Luận văn Thạc sĩ Quản trị kinh doanh: Improving competitiveness through financial solutions - A study of Vietnam posts and telecommunications (VNPT)

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In this dissertation, first of all, the study aims to clarify basic theories on corporate competitiveness and financial solutions for improving competitiveness of enterprises; this study evaluates the competitiveness of VNPT through the comparison between enterprises in the industry. Also, the actual performance of improving the competitiveness through financial solutions in VNPT will be focused.

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ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH --------------------- NGUYỄN ĐỨC ANH IMPROVING COMPETITIVENESS THROUGH FINANCIAL SOLUTIONS: A STUDY OF VIETNAM POSTS AND TELECOMMUNICATIONS (VNPT) GIẢI PHÁP TÀI CHÍNH NHẰM NÂNG CAO KHẢ NĂNG CẠNH TRANH: NGHIÊN CỨU TẠI TẬP ĐOÀN BƯU CHÍNH VIỄN THÔNG VIỆT NAM (VNPT) LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH HÀ NỘI - 2020
ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH --------------------- NGUYỄN ĐỨC ANH IMPROVING COMPETITIVENESS THROUGH FINANCIAL SOLUTIONS: A STUDY OF VIETNAM POSTS AND TELECOMMUNICATIONS (VNPT) GIẢI PHÁP TÀI CHÍNH NHẰM NÂNG CAO KHẢ NĂNG CẠNH TRANH: NGHIÊN CỨU TẠI TẬP ĐOÀN BƯU CHÍNH VIỄN THÔNG VIỆT NAM (VNPT) Chuyên ngành: Quản trị kinh doanh Mã số: 60 34 01 02 LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH NGƯỜI HƯỚNG DẪN KHOA HỌC: PGS.TS. HOÀNG ĐÌNH PHI HÀ NỘI - 2020
DECLARATION The author confirms that the research outcome in the thesis is the result of author’s independent work during study and research period and it is not yet published in other’s research and article. The other’s research results and documentation (extraction, table, figure, formula, and other document) used in the thesis are cited properly and the permission (if required) is given. The author is responsible in front of the Thesis Assessment Committee, Hanoi School of Business and Management, and the laws for above- mentioned declaration. Date: November 2019 i
ACKNOWLEDGEMENT I wish to express my deepest gratitude to my thesis advisor, Assoc. Prof. Dr. Hoang Dinh Phi, dean of Hanoi School of Business and Management at Vietnam National University. Without his enthusiastic support, the goal of this project would not have been realized. I am gratefully indebted to his very valuable advices on this thesis. I would like to give great thanks to all my respected lecturers during my two years of study at HSB. It is whole-heartedly appreciated that their great advice proved monumental towards the success of this study. I wish to thank all my colleagues and all my friends whose assistance was a milestone in the completion of this project. I would like to recognize the invaluable assistance that you all provided during my study. Finally, I must express my very profound gratitude to my parents and to my sister for providing me with unfailing support and continuous encouragement throughout my years of study and through the process of researching and writing this thesis. This accomplishment would not have been possible without them. Thank you. Hanoi, November 2019 Duc Anh Nguyen ii
TABLE OF CONTENTS DECLARATION ................................................................................................... i ACKNOWLEDGEMENT .................................................................................... ii TABLE OF CONTENTS ..................................................................................... iii LIST OF ABBREVIATIONS .............................................................................. vi LIST OF TABLES ............................................................................................. viii LIST OF FIGURES .............................................................................................. ix ABSTRACT ...........................................................................................................1 1. Rationale .................................................................................................. 1 2. Literature review...................................................................................... 2 3. Research objectives ................................................................................. 7 4. Research scope ........................................................................................ 7 5. Research methods .................................................................................... 7 6. Structure of the dissertation ..................................................................... 8 CHAPTER 1. BASIC THEORY ON FIRM’S COMPETITIVENESS AND THE ROLE OF FINANCE IN IMPROVING COMPETITIVENESS OF ENTERPRISES ......................................................................................................8 1.1. CORPORATE COMPETITIVENESS ................................................. 8 1.1.1. Theories of competitiveness and competitive advantage .............. 8 1.1.2. Methods of measuring and analyzing competitiveness ............... 12 1.1.3. External factors affecting competitiveness .................................. 20 1.2. THE ROLE OF FINANCE IN IMPROVING ENTERPRISES COMPETITIVENESS ............................................................................... 22 1.2.1. Taxation ....................................................................................... 22 1.2.2. State investments on supporting industries ................................. 23 1.2.3. Enterprises’ financing policy ....................................................... 23 1.2.4. Enterprises’ investment policy .................................................... 24 iii
1.2.5. Enterprises’ distribution policy ................................................... 25 CHAPTER 2. ANALYSIS OF VNPT COMPETITIVENESS AND ITS CONTEMPORARY FINANCIAL SOLUTIONS FOR IMPROVING COMPETITIVENESS DURING 2014 - 2018 ....................................................26 2.1. BRIEF OVERVIEW OF VNPT ......................................................... 26 2.1.1. History and development of VNPT ............................................. 26 2.1.2. Characteristics of VNPT activities .............................................. 26 2.1.3. Business performance of VNPT in comparison with its competitors............................................................................................. 28 2.2. THE COMPETITIVENESS OF VNPT DURING 2014 - 2018 ........ 37 2.2.1. Evaluation of VNPT’s competitiveness using Pyramid Model .. 37 2.2.2. Evaluation of VNPT’s competitiveness using 5-Forces model .. 44 2.3. EVALUATION ON VNPT FINANCIAL SOLUTIONS FOR IMPROVING ITS COMPETITIVENESS DURING 2014 – 2018 .......... 50 2.4. EXTENDING THE ANALYSIS ....................................................... 51 CHAPTER 3: PROPOSAL OF FINANCIAL SOLUTIONS FOR IMPROVING COMPETITIVENESS OF VNPT IN VIETNAM .......................54 3.1. DEVELOPMENT ORIENTATION OF VNPT IN THE NEAR FUTURE .................................................................................................... 54 3.1.1. Opportunities and challenges to VNPT ....................................... 54 3.1.2. Development orientation of VNPT.............................................. 56 3.2. RECOMMENDED FINANCIAL SOLUTIONS FOR IMPROVING COMPETITIVENESS OF VNPT ............................................................. 58 3.2.1. Diversifying sources of capital .................................................... 58 3.2.2. Improving VNPT’s credit and inventory management ............... 59 3.2.3. Making investment decisions effectively .................................... 61 3.2.4. Innovating financial management team ....................................... 61 3.2.5. Creating a diverse and flexible price policy ................................ 62 iv
3.3. OTHER RECOMMENDATIONS ..................................................... 63 CONCLUSION ....................................................................................................67 REFERENCES APPENDIX v
LIST OF ABBREVIATIONS 1 AAG Asia - America Gateway 2 ABC Antecedent - Behavior - Consequence 3 ADSL Asymmetric Digital Subscriber Line 4 AFTA ASEAN Trade-in Services Agreement 5 ATM Asynchronous Transfer Mode 6 EOQ Economic Order Quantity 7 FTTC Fiber to the Curb 8 FTTH Fiber to the Home 9 GDP Gross Domestic Product 10 ICT Information and Communication Technology 11 IP Internet Protocol 12 ISO The International Organization for Standardization 13 IT Information Technology 14 IXP Internet Exchange Point 15 JIT Just-in-time 16 MRP Materials Requirements Planning 17 NGN The Next Generation Network 18 ODA Official Development Assistance 19 OECD The Organization for Economic Co-operation and Development 20 R&D Research and Development 21 ROA Return on Assets 22 ROE Return on Equity 23 ROS Return on Sales vi
24 SDH Synchronous Digital Hierarchy 25 SWOT Strength - Weakness - Opportunity - Threat 26 VNPT Vietnam Post and Telecommunications 27 VTF Vietnam Public Utility Telecommunications Service Fund 28 WDM Wavelength Division Multiplexing 29 WEF World Economic Forum 30 WTO World Trade Organization 31 xDSL Digital Subscriber Line vii
LIST OF TABLES Table 2.1 VNPT financial indicators 2014 - 2018 ................................................. 32 Table 2.2 Comparison in price of the same service provided by VNPT, FPT, Viettel 2019 ............................................................................................................ 35 Table 2.3 VNPT’s business result 2014 - 2018 (Unit: Million VND) ................... 39 Table 2.4 VNPT’s Accounting Balance Sheet 2014 - 2018 (Unit: Million VND) 40 Table 2.5 Strengths and weaknesses of VNPT’s competitors in the postal sector 45 Table 2.6 Strengths and weaknesses of VNPT’s competitors in telecommunications sector ..................................................................................... 47 viii
LIST OF FIGURES Figure 1.1 Firm's Sustainable Competitiveness Pyramid....................................... 19 Figure 2.1 Organization chart of VNPT ................................................................. 28 Figure 2.2 Market share of postal providers by revenue 2016............................... 29 Figure 2.3 Market share (by subscriptions) of terrestrial fixed-line telephone service providers 2016 ........................................................................................... 29 ix
ABSTRACT 1. Rationale Recent times have witnessed a rapid development of the telecommunications sector in many developing countries. This is due to the emergence of internet and wireless services, which enables the entrance into the sector of competitive service providers; and strong development of international trade in telecom services. Telecommunications sector also recognized that a liberalized telecom market could generate higher growth, and produce better services. Thereby, this development resulted in significant improvements of their telecommunications networks and performance. In Vietnam, telecom market has transformed from monopoly based to competition-based approaches in the last two decades. In 2007, Vietnam was recognized as the world’s second fastest growing telecom market by the International Telecommunications Union. Recently the market has about 70 operating telecoms companies, approximately 47% of those was granted licenses to provide telecommunications services whereas the rest established network infrastructure (Vietnam News, 2017). In general, it can be seen that the reforms have lifted the overall competitiveness of the telecom sector. Initially, there was only one service provider in Vietnam, namely the Vietnam Post and Telecommunications General Corporation (now the VNPT Group), who laid the first stone for the development of the telecommunications sector in Vietnam. VNPT remained its monopoly for years, managing all the infrastructures and all types of basic telecommunications services in Vietnam. However, the rapid growth of telecom sector in Vietnam changed the landmark. The governmental decree in October 2003 gave all telecom provider the freedom to establish network and provide telecom services in Vietnam. As a consequence, VNPT lost 1
their monopoly position. In addition, for the past few years, while commitments concerning Vietnam’s telecom sector has been made in its Bilateral Trade Agreement with the US and within the ASEAN framework, more and more service providers began to emerge in the market and has been threatening the leading position of ringleader of the industry. The competition from foreign companies such as Telstra (Australia), Alcatel and France Telecom (France), Siemens (Germany) has also become stronger. Although VNPT has currently been one of the top-five domestic telecom companies in Vietnam1, its market share is only 17.5%, much lower than other competitors, compared to Mobifone (31.8%) and Viettel (43.5%) (Vechi, 2015). In this context, in order to remain as one of the leading telecommunications companies in Vietnam, it is very much essential for VNPT to push much more effort on improving its performance and gain competitiveness in the market. One of the most important solutions to enhance the competitiveness is from financial perspective. For these reasons, the topic “Improving the competitiveness through financial solutions: A study of Vietnam Posts and Telecommunications (VNPT)” has been chosen for this master dissertation. 2. Literature review There are broad and varied definitions of competitiveness concept based on different schools of thought and the level of analysis. 1 Five major service providers in Vietnam market are currently Viettel, Mobifone, Vinaphone, VietnamMobile and GMobile. 2
According to Michael Porter (1990), the leading researcher on competitiveness and competitive strategies, the concept of competitiveness can be understood as the company’s ability to obtain the market share and generate higher profit than its current average profit. Under mercantilism, according to Krugman (1994), competitiveness is a different name of productivity, considering the rate of growth of one enterprise compared to the others in the same industry. In deeper research, according to the UK Department of Trade and Industry (2001), competitiveness is the capacity to supply the right goods and services of the right quality, at the right price and at the right time. On the other hand, Chikan (2008) defined the competitiveness of an enterprise is its capability to sustainably satisfy the requirements of customers at a profit. In addition to the concept, Reiljan, Hinrikus & Ivanov (2000) took the conflict of interest approach to competitiveness. They also identified three different levels of competitiveness as (i) ability to survive, (ii) ability to develop, (iii) superiority. Of which, ability to survive is the lowest level of competitiveness, which is the capacity to adapt passively to the competitive environment without any significant change or development. The medium level of competitiveness is ability to develop, in which an enterprise is considered to be competitive if they can actively respond to changes in the competitive environment, thus improving their qualities and efficiency. Superiority is the highest level of competitiveness, in which an enterprise is considered competitive if their operations are more efficient, faster development or better qualities than other competitors, thereby influencing on the competitive environment. Regarding the determinants of corporate competitiveness, Buckley, Pass & Prescott (1988) indicated that competitiveness has 3 dimensions including potential, process and performance, whereas Waheeduzzaman and 3
Ryans (1996) identified competitiveness as a buildup of many other disciplines (i.e. comparative advantage, price competition, strategic and management, including historical and socio-cultural disciplines). According to Vlachvei et al. (2017), dynamic capabilities, flexibility, agility, speed, and adaptability are recognized as the most important sources of competitiveness in the business environment. In addition, Anca (2012) emphasized that there is a close relationship between the various levels of analysis of competitiveness (i.e. product, firm, industry, organization, etc.). In particular, the quality of a product will determine whether an enterprise can survive competition, whereas a firm’s performance will determine if an industry or country can compete internationally. According to Michael Porter (1990), there are five forms of competitive advantage any firm may possess, including human resources, physical resources, knowledge resources, capital sources and infrastructural resources. Although there are unsettled arguments from different schools of thought, most researchers agree that competitiveness is a complex concept due to the differences in definition and methods of measurement. Overall, the concept of competitiveness focuses on 3 major aspects: (1) Different parties (including individuals and organizations) compete with each other in order to improve their position in the market; (2) Competition between the parties aims to obtain specific benefits such as market share, a certain group of customers, potential benefit in order to generate higher profits or maximize the firm’s value; (3) The participants might use different approaches (via price, product, brand, marketing, quality of human resources, financial resources, capital resources etc.) to beat the competition. Regarding the competitiveness in the telecommunications sector, there is also a number of studies from various perspectives. Trauth E. & Pitt D. (1992) traced the movement towards competitions in two different telecom 4
markets (the United States and the United Kingdom), and found out there are 3 major pressures for changes in the industry (i.e. technological, industrial and economic pressures). The research also stated that the continuing strength of the competitive social project in telecommunications cannot be denied. They suggested that different countries should progress along different telecommunications policy paths. In the study on competitive trends in the telecommunications industry, Fletcher & Kolle (2017) has identified the 4 trends as areas of competitive competence. First trend is digital customer service, in which telecoms companies invest in digital technologies that remove the need for staff, and also invest in bots to simple recurring tasks that do not need a high-touch customer engagement. Second trends in telecoms industry is to invest in security and encryption as a service, which leverage digital trust (i.e. security and privacy) is considered as a competitive advantage, and also invest in platforms for billing and payments. Third trend is to sell services not data, in which the companies invest and explore in connecting devices to form value added services in the smart home and smart office space. The fourth is content exclusivity, which implies the trend that the companies are likely to offer different digital services at reduced or zero rating. In this trend, the companies are also aware of erosion of net neutrality and potential brand damage from negative user awareness. Wilson P. & Gibbons (2014) suggested that the most successful enterprises are those that continually search for and find ways to create new value. They emphasized that value is not price driven but the value in the process and purse growth. They also indicated three rules that drive long- term superior performance in competition for telecommunication enterprises, including: (i) Better before cheaper (i.e. Do not compete on price, compete on value); (ii) Revenue before cost (i.e. Drive profitability 5
with higher volume and price, not lower cost); (iii) there are no other rules (i.e. Do whatever you have to in order to remain aligned with the first two rules). In a different approach, Grzybowski (2004) used panel data for the 15 EU countries from 1998 – 2002, and found out that the competitiveness of mobile telecommunications industry is significantly influenced by the regulation policy implemented throughout the liberalization process of fixed telephone lines. Also, the implementation of the number portability for mobile services has a positive impact on competitiveness. In Vietnam, there are several studies on corporate competitiveness in Vietnam. Tran Van Tung (2004) analyzed the economic and national competitive advantage and competitive strategy of the company. Vu Trong Lam (2006) systematized the concept of corporate competitiveness in the process of international economic integration in Vietnam and suggested some solutions to improve the international competitiveness of the company in Vietnam. Some researches focused on the competitiveness of telecommunications industry and companies in Vietnam such as Bui Xuan Phong (2007), Nguyen Dang Quang & Tran Xuan Thai (2008), Nguyen Duc Kien (2011), Tran Thi Anh Thu (2012), CIEM (2006). However, most of them evaluated the overall competitiveness of telecommunication industry or a telecom company and proposed some general solutions to improve the competitiveness of the industry or company. Few studies focused deeply on the field from financial approach and evaluated the performance of improving the competitiveness through financial solutions. This can be seen as a research gap for further studies in the dissertation. 6
3. Research objectives Though the literature review shows that competitiveness in telecommunication services is not a new topic, researches on the competitiveness in telecommunication industry from financial solutions approach are still a few. This is the research gap available for further research. In this dissertation, first of all, the study aims to clarify basic theories on corporate competitiveness and financial solutions for improving competitiveness of enterprises. Second, this study evaluates the competitiveness of VNPT through the comparison between enterprises in the industry. Also, the actual performance of improving the competitiveness through financial solutions in VNPT will be focused. Third, some financial solutions for improving competitiveness of VNPT in the future will be analyzed and recommended. 4. Research scope The main research object of the dissertation is the competitiveness performance of VNPT and financial solutions to improve its competitiveness. Therefore, the study will focus on analysis of evaluation criteria, factors affecting the competitiveness of VNPT. Some comparisons among major service providers will be analyzed. Research scope ranges from 2014 to 2018. The research basically uses secondary data from official annual reports, financial statements of companies, General Statistics Office, and other topic-related articles, journals and academic research. 5. Research methods The dissertation uses traditional qualitative approach to analyze theoretical concepts. Besides, the dissertation employs statistics, 7
comparison, analysis, synthesis, interpretation and induction to evaluate the competitiveness of selected companies and show the actual performance of improving competitiveness through financial solutions. 6. Structure of the dissertation The dissertation consists of 3 chapters: Chapter 1: Basic theory on firm’s competitiveness and the role of finance in improving competitiveness of enterprises Chapter 2: Analysis of VNPT competitiveness and its contemporary financial solutions for improving competitiveness during 2014 - 2018 Chapter 3: Proposal of financial solutions for improving competitiveness of VNPT in Vietnam CHAPTER 1. BASIC THEORY ON FIRM’S COMPETITIVENESS AND THE ROLE OF FINANCE IN IMPROVING COMPETITIVENESS OF ENTERPRISES 1.1. CORPORATE COMPETITIVENESS 1.1.1. Theories of competitiveness and competitive advantage 1.1.1.1. Definition of competitiveness Competitiveness is a vital characteristic of the market economy. There are broad and varied definitions of competition and competitiveness concept based on different schools of thought and the level of analysis. According to the surplus value theory, competition is a rivalry among capitalists in order to seize favorable conditions in production and consumption of goods to achieve super profits. In the deep study on capitalist competition, K. Marx discovered that the fundamental of competition is adjusting the average profit rate among sectors. Industries with high profit margins will attract more investors than the others. Meanwhile, Samuelson (1948) mentioned the competition in the relationship 8
between market and product consumption, in which enterprises compete for their market share to dominate the competition. Under mercantilism, competitiveness is a different name of productivity, considering the rate of growth of one enterprise compared to the others in the same industry (Krugman, 1994). If competition is the battle between enterprises in the same environment to increase their value, the competitiveness is about the ability to win the competition and create competitive advantage. According to Michael Porter (1990), the leading researcher on competitiveness and competitive strategies, the concept of competitiveness can be understood as the company’s ability to obtain the market share and generate higher profit than its current average profit. In the whole industry, the average profitability of the industry would be increased as a result of the competition. In deeper research, according to the UK Department of Trade and Industry (2001), competitiveness is the capacity to supply the right goods and services of the right quality, at the right price and at the right time. On the other hand, Chikan (2008) defined the competitiveness of an enterprise is its capability to sustainably satisfy the requirements of customers at a profit. In addition to the concept, Reiljan, Hinrikus & Ivanov (2000) took the conflict of interest approach to competitiveness. They also identified three different levels of competitiveness as (i) ability to survive, (ii) ability to develop, (iii) superiority. Of which, ability to survive is the lowest level of competitiveness, which is the capacity to adapt passively to the competitive environment without any significant change or development. The medium level of competitiveness is ability to develop, in which an enterprise is considered to be competitive if they can actively respond to changes in the competitive environment, thus improving their qualities and efficiency. 9