Development strategy of Joint Stock Commercial Bank for Foreign Trade of Vietnam - Can Tho Branch - in the peeriod of 2011-2015

CAPSTONE PROJECT REPORT DEVELOPMENT STRATEGY OF JOINT STOCK COMMERCIAL BANK FOR FOREIGN TRADE OF VIETNAM — CAN THO BRANCH - IN THE PERIOD OF 2011 - 2015 Group No.: 9 e TRAN NGUYEN

CAPSTONE PROJECT REPORT

DEVELOPMENT STRATEGY

OF JOINT STOCK COMMERCIAL

BANK FOR FOREIGN TRADE OF

VIETNAM — CAN THO BRANCH -

IN THE PERIOD OF 2011 - 2015

Group No.: 9

e TRAN NGUYEN HUYNH ANH

e TRAN QUOC HUNG

ACKNOWLEDGEMENTS

On behalf of the whole member of the group,

we would like to send to teachers the deepest gratitude Our group has studied the lectures and documents of the Teachers and have researches additionally a lot of different

practical document resources to write the

capstone

Thank the Board of Directors of Joint Stock

Commercial Bank for Foreign Trade of

Vietnam — Can Tho Branch for being enthusiastic for providing data and documents for us to complete this capstone

We hereby commit this is capstone written by our group and this is first time for publishing

Thank sincerely!

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CONTENTS

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INTRODUCTION

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CHAPTER 1: BASIC RATIONALE

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2 Agsescing The CONIC UIVE BIBWIK, cee sen mnncecanmones nennme meee open 30

CHAPTER 3: ANALYSIS ON THE CURRENT SITUATION OF VIETCOMBANK CAN THO

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CHAPTER 4: DEVELOPMENT STRATEGY FOR VIETCOMBANK CAN THO (2011 — 2015 PERIOD)

4.] Strategic Objectives ooo ee ẽ 48

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5.2.2 Proposals recommended to Central Vietcombank - 67

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LIST OF FIGURES AND GRAPHS

Figure ]l_1: Model oƒ tmpáct oƒ external envữonmentdl [dCÍOFS J Figure 1.2: Model of 5 competitive forces by M Porter .0 cccccccecctee ete ete 6 Figure 1.3: Model of evaluation matrix for internal and external factors I] Figure LA? SPACE Wage WOMEN casio asesev sm axes ssaccax mn assess Mesa a Bae aN Ni RP REI 12 Cure Fae SY Cl Te eens ecm eee ECE 14 Fieure 2.4: GDP growth: Fate, POTIOd ZOGO2OLD eeu«sssussesnssondnaordisgaogazarirnslEortgoahosdtgsok 1 Figure 2.2: Inflation, period 2006-20110 Ă 6 S11 ** 1122 112851 khe 20 Figure 2.3: Graph on market share of capital mobilizing activities in CT City 26 Figure 2.4: Graph on market share of credit debts in CT City af PLOWS 2 Ss TASES PHÊ s01 seseeerieeoennssdahsnitsddiietiddtigSdOSULHHh€HEAH00820046038.2000410400000/0086100 28 Figure 2.6: Graph on market share of export and import payment in CT City 29 Figure 3.I: Orgamizational chart oƒ Vietcombank Can Tho 34 Figure 4.I- Matrix to evaluate the internal-external ÍqCÍOFS + 49 Figure 4.2: SPACE matrix represent sirategic group oƒ the bank si

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Table 1.1:

Table 2.1:

lable 2.2:

Taple 2.3;

Table 2.4:

Table 2.5:

Table 2.6:

Table 2.7:

Table 2.8:

Table 2.9:

Table 3.1:

Table 3.2:

Table 3.3:

Table 3.4:

Table 3.5:

Table 3.6:

Table 3.7:

Table 4.1:

Table 4.2:

Table 4.3:

Table 4.4:

Table 4.5:

Table 4.6:

Table 4.7:

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LIST OF TABLES

List 0ƒcriteria to be qnalyzed in the SPACE MaIrix 13

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Credit activity oƒcredit organizafions (2006 — 2010) 26

Business results of credit organizations, period 2006 — 2010 28

Import — Export payment by credit organizations in 2010 29

Strengths and weaknesses of competitors oƒ CB Can Tho 30

Evaluating competitive image matrix of Vietcombank Can Tho ai Capital mobilization by VCB Can Tho (2006 — 2010) 37

Credit activity of VCB Can Tho (2006 — 2010) 37

Service activity of VCB Can Tho (2006 — 2010) - - 39

Operation situation of VCB Can Tho (2006 — 2010) 40

Statistics of working age in VCB Can Tho (2006 — 2010) 42

Statistics of staff qualification in VCB Can Tho (2006—2010) 43

Internal Factor Evaluation Matrix (IFE) of VCB Can Tho 46 Vielogemtbimmk Can THö THÍ s «.«siusiae diekaEASi 285L0000%908.000080010604 20831084 48 The variables forming the axis of SPACE IMAffIX à 50 IVIL BUTI OT VC LG N TP EksessssessnennaerttedtuichrgieloAHDAGEAGHGOEEHS DGE-00/106730001 000.0 32 QSPM matrix, ŠS-Q sifdl€Øi€S ØFOHD .àà.ằ eset nhiên 36 OSPM matric, S-T sWGÍ6tio ĐIDHỮ? dsadea ào Ha ngtrĩn nà 103v810388286.0140/6028 af OSPM matrix, W-O SEPRIERICS BP OUD cxcsscasnwnsa secnerwensennccnnaxapemanesvacens 59 OSEM maitre, W=T SIPQLERIOS SP OUD see cocsmensagu snennnmmvnsmesnamaanansenutucsenni 61

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LIST OF ABBREVIATIONS

ACB: Asia Commercial Bank

Agribank: Viet Nam Bank for Agriculture and Rural Development

BIDV: Bank for Investment and Development of Viet Nam

BCG: Boston Consulting Group matrix

EFE: External factor environment matrix

IFE: Internal factors environment matrix

NHNN: The State Bank of Viet Nam

NHTM: Commercial Bank

QSPM: Quantitative strategic planning matrix

SBU: Strategic Business Unit

SMART: Specific; Measurable; Achievable; Realistic; Timely

SPACE: Strategic position matrix and performance assessment

SWOT: Strengths - Weaknesses - Opportunities - Threatens

TCTD: Credit organization

Vietcombank: Joint stock commercial Bank for foreign trade of Viet Nam

Vietinbank: Viet Nam joint stock commercial Bank for industry and trade

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INTRODUCTION

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1 Foundations for the subject

After more than 25 years of innovation and economic development, Vietnam joined the World Trade Organization (WTO) In the current trend of globalization; businesses have been facing not only great opportunities to construct and develop themselves to new heights but also big potential risks To survive and grow, businesses need to build their own orientations and business strategies based on researches and analyses of the external business environment as well as the internal environment within which they operate in order to take advantage of the opportunities, minimize the hidden risks in business field, thereby bringing into play their strengths and limiting their weaknesses

Doing business in banking area is specialized and requires such special conditions as strong financial resources, good risk management capacity, capital mobilizing capacity, and increasingly professional customer services However, the global financial crisis in 2008 has weakened the power of large banks in the world There have been difficulties in the world economy, especially those in banking and financial sectors which have great impacts on these sectors and forced a series of major banks in the world to declare bankrupt In Vietnam, local banks have to deal with these global difficulties and, at the same time, compete with other domestic banks plus foreign banks who step into the area in large number as a result of WTO

commitment and agreement

Resulting from the above-mentioned reality, the development of business strategies is essential for each and every business It helps the business have a clear vision and particular business objectives to enable the departments and individuals in the business to meet the final common vision and objectives and avoid the business resources being localized or dispersed which surely weaken the business Today's business environment which changes rapidly and the global competition require enterprises to keep being active and creative to adapt to changes Based on these points of view, we come up with the research topic titled as "Development Strategy for Joint stock Commercial Bank for Foreign Trade of Vietnam in Can Tho in the period between 2011 and 2015"

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GRIGGS

2 Research objectives

Systemizing theoretical bases on strategies to provide premises for the analysis of factors impacting the operation of Vietcombank in Can Tho, from which

a set of development strategies for the branch from 2011 to 2015 can be formulated

Analyzing and assessing the operation situation as well as the business

environment of Vietcombank in Can Tho and other commercial banks in Can Tho city area, thanks to which suitable alternatives for solutions and selections can be made to aid the development of Vietcombank in Can Tho in the coming years

3 Research content

To accomplish the research objectives as clarified above, we shall consider

the followings:

Rationale: presenting the viewpoints and tools necessary in management to

guide the analyses in this report

Analysis of commercial banks’ operation in Can Tho city: based on this analysis we figure out opportunities and challenges affecting the operation of Vietcombank in Can Tho

Analysis of current situation of Vietcombank Can Tho: looking into the strengths, weaknesses and core competencies of the unit, which helps locate Vietcombank Can Tho in the course of development in the area

Building a development strategy for Vietcombank Can Tho in the period between 2011 and 2015: thanks to the aforementioned analyses and assessments we recommend key strategies and then have them analyzed based on the real conditions

of the unit to examine its feasibility

Solutions, conclusions and recommendations: based on the examination on this feasibility we make suggestions whether to implement the solutions and foresee

possible gains and losses if these solutions applied

4 Research methodology

To complete the research we have applied a combination of research methods:

- Method of primary data collection: in-person interviews with customers, staff and leading board members of the unit;

- Methods of secondary data collection: through the synthesis of statistical

yearbooks, the banks’ websites and annual reports, scientific research reports,

statistics, bank financial statements, market analyses, reference materials, books, magazines and instructional materials in Griggs program, .;

- Methods of descriptive statistics; - Methods of analysis and comparison

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5 Objects and scope of the research

Objects of research: Joint stock Commercial Bank for Foreign Trade of Vietnam, Can Tho Branch, customers, the competitors; products; and banking services in Can Tho city

Scope of research: focus on studies assessing the business situation of Vietcombank Can Tho and other commercial banks in the same area

6 Significance of the subject

This study, when completed, helps the Joint stock Commercial Bank for Foreign Trade of Vietnam-Can Tho Branch plan its program for sustainable development of currency trading sector in the near future as well as propose solutions to improve currency trading operation effectiveness in the city of Can Tho

In addition, working on this study topic enables our group members practice and strengthen specialized and professional knowledge from the course and improve the skills to analyze, evaluate, and synthesize relevant business activities

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CHAPTER 1: THE LITERATURE REVIEW

1.1 The definition of strategic management

Strategic management is a research process of current and future environments,

a planning process for the organization’s goals; formulating, organizing, and monitoring the implementing of decisions in order to achieve those goals in the current as well as future environments

The important characteristic is that every business strategy is carefully considered and helps distinguish business plans to result in the so-called

“competitive advantage” In reality, there is no business competitor without a strategy These strategies possess the sole aim to make sure the business can seize a sustainable competitive advantage over other competitors

1.2 The strategic management process

This process is composed of 3 basic stages: strategy formulation, strategy implementation, and strategy evaluation

1.2.1 Strategy formulation

Strategy formulation is the analysis of internal and external factors having impacts on the business and then making a plan for that business in accordance with the analyzed factors This stage helps the business decide whether or not to carry out their activities in a field/geographical area, or how to allocate resources, expand/limit its business, cooperate with counterparts/competitors or work separately

12.1.1 Strategic goal-setting

Identifying strategic goals, also called ‘business vision’ —‘mission’; in other

words, we should point out our tasks in doing business and what we should achieve

in the future

1.2.1.2 Analyzing the external environment

Analyzing the external environment on a macro scale helps the business know how external opportunities and challenges affect their business strategies Analyzing

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the external factors also includes considering the working environments In order to have proper strategies

** Analyzing the macro environment:

The macro environment has a considerable impact on the activities of every

business, including factors related to economy, culture-society, politics—law,

technology, demography, globalization, ctc This analysis allows us to identify opportunities, challenges, as well as other legal ties so that we can minimize issues or have plans to response to them Besides, we can take opportunities of the environment to carry out business goals

This is an important part in the process of strategy formulation External

factors are unable to control, but when we understand them we can maximize

opportunities and minimize challenges to be successful in our business

Politics/ olitics/ Law [ae Globalization

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Michael Porter — a leading strategist in business has formulated a model of 5 competitive forces in order to analyze the working environments related to the field The industry working environment is the business area where a particular firm and other competitors are operating Its scope includes customers, competitors, substitutes, suppliers, and potential competitors This analysis functions as guidelines

to help us identify factors with direct impact on our business; it is the key for us to formulate our strategy successfully

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businesses In the same

4 Potential entrants: are competitors who will join in the industry in the future and directly competing with us in the market, sharing the market and profits with us

Therefore, in strategy formulation, a strategist should consider the threats from these potential entrants

4 Competitive rivalry: the second force in Michael Porter’s Five Forces model

is competitors in the same sector, offering similar products This analysis helps us know what their strengths and weaknesses are, and what they are planning to do, so that we can have an appropriate strategy to push them back, defeat them, or

collaborate with them

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4 Buyers: the third force in Michael Porter’s Five Forces model is the bargaining power of the buyers Usually, buyers have powers to ask for lower prices, better quality of products, and ideal services, etc., which increase operating costs and

so reduce profits Understanding buyers helps learn about the position of the firm in the business process

4 Suppliers: the fourth force in Michael Porter’s Five Forces model is the bargaining power of suppliers, including suppliers for materials, ingredients, other services, etc for our business They have the bargaining powers to raise the prices or lower the qualities, change the payment methods, etc, which put more pressure on

our business

4 Substitutes: the last force in Michael Porter’s Five Forces model includes other products whose functions are similar to ours yet are not of the same type in

order to meet the customers’ demands

1.2.1.3 Analyzing the firm’s internal environment

Analyzing the internal environment helps identify the strengths/weaknesses of the firm and, when combined with analyzing the external environment, helps

figuring a proper strategy In addition, it allows us to know the firm’s core capability

in the competitive process with others and whether we are capable enough to take Opportunities from the external environment The analysis of internal environment includes: auditing, financial activities, human resources, marketing, infrastructures, etc in a comparison with those of other competitors in the same sector or the average criteria applied for the sector

1.2.1.4 Designing strategy and making a decision

4 Identifying strategic goals

Strategic goals are what we need to accomplish in the future These goals must satisfy SMART criteria

4 Designing and selecting strategy

This process has 3 stages:

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Upon deciding on a strategy, the firm will start to implement it by establishing programs for setting goals, organizing, and implementing these programs The firm has to mobilize and allocate the sources, work out budget plans, make policies, and organize the firm’s structure and culture in order to support the successful realization

of the strategy

1.2.3 Strategy monitoring, evaluation, and modification

During the strategy implementation, the firm needs to have regular monitoring

and evaluating activities of the progress and goals of the implementation If necessary, the firm has to modify the strategy so that it fits the situations and

previously-set goals

The benefits of this monitoring, evaluating, and modifying activity are to orient the employees to the good results they will get so that they can try their best at work Moreover, monitoring and evaluating also provide useful information as well

as experience to help in formulating other strategies in the firm

1.3 Tools for designing and selecting a strategy

As mentioned before, the tools for designing and selecting a strategy includes the establishment of matrices in the following order:

1.3.1 Input stage

4 Internal Factor Evaluation (IFE)

There are 5 steps to carry out an [FE matrix:

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e Step 1: Identify 10-20 key factors in accordance with the size and complexity of the business areas, including basic strengths and weaknesses which may affect the business and its goals

e Step 2: Assign weights from 0.0 (not important) to 1.0 (very important) to each factor The weights of these factors depend on how much influence each factor has on the business success If it is difficult to identify the weights, the strategy building group may discuss and come up with an agreement The sum of all weights must be equal to 1.0

e Step 3: Identify strengths and weaknesses of the business based on each factor identified Use rating from | to 4 for each factor, in which 4 is major strength,

3 is minor strength, 2 is minor weakness, and | is major weakness

e Step 4: Identify the weighted score for each factor by multiplying the weight by its rating

e Step 5: Identify the total weighted score for the business competitive capacity by summing up the weighted score of all factors to arrive at the [EF matrix

Comparison and evaluation: The total weighted score of the matrix ranges

from | to 4, independent of the number of important factors in the matrix

- If the total weighted score is below 2.5: the business is internally weak

- If the total weighted score is above 2.5: the business is internally strong

4 Competitive image matrix: similar to the formulation of the IFE matrix, but

also including several major competitors to compare the businesses’ competitive

capacity

4 External Factor Evaluation (EFE)

There are 5 steps to construct an EFE:

e Step 1: Make a list of 10-20 external factors in terms of opportunities and threats which we consider to have an important impact on the business success

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e Step 2: Assign weights from 0.0 (not important) to 1.0 (very important) to each factor The weights of these factors depend on how much influence each factor has on the business area The sum of all weights must equal 1.0

e Step 3: Identify rating from | to 4 for each factor Rating of each factor depends on how well the business responds to each factor: 4 is superior, 3 is above average, 2 is average, and | is poor

e Step 4: Identify the weighted score for each factor by multiplying the weight s of each factor

e Step 5: Identify the total weighted score for the business response capacity

by summing up the weighted score of all factors

Comparison and evaluation: The total weighted score does not depend on

the number of factors in the matrix, the highest score is 4, average is 2.5, and the

lowest is 1

- If the total weighted score are 4: the business has superior response to opportunities and threats

- If the total weighted score are 4: the business has poor response to

opportunities and threats

1.3.2 Combination stage

This stage consists of 2 steps: planning for the business unit and for the

corporate strategies

1.3.2.1 Business strategies

The goal of pianning for business strategies is to develop a suitable investment

portfolio for long-term sustainable development of the business Necessary tools for this stage are: Boston Consulting Group (BCG) matrix, General Electric (GE) multifactor portfolio, and Charles Hofer matrix However, in this research, the authors study corporate strategies in Cantho City; therefore, theories on BCG and GE

matrices will not be mentioned

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1.3.2.2 Corporate strategies

This includes planning for general strategies and detailed strategies

4 Planning for general strategies

The tool used is Internal — External matrix:

Internal-External matrix positions different Strategy Business Units of an organization into a nine-cell table This matrix is based on 02 basic aspects:

- Scores from the IFE matrix are plotted on the X axis;

- Scores from the EFE matrix are plotted on the Y axis

- Each SBU has to set up its own IFE and EFE matrices, based on which its IE matrix can be made

- The X axis shows the total scores from IFE matrix

Y Total weighted score of 1.0 - 1.99 represents a weak internal position;

Y Total weighted score of 2.0 - 2.99 represents an average internal position;

Y Total weighted score of 3.0 - 4.0 represents a strong internal position

- The Y axis shows the total scores from EFE matrix

Y Total weighted score of 1.0 - 1.99 is considered low;

Y Total weighted score of 2.0 - 2.99 is considered average;

Y Total weighted score of 3.0 - 4.0 is considered high

Total weighted score of IFE matrix

+ For SBUs in cells IJ, Il, 1V: should be further grown and built;

+ For SBUs in cells II, V, VII: should be maintained;

+ For SBUs in cells VI, VIII, LX: should be harvested or get rid of

4 Planning for detailed strategies

Tools used in this part include SWOT matrix and SPACE matrix These matrices use data from the input stage, combined with external opportunities and threats as well as internal strengths and weaknesses to arrive at possible strategies for the firm to select and carry out

SPACE matrix

SPACE matrix is used by a company to decide what type of strategy it should undertake: Aggressive, Conservative, Defensive, or Competitive The matrix’ axes are:

- FS: Financial Strengths of the enterprise

- CA: Competitive Advantage of the enterprise

- ES: Environment Stability

- IS: Internal Strengths

Figure 1.4: SPACE matrix

G Global Advanced foster oF Busnes A tna 42

In order to construct a SPACE matrix, the following steps are needed:

- Step 1: Choose a set of variables to represent financial strengths (FS), competitive advantage (CA), environment stability (ES), and internal strength (IS) Followings

are some values used to create SPACE matrix’s axes

- Step 2: Use rating scale +1 (worst) to +6 (best) for each factor of FS and IS; use rating scale -1 (best) to -6 (worst) for each factor of ES and CA

- Step 3: Find the average score for FS by adding all the values, then divided by the

number of selected factors in FS Do the same with IS, ES, and CA

- Step 4: Plot average scores for FS, IS, ES, and CA on the appropriate axes of SPACE matrix

- Step 5: Add the average scores on X axis and mark the result on X axis; do the same with Y axis; then find the intersection point of the new points

- Step 6: Draw a vector from the centre of SPACE matrix to the intersection This

vector shows the type of strategy that can be applied for the company: aggressive, competitive, defensive, or conservative

Financial strength: FS Environment stability: ES

- Investment earnings - Policy changes

- Capital circulation - Inflation rate

- Solvency - Demand variability

- Capital expenditure - Financial institute competitions

- Business risks - Competition pressure on

financial fields

Competitive advantage: CA Internal strength: IS

- Market share - Growth potential

- Diversified products - Profit opportunities

- Customer loyalty - Financial stability

- Brand reputation - Capital intensity

- Professional staffs - Market penetration

GRIGGS

** SWOT matrix

SWOT matrix allows us to evaluate business strengths and weaknesses, estimate external opportunities and threats, and then have a good combination of business capability and external environment This matrix helps us to develop 4 types of strategy:

Strengths — Opportunities strategies (S-O)

Weaknesses — Opportunities strategies (W-O)

Strengths — Threats strategies (S-T)

Weaknesses — Threats strategies (W-T)

order of (O,, Os, .) (T:, T›, )

Strengths (S) S-O strategies S-T strategies

List strengths in the] Use strengths to take | Use strengths to avoid

order of (S;, So, .) advantage of opportunities | threats

W-O strategies W-T strategies Weaknesses (W)

List weaknesses in the

order of (W,, W5, .)

Limit/Improve weaknesses | Minimize and avoid

to take advantage of | threats

In this stage, QSPM matrix is used to evaluate the strategies applied in stage

2 This matrix reveals the relative attractiveness of the strategic measures, thereby

providing logical bases for the selection of a strategy

** Quantitative Strategic Planning (OQSPM) Matrix

QSPM matrix aims to evaluate and rank possible strategies, based on which

we can select the best strategy This matrix uses input data from all other matrices (IFE, EFE, IE, SWOT, SPACE, etc) To construct a QSPM matrix, there are 6 steps:

CG Global Advanced Master of Business / tran 14

- Step _1: List external opportunities/threats and internal strengths/weaknesses The matrix consists of about 10 important external factors and 10 internal ones for

SUCCESS

- Step 2: Weighting for each factor by its importance

- Step 3: List strategy alternatives which can be considered by the firm They can be put in separate groups if possible

- Step 4: Identify the attractiveness score for each strategy The strategies should be compared within their group Attractiveness score is as followed: 1 = completely unattractive, 2 = somewhat attractive, 3 = reasonably attractive, 4 = highly attractive

If the factor does not have an influence on choosing a strategy, it is not scored (or can even be excluded from the matrix)

- Step 5: Calculate the total attractiveness score by multiplying the weights (step 2)

by the attractiveness score (step 4) in each row

- Step 6: Calculate the sum of attractiveness score for each strategy by adding all

total attractiveness scores in each strategy column The higher the score is, the more attractive the strategy ts

C2 Global Advanced Master of Busun i tate 15

GRIGGS

SETLIST 5 TT <

CHAPTER 2: ANALYZING THE OPERATION

ACTIVITIES OF COMMERCIAL BANKS IN

CANTHO CITY

2.1 Analyzing the effects of macro environment

In 2010, although the global economy overcame its crisis, it 1s far from full recovery In addition, new threats have come into being: public debt crisis of European countries, high inflation in China and other newly-rising economies,

soaring food prices, etc

In such a difficult situation, with the flexible and strict management of the

government, Vietnam has maintained its GDP growth rate at 6.78%, the industry

values increased by 7.7%, exporting turnover value increased by 25.5% in

comparison with those values in 2009 However, the economy still bears potential

internal difficulties; transfer of economic structure is slow, investment is of low

efficiency, trade deficit tends to increase, reservation for foreign currency is low, and

inflation is high (11.75%) Another issue is that international organizations continuously lower Vietnamese credit values due to concerns of payment balance and increasing inflation

To the banking sector, 2010 was when the banks faced many difficulties such as: strong fluctuations of exchange rates, interest rates influenced by requests for safety pursuant to Circular No 13/2010/TT-NHNN, No 19/2010/TT-NHNN, etc Business results in 2010 reflected the banking differentiation levels: some middle- scale and large-scale banks got the good business results; however, smaller banks suffered from high input costs and risks, which led to lower business result Up to 31 December 2010, the total credit outstanding of banking sector was 29.8% higher than that by the end of 2009; the capital mobilization from the economy increased by 27.3%; total means of payment was 25.4% higher than that by the end of 2009

2.1.1 Opportunities from macro factors

- Continuous and high growth rate of Vietnamese economy

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In recent years, Vietnamese economy has developed well GDP growth rate has kept increasing for the past 5 years, even in the years of the global financial crisis in 2008-2009

Table 2.1: GDP growth rate, period 2006-2010

(Source: General Bureau of Statistics)

Chart 2.1 : GDP growth rate, period 2006-2010

billion, (about USD 112.8-113.8 billion), GDP per capita is about USD 1,290-1,300

CG Global Advanced Master of Busaiess “i trate 17

Continuous economic growth rate and higher income in the past few years are good opportunities for the development of banking services It lays a firm foundation for a potential market which has not fully exploited yet Moreover, the government policy to expand the private business sector has resulted in the boom in numbers of non-state enterprises All of these have created great opportunities for development

of banking services

- Globalization and international economic integration Regional and international economic integration is taking place strongly all over the world, especially in developing countries Economic integration is the chance for development, and it also creates challenges for countries In Vietnam, international integration and economic liberalization have gone through several routes and can’t

be reversed They can be listed as the process of removing protectionism according

to Vietnamese-American Bilateral Trade Agreement, and the process of joining

AFTA, WTO and following other bilateral agreements with other countries like

Japan

Opportunities that Vietnamese banks can take advantage of when integrating:

+ Diversifying services to meet demands of businesses and commoners

+ Attracting foreign investment in terms of capital, technology, management Capital participation of foreign enterprises in Vietnamese banks is an evident tendency; via capital investment, they also invest in those banks in terms of technology, and management

- Legal framework for the improvement of banking activities The National

Bank of Vietnam is revising the system of mechanisms and policies in banking sector in order to supplement and modify them so that they are in line with the

integration commitments The National Bank is also constructing a warning system

of abnormal fluctuation in exchange rate, interest rate, and credit enhancement of

credit organizations

With upcoming policies and documents to be issued, banks will have a legal

framework to stabilize their operations and to develop new services such as SMS- banking, Internet-banking, etc

2.1.2 Threats from macro factors

Apart from the opportunitics mentioned above, there are also some threats that the banking sector faces, such as:

- High inflation: In the past few years, the inflation rate has increased rapidly, out of the control of the government, badly influencing the policy to control macro economy, especially influencing the monetary-related policies Therefore, recently,

the government has given the first priority to macro stability and inflation control

Table 2.2: Inflation, period 2006-2010

———= APES ORME TE ICTR LARD

CZ Global Advanced Master of Busitess AG trate 19

- Carrying out the international commitments on banking sector: commitments on Vietnamese-American Bilateral Trade Agreement and on negotiations to join the WTO have put up several challenges to Vietnamese banks They are:

Firstly, challenges to bank customers

Carrying out commitments to reduce tariffs and remove the state protectionism

will increase the competition from other partners in the domestic market When the businesses’ working effectiveness and financial results get worse, it is the Vietnamese banking system that has to bear higher risks and the potential overdue issues

Secondly, higher pressure from competition in banking sector

According to WTO commitment, since 01 April 2007, Vietnam has allowed foreign banks to have subsidiary banks with 100% foreign capital The allowance of

CS Global Advanced Master of Busia i tration 20

foreign banks to join in Vietnamese financial market leads to more competitors having better financial and competitive capability, technology, and business

administration than Vietnamese banks

Before 2000, four state-owned banks dominated the market of deposit and

lending in Vietnam, but 10 years later, the Vietnamese banking system has four state-owned banks (Vietcombank has just been equitized, another state-owned bank has just been established — Vietnam Bank for Social Policies), 36 equitized banks, 44 branches of foreign and venture banks, 10 financial companies, 13 financial leasing

companies, and 998 basic-level civic credit funds All of these figures indicate how

dynamic the competitive environment of financial services Is

- More and more severe competition between banks and other financial

The foundation and development of Stock Trading Center also changes the role

of banks in financial market Stock centers will create a new method of investment — direct investment, i.e direct relationship between surplus holders and shortage holders With this investment method, credit size of mediate financial organizations will be affected

- Popular habit of using cash in Vietnam

The rate of using cash for payment is still high in Vietnam In 2000, this rate

was 30.8% Today it is lower (about 25%), yet it is higher than that in other countries

in the region According to some economists, Vietnam is still a cash economy The amount of cash circulating is high, resulting in several drawbacks such as: high cost for issuing (printing, preserving, transporting, and disposing of money), counterfeit

c2 Global Advanced faster of Busnes ¢ nator 24

2.1.3 External Factor Evaluation (EFE) matrix

Table 2.3: Matrix evaluating external factors from macro level

4 Population size and structure for the 0.05 2 0.10

development of banking services

5 Stability of Vietnamese politics — 0.05 3 0.15 society

Source: Group Survey

cs Global Advanced Master of Busan ‘ tratu 22

However, there are several external threats to Vietcombank operation, such as

high inflation, public debt in Europe, and habit of using cash of Vietnamese, etc

Vietcombank Cantho in particular and other commercial banks in Cantho City

in general are inseparable parts of the national banking system as well as the national

financial and monctary system Therefore, influences of the above-mentioned factors

are concerns that every business has to take into consideration

2.2 Analyzing competitors

The term “competitors” is mentioned mostly in issues related to business administration and business marketing Competitors of a commercial bank (hereafter

referred to as “competitors”) are groups of businesses which provide

products/services to satisfy banking—financial needs; they also have particular influence, decreasing the benefits of the commercial bank in a particular place and time Therefore, analyzing competitors has become an essential and inevitable part of strategy formulation and implementation in each commercial bank

In reality, there are only four banks which can compete with and have strong impact on Vietcombank Cantho in Cantho City area They are:

2.2.1 Overview of banks that can compete with Vietcombank Can Tho:

- Vietnam Bank for Agriculture and Rural Development - Cantho Branch (Agribank Cantho): Founded in 1988 with a wide and good network of branches and transaction sites In addition to the headquarters and its level-one branch and 8 level-two branches in districts and towns, Agribank Can Tho has 10 transaction sites

in wards and communes As a result, the total number of customers of Agribank is considerable In addition to loan programs similar to those by other banks, Agribank

cS Global Advanced Master of Brisumess + tEHIẨN 23

Can Tho offers loans to buy food, and foans to develop agriculture activities and rural development The market shares of this bank are always on top in comparison with those of other commercial banks, both in lending and mobilizing However,

there are some drawbacks, such as: cumbersome operating mechanism, services and

products focusing on traditional ones, low flexibility and adjustment to the market, and high overdue

- Vietnam Joint Stock Commercial Bank for Industry and Trade - Cantho Branch (Vietinbank Cantho):

Founded in 1988 with early focus on customers who were state-owned enterprises, It used to operate with low effectiveness and high bad loans However, since its equitization in 2009, Vietinbank has applied drastic changes in human

resources, rejuvenating its staff, extending its networks and exploring new

customers Thanks to policies in customer care and attractive interest rates, Vietinbank has achieved initial growth rates and profits This bank has become the main rival of Vietcombank Can Tho in competing for customers who are large-scale enterprises in Can Tho city area Vietinbank currently has one branch and 8

customers for a long time, its growth rate is still limited In 2008, BIDV made a

milestone of moving to a new headquarters, providing its customers with more

convenience As a state-owned commercial bank, with strong capital sources and

competitive interest rates, BIDV has become a direct competitor of Vietcombank

Can Tho in customer development policies This bank now has one branch and |

C/iIGGS

Nee a

- Asia Commercial Bank — Cantho Branch (ACB Cantho):

ACB Cantho officially started its operation in 1994 This bank operates thanks

to its structure including 01 branch and 07 transaction offices In 2010, ACB Can Tho inaugurated the new headquarters at No 14-16B Hoa Binh, which is an impressive premises and helps build trust among customers for its lending and

capital mobilizing activities This bank is a typical example of a business institution

that knows how to polishes its own image via the media, sponsoring events, ceremonies which other banks cannot perform List of products by ACB is diversified yet focused on identifying targeted customers including individuals and enterprises of small and medium scales The diversification and innovation of products to meet the various demands in the market have become frequent and

continuous activities within this bank Products by ACB always base on advanced

technology, with high safety and confidentiality In addition to traditional products, ACB offers intermediate products such as local and foreign payments, fund services,

money transfer services for overseas Vietnamese, express money transfer, life

insurances via bank, foreign currency and gold trade, issuance and payments of credit cards, debit cards The qualities of these products by ACB are welcomed by customers and rated by national and international institutions every year The awards and prizes from these rating activities have been an invaluable evidence for its quality This bank has become a considerable rival of Vietcombank Can Tho in expanding customers and selling subsequent services

5 ACB 630 856 870 1,032 1,251

6 Others 2,816 5509 9,113 12,886 17,609

Total 6,233 9,553 14,054 18.880 25,383

Source: The State Bank of Vietnam, Cantho Branch

CZ Global Advanced Master of Busia tate 25

From 2006 to 2010, regarding the capital mobilizing, Vietcombank has

always achieved high rates at 12.67%; 9.61%; 8.26%; 8.38%; and 8.06%

respectively The rates have decreased over the years due to severe competition from other banks, but values of capital mobilizing by Vietcombank Can Tho have been higher than those of other competitors in the area

Chart 2.4: Shares of outstanding loans by credit organizations in Cantho City

2010

VCB VieUunbank 61% 5% : ⁄ Apftbank ge

VCB BIDV

Lending is always a core matter of credit organizations, helping to boost the manufacturing and production; it also generates the major profit of banks With the

mobilized capital, the banks promote their investment in loans to different economic

sectors in the society

From 2006 to 2010, in terms of lending, Vietcombank Cantho was second only to Agribank Cantho with the debt outstanding in 2010 of VND 2,201 billion (accounting for 6% of the market share) The growth of Agribank which exceeded Vietcombank was mainly thanks to the wide network of branches/transaction offices

in towns, wards, and communes

Overall, in Cantho City in the past 5 years, debt outstanding has developed in

a stable way In 2006 the city outstanding was VND 11,031 billion and in 2010 it was VND 38,862 billion, which was 3 times higher than that in 2006, indicating the positive economic growth of the local area However, the outstanding structure of local commercial banks has changed significantly, allowing more competition, for example, in 2006 Agribank accounted for 18% of market share, but in 2010 the figure was only 9% In addition, other commercial banks accounted for 38% in 2006 but 72% in 2010 (nearly twice as much as) The reason was due to potential

CF Global Advanced Master of Busin Han 27

Source: The State Bank of Vietnam, Cantho Branch

Chart 2.5: Business results 2010

Business results 2010

Business results 2010

In general, in the period 2006-2010 the banking system had to confront quite a

few difficulties, especially during the economic crisis in 2008 and its subsequent

long-lasting consequences Vietcombank Can Tho, however, thanks to its benefits of capital structure with low expenditure, priorities set for credit management, and revenues from non-credit sources such as charges from import-export payments, buying and selling foreign currencies, money transfers achieved high figures

CS Global Advanced faster of Business 4 trate 28

( RIGGS)

Therefore, the overall business results of Vietcombank were stable and positive when compared with those by other rival banks

2.2.5 Payment of import and export

In the area in Cantho City, Vietcombank ranked the first in the turnover of import-export payment in 2010 with the figure of USD 375.568 million (40.31%); other banks had high proportions in the same year as listed in the following table:

Table 2.7: Payments for import-export by credit organizations in 2010

Unit: USD million

Source: The State Bank of Vietnam, Cantho Branch

Figure 2.6: Shares of import-export payment by credit organizations in Cantho City

Payment of import and export in 2010

Source: The State Bank of Vietnam, Cantho Branch

fw] Global Advanced ‘aster of Busines 45 trate 29

gers

GRIGGS

For convenience in comparing competitive capacity by commercial banks, the survey group comes up with a table to summarize the strengths and weaknesses of these banks based on the analyses and theories mentioned above

Table 2.8: Strengths and weaknesses of com petitors of VCB Can Tho

No | Criteria Victinbank | Agribank BIDV ACB

3 | Diverse products/services Good Average Average | Excellent

4 | Attractiveness and Good Average Average Good competitiveness of

products/services

products/services

6 | Professionalism of staff Good Average Average Good

7 | Customer services policies Good Average Average | Excellent

8 | Waiting time and procedures Good Average Average Good

branches/transaction office to

satisfy customers’ needs

10 Approaching new customers Average Average | Average | Excellent

Based on the analyses on strengths and weaknesses of direct competitors of VCB Can Tho, the survey group compares the competitive capacities of VCB and these competitors using the image matrix The competitors include Vietinbank Can Tho and Agribank Can Tho

No Competitive factors S ce Weight er Weigh co Weigh

= &: ed € ted & : ted

ww: _ S€OF€ - Os score M : - §COF€

fee] Global Advanced Master of Business 4 30

Source: Group Survey

Table 2.9: Evaluating competitive image matrix of Vietcombank Can Tho

Comment: From the above competitive matrix, it can be seen that

Vietcombank Cantho has a good competitive position, getting a score of 3.22, the highest of the three banks (Vietinbank at 2.998 and Agribank Cantho at 2.830) Among the three, Vietcombank Cantho stands out with its financial potential and brand name Vietinbank has advantages of competitive interest rates and service fees; Agribank Cantho has a wide network, yet it is weak in terms of diversity of products and quality of services

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