial objectives Companies aim to dominate the market, attract customers, and secure the most advantageous production and market conditions, ultimately seeking to maximize their interests.
In the construction steel industry, competition drives steel producers to strive for business success by developing unique advantages To effectively compete, companies must focus on enhancing product quality, reducing prices, and optimizing distribution systems These strategic improvements enable businesses to achieve key objectives such as increasing profits, expanding market share, and strengthening their market position relative to competitors.
The concept of competitiveness emerged in the US during the early 1990s, highlighting that a competitive enterprise excels in delivering high-quality products and services at lower prices than both domestic and international competitors According to the Aldington Report (1985), competitiveness is crucial for ensuring long-term business success and securing stable income for employees and business owners alike.
In 1998, the British Ministry of Commerce and Industry defined business competitiveness as the ability to deliver the right product at the right price and at the right time, emphasizing the importance of meeting customer demands with superior performance and efficiency compared to competitors.
According to Randall, enterprise competitiveness is the ability to gain and maintain market share with a certain level of profit
According to Hoang Dinh Phi (2015), in his lecture on technology and innovation management, a firm's competitiveness is defined by its ability to enhance its capabilities in producing goods or services that can be profitably marketed under normal market conditions.
Competitiveness refers to a company's ability to thrive in a competitive landscape, achieved through strategies like lowering prices, enhancing product quality, and innovating new offerings Key factors influencing a company's competitiveness include its internal resources—such as human capital, financial assets, and technology—market power, approach to competition, adaptability to change, market creation capabilities, and the supportive institutional environment provided by government policies and infrastructure.
The competitiveness of enterprises encompasses various perspectives, but fundamentally, it refers to their ability to establish competitive advantages that lead to superior productivity and quality compared to rivals This capability enables firms to capture significant market share, generate substantial income, and achieve sustainable growth Key elements of enterprise competitiveness include innovation, operational efficiency, and strategic market positioning.
In a market economy, customer demands serve as the benchmark for evaluating the competitiveness of businesses, as these demands not only represent a key objective but also act as a driving force behind production and operations.
The key to attracting customers lies in the inherent strength of the business, which is fundamentally rooted in its intrinsic qualities This strength is reflected in the business's reputation and prestige, serving as a powerful magnet for potential clients.
The competitiveness of enterprises is defined by their ability to compare favorably against rivals within the same market To establish genuine competitive strength, businesses must develop unique advantages that set them apart from competitors, ultimately attracting more customers.
The competitiveness of a business is intrinsically linked to its ability to effectively meet customer needs While a company may excel in certain areas, it often faces challenges in others, making it difficult to fully satisfy customer demands Therefore, identifying and evaluating the strengths and weaknesses of a business is crucial for developing strategies to enhance its competitiveness.
Product competitiveness is a crucial aspect of enterprise competitiveness, focusing on how well a product meets customer needs regarding quality, price, and brand perception A product is deemed competitive when it significantly outperforms similar offerings in the market However, the overall competitiveness of a product is inherently linked to the competitiveness of the enterprise itself; without a strong enterprise foundation, product competitiveness cannot thrive.
CRITERIA FOR EVALUATING COMPETITIVE RESULT OF PRODUCT
The market is a fundamental aspect of the commodity economy, defined variably by economists It is often viewed as a physical space for buying and selling goods, while the American Society for Scientific Management describes it as a combination of forces and conditions that facilitate the transfer of goods and services between buyers and sellers Additionally, some economists emphasize the competitive nature of markets, where buyers and sellers interact to establish prices for goods and services Ultimately, the market can be understood as a dynamic process where buying and selling activities occur within a specific time and space, influencing the quantities and prices of products offered.
In a market economy, the market holds a central role as both a goal for producers and a dynamic environment for the production and exchange of goods and services It serves as a vital platform where buyers, sellers, and intermediaries come together to facilitate trade and transfer business activities.
The process of social production involves four key stages: production, distribution, exchange, and consumption Within this framework, the market plays a crucial role, encompassing both distribution and exchange stages Acting as an essential intermediary, the market bridges the gap between production and consumption, significantly influencing both production processes and social consumption patterns.
This thesis examines the construction steel market by analyzing specific regional markets, including the Northern, Central, and Southern markets, to evaluate key market parameters.
+ Total construction steel products supplied to the market in a period of time, in a certain market area
+ Revenue and growth rate of enterprises in each period for each market
Market share refers to the percentage of a market that a specific company or product controls, indicating its consumption relative to the overall market To increase market share and compete effectively, businesses often implement strategic pricing policies, including necessary discounts, particularly when entering new markets.
Market share is crucial in contemporary marketing and strategic management, as companies with significant market share can dominate their respective markets To achieve this, many businesses invest heavily and may forgo other advantages Nevertheless, acquiring a substantial market share offers numerous benefits to the company, enhancing its competitive edge and overall success.
Market share of enterprises can be measured as follows:
+ Market share = Number of products sold by the enterprise / Total consumption products of the market
+ Market share = Sales of enterprises / Total market sales
The profitability of a business is determined by the difference between its revenue and the costs incurred to generate that revenue Profit serves as the ultimate financial outcome of various activities, including production, business operations, and financial transactions, making it a key indicator for assessing the economic efficiency of a company's activities.
The profit rate serves as a key metric for assessing the efficiency of production and business operations, enabling comparisons across different time frames or among various enterprises A high profitability rate indicates that a company's production and business activities are operating effectively.
In a competitive market economy, profit is the primary concern for businesses as it serves as a key economic indicator of operational efficiency The ability to generate profit is crucial for the survival and growth of enterprises; without sufficient revenue to cover expenses, businesses risk bankruptcy As competition intensifies, the significance of profit becomes even more pronounced, determining the viability of enterprises in the marketplace.
Profit is a crucial factor that influences every aspect of a business, directly impacting its financial health and ability to meet obligations When a business operates efficiently and generates high profits, it strengthens its capacity to fulfill financial commitments and repay debts Conversely, low profitability can hinder a company's ability to manage its financial responsibilities effectively.
Profits play a crucial role in ensuring sustainable growth for businesses By generating undistributed after-tax profits, enterprises can reinvest in their operations, adopt scientific and technological advancements, and upgrade equipment This not only allows for the expansion of business activities but also facilitates easier access to external capital, ultimately contributing to steady market development.
- Profit target is also a basis for assessing human resource capacity, financial capacity, management and operating capacity of enterprises
High profits create opportunities to enhance employee income and improve their quality of life This financial success fosters excitement, stimulates creativity, and maximizes the potential of employees within the organization, serving as a foundation for future development.
Profit and profit ratio of enterprises are determined as follows:
+ Return on equity (ROE) = Profit / Equity
+ Return on Assets (ROA) = Profit / Total assets
BASIC FACTORS OF PRODUCT COMPETITIVENESS
Technology is a crucial element in the operations of manufacturing enterprises, serving as the backbone for meeting business requirements By leveraging advanced equipment and technological capabilities, businesses can foster innovation and enhance their competitive advantage in the market.
The modern advancements in machinery, equipment, and technology significantly enhance business competitiveness by directly influencing production capacity and product quality Businesses equipped with state-of-the-art technology can produce high-quality products, which not only reduces costs but also strengthens their competitive advantage in the market.
The rule of value emphasizes that a product of equal quality with a lower price holds a significant competitive advantage Consequently, businesses must not only enhance product quality but also implement strategies to minimize production, management, selling, and financial costs Selling prices play a crucial role in competition, necessitating that each enterprise develops a tailored pricing strategy to boost consumption and maximize benefits for both the business and its customers over time These selling prices are primarily determined by key expense components.
- Production cost or product import price
Administration costs encompass the general management expenses of a business, which include salaries for management personnel, costs for office supplies, expenses related to labor tools, and depreciation of fixed assets utilized in management activities.
Selling expenses encompass the costs associated with promoting and delivering products for an enterprise These expenses include product advertising, sales commissions, warranty costs, storage fees, packaging, and shipping expenses, all of which contribute to the overall consumption of products by the business.
- Financial expenses are the interest expenses that enterprises have to pay to credit institutions to borrow capital for use in production and business purposes of enterprises
- Expected profit of the enterprise (if any)
The selling price of businesses varies at different stages, and those that can offer lower prices than their competitors enhance their competitiveness and attract more customers.
A distribution system is essential for efficiently connecting production to consumption, ensuring that products reach consumers quickly and effectively It plays a crucial role in the competitiveness of products; a well-structured distribution system enhances market presence and customer access, while a poorly managed system can lead to stagnant inventory and missed market opportunities.
Businesses select specific distribution channels based on their unique characteristics, products, and market dynamics, leveraging these channels as competitive tools to enhance product consumption Today, many enterprises utilize a combination of direct and indirect distribution channels, with a significant portion of sales still generated through indirect channels in the distribution strategies of manufacturing companies.
Direct distribution channels enable businesses to directly advise and supply products to customers, offering the advantage of reduced brokerage costs and better control over the customer portfolio However, this approach can lead to a larger business apparatus and increased sales management costs, especially if products do not sell effectively.
An indirect distribution channel involves businesses selling their products to users through intermediate buyers, such as level 1 and level 2 distributors In this model, goods may change ownership multiple times before reaching the final consumer, with level 1 distributors acting as the direct customers of the enterprises The advantages of this approach include enhanced specialization in production and trade, broader product distribution, reduced capital stagnation, and lower risks However, the drawbacks include a greater distance between manufacturers and consumers, challenges in obtaining customer and market insights, and increased operational costs for businesses.
Figure 1.1 Product distribution system model 1.3.4 Promotion
Promotion is a critical business activity that enhances product visibility and communication with customers Effective promotional strategies not only boost sales but also foster a positive business image, ultimately improving competitiveness and attracting a larger customer base The ability to promote is a key factor in assessing a company's competitiveness; even high-quality products at competitive prices can struggle in the market without effective promotion Therefore, strong promotional capabilities significantly contribute to more favorable sales outcomes for businesses.
Product promotion activities include the following contents:
Direct sales involve personalized, one-on-one communication where sellers assist, advise, and persuade customers to purchase their products This method establishes direct contact between sellers and buyers, distinguishing it from traditional advertising, and utilizes various channels to foster these interactions.
Advertising encompasses various communication methods that indirectly improve a company's product image Businesses utilize brand advertising across multiple media platforms, including television, social networks, newspapers, and promotional publications.
- Promotion is an immediate short-term impact measure to encourage product purchases, activities that encourage customers to buy products by increasing benefits for customers
Public relations involve indirect and non-personal communication strategies employed by businesses to promote their enterprises and products without direct or hidden payments, such as sponsorships These activities aim to foster goodwill and positive public sentiment through initiatives like community support, sponsorship of events, and cultural or sports exchanges.
The financial capacity of enterprises is demonstrated through various criteria, including total assets and profitability; however, the most critical indicator influencing business development is equity Equity serves as a key measure of a company's strength at any given time.
EXTERNAL FACTORS AFFECT PRODUCT COMPETITIVENESS
The business environment significantly influences a company's competitive strategy, with various factors impacting product competitiveness Experts agree that understanding these environmental elements is crucial for enterprises aiming to enhance their market position.
Business activities of enterprises are affected by many factors in the macro environment such as political environment - law, economic environment and natural environment
The political and legal environment significantly influences the consumption market and enterprise input choices, impacting overall competitiveness Globally and regionally, trends such as protectionist policies, war situations, and political instability affect economic conditions Vietnam stands out as a politically stable country, attracting substantial foreign investment opportunities Investors prioritize political factors when making decisions, highlighting the importance of Vietnam's political institutions in fostering economic growth Additionally, a robust legal system and clear policies provide a solid operational framework for businesses, ensuring a fair and competitive market environment.
Vietnam is currently in a development phase, leading to a gradual improvement of its legal system and the implementation of flexible policies tailored to various stages of economic growth However, this evolution has resulted in overlapping legal documents, which pose challenges for businesses operating in the country.
The natural environment, encompassing elements such as mineral resources, geographical location, and climate, significantly influences business operations and competitiveness Factors like natural disasters, storms, and floods can impact the costs associated with raw materials, fuels, and energy, ultimately affecting productivity and product quality Regions rich in natural resources, including valuable minerals like coal, iron, and rare earth elements, along with hydropower potential, offer businesses a competitive edge In contrast, enterprises situated in resource-poor areas or those facing severe weather conditions may struggle to compete effectively, highlighting the critical role of natural conditions in shaping business success.
Vietnam's economic environment, shaped by a regulated market economy, presents both opportunities and challenges for businesses Key factors such as state economic development policies, national growth rates, inflation, and average income levels influence the dynamics of various industries and regions These macroeconomic elements can either foster growth or impose constraints, directly affecting the performance and efficiency of enterprises To thrive in this competitive landscape, businesses must enhance their market competitiveness, which is crucial for success in today's economic climate.
In a competitive market, the strategies and policies of current and potential competitors significantly influence business operations For instance, if competitors lower their prices, it can directly affect the pricing strategy and overall competitiveness of other businesses Competitors can include both local companies and those looking to enter the same product market To thrive in such an environment, businesses must not only develop effective business strategies but also analyze their competitors' approaches to enhance their competitive capabilities Understanding the dynamics of competition is essential for maintaining a strong market position.
To enhance business efficiency and competitiveness, companies must secure quality input resources from a diverse range of suppliers rather than relying on a single source Maintaining relationships with multiple suppliers helps stabilize the quantity and variety of goods while ensuring competitive pricing The quality and cost-effectiveness of input products directly influence a business's ability to attract customers and drive revenue Consequently, avoiding supplier monopolies and fostering strong supplier relationships are crucial for reducing input costs and improving overall market competitiveness.
Customers are the key to a business's success or failure, with many companies emphasizing that "our most valuable asset is our customers." Products are designed to meet customer purchasing needs, and without customers, these products become stagnant and unsellable, ultimately leading to business bankruptcy.
In the context of economic development and fierce competition, customers have become a very important role for each business, which is the cause of the enterprise's existence
Steel product customers primarily consist of construction enterprises and contractors engaged in industrial and civil construction projects These customers can be categorized into two groups: large and small clients, each with distinct goals and product preferences To boost competitiveness, businesses must understand the diverse needs of these customer segments and market superior products that cater to a wide range of requirements.
CHAPTER 2: CURRENT SITUATION OF COMPETITIVENESS OF
OVERVIEW OF VIETNAM STEEL CORPORATION
- English name: VIET NAM STEEL CORPORATION
- Charter capital: 6,780,000,000,000 VND (Six thousand seven hundred and eighty billion Vietnamese dongs)
- Owner's investment capital: VND 6,780,000,000,000 (Six thousand seven hundred and eighty billion Vietnamese dongs)
- Address: 91 Lang Ha, Dong Da, Hanoi
- Representative office: 56 Thu Khoa Huan, District 1, Ho Chi Minh City
History of establishment and development
Vietnam Steel Corporation - CTCP, originally a state-owned entity, was established on April 29, 1995, through Decision No 255/TTg by the Prime Minister This formation resulted from the merger of two state corporations: Vietnam Steel Corporation, which operated under the Ministry of Industry, and the Metal Corporation under the Ministry of Trade The establishment followed the business group model outlined in Decision No 91/TTg issued on March 7, 1994.
Since 2007, the Corporation has adopted a parent-subsidiary operational model, aligning with the Government's initiative to innovate and enhance state-owned enterprises In 2011, the Prime Minister approved the equitization of Steel Corporation Vietnam, leading to its official transition into a joint stock company on October 1, 2011, under the name Vietnam Steel Corporation - CTCP (VNSTEEL).
The Corporation's primary objective is to establish and enhance a multidisciplinary business model focused on the production and trading of steel products Its core activities encompass the extraction of iron ore and coking coal, the production of cast iron, steel, and various metal products, as well as the import and export of steel and metallurgical equipment Additionally, the Corporation engages in technology transfer, technical support, and the design, manufacturing, and installation of equipment for both metallurgy and civil construction Other ventures include operating hotels and restaurants, developing synthetic materials, providing vocational training, conducting scientific and technological research, and fostering investment and economic cooperation through joint ventures with international partners.
On April 29, 1995, the Prime Minister signed Decision No 255/TTg, leading to the establishment of the Vietnam Steel Corporation This new entity was formed by consolidating various enterprises and units within the steel production sector, including General Corporations Vietnam Steel Company operates under the Ministry of Industry and is affiliated with the Metal Corporation under the Ministry of Trade.
November 23, 2006: Establishment of Parent Company - Vietnam Steel Corporation
June 21, 2007: The Prime Minister approved the Organization and Operation Charter of the Parent Company - Vietnam Steel Corporation
July 1, 2007: Officially operated under the model of Parent Company - Vietnam Steel Corporation
On December 31, 2009, the Government Office released Official Letter No 373/TB-VPCP, which communicated the Prime Minister's decision to approve the equitization of the parent company of Vietnam Steel Corporation, with the State retaining over 65% of the charter capital.
On January 15, 2010, the Minister of Industry and Trade announced Decision No 0256/QD-BCT, initiating the equitization process for the parent company, Vietnam Steel Corporation Subsequently, on September 29, 2011, Vietnam Steel Corporation transitioned to operate as a joint stock company.
According to the Business Registration Certificate, Joint Stock Company No
The Vietnam Steel Corporation, established under license 0100100047 by the Department of Planning and Investment of Ha Noi on February 5, 1996, and last amended on January 4, 2017, engages in a diverse range of operations These include the extraction of iron ore and coking coal, production of steel and metallurgical equipment, and logistics services related to steel products and materials The corporation also specializes in the design and construction of steel production facilities and civil projects, alongside providing consultancy for metallurgy and construction Additionally, it trades in industrial gases, operates ports and warehouses, invests in industrial park infrastructure, and engages in real estate development The corporation further offers services in hospitality, finance, labor export, and collaborates with domestic and international partners for investment and technology transfer initiatives, while complying with legal regulations for its various business activities.
The Corporation aims to achieve sustainable development and enhance competitiveness through efficient production and business practices, ultimately maximizing shareholder value, contributing to the state budget, and creating stable employment opportunities for workers.
Business areas: Hanoi, TP Ho Chi Minh City and provinces and cities nationwide
Figure 2.2 Organizational structure of VNSTEEL
Southern Steel Company Limited - VNSTEEL Phu My Flat Steel Company Limited - VNSTEEL
MDC-VNSTEEL Consulting Company Limited VICASA JSC- VNSTEEL JSC Nha Be JSC- VNSTEEL
Center for labor cooperation with foreign countries Ferrous metallurgy
VNSTEEL- Quang Huy Real Estate JSC Đà Nẵng Steel JSC
Binh Tay Steel Grid Joint Stock Company
Southern Investment and Construction JSC
Metallurgical Engineering JSC Nipponvina Co LTD
Sounthen Steel Sheet Company Ltd
Saigon Steel Processing and Service Company Limited Tay Do Steel Ltd
Viet Nhat Mechanical Co., Ltd
Viet Trung Minerals and Metallurgy Company Limited
Nippon Vietnam Steel Pipe Co., Ltd
VSC-Posco Steel Limited Company
Vinausteel Steel Joint Venture Company
Vina Kyoei steel Co., Ltd
International Trade Center joint venture company
Thi Vai International Port Co., Ltd.
Central Metal Joint Stock Company
Thach Khe Iron Joint Stock Company
Thong Nhat flat Steel Joint Stock Company
Thai Nguyen Metallurgy and Electrical JSC
Tan Thanh My Joint Stock Company
Nam Ung Refractory Material JSC
VNSTEEL's organizational structure comprises its parent company and 40 subsidiaries and associated companies By the end of 2017, the parent company had invested a total of VND 7,264,823 million across these 40 enterprises.
Twelve subsidiaries hold a significant stake, contributing 51% or more of the capital, totaling VND 3,150,009 million, which represents 43.4% of the overall investment capital This includes two one-member limited liability companies under the Corporation, with an investment capital of VND 1,800 million.
- 28 associates have dominant contributed capital of less than 51% with the amount of VND 4,114,814 million, accounting for 56.6% of the total investment capital
The Corporation oversees the management of its subsidiaries and associates by utilizing authorized capital representatives within their governance and administrative frameworks This approach ensures effective control of operations, aligned with the capital contribution ratio and the enterprise's charter.
VNSTEEL, a prominent public joint-stock company, operates under the Enterprise Law and securities regulations, with state capital representing 93.93% of its charter capital This significant state ownership necessitates stringent oversight from government agencies, resulting in slower decision-making processes and reduced flexibility in adapting to market changes Consequently, this hampers overall business efficiency and diminishes the effectiveness of state investments.
The corporate governance mechanisms at the parent company have remained largely unchanged, failing to adapt to the demands of a modern market-oriented environment This rigidity in management processes has led to a lack of creativity and unsatisfactory effectiveness VNSTEEL's investment portfolio is overly diverse, with numerous small-scale, duplicated, and low-impact investments While some companies possess significant capital, they have not leveraged their advantages, and several subsidiaries in the commercial sector exhibit limited potential, small scale, and low operational efficiency.
Production and consumption of construction steel production and operation efficiency of the whole Corporations in the period 2015-2017 are as follows:
Table 2.1 Production and Consumption of Construction steel 2015-2017
Figure 2.3 Production and Consumption of VNSTEEL
Between 2015 and 2017, the Corporation's construction steel production experienced a notable increase of 12.4% in 2016, followed by a decline, with only a 1% rise recorded in 2017.
Sales volume of the whole system has recovered with a relatively high growth rate, reaching 16.6% in 2016 and declining in 2017 (down 0.2% in 2017)
In recent years, private enterprises have significantly boosted steel production, leading to a sharp decline in the Vietnam Steel Association's market share for construction steel, which fell from 49% in 2010 to 41.7% in 2015, and further decreased to just 34.5%.
THE CURRENT COMPETITIVENESS OF CONSTRUCTION STEEL
2.2.1 Situation of criteria to evaluate the competitive results of construction steel products of Vietnam Steel Corporation
In a market economy, the market serves as a central hub for producers, facilitating the production and trading of goods It acts as a dynamic environment where buyers, sellers, and intermediaries come together to exchange products and services, driving economic activity and ensuring the flow of goods.
VNSTEEL dominates the construction steel market across Vietnam, with its operations segmented into four primary regions: Northern, Central, Southern, and Export markets Given the heavy industry nature of steel production, strategically locating factories near key markets offers a significant competitive edge by minimizing transportation and logistics expenses.
Table 2.4 Consumption of construction steel by market in 2017
2017 (ton) Northern Central Southern Export Total
Market share is crucial in contemporary marketing and strategic management, as companies with significant market share can dominate their industries To achieve this, many organizations invest heavily and make sacrifices in other areas However, the advantages of acquiring a large market share are substantial, providing numerous benefits to the company.
In recent years, VNSTEEL has experienced a decline in its construction steel market share, as evidenced by data on domestic consumption and market share across various regions, including exports.
Table 2.4 Situation of consumption and market share
Figure 2.4 Situation of consumption and market share
Table 2.5 Situation of consumption and market share in the Northern market
Figure 2.5 Situation of consumption and market share in the Northern market
Table 2.6 Situation of consumption and market share in Central market
Figure 2.6 Situation of consumption and market share in Central market
Table 2.7 Situation of consumption and market share in the Southern market
Figure 2.7 Situation of consumption and market share in the Southern market
Table 2.8 Situation of export and market share
Export Market share Export Market share Export Market share
Figure 2.8 Situation of export and market share 2.2.1.3 Profit
Between 2015 and 2017, VNSTEEL's consolidated financial reports indicated a generally positive trend, with after-tax profits rising from 172 billion VND in 2015 to 834 billion VND in 2016, marking a significant increase of 383.6% However, in 2017, profits declined to 778 billion VND, a decrease of 6.8% compared to the previous year The company's debt-to-total-assets ratio improved from 50.8% in 2015 to 42.4% in 2017, reflecting a prudent use of financial leverage that mitigates risks in a volatile market Additionally, VNSTEEL's return on equity (ROE) has shown gradual improvement, maintaining levels between 10-12% in recent years, although this remains below the industry average and its direct competitors, Hoa Phat and Pomina.
Table 2.9 Business results of the Corporation 2015-2017
Net revenue 17.094.264.208.833 17.849.248.498.866 19.802.820.975.809 Costs of goods sold 15.892.404.579.093 16.317.288.520.243 18.452.002.915.912
Gross profit 1.201.859.629.740 1.531.959.978.623 1.350.818.059.897 Revenue from financing activity 287.178.283.073 308.080.993.596 342.717.907.151 Financial expenses 299.734.745.860 262.308.317.030 251.468.684.133 Selling expenses 279.012.663.396 346.429.914.034 251.931.139.773 Administration expenses 463.678.009.708 499.453.229.102 505.142.338.757
Operating profit 446.612.493.849 731.849.512.053 684.993.804.385 Other income 79.542.009.921 55.506.664.935 28.392.604.156 Other expenses 36.340.384.699 13.163.271.189 1.588.560.961
Other profit 43.201.625.222 42.343.393.746 26.804.043.195 Net profit in associates and joint ventures (201.767.793.115) 173.839.425.262 186.329.800.106 Profit before tax 288.046.325.955 948.032.331.061 898.127.647.686 Coporate income tax 115.459.676.476 113.408.874.863 120.059.990.308
Profit before tax on revenue 1,69% 5,31% 4,54%
Profit after tax on revenue 1,01% 4,68% 3,93%
Net profit on total assets 1,26% 5,66% 5,36%
Source: Financial Statements of Vnsteel
2.2.2 Current situation of basic factors affecting the competitiveness of VNSTEEL’s construction steel products
The production of construction steel globally employs various technologies, with the most prevalent being Blast Furnace (BF) and Electric Arc Furnace (EAF) methods VNSTEEL utilizes both of these technologies to enhance its steel production capabilities.
Iron ore – Iron making by blast furnace (BF) - Steel making (BOF) - Continuious billet casting - Rolling - Construction steel products
+ Electric Arc furnace Technology (EAF):
Steel scrap - Electric Arc furnace - Continuous billet casting - Rolling - Construction steel products
With blast furnace technology, VNSTEEL uses 03 blast furnaces with capacity of 100 m3, 120 m3, 550 m3;
Electric furnace technology VNSTEEL has 6 electric arc furnaces with the following capacity: 2 furnaces 70 tons/hit, 2 furnaces 30 tons/hit 2 furnaces 20 tons/hit
In the domestic steel industry, various manufacturers utilize distinct technologies for production For instance, Hoa Phat employs blast furnace technology with three furnaces of capacities 350 m³, 450 m³, and 700 m³, while Pomina and POSCO SS utilize electric arc furnace technology with capacities of 70 tons and 120 tons per hit, respectively However, many construction steel producers, such as Viet Duc Steel, Vinausteel, VPS, and Viet Ý Steel, rely solely on steel rolling without their own steel-making capabilities Consequently, these manufacturers often purchase billets from those with steel-making technology or resort to importing billets.
The technological process of steel production is shown in the following diagram:
Figure 2.9 Technology process of construction steel production
Table 2.10 Classify production capacity by technology
Steel making capacity (ton / year) Rolling capacity (ton/year)
VNSTEEL's blast furnace technology faces limitations in capacity compared to its competitors, resulting in higher consumption of coking coal and elevated production costs This inefficiency diminishes the competitiveness of its products in the market.
Table 2.11 Comparison of technical indicators of blast furnace technology
Items Unit TISCO VTM Hòa Phát
Number of charges Hit/day - 173 203
Source: VNSTEEL VNSTEEL's electric furnace technology, for electric furnaces with a capacity of
70 tons / hit, these economic and technical criteria of these furnaces are relatively advanced compared to competitors, specifically:
Table 2.12 Compare technical indicators of electric furnace technology
Items Unit SSCV TISCO Pomina
The construction steel industry is characterized by high standardization, leading enterprises to adopt price-leading strategies rather than product differentiation A key factor in achieving competitive advantages is cost optimization, which is primarily influenced by production scale and the implementation of modern technology to enhance energy efficiency Currently, while VNSTEEL utilizes blast furnace technology in some facilities, most of its production relies on Electric Arc Furnace (EAF) technology EAF offers the benefits of lower initial investment costs, ranging from $140 to $200 per ton of capacity, along with a shorter and more flexible production cycle.
The Electric Arc Furnace (EAF) method has a significant drawback, as it relies heavily on scrap metal (55.5%) and electricity (26.2%), which together constitute 80% of production costs Consequently, fluctuations in global scrap prices, foreign exchange rates, and electricity costs can directly impact overall production expenses Additionally, Vietnam's steel industry is still in its early stages, resulting in a limited domestic supply of scrap, necessitating nearly all scrap to be imported.
Regarding labor productivity due to small scale, dispersed, labor productivity in construction steel production of VNSTEEL is still low compared to competitors, specifically:
Table 2.13 Comparison of labor productivity in iron production
No Items Unit TISCO VTM Hòa Phát
Table 2.14 Comparison of labor productivity in billet production
No Items Unit TISCO SSCV BOF
Table 2.15 Comparison of labor productivity in the production of coke
No Items Unit TISCO Hòa Phát
Table 2.16 Comparison of labor productivity in rolling
No Items Unit TISCO SSCV Hòa Phát
Source: VNSTEEL Compared with other manufacturers in the industry, VNSTEEL's labor productivity is lower due to technological factors, specific businesses
Construction steel products are prices controlled by the State so the production and trading of construction steel products must comply with the following legal provisions:
- Price Law No 11/2012 / QH13 June 20, 2012
- Decree No 177/2013 / ND-CP dated November 14, 2013 of the Government detailing and guiding the implementation of a number of articles of the Law on Price
- Decree No 149/2016 / ND-CP dated 11 November 2016 of the Government amending and supplementing a number of articles of Decree No 177/2013 / ND-CP dated November 14, 2013 of the Government
- Circular No 56/2014 / TT-BTC dated April 28, 2014 of the Ministry of Finance guiding the implementation of the Government's Decree No 177/2013 / ND-
CP dated November 14, 2013, detailing and guiding conduct some articles of the Price Law
- Circular No 233/2016 / TT-BTC dated 11 November 2016 of the Ministry of Finance amending and supplementing a number of articles of Circular No 56/2014 / TT-BTC dated April 28, 2014 of the Ministry of Finance
The construction steel prices of Vietnam Steel Corporation (VNSTEEL) are determined by its steel producing and trading companies, with products available across the North, South, and Central regions of Vietnam VNSTEEL offers various brands, including "TISCO" from Thai Nguyen Iron and Steel Joint Stock Company, the trademarked steel from Southern Steel One Member Co., Ltd., and "Vinakyoei Steel" from Vinakyoei Steel Co., Ltd The pricing of these construction steel products is widely accepted by the market and construction companies, varying by brand and regional demand.
In the steel industry, construction steel products are largely standardized, limiting opportunities for differentiation among steel enterprises As a result, companies typically adopt a low-cost competitive strategy, focusing on offering cheaper prices to gain an advantage in the market.
VNSTEEL's construction steel products, represented by the "TISCO" brand, are currently priced higher than competitors, with TISCO steel averaging VND 500,000 to VND 600,000 per ton more in the Northern market Similarly, Steel / V / V is priced VND 200,000 to VND 300,000 per ton above other manufacturers in the Southern market This price difference reflects the brand positioning of TISCO and SSCV / V /, which remains well-accepted in the market.
The gap in market share among steel producers is narrowing, with Hoa Phat Steel leading the Northern market at 34.2% and TISCO Steel holding 14.9% as of 2017 In the Southern market, Pomina Steel ranks as the third-largest producer with a 19.8% market share, while Steel V commands 25.1% The pricing strategies of Hoa Phat and Pomina significantly impact the market; if TISCO and Steel V maintain their current price levels, it will hinder their ability to expand market share and boost sales.
In the competitive construction steel market, North Hoa Phat Steel strategically maintains a price advantage over TISCO to enhance its competitiveness and grow its market share Should TISCO reduce its sales volume, Hoa Phat promptly responds with increased discounts, intensifying the price competition for construction steel products in the Northern market.
Figure 2.10 Situation of selling prices of northern producers
ASSESSING THE COMPETITIVENESS OF CONSTRUCTION STEEL
From 2015 to 2017, VNSTEEL experienced a blend of opportunities and challenges, leading to positive business outcomes characterized by revenue growth and enhanced profitability As a result, worker income has also seen improvement, driven by the Corporation's competitive advantages.
VNSTEEL stands out as the sole manufacturer in the domestic market utilizing both blast furnace (BF) and electric arc furnace (EAF) technologies in steel production This unique capability allows VNSTEEL to capitalize on market opportunities by selecting the most suitable input materials based on fluctuating prices, thereby maximizing benefits and enhancing operational efficiency As a large-scale enterprise with a significant market share in the steel industry, VNSTEEL leverages its production scale to optimize costs, providing a competitive edge against rivals employing aggressive cost strategies to capture market share.
VNSTEEL stands out as the sole manufacturer in the domestic market offering a comprehensive range of construction steel products tailored for both civil and industrial construction needs With significant production and distribution centers located in the North and South, VNSTEEL has established a reputable brand that resonates with customers The high quality of its products has earned the company a strong position in the market, further enhancing customer satisfaction and trust.
VNSTEEL employs a comprehensive distribution system that incorporates both direct and indirect channels to enhance product consumption By utilizing a diverse and adaptable distribution network across the country, VNSTEEL effectively reaches customers swiftly and responds promptly to their needs, thereby leveraging its distribution strategy as a competitive advantage.
VNSTEEL has implemented comprehensive advertising, promotion, and public relations strategies, with a strong emphasis on customer care and the professionalism of its sales staff, earning high praise from clients As a responsible corporate entity, VNSTEEL actively contributes to charitable social programs and government initiatives, such as Program 30A, enhancing its reputation within the community and among customers.
Between 2015 and 2017, VNSTEEL experienced significant financial improvements due to decisive actions taken by its board of directors Key financial ratios, including liquidity and debt ratios relative to total assets and equity, were enhanced This strengthened financial capacity allowed the corporation to streamline its focus by divesting from non-core member companies, reallocating resources to invest in its primary business projects As a result, VNSTEEL's overall performance has seen notable growth.
VNSTEEL effectively manages its subsidiaries and associates through authorized capital representatives, ensuring control over operations in line with capital contributions and corporate charters Despite experiencing a transition in the senior management team and facing challenges during the restructuring process from 2015 to 2017, VNSTEEL's governance activities remained efficient and uninterrupted.
VNSTEEL enhances its management approach by granting greater autonomy to the leadership of its subsidiaries in both planning and execution Regular inspection and supervision activities are carried out to ensure that management decisions are implemented swiftly, adapting to the ever-changing business landscape.
Between 2015 and 2017, VNSTEEL experienced revenue growth, yet its market share in the construction steel sector diminished due to intense competition from other manufacturers Several weaknesses affecting the competitiveness of VNSTEEL's construction steel products have been identified, highlighting the challenges the corporation faces in maintaining its market position.
Since its inception in 1963 with a 100 m³ high blast furnace at TISCO, VNSTEEL has evolved significantly in steel production While some facilities still utilize blast furnace technology (BF), the majority of VNSTEEL's factories and affiliated companies now employ Electric Arc Furnace (EAF) technology for steelmaking.
VNSTEEL's operations are limited in scale and lack the technological advancement seen in other steel plants both nationally and globally As a result, the company experiences low labor productivity and higher production costs compared to its competitors.
Investment projects aimed at expanding production scale, such as the Phase 2 expansion of the Thai Nguyen Iron and Steel Company, encounter numerous challenges These difficulties hinder the Corporation's ability to increase production capacity and reduce production costs effectively.
The Corporation's construction steel products are priced higher than those of its competitors in the industry In a market where steel products are largely standardized, opportunities for differentiation are limited, prompting most enterprises to adopt a low-cost competitive strategy that focuses on offering cheaper prices.
Due to elevated production costs, the Corporation's average selling price for steel products is significantly higher, ranging from 200,000 to 300,000 VND per ton in the Southern market and between 500,000 and 600,000 VND per ton in the Northern market, which may hinder the competitiveness of its steel offerings.
Therefore, in the coming period, VNSTEEL needs to focus on cost-saving solutions, lower product costs to improve product competitiveness, increase operational efficiency
Due to the history of formation and development, VNSTEEL now maintains a lot of independent subsidiaries with separate product and brand systems Therefore, each company operates a separate distribution system
The characteristics of this business structure highlight significant limitations in sales and distribution, including high selling expenses and advertising costs per ton of product These factors restrict market power and competitiveness, as resources are dispersed, leading to internal competition among companies within the system and ultimately diminishing overall business efficiency.
EXTERNAL FACTORS AFFECT PRODUCT COMPETITIVENESS
2.4.1 Factors of macro environment a) Adjustment of the State's economic development policy:
In recent years, the steel industry, once prioritized for rapid growth under a heavy industry development model, has shifted in its significance due to Vietnam's evolving growth strategy and international integration The country's modernization and industrialization strategy, as outlined in the Prime Minister's Decision 1043/QD-TTg dated July 1, 2013, identifies six key industries for development by 2020, which include electronics, agricultural machinery, agro-fishery processing, shipbuilding, environmental and energy-saving technologies, and automobile manufacturing, highlighting a transition away from steel as a central focus.
Vietnam's government is actively promoting investment in various economic sectors, encouraging both foreign direct investment (FDI) and private sector participation in the steel industry As the steel industry continues to develop, it is anticipated that foreign investment will increasingly become a dominant force in shaping the future of Vietnam's steel sector.
In recent years, the Government has been actively promoting the implementation of an economic restructuring master plan, as outlined in Decision No 339/QD-TTg dated February 19, 2013 This plan emphasizes the restructuring of public investment, state-owned enterprises, and the financial and banking systems The growth model aims to shift from extensive growth to intensive growth, focusing on resource efficiency and labor productivity Additionally, Decision No 37/2014/QD-TTg, issued on June 18, 2014, established criteria for classifying state-owned enterprises, indicating that the steel industry does not fall under the category where the State holds a majority stake (over 50%).
As part of its state-owned enterprise restructuring policy, Vietnam Steel Corporation has undergone equitization since 2011, with the government planning to gradually decrease its state capital stake to 57.92% and eventually below 36%.
2020 according to the Prime Minister's Decision No 1232/2017 / QD-TTg of August
17, 2017, approving the list of enterprises with state capital to divest from 2017-2020
The Government has authorized the Ministry of Industry and Trade to oversee the development master plan for the steel industry This plan focuses on the advancement of the steel production and distribution system, targeting completion by 2020, with considerations extending to 2025, as outlined in Decision No 694/QD-BCT issued in January.
The master plan No 145 was replaced on March 31, 2013, leading to significant changes that impact the legal framework of various development projects within the Corporation Consequently, the Corporation must adapt its strategies to align with the new strategic orientation.
The Government has implemented institutional reform policies aimed at enhancing the legal framework, such as the Enterprise Law and Investment Law, to facilitate proactive business operations However, alongside these reforms, there has been an increase in regulatory measures that impose stricter controls on enterprises These include regulations on scrap standards, environmental tax rates, and the conditions for granting mineral exploitation rights, all of which significantly impact the operations of businesses in the steel industry.
Recent enhancements in legal regulations governing the stock market necessitate that joint stock companies, particularly public ones like VNSTEEL, innovate their operational models and governance methods These companies must prioritize transparency in their processes and information disclosure to align with international standards and regulations amid ongoing global integration.
Vietnam has embraced proactive international integration, leading to a rapid and positive integration process Since joining the World Trade Organization (WTO) in 2007, Vietnam has actively participated in numerous regional free trade agreements (FTAs) as an ASEAN member, including "ASEAN + 1" and "ASEAN + 3," along with various bilateral and multilateral FTAs.
2015, ASEAN countries have also formed the AEC economic community and are actively negotiating the RCEP agreement as the regional comprehensive economic cooperation agreement (ASEAN + 6)
Vietnam's steel industry has experienced significant growth, now ranking 19th among the world's top 50 crude steel producers and becoming the largest steel producer in the ASEAN Economic Community (AEC) This region has emerged as Vietnam's primary export market, showcasing the industry's strong competitiveness.
Vietnam's steel industry faces both challenges and opportunities, particularly in attracting investment and expanding export markets The trend of relocating production to Vietnam for export incentives to major economies presents a significant opportunity, especially as companies seek alternatives to Chinese exports However, Vietnamese enterprises must navigate an increase in trade disputes, defense measures, and technical barriers imposed by foreign countries This situation poses a considerable challenge due to a lack of understanding of international trade and limited legal and foreign language proficiency among local businesses.
As the state progressively decreases its intervention in the steel industry, companies will need to adapt by actively developing and operating within a market-driven framework This shift comes amid a challenging operating environment characterized by heightened risks and intense competition.
2.4.2 Factors of the industry environment a) Domestic steel market situation:
- Importing billet and construction steel:
Table 2.23 Import situation of billet and steel products 2015-2017
- Exporting billet and construction steel:
Table 2.24 Export situation of steel products 2015-2017
Between 2010 and 2013, Vietnam's economy experienced a recession with no signs of recovery, as macroeconomic instability persisted and economic institutions failed to stimulate growth The country's GDP growth rate declined significantly from 6.78% in 2010 to 5.03% in 2012 This downturn affected various sectors reliant on steel, including construction, real estate, machinery manufacturing, and shipbuilding, resulting in a notable decrease in steel demand.
From 2013 until now, with drastic policies of the Government, macro economy has gradually stabilized, inflation has been controlled GDP has a good growth
(reached 5.4% in 2013, 5.98% in 2014 and 6.7% in 2015) As a result, steel consumption also increased, especially in 2014-2015
Table 2.25 Apparent construction steel consumption in Vietnam 2015-2017
Source: VSA b) New investment capacity increases, fierce competition:
In recent years, the Vietnamese steel industry has experienced an influx of supply due to significant investments from foreign investors and the private sector, leading to an oversupply of construction steel products.
- In the long steel products, there are the following projects:
+ Fuco: capacity of 1 million tons of billets / year; operating from 2012
+ Pomina: Pomina No 3 factory went into operation in March 2012, increasing the total capacity of Pomina to 1.5 million tons / year
+ Posco SS: capacity of 1 million tons of sections and bars; put into operation in 2015
+ VinaKyoei: 500,000 tons of billet / year and 500,000 tons of rolled steel / year; completed and put into commercial operation from July 2015
Hoa Phat completed its Phase 2 project in 2013, boosting its total billet and steel rolling capacity to 1.0 million tons per year Additionally, the third phase project, which has a capacity of 750,000 tons per year for billets and 600,000 tons per year for rolled steel, began stable operations in the first quarter of 2016.
+ Formosa: capacity of 1.2 million tons / year of square billet and ~ 1.0 million tons / year of long steel products Expected to operate from 6/2017
As of the end of 2017, the total capacity of long steel production in Vietnam according to the design capacity is as follows:
- Blast furnace technology : 4.42 million tons / year
- Electric furnace technology : 10.12 million tons / year
- Steel making (billet) : 14,415,000 tons / year
- Steel rolling (long product) : 13,080,000 tons / year
SOME SOLUTIONS TO IMPROVE THE COMPETITIVENESS
3.1 ORIENTATION TO DEVELOP VNSTEEL'S STEEL PRODUCTS IN THE COMING TIME
VNSTEEL aims to solidify its position as a top steel producer in Vietnam by delivering high-quality steel products that are competitively priced and sustainable The company's corporate strategy focuses on establishing a comprehensive business and production system that integrates the entire value chain, from raw materials to sales and distribution networks This approach aligns with the strategic goals outlined in the 2010 Strategy, emphasizing innovation and adherence to international standards.
In its Strategy to 2020 and vision for 2025, VNSTEEL has reinforced its corporate strategy by adopting a vertical integration approach while simultaneously enhancing strategic alliances.
VNSTEEL's vertical integration strategy enhances its competitive edge by leveraging diverse steel production facilities with varying technological processes This approach not only reduces costs but also maximizes value added through investments in specialized assets that boost efficiency and ensure product quality Additionally, international integration, guided by rules of origin in free trade agreements (FTAs), further supports the company's restructuring towards upstream integration.
Given VNSTEEL's limited resources and the unpredictable nature of the market, particularly in the context of trade liberalization and international integration, the vertical integration strategy presents certain disadvantages and risks To mitigate these risks, it is essential to enhance strategic alliances, which can be achieved through joint ventures that allow for shared investment and operation across various stages of the value chain, thereby distributing risks Additionally, establishing long-term contracts with suppliers can help minimize the impact of price fluctuations.
By 2025, VNSTEEL aims to enhance its competitiveness by solidifying its market position and expanding the share of construction steel products The corporation will implement strategies to boost business efficiency, increase revenue, and lower costs, ultimately leading to higher profits and improved income for employees while ensuring their well-being.
3.2 SOME SOLUTIONS TO IMPROVE THE COMPETITIVENESS OF CONSTRUCTION STEEL PRODUCTS OF VIETNAM STEEL CORPORATION a) Technology solutions:
The goal is to implement suitable technology that enhances operational efficiency and boosts competitiveness, while also allocating sufficient resources to adopt energy-saving technologies This approach aims to lower production costs and promote environmentally friendly practices.
To enhance operational efficiency in iron production using blast furnace (BF) technology, it is essential to optimize the performance of existing blast furnaces Consideration should be given to replacing TISCO's ultra-small blast furnace with more suitable technology Additionally, expediting the implementation of Phase 2 expansion at Thai Nguyen Iron and Steel Company will significantly boost scale and operational effectiveness.
- Steel making (EAF technology and BOF): Apply advanced techniques to improve operating efficiency of plants using basic oxygen furnace (BOF) and electric arc furnace (EAF)
- Steel rolling: Complete the hot-charged technology of all factories with steel making and steel rolling mills
Research is underway on innovative technologies for integrated steel plants that do not rely on coke or blast furnaces, aiming to support investments in facilities with a capacity of 3 million tons per year Additionally, strategies are being developed to lower production costs effectively.
- Strengthen the input management and production management to achieve the goal of reducing costs and economic and technical criteria
- Through technical investments, upgrade investments to improve operational efficiency with existing small-scale factories to increase the competitiveness of production cost and maximize economic performance
- VNSTEEL needs to build a strong and potential distributors system, having the long-term benefits with VNSTEEL’s products and services
To enhance market coverage and effectively meet customer demand, we are focused on establishing regional warehouses in key markets This strategy aims to consolidate product consumption among our member companies In the long run, we envision transforming these warehouses into large regional processing and distribution centers that will offer a diverse range of VNSTEEL products and services.
- Research to form a strategic alliance with major construction contractors to create favorable conditions for VNSTEEL steel supply to projects and construction works
- Strengthen system coordination of trading companies to focus on business activities that directly support the consumption of products for steel producers in VNSTEEL system d) Financial solutions
Between 2018 and 2020, restructuring long-term financial investments emerged as a crucial strategy for VNSTEEL to recover capital from non-core assets and redirect financial resources towards its strategic projects The divestment process of these non-core investments will be executed in stages, influenced by market conditions and the appeal of the investments being liquidated.
VNSTEEL aims to strengthen cost control and enhance profit accumulation from its core business activities, enabling the company to gather financial resources for strategic project investments Additionally, implementing effective human resource solutions is essential for achieving these objectives.
- Strengthen the labor productivity of the system by arranging and re-stabilizing personnel, ensuring the right personnel arrangement and the right job
- Developing reasonable and dynamic personnel policies to attract more talents from other places to serve the Corporation f) Management solutions for the parent company
Since 2015, VNSTEEL has transformed its parent company model to focus on capital investment in subsidiaries and the development of management policies for the entire system This strategic shift allows the parent company to mitigate risks, lower operating costs, and facilitate restructuring within its affiliated production units Initial outcomes indicate that this adjustment has been effective and beneficial for the parent company.
VNSTEEL must promptly revise its governance model, organizational structure, and management mechanisms to ensure they are aligned and comprehensive Establishing a parent company management model that fits its designated functions is essential for creating a streamlined and effective management system Additionally, the integration of Information Technology through the development of ERP software will enhance the management of the entire system.
The steel industry is vital for the industrialization and modernization of nations, and Vietnam recognizes its significance by prioritizing strategies for its development The Vietnamese government has consistently focused on enhancing the steel sector, leading to the establishment of the Vietnam Steel Corporation (VNSTEEL), which was initially a state-owned entity created under Decision No 91.
On April 29, 1995, the Prime Minister issued Decision 255/TTg, merging the Vietnam Steel Corporation from the Ministry of Industry with the Metal Corporation from the Ministry of Trade Over the past 24 years, VNSTEEL has established itself as a leader in Vietnam's steel industry, playing a significant role in the country's industrialization and modernization efforts.