G1_00196 CONSTRUCTION OF BUSINESS STRATEGY FOR TRANSACTIONAL CENTER OF NORTHERN ASIA COMMERCIAL JOINT STOCK BANK WITH IN THE PERIOD OF 2012-2016 XÂY DỰNG CHIẾN LƯỢC KINH DOANH CHO TRUNG TÂM GIAO DỊCH NGÂN HÀNG TMCP BẮC Á GIAI ĐOẠN 2012-2016

G1_00196 CONSTRUCTION OF BUSINESS STRATEGY FOR TRANSACTIONAL CENTER OF NORTHERN ASIA COMMERCIAL JOINT STOCK BANK WITH IN THE PERIOD OF 2012-2016 XÂY DỰNG CHIẾN LƯỢC KINH DOANH CHO TRUNG TÂM GIAO DỊCH NGÂN HÀNG TMCP BẮC Á GIAI ĐOẠN 2012-2016 GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM GRIGG UNIVERSITY CAPSTON PROJECT REPORT CONSTRUCTION OF BUSINESS STRATEGY FOR TRANSACTIONAL CENTER OF NORTH

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

GRIGG UNIVERSITY

CAPSTON PROJECT REPORT

CONSTRUCTION OF BUSINESS STRATEGY FOR TRANSACTIONAL CENTER OF NORTHERN ASIA COMMERCIAL JOINT STOCK BANK

WITH IN THE PERIOD OF 2012-2016

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Construction of business strategy for transactional center of Northern Asia Commercial Joint Stock bank within the period of 2012-2016

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EXPLANATION OF ABBREVIATION LIST

LIST OF FIGURES AND DIAGRAMS

PREFACE

Chapter 1 ARGUMENTAL BASIS OF TOPIC STUDY

STRATEGY

enterprise

1.1.2

Other common strategies

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COMMERCIAL JOINT STOCK BANK

STOCK BANK

Commercial Joint Stock Bank

SELECTING BUSINESS STRATEGIES OF NASBANK

HEADQUARTER IN THE PERIOD OF 2012-2020 AND

IMPLEMENTING SOLUTIONS 3.1 OBJECTIVES OF THE BANK TOWARD 2016 AND THE ~™ VISION TOWARDS 2020 OF NASBANK HEADQUARTER

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EXCHANGE BANK NORTH Asia DONE BUSINESS

STRATEGY

SOME RECCOMENDATIONS FOR THE STATE

ROE _| Ratio of Equity

_TSLĐ Mobile asset

CENTER OF NORTHERN ASIA COMMERCIAL JOINT STOCK BANK

WITHIN THE PERIOD OF 2012-2020

PREFACE

1 Common background, the need and significance of topic study:

In current globalization, cultural economic exchanges among nation is the natural thing

then risks within the market for the enterprises will be very high; then enterprises can know one thing for sure which is the change; Vietnamese banking activities in the period

of innovation, global integration play an important role which is not out of such rule

Being the blood of the economy, the growth and development of banking sector will promote economic growth, well implement targets of industrialization - modernization

of the nation .which will gradually change the economy to be suitable to global

economy; process of construction and strategic administration will help enterprises and

banks to overcome all problems of the market, go ahead to the future by its own effort and capacity

In the condition of global economy, an enterprise must have capacity to cope with

all situations, self-control, decision making and bear all duty for all activities Then

it requires enterprises to grasp the trend of change, exploit strengths, limit weaknesses, make use of opportunities to overcome challenges then create creative steps for themselves then it must construct a suitable business strategy Construction

of strategy is very important for each enterprise to exist and develop in sustainable way; strategy is like a guideline, magnetic to orient the trading ship to the right purposes, targets; strategy is the will, trading method to show core values of the enterprise

Being one of Vietnamese commercial banks to be established soon, NASB Bank

has been via the changes according to globalization trend and global economy With nearly 20 years of construction and development, the bank has reached much

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the system of Vietnamese bank It is because NASB Bank has gradually constructed business strategy for itself then implement annual business plan However constructing business strategy, implementing annual business strategy are still passive which does not focus on SWOT analysis and five force model then it cannot draw effective development strategy, activeness - creation, breakthroughs in trading

To gradually integrate, orient to a modern bank to operate according to the rule - standard with enough power to compete, exist and develop, construct long term brand name and image, the bank must innovate thoughts, operation in business management, create breakthroughs to develop which requires to construct a business strategy from the branch to the whole system

Originated from above thoughts together with gained knowledge via the courses we have chosen the following topic “construction of business strategy of transactional center of Northern Asia Commercial Joint Stock Bank within the period of 20/2 - 2020” as the topic of the capston project report

2 Study targets and scope:

The topic studies the basis for constructing business strategy in market mechanism and integration; then we can analyze, evaluate implementing business strategy of the bank in recent years then select, construct the most suitable business strategy for the center in the period of 2012 — 2020

Finally we can find out solutions to implement selected business strategy

3 Study method

The report is done based on using the following methods: study method of argumental basis combined with reality study at transactional center of the bank; method to gather primary and secondary information; method of analysis, comparison and synthesis

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The report includes preface and three chapters:

Chapter 1: Argumental basis of topic study

Chapter 2: Analysis of trading reality in transactional center of NASB

Chapter 3: Proposals and recommendations

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1.1 DEFINITION AND CLASSIFICATION OF BUSINESS STRATEGY

1.1.1 Viewpoints of approaching business strategy of the enterprise

The term of strategy has has long term origin Previously this term is firstly used

in military force; nowadays, this term has been used in most of fields in term of economy, politics and culture, society; especially in economic sector in term of macro and micro scope In term of macro scope we can have the following definitions: “sector development strategy”; “industrialization strategy of export”;

in the scope of terminology strategy can be combined with definition, management scope of the enterprise to form the following terms “marketing strategy”, ~ production strategy”, “trading strategy”

There are many different definitions of business strategy depending on the perspective of each author:

- In view of category management, business strategy if a kind of plan

- According to unity, business strategy is the art of combining activities and

controlling them to achieve long-term goals of the

- Business strategy will define targets for the enterprise in each period, scope of Strategy defining; on the other hand business strategy will orient the enterprise to focus on main phases then define suitable targets for the enterprise

- Business strategy is aimed to define implementation method of the target; this method will be chosen in all methods via technical analysis and current capacity of the enterprise then we can choose a suitable method for the enterprise

- Business strategy will show the decision to choose strategic option; in such decision it will mention concrete solutions for activities of the enterprise based on analysis, evaluation of trading reality then expected results

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1.1.2 Other common Strategies

One of the main targets that enterprise follow are the target of growth: most of enterprise level strategy will be set in growth target then construction of strategic model will be based on such targets Besides with the targets to maintain or reduce targets to develop abroad to combine with strategies will be applied to enterprise level

1.1.2.1 Growth strategy model

The targets of such strategy are to increase profit and market share of the enterprise including:

a) Growth strategy of enterprise:

It is called focused growth strategy which is the main strategy to be set in improving products or existing market without any change of other factor: This strategy is the growth form by increasing revenue, production capacity and labor

force; three main options of such strategy will be presented as follows:

b) Integration growth strategy (association )

Integration growth strategy is to merge two or more enterprises to share resources

to occupy stronger force in competition with two forms of association:

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trariwise vertical integration:

It is the growth by grasping ownership or increase controlling for supply of materials, internal enterprise to set up provision of subsidiaries

* Direct vertical integration

It is to grow by buying holding ownership or increasing control with consumption channels close to destination market such as sale system or distribution system

c) Diversification strategy

Diversification to invest surplus in many different sectors when the company has occupied much competitive advantages in current trading activities of the company; this is the third strategy that big companies often apply

1.2 The process of developing strategies1

1.2.1 Defining strategic visions and missions

- Future concentration on technology, products and customers

1.2.2 Strategic vision addresses the future business orientation of a company

External environment of the enterprise will include macro and micro environment: analysis of external environment will be aimed to realize opportunities and threast for business activities of the enterprise

Economic factor

Reality of the economy and future trend can impact on the success and strategy of

an enterprise; main factors to be analyzed are as follows: growth rate of the

economy, interest rate, exchange rate and inflate rate

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Political and legal factors can impact on enterprises; this factor can create

opportunities or threats for enterprise including:

+ Political stability consistency of policy are the attraction for investor; legal system will be constructed and improved which will be the basis for stable trading

+ Regulations of advertisement for enterprises trading sectors for instance

companies of producing wine, alcohol, tobacco

+ Regulations of tax, fees can create opportunities as well as hinder production

+ Law on labors, regulations of recruitment, appointment, and labor dismissal are the thing that enterprise must account for

+ Regulation of environmental safety and protection

Social factors

In the time of common and long term strategy, this can be the factor to change according to the trend to integrate new living style which will be the opportunity for many producers Enterprise must count for consumption, the change of the age

tower, working place and family The appearance of association of consumers is a

barrier to hinder requirements of enterprises, then we must analyze social factors

to realize opportunities and threats

Factors including:

+ Living level can impact on expanding or narrowing down production scale

+ Tradition, customs, habit, consumption

+ Regional culture

Lễ

Influence of natural conditions for policies of enterprises has been recognized:

nowadays problems of environmental pollution, lack of energy, waste of natural resources together with increased demand for limited resource which makes enterprise change decisions and related operational methods

Wise strategists often have interests on climate environment and ecology; threaten

to change not to predict the climate then enterprises will produce then their services will be considered carefully

Technological factor

This is the factor to impact on business strategy of the enterprise;in fact it has

witnessed technological change to appear many new trading sectors In twentieth

century it is the century of science and technology Then the analysis and prediction of technological change will be important and urgent; example will be appeared with electronic, computer and biographical technology It is certain that advanced technology wiil appear, create many opportunities as well as threats for enterprise then enterprises will care for policy of science and technology in

research and development, technological transfer and patent discoveries

1.2.2.1 Micro environment (operational environment)

Micro environment will include sector factors and external factors for the enterprise which will decide quality and competitive level of the sector According

to M Porter: “business environment has five factors to impact on the activities of

the enterprise’ And enterprise must analyze competitive force to realize opportunities and threats that the company has coped with

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1.2.3 Analysis of internal environment

a Human resource

Human resource has important role for the success of the enterprise: people will gather data define targets select and implement the checking of the enterprise and

to have good results then it cannot lack of people of effective working: when

analyzing human resource enterprise must focus on the following contents:

employees; personnel policy of the enterprise; balanced capacity between using

level of maximum level; capacity, interest and qualification of leading board

b Research and development

The effort of research and development will help enterprise to keep leading position

in the sector and vice versa which will make the enterprise to be outdated compared

to leading enterprise then enterprise must change technology related to process of technology, product and materials

c Production factor

Production is one of main activities of the enterprise connected to product creation;

it will impact on the success of the enterprise; production of high quality product with low price will bring more profit to the enterprise because: products will be easily sold, save financial source to create positive attitude to employees; attentive contents when analyzing production factor are as follows: price and material provision, inventory circle, cost, technological capacity compared to the whole sector and competitive opponents

d Financial accounting factor

The function of financial divisions will include analysis of planning and checking

financial plan and financial situation of the enterprise; financial division will impact

on the whole enterprise; when analyzing financial accounting, administrators will focus on the following contents:

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price, financial plan and profit

e Marketing factor

The function of marketing division will include analysis, planning, implementation

and checking given programs then the duty of marketing task is to adjust level, time and quality of demand of customers and the enterprises to reach given targets

1.3 The tools of building strategies

To form a strategy to use common tools follows:

1.3.1 EFE Matrix

1.3.1.1 External factor evaluation (EFE)

EFE matrix will synthesize, summarize and evaluate main opportunities and threats

of external environment which can impact on enterprise then it can help strategic

administrators to evaluate reaction level of organizations on opportunities and

threats then having realization of external environment which can create advantages

or disadvantages for enterprise

Steps to develop EFE matrix:

- Make a list from 10-20 factors of main opportunities and threats to impact on

the success or failure of organization in trading sector

The weight of each factor will depend on its influence level on the organization’s success or failure; total weights will be defined for all factors to be equal to 1.0

Assign a rating from | to 4 to each factor; the rating of each factor will depend on reaction level of organization for such factor: 4 - good reaction, 3-above average

reaction, 2-average reaction, 1-weak reaction

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Construction of business strategy for transactional center of Northern Asia Commercial Joint Stock bank within the period of 2012-2016

1.3.1.2 Internal factor evaluation (IF E)

IFE matrix will synthesize important strengths and weaknesses of the enterprise, define core capacity to develop competitive advantages for the enterprise

Steps to conduct IFE matrix:

Total weights are equal to 1.0

2-minor weaknesses, 1-major weaknesses

for each factor

- Te sum of all weighted scores of all factors is total weighted score of IFE

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It is the model to be used popularly to evaluate the activities of the enterprise then

we can draw suitable operational strategies for the enterprise in the coming time:

this model includes two aspects:

S - W: internal factors such as personnel, finance, technology, prestige, culture

organizational tradition

© - T: it is the factor of external environment which come from objective environment; related aspects of opportunities and threats can be due to economic change, the change of State’s policy if such analysis is implemented carefully then business strategy can grasp opportunities and ready to cope with threats to happen

Based on evaluating factors in the matrix, based on targets and orientation of

business trend, motivation can establish combination; there are four kinds of combination which are: OS OW, TS and TW

Coordination of preferential targets in each strategic period to make use of opportunities, avoid risks, promote strengths and conceal weaknesses of the

enterprise to form strategic option

The following is SWOT matrix

Table 1.4 - SWOT matrix model

Quantitative Strategic Planning Matrix (QSPM) uses information obtained from the

3 matrixes in the first phase and 3 matrixes in the second phase Thereby we can objectively assess the strategies which can be replaced Since then choose the best

strategy for enterprise

To build the matrix QSPM 6 steps should be taken

Step I: List the factors S, W, O, T is taken from the EFE matrix, IFE

Step 2: Classification for each element in accordance with EFE matrix, IFE Step 3: Look at the second stage matrices and identify alternative strategies

can be considered

Step 4: Determine the number of attractions (TAS) for each element: the point is rated from | to 4, with | unattractive, 2 little attractive, 3 quite attractive, four very attractive

Step 5: Calcuiate the total number of attractions (TAS) in each row by

multiplying the classification points in step 2 with the AS in step 4

Step 6: Calculate the total attraction of each strategy

The most attractive strategy is the strategy a total score in step 6 Is the highest

1.4 EFE Matrix

According to the evaluation of external and internal environments, defining strengths, weaknesses, opportunities, threats, Nasb can choose the most suitable business strategy based on EFE, IFE and SWOT matrix This is the model to analyze and evaluate four main groups of factors which are opportunities, threats, strengths and weaknesses of the enterprise Analyzing influence of 4 groups of factors to each strategy enterprise, is to select the strategy with the highest point which means the most optimal and suitable strategy for the distinction of Northern

Asia Commercial Joint Stock bank

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2.1.1 Formation, structure and organizational machine

NASB has the main office located in 117 Quang Trung street, Vinh city, Nghe An

province which was established then went on operation in 1994 according to

Decision No 183/QD-NH5 on 01/9/1994 and operational certificate no 0052/NH-

GP on 01/9/1994 of Governor of Viet Nam State’s bank; by 31/12/2011 charter capital of the bank is 3.000 billion dong which is one of commercial joint stock banks with healthy trading activities

Via nearly 20 years of operation, with the system of more than 64 transactional centers nationwide (Ha Noi, Thanh Hoa, Nghe An, Ha Tinh, Quang Binh, Hue,

Ho Chi Minh city, Mekong river delta .) the bank has been more and more developed to prove its own prestige within the market of financial and currency

then it has received emulation flag of Prime Minister, certificate of merit of Governor of State’s bank for its good trading activities and emulation flag of

Nghe An provincial People’s committee

With the main function and duty of NASB of currency trading: provide financial banking services such as: open account of foreign and domestic currency, deposit investment in lending and guaranteeing, payment, commercial support, money transfer, card issuance and payment, tourism cheque, homebanking, online banking, lending for project implementation; besides it also joins in trading tourism and hotel Services

Its main activities are currency trading and provision of modern banking services to all economic sector; the institution includes 200 cadres with good qualification and experiences to contribute to construct and develop Nghe An provincial economy With the norm to set profit of itself beside profit of the nation, the bank will focus

on financial consultancy for projects to improve living standards for people as

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- Medical ecological urban center project

- Herbal medicine and constructing factory of producing herbal medicine in Nghe An

Figure 2.1: Organizational diagram of NASB

ADMINISTRATION COUNCIL

C set hoation of a asset

_- Debit balance without guaranteed asset

3 | Credit market share

|

Income from banking services

Via nearly 20 years of formation and development via national period, it has

contributed to the career of protecting and constructing the nation; being the big

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branch of commercial joint stock bank within the province with important role for provincial socio-economic development, NASB always keep the leading position for the development of industry construction materials, project investment

2.1.2 Situation and operational result from 2009 to 2011

2.1.2.1 Activities of capital mobilization

With the targets of diversifying mobilized capital, the bank not only orients to traditional customers but also retailed customers, small and medium-sized

enterprises; with competitive strategy by difference based on capital management

technology of modern banking, deposit in the bank has brought customers difference facilities compared to products within the market; due to the best policies

of mobilization, capital mobilization of NASB - Vinh branch has increased via 2009

to 2011 As follows: in 2009: total mobilized capital was 5.278 billion dong and in

2010 it was 5.331 billion dong and in 2011 it has developed to 6.269 billion dong

2.1.2.2 Credit activities

Law on credit organizations, lending regulations will follow Decision No

1627/2001/QD-NHNN on 31/12/2006 and decision to supplement of Viet Nam State’s bank, remove barriers of mechanism; besides the Government has

transaction and documents to grant self-control right of credit organizations All of such decisions will create good conditions for commercial banks to expand credit, provide maximum capital for the economy then create premise for economic growth

rate of Viet Nam

development, focus capital on strong sectors of the locality such as:

construction materials, ship building, agricultural products, seafood, tourism;

focus on industrial zones development

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Construction of business strategy for transactional center of Northern Asia Commercial Joint Stock bank within the period of 2012-2016

Previously lending activities of the bank mainly focuses on big enterprises state-owned enterprises: however reality has shown that available capital of enterprises is very low which is from 10 - 20% total asset while there is also preferential treatment of interest rate, guaranteed asset

2.1.2.3 Other service activities

Currently, apart from implementing and applying traditional trading activities, the institution also implements other activities such as: trading foreign currency

issuance However the income from such income just occupies about 5% total income of the institution Meanwhile income from banking services occupies

development when collecting from income activities of not under 25% total income of the bank Service activities of the institution has developed to bring considerable income for the bank in the future On the other hand, development of such services will create motivation to attract customers and stimulate other trading activities of the institution

2.1.3 Strategic vision and targets of NASB

NASB always define the following vision “patiently trying to become a bank with

starry heart to create sustainable generation of customers, investment in modernized

industry and rural area, social welfares such as agriculture, forestry, fishing, herbal medicine, medical care, education With outstanding thinking, professional style, its

targets by 2015 are to fulfill standardization of the norms of the banks from consultancy for enterprises in term of high tech in agriculture and rural area From

2015 to 2020 it will bring such generation of investors to a new height to integrate into global market”

From above vision, leading board of NASB has defined the following mission

“NASB consults and serve a generation of enterprises of sustainable development to create core value, bring real value to community and friendly with environment”

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Being one of the big commercial joint stock banks then leading board together with cadres define the objectives in the coming years as follows:

- In term of implementing trading plan it must be sustainable, effective focusing on capital mobilization from customers and service development; being a commercial bank to contribute to the task of mobilization and harmonized capital system, capital mobilization is one of the center duty which can decide banking activities

- Construct corporate culture and consider it as the basis to invest deeply

from the beginning for personnel and staffs; care for mental as well as material life

of employees

- Continue growing suitable debt balance with growth rate of the capital: closely control credit quality; develop banking services according to the trend of diversification, modernization and improving quality

- Continue constructing project to develop and vision out of which it must

develop with breakthrough, suitable to the development of the era to construct it

become the joint stock bank as its own significance operating according to corporate law with strong domestic and foreign shareholders

- Construct strong NASB in all terms to have enough competitiveness in the period of integration, consider service quality as operational norm

2.2 ANALYSIS OF BUSINESS PICURE OF NASB HEAD OFFICE

2.2.1 Analysis of external environment

2.2.1.1 Macro competitive environment

In the past years, the complicated ever-change of international and Asia-region economy has remarkable effect on the economy of Vietnam From 2001 to 2003 the growth of global economy had slowed down due to monetary crisis, IRAQ war, and terrorism in some countries, etc In the period of from 2004 to 2006 the world

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increasing That makes direct effect on operations of the economy over the world

In the period of from 2007 to 2011 the world economy had many remarkable variations because the war, disasters in some countries over the world such as Libya war, earthquake, tsunami and flood, etc severely affected development of the world economy Besides the inflation had been increasing, exchange rate had been increasingly fluctuating, price of fuel had been continuously rising, gold price had been sharply lifting compared to the same period of last year, stagger of real estate

exchange market The strong development of technology and informatics had booted the world economy to reach a new height

In general, in from 2001 to 2011 the economy of Viet Nam had been noticeably affected from the world economy In this period Viet Nam economy had had many positive changes, the annually average growth reached from 8 to 10%; source of annual foreign exchange has been sharply increased For transfer of economic structure, the state has policy of decrease in agricultural density and development of industrial field including auto and motorbike assembly and manufacture, etc the macro economy had been relatively stable-maintained compared to other countries

in the region and over the world, which ensures great balance of the economy and keeps high inflation under control Channel of exchange market that had been attracting many investors is a market convenient to capital mobilization for Enterprises

Besides gained achievements, the Viet Nam economy in the period of 2001 — 2011

inferior to some countries in the region and over the world; social labor productivity had been slowly increasing due to underdeveloped industries of production technology; the shift of agricultural and rural economic structure and the state reformation of agriculture had been slow; the cooperative environment had not been completely established; the competition is equal among economic sectors; export

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In the period of 2001 -2011 despite difficult condition of the global economy as

well as of Viet Nam socio-economic situation of Nghe An province had been

positively developing, GDP growth rate reached approximately 12.1%, total annual

budget income accounts for 9.2%, employment for 83,000 people had been created According to statistics in end 2011, there are 8,765 enterprises operating under the Business law with total capitals of VND 32,000 billion in Nghe An province, of which small and large scaled enterprises make up 97% Small and large scaled enterprises have been sharply increased, resulting in quick increase of capital However, according to evaluation by People’s committee of Vinh city, the city economy had not promoted all of its potential such as export: numerous human

resources had not been well employed; export turn-over has been low, many

convenient fields have not been invested or unfocusedly invested; advantage of sea, port and border gates has not been effectively exploited; some key projects have not been deployed as planned

In the period of 2012 — 2016 it is estimated the world situation is possibly having

complicated changes in many fields such as economy, politics and military, etc The

economy and politics of Vinh city and its adjacent regions as well as of Viet Nam Shall have many opportunities as well as new challenges

Entering into WTO and implementation of AFTA routes have created a convenient

and attractive environment for oversea investors As a result, number of investors in

Viet Nam has been increasing, which contributively boost the domestic economy but also creates severely competitive environment among economic sectors and

service industries such as Telecommunication, insurance, bank, communication,

etc After becoming a full member of WTO financial market has had many changes,

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many types of credit have been formed capital flow has been freely rotated service

types in financial market has been being abundant and diversified In the face of

such changes the banks that have small financial capacity as well as small scaled operation shall be dismissed by competitive rule Recently, the policy of Viet Nam State is planning to merge some ineffective and unhealthy banks

The linking network of oversea systems is more convenient than before because the competition between domestic and oversea banks has been increasingly severe Technologies especially high technology have been increasingly applied to serve human life, including information and communication, telecommunication and postal service accommodation service, entertainment and learning, etc together

with Bank’s financial service Competition in modern technology of bank financial

has been gradually severe, especially service activities as for oversea banks

Before such a situation, the trend of cooperation, mergence, dealing and mutual engulfment due to bad management and ineffective employment of technology and

human resources has been noticeably developing in many directions

From opportunities and challenges in many fields, selection of a right direction, administration form in bank system at macro level is very necessary

2.2.1.2 Sector environment and competitive one

Entering into WTO helps domestically commercial banks have condition of integration and expansion to international market and simultaneously accepts severely domestic and oversea competition This is both opportunities and challenges but an indispensable thing in natural law

Strong competition has been gradually rising in banking operations with external

ones, with oversea banks located in Viet Nam and with domestic ones

Banks must be controlled on commitment on entering into WTO in their operations

The control is conformable to standard of system and explicitness of policies as

well as prescribed general rules Commitments refer to presence of oversea bank

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having 100% capital as shares of domestic banks liberalization of foreign currency exchange at nonresident transactions, payment capacity bank administration, MFN treatments and national treatment (NT)

The state policy is to absolutely reform and complete the state bank system including model machinery, regulation, law, policy, human, material bases, equipments, and specialty technology, etc in order to improve its position and competitive capacity with other bank systems

The government planned to push equalization of commercial bank system for enough condition and taking initiative in integration, simultaneously commercial bank system operates as key role in the country

The non-cash payment policy is urging modern bank service

The trend of comprehensive cooperation between Banks with the economic

corporations or among banks has been clearer in order to create condition in scale and strengths for mutual development This indispensable trend requires enterprises,

Corporations, Banks to early develop under scale of Bank- financial banks and to

invest in multi-sectors with enough strength for domestic and oversea competition

Banks that are adaptable to policy of integration and promptly converse shall take

more advantages and strengths for development and speeding up in the following

year On the contrary, some that cannot adaptable shall meeting with remarkable challenges

According to Michael Porter model we can summarize five competitive forces in banking industry as follows:

a Analysis of NASB’s current competitors

There are three main competitive groups against NASB

+ Group of commercial banks with state equity

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- Joint Stock Commercial bank for foreign trade of Viet Nam: Having depth

of history, large-scaled operating market, leading in international payment card service, abundance of foreign currency resource

- Viet Nam Bank for Agriculture and Rural Development: Having much

experience in formation and development, simultaneously having

large scaled operations and network, governing market in fields of rural agriculture and forestry foodstuff and capital mobilization in

every residential area

- Bank for Investment and Development of Viet Nam: gaining much

experience in banking operations, having advantage on large number

of traditional customers, especially conformable to investment and development

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+ Group of joint stock commercial banks

This group has a large number of banks and simultaneously most of them have good financial capacity compared to operating scale Financial safety coefficient CAR

reaches international rule ( 8+10%) Some banks have capitals from oversea banks

as well as international financial organizations including Asia Commercial Bank (ACB), Sacombank, SHB, Techcombank VPB, etc they have the method of relatively flexible operation and transaction Business administration is regularly improved It is commonly evaluated that rate of bad debts of some banks in this group is noticeably high Some products and services are promptly implemented They successfully catch their customers’ demand and psychology in capital

mobilization is gradually increasing

+ Group of oversea and joint-venture banks

In general, this group operates according a relatively completed model despite of short-time penetration into Viet Nam market such as HSBC Bank, ANZ, Citibank, Deutsche Bank or Hong Leon Viet Nam, etc strength of this group is having high quality of service, global prestige, operating according to international standards, outstanding management qualifications and low management cost They have good credit capacity and very low rate of bad debts (0.2%/ total debts) Their system of brand and image promotion is extremely emphasized, leading in high results of

capital mobilization as well as credit supply

b Analysis of hidden competitors

At present, in Nghe An province there are six branches of State Joint Stock Commercial Banks (SJSCB), 26 branches of Joint Stock Commercial Bank (JSCB),

O05 of joint stock bank with equity of oversea banks or international financial

organizations, branches of Central People’s credit fund, branch of Viet Nam bank

for social policies, branch of Viet Nam Bank for development, exchange offices

directly under branches, Automated Teller Machines and system of local People’s

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trained personnel, local Bank system relatively meets demand of capitals and banking service for Enterprises and local people

2.2.2 Analysis of NASB internal environment

2.2.2.1 Analysis of distribution channel model

Founded in 1994 and with 18 years of operation, NASB system has been constantly

Thanh Hoa, Nghe An, Ho Chi Minh city, etc.) and charter capital of VND 3000

billion NASB focused operation is to serve project investment, key programs and projects of the country, to establish close relationship with enterprises and simultaneously to provide customers with modern banking service NASB has continuously expanded its agents and payment relation with domestic and oversea credit organization

NASB has one headquarter and 01 exchange office with well-trained officers of

high qualifications and good management ability Main operation is to deal with

monetary and to provide banking financial services such as domestic and foreign currency account opening, deposit-taking, lending investment and guarantee, domestic and oversea payment, commercial sponsor, quick transference, foreign currency dealing, card issue and payment, traveler’s cheque homebanking, online

VND 6.875 billion In the last years, with constantly developing operations, NASB

honorably received the emulation flag from Prime Minister, certificate of merit from Governor of the State bank, and emulation flag from People’s committee of

Nghe An Province for achievements of operations NASB is one of ten banks

selected to take part in automatic inter-bank payment

Through eighteen years of formulation and development, NASB headquarter has

construction Being a large-scaled branch of Commercial bank in the region and

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playing an important role in provincial socio-economic development NASB

headquarter has always maintained its leading position as for development of

industrial and commercial sectors, constructional materials, project investment, etc

2.2.2.2 Analysis of capital mobilization

With objective of diversification of mobilized capital NASB policy of capital mobilization is not only towards traditional wholesale traders but also constantly

competitive strategy of differentiation on the modern capital management technology and deposit products help NASB bring its customers with different benefits compared to the same products in the market

The year 2011 is evaluated as a year of noticeable changes in banking operations (especially JSCB group), but capacity of credit mobilization had been much more increasing than 2009 In early 2011 the situation had been still good although increase in inflation had been lasting from early 2010 until 2011 The State bank

had been implementing the policy to tighten monetary, control speed of total

payment means and dominate growth rate of credit, which results in a race on mobilization interest rate among banks, heightening general interest rate and

maintained stable growth rate compared to the previous years

2.2.2.3 Analysis of credit activity

Law on credit organization, Regulation on lending according to Decision no

decisions by The State bank of Viet Nam has basically solved the former regulations Besides, the Government issued Resolution no 163/2006/ND-CP dated

29 December 2006 regarding guarantee transaction and guiding documents on authorizing autonomy for credit organizations, etc such decisions created condition

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for commercial banks to expand credit, maximally provide capitals for the economy and created the growth premise for the economy of Viet Nam

In particular, in 2011 there were many important events many changes and disordering in operations of commercial banks Many people working in the banking industry said that the year 2011 was more difficult than crisis in 2008

in 2011 is limited to below 20%, total payment means for about 15%-16%, but estimated results are 12% and 10% respectively Then the State bank emphasized such results on inflation restriction value, and improved capital absorbance capacity

of the economy Nevertheless, the other side of such two too low rates has not been

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challenging for effort on increase of interest rate and enterprise's ability of capital approach

In March 1 2011 Governor of the State bank issued Instruction no 01/CT-NHNN regulating until June 30 2011 account outstanding for non-production field compared to total accounts outstanding to be max 22% and until December 31

“loosing” by excluding four groups of objectives from group of non-production accounts outstanding (according to vietbao.vn)

Credit activities of NASB had stuck close on the provincial and state policies of

socio-economic development to centralize capitals on strong local sectors such as constructional material, shipbuilding industry, export of agricultural and fishery product, small-scaled industry, agricultural services and tourism and emphasize on investing in provincial industrial zones and some strong clusters of industries

Before NASB lending was mainly for large-scaled enterprises, State ones However, the survey indicates that own capital of such enterprises had been very

received preference in interest rate and guarantee assets, etc

In recent years, NASB exchange office has been successfully implementing the policy to gradually reduce accounts outstanding from large-scaled enterprises and

the State ones, increasingly rise accounts outstanding from the group of non state-

run enterprises especially Small and medium-scaled enterprises (S&MSE) in 2011

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