Exploring business activity (1)

Introduction: In this assignment, I will introduce about two contrasting organizations. One is a private sector organization and other is public sector organization. I will let more detailed about my two chosen companies business activities and their different events around that affect to them. My two chosen organizations:

Kinh Do Group.

Petrovietnam Oil and Gas Group.

P1:
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Kinh Do Foodstuff was established in 1993 with five founders: Tran Kim Thanh, Tran Le Nguyen, Vuong Buu Linh, Vuong Ngoc Xiem, Wang Chin Hua. The first product was Snack which quickly became very popular at that time. After many years, Kinh Do successfully introduced cake, candy, chocolate, cookies, crackers, wafer rolls and other snacks. The headquarters is located in 141 Nguyen Du St, District 1, Ho Chi Minh City, Vietnam. In 2010, the North Kinh Do and KIDO Company merged into Kinh Do Corporation. From the size only 70 staffs at the beginning, up to now, Kinh Do has total employees of over 7,741 persons. Currently, total capital of Kinh Do Corporation is 3,483.1 billion dong. Total revenue reaches 3,471.5 billion dong, in which the revenue from foodstuff accounts for 99.2%, total profit reaches 756.1 billion dong. Kinh Do Foodstuff is in the secondary sector. It manufactures and sells products such as candy, bread, Custard cake, chocolate, cookies, etc on the market with a suitable price and delicious taste. Kinh Do Group is a public limited company which has its shares bought and sold on the Stock Exchange. One clearly advantage of this type of ownership is that amounts of capital can be raised very rapidly. However, since the company is public, the founders can lose a certain lack of control because anyone can buy its shares without limits including the companys competitors, so they can have a strong voice in the board of directors if theyve got a large of shares. In general, this ownership is completely suitable for the organization because Kinh Do is a large group and is expanding to become a multi-sector organization that means they need amounts of large capital. Since 2001, Kinh Do determined to step up export to other countries. After that, Kinh Do has quickly become an international business until now. The companys products are sold in more than 30 countries including China, Malaysia, Russia, Canada, Japan, USA, France and Germany. With the development strategies, Kinh Do expects to become the best foodstuff organization in Vietnam and plan to expand to become one of the leading food retail organizations in South Asia.

PetroVietnam or called Petrovietnam Oil and Gas Group (PVN) is one of the largest groups in Vietnam. It was set up in 1977 and has developed rapidly then. Petrovietnam is responsible for all oil and gas resources in the country. The headquarters is located in 18 Lang Ha St, Ba Dinh District, Hanoi, Vietnam. Petrovietnam now covers all the operations from oil and gas exploration, refinery, petrochemicals, storage, transportation and service in petroleum field. Petrovietnam also imports and exports petroleum materials and carries out some of the exploration activities in Malaysia, Indonesia, Mongolia, Algeria. Petrovietnam is a multi-sector organization. PetroVietnam invests and operates in other fields including: real estate, power project, finance, banking, insurance, hotel and travel. It has a lot of subsidiaries, affiliates and science research institutions in Vietnam. However, in this assignment, I will only focus on the main subject import and export oil and gas, which means petrovietnam is a secondary sector. Petrovietnam is a public sector organization which means PetroVietnam is completely owned by Vietnamese central government. The advantage of being a state-owned organization is to get a special attention and to receive capital from government easily. However, one obviously disadvantage is that the public sector organization is very large, which can lead to inefficiencies because the government cannot control all the operations of the organization and it doesnt know if there is any corruption. Overall, this type of ownership is suitable for the business because Petrovietnam is responsible for all oil and gas in the country, if there is any private sector company owned Petrovietnam, it may increase the price of electricity and fuel. This makes the growth of community might be affected seriously. Petrovietnam is a large national group. The government wants Petrovietnam to become one of the strongest economic groups in Vietnam and the region and to lead the state sectors in the process and development of economic.

P2: When a company is established, there will be some of external and internal factors that affect to the businesss purpose and operation, all of them called stakeholders. In this task, I will introduce some type of stakeholders of my two chosen corporations: External stakeholders: Customers Shareholders Suppliers Government Community

Internal stakeholders: Owner Employees ( Staff )

What do stakeholders want from the business? Kinh Do Customers are one of the important things that make the existence of a company. Customers always want Kinh Do to introduce a variety of quality products that is flavor, convenient and worth for them to pay. Shareholders are a group of people who legally own one or more share of stock of a corporation. They want to see their revenue increasing rapidly and running smoothly. Suppliers want Kinh Do to buy materials with a high price and to maintain the steady orders. They also want to feel valued from the company that they supply. Employees are the main labors in a company with different levels. They have to be provided with good equipments and an encouraging work environment to make the best effort for their work. They also need a high salary and want to work for a well-known company with opportunity promotions as Kinh Do. Governments want the business to become successful to pay tax for them and to create more jobs. Community needs more jobs from the business to reduce unemployment rate. It also wants the companies to be responsible for their operation to local environment and social life. Moreover, community also wants companies such as Kinh Do to contribute a part of their profit to charity organizations in local.

Petrovietnam

The owner of Petrovietnam is the government. It wants the business to smoothly run to get more investments from other partners all over the world. From that point, it can reduce its investment costs and develop technology. The government needs Petrovietnam to become successful and pay tax for it. In 2010, Petrovietnam became one of the top ten companies which pay most tax in Vietnam. Employees want the organization provide them with good equipments and high technologies because their research on petroleum field may take more risks and they also need accurate appraisals which only high technologies can do. Community needs electricity and other fuels from Petrovietnam. It also needs employments and helps for poor people from the organization.

P3: Each business needs to have strategic aims and objectives for a long-term development Strategic aim is a long term direction of the company and offered to all the stakeholders to have as much as consensus as possible. Objective is a specific description of the targets. Strategic aims and objectives depend on the type of business, so the company has to balance stakeholders benefits to avoid the arguments between members of the board of directors. A good set of objectives should be SMART, which stands for Specific, Measurable, Achievable, Realistic and Time related. The objective has to be specific so that everyone can understand and know what they are going to achieve easily. Measurable means that you have to know if the objectives are obtainable and how far completion is. For example, you set objectives for your company next year, you cant only say that my company will make more profits next year. You have to set how will your company make more profits? and how much profit will your company make? You must have a clearly picture of what your company want. Objectives need to be achievable and based on your experience. They also have to be capable of being reached. The objective has to be realistic, which means within your businesss the capability of resources, knowledge and time. Time related means that when your objectives will be gained. You have to estimate a right period of time to avoid wasting your time too much and affecting your business performance.

For a long-term development, each business should set the SMART objectives. Therefore, my two chosen company also set these and I will mention in the following section.

Kinh Do Strategic aim: Kinh Dos development strategy is to become a multi-sector organization in fields of: foodstuff, retails, real estate, financial investment. Objectives: In foodstuff field, Kinh Do Group manufactures healthy, satisfying and convenient products to all the customers with a suitable price. Kinh Do plans to cooperate and associate with other foreign partners to expand retails in Vietnam that are involved in operation and management of chains of supermarket, convenient stores, fast food stores, distribution and logistic center. In real estate, Kinh Do Group will expand the projects including luxury apartments, service apartment, shopping centers, hotel, resorts. In financial investment, Kinh Do Group carries out activities in other foodstuffs of the same sector, in the banking field and financial investment in securities listed on the market.

PetroVietnam Strategic aim: Petrovietnams highest aim is to look for more oil and gas reserves and become one of the strongest economic groups in Vietnam. Objectives: To achieve the goal mentioned, Petrovietnams objectives are to: Improve the scientific and technical advancements in order to support for exploiting, transportation and service better. Exploit oil and gas reserves effectively to save the resources for a long-term utilization. Plan to build three other petroleum processing plants so that they can expand the organizations production, develop the oil and gas processing efficiently and increase the products for domestic services.

There are some mentioned stakeholders above that affect to the businesses objectives such as: customers, suppliers, owner, government, etc In this section, I will express what they affect to the objectives of each organization. Kinh Do Group. Customer: A companys establishment is based on the customers needs, so all the products of the company have to meet the customers demand to make more profits. Shareholders are a group of people who legally own one or more share of stock of a corporation, so they have to think how to run their business better and better and avoid all the risk that may make their business sell below cost. Suppliers are the important partners who can help a company achieve their purposes. A business has to make sure that their suppliers have good qualities and certified source of materials to manufacture safety products to the customers. If there are few suppliers on the market, the price of raw materials will increase. This leads to Kinh Do will increase the production costs and the number of consumers therefore will be affected. Government keeps an important position in managing all the business. If the government makes tax higher, the price of products will increase; as a result, the number of customers will be reduced and Kinh Do might sell below cost. Employees: with good workers, a company can carry out its activities better and more professional because the workers are people who directly deal with the customers and they do business under the managers direction. Community: thanks to the Kinh Do operation, the unemployment rate in the city may reduce. However, the company might be a reason for the environment pollution if they are not careful to deal their wastes.

Petrovietnam. Employees are very important to the operation of the company. The organization always needs experienced staff to carry out research and exploitation processes efficiently. Community: The demand of using fuel and electricity always rising higher, so Petrovietnam has to increase production to meet that demand. On the other hand, Petrovietnam also has to pay attention to environmental problems in the oil and gas shipping and exploration.

P4: The purpose of an organizational structure chart is to give you an obvious picture of the relevant sections, span of control and the levels of hierarchy. Span of control is the human resource management term that refers to a number of people who are responsible for a section in an organization. Levels of hierarchy relate to the number of levels in an organization. Both of my two chosen companies organizational structures are based on the functions of the departments and there are some the same departments between them such as: marketing, production, finance accounting and HR management. I drew an organisation chart for both businesses and its following below: Kinh Do Groups organizational structure:

GROUP CHAIRMAN

GROUP PRESIDENT/CEO Levels of hierarchy

GROUP COO

MARKETING

R&D

LOGISTIC

PRODUCTION

SALES

IT

HR ADMIN

FINANCE ACCOUNTING

2 ASSISTANTS

15 STAFFS

Span of control

Petrovietnam Oil and Gas Groups organizational structure:

Board of Directors Board of Internal Controllers Executive Management Board

HR Development

Finance accounting

Production

Research and Development

Marketing

Planning Division

Inspection Division

Information Technology and Science Division

The following section describes about the key functional activities of my chosen companies: Kinh Do Group and Petrovietnam (PVN)

Departments name Finance

Definition They keep all the records of financial activities and manage activities that relate to finance.

Function They take responsibility for reporting to the owners all of the processes and expenditures of the company. They analyze current figures and make predictions in the future. Then, they will supply information that helps managers make decisions. Moreover, they take charge of calculating the wages and salaries for employees and paying for income tax. They cover some type of work including: Making policies in an organization that force people to follow. Recruitment, training, staffing and keeping employee records for the company. Paying wages, supervising health and safety requirements.

Kinh Do Yes

PVN Yes

Human resource management

HRM is the management of an organizations staffs.

Yes

Yes

Research and Development

This department investigates new products and processes and then seeks to develop them into the finish article.

Production

This department is to make raw materials into finished good well. Marketing is a process

Marketing

They include investment or sale Yes of research, new technology tools for the survival and development of the business. In addition, they explore more information about their products, processes, services to meet the customers demands and improve their market better. Therefore, they keep an important position in increasing competition for the company. They carry out the production Yes chain including processing, packing, storing which is operating well to manufacture high quality goods They carry out research on Yes

Yes

Yes

Yes
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which communicates and delivers the value to the customers and keeps the relationship with customers.

market about: What are customers needs? Who are interested in their products most ? What price is suitable.? They are in charge of the process of getting customers to buy what the company produce, so they has to create more and more orders for products and services. IT specialists play an important role in operation of the company. They create and maintain the computer systems. They train staffs to use applications and access to databases. Moreover, they can protect the companys information secretly by technology. Logistic makes sure that the process of supply chain from raw materials into finished goods and deliver to the customers running smoothly. They are responsible for planning business strategies, promoting and developing project processes. They inspect, develop and give advice about quality of goods to satisfy the customers. Furthermore, they also inspect about finance and accounting to avoid the embezzlement in an organization. Yes No

Sales

This department determines how to sell the companys product. IT service include: Supporting other business functions Providing specialist IT support Managing computer functions. Logistic is in charge of managing process related to supply chain including suppliers, manufacturers and retailers. Planning Division supports and drives the development of the company This department is responsible for inspecting about technologies, qualities, methods and applications.

Information technology services

Yes

Yes

Logistic

Yes

No

Planning Division

No

Yes

Inspection Division

No

Yes

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There are some interdependencies between other departments in the companys operation and they have to work together to achieve the businesss aim. For an instance, when doing a project for the company, it is necessary to have a team consisting of: Research and development specialists explore how to improve their products better. Production specialists put forward ideas about how the products can be made. Financial specialists analyze what profits as well as losses which the company might get. Marketing specialist who identify if the customers desire their products and how to introduce them impressively. Information technology service has to make sure that all their computer technologies running smoothly so that everyone in the project can access to team databases.

Each departments have to work and discuss together efficiently to make sure that the organizations project is running steadily to save time as well as investment costs.

Influencing factors: Size is one of factors that affects to the organizational structure of the company. The larger the organization is, the more complex its structure becomes. For example, a company with a large number of employees has to need more supervisors to manage these individuals. Business environment is also play an important factor in a company. The company environment consists of all those factors which lie outside the company. Static and dynamic environments. For an instance, in Kinh Do group, sales may have peaked and maintained steadily a period of time. Therefore, they feel little need to restructure. In the other hand, in dynamic environments, Petrovietnam has to change their structure to be more suitable and flexible. Strategic plans. The kind of organizational structure also depends on business plan. For example. Kinh Do which expects to develop globally will expand structures that allow to adapt with the culture of each countries.

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Supply chain for a typical product: The chart following below is the supply chain of my chosen company Kinh Do Group.

Raw materials from suppliers

Manufacturing facilities

Sales department

Distribution

Supermarket

Grocery store

Customer

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P5: There are some changes in the external business environment which may have an impact on businesses are often considered under the headings of Political, Economic, Social and Technological. This is called a PEST analysis. PEST analysis helps you identify the external factors that might be a chance or challenge for your organization.

Political Factors

Technological Factors

The Business

Economical Factors

Social Factors

Political factors: there are many laws enforced by the government to affect to the business activities including export and import, production, hiring labor such as: Tax law. Employment law. Environmental regulations.

For both of my chosen organizations, Employment law doesnt allow the companies hiring children under age of working. Therefore, the companies have to hire adults and pay higher salary for them. In addition, the total working hours must not exceed 48 hours per week, if the working hour is exceed, the company have to pay extra hours wages for workers.

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Economical factors are always changing day by day and they affect to the companys decisions in development strategies. Economical factors include: State of the economy Inflation rate Interest rate

Both of my companies always deal with states of the economy. For example, if the economic state is unstable, Kinh Do faces many risks such as: the price of raw materials rising causes the cost of production and the price of goods also increasing; as a result, the amount of consumption will reduce. This leads to the revenue of Kinh Do also decrease seriously and the company might fall into debt. Social factors are also an important thing that dramatically affects to the business. Social factors include: Culture Living standard Population growth

When Kinh Do Group set the price of goods, it has to look at the local living standard. For an instance, if people who live in a city have a low living standard, Kinh Do shouldnt set a high price of good. This leads to selling below cost quickly and the company might be collapsed then. Kinh Do has to set a suitable price with customers expenditure to attract them. In general, businesses are affected by factors around them. Since the company was established, the owners have to find an appropriate type of business and try to run and maintain the business smoothly to avoid selling below cost. They have to divide works in an organization clearly and reasonable to drive the company efficiently and not waste their time as well as investment costs.

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Referencing:

Energy for national sustainable development n.d, viewed 7 November 2011

< http://www.pvn.vn/>

Hoddereducation n.d, Types of Business Organisation - Public sector, viewed 9 November 2011. < http://www.hoddersamplepages.co.uk/pdfs/cceabus3.pdf> Kinh Do Group 2009, viewed 5 November 2011. < http://www.kinhdo.vn/Default.html > Projectsmart.co.uk 2000, PEST Analysis, Duncan Haughey n.d, viewed 20 December 2011. < http://www.projectsmart.co.uk/pest-analysis.html>
Tutor2u n.d, Subject: Organization, Stakeholders and Business ethics n.d, viewed 20 November 2011

< http://tutor2u.net/business/gcse/organisation_stakeholders_ethics.htm> Value Based Management.net 2011, PEST Analysis n.d, viewed 20 December 2011. < http://www.valuebasedmanagement.net/methods_PEST_analysis.html> RapidBI 2007, Write SMART objectives & goals, 29 January 2007, all right reserved by Mike Morrision, viewed 15 December 2011 < http://rapidbi.com/created/writesmartobjectives/>

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