HOA PHAT

GROUP- HPG
By Le Thanh Danh
Phan Thi Thuy Duong
Nguyen Thuy Duong

CONTENT
1.Background
2.Steel production and related industry
Overview
Hoa Phat Operation
Problem and Solution

3.Agriculture
Overview
Hoa Phat Operation
Problem and Solution

BACKGROUND
Founded in 1992
One of the 5 largest private enterprises in Vietnam

BACKGROUND
Organization:
Group model, in which Hoa Phat Group Joint
Stock Company is the parent company (since
2007)
18 subsidiaries and 1 associate. (As 29 February
2016)

BACKGROUND

STEEL PRODUCTION AND RELATED

INDUSTRY
Overview
Vietnams steel industry is dominated by producers of
construction steel products such as rebar
27 Major construction steel manufacturers
Top five of which have a collective market share of nearly
60%.

LEVEL OF COMPETITION AND

CONCENTRATION
C4 = MS of HPG+ MS of Pomina + MS of Vinakyoel +
MS of Tisco
= 21.3% + 12.6% + 8.5% + 10.3% = 52.7% =
0.527
=> OLIGOPOLY

OLIGOPOLY IN STEEL INDUSTRY

Steel industry is a classic example of oligopolistic
industry.
Steel industry due to its status as a core industry
directly related to the infrastructural development of
the country holds a unique position where the
decisions made by a few players can affect the
entire economy.

 The top 3 are called integrated producers and the rest

are called secondary producers.
Mild steel production constitutes 95% of total output
and is controlled by the top 3.
Oligopolistic nature of the industry is also helped by the
treatment given to the steel industry by the
government.
The steel industry is going through a period of mergers
and acquisitions where the smaller producers are being
taken in by the larger firms, thus increasing the control
over the industry.

DEMAND AND SUPPLY

Demand: 6 million tons
Supply: 11 million tons
Almost all types of steel supply reached twice the
domestic demand
Supply exceeds demand too far
CONSEQUENCIES:
Small businesses exit
Only a few large firms can remain

HOA PHAT OPERATION

Modern synchronized full circle production
lines from iron ore to finished steel
Early 2010, HPG consist of full circles cluster including Iron
ore processing factory, coal coking and thermal electricity
plant, Iron cast processing factory, Billet casting factory and
Steel rolling mill
2015, the first iron and steel complex in Hai Duong reached
1.1 million tons output on embryos, of which 1 million tons
have already been rolled out steel building products serve
the needs of the domestic and foreign markets
Cost complementarity, economies of scope, less depend on
other supply.

HOA PHAT OPERATION

Input
Coke
Iron Ore

HOA PHAT OPERATION

New Product
Galvanizing / plating cold and painted
Welding steel
Draw wire coil

PROBLEMS AND
SOLUTION
Foreign competitors, especially
China
Entrant into corrugated iron
market
Input and supplier
Steel slab self-production

PROBLEM AND SOLUTION

Foreign competitors, especially China
Pressure from cheap steel imports

PROBLEM AND SOLUTION

Entrant into corrugated iron market
HPG decided to join color coated market
Hoa Sen Group- business titan almost rule this
market

Solution:
Market penetration

PROBLEM AND SOLUTION

Input and supplier
Import a huge volume of iron ore
Depend on price of imported iron ore
In long run, it can cause obstacles for
company

Solution:
HPG should invest and expand the abundant
mineral resources of Vietnam

PROBLEM AND SOLUTION

Steel slab self-production
Hoa Phat is a big slab distributor for its
competitors
Due to the dumping-tax, Hoa Phat can
definitely control competitors

Solution:
Tariff

AGRICULTURE OVERVIEW
Animal feed:
Double-digit growth rate
The most profitable
segment in agriculture
Highly competitive
Dominated by foreigninvested enterprises
50%: 59 FIEs
20%: Vietnamese firms
(March 2015)

AGRICULTURE OVERVIEW
Livestock
Diseases, negative information (using prohibited substances e.g:
Salbutamol)
=> Anxiety among consumers
The purchase of other countries, especially China.

AGRICULTURE HOA PHATS

OPERATION
First production
factories in Hung
Yen and Dong Nai
provinces --->
Quarter 2 and
4/2016

Large-scale pig and

cow raising projects

Imported 500
breeding stocks
(GPP) ---> 2018

AGRICULTURE HOA PHATS

OPERATION
Full circle production process
3F model (Feed Farm Food)

AGRICULTURE HOA PHATS

OPERATION

AGRICULTURE PROBLEM &

SOLUTION
1. Financial problem
3F model requires large amount
of capital

7 to 8 factory, which is
estimated to cost about
2,000 to 2,500 billion VND
Borrow from bank, etc
High interest rate, compared to
other countries
VN: 7-8%/year
The Philippines (2.2%/year)
or Malaysia (2.1%/year)
VCCI

AGRICULTURE PROBLEM &

SOLUTION
1. Financial problem
Solution

Make use of company

capital
Keep the debt ratio at the
safe level (current ratio = 0.76)
3F model is completed
=> save cost => reduce
pressure on debt

AGRICULTURE PROBLEM &

SOLUTION
2. Distribution channel
Competitor, CP
3,000 small farms and food factories all over the country
Plan: 10,000 dealers through franchising and the retail chain Seven
Eleven.

=> Hoa Phat needs large and extensive distribution network, close
to farmers

AGRICULTURE PROBLEM &

SOLUTION
2. Distribution channel
Solution

Utilize the existing widespread distribution

network for steel
Cooperate with farmers
Communicate to differentiate product
Local distributors and dealers

AGRICULTURE PROBLEM &

SOLUTION
3. Input
Import material: protein and other nutrients, maize, soybeans
Exchange rate, tariffs, transportation cost

AGRICULTURE PROBLEM &

SOLUTION
3. Input
Solution
More suppliers, firm contract
In long-run, use domestic supply by contract with
farmers, teach them to produce material

AGRICULTURE PROBLEM &

SOLUTION
4. Livestock market
Negative information, diseases
Solution
Apply modern technology and sanitary standard
Build reputation for Hoa Phat brand.
=> Demand for Hoa Phat product less sensitive to negative
information

AGRICULTURE PROBLEM &

SOLUTION
4. Livestock market
Chinese pork market is an opportunity for Vietnamese firms
Pork - the main goods in the purchase basket of Chinese
Domestic supply < Chinese demand

AGRICULTURE PROBLEM &

SOLUTION
4. Livestock market
Solutions

Should not rely on unauthorized channel of

importation.
Legally bounded contracts
Of course, some actions of Vietnamese authority are
needed

REFERENCES
Hoa Phat Group. Groups Annual Report 2015. Retrieved from
http://www.hoaphat.com.vn/en/category/investor-relations-en/annual-reports/
Tu Linh. HC Tp on Ha Pht: Li nhun sau thu qu 1/2016 khong 900
t.Cafef. Retrived from http://cafef.vn/doanh-nghiep/dhcd-tap-doan-hoa-phat-loinhuan-sau-thue-quy-1-2016-khoang-900-ty-20160331093906083.chn
Channuoivietnam. Retrieved from http://channuoivietnam.com/25374/
Lan Nhi. T Ha Pht u t chui nh my thc n chn nui. Thesaigontimes.
Retrieved from http://www.thesaigontimes.vn/127366/TD-Hoa-Phat-dau-tu-chuoinha-may-thuc-an-chan-nuoi.html
Nguyen Bao & Hai Au. Th trng thc n chn nui: Cuc ua 3F.
Doanhnhansaigon. Retrieved from http://www.doanhnhansaigon.vn/chuyen-laman/thi-truong-thuc-an-chan-nuoi-cuoc-dua-3f/1096243/
Nguyen inh Bich. Th trng Trung Quc: vn ng cho tht heo ca Vit Nam.
Retrieved from http://www.thesaigontimes.vn/147202/Thi-truong-Trung-Quoc-vande-ngo-cho-thit-heo-cua-Viet-Nam.html
Viet Nguyen. Ginh 10% th phn thc n chn nui: Ha Pht c qu tham vng?
Nhipcaudautu. http://nhipcaudautu.vn/doanh-nghiep/phan-tich/gianh-10-thi-phanthuc-an-chan-nuoi-hoa-phat-co-qua-tham-vong-3278105/#axzz4C1IgLc5I

THE END
Managerial Economics 3
Instructor: Pham Dinh
Long