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Some Problems Remaining In The Process Of Implementing Vnpt's Diversification Strategy

CHAPTER III:‌‌

SOME PROPOSALS TO IMPROVE THE EFFICIENCY OF THE STRATEGY TO DIVERSIFY PRODUCTION AND BUSINESS ACTIVITIES AT VNPT

I. Some remaining issues in the process of implementing VNPT's diversification strategy

1. Horizontal linkages between units are still weak


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Vietnam Posts and Telecommunications Group is a State economic group originating from a state-owned enterprise with a monopoly in the field of post and telecommunications, established on the basis of restructuring the General Post and Telecommunications Corporation established according to the model of Corporation 91, and more deeply, a State agency: the General Department of Posts and Telecommunications. With such a birth, VNPT owns important telecommunications infrastructures such as the national telecommunications backbone or the VinaSat-I satellite... This is a huge advantage of VNPT compared to other enterprises. However, besides that, VNPT also "inherits" the inherent weaknesses and shortcomings of state agencies and enterprises that have existed since the subsidy period, which has a significant impact on the effectiveness of the Group's strategy implementation. And one of the biggest remaining problems in the process of implementing VNPT's strategy is that there is almost no cooperation or association between subsidiaries and affiliated companies in the Group. Currently, the Group has 17 subsidiaries and 14 affiliated companies operating in the fields of postal services - telecommunications - information technology and some other fields. Most of the companies are strong enterprises that occupy a large market share in their business fields, however, there are almost no joint activities between these companies. Except for a few companies such as the Data Communication and Computing Company (VDC)... which still have dependent accounting, each subsidiary or affiliated company is a separate business, has its own financial accounting, has its own human resources, has its own specific policies for each business field, has its own marketing plans, its own human resource development plans... Not only that, within each member company itself there are subsidiaries, centers, affiliated departments and these units almost do not have joint activities with each other.

in the process of participating in business. In the same business field of the Group, member companies compete for market share without any business cooperation. For example, in the field of manufacturing telecommunication cable materials, VNPT currently has 07 member companies participating in production, competing with each other without any cooperation:

Some Problems Remaining In The Process Of Implementing Vnpt's Diversification Strategy

- Cable and Telecommunication Materials Joint Stock Company (SACOM).

- VINADEASUNG Cable Joint Venture Company.

- FOCAL Optical Cable and Accessories Manufacturing Joint Venture Company.

- VINA-GSC Optical Fiber Cable Manufacturing Joint Venture Company.

- Post and Telecommunication Construction Materials Joint Stock Company (PCM).

- Postal Materials Joint Stock Company (POSTMASCO).

- Postal Materials Joint Stock Company (PMC).

Or as mentioned in Chapter II with the case of Postal Finance Company (PTF) and Postal Insurance Joint Stock Company (PTI). Although they have been established and operated for more than 10 years as the two largest financial institutions of VNPT, playing an important role in the capital mobilization and financial investment channel of VNPT, it was not until 2007 that the two companies began to have the first steps of cooperation.

This has significantly affected the Group's operations. With many member companies operating and competing with each other in the same field, in the beginning, this may be a good way to gain market share. However, the lack of connection will prevent businesses from taking advantage of each other's advantages, promoting economic advantages according to scale, and furthermore, it will be difficult for the Group to manage.

2. The team of highly qualified experts in many fields is still lacking, unable to meet the development speed of the Group.

Coming from a state-owned enterprise, the working style of VNPT employees still shows dependence and lack of professionalism. The level of the workforce is generally not high, especially in some areas where there is a lack of highly qualified experts.

Typically in the Postal sector: In the total number of employees of VNPT before separating post and telecommunications, there were about 90,000 employees with university degrees or higher, accounting for about 27.28% and intermediate, workers, short-term training accounting for over 72%. The Postal sector had about 52% of employees, with professional qualifications mainly being college, intermediate, technical workers, and short-term trained workers. The number of employees with university degrees or higher was very low. Even at

Post and Telecommunications Corporation: The number of employees with university degrees is 3,165 people and 70 people with post-graduate degrees out of a total of 29,010 people 21 , accounting for only about 11%. This has affected the business results of the Group, the revenue of the Postal Service only accounts for about 6% of the total revenue of the entire VNPT at present.

In addition, in the field of information technology, the number of highly qualified workers is also very scarce. Currently, the IT workforce accounts for only about 1.7% (of which 67.4% have university degrees and 23.5% have college degrees) of the total 90,000 employees of VNPT. As a Group operating mainly in the field of Post and Telecommunications - Information Technology, a leader in the field of information technology, this is an alarming rate.

Looking at the whole Group, out of a total of 73,906 long-term employees, only 18,581 have university degrees and 1,293 have post-university degrees. This is also a very low number for a large corporation operating in the telecommunications and information technology sector like VNPT.

3. There are still some shortcomings and negatives in the operation process.


During its operation, VNPT still had some negative aspects that were common in a state-owned enterprise during the subsidy period, seriously affecting the Group's image. Typically, the negative aspects in the Group's equipment bidding in 2002 - 2003. During this period, VNPT often went through numerous intermediary bidders, which were VNPT's subsidiaries or other outside companies, while the discount price for telecommunications equipment for these sales units was often 35% - 65% of the price sold by the company. In addition, VNPT's investment rate: to invest in a gateway


21 Vietnam Posts and Telecommunications Group , Statistics on labor structure in 2008, page 2.

For example, for ADSL Internet connection, VNPT had to spend 200 USD while another unit in Vietnam only spent 70 USD. Or VNPT assigned the Center for Information Technology (CDiT) to bid packages in the project of upgrading computer networks and management software, operating production and business for the provincial post office. In fact, CDiT is a scientific research center, without a business registration certificate. However, from 1999 to 2000, this unit signed and implemented 51 economic contracts. These negative events had a significant impact on the Group's business results, creating a bad precedent for other members to follow and damaging VNPT's reputation.

4. The conversion of the Postal Savings Service Company into a Bank encountered many difficulties.

Obviously, when converting VPSC into a Bank, VNPT has advantages in terms of capital, network and experience. However, up to now, the conversion project is still on paper and according to many experts, it is at risk of "failing halfway".

First of all, VNPT is currently facing difficulties in human resources: This is an important factor when doing business in the banking sector. However, immediately training a team of postal staff to switch to working in the banking sector is a real challenge for the postal sector at the present stage. Searching for human resources from outside will face fierce competition for highly qualified human resources in the banking sector from the banks that are currently operating.

Besides, there are difficulties in experience. Although having experience from the operation of the Postal Savings Service Company (VPSC), doing business in the banking sector requires standards, regulations, and highly specialized operations. This is completely different from the business of VPSC before. This, if compared with state-owned commercial banks, joint-stock commercial banks, foreign banks, and postal services, will take a long time to learn if one wants to do business in the banking sector, which has a fierce level of competition according to market principles.

Next, VNPT also faces significant difficulties in capital: The charter capital to help a commercial bank survive and compete in the integration period, according to the calculation of the State Bank Strategy Department, is about 9,000 billion VND. State-owned commercial banks and joint-stock commercial banks are striving to obtain this capital through many different forms of capital mobilization, the most important of which is participating in capital mobilization on the stock market. The current charter capital of the Postal Savings Service Company is about 163 billion VND. To establish a postal bank with a charter capital of about 1,000 billion VND (expected), the Postal Service will have to add about 837 billion VND. Thus, this is really a big challenge for the Postal Service, when it needs a lot of capital to modernize its own network and do profitable business when the separation from Telecommunications has been completed.

In addition, the difficulty also comes from VNPT's strength, which is the network. Although having the advantage of the post office network, however, the Postal Bank (if established), will have to compete to attract customers in terms of service radius with all other banks, not just one bank. Currently, State-owned commercial banks, Joint Stock Commercial Banks (urban and rural), all have a network of branches across the country. While the banks have a lot of experience in operations, the postal service will face difficulties when entering the market, attracting customers if there is no reasonable marketing strategy. Mobilizing savings deposits will also face challenges from more than 900 People's Credit Funds. Banks expanding their service radius, transaction offices, establishing many transaction branches in provinces and cities across the country, increasing the number of payment card acceptance points and automatic teller machines (ATMs), will also reduce the advantage of opening hours and service radius of Postal Banks.

II. Development orientation of Post and Telecommunications and trends in the international environment affecting Post and Telecommunications services

1. Development orientation in the "Vietnam Post and Telecommunications Development Strategy 2010 and towards 2020" of the Ministry of Post and Telecommunications

- Regarding service development orientation: Rapidly develop and diversify telecommunication services on the basis of the advanced and modern national information network infrastructure that has been built, meeting information needs at reasonable prices. Accelerate the socialization of telecommunication services, moving towards universalizing telephone services nationwide as soon as possible.

- In addition to developing fixed basic services, shifting the focus to developing services such as mobile, Internet, e-commerce, and value-added services, which are the core services of the information society and knowledge economy in the future.

- Development and improvement of service quality must go hand in hand with measures to increase labor productivity, reduce costs and service prices, and strive for telecommunications services, including mobile information services, to have lower or equivalent rates compared to other countries in the region.

2. Development orientation of Vietnam Post and Telecommunications in 2010 and towards 2020 of VNPT

- Building Vietnam National Posts and Telecommunications Group to become the leading economic group in Vietnam, with modern management technology and high specialization on par with countries in the region; multi-industry business in which post, telecommunications and information technology are the main business sectors with many types of ownership; closely linking production and business with science, technology, research and training; improving competitiveness, proactively reaching out to regional and world markets; developing rapidly and sustainably in the context of international economic integration.

- Improve production and business efficiency, actively contribute to growth and structural transformation of the service industry and economy.

- Maintain the leading role and core role for the development of Vietnam's postal and telecommunications industry. Ensure smooth information to serve the direction and administration of the Party and Government; contribute to maintaining security, national defense, natural disaster prevention, and well performing the public service tasks assigned by the State.

3. Trends in the international environment affecting Postal and Telecommunications services

3.1. The trend of liberalization of telecommunications market


This trend is taking place strongly in many countries, in order to adapt to the rapid development of technology and services, increasing the efficiency of telecommunications development. The participation of the private sector in the development of Post and Telecommunications is increasingly evident and accounts for an increasingly large proportion. The trend of mergers and acquisitions of large corporations with the goal of adjusting investment structures, diversifying business fields to increase specialization, improve competitiveness, develop new technologies...

3.2. Globalization and regionalization trends


Economic globalization is an objective trend, attracting the attention of all countries, covering almost all fields, promoting cooperation for development, while increasing competitive pressure and interdependence between economies. Bilateral and multilateral relations between countries are increasingly deepening in many fields, corporations and transnational companies continue to restructure, forming giant corporations that dominate many fields of the country.

3.3. Development trends of mobile technology and telecommunications


Second generation mobile information technology such as GSM or CDMA will gradually be replaced by 3G technology to facilitate increased access speed via mobile subscribers.

Due to changes in technology, the convergence of telecommunications and information technology also occurs with mobile networks, so the mobile network structure develops strongly according to the trend of switching to packet switching technology with GPRS and 3G structures to meet the services requiring high speed. Besides, mobile services and Internet are two services

The most developed of all telecommunication services to date. The combination of mobile and Internet has been a big trend in recent years. The trend of mobile-Internet interworking will develop more strongly in the future when the market of more and more people uses mobile phones and the Internet.

There are many factors that influence the successful development of mobile networks.

- Internet. First, the rapid deployment of high-speed 3G networks will facilitate the provision of mobile multimedia services. Second, mobile phones with Internet access must be reasonably priced for users. Third, Internet information content must be enriched. Finally, the billing model must be simple and flexible, clearly distinguishing between voice and data service charges. Therefore, a healthy competition policy is the best way to develop both the mobile and Internet markets on a global scale.

III. Some recommendations for VNPT


In addition to the suggestions when analyzing the SWOT model above, some other solutions to improve the effectiveness of VNPT's diversification strategy are proposed as follows:

1. Diversify in a focused and systematic manner, based on the core values ​​of the business

In the coming time, especially when the telecommunications market will be opened to foreign investors in 2012, it is absolutely necessary to build a clear and systematic strategy for diversifying operations. Having a roadmap for the steps to implement the strategy in a systematic way will help VNPT save resources and minimize risks. On the other hand, carefully studying policies and legal regulations as well as having a systematic plan for the steps to implement the strategy plays a very important role.

When choosing investment fields to expand production and business activities, the Group needs to choose fields related to or supporting its main production and business activities such as Post - Telecommunications - Information Technology, and should not invest in fields that are completely not its forte. Only then will

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