Stories of restructuring of private enterprises

Identify strategy of entire and thorough restructuring as the way some

private companies have done and are doing under the pressure that they have
to renew for development.

The private economic sector now accounts for 24% of total industrial output
value, 11% of gross domestic product (GDP) and uses about 7% of the
workforce of the economy (according to the Ministry of Planning and
Investment). In terms of scale, each private enterprise only has average of
about 28-30 employees, with 1 / 15 compared with State-owned
enterprises. Because the level of science and technology, strategic vision,
human resource, management model and the ability to accumulate capital
are limited, when facing stiff competition from stronger economic
components, most private enterprises often lose position and market share.

The key to success

Therefore, some enterprises are cherishing plans of radical restructuring,
comprehensive reforming to enhance competitiveness and gain advantage in
the tense race in the market. The self-change and self-rising through the
restructuring process theoretically derives from the internal needs of the
enterprise; however, there is still huge and aggressive pressure from the
outside environment. The reason is quite simple: missing a step means
missing business opportunities.

General Manager of a local private manufacturing company said that the

restructuring pressure was so great that he did not sleep at many nights.
According to him, the positive point of this pressure is to help businesses
always move forward, that force to find a solution to all problems because
they could not be allowed be back.
This manager also said that he had hired a team of consultant experts of the
company’s restructuring strategy with visibility from 5-10 years; the goal is
to self-make the domestic market and gradually expanding over the world.

In Vietnam, there are not many private companies achieving revenue growth
of 33% in the volatile year 2010 as FPT. More than 22 years ago, from the
company formerly known as Food Processing Technology and business in
the food industry, FPT today has become the top information technology
company in Vietnam, one of the few private companies being about to reach
$ 1 billion revenue threshold.
FPT's story is a typical example illustrating the importance of the
restructuring process for the strong development of private enterprises.
The implementing of business equalization in 2002 specified for the long-
term restructuring strategy of the FPT. According to economic expert, Le
Duy Binh belonging to Economica Research and Independent Advisory
Organization, this was an extremely important milestone in the process of
restructuring of the company. That decision created a new mechanism and
dynamic as the foundation for the period of strong development of FPT in
the following years.

Mr. Binh who directly studied on restructing case of FPT, pointed out the
key points, demonstrating the major role of restructuring for the success of
this company. "together with the decision of equitization, a series of changes
in the structure of the company has been made. Operating under the
equitization model is the basis for FPT to apply modern and healthy
management principles in the process of their activities, "he said.

Only a year after FPT stock listing at Ho Chi Minh City’s Securities
Exchange Department, this action Mr Binh said as "open a new chapter in
the operation of FTP." He explained, listing plays an important role in the
restructuring process of the FPT. Since then, the transparency in the
management of the company was raised to a new step. Once it became a
listed company, the business activities of the FPT must be monitored by
shareholders and the public.

However, that supervision included positive point. It created upward

pressure on company employees at all levels of management, force them to
attempt to operate effectively, enhance the transparent principle for the
common interest of the Company and its shareholders.

And according to information from FPT, this restructuring process has been
continuously carried out by the company in 2010 and the following years.

Always stick to main competencies

From the results of research on the process of restructuring in both
Vietnam's private companies: FPT and Vietnam Asia (Vietnam Asia
Commercial Investment Joint Stock Company), Economica pointed out an
important detail: adhering to the core competency of the enterprise itself is
one of the main principles of the restructuring process. Even while
expanding production and business activities to outside key areas,
enterprises still have to return to core competencies.

Vietnam Asia is considered as the typical example in this case. In 2007,

Vietnam Asia expanded investment into nine fields besides their major one
such as real estate, electronics; manufacturing stone, etc. Vietnam Asia ‘s
targets in this new strategy is growing, expanding horizontally with the sales
increased 30% annually, the labor force increased by 30% per year.

However, then the company's leaders said they were able to see the non-
success of the too horizontally quick expansion of business activities. The
expansion of business areas went too far with the core competencies of the
company; moreover, it systematically supported for core activities.

Therefore, Vietnam Asia decided to remove some fields included in a

expansion list previously such as agro-processing, information technology,
education, media, despite the initial investment. The fields of industrial
property were also removed from the focus of company’s investment.
After the restructuring process, Vietnam Asia returned to with the main
sectors include electricity, electronics, construction and EPC contractor
(general contractor to perform the contract) on the power, industrial
construction and civil engineering , engineering, heavy industry ... Besides,
instead of targeting the growth of sales, number of employees, Vietnam Asia
set out the criteria for quality performance and business efficiency.
The result, if in 1999 the company's sales reached 20 billion by 2007 it is
nearly 1,500 billion VND.
FPT is similar. In the two years 2007-2008, the company has also invested
in the areas outside of real estate, finance, banking, education, retail with the
launch of its affiliates, related companies the activities in that field.
But before concerns about the expansion of multi-sector, in 2009 to the
Board of FPT has consolidated into a corporate model of
telecommunications technology, identify key business sectors including
telecommunications information, content industry and information
technology services.
In perspective, economist Bui Kien Thanh said that the restructuring is not
only own the business that should be the role of government and must be
deployed on the scale of the entire economy.

Dr. Nguyen Dinh Cung, Deputy Director of the Institute for Economic
Management Research Central, agreed with the point of view. He said that
the business environment in Vietnam there are many unresolved issues
thoroughly as business costs rise (especially the unofficial costs),interest has
increased, it is difficult for enterprises to Private capital can accumulate.
"In the current economic context, many private enterprises are business
types and shock as they must bear and strive to survive, rather than
determine the long-term business strategy. With such a situation is how to
restructure? Difficult to do long term and all copies ", he added.

Finally, an issue arises that is necessary to change the institutional structure

or not,such as decreasing the number of state enterprises, increase the
number of private enterprises (according to his proposal Palace ), or is still
to let the private sector swim.