Building business strategy for Bank of Investment and Development Vietnam-Thang Long Branch in the period of 2012-2016

i*J ; 5 NTERNATION BUSINESS ADMINISTRATION MASTER GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT BUILDING BUSINESS STRATEGY FOR BANK

( i*J( ;( 5) NTERNATION BUSINESS ADMINISTRATION MASTER

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS

ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT

BUILDING BUSINESS STRATEGY FOR BANK OF

INVESTMENT AND DEVELOPMENT VIETNAM -THANG

LONG BRANCH IN THE PERIOD OF 2012-2016

GaMBA01.X0410 - Group No 03 Group Members: Pham Thu Phuong (Group leader)

Vu Hong Phong Dang Mau Son Pham Duc Anh

HANOI, November 2011

strategic Management Capstone Report Assessment Group 3 |

ACKNOWLEDGEMENT

This Capstone Project is the last and most important request of our MBA program in finance This project focuses on the business strategy management, which is integrated with others as marketing management, human resource management and corporation finance management This project helped us having an occasion to match

the knowledge and skills of modern business management from MBA program with the practical situations of the medium firm in Vietnam

To full fill this project, we would like to express our deep gratitude for the favor support of Griggs University, Center for Educational Technology and Career Development (ETC) of Hanoi National University and especially to the lecturers,

who have enthusiastically taught, guided and provided us with the valuable knowledge We sincere thanks also to the support and assistance of the leaders and

staffs of BIDV Thang Long branch They have spent highly valuable time on

organizing surveys, providing data and discussing with us about the relation between the project contents and practical situations at the Company; from that, helping to create a close connection between theory and practice and resulting in a highly feasibility in the future

We, the Group No3 members, would like to receive the continual support of the

lectures to help us completing the course with the highest results Particularly, the support of all BIDV Thang Long’s leaders and staffs will be an indispensable motivation for this project coming into the bank’s practice

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CONFIRMATION OF BANK FOR INVESTMENT AND DEVELOPMENT OF

VIETNAM - THANG LONG BRANCH

We, Bank for Investment and Development of Vietnam — Thang Long Branch confirm that we agree the research group including the members mentioned below to be allowed to get access to the internal documents, data as well as contact with the operation fact to study about the strategic orientations of BIDV

— Thang Long Branch, serving the research purpose of the group to complete the MBA course:

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5 VN 592 ốc cố Só 2.2.4.3 ODDOr†Uniifi©S LH 2211 10110 HH HH TH ng TH HT TT nến 57 2.2.4.4 Thr@CÏS HH1 1110111101011 HH TH TT S9 2.2.4.5 SWOT mIÌX St 1211121111111 11 1 1 HH TH TH TT TT ưệc 61 CHAPTER 3: CHOOSING BUSINESS STRATEGIES AND SOLUTIONS TO APPLY STRATEGIES FOR BIDV - THANG LONG BRANCH IN THE PERIOD OF TIME 2012-2016 o.oo cccececcccsccesscseecseeeeees 63 3.1 Long-term development trend of BIDV Thang Long 0 ce ccccccccccesscescscscesescscescscesees 63 4.1.1 Long †erm target 2020.0 ceecccscsesscsscscssescsscsscscsssssssecscsaceaesaesccssacacesesacsucaecasssessessaceasceeses 63 3.1.2 Short term target through financial strategy during from 2012-2015 cccccscscssssseseseseees 63 3.2 Choosing strategy and solutions to apply strategy ooo cccccccccecscscsseccccscscscsesescesseesees 66 3.2.1 CHOOSING SHOE GY eeeceescccsscsesescsesescscsvscscscssssvavavscecsevsvassesssesasavssasussavavasssiceessvavasscecsevaveses 66 3.2.1.1 Choosing strategy Vid SWOT Matix c.cccscscsscsesesescesscscscscscssscssscacsvscscacacatacstststesvassessaes 66 3.2.1.2 Choosing strategy Vid QSPM Matrix cccccccscscscscsescscscecscsescacscsesescatacacasacavscsesssssevesceasees 67 3.2.2 SOIUPIONS TO APPly StATEGIES ec eeccscscesescscescscsesecscsecsesecsesessesesacsssasacsessssssscscsesesassececseees 69 3.2.2.1 Solutions to diversify DANKING SEPVICES c.ccccscessscssssecsescecscscssscscstscscsescasscseseevevevecevseees 69 3.2.2.2 Solutions to diversify DANKING Credit SEPVICES oo cecesecesesescsesesesssescseecscscecseeveuseeveveees 72 3.2.2.3 HUMAN FESOUFCE SOLUTION 2 eececcesescsessesesesescscsescscscscscssssasacasscavscasscacaacassvavasatsavacevavavavaes 73 3.2.2.4 Morke†ting develoDmen† s†rQ†@Qy - TT HH TH TT TH TH TH TH Tnhh re 7ó 3.3 Conclusion 2212112111 111 eo 77 Ree ES ES vcr svssrrennssesesptstebeosEHU 0107803588138 Kt denanmnmnnnnanneoununererecexinesamurncepmmsanueergeraveremmeneesvavesseesues 78 PPE LO A CŸ trynisgagipdiidfii2i8.8/6:81090501900108.2U801 lu, 2s ụcgọ E710 -20,-4240101200.11L81-71E-00TT7-17T2T 7717 TT T7 TT 07177787 78

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2 ATM Automated teller machine

3 BIDV | Bank oflnvestmentand Development of VN

6 IFE Internal factor evaluation matrix

12 QSPM Quantitative Strategic Planning Matrix

13 BIDV _| South East Asia Commercial Joint Stock Bank

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LIST OF FIGURES AND TABLES

1 List of figures

[Figure 2.1: Organization chart of BIDV - Thang Long branch ¿5-5 sscscvsa 2

ligure 2.2: Credit mechanism chart according customer type .c.cccccccscsseessseceeeeeseeees 36

Figure 2.3: Credit structure according to borrowing time .c.ccccceccccessseceeseeeeecseeseseees 49 Figure 2.4: Opening coefficient of Vietnam economy (%) .cccccccsscsesesecesseseeeecsceceees 58 Figure 2.5: The number of transaction offices of some commercial banks 6 - 60

2 List of tables

Table 2.1: Matrix of competitive picture .0.0 cccccccceccseeseccscescescscesssscsseseeacsecaseecsees 30 Table 2.2: Credit mechanism according to CUStOMET .c.cccceseseeceeeseesesescesescsceseseees 36 Table 2.3: EEE, mafFIX S1 1S 1n HH n TH Hà TH TH HT Tnhh TH ngư 38 Table 2.4: Assessment prOC€dUre - - SE S1 03 011211201 5 11T ngan 42

Table 2.5: Some operation crteria of BIDV — Thang Long Branch during from 2008 Z) 44

Table 2.6: Income from credit activities of BIDV Thang Long branch from 2008-

DLO sessccrenenexesninsi nen tas aiisichousnenensneonnenvemesnecny goveysustee 0 Y0 996315000015025001079EX5E39TS95.7010450702013 913560 X6 50

Table 2.7: Long -Medium term overdue debts are assessed in BIDV —Thang Long

Branch o cc ececeesescscscsceesessseseseessnesssenssesesessseesasasessusvesesssesscsevevscscscsasavavacacecessasacacansesavaces 51

Table 2.8: Assessment matrix of internal factor .0.ccccccccccccscssesescscescecceseseeecscseeseseees 53 Table 2.9: SWOT matrix for BIDV — Thang Long 5-5-6 5S 3v t£zEsEzEsecez ó] Table 3.1: Development target of main financial indexes till 2015 -sccscs=a 63 Table 3.2: Development target for credit activity till 2015 oo cccccesccsscsesecsescsecesseees 65 Table 3.3: QSPM matrix of BIDV - Thang Long c.c.ccccccccsscscsseseseeeseseseseseestecseseseeees 68

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1 Reason for theme selection:

The year of 2010 is the fourth year, Vietnam joined World Trade Organization After 20 of innovation, our economy has achieved a lot of great achievement as well as growth speed of Gross National Products (GNP) is over proposed plan Although, the economy has not been developing strongly as economy

of other countries in the area, our economy has been proved to develop higher and higher The contribution of Commercial Bank system in our country for our economic development is significant The banking activities have been actively

contributed in capital mobilization and increasing investment capital for production and create favorable condition to attract foreign capital for national economic growth

Commercial bank system in Vietnam has great and strong development in economy in all fields including quantity, scale, content and quality, which is really

pioneered in innovation of economic mechanism and deserves to be efficient tool to

support Government in limiting and driving back inflation and stabilize price

For above reasons, our team decided to select the theme “Building business strategy for BIDV — Thang Long branch in the period of 2012-2016”

- Analysis method: Statistic, interpretation, inductiveness

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4 Theme contribution:

Great homework is based on theoretical basis relating to strategic

administration and applies that theory to analyze the strong and weak points, chance and challenges of BIDV- Thang Long branch By the way, could determine the business strategy and propose solution to implement these strategies, especially in the background that Vietnam joined WTO and will completely implement commitment in banking until 2016

5 Structure of great homework:

A part from opening, conclusion, appendix and list of referent documents, the essay includes the following chapters:

Chapter 1: Theoretical basis about strategy and strategic management

Chapter 2: Analysis business environment of BIDV — Thang Long branch

Chapter 3: Choosing business strategy and solutions to apply strategy for BIDV — Thang Long from 2012-2016

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CHAPTER 1: THEORETICAL BASIC ABOUT STRATEGY AND

STRATEGIC MANAGEMENT 1.1 Concepts and theories

1.1.1 Strategy and strategic business management

The overview about management

Management is a process aiming at achieving the success of desired goals and

objectives by using available resources efficiently and effectively From this concept,

we can see that management is a series of necessary and constant activities for the existence and development of all organizations

The goals of management are create surplus value, which means finding out suitable

methods to implement the jobs in order to accomplish the highest efficiency at the

most acceptable cost of resources Management comprises 4 basic functions: planning,

organizing, leading (or directing), and controlling an organization

Concept about strategy:

Strategy is a range of scheduled goals and policies implemented in a long term

based on exploiting the most of the resources of the organization to meet the

development goals Therefore, the strategy should be formulated as detailed plan or

general operational diagram to drive the company to the expected goals

Concept about business:

According to our country’s Article 9 of Business Law promulgated on February 2" 1991 “Business means the continuous conduct of one, several or all of the stages of the investment process, from the production to sales of the products or provision of

services in the market for profits.” Therefore, we can understand that Business is a range of activities aiming at producing profits of the economic subjects in the market

Strategic business management:

Strategic management is a process in which managers determine the long-term goals and formulate great oriented methods to achieve these goals on basis of using the most of existing resources and possibly mobilized resources of the enterprise

The goal of a strategy is find out opportunities; or in other words, increase opportunities and look for competitive position Therefore, strategic management is a process including 3 main phrases:

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1.1.2 Levels of business strategy

Previously, strategic system in an enterprise was normally divided into 3

levels:

- Corporate strategy

- Strategic Business Unit — SBU

- Functional strategies

Today, with the globalization trend, many companies have quickly led their

business operations get out of the nation’s border and now people start to mention

about the fourth strategy:

- Global strategy

1.1.3 The formulation of strategy

The generic business strategy is mapped out on basis of the vision of the enterprise; it is the orientation for all of the operations of the enterprise; therefore, it

is considered long-term strategic The formulation of the strategy can be divided into

5 main steps:

- Set up organization’s missions and objectives

- Analyze the external environment to recognize opportunities and threats

- Analyze the internal environment to recognize strengths and weaknesses of the organization

- Select fundamental strategies to find out resources, abilities and core

competences; then develop them to dispel threats and make use of opportunities from the external environment

- Implement the strategy

The analysis of internal and external environment of the enterprise and the selection of the strategy is known as the formulation of strategy The implementation

of strategy includes the set-up of organizational structure and suitable controlling system to bring the strategy into practice

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External analysis Choosing and Internal analysis

(opportunities and | formulating strategies (abilities and core

Organizational Combine strategies,

structure structures and controls

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1.2 Strategic formulation analysis

1.2.1 External environment analysis, EFE matrix and CPM

1.2.1.1 Sectorial environment

Michael Porter, a well-known strategic manager from Harvard University wrote in “Competitive Strategy: Techniques Analyzing Industries and Competitors” about competitive forces in all business industries including:

- Bargaining power of suppliers

- Bargaining power of buyers

- Threats of new competition

- Threats of substitute produces and services

- Intensity of competitive rivalry

- Threats of closely — related parties

Political Economics Socio-cultural Technological These 4 factors have direct influences on the business; they are considered the external factors of the enterprises; their impacts on the enterprise are objective factors The enterprises base on these impacts to decide suitable policies and business Operations

%

Opportunity

Source: https://www.google.com.vn/ PEST model

1.2.1.3 EFE (External Factor Evaluation matrix)

EFE matrix valuates external factors, then generalizes and summarizes main opportunities and threats of the external environment that influence on the business operation of the enterprises Thanks to that the business managers can evaluate the reaction of the enterprises to opportunities and threats; and make judgments about Strategic Management Capstone Report Assessment Group 3 13

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\ Step 2: Classify the importance according to the marking scheme from 0.0 (not important) to 1.0 (very important) for each factor The importance of each factor depends on the influence of that factor on the fields/business sectors your enterprise

is doing business on Total weighted score of all factors is equal to 1.0

V Step 3: Determine weighted number from 1 to 4 for each factor: the weight

of each factor depends on the reaction of each enterprise to each factor; in which 4 is

the best reaction, 3 is above-medium, 2 is medium and 1 is weak

v Step 4: Multiply the importance of each factor with by its weight to

determine the score of each factor

V Step 5: Plus the scores of all factors to determine the total score of the

matrix

Evaluation: total score of the matrix does not depend on the number of factors

in the matrix; the highest score is four and the lowest one is one If the total score is

four, the company has good reaction to opportunities and threats If the total score is 2.5, the Company has medium reaction to opportunities and threats If the total score

is one, the Company has weak reaction to opportunities and threats

1.2.1.4 CPM — Competitive Profile matrix

The formulation of this matrix aims at introducing evaluation and comparison between the enterprise and its major competitors in the same industry; the

comparison relies on factors that influence on the competitive ability of the enterprises in the same industry Thanks to that, the Managers can understand the strengths and weaknesses of the enterprises over its competitors, and determine its competitive advantages and make good weaknesses To formulate a competitive profile matrix, we need to implement 05 steps:

¢ Step 1: Set up a list of 10 main factors that have important influences on the competitive abilities of the enterprise in the industry

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score of all factors is equal to 1.0

¢ Step 3: Determine weighted number from | to 4 for each factor; the weight

of each factor depends on the reaction of each enterprise to each factor; in which 4 is

the best reaction, 3 is above-medium, 2 is medium and 1 is weak

e Step 4: Multiply the importance of each factor with by its weigkt to

determine the score of each factor

¢ Step 5: Plus the scores of all factors to determine the total score of the matrix

Evaluation: Compare the total score of the enterprise with that of its major

competitors in the same industry to evaluate the competitive ability of the enterprise

1.2.2 Internal environment analysis and IEF matrix

The internal situation of the enterprise is normally evaluated by means of functional fields as: Finance; Human resources; Management; Organizational structure; Marketing; Research/Development; Information Technology

IFE (Internal Factor Evaluation matrix)

Internal factor is thought to be very important in each business strategy and in the goals of the enterprise After considering internal factors, the strategic managers need

to set up internal factor matrix to examine the ability of reaction and recognize the strengths and weaknesses Since then, help the enterprises make the most of the strengths and exploit and prepare inner forces to face up with weaknesses and find out ways to improve these weaknesses To form an IEF matrix, it is necessary to

implement 5 steps as below:

e Step 1: Set up a list of 10 to 20 main factors including the strengths and weaknesses that influence on the enterprise and its goals

¢ Step 2: Classify the importance from 0.0 (not important) to 1.0 (very important) for each factor The importance of each factor depends on the influence of that factor on the success of the enterprise in the industry Total important score of all factors is equal to 1.0

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4 is the best reaction, 3 is above-medium, 2 is medium and | is weak

¢ Step 4: Multiply the importance of each factor with by its weight to determine the score of each factor

e Step 5: Plus the scores of all factors to determine the total score of the matrix Evaluation: total score of the matrix ranging from 1 to 4 does not depend on the number of factors in the matrix If the total score is below 2.5, the Company is weak at internal factors If the total score is above 2.5, the Company is strong at internal factors

1.2.3 Analyze the strategy and choosing the matrix strategies

1.2.3.1 SWOT matrix

SWOT analysis model is a very useful tool for any business organizations to grasp and make decisions in all situations SWOT is the abbreviation of Strengths, Weaknesses, Opportunities, and Threats SWOT provides a strategic analyzing tool

to check and evaluate the position and orientation of an enterprise or of a business project

Table 1.1: SWOT matrix

‘Total attracting score —«|_~*t ft

Quantitative strategic planning matrix uses input information from IFE matrix, EFE matrix, SWOT matrix and main strategy to make the best objective evaluation of substitute strategies The following is six steps to develop a QSPM matrix:

Step 1: List important external opportunities and threats, and internal strengths and weaknesses of the enterprise

Step 2: Classify each important success factor of the internal and external of the enterprise

Step 3: List strategic projects the enterprise should consider Collect the strategies into specific groups if possible

Step 4: Determine the attracted score of each strategy Only strategies in the same

group can be compared together The attracted scores are classified as below: | = not

attractive; 2 = less attractive; 3 = rather attractive; 4 = very attractive

Step 5: Calculate the total attracted scores by multiplying classified scores in step 3 with the attracted scores in step 4

Step 6: Calculate the total attracted scores for each strategy The higher the score is, the more attractive the strategy is

1.3 Strategy choosing

1.3.1 Low cost strategy

Low cost strategy aims at the target to become the lowest cost producers with certain quality standard In which, the company will sell its products with industry averages price to obtain bigger profit and share than competitors

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Enterprise can base on some main method to obtain advantage in reducing cost such as: improve productivity search for big material source with low price utilize comparative advantages between countries or reduce unnecessary expense If the competitors cannot cut the same expense level the company can keep its comparative advantage by leading in cost reduction

1.3.2 Product specification strategy

The company aims at developing products and services with special and unit characteristic in this strategy These characteristics are highly appreciated by customers, benefit of the product specification allow the company set a higher price level than competitors When applying this strategy, the company must evaluate suitable price so that this price gap can cover additional cost arise in production and

distribution Moreover, this additional cost can be transferred to customers because

they cannot find the same product to replace

Because of focusing on a narrow market, enterprises apply this strategy have lower turnover Then it makes them hard in negotiating with suppliers Anyway, the company can transfer this advantage to customers by setting them a higher price level

Enterprises in centralization strategy can change their advantage in product development so that it is suitable for the market segment that they investigate thoroughly and know clearly One of major risk that created by this strategy is the

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1.3.4 Integrating development strategy

Company follows this strategy can find the way to produce material or distribute its products internally Applying integrating development the company can use reverse integration or positive integration, partly or tota! integration, internal or external integration

Integrating development strategy can help the company reduce its expense and market cost, better quality controlling and utilizing business opportunities and be active in set up production plan This strategy can be applied for companies which have ability to catch up with opportunities which are suitable for company’s vision

1.3.5 Mixed strategy

A company can apply many different strategies in a period The company can

pay much attention to development in this area while cut down in others Those

activities aim at implementing successfully the company’s general objective during the strategy implementation period

The strategic choice out of strategies above depends on the company’s

capability and related environment factors From the result of analysis of SWOT matrix, the company will choose for itself the best business strategy

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CHAPTER 2: ANALYSIS OF BUSINESS ENVIRONMENT OF BIDV —

THANG LONG BRANCH 2.1 Overview of BIDV — Thang Long branch

2.1.1 Establishment and development history

BIDV — Thang Long branch is one branch under Investment and Development Bank of Vietnam Forerunner of the branch is one Administration Department under Central Construction Bank in accordance with Decision No 103/TC-QD/TCCB dated 03/4/1974, the main duties is to issue, check and pay basic construction investment capital to build Thang Long Bridge This Department locates in Dong Ngac Commune -

Tu liem — Hanoi and the seal named “Central Construction Bank — Administration Dept

Of Thang Long Bridge”

Since the time of having Decision No 75/NH-QD dated 17/7/1981 of General Director of State Bank of Vietnam, the department is renamed “Branch of Main Point

Work Investment and Construction of Thang Long Bridge ”, this bank is assigned to

control capital sources for basic construction and investment of Thang Long bridge, to enter in the account and lend, issue, pay and control cash, control incomings and outcoming of salary budget in basic construction and investment for construction enterprises setting up the accounts in the branch, implement according to policies,

regulation and plan of Government On 27/6/1988 in accordance with Decision No

52/NH-QD of General Director of State Bank of Vietnam about changing name from “ Branch of Main Point Work Investment and Construction of Thang Long Bridge” to be

“Branch of Investment and Construction Bank for Thang Long Bridge”

To be suitable with organization chart of Investment and Development Bank

of Vietnam, in 1991 in accordance with Decision No 38/NH-QD on 2/4/1991 of

Governor of State Bank of Vietnam, the branch is renamed to be “Investment and

Development Bank — Thang Long branch” under Investment and Development Bank

of Vietnam and move the head office to Pham Hung highway in Tu Liem district- Hanoi

Up to 1994, Governor of State Bank of Vietnam already promulgated the Decision No 38 NH/QD-NH9 dated 10/11/1994 to adjust the function and duties of Investment and Development Bank- Thang Long branch under Investment and

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Development Bank of Vietnam and allow the Branch to operate as one Commercial Bank

2.1.2 Organization’s structure

In 1991, the branch consisted of 22 employees and was divided into 3 Depts including: Business and allocation Credit Dept., Permanent Accounting Dept., Budget-Administration-Organization Dept

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Source: Administration dept BIDV Thang Long Branch

Figure 2.1: Organization chart of BIDV — Thang Long branch

2.1.3 Main business activities of BIDV — Thang Long Branch

Similar to many units in finance sector, BIDV Thang Long supplies different services and products meeting diversified and ceaseless demands of customers In particular with retail banking service, BIDV Thang Long focused on the two main market segments name individual customers and small and medium enterprise

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With the main products mentioned above, in 2011, BIDV Thang Long has

provided services to more than one hundred thousand individual customers and made

mre than two hundred thousand commercial transactions for customers as small and m:dium enterprises The next time, along with the development of market economy ard economic integration, retail banking products and services of BIDV Thang Long wll continue to be developed and upgraded matching to overall strategy of the bank

2.1.4 Vision and mission

With the guideline to become the leading retail bank in Vietnam, to provide

se:ure financial services for consumers as well as to contribute expanding market shire and profitability, BIDV Thang Long has a clear vision and mission for the coning years

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Mission: BIDV Thang Long strives to become typical retail financial banking group in Vietnam with the aims of maintaining the outstanding values about reputation, brand and quality of product and service, committing to bring customers a set of products and services with high professionalism to meet the needs of individuals, optimizing value for customers, shareholders and sustainable development of group, contributing to general development of community and society

2.2 Analyzing business environment for investment project appraisal activities

in BIDV — Thang Long branch

2.2.1 Fundamental basic to build business strategy in the period of 2012-

- The bank is active in finding high economic benefit project with short time

capital collect for funding

- When lend the project, it is absolutely to follow regulation about credit organization and relevant legal documents Besides that, internal decisive documents

of BIDV and BIDV- Thang Long branch includes credit manual, project assessment manual procedure and assessment content is basic documents in assessment step for project lending

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- Keep checking mechanism, check internal control in the Branch to find out tte problems and solution

- Active in opening co-operation relationship, joint support to be profitable for binking partners

2.2.2 External factors analysis

2.2.2.1 Macro environment factors (PEST model)

PEST Analysis

Political factors

leading demand Therefore, when economy grows, which could affect to

investment project assessment

Investment activities: During recent years, there is positive change in atracting domestic and foreign investment Government already step by step iproves investment environment to create favorable condition for activities of enerprises From that, there is significant increase in whole society investment

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improved more and more, which make Vietnam, become destination of foreign

investors as safe and interesting investment place

When investment activities increase, which leads to increase in demand of

long term and medium term funding Therefore investment also affects to investment project assessment at Commercial Banks

e Socio-cultural environment

Population scale and mechanism: It is estimated to be 86 million people in

2010 There is increase in urban population due to quick speed of urbanization

recently

Increasing population scale and mechanism leads to increase in social demand At that time, investment demand for projects increases which leads to

increase in borrowing to invest in long term and medium term projects Therefore,

population scale also affects to assessment on investment project at bank

Income of people: Like affect by population mechanism and scale, when average income of the Vietnamese increases, living standard increases, which will

make people think about investment by their income to have benefit, as well as

demand in borrowing for consumption All of them have to find down the financial service market from consultation too investment channel, investment management,

help people to invest Therefore, that could have increasing demand in long term

and medium term capital

Education and training: Besides, education and training also develop

strongly A part from State Owned School, more and more private schools has been set up, there are banking education in almost Universities Banking Association and banking training center always opens training courses to help staffs of Commercial Bank to update the knowledge usually

e Political and law environment

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Politic: In general, socio-political situation of Vietnam is very stable

International Organization as the most stable country in Asia accepts Vietnam

Law for banking activities: awful frame for banking activities is improved more and more to meet the demand in internationally economic integration such as State Bank law and law of Credit organization have been complemented and revised

in 2010 These revisions are to set up modern banking system to be more suitable with usual regulation and international standard to decrease interference of authorities in banking operation Lawful frame nonstop being perfected and

innovated according to orientation to lose the control of banking service and

financial market

Currency policy management and administration: In management and administration, State Bank already succeeded in controlling currency policy, stabilizing currency value, speeding up economic growth, guaranteeing stability and development of banking system Tools of currency policy are used as indirect toll such as opening market profession, exchange foreign currency are replaced for administrative tools Interest is gradually to be free, exchange rate is changed from stable exchange rate to be flexible exchange rate adjusted based on the market Mechanism about foreign currency management and payment activities become more and more feasible, more open to increase self-responsibility of Bank

e Technological environment

Informatics technology (IT) in Vietnam develops with high speed Application of informatics technology in life and business activities becomes

more and more popular: Website for production introduction, electronic mail

transaction, ADSL data transaction line

Recently, Vietnamese bank system pay a lot of attention to investment in technology: Interbank electronic transference system allows receiver to be able to receive money within some seconds, ATM system allows to have 24/24 automatic service, global SWIFT payment system, treasury bill bidding It could be said that technological knowledge of bank belongs to high senior and the most modern group of economy At this moment, operation and professional stage are handled

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guaranteed to be able to repay the debt well but could not implement in the progress,

even a lot of projects stops or change the other investors However, BIDV is one great bank with variety of capital, which is not much affected to payment but

difficulties of economy, also affects to benefit target of the bank greatly

2.2.2.2 Micro environment (Michael Porter’s five-force model)

In Pham Hung Street of Tu Liem district, there are many bank branches, therefore, competition is fierce However, Thang Long branch is State

Commercial Bank and consider capital interrelation, network, customers, Thang Long branch have direct competition with Vietcombank, Agribank, Vietinbank This homework selects Vietcombank to be sample bank to compare with

remaining banks Banks not only evaluate according to branch but also evaluated

according to system of each bank

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4 Total available asset 5% 4 0,2 4 0,2 4 0,2 4 0,2)

10 Foreign affair business 10% 4 0,4 3 0,3 3 0,3 3 0,3)

Total important point Column (1): Criteria affect to bank activities 35 | s4 | s3 348

Column (2): Total affecting rate of criteria in column (1) is 100% The essay

evaluates the affecting rate of each criterion to banking activities

Column (3), (5), (7), (9): Systematically is reaction of VietcomBank, VietinBank, AgriBank, BIDV to that criteria Accordingly: point 1: Little reaction, point 2: average reaction Point 3: Above average reaction, Point 4: Good reaction

Based on information and survey, we could find out that each bank reacts

with criteria in different level:

(1) Chartered capital: All 4 banks have annual increasing self-funding with good reaction with criteria of self-funding is marked 4 points

(2) Distribution channel: There are few transaction points in VietcomBank, averagely there are about 3 transaction points with average reaction, 2 points; AgriBank is age-old bank with national wide scale network with good reaction, therefore, it is marked 4 point; there are 5 transaction place of BIDV with above average reaction, therefore, it marked 3 points; there are 5 transaction places with above reaction in VietinBank and it marked 3 points

(3) Service quality: Enterprise and consumer Researching center already declares list of 10 Commercial banks of Vietnam which are most satisfied by

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C RIC 5 Ss) INTERNATION SUS NI SS ADMINISTRATION MASTER

consumers in 2010 based on 3 groups of product of budget, payment and funding (Source: Asset.com.vn) including VietcomBank, BIDV, AgriBank, Vietinbank The essay evaluates service quality of banks with good reaction to be marked 4 points

(4) Total available asset: All of four banks try the best to increase total asset

to be higher than previous year, therefore, they are evaluated to have same reaction and they are marked 4 points

(5) Name awareness: VietcomBank is selected to be “the best bank of Vietnam” by “the Banker” magazine for many continuous years, is the foreign payment center of interbank of more than 100 domestic banks and foreign bank branches in Vietnam To be selected as the main bank in management and service for borrowings and funding of government as well as many ODA projects in

Vietnam Therefore, the author already evaluated VietcomBank to have good reaction about name awareness and is marked 4 points

BIDV is the first bank with success in brand name registration in United State market (2005) BIDV is a member of Asian Bank Association (ABA), ASEAN and

is member of Management Board of ADFIAP BIDV has above average reaction

and marked 3 points

AgriBank is offered the prize named “Lighthouse”, “Sao Vang Dat Viet 2006” AGRIBANK brand name gets the prize of Sao Vang Dat Viet in 2004

However, AgriBank had not enlarged to international market; therefore, the author

evaluated that Agribank gets average reaction for this brand name and marked 3 points

In 2006, Vietinbank already got the prize “Lighthouse”, Golden cup “for stable development and social improvement”, Vietinbank brand name- gets the prize Sao Vang Dat Viet in 2010 However, Vietinbank brand name is similar with bank

of Russia that already registered the brand name in many countries in the world

Therefore, in order to have international integration, at the beginning of 2008,

Vietinbank rename brand name and logo to be VietinBank, therefore, the author evaluates that VietinBank gets average reaction and marked 2 points

(6) Bad debt rate: All of 4 banks are trying the best to decrease overdue debt

to implement privatization, therefore, this banks gets good reaction with this criteria

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KIGGaS NTERNATION BUSINESS ADMINISTRATION MASTER

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and marked 4 points

(7) Attention to strategic administration: VietcomBank and BIDV pay attention to their strategy averagely, | marked 3 points ViettinBank and AgriBank gets average attention and marked 2 points

(8) Investment for human resource: VietcomBank, Vietinbank and BIDV are banks which usually organize professional training course, customer service style, and attention to human resource is more than average, marked 3 points Most of

employee of AgriBank are old this banks has not paid attention to use young staffs

to change service style and marked 2 points

(9) Service diversification: VietcomBank is the first Commercial bank to issue and pay by International card Visa, MasterCard and the biggest card payment agents in Vietnam: Visa, American Express, MasterCard, JCB At this moment,

this bank is a sole agent issuing American Express card in Vietnam, is the biggest Money Gram in Vietnam VietcomBank is evaluated to have good reaction and

marked 4 points

Up to now, BIDV already issued 27 new service products with a lot of

suitable diversification benefit such as: Automatic message sending/receiving service BSMS, future contract service of products, receipt payment BIDV also

speeds up automatic salary payment service, connect card payment with Banknetvn, implement modern banking service such as: Internet banking, P homebanking, Homebanking, co-operate with Western Union to transfer the money to oversee A part from above service, in the coming time, BIDV will implement 2 modern

distribution channels including click - call (based on internet background and

distribution channel through), co-operate to sell banking service product with other services in accordance with model "one stop service" BIDV gets goods reaction and marked 4 points

From 2008-2011 is the year in which all Agribank system has a lot of effort

in implementation of developing new product and VAT service such as: Send and withdraw money in many places, mobilize saving to guarantee the value according

to value of gold: set up connection program of Agribank with Securities Companies

(10)Foreign affair business:

VietcomBank is the bank with the best foreign affair business among banking system in Vietnam and marked 4 points

Agribank is one of the banks with good relationship with the greatest banks agents in Vietnam with more than 1,065 agent bank in 97 countries and area up to end of 2011 Agribank gets the good reaction with this criteria and marked 3 points

VietinBank have agent relationship with 850 banks and great financial organization of more than 60 countries in the world VietinBank gets good reaction with this criteria and marked 3 points

Up to 2011, BIDV has had agent relationship with more than 1,551 banks and

banking branches BIDV gets above average reaction and marked 3 points

Through competitive picture matrix of 4 banks, it shown that Vietcombank is

graded to be first with 3.5 points, the following is BIDV 3.45 points, after that it is

Agribank with 3.35 points and finally is VietinBank 3.2 points Deference mark among the bank is not much

e Threat of new entrants

The increase of domestic banks: The establishment of commercial banks in Vietnam is not met many obstacles That is the reason why the number of commercial banks has increased rapidly in recent times Despite having been just founded for ten years in area of credit operation, commercial banks providing credit Operations are up to more than hundred Nevertheless, to entry sector and become a reputable unit to customers, new banks will face many obstacles and they will not cause much difficulty for the expansion of market share of BIDV

Entry threat of foreign banks: The threat from the new bank will depend on the "high" of barriers to entry Under the WTO commitments, the banking sector is gradually opening up in the routine for seven years The banking sector has made fundamental changes when foreign financial institutions may hold shares in the

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There were 05 (five) 100% foreign banks licensed establishment in Vietnam Nevertheless, when looking at the number of foreign banks having representative offices in Vietnam and foreign banks having equity in the domestic commercial banks, banks with 100% foreign capital will certainly be increased in the future The foreign banks are such way; barriers to the penetration of banks with domestic sources are being raised after the government suspended licenses to establish new

banks from August 2008 Apart from the provisions of charter capital, the time to

constantly be profitable, the State Bank is monitoring the newly established banks

However, that will not prevent enterprises having enough conditions from participating in banking sector once Government allowed re-establishment of bank

Entrance barriers are also reflected through market segmentation and target market that existing banks are targeting, brand value as well as customer base, customer’s loyalty that banks have built These are particularly important because they will determine the viability of a bank looking forward to entering Vietnam market

Look at Vietnam's banking sector in the context of Vietnam and the world; it

is covering by economic crisis The strict entrance barriers make the threat from new

banks in the future quite low Once the world economy has recovery with open of

banking sector under WTO commitment and other organizations, the existence of new banks is almost certain

© Threat of substitute products

For corporate customers, the risk from being replaced is not high since this customer kind needs clarity as well as vouchers, bills in the package of banking services If trouble occurs during use of products and services, customers often

Strategic Management Capstone Report Assessment Group 3 34

payment, contribute to financial transparency for every citizen However, the

locations to accept card payments are most of the restaurants, luxury-shopping areas where people are not always to purchase

Even in the supermarket, consumers have to wait for employees to get the card reader or go to another bar when trying to use the card for payment The main inconvenience adding psychology favor money makes consumers want to keep and use money rather than via banks

In addition to the form of saving in bank, Vietnamese consumers have many

other options such as holding foreign currencies, investing in securities, mode of

insurance, investing in precious metals (gold, diamonds, etc.) or investing in real estate Interest rate from bank does not always attract consumers At this time for

instance, gold price is on hot, sudden increase or decrease during the day, while the

U.S dollar in the free market also changes, the interest rates of most banks is only at 14% a year

Thus, with the subject as corporate customer, the risk of replacing the retail banking products is not high; however, concerning products for individual customers, BIDV faces up more threats from substitute products The substitutes for

individual credit operations will be on growth when financial market lacks of stability and psychology to use money of people is at high level

e Bargaining power of customers

There are three main kinds of customers in BIDV-Thang Long State enterprise, private enterprise individual customers, in the past, the main volume of credit is State enterprise together with the development of private economic sector the credit amount of this sector is increasing year by year

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( pic IC yf ©) NTERNATION BUSINESS ADMINISTRATION MASTER

Table 2.2: Credit mechanism according to customer

(Source: Report on appraising activities of BIDV —Thang Long branch from 2008-2010) Besides the development of total credit amount in BIDV — Thang Long, the structure of customers also changed This change can be indicated via figure 2.2 below:

market Lending rate for state owned enterprises decreases from nearly 40% in 2008

to be 20% at the end of 2010 and lowest during 5 years from 2005-2010 Meanwhile,

account outstanding density of private enterprises is developing strongly and continuously through assessment periods (Up to 31/12/2010 it was 1,533 billion Dong which hold density 68%/total account outstanding, increase 668 billion Dong

in comparison with 2008) Retail account outstanding increases 84% in comparison with 2008 (hold 12% in comparison with total account outstanding)

We could see that there are a lot of changes in mechanism according to customer type, private account outstanding density increased from 53% in 2008 to

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QC CC S/ INTERNATION BUSINESS ADMINISTRATION MASTER

63% in 2009 and 68% up to end of 2010, it guarantee that the branch always

complete the assigned task by BIDV in years The increase concentrates on private customer, small and medium term enterprises operating in commercial production, small business or consumption to buy house, motor or borrow salary etc These customers guarantee to bring the benefit for the branch

Thang ong branch could achieve the strong movement in restructuring the customers because not only they follow development orientation of the system but also it reflects the activeness and accuracy in business decision of Leadership and employees of the branch Change in operation model according te TA2 model and compietion of all credit products during from 2008-2009 had also contributed greatly

to increase competence of the branch, especially enlarge the lending for highly

efficient small and big enterprises

Together with development of bank systems and competition between banks the power of customers has become bigger and bigger, especially for private sector

To ensure the efficiency of credit operation, BIDV — Thang Long needs to have new

strategy for investment project appraisal activities It will be the basic to develop

credit operation in future

e Bargaining power of suppliers

The concept of supplier in banking sector is quite diversified They may be shareholders provide capital to banks’ operations, or companies who are responsible

for maintaining the system or ATM machines, companies providing banking

software, human resource provision system At present, BIDV is investing equipment

and selecting suppliers depend on their conditions This contributes to reduction of

Supplier's power when they cannot provide a large market but must compete with other ones

One of suppliers having the great power with banking development strategy is shareholders They have great influence on the development strategy of the bank in general and BIDV is not an exception In recent years, the stock market has been

frozen due to the financial crisis However, the existing shareholder system of BIDV

is quite strong It is a source of capital, management consulting for efficiency of BIDV in expanding network of clients The shareholders may aid for development of

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oo" oe C TRAINING PROGR

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ter of Business Administration

retail banking products including VMS (20% stake), Mobifone (development cooperation in mobile banking), PV Gas (Development of credit operations to the oil companies)

One of the sources having a large impact on the quality of retail banking operations is labor force Along with the explosion of the commercial banking system, banks are looking for qualified labor force in area of retail banking The scarcity of senior labor in banking industry is becoming more serious when banks are expanding its network to dominate market For human resource issues, BIDV focuses

on attracting talent and train the best personnel from developing available human

resources

2.2.2.3 External factors evaluation matrix

To use quantification method of outside environmental factors to approve

important marking as mentioned in chapter I, we will see the reaction capacity of

BIDV — Thang Long branch for environmental change through EFE matrix as

(3) Development of science and technology 0.20 3 0.60

4 eee financial market to speed up bank to self- oo 0.05 3 0.15

(6) Market Penetration of foreign banks 0.05 3 0.15 (7) Informatics technological development 0.05 3 0.15

(9) Risk of bankruptcy of enterprise during 3

(2) Political environment is stable which has much affect to operation of the

field However, in Vietnam, politics is stable and could not be changed, therefore,

evaluation on this effect of these criteria is only 5%, which leads to success of investment project assessment, and this is the factor that Thang Long Branch reacts

a little Therefore, classification matrix is followed: column (2): 0.05; column (3): 1

(3) Scientific and technological development: This criterion greatly affects to success of the industry, the author estimates about 20% Thang Long branch reacts this one factor well Therefore, classification matrix: column (2): 0.2; column (3): 3

(4) Open financial market to make bank self-innovate: This criterion certainly affects to bank operation with 5% of rate and this is the factor that Thang Long

branch react more than averagely Therefore, classification matrix as followed:

column (2): 0.05; column (3): 3

(5) GDP growth speed: This outside affect greatly affects to success of the bank, affecting rate is 20% This is the factor that Thang Long branch pays a lot of attention with high reaction Therefore, classification matrix: column (2): 0.20; column (3): 4

(6) Market penetration of foreign banks: Many people worry about foreign

banks However, according to the author, the presentation of this bank is not so

worried; affecting rate is only 5% Thang Long branch reacts with this affect above averagely Therefore, classification matrix: column (2): 0.05; column (3): 3

(7) Informatics technological development: develop automatic updated software system to assess effectiveness of the project to help assessment staffs to

assess and evaluate the project more accurate This affect could affect 5%, and

Thang Long branch reacts more than averagely Therefore, classification matrix: column (2): 0.05; column (3): 3

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