G1_00272 BUU DING UP BUSINESS STRATEGY OF FINANCIAL SERVICE OF AGRIBANK NGHE AN WITHIN THE PERIOD OF 2011-2020

3.3 Analysis of Agribank Nghe An's internal environment 43 2.3.1 Assessment of infrastructure and Technique 43 2.4.1 Strengths, Weaknesses, Opportunities and Threats of the organization

VGẦN HÀNG NÔNG NGHIỆP VÀ PHAT TRIEN NÓNG THÔN VIỆT NANA

CHỨNG NHẬN CỦA NGÂN HÀNG NÔNG NGHIỆP TỈNH NGHỆ AN

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tỉnh Nghệ An,

Ngân hỏng chúng tôi nhận thấy rằng đây là đài có chất lượng tốt và có khả năng áp dị vào thực tế hoạt động kinh doanh của đơnvị, phục ụ phát triển các điển lợc nh dọa của đơn vị,

Ngày 15 tháng 2năm 2017 GIÁM ĐỐC

NGAN HANG NONG NGHIEP VA PHAT TRIEN NONG THON VIET Nam

CHÚNG NHẬN CỦA NGÂN HÀNG NÔNG NGHIỆP TỈNH NGHỆ AN

2É ti" Xây dựng chiến lược kính doanh dịch vụ tài chính của Ngàn hàng Nông ng

và Thảtiển Nông thôn chỉ nhánh Nghệ An gi đoạn 201 1-2020 "đã được nhóm học viên

số 3 lớt GaMBA V0110 chương trình MBA quốc tế của Irường Đại học Griggs thực hiện trêt

00 ven dung Kiến thức được đào tạo và thực tiến hoạt động kính doanh tại Ngân hàng 1 ngiiệp tỉnh Nghệ An,

Ngan hn ching tinh thay rng dy a i có chất lượng tốt và có kha ning dp dun

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GRADUATION ASSIGNMENT

BUU TLDING UP BUSINESS STRATEGY OF FINANCIAL SERVICE OF AGRIBANK

NGHE AN WITHIN THE PERIOD OF 2011 -2020

Tran Thi Viet Anh Nguyen Kim Khanh Nguyen Thac Chinh

Vi Van Quynh

Class GAMBAO1.V0110 — Group No.8

HANOI - 2011

!.1.1 Concept of business strategy 9

1.2.1 Mission and objectives of the organization 10

1.3.2 IF matrix 18

1.3.2.1 EFE matrix (External Factor Evaluation Matrix)) 18

| 3.2.3 [FE matrix (Internal Factor Evaluation Matrix) 22

CHAPTER Il: ANALYSIS OF THE BASIS FOR BUILDING UP STRATEGY

2.1.1 History of Establishment and Development Zt

2.1.3 Mission and Vision, Core Value, Strategic objective 32

2.2 Analysis of Agribank Nghe An's business environment a0

2.2 External environment (PEST Model) 33

2.2.1.1 Political-legal factors (P) 33 2.2.1.2 Economic factors (E) 33 2.2.1.3 Cultural - Social factors (S) 34 2.2.1.4 Technical factors (1) 34

2.2.2 Analysis of sector environment (5 Forces Model of Michael Porter) 35

2.2.2.1 Competitive rivalry within an industry 35

3.3 Analysis of Agribank Nghe An's internal environment 43 2.3.1 Assessment of infrastructure and Technique 43

2.4.1 Strengths, Weaknesses, Opportunities and Threats of the organization 55

CHAPTER Il: RECOMMENDATION OF SOME STRATEGIES AND

3.1 Development orientation of Agribank Nghe An in the future 61

3.1.2.1 Development orientation from now to 2015 and vision in 2020 62 3.1.2.2 Business objectives of Agribank Nghe An in 2015 63 3.2 Selecting financial service strategy for the period of 2011-2020 64 3.2.1 Selecting general strategic options of the organization from SWOT matrix 64 3.2.1.1 Distribution channel development strategy 64

3.2.1 4Financial condition improvement strategy 65

3.2.2.1 Integrated strategy of cost leader and difference 65

|.1 Charter capital increase

.1.2 Improvement of credit-debit management

.1.3 Processing bad-debts, strengthening financial condition

.2 Human resource solution

.2.1 Changing conception of modern bank

.2.2 Improving qualification of staff

.2.3 Changing customer service styles

.2 Improving safety and stabilizing CTTT system

.3 Improving automaticity of processing system

Solution to improve management of the leaders

.{ As for the branch

2 As for the Head Office

in Competitive competency solution

củi .| Promoting system network advantage

tai .2 Diversilying traditional products and developing new products

củ .3 Improving marketing and advertisement

.6 Customer solution

.6.1 Updating customer information

3.3.6.2 Updating new customer information

6 Bank for Agriculture and Rural Development | — Agribank -

7 | Bank for Agriculture and Rural Development NHN, & PTNT

Figure 2.1: , Organizational structure of Agribank Nghé An

INTRODUCTION

1 General context and role of the research topic

Starting from the actual operation of Vietnam bank for Agriculture and Rural Development, finance showed many challenges before the competitive demands to integrate into AGRIBANK is the top commercial bank in Vietnam and in the course of the business has also built up many specific development strategies Beside the general difficulties of economic-social environment, there are many reasons that the bank governance, the management of business operations also have many problems need to be researched, and solved in order to adjust strategies and provide the solutions of safe and effective development

The scope of the study is business, the strategic management of Nghe An AGRIBANK in financial services in recent years and then proposing strategies in the next years

The selected topic called: “Building up business strategies of financial service products of Vietnam bank for Agriculture and rural development from 201 1-

2020."

2 Purpose and significance of the study

The research purpose of the topic is to apply the knowledge gained and some

experience in strategic management subject, to analyze and evaluate the current business development strategies of branches of Nghe An AGRIBANK in financial

service business On that basis to give some ideas to improve the strategic

management of the bank in the next time

3 Methodology

In building financial service business strategies of Nge An AGRIBANK, there are the data collection method as follows:

* The secondary data collection

Using The table methodology: Analyzing information for this study came from a lot of sources including annual reports of Nghe An AGRIBANK and data of Nghe An AGRIBANK, articles on magazines or newspapers, etc Besides, the study group also reviews general directions of Vietnam AGRIBANK up to 2020

The secondary data is identified by the annual statistical methods and analyzing methods of AGRIBANK:

he internal data of the bank includes:

- The financial reports

- Reports of bank business results

- The research reports of the bank + The external data of the bank includes:

- State bank information

- The public media (television, newspapers, internet)

- Website: http://www.agribank.com.vn

- Website: http://www.sbv.gov.vn

* The primary data collection

- The method of collecting opinions through group discussions

Group discussion will be conducted with groups of 4 members Each group has 2 umes of discussion within a week

- Interviewing method: The author of this topic directly interviewed some kev officials and employees as well as had direct discussion with the leaders of

Nohc An Agribank about the current situation and the development orientation in

the next years

Theoretical models such as PEST analysis, Porter, SWOT

4 The structure of the study includes three chapters:

Chapter 1: THEORETICAL BACKGROUND TO FORMING CORPORATE

CHAPTER I: THEORETICAL BACKGROUND TO FORMING

CORPORATE BUSINESS STRATEGY

1.1 Concept and role of business strategy

1.1.1 Concept of business strategy

The term of “strategy” is used firstly in military and from the 60s (XX century), it is applied in business and called “business strategy.’ However, the concept of business strategy is also developed over time and approached in many

Ways

According to the traditional approach of Alfred Chandler, a professor of Harvard University, “Strategy is the process of identifying basic long-term objectives of enterprises, selecting the way or the direction of operation and allocation of necessary resources to perform these objectives.”

According to Fred R David, the author of Concepts of Strategic Management book, “Strategy is the means to achieve long term goals.”

Although approached in any way, business strategy is a system of long-term solutions for enterprises to develop production and business And as we understand:

“Business strategy of a enterprise is a general program of actions towards the performance of enterprises” goals Thus, strategy only creates frames to guide action

thinking Business strategy is not to show specifically how to achieve these goals

because it is the task of a multitude of support programs, other functional strategies

1.1.2 Role of business strategy

- Business strategy helps bank managers realize clearly opportunities and advantages in business, make use of them to make suitable strategies, and policies to achieve the proposed objectives

- Business strategy helps managers to predict the difficulties and risks happening at present as well as in the future Then, based on their resources, it is easy for banks to actively deal with these unforeseen situations

- Business strategy helps managers to use effectively the current resources of banks and allocate them properly

- Business strategy combines the functions in a organization in the best way

on the basis of achieving common goals of the organization

1.1.3 Strategic system in business

+ Global strategy: a tool to search for the ways to penetrate globally The company will review benefits and costs of expanding operation on a global scale, on the basis of 4 different strategies, including: multidomestic strategy, international strategy, global strategy, and transnational strategy, which companies can approve

to compete on the global market

+ Identify and define clearly goals, objectives and business activities of a

company, make policies and basic plans to achieve goals of the company

+ Business unit strategy: [t is planned to identify the selection of products and specific types of the market for private business activities within the company, identity the ways each business unit tries to use to complete its goals to contribute

to the fulfillment of the company’s general goals

+ Function strategy: Identify solutions, and plans for each business field

1.2 Steps to build-up business strategy

1.2.1_ Mission and objectives of the organization

Mission is considered as statements which have long-term value of the future

10

direction of banks to differentiate this bank with other one In the process of strategie management, mission helps an organization realize long-term directions,

and since then, they can approve of the actions of individuals and departments in an organization Mission is the basis to allocate properly and use effectively banks’ resources, helping banks actively scope with internal changes as well as changes

from outside environment It is also the basis to determine long-term objectives, encourage spirit, and promote the dynamism and creativity of members in banks

Researching objectives is the first stage and the foundation to build up strategies Objectives are set out in order to show specific results that banks expect

in a certain period Objectives have to be scientific, united, and continuous Objectives need to be identified the time to fulfill and by quantitative targets

1.2.2 Analysis of external environment

All enterprises are affected by external environment factors These factors

can be divided into 5 main categories: (1) Economic environment, (2) culture,

society, geography, and demography, (3) Law, government, and politics, (4) lechnology, (5) Competitive environment

Analysis of external factors allows enterprises to identify clearly opportunities (O) which they can take advantage of and threats or challenges they have to face with

Identifying and evaluating opportunities and threats from external environment affecting enterprises will allow them to build clear business tasks, determine feasible long-term goals, make suitable strategies, and set appropriate policies in order to annual objectives

Some features need to be paid attention when analyzing external

environment:

- The influence of these factors is so big and long on enterprises, and they cannot control these environmental factors The level of impact and the impact

d rection are different for each field and enterprise

- A change of external environment is completely able to affect the elements

of the internal environment of an enterprise

- Every factor of external environment can directly impact on enterprises or

indirectly impact on them through the link of other external environmental factors

The macro economic factors in which enterprises operate or even in other countries over the world such as GDP growth, rate of inflation, and exchange rate have great influence on the selection of strategies and the ability to fulfill proposed business objectives of enterprises

/.2.2.2 Cultural-Social factors

Social-cultural environment includes the norms and values accepted widely

in a geographic area in a country or in a particular culture Generally, changes in cultural-social factor occur more slowly than other ones because it is considered as a factor influenced by outside environment factors

This factor includes opinions, guidelines, policies, current law system, and diplomatic-political tendency of government in the country or other governments A change in this factor completely can bring gold opportunities but also bring huge challenges and difficulties for the fulfillment of the proposed business objective; especially enterprises operate in the foreign trade field

Changes of state legal environment in the financial-banking field have huge effects on banking service activities although banks still expect many basic reforms For example, loosening the regulations of foreign exchange management made amount of remittances transferred through banking channels develop tremendously Stable political situation also creates a lot of favorable conditions for the operation

of banks to develop

/ 2.3.4 Technical factors

In the period of technology, technology can be considered as one of the most

dynamic factors or in other words, it is the factor which has the lowest/least stability

among external environment factors of enterprises When we build up business

12

Strategies it is a must to think of the rushing development speed of technology, and

consider it as a key tool to help enterprises perform the proposed long-term business objectives

The changes of geography, demography, culture, and society have an

important influence on most of products, services and consumption markct Migration, unemployment, proportion of old people in the population structure are the common factors when analyzing banking business environment, are very important foundations to suggest strategies such as places to open branches, install ATM machines, and be suitable to each kind of products and services

1.2.3 Analysis of internal factors

Every enterprise has its own strengths and weaknesses depending on the basic features of each enterprise The process of recognizing, and analyzing strengths and weaknesses helps strategic managers evaluate exactly the quality and quantity of human resources of an enterprise to make plans of mobilizing, distributing and using these resources in the most appropriate way for performing the proposed business objectives

/ 2.3.1 Infrastructure

Analyzing the capacity of facilities and technologies which enterprises are using in the market, whether enough to meet the demands of production and business and development strategy of enterprises in the future? Including workshops warehouses, yards, roads, means of transporting machines and

equipments

1.2.3.2 Finance

The financial factor expressed through financial indicators is considered as the method of evaluating the best competitive position of an enterprise, and the conditions, and foundations to make investment decisions of investors The financial index show the ready level and power of an enterprise’s finance for big investment projects in business strategies, on the other hand, they are signs to make present and

future competitors step back or discourage who want to penetrate business

1.2.3.3 Human Resource

Human resource is an indispensable resource in any organization The

competitiveness of human resource is reflected in factors such as: the training level, level of professional proficiency, motivation, and level of attachment to an enterprise, awareness, and working style

1.2.3.4 Marketing

Marketing is described as a process of identifying, predicting, establishing

and satisfying/meeting the demands of consumers for a product or a service It

means that all works from researching product, price, distribution channel, sales promotion, customer, competitor, and studying the company itself relate to marketing In other words, if a marketing task is well organized, it means that the company has a lot of possibilities and opportunities to perform successfully the proposed business strategies

1.2.4 Selecting strategy

The nature of analysis and selection of strategies is to establish long-term objectives, to make strategies which are able to be alternative and optional to pursue Analysis and selection are to identify processes of operation which can be secreted for enterprises to fulfill their responsibilities and goals Strategies, objectives, and current missions of enterprises adding to internal and external control information will form the foundations for the establishment and assessment

of feasibly alternative possibility

Identifying and evaluating strategies which can be optional often relating to many managers and_ staff, who collected early by duty assignment of an organization implemented external control, and internal control Representatives of each department and area of a company need to participate in this process

Based on the functions, tasks, goals and results of analyzing and evaluating business environment, banks will select appropriate strategies options There are three levels to select strategies:

14

* Company strategy:

It refers to the type of strategy to develop resources and allocate resources to

Subs: among them, banks will decide to select the type of suitable growth strategy to

external and internal environment which it is and will face with, specifically the

following strategies:

- Concentrated growth strategy

- Diversified growth strategy

- Vertical integration growth strategy (before and after)

matrix

Phase 2: Combination:

This phase will select, arrange, combine internal and external factors to find out feasible strategy for the organization; this phase will use 5 matrix tools including

SWOT SPACE BCG IE and big strategy matrix

phase 3: Decision:

After the phase of combination there will be feasible selective strategies; this phase will use one only tool which is QSPM; QSPM uses information in phase 1, evaluate objectively selective business strategy in phase 2 to decide which business strategy is the most optimal for the enterprise

IHmdUC

| un Mate of Boston - Internal and Matrix of

pened SULC LG vonsnltine external main

postiben iid QTOUD factors SUALCĐA

vi Compehlive (BCCI) evaluation

1.3.1 Participation

1.3.1.1 EFE matrix

Matrix will allow strategists to summarize and evaluate information of

economy, society, culture, geography, politics, government, law, technology and competition EFE is established according to 5 following steps:

- Step 1: make the list of factors with decisive role for the success in the sector that the enterprise is trading including opportunities and threats (5 factors

minimum )

- Step 2: evaluate the importance of each factor according to each marking ladder trom 0,0 to 1,0 (increased importance level) with total point of all factors equal to 1; this importance level is based on trading features of the enterprise

- Step 3: Marking from | to 4 for each factor with the point to show reation

level of the enterprise for this factor 4 is the good reaction; 3 1s the reaction on

average level; 2 is the evarage reaction and | is the low reaction

- Step 4: define total important point for each factor (equal to the points in step 2 and step 3)

- Step 5: Define total point of importance of the enterprise (equal to total point of step 4)

The highest total point is 4 and the lowest one is 1; average point is 2,5; the

point is high which can show that the enterprise has reacted with external factors

well: on the other hand, enterprise is maximizing opportunities and minimize influences of threats; total point is | which can show strategies that the company finds out without making use of opportunities and avoiding external threats

/.3.1.2 Competitive image matrix

This matrix will realize the main competitive opponents of enterprises together with their strengths and weaknesses This matrix is the expansion of EFE with the importance level of factors, significances of each factor and total important point with the same significance

Matrix of competitive imgae is different from EFE matrix in which there are

some important internal factors to be compared; total evaluation point of competitive opponents will be compared with selected enterprise

/.3.1.3 [FE matrix

This matrix will summarize and evaluate strengths and weaknesses of functional business divisions and it will provide basis to define and evaluate relations among such divisions; establishment of IFE also follows 5 steps for EFE matrix:

- Step |: make the list of internal factors with decisve role in analyzing internal environment including strengths and weaknessed (5 factors minimum)

- Step 2: evalutae the importance of each factor according to each marking ladder from 0,0 to 1, with total point of all factors equal to | Such importance level will base on the importance of such factors for the enterprise which does not distinguish whether this factor is the strength or weakness of the enterprise

- Step 3: marking from | to 4 for each factor with the point to show internal featuresof the enterprise for such factor; | is the biggest weakness, 2 1s the smallest weakness, 3 is the smallest strength and 4 is the biggest strength

- Step 4: define total importance point for each factor (equal to multiplied points of step 2 and step 3)

- Step 5: define total importance point of the enterprise (equal to total point

in step 4)

The highest total point is 4 and the lowest total point is 1; average level is 2.5 The importance point lower than 2,5 will show that the enterprise is weak internally, higher than 2,5 will show that the enterprise is strong internally

of controlling of the organization to harm the organization: in strategic

administration it must form strategies to make use of all opportunities and avoid or reduce threats

- (S - Strengths) and (W - Weakness): are internal factors of the organization

within controlling scope of the organization; strengths and weaknesses will be defined in the relation with competitive opponents

- ST strategy: use strengths of the enterprise to avoid or reduce threats from external environment

- WT strategy: this is the defending strategy to reduce internal weaknesses and avoid external threats; an enterprise meet external threats together with internal weakneses which cope with big risks then it must associate, merge, limit spending

or even bankruptcy

Establishment of SWOT matrix will implement the following 8 steps:

- Step |: list the main internal strengths and weaknesses of the company

- Step 2: list internal weaknesses of the company

- Step 3: list external big opportunities of the company

- Step 4: list important threats out of the company

- Step 5: combine the internal strengths with external opportunities and then note down the results of SO strategies

- Step 6: combine internal weaknesses with external opportunities then note down the results of WO strategies

- Step 7: combine internal strength with external threats and note down the

results of ST stratey

- Step 8: combine internal weaknesses with external threats then note down j the results of WT strategy

external factors: Environmental Stability (ES) and Internal Strength (IS)

SPACE matrix is constructed according to the following six steps :

- Step |: choose a group of representative variables of FS, CA, ES and IS

- Step 2: define values from | (the worst) to 6 (the best) for FS and IS, from -[ (the

best) to -6 (the worst) for ES and CA

- Stepe 3: estimate average point for FS, [S, ES and CA

- Step 4: mark the average point for each aspect

- Step 5: plus 2 points on horizontal axis and mark the results, plus 2 points on

vertical axis and then mark the results then mark the new point

-Step 6: draw vector from original point to the new point

The following figure will express SPACE matrix; in this figure, 4 arrays are used to demonstrate the estimated results which can belong to a certain strategy group

in 4 groups; in fact after estimating it will give the results of | in 4 arrays

The vector will demonstrate strategy of enterprirse: attack, defense, compete or

caution V

When the vector in attack corner: the enterprise is in the best position to

20

use internal strengths to make use of opportunities, overcome weaknesses, avoid threats: strategies to penetrate the market market development, product

development, combination backwards, combination forwards, horizontal combination can be feasible depending on concrete background of each enterprise

If the vector in cautious corner: the enterprise should operate with basic

capacity without taking risk; selected strategies are: market penetration, market development, product development and focused diversification

If the vector in defense corner: the enterprise should focus on improving weaknesses and avoiding external threats; it include: limited spending, removing,liquidation and focused diversification

If the vector in competitive corner: competitive strategies can be:

combination backwards, combination forwards, horizontal combination, market

penetration, market development, product development and joint venture c

financial situation of the whole company

Relative market share in the sector

Stars: such divisions have rather high market share and high growth rate,

suitable strategies are: combination forwards backwards, horizontal, market

penetration, market development, product development and joint venture

Cash cows: such divisions have high market share but low growth rate; it is called cash cows because such divisions can create money with positive cash flow: product development or focused diversification is suitable; however when cash cows

is Weak then strategy of spending reduction and removing is suitable

Dogs: this division has low market share and competition has low growth rate; they are weak internally and externally then suitable strategies are liquidation, removing or reducing spending

SBUs of many enterprises develop according to time from Dogs - Question marks - Stars - Cash cows - Dogs

The targets of the enterprise are trying to turn SBUs into Stars

/.3.2.4 TE matrix

IE matrix includes 9 squares like the following figure

Horizontal axis will show the total importance point of IFE from 1,0 to 4,0 according to decreased order, from the left to the right and include 3 levels

equivalent to 3 columns: strong, average, weak

Vertical axis will show total importance point of EFE matrix, from 1.0 to 4,0, according to decreased order from up to down including 3 levels equivalent to 3 rows: high, average, low

The width of rounds will show percentage of sale revenue of divisions in the enterprise

24

Total importance point of IFE

Figure 2.4: [IE matrix

IE matrix is divided into three big parts:

- Divisions in square I, II, IV are called “development and construction’ such divisions are suitable to focused strategy (market penetration, market

development, product development) or combination strategy (backwards, forwards,

horizontal

- Divisions in square II, V, VII are called “keeping and maintaining" suitable to market penetration and product development

- Divisions in square VI, VIII, LX are called "harvesting and removing

BCG and IE matrix are used for enterprises with many business divisions to

form many replaced strategies

1.3.2.5 Matrix of main strategy

This matrix includes 4 square angles and based on two factors: horizontal axis shows the competitive position of the enterprise (strong or weak) and vertical axis shows the

growth of market (quick or slow), suitable strategies are listed as follows:

Quick (market growth)

| 1 market development 1 market development

| 2 market penetration 2 market penetration

3 Product development 3 Product development

4 Horizontal combination 4 Combination forwards

2 Focused diversification Horizontal diversification

3 Horizontal diversification Associated diversification

1.3.3 Decision phase: OSPM

¬

QSPM_ uses information from 3 matrixes in phase |! (collected and

26

systemized information) and 5 matrixes in phase 2 (combination phase) then evaluate replaced trading strategies Selected strategies can be put into QSPM which

are not all strategies in phase 2

To construct QSPM we must follow 6 steps

- Step |: list S\W.O,T from EFE, IFE

- Step 2: classify each factor to be suitable to EFE, IFE

- Step 3: study matrixes in phase 2 and define replaced strategies

-Step 4: define attraction point according to each factor: from | to 4: | is not

attractive, 2 is a little attractive, 3 is rather attractive and 4 is very attractive

- Step 5: estimate total attraction point according to each row by multiplying classification point in step 3 with point of AS in step 4

- Step 6: estimate total attraction point in each strategy

The most attractive strategy is the one with the highest total point in step 6

CHAPTER II:

ANALYSIS OF THE BASIS FOR BUILDING UP STRATEGY FOR

AGRIBANK NGHE AN 2.1 Overview of Agribank Nghe An

2.1.1 History of establishment and development

The bank for Agriculture and Rural Development Nghe An is a branch of the Vietnam Bank for Agriculture and Rural Development Agribank Vietnam Trading name in English: Bank for Agriculture and Rural Development (Agribank)

Headquarters located at: No 364, Nguyen Van Cu Street, Vinh City, Nghe An

Province, Vietnam The developing process of the bank can be divided into the following stages:

* 1988-1990: The bank was established according to Decree No.53/HDBT

on March 26th of 1988 of President of Minister Council (now the Prime Minister),

with first name as Vietnam Bank for Agricultural Development On the basis of

receiving all Agribank branches, district, Chamber of agricultural credit and savings banks from the State Bank In October of 1988, Nghe Tinh Bank for Agricultural Development was established in the context of transition of provincial economy,

bad efficient production of enterprises, cooperatives, and unpaid bank debts leading

dissolution In these circumstancesm business activities of the bank for Agricultural Development Nghe Tinh also had many difficulties Many loans can not be recovered, overdue debts make up fpr 31.6% of total loans in 1990

* 199]-1996: This is the period of constructing organization and synchronization mechanisms to operate under market mechanism When the Bank Ordinance was launched, Vietnam bank for Agricultural Development was renamed the Vietnam Bank for Agriculture under the Decision No 400/HDBT by the

President of Minister Council In October of 1991, under the decision No 168/NH-

QD, Bank for Agriculture Nghe Tinh was split into Bank for Agriculture Nghe An and Bank for Agriculture Ha Tỉnh

Thus Agribank Nghe An was established on December 10 th of 1991 and has operated in Nghe An province Before the new situation, the bank has consistently implemented the principle of "borrowing for lending”, sticking close on the serving objects: "Agriculture - Rural - Farmers" according to policy of the sector Implement the goal of improving staff quality, perform the transfer of funds and disburse to farmers timely for poverty reduction Better handling of overdue debts and gradually increase their revenues from credit operations Banks carry out technological innovation, supply more computers for staff, improve facilities and actively participate in social activities However, many limitations exist, the business is simple, mainly credit operation, but credit quality remains weak, many potential risks On October 15th of 1996, Decision no 280/NHNNS-QD of the State Bank the Vietnam Bank for Agriculture renamed the Vietnam Bank for Agriculture and Rural Development basing on redetermining the bank's business tasks

* 1997- now: Bank for Agriculture and Rural Development has operated under the mechanism issued by the Law of Credit Institutions Agribank Nghe An

28

has moved strongly into the investment program of socioeconomic development - social, exploit and promote potentials and strengths of local, especially programs directed by the Government Credit is increasingly diversifying, well-served for loan requirements of the economic sectors Banks increase restructuring banking,

solve bad loans, gain the capital adequacy ratio according to international standards

In the strong development of information technology, the bank focuses on developing modern banking products in addition to improving the quality of traditional products On January Ist 2011, the State Bank of Vietnam decided to transform the Vietnam Bank for Agriculture and Rural Development into a one member limited liability company owned by the State

After 22 years of construction and development, Nghe An Bank for Agriculture and Rural Developmentare has a strong attachment to agriculture, rural areas, is the reliable companion of farmers, contributing positively to restructure agricultural economy, rural and develop the province's socio-economics Currently, Agribank Nghe An is the bank which has a top network among banks in the area, covering the whole of the difficult mountain areas such as Tuong Duong, Ky Son, Que Phong

Currently, trading in the banking sector is increasing fierce competition, with the participation of many domestic and foreign banks Especially foreign banks with large economic potential, experience in risk management In the context of new business Nghe An Bank for Agriculture and Rural Development has always strived

to keep the market, widen customer targets, improve the quality of products and

Services

2.1.2 Organizational Structure

AGRIBANK NGHE AN — BRANCH TYPE |

General Credit [Exchange Budget & Marketing| {Computer tesung | |Personnel alive planning Division Division accountin and service ing and Organizat} | Division

Agribank in districts, cities,

towns - BRANCH TYPE 3

Credit Departme

nt

Transacti

ng room

30

Figure 2.1: Organizational model of Agribank Nghe An

(Source: Agribank Nghe An)

2.1.2.1 Vertical Organizational Structure:

- [The headquarters, 21 branches of Agribank type 3, in which there are 18 district branches, the remaining branches is of towns and cities

- 44 transacting rooms of branch type 3

According to decision 1377/QD/HDQT-TCCB dated on December 24"

2007 by Board of Agribank Vietnam, Agribank Nghe An is a type | branch Agribank, the district, town, city branches, town, city are limited operating branch called type 3 branch under which there are transacting room

2.1.2.2 Horizontal Organizational Structure

9 divisions have the following duties:

- General Planning Division: directly balance the budget to ensure the

structures of maturity, currency, deposits; advise the director of business about short-term, medium-term and long-term business planning; monitor business plan targets

- Credit Division: Building strategy of credit customer, customer classification; evaluate, propose loans; classify debs and analyze overdue debts

- Budget and accounting Division: directly posting, statistical accounting and payments according to Agribank of Vietnam, building financial ratios, salary fund

of the branch

- Foreign Exchange Division: business of foreign currency, international

payment directly under the provisions, implementing services of remittances,

transfering money and opening accounts in foreign — countries

- Service and Marketing Division: Marketing to introduce products of banking service, access feedbacks from customers; Propose new products and services; implement the marketing plan, information for propaganda

- Computing Division: Aggregate, reckon up and store data; manage, maintain and repair machinery and IT equipments

- Internal Testing and Controlling Division: Implementating and control following the draft, the inspectng and controlling program; secure records, documents and information relating to inspection, inspection according to regulations

- Personnel Organization Division: Implementing regulations concerning wage insurance, labor management; implementing personnel project, proposing and storing personnel

- Administrative Division: Enforcing laws related to security and order at the agency; Concern spiritual and material life of the staff

At the branches in districts, towns and cities (a subsidiary type 3), there are Credit Department, Accounting Department and Administrative Department Depending on business conditions, the branches type 3 open transacting departments,

2.1.3 Mission, vision, core value, strategic objective

2.1.3.1 Mission - Vision

v Mission: “Agribank - Bring prosperity to our customers”

¥ Vision: Agribank Nghe An strives to become a leading commercial bank in the province, hold the decisive role in economic development of Nghe An province, especially the agricultural sector and rural areas

2.1.3.2 Core value

Y Customer orientation is the foundation of all activities.

Y The culture of Agribank: Honesty, discipline, creativity, quality and

Nghe An Agribank continucusly improves competitiveness in the new period

to continue to hold the position of a leading commercial bank in Nghe An province Strategy of brand development of Agribank will stick the motto "For the prosperity and sustainable development of customers, banks, partners and communities."

Financial services of Agribank are associated with strategic positioning:

"Comprehensive customer solution"

2.2 Analysis of Agribank Nghe An's business environment

2.2.1 External environment (PEST model)

? 2.1.1 Political and legal factors

- The society and politics is stable, national defense and security social safety and order is maintained, creating confidence among businesses within and outside the province, even foreign business comfortably invest and do business

- Nghe An is step by step becoming the type | city, directly under the Central Government, with the high rate of ecnomomic growth, creating favorable conditions for domestic banks as well as foreign banks investing into Nghe An

- The State Bank controls the operations of all the banking system, creating the legal basis for currency trading activities of joint stock commercal banks, joint venture banks and foreign bank in Nghe An

2.2.1.2 Economic factors (E)

- Nghe An's Economics has grown continuously for many years the rate of economic growth on average 2004 - 2010 reaches 13.07 % Income per capita in

2010 reaches 11.8 million dong, increase 2.5 times compared to 2005, initially

exploit effectively the potentialities, advantages of mining and processing minerals,

production of construction materials, agro forestry, hydro, .the expected economic

growth in 2011 of Nghe An is over 15%

- The economy develops with high speed, banking activities have many incentives for capital, technology, markets, strengthening enterprise management, orient business to high results

2.2.1.3 Social - Cultural factor (S)

- The human resource is young and abundant

- Social problems is interested and change positively; some unsound customs

is limited, the material and moral life of people are improved distinctly, the face of the rural areas has many innovations

- Quality of people's life is improving people, positively influence raising

capital products and credit activities, for example, household credit, personal

consumer credit, real estate credit

- The quality of banking ang financial services is more and more prolessional, satisfy the growth of the industry

2.2.1.4 Technological factors (T)

- The Application of new bank technology and trend of technological conversion in banking are increasing: internet banking, mobile banking, electronic payment

- Modernize banking technology in paying phase and basic specialist skills, electronic payment, banking acounting program, data management on the computer

2.2.1.5 Natural factors

The physical elements and infrastructure include: natural resources, environment, climate, weather, temperature, economic infrastructure As well as

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the cultural - social factors these ones effect the Bank's activities slowly and unidentifiably Eventhough Bank needs to creat solutions for using suitably and

economically the scarce resources protecting environment and developing infrastructure, in order to provide for the Bank’s business

Economics

Change of GDP

Phe rate of economicgrowth

Interest rates, inflation

Intellectual and cultural Customs and habits

Technological The discovery of new technologies

The speed of technology transfer

Government spending for R & D

The market for technology

Image 2.2: PEST analysis model

2.2.2 Analysis of sector environment (5 Forces Model of Michael Porter)

Besides the equitized state commercial banks, Nghe An Agribank has to face more than 30 direct competitors, the foreign-owned commercial banks,

rural and mountainous areas

The other commercial banks with simple operation are more active and flexible in policy mechanisms, which are the direct competitors of Agribank Nghe

An on interest rates, service costs, product quality, marketing reports, marketing, promotions,

Within the area there are most of branches of the banks then competition has happened violently But Agribank is the state's commercial bank and in term of capital network, customers then Agribank competes directly with Vietcombank,

Vietinbank, BIDV

[otal asset

Importance Impor [mpor [mpor Impor

papel ceo eet

Column (1): criteria impacts on bankin activities

Column (2): Total influence level on criteria of column (1) 1s 100%

Column (3), (5), (7), (9); it is the reaction of Vietcombank, Vietinbank, Agribank,

BIDV to the criteria According to that: 1: less reaction; 2: average reaction; 3: above average reaction; 4: good reaction

(1) Charter capital: four banks have increased available capital in each year with good reaction for available capital

(2) Distribution channel: Vietcombank reacts on average, Agribank is the long term

bank with large network and good reaction; BIDV has reacted on average level; Vietinbank reacts on average level

(3) Service quality: center of studying consumers and enterprises has declared the list of 10 commercial banks of Viet Nam which make consumers the most satisfied in 2008 based on 3 groups of budget, payment and support Out of which,

Vietcombank, BIDV Agribank Vietinbank: service quality of the banks has good

reaction

(4) Potal asset: 4 banks are trying to increase total asset of this year higher than

previous year to evaluate equal reaction

(5) The fame of brand name: Vietcombank has been selected as the best bank of Viet Nam by The Banker of England which is the interbanking payment center of above 100 domestic banks and foreign branches at Viet Nam; It is chosen as the main bank in management and serving loans, supports of the Government and many ODA projects in Viet Nam BIDV is the first bank to register brand name at American market BIDV has been the member of ABA which is the member of administration council of Association of financial institution of Pacific Ocean, Agribank has been rewarded as the lighthouse, Vietnamese golden star in 2006”, " Vietnamese golden star in 2004" However, Agribank has expanded to international market In 2006, Vietinbank has won the prize of lighthouse, golden cup for the social breakthrough and sustainable development; Vietinbank brand name - win the prize of

Vietnamese Golden Star in 2005

(6) Rate of bad debt: 4 banks are trying to reduce overdue debt rate to privatize then it

has good reaction

(7) Interest level on strategic administration: Vietcombank and BIDV care for their own strategies; Vietinbank and Agribank cares with average level

(8) Investment in personnel: Vietcombank and BIDV are the constant banks to constantly organize courses on professional tasks, serving style, interest level on personnel: personnel of Agribank is mostly elder

(9) Service diversification

Vietcombank is the first commercial bank to issue and payment with Visa, MasterCard and the biggest card payment agency in Viet Nam: Visa, American Express, MasterCard JCB Currentyly the bank has monopoly to issue card of American Express at Viet Nam which is the biggest global money transfer agency -

Money Gram in Viet Nam

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