Luận văn Thạc sĩ Kế hoạch phát triển chiến lược của ngân hàng đầu tư và phát triển BIDV giai đoạn 2015 2020

Luận văn Thạc sĩ Kế hoạch phát triển chiến lược của ngân hàng đầu tư và phát triển BIDV giai đoạn 2015 2020 Luận văn Thạc sĩ Kế hoạch phát triển chiến lược của ngân hàng đầu tư và phát triển BIDV giai đoạn 2015 2020 Luận văn Thạc sĩ Kế hoạch phát triển chiến lược của ngân hàng đầu tư và phát triển BIDV giai đoạn 2015 2020 Luận văn Thạc sĩ Kế hoạch phát triển chiến lược của ngân hàng đầu tư và phát triển BIDV giai đoạn 2015 2020 Luận văn Thạc sĩ Kế hoạch phát triển chiến lược của ngân hàng đầu tư và phát triển BIDV giai đoạn 2015 2020 Luận văn Thạc sĩ Kế hoạch phát triển chiến lược của ngân hàng đầu tư và phát triển BIDV giai đoạn 2015 2020 Luận văn Thạc sĩ Kế hoạch phát triển chiến lược của ngân hàng đầu tư và phát triển BIDV giai đoạn 2015 2020

1

-Luận văn thạc sĩ

Kế hoạch phát triển chiến lược của Ngân hàng đầu tư

và phát triển BIDV giai đoạn 2015-2020

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION

PROGRAM

CAPSTONE PROJECT REPORT

Planning development strategy for Bank for Investment and Development of Vietnam (BIDV), Period 2010 – 2015

We would like to send our great thanks to teachers of VNU, who have taught

us with the enthusiasm and helped us have precious knowledge during the time ofstudying the program We also express our thanks to specialized team who haveread, given advices and instructed us during the study and completion of the project

In addition, we would like to send our deep gratitude to the Bank for Investmentand Development of Vietnam, head office, Hanoi, Ha Thanh, Hung Yen brancheshaving helped and created favorable conditions so that we can obtain necessaryinformation for completing thesis

TABLE OF CONTENTS

CHAPTER I.

FUNDAMENTALS OF STRATEGIC MANAGEMENT AND

STRATEGIC PLANNING IN ENTERPRISE

14

1.3.2 Analyzing internal and external environment of the enterprise 19

CHAPTER II.

ANALYSIS ON REAL SITUATION – ENVIRONMENT –

STRATEGY – BUSINESS OF BANK FOR INVESTMENT &

DEVELOPMENT OF VIETNAM

33

2.1 Overview about Bank for Investment and Development of VN 33

2.1.1 General information about Bank for Investment and

2.2 Analysis on business environment of BIDV 35

CHAPTER III:

DEFINE THE DEVELOPMENT STRATEGY OF BANK FOR

INVESTMENT AND DEVELOPMENT OF VIETNAM FROM

2015-2020

72

3.2.3 Analysis of capacity of opportunity exploitation 78

3.4.1 Healthy finance, profitability, financial status enhancement, risk

3.4.2 Restructuring organization and management, as well as

3.7 Factors to facilitate the implementation of plan need to be

ABBREVIATED TERMS

Abbreviated

word

WTO World Trade Organization Tổ chức thương mại thế giới

TMCP Joint stock commerce Thương Mại Cổ Phần

R&D Research and Development Nghiên cứu và phát triển

SBU Strategic Business Unit Đơn vị kinh doanh chiến lược

HĐQT Board of Management Hội Đồng Quản Trị

ASEAN Association of Southeast

Asian Nations

Hiệp hội các quốc gia Đông Nam Á

BIDV Bank for Investment and

Development of Vietnam

Ngân hàng Đầu tư và Phát triển Việt Nam

NHNN State Bank of Vietnam Ngân Hàng Nhà Nước

LIST OF FIGURES, TABLES AND CHARTS

Figures Page

23 Figure 1.4: Five competitive forces of Michael.E.Porter 24

31 Figure 2.1: Comparing the capital mobilization of BIDV with that of

Charts Page Chart 2.1: GDP growth and GDP per capita in 1998-2007 36

Chart 2.3 : Prime interest rate of State Bank in the last months of

Chart 2.4: Exchange rate of Vietnam dong over USD in 2003-2008 39

46

Tables Page Table 2.1: Number of branches of BIDV to be regionally

Table 2.4: List of internal and external factors of BIDV 63

Table 2.8: Targets of strategy performance in phase 2005-2010 70

PREFACE

A Reason for choosing the Subject:

Business strategy is always one of the important factors affecting the survivaland development of an enterprise Especially in a period when the competitivenessand economic crisis is as critical as now, the future of an enterprise more and moredepends on whether that enterprise has a good business strategy or not On the otherhand, besides Vietnam become a member of the World Trade Organization (WTO),our enterprises are facing with new challenges; the competitiveness is not onlyamong domestic enterprises but also among foreign ones

In fact, after Vietnam become a WTO official member, governments of manycountries and their banks also put pressure on Vietnam aimed at operating inVietnam market, particularly the foreign banks which meet regulations specified inthe Banking Law and strategy of developing Vietnam market On the other hand,Vietnamese Banks do not receive protection from the State any more, thus, there is

no difference between domestic or foreign banks Up to now, the two banks: Bankfor Foreign Trade of Vietnam and Vietnam Bank for Industry and Trade have beencapitalized, and other trade banks of the State will be capitalized in near future;therefore, pressure on sharing profits to shareholders is not little if businessoperation and investment of the bank is ineffective Besides, brain drain of the StateBank to highly-profitable foreign banks is also remarkable issue With powerfulfinancial capacity, foreign banks shall find any way including propaganda,promotion and reduction of service price to create prestige and control the market

For above reasons, our group including four members has chosen the research

subject “Planning development strategy with the Bank for Investment and Development of Vietnam in the period 2015-2020” and hopes to contribute an

tiny effort aimed at providing banks in Vietnam in general and the Bank forInvestment and Development of Vietnam in particular with the overview onbanking market so that they can build the most suitable business strategy in thecoming time

B Objective of the Study

Our thesis aims at studying operating environment of the Bank for Investmentand Development of Vietnam including factors inside and outside the bank Thanks

to that, it is possible to define good opportunities, risks and development orientationfor the bank in the period 2010 - 2015, also help the bank keep its competitiveadvantage in the market and develop more in the integration period

C Object and scope of the study

Object and scope of our study is the Bank for Investment and Development ofVietnam and Banking industry in Vietnam, respectively

D Studying method

In order to complete the thesis, various studying methods have been used byour group including statistics, analytical method, method of consulting experts,observation and interview, etc

E Structure of the Thesis

Besides the overview, conclusion, table of contents, and references, the thesis

is divided into three parts

Chapter I: Overview of strategic management and strategy planning in

FUNDAMENTALS OF STRATEGIC MANAGEMENT AND

STRATEGIC PLANNING IN ENTERPRISE

1.1 Definition and role of strategic management

1.1.1 Definition

The term Strategy comes from two Greek words “stratos” (meaning an army)and “agos” (meaning to lead, to guide to move) referring to large and long-termplans on the basis of analyzing strengths and weaknesses of opponents, first of all, it

is used in military Since then, the term business strategy is used, in traditionalviewpoint; strategy is the determination of basic long-term goals and objectives of

an organization to give out specific action plan as well as use resources properly toachieve the planned objectives

According to Alfred Chandler1: “Strategy is the determination of basic term goals and objectives of an enterprise, and the adoption of courses of action andthe allocation of resources necessary for carrying out these goals”

long-According to William J’ Glueck2, strategy is “a unified, comprehensive andintegrated plan designed to assure that the basic objectives of the enterprise areachieved”

Fred R David3 defined strategy as “Means by which annual objectives will beachieved Business strategy may include geographic expansion, diversification,acquisition, product development, market penetration, retrenchment, divestiture,liquidation and joint venture”

Michael E Porter4 stated strategy as “Positioning the company so that itscapabilities provide the best defense against the competitive forces”

Together with definition of business strategy, strategic management is alsointroduced

1 Nguyen Khoa Khoi and Dong Thi Thanh Phuong (2007), Strategic management, Statistics Publisher, p.4.

2 Nguyen Khoa Khoi and Dong Thi Thanh Phuong (2007), Strategic management, Statistics Publisher, p.4.

3 Fred David (2006), Translation version: Strategic management Concepts, Statistics Publisher, p 20.

4 Assoc Prof Dr Dong Thi Thanh Phuong, MA Nguyen Dinh Hoa, MA Tran Thi Y Nhi (2005), Textbook

Fred R David5 defined strategic management as: “Art and science offormulating, implementing, and evaluating cross-functional decisions that enable anorganization to achieve its objectives”

John Pearce II and Richard B Robinson6 defined strategic management: “asthe set of decisions and actions that result in the formulation and implementation ofplans designed to achieve a company’s objectives”

Thus, like any management progress, strategic management includes planning,organization, implementation and supervision of implementation Managementobject here is the environmental impacts (opportunities, mishaps) and the waywhich enterprises respond environmental impacts (by efforts of all sections inenterprise) In other words, strategic management comprises general planningactivities, implementation, supervision and adjustment of strategic management inorder to ensure that enterprise always takes full advantage of all opportunities,chances as well as limiting or avoiding threats, risks on the way of implementing itsobjectives

1.1.2 Role

Strategic management helps enterprise orient clearly strategic visions,missions, and its objectives, or otherwise helps enterprise realize its objective anddirection to select the way to achieve objectives proposed at the same time strategicmanagement shows the position of enterprise in implementing these objectives Strategic management helps enterprise recognize opportunities, risks fromexternal environment, strengths, weaknesses in current enterprise to promote strongpoint and minimize weaknesses in order to take advantage of opportunities and havesolutions to prevent from threats outside, helping enterprise in choosing the beststrategy suitable with environment and business situation This is very importantespecially in more and more complicated, continuously changed and criticalenvironment all over the world

5 Fred David (2006), Translation version: Strategic management Concepts, Statistics Publisher, p 9.

6 Assoc Prof Dr Dong Thi Thanh Phuong, MA Nguyen Dinh Hoa, MA Tran Thi Y Nhi (2005), Textbook

of Strategic management, Statistics Publisher, p 26.

Strategic management requires managers to update information on internaland external environment of enterprise, thanks to this, predict and plan possiblesituations Therefore, it also helps company always make decision actively andflexibly to cope with the changes of market

Figure 1.1: Five tasks of strategic management 7

1.2 Definition and role of strategic planning

1.2.1 Definition

Planning is one of the most significant and basic operations of managers Theterm planning is generally construed as drafting and completing ideas and projects.Strategic planning is the determination of objectives of organization, construction ofgeneral planning to achieve proposed objective and development of acomprehensive planning system to coordinate and combine with operations oforganization In accompanying with the development of organization, strategic

7 Assoc Prof Dr Le The Gioi, Dr Nguyen Thanh Liem, MA Tran Huu Hai (2007), Strategic management,

Build strategies

to achieve objectives

Perform and run selected strategies

Assess performance, repair and adjust

Improve/

change if necessary

Repair if

necessary

Repair if necessary

Improve/

change if necessary

Restore 1,2,3,4

if necessary

planning plays a more and more important role It is the spine controlling alloperations as well as culture of an organization.

1.2.2 Role

Strategic planning is an important stage in strategic management process; itorients managers as well as execution staffs When staffs define where theirorganizations go and what they have to contribute in order to reach organization’sobjective, they will coordinate to gain the highest efficiency, avoid repetition andwaste resources

Strategic planning also contributes to limiting instability because it forcesmanagers to have broad view, predict possible change, assess impact of thosechanges and prepare plan suitable with those changes

Strategic planning sets up strategic objectives which are also just standards forcontrol activities By planning, it is easier to recognize weak activities to havetimely repair, make enterprise have more and more complete operation machinery

1.3 Strategic planning process in enterprise

Strategic planning process in enterprise includes the following steps: First ofall, enterprise has to define their objectives in given time, after that, analyzeexternal environment to determine chances and challenges, and then, analyzeinternal environment to define strength and weakness of enterprise in order toanalyze and select reasonable strategies

Figure 1.2: Strategic planning process in enterprise

1.3.1 Defining strategic objective

Each organization needs define one own specific mission (task) Mission isread as the reason for existence and operation of company, answer to question

“What must we do?”; “Why do we do business?”

In terms of company’s tasks, product, market, customer, technology, profit,community image, staff and business philosophy are usually mentioned In order todefine these missions, company needs find out the answer to the following question:

1 Customer: Who is company’s customer?

2 Product or service: What is the main product and service of company?

3 Market: Which market does company focus on?

4 Technology: Does company pay attention to technology development?

5 Attention to existence, growth and profit: Does company undertake to gainfinancial stabilization and growth?

6 Business philosophy: What are the recognized key values, basic beliefs,aspiration and priorities in terms of business ethics of company?

7 Self-assessment: What is the competitive benefit and special capacity of thecompany?

8 Attention to image before community: How does company meet demand forsocial and environmental issues?

9 Attention to staff: Does company consider its staff as valuable asset?

From mission and vision of company, leaders will define strategic objectives

of that company Strategic objective states the specific results which companywants to gain in a given time Defining strategic objective is specialization ofcompany mission into specific tasks as well as giving orientation for managementdecision and forming standard to evaluate work achievement

Two basic strategic objectives of enterprise are financial and strategic Theformer refers to improving financial and the latter aims at competitive position ofcompany in industry In the process of implementing long-term strategic objectives,

enterprise can divide into many short-term objectives respective with each period.

1.3.2 Analyzing business internal and external environment of the enterprise

1.3.2.1 Analyzing external enterprise (EFE)

The assessment of external environment shows us major opportunities andrisks and enables the enterprise to plan strategy taking advantage of opportunitiesand avoiding threats External environment is divided into macro-environment andindustry environment

Analyzing macro-environment

Analyzing macro environment through the following factors:

 Economic factors:

Gross Domestic Product (GDP): Enable us

to have an overview of economy health, impactindirectly on business activities of industries ineconomy, as well as being lever to boostoperation process of enterprise

Income per capita: Increase income percapita will lead to increase in demand, quantity, and quality of goods, make customer’s taste change

Inflation factor, foreign exchange rate, fiscal policy also influences

business strategy of enterprise

 In terms of government, politics and law:

Enterprise must comply with regulations of the government and law so theregulations on tax, safety and environmental protection, import-export policies,industrial ownership protection and socio-political stabilization and so on alsoimpact on enterprise’s strategy

 Technological factor:

More and more new, advanced technologyinvention also creates chances as well as risks forenterprise New invented technology is thechance for enterprise to take advantage tomanufacture products with high competitiveness and the risk if other enterprises apply before At the same time, new technologycreates new better products, makes existing products become backwardness orreduces life cycle of product

Analyzing industry environment

Analysis of industry environment or micro-environment is the consideration ofemergence factor in operation industry deciding property and competitive level in

this industry This is also called competitive environment because it links directly toeach enterprise and most competitive activities of enterprise in this environment.Three main tools are used to analyze industry environment, i.e strategic group,development cycle of industry and five competitive forces of Michael E.Porter.

Strategic group

Strategic group is a group of companies applying one same or similar strategy

in one certain target market Determining to which strategic group enterprise isbelonging will help strategic planners narrow sphere of main competitors withwhich enterprise must cope Different strategic groups will create various barriers toentry industry

Model of five competitive forces

Michael E Porter, Harvard Professor, proposed one framework to helpmanagers recognize opportunities and risks with which enterprise must deal in oneindustry This framework is called “The five competitive forces that shape strategy”

as Figure 1.4

Figure 1.4: Model of five competitive forces of Michael.E.Porter 8

8 Garry D Smith, Danny R Arnold, Boby R Bizzell, Translator: Bui Van Dong

(2003), Business strategy and policy, Statistics Publisher

 Risks of reducing market share from new competitors (Potentialentrants):

When potential entrants take part in industry, market share, profit of enterprisewill reduce To maintain its competitive position, enterprise must increase barrier toentry industry through solutions such as product diversification, scale advantage, etc

or access to distribution Moreover, policies of the government, intellectual propertyright, or accessibility to material resources also create barrier to entry industry ofpotential entrants

 Bargaining power of suppliers:

Suppliers are enterprises supplying input factors for operation of enterprise.Relative forces of suppliers are usually shown in the following cases:

 When there are only a few suppliers

 When substitutes are not available

 When products of supplier are important input factors for operations

of customers, etc

 Bargaining power of customers (buyers):

Customer’s prestige is valuable assets for enterprise However, whencustomers predominate, they can reduce enterprise’s profit by bargaining orrequiring higher quality Pressure from customers originates from the followingconditions:

 When the number of customers is small:

 When customers buy a large and concentrative volume

 When product of enterprise is common product without highdifferentiation

 When customers threaten and have capability of integrating backward

 When customers have lots of information

 Threats of substitute products or service :

Substitute products are products meeting one demand of customers such asproduct of enterprise Substitute products can put pressure on competitiveenterprises in terms of price, quality of products-services, function – performance ofproducts, model of new product, new consumption trend

 Industry competitors:

Existing competitors is enterprises currently operating in one operationindustry Analyzing existing competitors helps enterprises define competitive levelbetween enterprises in the same industry There are three main factors impacting oncompetitive level between enterprises in the same industry, i.e industry structure,demand and industry exit barriers

 Industry structure

Industry structure is distribution in terms of number of enterprises withvarious scales in the same business and production industry Generally, indecentralized industries include a large number of small and medium-sizeenterprises operating individually and independently, competitive level will befiercer, there is no enterprise playing the dominant role of the whole industry andcompetition in prices arises easily In contrast, the centralized industry includes asmall number of enterprises, most large-size ones and even one dominant enterprise

of the whole industry, competitive level in these industries is not fierce asdecentralized industries but difficult to analyze and predict

If the demand of industry increases, enterprise will have the chance ofincreasing revenue, reaching higher growth rate However, if demand increases toohigh, it means that industry becomes more and more attractive and lots ofenterprises want to take part in the industry That would be risk for enterprisescurrently operating in the industry In contrast, decrease in industry demand willmake competitive amongst enterprises fiercer It is difficult for enterprises withoutcompetitive capacity to avoid threats of market loss

 Industry exit barrier

When operating in one industry is not advantageous any more, due tosubjective and objective reasons, enterprises in the industry want to move into otherbusiness line Sometimes, it is hard to leave because enterprise must overcomesome specific barriers The industry exit barriers usually include:

 Investment expense and other expenses: fixed assets, trainingexpense, advertising expenses, expenses for building distribution channel, etc

 Relationship between business activities of enterprise: if enterprisetakes part in operation of various business lines, industry exit will impactlargely on general strategy of enterprise If the impact is too large, it isdifficult for enterprise to exit one industry

 Psychological factor: value, prestige of leaders

 Legal ties are also one barrier restricting industry exit Whenenterprise wants to exit a certain industry that enterprise must carry out manyadministrative procedures in that industry and other procedures to join oneanother industry Administrative procedures are complicated, cost enterprise alot of time and effort

From analyzing factors of external environment, enterprise will recognizeopportunities and potential risks Opportunities will be levers helping enterprisedevelop but risks damage existence and development of enterprise

1.3.2.2 Analyzing internal enterprise (IFE)

Analyzing internal enterprise is to find out strengths and weaknesses ofenterprise in order to define distinguishing capacities of enterprise in industry.This

is the basis for enterprise to build suitable business strategy

It focuses on analyzing functional activities such as: production, marketing,R&D, human resources, accounting finance, organization order and discipline, etc

In order to assess operation situation of functional parts in enterprise correctly,managers need analyze functional parts in its movement process, that meansanalysis of these factors in context that operation activities is in “value chain” ofenterprise

Value chain is the systematic related activities of enterprise to increase valuefor customers Value chain includes two main operation groups: main activities andsupplementary ones

Figure 1.5: Value chain

Main activities: directly impact on value of the product and services

(creating value) including input activities, production, output activities, marketingand sale, service

 Input activities: being in association with activities of receiving,reserving, and managing input factors The completion of any activity amongthese shall result in reduction of cost and increase of productivity

 Product: includes all activities aimed at changing input into finalproduct

 Output activities: are activities delivering finished products toenterprises’ customers These activities include storage, management ofproducts, delivery of goods and orders processing

 Marketing and sale: relating to products, price, promotion andsupport, distribution channel

 Service: Customer services include activities such as installation,repair, consultancy, supply of component, parts, adjustment of products aswell as patience to satisfy customers’ claim and requirement Customerservice is higher and higher appreciated and considered as one of the mostimportant activities of the enterprise

Supporting activities: are activities affecting indirectly product and

service value (adding more value)

 Infrastructure of the enterprise:

Input Supply Activities

Including main activities in term of finance, accounting, law, authority, generalmanagement and information system Infrastructure shall play the role of supporting allactivities in the value line including major activities as well as others.

 Human resource administration:

Including activities aimed at training, developing and giving payment to allemployees at all grades of the enterprise

 Technology development:

These activities are in association with all valuable activities of the enterprise.Technology development is to find new production method and products forenterprise

 Purchase:

This activity relates to purchase of input factors used in value chain of theenterprise These input factors includes: material, energy, water and other inputfactors directly used in the production as well as fixed assets of the enterprise such

as machinery, equipment and facilities

Analysis of enterprise internal environment shall help enterprise to recognizeits strengths for development and weaknesses for restriction

1.3.3 Analyzing and selecting strategy

Managers shall combine opportunities, threats, strengths and weaknessesdefined in the analysis of business environment and enterprise internal environmentwith objective which the enterprise needs to obtain so as to select a suitablestrategy

1.3.3.1 Building a strategy with SWOT matrix

SWOT is used to list all opportunities, threats, strengths and weaknesses in theinternal and external environment of the enterprise, in appropriate order andposition In order to build SWOT matrix, at first, managers carry out selection,determine opportunities and threats as well as key strengths and weaknesses ofenterprise

 Main opportunity: is the opportunities with high impact and probabilitylevel, it can bring about enterprise higher development in quality.

 Major threats: means the threats which have large impact and probability,

it is capable of causing remarkable damages to enterprise if not being appropriatelyconsidered

 Key strengths: are relative and absolute advantages of enterprisecompared to main competitors or average level of the industry in which theenterprise is participating

 Key weaknesses: are main weak points which enterprise needs overcome

in order to remain its competitive advantage compared to main competitors

When having defined opportunities, threats, strengths and weaknesses,managers need carry out following steps to build a SWOT matrix:

Step 1: Listing main opportunities, threats, strengths and weaknesses insquares of SWOT matrix

Step 2: Combining them in pairs logically

 S_O: These strategies base on strengths of enterprise to exploitexternal opportunities Enterprise tends to develop and take part in newbusiness field;

 S_T: These strategies base on strengths of enterprise to prevent or set

a restriction to external threats Enterprises tend to build their ownbarriers;

 W_O: These strategies overcome internal weaknesses to takeadvantage of external opportunities Enterprises tend to cooperate withothers in business

 W_T: These strategies overcome internal weaknesses to prevent orminimize external threats Enterprises tend to narrow or exit industry

Step 3: Summarizing and reviewing strategies

1.3.3.2 Selecting trategies

After analyzing opportunities, threats, strengths and weaknesses of enterprise,manager shall assess various solutions in correlation with abilities of achieving goalset out by enterprise Such strategic solutions as: level of business unit, functionlevel or corporate level

Corporate-level strategyCorporate-level strategy enables enterprise to:

 Define business industry or business industries which enterprise shallparticipate in the competition

 Determine how these various business industries so as to strengthenthe general position of the enterprise

There are three types of corporate-level strategies which enterprise can chooseincluding growth, stability and retrenchment strategies

Business-level strategy Business-level strategy defines operation direction for each business line ofone multi-industry company or one SBU (Strategic business unit) or one singleindustry company Strategic business unit enables enterprise to create itscompetitive benefit in one specific strategic business unit There are three types ofoverall competitive strategies i.e low cost strategy, differentiation strategy andfocal strategy

Functional level strategyFunctional level strategy is the strategy related to functional parts inenterprise It comprises of strategies in price, product, strategies of research anddevelopment (R&D), etc

Functional strategies support, ensure and specialize through the process ofimplementing business strategy of enterprise Formation and development of

functional strategies must create sharing of functions to promote competitiveadvantages of enterprise Marketing strategies, product strategies, price and so onmust be designed suitable with selected competitive strategies in order to reachobjectives of competitive strategy and strategy at corporate level.

These three strategic levels have close relations with one another, so theyshould be executed simultaneously, synchronously, if it fails to implement onestrategic level, it will impact on the results of both two other strategies and generalobjectives of enterprise

CHAPTER II.

ANALYSIS ON REAL SITUATION – ENVIRONMENT –

STRATEGY – BUSINESS OF BANK FOR INVESTMENT &

DEVELOPMENT OF VIETNAM

2.1 Overview about Bank for Investment and Development of Vietnam

2.1.1 General information about Bank for Investment and Development of Vietnam

Name of the bank : Bank for Investment and Development of Vietnam Abbreviated name : BIDV

Date of establishment : On 26 April 1957

Current logo and slogan of BIDV:

"COOPERATION FOR MUTUAL DEVELOPMENT"

2.1.2 Functions and missions of BIDV

Providing a full range of currency, credit, banking and non-backing servicesand acting as authorized agency funding projects with sources from domestic andinternational financial institution in conformity with legal regulations, continuouslyraising benefits of the Bank, contributing to executing national fiscal policies andeconomic development of the Country

2.1.3 Business activities of BIDV

 Bank: Providing sufficient and lump-sum traditional and modern bankingservices

 Insurance: Insurance, reinsurance of all non-life insurance business forms

 Securities:

 Securities brokerage; Securities deposit

 Investment consultancy (businesses, individuals)

 Guarantee, issuance

 Portfolio management

 Financial investment

o Securities (bonds, shares, etc)

o Capital contribution to an enterprises to invest on projects

2.1.4 Organizational structure of BIDV

(See Appendix 2: Organizational diagram of Bank for Investment and

Development of Vietnam at page 100)

 Board of Directors:

This is the highest management organ of the Bank, responsible for makingdevelopment policies and operational orientation of BIDV

 Board of General Directors:

Board of General Directors is the direct management organ, responsible fordirecting all activities of the Bank

BIDV is one of the banks with the largest distribution network within the banking system of Vietnam , which is divided into two industries”

 Business unit:

 Commercial banks include 103 first-grade branches with nearly 400

transaction points, over 700 ATMs and ten thousands of POSpoints in the whole country meeting all customer's demands Inwhich, there are two specific units:

 01 Security Company (BSC)

 01 Insurance Company (BIC): a Head office and 10 Branches

 05 Joint-ventures

 Administrative unit

 BIDV Training Centre (BTC)

 BIDV Information Technology Centre (BITC)

Total officials and staffs of the whole system are over 10,000 people

2.2 Analysis on business environment of BIDV (EFE)

2.2.1 Macro- environment

Banks, clients, competitors and the community operate in a large environment with such forces and trends which create opportunities as well asraising risks These forces are “uncontrollable” forces that the bank has to keeptrack and deal with Within the global image of rapid change, BIDV in particularand other State-owned commercial banks in Vietnam in general have to adapt 4main issues, namely: Politics, Law – Economy, Culture, Society and Technology –Technique

macro-2.2.1.1 Effects of Law and Politics

Vietnam is originally assessed as possessing stable political environment.People believe in Guidelines, Policies of the Party and Government and feel secureand encouraged to invest in production and business Measures for ensuringpolitical security, social safety and order and fighting against criminality arestrengthened Vietnamese Government always offers policies encouraging thedevelopment of Banking Industry in Vietnam From the implementation of openeconomy and Financial – Banking market up to now, Vietnamese Government hascontinuously perfected legal system on Bank including Law on State Bank and Law

on Credit Organizations born in 1997, amended and supplemented on 15 June 2004

2.2.1.2 Effects of the economy

Recently, Vietnam is one of the most rapid developing world economies,boosted by the boom of foreign investment Vietnam’s accession to WTO in 2006and new direct investment wave as well as indirect investment capital indicate the

impressive process of economic innovation, especially on trade and investmentliberalization These innovations have led to achievements in economy, i.e annualaverage growth of 7.5% throughout the last decade – one of the most rapid growths

in Asia (see the Chart 2.1)

Chart 2.1: GDP growth and GDP per capita in 1998-2007

Source: General Statistics office of of Asian Development Bank

Official economic statistics in 2008 announced by General Statistics Office on

31 December 2008 show that absolute GDP of the whole country in 2008 reach1,487 thousand billion Vietnam Dongs With Vietnam’s population of about 86million people, average GDP per capita reaches about 17 million Vietnam DongsWith average accounted USD in 2008 of 16,700 Vietnam Dong/USD, average GDP

of Vietnamese people have reached 1,024 USD/person

Rapid economic growth and increase in people’s living standard createfavorable conditions for the Bank to stably develop and thoroughly exploit servicesmarket with high potential in the country

GDP per capita (USD, left column) GDP growth rate (%,right column)

Interest rate has considerable effects on enterprises because it is a component

in product price of a enterprise Higher interest rate and harder loans shall directlyaffect production and operation expenses of such enterprises needing borrow Inaddition, interest rate also affects many other factors and these factors, in turn,affect business activities of the banks

Chart 2.2: Movement of interest rate in 2008

Source: State Bank of Vietnam

The State tightens currency in order to minimize inflation but weakensbanking system and its liquidity capability, leading to interest rate race Primeinterest rate increases from 8,25% at the beginning of the year to 14% on 12 July

2008 Mobilized interest rate sometimes increases to 20%, loan rate also increases

at the corresponding level Loan rate of Commercial Banks in Vietnam in the earlymonths of the year 2008 increases highly Interest rate race among the banks in thatperiod had negative impacts on business activities of many enterprises and theeconomy in which Banking industry is not an exception In August 2008, StateBank of Vietnam decides to keep prime interest rate of 14%/year and increaseinterest rate for the compulsory reserve by 1.2% - 3.6% This creates favorable

MOVEMENT OF INTEREST RATE IN 2008

Prime interest rate Interest Rate Refunding Interest Rate Deduced

conditions for the banks to decrease output interest rate Then, the State Bankcontinuously decreases prime interest rate to support enterprises to overcomedifficulties.

Chart 2.3: Prime interest rate of State Bank of Vietnam in the last

months of 2008

Source: www.atpvietnam.com

Although in early September of 2008, series of banks announced to decreaseloan rate, but this rate remained fairly high In the early months of 2009, highinterest rate is a big obstacle for production and business activities of Vietnam’senterprises

In terms of exchange rate, in the past few years, exchange rate of VND/USDwas fairly stable and slightly changed Mean of following year in comparison withthe previous year: increases by 1.57% in 2004, by 0.56% in 2005, by 0.95% in 2006and by 0.62% in 2007 In 2008, the exchange rate of VND/USD has changed incomparison with the previous years The differences are shown in the followingfactors Firstly, the exchange rate flunctuates more : continuously decreasing in thefirst three months and continuously increasing in the three following months.Secondly, the difference between USD in free market and in commercial banks is

sometimes negative, sometimes positive with fairly big range Thirdly, the exchangerate of VND/USD in the whole year: decreases from January to April, increases inMay and June and especially increases in June However, in the last six months ofthe year, exchange rate of VND/USD has not changed much except for widenedexchange rate range up to 3% on 25 December 208 from 2% in June 2008.

Chart 2.4: Vietnam Dong Exchange rate against USD in 2003-2008

(In December 2002, exchange rate = 100, an increase in value of the indicator

leads to the growth of currency rate)

Source: International financial statistical figures of IMF and

estimation of ADB

Inflation rate has large effects on enterprises in the economy because inflationincreases input factors prices of the enterprises (Input mobilization interest rate ofthe banks increases) Inflation rate of Vietnam in the recent time is at high level,shown in the following chart:

Chart 2.5: Inflation in the period of 1995-2007 (calculated according to

consumer price index in December of each year in comparison with

December of the previous year).

Real exchange rate Nominal exchange rate

Source: General Statistics Office of Vietnam

Among 10 outstanding events summarized by Vietnam Television, there is anevent that inflation rate in 2008 is about 22% Inflation rate in the first quarter ofthis year remains 14.47% higher than that of the same period of the last year(Figures of General Statistics Office of Vietnam announced on 24 March 2009).High inflation not only increases production costs, affects revenue and benefits ofthe enterprises, but also reduces consumption demand of people due to lowpurchasing power of the currency

2.2.1.3 Effects of culture, society, geography and population

 In terms of the culture:

Socio-cultural environment affects lifestyle, demand and consumer'spreference It can be said that, as an environmental factor, culture has thecomprehensive effect on the banks’ activities Culture affects series of strategicissues such as: business field selection, targeted market selection, general strategyselection, decisions on general targets of the banks and business activities Culture

is both the target and motivation of social development Cultural effects oneconomic activities are widespread and complicated Vietnam has a culturebackground with advance and highly national character However, in the recentyears, due to integration process, many foreign cultures penetrate in Vietnam,especially big cities, middle class and the youth are mostly affected in lifestyle andway of thinking This thus affects their consuming and buying behaviors: they tend

to enjoy foreign goods, consider trademarks, quality and value of the products.Academic standards of Vietnamese people are increasing, Vietnamese consumersrequire products with both material and immaterial values, especially for services ofthe banks This factor requires concern when Planning development strategy of thebanks

 In terms of population and society:

Vietnam is one of the populous countries According to the report of SteeringCommittee on Central Population and Accommodation General Survey , up to 0h

on 01 April 2009, total population of Vietnam is 85,789,573 among which urbanpopulation accounts for 25,347,262 (29.6%) and rural population accounts for60,415,311 (70.4%) With such population, Vietnam is the third most populouscountry in Southeast Asia (ranking after Indonesia and Philippines) and ranks the

13th most populous countries Our country’s population increases by 9.470 millionpeople after 10 years (increasing 947 thousand people each year on average) Meanpopulation growth rate between two general population and accommodation surveys

in 1999 and 2009 is 1.2%/year The report shows that gender ratio of the population

of Vietnam reaches 98.1 male/100 female, higher than that in general populationsurvey in 1999 (96.7 male/100 female)

This is one of the attractive factors for business activities in general andbanking services supply in particular, because this factor itself creates the market.Population growth means demand increase, but does not mean that market increase

is only due to purchasing power sufficiency If population growth imposesexcessive pressure on economic development and results in poverty, this thusnarrows the market The high and increased population of Vietnam over the yearsshows that domestic market for the banks are very potential Moreover, thoroughdomestic exploitation is a strategic mission for the banks to stabilize monetarymarket, compete with foreign banks and widen the market out to all over the world

 In terms of geography and natural conditions:

Vietnam is a semi-continental country with the coast stretching along thelength of the country Vietnam locates in tropical monsoon area with diversifiednatural resources and advantageous geographical position, etc At present, due tomany different causes, these resources are being uncontrollably exploited, thus theforests are destroyed and rapidly narrowed, making climate and weather changebecome more and more irregular and complicated

2.2.1.4 Effects of Technology – Technique

One of the factors based on which the banks can meet the customers’ demandsand adapt increasing competitiveness in the market is scientific, technical andtechnological level applied in their operation Rapid development of science andtechnology provides or offers opportunities for the banks to buy advancedequipments and technologies to serve the best services of the banks Therefore,those banks wishing to win in competitiveness race have to apply, even pioneer inapplying, modern technologies

Moreover, to promote industrialization and modernization process of thecountry, the Government has encouraged investment enterprises to renovatemachines and equipments and transfer technologies Certainly, those enterprises andbanks approach and apply modern machines, equipments and technologies earlierand better shall have higher stability and success in competitiveness race It must benoticed that modern technologies have to adapt specific conditions of eachenterprise

The world’s technology has been developing everyday, especiallycommunication and telecommunication technologies have not cleared the previousbarriers Being an underdeveloped agricultural country, exported goods of Vietnamare mainly raw materials (crude oil, foods, etc.) Therefore, with current integrationtrend, approaching advanced scientific and technological achievements isobjectively indispensable for economic development process

Along with this trend, BIDV requires deep concern on regularly updatinginformation technology, organizing development researches to make our servicessatisfy increasingly diversified demands of the customers, for instance, stronginvestment in technological foundation and developing new distribution channelssuch as Auto Bank, Internet Banking, Phone Banking, POS at commercial centersand stores We tend to associate in techniques and outsource in services supply tocustomers Law on electronic transaction officially comes into full force and effectsince 01 March 2006 and creates favorable conditions for commercial banks todevelop online services on the basis of Internet.

2.2.2 Industry environment

2.2.2.1 Strategic group

The strategic group is a group of companies which all apply the same orsimilar strategies in an industry Management and strategic decision-making will bemore favorable if companies in the same industry are classified into strategicgroups For the Banking industry in particular, analyzing the strategic groups is auseful tool for managers to understand and compare performance of strategies oftheir Banks with those of other competitors In Vietnam’s banking market, there aremore and more new bank established with large and powerful financial abilitiesthreatening positions of older banks If in consideration of two criteria as financialabilities and channel systems, the strategic groups now in the banking market can beseen as follow:

Figure 2.1: Comparing the capital mobilization of BIDV with that of other

banks

Vietinbank 18.4%

Share bank 16.3%

Agribank 15%

BIDV 20.9%

Foreign bank 15.6%