LUẬN văn CHIẾN lược NGÂN HÀNG bán lẻ tại NGÂN HÀNG AN BÌNH ABBANK

The content presented in this exercise is to apply the knowledge learned inthe program to analyze the state of An Binh Commercial Joint Stock Bank and todevelop a retail banking strategy

LUẬN VĂN THẠC SĨ

CHIẾN LƯỢC NGÂN HÀNG BÁN LẺ TẠI NGÂN HÀNG AN BÌNH

ABBANK STRATEGY OF ABBANK’S RETAIL

BANKING DEVELOPMENT

First of all, the members of Group 1 would like to thank sincerely to the ETCTraining Centre, National University and Griggs International University, theUnited States to facilitate us to study in a practical and rewarding program.Especially, we would like to deeply thank to the teachers who taught in the programfor their precious knowledge and the tutors of the class for their invaluableassistance to help our group completed this graduation exercises

The content presented in this exercise is to apply the knowledge learned inthe program to analyze the state of An Binh Commercial Joint Stock Bank and todevelop a retail banking strategy for the bank in the period 2011 - 2020 So, theanalysis and contents in this exercise are completely of our group member’sopinions and efforts

However, due to the limit of the time, this capstone project contents may beinevitable misunderstood and flawed Therefore, we look forward to receivingcomments from the readers as well as the teachers so that we can improve ourcapstone project better

Best regards,

TABLE OF CONTENT

ACKNOWLEDGEMENTS i

TABLE OF CONTENT i

LIST OF ABBREVIATION i

LIST OF FIGURES, GRAPHS AND TABLES i

INTRODUCTION 1

i Urgency of research theme 1

ii Purpose of research 3

iii Research method: 3

iv Structure of theme: 3

CHAPTER I: THEORIES OF STRATEGIC MANAGEMENT 4

1.1 General concept 4

1.1.1 Concepts of strategy 4

1.1.2 Concepts of strategic management 6

1.2 Foundations of strategy 7

1.2.1 Role of strategy 7

1.2.2 Types of strategy 8

1.3 The process of strategic management 9

a Process of forming strategy 9

b The process of implementing strategy 11

1.4 Steps for establishing a strategy 13

1.4.1 Definition of mission, vision and core value: 13

1.4.2 Analyze of external environments 14

1.4.3 Analyze of internal environment 15

1.4.4 Selection of strategy 15

1.5 Techniques for strategy analysis 16

1.5.1 PEST analysis 16

1.5.2 Analysis of M.Porter’s five forces model 17

1.5.3 SWOT analysis 19

CHAPTER 2: ANALYZE THE STATE OF AN BINH COMMERCIAL

JOINT STOCK BANK (ABBANK) 21

2.1 General introduction of ABBANK 21

2.1.1 History of ABBANK’s development 21

2.1.2 Developmental milestones 21

2.2 Analyze the state of An Binh Commercial Joint Stock Bank 22

2.2.1 Analyzing factors of external environment 22

2.2.2 Opportunities and threats for retail banking 32

2.2.3 Analysing internal environment 33

2.2.4 ABBANK’s opporturnities, threats strength and weakness 51

CHAPTER 3: STRATEGY FOR DEVELOPMENT RETAIL BANKING OF AN BINH COMMERCIAL JOINT STOCK BANK FOR THE PERIOD 2011 -2020 55

3.1 Vision, mission and core value 55

3.2 Targets of ABBANK’s retail banking development for the period 2011- 2020 56

3.3 Strategic analysis and selection 57

3.4 Several solutions for retail banking development 59

3.4.1 Construction for organizational model of retail banking 60

3.4.2 Development of human resources 61

3.4.3 Investment into information technology: 65

3.4.4 Network development 66

3.4.5 Developing products 66

3.4.6 Marketing and trademark development 68

3.4.7 Risk management 72

3.4.8 Business culture of retail banking 73

3.4.9 Implementation schedule 74

CONCLUSION 75

REFERENCES 76

LIST OF ABBREVIATION

ASEAN Association of South-East Asian Nations

LIST OF FIGURES, GRAPHS AND TABLES

Figure 1-1 Process of strategic management 11

Figure 1.2 The basic model of strategic management 14

Figure 1.3 Eight activities of the strategy implementation and operation 16

Figure 1.4 Basic steps of strategic management 17

Figure 1.5 M.Porter’s five forces model 21

Figure 2.1 Structure of lending market share of credit institutions 32

Figure 2.2 Structure of mobilization market share of credit institutions 32

Figure 2.3 Organization chart of ABBANK 40

Table 2.1 Results of business operation in 2008, 2009, 2010 41

Figure 2.4 Structure of lending, mobilization of Individual Customer

Table 2.2 Banks’ criteria of total assets in 2009 46

Figure 2.5 Banks’ market share of loan, mobilization in 2010 48

Table 2.3 Quantity of branches/transaction offices and competitive banks 50

i Urgency of research theme

In the process of restructure of the Vietnamese commercial banks, thedevelopment of retail banking and wholesale banking is rising in the planning andimplementing strategy of each bank system as well at the macro level of State Bank

We are witnessing the development and keen competition of services of Vietnamesebanks, especially retail block Retail banking service is the new way of looking atfinancial market, therefore, major of small and retail work-people will be approach

to banking products and services, making a creative, various and potential market Today, competition in banking is the hot issue of the economy; thecommercial banks develop incessantly the services and products with expectation ofbecoming the top special leader in retail services that are banking services connectclosely to the multi-purpose and modern technology towards to major individualsand medium and small businesses Modern banking services have become habit ofmost of people in the world, but quite fresh to Vietnamese people

Besides, in the condition that the open economy, trade liberation and financeliberation have been wide and deep, demand for banking - financial services candevelop quickly and beyond capability of satisfying of current financialintermediate institutions in the country This is the point attracting the foreignfinancial organizations to control domestic market, especially when barrier offinancial market in Vietnam is removed, and since 01/04/2007, State of Vietnamhas permitted the Bank 100% foreign capital to establish in Vietnam according tothe commitments in WTO integration It is actually that people’s demand for usingbanking - financial services is increasing That demand connects closely to thequickly forming process of business form in the economy, as well as thetransferring process from State-own enterprise to Joint Stock Company That is thedemand for stock transaction, investment consulting, financial lease and purchase,debt management … At the same time, the appearance of foreign enterprises in the

economy plays a role as catalyst, to promote the appearance and quick development

of market demand for banking - financial services Those are services relating tonon-cash payment, automatic withdraw, remittance services … Obviously, demandfor the form of banking – financial service is initiatively, as breakthrough, andmotive the appearance and development of supply resource of domestic services Therefore, the market of modern and new services of banks in Vietnamnowadays is the potential market which is ready to receive the new financialinstruments and supply resource in the market Although the commercial banks isstill sponsored by State Bank of Vietnam through the limit of establishment of jointventure banks or 100% foreign capital; the commercial banks in Vietnam havedetermined that in the current situation and in the future, they will not sit tight totake advantages of domestic market as before, a lot of banks determined thatdevelopment of retail banking services is the important part of their developmentstrategy; beginning from the grasping opportunity from new market, from applyingtechnology and using system to create many new products and services, effectivemean of distribution, enhancing relationship between customers and banks.Actually, we see that the opinions of banks’ leaders are the same in developmentorientation of their banks such as:

“The application of IT to create new products is the target of almost banks

nowadays VietinBank will make a lot of new products allowing customers to use financial transactions in Internet and on mobile” Mr Le Viet Bac, Chief of E-

banking Services Department (VietinBank) said

Or Mr Hoang Trung Dung, Director of company customer of Maritime Bank

Vietnam said: “We will develop through quality of banking services, and expand

market share through utility products and services”.

And Mr Nguyen Hung Manh, General Director of An Binh Commercial

Bank said that: “An Binh will strengthen in investment in infrastructure, especially

IT in the orientation of retail banking development; expanding cooperation with partners to bring utility products to many people more and more…”

Based on the above fact as well as according to the opinion and developmentorientation of General Director of An Binh Commercial Bank, the group has chosenthe theme: “Development strategy for retail banking of An Binh Commercial Bank”

to be the research theme in exercise with expectation to contribute a small part inthe strategic planning at An Binh Commercial Bank

ii Purpose of research

Applying the knowledge learned on the subject of strategic management toexplore opportunities and threats of the banking sector especially in retail bankingarea Also, through the analysis of the internal environment of the An BinhCommercial Joint Stock Bank (ABBANK) to understand its strengths andweaknesses associated with the use of SWOT matrix to select the most effectivestrategy for ABBANK’s retail banking development in the period 2011 to 2020

iii Research method:

In the research method, the theoretical models of strategic management aremainly used to apply in the specific condition of An Binh Commercial Bank inorder to form a business strategy

In the theme, methods of statistics, reason, comparison, judgment and summaryare used through internal data of the An Binh Commercial Bank, data of the othercommercial banks, teaching materials in strategic management in domestic andinternational countries and through magazines resource, internet to research

iv Structure of theme:

 Chapter 1: Theories of strategic management

 Chapter 2: Analysis the real situation of An Binh Commercial Joint Stock Bank (ABBANK)

 Chapter 3: Strategy of ABBANK’s retail banking development for the period

2011 -2020

CHAPTER I: THEORIES OF STRATEGIC MANAGEMENT.

1.1 General concept

1.1.1 Concepts of strategy

There are many concepts of strategy, those concepts have one or more than

one difference depending on each author’s conception, and we will bring out

some concepts of strategy as follows:

- According to Chandler, in 1962 “Strategy is the determination of term basic purpose and target of enterprise and the application of a series

long-of actions as well as distribution long-of necessary resources in order to carryout this target” (Source: Chandler, A (1962) Strategy and Structure.Cambridge, Massachusetts MIT Press.)

- According to Quinn “Strategy is pattern or plan which integrate the maintargets, policies and series of actions into the general united closely.”(Source: Quinn, J., B (1980) Strategies for change: LogicalInscrementalism Homewood, Illinois, Irwin.)

- According to William F.Gluek: “Strategy is the united, comprehensiveand co-ordinate plan, designed to ensure that the enterprise’s basictargets will be complemented successfully However, this perspectiveisn’t actually sufficient, it is practically proved that: Sometimes theofficial plans scheduled concretely are unsuccessfully"

- According to Johnson and Scholes: “Strategy is the orientation andscope of a organization in long term in order to gain competitiveadvantage for the organization through formatting its resources in thechanging environment, in order to meet demands of market and satisfythe related parties’ expect” (Source: Johnson, G., Scholes, K (1999).Exploring Corporate Strategy, 5th Ed Prentice hall Europe.)

- According to Mintzberg, strategic management is:

+ Plan: Series of actions intended consistently.

+ Patten: Consistency in behavior in time line intended or not intended.+ Position: appropriate between organization and its environment

+ Perspective: method to deeply aware of the world

+ Ploy: concrete method to deceive opponent

Definition of strategy not only includes the different aspects, but also variousdepending on level Substantially, the exact definition of strategy according to leveldepends on perspective At least, 3 strategy levels need identifying: strategy atcompany level; strategy at business unit level and functional strategies

Enterprise development strategy: “A series of commitments and actions

applied by enterprise to gain a competitive advantage by exploiting the corecapacities in the decisive market”

In summary: Generally, it is obligatory to meet sufficiently the following

factors when forming strategy:

- Being set up for a long time;

- Creating growth for organization;

- Using all of the resources of organization effectively;

- Making the best competitive position for organization in the future

We can say that strategy "is a series of long-term actions formed to make anorganization from the current position to the expected position in the future bysetting up the competitive capacity compared to advantages of the otherorganizations in the market” (Michael E Porter (1996) What is strategy?, HarvardBusiness Review)

Strategy is an orientation and scope of an organization in long term in order togain competitive advantage for the organization through formatting its resources in

the changing environment, in order to meet demands of market and satisfy therelated parties’ expect.

1.1.2 Concepts of strategic management

People usually consider strategy as a product of a reasonably formed processguided by superior manager, but not efficiently In many cases, the valuablestrategies can be arisen in the organization without planning

Strategic management is a series of the management decisions; and the

actions which define the long-term productivity of a company Strategic

management includes continuous actions: Examining environment (both internaland external); building strategy; implementing strategy and evaluating strategiccontrol Therefore, strategic research stresses the monitor and evaluation of the

external threats and chances in the context of internal weakness and strengths.

Strategic management is the process of arranging flexibly strategies, operation

situation and business results, including personnel, leaders, techniques, andtreatment methods

Strategic management can be defined as the artistically and scientifically

formation, implementation and valuation of the decisions related to functions whichare enable a organization to reach its planed target

As we show in this definition, strategic management focuses on unifying themanagement of marketing, finance, production, development research and systems

of information on business fields in order to gain organization’s success

The process of strategic management includes 3 periods: Setting up strategy,implementing strategy, and valuating strategy Strategy formation period includes:developing the business missions, determining the external chances and threats,clearly defining the internal strengths and weaknesses, setting up the long-termtargets, creating the alternative strategies and choosing the specific strategies topursue

From the definitions of strategy and strategic management stated above, wecan see that the basic content of strategic management includes: Determining themain organization’s mission and target; analyzing the external and internalenvironment of an organization; choosing a strategy corresponding to strengths andweakness and chances, threats; accepting organization’s structure and controlsystems to carry out the chosen strategy.

Figure 1-1: Process of strategic management

- Which resource does the enterprise need to use (human, skills, property,finance, and technologic secret …) to be able to reach the planned target?

- To see the implicit chances and threats from external environment can affectthe implementation of enterprise’s target: environment, competition, policy,natural resources … plans for preventing risks

- To help the business manager to clearly realize that the strengths,weaknesses, chances and threats can occur in business at present and in thefuture, to analyze and forecast the conditions in the business environment inthe future To help the enterprise to take full advantage of chances, todecrease risks, and to increase the enterprise’s competitive capacity

- To help the enterprise to build the business strategy better through using

“system approach” method, creating foundation to increase association andattachment among members in the implementation process of enterprise’starget

1.2.2 Types of strategy

a Classification according to strategic levels:

 Strategy at company level (general strategy): Strategy at companylevel towards the organization’s general scope and purpose

 Strategy at business unit level (field): Strategy at business unit levelrelates to the successfully competitive mode in the concrete markets

 Strategy at functional level (or operation strategy) is the strategywhich helps strategy at business level and at company level to beimplemented effectively by component parts in aspects such asresources, processes, human and necessary skills

Today, with the globalization tendency, companies are quicklydiversifying their activities beyond national border; thence, global strategiesare considered as a choice to cope with the problems in international business

b Classification according to contents of strategy.

+ Trading strategies

+ Financing strategies

+ Human strategies

+ Technology strategies and technical strategies

c Classification according to development processes:

According to this classification, the strategy includes:

 Oriented strategies: refer to the great orientation of enterprise’s target

It is formed based on the result of environmental analysis and internalenterprise analysis

 Operation strategies: are enterprise’s methods of operations undereach concrete circumstance and plans to adjust strategies

1.3 The process of strategic management

Strategic management is a series of the management decisions; and the actions

which define the long-term productivity of a company Strategic management

includes continuous actions: Examining environment (both internal and external):(i) forming strategy; (ii) implementing strategy and (iii) evaluating strategy

Therefore, strategic research stresses the monitor and evaluation threats and

opportunities of the external environment in the context of internal weaknesses and

strengths

a Process of forming strategy.

This is the most important period in the process of strategic managementincluding 3 steps:

- Step 1: Choosing the company’s main target and mission.

- Step 2: Analyzing external environment to define opportunities, threats and

analyzing internal environment to define the organization’s strengths andweaknesses

- Step 3: Choosing strategies based on seeking resources, ability, core

competencies, and developing them to overcome the threats, to utility theopportunities from the external environment

The process of forming strategy can be carried out according to the basicmodel of strategic management (figure 1.2)

Figure 1.2: The basic model of strategic management

b The process of implementing strategy

After finishing the process of forming strategy, the chosen strategy will becarried out through the clear identification of development target in each period, foreach department; changing the organization’s structure (if needed) and working outproduction plans, business plans, creating the necessary and appropriate resources

Strategy implementation is the method which a company creates theorganizational arrangement allowing them to pursue their strategy most effectively.The organizational design means that choosing mode of coordination betweenorganization’s structure and control system for the company in order to pursue itsstrategy effectively, to create the value and the firm competitive advantage

In practice, many companies have set up strategy but unfeasibly due toshortage of necessary capacity to implement plan The implementation is theprocess from up to down

Purposes of implementation of strategy are: Building capacity, ability andresource; building up budget; setting up policies and regulations to support andchoose the best activities and promote continuous innovation, building theinformation and connection system and operating; attaching a reward/ punishment

to target to promote the implementation of strategy; creating working environment

to carry out strategy better

The necessary component parts of the strategy implementation process are

shown in the figure 1.3 below:

Figure 1.3: Eight activities of the strategy implementation and operation

In the strategy implementation process, leader board is the key componentpart contributing to the success of the strategy implementation process Leader has

to be usually ready with awareness “what to do” to gain the expected result Theybuild the competent organization by choosing the peoples suitable to the keypositions, to guarantee that the organization will have enough skills, capacity,management skills, technologic secrets, competitive capacity and proper resources.Simultaneously, they combine the organization’s structure with the strategy underimplementation, unify whole organization to act for strategy, create commitment,shape a mobilization, implement strategy and attach mode of organization to carryout activities to the strategy’s requirements

a Stage of strategic audit

This is the final stage of strategic management process Strategic control is aprocess in which administrators shall encourage and supervise the implementation

of each organization as well as its members in order to assess whether activities arecarried out continuously and effectively or not Consequently, the company shall

make adjustment decisions to improve for better efficiency Contents for control caninclude: the control of efficiency, quality, improvement and customer satisfactiondegree

In brief, strategic management process consists of basic steps in the

following model:

Figure 1.4: Basic steps of strategic management

1.4 Steps for establishing a strategy

1.4.1 Definition of mission, vision and core value:

a Definition of the organization’s mission:

Mission is a declaration aiming at informing of the existence of the Enterprise,which defines values and rules governing the Enterprise, and is a vital part duringstrategic planning process Mission of the company is the reason for the existence ofthe company on the market, who you are and what kinds of products and services youshall bring to customers and the community

b Definition of vision:

Vision is an image, a lively picture about what shall happen to a trade mark inthe future It is the choice of one of the most wonderful values of a trade mark.Vision is also characterized by the uniqueness, implying to create somethingspecial

Hence, a declaration about vision is considered as a report on the position yourcompany desires to achieve Vision declaration outlines the future of your companywhen you gain your own target and purposes

c Definition of core value:

- Core value helps to form the psychology for enterprise, which cansupport or reject the personal psychology accordingly

- Being values deeply rooted in the enterprise

- Being a belief system influencing the behavior between individuals oramong groups of people

- Core values are “the soul” of the enterprise

- Core values are essential and long-term guidance rules

- Helping enterprise to orient its decisions and actions

1.4.2 Analyze of external environments.

Analyze the external environment in order to find the opportunities andchallenges from the environment outside of the business Three types of externalenvironment have been linked together include: the macro environment, nationalenvironmental and industry environment in which enterprises are operating

Enterprises identify opportunities and challenges through analysis of data onchanges in the environment where businesses are operating or planning to enter.Opportunities may include market potential, market space, close to the resources orskilled and cheap labor forces The challenges for the enterprise may be the narrowmarket, increasingly fierce competition; changes in policy, political instability inkey markets or new technologies development make facilities and production lines

of business becoming obsolete

1.4.3 Analyze of internal environment.

Analyze of internal environment is to find the strengths and weaknesses ofthe business

By analyzing the internal environment of business, the strengths of thebusiness organization may be the skills, resources and advantages that businessesget ahead of competitors (the key capacity of businesses) as there are many talentedexecutives, have advanced technology, famous brand, available cash, businesseshave a good image in the eyes of the public or a large market share in the keymarket The weaknesses of the enterprise reflected the shortcomings ordisadvantages of skills, resources or other factors limiting the competitiveness ofenterprises That may be the inefficiency distribution network, bad labor relations,lack of international experienced managers or outdated products and servicescompared to competitors

Selecting business strategy is the orientation to develop and build competitiveadvantage of businesses that rely on understanding and assessing the situation hasbeen made in the above steps Enterprises can choose strategies according to threegroups of strategies:

- Strategy of the cost leader (Lowest price)

- Centralized strategy (focus on a market or a certain market segments orfocus on a certain product groups.)

- Differentiation strategy

In summary: Best strategy is to have high feasibility and be appropriate to the strengths and resources of the enterprise, and aiming at grasping at the best business opportunities, and establishing the defensive barrier against the competitors’ risks which can harm interests of the enterprise

1.5 Techniques for strategy analysis

Techniques for strategy analysis are used in this research subject including:

1.5.1 PEST analysis

Legal and political environment: Legal, political factors impact on

development strategy of the enterprise in various directions Sustainability ofpolitics and completion of legal system are always the big concern of businessmanufacturers

Economic environment: Real situation of economy and future trade have an

influence on the enterprise’s success and strategy Changes of principal factors are:economic growth rate, interest rate, inflation, unemployment, exchange rate whichall impact on the enterprise

Social-cultural environment: For strategic management, cultural and social

factors are sensitive matters and have changes Lifestyle of people quickly altersfollowing the integration trend, leading to the change of consumption attitude Thehigher intellectual level of people is, the higher the consumer’s need for quality,diversity of product category is

Technological environment: Technological factor has a great influence on

business strategy of the enterprise and industrial sectors as well The change intechnology considerably influences life circle of products and services.Consequently, the enterprise needs to have sound judgments on technology, aiming

at creating opportunities for the enterprise in the development of products andservices.

Through the analysis process of external environment, business managers canassess the opportunities and threats to their enterprises Accordingly, entrepreneursshall have foundations to build and choose development strategy in a right andobjective way Changes in macro strategy can directly impact on any forces in thesector, which therefore alter relative strength to other forces and to it, finallychanging attraction of one sector

1.5.2 Analysis of M.Porter’s five forces model

Analysis of sector environment needs the assessment of competitive structurewithin a sector, including competitive position of a central organization andprincipal competitors, and development stages of the sector as well

M Porter, professor of Harvard Business School draws out a frameworkwhich helps administrators find out opportunities and threats facing the enterprise inthe sector

Figure 1.5: Michael Porter’s five forces model

According to Michael E Porter, competition in an industry depends on fivebasic factors, such as the bargaining power of customers; bargaining power of

suppliers; the threat of substitute products and services ; the threat of new entriesand competition from the direct competitors (E Porter, 1998) The analysis of fivemarket impacts has a significant value for choosing the strategy of a business.

 Bargaining power of customers

Bargaining power of each customer depends on market patterns Forcompetitive markets, customers have greater bargaining power, because they havemore product choices Conversely, customer power is weaker in monopoly marketsfor the price negotiation In addition, the bargaining power of customers depends onthe purchased amount more or less; products that customers buy have low chemicalspecificity

 Bargaining power of suppliers

The power of suppliers depends on their products are proprietary products orcompeting products; depends on the scarcity of products on the market The power

of suppliers is reflected whether they can raise prices or reduce quality of goods andservices

 Pressure from substitute products

The competitive pressures for enterprises are higher if there are more andmore attractive substitute products and services Substitute products and servicesbring the same satisfaction to the customers Pressure from substitute productsdepends on the quality of the product, the easy acceptance of buyers and the price ofthe product

 The threat of new entrant

The entrant of the potential rivals depends on government regulations.However, joining the industry depends more barriers such as economies of scale,product characterization, conversion costs for the retraining, the cost of ancillaryequipment costs, the cost of designing product, access to distribution channels,government policies such as limited or even not to allow to participate in some

sectors through the grant or restrict access to material inputs, brand recognition,capital investment required (E Porter & Nguyen Phuc Hoang translation, 2009)

 Competition among rivals:

Competition among rivals in the industry is often through the competitionabout price, marketing, advertising, customer consulting, product and servicequality, customer care The level of competition within an industry depends on twofactors; they are the number of enterprises and the profit rate in the same industrywhether is high or low Competition occurs because the competitors can either feelpressure or see opportunities to improve the position In the form of competition,price competition is notable because it has no stability and can cause damage to theentire industry benefits

Michael Porter shows that the stronger above-mentioned forces are the morerestrictedly existing companies’ capability of increasing price and gaining profitsbecomes Within the scope of 5 forces model of M Porter, one strong competitiveforce can be considered as a threat because it reduces profits of the company Tocope with more and more violent competition, the company has to invest more costfor product differentiation, market accessible service or price reduction.Competitive intensity within the sector depends on:

+ Quantity and capability of the company in the sector

+ Market need: Need for products, services of the company

Task of administrators is to be aware of opportunities and threats which thechange of these five forces can bring in, accordingly building up suitable strategies

1.5.3 SWOT analysis

SWOT analysis model is a very useful tool for any business organization tograsp and make decisions in any circumstances SWOT stands for 4 words:Strengths, Weaknesses, Opportunities and Threats SWOT provides a tool whichhelps analyze the strategy, check and assess the position, orientation of a company

or a business project SWOT is suitable for work and analysis in group, being used

in planning business, building strategies, assessing competitors, marketing,developing products and services, etc

Strengths and Weaknesses are internal factors of the company whileOpportunities and Threats are external ones SWOT allows analyzing differentfactors which have relative influence on competitive capability of the company.SWOT is often combined with PEST (Political, Economic, Social, Technologicalanalysis), model of market analysis and potential assessment via external factors inall aspects of politics, economy, society and technology SWOT analysis is asubjective assessment of data which is organized by the SWOT format into a logicalorder that helps understanding, presentation and discussion and decision-making

On the basis of SWOT matrix, the enterprise finds out the strategy in order topromote its strengths and overcome its weakness, make full use of opportunities andavoid threats created by outside environment

SWOT analysis is a useful tool in widening the resources capability of theenterprise, extending the market and threats from the outside SWOT matrix canform strategic ideas into groups:

S-O: strategies using strengths to gain opportunities

S-T: strategies using strengths to eliminate or avoid threats

W-O: strategies overcoming weakness to gain opportunities

W-T: strategies eliminating weaknesses to avoid threats

Figure 1.6: SWOT matrix

CHAPTER 2: ANALYZE THE STATE OF AN BINH COMMERCIAL

JOINT STOCK BANK (ABBANK) 2.1 General introduction of ABBANK

2.1.1 History of ABBANK’s development

ABBANK (An Binh Commercial Bank) is established according to license

no 535/GP-UB issued by People’s Committee of Ho Chi Minh city on May 13th,

1993 The main business lines of ABBANK are mobilization of short-term capital,medium term capital and long-term capital under forms such as deposit account,certificate of balance, the investing and developing authorized capital acceptance oforganizations; funding of SBV - State Bank of Vietnam and the other creditagencies; lending with short term, medium term, long term period in order todevelop rural economy; to discount commercial papers, bonds and valuable papers;

to contribute capital and joint venture; to make payment services among banks

2.1.2 Developmental milestones

 In 2002: ABBANK reformed structure and human resources to focus on

specialty of trading in commercial bank

 In 2004: ABBANK increased charter capital to VND 70, 4 billion.

 In 2005: ABBANK increased shareholders

- Strategic shareholder: Vietnam Electricity Corporation (EVN)

- Other big shareholders: Petrol Vietnam Finance Corporation (PVFC),Hanoi General Export Import Corporation (Geleximco)

 In 2006: Charter capital was increased from VND 165 billion to VND

1,131 billion

 In 2007: ABBANK signed strategic cooperation with Agribank and

member corporations of EVN such as PC1, PC2, PC3, etc

- ABBANK became a member of PAYNET

- Charter capital of ABBANK was raised to VND 2,300 billion.

 In 2008: ABBANK implemented successfully core banking software

operating in the whole system May bank is strategic foreign shareholder ofABBANK and has the owning rate of 15% ABBANK raised charter capital

to VND 2,705 billion

 In 2009: ABBANK cooperated with Prudential Vietnam and Deutsche

bank In July 2009, ABBANK raised charter capital to VND 2,850 billion

In September 2009, ABBANK set up a new headquarter at 170 Hai BaTrung, Da Kao ward, District 1 and executed street dealings in Transactionoffice In December 2009, ABBANK raised charter capital to VND 3,482billion

 In 2010: ABBANK connected with VNB network system through Smart

link ABBANK set up sponsor centre for Small and Medium enterprises

(SMEs) and participated in Small & Medium Enterprise Finance Program

III (SMEFP III) ABBANK widened cooperation with internal and externalpartners such as Southern Power Corporation (EVN SPC), VN Prevoir …After more than 15 years of establishment and development, ABBANK hadmore than 10,000 corporate customers and more than 100,000 individual customers

in 29 provinces and cities in all the country with 115 branches/transaction offices.Until 12/2010, charter capital of ABBANK reached to VND 3,831 billion, total ofproperty was VND 38,015 billion

Target customers of ABBANK include: Corporate Customer Group (CCG),Individual Customer Group (ICG), Investment customer group and EVN customergroup and member units ABBANK always studies and develops service products

in order to bring the high benefit and meet fully demands of customers

2.2 Analyze the state of An Binh Commercial Joint Stock Bank

2.2.1 Analyzing factors of external environment

Factors of external environment include factors of macroscopic environmentsuch as politics, economy, socio-culture, natural environment, technologyand factors belonging to environment, profession according to M Porterincludes competitive level in internal profession, threatening of new entrancemembers, Negotiation power of service users (customers): Power ofsuppliers, Threatening of product or service replacement These factorsimpact directly on operation of any enterprises or economic organizationsand are always cared and considered when there are contribution andstrategic decision making To banking, especially ABBANK, these factorsare shown in concrete contents as follows:

2.2.1.1 Macroscopic environment

a Environment of politics and law

- Vietnam is a country having stable politics and an interesting investmentenvironment

- Vietnam Law was more suitable to international normal practice to attractinvestment of enterprises and foreign investment, these are good opportunityfor credit organizations to develop customers, raise market share to grow andstep investment up

- Because of international integration, policies of tax, financial – bankingmanagement and bank are improved on to integrate with internationalcommunity, are prepared with necessary conditions to compete with strongforeign competitors when commitments of opening market have validity

- Foreign relationships extension (WTO, Asean, bilateral relationship, etc.) ispremise to develop economy, commerce and attract foreign investmentcapital

- 2010-2015 is period of innovations such as innovation of growth model,economic structure in order to stabilize macroeconomics, restrain inflation

and guarantee social security Government’s policies, law system also havemany changes in order to be suitable to development target.

b Economic environment

- The world economy is in rehabilitation period, however (1) The worldeconomy is in danger of falling into a double-dip recession (2)Unemployment is still not improved in most of countries, (3) Deficit andpublic debt are still at warning level in many countries; (4) Risk from a veryhot development of China caused disadvantageous impacts for globaleconomy rehabilitation

- Vietnam economy is in rehabilitation period, GDP - gross domestic producthad sign of growing The world economy after rehabilitation will impact onthe investment capital flow into Vietnam positively although it is slower than

- In all the country, it is adjusted to have economic centers; industrial parks,key economic sectors, and great economic corporations, economy structuredevelops toward increasing in sector rate, service and decrease in agriculturerate Integration process into the world economy such as events: Vietnamjoined in the ASEAN Free Trade Area (1996) and the World TradeOrganization (2007) During process of implementing the commitments ontrade liberalization and the investment, removal of barriers, protectionismwere demolished; export, foreign investment increased strongly which madeour country get advantages from globalization process but also face to face

with threats of complicated economy management and being impacted fromoutside fluctuations.

- Transparency, equality, self-control in business of economic sectors andinternational commitments implementation of Vietnam will develop well

- Inflation runs the risk of breaking out and is difficult to control

- Loan rate is still at high level Internal gold price fluctuates irregularlyaccording to international price of gold and these impacts on interest andbusiness operations of bank It is difficult for individual customers, SMEs toapproach source of funds of bank

c Social environment

- Retail market is potential with large population, young population structure(According to Central Statistical Office of population density, the main forceage group of labor force 15-64 increased from 61,1% to 69,1%)

- Vietnam society develops day by day, per capita income raised with everypassing day (according to draft target of Economic and social developmentplan submitted to Government by Ministry of Planning and Investment,GDP/per capita in Vietnam in 2010 estimated to achieve USD 1200 and in

2015 estimated to achieve USD 2,100 (increasing 1.7 times compared to theaverage level in 2010) and USD 3,000 in 2020) The masses’ living standardsbecomes higher with every passing day, the thinking of working to savemoney reduces, people care for current consumption demands to raise livingcondition of themselves and their family The cross-section of people has thestable income, the main is young families who start habit of consumption bycredit (form of installment buying of house, car, etc.) which is goodcondition to develop services in finance, bank

- Intellectual standards of the people have improved and the urbanizationprocess has happened strongly

- The habit of using cash in consumption limiting the application of newservices in finance for individual customers’ group is difficult to strategy of

increasing service rate in finance of banks, some people like hoarding goldand strong foreign currency and this reduces circulation in financial market.

d Technological environment

- Vietnam is one of 10 countries having the fastest growth rate of informationtechnology in the world and contributing nearly 7% GDP Vietnam has hadinternet service since 1997, Vietnamese rate using these services increaseevery year This is a good opportunity to economy and banking takeadvantages in order to develop business operation

- Technology related to banking also develops strongly Banks attach specialimportance to invest technology, renovate applications, deploy and applycore-banking system; payment services via internet-banking, SMS Banking,replace magnetic storage card by safe chip card These things areadvantageous to banking in order to control system and increase services offinance, banking, but also require great capital and appropriate investmentstrategy

- Till 2010, telephone density will achieve 32-42 telephones/100 people, inwhich the fixed telephone density will achieve 14-16 phones/100 people;internet subscriber density will reach 8-12 subscribers/person, internet userate will reach 25-35%; average density of personal computer will reach over

10 computers/100 people 100% of communes have telephone; 70% ofcommunes have internet asses point, 100% of districts and almost ofcommunes in main economic region are served broadband Internet

- Transaction environment and e-commerce were formed and developed fast

It is expected that 25-30% total transactions of economic sectors will beimplemented via e-commerce and transaction system E-commercetransaction will be 10 times in 2010 compared to that in 2002

e Integration environment

- Operations of finance – bank are committed to be open strongly in the worldeconomy integration of Vietnam Therefore, foreign banks will be treatedequitably according to the most favored nation rule of WTO Domestic bankswill have to compete violently with important foreign competitors (with theadvantages of trade name, capital, technology, human resources, experiences,product, etc.)

- Banks will also meet with pressure of technology renovation, standardenhancement and management method in order to adapt to the newcompetition

- Integration makes Vietnam financial market depend much on world market;this is not only good threat but also a good opportunity for domestic banks

- Integration also makes opportunities for banks approaching capital resources,technologies, management experience and foreign market If these can beadapted and taken full advantage, this will be opportunity to expand scale ofbank However, this will also be pressure for banks when they have torenovate technology, improve standard and management method in order toadapt to the new competition

2.2.1.2 Sector environment

a) Internal sector competition

Vietnam baking has been developing strongly in quantity as well as inquality Till August of 2010, bank system in Vietnam included 5 state-ownedcommercial banks, 39 joint-stock commercial banks, 5 joint venture banks, 5banks with 100% foreign capital, 48 branches and 47 representative offices offoreign banks, 16 finance companies, 13 finance lending companies, 1 Centralcredit fund and nearly 1,000 Local people’s credit funds Financial institutionsnot only hasten expansion rate of domestic market but also have big steps in netdevelopment into international market, especially in neighboring countries(China, Laos, and Cambodia) Besides there are tens of files of asking for joint

stock banks and banks with 100% foreign capital establishment submitted in anoffice of SBV This number shows sector competition becomes keener day byday

An increase in quantity of joint stock banks and foreign banks made themarket share of existing banks impacted, especially to state-owned commercialbanks Statistics of SBV showed clearly the conversion trend of deposit marketshare and loan of group of state-owned commercial banks, joint-stockcommercial banks, joint venture banks and banks with 100% foreign capital andsome credit institutions as the following figures 2.1 and 2.2:

Figure 2.1: Structure of lending market share of credit institutions (Source: SBV)

Figure 2.2: Structure of mobilization market share of credit institutions (Source: SBV)

Competitive pressure among existing banks is stable, but there is an increasingtrend between group of state-owned commercial banks and group of joint-stockcommercial banks Joint-stock commercial banks with ability of creating higherrevenue-earning rate will control operation-market share of banking.

Competitive pressure in financial market is increased when subsidiary bankswith 100% of foreign capital has been promoting development strategy inVietnam An attraction of idle money resource into bank is not easy;expenditures for capital mobilization may be increase These elements willpressurize banks having high benefit target

Banks in Vietnam have advantages in quantity on the market, branch nets andtransaction offices scattered everywhere in all the country, concurrently,understand particularities in Vietnamese business, production, consumption,predilection, mentality well Meanwhile foreign banks have advantage of financepotential, management experiences, system of production-service and hightechnology HSBC, ANZ and Standard Chartered Bank are symbolic faces in thismatter Number of foreign banks having branch/representative office in Vietnam

or number of foreign banks having share capital in internal commercial banksshows that the number of banks with 100% of foreign capital will increase in thefuture And they are also making intensely strategies of expanding market share

in Vietnam customer segment, especially the retail service Thus, competitivepressure for domestic banks will become bigger

Besides, with a large number of banks and types of credit service organizationlike this, the conversion of using finance services to banks is very simple andcosts low fee Therefore, banks have to race in interest rate and fee of servicesupply in order to attract customers and guarantee operation profits

Integration barrier will also be an element expressing the competitive level ininternal sector To develop a healthy financial market, SBV had regulations aboutcapital to fairly big bank This is a big barrier to new members who want to join

Vietnam banking However, the existing banks have length of operation, thegreat capital potential, a quantity of veteran customers and the fixed market share

so it is not easy for newly-established banks in competition for the market share.Products of Private-owned commercial banks (POB) in Vietnam have littledifference, these products focus on traditional field such as lending and someservices such as card service, mortgage, discount of valuable papers, moneytransfer, payment, etc ; thus, service quality and price will be the successdeterminant of bank Basing on bank’s advantage, each bank builds long-term,medium-term and short-term strategies to determine the continuously renovatedheading, apply management technology, the latest information

b) The threats of the new participating members:

When the country opened and integrated into the world economy, theGovernment allowed and made condition so that international organizations anddomestic enterprises have enough conditions to open and trade in banking Thiscreated a favorable premise so that banking developed strongly, especially togroup of joint-stock commercial banks and joint-venture banks The participation

of the new banks is threatening to existing banks in banking because of thefollowing reasons:

+ Divided market: All banks determine their market development strategy;

they have preferential policies to attract customers With advantages oflarge capital, service technology, new members, professional workingattitude, the depth of experience make competition keener At the firststage, they can be new to market, but this disadvantage will be rejectedstep by step as time goes by

+ Competition in human resources: Nowadays, human resources for

banking are deficient This makes competitive pressure among banks toattract talents, leads to spending on salary higher while the quality ofhuman resources is not improved much With methodical policy as well as

good treatment regulations of foreign banks, keeping superior employees ismore difficult.

+ Advantage of capital and Information Technology (IT): newly-establishedbanks have advantage of capital and Information Technology (IT) This isthe threat for existing banks which have not met enough charter capitalaccording to State Bank of Vietnam IT created big advances in innovationduring process of establishing and developing various services of bank andthus banks having developing IT system will be important competitors

c) Negotiation power of customers:

Customers play a role as the vital problem of banks With scale of more than

100 banks, it is easy for customers to transfer to use service of other bank whenservice fee increases

One of the important features of banking is that all individuals; organizationstrading in production or consumption, even other banks can be buyers of bank’sproducts, services and sellers of products, services to bank Therefore, bank willhave to face with contradiction between effective operation making profits andkeeping customers as well as having attractive capital source with fee as cheap aspossible

d) Negotiation power of suppliers:

Bank needs the main suppliers as follows: Supplier in IT, supplier in securityservice, manufacturers guarantee ATM, part owners, depositors, etc

In Vietnam, banks themselves usually invest in equipments and selectspecific suppliers depending on condition to reduce power of equipment supplier.However, when costing a quite great expenditure in system investment, banks donot want to change supplier because of expensiveness, this will raise the power ofequipment supplier who has accepted bid

Power of supplier is emphasized when the supplier also is shareholder ofbank When owning an equity which is large enough, these shareholders willhave direct impacts on business strategy of bank and the power will increase inaccordance with rate of investment capital In some cases there can be division,mergence of bank.

Bank operates in field of service trade, to have a good product with highquality and meeting quickly customers’ demand, opening cooperativerelationship with suppliers is very important Today, to raise service quality andcompetitive ability, banks usually co-operate with suppliers to make perfectvalue chains with competitive expenditure

e) The threats of substitute products and services:

About capital mobilization: There are many investment channels with highrate of return such as Securities, Property, gold and foreign currencies, etc…These channels created the transference tendency of capital flow from bank to theinteresting investment channels as above

About lending and services: finance companies, finance lending companies,insurance companies are allowed to provide some equivalent services to banksuch as lending, mortgage, discounting, issue of valuable papers, guarantee withhigh quality and professional level which make the big changing risk forproducts of bank

2.2.2 Opportunities and threats for retail banking

Retail banking is a type of bank attracting special importance to diversifyproducts A large number of products meet the demand of many kinds of customer.Though the value of each product is not much but in return, bank will have a largenumber of customers The main operation this bank is financing from everyeconomic sector and lending to solve consumption matter or production project withsmall and medium scale

With those attributes, from the analysis of the elements of the macroenvironment and industry environment that ABBANK with 115 branches andtransaction offices at the national coverage is 46%, along with the strategiccooperation with EVN is an opportunity for ABBANK reduce the cost ofadvertising and marketing to reach customers are using products of the EVN toincrease the number of customers in rural areas This is the opportunities ABBANKsuperior than other commercial banks to choose development ABBANK retailbanking sector.

2.2.3 Analysing internal environment

Internal environment analysis is to find strengths and weaknesses ofABBANK to competitors so that ABBANK can use opportunities and threats ofexternal environment to build orientation of long-term stable development

Banks are divided into three groups by size of total assets that does not give adirect competitor to analyze because of the economic integration and theestablishment of many banks in the past time lead to market share in the provinces,major cities will be narrowed To gain market share is growing, more and morecustomers, the banks gradually expand the district, town or village With this trendABBANK also envisages the development of retail banking services

Besides the business of commercial banks are the similarities of products andservices, and prices of products and services are controlled by the State Bank Thuscompetitors of ABBANK always find the way to satisfy the same customers, supplythe same products with ABBANK and are on the same operation location withABBANK

With these features, most of private-owned commercial banks are considered

as competitors of ABBANK However, basing on scale of total assets, selectedbanks will be divided into 3 main groups as follows:

+ Group 1: Group of Private-owned commercial banks having scale of total

assets over VND 65,000 billion includes ACB, Sacombank andTechcombank

+ Group 2: Group of Private-owned commercial banks having scale of total

assets from VND 40,000 billion to VND 65,000 billion includes SCB, VIBand MSB

+ Group 3: Group of Private-owned commercial banks having scale of total

assets from VND 25,000 billion to VND 40,000 billion includes Habubank,Seabank, SHB, Oceanbank and ABBANK

Norms are used to compare: Scale of total assets, market share of lending – mobilization, Service product, Distribution channel, Marketing and trademark development

2.2.3.1 Organizational structure of ABBANK

Organizational structure of ABBANK at present is implementing according

to form of functional structure including the following levels:

+ Board of Shareholders is the highest decision institution, has the periodicmeeting once time per year when ending finance or has exstraodinary meeting

as regulations in order to make strategic resolutions and operation programsduring bank’s development process

+ Board of Directors: BOD works according to regulations, combines direction

of community with management and co-ordination of Chairman of the board,and gives prominence to responsibility of each member of Board of Directors.Executive machinery of ABBANK includes:

+ Executive commitee includes 01 General Director and Deputy GeneralDirectors undertaking operational departments and Directors of branches.+ Operational groups include: Group of Corporate Customer, Group ofIndividual Customer, Group of Risk management, Group of capital sources,Group of Human resources, Group of supervision for foreign relationship,