CASE STUDY ANALYSIS- HO CHIN MINH

SECURITIES CORPORATION: SEEKING ADVANTAGE

IN VIETNAM'S EVOLVING FINANCIAL SECTOR

Done by,

Kenez Peter Abraham

Roll Number: b2463

Class: MBA - A
1. SUMMARY

This case deals with a securities company named ‘HO CHIN MINH SECURITIES’.

This was the 11th security company that was founded in Vietnam. The company was

formed on 23rd April 2003 as a joint stock company. The company offered more than 3.2

million U.S. dollars initially making it by this measure the largest company in the

industry. There were 8 major shareholders among which the Ho Chin Minh investment

fund for urban development (HIFU), this was a state institution. HIFU has also founded

the CII (Ho Chin Minh technical infrastructure company investment joint stock company)

which contributed nearly 4.8% of the startup capital for HSC and therefore was also

present as one of the board members. The main purpose for the establishment of the

securities company was to aid the state owned enterprises (SOE) restructure themselves

and raise capital for major projects for the city ( HSC was established through the

recommendations of the people of the Ho Chin Minh city). Further into the case deals

with how the relationship of the company changed with HIFU and how the company was

able to make use of the strong client base offered by HIFU, not only this but also the

company got ample help through CII also. Slowly the company developed and looked for

international partners in order to put up with the other competition from the global

security company present within vietnam which led to strengthening the companies ties

with the Dragon Capital Group ( Dragon Capital ). In other words, the Dragon Capital

group had increased its shares in HSC from 10% to 28% or slightly less than 30% , this

helped the private firm to gain its place in the board of directors of HSC. A brief insight

into the changes of the people constituting the top management of the firm after the new

CEO Nyvene took over is discussed in the paragraphs that comes later in the case.
 Moreover , the case also discusses various opportunities that were presented to the

company due to the various changes the dimensions influencing the industries had

undergone, the company also faced as many challenges as the opportunities that were

presented to the company. However as per the case the company was able to steer clear

of these challenges due to the sheer optimism of the CEO and the top management. At a

later stage the company had formed strategic departments and then specifically expanded

these departments and leveraged these critical departments to make profits. The

expansion of these departments are in terms of the employees. In the paragraph followed

by the one which talks about expansion of critical departments the case also talks about

how the company made its expansion in terms of infrastructure and different locations

within the country. The company's business functions can be classified into broadly four

different areas namely; brokerage and sales, research, corporate finance and treasury.

Under the following areas the company had further segaraged their services and tailored

them according to the various customers i.e. individual, corporate and institutional

clients.

2. QUESTION AND ANSWERS

2.1) In 2008, what were the major factors that influenced HSC from the macro and

industrial environment? What are its implications for HSC ?

Factors that influenced HSC from the macro environment

In order to under the macro factors from the industry that influences a PESTEL analysis was

performed on the company at the given point of time in the case.

● P : political factors - After the vietnam war two countries were unified as one single

country under the communist rule and this move led to great economic downfall as it
 involved couling the manufacturing and production facilities. The recession was so

severe that they had to borrow food from other countries and many people even started

leaving the country. In order to counter this economic stagnation the company decided to

privatise all the SOE (state owned enterprises), this decision by the government created a

huge market for the companies like HSC in the securities industry. A change in the ruling

government will definitely have an impact on the companies in this industry as the

government is the ultimate body that decides the composition of public sector and private

sector companies. Not only that but also, the legal system was relevant to this industry

was very disorganized, the presence of a party was highly necessary in all state owned

and private businesses as the government strictly controlled the media. The communist

party had a pervasive influence.

● E : economic factors - as any countries economic state is decided by the trade policies

within the country in the following case we can see that the vietnam was taking positive

steps regarding improving the trade of the country like signing the American Vietnam

trade pact in 2000 and then in 2007 joining the world trade organization in 2007 this not

only helped companies to get an access to the global market but also helped in improving

the per capita income within the country .

● S : social factors - as we can see from the educational qualification of the top

management including the CEO Nyvene all of them were well educated and held Degrees

to prove their competency skills, this fact alone is good enough to state that the

population was very well educated thus providing a quality employee pool for recruiters.

Not only that but also the demographic range within the HSC was below 35 which can

also help us to understand that the population of Vietnam was not just educated but
 belonged to the younger portion of the population. Apart from that we can also

understand from the case that Vietnam was the largest country in terms of population in

2008.

● T : Technological factors - there's not much given in the case about the Vietnams market

development with respect to the technology , however an instance it was only by 2007

and 2008 that companies leveraged technologies from the global market to improve their

business activities. It is given in the case that the company invested around 1million us

dollars to buy an information technology system from Hongkong this new technology

helped their customer to make transactions online , via phones or emails. This instance is

good enough to make an assumption that the vietnames market would still be developing

market in terms of technological aspects.

● E : environmental factors - the case doesn't talk much about the environmental impact or

regulation in vietnam. The only points that were close to the environmental factors was

that Vietnam was a country which had a major contribution from the farming sector

earlier.

● L : legal - as the Vietnamese government believed that a vibrant financial sector was

critical for its economic development post war they decided to define a legal and

technical framework which would enable adequate transparency within the industry and

thus would help in gaining confidence in the purchase and selling of shares as well to

attract foreign investors. Another factor required in the legal framework was the

importance in the requirement of the vietnamese language , so foreign investors who

were interested in the companies within the countries could only make the transaction

through one of the local securities companies.

Factors that have an impact on the industry

In order to understand this PORTERS FIVE FORCE ANALYSIS has to be done on the

securities industry of Vietnam at that point of time.

1. Bargaining power of buyers - the buyers in the securities industry were mainly

individuals, corporates and institutional buyers, and the services that the

companies offered was either a commission of the profits gained for the buyer

from the share this significantly brought down the bargaining power of the

buyers. secondly , the conversion of SOE to privatised companies meant that the

government wouldn't rush in to financially help an underperforming company so

companies had to stick to strict pricing strategies in order to make profits and

sustain business.

2. Bargaining power of suppliers- bargaining power of suppliers in terms of

technology was very high as the technology required had to be purchased from

the global market on the other hand bargaining power in terms of the talent pool

the local companies had a competitive advantage as they did not have to recruit

people for any position in the management level as vietnam had an educated and

young talent pool , apart from that the legal framework also gave them the

freedom to communicate freely in the vietnamese language. Although it was

difficult for the companies in security industries established in Vietnam to find

investors from outside, there were local investors in the country but very few in

number gave them very high bargaining power.

3. Threat from competitors - within the four years the hsc was established a 100 new

companies had come up in the securities industry which clearly meant that the

barriers to entry were really low. A series of events between 2007 and 2008

specifically the impact of the bull and bear market had taken a toll on companies.

Many companies had to lay off nearly 70% of employees who were employed

when the bull market was in play. On the other hand this also helped the

incumbents to learn that a small upward fluctuation was not good enough to make

an optimistic development in the business in the industry. Another factor that

contributes is the foreing firms that serve niche markets within the industry,

furthermore this was the only barrier that was present for the new entrants.

4. Threat of substitute products and services - this was very high in the following

industry as there were a large number of players, apart there were other firms who

specialize in serving specific sectors which brought in a wide range of products

which is why impact due to this force was high.

5. Threat of new entrants - the entry and exit barriers within this industry was very

low this is clearly how many companies entered the industry reaped the benefits

of the bull market and couldn't sustain and pulled out of the industry due to the

negative impact of the bear market. Another fact that the barriers of entry were

very low how many foerign companies entered to serve particular sectors in the

markets thus there were no visible barriers to entry for companies that are

specialized in serving particular Niche markets

2.2 Critically analyse the resources, capabilities, distinct competency, and dynamic
capabilities of HSC. Determine if they help HSC to create a sustained
competitive advantage?

In order to understand about the resources, capabilities, distinct competency and

dynamic capability the company has to be analysed using the VRIO framework.

The firm's resources can be classified into physical capital, human capital, and
organizational capital.

PHYSICAL CAPITAL - the firms physical capital that are identified from the
case are the physical buildings and the technological aspects. Both of these
resources are not rare and imitable however the following resources are highly
valuable as a part of the expansion strategy of the company and technological
resources are also valuable in order to stay competitive in the market furthermore
we can understand from the case that all the physical resources mentioned above
were well organized and expanded in an organized manner, an instance in the
case mentions that the company invested in a high end technology 5 years after
the company was established.

HUMAN CAPITAL - Human capital directly refers to the employees within the
company. The company had a very distinct set of employees, in other words the
diversity of talents in HSC was unique. All the members of the top management
had knowledge of the local market, had an exposure to the outside countries in
the form of foreign education, and putting all of their experiences , we can say
that they had professional experience in the financial markets spread over the
United states, Europe and the Asia pacific. Furthermore 85% of all the employees
 were below the age of 35. Thus we can safely say that the human capital was
VALUABLE , RARE , NON-IMITABLE and ORGANIZED.

ORGANIZATIONAL CAPITAL - this directly refers to the organization

structure which helps in combining the tangible assets and intangible assets of a
company to produce profits. The company decided that in public presentation
they emphasize more on the values that the company proclaimed about which is
that the company puts highest priority on integrity. The top management team
again placed strong emphasis on professionalism. Work Hours and deadlines
were more closely monitored, HSC paid employees to take classes in security
and other tools required for the job. The employees were prohibited from trading
from their private accounts or from the accounts of any of their close family
members during the business hours. Implementing and holding such a strict
organizational structure is as difficult as it sounds hence this resource is valuable,
it is not rare and it is imitable and this is non-substitutable.

2.3 Using the above two analysis, create a SWOT table for HSC. Based on the
SWOT, what are your recommendations for HSC in terms of achieving future
growth?

STRENGTHS -

○ HSC built a diverse product portfolio in order to compete in every

niche market and also to diversify its risks.
○ Strong relationship with customers and the shareholders due a
successful record in the past.
○ Improved the accountancy system in order to provide more
transparency and thus targets to attract more investors.

WEAKNESSES
 ● Lack of resources to expand to to other countries and hence not able
to capitalize on this opportunity
● Unable to attain economies of scale
● Lack of diversity in the workforce in terms expatriates

OPPORTUNITY

● Opportunity to expand into other countries

● Create barriers of entry in the current market based on the strength
of the company

THREATS

● Implementation and updation of technological changes as we can

see their major investment in a technology came in 2008, which had
to happen earlier.
● Possible causes of customer dissatisfaction.
● Too much dependence on the local workforce.
● Threat of new entrants.

Recommendation for HSC to attain future growth

● Investing more into technologies and automation of various businesses in order to increase
the accuracy and effectiveness.
● Look for methods to increase the market share.
● Come up with strategies for geographical expansion and also to gain presence in these
areas.