LUẬN ÁN TIẾN SĨ IMPACT OF COMPETITIVENESS ON BUSINESS PERFORMANCE AN EMPERICAL STUDY FOR JOINT-STOCK COMMERCIAL BANK IN HOCHIMINH CIY

--- NGUYEN VAN THUY IMPACT OF COMPETITIVENESS ON BUSINESS PERFORMANCE: AN EMPERICAL STUDY FOR JOINT- STOCK COMMERCIAL BANK IN HOCHIMINH CIY Major: Business and Administration Code: 62

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NGUYEN VAN THUY

IMPACT OF COMPETITIVENESS ON BUSINESS PERFORMANCE: AN EMPERICAL STUDY FOR JOINT- STOCK COMMERCIAL BANK IN HOCHIMINH CIY

Major: Business and Administration

Code: 62.34 05.01

SUMMARY OF ECONOMIC DOCTORAL THESIS

Ho Chi Minh City - 2015

The work was completed at:

University of Economics of Ho Chi Minh City

The scientific instructors:

Dr Dang Ngoc Dai

Dr Nguyen Thanh Hoi

at hour day month 2015

The thesis can be studied with:

- National Library of Vietnam

- Synthesis Scientific Library in Ho Chi Minh City

- Library of University of Economics of Ho Chi Minh City

1 Nguyen Van Thuy, 2014 The effects of management capability on business performance: An Emperical study for commercial bank in Ho Chi Minh city

Banking Technology Review, No 102, p 44-51

2 Nguyen Van Thuy (co-author), 2014 Impact of competitiveness on business performance: Evidence from Joint-Stock commercial bank in Ho Chi Minh city

Journal of Economics & Development , No 203(II), p 99 – 110

3 Nguyen Van Thuy (co-author), 8/2012 Factors affecting service quality to customer satisfaction and customer loyalty for commercial banks: Evidence from Ho

Chi Minh city Journal of Economics & Development No special, p 61-71

4 Nguyen Van Thuy, 2011 Factors affecting to job satisfaction and life satisfaction

of sale/marketing in Ho Chi Minh city Journal of Economics & Development,

No.169, p 61-70

5 Nguyen Van Thuy, 2008 The cause of brain drain of commercial banks in

VietNam Banking Technology Review, No 24, p 30-32

CHAPTER ONE: INTRODUCTION 1.1 Background to the research

1.1.1 The urgency of research

In Vietnam, the process of restructuring the banking system in the period

1990 - 2010 and the scheme restructuring the banking system in 2011-2015, was created for the banking sector major changes both in number quantity, size and quality, this is the basic premise of the original meet the commitments signed in the process of integration of the banking sector and create favorable conditions for the banking system entered a period of opportunity international economic integration However, besides the success of the integration process, the commercial bank of Vietnam has exposed some shortcomings such as governance, human resources remain weak, rising NPL ratio, low liquidity leading to low competitiveness This situation raises the issue of urgency to restructure the system of commercial banks from which high performance competitiveness

According to Sanchez & Heence (1996, 2004), the competitiveness of businesses based on their ability to combine the resources of businesses to create competitive advantage “The competitiveness of a company's ability to maintain, implement and coordinate the resources and capabilities in a way help the company achieve its goals” (Sanchez & Heene, 1996, 2004) The essence of competitiveness was redirected to focus on capabilities instead of resources (Sanchez & Heence,

1996, Sanchez, 2001; Freiling et al, 2008) Thus, competitiveness becomes a key criterion for assessing the existence and development of a bank in the international competitive environment is increasing

On the other hand, to put the issue studied in a particular context, joint-stock commercial bank in Vietnam and the branch of commercial banks in Ho Chi Minh City were selected for study because missing experimental studies on competitiveness in the banking sector and TP Ho Chi Minh City is concentrated most of all joint stock commercial banks (JSB) Vietnam

1.2 Previous studies related to the thesis

1.2.1 The previous studies in all the world related to the thesis

(1) The study of CameliI & Tishler (2004) about the relationship of intangible factors to the business results of the administrative organization in Israel, was based

on schools of resources and strategic management to assess the impact of the elements of intangible resources of the organization to the performance of the organization (2) Research of Aziz et al (2006) on competitive resources of investors

of private housing development in Malaysia has been ranked the resources to create competitive capabilities of investors developers estate of Malaysia (3) The study of Thompson, Strickland & Gamble (2007) has proposed elements of the overall competitiveness of an enterprise (4) Research Aboagye-Debrah (2007) the competitive situation, growth and efficiency of the banking sector in Ghana has analyzed the competitive factors of the market share of loans and capital mobilization and collective capital and level market concentration banks through

five forces models of Porter (5) Research Ilihomovich (2009) analyzed the factors affecting the business results of the foreign banks in Malaysia during 2004-2008 were used CAMEL factors affecting business performance (ROE, ROA) (6) The study of Onar & Polat (2010) about the factors affecting the relationship between business strategy options and competence building process of 104 firms quoted on the Istanbul Stock Exchange are evaluated A questionnaire was completed by either the general manager or the human resources manager of each firm based on

7 point Likert questionnaire In summary, the studies on competitiveness and business performance of the enterprise in the world to focus on the business and has proposed a number of elements of the competitiveness of enterprises Particularly in the banking sector, the study focused on assessing competitiveness based solely on the financial perspectives through CAMEL indicators fail to evaluate factors such as human resources, administration, research and development, risk management

1.2.2 The domestic studies related to the thesis

In Viet Nam, the research on competitiveness have been concerns expressed issues such as Trinh Quoc Trung (2004), Le Dinh Hac (2006), Nguyen Viet Hung (2008), Nguyen Dinh Tho and Nguyen Thi Mai Trang (2008), Dang Huu Man (2010), Nguyen Thu Hien (2012), Phan Thi Hang Nga (2013, Hoang Thi Thanh Hang (2013) study on the competitiveness of enterprises or the competitiveness of the banks mentioned factors constituting competitiveness and assess the status of competitiveness From there, make subjective judgments about the competitiveness

of banks that do not assess, build scale and quantifies the impact of individual components of competitiveness to the business results of banks

On the other hand, there is currently no empirical research to examine the extent of influence of the elements of capacity systematic competitiveness, particularly competency-based approach of banks Therefore, the study of the elements of competitiveness of commercial banks and the impact of competitiveness

on business performance of commercial banks is a critical requirement for commercial banks to help identify, nurture, develop and use their talents to compete effectively, adapt to changing business environments

1.3 Research objectives

This study aims to fill the identified gap emerging from a review of prior research in the areas of competitiveness The research examining the relationship between competitiveness and businessperformance of commercial banks and so achieve the following major objectives:

First, the study proposed and tested measurement model of competitiveness applied in the banking sector, in the context of an emerging less developed economy

Finally, testing different samples of the study and validate the entire theoretical models from which additional documents empirical evidence in the context of commercial banks in Hochiminh city - Vietnam and provide some implications practical for business managers to succeed in the bank long-term competitive strategy.

1.4 Research subject and delimitations of the scope

Subjects of study of the thesis is the constituent elements competitiveness and its impact on business performance of commercial banks Subjects of investigation

is the director of the branch commercial banks The scope of this study is focused analysis of commercial banks are operating in HCM City – Viet Nam

1.5 Methodology

This research design for this study consists of three steps, (1) design questionaire, (2) Pilot survey and (3) main survey This process is describled in Figure 1.1

1.6 Scientific contributions of the thesis

The research results presented in the author's thesis show some new major contributions as follows:

- Summary of a systematic theory of competitiveness of enterprises for applications

in the field of commercial banks but no previous study done

- Identify the components and build competitive scale of commercial banks This is the first study carried out in Vietnam, a developing country and the banking sector is

in the process of innovation, restructuring in the context of international integration and competition

- In addition to inheritance and adjust some of the scale, the thesis also build and develop a new scale Risk management capability that previous studies have not done

- This is the first study to apply quantitative methods in a systematic (Cranach’s Alpha reliability and Exploratory Factor Analysis - EFA, Confirmatory Factor Analysis - CFA and Structural equation modeling - SEM) to evaluate the competitiveness of the banking commercial sector in Vietnam but no research approach method in assessing behavior competitiveness and business performance

- This research has discovered new, unlike previous studies, it is in the banking business in Vietnam, Risk management capabilities element with the strongest effect business performance followed by the marketing capability, financial capacity, management capabilities, organization service capability and innovation products-services capability

- The implication drawn difference compared with the previous study were: The bank management in economies transformation in Vietnam in Vietnam need special attention and risk management capability, financial capability, marketing capability and management capabilities during operating decisions to be discovered, maintain and develop their competitiveness in order to improve the business performance of commercial banks

1.7 Structure of thesis

Chapter 1: Introduction; Chapter two: Literature review; Chapter three: Methodology; Chapter four: Findings and discussions; Chapter five: Conclutions and Implications

CHAPTER TWO: LITERATURE REVIEW 2.1 Concepts of competitive and competetitiveness

2.1.1 Concepts of competitive

According to Vietnam's Wikipedia (2014): “Competition (in business) is active competition between commodity producers, traders, trading in the market economy, through the relationship supply - demand, to win the production conditions, consume the most profitable market”

According to Porter (1985, 1998), the competition is gaining market share The essence of the competition is to seek high returns than average returns Results competitive process is the average profit in the direction of improved depth consequently led to the price can fall

2.1.2 Competitive advantage

According to Porter (1985, 1998), competition is at the core of the success or failure firms Competition determines the appropriateness of a firm's activities that can contribute to its performance, such as innovations, a cohesive culture, or good

implementation Competitive strategy is the search for a favorable competitive position in an industry, the fundamental arena in which competitive occurs Competitive strategy aims to establish a profitable and sustainable position against the forces that determine industry competition Firms have many strengths and weaknesses compared to other competitors, but taken together with the two types competitive advantage that firms can possess: cost leadership or differentiation The two basic types of competitve advantage combined with the scopeof activities for which a firm seeks to achieve them lead to three generic strategies for achieving above-average performance in an industry: Cost leadership, differentiation and focus (Porter, 1985, 1998)

Competitive advantage is whatever value a business provides that motivates its customers (or end users) to purchase its products or services rather than those of its competitors and that poses impediments to imitation by actual or potential direct competitors (Christensen, 2010, p.21)

2.1.3 Compettiveness

There are many definitions of competitiveness and in this thesis would like to quote some key concepts mentioned in terms of the competitiveness of enterprises in order to clarify this matter

Firstly, the competitiveness of businesses is the ability to maintain and expand market share and achieve high profits of the firm (Porter 1985, 1998); Second, competitiveness is synonymous with productivity Third, competitiveness means to maintain and enhance the competitive advantage (Porter, 1985.1998) Fourthly, the competitiveness of a firm based on their ability to combine the resources its to create competitive advantage (Sanchez & Heene, 1996, 2004)

In the banking and financial sector has many of the concepts of competitiveness of commercial banks, the thesis would like to quote some of the following concepts:

Nguyen Thanh Phong (2010) defined: “The competitiveness of banks is likely that by itself created on the basis of maintaining and developing its own advantages,

to consolidate and expand market share; increase profitability and resilience and overcome the adverse changes of the business environment” According to Nguyen Thi Quy (2008), “The competitiveness of a bank is its ability to create, maintain and develop the advantages to maintain and expand market share; achieve higher profitability than the average of the industry and constantly increasing, while ensuring safe operation and healthy, able to resist and overcome the adverse changes in the business environment” In this study, the competitiveness of banks are defined as follows: “The competitiveness of banks is ability to use, combine the resources, capabilities to maintain and create their advantages compared to competitors and achieve its objectives in terms of business environment changes”

2.2 Overview theory of competitivenes

2.2.1 Competitiveness approach from internal resources of the entepries

2.2.1.1 Competitiveness in the school of industrial organization economics

Industrial Organization economics model is Procter (1980) generalized through the relationship between the industry structure, operations, or firm strategy and business performance of the sector The key of this model is that business performance depends largely on the industry structure that businesses are competing with each other Industry structure decided acts - business strategy - of a firm and this leads to business performance of the industry (Barney, 1986; Porter, 1980)

Theoretical economics organizations have presented an analytical framework

to help firm analyze a whole business sector, forecasting future movement of the industry, understand the competition and position themselves business and thereby transform this analysis into a competitive strategy for the specific firm (Porter, 1985, 1998) This model also helps us to analyze the business performance of the industry and identify the potential of each business sector Economics organizations admitted decisive advantages huge difference to the business strategy of the business The distinct advantage of this firm is the basis for the resource - based theory of the firm (Wernefelt, 1984, 1995; Barney, 1991, 2001)

2.2.1.2 Resource-based View of the firm

The Resource-based view - RBV was launched by a number of key publications, including Lippman & Rumelt (1982); Wernerfelt (1984); Dierickx

& Cool (1989); Barney (1991, 1996);; Peteraf (1993); Maijoor & Witteloostuijn (1996), Miller & Shamsie (1996), Markides & Williamson (1996) The RBV mainly tries to use the resources available to a firm at a certain point in time to explain firm performance The approach is based on two target resource is classified different forms of resource ownership and resource linked together to form and create competitive advantages from comparative advantages (Makadok, 2001; Wilcox & Zeithmal, 2001) RBV assumes businesses in the same industry using different business strategy to compete

Arccoding to Barney (1991, p.105), a firm resource create competitive advantage must have four arttributes: (1) it must be valuable, (2) it must be rare, (3) it must be imperfectly imitable and (4) Non-substituable, called to VRIN

RBV emphasizes the characteristics of resources (Barney, 1991) is valuable, rare, difficult to imitate and no substitute will create a competitive advantage for businesses However, today's competitive environment, firm compete not only by differences in resources that focus on the ability to coordinate and use resources effectively to achieve their strategic objectives (Sanchez & Heene, 1996) This is a limitation of resource-based theory when only emphasizes the intrinsic element without no consideration to these factors the business environment, the competitive pressures of the business

2.2.1.3 Competence-Based View of the firm

Competence-based Management of firm focused on usability, combined assets, resources and capabilities to achieve growth and overall efficiency of the organization

It was developed by the research mainstream of Barney (1991), Wernerfelt (1984), Peteraf (1993), Sanchez & Heene (1996, 2004, 2008, 2010) Competence-based view

defines a set of fundamental concepts of the original entity that it represents and used

as a basis for analyzing businesses, markets and their interaction (both side competitive and cooperative) Figure 2.2 shows the relationship between the original entity is the ability constituents of the companies that Sanchez & Heene (1996, 2004) proposed to use in the development of strategic theory in view of competence –based

Fig 2.2: Primitive Entities Invoked in Competence Perspective

Source: Sanchez.R (2008)

Sanchez & Heence (1996, 2004), Hubbard et al (2008), Freiling et al (2008) works is confirmed that the competencies are created by adding the capabilities, coordinate resources to create competitive advantage and allow the company achieve its strategic objectives According to Sanchez & Heence (1996, 2004), the organizations are organized as open system resources and the flow of resources to be deployed and coordinated in the process of value creation and value distribution Effective organization must be designed and managed as open systems targeted

search CBV has been built into an approach “dynamic, systemic, cognitive and

holistic” to strategy manage (Sanchez & Heene, 1996; Sanchez, 1997; Sanchez &

Heene, 2004, Freiling et al, 2008)

Four point are called “Four-Cornerstones” of the competence perspective It examines how each platform identified a significant impact on the nature of the performance management process in the organization as open system

Sanchez (2008) summed up these fundamental conceptual differences in the foundations of the RBV and competence perspective can be summarized in this compact form:

RBV assumptions:

Firm Success = Sustained generation of rents

Firms Success = f(resources)

Competence Perspective assumptions:

Firm Success = Ongoing satisfactory level of attainment of a firm’s goals Firm Success = f(resources, capabilities, management processes, strategic logic)

2.2.1.4 The value chain approach

Porter (1985, 1998) propose common value chain by the enterprises can use to test all of their activities and see how they coordinated Value chain explains how companies create value and find ways to increase the value is an important factor in developing a competitive strategy Hubbard et al (2008) suggested that the value chain resources and capabilities will be most useful when determining how the business processes of a firm should be invested in the resources and capabilities to create them,

or how these decisions might affect the current organizational structure of the company

Fig 2.6: The resources and capabilities Investement Valua Chain

Source: Hubbard et al (2008)

Study of Lamarque (2005) research to source of competitive strength in the value chain applied to various commercial banks The value chain of commercial banks corresponding to the description of banking activities for private investors or small business (financial, investment, savings, service)

Fig 2.8: The Commercial Bank Value Chain

Source: Lamarque E (2005)

Huovinen (2008) summarized the studies related to business management competence from 1990 to 2002 (Appendix 1) Accordingly has 84 research works related to the competitiveness of firm In particular, the geographical distribution, the

43 publishers in the US and 26 in Britain From 2003 to 2013 there were more than 32 (according to the author's collection) study on this issue was published in the US journal

2.2.2 C ompetitiveness approach of market orientation

Competitiveness based on market orientation (MO) was developed on the basis that the business will achieve competitiveness by focusing on how to meet needs customers, create customer value better than competitors and achieve business performance Kohli & Jaworski (1990) and Narver & Slater (1990) have developed the content of market orientation consists of three components: customer responsiveness, competitor responsiveness, functional coordination Following the point of view, the study of Deng & Dart (1994) in Canada to add the fourth component- Profit orientation Gray et al (1998) were synthesized and build a more general scale with 5 components MO, includes four basic components plus the new component is to Adapt to the business environment (Hou, 2008)

2.2.3 Gaps in the literature

Resource-based view (Barney, 1991), competence-based view (Sanchez & Heene, 1996) and market orientation (Kohli & Jaworski 1990; Narver & Slater 1990), was directly addressing the the most basic challenge in the heart of the survival of firms: What creates competitiveness and how can be maintained? On the other hand, within the knowledge and efforts of the author to review both international and Vietnam, so far in the banking sector no empirical studies on the relationship Competitiveness – Business Performance Researches on competitiveness from the resources, competence and market orientation perspective has not completely solve this relationship Therefore, this study aims to fill the identified gaps by employing the RBV, CBV and MO of the firm approaches to deveplop intergrative theoretical model that explain the relationships among components of competitiveness and their impacts on business performance This research also aims to provide empirical evidence by testing the model in the context of Joint-stock commercial banks in Ho Chi Minh city - Vietnam, the area of development and significant changes in the current period of Vietnam

2.3 Business performance of commercial bank

2.3.1 Concepts of business performance

Kaplan & Norton (1992) have defined the business performance of the enterprise is determined from 04 impotent perspectives: financial, customer, internal processes and innovation and learning Firms used to manage and measure business results to create a consistent understanding of business strategy by transforming strategy into a set of scales measuring business performance

According Waal & Coevert (2007), the result means that continuous process to achieve financial and non-financial targets, to develop skills, abilities and improve

customer care and process quality Thus, the concepts of business performance of Waal & Coevertl (2007) mentioned both financial factors (Kaplan & Norton, 1992) and the process to meet customer demand, product development, and creating the capacity of the firm It reflects the system of criteria for evaluating the busniess performance and adapt to a dynamic environment

2.3.2 System of evaluation criteria for business performance

Yadav et al (2013) summarized the trend of using the ladder measure business performance in two decades, from 1991 to 2011 show the change the pattern from financial to integration perspective (1991 -2000), from strategic viewpoint, the use of technical systems and modeling (2001-2011) The change and the development of the results measurement systems, integrated and dynamic business performance are presented in Figure 2.9

Fig 2.9: Research trends of Performance Management and Measurement

Source: Yadav & Sagar (2013)

Business results expressed as a multidimensional structure with measuring

groups: The firstly, the financial indicators to measure competitiveness and forecast

the degree of success of business strategy, as well as ensuring protect the interests of shareholders (Kaplan and Norton, 1992; Neely et al (1995); Waal & Coevert, 2007;

Consuegra et al, 2008) The second, operating targets are non-financial indicators in

the business process activities to support achieving the profitability targets, including: market share, growth in the size and resources (Kaplan and Norton, 1992; Neely et al, 1995; Waal & Coevert, 2007; Consuegra et al, 2008, Laihonen et al,

2014) Third, customer criteria to assess customer satisfaction and is considered

important criteria for evaluating the degree of success of most of the organization's strategy (Kaplan & Norton, 1992; Neely et al, 1995; Waal & Coevert, 2007;

Laihonen et al, 2014) Finally, the criteria for innovation and learning through

knowledge, skills and attitudes to work of employees is the priority investment because it determines the existence and development of organization (Kaplan & Norton, 1992; Neely et al, 1995; Vorhies & Harker, 2000; Waal & Coevert, 2007)