Luận văn business development strategy of joint stock commercial bank for investment and development of vietnam chuong duong branch in period 2017 2020

- 35 CILAPTER 2 BUSINESS ENVIRONMENT ANALYSIS OF JOINT STOCK COMMERCIAL BANE FOR INVESTMENT & DEVELOPMENT OF VIETNAM- CHUONG DLONG BRANCH BIDV CHUONG DUONGError!. Torter applicable with

ACKNOWLEDGEMENTS

I assures that this thesis is the researching work of myself The data of orgarivations and mdividuals are referenced and used as prescribed) The resull

presented in this project is honest and has not been published in any public works

1 would like to thank Nantes University of Nantes and Intemational School - Vietnam National University, Ila Noi for giving me and my classmate opportunity to patticipatc in this course The staffs of ISVNU have dedicated to support organizing activities, facilities, and help us during the course In addition, the course is designed

in a reasonable way so we are acquired a lot of knowledge, relationships and opporlunilics to share informations and Jeara [rom the experienees of fellows in

the process of coltort to have good resulis in this graduation thesis

To complete this assignment, I will not avoid the shortcomings 1 look forward to the opinions from the advisor, lecturers and classmates to complete this study and make contribution io business development stalegy of Join, Stock Commercial Bank for Investment and Development of Vishiam - Chuang Dnong Branch in the falure

Sincere thanks!

1.1 Overview of Strategic Management - - 10

1.1.2 Business Strategy and the strategy selection - 10

1.1.2 The basic features of the business strategy Error! Bookmark not defined

1.2 Strategy Plamning - Errort Bookmark not defined 1.2.2, Analysis of the external environment Error! Bookmark not defined 1.2.2.1 Macro Fnviromnent, Auilysis - PEST model ++ 14 1.2.2.2 Analysis of the industry and cormpetitive enyironHebt 18 1.2.2.3 Analysis of competitors - Error! Bookmark not defined 1.2.3 Analysis of the intemal environment ssssieensssrstntinennineeieeneneenees 33 1.2.4 SWOT matrix veces cseesmnnstnsieetsimssnnersemsiaetnsssnetstunneeiteeneenees 24 1.2.5 Selection stralogics deough QSPM matrix - 35

CILAPTER 2 BUSINESS ENVIRONMENT ANALYSIS OF JOINT STOCK COMMERCIAL BANE FOR INVESTMENT & DEVELOPMENT OF VIETNAM- CHUONG DLONG BRANCH (BIDV CHUONG DUONG)Error! Bookmark not defined

2.1 Overview of Join Stock Commercial Rank for Investment & Development, of

Vietnam- Chuong Duong I3ranch Krrer! Bookmark not dcfined 2.1.2 The principal business activities of BIDV Chuong Duong Error! Bookmark not defined

2.1.3 Organization sirulure of BIDV Chuong DuongErrer! Bookmark — nat defined

2.1.4, Some business operation indicators o£ BIDV Chuong Duong Error!

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2.2 Analysis of the extemal environment 30 2.2.1 Analysis of the macro environment (E8) "— 30

2.2.1.2 Economic envonment (E): " "— 31 2.2.1.3 Cultural environment - social (S) oi ¬ 2.3.1.4 Environmental technology (T) Error Bookmark not defined Banking industry analysis (Five Foroe) Error! Bookmark not defined 2.2.2.1 The power of customer - Error! Bookmark not defined 2.2.2.2 The power of suppliers - Frrort Bookmark not defined 2.2.2.3 The potential competitors Error! Bookmark not dcfined 2.2.2.4, Threat of substitute produois Error! Bookmark not defined 2.2.2.5, Existing competitors Errort Bookmark not defined 2,3 Analysis of intemal environment of BIDV Chuong DuongError! Bookmark

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2.3.1, The supporting activities Error! Bookmark not defined 2.3.1.1 The organizational structure and human resourcesError! Bootumark not defined

2.3.1.2 Technology and equipment systems Error! Bookmark not defined 2.3.2 Analysis and evaluation of business operations BIDV Chuong Duong

Error! Bookmark not defined 2.3.2.1 Financial Capacity Assessment Error! Bookmark not defined 2.3.2.2 Marketing and sales activities of BIDV Chuong Duorygs Error! Bookmark not defined

2.3.2.3 Management activities in BIDV Chuong DuongError! Bookmark not defined

2.3.2.4 Risk Management Error! Bookmark not defined CHAPTER 3 IMPLEMENTATION SOLUTION FOR SELECTED STRATEGY 62 3.1, BIDV Clmong Duong’s Strategic development orientation until 2020 , Error! Bookmark not defined

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3.1.2 Mission - Error! Bookmark not defined 3.1.3 Coro VẠH68, cu cu eeeerreeerree Error! Bookmark not defined

3.2.2 Stralegy 2: Focus on the exploilalion of the customer resource from the

strategic sharcholder (SO- Error! Bookmark not defined

3.23 Strategy 3: Finding strategic investors which are large intemational financial and banking corporations to make use of their brands, management capability and so on to improve the competitiveness (SO-03)Error! Bookmark

3.5 Solutions and budget planning for BIDV Chuong Ruong’s strategy

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3.5.1 Bad debt treatment - Error! Bookmark not defined

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LEST OF TABLES

21 Some key indicators of BLOV Chuong Duong in period 2014-2016 28

22 5 force analysis of M Torter applicable with banking in dustry in

23 ‘The basic data operations of the competition in 2014 40

25 Evaluation of the impact of external factors on BIDV Chuong Duong

29 Summary of some bad debt customers in BIDV Chuong Duong 37

2.10 Summary of strengths and weakness of BDV Chuong Duong 63

211 Matrix of assessment of environmental factors within the

3.12 Quantitative Strategic Planning Matrix for BIDV Chuong Duong

313 Financial indicalors of BIDV Chuong Duong in 2017 — 2020 5,

3.14 Strategy implementation roadmap and budget planning 79

INTRODUCTION

The reason for topic selection

In recom years, the financial industry in Victnam has been impacted by the introduction and development of domestic and foreign banks ‘hat rapid development

of the banking system makes operation of banking sector more difficult and intensely competitive, especially in the two big cities, Hanoi and Ho Chi Minh City

In fact, from late 2015 until now, the banking industry is in extremely difficult

sitmation because of the bad impacts of the world economy crisis in general as well as

the economic situation in Vietnam in particular that lead to the loss of liquidity, higher bad debt, high potential loss of capital, professional ethics harm and inconsistent regulalions with the growth of the market They are main causes that affected the

operation and effectiveness of the banking sector and Joint Stock Commercial Bank for

Investment and Development of Vietnam — Chuong Duong branch is not exception

Joint Stock Commercial Bank for Investment and Development of Vietnarn — Chuong

Duongbranch is a business unit of Joint Stock Commercial Bank for Investment and Development of Viemam, over the years has constantly improved and made efforts to penetrate to focal area to sinvive and develope in accordance with the strategy and

direction of the system

Stemming from mentioned fact in combination with the knowledge leamed from the program Master of Finance-Banking-Insuranee (Southcast Asia), rough University

of Nantes FBA program, practical experience of myself, all reference materials, and opinions from fellows and economists, I would like to choose the research topic

"Business development strategy of Joint Stock Commercial Bank for Investment and Development of Vietnam — Chuong Duong branch in peried 2017 — 2020" (Hereinafter referred to as “BIDV Chuong Duong")

Objectives of the study

‘This study aims to build business strategy for specific BIDV Chuong Duong with following detailed objectives

— Identify strengths, weaknesses, opportumities faced by BIDV Chuong Duong ;

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— Assess the strategic position of BIDV Chuong Duong to build competitive position of BUOV Chuong Duong compared to competitors, other bank

branches, in Hanoi

— Develop business strategy for BIDV Chuong Duong in next period 2017-2020

On this basis, T will use rationale for stralogy aud business straicgy and application

of the model for construction, planning and strategy analysis in case of BIDV Chuong

Duong As a result, the study offers recommendations for BIDV Chuong Duong in

chovsing business strategy and successful implementation such stralegy

Methodology of the study

The thesis uses the following methods:

— Qualitative method for oase study of BIDV Chnong Duong

Data: Primary (expert opinion .) and secondary (from other sources such as journals, bauking statemems, stalislical reporl, tternet .)

— Methed for data collection: direct interviews of leading experts and opinion gathered Uough interviews and surveys to collect opimtons of experts currently working in mother bank BIDV and experts in banking scetor (specialists in policy,

strategy, risk management )

Specific method: On the basis of information obtained from the survey interviews,

data associated with the financial statements, business plans of BIDV Chuong Duong against the competitors in Hanoi and publications on socio-economic situation of Vietnam I have applied the methods and tools leamed in FBA course

— University of Nantes

Scope of the study

This study ji st focuses on analysis contribution for business strategy of BIDV Chung

Duong,

I focus on data analysis of BIDV Chuong Duong and competitive branches of other banks in Hanoi for comparision combined with data from the State Bank of Vietnam detailed for Hanoi area These dala can be oblained (ram 2014 to 2016 And the scope

of this study just could be applicable in one particular bank branch,

Significance of the study

= Apply theories learned in the FRA program — University of Nantes to build the

business strategy with specific cases of BLDV Chuong Duong

- Build and develop a business strategy suitable for BIDV Chuong Duong to

maximize the strengths of BIDV Chuong Duong , take advantage of markel opportunities {focus resources towards best chance of the market)

- Become reference to other studies

Limitations of the study

- This study focuses on building and developing business strategies for BIDV

Chuong Duong so all conclusions drawn as well as the stralegy selection applied

ouly to BIDV Chuong Duong

- it’s required additional research to apply the conclusions or strategies for other

sectors or other companies

The structure of the study

Introduction

Chapter I: Rationale for business strategy construction and selection

Chapter I: Analysis of the business environment for BLD Chuong Duong

Chapter II: Business strategy development and selection as well as implementation

solutions applicable for BIDV Chuong Duong

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CUAPTER 1 THEORETICAL BASIS FOR BUILDING BUSINESS STRATEGIES

1.1 Overview of Strategic Management

LAD The concept of strategy

‘The term "strategy" is derived from the Greek word “Strategos" used in the military, according to Von Clausewitz Calr, 19th century “war planning and the formulation of campaign strategy." Since the '60s of 20th century, the strategy can be applied in the field of business and the term "Business Strategy" was bom The

concept of business strategy developed over time and was approached in different

Cambrige, Massacchusettes MIT Press)

Strategy is the model for the targets, intention and plans to achieve those goals

(Kenneth, 1965)

"Strategy is the pattern or plan to integrate the major goals, policies, and action sequences into a cohesive whole is a coherent way" (Quim, J., B L980 Strategies for

Change : Logical Incrementalisia Homewood, Hlinois, Irwin}

Johnson and Scholes define strategy in the environment having a lot of rapid change: "Strategy is the direction and scope of an organization in order to gain long- term competitive advantage for the organization through the format of its resources in

a changing environment, to meet market demand and to satisfy the expectations of

stakeholders "(Tohnson, G., Scholes, K (1999) Exploring Corporate Strategy, Sth Ed Prontice Halt Furope)

In summary, whatever the way approached, the nature of the business strategy is sketching future picture of the business in its region and the ability for the

organization lo achieve cerlain goals

1.1.2 Business Strategy and the strategy selection

Busitiess straleyy is:

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- The most important part of the whole strategy of the business

> The direction of the business operations

- ‘the major targets for businesses

Business strategy is the way or methods of business in competition, it specified

producls and services thal businesses produce or render, scale and resource for production; profitability and growth prospects of business

Busitess siralegy is the most important part of the whole strategy of the business Other parts of the overall strategy must be based on the business strategy to build

and calibrate

Business strategy is extremely important for the existence and operation of the

business It sets out the key objectives, which help to mobilize both short and long term resources It ensures all plans are not misleading A good business strategy helps the business get more profit, set a stable position in the market and proactively adapt

to the environment So the enteiprise needs to build a business strategy suitable with each condition and circumstance This is a necessary requirement for any enterprise

The advantage of the business strategy: the slralegy can be considered as a combination of business cnvironment, capacity as well as targets of the business In other words, in the life of the business, strategy is one kind of art relating to designing aud organizing all resources to achieve long-lerm goals (ic ccouomic objectives), the

relationship with a changing and competitive envionment

Strategy identification is a vital task for the survival and development of all

culerpriscs as the enterprises niced to know about business environment, in order to

survive and thrive in the market economy

The strategy is interpreted as a comprehensive plan of business It lays out the devclopment trond in the long run, draws out key objectives of the company, outlines the basic resources and suggests ways to deal with uncertainties of businesses in a competitive environment Following that, the strategy is a basic and radical plan with defined tasks (positioning) the resources, create a united resource to focus on the target and utilize the power of the organization to implementation of that goal

Competitive strategy helps businesses capture market opportunities and create a

competitive advantage by applying the limited resources of the business in an

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effective method to achieve targets and forces businesses to consider and determine

the direction for operation

‘fhe business environment changes rapidly and creates opportunities and msks in

the future (business strategy will help businesses better to leverage opportunities and

reduce nsks related to the business environment)

Business strategies help businesses better to prepare and deal with all the market

mmovernents,

Business strategy also helps to reduce the risk and onhance the ability take advantage of emerging business opportunities

The basic features of the business strategy

Business strategies often determine the basic objectives and direction of the business in each period and fully applicable in all aspects of the business operations to

ensure the continous development and stability (greater than 1 year)

- Business strategy to ensure to mobilize and combine the exploitation and utilization of enterprise resources in the present and future, promoting the advantages and seize the opporlunily to gain commercial advanlage im the

market

- Business strategy must be reflected throughout a continuous process from

strategy construction, implementation, testing, evaluation and adjustment

- Business strategy must be set to gain the advantage position in the market (to

utilize all the advantages to win)

- Business strategies are usually built for a relatively long poriod (3 years lo 5 years) and tend to shorten down depends on the characteristics of each industry Basic task of the business strategy is that the strategic managr must address three following issues:

+ Who will be the subject of the business?

| Which demand will be met?

+ How will above demands be satisfied?

12Strategy Planning

1.2.1 The procexs of strategy development

Diagram of business strategy development process

The Strategic

Management Process

Strategic goal, vision & mission

The strategic goal (SMART goal)

‘The building of the strategic goals of the business is extremely important asthey are

goals for the enterprise to achieve and measure the completion of the target so the business could allocate adequate resources Thus each strategic goal should have the

following characteristics:

- Should be specific accuracy (Specific)

~ Should be measurable (Measurable)

- Must be challenging but can be done (Achievable)

- Should be directed to the important issues, result-oriented (Relevant)

~ Should specify a period of time can be achieved (Timed)

SMART is the acronym for the interesting set of criteria that a viable target goals that

have to be done

Vision (Vision)

All business and organization have their unit's vision which presents the

principles and long-term oriented operation of the business The objective of the business from time to time may change, but the vision, principles of business should

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be oriented for long-term period and must be disseminated throughout the enterprise for each member lo understand, be proud of and implement in the business operation All of these constitute what we call business cultural

Vision statement is a message specifying the mission into a highly motivated largel, highlighting the need lor improvements thal are vi 1 for businesses, creating

the confidence in the future and aming to make the impossible possible

1a Mission (mission)

A strategic plan starts with a defined mission of the enterprise According to Mintzberg: “The mission presents basic functions of an organization in the society in terms of goods and services [hal organizalion serving ils cuslomers.”

Mission statement is the message embodied in the core values of the business

It expresses the important contribution of business to the society, it is the motto of the

business and shown location of the business in the marketplace and especially

presented what business commitments Mission statement is often concise but meaningful, highly motivated and shown the long-term stability

1.2.2, Analysis of the external environment

To provide strategic business feasibility, after identifying business goals, enlerprises must conduct analysis and evaluation of the fluence of external environmental factors to the implementation of the goals

Business activities are in connection with a specific environment consisting of many [actor affecting the business activilies such as: macroeconomic, legal, cultural, technology, micro elements (environment sector), competitors

1.2.2.1 Macro Environment Analysis - PEST model + +

In fact, all industries and businesses operate in the macro environment

including economic, technological, cultural, social, demographic, political, legal and international factors The changes in the macro environment can directly impact any particular force in the industry, which may affect relalavely to other forces and lo itself also, eventually change the attractiveness of an industry ‘he scope and content of environmental analysis including: analysis of the macro environment and analysis of

micro envirorment, also known as the industry enviroment

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The scope and content of environmental analysis, including: analysis of the macro environment and micro environment analysis, also known as the industry

environment

In this content, I would like to introduce 3-level analytical model applicable for inside

and outside enviroment:

Source: Lecture note for

Strategy management at NEU

Economic environment (Economic)

In every country, macroeconomic situation presents how healthy and prosperous the economy is and always causes impacts to businesses and industries

Enterprises need to study it to predict changing trends which affect the business and

industry

There are four important factors of the macro-economic environment that businesses

need to consider; economic growth rate (GDP), interest rates (Interest), foreign

exchange (Exchange rate), inflation (inflation)

Analysis of the economic environment evaluates factors affecting supply and demand

of products and services, evaluate the movement of such factors and is expected to

draw the market demand and supplying ability of the business for the study period

Politics— legal enviroment (Political)

Any countries or territories are under certain political conditions so legal and

politics factors also have major impact on the opportunities and external challenges to

the business This is the way businesses can influence government, and conversely

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how government affects them The coutinaus change of this factor significantly affects

compelilion

Cultural - socicty enviroment (Social)

The cultural factors - such as social habits, customs, concepts, consumer trends,

cthics, acsthelics, cognitive are usually long-term and more subtle Gian other factors

so sometimes even hard to recognize In other hand, the impact of cultural factors is

often in a lage scope: "il determines how people live, work, produce and consume products and services" It creates habit in consumption, basic demands and affects the

way business operating or supply ‘Ihe understanding of cultural - society

enviroment is very important for the manager in management of organization

Technology environment (Technology)

Technology changes can create new products, increase productivity and meet

increasing demands, make existing products may be obsolete ovemight, and create a

series of new products ‘hus, technological change includes creation and destruction, both opportunities and challenges

Therefore, the analysis and Corecasting of technological change is very

important and urgent than ever The cmorgence of electronic, information technology and biotechnology is a typical example In fact, technological change affects business

in many aspects, including price, market supply and demand, and even change

consumer behavior or production Managers need to pay constant attention to

technology changes as well as investment in technological advances

The natural environment and demographics (+)

Climate and ecological factors are what businesses also need concern because

they also change the factors related to production and consumption Today, olimate changes not anticipated such as warming of the carth, clnino, ote, sometimes threat businesses with seasonal cycle

Global environment (+)

‘The developing trend of globalization: Globalization is the process of forming

an unique world market, the global financial system, expand economic and science -

technology exchanges between countries and solve the political problems in the whole

world Globalization crcales conditions for ceoromies lo develop, promotes the

exchange of goods, services, capital and labor

4 could summarize the macro cnvironment analysis in the following table:

Policy and educational philosophy

Tabor laws Policy and philosophy

Siato budget bølsmeo male and fernale labor foree Enviroment concern Diversification labor Shifl wark and occupational Social Altitudes towards quality work favorite

Changes of product concept

Technology Life \rate of change | Private focus and support for

‘Technology knowledge application Government R&D

The natural Ths age structure Distribution of income

environment and Gvographic Disttibution Ethnic

demographics (+) | Communities

Distribution of income Imporlant political event New industrial counties

Conclusion: The main objective of the macro environment analysis is to

identify the changes, the trend expected fram the factors of the extemal environment

With the focus on iss es in the future, the analysis of the extemal environment allows

enterprises to realize real opportunities and challenges to the business

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1.2.2 Analysis of the industry and competitive cnvironment

To build a business stralogy, onc important, point is thal, the business should be

considered in relation to operation environment correlateing to the business, analyzed and forecasted competitive forces in the industry to identify opportunities and challenges [or enterprises

‘Yo see clearly the image of competitive pressures of the industry, we need to

apply the model 5 forces of Michael Porter

5 forces model of Michael E Porter

Michael 1, Porter, a professor at the Harvard School of usiness Administration, has a framework to help managers identify the opportunities and risks that businesses face in one industry (Michael H, Porter, Competitive Stratery, New York : Prepress, 1980) Framework of Michael I, Porter called five forces model of competition, is shown in the following diagram:

profits The strength of the five competitive forces can change aver time, as industry

conditions change

‘The task set for the administrators is to be aware of the opportunities and risks

brought by changes of five competitive forces to set up corresponding strategy

Moreover, if is likely the chance lo a business Ibrough strategy selection shilling the

power of one or more competitive forces to advantages for its own organization

(1) Competitive pressures from existing competitors

The scale of competition existing in the same industry: the weaker the

competitors, the more opportunities to increase sales and earn profit and vice versa, when the current competition goes from a stronger competitor, the competition on

price is significant, and all about price competition leads to injuries ‘hus, the intensity of competition between firms in the same industry creates huge challenges with profitability

(2) Risk from potential competitors

The enterprises will enter the industry in the future and also become

compelilors (potential) are also considered as significant competitive force, and il is

called potential competitors This is the business currently operate in other industries,

‘but competition will be created in case they decide to join the industry This is a great challenge for cxisting businesses in (he indusiry Tn general, axiating (irms in the

industry attempts to prevent the attendance of potential competitors into the industry

(3) The power of buyers

In other words, we call it Ihe bargaining power of buyers The buyer of a

business may be the end user, the distributor to end users and wholesalers or retails

The buyers can be viewed as a challenge as they require for price decreament or higher quality and better service In contrast, in casy buyers, businesses will have the opportunity to raise prices and eam higher profits Buyers can raise their demanding

or not depending, on their relative power with the business

(4) The power of suppliers

Although the business is customer of the supplier but bargaining power of

suppliers is a competitive force as they now have the ability to raise prices or reduce

the quality of products and services they provide which might leads 10 reduction of

sales and profitability of the business Conversely, if the supply is weak, this would

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give businesses an opportunity to push prices down and require more for quality

improvement Like the buyer, the power of the supplier having against the business depending on the relative power between them

(5) The alternative products and services

One of the competitive forees in Porter's wodel that challenges or threats from

substitute products ‘hese products can satisfy the needs of the customer so replace

products of the business

Substitutes products are prevailing by its distinct characteristics The existence

of these alternative products is a strong competitive threat, limiting the ability to raise

prices high and thus limits the profitability of the business Conversely, if the business

has little equivalent alternative product (in case of weak alternative products), and other factors are normal, businesses will gain the opportunity to raise prices and

increase profit As a result, its strategy will be designed to gain this competitive

advantage

Analysis of industry environment on the basis of 05 competitive forces, shows the allractiveness of the industry im terms of polential earning ability based on full or outstanding capital In gonoral, the stronger the competitive forces the less potential profit for businesses in the industry An unattractive industry has a low entry barriers, supplicrs as well as buyers with slong bargaining position, strong threal of

competition from substitute products and high intensity of competition in the sector

Such features of the industry will cause major difficulties for the business to create

new value and make return more than avorage Figure

1.2.2.3 Analysis of competitors

To evaluate the compelitiveress of the enterprise on the market, the strategic

manager will use CPM Matrix Enterprise will pick out the key success factors for an organization [hen select competitors to compare with the score afler weighting

To construct a matrix of competition image, 5 steps should be taken:

Step 1: Make a list of 10 factors that influence critically to the competitiveness

of firms in the industry

Step 2: Classification the important level from 0.0 (not important) to 1.0 (very important) to each factor The importance of each factor depends on the level of the

factors that affect the competitiveness of businesses in the industry The total number

of classifications assigned lo the factors must equal 1.0

Step 3: Classificalion from 1 to 4 for cach factor delermining the success of the

business based on the assumption how the current strategy of the company respond to

this factor As such, 4 is for good reaction, 3 is reacted reaction, 2 for medium reaction

medium and 1 is poor response The coeflicients are determined by expert method

based on the results of business activities

Step 4: Multiply the importance of each factor with its classification to

determine the total mark for that factor

Step 5: Sum of the critical factors to determine the total mark for the organization (lhe highest score thal one organization ean achicve is 4, the lowes! average of 1,0 and 2.5 is average)

‘The result of these factors lets the business know their competitors in terms of

their current situations and their positions in the market

Competition matrix (CPM)

From the above transcript, the business could identify its strengths and

weakricsses compared {0 ils compelilors and thercby overcome the weakness and develop strengths

Matrix of integrated assessment of external environmental fact- EFE

Assessment of external environmental [actors is the ongoing process and requires the participation of all administrators and departments ‘the first is to gather sufficient infonnalion about environmental factors in the industry and the macro environment, then use quantitative methods (EFE matrix) and the predictability of the business to assess the opportunities/challenges and measure the reaction abilities of

the business The process of developing EFE matrix consists of 5 steps:

Step 1: Identify and make a list of 10 to 20 factors (opportunities & threats)

having a crucial role to the success of the company

Step 2: Assess the importance for each factor from 1.0 (most important) to 0.0

(not important) 'o evaluate the importance of this factor, we rely on umpact (extent

and duration) of each factor to the current strategic position of the company, the sum ark of all these imporlant factors must be equal tu 1

Step 3: Grading cach factor from 4 (Highlights - good) to 1 (poor) based on how the current strategic direction of the company in response to this factor

Step 4: Multiply the mportance of cach factor with rariking poinis to determine

the mark of each factors

Step §: Total mark of all external factors to determine the total mark of the company Total mark ranges between 4.0 (Good) to 1.0 (Poor) and 2.5 is the average

value

Matrix for integrated assessment of external environmental factors (EFE)

Strategic factors (1) | Important level (2) Ranking (3) | Total marl/factor (4) | Note

1.2.3 Analysis of the internal environment

To adapl le the external environment change, the business needs and such changes need to be considered with intemal factors within each business, The

identification of internal strengths and weaknesses help the business to build an

efleclive business strategy The number of internal factors inside the enterprise is huge

and diversified ‘Therefore, to evaluate the environment within the enterprise, we need

to poinl oul the major factors in the enesprise winch represent ihe operations inside of

the business

Internal factors are very important in every business strategy and business objectives set out After taking inta account internal factors, managers need to establish strategic elements matrix to have a close look at the ability to react and recognize strengths and weaknesses That will help enterprises maximize strengths to exploit internal resources and prepare to confront the weaknesses and find ways to improve this weakness LYE Matrix will help this strategy warks

IDE matrix could be formed and developed through 5 steps:

+ Step 1: Make a list of 10 to 20 elements, including the strengths and weaknesses thal

afteet the basic operations of the business

« Step 2: Classification importance level from 0.0 (not important) to 1.0 (very important) 0 cach factor to the success of busmesses im the mdusiry Tolal importance grade of alll factors must equal 1.0

« Step 3: Determine the weight for each factor with scale of 1 to 4, where 4 is very

strong, 3 point is pretly strong, 2 point is prelly weak, 1 is very weak

« Step 4: Multiply the importance grade of each factor with its weight to determine the

mark of each factor

« Step 5: Plus all the factors to determune the total mark of matrix

Assessment: in case total mark of matrix between point 1 to point 4, it will not

depend upon the number of factors in the matrix

- Lf the total mark less than 2 the Company has weak intemal factors

- TÝ the total mark more than 2.5: the Company has strong internal factors

Matrix for assessment of internal enviromental factors (FE)

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§trengtiis ( S) SO strategics ST strategics

Sl: list all strengths in] 1 Use all strengths to| 1 Use all strengths to avoid order of importance utilize opportunites threats

WI: list all weakness in

‘There are eight steps involved in designing the SWOT matrix

Step 1: List the major opportunities outside of the company

Step 2: List the basic threats outside of the company,

Step 3: List the basic strength within the company

Step 4: List the weaknesses within the company

Step 5: Combine the internalstrength with extemal opportunities and record the results

SO Strategies in lhe appropriate box

Step 6: Combine the internal weaknesses with external opportunities and record the results WO strategy

Step 7: Combine the internal weaknesses with cxtermal apporlurities and record the results of the SII strategy

Step 8: Combine the internal weaknesses wilh external threats and record the results

¥ ST strategies companies use strengths to cope external threats

¥ WEE strategies to overcome the weaknesses to reduce the risk from outside

The most important thing is that the admimstratar needs to determine exactly where the strengllis, weaknesses, opporlurnities and challenges of the orgarazalions

1.2.5 Selection strategies through OSPM matrix

According FERD R David, QSPM matrix uses input from all matrices introduced in the previous scction as FFE, TFE, pholo compehtion, SWOT and key

strategies to evaluate the best alternative strategies Lo develop a QSPM matrix, we

need to go through 6 steps

Step 1: List the opportunities / threats and other important external strengths / weaknesses within the company Matrix includes at least 10 critical success factors outside and 10 factors inside the company

Step 2: Classification cach inside and outside success factors

Step 3: List all the strategic plans that the company considering Gather the strategies into separate groups if possible

Step 4: Identify the attractions of each strategy Only strategies within a group will be compared with each other Number attractions are categorized as follows: 1 - Do not attractive, 2 — Little attractive: 3 - Quite attractive; 4 - Very Attractive If the success

[actors will not be graded if do not affect, the chotce of strategy

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Step S: Calculate the total number of points, the result of the classification score (step 2) the number of points (step 4) in cach row

Step 6: Calculate the total points for each strategy ‘Lhe higher score indicates, it is the

more attractive strategy

CHAPTER 2

BUSINESS ENVIRONMENT ANALYSIS OF JOINT STOCK COMMERCIAL

BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM —

CHUONG DUONG BRANCH 2.1 Overview of Joint Stock Commercial Bank for Investment and Development of

‘Vietnam— Chuong Duong branch

2.1.1 General Information

Joint Stock Commercial Bank for Investment and Development of Vietnam—

Chuong Duong branch has officially operated since 01 October 2013, it is under the

first branch of under the branch of Joint Stock Commercial Bank for Investment and Development of Vietnam, after more than 03 years of operation, BIDV Chuong

Duong has been developing steadily and achieving many encouraging results Currently the headquarters of Chuong Duong Branch at 41 Hai Ba Trung street, Tran

Hung Dao ward, Hoan Kiem Dist, Ha Noi city The area of BIDV Chuong Duong's

operation is mainly in the districts of Hanoi

Starting from 3 saving rooms and an transaction office with 98 employees,

transaction points, namely savings and transaction offices and branch offices and 98

employees After more 3 years, BIDV Chuong Duong has been upgraded into 3 transaction offices, increasing the total number of transaction offices is 4 rooms Anh

now BIDV Chuong Duong has five transaction offices in Hanoi

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The number of employees at BIDV Chuong Duong branch to 31December 2016 up to

105 people with expertise and skills trained in the spirit of professional, honest and

friendly customer service

2.1.2 The principal business activities of BIDV Chuong Duong

As a major branch of BIDV, BIDV Chuong Duong offers a full range of products

and services of a modern bank BIDV Chuong Duong serves all economic

organizations, individual clients in the Hanoi area and other regions of the country where the branch can be managed and monitored

The main products and services

Deposits for organizations and individuals

Loans to businesses and individuals, households

The domestic and international payment service

Foreign Exchange and Derivatives

The trade finance products

v The credit guarantee products

v The intermational and domestic debit card and credit card

v Funds services, collecting money at the business location

v Cash remittances via Western Union

v The electronic banking services (of Mobile & InternetBanking)

2 .1.3 Organization struture of BIDV Chuong Duong

CORPORATE) (‘WIDIVIDUAL) (— Risk) (Credit a) divid) (Wanageme) (Transaction)

manageme| |managemen| |@ client] Jal at and | |offices

nt division | client | |treasury| | division) | lion transact) (division

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General function of the Division

1 Division is the focal point of suggestions, advise and assist the branch's director in

working out plans, working programs, measures and solutions for the performance of tasks

falling under ils assigned imotions and tasks, guiding documents , Legislation in the field of business assigned

2 Actively implementing the assigned tasks, To directly carry out, handle arxl perform operations in the assigned ficld in accordance with tho regulations, competence and professional procedures, contributing to the fulfillment of business tasks of the entire branch

To take full responsibility for the comeciness, accuracy, truthficness, safety and

efficiency in the scope of the assigned office, contributing to ensuring safety and improving, the efficiency of the whole branche’s operation

3, Work closely with other units in the branch according to business processes: To be

responsible for the comments made by the functions and duties of the Department for Business

and General Affairs of the Branch

4 Organization of archives, management of information (collection, processing,

archiving, analysis, confidentiality, supply .) to synthesiac and make reports and statistics

within the scope of tasks of Division in order to to serve the management of the Branch, mother

bank, and he roqpucal of the Slalc tamagcmtenl ngenoies

5 Regularly improve the method of working, training, training staff about the style of

transactions, professional skills and professional ethics to improve the quality of customer

service, mecting development requirements Keep prestige, creale image, nice impression about

Branch / BIDV., Researching, proposing to improve the application of information technology

to the assigned management Regular self-examination of the performance of assigned business

& Building solid collective, solidarity, complying with labor rules, collective labor agreement, participating in emulation movements, contributing to building strong branches ‘'o

well wain the staff of the Divisions to contribute to human resource development of the branch

2.1.4, Some business operation indicators of BIDV Chuong Duong

‘Lablc 2.1: Some key indicators of BIDY Chuong Duong in period 2014-2016

Unit: YND billions

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2.2 Analysis of the external environment

2.2.7 Analpsis of the macro environment (PEST)

market, the inventory at a high level; real estate market freeze, bad debts tend to

increase In this context, the State Bank has been very active in operating the tools

of monetary policy on the basis of strict monitoring of macroeconomic variables to stabilize the currency market

The promulgation of Decree 24 has handled the shortcomings, limitations of

mechanisms and policics to manage the gold market provided by Decree

174/1999/ND-CP in context of the instable macro-economic and volative price of

gold Deerve 24 has ercaled a new legal framework for the management of gold

trading activities, gradually organize the operation of gold market, especially gold

piece market to stabilize the gold market

The State Bank issued Circular 02 providing regulations for loan classification and provision of the organization in the tightening direction compared with Decision No

493 and Decision No 18 amending Decision No to help credit institutions in rehabation and handling bad debts However, to support credit inslilulions and enterprisesSBV has

delayed the effective date of Circular 02 from 06.01.2013 to 01.06.2014 is to create

conditions for enterprises to approach loans, enhance credit activities in the economy,

create the reasonable interest rates aud solve difficulties for business, while also helping

credit institutions have enough time to prepare and build implementation schedule to

follow full terms of Circular 02 and implement solutions to reduce bad debi, improving

credit quality

Accerding to my opinion, public policy is not really stable change frequently and applicable for shori-torm that make difficulties and challenging for

organizations to adapt

2 Economic environment (E):

Year of 2014 look plave in the context of the world econo slowly revovered

after the global recession ‘The largest economy development towards accelerating growth but there are many risk factors in adjusting monetary policy Business production is under pressure fram the cconomic and political uncortaintios of the world market, coupled with the difficulties from previous years have not been resolved thoroughly as the pressure on capital absorption capacity of the economy Not high; Bad debt pressure is heavy; Slow domestic consumption; Management capacity and competitiveness of enterprises are low 1n that context, the Govemment and the Prime Minister issued many resolutions, directives and decisions aimed at stabilizing the macro economy, removing difficulties and improving the business environment, creating growth momentum, ensuring Social security work Banking activity in 2014 continues to face difficulties: bad debt ratio has dechned but still high, the quality of credit has not been as expected However, the targets achieved in the past year show certain advances in the implementation of the bank's monetary policy: Total liquidily as of December 22, 201 4 mereased by 15.99% Compared with December 2013 (the same period in 2013 increased by 16.13%), Credit for the economy increased by 12.62% (same period of 2013 increased by 12.51%), Tund mobilization inereased by 15.76% (same period in 2013 increased by 17.23%); High foreign exchange reserves; Exchange rates are controlled within the band

The economy of 2015 tock place in the context of uncertain global markets, the world cconamy still faces huge risks with unpredictable factors

Gross domestic product (GDP) in 2015 is estimated to increase by 6.68% compared to

2014, of which the first quarter increased by 6.12%; Second quarter increased by 6.47%; Third quarter increased by 6.87%; Fourth quarter increased 7.01% This year's gxowth rate is higher than the target of 6.2% set and higher than the increase of the years 2011-2014 [1], showing a clear recovery of the economy In the 6.68% increase of the economy as a whole, agriculture, forestry and (ishery increased 2.41%, down from

3.44% in 2014, contributing 0.4 percentage point to the increase general; The industrial

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and construction sector increased by 9.64%, much higher than the 6.12% growth of the previous year, contributing 3.2 por tage points; The service scelor inercased by

6.33%, contributing 2.43 percentage points

Up to December 18, 2015, credit growth reached 17.03% compared to the end of

2014, the highest merease since 2011; Capilal mobilizaiton of credit mstitulions increased 13.49%; ‘Total payment means increased by 13.6% ‘The liquidity of the

commercial banking system has been further improved, ensuring the payment and

payment capacity of the system, contributing to controlling inflation and stabilizing the macro economy ‘I'he average exchange rate of the Vietnamese dong against the

US dollar remained stable after fluctuations in mid-August 2015

In 2016, the total means of payment increased by 16.47% over the end of 2015 (same

period last year increased by 13.55%), although higher than the same period but the total means of payment has not put pressure on Inflation, basic inflation stable At

the same time, capital mobilization of credit institutions increased 16.88% (the same

period in 2015 increased 13.59%), helping credit institutions to stabilize liquidity,

ready to mee! the demand Credil to the economy and secure credit, / deposil ratio;

The credit growth of the cconomy was 16.46% indicating that the capital absorption capacity of the business was relatively pood and the bank's interest income improved positively

Cumently, deposit rates are relatively stable Interest rates in VND are common at 0.8% -1% pa for demand and time deposits of less than 1 month: 4.5% -5.4% pa for tem deposits from | month to less than 6 months; 5.4% -6.5% pa for term deposits

from 6 months to less than 12 months; ‘Terms over 12 months at 6.4% -7.2% per year The common lending rates in priority areas are 6% -7% pa for short, 9% -10% pa for

medium and long term Interest rates for nonmal business lines arc 6.8% -9% pa for

short term; 9.3% -11% pa for medium and long term In general, the credit structure is continuing ta focus on priority areas such as agriculture, exports, supporting industries, small and medium enterprises to effectively support economic growth

2.2 ultural environment - social (S)

Hanoi is the capital of Vietnam with an area of 3328.9 km and also has the

second largest population of over 7 million people Administrative organizations are

allotted across 10 districts, 01 town and £8 district suburbs The average income level

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of Hanoian in 2014 was 466 million/capita/ year, increasing 4.7 million compared to

2013, GDP growth was 8.2% lower than the sct largel of 10%

Hanoi area is a convenient location with road traffic system, maritime, river and air

modemization therefore very favorable for the development of cultural and trading

domestic and abroad Due to above favorable conditions so cultural activities, social

activities, health and education centers, commercial centers, headquarters of many

organizations are all located in Hanoi and create a vibrant and active enviromment

In 2015, the growth of Hanoi is 9.24%, higher than in 2014 (8.8%), 17/20 reached and exceeded the plan; Interest rates fall, Capital mobilization and credit debt

surges; Inflation is controlled Budget revenue is estimated at 116,585 billion VND

gaining 103.5% of the estimate, Mobilize more social investment

In 2016, the total circulation of goods and services of social consumption of Hanoi reached 2.131 trillion, up 10% over 2015 Exports reached 10.613 billion

USD, up 1.3% over the same period, Of which, local exports reached 8.1143

billion US dollars, up 1.5% Investment cupilal in the city o[ Hanoi in 2016

reached 277,950 billion, up 10%, of which capital [rom local stale budget managed

31.687 billion, up 45.9% compared with the same The focus is on speeding up key

projects and will continue to increase in 2017

With these advantages, 2017 will be the year of the strong, comprehensive and synchronous movement in terms of awareness and action of the entire Party, government, business community and people in the capital To create an

investment and business environment conducive to the Capital's economic

development, both in quantity and quality, and lo increase the technology content

of each product; Promote the export of services and Locus more on the comparative

advantages that Hanoi owns

BIDV Chuong Duong has grasped the strengths that have planned to develop

the network around the city aver the years so far BINV Chuong Duong has 5

tvansaction points in the city and the direction of development in the coming time will

Expanded to meet the needs of customers using the products and services of BIDV

Bank

BIDV Chuong Duong is concentrating in the market trends and consuming

habits of the people in the area

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« People have the habit of using cash im transactions and are afraid or seared

of expanding business by loans or external funding so they do not use much products affered by barks

« Incase need fund to finance for their needs, they ofter ask from the relatives

in sicad of approaching the bank because the administrative procedures is a major barrier to access te bank

‘the customers in high age are aftaid to use the advanced of the modem technology in payment so it is difficult to diversify praducts used by these customers But young customers tend to use payment cards so this is an opportunity for banks to locate the product strategy for the younger

generation in the future

Tn summary, il catt say thal the cullural-social environment of Hani is very couvenient for the development of banking, industry but the bank must also strongthen

risk management, promote the communication, improve service quality, increase awar s and build the trust from poopt: with the bank

‘That will be an opportunity for banks in Hanoi to apply modern banking services such

as e-banking, mobile banking, intemet banking

In banking industry, information tochnology has been widely used in business such as the use of core banking software (CORL’ BANKING, card systems, A'lMs, electronic payment systems The acquirement and application of new technology in banks in Vietnam are very high and the awareness of bankers inereased should be advantageous for technology development in banks Hlowever, such technology still depends on overseas sources so the costs are high which push the cost of IT investment in banks rising

Conclusion: There are following opportunities and challenges drawn out from analysis and evaluation of macro environment via PEST model

Opportunity: The political stability, complete legal system, the appropriate monetary policy will impact positively on the ecomomic development of a country Those policies reflected in the aclivilics of Lie banking systarn

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So the restructuring of the banking system and business will create good

conditions or good credit institutions and onterprises which have abilities to adapt

with the environment ‘he development of economy will be under the control of the

state bank

Challenges: logislation sysicm is vo! really complete and consistent with the international standards and practices

The imbalance of macroeconomic, trade deficit and instable inflation rale

inorcases risks to cconomic activities and threatens the banking system, especially bad

debts in the bank In order to restructure the banking system and stabilize national economy, we need to remove all the weaknesses including the SOEs to build a strong

and efficient economy

2.2.2 Banking industry analysis (Five Force)

Table 2.2: 5 force analysis of M Porter applicable with banking in dustry in

Riskfrom potential competitors -Forsign banks

- Domestic banks intented to

be cetablished nterbank payment organizations

g nhan m Competitors in the same = Attractive price

Sepplies fr industry: offered by other banks service of banks —> + Stale Owned Banks om ~ Atractive products

- Staten pana + Joint Stock Banks offered by other

suppliers

Alternative products:

“Financial companies, Funds, Social fimding,

Securilies companies, Gold and gem companies

- Payment services

The power of custome!

Based on existing customers and potential customers, we can classified into

following main groups:

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- Enterprises: The power contractors, SME customers having loans, deposits and using, paymenl service and other bariking su in many areas These customers are relatively loyal and have potential usage of various services

- Individual clients include’

+ Ollfcers, cmployces and workers ol’ (he power companies, companies and organizations having long relationship with BIDV Chuong Duong and paid salary through the card system of BIDV Chuong Duong as Tran Anh, Dong Ath Mechanical Engincering, branches of EVN in Hai Ba Trung districts These customers having good relationship with branch will be a customers database for IDV Chuong Duong

to mobilize cheap deposit and cross-sale other products and services for individuals

+ Households and traders having business operation in Hanoi area BIDV Chuong Duong always identify market segments according operating area, industry to manage and develop customer base in a effective way, for instance with customers of the traditional villages such as Bat ‘frang pottery, kneeling gold, silver, leather Kieu

Ky, Le Mat Snake Village, customers in the petroleum sector, ticket agents and consumer goods

+ The number of current customers consists of 20,000 individual customers and households, 4,000 corporate customers However, But the actual number of regular transactions is 250 There are only 20 large corporate customers and 420 VIP individual customers has brought about 70% of the profits for BIDV Chuong Duong such as Lifestyle Joint Stock Company, Viettel Corporation, State Capital Tavestment Corporation (SCIC), Tha Thanh An Company, Union University) and other individual customers with home loans, business loans more than 5 billions

+ Currently, BIDV Chuong Duong serves 1,357 individual bomowing customers (excluding 1,000 customers using credit cards), and 562 corporate borrowing customers Overall, the growth of number of borrowing customer remains low ‘he power of borrowing, customers at BIDV Chuong Duong is higher than other State Owned Banks but lowers than that of other Commercial Banks The advantage

of good source of short-term source and qualified services have help BIDV Chuong Duong 1o approach large corporate customers and individuals having demand [or banking products and services

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| BIDV Chuong Duong’s mobilization of fund from the residential areas, from businesses, organivalions, financial institutions and directly allecled by such customers ‘The power of such customers with the bank is relatively strong because the bank exist and grows on the basis of mobilization The risk relating to the change of bank of customers is relatively high due to the sensitivity of interest rales and the

flexibility of the term deposit

he power vy

+ The suppliers of transmission and technology equipment: Although the market has a number of vendors, but the technology and transmission equipments of BIDV Chuong Duong is mainly provided by strategic parmer of BIDV Vietnam Posts and Teleeommunications Group (VNP') This co-operation brings beuefits to both parties Currently, the branch is also quite dependent on this provider Dependence

level: medium

+ ‘fhe suppliers of management software: BIDV Chuong Duong totally depends on the management software of the head office BIDV in generai and BIDV Chuong Duong in particular - both use the system with core sofiware program - Silverlake (SIBS), an online system helping information processing safety, quick, and

accurate,

+ The leasor of office and branch: office leasing marke! with office facilities

suitable with the bank's operations (such as position, premises, infrastructure ) at a

reasonable cost and term is relatively limited so the power of suppliers is big It is

relatively difficult for the branch to find new premise as well as oxpand transaction

network

— The service supplier such as warranty and maintenance of computer equipment, software copyrighted by Micorsoft is CMC — BIDV’s sharcholder, and Lantabrand interior designing company create images for BIDV system ‘these suppliers had relationship with BIDV from the first time of the bank and always give the best benefits to BIDV compared with other competitors, otherwise BIDV do not use their services any more so the power of these suppliers is moderate with BIDV

2.2.2.3 The potential competitors

Barriers to the panatration of new banks from domestic is heightened after the government suspended to license for new hanks establishment since May 8/2008 as

Page 37

well as requirement for restructuring the banking system The potential competitors af

BIDV Chuong Duong mainly come from the movement and new establishment of new transaction offices or Headquarter of commercial banks in the region that BLDV

Chuong Duong located

Besides, according to the WTO commitments, the banking sector will be gradually opened so the mumber of banks with 100% foreign investment will increase in the future Foreign banks with market experterice, strong capital, technology, management

will be main competitors for BIDV Chuong Duong,

2224 Threat of supsl itis odue

- A place for receiving salary (wages, bonofits, pensions .)

- A place to keep money (savings )

- A place to make payment

- A place to borrow money

- A place for remittance activities The finance comparies, financial leasing, credit funds with products similar to the bank inckading loans, deposit, retail bankcing

The securities companies, fumd management companies, Gold exchange companies: more than 100 companies of this kind with a large basc of customers also having products that can replace banking products such as repo, and trustee services other consulting services

‘The type of eredit funds, bank policy

The other informal forms: Retail installment, spontaneous lender

The company made the paymemt service: VNPOST, PayNet, VNPAY This is

a new type busmess based on ieckmology and also considered as alternative products

The private gold stores, pawn, credit union funds For corporate customers, the risk relating to replacement is nol very bigh due to

these customers require clarification as well as adcquate sct of invoices, bills If trouble occurs, the customer tends ta switch to another bank instead of looking to services oulside the bank

For individual customers, the risk relating to replacement is very high because

of the inconvenience from payment process and cash preference so they want to keep

and use cash rather than banking services Even al the supermarket, consumers have to

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