BUSINESS TRATEGY FOR THE BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM YENBAI BRANCH IN THE PERIOD OF YEARS 2010 2015

New York In general, the mentioned-above concepts in strategy term sense all imply andreflect the following issues: + Objective of strategy + Time of implementation + Process of strategy

MBA THESIS STRATEGIC MANAGEMENT

“BUSINESS TRATEGY FOR THE BANK FOR

INVESTMENT AND DEVELOPMENT OF VIETNAM – YENBAI BRANCH IN THE PERIOD OF YEARS 2010 – 2015”

TABLE OF CONTENTS

ACRONYMN TABLE 3

Approval by GaMBA Program: 4

DECLARATION 5

CHAPTER I 7

INTRODUCTION 7

1.1 Necessity and significance of research topic: 7

1.2 Goal of research/ objective of business development strategy 8

CHAPTER II 9

COMMON ISSUES IN STRATEGIC MANAGEMENT 9

2.1 Concept of business strategy 9

2.1.1 Viewpoints in approaching corporate business strategy 9

2.1.2 Concepts of corporate business strategy 11

2.2 Features of business strategy 12

2.3 Type of business strategy 13

2.4 Process to build business strategy 14

2.5 The objective necessity of the business strategy of the enterprise 15

2.5.1 The importance and benefits of business strategy 15

2.6 The planning of a business strategy of a enterprise 18

2.6.1 Requirements and grounds for the planning of business strategy 18

2.6.2 Ideas to be fully understand when making business strategies 21

2.6.3 Steps for making business strategies of the enterprise 22

2.6.5 Identifying objectives of the enterprise 31

2.7 Build the strategic model 34

2.7.1 The model of growth strategy 34

2.7.2 Stable strategy 36

2.7.3 Cutting strategy 36

2.7.4 Combination strategy 37

2.7.5 Outward strategy 37

2.8 Selection of strategy option 38

CHAPTER III 41

STRATEGIC ANALYSIS AT BIDV - YEN BAI 41

3.1 Overview of Bank for Investment and Development of Yen Bai 41

3.1.1 Process of formation and development 41

3.1.2 Structure and management apparatus of the branch: 43

3.1.3 Human resources of the branch: 45

3.2 External environment analysis 45

3.2.1 Analyzing local socio-economic environment: 45

3.2.2 Analyzing market share, market 48

3.2.3 Analysis of customers 57

3.2.4 Competitor analysis 58

3.3 Internal analysis: 60

3.3.1 Analysis of products and services: 60

3.3.2 Analysis of the model of distribution channels network 61

3.3.4 Analysis of credit operation: 63

3.3.5 Analysis of services operation: 64

3.3.6 Analysis of technologies: 64

3.3.7 Analysis of the training resources: 65

3.3.8 Analysis of assets, liabilities management- risks management: 65

3.3.9 Financial Analysis: 66

CHAPTER IV 75

BUSINESS STRATEGY FOR BIDV – YB for the period of 2010 – 2015 …76

4.1 Strategic plans of BIDV until 2015……… ……… 76

4.1.1 Purpose – Principle Operations……… 76

4.1.2 View 75

4.1.3 Ten major objectives should be priorities of BIDV 76

4.1.4.The basic targets for the period 2010-2015 76

4.1.5 Detailed Objectives for each major business: 77

4.2 Objectives, the guideline work, the idea of strategic business view of BIDV – Yen Bai……… 79

4.3 General targets (quantitative and qualitative):……… …84

4.3.1 The period of 2010-2012: 83

4.3.2 The period of 2013-2015 84

4.4 Determine partial plans: 85

4.4.1 Capital mobilization plan: 85

4.4.2 Credit plans: 86

4.4.3 Plans for credit quality and bad debt handling: 89

4.4.4 Plan service: 90

4.4.5 Plan for extending network and distribution: 91

4.4.6 Plan for human resource training and development: 92

4.4.7 Plan for development and information technology application: 93

4.4.8 Plans for risk management: 94

4.4.9 Plans for operational management, business management: 95

CHAPTER 5 98

CONCLUSION 98

REFERENCES 101

ACRONYMN TABLE

8 Fund Service and Management Team QLDVKQ

Approval by GaMBA Program:

Signature of group members

1 Dang Thi Kim Phuc

2 Nguyen Van Tri

3 Ha Cam Thuy

CHAPTER IINTRODUCTION

1.1 Necessity and significance of research topic:

One organization in general or one enterprise in particular, who wishes to succeed

in business market, needs to have capacity to deal with all situation – they have tototally self-control, to make decisions, and be responsible for every operation of thebusiness So it requires the organizations to grasp the changing tendency, know how

to use best the strengths and limit the weaknesses, take advantage of goodopportunities to overcome challenges From this foundation, the creative businesssteps will be performed, in other words, we must build the suitable business strategyfor ourself

In recent years, most state-owned enterprises have operated the business withoutproper business strategy The run the business depends on the function of assignedmissions in the decision of establishing enterprise, The State will hand the annualbusiness plan over through the Ministries-sectors-local authority (authority incharge) They will assign the plan to the enterprises for implementation based onthe focus planning system That means what the enterprises produce, what kinds ofproducts, quantity, quality, and varieties of products, scale, technology, rawmaterial, distribution, and consumption, etc., are all decided by the State

Today, in the market economy mechanism, what enterprises produce, what sort ofproduct, quantity, quality, varieties of products, scale, market share, market –customer – consumer –competition, etc will be regulated by the market and theenterprises; The State holds the role of orientation, business guideline, legal framebuilding, mechanism – regime policies for the enterprises and market

At present enterprises frequently lose their direction if there is no business strategy

If there are unclear objectives and purposes, business operation will runinefficiently, which might lead to failure – bankruptcy In addition, the businessmay have no competitiveness and cannot have brand in the business market;

It is possible to say that the role of business strategy is getting more particularlyimportant to enterprises, especially in the context of global economic integration.BIDV has complied with the requirements – missions of the Government and of theState Bank of Vietnam for the recent years It has built up its business strategy andthen deploys the annual business plan However, the building of business strategyand business plan deployment remains inefficient and is left beyond the growth Thescale simply focuses on volume, not aware of quality and efficiency; portability –creativeness – breakthrough in business not yet to improve; Compliance –transparency is still weak;

Business strategy building is extremely important for each enterprise to develop; thestrategy is considered as a guiding star, a compass that conduct business ship in theright direction and objective, it will also be a will- fundamental method – businessmanner which indicates core persistent value of the enterprise

1.2 Goal of research/ objective of business development strategy

Originating from the goal-objective business, which is to make profit, BIDV aims tobecome a multi-purpose and multi-possess commercial bank that offersdiversifications and standard-criterion heading for international practices It expects

to have a quality similar of that of regional banks; it aims to be the top leading bank

in Vietnam and gain a firm position in Asian region

Gradual integration in the direction of being a modern bank operating under theguided practice-standard basis will help BIDV be strong enough to compete and toexist as well as make persistent development

In order to complete this task, BIDV needs to renovate mindset, innovate activities,reform business management and executive management, make breakthrough forfoundation of growth More important, it is necessary to set up business plan frombranch level to the entire bank network

CHAPTER IICOMMON ISSUES IN STRATEGIC MANAGEMENT AND BUSINESS DEVELOPMENT STRATERGY

2.1 Concept of business strategy

2.1.1 Viewpoints in approaching corporate business strategy.

The term of strategy existed for a very long time, previously the term first used inthe military Today, it is widely used in most fields of economy, politics and socialculture Particularly in the economy field both in micro-economy and macro-

economy In macro-economy, we may find the concept such as “industry

development strategy”, “industrialization of exports strategy”, in micro-economy,

the strategy term combines with the concept of corporate management; some

popular terms are “marketing strategy”, production strategy”,” business

strategy”

The appearance of business strategy concept is not simple borrowing but itoriginates from the necessity reflecting the actual objective of corporatemanagement in the market mechanism

We will find out some methods in approaching corporate business strategy as follows

* Classical viewpoint.

This viewpoint came out before the 1960s, based on this viewpoint, the enterprisecan optimize and plan for all input factors so that it can create long-term favorablecompetitiveness edge in an aim to achieve goals efficiently and maximize profit

In reality, year 1970 this approach lost its meaning, due to not mention to theexternal environment and whole activities of the enterprise was directed by chiefaccountant and director On the other hand, the competition appeared among theregions North America, South America, Eastern Europe became more severe at thattime It required the enterprises to have common voices of collaboration and tofigure out the competitiveness factors

* Evolutional viewpoint.

This viewpoint sees “The enterprise is the living body that is affected by external

environment, meanwhile this living body controls itself to adapt to the surrounding environment” So this viewpoint does not regard the enterprise as a black box On

the contrary, the enterprise is the open system influenced by external environment,

“The business is unable to sit in four walls that it must open window to observe the

sky of full stars”, in an effort to seek business opportunities and detect the threats to

the business.

* Processing viewpoint.

Pursuant to the processing viewpoint, the enterprise wants to succeed in the market;

it must go through a long process of doing business During the period, theenterprise will gradually accumulate experience to acquire the business secret.According to the calculation of American Harvard University: It takes three andhalf years for a business to integrate into the market and three to five years to affirmits position and over eight years to succeed in the business market Thus thebusiness must possess the long-term plan and must build long-term businessdevelopment plan in its market

(Website://bwportal.com)

* Systematic viewpoint.

This systematic viewpoint assumes that business enterprise is the element ofeconomic system in which the enterprises have the relationship one another, theyare strictly governed and impacted by their environment (environment of economicsystem includes collective element, subsystems such as politics, law, socialculture…) or economic system influences on its environment Hence each enterprise

(element) when conducting business activities not only look at enterprise itself but also pay attention to the influence of other element in the system (industry

environment) as well as the external system and it’s called external environment of

enterprise In such a way, it is essential matter for enterprise to make environmentalanalysis

In summary, no matter what viewpoint in approaching business strategy, all in all

we have common target, which is that to grow fast, consistently and to maximizeprofit in the more changing fluctuation and tough competition market

This fact can also be seen clearly at Bank for Investment and Development ofVietnam – Yen Bai Branch The economic growth rate in 2008 is estimated at12,5%, in which: agriculture – forestry - fishery sector increases by 4,38%, industry– construction sector increases by 18,95%, service sector increases by 14,1% Theeconomic structure is moving in the right direction, in which agriculture – forestry -fishery sector accounts for 35,05%, industry – construction sector account for31,93%, service sector accounts for 33,02% GDP per capita is estimated at 7,5

million dong (2008 Report of Bank for Investment and Development of Vietnam –

Yen Bai Branch)

2.1.2 Concepts of corporate business strategy

Because of having different kinds of approaching in the strategy, a common concepthas not been defined so far Some concepts are indicated as follows:

- “Strategy is decisive factor of long-term objective of organization” (Prof Alfred

- “Strategy is an art of establishment of competition advantages” (M.Porter, 1980)

- “Strategy aims to illustrate long-term strong solid orbits of which surrounding

orbits can arrange accurate decisions and actions of the enterprise” (Alain Charles

Martinet, 1983)

-“Strategy outlined as plan or general guide operation chart or lead organization

to desired goal This general operation plan lays foundation for policies (orientation through decision) and operation mechanism” (Group authors: D.Smith,

DannyR.Arnold, Bopby G.Bizrell in book “Strategy and Tactics Business”.

- “Business strategy covers basic long-term gain targets of business unit, meanwhile selection of method or process or process of operation and allocation of essential sources to implement that target” (Alfred Chandle, 1989, Task of

Strategy New York)

In general, the mentioned-above concepts in strategy term sense all imply andreflect the following issues:

+ Objective of strategy

+ Time of implementation

+ Process of strategy decision making

+ Factors of environmental competition

+ The strengths and the weaknesses in general and depending on each business

activities in particular Hence can we see that the enterprise’s strategy is “product”

in combination with given environment? What can enterprise do? In addition, whatdoes enterprise expect?

In short, in the enterprise’s operation, strategy will be: An art of design, organizingmeans in an aim to achieve long-term objectives in relation to the changes inenvironment and competition

2.2 Features of business strategy.

To further understand the category of business strategy, we need to revise theirfeatures to classify relevant concepts

Business strategy features the following basis:

-Business strategy frequently determines basic objectives, business direction of eachenterprise in specific stage and masters all aspects of production activities fully toensure that enterprise grows constantly and firmly (more than 1 year)

-Business strategy ensures to mobilize and combine the exploitation and the use ofhuman resources of enterprise in present and future, enhance its advantages andgrasp opportunities to gain premium position in the business market

-Business strategy must reflect the constant process of strategy building,organization, implementation, check, evaluation and strategy adjustment

-Business strategy must possess a mindset to assault for achievement gain inbusiness market (must maximize best use of its advantage to win.)

-Business strategy is usually set up for relatively long period (3 to 5 years), and can

be shortened depending on features of specific commodity industry

From the mentioned-above features, it is easy to distinguish strategy category from

related concepts The closest meaning between concepts with strategy is “plan”, in

reality; these two concepts are sometimes mistaken for each other

In the view of approach sequence that business strategy is formed on basis ofenvironment analysis and diagnoses, then strategy will be the platform fordeployment strategy plans Main striking feature of strategy provides quantitativeand determines solutions Policies and objectives, and plans link to each other tobecome criterion system that reflects the enterprise’s comprehensive businessoperation

2.3 Type of business strategy

Depending on each sort of classification we will discuss different types of businessstrategy:

a Based on domain of strategy:

+ General business strategy:

General business strategy refers to the most important and most comprehensiveissues and it specifies long-term significance and decides vital factors of enterprise

as well as the long-term motto and objective

+Specific domain business strategy: it relates to the concrete fields in production ofenterprise, from this point, implementation of general business strategy such asproduct strategy, marketing strategy, finance strategy, human resources strategy,technology strategy etc

b Based on level to formulate business strategy as follows:

+Business strategy at corporate level: it refers to overall strategy, determines term goals and formulas to achieve that goal in each period

long-+Business strategy at sector level: it refers to the concrete goals and how to gainthat goal in its scope on basis of overall goals from the upper department.

+Business strategy at functional level: it refers to the strategy that supports forcorporate business strategy and sector business strategy

2.4 Process to build business strategy.

As stated above, due to different concepts of business strategy presented, there are,therefore, a wide range of opinions of strategy as a result However, there is still onecommon point among those opinions, that is, the business strategy of a enterprise is,

in fact, a general strategy of a enterprise in business activities Business strategyrefers to most important, long-term and decisive issues to the survival of theenterprise The business strategy covers both general and partial strategies whichare closely combined to form a comprehensive one covering all activities of theenterprise Any strategies, whether in case of partial or general one, have, ingeneral, their major contents as follows:

2.4.1 The opinions and ideas of which the center point is about the philosophy of

business of the enterprise will answer the questions of what basic beliefs,expectations and prior philosophy of the enterprise are

2.4.2 The business strategy of the enterprise will determine objectives of business

and operations of the enterprise in each period and scope for determining strategiesmade In addition, the business strategy will also direct the enterprise to focus onimportant issues and determine proper objectives of the enterprise to achieve

2.4.3 The business strategy of the enterprise is made in order to determine the way

and method to realize objectives This method is selected among other methodsmade based on technical analysis and current capacity of the enterprise and in order

to select a proper method for the enterprise

2.4.4 The business strategy of the enterprise presents the determination of selected

strategic method The determination refers to detailed solutions for all operations ofthe enterprise based on the analysis and assessments made on real situations ofoperating of the enterprise apart from expected outputs which may be achieved

2.5 The objective necessity of the business strategy of the enterprise.

2.5.1 The importance and benefits of business strategy.

* The importance.

The building (planning) and information of business strategy are those among most

important activities carried out by senior business managers One enterprise without

a business manager may be seen as a ship without a steering wheel And mostfailures in business are due to lack of strategies, mistaken strategies or failure inimplementing a right strategy for the enterprise Without a proper business strategy

or effective implementation of such strategy planned, failure is a result of course.Sometimes, the planning of business strategy is ignored due to the lack of fullunderstanding of the manager on (1): the question what strategy is and the reasonwhy it is so important, (2) how to combine all processes of planning for businessstrategies altogether, (3) how to build business strategy and (4) how to implementsuch business strategy by connecting it to existing determination

* Benefits.

The business strategy will bring real benefits for the enterprise as follows:

+ Business strategy helps find out the way in a future time for the enterprise in orderthat managers may consider and determine which way the enterprise will take toachieve its objectives or targets planned

+ Business strategy helps managers of the enterprise to be always active and facewith any changes of the environment: managers may successfully identify bothopportunities and risks of its existing operating in order to make analysis,assessments and estimation on conditions of business environment of the futuretime for the enterprise Based on this condition, the enterprise may make the bestuse of opportunities granted and eliminate risks in order to finally achieve itsvictory and success in the market

+ Business strategy also helps the enterprise employ and use its own resources andpotentials at a maximum level to maximize the strength of the enterprise for agrowth and development of the enterprise

+ Business strategy helps the enterprise successfully allocate its own resources ineach field and activity in each period and time.

+ Business strategy helps combines staffs and managerial officers together inrealizing objectives of the enterprise to create an internal strength of the enterprise.+ Business strategy helps increase sales, productivity and efficiency of themanagement of the enterprise and prevents risks and difficulties which may affectthe enterprise

2.5.2 Indispensability and objectiveness of the planning business strategy of the enterprise in recent economic conditions of Vietnam.

In time of subsidiary, the concept of business strategy of a enterprise was less usedand employed when enterprises did not focus on building their own businessstrategies It can be mainly explained by quotas set and determined by leaders andhigher authorities But the business strategy in recent time is an important andnecessary link of planning the national economy carried out by higher authorities.Most ideas are that the State is mostly responsible for planning the businessstrategies for the whole national economy as for sectors: society and production.The growth of the country is under the control and management by the Government

So, most enterprises build their own business strategies according to an inflexiblemodel

The consequences of such model are:

- The speed of investment and development of infrastructure is slow

- Shortage, imbalance and asynchronousness resources for the development

- Impractical business strategies introduced in the market

- Those business strategies introduced in the market are too general and impractical

- Methods and ways to build business strategies are almost based on experience andmechanically applied following the models used by other socialist countries

- In practice, enterprises did not build their own business strategies or restricted theadvantages of those methods so they failed to unveil the importance and necessity

of these business strategies for their enterprises in subsidiary time

However, enterprises have been active to run their business operations, finding theirown ways for development in a new stage of new mechanism since 1986 when

Vietnam implemented and applied the policy of doi moi, especially the renovation

of national economy by eliminating the red tape, developing a multi-sectoreconomy to transfer into a policy of business accounting according to socialistorientation That is also the reason why business strategy is an important andnecessary component in a new period

In recent time when Vietnam has transferred to a business accounting mechanism in

a market-oriented economy, enterprises have to face with more and morechallenges, difficulties and risks in running their business It is necessary for suchenterprises to get familiar with changes of market This method is a decisivecondition which determines the success or failure of these enterprises In practice,failure or success in running business has been also identified Some businessmengained their success and became billionaires from nothing due to right businessstrategies whereas some lost their business to competitors in a short time due toerrors in policies on running business The closing of losing enterprises anddevelopment of high effective enterprises actually depend on business strategies ofenterprises, especially in such a time of market-oriented economy

Due to the rapid changes of environment, increasingly severe competition andshortage of natural resources, needs of society, enterprises and from individualshave been on a rise which shows the increasing importance of business strategy of aenterprise

The objective necessity for building a business strategy of a enterprise is made clear

in the following aspects:

The business strategy helps the enterprise determine their purpose and ways

Because of rapid changes of business environment of the enterprise which may lead

to both opportunities and sudden risks, the building of business strategies will helpsuch enterprises make the best use of opportunities and minimize risks to increasethe competitiveness of the enterprise accordingly

The business strategy helps the enterprise combine their decisions with conditions

of business environment In other words it helps the enterprise be active in makingdecisions

The building of business strategies helps the enterprise make and prepare betterbusiness strategies by applying the method of system-access, increasing foundationand combination, and increasing the combination between staffs and managerialofficers in realizing objectives of the enterprise

Business strategies help the enterprise employ their resources most effectively.With above reasons, it is possible to make a conclusion that the building offavorable business strategies is extremely important and necessary for not only

home enterprises but for enterprises in other countries It may be seen that “The

business strategy is considered as a steering wheel of a ship which will leads the ship to a victory over a high sea”.

2.6 The planning of a business strategy of a enterprise.

2.6.1 Requirements and grounds for the planning of business strategy.

- Apart from existing business strategies, enterprises should build their auxiliary andalternative strategies

- To acquire and make the best use of opportunities as well as being a littleadventurous.

* Grounds.

As we know that, one of the objectives of the enterprise is maximizing its profits byproviding products and services to customers In order to have their products andservices supplied to customers, the enterprise must employ inputs and technologies

to produce such products and services In other words, the enterprise must best usetheir internal factors However, there are also other enterprises providing such

products and services (competitors) So, to attract and win more customers, the

enterprise must improve and make better models and quality of products andservices than those of their competitors It means that the enterprise must win overtheir competitors

From this point, we can determine the most important grounds for planning businessstrategies of the enterprise, they are:

+ Customers

+ Competitors

+ Enterprise

These three entities are considered as “strategic trio” by economists on which

enterprises have to rely to build their own business strategies

a Customers

As the embodied entity of the “needs” of the market, the concept of customer refer

to a wide range of needs, motives and purposes of different groups of people toform segments of markets that the enterprise cannot fully cover The businessstrategy of a enterprise must be made based on customers, that is, it will to identifyone or more than one group of dominant customers in forming a market segmentwhich is big enough so that the enterprise will focus on satisfy the needs of suchcustomers in that market

In order to do so, the enterprise must classify and group such customers into groupsaccording to criteria such as education, income, age and lifestyle

By this classification, the enterprise may identify a targeted market segment andthence to focus its resources to satisfy the needs of such market.

b Competitors.

It is not difficult to understand that competitors of a enterprise also have the sameambitions, methods and expedients as the enterprise has considered before So, thebusiness strategy of the enterprise must focus on making a distinction over itscompetitors in major sectors and fields by making a comparison of such statedissues with those of competitors

The distinction to be identified and determined is existing advantages of theenterprise or those that the enterprise may make including both intangible andtangible values

The tangible categories include:

+ Production capacity of the enterprise

+ Systems of distribution and marketing

The intangible categories include:

+ Reputation and trustworthy of customers

+ Quality and styles of products

+ The know-how of technologies

+ Advantages in terms of place of operation, location near material sources forproduction

+ Traditional customers and relationship with authorities of various levels

+ The professional workmanship and experience of managerial officers

c Enterprises (the real capacity of the enterprise).

The business strategy of a enterprise must be made based on the real capacity of theenterprise in order to exploit and employ its resources at maximum degree to applyinto most important fields and operations which determine the success of theenterprise in trading identified products, services and in those to be identified in afuture time Such sectors may be identified according to bases as follows:

+ Which products and services to invest into?

+ Which technologic period for investment?

+ Whether to concentrate on a developed scale or reduce costs?

+ Whether to organize a comprehensive production of complete products or topurchase semi-finished products for assembly?

The right determination of business lines and functions of the enterprise willfacilitate the orientation and concentration of the enterprise into key links in order tocreate the competitive advantages in the determined market

Based on the grounds of the strategic trio as stated above, the business strategy ofthe enterprise may gain its necessary trust However, business environment requiresmore than those factors as stated above It requires other factors of a macro businessenvironment in each situation such as: politics, law, technologies and science andthose of a micro-environment like suppliers, alternative products in order todetermine and select higher reliable business strategies for the enterprise

2.6.2 Ideas to be fully understand when making business strategies.

When making business strategies, the following ideas and opinions should be fullyunderstood:

+ The making business strategies must be based on exploitation and employing keyfactors as advantages of the enterprise for success

+ The making business strategies must be based on making the best use of strengthand competitive advantages

+ The making business strategies must be based on exploitation of new factors andnew creativeness

+ The making business strategies must be based on full exploitation of all factorswith a concentration on key factors

2.6.3 Steps for making business strategies of the enterprise.

Chart 2-1Modeling of steps for making strategies

* Determining right policies.

Determining right policies is the determination of historic mission of the enterprise.This mission is a message to express the reason for the existence of the enterprise

In other words, what is the purpose for the existence of the enterprise? This is theprerequisite for determination of methods of action of the enterprise

In the stage of market mechanism, any enterprise has their certain functions and

tasks when establishing and running their business However, in practice, “what is

the business of the enterprise” or “what is tasks of the enterprise” are always the

questions having no ultimate answers In order to make answers for these questions,the enterprise must present a report of their tasks and duties in business That is thehistoric mission of the enterprise and the mission conveys nine questions as follows:

Customer: Who buy products of the enterprise? What are products and services of

the enterprise?

Determining policies

(B1)

Research and estimates (B2)

Determining strategic objectives

(B3)Building strategic methods (B4)

Selection of best strategies (B5)

Determining the strategies

(B6)

Market: Where does the competition of the enterprise take place?

Technology: Is technology firstly concentrated and concerned by the enterprise?

Technology is the life-and- death issue, the growth and profitability for theenterprise

Business philosophy: What are the basic belief, value and expectation and priority

for the philosophy of the enterprise?

Self evaluation: What are special capacity and primary competitive advantages of

the enterprise? What are the concerns of the enterprise in their socialresponsibilities?

Cares of the enterprise for their employees: What are the attitudes of the enterprisetowards their employees and staffs?

*Research and making estimates.

If the enterprise wants to build a good strategy, the enterprise must have a goodstanding of conditions of business environment which the enterprise is working in.The business environment has its strong influences for it affects all steps of thebuilding business strategies The ultimate strategy should be built based on expectedconditions So, it is necessary to carry out the research and making estimates for thebusiness environment of the enterprise

2.6.4 Research and making estimates of outside business environment of the enterprise.

The outside business environment of the enterprise covers both macro-environmentand micro-environment

The making analysis of the outside environment of the enterprise is carried out inorder to identify both opportunity and risks of the operations of the enterprise

a Macro-environment

Economic factors.

The real situations and future trends will have effects on the success and strategies

of a enterprise The growth rate of the economy, interest rates, exchange rate andinflation are main targeted factors in the analysis of the enterprise Thus, the

different growth rates in the time of a rise and a decline and recovery of theeconomy will affect the consumption in the market When the economy is in thehigh growth, it will offer more investment opportunities and developed operations

of the enterprise In contrast, when the economy is in a decline and recession, itreduces the needs for consumption and increases the numbers of competitors Ingeneral, when the economy is in a recession, there will be a struggle over price inproduction sectors, especially for mature sectors The interest rate will affect anddetermine the needs for products of the enterprise Monetary policies and exchangerates may also offer both opportunities and risks to the growth of such policies.Inflation and the issue of disinflation policy must be necessary factors to beconsidered and analyzed In practice, if the inflation is high, it is impossible tocontrol price and wages If the inflation is in a rise, it will be adventurous forinvestments and the enterprise must consider and lower their attentions forinvestment for production So, a high inflation is a thread to the enterprise

+ Regulations on advertisement in business will be threads to enterprises and thegood example may be the case of alcohol or tobacco enterprises and suppliers.+ Regulations on duties, fees and charges may be opportunities and risks forenterprises which affect the developed production of these enterprises

+ Law on labor, regulations on employment, appointment and dismissing ofemployees must be considered by enterprises

+ Regulations on safety and environmental protection

Social factors:

In both medium and long-term strategies, social factors change quickly according tothe trends of importing and adoption of new lifestyle and this will be goodopportunities for production enterprises The enterprise must also consider theattitudes of consumers, changes in of age tower, work place and homes ofconsumers The incoming of consumers’ associations will be a question requiringthe concerns of the enterprise It is necessary for enterprises to pay attentions to andmake a deep analysis on social factors and risks which may come.

Social factors are included:

+ Living standard which influences the expansion and restriction of productionscales

+ Customs and habits of consumers

+ Regional cultures

+ Psychology and lifestyles

+ Rate of marriage and birth rate

Natural factors:

It is recognized that natural factors affect the policies and decisions of enterprises

In recent years, environmental pollutions, shortage of energy, waste of naturalresources whereas the needs are in a rise and shortage of resources, it drivesenterprises to change their decisions and modes of operating

Wise strategy planners always pay more attentions to the environment and ecology.Production and service enterprises have considered and calculated the unforeseeablethreads of climate according to their seasons of production

Technological factors.

This is the direct and key factor affecting the business strategies of enterprises Inpractice, the world has witnessed remarkable changes in technologies and creatednew and more finished sectors of business The twentieth century is considered ascentury of technology and science It is, therefore, more important and necessary tomake analysis and estimates of technological changes than ever Good examplesmay be the coming of electronic, informatics and bio-technologies It is sure that

there must be more advanced technologies coming in a future time which will createboth opportunities and risks for enterprises So, enterprises should pay more andmore necessary attentions to technologies and science for research and developmentactivities for new technologies, technological transfers and for inventions if theseenterprises feel it is a right time to pay their special attentions to environment,

technologies and science from the idea “the twenty first century will be the century

of knowledge economy And knowledge economy will replace for the industrial time”

b Environment for operating (micro environment)

The environment for operating covers sector and external factors affecting theoperations of enterprises, determining the nature and degree of competition within

the sector In the view point of M Porter, “an environment for business always has

its five factors (driving force) affecting the operations of enterprises” So, such

enterprises must make a deep analysis on these competition-related driving forces inorder to identify their opportunities and risks and threads to the operations of theseenterprises

The relationship among these five factors is made clear as follows:

Chart 2-2 The model of five driving forces by Michael Porter

Risks of newly coming competitors

Competitors of the same sectorCompetition in existing enterprises

replacement products

Source: Techniques for Analyzing Industries and Competitions by M Porter.

Copyright 1980 by the Free Press Competitors.

When considering competitors, we must concentrate on two issues as follows:

First, the degree of competition within the sector which depends too much on other factors

+ Number of competitors: number of the same power competitors, and structure of sector competitors

+ Growth rate of the sector: the higher rate of growth, the higher degree and vice versa

+ As for some industries of fixed expenditure and high costs for provision, thedegree of competition is higher

+ The difference in the degree of complexity of competitors of the same sector.+ Restrictions preventing the withdrawal of competitors

Second, the analysis on direct competitors:

First of all, we must identify our direct competitors In general, we identify thesecompetitors according to signals presented in the market After identifying directcompetitors, we must make an analysis on weak and strong points of thesecompetitors and identify their purposes and objectives We also analyze theirexisting strategies and potentials for our exploitation

In particular, we must analyze potentials of these competitors as follows:

+ Potentials for making a growth, existing production scales of these competitors.+ Adaptive capacity of these competitors

+ Abilities to make reactions to situations of these competitors

+ Abilities to stand and to be consistent in the market

So, the fully understanding of direct competitors plays an important role whichallows the enterprise to prepare methods for analyzing and keeping profiles ofcompetitors and thence to provide proper reactions and steps We must repeat the

immortal saying of Sun Tzu “One who knows the enemy and knows himself will not

be in danger in a hundred battles”.

Customers

Customers play an integral part of a competitive environment The trustworthy ofcustomers may be the most valuable property of the enterprise However, in order toget such trustworthy of customers, the enterprise must satisfy the needs and taste oftheir customers better than other competitors

The important issue is the price squeeze by customers or the requirement for ahigher quality product and more services by customers And price squeeze mayhappen in the following cases:

+ When customers buy a large amount of products (in bulk) and they make the bestuse of their purchasing power for lowered price

+ When the enterprise wants to acquire materials for production from limitedsuppliers This category of customers is small but they are powerful enterprises.+ When customers are offered more choices for different alternative and diversifiedproducts

+ When customers have their advantages in converse vertical strategy for

integration, that is they are able to self supply their materials for production with

lower costs

+ When they are regular customers, products are not classified, and when customers

do not have enough information and lack of binding conditions stated in salescontracts

However, the enterprise is active; it must keep a good relationship with itscustomers by competitive prices, quality, delivery and after-sales services for theirproducts Then, the enterprise must consider its customers as partners who will fullysupply information for the enterprise

Suppliers.

To ensure a stable and continued production, the enterprise must keep goodrelationships with suppliers of inputs such as materials, equipment, labor and

finance The enterprise should keep these relationships on a long time and stablebasis with such suppliers However, some suppliers always try to cause theirpressure on the enterprise for their profits in the following cases: exclusivesuppliers; suppliers of materials in bulks or of special and irreplaceable materialsfor the enterprise is not their regular customer; in contracts, no binding terms arestated and these suppliers have their closed production.

Potential competitors.

We do not underestimate our potential competitors, because they have their moreadvantages in terms of new technologies and financial standing than us So, whenrunning business, these competitors are extremely dangerous For this reason, theenterprise must have its measures to deal with this situation And regular steps areincluded: tricks, combination with other competitors to protect market and building

a barrier against penetration from the outside

Replacement products

The replacement products are those which are able not only to satisfy the sameneeds of customers but to have other performance The pressure of replacementproducts will set limits on market, profits due to the fact that its highest price islimited and controlled So, the enterprise should pay their attentions to the needs,price of replacement products, especially the application of new technologies intoproduction

* Research and making estimates on factors of a enterprise

That is the analysis made on real situations and capacity of a enterprise

The analysis made on real situations and capacity of an enterprise is an analysis ofinternal factors in order to identify both strong and weak points of the enterprise tomake the best use of their advantages and eliminate internal disadvantages Andinternal factors of a enterprise are included: human resources, ability to organizeand ability of competition of the enterprise

c Analysis of internal factors of the enterprise.

- Human resources

Human resources are the most important factor of the operations of the enterprise,including three levels as follows:

+ High-rank managerial officers

+ Groups of executive officers

+ Workers

It is necessary to concentrate on the following aspects when making analysis onhuman resources:

+ Leadership

+ Workmanship and personality of officers and workers

+ Effective policies on officers

+ The transfer and resignation of officers

+ Profession

Experience

- Financial resources: it is necessary to analyze financial standing of the enterprise.The contents to be analyzed are included:

+ Real funds and structure of the enterprise

+ Real situations of capital allocation

+ The effectiveness of using funds for operations of the enterprise

+ Real situations of expenditure of general funds and the position of the enterprise

d Analysis on ability of the enterprise for organization.

The analysis on ability of the enterprise in organizing is made by making questionswhether the organizing of the enterprise has satisfied the needs for businessstrategies and this can ensure an implementation of strategies stated The analysis ismade in a focus on:

- The real situations of existing structure of the enterprise in terms of bothorganization and regulations for operating

- The adaptive ability of the enterprise to changes of environment and conditions forrunning business

- Whether the strategy matches with objectives and tasks of the enterprise or not?-Whether the decisions of the enterprise are valid or not?

e Analysis on ability of competition.

The ability of competition of the enterprise is the ability to remain its position inmarket on a sustainable and permanent basis

Factors affecting the ability of competition of the enterprise:

- Working environment in the enterprise

- Profitability on investment capital

- Labor productivity

- Product costs and ability to lower price of the enterprise

- Experience in running business of the enterprise

- The flexibility and creativeness of managerial officers and leaders

- Quality of products and services

2.6.5 Identifying objectives of the enterprise.

+ Profit rate

+ Productivity

+ Ability of competition

+ Facilitation of employments and for lives of laborers

+ Leadership of technologies

+ Responsibilities in front of the public

- Short-term objectives often cover specific jobs and the management of theenterprise

* In order to identify right and proper objectives, the enterprise should base on thefollowing factors:

- Relative partners of the enterprise

- Based on the establishment and development of the enterprise

- According to decisions by the executive officers and owner

- According to resources and advantages of the enterprise

* Requirements and levels of strategic objectives of the enterprise

This objective ensures associability and supports for each other between objectives

or in other words the implementation of this objective does not obstruct the others

- Priority:

It is required to identify the level and hierarchy of priority for each objective.

The objectives made must be acceptable and fully understood

b The hierarchy of strategic objectives

The hierarchy of strategic objectives is shown the following chart:

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Planningsystem andeconomic ofhumanresource

Planningsystem andfinancialeconomicsourceObjectives for positions, business aspects

Objectives relating to human resource

Finance related objectives

Objectives of general effectiveness

The above analysis shows an enterprise has many strategic objectives One of keyobjectives pursued by enterprise is the growth one as almost strategies of enterpriselevel placed in the growth objective, so the building of strategic models basicallybased on growth objective Besides, for presently maintained or reduced objectives

of stable strategy, reduction strategy, and objectives of stretching oversea markethave outward strategy and combination of other kinds of strategies to be applied forenterprise level Such kinds of strategies called general strategies

2.7 Build the strategic model

2.7.1 The model of growth strategy.

Objectives of this strategy are to increase profit and market share of enterprise Thisstrategy includes:

a Growth strategy of internal enterprise:

Also called concentrated growth strategy that is the decisive one focused onalternating products and/or present market without change in any elements(business line, sector class, applied technology) This strategy is a form of growth inway of increasing revenue, productivity, and quantity of laborers The three decisiveoptions of this strategy are shown as follows:

* Market entry:

That is how to grow products presently produced while maintaining marketcurrently consumed, generally by strongly activities of marketing, promotion,advertisement

Guarantee services

BSMS services

Card services

Salary payment via bank account

Domestic and international money transfer services

b Growth strategy by integration (association).

Growth by integration means merging or associated with one or more otherenterprises to share resources with the objective of obtaining more powerfulstrength in competitiveness, with 2 ways of associations:

* Vertically merging (associate) in reverse order:

That is growth by gasping ownership right or increase control for supply ofmaterials, if the internal enterprise, it is required to establish sources of supply,subsidiaries must be formed If external association, take over bases of supply

* Vertical merging propitiously:

That is to find way of growth by acquisition, taking ownership right or increasecontrol for consumption channels close to target market, such as sales anddistribution system

c Growth strategy by diversification.

Diversification is to invest redundancy capital into many different business lineswhen enterprise gained many competitive advantages in present operating activities

of Enterprise This is the third general strategy applied in the long term orientation

by almost of big enterprises during growth and development process There arethree kinds of growth strategies of diversification:

* Concentric diversification: That is to seek growth by stretching to new marketwith products of suitable technology and meaningful marketing or products beingpresently produced, which is able to give back result beyond expected Key toimplement concentric diversification is to take partial advantage of internalenterprise

* Horizontal diversification: That is to seek growth by aiming at the marketspresently consumed with new products that are not related technologically topresent products.

* Combination diversification: That is to seek growth by aiming at the marketspresently consumed with new products that are not related technologically topresent products

2.7.2 Stable strategy.

In doing business, enterprises sometime have to use stable strategy by trying to keeppresent production scale due to the reason of having many disadvantages in therisky market or with no competitive strength The stable strategy is often applied infollowing situations:

Enterprises in business sectors are less developed or underdeveloped

Expense for expanding market or diversifying products is too high

Small enterprises manufacture highly specialized products, serving narrow market,

so if the scale increases, the quality of product and services shall be affected

2.7.3 Cutting strategy.

When enterprises need to restructure to intensify operating result after a fast growthperiod, when the sector has no long term growth chance or profitability, and whenthe economy is unstable, or enterprises is without strong point and developmentability, such enterprises should apply cutting strategy There are 4 ways to beapplied as follows:

* Expense cutting: that is a back- step and restructuring measure, may be oriented tocutting parts of non effectiveness, restructuring production line, shifting thebusiness lines of enterprise to the others

* Recovery of investment capital: occurring when an enterprise is transferred orclosed one among subsidiaries in order to change basically content of operating

* Harvest: that is to seek for increasing at maximum the cash flow for the short termpurpose regardless of long term consequences The strategy is often applied byenterprises of uncertain future but with ability of gaining dung harvesting time

* Dissolution: When an enterprise is unable to exist or shift production, it has nochoice by dissolute, which is a final compulsory measure, generating manydifficulties and complexity that no enterprises want.

2.7.4 Combination strategy

Organizations are often of multi-objective ones, so it can be combined generalstrategies for different objectives In a market with much variation, if an enterpriseknows how to combine strategies appropriately, it shall bring into full play itsstrong points and minimize risks It can take advantages of prosperous businessenvironment and restrain at minimum the weak aspects, which is a suitable strategyfor enterprises seek to buy up or merge with multi-sector enterprises

2.7.5 Outward strategy.

This strategy is the form for a developed enterprise stretch to market outside Thereare 3 options for enterprises to apply, they are: merging, acquisitions andassociation

* Merging: Merging occurs when two or more firms joining with each other to

merge an unique, new enterprise This process is often resulted from agreementamong firms at their discretions to associate to form a firm having new name andidentification, issuing new shares, building new organization structure and withother new changes

* Acquisition: Acquisition occurs when a firm buy up other firm and draw or add

more operation aspects being carried out the firm, often as branch of firm

* Association:

Association occurs when two or more firms synergy to execute an affair that isimpossible to implement by a single firm Ownership right of the two firms isremained There are three forms of association: first one is International jointventure; second often joint venture for developing a strategy for mutual benefit butnot beyond financial capacity of either firm; third is form of joint venture when two

or more firms with their different ability (capital of intellectual, technical) neededfor the common effort

2.8 Selection of strategy option.

After defining model of strategy options, next we switch to select a strategy option.Basis for assessing the strategy options is selecting some options considered betteramong built options Among the selected options, choose a best optimal option.Selection of the option is done by one among following options:

* Analyzing by share market growth matrix BCG (Boston Consulting Group).This is a rather classical and simple matrix, appropriate when needing to locateenterprise, analyzing product structure, investments portfolio of enterprises

The matrix include two axis:

- Vertical axis:

Possibility of market growth

Total assets in 2004 was 382 billion Vietnam dong, by 2008 the total assets reaches

870 billion dong (an increase of 2.3 times) The mobilization of capital alsoincreases remarkably, from 193 billion dong in 2004 to 571 billion dong in 2008 (anincrease of 3 times)

Profit of BIDV-YB of the next year is always higher than that of previous year

- Horizontal axis;

Relative market share

+ Market share for capital mobilization of the branch is decreasing compared toother branches in the Northern mountainous area and other branches in theprovince However, compared to previous year, this number of the branch is higher

in the next year;

- Mobilization from organization (including State Treasure) is estimated at 252,6billion dong, an increase of 24% compared to 2007 (equal to 49,6 billion dong)

- Mobilization of Vietnam dong reaches 537 billion dong, an increase of 35%compared to 2007 (equal to 138 billion dong)

- Mobilization of converted foreign currency reaches 34,6 billion dong, an increase

of 23,6% compared to 2007 (equal to 6,6 billion dong)

- Mobilization for short term reaches 526.4 billion dong, accounts for 92% of thetotal mobilized capital at the branch, an increase of 96% compared to 2007 (equal to257,6 billion dong).

- Mobilization for medium and long term reaches 45,2 billion dong, accounts for8% of the total mobilized capital at the branch, an decrease of 72% compared to

2007 (equal to 113,5 billion dong)

Liberate capital according to moncy kind year 2007

0 100 200 300 400 500 600

M obilize capital organizations (state treasury)

Capital mobilization population

Liberate capital according to client object year 2008

Liberate capital according to client object year 2007

(According to 2008 Report of BIDV-YB)

+ Market share of credit of the branch is decreasing compared to other branches inthe Northern mountainous area and other branches in the province

+ Service market:

Compared to other branches in the Northern mountainous area is still low

- Horizontal axis

Relative market part

* Method of SWOT matrix analysis and defining business strategy option:

In the matrix, it appears four factor groups: Strengths, Weaknesses, Opportunitiesand Threats In which, Strengths and Weaknesses are of interal enterprise factors.And Opportunities and Threats are business environment factors

* Steps of forming a business strategy option:

- Forming strategy options and proposing general objectives of each option

- Selecting couple of combined strategies appropriate to each business strategyoption

- Defining specific objectives, policy targets, and measure for each option

- Comparing, assessing and selecting appropriate option, business strategy