Strategy of abbank’s retail banking development for the period 2011 - 2020

Urgency of research theme In the process of restructure of the Vietnamese commercial banks, the development of retail banking and wholesale banking is rising in the planning and impleme

CAPSTONE PROJECT REPORT

STRATEGY OF ABBANK’S RETAIL BANKING DEVELOPMENT FOR

THE PERIOD 2011 - 2020

NguyenDuy Vinh Dang Anh Tuan

Le Thi Hien Giang Thi Thu Huong (X0309)

HA NOI 2011

ACKNOWLEDGEMENTS

First of all, the members of Group 1 would like to thank sincerely to the ETC Training Centre, National University and Griggs International University, the United States to facilitate us to study in a practical and rewarding program Especially, we would like to deeply thank to the teachers who taught in the program for their precious knowledge and the tutors of the class for their invaluable assistance to help our group completed this graduation exercises

The content presented in this exercise is to apply the knowledge learned in the program to analyze the state of An Binh Commercial Joint Stock Bank and to develop a retail banking strategy for the bank in the period 2011 - 2020 So, the analysis and contents in this exercise are completely of our group member’s opinions and efforts

However, due to the limit of the time, this capstone project contents may be inevitable misunderstood and flawed Therefore, we look forward to receiving comments from the readers as well as the teachers so that we can improve our capstone project better

Best regards,

TABLE OF CONTENT

ACKNOWLEDGEMENTS i

TABLE OF CONTENT ii

LIST OF ABBREVIATION iv

LIST OF FIGURES, GRAPHS AND TABLES v

INTRODUCTION 1

i Urgency of research theme 1

ii Purpose of research 3

iii Research method: 3

iv Structure of theme: 3

CHAPTER I: THEORIES OF STRATEGIC MANAGEMENT 4

1.1 General concept 4

1.1.1 Concepts of strategy 4

1.1.2 Concepts of strategic management 6

1.2 Foundations of strategy 7

1.2.1 Role of strategy 7

1.2.2 Types of strategy 8

1.3 The process of strategic management 9

a Process of forming strategy 9

b The process of implementing strategy 11

1.4 Steps for establishing a strategy 13

1.4.1 Definition of mission, vision and core value: 13

1.4.2 Analyze of external environments 14

1.4.3 Analyze of internal environment 15

1.4.4 Selection of strategy 15

1.5 Techniques for strategy analysis 16

1.5.1 PEST analysis 16

1.5.2 Analysis of M.Porter’s five forces model 17

1.5.3 SWOT analysis 19

CHAPTER 2: ANALYZE THE STATE OF AN BINH COMMERCIAL

JOINT STOCK BANK (ABBANK) 21

2.1 General introduction of ABBANK 21

2.1.1 History of ABBANK’s development 21

2.1.2 Developmental milestones 21

2.2 Analyze the state of An Binh Commercial Joint Stock Bank 22

2.2.1 Analyzing factors of external environment 22

2.2.2 Opportunities and threats for retail banking 32

2.2.3 Analysing internal environment 33

2.2.4 ABBANK‟s opporturnities, threats strength and weakness 51

CHAPTER 3: STRATEGY FOR DEVELOPMENT RETAIL BANKING OF AN BINH COMMERCIAL JOINT STOCK BANK FOR THE PERIOD 2011 - 2020 55

3.1 Vision, mission and core value 55

3.2 Targets of ABBANK’s retail banking development for the period 2011- 2020 56

3.3 Strategic analysis and selection 57

3.4 Several solutions for retail banking development 59

3.4.1 Construction for organizational model of retail banking 60

3.4.2 Development of human resources 61

3.4.3 Investment into information technology: 65

3.4.4 Network development 66

3.4.5 Developing products 66

3.4.6 Marketing and trademark development 68

3.4.7 Risk management 72

3.4.8 Business culture of retail banking 73

3.4.9 Implementation schedule 74

CONCLUSION 75

REFERENCES 76

LIST OF ABBREVIATION

ASEAN Association of South-East Asian Nations

HSBC Hongkong Shanghai Bank Corporate

T.Os Transaction Offices

LIST OF FIGURES, GRAPHS AND TABLES

INTRODUCTION

i Urgency of research theme

In the process of restructure of the Vietnamese commercial banks, the development of retail banking and wholesale banking is rising in the planning and implementing strategy of each bank system as well at the macro level of State Bank

We are witnessing the development and keen competition of services of Vietnamese banks, especially retail block Retail banking service is the new way of looking at financial market, therefore, major of small and retail work-people will be approach

to banking products and services, making a creative, various and potential market Today, competition in banking is the hot issue of the economy; the commercial banks develop incessantly the services and products with expectation of becoming the top special leader in retail services that are banking services connect closely to the multi-purpose and modern technology towards to major individuals and medium and small businesses Modern banking services have become habit of most of people in the world, but quite fresh to Vietnamese people

Besides, in the condition that the open economy, trade liberation and finance liberation have been wide and deep, demand for banking - financial services can develop quickly and beyond capability of satisfying of current financial intermediate institutions in the country This is the point attracting the foreign financial organizations to control domestic market, especially when barrier of financial market in Vietnam is removed, and since 01/04/2007, State of Vietnam has permitted the Bank 100% foreign capital to establish in Vietnam according to the commitments in WTO integration It is actually that people’s demand for using banking - financial services is increasing That demand connects closely to the quickly forming process of business form in the economy, as well as the transferring process from State-own enterprise to Joint Stock Company That is the demand for stock transaction, investment consulting, financial lease and purchase, debt management … At the same time, the appearance of foreign enterprises in the

economy plays a role as catalyst, to promote the appearance and quick development

of market demand for banking - financial services Those are services relating to non-cash payment, automatic withdraw, remittance services … Obviously, demand for the form of banking – financial service is initiatively, as breakthrough, and motive the appearance and development of supply resource of domestic services Therefore, the market of modern and new services of banks in Vietnam nowadays is the potential market which is ready to receive the new financial instruments and supply resource in the market Although the commercial banks is still sponsored by State Bank of Vietnam through the limit of establishment of joint venture banks or 100% foreign capital; the commercial banks in Vietnam have determined that in the current situation and in the future, they will not sit tight to take advantages of domestic market as before, a lot of banks determined that development of retail banking services is the important part of their development strategy; beginning from the grasping opportunity from new market, from applying technology and using system to create many new products and services, effective mean of distribution, enhancing relationship between customers and banks Actually, we see that the opinions of banks’ leaders are the same in development orientation of their banks such as:

“The application of IT to create new products is the target of almost banks nowadays VietinBank will make a lot of new products allowing customers to use financial transactions in Internet and on mobile” Mr Le Viet Bac, Chief of E-

banking Services Department (VietinBank) said

Or Mr Hoang Trung Dung, Director of company customer of Maritime Bank

Vietnam said: “We will develop through quality of banking services, and expand market share through utility products and services”

And Mr Nguyen Hung Manh, General Director of An Binh Commercial

Bank said that: “An Binh will strengthen in investment in infrastructure, especially

IT in the orientation of retail banking development; expanding cooperation with partners to bring utility products to many people more and more…”

Based on the above fact as well as according to the opinion and development orientation of General Director of An Binh Commercial Bank, the group has chosen

the theme: “Development strategy for retail banking of An Binh Commercial Bank”

to be the research theme in exercise with expectation to contribute a small part in the strategic planning at An Binh Commercial Bank

ii Purpose of research

Applying the knowledge learned on the subject of strategic management to explore opportunities and threats of the banking sector especially in retail banking area Also, through the analysis of the internal environment of the An Binh Commercial Joint Stock Bank (ABBANK) to understand its strengths and weaknesses associated with the use of SWOT matrix to select the most effective strategy for ABBANK’s retail banking development in the period 2011 to 2020

iii Research method:

In the research method, the theoretical models of strategic management are mainly used to apply in the specific condition of An Binh Commercial Bank in order to form a business strategy

In the theme, methods of statistics, reason, comparison, judgment and summary are used through internal data of the An Binh Commercial Bank, data of the other commercial banks, teaching materials in strategic management in domestic and international countries and through magazines resource, internet to research

iv Structure of theme:

 Chapter 1: Theories of strategic management

 Chapter 2: Analysis the real situation of An Binh Commercial Joint Stock Bank (ABBANK)

 Chapter 3: Strategy of ABBANK’s retail banking development for the period

2011 -2020

CHAPTER I: THEORIES OF STRATEGIC MANAGEMENT 1.1 General concept

1.1.1 Concepts of strategy

There are many concepts of strategy, those concepts have one or more than

one difference depending on each author’s conception, and we will bring out

some concepts of strategy as follows:

long-term basic purpose and target of enterprise and the application of a series

of actions as well as distribution of necessary resources in order to carry out this target” (Source: Chandler, A (1962) Strategy and Structure

Cambridge, Massachusetts MIT Press.)

targets, policies and series of actions into the general united closely.” (Source: Quinn, J., B (1980) Strategies for change: Logical Inscrementalism Homewood, Illinois, Irwin.)

and co-ordinate plan, designed to ensure that the enterprise’s basic targets will be complemented successfully However, this perspective isn’t actually sufficient, it is practically proved that: Sometimes the official plans scheduled concretely are unsuccessfully"

scope of a organization in long term in order to gain competitive advantage for the organization through formatting its resources in the changing environment, in order to meet demands of market and satisfy the related parties’ expect” (Source: Johnson, G., Scholes, K (1999)

+ Plan: Series of actions intended consistently

Definition of strategy not only includes the different aspects, but also various depending on level Substantially, the exact definition of strategy according to level depends on perspective At least, 3 strategy levels need identifying: strategy at company level; strategy at business unit level and functional strategies

Enterprise development strategy: “A series of commitments and actions

applied by enterprise to gain a competitive advantage by exploiting the core capacities in the decisive market”

In summary: Generally, it is obligatory to meet sufficiently the following

factors when forming strategy:

We can say that strategy "is a series of long-term actions formed to make an organization from the current position to the expected position in the future by setting up the competitive capacity compared to advantages of the other organizations in the market” (Michael E Porter (1996) What is strategy?, Harvard Business Review)

Strategy is an orientation and scope of an organization in long term in order to gain competitive advantage for the organization through formatting its resources in

the changing environment, in order to meet demands of market and satisfy the related parties’ expect

1.1.2 Concepts of strategic management

People usually consider strategy as a product of a reasonably formed process guided by superior manager, but not efficiently In many cases, the valuable strategies can be arisen in the organization without planning

Strategic management is a series of the management decisions; and the

actions which define the long-term productivity of a company Strategic

management includes continuous actions: Examining environment (both internal and external); building strategy; implementing strategy and evaluating strategic control Therefore, strategic research stresses the monitor and evaluation of the

external threats and chances in the context of internal weakness and strengths Strategic management is the process of arranging flexibly strategies, operation

situation and business results, including personnel, leaders, techniques, and

treatment methods

Strategic management can be defined as the artistically and scientifically

formation, implementation and valuation of the decisions related to functions which are enable a organization to reach its planed target

As we show in this definition, strategic management focuses on unifying the management of marketing, finance, production, development research and systems

of information on business fields in order to gain organization’s success

The process of strategic management includes 3 periods: Setting up strategy, implementing strategy, and valuating strategy Strategy formation period includes: developing the business missions, determining the external chances and threats, clearly defining the internal strengths and weaknesses, setting up the long-term targets, creating the alternative strategies and choosing the specific strategies to pursue

From the definitions of strategy and strategic management stated above, we can see that the basic content of strategic management includes: Determining the main organization’s mission and target; analyzing the external and internal environment of an organization; choosing a strategy corresponding to strengths and weakness and chances, threats; accepting organization’s structure and control systems to carry out the chosen strategy

Figure 1-1: Process of strategic management

- Which resource does the enterprise need to use (human, skills, property, finance, and technologic secret …) to be able to reach the planned target?

- To see the implicit chances and threats from external environment can affect the implementation of enterprise’s target: environment, competition, policy, natural resources … plans for preventing risks

- To help the business manager to clearly realize that the strengths, weaknesses, chances and threats can occur in business at present and in the future, to analyze and forecast the conditions in the business environment in the future To help the enterprise to take full advantage of chances, to decrease risks, and to increase the enterprise’s competitive capacity

- To help the enterprise to build the business strategy better through using

“system approach” method, creating foundation to increase association and attachment among members in the implementation process of enterprise’s target

1.2.2 Types of strategy

a Classification according to strategic levels:

level towards the organization’s general scope and purpose

relates to the successfully competitive mode in the concrete markets

which helps strategy at business level and at company level to be implemented effectively by component parts in aspects such as resources, processes, human and necessary skills

Today, with the globalization tendency, companies are quickly diversifying their activities beyond national border; thence, global strategies are considered as a choice to cope with the problems in international business

b Classification according to contents of strategy

+ Trading strategies

+ Financing strategies

+ Human strategies

+ Technology strategies and technical strategies

c Classification according to development processes:

According to this classification, the strategy includes:

It is formed based on the result of environmental analysis and internal enterprise analysis

each concrete circumstance and plans to adjust strategies

1.3 The process of strategic management

Strategic management is a series of the management decisions; and the actions

which define the long-term productivity of a company Strategic management

includes continuous actions: Examining environment (both internal and external): (i) forming strategy; (ii) implementing strategy and (iii) evaluating strategy

Therefore, strategic research stresses the monitor and evaluation threats and

opportunities of the external environment in the context of internal weaknesses and

strengths

This is the most important period in the process of strategic management including 3 steps:

- Step 1: Choosing the company’s main target and mission

- Step 2: Analyzing external environment to define opportunities, threats and

analyzing internal environment to define the organization’s strengths and weaknesses

- Step 3: Choosing strategies based on seeking resources, ability, core

competencies, and developing them to overcome the threats, to utility the opportunities from the external environment

The process of forming strategy can be carried out according to the basic model of strategic management (figure 1.2)

Figure 1.2: The basic model of strategic management

b The process of implementing strategy

After finishing the process of forming strategy, the chosen strategy will be carried out through the clear identification of development target in each period, for each department; changing the organization’s structure (if needed) and working out production plans, business plans, creating the necessary and appropriate resources

Strategy implementation is the method which a company creates the organizational arrangement allowing them to pursue their strategy most effectively The organizational design means that choosing mode of coordination between organization’s structure and control system for the company in order to pursue its strategy effectively, to create the value and the firm competitive advantage

In practice, many companies have set up strategy but unfeasibly due to shortage of necessary capacity to implement plan The implementation is the process from up to down

Purposes of implementation of strategy are: Building capacity, ability and resource; building up budget; setting up policies and regulations to support and choose the best activities and promote continuous innovation, building the information and connection system and operating; attaching a reward/ punishment

to target to promote the implementation of strategy; creating working environment

to carry out strategy better

The necessary component parts of the strategy implementation process are

shown in the figure 1.3 below:

Figure 1.3: Eight activities of the strategy implementation and operation

In the strategy implementation process, leader board is the key component part contributing to the success of the strategy implementation process Leader has

to be usually ready with awareness “what to do” to gain the expected result They build the competent organization by choosing the peoples suitable to the key positions, to guarantee that the organization will have enough skills, capacity, management skills, technologic secrets, competitive capacity and proper resources Simultaneously, they combine the organization’s structure with the strategy under implementation, unify whole organization to act for strategy, create commitment, shape a mobilization, implement strategy and attach mode of organization to carry out activities to the strategy’s requirements

a Stage of strategic audit

This is the final stage of strategic management process Strategic control is a process in which administrators shall encourage and supervise the implementation

of each organization as well as its members in order to assess whether activities are carried out continuously and effectively or not Consequently, the company shall

make adjustment decisions to improve for better efficiency Contents for control can include: the control of efficiency, quality, improvement and customer satisfaction degree

In brief, strategic management process consists of basic steps in the

following model:

Figure 1.4: Basic steps of strategic management

1.4 Steps for establishing a strategy

1.4.1 Definition of mission, vision and core value:

a Definition of the organization‟s mission:

Mission is a declaration aiming at informing of the existence of the Enterprise, which defines values and rules governing the Enterprise, and is a vital part during strategic planning process Mission of the company is the reason for the existence of the company on the market, who you are and what kinds of products and services you shall bring to customers and the community

b Definition of vision:

Vision is an image, a lively picture about what shall happen to a trade mark in the future It is the choice of one of the most wonderful values of a trade mark Vision is also characterized by the uniqueness, implying to create something special

Hence, a declaration about vision is considered as a report on the position your company desires to achieve Vision declaration outlines the future of your company when you gain your own target and purposes

c Definition of core value:

- Core value helps to form the psychology for enterprise, which can support or reject the personal psychology accordingly

- Being values deeply rooted in the enterprise

- Being a belief system influencing the behavior between individuals or among groups of people

- Core values are “the soul” of the enterprise

- Core values are essential and long-term guidance rules

- Helping enterprise to orient its decisions and actions

1.4.2 Analyze of external environments

Analyze the external environment in order to find the opportunities and challenges from the environment outside of the business Three types of external environment have been linked together include: the macro environment, national environmental and industry environment in which enterprises are operating

Enterprises identify opportunities and challenges through analysis of data on changes in the environment where businesses are operating or planning to enter Opportunities may include market potential, market space, close to the resources or skilled and cheap labor forces The challenges for the enterprise may be the narrow market, increasingly fierce competition; changes in policy, political instability in key markets or new technologies development make facilities and production lines

of business becoming obsolete

1.4.3 Analyze of internal environment

Analyze of internal environment is to find the strengths and weaknesses of the business

By analyzing the internal environment of business, the strengths of the business organization may be the skills, resources and advantages that businesses get ahead of competitors (the key capacity of businesses) as there are many talented executives, have advanced technology, famous brand, available cash, businesses have a good image in the eyes of the public or a large market share in the key market The weaknesses of the enterprise reflected the shortcomings or disadvantages of skills, resources or other factors limiting the competitiveness of enterprises That may be the inefficiency distribution network, bad labor relations, lack of international experienced managers or outdated products and services compared to competitors

Selecting business strategy is the orientation to develop and build competitive advantage of businesses that rely on understanding and assessing the situation has been made in the above steps Enterprises can choose strategies according to three groups of strategies:

- Strategy of the cost leader (Lowest price)

- Centralized strategy (focus on a market or a certain market segments or focus on a certain product groups.)

- Differentiation strategy

In summary: Best strategy is to have high feasibility and be appropriate to the strengths and resources of the enterprise, and aiming at grasping at the best business opportunities, and establishing the defensive barrier against the competitors’ risks which can harm interests of the enterprise

1.5 Techniques for strategy analysis

Techniques for strategy analysis are used in this research subject including:

1.5.1 PEST analysis

Legal and political environment: Legal, political factors impact on

development strategy of the enterprise in various directions Sustainability of politics and completion of legal system are always the big concern of business manufacturers

Economic environment: Real situation of economy and future trade have an

influence on the enterprise’s success and strategy Changes of principal factors are: economic growth rate, interest rate, inflation, unemployment, exchange rate which all impact on the enterprise

Social-cultural environment: For strategic management, cultural and social

factors are sensitive matters and have changes Lifestyle of people quickly alters following the integration trend, leading to the change of consumption attitude The higher intellectual level of people is, the higher the consumer’s need for quality, diversity of product category is

Technological environment: Technological factor has a great influence on

business strategy of the enterprise and industrial sectors as well The change in technology considerably influences life circle of products and services Consequently, the enterprise needs to have sound judgments on technology, aiming

at creating opportunities for the enterprise in the development of products and services

Through the analysis process of external environment, business managers can assess the opportunities and threats to their enterprises Accordingly, entrepreneurs shall have foundations to build and choose development strategy in a right and objective way Changes in macro strategy can directly impact on any forces in the sector, which therefore alter relative strength to other forces and to it, finally changing attraction of one sector

1.5.2 Analysis of M.Porter‟s five forces model

Analysis of sector environment needs the assessment of competitive structure within a sector, including competitive position of a central organization and principal competitors, and development stages of the sector as well

M Porter, professor of Harvard Business School draws out a framework which helps administrators find out opportunities and threats facing the enterprise in the sector

Figure 1.5: Michael Porter‟s five forces model

According to Michael E Porter, competition in an industry depends on five basic factors, such as the bargaining power of customers; bargaining power of

suppliers; the threat of substitute products and services ; the threat of new entries and competition from the direct competitors (E Porter, 1998) The analysis of five market impacts has a significant value for choosing the strategy of a business

 Bargaining power of customers

Bargaining power of each customer depends on market patterns For competitive markets, customers have greater bargaining power, because they have more product choices Conversely, customer power is weaker in monopoly markets for the price negotiation In addition, the bargaining power of customers depends on the purchased amount more or less; products that customers buy have low chemical specificity

 Bargaining power of suppliers

The power of suppliers depends on their products are proprietary products or competing products; depends on the scarcity of products on the market The power

of suppliers is reflected whether they can raise prices or reduce quality of goods and

services

 Pressure from substitute products

The competitive pressures for enterprises are higher if there are more and more attractive substitute products and services Substitute products and services bring the same satisfaction to the customers Pressure from substitute products depends on the quality of the product, the easy acceptance of buyers and the price of the product

 The threat of new entrant

The entrant of the potential rivals depends on government regulations However, joining the industry depends more barriers such as economies of scale, product characterization, conversion costs for the retraining, the cost of ancillary equipment costs, the cost of designing product, access to distribution channels, government policies such as limited or even not to allow to participate in some

sectors through the grant or restrict access to material inputs, brand recognition, capital investment required (E Porter & Nguyen Phuc Hoang translation, 2009)

 Competition among rivals:

Competition among rivals in the industry is often through the competition about price, marketing, advertising, customer consulting, product and service quality, customer care The level of competition within an industry depends on two factors; they are the number of enterprises and the profit rate in the same industry whether is high or low Competition occurs because the competitors can either feel pressure or see opportunities to improve the position In the form of competition, price competition is notable because it has no stability and can cause damage to the entire industry benefits

Michael Porter shows that the stronger above-mentioned forces are the more restrictedly existing companies’ capability of increasing price and gaining profits becomes Within the scope of 5 forces model of M Porter, one strong competitive force can be considered as a threat because it reduces profits of the company To cope with more and more violent competition, the company has to invest more cost for product differentiation, market accessible service or price reduction Competitive intensity within the sector depends on:

+ Quantity and capability of the company in the sector

+ Market need: Need for products, services of the company

Task of administrators is to be aware of opportunities and threats which the change of these five forces can bring in, accordingly building up suitable strategies

1.5.3 SWOT analysis

SWOT analysis model is a very useful tool for any business organization to grasp and make decisions in any circumstances SWOT stands for 4 words: Strengths, Weaknesses, Opportunities and Threats SWOT provides a tool which helps analyze the strategy, check and assess the position, orientation of a company

or a business project SWOT is suitable for work and analysis in group, being used

in planning business, building strategies, assessing competitors, marketing, developing products and services, etc

Strengths and Weaknesses are internal factors of the company while Opportunities and Threats are external ones SWOT allows analyzing different factors which have relative influence on competitive capability of the company SWOT is often combined with PEST (Political, Economic, Social, Technological analysis), model of market analysis and potential assessment via external factors in all aspects of politics, economy, society and technology SWOT analysis is a subjective assessment of data which is organized by the SWOT format into a logical order that helps understanding, presentation and discussion and decision-making

On the basis of SWOT matrix, the enterprise finds out the strategy in order to promote its strengths and overcome its weakness, make full use of opportunities and avoid threats created by outside environment

SWOT analysis is a useful tool in widening the resources capability of the enterprise, extending the market and threats from the outside SWOT matrix can form strategic ideas into groups:

 S-O: strategies using strengths to gain opportunities

 S-T: strategies using strengths to eliminate or avoid threats

 W-O: strategies overcoming weakness to gain opportunities

 W-T: strategies eliminating weaknesses to avoid threats

Figure 1.6: SWOT matrix

CHAPTER 2: ANALYZE THE STATE OF AN BINH COMMERCIAL

JOINT STOCK BANK (ABBANK) 2.1 General introduction of ABBANK

2.1.1 History of ABBANK‟s development

ABBANK (An Binh Commercial Bank) is established according to license

1993 The main business lines of ABBANK are mobilization of short-term capital, medium term capital and long-term capital under forms such as deposit account, certificate of balance, the investing and developing authorized capital acceptance of organizations; funding of SBV - State Bank of Vietnam and the other credit agencies; lending with short term, medium term, long term period in order to develop rural economy; to discount commercial papers, bonds and valuable papers;

to contribute capital and joint venture; to make payment services among banks

2.1.2 Developmental milestones

 In 2002: ABBANK reformed structure and human resources to focus on

specialty of trading in commercial bank

 In 2004: ABBANK increased charter capital to VND 70, 4 billion

 In 2005: ABBANK increased shareholders

- Strategic shareholder: Vietnam Electricity Corporation (EVN)

- Other big shareholders: Petrol Vietnam Finance Corporation (PVFC), Hanoi General Export Import Corporation (Geleximco)

 In 2006: Charter capital was increased from VND 165 billion to VND

1,131 billion

 In 2007: ABBANK signed strategic cooperation with Agribank and

member corporations of EVN such as PC1, PC2, PC3, etc

- ABBANK became a member of PAYNET

- Charter capital of ABBANK was raised to VND 2,300 billion

 In 2008: ABBANK implemented successfully core banking software

operating in the whole system May bank is strategic foreign shareholder of ABBANK and has the owning rate of 15% ABBANK raised charter capital

to VND 2,705 billion

 In 2009: ABBANK cooperated with Prudential Vietnam and Deutsche

bank In July 2009, ABBANK raised charter capital to VND 2,850 billion

In September 2009, ABBANK set up a new headquarter at 170 Hai Ba Trung, Da Kao ward, District 1 and executed street dealings in Transaction office In December 2009, ABBANK raised charter capital to VND 3,482 billion

 In 2010: ABBANK connected with VNB network system through Smart

link ABBANK set up sponsor centre for Small and Medium enterprises

(SMEs) and participated in Small & Medium Enterprise Finance Program

III (SMEFP III) ABBANK widened cooperation with internal and external partners such as Southern Power Corporation (EVN SPC), VN Prevoir … After more than 15 years of establishment and development, ABBANK had more than 10,000 corporate customers and more than 100,000 individual customers

in 29 provinces and cities in all the country with 115 branches/transaction offices Until 12/2010, charter capital of ABBANK reached to VND 3,831 billion, total of property was VND 38,015 billion

Target customers of ABBANK include: Corporate Customer Group (CCG), Individual Customer Group (ICG), Investment customer group and EVN customer group and member units ABBANK always studies and develops service products

in order to bring the high benefit and meet fully demands of customers

2.2 Analyze the state of An Binh Commercial Joint Stock Bank

2.2.1 Analyzing factors of external environment

Factors of external environment include factors of macroscopic environment such as politics, economy, socio-culture, natural environment, technology and factors belonging to environment, profession according to M Porter includes competitive level in internal profession, threatening of new entrance members, Negotiation power of service users (customers): Power of suppliers, Threatening of product or service replacement These factors impact directly on operation of any enterprises or economic organizations and are always cared and considered when there are contribution and strategic decision making To banking, especially ABBANK, these factors are shown in concrete contents as follows:

2.2.1.1 Macroscopic environment

a Environment of politics and law

- Vietnam is a country having stable politics and an interesting investment environment

- Vietnam Law was more suitable to international normal practice to attract investment of enterprises and foreign investment, these are good opportunity for credit organizations to develop customers, raise market share to grow and step investment up

- Because of international integration, policies of tax, financial – banking management and bank are improved on to integrate with international community, are prepared with necessary conditions to compete with strong foreign competitors when commitments of opening market have validity

- Foreign relationships extension (WTO, Asean, bilateral relationship, etc.) is premise to develop economy, commerce and attract foreign investment capital

- 2010-2015 is period of innovations such as innovation of growth model, economic structure in order to stabilize macroeconomics, restrain inflation

and guarantee social security Government’s policies, law system also have many changes in order to be suitable to development target

b Economic environment

- The world economy is in rehabilitation period, however (1) The world economy is in danger of falling into a double-dip recession (2) Unemployment is still not improved in most of countries, (3) Deficit and public debt are still at warning level in many countries; (4) Risk from a very hot development of China caused disadvantageous impacts for global economy rehabilitation

- Vietnam economy is in rehabilitation period, GDP - gross domestic product had sign of growing The world economy after rehabilitation will impact on the investment capital flow into Vietnam positively although it is slower than

- In all the country, it is adjusted to have economic centers; industrial parks, key economic sectors, and great economic corporations, economy structure develops toward increasing in sector rate, service and decrease in agriculture rate Integration process into the world economy such as events: Vietnam joined in the ASEAN Free Trade Area (1996) and the World Trade Organization (2007) During process of implementing the commitments on trade liberalization and the investment, removal of barriers, protectionism were demolished; export, foreign investment increased strongly which made our country get advantages from globalization process but also face to face

with threats of complicated economy management and being impacted from outside fluctuations

- Transparency, equality, self-control in business of economic sectors and international commitments implementation of Vietnam will develop well

- Inflation runs the risk of breaking out and is difficult to control

- Loan rate is still at high level Internal gold price fluctuates irregularly according to international price of gold and these impacts on interest and business operations of bank It is difficult for individual customers, SMEs to approach source of funds of bank

c Social environment

- Retail market is potential with large population, young population structure (According to Central Statistical Office of population density, the main force age group of labor force 15-64 increased from 61,1% to 69,1%)

- Vietnam society develops day by day, per capita income raised with every passing day (according to draft target of Economic and social development plan submitted to Government by Ministry of Planning and Investment, GDP/per capita in Vietnam in 2010 estimated to achieve USD 1200 and in

2015 estimated to achieve USD 2,100 (increasing 1.7 times compared to the average level in 2010) and USD 3,000 in 2020) The masses’ living standards becomes higher with every passing day, the thinking of working to save money reduces, people care for current consumption demands to raise living condition of themselves and their family The cross-section of people has the stable income, the main is young families who start habit of consumption by credit (form of installment buying of house, car, etc.) which is good condition to develop services in finance, bank

- Intellectual standards of the people have improved and the urbanization process has happened strongly

- The habit of using cash in consumption limiting the application of new services in finance for individual customers’ group is difficult to strategy of

increasing service rate in finance of banks, some people like hoarding gold and strong foreign currency and this reduces circulation in financial market

d Technological environment

- Vietnam is one of 10 countries having the fastest growth rate of information technology in the world and contributing nearly 7% GDP Vietnam has had internet service since 1997, Vietnamese rate using these services increase every year This is a good opportunity to economy and banking take advantages in order to develop business operation

- Technology related to banking also develops strongly Banks attach special importance to invest technology, renovate applications, deploy and apply core-banking system; payment services via internet-banking, SMS Banking, replace magnetic storage card by safe chip card These things are advantageous to banking in order to control system and increase services of finance, banking, but also require great capital and appropriate investment strategy

- Till 2010, telephone density will achieve 32-42 telephones/100 people, in which the fixed telephone density will achieve 14-16 phones/100 people; internet subscriber density will reach 8-12 subscribers/person, internet use rate will reach 25-35%; average density of personal computer will reach over

10 computers/100 people 100% of communes have telephone; 70% of communes have internet asses point, 100% of districts and almost of communes in main economic region are served broadband Internet

- Transaction environment and e-commerce were formed and developed fast

It is expected that 25-30% total transactions of economic sectors will be implemented via e-commerce and transaction system E-commerce transaction will be 10 times in 2010 compared to that in 2002

e Integration environment

- Operations of finance – bank are committed to be open strongly in the world economy integration of Vietnam Therefore, foreign banks will be treated equitably according to the most favored nation rule of WTO Domestic banks will have to compete violently with important foreign competitors (with the advantages of trade name, capital, technology, human resources, experiences, product, etc.)

- Banks will also meet with pressure of technology renovation, standard enhancement and management method in order to adapt to the new competition

- Integration makes Vietnam financial market depend much on world market; this is not only good threat but also a good opportunity for domestic banks

- Integration also makes opportunities for banks approaching capital resources, technologies, management experience and foreign market If these can be adapted and taken full advantage, this will be opportunity to expand scale of bank However, this will also be pressure for banks when they have to renovate technology, improve standard and management method in order to adapt to the new competition

2.2.1.2 Sector environment

a) Internal sector competition

Vietnam baking has been developing strongly in quantity as well as in quality Till August of 2010, bank system in Vietnam included 5 state-owned commercial banks, 39 joint-stock commercial banks, 5 joint venture banks, 5 banks with 100% foreign capital, 48 branches and 47 representative offices of foreign banks, 16 finance companies, 13 finance lending companies, 1 Central credit fund and nearly 1,000 Local people’s credit funds Financial institutions not only hasten expansion rate of domestic market but also have big steps in net development into international market, especially in neighboring countries (China, Laos, and Cambodia) Besides there are tens of files of asking for joint

stock banks and banks with 100% foreign capital establishment submitted in an office of SBV This number shows sector competition becomes keener day by day

An increase in quantity of joint stock banks and foreign banks made the market share of existing banks impacted, especially to state-owned commercial banks Statistics of SBV showed clearly the conversion trend of deposit market share and loan of group of state-owned commercial banks, joint-stock commercial banks, joint venture banks and banks with 100% foreign capital and some credit institutions as the following figures 2.1 and 2.2:

Figure 2.1: Structure of lending market share of credit institutions (Source: SBV)

Figure 2.2: Structure of mobilization market share of credit institutions (Source: SBV)

Competitive pressure among existing banks is stable, but there is an increasing trend between group of state-owned commercial banks and group of joint-stock commercial banks Joint-stock commercial banks with ability of creating higher revenue-earning rate will control operation-market share of banking

Competitive pressure in financial market is increased when subsidiary banks with 100% of foreign capital has been promoting development strategy in Vietnam An attraction of idle money resource into bank is not easy; expenditures for capital mobilization may be increase These elements will pressurize banks having high benefit target

Banks in Vietnam have advantages in quantity on the market, branch nets and transaction offices scattered everywhere in all the country, concurrently, understand particularities in Vietnamese business, production, consumption, predilection, mentality well Meanwhile foreign banks have advantage of finance potential, management experiences, system of production-service and high technology HSBC, ANZ and Standard Chartered Bank are symbolic faces in this matter Number of foreign banks having branch/representative office in Vietnam

or number of foreign banks having share capital in internal commercial banks shows that the number of banks with 100% of foreign capital will increase in the future And they are also making intensely strategies of expanding market share

in Vietnam customer segment, especially the retail service Thus, competitive pressure for domestic banks will become bigger

Besides, with a large number of banks and types of credit service organization like this, the conversion of using finance services to banks is very simple and costs low fee Therefore, banks have to race in interest rate and fee of service supply in order to attract customers and guarantee operation profits

Integration barrier will also be an element expressing the competitive level in internal sector To develop a healthy financial market, SBV had regulations about capital to fairly big bank This is a big barrier to new members who want to join

Vietnam banking However, the existing banks have length of operation, the great capital potential, a quantity of veteran customers and the fixed market share

so it is not easy for newly-established banks in competition for the market share Products of Private-owned commercial banks (POB) in Vietnam have little difference, these products focus on traditional field such as lending and some services such as card service, mortgage, discount of valuable papers, money transfer, payment, etc ; thus, service quality and price will be the success determinant of bank Basing on bank’s advantage, each bank builds long-term, medium-term and short-term strategies to determine the continuously renovated heading, apply management technology, the latest information

b) The threats of the new participating members:

When the country opened and integrated into the world economy, the Government allowed and made condition so that international organizations and domestic enterprises have enough conditions to open and trade in banking This created a favorable premise so that banking developed strongly, especially to group of joint-stock commercial banks and joint-venture banks The participation

of the new banks is threatening to existing banks in banking because of the following reasons:

+ Divided market: All banks determine their market development strategy;

they have preferential policies to attract customers With advantages of large capital, service technology, new members, professional working attitude, the depth of experience make competition keener At the first stage, they can be new to market, but this disadvantage will be rejected step by step as time goes by

+ Competition in human resources: Nowadays, human resources for

banking are deficient This makes competitive pressure among banks to attract talents, leads to spending on salary higher while the quality of human resources is not improved much With methodical policy as well as

good treatment regulations of foreign banks, keeping superior employees is more difficult

+ Advantage of capital and Information Technology (IT): newly-established banks have advantage of capital and Information Technology (IT) This is the threat for existing banks which have not met enough charter capital according to State Bank of Vietnam IT created big advances in innovation during process of establishing and developing various services of bank and thus banks having developing IT system will be important competitors

c) Negotiation power of customers:

Customers play a role as the vital problem of banks With scale of more than

100 banks, it is easy for customers to transfer to use service of other bank when service fee increases

One of the important features of banking is that all individuals; organizations trading in production or consumption, even other banks can be buyers of bank’s products, services and sellers of products, services to bank Therefore, bank will have to face with contradiction between effective operation making profits and keeping customers as well as having attractive capital source with fee as cheap as possible

d) Negotiation power of suppliers:

Bank needs the main suppliers as follows: Supplier in IT, supplier in security service, manufacturers guarantee ATM, part owners, depositors, etc

In Vietnam, banks themselves usually invest in equipments and select specific suppliers depending on condition to reduce power of equipment supplier However, when costing a quite great expenditure in system investment, banks do not want to change supplier because of expensiveness, this will raise the power

of equipment supplier who has accepted bid

Power of supplier is emphasized when the supplier also is shareholder of bank When owning an equity which is large enough, these shareholders will have direct impacts on business strategy of bank and the power will increase in accordance with rate of investment capital In some cases there can be division, mergence of bank

Bank operates in field of service trade, to have a good product with high quality and meeting quickly customers’ demand, opening cooperative relationship with suppliers is very important Today, to raise service quality and competitive ability, banks usually co-operate with suppliers to make perfect value chains with competitive expenditure

e) The threats of substitute products and services:

About capital mobilization: There are many investment channels with high rate of return such as Securities, Property, gold and foreign currencies, etc… These channels created the transference tendency of capital flow from bank to the interesting investment channels as above

About lending and services: finance companies, finance lending companies, insurance companies are allowed to provide some equivalent services to bank such as lending, mortgage, discounting, issue of valuable papers, guarantee with high quality and professional level which make the big changing risk for products of bank

2.2.2 Opportunities and threats for retail banking

Retail banking is a type of bank attracting special importance to diversify products A large number of products meet the demand of many kinds of customer Though the value of each product is not much but in return, bank will have a large number of customers The main operation this bank is financing from every economic sector and lending to solve consumption matter or production project with small and medium scale

With those attributes, from the analysis of the elements of the macro environment and industry environment that ABBANK with 115 branches and transaction offices at the national coverage is 46%, along with the strategic cooperation with EVN is an opportunity for ABBANK reduce the cost of advertising and marketing to reach customers are using products of the EVN to increase the number of customers in rural areas This is the opportunities ABBANK superior than other commercial banks to choose development ABBANK retail banking sector

2.2.3 Analysing internal environment

Internal environment analysis is to find strengths and weaknesses of ABBANK to competitors so that ABBANK can use opportunities and threats of external environment to build orientation of long-term stable development

Banks are divided into three groups by size of total assets that does not give a direct competitor to analyze because of the economic integration and the establishment of many banks in the past time lead to market share in the provinces, major cities will be narrowed To gain market share is growing, more and more customers, the banks gradually expand the district, town or village With this trend ABBANK also envisages the development of retail banking services

Besides the business of commercial banks are the similarities of products and services, and prices of products and services are controlled by the State Bank Thus competitors of ABBANK always find the way to satisfy the same customers, supply the same products with ABBANK and are on the same operation location with ABBANK

With these features, most of private-owned commercial banks are considered

as competitors of ABBANK However, basing on scale of total assets, selected banks will be divided into 3 main groups as follows:

+ Group 1: Group of Private-owned commercial banks having scale of total

assets over VND 65,000 billion includes ACB, Sacombank and Techcombank

+ Group 2: Group of Private-owned commercial banks having scale of total

assets from VND 40,000 billion to VND 65,000 billion includes SCB, VIB and MSB

+ Group 3: Group of Private-owned commercial banks having scale of total

assets from VND 25,000 billion to VND 40,000 billion includes Habubank, Seabank, SHB, Oceanbank and ABBANK

Norms are used to compare: Scale of total assets, market share of lending – mobilization, Service product, Distribution channel, Marketing and trademark

development

2.2.3.1 Organizational structure of ABBANK

Organizational structure of ABBANK at present is implementing according

to form of functional structure including the following levels:

+ Board of Shareholders is the highest decision institution, has the periodic meeting once time per year when ending finance or has exstraodinary meeting

as regulations in order to make strategic resolutions and operation programs during bank’s development process

+ Board of Directors: BOD works according to regulations, combines direction

of community with management and co-ordination of Chairman of the board, and gives prominence to responsibility of each member of Board of Directors Executive machinery of ABBANK includes:

+ Executive commitee includes 01 General Director and Deputy General Directors undertaking operational departments and Directors of branches + Operational groups include: Group of Corporate Customer, Group of Individual Customer, Group of Risk management, Group of capital sources, Group of Human resources, Group of supervision for foreign relationship,