Luận văn building business strategy for bank for investment and development of viet nam securities joint stock company in period of 2012 2015

ABSTRACT BUILDING BUSINESS STRATEGY FOR BANK FOR INVESTMENT AND DEVELOPMENT OF VIET NAM SECURITIES JOINT STOCK COMPANY IN PERIOD OF 2012-2015 Nguyen Xuan Hai MBA Candidate, 2008-2010 Ha

ABSTRACT BUILDING BUSINESS STRATEGY FOR BANK FOR INVESTMENT AND DEVELOPMENT OF VIET NAM

SECURITIES JOINT STOCK COMPANY IN PERIOD OF 2012-2015

Nguyen Xuan Hai MBA Candidate, 2008-2010 Hanoi School of Business, Vietnam National University

Supervisor: Dr ‘tran Doan Kim

December 2012, 91 pages

‘The world economy has been in more stable phase after economic crisis and is having significant development Together with general development trend of the world economy, Vietnam is gradually marking position in global cconomy With the open economy, demand on capital in regard to enterprises increases and become diversified Seourities market, by means of a part of market It is useful took to

solve demand on capital

After 11 years of foundation and development, seourities market in Vietnam has

gained significant achievements and steps At present, there are more than 100

securities companies and cach of thom sell-drives to survive and develop afler ups and downs in market The ups and downs of market in 2010 and first half of 2012

have made some securities companies recognize efficiency and adjust their trading

achvilics BIDV Sccurilics Joml Slock Company (BSC) is one of the first seeurilics companies adjusting their development strategy to be able to have improvement in

advantages namely strong finanec capacity and trademark and over the past years, BSC always improves to increase prestige and product quality provided customers;

BSC must have development slralegy in the future egamst fier compelilive

pressure as present If applicable, the company can control risks, solid steps and

mark position in Vietnam Securities market

Ta the condition of the difficulties of the economy, Ihe sceurilics industry has faced

up to huge challenges Developing strengths, eliminating weaknesses, promoting the absolute advantage and competitive advantage will help the businesses in the

field of securities find the way Lo survive and develop in the current, period Which direction should be selected? what strategy should be chosen? ‘rhe limitation of

resources and the current period is extremely difficult for securities companies

Thanks to discussions wilh experts m the field of securities as well as colleagues,

leaders in the BSC and the knowledge achieved from the course, the author has

contributed a little to find out strategy and direction for the BSC in the future With

all the general formation about the stock markel, Ile author would like to bring Lo

the reader an overview of the stock market in Vietnam, point out the strengths and the weaknesses of the BSC as a basis [or selection of strategic development im the future All the solutions are oricntedly given, accompanied with the instability of

the stock market; the author hope to contribute a lot of useful ideas for development

of the BSC im the future

ili

1.1 Overview abaut business strategy of enterprise

141/1 COncepts cnssnissensenesne sees stnsiees senses

1.2.3 Analyzing internalenvironmnent "— 1.2.4 Builling business srategy - - - H 1.2.5 Dislinguishing three strategic lypes 12

1.3 ‘Tools used to analyze strategies

1.3.2 Quantitative Strategic Plamung Matrix (QSPM)

CHAPTER 2: ANALYSIS OF STRATEGY CONSTRUCTION BASIS OF

BIDV SECURITIES JOINT STOCK COMPANY (BSC)

2.1 Overview af BSC

2.1.1 Histery of formation and development eeeesoecos.2Ô

vi

21.2 Business ]ine3 ccceencssesetnessenveeesentsiensnnessensnt 20 2.1.3 Organizaional siruette —

2.1.5 Phiosophy, viewpolnt of business 24

2.2 Outside market analysis of BS!

2.2.2 Analysis of securities business sector environment "

2243 Tudgment of opportunity and challenge, - - 45 2.3 Analysis of internal environment

2.3.1 Business activity uccossssssetensesieetenessensene sense 48

23.3 Tdontifying strength, weakness and building the cvahwition matrix of internal environment factor (IEE matrix) of R§C: "—

2.4 SWOT matrix of BSC

CHAPTER 3

3.1 Orientation for business strategy of BSC in period of 2012 - 2015

3.1.2 Building parual strategies

3.2 Selecting business strategy for BSC in period of 2042 - 2015

3.3 Solutions for implementing business strategy of BSC

3.3.1 Solutions on Ìntiiah reSOtCE coi suaseeooo.Ả 3.3.2 Sohutions on Marketing cceocooeecoee — -

CONCLUSION

REFERENCES

vũ

LIST OF TABLE

Table 1.1: SWOT analysis

Table 2.1 Important milestones

Table 2.2 Comparison of some criteria in business activity of BSC with

€0TIPElOTs e c

Table 2.3 Extcrnal factor matrix aifccting BSC (EFEB)

Table 2.4 - Main financial targets of B5C Im 2009 — 201 l sọ

Table 2.5 - Matrix of imernal factors of BSC (IFF)

Table 2.6 SWOT matrix of BSC

Table 3.1: QSPM matrix of BSC

viii

dd

"- 57

LIST OF FIGURE

Figure 1.1; PEST modef in macro-enviroument analysis

Figure 1.2: Michael H, Porter’s five force model

LIST OF CHART

Chart 2.1 GDP growth rate of Vietnam in period 2000 - 2010

Figure 2.2 Inflation of Vietnam in period 2000-201 0 30

LIST OF SYMBOLS AND ABBREVIATIONS

Boston Consulting Group FPT Securities Joint Stock Company

Ho Chi Minh City Securities Joint Stock Company

HSX/HOSE _| Ho Chi Minh City Securities Trading Department

csc Capital Securities Joint Stock Company

BSC BIDV Securities Stock Company

INTRODUCTION

T The imperativeness of topic

The world economy has been in more stable phase after economic crisis and is

having significant development Together with general development trend of the

world economy, Vietnam is gradually marking position in global economy With the open economy, demand on capital in repard to enterprises increases and became

diversified Securities markel, by means of a part of markel Tt is useful look to

solve demand on capital

After 11 years of foundation and development, securities market in Vietmam has

gained significant achievements and steps AL presanl, there are more than 100 securities companies and each of them self-drives to survive and develop after ups and downs in market The ups and downs of market in 2010 and first half of 2012 have made some securilics companies recognize ollicieney and adjust their trading

activities BDV Securities Joint Stock Company (BSC) is one of the first securities

companies adjusting their development strategy to be able to have improvement in

securities market

With open tendency of economy, SC has to face up with more and more rivals not

only domestic ones but also foreign one with strong finance capacity The increase

of rivals reduces market share of BSC Although BSC has many competitive advantages namely strong finance capacity and trademark and over the past years,

BSC always improves to increase prestige and product quality provided customers,

BSC inust have development stralegy in the future against ficrecly compelitive pressure as present If applicable, the company oan control risks, solid steps and

qaark position mm Viebwam Securiliss market

Coming from above problems, I realized the particularly important role of building

strategy for existence and development of a securities company Therefore I

= To systomatize basic knowledge and theory of strategic management and strategy building

= ‘fo initially approach to actual operations of securities company in particular and

Vietnam securities market in general

* To apply gained Imowledge building strategy for BIDV Securities Joint Stock

Company

TI Researching scope

Re ching scupe: Trading activilics of BIDV Securitios Joint Sock Company,

Vietnam securities market and some factors in currency market

TV Researching methods

= Analysis of data from books, newspaper and intemet;

= Observation from reality of the company,

= Summary of appraisal about the company;

CHAPTER 1: THEORETICAL FOUNDATION OF BUILDING

aboul strategy conception:

According to Alfred Chander (1962); “Business strategy covers definition of long term basic target of enterprise, selection of method or action program

and allocation of resources to implement that target”

According to Ansoff HI (1965): “We can consider strategy as “joint

connection” among activities of enterprise and market consuming products,

it contains four parts: market scope — product, growth rate (changes

conducted by enterprise to match to market scope definite products),

competitive advantages and resonance”

According to school of Harvard Business University (1965): “Strategy is

system of gouls, targets staled under the form of sectors/business activities

that the company wants to, eniry, size, position that the company wants to

achieve and basic policies as well as plans to implement predetermined

targets

According to William Glueck (1980) “Business strategy is a united,

comprehensive and cooperative one designed to ensure the enforcement of basic targets in enterprise” or “Strategy is a united and general one drafted

= According Michael Porter * “Strategy is the creation of unique and valuable position including differentiation, exchanged selection to focus on resources; from that it brings advantages Jor organization”

From above definition, we can see that strategy relates to long term and basic goals of an enterprise Nevertheless, building and selecting the strategy oriented goals are not enough; stralegy must be defined as malchinig to vision, mission of organization and methods as well as means to reach those goals the most effectively If applicable, it promotes strengths, overcomes weaknesses, makes

use of opporlunilies and mitigates threats (rom exLernal enviromnent

‘Thus, we can define strategy in general as following: “Strategy is a series of

complex activities to mobilize resources of organization and gain certain objective.”

1.1.1.2 Concepfs about business strategy of enterprise

As mentioned above, strategy related to goals of an enterprise and set forth strategies must help crlerprise gain predetermined goals Neverlheless, busities strategy has connection to the methods for enterprise to be able to successfully compele tt specific market T relates to strategic decisions about product selection, mecting requirements from customers, holding competitive advantages in comparison with rivals, exploiting and creating new opportunities

Apeording lo Fred R.David “Business strategy contains means reach to long-

term goals”

It can say that, business strategy is means helping enterprises reach long term goals Business strategy is not to outline specific actions; it is compressive program, the most effective mobilization solutions for resources with the aim at conducting predetermined goals

Business strategy in at enlerprise can be defined in following general way

“Business strategy is an art of designing and organizing means to reach long term goals of enterprise; it has connection fo changes of business environment

©: Stratesy Management - Strategy Management Curriculum

‘Sh FredR David, 2000: “Concept on stratcgie management”

und competition”

112 Typical features of business strategy

From viewpoints about strategy mentioned above, strategy still has the most typical

features in any period of time It reflects the nature of business strategy in enterprise

wilh the most basic ones such as:

113

Business strategy defines basic goals and business orientation of enterprise in each phase

The orienialion of strategy is to ensure the continuous and stable

development in fluctuated business environment for enterprise

Business strategy ensures the maximum mobilization and optimal

combination m exploiting and using resour

of erilerprise al presen anid ire

the future It also upholds advantages, catches opportunities to hold competitive initiative in market

Business stralegy of enterprise is shown in conlinuous process from forming

to conducting, assessing and adjusting the enforcement of predetermined

The role of business strategy in enterprise

The role of business strategy in enterprise is demonstrated through following issues:

Business strategy helps enterprise define their orientation in each specific period of time It is guideline for all production and trading activities of

" Business strategy has significant contribution to the effect of using resources, promotes position of enterprise and ensures the continuous as well as

sustainable development

"Business strategy creates solid foundation for enterprise to make decisions in

accordance with displacement of market It also creates solid foundation for research and deployment, development investment, human resoures tainting,

market expansion and product development

1.2 Process of building business strategy of enterprise

1.2.1 Define Vision, Mission, Target, Policy and Core thinking

L211 Vision

Strategic vision demonstrates the highest and the most general desires and

wishes (hal organization wants lo achicve We algo consider vision as routine of

enterprise in which it shows the destination in the future and the way enterprise will follow to reach that destination Or in other words, strategic vision is to

draw a picture of destinalion logether with reasons and means to do

Defining and stating vision have particularly important role since it gathers expectalions of all members in erlerprise and encourages ther making efforts to gain goals, carcer and noble ideas

1212 Mission

Mission or function is a statement having long term value in objective and

distinguishes this company to others, Such statements are also called as business philosophy, business principles and belief of the company

The mission states the existence reason of enterprise According to Drucker, the

business mission statement gives answer to the question “What is our business

operation?” “What would we do and how would we do to reach the vision

statement”

1213 Target

We can understand target as established achievements which enterprise finds out all ways to gain while pursuing their mission The right definition of targets bas

remarkably important role to the success of organization since targets map out development orientation and evaluation for gained results They also provide the

view about priority in allocaling development resources, foundation to have

effective plan as well as solid basis for assessing result

Target is considered as a factor if it contains enough measure factors and reality

with obvious apportionment TL also reflects concentration, threats and [easibility

in ferm

1214 Policy

Fred R.David said that “Policy ix fool to wmplement strategy as well as the mean to gain target Policies include guidelines, principles, regulations and procedures established to support efforts to gain predetermined targets Policies

are instruction to make decisions and show repeated situations or recycle

situations”

1215 Core thinking

Core thinking defines long term fealures of an organization TL is consistent

definition over life cycle of product or market, technological breakthrough, ways

of administration and leaders In fact, core thinking creates the most important and stable conuibutions for success in a company with further vision

Core thinking is basic and sustainable regulations, principles of organization

Core values do nol need fo exlermal defense They have value and important

within organization, A company must determine value as a core that is dependent on current environment, competitive environment and administration methods In order to recognize core value, we need to sort the honesty and

define the central one

1.2.2 Analyzing external environment

External environment includes factors, forces and regulations happening oul of enterprise nterprise cannot control them but they have significant influences to efficiency and operation of enterprise

Fred David, 2000: “Coneept on strategic management”

Recognizing and assessing opportunitics and threats from extemal environment led enterprise define their mission and functions correctly and obviously Furlhermore, onterprise can build strategies and reach long tert largel as well as policies to reach annual targets

External environment contains:

*) Macro-environment or known as general environmen;

= Sector environment or knơwn as micro-environment or competitive environment,

1.2.21 Analyzing macro-environment

Macro-environment is the environment covering activities and having direct or

indirect influences to all activities of enterprise

The main objeclive of analyzing macro-environment is (o acknowledge changes

of anticipated tendencies from factors of extemal environment With the

concentration on future, analyzing external environment allows enterprise ta recognize and a Opporlimities (Q) of environment thal enterprise can make

use of and Threats (1) facing up enterprise, Krom that, enterprise builds clear business functions, defines feasible long tenn targel and designs stralegy anatching to business goals

We can use PUST model to analyze macro-environment ‘he model includes:

= Political

= Economics

= Socioculture

* Technological

Figure 1.1: PEST model in macro-environment analysis

1.222 Analyzing micro-environment

In order to plan strategy, apart from analyzing macro-environment, researching

micro-environment (sector environment) is particularly important Sector

environment has close connection to enterprise and most of activities and

competitiveness of enterprise directly happen in this kind of environment

Five force model

In order to clarify competitiveness within industry, Michael E.Porter — professor

of Harvard Business Administration University pointed a frame that helps

administrators realize opportunities and threats facing up enterprises or industry

The frame of Porter is called as five force model According to Porter, there are

five force orienting competitiveness within industry regarding as:

survive and develop, every enterprise has to implement management operation

for finance, human resource, trading and production, research and development

as well as marketing Additionally, they must have information system,

management system, and functional departments in each sector Each of them

has strengths, weaknesses and defining these factors will help enterprise to build

and select suitable business strategy

Analyzing internal environment is to define strengths (S) as well as weaknesses

(W) of enterprise

* Strength (S) is the things that business is doing well or feature to help businesses improve their competitiveness Strengths can exist in the

following formats:

- An important skill or experience - the secret to manufacture with low

cost, technological secret, producing without defective products,

experience in providing good customer service, product innovation skill,

commercial skills for product in large seale and unique advertising

promotions;

- Advantages in material [facilities as rich capital, large distribution system,

- Strong human resource;

- Advantage in organization and management,

- The valuable physical property - modern buildings, aliractive Tocalion, natural resources stocks,

- Keep interest position in market: lower cost and better products:

- Strengths in relationship,

- Predominant core capacity;

- Important competitive capacity

business may present:

- Lack of the sigrtificant skills and experience im compalilion;

- Lack of resource: human resource, finance,

- Weak in management and orgamzation ability:

- Donot have stable put material supplying sowrec,

and strategy However, it is important to be able to build competitive advantage

and maintain it in a sustainable way And the enterprise is required to understand the nalure and ongin of competitive advantage

1.2.4 Building business strategy

In order to exist and develop in fiercely competitive environment, enterprise

must create competitive advantages The competitive advartage ia shown under

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the two basic forms: the lowest cost or product differentiation Combining the two basic forms of competitive advantage with operation scale of enterprise, we will have three general competitive strategies such as

"Cost leadership strategy;

"Differentiation strategy;

* Focus strategy: this stralogy has the two specific forms as cost focus oF differentiation focus

1.2.5 Distinguishing three strategic types:

1.2.5.1 Cost leadership strategy:

Cost leadership strategy (the lowest cost strategy) was popularly applied in the 1970s af the 20" century in the developed capital countries and now still applied

by many enterprises of developing countries The lowest cost stralegy with its nature is how to reach total lowest costs (production, management) in the branch, on the basis of implementing policies: focus on investment in material facilities, cquipments, mass production to utilize large seale goodwill, follow the purpose of cost reduction from experiences, cost control and close expenditure, reduce costs for research and development, marketing Gelds,, advertising

8GIVIGCS

‘he objectives pursued by the company for this strategy are to create products,

services with the lowes! cosis 1a overcome competitors te exist and develop

Companies choosing the lowest cost strategy have low differentiation levels of products, low market segment, have strength of focusing on production administration and material supply section With low product prices, the company has capacities to consume block volume of products, create conditions

to strength production, to lower more product prices

«Strength

- ‘Thanks to low costs, the company may sell products with lower price than competitors but still maintain estimated profit level In the case

competitors sell products at the same price, then the company with the lowest cost shall reach higher profit level

- When the business line is in growth period, if there is a price war and companies compete mainly in price aspect, the company with lower cost shall reach winning part thanks to better competition capacity

- The company is casy to suffer when having price inerease pressure from suppliers

Advantages

- With low costs, the company has more advanlage than existing

competitors

- Also thanks to advantages on costs, the company shall be influenced less

than competitors, m the

increase in prices of matcrials or decrease in

product price

- To meet large production scale, the company always has demands on

malerals wilh large quantity, as a resull, posilion of the company in

negotiation with suppliers is improved

- Tf happening alternative products, the company may reduce product price

to compete and remain market share

- Advantages on costs are barriers to prevent other companies io penetrate

the market Thus, as long as maiutaining advanlages in costs, the

company’s pursuing this strategy is still safe

Threatening

- The most serious danger for the company pursuing the lowest cost strategy is continuously finding production method with lower cost than competitors If not, the company shall lose its position; the company must oflen re-tivest in inodem equnpments, reject timeless assets

- Changes in technology make investment costs or whatever is learned null

and void

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- Capacities of casy imitation by competitors for production methods of the company or leaming experiences of investment in more advance

}roduction methods ta have lower costs of as same as the company

- Due to low cost objective, the company doesn’t invest appropriately in R&D, marketing operations, thus, necessary changes in products or

marketing are not scen, changes in cusiomers’ laste are nol salislied ard

gradually the company loss its competitive advantages

1.252 Differentiation strategy:

Nature of the Product, Differentiation Strategy 1s to creale thiry recogmved by the whole industry as “unique" Differentiation may be expressed in many forms: product design, quality, mark, trade name, manufacturing technology,

customer service

Cbjectives of the Product Differentiation Strategy is to obtain competitive advantages through creating products considered as unique for customers,

salisfactory with customers’ demands by way impossible to implement by

competitors Just this capacity permits the company to price “dominant” to

product, increase revenue and reach profit vale over average This “dominant” price is always higher than product price of the company pursuing the low cost strategy and accepted by customers because they believe that products have high

quality As a result, products are priced on the basis of markel, al acceptable

level by the market

Powerful supplier or powerful buyer is not important issue because in the

Differentiation strategy, the company is interested in which price level products shall be more accepted by customers than production cost issue

- Wilh the Differentiation stratogy, the company may support irr

in

material price better than the company pursuing the low cost strategy Because customers shall be end sufferers, once only the company is a

supplior of product, and customers bave loyalty with loved brand, hen

they shall accept with dominant price level

- The differentiation and loyalty with brand is barrier for other companies

tò penelrale lo the market New compares want to compelilion, the must create strengths, special differences for them and this is costly

= Challenges

- Building and developing differentiation capacity to create điíTerer

products/services xequest high costs and make product price high, even

very high Once, difference from price between competitars selling

yroducts with low pnees and the company creates significant difference,

then differentiation may not keep loyalty with the brand, Customers shall

sacrifice some cerlain features, services or images of differentiated

products to buy other products and save significant amounts

- Advantage of the differentiation strategy is the unique of product That

factor permits the product to be priced dominantly However, how lo

maintain this advantage and mention to price level acceptable by the

market Correct pricing plays very important role, has capacity to

determine survival, sustainable development of the company

1.253 Focus strategy:

Different from two lowest cost strategy and Differemiation strategy of products, the nature of focus siralegy is to meet requirements for some certain market segments determined through geographical factors, customer objects or product

nature As well as the Product Differentiation Strategy, the centralization

strategy may implement under many ways: centralivation on the basis of the

15

lowest cost or on product differentiation or both of them, namely the company

implements the low cost strategy or differentiation only in market segment chosen to reach competitive advantage

= Advantages

- Competitive advantage of companies pursuing centralization strategy

originated from their competitive capacities - unique, special product or service supply capacities which are unable to implement ‘his also permit the company have advantages in relation with customers because the

company is sole person lo supply products, services, customers are

unable to find at other competitors

= Challenges

- Due lo small seale, thus in relation with supplicr, he company has no advantage, has no initiation in material price

- Also due to small scale production, thus the company applies the

centralization strategy, not ulilizes effec of large scale and experience curve and always has high production costs

1.3 Tools used to analyze strategies

13.1 SWOT matrix

SWOT analysis model is the useful tool for catching up with and making decision in every case with respect to any business SWOT is the abbreviation of four letters Strengths, Weaknesses, Opportunities and ‘[hreats In a visual way, SWOt is theory frame and basing on that, we can consider strategies, define

position as well as direction of an organization, a company Furthermore we can

analyze business proposes or any ideas relating to interest of enterprise In fact, application of SWOT in business plan, strategy planning, rival assessment,

markel research, produc development and research report is selected by many

enterprises

SWOT analysis makes enterprise have through understand about:

= Strengths

= Weaknesses

= Opportunities

= Threats

From that, enterprise can make conclusion as the ways to mobilize resources

with internal and external environment the best

Table 1.1: SWOT analysis

SO strategies ST strategies S: Strengths ‘Use strengths tomake use | Use strengths to avoid

WO strategies WT strategies W: Weaknesses | Overcome weaknesses to | Overcome weaknesses to

make use of opportunities avoid threats

1.3.2 Quantitative Strategic Planning Matrix (QSPM)

QSPM is tool used to decide the best selection for enterprise QSPM matrix uses

input factors from analyzing EFE, IFE matrix and combination result of analysis

in SWOT matrix to have objective decisions in the best alternative strategies In

order to develop a QSPM matrix, we have to implement following six steps:

= Step1: List important external opportunitiesthreats and ¡nternal

weaknesses/strengths

= Step 2: Classify internal and external important factors

* Step 3: Determine alternative strategies that the company should consider for

implementation Collect them into specific groups if possible

" Step 4 Define attractive score of each strategy The attractive score

demonstrates the relativeness of each strategy in comparison with other We

only make comparison for strategies in the same group The attractive score

is classified as follow: 1= not attractive, 2= lightly attractive, 3= quite

attractive, 4= significantly attractive If successful factors do not affect to

strategy selection, we will not mark attractive score for these strategies.

Step 5; Calculate total attractive score It is the result of multiply classified score (step 2) with attractive score (step 4) in each line

Step 6; Caloulate total attractive score for cach strategy Tt is the addition of attractive score in each strategic line The higher and higher score is, the strategy is more and more attractive

CHAPTER 2: ANALYSIS OF STRATEGY CONSTRUCTION BASIS OF BIDV SECURITIES JOINT STOCK COMPANY (BSC)

2.1 Overview of BSC

Being issued license to incorporate on 26/11/1999, with transaction name: BEDV

Securities Joint Stock Company (BSC), the Company had the honor of becoming

the firsl securities company in the banking seclor to participate im the business in

securities field and it is also one of the first two securities compaiies in Vietnam

Inheriting and bringing into play the highly valuable experience over the past 50

years of the system of Bank for Investment and Development Bank of Victuam (BIDV) - the State-owned commercial bank was appointed by State Securities

Commission of Vietnam to be the payment bank for the securities markel - the

opening and putting into operation as a fmmancial intermediary operation with nrulti- purposes of BSC also marked the start for securities section in general and career of

brokerage, investment and securities investment brokerage in Vietnam in particular

At the end of 2010, with the development orientation of BLDV, at the same time, to meet the demand and requirement of the market, BSC carried out the capitalization and auction successfully 10,195,570 shares On 01/01/2011, the Company officially changed name into BI2V Securities Joint Stock Company with the charter capital

of 865 billion VND At present, BSC has a head office in [lanoi, a branch in 1lo Chi

Minh city, bansachon network all over the country with over 200 employees

working in both support block and operations block

Over the past 10 years, with the comprehensive, strong and effective support of

BIDV, by effort of personnel, BSC is incessanily betlor itself with the objective of”

becoming one of the leading securities companies in Vietnam

19

Log

http:/Awww.bsc.com.vn

2.1.1 History of formation and development

Table 2.1 Important milestones

1 In 2009 BSC was respected by Hanoi Stock Exchange (HNX) to be

one of 15 typical securities companies among nearly 100

members in HNX according five criteria determined by HNX

2 Beginning of | BSC received the Certificate of Merit of Ministry of Finance

2010 “Have achievement in constructing and developing securities

market - Period 2006 - 2010”

3 September 2010 BSC respectfully received Gold Cup of typical enterprises of

1000 years of Thang Long awarded by Vietnam Union of

Science and Technology Association

4 In 2010 BSC received the prize “Prestigious secunties trade name” -

in 2010 for typical enterprises in Vietnam securities market

5 May 2011 BSC was awarded the prize “The best securities consultancy

Company” selected by The Best Vietnam 2010 program

6 June 2011 BSC was awarded the Third Labor Medal by the State

transaction account, securities transaction consultancy brokerage, implementation

of securities transaction, money payment, securities deposit, consultancy brokerage and support of listed securities transfer

2.1.2.2 Investment banking service

BSC provides diversi ‘ified financial consultancy products including:

- Enterprise finance consultancy, cuterprise assessment, onterprise finances restructure, purchase, sale and merger of enterprises

- Capital mobilization consultancy inside and outside the country including securities market and debt market, split consultancy, issuance consultancy and guarantee (issuance for the first time to the public, separate issuanve) of stovks, issuance consultancy and guarantee of enterprise bands

2.1.2.3 Investment analysis and consultancy scrvices

Analysis products include

- Company analysis report, initial analysis roport and periodical diary report or according to each event

- Market analysis report: fovusing on analysis, updating the happermng of macroeconomics, securities market according to day/week/month

- Expert reports to update the changes of monetary policies of the State Bank of Vietnam as well as the Ministry of Finance:

BSC strives for becoming one of the leading Securities Company about prestige,

quality of product and market share in the securities market

Mission

BSC always creates new value by contributing and sharing new knowledge

22

Core value

- Product, service: Value of I3SC is located in the long-term development value

of the customer brought by the produ and service

- Experienced and creative staff: Traveling with and attaching to the development process of the company is always considered as the most highly

valuable thing with BSC

- Advanced infrastructure: modern infrastructure is always focused the

investment and exploitation effectively to create the important driving force for the product development, process and use efficiency of investment capilal of

BSC

Competitive advantage

Being the member of Bank for Investment and Development of Vietnam, one of

the four biggest State-owned commercial banks at present, BSC always receives

the comprehensive support of BIDV in all operation aspects

The most valuable assets crealing the prestige and image of BSC is the human

resource With the personnel who is young, self-motivated and keen on business, trained iu famous universities mside and outside the country, through the regular organization of new knowledge traimng and cultivating programs, by oxpericuce accumulated from implementation of the contracts, big projects, BSC always

brings (o Ihe customers the belief by series of methodical, creative and

professional consultancy services

On the basis of wide branch network of BIDV, BSC developed quickly the transaction point systems all over the country to timely service the demand of all

customers

Due to opening since the securities market of Vietnam was put into operation,

up lo now, BSC has constructed and developed a big customer basis belonging

to various sectors, lines and fields

All activities of BSC are constructed and operated on the basis of a modern

information technology foundation; they are designed as an open system;

therefore, they not only meet the demand on transaction, information query, consultancy for the investors, internal management of the company in the

current slage but can also be developed, compleled and inlegrated wilh other

systems as having the change, upgrade in the transaction system and information announcement of the Stock Exchange in the future

BSC is also one of the first securities Compames which were issued the

certificate of reaching the quality management standard under standard ISO

9001:2000 by BVQI international measurement organization

With strong financial potential, with prestige created and affirmed in the market, apart from establishing the relationship with domestic partners to implement big projects, BSC can establish the relationships with intemational financial

organizations (WB, TFC, MPDF ) to supporl comprehensively for customers

2.1.5 Philosophy, viewpoint of business

Philosophy of business

BSC: Rehabte f[cllow-iraveler

Business strategy

Tncessantly training, cultivating the skills, knowledge, behavior culture and

occupational cthnics for the existing human resources, at the same time, constructing and executing the policies to attract the human resources with high

quaHly to meet the strict demands of all customers

Upgrading the information technology infrastructure, developing and putting into operation the advanced application software such as securities assessment,

determination of enterprise value, basis analysis, technical analysis and online

order to support timely, effectively the process of making decision of the

investors

Further improving the information arouncemert syslem lo provide the information fully, timely, accurately, reliably and having use value for the investors.

Improving the service quality through focusing on resource investment into the services which allow approaching directly to abjective customer groups

Strenglhening the sponsoring for projects for supporting the invesLment

knowledge increase for the community through coordination with Universities, Academies, Research Institutes to hold regularly the programs on scientific

seminar, direct consultancy at enlerprises, test on securilics study, tests on

enterprise director, financial director, virtual securities to increase the prestige

and image of BSC

Quality management policy

Being aware that product quality, service provided to customer is the factor having survival significance for the development and development of each

onterprise, from the begitmming, BSC directed all efforts on improving and

increasing the service quantity, quality to maximize the interest of customers

To facilitate maintaining the continuity and utility of the quality management

system; al the same time, to standardize and control the risk in all main

activities, BSC promulgated the quality management manual under standard [SO 9001: 2000 This is the malerial stating clearly the guideline, policy, general principle and content on quality management which BSC commits to uuplement

in order to improve the quality of product, service, serve the customers better

and betler

On the basis of forming the quality management objective, forming the quality

management system, BSC constructs and implements the human resource

management policy; forms and checks the process of creating service products

under PDCA model, manages all documents, procedures in the quality management system, periodically organizes the idea collection of customers, partners to measure, analyze, improve and overcome the shorlcomings in order

to complete the products and services

2.2 Outside market analysis of BSC

2.2.1 Macro market analysis

Business operation situation of a company is (he basic and relatively popular foundation for decision of the investor Considering the fluctuation of business situation of the Company is to estimate directly the seourities price of the Company The investors can judge the business situalion through economic

factors such as: economic growth rate, interest rate, inflation, exchange rate

The systematic risk factors have preat impact to the companies in the financial

field, especially the securilies companies, securities invesbnent fumd

2.2.11 Political, legal factors

At present, the operation of enterprise in Victnam in general and companics

operating in the financial field in particular such a3 securities companies may

bear risk from charyes ou law, policy because the legal system and policy of Vietuam are not completed, synchronous and always have change, in which

there are regulations relating to securities investment, securities market, corporale tacome tax, personal imcome tax in the securilics investment, activity

Furthermore, the explanation, application and execution of legal regulations in

Vietnam always have certain lag, compared with the promulgation, amendment,

supplementation of new regulations and have inconsistency at difforent points of

time, between the transactions etc ‘Iherefore, they create many shortcomings and many have great impact to investment, business activity of enterprises

in recent years, although the legal system of Vietnam has been prepared meticulously, more transparently so that investors are easy to access, the

uncertainty and the legal issues that arise in the legal documents such as the

Civil Code, Commercial Law, Securities Taw, Law on Enterprises, Law on Corporate Income Tax, Law on Value Added Tax, Law on Personal Income

Tax, Construction Law, Real Fstale Business Law, Housing Law, Law ơn Environmental Protection, etc affect to the documents guiding the execution

and affect to the business activities of the enterprises.

When Vietnamese logal system develops, it is expected that the inconsistency and uncertainty of the legal regulations will be settled in accordance with new logal regulations, explained and clarified more clearly and the old laws will be replaced or modified However, it is difficult to predict when Vietnamese legal system will achieve the stability and predictability as the legal system of the

other developed ceonomics On the other hand, the recognition and enforcemerit

of decisions of the court, arbitration and Vietnamese administrative agencies in the event of occurring dispute remain uncertain

Prior to the integration movement, Vielnamese enterprises have had many

opportunities to develop but has faced many difficulties An enterprise wants to stand stably in the international market must face with numerous factors heyond

iis control In those factors, polilics and law are two issues fo bơ concerned The

success or failure of enterprise in the international business depends largely on

whether the enterprise understands the policies and laws of the host country or

not Wherever the erilerprise is located, it is affected by the logal system and policies of that country’s government ‘Therefore, let’s consider the impact of

pohtics and law to operation of BSC

Legal enviranment affects la BSC;

= Creating equal environment for the companies to operate, protecting as the

companies comply with the law, maybe having priorities for the companies

= Putting forth the regulations allowing or not allowing, binding, requiring the company to comply, like this, the company must comply well the regulations of the law and the company will develop in sight direction

= BSC can compete healthily with other companics

= The company can take full advantage and mitigate the risks, grasp the

viewpoints, regulations, priorilies, even carry out the corridor movement as

necessary to create the favorable environment for its operation

kở a

However, the law had the change and such supplementation may influence on the company ‘The new laws often bring out obstacles and challenges ‘I'he

company mush always be ready to deal wilh new challoryges, new opportunities

when the new law is issued along with the frequent and rapid changes in the

socio-economic standards, and legal standards A market which has been closed can suddenly be open ele duc to the change of the law

Tmpact of political environment:

Stable politics is a condition for developed economy and vice versa, developed economy is an important factor contributing to slable politics On the other hand, the institution and political guidelines decide the way of economic policies Politics affects to the enterprises primarily through the economy Vietnam is a

country which is considered Io be polilical stabilily and “Vietnam wants to be

friends of all countries” is the condition for the company developing a maximum

As the politics is stable, the company will attract more investors It can be said

thal political stabihty is one of the most comecmed issucs of the investors Wilh

stable politics, no wony about the instability, the company only focus on development

2212 Economic factors

= Economic growth rate

In the period from 2006 to early 2008, Viemam was one of the countries

with relalively high ard stable growth rate: the average GDP growlh rate was

7.8%/year However, since 2008 up to now, along with the deterioration of

the world ecomomy, Vielnam’s economic growth stowed considerably, in

2009 it was only 5.32%, im 2010, it was 6.58%, in 2011] it contmmued to

experience difficulties and it is predicted that 2012 will be further reduced.

3000 2001 2003 2003 2004 200% 300G 2007 3008 2009 2010 Chart 2.1 GDP growth rate of Vietnam in period 2000 - 2010

The development of the securities market bear great influence from the

growth and development of the economy Strong and grown economy opens

opportunity of high and stable growth for the enterprise, helps making

healthy the shares on the securities market and promote the investors to

actively participate in the market At the same time, economic growth is the driving force to motivate the enterprise to expand production and business

activities, enhance the mobilization of financial resources in the securities

market, make the securities market more vibrant In contrast, when the economy is unstable or slowly developed, “health” of the enterprise and

optimism of investors will be reduced, and the securities market in general

and the business activities of the BSC in particular will indirectly adversely

affected

Despite the fact that global economic crisis has no small influence on the

growth of developing countries like Vietnam, according to the evaluation of

Japanese Bank for International Cooperation (JBIC), Vietnam still ranks the

third in prospects for development of business activities in the medium term

stage (behind China and India and above Russia, Thailand, Brazil) with the

reasons: good location for diversifying the investment, cheap manpower

source, having good capability of domestic market development, good

quality human resources, having good supply source for assembly industry

29

Thus, in the medium term, the securities market of Vietnam will have

favorable growth prospects

However, the growth rate of gross domestic product (GDP) which is rather

good together with the inflation rate which rises dizzily are no small concerns to the business activity of enterprises, especially for securities

companies

Inflation: this was the biggest risk in 2011 and it has been overcome gradually

in 2012

Vietnam’s CPI index in recent times fluctuates rather unusually, it is mainly

due to food and foodstuff factors (accounting for 39.93% of the CPI goods),

The main factors continuing to put pressure on CPI in the coming year

include escalation of commodity price (along with the pressure on increasing

the world commodity price), unstable weather affecting to food supply,

routes of increasing coal and electricity prices which were implemented and finally, an important influence factor on inflation being the import demand

for production and consumption continues to increase, while maintaining a

stable exchange rate and regain confidence in the VND as well as a challenge to the management authorities

Chart 2.2 Inflation of Vietnam in period 2000-2010

Source: General Statistics Office of Vietnam

30

On fiscal policy, the Goverment had clear orientation te tighten, specifically to reduce unnecessary investment projects, increase collection, reduce budget

expenditure, take the budget deficit lo below 5% With public investment being

an important driving force of the growth, it is possible to see that tightening the fiscal policy, a relatively important step in controlling inflation, will cause no

small cffeet to general growth of the coonomy The policy of tightening the

money and fiscal year will cause many challenges for growth of the economy

Connacting the difficulties of 2010, with inflation pressure is further maintained

in 2011, to 2012, the lightening of monetary policies, fiscal policies has been

causing many challenges for growth plan of the economy in the next time

With inflation pressure being imminent challenge, monetary policy and fiscal

policy are going according to the direction of cnaurmy the macro stability and

initially promoting the impact of dominating the inflation but reducing the growth rate of the economy When the interest rate level is still at high one, the

onterprise will be very difficult to approach the capital o produce and invest, or

have to bear a very high capital cost besides the input commodity price

increases The growth problem will not he given priority as in the past and not

Ict high inflation extend or happen again in the next years

Although the interest rate level was lowered, for the current situation of the onterprises, iL is still at high level, il will be maintained in further period arnt then it may be reduced; however, which level it will reduced to, it depends on

measures of the State Bank, general situation of the banking system and ability

of the Government in implementing the plan on cutting down the proposed

budget expenditure

Exchange rate: On 11/02/2011, the State Bank carried out the increase of

iuterbark exchange rale VNDAUSD from 18,932 VND to 20,693 VND, with narrow transaction margin from +/-3% to +/- 1% Lig adjustment level (over

9%) is considered as brave step of the State Bank aimed at taking official exclamge Tale near the exchange rate of (roc markel which was tensioned over

31

the past years Thereby, helping the cxchange rate of the official market reflecting more closely the demand as well as expectation of market

Tike this, from the beginning of 2011, the exchange rale problem was sottled partly, helped consolidating the belief in VND and expectation that exchange rate may be maintained stably in a long period of time [lowever, trade deficit continues lo cause pressure in (he nex years, USD paysnent demand at the end

of the year and the ability to strengthen the exchange reserve are still macro issues which require close monitoring of the management authorities in order to

have decision on whether adjusting additionally the exchange rate in the current

year or not

However, trade deficit in 2012 may be less stressful due to the support expectation from inercase of overseas national currency exchange and ineroase

of money flow from disbursement of ODA, FDI and II capital resources

According to the Ministry of Industry and Trade, in 2012, export is expected to increase 13% compared with 2011 and attains the turnover of about 108.5

billion USD Import tumover is about 121.5 billion USD, increases 14.6% compared wilh current year Like this, bade deficit in 2012 is expected of about

13 billion USD, equal ta 12% export turnover According to the Ministry of

Industry and Trade, total import turnover in 11 months of 2011 was estimated ta attain nearly 96 billion USD, in which enterprise with domestic capital attained 52.6 billion USD, foreign investment block attained 43.5 USD It was estimated

that in 11 months, it atiained over 8.9 billion USD, accounting [or 10.2% total

export tumover It was estimated the trade deficit of the entire year attained

about 10 billion USD, equal to 10.4% export tumover

Challenge for growth expectation

The Government adjusted GDP growth objective from 6% - 6.5% mslead of the

previous objective of 7-7.5% in the period 2012-2015 the first priority was to dominate the inflation, stabilize the macroeconomics Ilowever, it is estimated that cconomic growth rate (GDP) in 2012 inercases about 5.5%, takes the scale

of economy tp aflain about 136 billion UST, with average income per capita of