LV Thạc sỹ_Implementation of business strategy for retail banking at VIB

The objectives of this thesis are providing customer with findings and assessments of theway Retail Banking implementing its business strategy after 01 year by 1 investigatingmaster impl

TABLE OF CONTENT

ACKNOWLEDGEMENT 4

ABBREVIATION 5

LIST OF TABLES 6

LIST OF FIGURES 7

EXECUTIVE SUMMARY 8

CHAPTER 01: NTRODUCTION 10

Rationale 10

Research Problem 12

Research Objectives 12

Research Question 12

Research Methodology 12

Scope of Research 15

Thesis structure 15

CHAPTER 02: THEORETICAL BACKGROUND ON BUSINESS STRATEGY IMPLEMENTATION 16

2.1 Business strategy overview 16

2.1.1 Business strategy concept 16

2.1.2 Different kinds of business strategy 16

2.1.3 Business strategy implementation 18

2.2 The Thomas L Wheenlen theory on business strategy implementation 20

2.2.1 Organization structure and human resource 20

2.2.2 Action Planning 21

2.2.3 Leading 23

2.2.4 Controlling 24

2.3 Criteria to evaluate strategy implementation 26

2.3.1 Evaluation of strategy implementation through business performance 26

1.3.2 Evaluation of strategy implementation contents 26

CHAPTER 03: BUSINESS STRATEGY IMPLEMENTATION FOR RETAIL

BANKING AT VIB 28

3.1 VIB Overview 28

3.1.1 Company history 28

3.1.2 VIB product & service 30

3.1.3 VIB Retail Banking 31

3.1.4 Retail Banking’s business strategy content 32

3.2 Business strategy implementation for Retail Banking at VIB 35

3.2.1 Organization structure and human resource 35

3.2.2 Action Planning 40

3.2.3 Leading 52

3.2.4 Controlling 54

3.3 Assessment of achievements & shortcomings of the business strategy implementation 57

3.3.1 Evaluation of strategy implementation through business performance 58

3.3.2 Evaluation of strategy implementation contents 59

CHAPTER 04: RECOMMENDATION FOR BETTER BUSINESS STRATEGY IMPLEMENTATION FOR RETAIL BANKING 73

4.1 Organization Structure & Human Resource 73

4.1.1 Enhance the flexibility and activeness of the organization structure 73

4.1.2 Consolidate human resource policies and improve the operation of human resource department 73

4.2 Action Planning 74

4.2.1 Furnish the program action plan 74

4.2.2 Build action plan to be a tool of implementation controlling & evaluation 74

4.2.3 Standardize the process in the business operation 75

4.3 Leading 75

4.3.1 Improve the communication and coordination activities 75

4.3.2 Enhance the new corporate culture in everyday work 75

4.4 Controlling 75

4.4.1 Use plentiful sources to control the business strategy performance results .76

4.4.2 Build a better measure of business performance by using BSC 76

CONCLUSION 77

APPENDIXES 79

Appendix 01……… ……… 79

Appendix 02……… … 81

Appendix 03……… ……… 83

Appendix 04……… ……… 86

Appendix 05……… …… 89

The period of almost two years participating at the management of business administration(EMBA) program organized by the Business School of the National Economics University(BSNEU) has equipped me with the most advanced knowledge in international businessmanagement Thanks to the foreign and Vietnamese professors who enthusiastically led

me through 16 important subjects of the MBA program, I have been exposed to numerousways of scientific thinking and problem solving This exposure has helped me a lot inenriching my knowledge and improving my skills in various fields concerning my currentand future business management

My final EMBA these is a fine combination between the knowledge transferred from myprofessors at BSNEU and the practice that I myself have experienced Due to time limit,

my thesis may have some shortcomings I wish to receive contributing ideas andcomments from our professors and Evaluation Council so as to bring it to perfect

I would like to express my gratitude to my supervisor in conducting this thesis I sincerelythank all professors, tutors and the entire staff of BSNEU for their enthusiasm and theirassistance to create favorable conditions throughout the course I also wish to express mythanks to all the classmates in EMBA-7C who have been helping one another during thetime studying and researching

I would like to thank members of Board of Directors and all staffs of VietnamInternational Bank (VIB) who has helped me collecting data for analysis in my EMBAfinal thesis

Last but not least, my great thanks to my family: my parents, my husband and all relativesfor their strong supports all through the course of my study

Hanoi, December 03th 2010.

 Retail Banking Retail Banking

 R&D Research & Development

LIST OF TABLES

1 Table 3.1: Master plan for program implementation………… 42

2 Table 3.2: Detail action plan for Segmentation static………… 43

3 Table 3.3: Detail action plan for Product & Pricing Innovation 44

4 Table 3.4: Retail Banking product tree……… 45

5 Table 3.5: Detail action plan for Partnership Development……… 46

6 Table 3.6: Detail action plan for Channel Expansion……… 47

7 Table 3.7: Sales & Service standard Action Plan……… 49

8 Table 3.8: Talent Development Action Plan……… 50

9 Table 3.9: Target setting from 2009 to 2013……… 52

10 Table 3.10: Business performance objectives……… 56

11 Table 3.11: 2010 business performance objectives……… 57

12 Table 4.1: The actual completion of 2010 plan to September 2010 59

LIST OF FIGURES

1 Figure 1.1: VIB position in the financial market……… 11

2 Figure 1.2: Research process……… 13

3 Figure 2.1.: Porter Generic Competitive Strategies……… 17

4 Figure 2.2: Strategy implementation model of Bill Birnbamum……… 19

5 Figure 2.3.: Strategic management ……… 20

6 Figure 3.1: VIB Development Awards……… 28

7 Figure 3.2 VIB Financial Statistics……… 29

8 Figure 3.3: VIB organization structure……… 31

9 Figure 3.4: VIB Business strategy……… 33

10 Figure 3.5: VIB Retail Banking business strategy……… 34

11 Figure 3.6: The old Retail Banking structure……… 35

12 Figure 3.7: The new Retail Banking structure……… 36

13 Figure 3.8: Retail Banking structure during the implementation of business strategy from 2009 – 2013………

37 14 Figure 3.9: Business strategy implementation Project Unit organization structure………

38 15 Figure 3.10 Retail Banking product tree……… 45

16 Figure 3.11: Deposit customer portrait……… 64

17 Figure 3.12: Product satisfaction index……… 65

18 Figure 3.13: Channel Satisfaction Index……… 66

19 Figure 3.14: Service Satisfaction Index……… 67

20 Figure 3.15: Staff Evaluation about Training ……… 68

21 Figure 4.1: Communication survey results……… 69

EXECUTIVE SUMMARY

VIB has been in the market for 14 years During the time, the company has been goingupwards along with the development of the Vietnamese financial market In 2009, thecompany was restructured and VIB Retail Banking business strategy from 2009 to 2013 -

a part of VIB business strategy was formed and has been on the way of implementing for

01 years

The objectives of this thesis are providing customer with findings and assessments of theway Retail Banking implementing its business strategy after 01 year by (1) investigatingmaster implementing plan of Retail Banking to materialize its business strategy; (2) doingevaluation of business strategy implementation success of Retail Banking from differentaspects; and (3) proposing some recommendations for better implementation in the future.The author has collected secondary and primary data for analyzing the achievement andshortcomings from different aspects Secondary data is collected from industrial reports,professional magazines and books, VIB reports Primary data are collected by doingsurveys of VIB’s staff (sample size: 96 people with 07 questions) and survey of VIBcustomers (sample size: 375 people with 17 questions) and making in-depth interviewwith 02 managers of Vietnam International Bank Together with the author experienceduring the time working for VIB, these data analysis has constituted to a complete picture

of how business strategy of Retail Banking has been conducted for almost 01 year

The findings of the VIB Retail Banking business strategy has found out in the writing asfollows:

- VIB Retail Banking has comprehensive business strategy content with clearobjectives in 2013

- To implement the business strategy, VIB Retail Banking has conducted 06 strategicprograms including: Segmentation Innovation, Product & Pricing Innovation,Channel Expansion, Partnership Development, Sales & Service Standard andTalent Development The programs have been carried out professionally byBusiness Strategy Implementation Project Unit with action plan for each program

in term of organization structure & human resource; action planning, leading andcontrolling

- Up to end of September, VIB Retail has almost achieved the planned targets interm of program progress and business financial performance However, besides

the achievement, there are still many shortcomings related to the way businessstrategy content has been implemented.

Based on these findings and assessments, the author would like to propose somerecommendations to the VIB leaders with expectation of better implementation in thefuture as follows:

- In term of organization structure and human resource, the BOD should enhance theflexibility and activeness of organization structure as well as consolidate humanresource policies

- About action planning, Retail Banking should furnish the program action plan,build action plan as a tool of controlling and standardize the process in the businessoperation

- To leading perspective, the leader should improve the communication &coordination activities and enhance the new corporate culture in everyday work

- Last but not least, for controlling matter, it should use plentiful sources to controlthe business strategy performance results In addition, implementer should build abetter measure of business performance using Balance Score Card

Anyway, the recommendation needs studying a lot before implementing to avoid operationrisks to VIB system

 The minimum registered capital at 3000 Billion VND by 2010

 The increased minimum capital per branch came to effect in May 2009

 8% CAR is enforced

Last but not least it is fierce competition among state banks, commercial banks and foreignbanks when the economy is more opened to the world In fact, it is eligible to apply forlicense for wholly-owned units (equal legal standing to a local bank with 05 full banklicenses already granted so far) And foreign investors can buy existing shares and a singleinvestor now can hold up to 20% of a join stock commercial bank

Under the market situation, we can see that from 2008 there are a lot of commercial banksstarting to transform, redesign their business strategy to be more competitive towards aconcentrated market Among them, Techcombank, ACB and Maritime Bank are thebiggest affords recognized by the public and other players in financial field In fact theyare gaining attractive results, in which Techcombank and ACB is 02 top commercial banks

in Vietnam

About VIB, where is VIB standing in the picture? From 2008 to the point of new businessstrategy is implemented, VIB is recognized with no differentiate in products and services.VIB also had weak organizational structure and non effective operational management Tofinancial market, VIB was follower and always weak in product development stage Theresults was from 2006 to 2008, VIB lost 03 positions to the No.8 position amongVietnamese commercial bank in term of total assets despite of the fact that in term ofhistory, VIB was one of the earliest born banks in Vietnam

Figure 1.1: VIB position in the financial market

(Source: VIB strategy conference slide material)

Under the current market situation, standing unchanged is not a wise decision for VIBBODs That is why the company from 2008 invited a top consultant company in the world,Boston Consultant Group to carry out market research and build a well designed businessstrategy towards banking market changes In June 2009, the business strategy was formedsuccessfully with high votes of all VIB stakeholders Accordingly, VIB shall start thebusiness strategy from 2009 to 2013 with the objectives to become top three ofcommercial banks in Vietnam Retail Banking, being as one of 03 main business fields ofVIB, has started to implement consulted business strategy content officially later sinceJanuary 2010 As per consulted, Retail Banking shall contribute 70% to VIB’s profiteffective from 2013 So not only Retail Banking is moving towards the 2013 objectivesbut also all VIB departments from highest level to safe guarders are affording togetherwith VIB Retail to materialize it

Research Problem

Up to now, the implementation has been started for 1 year (from June 2009 when the pilotprogram is conducted at some selected branches applying new organization structure andnew sales & service standard program to October 2010 when almost branches and somecontents of the business strategy are being implemented), there is no in-depth andcomprehensive study to evaluate the effectiveness of the implementation of businessstrategy in general and its affects to actual operation of Retail Banking in particular Forthe reason, I decided to choose the topic of the research is “The business strategyimplementation for Retail Banking at Vietnam International Bank” with expectation that itshall serve for VIB leaders a lesson for better implementation of the remaining periodsfrom now on to end of 2013

Research Objectives

Basing on the situations, and assuming that the business strategy formation is welldesigned It is the implementing success shall decide the success of the business strategy Iwould like to propose some objectives for the writing are as followings:

 Investigate implementing plan of Retail Banking to materialize its businessstrategy

 Evaluate of implementing success of business strategy at Retail Banking fromdifferent aspects

 Find out the weakness of Retail Banking’s strategy implementation

 Propose some recommendations for better improvement

Research Question

To get the above mention objectives, I would like to make clear and answer the followingmain questions:

 How VIB make its plan to implement its business strategy of Retail Banking?

 What are strengths and weaknesses of business strategy implementationcontents of Retail Banking after 01 year’s implementation?

 What are possible recommendations for better implementation in the future?

Research Methodology

a) Research Process

This chart below shows the process of research for the thesis You will have a totally viewabout the way the thesis was done.

Figure 1.2: Research Process

(Source: Synthesized by author)

b) Data source

The thesis shall use different ways to collect information to support for arguments in thewriting:

o Firstly, the secondary data:

Getting Boston Consultant Group’s business strategy for VIB from 2009-2010 to know thecontents of VIB business strategy and how the strategy should be implemented It is veryimportant information serving as a base for comparison between what is consulted andwhat is practiced in reality The information I intend to get is from Business strategyimplementation Project Unit which is organized to implement the business strategy in VIB

to ensure the accuracy of information

Another source is company reports on current implementation status to get some annualbusiness results, financial data, and visual figures also from the Project Unit, CMO asreference and proofs serving for protecting my argument in the writing, especially related

to financial criteria

Next, articles on public communication channel are chosen to get opinion, evaluation ofspecialist, readers about VIB business strategy It is the public media to ensure the

EXPTECTED PRACTICE

QUESTIONAIRE

CUSTOMERS

QUESTIONAIRE STAFFS

BUSINESS STRATEGY IMPLEMENTATTION

DATA COLLECTION

INTERVIEW MANAGERS

objectivity of information as a third party However, the articles are carefully selected fromprestige magazines, specialist reports and financial forums.

o Secondly, primary information: It shall be collected through interview and

surveys to support for the arguments in the writings

- Internal survey for VIB staffs:

Size of survey: About 100 staff in which 70 staffs are for Retail Banking’staff and 30 staff for others

Location: VIB Retail Banking’s staff at front and back office (sales &support forces) in the North of Vietnam

No of question/ survey sheet: 12-16 questions Purpose of survey: to get staff opinion about how well VIB implement itsbusiness strategy like: the effectiveness in coordinating VIB resources,communication quality in broadcasting content of business strategy ofRetail Banking or how strength the VIB corporate is built among staffs andetc., to support for argument in writing

Time: At September, 2010

- External Survey for VIB Retail Banking customers:

Size of survey: About 400 VIB customersLocation: At 43 VIB branches where new sales & service model standard isrollouted completely

No of question/ survey sheet: 15-20 questions Purpose of survey: to get Retail Banking customer opinion about how wellVIB staff perform their works following new business strategy to supportfor argument in writing It also collect opinion about the change in VIBproduct line, branch network, marketing activities

or not? Especially, the interview is designed after the above 02 mentionedsurveys are finished so that the author can focus on the outstanding mattersfound in the surveys to ask the interviewer for deeper understanding andanalysis

Time: At October, 2010

Scope of Research

o Location: All VIB departments at head offices but focusing on Retail BankingDivision; VIB branches in the North of Vietnam

o About data: The primary data shall be collected from September 2010 to October

2010 during the time I write the thesis to ensure the information update Tosecondary data, they shall be collected from 2007- October, 2010

o Because the project just has gone almost ¼ path of implementing new businessstrategy so the writing is served as a middle review of what is going on and fromthat the author would propose some solutions for better implementation forremaining period

Thesis structure

Basing on the proposed objectives as mentioned in the previous parts, the author wouldlike to structure the writing with 03 chapters In which:

Chapter I: Theoretical background on strategy implementation model

Chapter II: Business strategy implementation for Retail Banking

Chapter III: Recommendations for better implementation in the remaining period

CHAPTER 2:

THEORETICAL BACKGROUND ON BUSINESS STRATEGY

IMPLEMENTATION 2.1 Business strategy overview

2.1.1 Business strategy concept

In an organization, there are 03 different levels of strategy In which, corporate strategywill describe a company overall direction in term of general attitude toward growth andthe management of various business and product lines Whereas, business strategy usuallyoccurs at the business unit or product level, and it emphasizes on improvement ofcompetitive position of a corporate product or services in a specific industry or marketsegment served by that business unit

The other level is functional strategy which is taken by a functional area to achievecorporate and business unit objectives and strategies by maximizing resource productivity.Actually, a company runs the 03 strategies simultaneously The hierarchy of strategy is thegrouping of strategy types within others so that they could complement and support oneanother Functional strategy support business strategy, which, in turn, supports thecorporate strategy

In term of business strategy direction, the company may apply competitive businessstrategy or cooperative business strategy

2.1.2 Different kinds of business strategy

2.1.2.1 Competitive business strategy

There are 02 main types of competitive business strategy The company may go aheadwith lower cost or differentiation strategy and depending on competitive scope, companymay specifies narrow target with cost focus and differentiation focus or broad target withcost leadership and differentiation In which:

- Lower cost strategy is the ability of a company or a business unit to design,

produce, and market a comparable product more efficiently than its competitors In which

if you apply Cost leadership, it is a low-cost competitive strategy that aims at the broad

mass market and requires “ aggressive construction of efficient-scale facilities, vigorouspursuit of cost reductions from experience, tight cost and over head control, avoidance ofmarginal customer accounts, and cost minimization in areas like R&D, service, sales

force, advertising, and so on Whereas, Cost focus is a low-cost competitive strategy that

focuses on a particular buyer group or geographic market and attempts to serve only thisniche market, to the exclusion of others.

- Differentiation strategy is the ability to provide unique and superior value to the

buyer in terms of product quality, special features, or after-sale service Follow it,

Differentiation is aimed at the broad mass market and involves the creation of a product

or service that is perceived throughout its industry as unique The company or business

unit may then charge a premium for its product; or Differentiation focus, like cost focus,

concentrates on a particular buyer group, product line segment, or geographic market

Figure 2.1.: Porter Generic Competitive Strategies

(Source: Strategic Management & Business policy)

2.1.2.2 Cooperative business strategy:

Competitive strategies and tactics are used to gain competitive advantage within anindustry by battling against other firms These are not, however, the only business strategyoption available to a company or business unit for competing successfully within anindustry Cooperative strategies can also be used to gain competitive advantage within anindustry by working with other firms under the typical following forms:

- Collusion

The two general types of cooperative strategies are collusion and strategic alliances.Collusion is the active cooperation of firms within an industry to reduce output and raiseprices in order to get around the normal economic law of supply and demand

- Strategic Alliances

A strategic alliance is a partnership of two of more corporation or business units to achievestrategically significant objectives that are mutually beneficial There are 04 kinds ofstrategic alliances

Joint Venture: It is a cooperative business activity, formed by separate

organization for strategic purposes, that creates an independent business entityand allocated ownership, operational responsibilities and financial risks andrewards its member, while preserving their separate identity/ autonomy

Mutual service consortia: A mutual service consortium is a partnership of

similar companies in similar industries who pool their resources to gain a benefitthat is too expensive to develop alone, such as access to advanced technology

Licensing arrangement: It is an agreement in which the licensing firm grants

rights to another firm in another country or market to produce and/or sell aproduct

Value –chain partnership: The value –chain partnership is a strong and close

alliance in which one company or unit forms a long –term arrangement with akey supplier or distributor for mutual advantage

2.1.2 Business strategy implementation

As the frame, business strategy implementation is one of the basic elements of a strategic

management model Before the business strategy implementation is carried out, anycompany or organization has to do environment scanning to set its strategy formation It isthe implementation that turns the formation into reality

In fact, we have many ways to express what strategy implementation is? Among them, the

most popularly known is "the process of allocating resources to support the chosenstrategies" This process includes the various management activities that are necessary toput strategy in motion, institute strategic controls that monitor progress, and ultimatelyachieve organizational goals

Also when looking in more detail, there are several methods used for strategyimplementation such as:

- Hambrick and Cannella with five steps for effective strategy implementation: Input from

a wide range of sources is required in the strategy formulation stage; the obstacles toimplementation; Use implementation levers or management tasks to initiate thiscomponent of the strategic management process; Sell the implementation; Selling upward,

selling downward, selling cross to related parties; and on-going and a continuous finetuning, adjusting, and responding.

- McKinsey and Company have also developed a model know as, "the seven elements ofstrategic fit," or the "7-S's including: strategy (the coherent set of actions selected as acourse of action); structure (the division of tasks as shown on the organization chart);systems (the processes and flows that show how an organization gets things done); style(how management behaves); staff (the people in the organization); shared-values (valuesshared by all in the organization); and skills (capabilities possessed by the organization)

- In the book named “Strategy implementation – Six supporting factor”, the author BillBirnbamum stated that organizations successful at strategy implementation effectivelymanage six key success factors:

1 Action Planning

2 Organization Structure

3 Human Resources

4 The Annual Business Plan

5 Monitoring and Control

6 Linkage

Figure 2.2: Strategy implementation model of Bill Birnbamum

(Source: Strategy implementation – Six key success factors )

We can not deny that each model has own strength and weakness, under my scope ofresearch I decide to apply the basic model of strategic management of ThomasL.Wheenlen for analysis of the implementation of business strategy of Retail Banking inVIB

The below diagram shall illustrate the overall business strategy from forming toimplementing & Evaluation As red circle in the figure, strategic implementation is thesum of the activities and choices required for the execution of a strategic plan It is theprocess by which strategies and policies are put in to action through the development ofprogram, budget, and procedures and then it is carried out from organizing structure andhuman resource, to action planning, leading, and controlling

Figure 2.3: Strategy management

(Source: Strategic Management & Business policy)

2.2 The Thomas L Wheenlen theory on business strategy implementation

In the textbook named “The business strategy management & policy”, the author Thomas

L Wheenlen has written a chapter about how an organization implements its strategy withdetails as follows

2.2.1 Organization structure and human resource

2.2.1.1 Organization structure

A classic study of large companies’ shows that corporate strategies lead to changes inorganizational structure According to them, the structural change because the old structurehas been pushed too far, has caused inefficiency that becomes too obvious Then, a neworganization structure is built to adapt to changes caused by new strategy This is newstrategy leading to change in the nature of current organization structure

Also, when the business strategy is implemented, it is necessary to have a temporaryorganization structure to lead change management from forming programs to carrying outstrategic statics, action plans and doing control and evaluation of performance

2.2.1.2.Human resource

Many of the people in the organization who are crucial to successful strategyimplementation probably have little to do with the development of the corporation and

even business strategy From to top level directors to normal staffs are involved someways in implementing corporate, business, and functional strategy so that it can bringshigher awareness and better corporate performance Also it depends on how organization

is organized, those who implement strategy will probably be not the ones who sets thestrategy In most large organization, the implementers are everyone in the organization Itcan be a group of directors of a division working together with their subordinates to puttogether in a large-scale implementation plans

The implementation of new strategies and policies often call for new human resourcemanagement priorities and a different use of personnel Such staffing issues can involvehiring new people with new skills, firing people with inappropriate or substandard skills,and training existing employees to learn new skills

- Staffing follows strategy: As in the case of structures, staffing requirement is likely to

follow a change in strategy For example, promotions should be based not only on currentjob performance, but also on whether a person has the skills and abilities to do what isneed to implement the new strategy

- Hiring and training requirements change Having formulated a new strategy, a

corporation may find that it needs to either hire different people or retrain current

employees to implement the new strategy Training is also important when implementing a

retrenchment strategy As suggested earlier, successful downsizing means that thecompany has to invest in its remaining employees

- Matching the manager to the strategy The most appropriate type of general manager

needed to effectively implement a new corporate or business strategy depends on thedesired strategic direction of that firm or business unit Executives with a particular mix ofskills and experiences may be classified as an executive type and paired with a specificcorporate strategy

- Selection: Selection and development are important not only to ensure that people with

the right mix of skills and the experiences are initially hired, but also to help them grow onthe job so that they might be prepared for future promotions

2.2.2 Action Planning

Activities can be directed toward accomplishing strategic goals through action planning

At minimum, an action plan states what actions are going to be taken, by whom, duringwhat timeframe, and with what expected objectives

Program is to make the strategy action- orientated According to it, a matrix of change to

help managers decide how quickly change should proceed, in what order change shouldtake place, whether the proposed systems are stable and coherent

The following questions need answering in the matrix of change:

 Feasibility

 Sequence of execution

 Location

 Pace or nature of change

 Stake holder evaluation

2.2.2.2.Detail action plans for each program

After programs have been selected to implement a particular strategy, an action planshould be developed to put the program in place The resulting action plan should includemuch of the following information:

 Specific actions to be taken to make the program operational:

 Dates to begin and end each action

 Person (identified by name and title) responsible for carrying out each action

 Person responsible for monitoring the timelines and effectiveness of each action

 Expected financial and physical consequences of each action

2.2.2.3.Process

Reengineering is the radical redesign of business processes to achievement major gain incost, service or time It is not in itself a type of structure, but it is an effective way toimplement a turnaround strategy

Reengineering strives to break away from the old rules and procedures that develop andbecome ingrained in every organization over the years These may be a combination ofpolicies, rules, and procedures that have never been seriously questioned because theywere established years earlier These may range from “credit decisions are made by thecredit department “to” Local inventory is need for good customer service.” These rules oforganization and work design were based on assumptions about technology, people, andorganizational goals that may no longer be relevant Rather than attempting to fix existingproblems through minor adjustments and fine-tuning existing processes, the key toreengineering is to ask “If this were a new company, how would we run this place?”

Also when implementing the strategic program, there is a system of sequence steps ortechniques that describe in detail how a particular task is to be done They detail variousactivities that must be carried out in order to complete the programs Once in place, theymust be updated to reflect any change in technology as well as in strategy.

2.2.2.4 Budget

It is the statement of a company program in term of dollars When it is used in planningand controlling, a budget lists the detail cost of each program If fact, many companyrequires a certain return on investment before they approve a program

The budget thus not only serves as a detailed plan of the new strategy in action, but alsospecifies through proforma financial statements the expected impact on the firm’s financialfuture

2.2.3 Leading

Implementation also involves leading people to use their abilities and skills mosteffectively and efficiently to achieve organizational objectives Without direction, peopletend to do their work according to their personal views of what tasks should be done, how,and in what order

2.2.3.1.Strategy Communication

Communication is a key to the effective management of change Rationale for strategicchanges should be communicated to staff not only in newsletters, daily transaction emailand speeches, but also in training and development programs

Basically, at strategic information level, it shall be communicated directly from highestmanagement personnel in an organization to ensure accuracy of information as well aspersuasiveness to all related parties

2.2.3.2.Coordination

It refers to the coordination of different resources, different business units to achieve acommon goal of business strategy For instance, to implement a product scheme to themarket which must be connected to core banking of a bank, there should havecoordination between the product launcher with the IT Department

Communication and coordination has a close relation to each other It is said that effectivecommunication shall bring affective coordination It is truth in term of the information

aspect because people will not coordinate if they don’t know it is for what expectedobjectives and what is their impacts they don’t take action.

2.2.3.3.Building corporate culture

Because an organization culture can exert a powerful influence on the behavior of allemployees, it can strongly affect a company‘s ability to shift its strategic direction Aproblem for a strong culture is that a change in mission, objectives, strategies, or policies

is not likely to be successful if it is in opposition to the accepted culture of the company.Corporate culture has a strong tendency to resist change because it’s very reasonable forexistence often rests on preserving stable relationships and patterns of behavior Also whenmerging with or acquiring another company, top management must give someconsideration to a potential clash of corporate cultures Therefore, a new corporate culture

is developed to adapt to changes causing by new strategy

Especially, when company choose a strategic partner from different cultures in the world

to shake a hand It shall have great impact on the current culture, which could drag thecurrent one to change dramatically without ability to control So it is the responsibility ofthe leader to lead the change and establish a new harmonious corporate culture to promoteproductivities without diverse impacts on system operation

2.2.4 Controlling

2.2.4.1 Controlling process

The controlling process ensures that the company is achieving what it set out toaccomplish It compares performance with desired results and provides the feedbacknecessary for management to evaluate results and take corrective actions, as needed Thisprocess can be viewed as a five –step feedback model

o Determine what to measure Top managers and operational managers need to

specify what implementation processes and results will be monitored andevaluated

o Establish standards of performance Standards used to measure performance are

detailed expressions of strategic objectives They are measures of acceptableperformance results

o Measure actual performance Measurements must be made at predetermined

times

o Compare actual performance with the standard If actual performance results

are within the desired tolerance range, the measurement process stops here

o Take corrective action If actual results fall outside the desired tolerance range,

action must be taken to correct the deviation

2.2.4.2 Measures of corporate performance

The company can use the following measures to evaluate the corporate performanceduring the strategy implementation period

- Traditional financial measures.

The most commonly used measure of corporate performance (in terms of profits) is return

on investment (ROI) It is simply the result of dividing net income before taxes by totalassets Other indicator is earnings per share (EPS), dividing net earnings by the number ofshares of common stock issued, also has several deficiencies as an evaluation of past andfuture performance; or Stakeholder measures which Each stakeholder has its own set ofcriteria to determine how well the corporation is performing These criteria typically dealwith the direct and indirect impact of corporate activities on stake holder interests Besidethat we have other measures like share holder value, economic value added and marketvalue added

- Balanced scorecard approach: Using key performance measures

Rather than evaluate a corporation using a few financial measures, Kaplan and Nortonargue for a “balanced scorecard,” including nonfinancial as well as financial measures.This approach is especially useful given that research indicates that nonfinancial measuresthat tell the results of actions already taken with operational measures on customersatisfaction, internal processes, and the corporation‘s innovation and improvementactivities – the drivers of future financial performance Management should develop goal

or objectives in each of four areas:

1 Financial: How do we appear to share holders?

2 Customer: How do customers view us?

3 Internal business perspective: What must we excel at?

4 Innovation and learning: Can we continue to improve and create value

These measures can be thought of as key performance measures- measures that areessential for achieving a desired strategic option

2.3 Criteria to evaluate strategy implementation

In assessing the success of a strategy implementation, we can evaluate in term of 02aspects The first thing is the evaluation of strategy results in term of businessperformance If the company achieved the business performance measurements, it means

that the company has a good strategy direction, and/or good strategy implementation Thesecond aspect is the evaluation of the strategy implementation contents This helps theimplementer know what areas are being weak and what areas can be implemented better tohave better strategy performance results.

2.3.1 Evaluation of strategy implementation through business performance

As said in the controlling Part, from beginning a company should set out expectedbusiness performance target during the implementation process It can be long-termobjectives or annual targets By comparing the actual results with the planned targets, wecan see if the targets are achieved or not From this, the roots of the actual results arewhether from strategy direction or the strategy implementation contents will be found out

2.3.2 Evaluation of strategy implementation contents

The evaluation of strategy implementation contents will clear the weak areas which lead tobad business results Incase all planned targets are achieved; the evaluation shall helpsimplementer to know what can be done for better strategy results

The implementer can evaluate by answering the following basic questions in each strategyimplementation content

2.3.2.1 Organization structure & Human Resource

o Does the organization structure match with business strategy content?

o Is the new organization structure flexible to keep up with the change caused by

new business strategy?

o Does the human resource for strategy implementation meet the requirements of the

new organization structure and task’s nature?

o Is the human resource policy innovative, motivated?

2.3.2.2 Action Planning

o Are the strategic programs well designed, detail and comprehensive enough to

implement all strategy contents?

o Does the strategic program match with planned budget, human resource?

o Does the overall action plan become a tool for controlling the performance?

o What is the current implementing status of each program?

2.3.2.3 Leading

o Does communication ensure staff’s awareness, staff’s acceptance, staff’s action

effectively and actively?

o Does coordination ensure consistent and supportive for the business strategy to

carry out?

o Does new corporate culture be strong and be valued enough to maintain and

promote new tasks and new structures caused by new business strategy

2.3.2.4 Controlling

o Is information feedback in time, objective and consistent?

o Does it help to make necessary adjustments during implementation period?

o Does it support to promote innovative initiatives to furnish and refresh strategy

direction?

CHAPTER 3:

BUSINESS STRATEGY IMPLEMENTATION FOR RETAIL

BANKING AT VIB3.1 VIB Overview

3.1.1 Company history

Vietnam International Commercial Joint Stock Bank, abbreviated as Vietnam InternationalBank - VIB, was established on September 18th 1996 in accordance with the Decision No.22/QD/NH5 dated 25 January 1996 by the Governor of the State Bank of Vietnam

Figure 3.1: VIB Development Awards

(Source: VIB Profile)

Founders of VIB consist of successful individuals and businessmen in the domestic as well

as foreign markets; Bank for Foreign Trade of Vietnam; Vietnam Bank for Rural andAgricultural Development Since the inauguration day, with its initial charter capital of 50billion Vietnam dong, VIB has been developing to become one of the leading domesticfinancial institutions of Vietnam VIB conducts its operations in the three main fields,including corporate banking services, personal banking services, and institutional bankingservices The administrative system of VIB is centrally structured to make decisions more

quickly while ensuring the consistent service quality and effective risk management Byend of 2009, the charter capital of VIB hit 3,400 billion Vietnam dong and total assetswere 56,638 billion Vietnam dong

Figure 3.2: VIB Financial Statistics

(Source: Synthesized by author)

The head office of VIB is located at 198B Tay Son Str., Dong Da District, Hanoi At thistime, beside the Head Office in Hanoi, VIB has over 120 branches and transaction offices

in 27 provinces, including Hanoi, Ho Chi Minh City, Hai Phong, Quang Ninh, Hai Duong,Vinh Phuc, Thanh Hoa, Nghe An, Quang Ngai, Hue, Da Nang, Nha Trang, Dong Nai,Binh Duong, Vung Tau, Can Tho, An Giang, Kien Giang, and 37 team works in 35 citiesand provinces around Vietnam

The motto “The heart of Banking", based on the highest standards for service quality, safeand strong development, aims to provide more added values to the customers, partners,staff and shareholders continuously

- Vision

“VIB becomes one of the leading joint stock commercial banks in the marker, providesuniversal, full packages banking and financial products and services for key customergroups in major economic areas of Vietnam”

- Mission

 Enabling the sustainable development of emerging small and medium businesses

 Creating and diversifying services offered to individuals with high income

 Providing comprehensive financial services to large businesses

 Forming strategic alliance and partnership with other financial institutions

- Core Values

 Flexibility and Creativity

 Cooperation and Sharing

 Honesty and Credibility

 Strict observation of banking regulations

- Commitments

To customer

 Efficient and speedy services in line with the demands

 Diversified and user-friendly services on the principle of mutual benefits

 Security and confidentiality in operations

To staff

 Trusting and respecting working environment

 Outcome- oriented working culture with honor given to good performers

 Opportunities for professional and career promotion

To Investor

 Sustainable growth of investment value as required

 Long-term and on-going development of the Bank

3.1.2 VIB product & service

VIB provides customers with a wide range of products Actually, there are different ways

3.1.3 VIB Retail Banking

The VIB Retail Banking is founded in 16th March 2009 according to the Decision No586/2009/QD-VIB by the CEO It is merged by Personal banking division, Card Divisionand Branch Network Development Department following BCG consultant

Figure 3.3: VIB organization structure

(Source: VIB strategy handbook)

If we look horizontally in the structure of VIB, we can find that Retail Banking is one ofthe main branches in the system It includes of many functional departments and salesforces.

In which, Marketing & Segmentation, Partnership Management, Product Management,Branch network Development, Alternative Channel and Regional Managers are 6 majordepartments structuring the Retail Banking (For more detail, please look at Appendix No1:The old VIB structure and the new VIB structure.)

3.1.4 Retail Banking’s business strategy content

As we know, in a big corporation, there is tight relationship between corporate strategy tobusiness strategy In other words, it is the success of business strategy contributing to theachievement of corporate strategy and normally when a corporation is under a crucialstrategic transformation, the corporate strategy is set out prior to business strategy To thecorporate which has more than 02 businesses, it is the individual business strategy shallconstitute to the company overall business strategy

In VIB, the same things happen VIB has 03 main business fields: Wholesales Banking,Retail Banking and Treasury Each of three field has an own business strategy with theafford of materializing VIB business strategy in common

Since end of 2008, VIB key personnel’s worked closely with BCG for 01 year to analyzethe market situation, do scanning of internal environment to set out a new businessstrategy for VIB to go ahead from 2010 to 2013 In which, VIB aims at becoming one ofthe 03 biggest Retail Bankers This totally differentiates VIB with other banks which havebeen serving for both Retail and Wholesales customers equally with almost same financialportions Focusing on Retail Banking, it does not mean that VIB shall stop doing inWholesales field but it targets to financing for Small & Middle Enterprises only with 30%accounting to profit portions To end of June 2009, the VIB business strategy in general forall 03 business sectors are developed with 7 key success factors (KSFs) including: Vision

& Strategic direction, Structure model, Branch Network, Sales & Service Model,Operation/ Function Model, Culture& People and Change management has been builtsuccessfully with brief content as in the below figure

We know that by any way, any method, the foremost important things for every strategy, programs, statics are for gaining the vision and vision of a corporation As a business field

of VIB, the content of business strategy of Retail Banking is built accordingly aiming to achieve the following objectives by 2013.

Figure 3.4: VIB Business strategy

(Source: VIB Strategy handbook)

Follow it, the 6 main components including: brand value/ marketing, product, partnership,talent, channel and sales & service standard are main forces driving VIB to havecompetitive advantages in Vietnamese financial market The 06 components then shall bedeveloped to 06 strategic programs with detail action plan under the leading of CEO andthe Business strategy implementation Project Unit The 06 components are expected tobring a comprehensive change in every aspect of Retail Banking business operation Theyare also contributing to create the competitive advantage of VIB Retail Banking productagainst other competitors in the market Besides that, the business strategy contentspecifies target segment for VIB products to penetrate in, the objectives in term of marketshares to achieve and the value to shareholders to gain in 2013

The below figure shall draw an overall picture about the VIB Retail Banking businessstrategy

Figure 3.5: VIB Retail Banking business strategy

(Source: VIB Strategy handbook)

We can see in the figure that the business strategy choice is the combination ofcompetitive strategy and cooperative strategy In which: The competitive strategy isdifferentiation focus where VIB Retail Banking shall focus on a specific market segment

of mass affluent and affluent by providing them with diversified product, excellentservices and competitive price in a convenient place, whereas, it also follows thecooperative strategy when forming a long standing relationship with strategic partners It

is business unit strategic alliance with the other VIB business units (Wholesales Bankingand Treasury) to achieve strategically significant objectives that are mutually beneficialthrough cross-sales and referral activities to explore all business opportunities It is value –chain partnership with a strong and close alliance in which Retail Banking forms a long –

term arrangement with a key supplier or distributor for mutual benefits All of this shallcreate a competitive advantage for VIB Retail Banking products against other competitiveone in the market This is crucial important when the market is more and more saturated inthe future.

3.2 Business strategy implementation for Retail Banking at VIB

As mentioned in the previous part of the writing, Retail Banking has developed acomprehensive business strategy from end of 2009 At the moment, it is on the way ofimplementing business strategy which has caused dramatically changes in all organizationaspects In this part of the writing, the author shall clear the way business strategyimplementation is carry out basing on the theoretical frame as mentioned in the previouspart

3.2.1 Organization structure and human resource

3.2.1.1 Organization structure

a) Retail Banking in VIB structure

Undergoing new business strategy, the structure of Retail Banking has 02 crucial changes.Firstly, it is the changes in Retail Banking division in the HO with the emergence ofPersonal banking division, Card Division and Branch Network Development Department

to the Retail Banking division; And the existence of new departments like ProductManagement, Partnership Management, and Alternative Channel All are afford tomodernize the business operation and management

- The below figure is the old Retail Banking structure before implementing newbusiness strategy

Figure 3.6: The old Retail Banking structure

(Source: Synthesized by author)

We can see that the way of organization is unclear and unprofessional in term of function.There is a lacking of many functional departments to promote and support for front salesforces

- In the new structure, the Retail Banking shall have organization structure asfollowing:

Figure3.7: The new Retail Banking structure

(Source: Synthesized by author)

Secondly, with the introduction of new sales and service model in front office (Branch) thebranch structure is changed seriously leading to changes in reporting line and the location

of functional department Accordingly, there is an appearance of regional model which hasRegional Manager and his assistants His machine shall manage the sales operation ofbranch in his region Now Regional Manager has big power in hand to decide businessissues in this region actively At the moment in VIB, there are 9 regions: Northern Hanoi,Southern Hanoi, Western Hochiminh, Eastern Hochiminh, Eastern North, Mekong Delta,Eastern South, Center, Center North Besides that, Product Management, PartnershipManagement, Marketing, Branch Network Development and Alternative Channel areseparated functionally to promote professional working styles

Thirdly, the branch has no longer serving for both retail and wholesale banking but itfunctionally separated, in which Retail Banking branch serves for Retail Banking staffonly except for company account service

a) Business strategy implementation project’s organization structure

When the organization is under a special stage of transformation towards new businessstrategy, there is a foundation of a temporary departments/ project which leads the

changes In VIB, we call it “Business strategy implementation Project Unit” It shall beleading of implementation of Segmentation & Marketing innovation, Product & Pricinginnovation, Channel Expansion, Talent Development, Partnership Development and Sales

& service standards which mentioned in the previous part They are strategic componentsdriving VIB toward the achievement of VIB Retail Banking’s objectives in 2013

The Unit shall under the head of Retail Banking and report directly to her the progress andquality of the implementing results up to date of specific periods Beside that the Unit isalso under direct supervision of CEO and BODs through Change management Office(CMO) This two parties involved monitoring and evaluation activities to make them doneeffectively

Figure 3.8: Retail Banking structure during the implementation of business strategy

from 2009 - 2013

(Source: Synthesized by author)

Inside the Project Unit, it is organized to manage the implementation of all programs.Follow it, the Project Unit shall have 02 main teams including Project Office and ChangeOffice In which, Project Office shall carry out the responsibility of administration of theproject, monitoring & evaluation of the Project Unit performance and preparing logisticsfor communication event serving for leading function The Change Office shall deal with

the implementation of 06 major programs developing from 06 strategic components ofRetail Banking business strategy as mentioned in the previous part It consists ofSegmentation group, Product & pricing group, Talent development group, Partnershipdevelopment group, Channel expansion group and Sales & service standards group.

Figure 3.9: Business strategy implementation Project Unit organization structure

(Source: Synthesized by author)

3.2.1.2.Human resource

a) Retail Banking in VIB structure: Staffing and training

Due to change in sales and service model with new branch structure together with newprocess, the current role and responsibility of staff is changed at certain level A new jobdescription (JDs) and KPIs for branch members replaced the old In detail:

 There is a separation in sales force and sales supporting force Previously, CreditAdministrators (CA), Teller and RM are all sales team Now, in the new model,CAs do not belong to sales force anymore and they are moved to sales supportingteam because the nature of CA job is just related to paperwork and coordinatebetween branch and credit administration in the HO It also means that there is amovement in the work place All CAs shall be centralized in the CA hubs They are

no longer placed in the branch

 Teller does not have financial KPI of deposit anymore They just only focus onproviding the best service quality to customers They just indirectly involve sales

by sales referral activity

 BM in the new business model will be placed at front of the branch to observe theactivity and do sales planning for his sales force to follow

 There is a new position appearing in the Customer Service Department that isService Ambassador This position is responsible for welcoming customer, andhelp customer do transaction

It is the change in the role and responsibility together with the existence of new positionslike BM and SA leading to the demand of new human resource policies in term ofrecruitment, selection and training In particular, with many new departments withspecialized functions, there are in need of number of personnel’s from managementposition to senior officers and junior officers And most of the cases are recruited fromoutside to meet the requirement of the job nature However to some specific positions like

SA, it is internal transfer only because the position need someone who has experience inVIB customer service department, the outsider is not suitable

Also, when the person like RM, SA and BM have new task, new role & responsibility innew business context, they need to be trained to get to know the job nature In fact, theyare requested to participate in an on job training program hold by the Project Unit Thecourse content has equipped them with many knowledge and soft kills to work moreprofessional like sales script course, service skill, sales & service process courses

It is what happened at branches At the back office, with the new appearance of newfunction departments as mention in the organization structure part, there are rotation,movement internally and externally among departments But with the expansion, thecurrent labor force is not enough and Human Resource Department has been recruiting alot from outside Due to the urgent need to fill in organization structure while the TrainingCenter is too busy to handle training for new-comers from beginning, especiallyprofessional knowledge, only experience candidates are qualified to select

c) Business strategy implementation project: Staffing and training

Successful implementation of the business strategy at Retail Banking in VIB is the crucial

to the success of corporate strategy Knowing its importance, the human resource for thetemporary Project Unit is highly prioritized Almost senior personnel in all levels fromfront office to back office are gathered in the Project Unit to lead the implementing