Building a business strategy for Vietfund management until 2017

The thesis, therefore, digs deeply in analyzing the internal and external environment of the company to figure out the most appropriate business strategy to obtain company’s goal.. Base

TA NGOC PHUC

BUILDING A BUSINESS STRATEGY FOR

VIETFUND MANAGEMENT UNTIL 2017

MASTER PROJECT MASTER IN BUSINESS ADMINISTRATION

(PART-TIME)

Tutor’s Name :Dr NGUYEN MINH KIEU

Ho Chi Minh City (2011)

COMMITMENT

I hereby, Ta Ngoc Phuc, committed my honesty for my thesis preparation and the content was written by myself with information retrieved and obtained from reliable sources The information was re-produces from publication information and clearly indicated with no plagiarism violation

I also certify that the substance of this thesis has not already been submitted for any degree and is not currently being submitted for any other degree or qualification

Ta Ngoc Phuc Date: December 2011

to Prof Georges Wanet who instructed me Strategy

Secondly, I owe a debt acknowledgement to my boss, my mentor, Mr Tran Thanh Tan, C.E.O of Vietfund Management for inspiring me to go beyond ordinary practice, knowledge, experiences and guide me from the first phase of company strategy formulation

I would particularly like to thank my colleagues in Investment and Research division of VFM, Dragon Capital for their support related to data collection

My sincere appreciation is extended Mr Serge Bywaski, program coordinator of Vietnam-Belgium program for his precious knowledge and great support throughout my study in MBAVB4 course

Specially, my sincere thanks go to my friends for their enthusiastic support for this thesis and for their comments, reviewing, proposing corrections from the early stage

of my thesis I would like to thank all persons who contributed one way or another to this final result, thanks for their kindness, excellent support and willingness to share their experiences and knowledge about fund management

I, therefore, dedicate this work as a gift to them all

SUPERVISOR’S APPROVAL

I hereby certify that this thesis, submitted by Ms Ta Ngoc Phuc, conforms to acceptance standards and is fully adequate in scope and quality to fulfill this thesis requirements for the degree of Master of Business Administration

- -

Dr Nguyen Minh Kieu

EXECUTIVE SUMMARY

VietFund Management (VFM) is a pioneer and leader of local fund management companies in Vietnam, offering a wide range of investment products and services VFM’s products fulfill the varying needs of both private and institutional investors

domestically and abroad

Established in July, 2003 from an initial base of VND 8 billions (US$0.52m) managed by 8 staffs, nowadays the total assets under VFM’s management are about US$220 millions VFM is managing 4 investment funds (3 of them have been listed in

Ho Chi Minh Stock Exchange) and providing discretionary investment portfolio management for institutional and individual investors

The always and ultimate goal of VFM is to maintain leading position in Fund Management business in Vietnam profitably and sustainably The total asset under management (AUM) is the first and most important criterion to define the strength of a FMC and affirm its leading position (as nearly 100% income of each FMC comes from fund management fee) Hence, how VFM could increase its AUM in long term run is a strategic question that the Company has to address It’s not too difficult to define key initiatives that have to take to hit the goal, which are: (a) fund raising; (b)investment value; (c) acquisition or take over other funds

But the important thing is what should be the right strategy to execute, especially for the period 2012-2017 when overall economic conditions locally and globally are not favorable to fund industry In the context of Vietnam’s economic is still faced with difficulties in general, Vietnam stock market is in industrial recession together with the lack of legal framework… and still unable to find out strong foundation to recover, it is realized that different industry face with different challenges How to foster and perform this goal with absolute professionalism and integrity, VFM needs to be driven

by an appropriate and challenging long-term strategy with the commitment to the

sustainable development of the environment, society and economy of Vietnam In the such real currently situation of Vietnam stock market, how financial institutions, banks, securities companies, FMCs can suffer, resist or survive is still an unsolvable issue To make business viable, sustainable, unscathed under financial crisis, to adapt challenges

to the growing use of environmental, social and governance investment criteria, to capitalise on relevant trends…are major issues to financial investment companies target

In search of a stable growth, VFM may find substantial growth, even seize in some moment

The thesis, therefore, digs deeply in analyzing the internal and external environment of the company to figure out the most appropriate business strategy to obtain company’s goal

Base on key findings of the analysing secondary data, interviewing management team and key staffs of Vietfund Management as well as other prominent Financial Institutions, differentiation strategy is recommended to be suitable strategy for VFM to pursue its business goal, especially for the period 2012-2017

“If you're not faster than your competitor, you’re in a tenuous position, and if you’re only half as fast, you’re terminal.” a notable quote of George Salk indicated a successful company invest in planning strategy will help to establish a business direction and focus on specific strategies and actions will improve performance To execute this, the firm focuses on indentifying and evaluating events beyond the company’s immediate control The company should know where it is, what its competitors do, then do faster and faster in a prudent and smart way

Every one knows that their company needs a strategy to move forward But how fast you find out your right strategy and execute it will decide the winner

TABLE OF CONTENTS

COMMITMENT i

ACKNOWLEDGEMENT ii

SUPERVISOR’S APPROVAL iii

COMMENTS FROM PROFESSIONAL MENTOR iv

EXECUTIVE SUMMARY v

TABLE OF CONTENTS vii

LIST OF ABBREVIATIONS xii

LIST OF TABLES xv

Chapter 1: INTRODUCTION 1

1.1 RATIONALE OF THE STUDY 1

1.2 PROBLEM STATEMENT 2

1.3 RESEARCH METHODOLOGY 3

1.3.1 Objectives 3

1.3.2 Research questions: 4

1.3.3 Data collection method 5

1.4 SCOPE, ASSUMPTIONS AND LIMITATIONS OF THE STUDY 6

1.5 DEFINITIONS OF TERMS USED IN THE STUDY 6

1.6 FRAMEWORK OF THE STUDY 9

Chapter 2:LITERATURE REVIEW 12

2.1 STRATEGY 12

2.2 STRATEGIC MANAGEMENT 15

2.3 STRATEGY ANLYSIS TOOLS 15

2.3.1 SWOT analysis: 16

2.3.2 PEST analysis: 17

2.3.3 PORTER’S FIVE FORCES MODEL 17

2.3.4 Generic strategies to counter the five forces 18

2.3.5 PORTER’S generic strategies 20

2.4 STRATEGY FORMULATION PROCESS 23

2.4.1 Mission and vision 23

2.4.2 Environmental analysis 24

2.4.3 Strategy formulation and strategic choice: 25

2.4.4 Strategy implementation: 25

2.4.5 Evaluation and control 26

Chapter 3: EXTERNAL ENVIRONMENT ANALYSIS OF VIETFUND MANAGEMENT 27

3.1 MACRO ENVIRONMENT ANALYSIS 27

3.1.1 Political, governmental and legal factors 27

3.1.1.1 Vietnam Political outlook: 27

3.1.1.2 Government’s policies 27

3.1.1.3Legal condition towards new products development in Vietnam 28

3.1.2 Economic factors 28

3.1.2.1Overview of the global economy: 29

3.1.2.2Overview of Vietnam economy: 29

3.1.2.3Vietnam enterprises operate under crisis: 30

3.1.2.4A look into the future( period of 2011-2012 and to 2020): 31

3.1.3 Social, demographic and environmental factors 35

3.1.3.1Vietnam individual and institutional investors’ trends and habits of investment35 3.1.3.2Investment obstacles in Vietnam 36

3.1.4 Technology 37

3.2 MICRO ENVIRONMENT ANALYSIS 38

3.2.1 Industry and market overview 38

3.2.1.1Define the market: 38

3.2.1.2 Role of Vietnam fund industry, its challenges and attractiveness : 47

3.2.2 Trends 66

3.2.3 Industry competitiveness and competitors analysis 72

3.2.3.1 Barriers of entry: low 72

3.2.3.2 Threat of substitute products: low to moderate 73

3.2.3.3 Bargaining power of buyers: low to moderate 73

3.2.3.4 Bargaining power of suppliers: low 74

3.2.3.5 Competitors analysis: moderate 74

3.3 SUMMARY OF COMPANY’S OPPORTUNITIES AND THREATS 76

3.3.1 Opportunities 76

3.3.2 Threats 77

Chapter 4: INTERNAL ENVIRONMENT ANALYSIS OF VIETFUND MANAGEMENT 79

4.1 COMPANY’S PROFILE 79

4.1.1 Introduction of VFM’s Partners – Dragon Capital & Sacombank Group 79

4.1.2 Introduction of Vietfund Management: 81

4.1.3 Vision and Mission 82

4.2 ORGANIZATION STRUCTURE 82

4.2.1 Organization chart 82

4.2.2 Human resources 84

4.2.2.1 Human resource in financial industry 84

4.2.2.2 Human resource in VFM 85

4.3 BUSINESS OPERATION 85

4.3.1 Products & Services 85

4.3.1.1 Product: 86

4.3.1.2 Services 95

4.3.1.3 Product development trend: 96

4.3.1.4 Product development opportunity: 97

4.4 TARGET MARKET/ MARKET SEGMENTATION 98

4.4.1 Target market 98

4.4.1.1 Pension and open ended fund, a new track 101

4.4.1.2 Time for FMCs consolidation and close-ended fund is no longer a favor 101

4.4.2 Target customers and segmentation: 102

4.5 BUSINESS OPERATION AND PERFORMANCE 104

4.5.1 Marketing 104

4.5.2 Finance 105

4.5.3 Business Development 106

4.5.4 Investment 106

4.5.5 Trading 107

4.5.6 Research and Analyst 107

4.5.7 Back office 108

4.5.8 Risk management 108

4.6 VIETFUND MANAGEMENT STRENGTHS AND WEAKNESSES 108

4.6.1 Strength 108

4.6.2 Weakness 110

Chapter 5: DEVELOPING AND FORMULATING STRATEGY FOR VIETFUND MANAGEMENT 112

5.1 REDIFINING COMPANY’S MISSION AND VISSION 112

5.2 SWOT ANALYSIS 113

5.3 SWOT strategies 117

5.4 KEY SUCCESS FACTORS 120

5.5 VFM POSITIONING TO MARKET UNTIL 2017 121

5.6 SHORT TERM AND LONG TERM STRATEGY FORMULATION 121

5.7 STRATEGY IMPLEMENTATION 122

CONCLUSIONS AND RECOMMENDATIONS 138 APPENDIX I QUESTIONAIRE (ENGLISH VERSION) I APPENDIX II – COMMON TERMS AND DEFINITIONS VII APPENDIX III - GOVERNMENT BODIES XI APPENDIX IV- WEBSITE FOR VIETNAM STOCK MARKET XII

LIST OF ABBREVIATIONS

OTC

Over The Counter or Off-exchange trading (to trade financial instruments as stocks, bonds, commodities…)

F/X market Foreign Exchange market

LIST OF FIGURES

Figure 1.1 Framework of the study 10

Figure 1.2 Framework of the study 10

Figure 2.1 Framework for strategic management 15

Figure 2.2 SWOT Analysis Framework 16

Figure 2.3 Diagram of Porter’s 5 Forces 19

Figure 2.4 The strategic planning process 23

Figure 2.5 Mission and vision 24

Figure 2.6 Strategy Formulation 25

Figure 3.1 Vietnam nominal GDP from 1993-2009, Source HSBC 32

Figure 3.2 Vietnam GDP per capita vs Developing Asia (USD) from 2000-2009 33

Figure 3.3 Investment obstacles in Vietnam 37

Figure 3.4 The Ho Chi Minh Index from 2000 – Jan 2010 40

Figure 3.5 Emerging and frontier markets comparison 40

Figure 3.6 VN Index and trading volume 41

Figure 3.7 Market performance from 2005 – 2011 with special events 41

Figure 3.8 Market share of listed funds managed by Vietfund Management in Vietnam on both Hose and Hnx 44

Figure 3.9 Total trading volume of VNI vs total trading volume of all public funds 47

Figure 3.10 Listed stocks, bonds and fund certificates from 2007-2010, Hose 50

Figure 3.11 Nominal GDP per capita 50

Figure 3.12 The NAV discount, Vietnam vs other countries from Feb 2010 to Sep 2011 52

Figure 3.13 Percentage of investors react with fund during glooming time 57

Figure 3.14 Trading Price, Discount vs NAV 58

Figure 3.15 Large market and historical high discounts to NAV, Vietnam-India and China 59

Figure 3.17 Market dominated by financial institutions 68

Figure 3.18 Vietnam GDP vs other Asia countries 69

Figure 3.19 Fees incurred by Stock and Bond Mutual fund declined since 1990 71

Figure 4.1 VFM Company organization chart 83

Figure 4.2 VFM Product and Services 86

Figure 4.3 VFMVF1 on Bloomberg news 87

Figure 4.4 VFMV1, NAV performance 89

Figure 4.5 VFMVF2, NAV Performance 90

Figure 4.6 VFMVF4, NAV Performance 92

Figure 4.7 VFMVFA, NAV Performance 94

Figure 4.8 VFM, Discretionary portfolio management service 95

Figure 4.9 VFM is on going stable growth (2003-2011) 96

Figure 4.10 Vietnam Social Security Fund payment 99

Figure 4.11 Total saving on GDP in Vietnam 100

Figure 4.12 Vietnam Gold Reserve 100

Figure 4.13 Vietnam Population Pyramid 100

Figure 4.14 Vietnam & Foreigner investor volume in 2007 vs 2010, 2011 of VFx 102

Figure 4.15 VFx, Investor regional segmentation in 2007 and 2010 103

Figure 4.16 VFx, Investors analyzing in 2007 and 2010 103

Figure 4.17, Fund certificate own percentage in 2007 and 2010 103

Figure 5.1 Japan market share in 1990-2010 127

Figure 5.2 Internet penetration in selected Asian countries 134

Figure 5.3 Internet use growth 200—2010 in selected Asian countries 134

LIST OF TABLES

Table 2.1Porter’s Generic Strategies 20

Table 3.1 Vietnam’s P/E ratio and others ratio comparison with other countries 30

Table 3.2 VnExpress survey on investors’ investment channel 36

Table 3.3 Vietnam Stock market and its figure 39

Table 3.4 Vietnam funds’ milestone 43

Table 3.5 Total of local FMCs and local funds in operation 43

Table 3.6 Information related to Vietnam Investment fund certificate listed 44

Table 3.7 Total number of local funds in operation and initial raised capital 45

Table 3.8 Discount rate in Vietnam, updated at August 2010 53

Table 3.9 NAV of Vinacapital at November 2011, according to Vinacapital source 56

Table 3.10 Current listing scale 67

Table 3.11 The market capitalization value (VND trillion) 68

Table 3.12 List of upcoming listings and IPOs 70

Table 4.1 Personnel status at securities companies in general 84

Table 4.2 Vietnamese funds, top 10 most liquid one 88

Table 4.3 VF1, Movement in NAV at 31June 2011 88

Table 4.4 VFMVF4, Movement in NAV 91

Table 4.5 VFMVFA, Movement in NAV 94

Table 4.6 Vietfund Management Financial Performance from 2003-1011 105

Table 5.1 SWOT analysis 113

Table 5.2 Industry statistics from 1998-2007 125

Table 5.3 VFM’s AUM projection 2012-2015 127

Table 5.4 Result of NAV before and after buy back plan in 2010 128

Chapter 1: INTRODUCTION

“ It takes 20 years to build a reputation and five minutes to ruin it If you think about that, you’ll do things differently” A famous saying of Warren Buffet has pointed out how important for a company to build up the right business strategy, how do it implement monitor and adjust, how necessary do we need to evaluate and control it…As

if the company does not take enough consideration and prudence on this matter, it will lose and lack direction and be unable to obtain targets Those what the company built up might be destroyed in a short time

1.1 RATIONALE OF THE STUDY

Profitability is the only reliable measure of the economic value of a company How to generate more profit, to preserve the asset, the arduous value obtained during the last 8 years and uphold the growth, VFM must engage in strategic planning that clearly defines objectives and assesses both the internal and external situation to formulate the ]strategy appropriately, implement it effectively and professionally then evaluate the progress, and make adjustments as basic necessities to stay on track

In the context of severe, unprecedented financial instability, survival and maintain the operation of the company, seems to be unachievable mission of FMCs in Vietnam According to Dau tu chung khoan, 6 August 2011, “… some close-ended funds will end up their fund term after 5-7 years operation The prospect of Vietnam stock market is still grey and uncertain, Vietnam domestic investment funds with NAV’s discounted unable to raise any other new fund Hence, the current funds will be terminated, new fund can not be established, domestic fund industry is predicted to be vanished soon…”

Vietnam fund management industry is considered as one of the most important sectors of the economy, to lever effect the development of many others economic industry However, the state of the fund management industry in Vietnam has not been

identified its value properly, lack of attention and has never been received favourable from government authorities Developing the Vietnam fund industry in general calls for more concerns of active well-performed knowledgeable authorities to construct a long term strategy operating in a stable healthy stock market

Investment managers that enjoy long-term success are increasingly differentiated from those that struggle to survive or even collapse by the strength of their marketing efforts: a solid marketing, sales and client relations team able to execute a well-constructed strategic plan

To prepare ahead for rapid change in the Vietnam financial market, to keep tract with the new trends of many other fund industries in emerging markets, developing markets, to continue the pioneering FMC in Vietnam, VFM not only build a developing strategy but also need a comprehensive insight on external, internal issues reciprocal impact to VFM’s business, thence each heading will be more prudent, smart, strategic, professional and effectively

Rudyard Kipling (English, short-story writer, poet, and novelist Nobel Prize), told his countrymen, “If you can keep your wits about you while all others are losing theirs, and blaming you The world will be yours and everything in it” It is obviously that if a company can survive during crisis period while others are in flopping status or fail, that company will have it all

1.2 PROBLEM STATEMENT

“To be or not to be that is the question; Whether ‘tis nobler in the mind to suffer” A notable quote of Hamlet act three, scene one, William Shakespeare, 1600 AD, is consider as a strategic question for FMCs during this period

Following the global financial crisis, 2011 is such a glooming year to all enterprises, especially to the financial institutions, local and foreign investment funds operating in the fluctuation of micro economic and the significant decrease of the capital market The investment management industry, especially the investment fund is intensively competitive crowded with firms offering comparable investment

capabilities, philosophies and expertise Building a wise, insight, detailed business strategy is a key driver of long term success in the market

Success hurdles are included in all plans, which can be measured against a range

of factors including payback period and net present value To accommodate the unpredictable markets, business strategy must be directional not precise; dynamic not static Business strategy serves as a map, with built-in flexibility for continuous recalibration The downtrend of the stock market had a strong impact on the operation

of FMCs in general and on the business that VFM is running in particular, specifically in:

‣ Net asset value of all the funds managed by VFM were extremely discounted against the trading price in comparison to 2010

‣ All investors neglected in investing in stock markets, neither listed stocks nor OTC stocks were lacked of investors’ interest Fund certificates are ignored much more and being traded less and its liquidation has dropped considerably

‣ The design and developing of new products met difficulties arising from the obstacles related to the legal framework and the favorable market conditions

If the above problems can not be solved, VFM might have difficulties in the fierce competition among other strong competitors and the leading position seems tough to control

The thesis will go overall and deep analyze the external environment including macro and micro factors in which VFM is in to figure out the opportunities and threats, then applying Michael Porter’s five forces model to have a closer approach to the company’s strengths and weaknesses and summarizes in the SWOT analysis Based on theses findings and trials, the most suitable and appropriate strategy will be chosen

1.3 RESEARCH METHODOLOGY

1.3.1 Objectives

The research objective is a precise statement of what information is needed It consists

of an identified application, the research question(s), the hypotheses, and the scope (or

boundaries) of the research(Aaker et al 2001) The purpose of this thesis is clearly established How to develop a business strategy for the company to pursue a long term success in the market This objective can be achieved by the following specific objectives:

‣ To understand clearly and deeply the external and internal environment of the company

‣ To understand clearly the actual state of the fund industry and the market trend

‣ To overall analyze the Vietnam fund industry and FMCs’ operation, including opportunities, challenges, obstacles and attractiveness

‣ To analyze the current status of the company and what the company would like to be under the severe condition

‣ Finally for the thesis is to determine and choose the strategic direction for the development

1.3.2 Research questions:

According to Zikmund (1997), research questions involve the research translation of

“problem” into the need for inquiry The research problem defined above leads to the following research questions Research questions are statements describing exactly what the research report should answer The research questions of this thesis are as followings:

‣ What are the external and internal factors affecting VFM’s business? (answered in chapter 3 and 4)

‣ What are challenges and difficulties of the Vietnam stock market in general and Vietnam fund industry in particular ? (answered in chapter 3)

‣ What is the status quo of the Vietnam fund industry and FMCs? (answered in chapter 3 and 4)

‣ What are the big issues of VFM in terms of business management and orientation? (answered in chapter 3 and 4)

‣ How to build up an appropriate business strategy for VFM until 2017? What kind of strategy should VFM develop for business growth? ? (answered in chapter 5 and 6)

1.3.3 Data collection method

This research uses weekly stock market data between 2002- 2009 from DataStream and emerging market fund data from Emerging Portfolio Fund Research Inc (EPFR)

‣ Theoretical Data – Secondary Data

The theoretical data is mainly derived from books and articles, from which we have collected the information constituting the theoretical framework for the master thesis This is the already developed information on the topic and the theoretical framework is

a result of our extensive research on corporate environmental strategy and other topics closely related to We found it necessary to look into these topics as well, due to their connection and co-dependencies, but we have remained at the core, that is corporate environmental strategy The surrounding topics have increased our knowledge base and given us a good understanding of the complexity businesses have to deal with today The theoretical knowledge has also been of importance in the creation of questions for the interviews We wanted to make sure that we would ask the “right” questions, but also be able to understand, interpret and analyze the information , according to Kvale, (1997)

Secondary data collection is conducted by retrieving from VFM performance data, VFM’s portal, and all information on fund industry, VFM’s competitors related to the study Vietnam financial articles, newspapers, magazines, internet websites, other information from reliable resources… were also utilized and examined to provide a deeper comprehension of how the market goes, what competitors do… Foreign reports, special reports, annual updated, fact books, statistical research and survey provide a broad overview of the investment landscape about global stock market performance, development in general

Primary data is collected mostly through in-depth interview with company’s executive managers, professional analysts, outsiders’ executive directors from big

financial institutions and do the questionnaire survey The questionnaire is designed to find out the information related to the market trend, investors’ behavior, product…This qualitative method is applied to find out the honesty as well as the quality of the study The insight and interesting inputs of VFM Board of Director, analysts… has contributed

to the success of this thesis

1.4 SCOPE, ASSUMPTIONS AND LIMITATIONS OF THE STUDY

Vietnam stock market in general is still young and not mature in comparison with others

in regional and the size and scale of Vietnam fund industry is not worth considering in particular The collection and gathering information related for this study is quite hard and limited The amount of FMCs is also small in size and insignificant, so that data are not shown on the surveys and reports of many big and prestige financial institutions There is limited information about competitors such as profits, market shares, strengths, weakness…

The study applied strategic management theories and its literature review of PEST framework, Porter’s five forces models, SWOT framework in order to achieve the objectives of the study

1.5 DEFINITIONS OF TERMS USED IN THE STUDY

Specialized terms used in this study include AUM, investment fund, close ended fund, open ended fund, Fund management company, financial management

What is a securities investment fund?

A securities investment fund is a fund that invests in the assets listed in the following: (1) securities as defined in Article 2.1 of Decree 48; (2) stocks and bonds issued by unlisted companies; (3) government bonds, convertible bonds, bonds with warrants, depository receipts; (4) money market instruments such as commercial papers and negotiable certificates of deposit; and (5) others debts by the State Securities Commission (SSC)

In general, investment fund is the pool of money contributed by a range of investors who may be individuals or companies or other organizations, which is

managed and invested as a whole, on behalf of those investors This investment fund is professionally managed by the fund management company and closely monitored by the regulators

What is a Fund Management company?

Fund management company is a type of the financial intermediary institution, dedicated to establish and manage investment funds, serve the need of medium and long term investment of investors In Vietnam, FMC is licensed and monitored by SSC Financial management is concerned with all areas of management which involve finance – not only the sources and uses of finance in the enterprise, but also the financial implications of investment, production, marketing or personnel decisions and the total performance of the enterprise (Meredith, 1986) Financial management is concerned with raising the funds needed to finance the enterprise’s assets and activities, the allocation of these scarce funds between competing uses, and ensuring that the funds are used effectively and efficiently in achieving the enterprise’s goals (McMahon, Holmes, Hutchinson and Forsaith, 1993) However, financial management,

in this study, is limited to a framework of five specific areas: (1) accounting information system (2) financial reporting and analysis, (3) working capital management, (4) fixed asset management, and (5) capital structure management This limitation is necessary and appropriate to financial management practices of SMEs in Vietnam, given information available for research

Assets under management or AUM is a type of financial service which is used

to estimate and approximate the money involved in an investment Most of the financial services establishments utilize this technique to measure their success rate Financial establishments normally use this assets under management service to judge their the amount of money they are managing through investment management, money management and mutual funds Financial companies compare their success rate with other financial establishments and while doing this they use assets under management instead of revenue

Assets under management (AUM) is a financial term used by those within the financial services industry such as mutual funds, hedge funds, private equity funds, money management, investment management, wealth management, and private banking businesses as a measurement of how much money they are managing It is sometimes used as a yardstick for success and for comparison of companies within an industry Asset under management balances consist of market performance gains/(losses), foreign exchanges movements, net new assets (NNA) inflow/(outflow), and structural effects of the company, such as acquisitions

Investors may also interested in the NNA (sometimes called net new money or NNM), which indicates how much client money has been newly invested Client assets are transactional assets, which are used as collateral for specific transactions, e.g margin accounts It is common to calculate the key figure NNA growth, which shows the NNA in relation of the previous AUM balance on an annualized basis NNA growth can also be referred to as organic growth

What Is a Close-Ended Fund?

According to 2011 Investment company fact book, A close-end fund is a type of investment company whose shares are listed on a stock exchange or traded in the over-the-counter market The assets of a close-ended fund are professionally managed in accordance with the fund’s investment objectives and policies, and may be invested in stocks, bonds, and other securities The market price of close-ended fund shares fluctuates like that of other publicly traded securities and is determined by supply and demand in the marketplace

Close-ended funds offer a fixed number of shares to investors during an initial public offering Close-ended funds also may make subsequent public offerings of shares

in order to raise additional capital Once issued, the shares of a close-ended fund are not typically purchased or redeemed directly by the fund Rather, they are bought and sold

by investors in the open market

Because a close-ended fund does not need to maintain cash reserves or sell securities to meet redemptions, the fund has the flexibility to invest in less liquid portfolio securities For example, a close-ended fund may invest in securities of very small companies, municipal bonds that are not widely traded, or securities traded in countries that do not have fully developed securities markets Close-ended funds also have flexibility to borrow against their assets, allowing them to use leverage as part of their investment strategy

Close-Ended Fund Pricing

Many close-ended funds calculate the value of their portfolios every business day, while others calculate their portfolio values weekly or on some other basis The net asset value (NAV ) of a close-ended fund is calculated by subtracting the fund’s liabilities (e.g., fund expenses) from the current market value of its assets and dividing

by the total number of shares outstanding The NAV changes as the total value of the underlying portfolio securities rises or falls

Because a close-ended fund’s shares trade in the stock market based on investor demand, the fund may trade at a price higher or lower than its NAV For example, a close-ended fund in great demand may trade at a share price higher than its NAV In this case, the fund’s shares are said to be selling at a “premium” to the NAV Conversely, a closed-end fund trading at a share price lower than its NAV is said to be selling at a “discount”

1.6 FRAMEWORK OF THE STUDY

The study is conducted based on the strategy formulation process Firstly, the external environment is analyzed to figure out opportunities and threats Then every aspect of the internal environment is scanned and audited to identify factors related to strengths and weaknesses of the company Finally, an appropriate business strategy is formulated Detailed recommendation for the implementation of the business strategy and evaluation after that Figure 1.2 illustrates the structure of the study framework Strategic planning process is shown by the following diagram:

Figure 1.1 Framework of the study

Or, strategic management process has three main components, shown in the figure 1.2 below:

Figure 1.2 Framework of the study

The study is organized as follows:

Chapter 1 – Introduction

This chapter introduces about the rationale of the study, problem statement, objectives

of the study, research methodology, definitions of terms used in the study, how the study

is carried out and what is the scope and limitations

Chapter 2 – Literature review

This chapter briefly presents the theories and models that will be used in the study, including theory of strategy management, strategy components, strategy hierarchy,

strategy planning process with external and internal analysis, strategy in action and choice The study also uses the theory of PEST framework, Porter’s five forces model and SWOT framework so as to achieve the objective of the study

Chapter 3 – External analysis

In this chapter, external environment including the macro and micro factor are

analyzed to simplify figure out what is the potential opportunities or threats to the company business The context analysis is made deeply into factors related to economic, political, social, industry, global trend…

Chapter 4 – Internal analysis

This chapter will show an overview about the company and its performance, then come

to analyze the internal environment of the company to indentify the strengths and weaknesses

Chapter 5 – Strategy formulation

Based on the current situation analysis mentioned in Chapter 3 and Chapter 4, business strategy will be recommended, examined and evaluated Objectives and strategy can not be reached without specific actions and implementations

Chapter 6 – Conclusions and recommendations

This chapter concludes the study and provides detailed recommendation for the

implementation of the business strategy

Chapter 2: LITERATURE REVIEW

It is said by Sun Tzu’s the Art of War that “People should not be unfamiliar with strategy, those who understand it will survive, those who do not understand it will perish” If the company does not understand and evaluate the strategy properly, it can not survive The main objective of the study is to develop a business strategy for Vietfund Management For that reason, the thesis will review the background theories related the strategy formulation process In particular, this chapter will review the definition of strategy, different levels of strategies and what analysis tools and models could be used It also presents an overview of some generic strategies that could be used

2.1 STRATEGY

The word “strategy” derives from the Greek word stratēgia generalship, from stratēgos

comes from two words: “stratos” meaning army and “ago” which is the ancient Greek

for leading/guiding/moving Strategy is the mean by which objectives are consciously

and systematically pursued and obtained over time It is the Art of the “Conscious Mind”; the Art of the General in the battlefield; therefore, it is: “A style of thinking; a conscious and deliberate process; an intensive implementation system; the art of ensuring future success”

Source http://www.easy-strategy.com/strategy-definition.html, Internet center for Easy Strategy

Johnson and Scholes (1999), Exploring Corporate Strategy, fifth edition, Prentice Hall Europe Defined strategy as follows: “Strategy is the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations”

In BNET Business Dictionary, strategy is also defined as: ‘…the process of conducting research on the business environment within which an organization operates and on the organization itself, in order to formulate strategy”

According to Dr David Ward, European School of Economics, White (2004) revisits the work of Mintzberg et al and builds a list of 14 types of strategy, these being:

• Strategy as design: for this school the aim of a strategy is “to fit organizational capability with environmental opportunity” (White, 2004) This is linked with the SWOT

approach and the case studies approach pioneered by the Harvard Business School The strategy that provides the best fit or best organizational design is chosen This was a dominant school until the early 70s

• Strategy as planning: here the aim of a strategy is “to plan” so as “to best allocateresources to achieve the chosen goals within a specific timeframe” This was a dominant school until mid 1970

• Strategy as positioning: strategy here has the purpose of finding the appropriate sector or industry to be in, finding the best market segments and focusing on the value-adding activities This was a dominant school through the 1980s and is the P5F approach

• Strategy as entrepreneurship: strategy is seen as an outcome of the leader, in this case the strategist, has the responsibility to control and inspire a vision throughout his company He or she usually works by intuition and imagination, thus giving strategy a more implicit and emergent character This school has always been present in the strategic management discipline and cycles continuously between dormant and favor modes

• Strategy as the reflection of an organizational culture or social web: strategy is seen

as a social process and is shaped by the nature and the culture of an organization This school was first introduced in 1960 to challenge the pure economist view of business It was further promoted in 1980 thanks to the Japanese Recent emphasis on Corporate

Social Responsibility (CSR) has taken this school of thought to a higher podium position

• Strategy as a political process: strategy is shaped by who holds the power Managing

the power means to have control of the strategy Strategy is the outcome of the negotiation of different interests among the stakeholders, through networking and forming alliances

• Strategy as a learning process: strategy emerges from a process of discovery andlearning Anyone inside the company can be the strategist, suggestions and new inputs are collected from any source in the organization and they go towards forming the overall strategy Formulation and implementation are not distinct

• Strategy as an episodic or transformative process: strategy is (only) developed when

a particular situation requires it This school can bring together all the other approaches

to fit them into the specific company situation Strategy is seen to deal with these

transformational situations in the ‘right’ way This school is strongly conditioned by

economic cycles (Kondratiev, 2005)

• Strategy as an expression of cognitive psychology: this school analyses how strategy

is formed in the strategist’s mind from a psychological point of view It takes into

account the single interpretation of the world by different individuals thus generating (inevitably) different strategic approaches This strategy is considered in all the other schools as well

• Strategy as consisting in rhetoric or a language game: thisschool studies the way

strategy is talked about by the people in the organization It works with the language

required to think strategically or to promote a particular strategy This is considered in all the other schools as well

• Strategy as reactive adaptation to environmental circumstances: strategy is shaped by the reaction to the environment Following this current of thought, adaptation is the key

to success There is a part of this in all the theories

• Strategy as an expression of ethics or as moral philosophy: Strategy here is a natural

extension of the strategist values and aims to satisfy the stakeholders goals It is about behaving ethically and providing a good reputation for the company (CSR ref.)

• Strategy as the systematic application of rationality: strategy is applied rationality to the organization of a business As a consequence urge and intuition are not admitted

• Strategy as the use of simple rules: strategy here derives from practice and

experience and is the application of a certain set of simple rules These rules come from repeated situations or problems in a particular industry or setting that allows the strategist to create a recurrent schema This school is useful in industries where the situation is highly variable and there is not enough time to go through the entire formal strategic process

2.2 STRATEGIC MANAGEMENT

According to Chandler, Strategy and Structure, Page 11 ‘Strategic decisions are

concerned with the long-term health of the enterprise Tactical decisions deal more with the day-to-day activities necessary for efficient and smooth operations’ The below figure 2.1 demonstrate the framework for strategic management

Figure 2.1 Framework for strategic management

2.3 STRATEGY ANLYSIS TOOLS

2.3.1 SWOT analysis:

A useful summary technique for summarizing the key issues arising from an assessment

of a businesses “internal” position and “external” environmental influences A scan of the internal and external environment is an important part of the strategic planning process Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T) Such an analysis of the strategic environment is referred to as a SWOT analysis

The SWOT analysis provides information that is helpful in matching the firm’s resources and capabilities to the competitive environment in which it operates As such,

it is instrumental in strategy formulation and selection The following diagram in figure 2.2 shows how a SWOT analysis fits into an environmental scan:

Figure 2.2 SWOT Analysis Framework

Environmental Scan / \

Internal Analysis External Analysis

• Threats

Changes in the external environmental also may present threats to the firm

The SWOT Matrix:

• S-O strategies pursue opportunities that are a good fit to the company’s strengths

• W-O strategies overcome weaknesses to pursue opportunities

• S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats

• W-T strategies establish a defensive plan to prevent the firm’s weaknesses from making it highly susceptible to external threats

Source: http://www.quickmba.com/strategy/SWOT, (1999-2000) Internet Center for Management and Business Administration, Inc

2.3.2 PEST analysis:

A technique for understanding the “environment” in which a business operates, a scan

of the external macro-environment in which the firm operates can be expressed in terms

of the following factors:

‣ Political: these include government regulations such as employment laws, environment regulations, tax policy…Other factors are trade restrictions and political stability

‣ Economic: these include economic growth, interest rates, inflation and currency exchange rates These factors affect the cost of capital of the company

‣ Social: these factors have impact on the investors’ demand and the potential market size Social factors include population growth, attitudes to saving, investment’s attitudes…

‣ Technological: these factors influence barriers to entry, technology change and the need

The acronym PEST (or sometimes rearranged as “STEP”) is used to describe a framework for the analysis of these macro environmental factors

2.3.3 PORTER’S FIVE FORCES MODEL

A technique for identifying the forces which affect the level of competition in an industry The model of pure competition implies that risk-adjusted rates of return should

be constant across firms and industries However, numerous economic studies have affirmed that different industries can sustain different levels of profitability; part of this difference is explained by industry structure

Michael Porter provided a framework that models an industry as being influenced by five forces The strategic business manager seeking to develop an edge over rival firms can use this model to better understand the industry context in which the firm operates

2.3.4 Generic strategies to counter the five forces

Strategies exist at several levels in any organization – ranging from the overall business (or group of businesses) through to individuals working in it

Corporate Strategy – is concerned with the overall purpose and scope of the business to

meet stakeholder expectations This is a crucial level since it is heavily influenced by investors in the business and acts to guide strategic decision-making throughout the business Corporate strategy is often stated explicitly in a “mission statement”

Business Unit Strategy – is concerned more with how a business competes successfully

in a particular market It concerns strategic decisions about choice of products, meeting needs of customers, gaining advantage over competitors, exploiting or creating new opportunities etc

Operational Strategy – is concerned with how each part of the business is organized to

deliver the corporate and business-unit level strategic direction Operational strategy therefore focuses on issues of resources, processes, people etc

Figure 2.3 Diagram of Porter’s 5 Forces

Source: http://www.quickmba.com/strategy/porter.shtml- (1999-2000) Internet Center for Management and Business Administration, Inc

2.3.5 PORTER’S generic strategies

The business unit level is the primary context of industry rivalry Michael Porter

identified three generic strategies (cost leadership, differentiation, and focus) that can

be implemented at the business unit level to create a competitive advantage The proper generic strategy will position the firm to leverage its strengths and defend against the adverse effects of the five forces

If the primary determinant of a firm’s profitability is the attractiveness of the industry in which it operates, an important secondary determinant is its position within that industry Even though an industry may have below-average profitability, a firm that

is optimally positioned can generate superior returns

A firm positions itself by leveraging its strengths Michael Porter has argued that

a firm’s strengths ultimately fall into one of two headings: cost advantage and differentiation By applying these strengths in either a broad or narrow scope, three

generic strategies result: cost leadership, differentiation, and focus These strategies are

applied at the business unit level They are called generic strategies because they are not firm or industry dependent The following table 2.1 illustrates Porter’s generic strategies:

Table 2.1Porter’s Generic Strategies

Broad (Industry

Wide)

Cost Leadership Strategy

Differentiation Strategy Narrow (Market

Segment)

Focus Strategy (low cost)

Focus Strategy (differentiation)

• Cost leadership strategy

This generic strategy calls for being the low cost producer in an industry for a given level of quality The firm sells its products either at average industry prices to earn a

profit higher than that of rivals, or below the average industry prices to gain market share In the event of a price war, the firm can maintain some profitability while the competition suffers losses Even without a price war, as the industry matures and prices decline, the firms that can produce more cheaply will remain profitable for a longer period of time The cost leadership strategy usually targets a broad market

Some of the ways that firms acquire cost advantages are by improving process efficiencies, gaining unique access to a large source of lower cost materials, making optimal outsourcing and vertical integration decisions, or avoiding some costs altogether If competing firms are unable to lower their costs by a similar amount, the firm may be able to sustain a competitive advantage based on cost leadership Firms that succeed in cost leadership often have the following internal strengths:

‣ Access to the capital required to make a significant investment in production assets; this investment represents a barrier to entry that many firms may not overcome

‣ Skill in designing products for efficient manufacturing, for example, having a small component count to shorten the assembly process

‣ High level of expertise in manufacturing process engineering

‣ Efficient distribution channels

Each generic strategy has its risks, including the low-cost strategy For example, other firms may be able to lower their costs as well As technology improves, the competition may be able to leapfrog the production capabilities, thus eliminating the competitive advantage Additionally, several firms following a focus strategy and targeting various narrow markets may be able to achieve an even lower cost within their segments and as

a group gain significant market share

• Differentiation strategy

A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition The value added by the uniqueness of the product may allow the firm to charge a premium price for it The firm

hopes that the higher price will more than cover the extra costs incurred in offering the unique product Because of the product’s unique attributes, if suppliers increase their prices the firm may be able to pass along the costs to its customers who cannot find substitute products easily Firms that succeed in a differentiation strategy often have the following internal strengths:

‣ Access to leading scientific research

‣ Highly skilled and creative product development team

‣ Strong sales team with the ability to successfully communicate the perceived strengths of the product

‣ Corporate reputation for quality and innovation

The risks associated with a differentiation strategy include imitation by competitors and changes in customer tastes Additionally, various firms pursuing focus strategies may be able to achieve even greater differentiation in their market segments

• Focus strategy

The focus strategy concentrates on a narrow segment and within that segment attempts

to achieve either a cost advantage or differentiation The premise is that the needs of the group can be better serviced by focusing entirely on it A firm using a focus strategy often enjoys a high degree of customer loyalty, and this entrenched loyalty discourages other firms from competing directly

Because of their narrow market focus, firms pursuing a focus strategy have lower volumes and therefore less bargaining power with their suppliers However, firms pursuing a differentiation-focused strategy may be able to pass higher costs on to customers since close substitute products do not exist Firms that succeed in a focus strategy are able to tailor a broad range of product development strengths to a relatively narrow market segment that they know very well

Some risks of focus strategies include imitation and changes in the target segments Furthermore, it may be fairly easy for a broad-market cost leader to adapt its

product in order to compete directly Finally, other focusers may be able to carve out sub-segments that they can serve even better

2.4 STRATEGY FORMULATION PROCESS

Strategy planning process is important and necessary for the company From the first step, defining mission and objectives, then assessing both external and internal environment so as to formulate strategy, implement strategy, evaluate and make necessary adjustment to move forward Figure 2.4 summarizes all the steps in the strategy formulation process

Figure 2.4 The strategic planning process

The Strategic Planning Process

2.4.1 Mission and vision

While a business must continually adapt to its competitive environment, there are certain core ideals that remain relatively steady and provide guidance in the process of strategic decision-making These unchanging ideals form the business vision and are expressed in the company mission statement The mission statement communicates the firm’s core ideology and visionary goals, generally consisting of the following three components:

• Core values to which the firm is committed

• Core purpose of the firm

• Visionary goals the firm will pursue to fulfill its mission

Source: http://www.quickmba.com/strategy/vision/, (1999-2000) Internet Center for Management and Business Administration, Inc

The mission statement is simply an expression of what already exists The specific phrasing of the ideology may change with the times, but the underlying ideology remains constant The mission statement describes the company’s business vision, including the unchanging values and purpose of the firm and forward-looking visionary goals that guide the pursuit of future opportunities Guided by the business vision, the firm’s leaders can define measurable financial and strategic objectives Financial objectives involve measures such as sales targets and earnings growth Strategic objectives are related to the firm’s business position, and may include measures such as market share and reputation Vision describes some milestone that the firm will reach in the future and may require a decade or more to achieve In contrast to the core ideology that the firm discovers, visionary goals are selected A vision says something that clarifies the direction in which an organization needs to move

These visionary goals are longer term and more challenging than strategic or tactical goals There may be only a 50% chance of realizing the vision, but the firm must believe that it can do so Figure 2.5 can express general ideas related this matter

Figure 2.5 Mission and vision

2.4.2 Environmental analysis

The environmental scan includes the following components:

‣ External macro environment (PEST analysis)

‣ Analysis of the firm’s industry (task environment)

‣ Internal analysis of the firm

The internal analysis can identify the firm’s strengths and weaknesses, which are marketing, finance, operation, human resources, product… and the external analysis reveals opportunities and threats Base on PEST framework, an overview evaluation on Economic, Political, Social, Technological…will support to figure out the benefit or harm

on an organization in the future A profile of the strengths, weaknesses, opportunities, and threats is generated by means of a SWOT analysis An industry analysis can be performed using a framework developed by Michael Porter known as Porter’s five forces This framework evaluates entry barriers, suppliers, customers, substitute products, and industry rivalry

2.4.3 Strategy formulation and strategic choice:

Strategy formulation is the developing from company’s vision and mission, then indentifying company’s external opportunities and threats, figure out internal strengths and weaknesses to formulate the most appropriate strategy, as in figure 2.6 This strategy brings out business solutions, determines long-term competitive advantages Figure 2.6 Strategy Formulation

2.4.4 Strategy implementation: