ENTRY STRATEGY INTO VIETNAMESE ENVIRONMENTAL MARKET
A CASE STUDY OF ALTECH ENVIRONMENT PTE LTD
by
Dang Tran Bao Hanh
A research study submitted in partial fulfillment of the requirements for the degree of Master in Business Administration
Examination Committee Dr. Do Ba Khang (Chairman) Dr. Fredric W. Swierczek Dr. Lalit M Johri
Nationality Vietnamese
Previous degree Graduate Diploma in Business Administration SAV Program
Scholarship Donor Government of Switzerland/ Swiss Agency for Development and Cooperation (SAV program)
Asian Institute of Technology
School of Management
Bangkok, Thailand
April, 2000
Acknowledgment
It is a rare pleasure for me to express my profound gratitude and thanks to Dr. Do Ba Khang, advisor to this research, for his valuable guidance, explicit direction, and encouragement throughout this research.
I also want to give my sincere thanks to Dr. Fred and Dr. Johri for serving as members of the examination committee together with their constructive and useful advice.
My acknowledgements are due to Swiss - AIT - Vietnam Management Development Program and Swiss Government who gave me a great chance to participate in MBA study by providing financial support.
My special thanks also go to the management of Altech Pte Ltd Company, especially Mr. Goh Boh Chung, for providing me helpful information and giving critical comments on this research.
My thanks are also extended to the companies and organizations in Vietnam for their help and cooperation during period of my data collection in Vietnam.
Thank all SAV5 members and those who have made my MBA study an unforgettable memory.
To all my lovely friends, I give my sincerest appreciation for their warm encouragement, friendship and help at all times, especially their motivation during my studying time.
I shall forever remain grateful to my beloved parents and my elder brother who want to see a constant progress in my life for their eternal love and enduring encouragement during my whole life.
Abstract
Throughout the world, communities are confronted with evidence of environmental pollution. A growing number of environmental problems are global in scope and face all communities. Developing countries, including Vietnam, therefore have to cope with the dual problems of poverty and the consequences of environmental and natural resource degradation. Development policies and strategies therefore need to be designed and implemented to both alleviate poverty and improve community living standards, and to protect the environment.
Besides that, Vietnam has adopted a policy strategy that encourages and is dependent upon foreign investment. A crucial priority for the development plans of the Vietnamese government to the year 2020 is attracting and utilizing a significant infusion of foreign capital.
Coming form the demand of expansion business overseas, especially to developing countries such as Vietnam, Laos, Myanmar, a case study was undertaken to devise market entry strategy for a Singaporean company to enter the environment sector in Vietnam. The study was conducted to examine the business in environment industry and to determine whether the industry is attractive for foreign companies to enter Vietnamese environmental market. The company situation analysis was carried out to determine the strengths, weaknesses, opportunities and threats for Altech Company. Moreover, the strategic audit withdrawn from company reports has helped further understand the current situation and strategic posture of the company.
Finally, various options for entering the market were analyzed and the choice of most suitable entry strategy was proposed with their advantages and disadvantages as the outcome of this research.
Table of contents
ACKNOWLEDGEMENT ii
ABSTRACT iii
LIST OF FIGURES vi
CHAPTER 1 INTRODUCTION 1
1.1. Background 1 1.2. Problem statement 1 1.3. Objectives 1 1.4. Methodology 2 1.5. Research Framework 3 1.6. Structure of the study 3
CHAPTER 2 LITERATURE REVIEW 4
2.1. Entry strategy 4 2.1.1 Entry strategy 4 2.1.2. Elements of Entry Strategies 4 2.1.3. Mode of Entry: 5 2.1.4. Advantages and Disadvantages of each entry mode 9 2.2 Discussion: Problems and some extensions of the state of market entry theory:. 10 2.2.1 Introduction: 10 2.2.2.Country of Origin-Specific Effects on the Market Entry Decision 10 2.2.2.1. Comparative Advantages 11 2.2.2.2. Cultural 12 2.2.2.3. Organisational and Institutional 12 2.2.2.4. Political-Economic 12 2.2.2.5. Governmental Strategy: 13 2.3. Environmental Technology Industry 14 2.3.1. An era of environmental awareness 14 2.3.2.Overview of environmental technology: 15
CHAPTER 3 EXTERNAL ENVIRONMENT ANALYSIS 19
3.1. Macro environment analysis 19 3.1.1. Economic trends and outlook 19 3.1.2. General remarks on the regulatory environment 22 3.1.3. Major Political Issues affecting the business climate 23 3.2. Environmental industry 25 3.2.1. Background on Vietnam’s environment and its biological resources 25 3.2.2. Environmental issues in Vietnam 26 3.2.3. Environmental management in Vietnam 28 3.2.3.1 Legal framework in environmental management in Vietnam 28 3.2.3.2. Institutional framework in environmental management in Vietnam 29 3.2.3.3. Environmental strategies and plans in Vietnam 29
CHAPTER 4 COMPANY SITUATION ANALYSIS 32
4.1. Company profile 32 4.1.1. History 32 4.1.2. Background of Business: 32 4.1.3. Scope of activities-Product and services: 33 4.2. Strategic audit of Altech Pte Ltd 34 4.2.1. Altech’s vision: 34 4.2.2. Altech’s business strategy: 34 4.2.3. Altech’s corporate objectives: 35 4.3. Performance: 35 4.3.1. Projects performed: 35 4.3.2. Financial data: 37 4.4. Strategic Managers 38 4.5. Main characteristics of the Top management 38 4.6. Altech’s organization structure: 39 4.7. Internal and external environment: strengths, weaknesses, Opportunities and threats (SWOT) analysis 40 4.7.1. Internal environment: 40 4.7.1.1. Strengths of Altech: 40 4.7.1.2. Weaknesses of Altech 41 4.7.2. External Environment 42 4.7.2.1. Opportunities for Altech: 42 4.7.2.2. Threats for Altech: 44 4.7.3. Altech’s competitive advantage 45 4.8. TOWS MATRIX 45
CHAPTER 5 PROFILES OF MAIN COMPETITORS IN VIETNAM 47
5.1. Chi Mei International Technology Co.,Ltd 47 5.1.1. Company background and philosophy: 47 5.1.2. Overview of Chi Mei International Technology Co.,Ltd 48 5.1.3. Overview of Chi Mei Entech Co., ltd 48 5.1.4. International Technology corporation (IT Corp.) 49 5.1.5. Goals: 49 5.1.6. Scopes of services: 50 5.1.7. Business expansion and market entry 51 5.1.8. Market Entry Mode 51 5.2. Salcon Limited: 51 5.2.1. Salcon Pte Ltd: Overview 51 5.2.2. Company background: 52 5.2.3. Scope of activities: 52 5.3. Other construction companies dealing in environmental industry: 56 5.3.1. Construction Company: 56 5.3.1.1. Investment and Construction Development Company (INVESCO) 56 5.3.1.2. Water construction company limited (WACO) 58 5.3.1.3. Viet Chau Construction Co.,ltd 59 5.3.2. Treatment technique company-P&G Engineering Pte Ltd 60
CHAPTER 6 DESIGN OF ACTION PLAN 62
6.1. Phase I : Set up representative office in HoChi Minh city 62 6.1.1.Objectives: 62 6.1.2. Activities: 62 6.1.3. Duration: 62 6.1.4. Human resources: 62 6.1.5. Budget: 63 6.1.6. Advantages: 63 6.1.7. Challenges : 63 6.2. Phase 2: Set up a Business entity 64 6.2.1. Alternative 1: Joint venture with local companies. 64 6.2.2. Alternative 2: Altech’s wholly-owned company 65
REFERENCES 66
LIST OF FIGURES
|Figure | |Description |Page |
| | | | |
|2.1 | |Elements of in International market entry strategies |4 |
|2.2 | |Factors in entry mode decision |13 |
|4.1 | |The projected sales and profit for 2000 to 2005 |43 |
|4.2 | |Chart on projected turnover and profit before tax form 2000-2005 |43 |
Chapter 1
Introduction
1.1. Background
Issues of environmental pollution increase day by day. Many countries are concerned with this matter, and try to sustain the environment from the damage. There is an increasing awareness in both the municipal and industrial sectors on the importance of the water and the environment. Legislation is continually imposed to control the quality of supply water and wastewater that is discharged. Awareness is slowly but surely being placed on contamination of soil/groundwater on land used by industries. This trend will continue in the Asian region until standards are compatible with or exceed present U.S. and European standards.
In the pursuit of ISO 14000 accreditation, increasingly more companies are looking at the responsible discharge of wastes from their manufacturing facilities. In order to minimize the wastage and high costs of disposal, an emerging market in resource and recycling is also made available to companies like Altech Environment.
Altech Environment Pte Ltd is a specialist environmental engineering company in the fields of water and wastewater treatment, contaminated soil/groundwater remediation, air pollution control and resource recovery and recycling. It possesses expertise and experience in water recycling, heavy metals recovery, composting, biogas-from-waste generation etc. which all contribute to waste minimization and resource recovery.
This research work aims to provide some information about environmental market in Vietnam to countries which are attracted by this potential market from the perspective of entry strategy in general; and to give some recommendations on the most suitable entry strategy for Altech Environmental Pte Ltd in particular.
1.2. Problem statement
This research is dealt with these two following problems:
• What are the business environments trends in Vietnam for the environment industry?
• What kind of entry strategy should be adapted by the Altech Environmental Pte Ltd in order to expand its business into Vietnam Environmental market?
1.3. Objectives
The overall goal of this study is to help the Altech Pte Ltd with the most appropriate entry strategy when entering Vietnamese environmental technology market. The study also help to provide the management of Altech Pte Ltd a business environment in Vietnam through:
• the macro environment in Vietnam, involving its politics, legal, culture and economy
• the environmental sectors in Vietnam
• the advantages and disadvantages of various international entry strategies
The study of external environment, competitive advantages of the company, its strengths and weaknesses, opportunities and threats is also conducted to come up with the best alternatives. Then, an action plan for Altech Environmental Pte Ltd is designed.
1.4. Methodology
This research is conducted in 3 stages:
Stage 1: Preliminary study of Vietnamese environmental market
A preliminary study of Vietnamese environmental market was carried out to understand the external and internal environment conditions such as the political, economical, social, business:
• economic trends and outlook
• general remarks on the regulatory environment
• major political issues affecting the business climate
• background on Vietnam’s environment
• environmental issues in Vietnam
• environmental management in Vietnam
The above details were obtained through reports from UNDP, from European commission, the socio-economical statistical (1998-1999) and through interviews with Mr. Tran Nguyen Hien, Vice Director of the Management Department of the Department of Science, Technology and Environment.
Stage 2: Company analysis
A comprehensive study was carried out in Altech Pte Ltd and a strategic audit of the company was conducted. The study included the
• Overview of Company
• Technology capabilities of the company
• Organizational strengths, weaknesses, opportunities and threats along with its competitive advantage and core competencies
The company’s analysis was done based on the information to be collected during personal discussions with the respective company’s Project Directors: Mr. Goh Boh Chung and based on the information of the company’s business plan.
Stage 3: Action plan design
Following company analysis and a study of market environment, the identification and evaluation of various strategic options are suggested to Altech.
1.5. Research Framework
1.6. Structure of the study
Chapter 1: Presents the research background, targeted problems, research methodology, research framework and limitation of the study
Chapter 2: Introduces the literature review of relative previous researches and theories
Chapter 3: External environment analysis
Chapter 4: Internal environment analysis
Chapter 5: Profile of competitors in Vietnam
Chapter 6: Designing action plan for strategic choice
Chapter 2
Literature Review
This literature review consists of three parts. The first part is overview of the theories of entry strategy. The second part is the discussion on some problems and the extension of the theory. Then in the third part, some notion and scope on environmental technology are presented.
2.1. Entry strategy
2.1.1 Entry strategy
Entry strategy for international markets is a comprehensive plan. It sets forth for the objectives, goals, resources, and policies that will guide a company’s international business operations over a future period long enough to achieve sustainable growth in world markets [Root,1994]
2.1.2. Elements of Entry Strategies
Figure 2.1.: Elements of in International market entry strategies
Source: Root, entry strategies for International Markets, 1994
Entry strategy is a composite of several individual product/market plans. Managers need to plan the entry strategy for each product in each foreign market. Once the individual product/market plans are completed, they should be brought together and reconciled to form the corporate international entry strategy.
The constituent product/market entry strategies require decisions on:
1. The choice of a target product/market;
2. The objectives and goals in the target market;
3. The choice of an entry mode to penetrate the target market;
4. The control system to monitor performance in the target market.
The design of a market entry strategy is iterative, with many feedback loops. Evaluation of alternative, for instance, may cause a company to revise target market objectives or goals or even to initiate the search for a new target market. Again, the formulation of the marketing plan may call into question an earlier preference for a particular entry mode. After operations begins, variances in market performance may lead to revisions in any or all of the first four elements, as indicated by arrows emerging form the Control system box. In short, planning for international market entry is a continuing, open-ended process.
2.1.3. Mode of Entry
After deciding which target market to enter, the next step to select an entry mode is a complex decision mainly because of different internal and external variables involved. One important internal variable is the degree of control the company wants to have in the operations in the target market. About external factors, one of the important external variables is the governmental policy towards foreign investments. These internal and external factors are further explained in the rest of the discussion on mode of entry for the firms as discussed below.
This business strategy approach is well explained by Root (1987) who mentions a wide range of external and internal factors influencing the choice of market entry mode (see figure 2.2).
Figure 2.2. Factors in entry mode decision
The most important external factors include the following:
1. Target countries environmental factors (risk factors)- the political, economical and social-cultural characteristics of the target market, including government policies regarding inputs and inward direct investment, geographical distance, economic growth and performance, the countries external relations (including exchange rate influences), cultural distance and political risk.
2. The target country market factors (rate of return factors) – market size, growth prospects, competitive structure, marketing infrastructure, etc.
3. Target countries cost factors (rate of return factors) – the availability, quality and cost of inputs, labour and other cost factors together with economic and technological infrastructure.
4. Home country factors (rate of return factors) – the market, cost of services, competitive and environmental conditions of the home country which will influence the entry mode decision through their impact on firm size, competitiveness and reasons for expansion.
The most important internal factors influencing the choice of foreign market entry mode are the following:
1. Company product/service factors – the extent of the product differentiation, the service content, technology intensity, and the ability to standardize products globally.
2. Company resource/commitment factor – management, capital, technology resources, services and marketing skills, companies over all commitment to international business
From an economist’s perspective, a company can arrange entry into a foreign country in only two ways. First, it can export its product to the target country from a production base outside that country. Second, it can transfer its resources in technology, capital, human skill, and enterprise to the foreign country, where they may be sold directly to users or combined with local resources to manufacture products for sale in local markets. From a management/operations perspective, these two forms of entry can be broken down into several distinctive entry modes that offer different benefits and costs to the international company. The classification of entry modes is as follows [Root, 1994]:
* Export Entry Modes
- Indirect
- Direct agent/distributor
- Direct branch/subsidiary
- Other
* Contractual Entry modes:
- Licensing
- Franchising
- Technical agreement
- Service contracts
- Management contracts
- Construction/turnkey contracts
- Contract manufacture
- Counter-trade arrangements
- Other
* Investment Entry Modes
- Sole venture: new establishment
- Sole venture: acquisition
- Joint venture: new establishment/acquisition
- Other
• Exporting is the most traditional and quickest way to enter a foreign market, which is confined to physical products. Exporting is often identified as a low-cost alternative because it requires no investment in manufacturing operations abroad. However, if it is done effectively and well, exporting needs significant investments in marketing, Port [1994] defined the indirect exporting by using middlemen who are located in the company’s own country and who actually do the exporting. In contrast, direct exporting may use target country middlemen, which leads to a distinction between direct agent/distributor exporting and direct branch/subsidiary exporting. The former depends on target-country middlemen to market the exporter’s product while the latter depends on the company’s own operating units in the target country.
• Contractual entry modes are long-term non-equity associations between an international company and an entity in a foreign target country that involves the transfer of technology or human skills.
• In a licensing arrangements, a company transfers to a foreign entity for a defined period the right to use its industrial property (patents, trademarks, product or process technologies or company name) in return for a royalty or other compensation. Licensing avoids the risks or product or market development by exploiting the experience of firms that have already developed and marketed the product. It also provides a good vehicle for the internationalization of small firms that might not have the capital or the foreign experience to establish a joint venture or a wholly owned subsidiary [Carstaira and Welch, 1983]. It possesses the advantage of reducing firm’s exposure to financial risk as fixed asset investment is minimized due to the utilization of another’s existing investment [Bradley,1991]
• Franchising is form of marketing and distribution in which the franchiser grants individual or small company, the franchisee, the right to do business in a prescribed manner over a certain period, in a specified place [Ayling 1988]. Adams and Mendelsohn (1986) deem franchising at a particular form of licensing of intellectual property rights and view franchising as a marketing method with four distinct characteristics as follows:
1. A contractual relationship in which the franchiser license the franchise to carry out business under a name owned by or associated with the franchiser and in accordance with a business format established by the franchiser.
2. Control by the franchise over the way in which the franchisee carries on the business.
3. Provision of assistance to the franchisee by the franchiser in running the business both prior to commencement and throughout the period of the contract.
4. The franchisee owns his/her business that is a separate entity from that of the franchiser; the franchisee provides and risks his own capital.
• A contract manufacturing arrangements has two major options: a firm can either supply a manufacturer with parts or have the manufacturer assemble them, or it can have the manufacturer fabricate the whole product according to the specifications. The business, however, retains marketing responsibilities [Akhter,1995].
• In management contracting, a firm provides management expertise and technical know-how to another concern or to the government. Although the management team basically acts as consultants, it may also get involved in operational activities [Akhter,1995].
• Under turnkey operations, a firm agrees to complete a project before handing it over to the owner. The responsibilities of the company generally include the design, construction, and operation of the project. Turnkey agreements are usually made with governments who have large public service and construction projects [Akhter,1995].
• A joint venture is formed when two or more firms form a third to carry out productive economic activity [Harrigan,1985]. More specifically, Weston, Chung and Hoag (1990) provide a joint venture’s characteristics:
1. Contribution by partners of money, property, effort, knowledge, skill, or other asset to a common undertaking.
2. Joint property interest in the subject matter of venture.
3. Right of mutual control or management of the enterprise.
4. Expectation of profit, or presence of adventure.
5. Right to share in the profit.
6. Usual limitation of the objective to a single undertaking or ad-hoc enterprise.
• A sole venture is the most extensive form of participation in the global markets, which may be achieved by new establishment or acquisition. Ownership requires the greatest commitment of capital and managerial effort and offers the fullest means of participating in a market. It assumes full responsibility for strategic and operational functions, exclusively assumes the risks, and enjoys the financial rewards.
• Strategic alliances allow firms to share their resources to gain a competitive edge in the marketplace, Unlike joint ventures that require companies to contribute specified amounts of resources to create an independent business organization, strategic alliances promote cooperation between firms without creating a new business organization [Lynch,1990]. The alliances are motivated by a desire of sharing technology, production, and marketing resources. Root (1998) classifies risks associated with alliance agreements on the basis of whether they are fiduciary or environmental. Fiduciary risk refers to the probability that the partner will fail to honor elements of the agreement, Environmental risk is the amount of the firm’s assets that would be directly affected by changes in the political, economic, competitive environment. According to Root, there is a trade-off between the two types of risk. The acquisition of control is often at the expense of increased exposure to environmental risk.
2.1.4. Advantages and Disadvantages of each entry mode
Source: Charles W.L.Hill, Gareth R.Jones, 1999
|Entry mode |Advantages |Disadvantages |
|Exporting |Ability to realize location and experience-curve economies|High transport costs |
| | |Trade barriers |
| | |Problems with local marketing agents |
|Licensing |Low development costs and risks |Inability to realize location and experience-curve |
| | |economies |
| | |Inability to engage in global strategic coordination|
| | |Lack of control over technology |
|Franchising |Low development costs and risks |Inability to engage in global strategic coordination|
| | |Lack of control over quality |
|Joint Ventures |Access to local partner’s knowledge |Inability to engage in global strategic coordination|
| |Shared development costs and risks |Inability to realize location and experience-curve |
| |Political acceptability |economies |
| | |Lack of control over technology |
|Wholly owned |Protection of technology |High costs and risks |
|subsidiaries |Ability to engage in global strategic coordination | |
| |Ability to realize location and experience-curve economies| |
2.2 Discussion: Problems and some extensions of the state of market entry theory
2.2.1 Introduction
Market entry theory is increasingly attracting attention as interest in international business also increases. However, the theory is not yet fully developed. Despite recent contributions to the body of theory, market entry strategy literature is still deficient in a number of areas.
2.2.2.Country of Origin-Specific Effects on the Market Entry Decision
One particularly area which has not been fully investigated in the literature is that of the country-of-origin of the internationalizing firm upon the market entry decision. A particular problem with this area is the difficulty in many cases of determining the ownership of the firm. A related issue is that even when ownership resides in a particular country, it is not necessarily the case that the country of ownership determines the cultural and organizational factors that shape country-of-origin effects. For example, a company that has been established for a significant period is taken over by a firm from another country. Establishing at what point the firm will act like a firm from the overseas country can only be properly achieved through close attention to firm-specific conditions. An additional point to raise is the danger of cultural stereotyping. For example, it is possible to gain an impression of the ways those firms from, for example, Japan, will behave and then assume that all firms will exhibit the same characteristics. In reality, research has shown that market-specific and industry-specific conditions have significant impact upon market entry decisions. Nevertheless, it is apparent that this form of analysis does have some valency.
In discussing country of origin-specific effects on the market entry decision, it is convenient to group comments into the following five areas:
• comparative advantages;
• cultural issues;
• organizational and institutional issues;
• political-economic issues;
• Governmental strategy.
Each of these will now be dealt with individually
2.2.2.1. Comparative Advantages
Countries are endowed with different levels and types of inputs. These may be in the form of natural resources such as minerals, fishing grounds and timber or in labour or capital. They may also be in the form of created assets such as intellectual property or a well-developed infrastructure. Although in some cases it may be more sensible to speak in terms of regions and even cross-border regions, it is nevertheless apparent that countries possess unique configurations of such inputs. According to Porter, the nature of such a configuration is an essential part of the forces that determine the comparative advantages that a state possesses. It helps to determine, for example, those industries in which firms of that country are likely to be particularly good or bad and it can influence the ways in which firms do business. For example, Korea had a significant labor pool of hard working, well-educated individuals prepared to sacrifice their immediate interests for long-term goals and work for low wage levels. It is not surprising, therefore, that Korean firm were able to prosper in light engineering industries in which labor costs were the determining feature. Consequently and, of course, not by accident, Korean firms could successfully export their goods while firms from countries without equivalent labor inputs would have to look to joint ventures or firm acquisition in order to be able to compete effectively.
In many cases, the boundaries of resources providing advantages of these sorts will not neatly coincide with national or political boundaries. Cross-border regions can give rise to areas known as "growth triangles," which have been demonstrated as providing effective promotion of economic development in, especially, East Asia. This idea is now being deliberately pursued as a means of stimulating industrialization in suitable regions. Market entry strategy in such situations is, consequently, considerably modified by the need to use the resources that are available most effectively.
2.2.2.2. Cultural
Although it is notoriously difficult to provide a satisfactory definition for culture or arrive at an understanding of what it means, there can be little doubt that it has been considered a relevant factor in explaining business behavior. Hofstede’s seminal work divided individuals from different countries in terms of such dimensions as uncertainty avoidance and power distance. Subsequent efforts have sought to demonstrate that such cultural differences are reflected in terms of firm level behavior. As examples of this, cultures that are thought to exhibit low levels of tolerance to uncertainty would therefore be expected to adopt market entry strategies that emphasize control of the overseas unit. Another strand of the literature has focussed on areas such as religion and philosophy to try to explain variations in firm structure, the structuring of relationships within firms and, consequently, the impact these variations have upon strategy and strategy-making processes. There is a danger here that selective use of sources can be used to adduce a range of different arguments. However, there does seem to be genuine reason to believe that cultural factors will cause firms to behave differently.
2.2.2.3. Organisational and Institutional
Whitley has described how the institutional and structural characteristics of a country impact upon the nature of business units and how, in the case of some East Asian states, this can lead to significant differences between them. An example of how this can be relevant here is in the case of firms’ ownership structure. In Britain, for example, many firms are effectively controlled by large, institutional shareholders, who see their responsibility as ensuring that their investment is handled primarily in terms of the returns that can quickly be made from it. They have, therefore, an incentive to influence management to behave according to a short-term timescale. Meanwhile, the board level ownership of German firms is subject to a rather greater level of responsibility as to the future of the firm and, so, has incentives to ensure profitable, long-term security. Similarly, those Korean firms that remain under strict family ownership may adopt strategies exactly as owners’ demand and, as has now become well known, in the case of Korea that generally has meant long-term market share. While the ownership structure of chaebol may well be required to change as a result of recently imposed IMF conditionally, it is still apparent that there is more than one viable model of capitalism. This diversity is reflected in the goals that are desired to be achieved and this, in turn, structures the strategies that are chosen to enact those goals.
2.2.2.4. Political-Economic
Relations between governments of different states of course vary. States, which maintain powerful positions vis-à-vis, other states generally wish to pursue policies, which retain that power differential. After all, "international political economy is the study of the inequality or asymmetry between nations and peoples and collective learning and positioning patterns that preserve or change this asymmetry." Relations between the USA and states of NorthEast Asia - notably Korea, Japan and Taiwan - have been primarily conditioned by the American perception of a strategic imperative in the region. In another way, the relations existing between Britain and countries around the world are determined to a large extent by whether those countries are part of the Commonwealth.
Such relations can have an important impact on market entry strategy. In Korea, research has shown, for example, that American firms are significantly more likely to be older and larger than British firms and to operate in a different range of industries. Not only does the length of time influence the amount of specific market knowledge gained and, hence, the range of market entry decisions that are feasible, it is also significant in Korea in particular because the number of industries in which foreign participation has been permitted has been strictly controlled and, although increasing, remains subject to regulation.
American firms enjoy some advantages in Korea with respect to firms from other countries and these result mostly from:
• the greater level of pressure that can be applied by US administrations compared to others;
• the long-term presence of US troops in the country and their desire to be serviced by firms providing US goods and services.
American firms have been presented with market entry opportunities that have not been available to their rivals from many other countries. A similar reason also helps explain the prevalence of Japanese-US partnerships in the semi-conductor sector as compared to those involving firms from other places. Currently, the dominant idea in the world economic order supports the increasing prevalence of overseas trade and investment conducted under a variety of free market economics. Simultaneously, there exists almost as an undercurrent a threat of the increasing difficulty for outsiders of being successful in regional trade blocs, such as the EU and NAFTA. States will, therefore, tend to act to promote freedom of action for their firms in overseas markets while looking to restrict that freedom in domestic markets. While this is unlikely to appear as a simple dichotomy, there is certainly a tension involved. In such a situation, the more power that a firm has, deriving both from itself and from its government, the more it can influence and shape the overseas environment to allow it the freedom of action it might desire to possess. This is a variation of an argument used against multinational corporations in what were then called Third World countries. Those corporations still wield considerable influence: after all, the ability to provide employment, especially when combined with the possibility of raising levels of skills and technology in otherwise unfavoured areas, has been considered sufficiently appealing as to inspire governments to provide huge financial incentives to attract them.
2.2.2.5. Governmental Strategy
For firms from East Asian states in particular, the government-business relationship has been of considerable importance in shaping not only the strategies that they have followed but also the ways in which they have been able to do business. The relevance of this relationship persists in many aspects of market entry strategy in the ASEAN region. A particular example of this is the attempt of the government of Singapore to create an external economy in countries such as Vietnam, China and India in order to compensate for the small size of the domestic market and to provide a low cost offshore manufacturing base, as well as investing capital in long-term growth projects that help to knit together the disparate elements of the region. This policy has featured extensive investment in industrial parks and economic zones in places such as Suzhou and Ningbo in China and Bangalore in India. Analysis of 822 cases of investment in Vietnam during 1995-6 indicates that projects from Singapore were significantly larger than those from other countries and also that contracts were likely to be significantly longer than those from other Asian countries, which perhaps indicates that long-term planning is more prevalent in those cases.
Investment in parks and zones of this kind constitutes an advantage to Singaporean firms and those able to enjoy cultural affinity with them in that the costs of doing business are reduced when a stable and psychically cognate infrastructure has already been put in place. Consequently, such firms are enabled to invest in production facilities, for example, while rivals from firms from other countries might only be able to export and, hence, unable to exploit the competitive advantages of low wage costs afforded to investors in the country. Another example might be the case of Taiwan, where the government has taken steps to upgrade the competitiveness of the economy and provide positive externalities through a combination of support for the IT industry and ensuring that all sectors of society benefit from it. Taiwanese firms have, therefore, been able to perform international operations through IT with a facility that firms from competing countries cannot afford. This tends to widen the range of options available to such firms. Table 5 illustrates the significant variations recorded in Vietnam for market entry choice with country-of-origin of the firm. According to the literature, selecting a joint venture rather than 100% foreign owned firm, assuming that meaningful choice is possible, entails choosing a mode which offers less control and more uncertainty. It would be expected that this choice would be more popular, therefore, amongst firms which are more familiar with specific local conditions or which generally have a more sanguine attitude towards doing business in the overseas market. The results reveal that, among other things, joint ventures are more frequent among Vietnam’s erstwhile communist allies, American, and Singaporean firms, which have developed their knowledge of international business. They are less frequent in the case of geographically distant European countries and in the comparative newcomers of Korea and Taiwan.
In short, it is considered that an extended analysis of the impact of country-of-origin effects on the market entry decision would constitute a useful addition to the literature.
2.3. Environmental Technology Industry
2.3.1. An era of environmental awareness
In the 1960s, a broad awareness of environmental pollution problems developed among the general public. Many people came to realize the value and importance of protecting environmental quality. Clean air and clean water were worth rallying about, and public demonstrations were held. People wanted streams and lakes that could be used for swimming and fishing, for safe drinking water supplies as well.
The word ecosystem and biosphere became popular buzzwords, and newspaper articles about local pollution problems become more common. Educational programs that focused on environmental issues were developed for grade school through the university level and grew in popularity.
In addition to stopping air and water pollution, solving problems related to garbage disposal, radiation, noise, pesticides, and wildlife preservation became important in the modern quest for environmental quality. Although infectious diseases like typhoid and cholera had virtually disappeared in the United States, people became aware of other types of problems caused by human and ecosystem exposure to industrial toxic chemical substances.
The emergence of an environmental awareness on the part of the general public in the 1960s was apparently more than just a passing fad. It was a genuine concern that served to focus the attention of politicians, lawmakers, and governmental agencies on the need for an appropriate legal and regulatory framework for environmental quality control.
Unfortunately, the objectives of environmental protection often seem to be at odds with those of industrial growth and economic “progress”. In the long run, however, the “external diseconomies” caused by environmental degradation will be far greater than the costs of regulation and control. This simply means that if our environment is damaged now in the interest of maximizing profits, we will have to “pay the piper” in the future, either in the form of expensive clean-up operations and increased health problems and medical costs, or in a generally lower quality of life with respect to our natural surroundings.
Although there is controversy on just what steps to take and how much to spend for environmental protection, most people agree that the problems cannot be ignored altogether. A certain amount of governmental regulation will always be necessary. Eventually, a balance will be reached in which environment, energy, and social problems will be solved without preempting or overshadowing the others. Meanwhile, there will be a need for technical personnel at all levels of training and education to plan, design, build, and operate environmental control systems.
2.3.2.Overview of environmental technology
Environmental technology involves the application of engineering principles to the planning, design, construction, and operations of systems for:
• Drinking water treatment and distribution
• Sewage disposal and water pollution control
• Storm water drainage and control
• Solid and hazardous waste disposal
• Air and noise pollution control
• General community sanitation
The structure and facilities that serve these functions, including pipelines, pumping stations, treatment plants, and waste disposal sites, comprise a major portion of society’s infrastructure-the public and private works that allow humanities to thrive and function productively.
The practice of environmental technology encompasses two fundamental objectives:
• Public Health Protection-to help prevent the transmission of diseases among human beings.
• Environmental Health Protection-to preserve the quality of our natural surroundings, including water, land, air, vegetation, and wildlife.
Actually, there is considerable overlap of these two objectives because of relationship between the quality of environmental conditions and the health and well being of the general population. In fact, the terms public health and environmental health are often used synonymously.
Environmental technology is usually considered to be part of the civil engineering profession, which has traditionally be called upon to plan, design, build, and operate the facilities required for public and environmental health protection. This particular specialty field within civil engineering is also called:
• Sanitary engineering
• Public health engineering
• Pollution control engineering
• Environmental health engineering
Whatever the profession is called, a knowledgeable and skilled team of engineers, technologists, and technician is needed to accomplish its fundamental objectives.
Environmental technology can be characterized as an interdisciplinary field because it encompasses several different technical subjects. In addition to such traditional civil engineering topics as hydraulics and hydrology, these include biology ecology, geology, chemistry, as well as others. This variety makes the field an interesting and challenging one.
To present overview of such a broad subject, we can consider a fictious project involving the subdivision and development of a tract of land into a “newtown”, which will include residential, commercial, and industrial centers. Whether the “project owner” is a governmental agency or a private developer, a wide spectrum of environmental problems will have to be considered and solved before the construction of the new community can begin (in this paper we limit just to the water/waste water pollution part). Usually the project owner retains the services of an independent environmental consulting firm to address these problems.
WATER SUPPLY:
One of the first problems the project developers and consultants must consider is the provision of a potable water supply one that is clean, wholesome, safe to drink, and available in adequate quantities to meet the anticipated demand in the new community. Some of the questions that must be answered are as follows:
1. Is there an existing public water system nearby, with the capacity to connect with and serve the development? If not,
2. Is it best to build a new centralized treatment and distribution system for the whole community, or would it be better to use individual well supplies? If a centralized treatment is selected,
3. What type of water treatment processes will be required to meet federal and state drinking water standards? (Water form a river or a lake usually requires more extensive treatment than groundwater does, to remove suspended particles and bacteria.) Once the source and treatment processes are selected,
4. What would be the optimum hydraulic design of the storage, pumping, and distribution network to ensure that sufficient quantities of water can be delivered to consumers at adequate pressures?
SEWAGE DISPOSAL AND WATER POLLUTION CONTROL
When running water is delivered into individual homes and businesses, there is an obvious need to provide for the disposal of the used water or sewage.
Sewage carries human wastes, wash water, and dishwater, as well as a variety of chemicals if it comes from an industrial or commercial area. It also carried microorganisms that may cause disease and organic material that can damage lakes and streams as it decomposes.
It will be necessary to provide the new community with a means for safely disposing of the sewage, to prevent water pollution and to protect public and environmental health. Some of the technical questions that will have to be addressed include the following:
1. Is there a nearby municipal sewerage system with the capacity to handle the additional flow from the new community? If not,
2. Are the local geologic conditions suitable for on-site subsurface disposal of the waste-water (usually “septic system”), or is it necessary to provide a centralized sewage treatment plant for a new community and to discharge the treated sewage to a nearby stream? If treatment and surface discharge are required,
3. What is the required degree or level of waste water treatment to prevent water pollution? Will a “secondary” treatment level, which removes al least 85 percent of the pollutants, be adequate? Or will some form of advanced treatment be required to meet federal and state discharge standards and stream quality criteria? (Some advanced treatment facilities can remove more than 99 percent of the pollutants.)
4. Is it possible to use some type of land disposal of the treated sewage, such as spray irrigation, instead of discharging the flow into the stream?
5. What methods will be used to treat and dispose of the sludge or sewage solids, than are removed form the wastewater?
6. What is the optimum level and hydraulic design of a sewage collection system that will convey the wastewater to the central treatment facility, with a minimum need for pumping?
SOLID AND HAZARDOUS WASTE MANAGEMENT
The development of a new community (or growth of an existing community) will certainly lead to the generation of more refuse and industrial waste materials. Ordinarily, the collection and disposal of solid wastes is a responsibility of the local municipality. However, some of the waste form the industrial sources may be particularly dangerous, requiring special handling and disposal methods.
Hazardous wastes, such as poisonous or combustible chemicals form industrial processes, must receive special attention with respect to collection, transport, treatment, and final disposal. This is particularly necessary to protect the quality of groundwater, which is the source of water supply for about 100 million people in the United States. In recent years, an increasing number of water supply wells have been found to be contaminated with synthetic organic chemicals, many of which are thought to cause cancer and other illnesses in humans. Improper disposal of these harzadous materials, usually by illegal burial in the ground, is the cause of the contamination.
Chapter 3
External environment analysis
3.1. Macro environment analysis
3.1.1. Economic trends and outlook
Vietnam, a nation of approximately 77 million people, has been engaged in a process of market reform since 1986-1987. Known in Vietnamese as “Doi Moi” (“renewal”), the process is aimed at restructuring Vietnam’s regulatory, legal, administrative, business, investment, and foreign trade apparatus and policies to produce a market economy “with social characteristics” under state management.
The reforms have achieved impressive results. Vietnam’s economic growth has averaged 8-9 percent a year for the past five years. In 1996, it grew 9.3 percent. Industry and construction are growing at 15-16 percent per year. Foreign investment-which stood at zero just a few years ago, now exceeds $28 billion in commitments and around $8 billion in actual inflow.
Vietnam’s foreign trade levels are also growing quickly. In 1996 exports ($7.3 billion) expanded 40 percent over 1995 ($5.2 billion), while 1996 imports ($11.1 billion) increased 36 percent over 1995 figures ($8.e billion). As a result, Vietnam had a trade deficit of nearly $4 billion, or 17-18 percent of GDP ($22-23 billion). Economic analysis agrees that Vietnam cannot sustain a trade deficit of this magnitude over the medium term.
Vietnam exports significant amounts of coal, textiles, footwear, coffee, rice, seafood, and oil. Bilateral trade with United States has grown rapidly and now exceeds $1billion a year. Overseas Development Assistance (ODA) also plays an important role in Vietnam, with capital commitments by the end of 1996 totaling around $8.4 billion per year and actual cash disbursements of $2.7 billion.
With per capita incomes in the range of $300 per year (several times higher in “purchasing power parity” terms), Vietnam still is an extremely poor country. Although urban residents may enjoy incomes two-to three times higher than average, three-quarters of Vietnam’s population is engaged in subsistence farming (mostly wet rice production) and the overwhelming majority of Vietnamese live in villages, not cities.
The agricultural sector is contributing an ever-shrinking proportion of national economic output, however, amounting to 27 percent for 1996. Industry now contributes 31 percent of the economic pie, while services account for 42 percent. Agricultural output is growing 4-5 percent yearly. Rural schools, hospitals, and roads are in pure condition. In general, rural infrastructure continues to lag behind urban infrastructure, primarily because so much new investment has been directly toward the cities. Continued government quotas on rice exports, strict regulation of the internal rice trade, and limiting rice traders to non-competitive state-owned firms all keep farm incomes and rural investment rate much lower than free market conditions would warrant. These policies also decrease export earnings and reduce incentives to increase rice production.
Vietnam’s development strategy is based on heavy use of foreign investment. To keep our GDP growth rates in the 9-10 percent range for the five-year period 1996-2000, the government calculates that Vietnam’s economy will need to attract $42 billion of investment. Fully half that figure ($21billion) must come form foreign sources, the reckons, two-thirds ($14billion) from Foreign Direct Investment (FDI) and one-third ($7billion) form ODA. The remaining $21 billion will come form domestic sources.
To achieve its investment goals, Vietnam will have to continue to improve conditions for foreign and domestic investors and boost the domestic savings rate. Now hovering around 30-40 percent attained in other East Asian countries (such as China, Taiwan, Malaysia, South Korea) during significant periods of their development. Increasing the savings rate poses a formidable challenge for their development, because the financial system is weak and under developed and because popular faith in local banks is weak to nil. The entire country has only 46,000 checking accounts.
Most of Vietnam’s growth and foreign investment is concentrated in Hanoi and Ho Chi Minh City (HCMC), in the provinces directly too the north of HCMC and, to much lesser extent, in the area around Danang. Hanoi, the capital, is undergoing a significant boom, but HCMC still is the investor’s lodestar and continues to attract the lion’s share of investors and economic activity. One big reason for this is that HCMC residents have far more experience than their northern cousins dealing with Westerners and with Western-style business practices and market concepts. Vietnam’s most successful Export Processing Zone (EPZ), the Tan Thuan EPZ, is located in HCMC, and many of the other functioning or planned EPZ’s or Industrial Zone (IZ’s) are in HCMC or close by. Urban planners are worried that HCMC’s growth, congestion, and overcrowding may impede its further development, They have proposed ambitious “satellite city” development schemes to address this problem. Of these, the giant Saigon South project is the most noteworthy.
An important growth area in Vietnam’s economy is services (especially tourism, hotels, restaurants, construction, informatics, and telecommunications); mining and manufacturing; oil gas exploration; water supply, waste disposal, and power generation.
Since a market economy cannot flourish without a rational, predictable, and secure legal environment, one crucial area prioritized for reform in Vietnam is the law and legal environment. The country has passed many new laws and law codes in recent years, For instance, after years of discussion, Vietnam promulgated a new civil Code in 1996, which regulates everything from inheritance to intellectual property and mortgages. The National assembly has just approved the country’s first Commercial Code. The new laws have increased transparency and measurably improved the business environment. The country also hopes soon to promulgate an entirely new Companies Law that will, among other things, set the rules for establishing and operating private businesses for many years to come. Also, the government announced changes in the Foreign Investment and Tax laws in 1996.
Administrative reform also is progressing in Vietnam. This ambitious program includes reforming the government’s regulatory, personnel, and financial management apparatus to make it more responsive to the people’s needs. This process includes such diverse aspects as reducing the size of the bureaucracy; rationalizing and reorganizing the administrative structure; increasing efficiency of government offices by training civil servants and eliminating corruption; raising salaries; “streamlining” procedures to license foreign investment; and establishing foreign representatives offices.
The government plays a significant role in the economy, Vietnam’s Constitution calls for state-management of the economy and the Communist Party of Vietnam believes the state sector should continue indefinitely as Vietnam’s “leading” economic sector. State-owned enterprises (SOEs) probably account for 40-45 percent of industrial output and absorb 60-65 percent of available credit. Vietnam’s four state-owned commercial banks account for 80 percent of lending. Almost all joint venture deals involving foreign firms have been struck with SOEs, to the exclusion of local private firms.
Government regulatory agencies, particularly the Ministry of Planning and Investment (MPI) and the Prime Minister’s office, play an all-important role in licensing foreign investment. With government participation in the economy so extensive and intrusive, conflict of interest abounds and many private and foreign firms find themselves in the unfavorable position of competing with their regulators. Although MPI makes the final decision on most investments, local authorities wield considerable influence. The 1996 changes in the Foreign Direct Investment Law delegates more control to local authorities, No foreign investment goes smoothly without full support form local authorities.
With continued strong inflows of foreign financing. Foreign Direct Investment (FDI) and ODA, the capital amount has offset the deficit in the current account and has allowed the balance of payments to maintain an overall positive position. Vietnam's official foreign currency reserves are fairly strong, equivalent to 8-10 week of exports. The government believes the current account deficit trend can be curtailed, and many even contend that a large proportion of imports actually is capital equipment, which soon will be producing export goods.
International Financial Institutions (such as World Bank and the International Monetary Fund) note that a worrisome amount of imports may actually be consumption goods bought on credit. In addition, the IMF has estimated that as much as 70 percent of Foreign Direct Investment actually is debt, not equity. In itself, this is not overly troubling. Vietnam’s debt service payments are estimated at 16 percent of exports, well within a manageable range.
By joining the ASEAN Free Trade Area (AFTA) in 1995, Vietnam committed itself to reducing tariffs along with other AFTA member countries (Malaysia, Indonesia, Brunei, Singapore, Thailand and Philippines) to 0-5 percent by 2006, and is taking steps to join the World Trade Organization (WTO) and the Asia-Pacific economic Cooperation Forum (APEC). The country is engaged in negotiations with the United States to conclude a comprehensive bilateral trade agreement that will include provisions on tariffs, intellectual property, services, investment, and trading rules, and which will eventually lead to Most-Favored Nation (MFN) status for Vietnam. Vietnamese officials have stated many times that the country is committed to adopting international trading and business practices and to integrating itself into the world economy.
Nevertheless, Vietnam still has significant tariff and non-tariff barriers to trade. Tariffs are relatively high and are based on imputed than actual cost. “Special consumption taxes” are applied to imported cars, alcoholic beverages, and tobacco. The government runs a complex, highly non-transparent system of trade licensing which applies to all imports, as well as, to exports of rice. No foreigners may engage directly in trade; only a relatively small number of Vietnamese firms (most of the state-owned) have this right. Licenses are required yearly for each commodity to be exported, although the permits required in the past for each shipment have been dropped. In addition, certain commodities (petroleum products, sugar, fertilizer, cement, and steel) are subjected to special import surcharges, which the government says it needs to “regulate” these markets. Around 25 percent of the state budget come directly form import taxes.
Vietnam’s labor force is overwhelmingly young (more than half the population is under 25 years old), relatively well educated (the literacy rate is 80-90 percent), and willing to work for low wages (the minimum wage is $40-45 per month). Despite relatively high literacy, foreign employers often note the work force requires extensive training. Few workers in Vietnam, government included, has much experience working in a Western business environment. Many new recruits for factory jobs come straight form the countryside. Vietnamese workers are eager to learn and perform well in many work situations. The country has experienced a number of strikes at foreign-run plants in recent years, but this seems to be the result more of foreign management misconduct than of a fractious labor union situation.
Vietnamese infrastructure is improving slowly but still is deficient and, in many cases, dilapidated and obsolete. Specifically, Vietnam’s roads, bridges, railroads, airports, power generation plants, shipping, seaports, telecommunications, schools, hospitals, and government buildings are in poor condition or need to be increased substantially. With help form bilateral and multilateral donors, Vietnam has made improving its infrastructure a major economic priority.
3.1.2. General remarks on the regulatory environment
This section is devoted to a brief review of the general trends in the Vietnamese legal and regulatory environment.
• There has been a very large flow of new legal and regulatory decisions, reflecting the desire to accompany the economic reform process, but resulting in increased confusion and seriously compromising the initial objective.
More than 4000 legal or regulatory documents were issued in 1997, at various level of the administration. It appears that no central administrative body is fully able to co-ordinate the different sources of regulations, and it is only very recently that new rules explicitly include the list of old rules cancelled or modified, especially when moving away from the Central Administration to local or technical entities.
Vietnamese authorities appear to look for balance between the regulatory environment required for the economic transition towards market-oriented mechanisms, and the political objective of keeping a significant state control over the economy. Hence the temptation too define precisely what is allowed, with the accepted assumption that everything which is not specified is forbidden, which in principle should allow a more extensive control. However, the multiplication and un-coordination of texts create a much more opaque environment, with heightened uncertainty for economic agents and a built-in rigidity in their ability to adapt to changing market conditions; it also induces increases corruption and finally weakens the effective control on economic changes.
• Related to the multiplication of rules, instability has persisted.
The perceived need to organize the legal framework around the precise definition of allowed activities in a context of rapidly changing domestic and international economic environment inevitably leads to frequent changes in texts related to the same subject or area. Trade and FDI regulations give a very clear example, including barriers to trade and financial or administrative conditions for foreign investment projects. There are also frequent public announcements of regulatory changes, including through laws adopted by the National Assembly, which are not allowed by the requested decrees, creating lengthened periods of uncertainty. It should be stressed again that, as was stated in the previous reports, this instability of rules is considered by European companies operating in Vietnam as a greater obstacle than the rules themselves, even when the latter are considered as restrictive.
• The effective application of the rules remains uncertain
Partly related to the multiplication of regulatory texts, the effective application of rules remains a significant obstacle to better trade and investment conditions. Difference in treatment between foreign and domestic entities (as for key issues like guarantees, access to trade license, etc.) can create difficult situations, especially when the domestic entity is state owned (at a central or local level of the administration). Both the lack of specific administrative jurisdiction and the extensive regulatory powers of the administration make it almost hopeless for a foreign partner to have its case examined by a judiciary body.
In that respect, it is revealing that, following a negative perception of the relations with the administration as noted in the 1996 and 1997 reports, the 1998 survey of European companies operating in Vietnam shows only 20% of respondents considering that there has been any significant improvement, and 80% declaring that it is either unchanged or even worse. On the more detailed question of industrial property rights but this reflects the overall qualitative appreciation of the regulatory framework. European companies declare that, notwithstanding an improvement in the regulation, the effective protection of their rights has either remained stable (implying poor) or worsened.
3.1.3. Major Political Issues affecting the business climate
The Socialist Republic of Vietnam (SRV) is a one-Party state controlled by the Vietnamese Communist Party (VCP). The VCP’s constitutionally mandated leading role, the occupancy of nearly all senior government positions by Party officials, and the Party’s extensive network down to the village level and through mass organizations ensures the primacy of guidelines from the Party’s Political Bureau (Politburo). The Party and the Government have a long-standing policy of not tolerating dissent and of prohibiting independent political, religious and labor organizations. The National assembly, chosen in elections in which all candidates are approved by the Party and most are Party members, remains largely subservient to the VCP, as does the judiciary.
Vietnam’s foreign policy is to cultivate friendly relations with all nations and integrate itself into regional and global organizations. Although it is hindered by corruption and a cumbersome bureaucracy, Vietnam’s domestic policy continues to be committed to economic reform and opening up to the world economy.
• Domestic policy: Since introducing the “Doi Moi” policy of economic reform in 1986, Vietnam’s leadership, the Party and the Government have remained committed to reforming Vietnam’s economy and integrating it into the region and the world. The official economic model is “market-based economy with socialist orientation”, the definition of which is unclear but generally interpreted to mean allowing market mechanisms but with a leading role for the State and maintenance of one-Party rule.
Debates continue over the proper pace of reforms and the future role of state-owned enterprises and foreign investors in Vietnam’s economy. The Eighth Party Congress in 1996 reaffirmed Vietnam’s commitment to continuing under “Doi Moi” renovation. The Congress re-elected Party General Secretary Do Muoi, President Le Duc Anh and Prime Minister Vo Van Kiet. There may be changes in the top leadership this year. They are not expected to result in a significant shift in policy direction, but could affect the pace of reform.
A Party proposal in 1996 to allocate state-owned enterprises a 60% share in the economy was dropped due to domestic protest and foreign concern, but the Party and government actively support the state sector’s leading role in the economy, Political commentators within the Party and government often write about the need to attract foreign capital and technology, while protecting against undue foreign influence in the economy and society.
The government is engaged in extensive efforts at legal and administrative reform, including in areas affecting economic activity and foreign investment. The financial sector and tax regime has been given priority emphasis. The most recent National Assembly passed legislation that provides for the Country’s first Commercial Code and a revised Foreign Investment Law was put into place at the end of 1996. Decrees promulgated in 1995, in support of the 1993 Land Law, have caused considerable public debate as citizens and officials try to resolve decades-old competing claims over land use rights throughout the country. The National assembly, in April 1997, passed a law concerning land transactions.
High level Party officials have urged formation of Party cells within every enterprise, including foreign joint ventures and wholly owned foreign enterprises. Foreign investors are watching warily how this issue develops, concerned it will increase Party control of businesses. Technically, wherever three or more Party members work, they should form a cell, and Party members are to actively recruit new members in their workplace. Some Part officials believe the cell have not been active enough.
Widespread official corruption and inefficient bureaucracy are often cited by Vietnam’s leadership, press and citizenry, as well as by foreigners, as serious obstacles to continued economic growth and foreign investment. Despite regular denunciations of corrupt practices by individuals, Party and government officials in public speeches and the press and several high profile court cases resulting in long prison sentences and executions, the problem of corruption remains pervasive. Competition among the government agencies for control over business and investments has created a confusion of overlapping jurisdictions and bureaucratic procedures. In addition, decisions handed down by the central authorities often do not translate into action at the province or district level, where the interests of local authorities or other economic actors may be counterpoised. Both local and nation decision-makers must be taken into account when pursuing commercial projects.
• Foreign policy: Vietnam has adopted an ‘open-door” policy of cultivating friendly relations with all nations in support of its economic development and attempts to attract foreign investment. In July 1995, Vietnam normalized diplomatic relations with the United States, became a member of the Association of Southeast Asian Nations (ASEAN) and, thereby, of the ASEAN Free Trade Area (AFTA), and signed a memorandum of understanding for commercial cooperation with the European Union. Vietnam aspires to obtain Asian Pacific Economic Council (APEC) and World Trade Organization (WTO) membership.
Vietnam and China normalized relations in 1991. Disputes over their borders, especially over control of Spratly and Paracel Island groups, remains problematic and a potential source of regional instability in the medium to long term. For the time being, both countries remain committed to negotiation and conduct regular talks on the issue. Vietnam and Cambodia continue to dispute their border and, occasionally, the status of ethic Vietnamese in Cambodia, but there appears to be little danger of major conflict between the two countries.
3.2. Environmental industry
3.2.1. Background on Vietnam’s environment and its biological resources
Vietnam is a tropical country located in the southeast of the Indochina peninsula, stretching from 8030’ N to 23022’ S, with a total land area of over 33.104 million hectares. It is relatively mountainous country, with a narrow central coastal strip and major deltas in the northern and southern extremities. Vietnam possesses a long coastline of 3.260km and a claimed Exclusive Economic Zone of almost one million km2. The country is endowed with latitudes and altitudes, land forms, and a monsoon climate varying form humid tropical conditions in the southern lowlands to temperate conditions in the northern highlands, Vietnam has a high diversity of natural ecosystems, species, and genetic resources, which have significant economic and environmental value.
Investigation has shown that Vietnam has about 12,000 species of flora, including over 7,000 macrophytes and 1,400 fungi. 275 mammals, 8000 species of birds, 80 species of amphibians, 180 species of reptiles, over 500 fresh water fish, 2000 marine fish, and thousands of invertebrate species have been identified in Vietnam. Vietnams’ biodiversity is relatively unique. 10% of the world’s mammal, bird and fish species can be found in Vietnam. Over 40% of local plant species are endemic. Among the four new mammal species discovered in this century, 2 new species, the Vu Quang Ox and the Giant Muntjac, were found in Vietnam. In addition, many species important to agricultural development have been selected in this country for thousands of years.
In terms of economic value, all agricultural, forestry, or marine products, which come form the biodiversity resources, is estimated to bring about US$2billion to the country’s revenue every year. In many places, especially in the mountainous regions, the food and foodstuff sources, medicine plants and essential source of income rely largely on the biodiversity exploitation.
Vietnam has undergone rapid economic growth and industrialization in the past decades. The shift to a market-oriented economy in Vietnam has resulted in higher personal wealth and further integration of Vietnam into regional and global economies. Population growth and economic development, however, are posing a serious threat to the country’s environment and natural resources. Environmental issues in Vietnam, focussing on problems of biodiversity loss and greenhouse gas emission, are discussed below.
3.2.2. Environmental issues in Vietnam
The most serious environmental problems in Vietnam: deforestation, degradation of land resources; inefficient use of fresh water; degradation of coastal and marine ecosystem; overexploitation of biological resources and significant loss of biodiversity; and increasing environmental pollution.
Today, Vietnam is facing a combination of environmental issue, including water, air and solid waste pollution. The contributing factors include high growth and urbanization, rising incomes and accelerating industrialization. Obsolete equipment and technology has significantly reduced the quality of environmental services.
Moreover, Vietnam is one of the untapped markets for equipment and services to protect environment, Years of delay and neglect in addressing pollution problems create a critical situation for the country.
Deforestation is now occurring in Vietnam at an alarming rate. Forest cover decreased from 67% to 29% of total area between 1943 and 1991. The main causes of forest degradation are agricultural encroachment, fuelwood consumption, commercial logging, shifting cultivation damage, fire damage and other causes (overgrazing, construction of dams and war damage).
In addition to the degradation of forest ecosystems, a wide range of wetland, coastal and marine ecosystems are being converted for agriculture, aquaculture and urban developments. This has resulted in rapid degradation of these ecosystems and their resources. The expected growth in economic activity will further increase the stress on wetland, coastal and marine ecosystems in forthcoming years.
Pressures form economic development and population growth has resulted in the overexploitation of biological resources. The exploitation of wood and other forestry products poses a bid threat to biodiversity loss. Overfishing occurs throughout the country. Destructive methods, such as using traps, small-meshed nets, dynamite and toxic substances, have been in practice in many areas, resulting in not only overexploitation of marine resources but also ecosystem destruction.
Deforestation and other habitat loss and overexploitation of biological resources together with pollution and uncontrolled local and international wildlife trade are the most important contributors to the loss of biodiversity in Vietnam. While the country’s biodiversity values is recognized internationally, extinction rates in Vietnam are far higher than the world average rate with 28% of its mammals, 10% of its birds and 21% of its reptiles and land amphibians facing extinction.
Land degradation is another serious environmental problem, which has occurred, and continues to do so, on a large scale from the coastal, delta areas to the hilly areas in Vietnam. A category of land designated as “barren lands” (largely denuded former forests, much of which are of low agricultural productivity) now covers about 13.4 million ha or nearly twice especially in the steep terrain in the Northern and Central Highlands, through intensive farming, including the improper use of chemical fertilizers and pesticides, slash-and-burn cultivation, and deforestation. The pressures of rapid population growth and unwise land use have caused widespread land degradation in many rural areas, resulting in increasing the number of land-poor farmers and accelerating poverty.
In terms of the problem of greenhouse gas emission, resulting in global warming, it is not as serious in Vietnam as other environmental problems discussed above. It is, however, a problem of growing concern because the country is in the process of industrialization and urbanization. The main sources of greenhouse gas emission are from industry and manufacturing, transport, and biomass burning. Most existing industries are backward with a low efficiency of material and fuel use and a high rate of waste generation per product. Most plants and factories have no waste treatment, resulting in releasing greenhouse and other hazardous gases into the environment. Medium-sized and small thermal power plants and cement industry are major contributors of greenhouse gas emission.
In addition to industry, accelerated urbanization leads to the development of transport. The explosive increase of motorized means of transport, such as motor cars, motorcycles, and diesel-powered vehicles, significantly increases the release of greenhouse gases into the environment.
Home use of local and biomass for cooking and heating is a more polluting and inefficient use of energy. Wood is the fuel of choice for households in the Mekong Delta and Northern Midlands, and urban households in the Central region. In addition to these major sources of greenhouse gas emission, deforestation and land degradation discussed above significantly contribute to accelerating global warming.
Vietnam is in the early stage of industrialization. It is among the countries which have the world’s lowest rate of energy consumption and greenhouse gas emission per capita. However, energy demand and use, especially fossil fuels, and greenhouse gas emission will rise along with the country’s rapid socio-economic development.
In response to the critical environmental issues described above and recognizing that the country’s people and economy largely depend on natural resource-based activities, the Vietnamese government has made every effort in managing the environment and its natural resources.
3.2.3. Environmental management in Vietnam
Environmental protection and management is high on the political agenda of Vietnam. National strategies and plans have been developed and implemented within a revised and strengthened legal and institutional framework.
3.2.3.1 Legal framework in environmental management in Vietnam
Recognizing that establishing a legal framework for environmental management is of great significance, the Government has revised and strengthened the legal framework. The National Plan for Environment and Sustainable Development 1991-2000, discussed below, stressed the need for effective environmental laws in environmental protection and management in Vietnam. Environmental legislation in Vietnam includes the National Law on Environmental Protection (NLEP), which came into force on 10 January 1994. The NLEP itself strongly advocates a preventative approach to environmental management and lays the foundation for coordination of environmental management between different levels of government. Decree 175/CP of 18 October 1994 provided guidelines for the implementation of the NLEP and further details on the roles, mandates and responsibilities of the government institutions involved in environmental management. The introduction of sectoral specific laws, such as the Maritime Navigation Law, the Law on Land and Territory, the Minerals Law, as well as guidelines and decrees, such as guideline on urgent measures to protect and foster wild animals, and policies and regulation on forest protection and development, and provincial regulations, have added to the legal framework in the area of the environmental protection.
Vietnam has also expressed its commitment to protecting the environment by signing and implementing a number of international environmental conventions, Regarding to biodiversity and climate change issues, Vietnam is a party to:
• Convention on Biological Diversity (CBD)
• Convention on Wetland of International Significance (RAMSAR)
• Convention on International Trade in Endangered species of Wild Fauna and Flora (CITIES)
• United Nations Framework Convention on Climate Change (UNFCCC); and
• Kyoto Protocol on reduction of greenhouse gas emissions.
3.2.3.2. Institutional framework in environmental management in Vietnam
The institutional framework dealing with environmental issues has also been revised and strengthened. A Ministry of Science, Technology and the Environmental (MOSTE) has been created and given responsibility for the management of research issues relating to sciecne, technology and environment, the preparation of environmental assessments and environmental action plans, implementing NLEP and its associated decreess, codifying regulations and standards, evaluating EIAs and coordinating with the Ministry of Planning and Investment (MPI). Within the MOSTE, the National Environment Agency (NEA) serves as a focal point for all environmental matters. A number of other government institutions with responsibilities in the management of natural resource use, such as the MPI and the Ministry of Agriculture and Rural development (MARD), also play an important role in environmental management and protection. The MPI is involved in vetting projects for their impact of the environment and administers a department charged with these responsibilities. In close coordination with MOSTE, MPI is also responsible for developing annual implementation plans for each of the BAP’s objectives. MARD is responsible for the management of national parks, forest reserves and other protected areas, and the management of wildlife trade, wetlands and agriculture. Other line agencies, such as the Ministry of Fisheries, Ministry of Labor, Invalids and Social Affairs, Ministry of Industry, also have a mandate in environmental management.
At a provincial level, departments of science, technology and the environment (DOSTEs) were formed and chaired by a vice-chairman of the People’s Committee. These departments have the power to review environmental aspects of investment applications and to resolve pollution disputes.
Although the institutional and regulatory arrangements that have been put in place are relatively strong considering Vietnam’s stage of development, their effectiveness is considerably weakened by lack of staffing and resources. This under resourcing has significantly impacted on the implementation and coordination of regulations, especially at the provincial level.
3.2.3.3. Environmental strategies and plans in Vietnam
The Vietnamese Government has formulated a number of plans and strategies aimed at addressing these environmental problems. It has identified sustainable development as its major objective and formulated the National Plan for Environment and Sustainable development 1991-2000 (NPESD), which was approved by the Government on 12 June 1991. The NPESD outlines the framework for action in the area of environment and sustainable development that will enable Vietnam to address its environmental challenges. It stipulates that appropriate environmental and natural resource management should satisfy the basic material, spiritual and cultural needs of all Vietnamese people, both in the present and future. This is to be achieved by establishing policies, action plans, legislation and institutional structures necessary to ensure that the sustainability of natural resource use is fully integrated into all aspects of the social and economic process.
In recognizing the economic and cultural importance of its biodiversity, Vietnam has already taken steps to preserve its resources over the past decades. The BAP was developed in expressing the country’s commitment to the CBD, which Vietnam signed in 1993 and ratified in 1994. The plan was approved by the government in 1995. It provides an overview of resources, institutions and laws related to conservation of flora, fauna, and outlines an action plan dealing with the country’s biodiversity, with a focus on biodiversity and green issues.
BAP aims to protect the rich and unique biodiversity resources within the sustainable development framework of Vietnam. A number of BAP’s priorities have been identified, including:
• Policy and legal issues;
• Establishment and management conservation areas;
• Public awareness raising;
• Capacity-building and staff training;
• Scientific research;
• Integration with socio-economic program; and
• International cooperation.
In addressing the issue of greenhouse gas emission, Vietnam has responded to the UNFCCC by passing policies on forest protection and development. The government has just approved a project to plant 5 million hectares of forest from 1998-2010. It has developed the draft of the national program on climate change, which embodies main policies on:
• Mitigating authropogenic emission by sources and enhancing sinks of all greenhouse gases, using cleaner energies, reducing energy loss, saving energy, planting and protecting forest;
• Drawing up and enforcing regulations relevant to climate change;
• Fostering agriculture’s adaptability to manage the use of water sources and to prevent and mitigate natural disasters; and
• Enhancing international cooperation.
In order to implement these policies, an action plan was also devised, giving priorities to the following action:
• Organizing a mechanism for the implementation of the Convention;
• Compiling laws and regulations;
• Developing inventory of greenhouse gas sources and sinks,
• Developing plans for the mitigation of greenhouse gas; for prevention and mitigation of natural disasters; and for observing, measuring and studying climate change; and
• Enhancing public awareness.
Chapter 4
Company situation analysis
4.1. Company profile
4.1.1. History
Altech Environment Pte Ltd (formerly known as “Soontong Sangyo Pte Ltd” incorporated in 1993) was set up in May 1998 as a private limited company to pursue and concentrate on the business of water and environmental engineering business. Formerly from the Environmental Division of AL Technologies, the management had opted to continue the business which they felt was viable when the company decided to close down the division due to financial and management difficulties.
In August 98, Altech Environment secured its first order, for a sewage treatment plant in Bintan Island, Indonesia for the Wah Chang Group, developers of the reputable Banyan Tree Resort. In September 98, Altech clinched the service maintenance contract for Grease Management System for the prestigious Great World City Complex as well as the project management service for chlorine neutralization plants for Public Utilities Board, both in Singapore. In October, the company was appointed the validator for the contaminated site remediation clean-up at BP Pasir Panjang Refinery, Singapore. Altech’s second sewage treatment plant contract was secured in February 1999 from Mitsui Construction in Yangon, Myanmar.
In February, Altech appointed an Executive Director (Projects) to run the project management for the company’s jobs-on-hand. Currently, the company is anticipating several potential projects in Myanmar, China, Vietnam and the Seychelles, very likely to be awarded in 3rd or last quarter of the year 1999.
In August 99, the company commences its relocation to bigger office premises in No. 4, Kim Keat Lane to cater to its planned expansion. The company is currently building up its facilities and personnel to enable the company to reach out to a bigger share of the water and environment market.
In review of performance, the company has imposed self-restraint in the number of contracts the company can manage due to personnel and financial limitations, which the company aims to overcome by the injection of funding.
4.1.2. Background of Business
There is an increasing awareness both in the municipal and industrial sectors on the importance of the water and the environment. Legislation is continually imposed to control the quality of supply water and wastewater that is discharged. Awareness is slowly but surely being placed on contamination of soil/groundwater on land used by industries. This trend will continue in the Asian region until standards are compatible with or exceed present U.S. and European standards.
The immediate markets, which is the market opportunity the company’s existence sought to capitalise on are:
- Water/wastewater treatment and reclamation
- Contaminated soil/groundwater remediation
- Resource recovery and recycling
The water/wastewater market is estimated to be $5 billion worldwide and in Asia alone, about S$1 billion per annum. A 1% share of this enormous Asian market is what the company aims to achieve by the year 2005.
The contaminated soil/groundwater remediation market is an emerging and potentially explosive one, once the governments in the region become organized. In Singapore, it is anticipating that the issue will be addressed seriously in the immediate future when existing industrial sites are released on the expiry of their lease, a substantial portion very likely to be rezoned for residential use. The Singapore market alone is estimated to be worth S$100 million by the year 2005. In the neighboring countries, the market is anticipated to be medium to long term can generate a demand in the S$1 billion region beyond 2005 due to the scarcity of more importantly, clean groundwater for potable use. Altech Environment’s strategy will be to remediate in-situ as much as possible to save clients’ costs and convenience through the investment in mobile technologies in bioremediation, thermal treatment and etc.
Environmental technology in Singapore:
A broad definition of the environment is the natural conditions, such as air, water and land, in which people, animals and plants live and thrive in. Environmental technology involves the protection and enhancement of the environment. It includes such diverse activities like developing substitutes for ozone depleting substances, waste management, monitoring of discharges into water, land contamination, clean air, resource optimisation, recycling and so forth.
Over the past two decades, responsible management of the environment has contributed to Singapore's economic success without compromising the needs of a better quality of living environment. Basic environmental infrastructure has been developed to support and ensure that the economic activities in industrial, commercial and service sectors continue to grow without damaging the environment. As a result, Singapore has become a city with a well designed land-use plan, a modern environmental infrastructure and an effective environmental management system.
4.1.3. Scope of activities-Product and services
Altech Environment specializes in the following activities on a turnkey engineering or design-and-build basis:
• Municipal and industrial water treatment
• Municipal and industrial wastewater treatment
• Contaminated soil/groundwater remediation
• Resource recovery and recycling
Its trade-name products include the following:
AL-PAK is a packaged sewage treatment plant targeted at communities of 100 to 1500 people. It is based on the very established extended aeration activated sludge technology. The treated effluent quality from the plant meets or exceeds most state regulations presently. It is noteworthy that the AL-PAK is one of only three makes allowed by the Bintan Resort Management on Bintan Island resorts, Indonesia. Currently, the company are introducing AL-PAK(ceceas) which treats effluent to a higher quality, which the company foresee the trend of governmental regulations to implement in the very immediate future.
Grease Eradication Program is a program which controls grease generated from commercial kitchens from clogging up drainage pipings and improving the performance of grease traps by using biotechnology. The program is currently proving itself in Great World City Complex where 20 units of Grease Guzzlers are currently in service.
AL-RO is a compact modular reverse-osmosis plant for desalination of seawater and brackish water as well as producing ultra-pure water of industrial process water. The company is presently having technical collaboration with firms in the U.S. and India. With water shortage expected to hit 40% of the world by 2003 as compared to a mere 3% at the moment, desalination technology for big and small users alike are anticipated to increase tremendously in the next few years.
4.2. Strategic audit of Altech Pte Ltd
Current situation
Strategic Posture:
4.2.1. Altech’s vision
To become a company in the environmental field which fully capitalize and expand on its expertise to capture a substantial share of the existing water/wastewater treatment market and to initiate and corner a foothold in the emerging contaminated soil/groundwater remediation market by the year 2005.
4.2.2. Altech’s business strategy
In water/wastewater treatment, the company plans to develop and apply niche and advanced technologies for specialized projects beyond the reach of typical engineering companies. This will be through the results of its in-house R&D or through application of specialist technologies from overseas. Its envisaged focus will be on reverse-osmosis desalination, industrial waste effluent treatment technologies, reclamation, and resource and waste recycling.
In contaminated soil/groundwater treatment, the company plans to set up mobile treatment units to treat clients’ sites in-situ. This will be inctroduced in Singapore and subsequently to the neighboring countries. The treatment technologies will as much as possible be a stable process that do not require excessive usage chemicals e.g. soil washing, fixation etc. and disposal. The focus will be on thermal treatment and bioremediation with the aim of re-using the treated soil and groundwater.
Altech Environment will build up its reputation as a local technology-rich company and promote its products and services on a global scale which will as competitive as local technology yet technically as superior as expensive imported foreign technology. The company’s primary focus will be on the existing water and wastewater treatment and the emerging contaminated soil/groundwater remediation markets as described above.
Altech envisage that the former activity will grow the company to become a substantial player in the world market, while the second activity will take the company up on a high level of play in a niche technological market where Altech now have the opportunity to be a pioneer in.
4.2.3. Altech’s corporate objectives
1. To continue to build on its expertise in the core businesses through applied research & development and strategic alliances with technology providers from more advanced countries e.g. U.S., Europe or Japan.
2. To realize a profitable business based on the core businesses described above.
3. To raise S$1 million in equity financing to be used for working capital, expansion expenses, marketing and research and development.
4. To become a public listed company with a sales turnover of S$100 million by the year 2005.
4.3. Performance
4.3.1. Projects performed
a) Projects since Jun 1998
|No |Project |Client |Project Value S$ |
|1 |Allamanda Bintan AL-PAK |Wah Chang |245,000 |
|2 |YKK Yangon AL-PAK |Mitsui/Shin Nippon |140,000 |
|3 |Grease Eradication-Great World City |Allgreen Ppties |26,000 |
|4 |Validation for Contaminated Site Clean-up |BP |3,000 |
|5 |Chlorine Neutralisation Plants* |PUB |374,000 |
| |Total | |788,000 |
(b) Current Potential Projects
|No |Project | |Value S$ |
|1 |Seychelles Desalination Plant | |320,000 |
|2 |Seychelles AL-PAK | |220,000 |
|3 |Food Processing Plant, Vietnam | |220,000 |
|4 |Dairy Plant, Myanmar | |270,000 |
|5 |Office Building AL-PAK, Myanmar | |140,000 |
|6 |Powerplant AL-PAK, Sri Lanka | |100,000 |
|7 |Water Treatment Plant, China | |270,000 |
|8 |BP Lub Blending Plant Soil Investigation, Singapore | |20,000 |
|9 |Grease Management System, Suntec City, Singapore | |25,000 |
| |Total | |1,585,000 |
(c) Target Potential Projects (Typical)
|No |Project | |Value S$ |
|1 |Wastewater treatment plant for chemical plant, Indonesia | |4 million |
|2 |Water and wastewater treatment plants for powerplant, Thailand | |5 million |
|3 |Wastewater treatment plant for chemical plant, Thailand | |35 million |
|4 |Oily sludge treatment and contaminated soil remediation for refinery, Brunei | |20 million |
|5 |Wastewater treatment plant for industrial park, Vietnam | |1.5 million |
4.3.2. Financial data
For the 6 months to end of Financial Year 1998, the sales turnover of Altech Environment was S$135,000 with gross profit S$9,800. The projected figures for FY 1999 are sales turnover of S$750,000 with gross profit of S$180,000.
Figure 4.1: The projected sales and profit for 2000 to 2005
| |2000 |2001 |2002 |2003 |2004 |2005 |
|Turnover |5 |15 |25 |50 |75 |100 |
|Profit b/f tax |1 |2.8 |4.5 |8 |11 |15 |
| |20% |19% |18% |16% |15% |15% |
Figure 4.2. Chart on projected turnover and profit before tax form 2000-2005
4.4. Strategic Managers
• Board of Directors:
Altech Environmental Pte Ltd is incorporated with the authorized capital is S$200,000. There are currently 3 shareholders who are also the key personnel in Board of Directors.With the full responsibility of the day to day business operations. The operations are currently structured into 3 sub-divisions of marketing, operations and finance/admin.
The Director for marketing is an engineering graduate (Honours) from a local university. He has 7 years of experience in business development, marketing and project management, and general management in various positions in his career with Singapore Airlines, Sembawang Engineering and AL Technologies, of which 4 years have been in the environmental engineering sector. His expertise is in water/wastewater treatment and contaminated soil remediation.
The Director for projects & operations oversees the operations of the projects and orders on hand. He holds an engineering degree (Honours) as well as an MBA from overseas university. He has 7 years of project management experience with Sembawang Engineering in various projects including a mini- refinery and a power plant. This included a 1½-year stint in Vietnam for the VSIP power plant project.
The company has an appointed Technical Adviser who provides process technology and commissioning advise. He holds a Masters engineering degree from India and has over 10 years of experience in the design and commissioning of water and wastewater treatment plants in his career with Degremont, Metito U.K. and AL Technologies. He holds a Singapore PR.
The Director of Finance/Admin is a B.BA (Accounts) graduate from Thailand with over 4 years experience in corporate and project accounting with Sembawang Engineering and Keppel Engineering. She holds a Singapore PR.
• Degree of involvement:
One can observe a high degree of involvement of the company’s management in all the strategic decision process and operations of Altech. And most of the controls are within the board of directors who are completely responsible for the performance of Altech both in terms of profits and turnover.
4.5. Main characteristics of the Top management
After conducting a survey/discussion with the key personnel of the Altech Company, and also understanding the business philosophy and culture existing in the company, the following main characteristics of the company are listed below. However, this view of the management is purely a personal observations made by the author.
1. Very senior, technically sound and deeply involved in the present and future strategic businesses. They know their business very well.
2. Have a good foresight and a strong vision.
3. Involve lower level employees in the decision making process , but almost all the powers of decision making lie with the Managing director and the Board of Directors.
4. Top management has developed a proper team of lower level management and a sound structure to meet the challenges in the technology markets and competition.
4.6. Altech’s organization structure
Altech is a new, small-sized company, as such the company’s current organization structure is rather simple and quite centralized. The management intents to re-organize the structure with more departments and functions after obtaining cash injection and re-structuring.
ORGANIZATION STRUCTURE
(Current)
4.7. Internal and external environment: strengths, weaknesses, Opportunities and threats (SWOT) analysis
4.7.1. Internal environment
4.7.1.1. Strengths of Altech
• Technology knowledge:
Altech have a strong engineering and process capability. Their engineers constantly apply their experiences from past projects to new projects. This will not only improve the technical knowledge individually but also the technology capability of the whole company as a whole.
• In-house design and project management expertise
With an average of 10 years’ experiences from the top management, of which 4-5 years are in the environmental field, it can be seen that Altech Company has a good expertise in engineering and process design and project management. Previous project experiences has also enhanced their expertise efficiently.
• Continuous innovations in applied research and development
Altech Environment are conducting pilot plant studies of the new AL-PAK (ceceas) technology and are setting up. A mini laboratory for conducting the studies, which they intend to expand gradually to cater for other pilot plant studies. Altech will also apply for an National Science and Technology Board (NCTB) grant to assist in the funding of the new AL-PAK (ceceas) technology experiment A potential opportunity to utilize the technology before the end of 1999 is very likely.
Altech Environment are also initiating studies into thermal desorption technology for contaminated soil remediation and anaerobic treatment for treatment of high strength industrial wastes.
• Track experience in highly-specialized environmental projects
Through the list of current projects and potential projects, Altech is building up and boosting its track record and experience in the industry. In gaining experience and reputation over time, Altech are constantly studying and reviewing other highly-specialized environmental projects, which are performed by either Altech or other international environmental companies.
• Competent key personnel
The Board of directors comprises of well-qualified, experienced and dynamic employees, holding at least the Bachelor degree and many years’ experiences in management and technical field. With a rather young, open-minded and entrepreneurial characteristics of the top managers, the company is eager to acquire skills and access to new technology, hence, to expand their business. Moreover, they are accessible to overseas projects. Operating with a cross-functional organizational structure, Altech are accorded with a good communication links with its clients, contractors as well as its various department in the company.
• Marketing team
Altech has a strong marketing team where the Marketing efforts are direct to clients. Altech’s Client base falls into the categories of end-users, main contractors, consultants and statutory boards and government bodies and in the following industries:
- Municipalities
- Industrial parks
- Resorts and hotels
- Commercial buildings
- Industrial factories
- Oil refineries
- Petrochemical and chemical plants
- Agricultural plants & large farms
- Food and beverage processing plants
- Electronics and semiconductor plants
Altech’s marketing effort includes marketing mails, visits and presentations, quotations and follow-ups. Brochures and specific product bulletin sheets for the core products are used concurrently. Altech Environment are in the process of advertising in the Green Book (Singapore’s Industry Directory), Yellow Pages and reputable environment magazines, and intents to participate in at least 1 trade show a year to increase their exposure in the region. A Company website will also be created to reach the global market via the Internet.
• High value added/overhead ratio
Altech’s added value to its environmental business essentially centers on its practiced concept of open-consultation with its clients, specifically in terms of process and technology selection and improvement, budget and cost evaluation as well as operations and operating cost concerns. This process of open-consultation begins as soon as a potential development project evolves.
4.7.1.2. Weaknesses of Altech
• Shortage of finance
The main weakness of Altech Environment is its financial situation. As it can be seen in the company’s history, Altech Environment is a relatively very young, small sized company, formed by the restructuring of the Environmental Division of AL Technology due to the financial and management difficulties. Since its inception as Altech Environment, the company had secured several contracts in Singapore as well as overseas. Due to its financial size, the company has imposed self-restraint in the number of contracts they can manage. As such, Altech are unable to clinch bigger contracts and achieve their objectives without a cash injection to build up its present resource-personnel, facilities and financial strength.
• Lack of independence:
The company is now still dependent on industry wealth or investors. The company’s business is largely dependent on the industry’s development as well as the investment of developer. Since the Asian Financial Crisis in 1997, the construction industry has not been recovering as well as the other sectors/industry, as such the number of projects in the region have not improved. Further, construction costs have also been dropping drastically due to the competition among contractors to vying to secure the limited number of jobs available.
• Type of contracts:
Due to Altech’s financial limitation, the type of contracts secured would also create constraints to its operations. As such, Altech needs to be selective concerning the terms and conditions of potential projects, specifically the terms of payment. This is to safeguard Altech’s long term survival. To date, most of Altech’s contracts have been largely structured on “Advance Payment” scheme, which have given the company a tremendous boost to its operational viability.
4.7.2. External Environment
4.7.2.1. Opportunities for Altech
• There are many potential overseas projects especially in developing countries such as Myanmar, Indonesia, Vietnam, Lao and Cambodia.
• Lack of technology-rich environment engineering companies in region
• Non-competitiveness of foreign big players especially in medium-size projects up to S$50million
• Besides its core activities such as sewage treatment, water and wastewater treatment, Altech Environment are also embarking on the grease eradication program aggressively sector. This is also an area that the company is doing their own research to build prototype suitable for domestic and industrial kitchen use. They are currently conducting surveys with restaurant owners, developers of shopping center, and resorts.
• Strong R&D of the environmental technology in Singapore: Singapore has accumulated considerable experience and know-how in environmental management, protection and infrastructure. Specific skills in environmental planning and development, environmental public health, operation and maintenance of environmental facilities and legislation were developed through the years. Capabilities such as engineering construction, procurement, mechanical equipment control and maintenance, water and wastewater treatment, pollution control, measurement and control technology, instrumentation, laboratories and consultancy services have also been developed.
Singapore is building up its capabilities in research and development in environmental technology. An Environmental Technology Institute was set up in 1996 to spearhead the R&D in ET in Singapore.
• A regional hub for environmental business: The environmental technology industry has emerged as one of the fastest growing industries in the Asia-Pacific countries. Rapid economic progress and urbanisation have been accompanied by growing pollution and environmental problems. This has generated demand for a wide range of environmental products, services and technology. Singapore's environmental expertise was built up from similar economic, social and physical circumstances to many countries in the region, this expertise is relevant to them. Singapore can share this expertise and position ourselves as the regional centre for environmental technology and an ideal hub for marketing environmental technology and expertise to the region. Further, many companies (both local and international) are also diversifying into this emerging business area dealing with environmental related products and services.
Singapore has the capacity to share its proven expertise in a number of areas:
a Manufacturing sector
Singapore has experience in design, fabrication and construction of plant and equipment to prevent, contain, treat and dispose of gaseous, liquid and solid wastes. It also has considerable expertise in process-control instrumentation and systems for monitoring, testing and analysis.
b Consultancy services
Singapore can offer consultancy services in pollution control, feasibility and hazard studies, environmental impact studies, and in providing technical support in waste management, recycling, disposal and treatment. Environmental engineering services in sewerage systems, incineration plants and drainage systems are other areas in which it has a reputable record.
c Other services
Singapore also has expertise in air- and water- quality monitoring, testing and laboratory services, and training in environmental planning, management, control and technical support services.
• Tie-up with International technology suppliers: with emerging consciousness among Asia Pacific countries on the need to balance economic development with environmental protection, both local and foreign environmental technology companies can use Singapore as a base from which to market and provide their environmental engineering services to the region and to exchange skills and expertise in environmental management and protection.
Strategic options which Singapore offers to environmental technology companies include manufacturing/service operation; product and process development; regional training and distribution centre; procurement.
Singapore will continue its ties with countries in the region through formal bilateral linkages and joint programmes to promote regional interests on environmental technology. These linkages will offer the opportunities of exporting Singapore's environmental management expertise.
Singapore will continue to organise regional level exhibitions and conferences with advanced countries and international organisations. Regional level environmental training courses will also developed and conducted for participants from developing countries.
• Promotion of environmental technology: The government plays a facilitating role in the development of ET in Singapore. This role involves the government as a "market maker", spotting market and technological opportunities and encouraging ET companies to exploit those opportunities. Government also encourages companies to switch or develop environment-friendly substitutes, adopt innovative technologies which will minimise pollution, and upgrade the skills of their staff.
For Singapore to promote excellence in ET, a multi-agency approach was also adopted to tap the expertise and resources of each agency. The multi-agency approach ensures that the efforts of the agencies are properly co-ordinated.
4.7.2.2. Threats for Altech
• The development of ET industry in Singapore: In recent years, there has been a growth in Singapore companies engaging in various environmental related services. There has also been growing interest among local companies to diversify into environmental business. There are more than 150 ET companies in Singapore comprising mainly small local companies and a few major engineering companies (some of which are public listed companies). Companies in the engineering services, wastewater and waste treatment dominate the environmental technology industry. Some of these companies, especially those engaged in the construction of wastewater treatment plant, have been very successful in establishing a niche in the regional market.
• Competition:
Competitors include local companies and expatriate companies who are trying to get a foothold in this region. Traditionally, reputable local companies e.g. Chemitreat, Salcon, use foreign technical expertise from the U.S. or Europe and perform a “trader type” of service. Process and equipment are imported from these countries as well as commissioning services, with installation and co-ordination by the local company. Smaller companies generally lack good repute and find it hard to convince clients of their capabilities. Most local companies are only competing in the water/wastewater sector.
Foreign companies from U.S. or Europe e.g. Babcock, Seghers usually establish a representative office with almost all input from the H.Q. country. Big companies with huge financial resources e.g. U.S. Filter are build up a sizeable local set-up. The above modes of set-up causes their huge overhead which in turn forces them to take on only big projects. Foreign companies from India, M.E., China, although inexpensive, lack good reputation in terms of technology and quality
4.7.3. Altech’s competitive advantage
1. Competitive Pricing for contracts:
Altech has the advantage over other competitors for the low price of the contract, resulting from setting the low profit margin. With their simple and effective engineering design due to constant review and improvement in design, Altech fix a low overheads, therefore, a low price is coming out as a result. The way Altech outsource their products and subcontract services gives them advantages to reduce their overheads to make it become a competitive advantage over other competition.
2. In Greaze Guzzler business sector
Currently, only Altech company to market this product. They are also into maintenance and servicing. 20 units of Grease Guzzler (from UK) have been installed in restaurant and kitchens. These units actually release bacteries into the water pipes which to help prevents clogging by oil and grease. Altech are now serving this equipment. This is also an area, which they are doing their own research and build prototype suitable for household. Besides, they also talking the suppliers from UK on having these equipment manufactured in Singapore fpr local/regional market. Meanwhile, Altech send out surveys to restaurant owners, developers of shopping center, other resorts.
3. R&D in house:
Altech emphasize on cross-functional organizational structure. In company, feedback always circled form site firectly to Engineering department. Together with practical experience and good communication within company structure, the in house R&D of Altech develop rather well.
4.8. TOWS MATRIX
Thus far we have discussed the SOWT analysis to assess the situation. The TOWS Matrix will illustrate how the external opportunities and threats facing a particular corporation can be matched with that company’s internal strengths and weaknesses to result in four sets of possible strategic alternatives.
| |Strengths (S) |Weaknesses (W) |
|INTERNAL FACTORS (IFAS) |Technology knowledge: engineering and process |Lack of reputation in Vietnamese market |
| |capability |Weak form of finance |
| |In-house design and project management expertise| |
|EXTERNAL FACTORS (EFAS) |Track experience in highly-specialized | |
| |environmental projects | |
|Opportunities (O) |SO Strategy |WO Strategy |
|Potential projects in developing countries |A wholly owned company is most appropriate way |Try to gain reputation through winning |
|Lack of technology-rich environment |to enter Vietnam market to take advantage of |contract and apply its expertise in the |
|engineering companies in region |both the Strength and Opportunities of this |project performance |
|A regional hub for environmental business |situation |Enter Vietnam through the representative |
| | |office form. |
|Threats (T) |ST Strategy |WT Strategy |
|Increase competition when market enlarges |Find joint venture partners in Vietnam to build |Postpone the plan of entering Vietnam |
| |more relationship, to more easily get the |Gain reputation through exploring |
| |contract than doing business alone. |Vietnamese projects |
Chapter 5
Profiles of main competitors in Vietnam
In order to understand the competitive forces working in environmental industry, some companies have been selected form other players of environmental activities for the research. Due to the concentration and government law on this issue, all the companies just take part in the water treatment, wastewater treatment projects, therefore, the scope of this research just limited in these factors, although some foreign companies has other sectors such as air pollution control in their scope of activities.
5.1. Chi Mei International Technology Co.,Ltd
5.1.1. Company background and philosophy
In 1990, Chi Mei Co., Ltd. (CMT), a member of the world renowned Chi Mei Corporation Group, started the Chi Mei Entech Co., Ltd (CME) as part of its business growth and diversification strategy and a demonstration of its dedication to the preservation of environmental quality. Chi Mei Corporation (CMC) is a world leader in the production of ABS and other plastic material.
In 1991, CMT started the Chi Mei Scientech Co., Ltd. (now Chi Mei International Technology Co., Ltd.-CMT). CMT started both CME and CMIT with an objective to offer high quality and comprehensive environmental monitoring and analytical services, and energy-efficient pollution control technologies.
CMT specialized in environmental and ambient sampling, monitoring and laboratory ananlysis. CMIT is dedicated to provide a wide range of environmental engineering and pollution control system construction and turnkey services. By starting both CME and CMIT, CMT has aimed fulfil its obligation as a responsible member of the society to reduce environmental pollution and improve the quality of life in Taiwan.
In 1996, to further upgrade CMIT and CME’s technical and management skill, CMT and International Technology Corporation (IT) executed a joint venture agreement to strengthen CMIT and CME’s financial position and technical and management capability. IT is a global leader in providing environmental infrastructure solutions. With its stocks listed in the New York stock Exchange (NYSE), IT has a 70-year corporate history in providing services to all levels of government agencies, a wide spectrum of industrial and commercial companies, and leading research institutions. Between the seven years from 1989 to 1996, IT was ranked #1 in the U.S.A.by the authoritative Engineering News Record (ENR) in the area of harzadous waste management.
Honestly, Quality, Service and Innovation are the company’s long term commitment to clients. The joint venture between CMT, CME, CMIT, and IT allows them to combine the state of the art technologies and proven management experience, thus offering our clients cost-effective solutions and best available services.
5.1.2. Overview of Chi Mei International Technology Co.,Ltd
CMIT is a Class A Registered Environmental Engineering Contractor with a registered capital of NT$100 million. CMIT employs an intergrated professional staff team to apply a variety of cost-effective and advanced pollution control technologies. CMIT’s commitment to quality work and client services has been well received and recognized by clients and the environmental industry in Taiwan.
Accomplishments of CMIT:
• Chi Mei Activated Carbon Regeneration Furnace
• San Yang Motor VOC Incineration System
• Ken Ding National Park: south bay sanitary wastewater treatment plant
• Tainan city:Chenxi Li Municipial solid waste landfill Leachate treatment plant
• Taiwan sugar company: Shao Kung sugar refinery wastewater treatment plant
• Taiwan sugar company: Shao Kung sugar refinery flue gas desulfurization and bad house
• Taiwan Railroad company: Taidong machine plant sanitary wastewater treatment plant
• Taiwan railroad company: Su Lin station wastewater treatment plant
• Ma Tsu area: Nan Gan desalination plant
• Lin Yuan Industrial park wastewater treatment plant
5.1.3. Overview of Chi Mei Entech Co., ltd
CME,with a registered capital of NT$20 million, dedicates a competent professional staff team to operate line of fully equipped environmental and ambient sampling and monitoring systems, and state of the art field and in house analytical instruments.
In 1994, CME applied for the National Contract Laboratory program administered by the R.O.C Environmental protection administration. CME was the only commercial laboratory awarded this prestigious recognition and status. CME’s comprehensive technical capability and high quality services have been well recognized by clients. Government agencies and the environmental industry in Taiwan.
Accomplishments of CME:
• China Steel Stack Emission Sampling and testing
• Hua Lien city environmental protection bureau soil investigation
• Taichung city municipal solid waste incinerator trial burn sampling and testing
• Taiwan housing and urban development bureau east-west express way construction environmental monitoring
• Tainan-Kuan Miao express way construction environmental monitoring
• Yun Lin off-shore industrial park construction environmental monitoring
• San Zu Ku municipal solid waste landfill environmental monitoring
• Tainan Hi-tech science industrial park environmental monitoring
• Ho Pin cement industrial park environmental monitoring
• Taipei rapid transit system initial construction phase environmental monitoring
5.1.4. International Technology corporation (IT Corp.)
IT Corporation (IT) is founded in 1926, headquarters in Torrance, California, and offices over 40 nations in the world. IT Corporation (IT) is an industry-leading, full service environmental management company. Their skilled professionals utilize cutting-edge technologies and efficient project management to solve clients’ problems involving hazardous, toxic, and radioactive materials in all types of environmental media.
IT’s in-house resources provide full range of environmental services, enabling to efficiently integrate problem definition, solution strategy, design activities and regulatory compliance, Their remedial expertise allows companies to move directly to the field for implementation, thereby eliminating handoff delays, reducing the overall project cost, and accelerating site closure.
It has designed and constructed facilities and equipment for on-site remediation, source control and containment, and off-site remedial solutions. Working closely with clients and regulatory agencies, they design and construct cost-effective remedial actions to achieve final cleanup and closure. Their field implementation expertise, established project management systems, flexibility to meet fluctuations in scope and schedule, outstanding safety record, and unmatched commitment to quality are keys to successful project execution. Competently applying these principles has resulted in IT’s ranking by Engineering News-Record as the nation’s No.1 hazardous waste design firm for 7 consecutive year.
5.1.5. Goals
CMIT and CME are committed to providing integrated and comprehensive environmental protection and pollution control services: from sampling and analysis to consultation and planning; form design and construction to startup and operation.
CMIT and CME have a long-term view for a leadership position in the environmental industry. They are not satisfied with their past accomplishments and continue to look for future challenges. They aim to expand their service coverage beyond Taiwan into neigboring countries. Just like Chi Mei Corporation and International Technology Corporation, they hope that CMIT and CME will prosper not only in Tawan, but also in rest of East and Southeast Asia.
5.1.6. Scopes of services
• Industrial wastewater treatment:
A. Primary and secondary treatment (physical, chemical, and biological treatment)
B. Tertiary treatment (chemical treatment; ion-exchange resin, activated carbon adsorption, reverse osmosis)
• Sanitary wastewater treatment
A. Primary and secondary treatment (physical, chemical, and biological treatment)
B. Tertiary treatment (activated carbon treatment)
• Groundwater remediation (including investigation and monitoring)
• Soil remidiation (including investigation)
• Air pollution control
A. SNCR (selective non-catalytic reductive DeNOx)
B. Flue Gas Sulfur and Chlorine removal
C. Volatile organic chemicals (VOC) vapor treatment
• Treatment of industrial wastes, hazardous wastes and medical wastes
A. Rotary Kiln incinerator
B. Fluidized bed incinerator
C. Multiple Hearth Incinerator
D. VOC incineration treatment
E. Explosive waste incinerator
F. Controlled-air incinerator
• Activated carbon regeneration
A. Multiple Health furnace
• Radioactive wastes management
• Landfill design/construction and Leachate treatment
5.1.7. Business expansion and market entry
Profit is the major consideration of CMIT management to expand its business into new markets. To reach the goal of the prosperity of CMIT not only in Taiwan but also in the . rest of East and Southeast Asia, Vietnam has been chosen by the following reasons:
• Vietnam is not as much developed as others in region
• The background of the Vietnam and Taiwan has something in similar
• Vietnam is on the development, which is the same of Taiwan 40 years before. There can be denied that the need of environmental protection is considered.
• Vietnam is a potential market. The present GDP of Vietnam is around US$352 [UNDP report 1999], which shows that in this level the government just care the standard living of the people, there is not enough condition for environmental protection. In Taiwan, just when the GPP reaches US$4,000, they are able to think of environmental protection.
• Vietnam has developed many Export Processing Zone (EPZ), which calling foreign investment because of big projects that local business could not afford in term of technology capability and capital.
One more reason is that Taiwan has developed over 30 years, the environmental protection issue is rather stable, hence, CMIT in order to expand its market has to choose the overseas market, especially countries that are developing and have a culture similar to Taiwan 30 years ago.
5.1.8. Market Entry Mode
CMIT is the joint venture between the IT group of USA (50%) and the Chi Mei group of Taiwan (50%). CMIT enter Vietnam through winning one project of wastewater treatment plant project in the Linh Trung Export Processing Zone. Then, in 1997, CMIT representative office in Vietnam was born to facilitate their operation. This is the simplest form for one company to expand their business overseas because it requires least investment in the first time of identifying the market situation.
5.2. Salcon Limited
5.2.1. Salcon Pte Ltd: Overview
• Year of incorporation: 1980
• Paid-up capital: S$ 15,000,000
• Authorised share capital: S$ 20,000,000
• Working capital: S$ 80,000,000
• No. of Engineers/Draftman: Mechanical: 28. Environmental:5, chemical: 15. Electrical: 6, civil: 5
• Sales engineer: 8
• Finance.accounts.store/administration/clerical staff: 33
• Bankers: The Standard Chatered bank, bank of America, Commerz bank AG, Royal bank of Canada, Deutshce bank, ABN-AMRO Bank, Keppel bank of Singapore Ltd, United Overseas Bank.
5.2.2. Company background
Salcon Pte Ltd is incorporated in Singapore in 1980. Salcon was awarded the ISO 9001: 1994 certification in April 1996.
Salcon’s principal field of activities involved:
• Design construction, erection, commissioning and packaging of water and waste treatment plant system
• Construction of palm oil mills on a turnkey basis
• Engineering procurement and construction of industrial plant, mechanical, electrical and civil engineering works
• Represents some of the most reputable equipment and material manufacturers for pumps, steam turbines, boilers, decanters, drinking water pipe, refractory bricks and monolithic, etc.
Salcon has the resources, capability and a team of highly qualified personnel committed to excellence with the united goal of providing high standard of engineering services. Its strength lies with its qualified professionals, engineers of various disciplines such as civil, public health, chemical, mechanical, and electrical engineering. A high standard of technical expertise is maintained through regular in-house training, on the job and off-the-job training.
Salcon and its network of subsidiaries, associated and related companies in Australia, china, Germany, Hongkong, Indonesia, Malaysia, Phillipines, thailand, United States of america and Vietnam could satisfy the engineering needs worldwide within our field of activities.
Salcon offers advanced technology and products developed within the company and by its subsidiary and associated companies. It also has technical and representation, arrangement with well-known organizations located in Western Europe. Canada and the United States of America
5.2.3. Scope of activities
A. Water Treatment:
Salcon has the state of art technical know-how to custom design water treatment plant on turnkey vadid to meet the specific requirements of its client
Process and Engineering Capabilities:
• Coagulation
• Flocculation
• Clarification
• Filtration
• Reverse Osmosis
• Ion exchange
• Degasification
• Sterilisation
Applications:
• Raw water pretreatment
• Potable water
• Industrial process water
• Brackish water desalination
• Seawater desalination
• Water softening
• Boiler feed water
• Condensate polishing
• Ultra pure water
• Water reclamation
Industries:
• Municipal
• Petrochemical
• Power Plant
• Steel Industries
• Pulp and paper
• Electronic
• Food and beverage
• Hotel and resort
• Pharmaceutical
• Textile
• Metal Fishing
• Palm Oil Mill
• Palm oil refinery
B. Waste water treatment
Salcon has the capability to design and construct on turnkey basis for industrial waste Water and Sewage Treatment Plant to meet the specific requirements of its clients.
MUNICIPAL WASTE WATER TREATMENT:
Process and Engineering:
• Screening
• Sedimentation
• Aeration process
• Nitrification. Denitrification and Phosphate elimination
• Combined biological treatment
• Activated sludge process
• Sludge thickening
• Sludge dewatering by continuous centrifuge, filter press or belt filter
• Tertiary treatment
Applications:
• Treatment for municipal sewage and combined sewage/industrial waste
• Removal of organic, minerals, solid particles, toxic waster and other hazardous waste
INDUSTRIAL WASTE WATER TREATMENT
Process and Engineering Capabilities:
• PH adjustment
• Flocculation/Clarification
• Filtration
• Activated carbon absorption
• Dissolved Air Flotation (DAF)
• Differential Flow System (DFS)
• Rotating Biological Contractor (RBC)
• Sequence Batch Reactor (SBR)
• Membrane separation process
• Ion exchange
• Oxidation/reduction
• Neutralisation
• Sludge thickening/Dewatering
Applications:
• Waste water pretreatment
• Removal of suspended solids, organic or inorganic
• Removal of toxic chemicals and other hazardous wastes
• Removal of heavy metals
• Waste water reclamation
Industries:
• Municipal
• Petrochemical
• Power Plant
• Steel industries
• Pulp and paper
• Electronic
• Food and beverage
• Hotel and resort
• Pharmaceutical
• Textile
• Metal finishing
• Palm oil mill and refinery
• Aircraft industries
5.3. Other construction companies dealing in environmental industry
Besides the above two big companies that specialized in environmental industry, in Vietnam, there are not so much companies that just operate in the environmental field because, as we mentioned earlier, this field has not been growing and attracted companies to focus only on it. This also shows that this is not such a big market that can bring profit enough to the company. The most part of Vietnamese construction companies is able to bid and perform the work, then they can have their own team to do this or subcontract to others. Normally, a project of environment protection consists of two parts: “hard” which is the concrete work and the “treatment technique” which is the equipment or/and technique used in the treatment process. The concrete work such as building a pipeline, tank as a case for holding equipment normally is done by the construction company, this is just as a civil work. Then the rest will be performed by other suppliers chosen by either the construction company or the owner, depending on the negotiation term.
5.3.1. Construction Company
5.3.1.1. Investment and Construction Development Company (INVESCO)
1. Background:
The Company is a member of Hanoi Construction Corporation
2. Personnel:
|CLASSIFICATION |NUMBER |
|Planning & scheduling engineers |15 |
|Structural Engineers |40 |
|Architechs |20 |
|Civil Engineers |18 |
|M&E Engineers |18 |
|Quality Control & quality insurance |22 |
|Administrators |59 |
|Sub-total |192 |
|Technicians |120 |
|Workers |3,500 |
|TOTAL |3,812 |
3. Organization structure:
There are many enterprises under the company. Under the Board of Directors there are Technical department, planning and investment dept., organizational labour and inspection dept., administration dept., auditing dept., financial-accounting dept. Under the management of BOD, there are five construction enterprises, under which there are 5 construction units numbering from 1 to 5.
4. Scope of services:
• Turnkey (design and build contract)
- Making investment project
- Project design
- Construction
- Handing over to the client
• Construction contracts
- Building projects
- Industrial projects
- Civil and infrastructure
- Electric net work and transformer station
• Consulting services
- Making project
- Project design
- Project management
- Consultation for tender
• Real estate
4. Track records
The Company has undertaken numerous construction projects throughout the country with high quality: Norfolk Mansion, P.D.D. Commercial Tower, Office & Apartment “National Maritime Bureau”, Indochine Park Tower, Vijco saLes centre, office and dormitory, Saigon Water Park, Cultural Centre-Ben Thanh Theatre, Mercedes-Benz vehicle plant, Sporting Shoes Nike Plant, Charoen Pokphand Vietnam factory, Unique gas & petrochemicals plant, Fuji film & Camera factory. Moreover, they have executed water supplied factory Luong yen and Phap van. Due to the fact that, in the completion of the projects, the procedures must consist of the environmental impact assessment report. These projects in which INVESCO is considered as a main contractor, and therefore, they have to deal with environmental technology either by itself or subcontracting to others. Form their records of accomplishment, we can see that INVESCO also is a big construction company that Altech have to consider when entering Vietnamese market.
5.3.1.2. Water construction company limited (WACO)
1. Company:
Waco Limited is located at 54/5 Au co street, District Tan Binh, founded in 1992 with the legal capital of 4.5 billion VND. Scope of services of the company is the bid of construction project and being the supplier of equipment for water supply project, water and wastewater treatment.
Form the time of foundation, WACO has operated with two main functions: trading and construction. Thanks to the traditional relationship with well-known manufacturer of water equipment over the world, WACO has rapidly become the main distributor and big equipment supplier in Vietnam for many water projects. Now, the company has expanded the relationship to some other nationwide manufacturers.
On performing water projects: with man experiences and the long history of company’s development, Company has gained its reputation through completion many small and big projects at the high level of quality and reliability. This success could be illustrated through the fact that WACO has been chosen to participate in many supply water, waste treatment, environmental projects, whose capital from ODA, World Bank, ADB, over Vietnam.
Company is increasingly developing itself in scope of activities and technology capability. Company incorporated and is incorporating with some companies in UK, USA, Canada, Malaysia in the application of the new technology to the treatment of various water source such as underground water, salt water. Company has completed some projects with low investment, high economic efficiency, limited the use of chemical and account for least surface, therefore, suitable to the construction condition of Vietnam.
2. Product-services:
Company is operating in form of the package tender of water projects: from the design, plan, to the supply of material and perform the project. Besides, Company supplies consultancy service in industry, introduce new products, new technology to local clients.
Company trades a variety of products of many capacities, which provided by well-known manufacturers, with ISO9001 standard. Each product is sold with the 12-month guaranty card together with clear guideline.
Besides the trading of water equipment, Company is also bidding for construction project, building water and waster water treatment system.
3. Track record:
• Construct and erect equipment for upgrading water supply network (ADB project-1998)
• Underground water treatment plant Cai Rang (Cantho water supply company-1998)
• Upgrade pipelines for water supply in HCMC (ADB-1998)
• Supply of wastewater pump (1998)
• Others (more than 40 projects from 1992-1998)
5.3.1.3. Viet Chau Construction Co.,ltd
1. Background:
Viet Chau Construction Co., Ltd was formed in 1990 in Ho chi Minh city as a construction company specialized in manufacturing and installation of high quality aluminum doors and windows, and interior decoration. A new environmental works division was created in September of 1997. (???)
2. Business expansion
Reason???
3. Human resource:
A new environmental works division was created and directed by:
• Mr. Tran Van Bay – President/Director
• Duong Minh Duc – Project director – with 15 years of experiences working in the USA in designing, project management, general construction, and pollution control
• Tran An Nhan, PhD – Technical Advisor – former research engineer of Electricite de France (Paris)
• Eddie Mahan – Technical Advisor – with 35 years of experiences working in the USA in engineering, project management, general construction, and pollution control
• Mai Thanh Toan, Eng – Environmental advisor –with 25 years of experiences in water supply/treatment, and pollution control
• Tran Tuan Long, m.S. – Environmental expert – with 10 years of experiences in pollution control
4. Scope of activities:
• Environmental impact assessment
• Water treatment and supply for industrial facilities, hospitals, hotels, housing subdivisions, and apartment complexes
• Wastewater treatment for industrial facilities, hospitals, and housing subdivisions
• Air emission control for industrial facilities
• Solid waste disposal for industrial facilities
• Noise control for industrial facilities, hotels and hospitals
• Civil and industrial construction
5.3.2. Treatment technique company-P&G Engineering Pte Ltd
1. The Company:
P&G Engineering was established in 1979 when two of its four founding partners were trained in the field of plastic fabrication by a specialist from canning, England. During the company initial period of operation its main business was in the area of fabrication, servicing and maintenance of electro-plating lines
P&G is today a 200-strong corporation established for its expertise beyond plastic fabrication. The company maintains a team of professionals whose expertise spans such diverse fields as high quality plastic fabrication, environmental engineering and industrial automation.
In 1985, the company ventured into the business of environmental engineering providing complete design and commissioning of pollution control equipment and system.
In 1998, the electro-plating business was further expanded when the company secured contract for manufacturing of electro-plating systems for a internationally known Swiss company.
The same year the company was converted to Private Limited status. In line with its commitment to continually up-grade its operation both in terms of technology and quality, the company had invested substantially in highly advanced plastic fabricating machinery form Germany and at the same time entered into technical tie-up with internationally renown specialist companies in area of environmental engineering and automated equipment
In its diversification strategy, P&G will constantly maintain its commitments in service and quality they believe in providing to customers
2. Environmental engineering
For many years P&G Engineering has been involved in the field of waste air purification, effluent treatment, recovery of valuable material and safe handling of polluting or toxic substances.
The company designs, manufactures and assembles corrosion-resistant plastics equipment used in air ventilation, clean air engineering and the construction of tanks and piping,
In addition, P&G Engineering supplies the KCH standardized fanx which P&G Engineering manufactures under license form Keramchemie GmbH. KCH series of exhaust fans broke new ground in the field of highly efficient plastic fan with its revolutionary design that offers unsurpassed price/performance ratio.
Also, the company’s association with KCH GmbH of Germany, provides it with the latest technology in environmental engineering to undertake complete plant design and construction.
P&G Engineering has a team of experienced engineers available to provide advice and recommend solution to problems in the field of environmental engineering.
3. Business expansion
P&G is a joint venture between P&G Singapore and P&G Cananda. The parent company is in Canada and the Company in Singapore to manage the operation. In order to expand their business, P&G enter Vietnam. In this mean time, they are in form of a Representative office, acting as a technological equipment supplier. All the equipment are manufactured by P&G Singapore, India and Indonesia. Because Singapore is famous of cleanliness, P&G can take advantage of this to marketing for itself in Vietnam. P&G used their own manufactured equipment, therefore, the price for the environmental projection is cheaper than others of technology form Canada, or European.
Chapter 6
Design of action plan
There are two options for initiating a commercial presence in Vietnam. A legal entity can be established by applying for either a representative office license or foreign investment project license, under Vietnam’s Foreign Investment Law. The representative office is a logical first step for foreign investors to take in order to determine the potential of the market and practicality of making investment in Vietnam. There are four types of foreign investment licenses available in Vietnam: the Business Cooperation Contract (BCC), the joint-venture (JV), the 100% Foreign owned corporation (100% FOE) and the Build-Operate-Transfer (BOT Project)
After conducting SWOT analysis, there are some suggestions for Altech company for entering Vietnamese market.
6.1. Phase I : Set up representative office in HoChi Minh city
6.1.1.Objectives
- To explore the potential market and the risk of doing business there.
- To built an awareness of Altech’s in the market as well as the relationships customers and the local authorities.
- To build reputation.
6.1.2. Activities
- Participate in bidding for environment projects.
- Learn the regulations and the cultures of customers, cultures of doing business in Vietnam.
- Build relationships with the local authorities and associations such as Service of Industry, Service of Science, Technology and Environment, Service of Planning and Investment, Association of Traders & Industrialists, FOSCO, etc.
- Hire and train local staff to act as business developers, who then together with knowledge of doing business in Vietnam, the relationship with local authorities and the perceived technical knowledge can help to enhance the performance of the representative office.
6.1.3. Duration
Estimated duration: 3 years.
6.1.4. Human resources
One director and two engineers who are expatriates from Altech headquarter, of which one have a good knowledge and experience in marketing. One local engineer also with knowledge in marketing and have experiences in environmental projects. Two secretaries who are local people: one for office operations, and another for project operations. Both must be knowledgeable in laws and regulations.
6.1.5. Budget
- Sunk cost : Fee for opening representative office USD$5,000 (fee for a rep.office license)
Furniture: US$20,000
Office’s machine (photocopier/fax/tel): USD$5,000
Computer/printer: US$ 3,000
Decoration/misc.: US$5,000
( Total: US$ 38,000
- Operation cost: Hiring office : US$1,500/month
Office supplies (stationery/newspaper/misc): $US 500/month.
Salary (Vietnamese staff): US$1,200
Telephone/internet: US$ 1,000
Accommodation (foreigner): US$ 1,200
- Total: US$ 6,400
- Average bidding cost: Tender package price is from US$300-US$2,000 (depend on the project size)
6.1.6. Advantages
- The most easiest form
- Exempt form corporate tax and auditing requirements.
- Procedure to establish a rep. office is relatively straightforward.
6.1.7. Challenges
- Representative office is the most restricted form, is strictly prohibited from engaging in any revenue-generating activities, such as trading, rendering professional services, revenue collection.
- The legal environment is not stable
- Quite new company in Vietnam, not yet gain reputation
- Bidding regulations and cultures in Vietnam (complex and not official)
6.2. Phase 2: Set up a Business entity
Herebelow are two alternatives that could be selected after 3 years, depending on the situation especially legal conditions and at that time.
6.2.1. Alternative 1: Joint venture with local companies.
Advantage:
- The current regulations in Vietnam give favor to joint venture rather than a wholly-owned company.
- Can make use of relationships of the local partners, which typically the state-owned enterprise (SOE) in Vietnam.
- Take advantage of an established Vietnamese partner in finding way through a poorly understood administrative environment.
- JV can apply for new license or undergo liquidation upon the expiration of the JV license (20-40 years).
- Reduce risk of investment and appropriate for Altech’s shortage of capital.
Disadvantage:
- Technology transfer can reduce the competitive advantages of Altech’s know-how.
- Knowledge inventory of the partner in environmental projects may reduce the effectiveness of the business.
Human resources:
- The staff of the representative office will be the trainers in the venture because they are the ones who know most in Vietnam’s current business environment.
- Additional expatriates: project manager (1), project engineer (3), technical adviser (1), finance manager (1).
- The remaining personnel will be local people.
Training and development:
- Train the trainers. Those trainers will train the customer according to requirements of each type of environmental project.
- Train technical skills for the local personnel which are specialized in the environmental business.
- Equip engineers with industry characteristics in Vietnam.
Public relations: Considerable in Vietnam culture
- Increase relationships.
- Support for social activities toward environmental conservation.
Tactics:
- Counseling in ISO 14000 to customers and potential customers to build relationships.
- Initially, try to win environmental projects of the government or local authorities in order to create the image of Altech’s technology to potential customers (which are business).
6.2.2. Alternative 2: Altech’s wholly-owned company
Advantage:
- Recently become more popular as investors have learned better to navigate the local system on their own, and as problems with JV partners have become more apparent.
- Make sure of know-how of Altech for high effectiveness .
- Reduce risk of loosing technological know-how.
- More active in management and keep track with Altech’s vision.
Disadvantage:
- The regulations do not give favor to wholly-owned companies.
- More difficult access to land (except in Industrial zones and export processing zone).
- More limited duration license of not more than 10-15 years.
Other activities can be the same as planned for JV.
References
Akhter S.H., 1995. Global Marketing. Ohio: south-Western College Publishing.
Daniels, J.D., Radebaugh, L.H., 1995. International Business Environments and Operations, 7th edition. Addison-wesley Publishing Company, Inc.
Charles W.L.Hill, Gareth R.Jones. Strategic Management, 4th edition. Houghton Mifflin Company
Porter, M.E., 1980. Competitive Strategy, Techniques for Analyzing Industries and Competitors. New York: The Free Press, Macmillan, Inc.
Root, F.R., 1994. Entry strategies for international markets. New York: Lexington Books, Macmillan, Inc.
Anderson, Erin and Anne T. Coughlan, January 1987. International market entry and expansion via independent or integrated channels of distributions. Journal of marketing 51: 71-82
Anderson, Erin and Hubert Gatignon, Autumn 1986. Modes of Foreign Entry: A transaction cost analysis and propositions. Journal of International Business studies 17,3: 1-26
Hill, C.W.L., p.Hwang and W.C. Kim (1990). An electic theory of the choice of international entry mode. Strategic Management Journal 11,2:117-128
A report for the European Commission. Vietnam Trade and Investment analysis 1998 update
A socio-economic statistical bulletin 1998-1999
Foreign investor pitfalls and perils in Vietnam: A review and commentary
U.S. Embassy, Hanoi, July 1998. Country commercial guide Vietnam 1998
United Development program. A national strategy for Vietnam pilot phase 1998-2000
http://gsb.curtin.edu.au/ibs/doc/WP4.htm
http://www.env.gov.sg/circle/index.html
http://www.tdb.gov.sg/singbiz
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Environment:
- Economics
- Policies
- Political factors
- Socio factors
- Cultural factors
Industry:
- Segmentation
- Companies
- Competition
- Strategies
- Opportunities
Market:
- Potential
- Demand
- Segment
- Share
Company profiles:
- Structure
- Capability
- Resources
-
Alternatives Entry Strategies
Literature Review
Action Plan Design
Foreign market entry mode decision
Company resource/commitment factors
Company product factors
Target country factors
Target country cost factors
Target country environmental factors
Target country market factors
Control system
Monitoring operations/
Revising entry strategies for other market
Target Market
Entry operations
Designing the marketing plan
Choosing the entry mode
- Licenses
- Contractual argreements
- FDI
- JV
- Wholly owned subsidiary
Setting objectives and goals
Assessing foreign markets/products in selected target countries
[pic]
Admin/Finance/HR
Engineering
Design/R&D
Projects & Operations
Managing Director 