Competitive strategies the case for Visa card of Techcombank

With hope o f finding the appropriate Techcombank visa card strategies to help Fechcombank to be the champion in the more and more harsh competitive environment, I have chosen the topic

VIETNAM NATIONAL UNIVERSITY, HANOI

SCHOOL OF BUSINESS

Vu Thi Kim Thu

C O M PE TIT IV E STRATEG IES THE CASE FOR VISA CARD OF T E C H C O M B A N K

Major: Business Administration

Code: 60 34 05

MASTER OF BUSINESS ADMINISTRATION THESIS

Supervisors: Dr Pham Thi Nhuan

A Icl Gb

Hanoi - 2009

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TABLE OF C O N T E N T S i

LIST OF FIG URES vi

ACKNOW LEDGEM ENTS viii

A BSTR A C T ix

TÓM T Ẩ T xii

INTRODUCTION XV 1 Research Problem Statement XV 2 The objectives of the s tu d y xvi

3 Scope o f the study xvi

4 Methodology o f the stu d y xvii

5 Limitation o f the study xvii

6 Contribution of the stu d y xvii

CHAPTER 1: LITERATURE R E V IE W 1

1 Overview o f Competitive Strategies 1

1.1 Competitive strategies 1

1.2 Categories o f competitive strategies 2

1.2.1 Cost Leadership Strategy 2

1.2.2 Differentiation strategy 3

1.2.3 Focus Strategy 4

1.3 The importance o f Competitive Strategy 6

T A B L E O F C O N T E N T S

2 Process to formulate Competitive S trategy 6

2.1 Vision and Mission 8

2.1.1 M issio n 8

2.1.2 Vision 8

2.1.3 Strategic objectives o f a c o m p a n y 8

2.2 External A nalysis 9

2.2.1 Macro Analysis (PEST m odel) 10

2.2.1.1 Economic f a c to r 11

2.2.1.2 Technological Factor 11

2.2.1.3 Political and Legal F acto rs 12

2.2.1.4 Social Factors 12

2.2.2 Industry Analysis (Five forces m odel) 13

2.2.2.1 Threat o f New E n tran ts 14

2.2.2.2 Rivalry among existing firm s 15

2.2.23 Threat o f Substitutes 15

2.2.2.4 Bargaining Power o f Buyers 16

2.2.2.5 Bargaining Power o f Suppliers 17

2.2.3 Summary o f macro a n a ly s is 18

2.2.3.1 Opportunities and rank o f opportunities 18

2.2.3.2 Challenges and rank o f challenges 19

2.3 Internal A n aly sis 19

2.3.1 Value Chain M o d e l 20

2.3.1.1 Primary A ctivities 21

2.3.1.2 Support Activities 22

2.3.2 Identification o f Core Competences and sustainable Competitive advantages 23

2.4 Formulation and Choice o f Competitive Strategy 26

CHAPTER 2 STRATEGIC ANALYSIS AND FORMULATION OF COMPETITIVE STRATEGIES FOR VISA CARD OF TEC H CO M B A N K 29

1 Background of Techcombank and Visa Card o f Techcombank 29

1.1 Techcombank O verview 29

1.2 Visa card o f T echcom bank 32

2 Analysis o f Techcombank Visa c a r d s 39

2.1 External A n aly sis 39

2.1.1 Macro Analysis: PEST m o d e l 39

2.1.1.1 Economic factor: 39

2.1.1.2 Social F acto r 44

2.1.1.3 Political and Legal Factor 49

2.1.1.4 Technology F a c to r 52

2.1.2 Industry Analysis (Five forces m odel) 54

2.1.2.1 Threat of e n tra n c e 54

2.1.2.2 Rivalry among existing firm s 57

2.1.2.3 Threats o f Substitutes: 62

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2.1.2.4 The power o f buyers 63

2.1.2.5 Bargaining Power o f Suppliers 64

2.1.3 Opportunities and T h re a ts 67

2.1.3.1 Opportunities 67

2.1.3.2 T h reats 68

2.1.3.3 Ranking o f Opportunities and Threats for T ech co m b an k 69

2.2 Internal A n aly sis 70

2.2.1 Value Chain M o d e l 70

2.2.1.1 Primary A ctivities 70

2.2.1.1.1 O peration 70

2.2.1.1.2 Sales and m ark etin g 71

2.2.1.1.3 Customer serv ices 79

2.2.1.2 Supporting activities 81

2.2.1.2.1 Infrastructures 81

2.2.1.2.2 T echnology 82

2.2.1.2.3 Human resources 86

2.2.1.2.4 Research and D evelopm ent 91

2.2.2 Identification o f Core Competences and sustainable Competitive advantages 95

2.2.3 Strengths and weaknesses 97

2.2.3.1 Strengths 97

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2.2.3.2 Weakness 972.2.4 SWOT matrix 99CHAPTER 3 SELECTION OF APPROPRIATE COMPETITIVE STRATEGIES FOR VISA CARD OF TECHCOMBANK AND PROPOSED ACTION PLANSFOR THE CHOSEN STRA TEG IES 1023.1 Vision/Mission 102

Techcombank 1023.3 Proposed action plans for chosen strategies 104CON CLU SIO N 110REFERENCE I l lAPPENDIX 1 112APPENDIX 2 114

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Figure 1.1 Process of formulating competitive strategies 7

Figure 1.2 Business environment 10

Figure 1.3 Five forces m o d el 14

Figure 1.4 The value chain model 21

Figure 2.1 Total number of international cards from Techcombank 37

Figure 2.2 The number of Techcombank cards and payment revenue by P O S 38

Figure 2.3 Techcombank Visa card clasified by region 38

Figure 2.4 GDP Growth rate 40

Figure 2.5 Estimate Techcombank Visa card marketshare 43

Figure 2.6 The estimated Vietnamese population 44

Figure 2.7 Estimated GDP per capita 2010-2015 45

Figure 2.8 The Visa card product life c y c le 57

Figure 2.9 international card market share 59

Figure 2.10 POS n etw o rk 66

Figure 2.11 Five forces model of Techcombank visa c a rd 67

Figure 2.12 Market share in customer awareness 73

Figure 2.13 VN POS market share 82

Figure 2.14 VN ATM market sh are 82

Figure 2.15 The interest level of new product 92

Figure 2.16 Value chain model of TCB Visa cards 94

L I S T O F F I G U R E S

Table 1.1 Evaluation sheet assessing each opportunity to a com pany 18

Table 1.2 Evaluation sheet assessing challenges to a com pany 19

Table 1.3 Assessment of Techcombank strengths and core competences 24

Table 1.4 Assessment of dominant competencies: valuable, scare, hard to imitate, security distance, success factors, and results 25

Table 1.5 SWOT m atrix 26

Table 1.6 GREAT m odel 27

Table 2.1 The main financial indices in 2008 31

Table 2.2 Some main features o f Techcombank Visa Debit C a rd 36

Table 2.3 Estimate demand o f International payment cards in Vietnam 43

Table 2.4 Compares some indicators o f Techcombank with those o f some main rivals in card product in 2 0 0 8 61

Table 2.5 Assesment of Techcombank’s strengths and core competences 95

Table 2.6 The sustainable competitive advantages 96

Table 2.7 SW OT matrix for visa card of Techcombank 99

Table 3.1 GREAT model 103

L I S T O F T A B L E S

1 Research Problem Statement

As a 15th member o f World trade organization (WTO) from at the end of 2006, Vietnamese economy has opened strongly, integrated deeply and widely in the global economy In the near future, Vietnam enterprises will face the high pressure

o f competition not only from domestic enterprises, but also from foreign enterprises who will take part in the Vietnamese market

It has been clearly demonstrated that the services of banks are quite similar, or in other words have little differences Therefore it is easy for customers to change bank to bank or to open 1 or more accounts at 1 or more bank at the same time even they never use the account That is waste o f banking resources Vietnam Technological and Commercial Joint Stock Bank (Techcombank) has been developing for more than 15 years and now it is evaluated being among one o f 3 leading joint stock banks in Vietnam After a quite long time o f being found and developing, it is the right time for the Bank’s stockholders and business managers take many new issues in business managing and long term competitive strategy into consideration Techcombank currently is focusing on retail banking services which are also focused by many other banks in Viet Nam

Although Techcombank became the official member o f Visa International Services Association since May 2005, the first Visa debit card was issued by Techcombank

in December 2006 and credit cards in 2008 Although, the card market in Vietnam has develop fast in recent years, as being the follower in the market, Techcombank still has to build many special programs to attract customers in this field The bank aims to create its card image connecting closely to Visa image then Techcombank

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decides to name its card Techcombank Visa And the bank also wants whenever customers talk about Visa then they think immediately Techcombank.

From 2010, with the much more opening for financial and banking sectors, the domestic banks must face the extremely sharp competitive pressure from not only the domestic banks, but also the high experience and capability international rivals

It is the fact that every bank cannot be successful without preparing the long-term suitable and strong strategies to readily compete And Techcombank is not an exception

With hope o f finding the appropriate Techcombank visa card strategies to help Fechcombank to be the champion in the more and more harsh competitive

environment, I have chosen the topic o f my thesis: “Competitive Strategy - The

case for Visa card of Techcombank”

2 The objectives of the study

To research the available background o f strategy and competitive strategies; the analysis model of both external and internal business environment; and the process o f formulating the competitive strategies to choose the best for the banks

To identify the necessary to formulate appropriate competitive strategies for Techcombank visa cards and choose the most effective competitive strategies for Techcombank visa card for next 5 years

To provide recommendations and main action plan for Techcombank to compete successful in the harder competitive environment

3 Scope o f the study

Focus on analyzing, formulating and selecting the competitive strategies for visa card products o f Techcombank for next 5 years

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4 Methodology of the study

Collecting materials and economic & financial data via various sources like newspapers, websites (Techcombank, Ministry o f Planning and Investment .), journals, reports, books

Qualitative methods for case study o f Visa card of Techcombank

Being guided by some experienced people who have knowledge o f this issueDescriptive and analysis method: analyzing, comparing and combining

5 Limitation of the study

The study only focuses on analyzing Visa card for Techcombank in Vietnamese market in next five years The results o f this study are specific and only applied for visa card o f Techcombank in next five years This study has just referred for others

If others would like to apply this study’s results, they need to research more or research in other thesis Besides, there are manv other strategic theories (strategy in global industry, strategy in emerging industry ) which are not mentioned and analyzed in this thesis The chosen competitive strategies which are referred in this study need have time to demonstrate in reality The implementation o f action plan sometime is affected by subjective thinking; hence the results may not reach as a plan

6 Contribution of the study

Research to find out the appropriate competitive strategies and propose some recommendations and action plans in order to implement successful the chosen strategies Thesis hopes to contribute much to the sustainable development of both Techcombank visa card in particular and Techcombank in general in the context of deeply integration economies over the world with many opportunities as well as many threats and difficulties for Vietnamese business, especially in financial and banking sector

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CHAPTER 1: LITERATURE REVIEW

1 Overview o f Competitive Strategies

1.1 Competitive strategies

“Competitive” is not a new concept It is used in many fields and viewed from many different angles (both positively and negatively) It is worldwide acknowledged competition and considered competition as both environment and driving forces for socio-economic development Competition now has regarded

as a tough competition among business owners in a certain market in order to win customers and the market itself, thereby selling a great deal o f goods and gaining high profit Business owners involve businessmen, enterprises, economies or countries

The term “strategy” was firstly used in military and literally meant how military forces were used to win a battle In business, the term “strategy” can be understood as “a plan that attempts to define a position for the business that utilizes the competitive advantages that the business has over its competitors” or

as “a way to achieve an organization’s objectives and missions”

“Competitive strategies” are known as a system of commitments and actions, which help enterprises, obtain competitive advantages by directing their

dominant capacities to a specific market Competitive strategies answer the

question o f how to compete against competitors.

Competitive competence o f enterprises involves their own strength and advantages that they can mobilize to maintain and promote their rank in the market as compared with other competitors in a long time Moreover, Competitive competence o f enterprises represents their determination to get

higher profit An enterprise can trade in one or more products or services; thus, it

is necessary to distinguish between competitive competence o f enterprises and that of product/ service While competitive competence o f enterprises is defined

as above, competitive competence of product/ service is decided by its market share

1.2 Categories of competitive strategies

According to Michael Porter, three types o f generic strategies are likely to be chosen to cope with competition: cost leadership strategy, differentiation strategy, and focus strategy Three types o f strategies derive from the aim of controlling the market and the desire to control competitive advantages The selected strategies will have much important to determine the business success or failure

1.2.1 Cost Leadership Strategy

Cost leadership strategy is a course of action so as to supply products or services whose qualities are accepted by the customers with the lowest cost as compared with other competitors

Enterprises choose cost leadership strategy to run the business better than their competitors by supplying mass production with lower cost in any circumstance Enterprises follow this strategy do not aim at higher quantity o f products but lower cost than those who follow differentiation strategy They do not try to be the top rank in their field by creating the differences They just make the differences in case customers have demand Besides, they do not pay attention to segment the market and often supply products to mass customers, as it is costly

to meet different demands in the market

Advantages Companies which follow cost leadership strategy can compete with

competitors with their cost advantage If there is an increase in industrial competitiveness, companies in industry will change to compete in cost In this situation, companies which followed cost leadership strategy in advance will have more competitive advantage than the others Those companies are also less affected when suppliers raise cost and when customers require to lower price as large-scale production can reduce cost Moreover, those companies have great market shares and desire to buy in a large number o f materials from suppliers; therefore, they have more right to bargain with suppliers Finally, companies with low cost effectively prevent the entry o f potential competitors

Disadvantages Competitors can imitate manufacturing methods with lower cost

Besides, the advanced manufacturing technology can reduce the company’s advantages with lower cost Additionally, if the company does not adapt with market change timely, the change in “customers’ taste” put it into the risk of losing profit

1.2.2 Differentiation strategy

The strategy aims at creating the differences and gaining competitive advantages

by creating products or services with original and important characteristics of which are recognized by customers Thus, the company is able to charge for those products or services higher than the normal rate, and get higher profit than the average In general, companies which follow differentiation strategy often divide the market into smaller ones To make differences, these companies need

to base on the functions of researching and developing, and the effectiveness of customer services However, focusing on making differences does not mean that

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cost controlling is not important Controlling cost and maximizing revenue help

to bring more profit to the company

Advantages: The companies which follow differentiation strategy take less risk

o f being competed by other opponents on account o f the customers' loyalty to their brand They have no pressure from customers as they provide customers with unique products and/ or services Additionally, the pressure from the suppliers does not matter much as company can afford the increasing cost of input to ensure the needed differences Finally, customer’s loyalty is a high barrier to prevent the threats of both potential rivals and substitute products

Disadvantages: The companies can hardly maintain the differences in a long

period of time as well as instability as their competitors can imitate their products Another risk is that customers don’t accept the differences of company’s products/ services and their high price These may lead to the failure

of differentiation strategy

1.2.3 Focus Strategy

Unlike the above-mentioned strategies, focus strategy is only used for a certain group o f customers or a certain segment o f the market Focus strategy bases on the specific market following geographic area, kind o f customers or line of products

Once a company chooses a segment o f the market, it is necessary for that company to follow a focus strategy, using methods of differentiation or cost leadership If a company use focus strategy on cost leadership, it will compete with the cost leader in the cost leader’s disadvantage segment If a company use focuses strategy on differentiation, it will employ the differentiation strategy

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explained in point 1.2.2 in one or more segments of the market Moreover, focusing on a small group o f products, companies will be able to develop their business faster than those who follow differentiation strategy on a large scale.Companies following focus strategies often set up their market shares in one segment This strategy creates a chance for business owners to find out and exploit the lack within the market by manufacturing, developing and improving products that meet customers’ demand.

Advantages: A company can compete with rivals within the industry as it

provides products and services that its rivals do not This helps the company cover a great number o f customers as they cannot buy such products and/ or services from other companies However, it is under its suppliers’ pressure The company just needs a small amount o f material; therefore, it suffers when the cost o f input is increased On the other hand, potential competitors and substitute products put little pressure on the company as they have to find the way to destroy customers’ loyalty

Disadvantages: Those who follow focus strategy just have concentration on a

segment o f market; hence manufacturing in small quantity Therefore, their manufacturing cost is higher than those who follow cost leadership strategy and differentiation strategy Those with focus strategy are likely to lose their market when the development o f technology helps those who follow cost leadership to meet customers’ demand, and when those with high production capability following differentiation strategy scramble their market

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13 The importance of Competitive strategy

Competitive strategies play a significant role in business activities as they determine the business success or failure Nearly all the enterprises who do not

c early and properly define their own long-term strategies or who choose wrong bjsiness direction will fail to run the business Some of such enterprises even become bankrupt

Ir the market economy, with the development of technology and increasing living standards, competition is becoming fiercer and fiercer; customers are becoming more and more demanding and sophisticated With proper competitive strategies, a company takes the initiative and be more active in forecasting market changes As a result, it proposes timely solution suitable with the business environment and its internal resources Furthermore, the suitable ccmpetitive strategies will strengthen the company’s capacity o f competing with its rivals to ensure its long-lasting existence and sustainable development

Competitive strategies are important to be flexible Within the implementing pncess, competitive strategies are necessary to be regularly monitored and adjusted, even changed so as to be suitable to specific situations and conditions

2 Process to formulate Competitive Strategy

Tt promote stable development, it is essential for a company to build a feasible methodical and complete process o f strategies In so doing, the company must de'ine its own strength, competitive advantages and weakness, in which competitive advantage is believed to be the central factor that influences the process o f analyzing and establishing strategies Competitive advantage may in'olve leaders' strategic vision, leaders’ capability, financial resources, human

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resources, technology, relationships with business partners, customer network, and adaptive ability, etc Basing on these factors, the leaders generate the objectives relating to practical experiences, as well as internal and external env ironment o f their enterprises.

Cost leadership Differentiation

Figure 1.1 Process o f formulating competitive strategies

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2.1 Vision and Mission

2.1.1 Mission

L’ach company has its own mission even though it is not officially announced Mission represents the core value of a company Through mission, a company is known for its socio-economic contribution, business orientation, global rank, and commitments Speech of mission must be brief and condense, yet involve all basic contents, be encouraging, and prove long-term stability

2.1.2 Vision

Company’s vision is ability to forecast and generalize changes as well as opportunities to the company in far future Forecasting situations in far future helps the company to avoid some risk, find suitable direction, and exploit business opportunities

A vision involves:

Determining a direction for the future

Paying attention to customers' benefits

Being practical

Creating impetus

Being fully presented

Beine regularly monitored and evaluated

2.1.3 Strategic objectives o f a company

It is very important to build up strategic objectives o f a company The objectives must ensure the following features:

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Be proper and can measure

Relate to important issues

Be challenging and feasible

Have time to achieve

Provide tools to assess the management’s operation

2.2 External Analysis

The purpose o f external analysis is to see how external factors impact the company External analysis forecasts opportunities and challenges to company business

External analysis includes: macro-analysis and micro-analysis (industry analysis)

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Political and Legal

Environment

Technological environment

Potential competitors

Supplier power Rivalry Buyer power

Substitutes

Demographic

Environement

Socialist Environment

Figure 1.2 Business environment 2.2.1 Macro Analysis (PEST model)

In fact, industry and enterprises co-exist in a macro-environment, including: economy, technology, socio-culture, law and politics factors Changes in macro- environment may directly affect any component in an industry; and then affect the industry itself

External analysis aims at investigating what a company is good at and what it should change Whereby, the company can catch up with the opportunities timelv from its environment and predicts challenges it can encounter with The company then determines “attacking” strategy or “defending” strategy to each affective factor As a result, opportunities are effectively exploited and potential

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risks are reduced With external analysis, a company anticipates the future trend; thus, external analysis must be conducted before internal analysis Many companies assess their strength and weakness before anticipating their opportunities However, successful enterprises affirm that they investigate opportunities in their environment before assessing their own strength and weakness in such opportunities Understanding business environment play an important part in making a plan Having a comprehensive grasp of aspects in general environment, the leaders are able to anticipate all external factors that are likely to affect the future of the company.

2.2.1.1 Economic factor

Macro-economic factors determine the clarity and prosperity of an economy These factors always have an influence on enterprises and industry Thus, enterprises must do research on macro-economic factors in order to recognize changes, trends and their strategies aims

The influence o f the economy on a company may alter its ability to create its values and revenue Important components o f macro-economic environment includes: economic growth rate, interest rate, exchange rate, and inflation rate The impact o f these factors may bring challenge or opportunities to a company

In other case, it may bring challenge to this company but opportunities to that one Besides mentioned factors, economic factors involve unemployment rate, financial policy, currency, GDP, GDP per capita, etc

2.2.1.2 Technological Factor

This group o f factors has a big, direct and high influence on competitive strategies o f a company Technological development is likely to lead to the

backwardness in products after one night Furthermore, such development brings potential new lines o f products with lower cost, better quality and higher productivity Therefore, technological development carries both creativity and backwardness, both opportunities and challenges.

When technological factors are investigated, it is necessary to pay attention to fund for research and development, intellectual property, copyright protection, and national policies on technologies

2.2.1.3 Political and Legal Factors

Political Factors refer to government policies such as the degree of intervention

in the economy, the political orientation, political stability, investment incentives, business regulations relating to labor and environment, goods and services a government want to provide, the extent o f subsidy, priorities in terms

of business support Political decisions from a government can impact on many vital areas for business such as the education o f workforce, quality of infrastructure

Legal Factors are legal regulations o f a government in using labor, treatment to employees, minimum wages, recycling, etc These laws can affect a firm’s costs, and the demand for its product

2.2.1.4 Social Factors

Like technological development, social changes also carry opportunities and challenges In medium and long term period, the kinds o f factors that quickly change along with the adoption o f cross-cultural habits bring a great number of opportunities Consuming attitude, structural composition by ages, work office and families also need to be taken into consideration

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Besides, it is important to take into account on social factors that divide the community into different groups o f customers As a result different segments of the market are formed, creating various opportunities for companies to gain profit because different groups o f customers have difference in psychological characteristics, interests, living habits, knowledge, aesthetic point o f views and income.

ỉn b rief \ the purpose o f macro-analysis is to recognize changes and trends arising

from external environment With the aim of discovering the future trend, macro­analysis helps companies to anticipate new opportunities and challenges

2.2.2 Industry Analysis (Five forces model)

Industry analysis is carried out to see how intensive the competition in a given industry is It is very important for managers to understand the industry in which their firms operate in to compete for resources, customers, sales and profits Five forces Model o f Micheál Porter is the most common analytical tool to help manager formulate appropriate strategy

According to Micheál Porter’s model, a company is under influence o f five factors within its industry, in other words, five competitive forces:

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h

Threat of lUbstitUB!'1

Figure 1.3 Five forces model

Micheál Porter states that the stronger these forces are the bigger limitation in increasing price and higher profit a company has The manager is responsible to

be aware of opportunities and challenges deriving from these five competitive forces; whereby formulating corresponding strategies

2.2.2.1 Threat o f New Entrants

Potential rivals are companies which are new in the industry, or companies which are not already in the industry yet have capacity to take part in that These rivals bring challenges to current companies Current companies have tried to prevent potential competitors from taking a share in their industry as the more enterprises co-exist in one industry the tougher the competition is In other

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words, a company’s market share is limited, its profit is divided, and its rank suffers.

A company must be aware of new enterprises and whether they are hindered by other rivals The company also needs to think of the way to obstruct their development Competitive intensity is caused by number o f rivals; the density of equally powerful rivals; strength and weakness of equally powerful rivals; its own rank by score and the way to gain the higher rank These factors must be carefully studied in details

Degree o f advantages and disadvantages o f potential rivals when entering an industry depends on barrier o f new entrance The primary barriers include: absolute cost advantages, loyalty to brand, the effect of business scale, exchange cost, government policies, hinders and competition

Competition among existing firms plays an important role in creating opportunities or brings obstacles to companies The weaker the rivals are, the more opportunities the companies have to increase product price and profit In contrast, when the rivals are strong, rivalry among companies is tougher, leading

to harsh price competitiveness and suffer for the companies Therefore, competitive intensity among firms creates risk in profitability Rivalry among existing firms is affected by three factors: industry structure, degree o f demand, and barriers o f quitting its industry

2.2.2.3 Threat of Substitutes

Substitutes are products that accomplish the same purpose or fulfill the same needs

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Substitutes create a threat to competition, limiting the likelihood of rising price; hence limiting companies’ profitability Inversely, if a company has few substitutes (in case substitutes have weak competitiveness), company will have chances to increase price and also increase its profit As a result, its strategies are formulated to gain competitive advantages from this practical situation To analyze the competitive pressure of substitutes, a strategic planner needs to answer the following questions:

Is there any new product that can make customers stop buying the company’s products?

How many similar products that can prevent the company’s development?How can the company do to weaken substitutes and prevent substitutes’ supply?

2.2.2.4 Bargaining Power of Buyers

Customers o f a firm can be end users or enterprises who deliver products to end users, or retail sellers Customers are considered as competitive threats when they have a chance to force companies lower the price or demand high quality services Conversely, when customers are in disadvantageous position, companies are likely to raise the price and gain more profit

The tense o f customers’ force depends on their advantages According to Micheál Porter, forceful factors arise when:

The industries contain many small and dispersive companies while the number o f customers is small and these customers are large customers

Customers buy products in mass number

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The companies depend on customers because the high proportion of orders

is from them

Customers stop buying products from one company to buy products from the other for lower cost, which stimulates companies compete with each other by reducing price

Economic characteristics of customers are to buy products from different companies at the same time

Customers threaten companies by vertical amalgamation which can lead to price reduction

2.2.2.5 Bargaining Power of Suppliers

Suppliers are considered as a threat when they are able to increase the input price

or decrease the quality o f their products or services As a result, companies’ profit is reduced In contrast, if suppliers are weak, companies force them to decrease price and promote quality

Analyzing which supplier have power to put the most pressure on companies helps the companies to plan flexible responding strategies

ỉn brief, it is significantly important for a company to analyze business

environment Business environment involves macro environment and micro

opportunities and challenges, basing on which proper management decision is determined

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A:lo/àỐ

2.2.3 Summary of macro analysis

The last stage o f macro analysis is to evaluate and rank opportunities and challenges By answer the three following questions; managers can rank the opportunities and threats:

Which are the most important now?

Which are likely to be most important in a few years?

What are the factors influencing any changes?

2.2.3.1 Opportunities and rank of opportunities

After analyzing macro-environmental factors and industry environment, we need

to synthesize all opportunities a company may have Follows are steps:

Step 1: List all opportunities for the company

Step 2: Draw an evaluation sheet assessing each opportunity to the company

Table 1.1 Evaluation sheet assessing each opportunity to a company

Basing on the evaluation sheet assessing impacts of opportunities on a company,

we can a eradable list o f opportunities in a priority order It is necessary for a company to take an advantage of high-ranked opportunities Medium- and low-

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ranked opportunities should only be exploited when resources are available This priority order is used as data for SWOT.

2.2.3.2 Challenges and rank of challenges

Like evaluating and raking opportunities, evaluating and raking challenges are done as follows:

Step 1: List all challenges to the company

Step 2: Draw an evaluation sheet challenges to a company

Table 1.2 Evaluation sheet assessing challenges to a company

Basing on the evaluation sheet assessing impacts o f challenges on a company,

we can a gradable list of challenges in a priority order This priority orders will

be used as data for SWOT

2.3 Internal Analysis

While external analysis is to find out opportunities and threats, internal analysis

is to evaluate relevant factors in an organization in order to determine its strengths and weaknesses

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It is clearly impossible to evaluate all internal factors as the number of factors is iireat Therefore, to be able to evaluate internal factors, it is necessary to point out the main factors which represent the internal situation o f the company Two tools used to analyze internal environment is the value chain model and the process to identify sustainable competitive advantage.

2.3.1 Value Chain Model

The value o f a company is measured by the amount that customers are willing to pay for products or services To gain competitive advantages, functional departments o f a company must produce a value with lower cost as compared with its rivals or must make its products different from rivals’ products in order

to have higher selling level in the market

Micheál Porter announced the concept “value chain” as differences exposition that determines competitive advantages The value chain o f a company includes two kinds o f activities that create value: primary activities and support activities

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Figure 1.4 The value chain model 2.3.1.1 Primary Activities

Primary activities are those that are directly concerned with creating and delivering a product In other words, primary activities directly add value to a product

Operations These are the activities related to the production o f products or

services For physical products, production generally has to do with manufacturing For services such as banking or retail operation, production typically takes place when the service is actually delivered to customer

Marketing and Sales Marketing is a process o f determining, forecasting and

satisfying the customers' demand Marketing and sales create value by discovering customers’ needs, and communicating them back to the R&D

function o f the company, which can then design product that better match those needs The marketing analysis often include: customer analysis, market research and product sales In analyzing marketing and sales functions, we need to consider some following issues:

• Do products meet the objectives or not?

• How do customers feel about brand name, design, quality and price of products (compared to competitors)?

• Are distribution channels effective?

• Do sale forces meet the objective or not?

• How is effect o f advertising products and services?

Customer Services All those activities associated with maintaining product

performance after the product has been sold This function can create a perception o f superior value in the minds o f customers by solving customer's problems and supporting them after they purchased the product

2.3.1.2 Support Activities

The support activities o f the value chain provide inputs that allow the primary activities to take place These activities don’t directly add value to products or services

Company Infrastructure The infrastructure includes the organizational structure,

control system, and culture of the company Since top managers can exert considerable influence in shaping these aspects o f a company, top managers should be also viewed as part o f the infrastructure of a company Though strong leadership top management can consciously shape the infrastructure of a

company, and through that the performance o f all other value creation activities that take place within it.

Human resource management This function concerned with recruiting,

developing, motivating and rewarding the workforce o f a business

Technology Development Activities concerned with managing information

processing and the development and protection o f knowledge in a business

Research a n d development (R & D): to promote new products and technology

By superior product design, R&D can increase the functionality o f products, which makes them more attractive to customers The technological development can lower manufacturing cost, creating more attractive products being able to be sold with higher price Thus, research and development have an impact on manufacturing and marketing

2.3.2 Identification o f Core Com petences and sustainable Com petitive advantages

To determine competitive strategy, we have to determine core competences and the sustainable competitive advantages o f a company

The core competences serve as a base for all strategies The concept “core competences” indicates the strength in resources, professional efficiency or business skills in primary areas that directly bring high profit

Basing on analysis result o f internal and external environment, a company needs

to be compared with its current rivals in order that its core competences in business activities are objectively evaluated

Criteria to assess strengths and core competences

C riteria 1: Financial resources/Capital

Criteria 2: Leaders and management capability

Criteria 3: Human resources

Table 1.3 Assessment o f Techcombank strengths and core competences

Table 1.4 Assessment of dominant competencies: valuable, scare, hard to imitate, security distance, success factors, and results

(Yes/ No)

Scare (Yes/

No)

Hard to imitate (Yes/

No)

Security distance (Y es/ No)

Success factors (Y es/

Any factor that satisfies 3/5 standards is categorized as a dominant competencies.

After analyzing internal environment, assessing the core competencies and the

weaknesses is drawn; whereby determining essential competitive strategies

2.4 Formulation and Choice o f Competitive Strategy

substitute strategies, some o f which are chosen to follow

A company cannot choose a substitute strategy one by one as it takes much time and does not work effectively Thus, it is recommended to choose and promote a group of best strategies together with careful anticipation o f advantages, disadvantages, cost and benefit o f implementation o f such strategies

understanding o f long-term goals and their nature, work frame o f strategy- planning process, methods and ways o f application, and ways o f using strategic models especially the ways to choose strategies such as SWOT matrix, GREAT model, etc

Table 1.5 SW OT matrix

0 - Opportunities1

S-T: Utilize and promote strengths to reduce the risk

o f loss

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w - Weakness W-O: Make good o f W-T: Repair internal

opportunities

S-O strategy This strategy is to utilize and pursue the opportunities which are

the most suitable with the com pany’s strengths and business orientation in the market (Attacking)

W-O strategy This strategy is to repair the weaknesses to take advantages o f and

pursue external opportunities (Competing)

S -T strategy: This strategy is to utilize and determine the method o f employing

the com pany’s advantages and strengths to reduce external threats and challenges (Being cautious)

W -T strategy: This strategy is to build up a defending plan o f preventing and

repairing the weakness so as to avoid external challenges

Basing on these above strategies, the company can choose one strategy or some strategies at the same time The criteria for choosing the strategies are to base on GREAT model which stands for Gain, Risk, Expenses, Achievable and Time - bound o f each strategy

Table 1.6 GREAT model

C rite ria W e ig h t Strategies

Strategy 1

Strategy

Assessing score

T ra n s fe rrin g score

Assessing score

T ra n s fe rrin g score

A ssessing score

T ra n s fe rrin g score

The theoretical background presented in chapter 1 is applied as a base for analyzing, assessing, formulating and choosing the best competitive strategies for Visa card product o f Techcombank.

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CHAPTER 2 STRATEGIC ANALYSIS AND FORMULATION OF COM PETITIVE STRATEGIES FOR VISA CARD OF TECHCOMBANK

1 Background of Techcombank and Visa Card of Techcombank

1.1 Techcorn bank Overview

Vietnam Technological and Commercial Joint Stock Bank - shorted name is Techcombank - was established on July 27’ , 1993 with the initial registered capital o f 20 billion dong with the aim to become an efficient financial intermediary bridging the savers with the investor in the need o f capital for business and economic development in the open door era Techcombank is now widely known in the market as the bank with strong competitive advantages, differentiated by modem technology and advanced services and products, with clearly defined development objectives and strategy as well as enthusiastic and creative staff Current registered capital o f Techcombank is nearly 5.400 billion dong The network o f the bank includes 169 branches/TSOs over the country

Mission

Techcombank is a multi-functional Joint Stock bank o f Vietnam, providing individuals and companies with high competitive, various and uniformed financing services and products in order to meet all demands o f customers, creating rising for shareholders, developing interests for Techcombank staffs and contributing to the development o f community

The core value

Customer orientation is a base for all activities

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