G1 00283 XÂY DỰNG CHIẾN LƯỢC KINH DOANH NGÂN HÀNG BÁN LẺ CỦA NGÂN HÀNG TMCP ĐẦU TƯ VÀ PHÁT TRIỂN VIỆT NAM TRONG GIAI ĐOẠN 2013 - 2017

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C 1 RIC AC x` aS MBA Progtam (GaMBA)

CAPSTONE PROJECT REPORT

FORMULATING BUSINESS STRATEGIES FOR RETAIL BANKING BUSINESS OF JOINT

STOCK COMMERCIAL BANK FOR

INVESTMENT AND DEVELOPMENT

OF VIETNAM

IN THE PERIOD OF 2013 - 2017

Pham Viet Anh Nguyen Hoai An

Le Thi Bich Hanh

Nguyen Chien Thang

Class: G€MBA.MO0111

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Abs ; NGAN HANG TMCP BAU TU CỘNG HOÀ XÃ HỘI CHỦ NGHĨA VIỆT NAM

BIDV PDF Com eer Fee Version Hà Nội, ngày lê tháng 11 năm 2012

GIẦY XÁC NHẠN

Kính gửi: Trường Đại học Quốc Gia Hà Nội

Trung tâm công nghệ đào tạo và hệ thống việc làm

ETC

Thời gian qua Nhóm 5 Lớp M0111 Thạc sĩ quản trị kinh doanh quốc tê trường

Đại học Griggs liên kết với Trung tâm công nghệ đào tạo và hệ thống việc làm

Đã đến Ngân hàng TMCP Đầu tư và Phát triển Việt Nam nghiên cứu và lấy số

liệu để làm đề tài tốt nghiệp thạc sĩ quản trị kinh doanh do Trung tâm công nghệ

đào tạo và hệ thống việc làm ETC tổ chức

Ngân hàng TMCP Đầu tư và Phát triển Việt Nam xin thông báo để Quý đơn vị

được biết

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is taken from research reports and articles of organizations and individuals, is quoted and used appropriately in accordance to the academic regulations The results presented in this report are valid and have not been published in any other research

We would like to express our deepest thanks to Griggs University, ETC — Vietnam National University — Hanoi and our lecturers for giving us valuable guidance and advice Sincere thanks should also go to the staff of ETC for providing us with dedicated support during the course

Finally, the group would like to thank Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) for helping us in the process of doing this research by providing us with useful data and information, enabling us to complete this Capstone Project

Hanoi November 15", 2012

GROUP OF AUTHORS

— ———— i

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“Table 1.1 | SWOT Matrix

| “Table 13 Quantitative Strategic Planning Matrix (QSPM) | -Table2l | Account outstanding of different banks có ˆ |

— 2,2 | Mobilizing capital from IndIividuai depoSIL |

| Table 23 | Position of banks in domestic debit card |

- Table 2.4 Position of banks in international credit card J Table 25 |p Position of banks in POS | Table 2.6 Insurance exploitation of banks

Table 2.7 Remittance activities of banks |

“Table2.8 | External Factor Evaluation-EFE Matrix = ss—S

Table 2 29 Consolidated Balance Shect | Table 2 10 Income Statement for Business Divisions

Table 211 | The capital adequacy ratio(CAR) of other banks Si ư Table 212 | Internal Factor Evaluation—IFE Matrix Hy

Table 2.13 | Competitive Profile Matrix (CPM)

'Table214 | SWOT analysis

Table 3.1 Comparison of alternative strategies using QSPM - 4

—_ Strategy implementation plan for retail banking business of 'BIDVin - Table 3.2 the period of 2013-2017

LISTS OF FIGU RES

| Figure: Lk | Business strategic management process

Figure 1.2 The Five Forces Model of Michel E Porter

Figure 2.1 The organizational structure of BIDV

Figure 2.2 _ IR Vietnam's GDP growth rate from 2005-2011 - a

Figure 2.3 CPI growth of Viet nam from 2005-201 1

Figure 2.4 Total assets scale of BIDV compared to other banks

Figure 2.5 Total equity scale of the BIDV compared to other banks

‘Figure 2.6 - | Gross profit of BIDV compared with other banks s

Figure 2.7 | The distribution channel systems of branches

Figure 2.8 The ATM and POS distribution channel systems

Figure 2.9 The credit rating options (BEINorm)

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CHAPTER III: STRATEGY SELECTION AND IMPLEMENTATION SOLUTIONSTO DEVELOP RETAIL BANKINGBUSINESS OF BIDV 63 3.1 BIDVs vision, mission and strategic øoals 63

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1 The necessity of the research topic:

The focus of expansion and development of the retail sector will be the decisive factor affecting the leading role of commercial banks in the future This ts

an inevitable trend of the banking sector in Vietnam when the international! economic integration is more intensive and competitive, the utility needs of people are the increasingly diverse, and commercial banks are trying to expand their market share, access to a large amount of people who still do not know the banking products and services, Further, retai! banking services bring higher revenue and !ess risky for banks In fact, the commercial banks in Vietnam have initially focused on exploiting the retail markets through the expansion of the network activity in order

to provide banking products and services to individuals and households; promoting plications in banking technology, developing of new services, multi-utilities such

as Internet banking, home banking, mobile banking, etc

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This is considered as one of the trend in choosing the long-term growth if banks want to continue maintaining and expanding market share in the future Retail development heips banks with larger market, higher economic efficiency because products are offered in bulk to large number of customers, which generates more sales and distributes business risks

Vietnam is considered to be a market with a lot of potential retail banking development The attraction of retail banking operations has been confirmed Therefore, not only domestic commercial banks but also foreign banks are looking for ways to penetrate deeper into Vietnam market Potential business market with increasing competition force banks to have effective business strategy, and the Bank for Investment and Development of Vietnam (BIDV) is not an exception

BIDV has been known as a bank operating mainly in the field of wholesale and retail operations have accounted for only a small percentage and have-not been focused for the development BIDV takes many advantages for retail development but so far this activity has not developed commensurate with the potential and advantages

With the goal of becoming a universal bank with large scale in the region,

BIDV must diversify its business areas, maintain the strength of a wholesale bank,

the bank should also promote effective strategies for retail operations From this necessity, our team has selected the theme: “Formulating strategies for retail banking business of Joint Stock Commercial Bank for Investment and

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Development of Vietnam during the period 2013 - 2017” with the desire to apply our knowledge to contribute to the overall development of the bank

2 Research purposes:

- Systematize a theoretical basis for business strategy and effective methods to

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- Apply this theoretical basis to focus on situational analysis and capacity evaluation of the BIDV in the deployment of retail banking services

- Propose solutions and recommendations for further development of the bank's retail banking activities

3 Subject and scope of the research:

- Subject: Retail Activities at the Bank for Investment and Development of Vietnam

- Scope of research: the entire system of the Bank for Investment and Development of Vietnam

Retail banking can be considered as a strategic business unit (SBU) of BIDV because of the following reasons:

+ Retail banking department (“Department”) is an independent and fully functional department operated as both cost and profit center of the branch + BIDV has fully delegated authority and responsibility to a director of the

department who reports directly to the Management Board of BIDV

+ The Department has its own budget, marketing plan, competitors as well as manpower The contribution in terms of money of the department is clearly calculated and monitored by BIDV

BIDV implement retail banking activities since 2009 and has independent parts management and implementation of retail banking activities However, the retail banking activities are spontaneous and haven’t a clear strategy

4 Research methodology:

The data were collected and compiled from the annual reports, financial

statements, from the website of BIDV and other banks, the published information from the State Bank and other reference materials, books, magazines, specialized

teaching materials

We have consulted BIDV experts in the assessment of weight in the process of analyzing the matrix

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Our group mainly base on statistical method, method of analysis, comparison, and synthesis to conduct the research

5 Structure:

In addition to the introduction, conclusion, references, the project consists of

three phanterc:

ear ws step eee a

Chapter |: 7heoretical framework for business strategy formulation

Chapter 2: Analysis of the foundation for formulating business strategies for retail activities of Joint Stock Commercial Bank for Investment and Development of

Vietnam

Chapter 3: Strategy selection and implementation solutions to develop retail-

banking activities of BIDV in the period 2013 - 2017

Hanoi, November 15" 2012

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Andrews & University 4 ,

Whatever approach we apply in each perspective and definition, there are three common characteristics of strategy:

- Establishment of an overall course of actions to wards the long-term goals in the future;

- Key policies and measures to implement the program;

- Establishment of action sequences, ways to proceed and allocate resources to achieve the goals

1.1.2 Business strategy:

1.1.2.1 Definition of business strategy

Business strategy is business-orientation with goals in a long time period along with policy systems, measures and ways to allocate resources to achieve the objective of the business in the corresponding period of time

Thus, the business strategy of an enterprise must be goal-oriented, long-term and must be done as a deliberate process

1.1.2.2 Classification of business strategy

There are many ways to classify business strategy, which creates diversity in the methods of implementing business strategy

Classification of business strategy by levels:

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1.1.3 The roles of business strategy

Business strategy is increasingly becoming a tool to orientate the business

development with goals that are in accordance with objective conditions of the

business environment

Business strategy helps enterprises understand and take advantage of the

business opportunities from the business environment; more over, it can capture the

most profitable opportunities to achieve its goals

1.2 The process of strategy formation

In order to create a strategy, it is necessary to have a strategic mindset and

have answers to three questions: "Where are we now? Where do we need to go?

And how do we get there?” through the following steps

Figure 1.1: Business strategic management process

A Acquisitions International Cooperative Strategic Enterpreneurship

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1.2.1 Strategic vision and mission statements

Mission is a concept describing the highest purpose, the meaning of the establishment and survival of the business However, in the each period, strategy must be specified in strategic objectives appropriate to each stage

Vision means a statement about the position where the company desires It is

an outline of the company's objectives and goals in the future

1.2.2 Strategic objectives

Strategic objectives are milestones, positions that enterprises want to achieve

in each strategic phase

It can be seen that the business strategy is formed on the balance among the three elements:

- Strategic objectives(the desire of business)

- Business Environment(the external constraints of the enterprise)

- Enterprise Competencies(the internal constraints)

1.2.3 Analysis of external environment

The objective of the analyzing the external environment is to identify opportunities and challenges for enterprises, to find ways to deploy and capture opportunities from the environment, and to avoid the necessary challenges for the enterprises

ihe scope and content of the environment analysis include: analysis of the

macro environment and micro environment, also known as environmental sector

1.2.3.1 Macro environment analysis — PEST model

The analysis and synthesis of elements exist outside the enterprise affect the survival and development of enterprises Enterprises need to realize the opportunities and challenges from objective environment, they also need to adapt, and promote environmental changes The macro-environmental factors:

s* Analysis of legal and political factors (P)

Politics are political factors and circumstances in which their operations affect the enterprises These factors include: the political regime, the regime of political parties, political organizations, the motto of the Party and State's policies, socio- political atmosphere

Law is the legal system relating to business, including the State's legal, legal awareness of the judiciary, law enforcement agencies and businesses

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The impacts of political and legal environment on business activities of the enterprises are extensive, sometimes are decisive factors In general, if a country 1s stable in terms of politics with clear and consistent policies, good political atmosphere, strict law, enterprises can develop a healthy and stable business environment

** Analysis of economic factors (E)

Economic factors are the socio-economic situation and economic policy of the country where the enterprise establish and develop Macroeconomic environment

includes: socio-economic structure, leve! of economic development, the economic

regime and macro-economic policies

s* Analysis of socio — cultural factors (S)

Social factors: including the formation and changes of the social class, the population size, age structure, geographic distribution, population structure, the movement of the population, the power structure, living and working methods of the people Present situation and the volatility of these factors can affect the business operations of the enterprises

Cultural factors: including elements of philosophy, religion, language, literature and arts The impact of these factors on the business of the enterprise is mainly indirect effects and they cannot be overlooked

“* Analysis of technological factors (T)

Factors of engineering science and technology are all social phenomena directly related to the engineering science and technology factors where the enterprises establish and develop, including four factors: qualifications, forces, regimes of the State; policies and the laws of science and technology

«* Analysis of natural factors (+)

Geographical location, climate, topography, etc are very important factors that directly affect the business of the enterprise The climate changes are not predictable and sometimes become threats to businesses that produce their seasonal Services

Existing infrastructure is also considered as a part of the natural elements that has an important influence on the organization of activities, cost calculation of the

business

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1.2.3.2 Analysis of industry environment

In any industry each business is subject to competitive pressures from 5 forces

Analysis of Michel E Porter’s Five Forces Model, helps the strategists

Source: Strategic management Textbook—Griggs University

- Competitive pressure from existing competitors: The competition among firms in the same industry reveals the patterns of competition, the nature of

competition Competition relates to the elements of an industry’s characteristics,

structure of business scale in an industry, the number of firms in an industry, and the market structure of the industry

- Threat of potential competitors: a new entrant can be a business that has just been established or an enterprise that produced other products in the past, and now produce many products These businesses bring new production capacity, and also require a certain market share

- Bargaining power of buyers: Customers of enterprises could be direct and end consumers of goods When consumers require cheaper prices, better quality and better after-sales services, they put a pressure on that industry Customers could be a

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distributor or dealer The most importance is: who are the main customers with strong bargaining power that business must pay special attention to

- Bargaining power of suppliers: Suppliers of raw materials, equipments have the ability to increase prices or lower the quality of products or both I'nterprises should negotiate with suppliers to resolve and achieve the main requirements: standard, quality, ability of quantity providing; price, ability of capital, and return on capital

- Threat of substitute products and services: substitute products are products

of similar use If the profits of substitute products are high, competitive pressure (pressure on production costs and selling prices) is also high and the business is put

on the passive and defensive position If the manufacturer of substitute products rapidly develops its products, that industry will be strongly affected If consumers comfortably accept the substitutes in terms of economic as well as psychological matter, that influence is greater

In summary, analysis of the business environment Is extremely important for enterprises Business environment includes macro economic environment and industry environment The goal of this analysis is to identify opportunities and threats Based on this, managers will make rational management decisions

1.2.3.3 External factor evaluation matrix — EFE

The external factor evaluation matrix helps strategists summarize and evaluate the information of economic, social, cultural, demographic, geographic, political, governmental, legal and technological factors There are five steps to develop an EFE Matrix

- Step 1: Make a list of 10 to 20 factors of opportunities and threats that influence the success of the business in the industry as identified in the process of external environment analysis

- Step 2: Each factor will be given a weight of importance from 0.0 (not important) to 1.0 (very important) This classification shows the respective importance of each factor to the success of the business The total value of the weight for all factor’s level of importance must be 1.0

- Step 3: Assign a rating between | and 4 to each factor that decides the business success to evaluate how the current business strategy responds to that factor: 4 = the response is superior, 3 = the response is above average, 2 = the response is average and | = the response is poor These ratings are given based on

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the effectiveness of the current business strategy Thus the ratings in this step bases

on firm size, while the second step bases on the industry

- Step 4: Multiply each factor’s weight with its rating to calculate the weighted score for each factor

- Step 5: Add all weighted score of all factors to identify the total weighted score for the company

The total score of the matrix does not depend on the number of factors in the matrix, the highest score is 4 and the lowest is | If the total weighted score is 4, the business response well to opportunities and threats, if the total weighted score is 2.5, the business has average ability to response to opportunities and threats If the total weighted score is 1, the enterprise response poorly to external opportunities and threats

1.2.4 Internal environment analysis

In addition to the analysis of the external environment that helps businesses identify opportunities and threats from the external environment, strategic planners should understand the internal environment in order to have a comprehensive and overall viewpoint about the strengths and weaknesses of their organization

1.2.4.1 Analysis of resources

Resource analysis shows the resources reserves, capabilities, and available

business properties Analysis should take into account main resources such as:

1.2.4.2 Research and Development capability (R&D)

Research and development can help businesses keep the leading position in the tidustry Of vice versa, make the enterprises lay behind the leading ones Therefore, enterprises must regularly change and innovate technology, products and materials

1.2.4.3 Production capacity

Manufacturing is one of the main activities of the enterprise with the creation

of products which has strong influence on the success of the business The production of relatively high-quality products with a relatively low price will bring

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many benefits to enterprises because the products are easier to sell, and saving financial resources will create a positive attitude among employees

When analyzing the factors of production are we should pay attention to: the price and the level of material supply, inventory turnover levels, allocation of means

of production, productivity and cost of the equipments, cost and technological capabilities compared to the industry and the competitors, etc

1.2.4.4 Financial potentials

When analyzing the financial and accounting factors, managers should focus on: the ability to mobilize short-term and long-term capital; total capital of the enterprise; the flexibility of capital investment structure; utilization of financial strategies; ability to control cost reduction; effective accounting system, cost planning, financial planning and profit, etc

i.2.4.5 Marketing capability

Marketing can be described as a process of identifying, forecasting, setting and meeting the desired demands of the consumers towards products and services Marketing includes 9 basic functions (1) customer analysis; (2) buying; (3) selling; (4) products and services planning; (5) pricing; (6) distribution; (7) market research; (8) opportunity analysis; (9) social responsibility The successful implementation of the marketing function will help us to identify and assess the strengths and weaknesses of marketing activities

1.2.4.6 Internal factor evaluation matrix — IFE

This strategy formulation tool summarizes and reviews the important strengths and weaknesses of a business unit, and it also provides the basis for identifying and assessing the relationships among these units An IFE Matrix can be developed in five steps:

- Step 1: Make a list of 10 to 20 elements including the strengths and weaknesses that affect the development of the business

- Step 2: Assign a weight of importance that ranges from 0.0 (not important) and 1.0 (all- important) to each factor The weight indicates the relative importance

of that factor to being successful in the industry Regardless of whether it is an internal strength or weakness, the factor is considered the most influential to the performance of the organization must be the most important ones Total value of all weights is 1.0

- Step 3: Assign a 1-to-4 rating to each factor to indicate whether that factor represents a major weakness (rating =1), a minor weakness (rating — 2), a minor

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strength (rating = 3), or a major strength (rating = 4) Thus, this evaluation bases on the business, while the evaluation of weights in step 2 bases on the industry

- Step 4: Multiply each factor’s weight by its rating to determine a weighted score for each factor:

- Step 5: Add all the weighted scores of all factors to identify the total weighted score for the organization

Regardless of how many factors are included in an IFE Matrix, the total weighted score can range from 1.0 to 4.0 The total weighted score below 2.5 indicates that the business is weak internally The total weighted score above 2.5 characterizes that the business is strong internally

1.2.5 Formulating alternative strategies and _ selecting appropriate strategies

Strategic analysis and selection mean making subjective decisions on the basis

of objective information Strategic analysis and selection are to determine the activity options that help the company fulfill the responsibilities and objectives Strategies, objectives and mission of the company with the internal and external information will provide the basis for the formation and evaluation of feasible strategies

1.2.6 Developing an action plan and implementation solutions

The implementation of strategy should focus mainly on the following management !ssues:

- Establishing annual goals

- Establishing policies

- Allocation of resources is the center management activity in the strategy implementation process

Conflict management

Aligning structure with strategy

- Aligning compensation with strategy

Change management - managing the anti-change thoughts

Creating corporate culture supporting strategies

1.2.7 Review and adjustment

A tigid and inflexible strategy will not be suitable when the extemal of internal environment of the business changes So the strategists need to review, evaluate and adjust the strategy implementation The criteria to evaluate strategies:

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Successtul evaluation allows businesses to take advantage of internal

strengths, exploit external opportunities, realize and cope with external threats as well as overcome internal weaknesses before they become hazardous

1.2.8 SWOT Matrix

/.2.8.1 General theory of SWOT

While PEST analysis is a tool related to external factors, SWOT analysis focuses on the internal changes related to the external factors

SWOT is an extremely useful tool that helps us understand the problems or make decisions related to the organization, management as well as business activities In other words, SWOT is a framework that helps us to review the Strategies, determine the position and direction of a company, analyze business proposals or any ideas related to the interests of the business SWOT analysis is a

key to strategic development, clarifying the internal strengths of the organization;

weaknesses, opportunities as well as challenges from external environment

1.2.8.2 SWOT Matrix

SWOT Matrix is used to synthesize the research on external and internal environment of a business (or an industry) Analysis of the external environment helps to discover opportunities and threats to the business Internal environment analysis helps to identify the strengths and weaknesses of the business

On the basis of analyzing the factors in the matrix, the objectives, direction of business development and its resources, business can set up various combinations

In principle, there are four types of combinations:

- Opportunities with strengths (OS);

- Opportunities with weaknesses (OW),

- Threats with strengths (TS);

- Threats with weaknesses (TW)

To develop strategies basing on the SWOT analysis, the company should establish a SWOT inatrix (also known as TOWS iiattix) as sliowu below

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Table 1.1: SWOT Matrix _

Ress Strategies to use the Strategies to use the

- business’s internal strengths | business’s strengths to cope

3 1o take advantage of | with or avoid external

_ external opportunities threats |

Weaknesses (W) | WO Strategies WT Strategies |

Ls ase to overcome the | Strategies to overcome

> business’s weaknesses to | weaknesses of the business

3 take advantage of external | to avoid external threats

1.3 Business strategy selection

1.3.1 Generic competitive strategies

Enterprises pursuing corporate-level strategies try to achieve competitive advantage, better performance and above average return They often choose from three generic strategies: Cost-leadership, Product differentiation and Focus

1.3.1.1 Cost-leadership strategy

The goal of the cost-leadership company is to create competitive advantage

by creating products with the lowest cost

1.3.1.2 Product differentiation strategy

The goal of the company with product differentiation strategy is to achieve competitive advantage through the creation of special and unique products, satisfying customer needs in the ways that competitors cannot perform

1.3.1.3 Focus strategy

Focus strategy meets the demand of a particular market segment through geography, customer or product nature

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1.3.2 Quantitative strategic planning matrix (QSPM)

This method will choose one strategy among a wide range of options given on the basis of evaluation criteria such as business value, revenue profits, investment levels, competitive advantage, suitability with the current culture of the business, time to find the best strategy in the given strategies This method involves 5

steps:

Step 1: Select some of the most important factors (including internal and

external factors), in accordance with the characteristics of business to assess the

competitive strategies such as enterprise value, revenue, profit, risk level, investment level, competitive advantage This 1s a subjective step of the selector Step 2: Assign weights to each key external and internal factor to determine the importance of these factors on the final decision

Step 3: Determine the Attractiveness Scores (AS) for each factor The range tor AS 1s: | = not attractive, 2 = somewhat attractive, 3 = reasonably attractive, 4 = highly attractive

Step 4: Calculate the Total Attractiveness Scores by multiplying the weights

by the Attractiveness Score in each row

Step 5: Calculate the Sum Total Attractiveness Score by adding Total Attractiveness Scores in each strategy column of the QSPM The strategy with the highest Sum Total Attractiveness Score will be selected

Table 1.2: Quantitative Strategic Planning Matrix (QSPM)

Internal factors

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ANALYSIS OF STRATEGIC BUILDING FOUNDATION

FOR RETAILING ACTIVITIES OF BANK FOR INVESTMENT AND

DEVELOPMENT OF VIETNAM JSC

2.1 Introduction of BIDV

- Registered name: Bank for Investment and Development of Vietnam Jsc

- English name: Joint Stock Commercial Bank for Investment and Development of Vietnam

e The structure of charter capital of Joint Stock Commercial Bank for Investment and Development of Vietnam was approved by the Prime

Minister in decision No 278/QDD-TTg, dated March 7” 2012

Shareholder structure

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e Commercial bank activities: include financial activities such as capital raising, credit facilities payment and budget processing and other business and commercial banking activities;

se Retailing banking activities: provide and the develop products and services

of capital raising, lending and payment processing which satisfy all personal needs for financial service; develop various card options

e Investment bank activities: perform the service of an investment bank under direct or indirect methods through securities companies, trust funds, financial companies or other forms of company that BIDV has share representation or stock subscription according to the laws

e Insurance: BIDV perform insurance service under by means of establishing relevant companies or agents for other insurance companies according to the laws

History of establishment and development

- Joint Stock Commercial Bank for Investment and Development of Vietnam, formerly Bank of Construction of Vietnam, was established according to

decision No 177/TTg by the Prime Minister dated April 26" 1957 with the

primary functions of distributing and managing the capital from state budget for basic construction plans in all economic and social fields

- On September 11" 1994, the Prime Minister issued decision no 654/QD-

TTg about transferring the responsibility of state budget and credit distributing from BIDV to the Central board (belongs to Ministry of finance);

on November 18" 1994 the Governor of State Bank of Vietnam issued

decision No 293/QDB-NH9, which allowed BIDV to diversify its functions as

a commercial bank BIDV has conducted critical stages of structure reorganizing and business direction to become a multifunctional commercial bank, aiming at gaining high profit

- After 55 years of development, BIDV has become one of the biggest four commercial banks in Vietnam, organizing activities in the format of a joint stock commercial bank where the state budget controls the largest share Organizational structure

‘The current organizational structure of BIDV is displayed in the following figure:

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Figure 2,1;

| Board of Shachobiers |

izational Structure of BIDV

Supervisory Board Risk Resolution Commitee

The orther Council/Commitee

Board of Management

& Chief Accountant

Council/Commitee ALCO Commitee

— Credit Commitee

/holesales Treasury Risk Operations Finacial & Business

anking Management Accounting support

linacial Retail Banking Treasury Dept Credit Risk Payment Accting Dept Administraion

mies =

eer Credit Management Operation Center Dept Development Dept

Dept

———

Representative Brand & PR

in Myanmar Managememt Dept

Representative Premis es & Facility}

in Campuchia Re Greene eT Menagememt Ney

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Besides the representative system, BIDV has a system of member companies, professional units and partner companies Until September 30 2011, B3IDV has a network of banks including the head quarter and 118 representative office over 63 cities and provinces in the country, 379 transaction offices, 157 saving funds, 1,295 ATM stations and more than 6000 POS machines, one BIDV training institution, one information technology center, one transaction center and representative in foreign countries such as Cambodia, Myanmar, Laos and Czech Republic

2.2 Analysis of BIDV business environment

Before going into the analysis, it is necessary to mention the perspective and definition of BIDV for retailing activities Each organization has its own definition of retailing However, BIDV considers that retail banking service includes all the activities related to the products and services that BIDV offers to the individual customers or households These products and services are directly distributed through the electrical communication and information technology system

2.2.1 Analysis of macro environment influence on BIDV’s performance

* Political — Legal Factors

Political Factors

Vietnam is one the countries that is considered to have stable security, political theme and gradually improved position in the world This is an important factor in attracting the foreign direct and indirect investment and it ts also the foundation for the development in manufacturing, commerce and infrastructure Vietnam has specified policies to advocate trade liberalization, free trade and the application of market economy principle in banking industry since 2011 Also in

2007, Vietnam opened the gates for foreign banks after the country join WTO, which opens a new playground for all banks Foreign banks are able to libertize their activities in finance sector while the domestic ones are bound to continuously improve their products and services to compete in the open market

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and approved in the XIIth Congress, and then it came into effect from January 1°

2011

Besides, the Government and State Bank also issued various policies to manage and control the economy to ensure the monetary security Many policies have great impact on all the banks’ activities Examples of those are Resolution | |

of the Government regarding the major solution to control inflation, stabilize the macro economy and social security, requirement of ceiling interest rate for credit institutions; requirement of the maximum proportion for credit growth and required

reserve, etc

There are some decisions that support the development of the banking system, such as: proposal for payment with cash, requirement of salary payment through banking account, legal codes on electronic transactions, electronic signature, electronic crime, and high technology crime Those policies reduce the technological crime and serve as the framework for the expansion of electronic banking, as well as the well being of banking activities in general

Although there are many significant improvements in completing the system

of legal documents, the framework for banking activities has yet uniform and completed Most of the policies are bureaucracy heavy, trifling and incoherent, impeding the performance of commercial banks The period of 2009-2012 observes many changes monetary policies and commercial bank controlling by the Government and State Bank Within a very short period of time, the Government and State Bank continuously launched directions which changed from the finance tighten stage to control inflation and credit growth in 2009, to credit relaxation stage

to boost the economy in 2010, and then again back to finance tighten stage, restructure the economy in 2011, which lasts until the middle November 2011 and the beginning of 2012, when the economy struggles and interest rates fluctuated unpredictably The State Bank twice conducted interest modification This was considered a positive move of the State Bank when inflation tended to slow down and the economy, as well as the enterprises has to face many difficulties In a broader viewpoint, the lowering of interest rate helps loosen the finance market, which was severely compressed by the monetary policies in 2011

* Economic factors

The world economy is in an unstable stage Banking activities are very Sensitive to the unexpected occurrence in the world, from the unstable political system in Middle East, natural disaster in Japan, public debt in European countries

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to the increased public debt ceiling in the US The possibility of a second world recession has been still threatening Therefore, the global environment for the activities of finance and banking sector has to face many risks and volatilities To pursue secure operation banks should restrict development and shield itself from the negative influence of external factors Meanwhile they should also improve internal performance to reduce cost, research to avoid potential risks, advocate secure activities and carefully consider risky endeavors

Under the influence of the world economic crisis, the GDP growth of Vietnam

in the recent years falls short of expectation The GDP growth rate in 2012 Is expected to be 5.1% only This is a low growth rate in comparison with previous years and needs consideration for improvement

However, considering the long period of economic revolution, Vietnam has achieved remarkable results with average GDP growth rate of 7% a year for a decade

Figure 2.2: Vietnam’s GDP Growth rate from 2005 to 2011

GDP Growth rate (%/year)

The economy grows fast, leading to the higher living standard and the formation of

a potential market with supportive features for domestic commercial banks

However, the current weaknesses of the domestic economy, which indirectly resulted from the unstable economic and political world situation, have caused an

unsustainable growth, with the high economic growth at the expense of high inflation

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Figure 2.3: CPI Growth rate of Vietnam from 2005 to 2011

CPI Growth Rate (“%/year)

* Cultural — Social factors

Vietnam is under the influence of the Oriental culture The economy was depleted after the wars Most of the citizens were originally deprived farmers and workers who are familiar with working hard, accumulating and saving into properties such as gold or real estate Saving properties at home rather than at banks

is a conventional habit, so is using cash in transactions The statistics from Visa International reveals that the cash supply in developed countries only accounts for 10-25%, while the figure in developing countries is 75 — 90% In case of Vietnam, according to Visa chief representative Gordon Cooper, the cash is still the primary payment method, with more than 99% of personal spending conducted with this means From a more positive viewpoint, the higher number of people using cash, the more market for retailing banking service available This is particularly applicable to electronic banking market

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Vietnam is also in the middle of global exchange, when the citizens are getting access to the international culture, especially to those from developed countries such as America, European countries, Japan, Korea, etc This means people are likely to follow the spending, thinking habit and technology level of those countries The amenities and development in banking service 1s one of these model factors

The population of Vietnam is estimated to be more than 87 million people, with 22 million households This ranks Vietnam at 13" in the world and 3™ in ASEAN in terms of population The percentage of people with bank accounts is 20% The proportion of people in the working age accounts for 55% to 60% In recent years, the average income per capita keeps increasing, from USD 639 to USD 1024 per year The current level at USD 1200 has potential to increase to USD

2000 in 2015 and USD 4000 in 2020, according to Mr Ayumi Konishi, Country director of Asian Development Bank

The forecast shows that the cash free spending habit will become popular at a fast rate in the time to come (after 2012 the percentage of citizen who has access to banking service can amount to more than 25%), especially within the youngsters, office works and administrative officers

* Technology factors

The technological level in Vietnam is low Products with technology advance are mostly bought or transferred from overseas, while the quality of training in this area has yet satisfy the market demand The number of labors who can take over and master the high technology products is low, and technological transfer often requires retraining from scratch

However, Vietnamese are considered technology strong advocates, and are willing to absorb advancement in this field, especially in high tech area This behavior pattern enhances the development of technology in Vietnam

While the application of technology in banking is commonplace in the world,

it just has a fresh start in domestic banks in Vietnam Banks have enthusiastically invested into Core Banking software However, due to limit in financial capability

and knowledge, the investment from each bank is independent and inconsistent The

investment is also at the primary stages, so there is limited connection among banks and restriction in resource and information sharing The application of technology

in management has yet caught up with the growth rate The products and services assisted by high technology are still rare

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Another factor ts the limited infrastructure The national broadband of Internet

connection is unstable, slow and costly, which severely affects the quality of banking service and leads to higher risks to customers when conducting transactions with technological assistance

The technological ability of banks is inadequate, so the security and protection

in banking service is not guaranteed, causing distrust from users Hacking for personal information and account value tends to become more and more complicated and commonplace

Despite those difficulties, banks have realized the benefits of applying high technology into business management and service diversification, which brings higher level of customer satisfaction and follow modern global trends, as well as reach out to foreign market Therefore, although starting late, banks are in a fierce competition for more advanced technology, helping spread and develop technology

in banking industry

The current infrastructure and development of technology in Vietnam indicate the potential for retail banking service:

Criteria Ranking

| The rate of development in technology, 2010 86/154

2 Ranking for Digital Government application, 2010 90/192

3 Proportion of technology users 34.8% (The world average if 30.2%)

4 Application of electronic commerce

- Internet connection 98%

- Email user 75%

(Source: Report of Vietnam E-Commerce and Information Technology Agency at

the Vietnam-Japan E-Commerce Laws Conference on 24” Nov 2011) When digital commerce emerges, the number of consumers through this means also increases with the practice of online shopping (for flight ticket, digital products, fashion and cosmetics) More and more households are paying utility fees (for example, when paying for electricity fee, cable TV subscription, telephone fee, etc ) through electronic payment (such as phone or electronic banking, etc.)

* Natural factors

Vietnam is located at a special geographic area - the center of South East Asian, which is considered to be the most dynamic area of development Therefore, Wietnam has many potential to become the trading intersection of the world

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Vietnam has the signature temperature of tropical monsoon, high humidity and

continuous facing of diseases Being one of the countries bearing most severe effect

of climate change, Vietnam has to experience consequences of natural disasters such as flood, drought, extreme sun, etc According to the estimate of Ministry of Agriculture and Rural Development, the annual damage by climate change takes up 1.5% of total GDP This is a challenge for the economic development of Vietnam The infrastructure of Vietnam has been built upon heavy investment, though it

is still behind the development requirement The problem of traffic jam, electricity Shortage in manufacturing and daily life, overloaded in education and medical system, etc impede the growth of Vietnam and lead to high production cost Consequently, Vietnam becomes less competitive to other countries in the area and less attractive for foreign investment

2.2.2 Analysis of industry influence on retail activities of BIDV

2.2.2.1 Analysis of competitive pressure from current rivals

The easier it 1s for new companies to enter the market, the more intense the competition will be In finance and banking sector in general and retail banks in narticular, although the new entrants needs to satisfy rigid requirements of charter capital, management, risk management system, etc, they have great motivation to enter, considering the trend of globalization and the Government’s commitment to Open financial market

Some factors can be considered as challenges for new entranis to reiail banking Domestic banks can take advantage of these factors to shield themselves

- Customer loyalty for major brand name: brand name is utilized as a barrier for new entrants However, in retail banking, there are few domestic banks that can benefit from their brand name and maintain customer loyalty

- Fix cost and capital requirement: the investment into new technology and equipment, which serve as foundation for retail activities, calls for great amount of capital However, this is only the barrier to new domestic entrants To foreign banks with strong financial capacity, this does not necessarily make any difference

- The ability of incumbents to launch initiatives to block a newcomer’s entry: current banks may take action to avoid reduction in market share and profit due to the new entrants Domestic commercial banks do not have diversified and attractive approach to attract customers Financial capacity is another concern that challenges the price-cutting or promotion budget Domestic banks therefore have trouble catching up with their foreign counterparts

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- The restriction of law and public policy: this barrier is no longer impenertratable but loosened when globalization becomes widespread Therefore, domestic banks cannot rely on the Government protection to avoid international competition

The operation scope of BIDV is mainly on domestic market, therefore the major rivals comes from domestic banks or financial institutions The rival profile includes 5 state owned banks, | bank for policy support, 37 joint stock commercial banks, 48 representative of foreign banks, 5 joint venture banks, 5 banks that have 100% foreign investment, 17 financial companies, 13 lending institutions and nearly 1,000 trust funds The above figures reveal the formidable number of rivals to BIDV, as well as the fierce competition in the industry

In recent years, the strong growth of domestic commercial banks 1s undeniable This group of rivals is the biggest competitors to BIDV, thanks to their compact operation principles and similar target market in retail banking Examples

of those banks are ACB, Techcombank, Sacombank, MB, and Eximbank, Dong A

The advancement of these banks in a short period of time fragments the share over the market These banks create solid position and enhance their strength by maintaining professional staff members who specialized in retail practice and customer care, a flexible procedure of operation, diversified offerings From now to

2015, these banks will still remain the biggest competitor of BIDV

However, in terms of retail banking practice, each bank has its own advantage Some banks are strong at card service; others excel at capital rising while others are good at lending In order to identify the rivals, BIDV needs to understand that the most formidable competitors base their advantage of their major product offerings Some specific products from retail banking service are taken to illustrate:

Table 2.1: Account outstanding of different banks

Unit: Billion VND, %

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Although having the largest size, BIDV’s total account outstanding ranks after that of CTG (14 thousand billion lower compare to 2011) and 1s the lowest among

all the banks (BIDV and CTG do not have the lowest rate) However, from 2006

to 2011, account outstanding from retailing of BIDV grew at high rate (33.3% per year) In 2011, BIDV is the only bank among the illustrated banks to have the increasing proportion of account outstanding from retailing over total account outstanding, which reflects BIDV’s dynamic operation in this field

Table 2.2: Capital Mobilizing from individual deposit

Unit: Billion VND, %

2011 2010 Banks Total Individual Pivportion Total | Individual Proportion

deposit deposit deposit deposit

_BIDV 240.508 128,798 53.6% | 244,701 | 100,364: 41.0% |

|CIG 257214 131,303 31.0% | 2U5,919| 106,891 | 51.9% _VCB 227,017 121,587 53.6% | 204,756 98.88 48.3% | _ACB 142,218 102,498 72.1% | 106,937 89.885 84.1% EIB 53,653 35.48] 66.1% | 58,151 32,8 | 56.4% | Eve: 86,648 | 57,636 | 66.50% | 80,551; 61,806, 76.70% |

Source: State Bank, July 2012 Similar to lending to individual customers, capital raising through individual deposit at three commercial banks, namely ACB, EIB and TCB may take up to more than 65% of the bank's totai capital, whiie at other commercial bank, this proportion is about 50% From 2009 to 2011, BIDV has the highest growth in individual deposit, compared to other banks mentioned above (at 30.5%/ year) This

growth significantly contributed to the goal of expanding capital base at the bank

Table 2.3: Position of banks in domestic debit card

No of credit cards T

until 30" June 2012 TAND

Turnover sack envd

Number | Position (Billion Position

VND) BIDV 4.142.600 5 44.800 5 II VCB 6,033,700 4 85,000 l 14 _Vietinbank 10,112,000 l 47,800 4 5 Agribank 9,300,800 | 2 84,600 2 9

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The number of credit cards available domestically of BIDV is low, nearly ranking the bank at the bottom among the sample group of banks It is only above that of Techcombank, and nearly equals a half of Vietinbank and Agribank’s figure However, the turnover on each card is high, ranking at second place like Techcombank and only after VCB

Table 2.4: Position of banks in international credit card

No of intl payment —— Turnover

card until 30/06/2012 on each Bank

Turnover card Number | Position (Billion Position (Million

VND) VND) BIDV 38,871 7 606,0 6 _—_ l6 _VCB 309.507 2 2.443.I l 8

_ACB 107,311 3 1146.6 5 1] Eximbank 40,301 6 490,1 7 12 _Sacombank 68.895 4 1 283,7 3 19

Source: VISA

The number of international payment card of BIDV ranks nearly at the bottom

among the illustrated banks, at 7 over 9 banks mentioned above It only equals one

ninth of Vietinbank and VCB’s However, the average turnover is at second place, only after Techcombank

Table 2.5: Position of banks in POS

No OL Os nn Turnover through POS Average Bank S006 (2012 = turnover on

lurnover each POS

Number | Position (Billion Position (Million VND)

VND) _BIDV 6.471 3) 4ó58| 10 72

| Vietinbank 27,196 l 3.7613 z 138 _ Agribank 6,167 4 1,716.1 4 278 ACB 2,262 9 2,073.0 3 916 Sacombank 2,645 7 996.9 6 377

| Military Bank 1,319 10 187.0 iM 142 VIB 2.647 § 703.1 8 266

_Eximbank 3,671 5 | 1,490.4 5 406

Source: State bank, July 2012

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BIIDV has the number of POS ranking at the third place in the system, but the turnover is next to the last place, while the average turnover is the lowest among all the banks (only equals a half of the nearest banks’ and a tenth of the highest ranking bank) This shows that BIDV has yet taken full advantage of its POS system

Table 2.6: Insurance exploitation of banks

| - Bank Insurance Insurance Commission over

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Table 2.7: Performance in overseas remittance

Bank Turnover on

overseas remittance (Billions)

Currently employed overseas remittance channels |

cooperated with KEB, Hanabank (Korea), VID

Bank and Ta Chong Bank), German partner

(Vietinbank representative in Germany) Korean partners (Kookmin Bank, Woori Bank, Korea Exchange Bank), Malaysian (Maybank), American (Wells Fargo Bank), Russian (RusslavBank)

Agribank

Channel the overseas remittance through Switt system, quick remittance Moncy Gram channcl and other partnered channels: In America market: Bank

of New York Mellon, TN Monex In other markets:

Uniteller

— ————— — —_—- == _ Channel the overseas remittance through Swift system, quick remittance channel WU and _ other partnered channels of Maybank (Malaysia) anf The Bank of New York Mellon branch in Taiwan

ACB 0.3 Mainly through quick remittance channel WU

Dong A Bank 1.6

Dong A bank is the agent of 27 remittance

companies with head quarter in America, Australia, Germany, Canada, etc

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Complying with the commitment when joining World Trade Organization, from January IŸ' 2011 Vietnam allows foreign banks to offer services and products similar to domestic banks Therefore after 2011, there is only one common ground for both foreign and domestic banks, encouraging the fair competition between two groups

Foreign banks have huge advantage of solid establishment, strong brand name, healthy financial ability competent human resource, advanced technology and expertise in retail banking in terms of network and product development The operation of foreign bank in retail banking sector will create many challenges to domestic commercial banks in general, and to BIDV in particular This is the potential and formidable group of rivals to BIDV in the future

By June 2012, there are 5 banks with 100% foreign investment operating in Vietnam They are leading international banks such as HSBC, Standard Chartered, ANZ, Shinhan and Hong Leong They are strong competitors who operate worldwide and promise to create challenges for BIDV’s retail activities in the time

to come This is only the beginning stage It is forecast by experts that more strong banks in the world will enter Vietnam in the future Therefore, the competitive force from these entrants is huge

2.2.2.3 Analysis of competitive pressure from customers

in retail banking service, BIDV identity its target customers as individuals and households This group’s nature is diverse in terms of education level, income, age, geographic settlement, etc Each specific product of retail banking will approach a different customer group In general, these offerings aim to attract customers in big cities, who have a certain level of education and medium income onward

There are a wide variety of customers on retail banking and a huge potential to exploit, given that the income level is improving This group of customer however

is sensitive and volatile, easy to be appealed and change service supplier Customer loyalty therefore depends on customer service from servicing staff, as well as customer’s benefit in the transactions They particularly care for price, fee, credit terms, the diversity and convenience of the product, etc This is a difficulty, as well

as an opportunity for BIDV in developing retail banking The bank needs to put efforts in retaining customers On the other hand, it is able to create attractive products and services to draw customers from competitors

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2.2.2.4 Analysis of competitive force from suppliers

The biggest group of supplier to BIDV includes individuals and corporate customers who deposit their money Besides, they are also customers of the bank’s products and services In the mean time this supplier group plays an important role

in the bank’s success or failure The competition to seek and retain these suppliers is the fiercest among domestic banks State bank requires that all financial institutions

no raising capital at the rate higher than 9% per year However, in the competition

to retain these suppliers as well as attract new ones, the unhealthy competition among banks becomes prevalent, when banks try to offer negotiated interest rate or use promotion as solution to overcome barriers Consider these efforts from the banks, the supplier — the customers who deposit their money have stronger bargaining power

Besides, in order to enhance the retail banking business, BIDV also needs to partner with other suppliers such as telephone operator, ATM machine provider, payment card chip providers, system operators and Vietnam Electricity Corporation (for electricity bill payment online), game card providers, electronic purse providers, etc These partnerships are crucial for BIDV to diversify its offerings RIDV can also outsource professional and experience providers overseas to research, supply and consult on its retail products

2.2.2.5 Analysis the competitive pressure from substitutes

Despite the diversity of retail banking services, there is a pressure from substitutes for products related to capital raising and credit products

About the products related to fund or capital rasing, the depositor can choose

to invest into properties such as real estate, gold, or securities instead of saving account, which directly affects the bank’s operation However, when the formerly mentioned channels are inefficient, people tend to deposit money into saving account The threat of those substitutes therefore is minimal to the banking offerings

About the credit products, borrowers can access other source of loan such as nonprofit organizations, welfare societies such as Women associations and Veteran

associations or even trom the tree market Ihe general evaluation, however, indicates

that these substitutes have minor influence on the products that the bank offers

Most of the products and services that banks offer are similar without any outstanding feature However, It is considered that the retail banking products are limitless, depending on the advancement in technology and changes in customer’s demand The time and context decides whether a customer prefer a specific bank product When a product is no longer satisfactory, the bank will launch a new one,

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except in the case of very unique product, or product that requires extreme technology that the bank cannot pursue The flexible nature of retail products enables convenient replacement of a product when demanded, without seriously affecting the bank’s operation

2.2.2.6 Evaluation of effects from external factors — EFE Matrix

After analyzing external factors, a matrix to evaluate the reaction of BIDV’s retail banking activities to the external environment can be drawn EFE Matrix is employed to illustrate

Table 2.8: External Factor Evaluation - EFE Matrix

Weighted

No External Strategic factors Weight | Rating | Score

1 Opportunities

l Stable political and social situation 0.11 4 0.44

Legal system encourages improvement in

5 Rapid growth of technology 0.09 3 0.27

6 Advantageous geographical location 0.06 3 0.18

Il Threats

ị Increasing crime in banking industry 0.07 2 0.14

Unstable macro environment and financial

2 market 0.08 ở 0.24

Stagnant economic growth qnd cCHIZeH

3 income 0.1 3 0.3

4 Conventional habit of using cash 0.08 2 0.16

5 Settlement pattern focuses on the rural areas 0.08 2 0.16

Limited infrastructure and level of

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2.2.3 Analysis of BIDV's internal environment of BIDV

Ul Balances with the State Bank of Vietnam 6,793 7,240

Tn Current accounts, term deposits with, and loans to 38,373 57,580

| 5 | Provisions for credit losses of loans to other banks (361) (297)

| _1 | Trading securities ` 3146| 1262| ] _2 | Provisions for impairment of trading securities (117); (223):

V_ | Derivative financial intruments and other financial 19 27 _ assets ="

VI_ | Loans and advances to customers, net of allowance 318,210 288,080

| for impairment losses

| | Loans and advances to customers 325,758 293.937

2 | Provisions for credit losses (7,548) (5,857)

VII | Investment securities 51,224 31,684

| | _| Available - for - sale securities 49 949 30.642 2_ | Held - to - maturity securities 1,680 1,550

3 | Provisions for securities depreciation | (405) (508)

VIIT | Investment in associates and joint - ventures | 4.164 3,677

1 | Investment in joint - ventures 2,977 2509

2 | Investment in affiliates/associates 460 442

3_ ¡ Other long - term investment 975 975

| 4 | Provisions for impairment of long - term investment (248) (299) |

Tiêu đề	Formulating business strategies for retail banking business of Joint Stock Commercial Bank for Investment and Development of Vietnam in the period of 2013 - 2017
Tác giả	Pham Viet Anh, Nguyen Hoai An, Le Thi Bich Hanh, Nguyen Chien Thang
Trường học	Andrews University
Chuyên ngành	Master Of Business Administration
Thể loại	Capstone project
Năm xuất bản	2012
Thành phố	Hanoi

Định dạng
Số trang	85
Dung lượng	15,98 MB