G1_00200 CAPSTONE PROJECT REPORT STRATEGY FOMULATION FOR VIETNAM - RUSSIA JOINT VENTURE BANK IN THE PERIOD 2011 - 2015 BÁO CÁO DỰ ÁN CAPSTONE XÂY DỰNG CHIẾN LƯỢC CHO NGÂN HÀNG LIÊN DOANH VIỆT - NGA GIAI ĐOẠN 2011 - 2015

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GRIGGS UNIVERSITY

CAPSTONE PROJECT REPORT

| STRATEGY FOMULATION FOR VIETNAM - RUSSIAJ

JOINT VENTURE BANK

IN THE PERIOD 2011 — 2015

Group No.: 06

Student's name:

NGUYEN THI BICH HONG

LE THI KIM CHUNG TRAN QUOC TUAN NGUYEN HUU HOANG

Class: GaMBA01-X0510

Hanoi, 2011

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CONFIRMATION OF VIETNAM - RUSSIA

JOINT VENTURE BANK (VRB)

Vietnam - Russia Joint Venture bank hereby confirm that we agree the research group including one member who is working at Finance and Accounting Department to

be allowed to use some data, documents of our bank to complete their research on

“Strategy formulation for Vietnam - Russia Joint Venture bank in the periad 2011 -

2015” to finish their MBA course

1 Nguyen Thi Bich Hong - Vietnam - Russia Joint Venture Bank

i) Nguyen Huu Hoang - Deputy Chairman of People’s Committee of Dan Phuong district

3 Le Thi Kim Chung - Vietnam airlines Corporation

Tran Quoc Tuan - Lung Lo 5 Investment and Development JSC

Hanoi, November 22” 2011

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MBA Capstone Project Report — Griggs University & International Academy

REASSURE WORDS Our group reassures this capstone project is the result

of our scientific and independent research Data and result

mentioned in this project is honest and clear origins

ON BEHALF OF GROUP 6

Nguyen Thi Bich Hong

THANK YOU LETTER

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LIST OF ABBREVIATION

SWOT : Strengths, Weaknesses, Opportunities, Threats

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SS SSeS Ansa sass initiates sia aS

LIST OF TABLES AND DIAGRAMS

Diagram I.1: Strategic management ProceSs ccccccscessesseeseeseeseesseseceeesecseeseeseeseens 5 Diagram 1.2: Process of strategy fomulation 0 cccccccccscescescessesecsscessseeseeseeseesees 6 Diagram I.3: Specific steps of strateey fomulation ¿ 555cc c<xc<xcsxsscss2 7 Table I.I: External factor evaluation matrix ( EFE ) 5 5-55 52s << ££<z<czss 10 Diagram I.4: Five forces model by Michael Porfer -.¿ ¿+ 5c 2c 2e cscsecsssecexce2 11

2.8bIe L2 Cornpeliion PTGIIÌS Watt n crcccermssseacassasaxactansnsschdaindtinsnnrentineaneateenenemennens 13

Table I.3 Internal factor evaluation matrix (IFE) -. 16

Table 1.4 SWOTT matrIX 20202 Q 2n nh nh 17

Table I.5 QSPM matrlX - - - G G Q1 ng ng ng re 17 Diagram II.1 VRBs organizational struCfUTF€ - 5 + 2+ 5232232 cexcceses 19 Table II.1: VRB’s business result in the period from 2008 to 2010 21

Table II 2 VRB’s external factor evaluation matriX + -s+s5ss5ss<ss+s52 af Table IIL3 VRBs competition profile mmafF1X - c5 5c 5325 *+*£+*z+szszzseeeescexs 31

Chart II VRB's total assets growth through years 32 Chart II.2 VRB’s capital mobilization through yearS cccccccsccssecsecseeseeeeeeseees 32 Chart II.3 VRB’s growth of equity and charter capital 33 Table II 4 VRB’s internal factors evaluation (IFE matriX) - 55555: 40 Table IHI.1 SWOT matrix to combine strat€gy 55 2c S2xssxczereeczxerxee 45 Table II.2 I-E matrix, synthesis ofinternal and external factors of VRB 50 Table II.3 Quantified strategic planning matrix of replaceable strategy of VRB (QSPM) - Group S/O - ác c1 2211211 vn vn TH TH ng TH Tung 51

Table II].4 Quantified strategic planning matrix of replaceable strategy of VRB

Table II].3 Estimated balance sheet cccccccccescesssesseesseesecseecseeeseessesseeseceaeeseeees 65

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MBA Capstone Project Report — Griggs University & International Academy Ƒ } | &§ _ l

INDEX

1 The necessity Of the topic eeceescessceseceseceseecesseeessecesscsseeecseeeseeesesseeeseeeseeeaeens ]

2 Aim Of the project cece eecesesseesecseeseeese eee ceeeeeesseeeseceesecseeeeeeseseeeeaeeseeseeeaeeseens ]

3 Object and scope of the DFOJ€C - - SG 2 1221121112111 1121112 11 11 81 01 H1 Hy cư ]

I Definition and role of business strat€gy . ¿+ 2c c2 se etevexrrrrerrred 3

1 Business strategy definition and cÌqssifÏCqliOH - 5c 5c + c2 cscxcsvsesss 3

hn AE POVE OY OHWIHEEW GÌ Đa kaysd nai 0 go du kg s0 sa eassastessssaLEiiEer nekboe 3

3 Strate gy CLASSIfICANIONL .ccccccccceccccseccescecenseesesessessescessescessesessecsssesesssenssecnscenen eas 4

II Strategic management DFOC€SS (6 52 22222213221 E21E 11121 E1 21 E1 3E crxcrxee 4

J, SUUUGRY TOMA QHON i xneccclbinxiisesesen serindsonnnrrdgtieetansib nich tants cap gl3 pbixiblagitbim4ki rhirtilissebes a

2 Implementation Strate gy ceccccccccccccccsecesecescesssesesessessesesecseeseessecseessessecssseseeseeese 4 >

L2 24ã2 /, /2 0n a 6

HI Process of strategy fomulatiOn - - c2 1S 3221121112112 1111 11111111 xe rrec 6

l Vision, mission, sffaf€ØiC ÍQFĐ€I - - - 0EE20 1E 1211111111 111111 11112111 111011 hy 7

2 BuSin€SS ÊHVIYOHIN€H( HẠVSÏS - 6622211111211 11511115821 111111181 11001111 k ng ch ổ 2.1.General PUsiH€SS €HVÌYOHIW€HI Ẳ 5S 3121115111 1151111 1111111111111 11 t1 Hy HH hệt 8

2.1.6 Synthesis of external environment analysis - External factor evaluation matrix

(EPE) oo ƠỎ 9

2.2 Analysis of industrial environMent ccccccccccsecsecesscesceseecsscsecsseeessssceseeaeess 10

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man reo TEED

2.2.1 IndUSEFV FÏVẠÏTV 12 1201122111211 1111112 111211111111211 01111111 Hà Hà I] 2.2.2 Threat of substitute Products 0c.ccccccccccceccscecvescecsesceesceeecseeeesessevetsasesseseeens {2

PP NG 0( (8 4 866 n :-lN ¡¡qa 12 2.2.4 Supplier ’S POW cccccccccccsecvesesesvssesesesesesesssesesssssessseseassvssesssessseseseacsusceesusseececeesesseees dz 2.2.5 BWW€FS DOWF 2 S5 ST St S111 12111111111 1111111112111 1H11 ta 13 2.2.6 Synthesis evaluation of the competition in the industry - Competition profile Matrix (CPM) ccccccccsssccesssceecessuccecseseecesseseecessecceesseseesesseeccuenseceessassessussesentneeeees 13

3 Internal factors analysis ec eccecccceeceseesseeeseeseesecsccssecsecsseecsecsecesssasseseseesseeess 14

3.2 Human resources and organizational StrUCtUF€ ¿+ 25255225 c+sczsczzcssces 14 3.3 Research and deveÏopme€rnIL - - ¿G6 2c 3133132111112 112 11 11 1v ng nưưệt 15

3.4 Technological factors cccccccsseesesssseseesseeseeeseeeeecseeseesseeseecsseeeeeseeseeseessseseeeas 15

EM an ố nốố.ẽ 15 3.6.Evaluate the internal factor of the enterprise — Internal factor evaluation matrix

TT EẾ boeeienidlonsagingintoossik-pag4000 nu eisan Eosv.SongDnbiTixesui 3erseerstrasdeSeeetig se Suy ie jpeg Sebo he pts 15

4 N0iØbEHHG TING SEN ALE BY continence dis slesa < apap racitne tt eandsnaing nema down dendy ondionorkindnledetiee riers 16

4.1 Matrix to combine strategy (SWOT mafFÌY) - 5 S28 ES +3 ESEESzEEEsrkeskee Nó 4.2 Matrix to select strategy - Quantified strategic planning matrix (OSPM

TE scr atetecaulllinse reheat llc lteter ck! ech eater tte eRe ded ecto Ae dl ot iy CHAPTER II: ANALYSIS THE BUSINESS SITUATION OF VIETNAM - RUSSIA JOINT VENTURE BANK , :cscsscsscescsscceccescecceessersecsersersecensencenees 19

I Overview of Vietnam - Russia Joint Venture Bank 5c 55+ 55 <<<<<<x<+s 19

1 Establishment and development ProcesS ccccccccsessesssscessssssesesssssseseseseseesees 19

2 Organizational SÍF 14C [HP c3 E1211211151 118115111511 811111 1211111111110 1H nà nh 20

3 Business resul1 in the period 2008-2010 - - 2Ï

II Analysis of business environment and the internal factors of Vietnam - Russia Joint 420)41)(-307-1/)aaaaaadđdđiiiaẳẳẳẳaẳaẳdẳaẳăẳi+ 22

1 Analysis of business environment 22 1.1 General environment anaÌySIS -c c2 s22 Ze ].L.1 Political ƒqGEOF .ằ cằ cee ce ce tances see tee ten tsr ess see eee dd T.1.2 ECONOMIC JACION oo coe cee cee nh ẽernA RA 1.1.3 SOCiO-£COHOHIC ƒACÍOF cà tee uee see tee tenes c 2

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1.1.4 TechnologiCalÏ ÍQCÍOF c2 222 eet beet eae eeteen es 24 LDS L@ GAL fACIOP oo cee cc cee ee ce ce cee ee ce eee ee ee cee cee cà cà SẼ Kê se SH se xà cụ cá, /.1.6._ Evaluation on the analysis of external environment (using EFE

].2 Industrial environment anaÌySIS c c2 222222 28 1.2] Pressure ƒTOI CHSÍOI€FS cà cào cà cài cà cà cài Ổ Ï.2.2 PotentiaÏ eHIFđHfS - - cà cà cà cà cà 29 1.2.3 Threat Oƒ SMSIIÍMI€S - cà cà cà cà cà cee cee cen ten cen est see sácc 29 1.2.4 Pressure ƒom SHDpĐÏl€FS .ằ cà cà tae ee tee tenes tence see eee ee dO

ID L1) 83) wrởaiiiiiiÝiiẢ 1.2.6 Competition prFOƒfÏÏê TQ ÙN - c5 3281312111231 EE51 151155115511 251 1515115 c5 32

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Z0: TILSN: JHGHTĐ DI 0i Kạc cohikg nà tạp Sen tà khá wats sh es Woon Barn te ig Lan “ll sis We sno essa cúi he, buổi GV” 2.6 Synthesis evaluation of analysis of VRB’s internal factor (IFE matrix) 38

HI Evaluation on VRB}s current business strategy - 4I

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CHAPTER III SELECTION OF BUSINESS STRATEGY FOR VIETNAM - RUSSIA JOINT VENTURE BANK IN 2011-2015, SOLUTIONS AND

RECOMMENDATIONS - - -Q c con HH HH HH KH in 43

[ Foundation for strategy formation - -ccccccccc+2 43

2 Long-term øOaÌS - c2 SQ ng SH HS ng ng nh nh kh nh, 43

3 Potential growth of banking se€cfOr - c2 c se 44

II Propose strategy for Vietnam - Russia Joint Venture bank 45

1 Strategy formulation (SWOT matriX) 45

1.1 Promote strengths - c2 2020000212121 ng ng ng nh nh nhớ 49

1.2 Overcome weaKn€SS 00000000 00 ng nh nh rx 49

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I.3 Taking advantage of ODPOTtUnItI€S c2 c2 50

| si: CÍƯEDGUHITE TỈHEEHỦNEe tong gì S0 1x BH HR Bak 4 SRN wd BB 0A 3 Han Hu Š ơn R He nace nomen 0 mene 50

2 Propose business strategy for VRE - - - - S1 2112211112211 19 11119 11x tri 50 2.1, Strategy for market pertetratiOnncvecisscsssaaicasasssnssssssansanscasnnncnedccerccacasancsessananennerans 52 Put: DIRALESY OT MIATKEL QGVWGIOTIEHÏ: nayng nữa nnnkuni 01g ha G2214 8858801868ã65ãsãckc.-dessesssio 53 2.3 Strategy for product dIÍfentIatiOn - - ¿c1 132111 2 1 21118 1e erreee 53

2, Strategy for product developmie tt bes iss ian sacsuesavacnsonnnanssurcenarnainnncnsdnadiasreidensinendssahe 53 soi DINEERV TOT HIEÍWOFEK EXPANSION sxc cann.siaccssssscntimnsanSsnnsnnshnsAdnenndAndncadanneeneonannnse 54

3 Select strategy - Quantified strategic planning matrix (QSPMI) - 54

HI Solution for business strategy implementation 60

I Solution for increasing capIfaÌ r€SOUTC€S - + 2+2 323223213 £Ezerrrrererres 60

2 Solutions for expand operations and distribution channels - - 61

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4 Information technology c2 2n S1 xi 61

5 Risk management and internal audit - - 62

6 Management and controlling -<-<< << cs+2 62

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ee eld ane ee tact tals cans le tröiecr-se sen lrenl nô cưới vúég E gas lata 63

1 With the Government and Statebank of Vietnam - 64

2 With two parents bank of BIDV and VTB - 65

V Estimated balance sheet and income statement in 2011 - 2015 65

Ds, BPRS SINCE sss 2 aa s ted « tian a Shoe soma Sot cose «were ers eu: oer enka $ wry tap» reg ek sean a peli 65

2 Ïncome s†at€ment - c2 eee e ee eee eee e ease beta eee e eee 66

CÔNG HO Nhan can oanas 9a sng sashice depemee ieee mame omens cave phi g kiêm 9415 008 190060794 67 LIST OE REEEREENCCE << <5 <9 90.9099599099899099089089099609090650656498 68

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INTRODUCTION

1 The necessity of the topic

International economic integration is a common and inevitable tendency of every economy and every business sector of the economy Integration in financial and banking sector is participating in the playing field of financial markets such as credit relations, currencies and other activities This integration makes the business environment of the banking industry fiercely competitive, which requires banks to innovate and develop in all aspects such as financial capability, technology, risk

management, human resources, branding So, to formulate appropriate business

strategies with the characteristics of each bank to survive and thrive in conditions of tough competition is an urgent task for every bank

In Vietnam - Russia Joint Venture Bank, although the business strategy

formulation has been developed, but so far business strategy in 2011-2015 has been only mentioned the development target The analysis of business environment and internal analysis have not been mentioned

Starting from the theoretical and practical argument above, with the desire to build an appropriate strategy for the development of Vietnam - Russia Joint Venture Bank, our group has agreed to select the topic "Strategy formulation for Vietnam - Russia Joint Venture Bank in the period from 2011 to 2015" as the topic for our capstone project of Master of Business Administration Program by Griggs University and ETC center of Hanoi National University

2 Aim of the capstone project

To analyze the real business situation of Vietnam-Russia Joint Venture Bank,

on this basis, propose appropriate business strategies in the period 2011-2015

3 Object and scope of the project:

- Study object: Vietnam - Russia Joint Venture Bank

- Scope of the study To do research of the Vietnam - Russia Joint Venture

Bank from the time established till now Since then, by applying the basic theory of

strategy fomulation, strategic management and basing on practical and competitive

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trends in the banking sector, we offer some strategies and some solution to implement business strategy for Vietnam - Russia Joint Venture bank in the period from 2011 to 2015

4 Research methodology:

Some methodologies of research used in our capstone include: methodologies

of analysis, synthesis, comparison, and inheritance

5 Contribution of the project:

- Research and systematization of the basic theory of business strategy as a basis for developing strategies for Vietnam - Russia Joint Venture Bank

- Make analysis and assessment of the business situation of Vietnam - Russia

Joint Venture Bank, some results and limitations in implementing the business

strategy of Vietnam - Russia Joint Venture Bank

- Analyze the business environment, pointing out the opportunities and challenges for VRB from which find out solutions for choosing and fomulating business strategies in consistent with the business environment and internal factors

of VRB to improve operational efficiency

6 Project structure:

Beside the introduction, table of contents, list of abbreviations, list of tables, figures, introduction, conclusion, list of references, appendix, the content of the project is divided into three chapters:

Chapter I General theory of business strategy fomulation

Chapter II Analysis the business situation of Vietnam - Russia Joint Venture bank

ChapterIII: Selection of business strategy for Vietnam - Russia Joint Venture

bank in 2011-2015, solutions and recommendations

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CHAPTER I: GENERAL THEORY OF BUSINESS STRATEGY

FOMULATION

I Definition and role of business strategy

J Business strategy definition and classification

The term of “business strategy” has appeared since there is competition in the market This concept has been defined by many economists Despite various ways

of definition, business strategy includes all the contents related to how a business can compete successfully in the market Specifically, it includes all the strategic

decisions about products choice to meet customer demands; how to gain

competitive advantage over competitors, how to exploit or to create new

opportunities

To compete successfully, their business strategy must meet some requirements

as follows:

- Enable to increase and gain competitive advantage over the competitor

When fomulating business strategy, these enterprises must fully exploit its

competitive advantage

- Ensure the safety in business operation To meet this requirement, the

enterprise must research and predict the business environment in the future

- Business strategy must clearly define the targets and the basic conditions to achieve these targets

- The strategy must combine the opportunities and maturity, and the enterprise

must build provision strategy

2 The role of business strategy:

Business strategy plays an important role in the sustainable development of enterprises A good business strategy can help the enterprises:

- Identify goals in each stage of the business; help them clear their direction to

reach their target

- Help the leader see the opportunities and challenges from the outside, the

strengths and weaknesses of their businesses, to forecast future changes to find solution for adaptation to such difficulties

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- Help them to exploit and make use of their resources, to appropriately allocate resources, improve the efficiency of enterprises avoid risks and prevent the difficulties occured

- Increase coherence and consensus of the staff and the leadership in implementing the goals of the business

3 Strategy classification:

There are some ways of classifying the strategy according to different

approaches such as the characteristics, the level or scale, Under our capstone, we

refer to classify business strategy on its nature In this way, business strategy is

divided into:

- Functional strategy is the strategy aiming at improving the performance of each function in the company such as production, marketing, material management, research and development and human resources

- Corporate strategy towards the coordination of business strategies in relation

to the expectations of the owners With a long-term prospects, corporate strategy

refers to the different cases in which the industry is growing or declining

II Strategic management process

Strategic management is defined as “an artistic and scientific establishment, implementation and evaluation of decisions concerning many functions that allow

an organization to achieve its target set out" (Strategic management — concepts and

cases by Fred R.David)

Strategic management process consists of three main stages of strategy fomulation, strategy implementation and strategy evaluation as follow:

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Strategy building Strategy implementation

strategy | Competition | strategy Company Structure

management and

Bh 5

25

A” 2 | Acquisition, International | Cooperation anagemen tung,

Source: Strategic management lecture slide-Griggs

1 Strategy fomulation: including the development of business tasks, identifying

opportunities and risks from outside the organization, pointing out strengths and

weaknesses of the enterprise, setting long term goals, formation of strategy, alternative strategies and select specific strategies to pursue

2 Implementation strategy: is the process of putting the different strategies of the organization into practice Measures to implement different levels of strategy are tied to the strategy

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3 Strategic evaluation: is the final stage of strategic management During this period the business will review basic factors for the current strategy; measure the achievement and implementation of activities, making adjustments if necessary

II] Process of strategy fomulation:

Process of strategy fomulation is the process of using appropriate methods, tools and techniques to determine the business strategy as well as to identify

strategies for each section of the business functions in a specific period It is

implemented through the following steps:

Diagram I.2: Process of strategy fomulation

External factor evaluation Competition Profile Matrix Internal factor evaluation

Stage 2: The matching stage

Stage 3: The decision stage Quantiative strategic planning matrix (QSPM)

Source: Strategic management - concepts and cases by Fred R David, page 209

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<— enterprises (S, W) environment (O T)

Source: Lecture slide of strategic management — Griggs University

1 Vision, mission, strategic target:

- Mission: shows primary function of the business, stating the reason of existence and what the enterprises need to do Mission statement describes the

organization in terms of its business environment, the customers it serves, the skills development to meet their vision The mission statement is the basis for the entire work of strategic planning It is the reference point for assessing the strategic targets

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of the organization

- Vision: A message to specialize the mission into general target, showing the main purpose that the enterprise wants to achieve in the long term Vision is extremely important as it clearly shows the direction, indicates the priority, and is the basis for planning and making efforts to achieve the targets

- Strategic target: Is the specific, clear and feasible target in a shorter time

Aiming to concretize the vision of the business

2 Business environment analysis:

The analysis of the business environment is to consider and judge the

influence of external factors to the enterprise’s business activity, from which to identify the opportunities and challenges for businesses Analysis of business

environment includes general environmental analysis (also known as the macro environment) and industrial sectors (also known as the operational environment): 2.1.General business environment: include the external factors that may affect the business To analyze the influence of external factors on the business operations of the company, people often use the extending PEST (Political - Economic - Social - Technical) model of some factors as follow:

2.1.1.Economic factor: Some of the economic factors such as growth, interest rates, inflation, exchange rates, wages and incomes have strong influence on the survival and development of enterprises So, the analysis of current economic situation and forecasting the economic trends affects on the future decisions and strategic success of the business

2.1.2.Political, legal factor: The government regulates the macro-

environment by issuing monetary, tax policy and consumption programs Legal

legislation is to allow or not allow, force the businesses to follow Changing in

operating political policy, or legal legislation will directly affect on the enterprise They may be opportunities for this business but risks to other businesses To take advantage of the opportunities and minimize risks, companies need to grasp the government's directing point in time

2.1.3.Socio-cultural factor: \nclude factors such as population, lifestyle,

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culture, religion, family

- Population has impact on human resources, affecting on the output of the enterprise to help businesses identify market size

- Lifestyle affects on the consumption demand, culture impact on consumption

behavior

- Family affects on productivity, work quality and efficiency

- Religion and culture have influence on moral and legal status in the

observance and enforcement of decisions

Thus, we can say social and cultural environment may influence on the

strategic decisions of the business such as choosing business fields, selecting

brands, colors, styles, changing distribution channels

214 Technical factor: Technological factors can be considered as

determinants for the success or failure of products and services In the context of the

technology makes change completely the traditional production process, if not timely apply the scientific and technical improvements in production and business activities, products or services will lose their competitiveness Thus the judgment of technical trends is very important for the development of the enterprises These

trends can be an opportunity for the businesses owning ability to raise capital, but also a threat to the business which is closely tied to old technology

2.1.5 Global environment: The international economic integration means that businesses will no longer receive protection or assistance from the Governement

As, the business environment becomes fiercely competitive, businesses can only

survive and develop with their efforts to improve their competitiveness

Based on the influence of external factors as above, to quantify the impact from the external environment as the basis for making the appropriate solutions to

take advantage of the opportunities or avoid threats, the strategic makers of the enterprise often use EFE matrix

2.1.6 Synthesis of external environment analysis - External factor evaluation

matrix (EFE)

External factor evaluation matrix (EFE) allows strategic planner to summary

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and evaluate the affects of the economic, social, cultural, demographic, geographic,

political, legal, technology on the operation of the business EFE matrix consists of

four columns as follows:

Table I.1: External factor evaluation matrix ( EFE )

Source: Strategic management textbook

- Column (1): Make a list of external factors that play a decisive role for the business activities of enterprises mentioned in the contents of external factors analysis List of about 10 elements, including both opportunities and threats affecting the company and the company's industry

- Column (2): Assign the importance 0,0 (not important) to 1,0 (very important) for each factor This assessment is based on the industry The total

weight of the factors must equal 1.0

- Column (3): Assign score 1 to 4 for each determinant for the success of the enterprise 4 (good), 3 (above average), 2 (average), 1 (not affect)

- Column (4): Score achieved = column 2 x column 3

Total points accumulated in column 4 shows that the strategy of the company

can take advantage of external opportunities and minimize the negative effects of

external environment; score of 2.5 is average; at least is 1 for strategy that does not

take advantage of opportunities and avoid threats from outside

2.2 Analysis of industrial environment: includes all factors directly affecting on

the enterprise’s operation in an industry such as the level of competition in the

industry, potential competitors, customers, suppliers, substitute products

To analyze the influence of the factors within the industry, five forces model

of Michael Porter is often used:

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I ARR IER RR TEE RIP STE SEE ES DIS 1 AS GB A HST TT ANGE NRT A ETRIT

Diagram I.4: Five forces model by Michael Porter

| Potential Entrants (Threat of Mobility)

Suppliers ˆˆ Beenie laa

; Supplier Power) Rivalry H ; (Buyer Power

Substitutes (threat of Substitutes)

Source: Economic management textbook - Griggs University

2.2.1 Industry rivalry

In fact, in the business environment, it does not exist the perfect competition

which requires the company be active and sensitive in building and exploiting their competitive advantage over competitors The strategic planner of the enterprise should pay special attention to the level of competition in the industry to make suitable decisions to help businesses increase their competitive advantage and win

in business The level of competition is often determined by the characteristics of

the industry and by some of the following characteristics:

- The number of enterprises in the industry

- The growth of the market

- The degree of product differentiation:

- Other factors such as the variety of competitive, market opportunities, fixed costs, exit barriers, also shows the level of competition in the industry

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2.2.2 Threat of substitute products:

The substitute product is the product of a similar product coming from other industry There will be a comparison of prices, price elasticity of a product will be affected by substitute product, the simpler the replacement it is, the more elastic the demand becomes as customers have more choice

Substitutes are not seriously competitive but it can affect on the profitability of

the market and it can be a threat to the enterprise Most new substitute product is the result of technological improvements Want to achieve success in their business, the enterprises need to spend necessary resources to develop new technology in their

development strategy

2.2.3.Potential entrants:

The potential competitors are likely to enter the business sector in the future,

threats to current enterprises The existing enterprises often try to prevent potential competitors from entering into the industry The level of profitability of potential

competitors depends mainly on the cost to entry is high or low (industrial barrier), including:

- Initial investment capital: the high initial investment capital it is, the less ability to entry of new competitors it will be

- The cost advantage: The business holding advance manufacturing technology

will be able to lower price to gain competitive advantage

- Advantage of brand: The cost of building a new brand usually takes more

time and be more expensive

- The advantage of scale: With large scale, the average fixed cost per unit of

product will decrease, large-scale enterprise shall have more competitive advantage

over new competitors

- Legal barriers: the State's regulations on the conditions for participation such

as capital, equipment, qualifications of the labor the strict regulations will be obstacles to new entry competitors

2.2.4 Suppliers power:

The suppliers can be a threat when they raise prices and limit the quantity, or provide uquality products The enterprises should pay attention to the negative impact from the suppliers Supplier will put pressure on businesses in terms of:

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- There are few supplier

- There are few alternative products and services

- Having the advantage of specialized products and services

- Being capable of vertical integration positively

2.2.5 Buyers power:

Buyers are the main objects involved in the sale of products Identification of customers and consumer’s habit in order to determine which products and services are needed to make investment Customer’s demand is the most basic elements interested by the business leader to make decision whether or not to maintain long- term competitive advantage for those products Customers often put pressure on the

enterprise in the following cases:

- They buy in large amount

- There are many suppliers for the same type of product

- Ability to integrate backward to own one part or all product manufacturing process

2.2.6 Synthesis evaluation of the competition in the industry - Competition profile matrix (CPM)

To assess the impact of major competitors with advantages and their disadvantages, strategic planners often use competition profile matrix (CPM) This

matrix is expansion of external factors evaluation matrix by input key elements of the business environment to compare between competitors in the industry

The specific steps to develop CPM matrix includes:

Table I.2 Competition profile matrix (CPM)

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- Step 1: Make a list of crucial factors affecting competitiveness of enterprise

in an industry (about 10 to 20 elements)

- Step 2: Assign importance by scoring from 0.0 (not important) to 1.0 (most important) for each element As the importance assigned is relative importance to the success of all enterprises in an industry, so the factors listed in step 1 are the same

- Step 3: Classification from | to 4 for each element Each point reflects the

competitiveness of each element of this enterprise compared to rivals in the

industry

- Step 4: Scoring the points by multiplying the importance with the corresponding classification scores

- Step 5: Calculate the total score for all of the elements in the matrix by

summing the elements of the corresponding component The total score demonstrates the competitiveness of enterprises

Accordingly, if the total score is from 2.5 and above, the enterprise has above average competitive capacity In contrast, if the total point in the matrix is less than 2.5, the competitiveness of enterprises is lower than the average

3 Internal factors analysis

Internal factors are all factors that belongs to the business itself, which directly

relates to business activities of enterprises, such as human resources and

organizational structure, research and development, information technology

systems, risk management

3.1.Financial capability: Is the financial resources of the enterprises to ensure the

production and running business activities For the banking sector, the financial

capacity of commercial banks is understood as the ability to create and use capital

funds arising in the banking business, and it is indicated in the scale of own capital,

asSet quality, capital quality, profitability and ability to ensure safety in operations 3.2 Human resources and organizational structure: Human resources are the intangible valuable assets of the enterprise, which plays an important role for the success of your business Elements of human resources including:

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- Leadership, expertise and management experience

- Appropriate organizational structure and management

- Skill level, morality of staff

- Flexible and efficient personnel policies

3.3 Research and development (R&D): The research and development can help

enterprises maintain its leading position in the industry Factors of research and product include experience, scientific capacity, the ability to acquire and apply the

scientific and technical production to meet increasing demands of the market

3.4 Technological factors:_Information technology is considered a key factor determining the success of the businesses In the banking sector, this factor plays a particularly important role due to specific industry requirements of safety and security information At the same time, information technology system is essential

to the development of modern banking applications as the basis for the development and diversification of products improve business performance, expand customer

base and enhance competitiveness

3.5 Risk management: For the operation of bank, credit activity is the main activity,

bringing over 80% of income for banks Credit activities hide potential risks that the cause of which is the bank have not good policy of risk management, lax in management, grant credits are not transparent Therefore, the management of credit risk is the first task, the most important in the process of bank management, must be

done regularly, continuously, seriously and thoroughly It can consider the credit risk management is a measure of risk, risk management, control and report risks and implement risk prevention measures

3.6 Synthesis evaluation of the internal factor - Internal factor evaluation matrix

(IFE)

To evaluate the affect of internal factor on the business operation, strategic

planners often use the IFE matrix Internal factor evaluation matrix (IFE) evaluates

the strengths and weaknesses of functional parts of the enterprise IFE matrix is

constructed in five steps:

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Source: Strategic management textbook

Step 1: Define the list of 10 to 20 important factors, including the strengths and weaknesses of the business These values are recorded in column ]

Step 2: Determine assessment score corresponding to the importance of

strategic position of the company from 0.0 (not important) to 1.0 (very important) for each element The total number of the importance of all factors must equal 1.0 These values are recorded in column 2

Step 3: Each enterprise will assess the impact of each factor for its own The

degree of reviews: 4 = good, 3 = average, 2 = below average, 1 = poor This score was recorded in column 3

Step 4: Multiply the score of each factor to the level of its influence (= column 2 x column 3) to determine the total degree of influence The results are

recorded in column 4

Step 5: Summing the total points of importance for each factor to determine

the total points for the organization

Total highest score that a company can achieve is 4.0, the lowest is 1.0 and 2.5 average The total score greater than 2.5 suggests internal strength, less than 2.5 shows internal weakness

4 Selecting the strategy:

To choose the strategy suitable with the present condition as well as with the influence from the business environment, strategic planners often use synthesis SWOT matrix based on opportunities and challenges, strengths and weakness from the analysis of business environment and internal factor analysis

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4.1 Matrix to combine strategy (SWOT matrix)

The purpose of SWOT matrix analysis (Strengths, Weaknesses, Opportunities, Threats) is to coordinate the strengths and weakness with the opportunities and threats in order to appropriately coordinate these elements to

identify and select suitable business strategy SWOT matrix has 9 cells in which

four cells are important factors, four intersection celss describes the strategy and one empty cell

Table 1.4: SWOT matrix

to overcome weakness avoid threats

Wi, W2

After choosing strategies can be applied to the actual situation of the

enterprise based on the analysis of threats, opportunities from the external

environment and internal strengths and weaknesses of the enterprise, the strategic planners often use quantified strategy planning matrix (called matrix QSPM) to determine the most appropriate strategy for the business

4.2 Matrix to select strategy - Quantified strategic planning matrix (QSPM

matrix)

QSPM matrix use input data from the analysis in the previous step to help strategists decide which of these strategies is the most suitable strategy to pursue to implement its goals Development process of QSPM matrix includes six steps:

Table I.5: QSPM matrix

———

important Classify Strategy 1 Strategy 2 Strategy 3 Foundation

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External factor

- Step 1: List of opportunities/threats outside and strength/weakness inside in

the column (1) These factors are taken directly from the EFE Matrix and IFE

- Step 2: In column (2) fill the score corresponding to each element in the classified columns of the EFE and IFE matrix

- Step 3: Look at the SWOT matrix and identify some alternative strategies that organizations should consider to perform, record these strategies on the top row

of the QSPM matrix

- Step 4: Determine the number of attractions (column A): Not attractive 1, less attractive 2, quite attractive 3, very attractive 4 These values indicate the

relative attractiveness of each strategy compared with other strategies

- Step 5: Calculate the total attractive number for each success factor listed in

column (1) by multiplying the number of classification with attraction number in

each row (record in column B )

- Step 6: Cumulative number show the attractions of each strategy (taking into account all the factors inside and outside affect strategic decisions) The higher the total score, the more appropriate strategy and the more worthy choice to make

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CHAPTER II: ANALYSIS THE BUSINESS SITUATION OF VIETNAM -

RUSSIA JOINT VENTURE BANK

I Overview of Vietnam - Russia Joint Venture Bank

I Establishment and development process:

The establishment of Vietnam - Russia Joint Venture bank is to strengthen bilateral cooperation between the two governments agreed during a formal visit to Vietnam of Russian Prime Minister Mikhail Fradkov in February 2006 Accordingly, Vietnam - Russia Joint Venture Bank (VRB) officially went into operation on 19/11/2006 under establishment license No.11/GP-NHNN dated

31/10/2006 of the Governor of State Bank of Vietnam and it is the result of cooperation of two leading banks in two countries - BIDV (Bank for Investment and Development of Vietnam) - 51% of charter capital and VTB (Foreign Trade Bank

of Russia) - 49% of charter capital

VRB is the first joint venture bank to increase charter capital according to the

stipulation of the Government and the State Bank of Vietnam from 10 million USD

to 30 million USD in 2007; 62.5 million in 2008 Implementation Document No 655/NHNN-TTGSNH on 21/01/2011, VRB has increased its charter capital to

168.5 million USD from funds contributed by the joint venture partners, BIDVof

84.25 million and VRT 84.25 million USD

Afier nearly five years of implementation tasks assigned by the two Government and under the support by the two Central Banks, at 30/06/2011 VRB had total assets of

466 million USD (from 33 million USD in 2006), raising capital moblization from

economic entities and individuals to 167 million USD, outstanding loans reached 274 million USD VRB has completed international payment system and establish a bilateral payment channel with VTB in USD, EUR and 2 local currency is RUB and

VND

As a leading bank in the group of joint venture banks in Vietnam to expand

the networt, VRB has 06 branches in major economic centers: Hanoi, Ho Chi Minh,

Da Nang, Vung Tau, Khanh Hoa and Hai Phong May 10/2008, VRB has officially opened representative office in Moscow On 14/12/2009, the bank of 100% charter

10

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capital owned by VRB - VRB Moscow Bank (VRB Ltd Moscow bank) officially

went into operations on the visit of Prime Minister Nguyen Tan Dung in Russia on

the invitation of Russian Prime Minister V.V.Putin This is an important

breakthrough, helping VRB expand abroad, especially in Russia, SNG countries and

Eastern Europe, improve competitiveness and customer development including the

business community between Vietnam and Russia

2 Organizational structure

Currently VRB’s system includes 01 transaction center, 6 branches and 9 transaction offices nationwide Also VRB owns subsidiary of 100% charter capital

in Moscow to provide services to Vietnamese as well as other customers in Russia

Diagram IT.1 VRB’s organizational structure

“ustomer Monetary Legal Legal Finance Administ Customer IT Retail

Relation Trading Dept Dept Accounti ration service Dept and

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3 Business result in the period 2008-2010:

Some major business indicator and financial situation of VRB in the period from 2008-2010 is as follows:

Table II.1: VRB’s business result in the period from 2008 to 2010

c1 (Fotal assets (billion dong) 6,088 6,606 11,255

m Outstanding loans (billion dong) 259 4.674 6,285

4 {Capital mobilization (billion dong) 4,985 5,393 8,551

+ From entities and individuals 2,975 1,630 4,692

- Value paper issuing (billion dong) - 38 907

As profits decrease, while total assets and equity rose, pull both targets

ROAA, ROAE are going down; these indicators are very low, especially in 2010 It

also explains the growth of equity of is decreasing

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II Analysis of business environment and the internal factors of Vietnam - Russia Joint Venture bank:

1 Analysis of business environment:

1.1 General environment analysis:

1.1.1 Political environment:

Political factors have great impact on the business activities of banking in

general and of VRB in particular VRB operates as joint venture banks between

Vietnam and Russia Thus, the political stability of the two countries has a particularly important for the development of VRB Vietnam and Russia are two countries with a tradition of solidarity, economic cooperation, culture and long- term friendship In recent years, Governments of both countries has signed several

documents, policies to promote economic - trade cooperation and investment between the two countries commensurate with the potential and desire of both

parties in the energy sector , industrial and military-technical cooperation

Vietnam-Russia joint venture bank was established on the basis of the policy

to promote economic-political cooperation between two countries, so, the operation

of Vietnam-Russia joint venture bank is certainly supported by the two countries

and accordingly have potentiality for future development

1.1.2 Economic factor:

After the world economic crisis, in 2010, socio-economic situation has seen

significant growth Specifically, GDP growth was 6.78% (higher than the target set

of 2010 of 6.5%); attract foreign direct investment of 17.23 billion USD; total

exports reached 71.6 billion USD Signs of recovery in the economy create good

conditions for financial markets, the development of the banking sector in general

and VRB in particular

Inflation in 2010 and early 2011 are still very high and the ability to record two digit growth is entirely possible To make adjustment for inflation, the State Bank may have policies to restrict banking activities to achieve the macroeconomic

targets

Bank interest rates are tightly controlled by the State bank by issuing a series

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of executive regulations on interest rates as ceiling interest 14% for deposit in VND, 0.5% with USD deposit of entity, 2% for USD deposit of individuals Loan interest rate is also adjusted down to 17-19% by consensus of the 12 leading commercial banks in meetings with state banks The base rate is limited by the provisions of the State Bank, which makes most commercial banks in general and VRB in particular have difficulty in raising capital from economic organizations and residents due to the attractiveness of other investment channels, especially gold investment Credit activities are also in trouble Business result is low as the interest rate difference of output - input is very low

In 2010, the State Bank has made two adjustments for VND/USD exchange rate Accordingly, the amplitude of the exchange rate is adjusted very strong of

18,932 VND/USD at 31/12/2010 In 2011, thanks to strict measures of the

government on the management of foreign exchange markets, closely managing

free markets regulate the institutions to sell foreign currency to banks, low interest rate, which make interest rate tend to be stable and is maintained at around 21,000 VND/USD

1.1.3 Socio-economic factor:

After the economy crisis period, the economic and social indicators is thriving,

production and consumption increases At this time, the demand for using banking

and financial services also increases Customer base is increasingly expanding,

banks have good conditions to develop and put into practice diversified products,

enhance liquidity and financial capacity of the banks

However, the majority of people in Vietnam still have the habit of consumption in cash This is one of the major barriers for the development of banking system in Vietnam In addition, a further difficulty that banks are facing is that the amount of cash and foreign currency reserved in the population with large amount, making the capacity of banks raising capital difficult These problems require banks in general and VRB in particular to further promote the marketing and research new banking products to attract consumers

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1.1.4 Technological factor:

Technology related to the banking industry has made great progress in recent years Thanks to new technology, the banking transactions become convenient, faster & more secure Vietnamese banks were racing in technology by applying the most advanced technology in the world (applying information technology in most operations, replacing magnetic cards with safer chip card; applying core-banking system; the payment service via internet-banking, SMS Banking; GPS-Tracking service; e-payment gateway .) this is extremely favorable conditions for the banking industry development

In the trend of modernization of the banking system, VRB has transferred the

core banking system and is now one of the bank owning the most modern corebanking systems VRB now owns Oracle FLEXCUBE Core Banking software Two Core Banking software which are considered the most modern in the market today are T24 banking and FLEXCUBE FLEXCUBE is now widely used in banks around the world In Vietnam, at present only some newly established banks have good chance to easily convert to FLEXCUBE corebanking as Indovina, Oceanbank,

Vietnam Russia, the Union of Vietnam, Tien Phong

On the foundation of modern banking system, VRB continues to deploy

modern banking products such as internet banking, SMS banking, cooperate with

vnEpay in the deployment of electronic payment online services via internet and non-cash payment

1.1.5 Legal factor:

For banking, the promulgation of regulations and policies of the Government and the State Bank have particularly important roles So when analyzing the macro

environmental factors affecting on banking, it can not help considering this factor

The legal legislation of the banking sector in Vietnam is being completed In recent years, a number of legal documents issued directly affect on the operation of the entire banking industry in general and VRB in particular such as:

- Decree No.141/2006/ND-CP of the Government's on regulation the minimum capital for banks to 2010 is 3,000 billion dong This regulation created

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great impact on the financial plan of the commercial banks in general and VRB in particular This provision put pressure on two parent bank BIDV and VTB for VRB itself on efficiently using capital while with the current scale of 1.000 billion dong, the capital using is still inefficient

- Decision No.34/2008/QD-NHNN_ dated 05/12/2008 amending and supplement some articles of the Regulation on the safety ratio in the operation of credit institutions, accordingly tightly restrict the capital investment activities of commercial banks Therefore, the investment of capital for the company joint venture bank of the parent bank would be affected by this provision

- Issuing the Circular 13 and 19 of the State Bank requires banks to maintain

the safety ratio such as CAR increase from 8% to 9%, securities lending in real estate has risk coefficient of 250 % this causes difficulties in banking, especially

credit activities While credit activities are the main activities of the VRB, the implementation of this Circular means shrinking business performance

- The ceiling interest rate provisions: Bank interest rates are tightly controlled state to implement the objectives of Resolution 11/NQ-CP such as ceiling interest

14% for deposit in VND, 0.5% with USD of deposit of entity, 2% for USD deposit

of individuals Most recently Circulars 30/201 1/TT-NHNN regulating the maximum interest rate for VND capital mobilization under one month maturity of 6% has cut off all forms of interest rate ceilings con-compliance of the commercial banks

Attached to these policies of interest rate, strict penalties is implemented, which show the determination of creating healthy banking activities, especially on interest

rates towards the implementation of the macro target

1.1.6 Evaluation on the analysis of external environment:

Through the analysis of general environmental factors affecting the banking

activities, our group we give out some of opportunities and major challenges for

banking in general and VRB operation in particular as follows:

+ Opportunities:

1 Political stability, economy recover after the crisis period

2 The friendship relationship and cooperation between Vietnam and Russia 1S

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increasingly enhanced and strengthened

3 Customer demand for retail banking products in the sector is huge According to

many prestigious rating organizations, the banking sector in Vietnam has huge potentiality for growth With the growth of Vietnam's GDP is estimated to be approximately 6-8% in the coming years Together with the efforts of the Government of Vietnam in reforming

the financial system has contributed to strengthening the confidence of the public to

increase bank deposits in the coming years Retail banking operations with the characteristic of safety, efficiency and potential development, many banks are interested in deploying In Vietnam, about !5 million bank card accounts, of which only about 10% of the people of Vietnam have personal accounts (Source SBV) This figure is small compared with the rate of penetration of internet and mobile phones with 25% and 20%

Therefore, in the future, growth will reach your bank account very high speed

4 International economic integration, foreign operations and foreign trade is increasingly enxpanded, enabling banking activities to operate in accordance with

international standards and practices,

5 System institutions, state legislation has been improved in accordance with

international practices and market rules for the operation of enterprises and banks

+ Threats:

1 The risk of falling behind on the technological level, management and corporate governance is the biggest challenge

2 Competitive pressure is increasing

3 Increasing requirements of Statebank in the administration of commercial bank, such as setting up provision, ensure capital safety ratios and transparency banking according to international standards and practices,

4 Effective business is lowered

5 Increasing demand for products and banking facilities

6 Habits of using cash of Vietnamese

7 The risk for the merger banks who has weak financial capacity

To assess the influence of external factors on the operation of VRB, our group has consulted some ideas of strategic expertise and VRB’s leadership and collegue and synthesize in the matrix evaluation of external factors (EFE) as follows:

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a a a

a

Table II 2 VRB’s external factor evaluation matrix:

3 Customer demand for retail banking products 0.15 Z 0.3

in the sector is huge

4 International economic integration, foreign 0.1 3 0.3

operations and foreign trade is increasingly

enxpanded, enabling banking activities to

operate in accordance with International

standards and practices,

5 System institutions, state legislation has been 0.1 2 0.2 improved in accordance with international

practices and market rules for the operation of

enterprises and banks

1 The risk of falling behind on the technological 0.1 4 0.4

level, management and corporate governance is

the biggest challenge

2 Competitive pressure is increasing 0.05 3 0.15

3 Increasing requirements of Statebank in the 0.05 3 0.15 administration of commercial bank, such as

setting up provision, ensure capital safety ratios

and transparency banking according to

Tiêu đề	Strategy Formulation For Vietnam - Russia Joint Venture Bank In The Period 2011 - 2015
Tác giả	Nguyen Thi Bich Hong, Le Thi Kim Chung, Tran Quoc Tuan, Nguyen Huu Hoang
Trường học	Griggs University & International Academy
Chuyên ngành	Master Of Business Administration
Thể loại	Capstone Project Report
Năm xuất bản	2011
Thành phố	Hanoi

Định dạng
Số trang	75
Dung lượng	46,18 MB