Improvement retail banking business strategy at BIDV = Hoàn thiện chiến lược kinh doanh ngân hàng bán lẻ tại BIDV

Some studies carry out a general research of retail banking strategies while others only work on a small aspect of retail banking services such as retail credit, card services, services

ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH

-

NGUYỄN THỊ KIM OANH

COMPLETING THE RETAIL BANKING BUSINESS

STRATEGIES AT BIDV

HOÀN THIỆN CHIẾN LƯỢC KINH DOANH NGÂN HÀNG BÁN LẺ TẠI NGÂN HÀNG THƯƠNG MẠI CỔ PHẦN ĐẦU TƯ VÀ PHÁT TRIỂN VIỆT NAM (BIDV)

LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

HÀ NỘI - 2019

ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH

-

NGUYỄN THỊ KIM OANH

COMPLETING THE RETAIL BANKING BUSINESS

STRATEGIES AT BIDV

HOÀN THIỆN CHIẾN LƯỢC KINH DOANH NGÂN HÀNG BÁN LẺ TẠI NGÂN HÀNG THƯƠNG MẠI CỔ PHẦN ĐẦU TƯ VÀ PHÁT TRIỂN VIỆT NAM (BIDV)

Chuyên ngành: Quản trị kinh doanh

Mã số: 60 34 01 02

LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

NGƯỜI HƯỚNG DẪN KHOA HỌC: TS NGUYỄN THỊ KIM OANH

Hà Nội - 2019

DECLARATION

The author confirms that the research outcome in the thesis is the result of author’s independent work during study and research period and it is not yet published in other’s research and article

The other’s research result and documentation (extraction, table, figure, formula, and other document) used in the thesis are cited properly and the permission (if required) is given

The author is responsible in front of the Thesis Assessment Committee, Hanoi School of Business and Management, and the laws for above-mentioned declaration

Date………

of business and management (HSB)

Secondly, I am extremely grateful to all of the lecturers from the Department

of Business Administration - HSB for providing me with research methods and professional knowledge during the course, especially the active and creative research skills

My appreciation also goes to the teachers in the thesis review committee for giving me valuable ideas during my thesis completion process

My profound gratitude is also conveyed to my instructor for his helpful assistance and guidance This thesis could have never been completed without his enthusiastic counsel and support

Despite the efforts during the research period, there are still many limitations

in the thesis I would hope to receive valuable comments from the teachers and workers to make this essay more complete

Thank you very much./

Ha Noi, 2018

TABLE OF CONTENTS

TABLE OF CONTENTS 1

LIST OF ACRONYMS iii

LIST OF TABLES iv

LIST OF CHARTS AND FIGURES v

INTRODUCTION 1

1 Rationale of the study 1

2 Research overview 2

3 Research objectives 6

3.1 General objective 6

3.2 Specific objectives 6

4 Research subject and research scope 6

5 Research methods 6

6 Organization of the thesis 7

CHAPTER 1: THEORETICAL FRAMEWORK ON RETAIL BANKING SERVICES AND RETAIL BANKING STRATEGIES AT COMMERCIAL BANKS8 1.1 Retail banking services 8

1.1.1 Concepts 8

1.1.2 Characteristics of retail banking services 8

1.1.3 Main retail banking services 10

1.2 Retail banking strategies 13

1.2.1 Concepts 13

1.2.2 Role of retail banking strategies 15

1.2.3 Retail banking business strategies 16

1.2.4 Factors affecting retail banking business strategies of commercial banks 21

1.3 Experience in the retail banking business of some banks and lessons drawn for BIDV 25

1.3.1 Experience of Vietinbank 25

1.3.2 Experience of Vietcombank 26

CHAPTER 2: REALITY OF RETAIL BANKING STRATEGIES OF BIDV 29

2.1 Introduction of BIDV 29

2.1.1 History of foundation and development 29

2.1.2 Organizational structure 30

2.1.3 Business results 31

2.2 Reality of retail banking business strategies of BIDV 34

2.2.1 General strategy 34

2.2.2 Section strategies 35

2.3 Factors affecting retail banking business strategies of BIDV 54

2.3.1 Internal factors 54

2.3.2 External factors 61

2.4 General evaluation on retail banking business strategies of BIDV 71

2.4.1 Achievements 71

2.4.2 Limitations 72

CHAPTER 3: SOLUTIONS TO COMPLETE THE RETAIL BANKING STRATEGIES OF BIDV 73

3.1 Development orientation of BIDV 73

3.2 Necessary issues in completing retail banking strategies of BIDV 75

3.2 Solutions to complete the retail banking strategies of BIDV 77

3.3.1 Improving financial capacity 77

3.3.2 Enhancing the quality of human resources 79

3.3.3 Modernizing the technology system 80

3.3.4 Completing activities of marketing and market research 82

3.3 Recommendations 85

3.3.1 To the State 85

3.3.2 To the State Bank of Vietnam 86

CONCLUSION 87

LIST OF ACRONYMS

1 ASEAN Association of South East Asian Nations

2 BIDV Bank for Investment and Development of Vietnam

3 GDP Gross Domestic Product

4 IT Information Technology

5 SMEs Small and medium-sized enterprises

LIST OF TABLES

Table 2.1: Some general indicators showing the business results of BIDV 32

Table 2.2: Lending interest rates for loans with collateral of some banks 36

Table 2.3: Lending interest rate for unsecured loans of some banks 37

Table 2.4: Interest rates for capital mobilization at some banks 38

Table 2.5: Customer survey results on price strategy 38

Table 2.6: Number of deposit products at BIDV 40

Table 2.7: Credit products at the bank 41

Table 2.8: Card products of the bank 42

Table 2.9: Customer survey results on product strategy 45

Table 2.10 : Number of branches and transaction offices of the bank 48

Table 2.11: Customer survey results on distribution strategy 49

Table 2.12: Some promotion policies for VIP customers 50

Table 2.13: Some policies for other types of customers 52

Table 2.14: Customer survey results on promotion strategy 53

Table 2.15: Structure of human resources 55

Table 2.16: Assessment of retail staffs at BIDV 56

Table 2.17: Market research at BIDV 59

Table 2.18: Assessment on influence of legal environment 63

Table 2.19: Competitors of BIDV 67

Table 2.20: Customers’ assessment of BIDV’s retail banking services 69

LIST OF CHARTS AND FIGURES

Figure 2.1: Scope of service 47

Figure 2.2: Assessment of financial capacity of some banks 58

Figure 2.3: GDP growth rate of the economy 61

Figure 2.4: Growth rate of return from retail business 62

INTRODUCTION

1 Rationale of the study

Providing personal financial services or retail banking services is one of the traditional activities forming the world's commercial banking system Since its establishment, retail banking has played an important role in creating a sustainable development basis for commercial banks Retail banking is a risk-spreading sector that is less influenced by economic cycles than other sectors Therefore, it contributes to creating stable sources of capital and income for banks In addition, retail banking plays an important role in expanding the market and enhancing the competitiveness and stability of banking operations

The role of retail banking services has been clearly illustrated by the recent global economic crisis While most commercial banks that focused on retail banking survived, many major investment banks (Merrill Lynch, Lemon Brothers, etc.) went bankrupt or were in difficulty and also moved to developing retail activities It can be seen that completing retail banking strategies has become the development trend of most commercial banks in today’s world

The current retail market of Vietnam is considered to be very potential due to the stable security and political environment, high population volume with young structure and improved education level The economy growing with high speed over the past few years has made the people's living standards keep improving So far, most commercial banks as well as foreign financial institutions operating in Vietnam have strategies for developing retail banking services

The potential business market together with the risk of fierce competition have made Vietnamese commercial banks constantly change their business strategies, seek new investment opportunities, expand and diversify their target customer groups Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV)

is not out of the general trend BIDV is one of the oldest state-owned commercial banks in Vietnam Wholesale banking services are considered its strengths and its

customers include domestic and foreign companies and organizations Before 2008, (the year when BIDV implemented the restructuring of business model according to TA2), individual customers were almost not focused at BIDV However, recognizing the importance and potential of retail banking in Vietnam, BIDV has restructured its business structure and orientation and focused on developing retail banking services With its existing strengths, the bank aims to make this activity become a core activity The overall objective of BIDV is to maintain its position and become the largest retail bank with the top retail brand in Vietnam and in the ASEAN region The banks also aims to build and perfect the business model and the system of retail banking management in a synchronous - professional - modern - effective manner according

to the international standards and practices To accomplish the planned objectives, the completion of retail banking strategies at BIDV is very necessary Over the years, the retail banking strategies at BIDV have been developed and implemented with specific objectives in terms of scale and product quality However, the overall strategy is still under construction and the factors such as business model, management functions, risk management, motive force mechanism, human resources development and system of information technology for retail operations are not synchronous and standardized in accordance with international practices Based on the above reality,

the author selected the topic entitled "Completing the retail banking strategies at BIDV" as her graduation thesis

2 Research overview

Research on retail banking services has been carried out by many domestic and foreign economists Some studies carry out a general research of retail banking strategies while others only work on a small aspect of retail banking services such

as retail credit, card services, services for rich customers, e-banking services, digital banking, etc Here are several studies related the thesis:

The study by G Vairava Subramanian and S Nehru (2012) on “Evaluating retail credit strategy for small and micro enterprises in India”: According to the authors’ statistics, small and micro-enterprises were contributing more than 16-18%

of India's GDP and if these retail enterprises received more support, they might contribute more than 30% to the GDP The biggest challenge for these enterprises was to manage their finances effectively for both the organizational operation and the expansion of their business In the study, the authors presented the following contents: concepts of retail credit rating, credit rating mechanism, credit rating planning, retail credit rating process and benefits of credit rating for small and micro-enterprises This research made a great contribution in helping small and micro-enterprises access the credit capital at commercial banks in India

The research by Phung Thi Nguyen Trang (2016) on "Completing the retail banking business at VietinBank - Gia Lai Branch": This research systematized the theoretical framework on retail banking at commercial banks, studied the reality of retail banking business at Vietinbank - Gia Lai Branch and proposed solutions to improve the retail banking business at Vietinbank - Gia Lai Branch The research was of great value to the management of the branch in developing and expanding its market share in retail banking However, the study did not build the retail banking strategies for Vietinbank - Gia Lai Branch

Han Kuo Tan (2009) conducted a research on a small aspect of retail banking strategies which was the credit card service Accordingly, the author studied the quality

of credit card service and expectations of customers towards credit card issuers in Malaysia The research showed that commercial banks that wanted to improve their competitiveness in the market needed to have complete business strategies and multi-utility credit card products to enhance customer satisfaction The study provided some recommendations to improve the quality of services provided by credit card issuers as well as to perfect the business strategies for card services at commercial banks However, retail banking consisted of a variety of products and services If banks only focus on developing credit card products and do not focus on other products, the strategies for developing retail banking will not be effective

The study by Nguyen Thanh Phong (2011) on "Diversifying business products

of Vietnamese commercial banks in context of international integration": The thesis

focused on: (1) Pointing out the important role of diversifying business products in the process of international integration of the banking system in Vietnam; (2) Examining and assessing the influence of various factors on the diversification of business products of commercial banks and identifying the most important factors for diversifying business products of Vietnamese commercial banks including: Legal environment, capital volume, technology, human resources, risk management and executive administration; (3) Proposing solutions to enhance the diversification

of business products of commercial banks in Vietnam in the context of international economic integration including: stabilizing legal environment, strengthening financial capacity, modernizing banking technology, renewing risk management and executive administration methods at commercial banks However, the research provided a general assessment on all types of banking services without any specific analysis of retail banking services

The study of Dao Le Kieu Oanh (2012) on "Parallel strategies for developing wholesale and retail banking services at BIDV": The research synthesized the theories on wholesale and retail banking services and business strategies Based on the assessment of the reality of wholesale and retail activities at BIDV, the author proposed solutions to complete the parallel strategies for developing wholesale and retail banking services at the bank However, since the author conducted a general study on both wholesale and retail banking services, there was no deep research on retail banking strategies

The doctoral thesis in 2014 by Pham Thu Huong, Hanoi Foreign Trade University entitled "Strategies to develop retail banking services in Vietnam in the international economic context": The author fully and rigorously systematized the theories on retail banking services as well as strategies for developing retail banking The author also analyzed the reality of strategies for developing retail banking services in our country regarding advantages and disadvantages in developing strategies, compared experience in developing banking services in some countries in the world and proposed solutions for banks in Vietnam

The master thesis in business administration, Danang University by Dinh Hoang Phu Quang (2013) entitled "Strategies for developing retail banking services

at BIDV - Hai Van branch": The study analyzed the reality of strategies for developing retail banking at BIDV - Hai Van branch by analyzing and evaluating the internal environment and external environment factors and proposed strategies

to develop the retail banking services at the bank The study used many methods such as approaching and developing products according to product policy, statistical methods, positive analysis and normative analysis to make judgments and assessments The author also considered the analysis criteria based on the comparison with the basic criteria The research provided better understanding on the role of banking products and services and oriented the marketing activities - developing old products and researching and developing more electronic banking products in the coming time

The master thesis by Than Thi Xuan (2014) entitled "Strategies for developing retail banking services at Sai Gon Commercial Joint Stock Bank - Hanoi branch", National Economics University The thesis systematized the theories on retail banking services, strategies for developing retail banking services, and indicators for evaluating the development of retail banking services The author conducted surveys and gave some strategies to develop retail banking services at the bank However, the system of interview questions was still general and the research results did not fully meet the purpose and requirements of the topic

In short, retail banking is a service that covers a wide range of services serving individual customers, households and SMEs, with a focus on micro-enterprises Previous studies looked at retail banking under different operational areas, angles, and banking systems and achieved certain results However, the published researches also still had many limitations in studying retail banking and had not had deeply studied the strategies for retail banking at commercial banks

Moreover, there were no studies on retail banking strategies at BIDV Therefore, by considering the reality of retail banking activities of BIDV and

previous studies, it is possible to confirm that the research "Completing the retail banking strategies at BIDV" was in accordance with the practical requirements and did not overlap with the published works

- Assessing the reality of developing retail banking strategies at BIDV

- Proposing solutions to improve the retail banking strategies at BIDV

4 Research subject and research scope

Research subject

The thesis aimed at studying the building of retail banking business strategies

at BIDV

Research scope

- In terms of space: The research was conducted at BIDV

- In terms of time: The research was conducted in the period of 2015 – 2017 Secondary data was collected in 2018

- In terms of content: The research only evaluated BIDV's retail banking strategies regarding scope of strategies (general strategies and section strategies)

5 Research methods

- Synthesizing, selecting and analyzing information from textbooks and specialized books related to retail banking strategies of commercial banks such as retail banking, business strategy for retail banking and factors affecting the retail banking strategies

- Synthesizing and analyzing environment factors affecting retail banking strategies including internal factors and external factors

- Synthesizing and analyzing data related to business results and results of retail banking activities of BIDV

- Collecting primary data by conducting surveys and interviews with the bank’s customers to understand customers’ assessments of the retail banking products and services provided by the bank The number of questionnaires administered was 400 and the number of collected questionnaires was 390 votes, in which 387 were valid The questionnaires were sent to all branches of BIDV in Hanoi The author used the 5-Likert scale and the Excel software for data processing

- Consulting experts to learn more about the advantages and disadvantages in the retail banking business of the bank; considering experts’ suggestions to complete the retail banking strategy of BIDV in the coming time

6 Organization of the thesis

The thesis consists of 3 chapters

Chapter 1: Theoretical framework on retail banking services and retail banking business strategies of commercial banks

Chapter 2: Reality of retail banking business strategies at BIDV

Chapter 3: Solutions to improve the retail banking business strategies at BIDV

CHAPTER 1: THEORETICAL FRAMEWORK ON RETAIL BANKING SERVICES AND RETAIL BANKING STRATEGIES AT

In many countries, retail banking is understood as the delivery of banking products and services to individuals and small and medium enterprises (SMEs) (Mac Quang Hung, 2010)

According to experts from the Asian Institute of Technology, retail banking is the bank's delivery of products and services to individual customers or SMEs through the system of distribution channels Using retail banking, customers can actively access services through modern electronic means

According to the modern banking operation, retail banking is the main services providing products directly to individuals, households and SMEs (Phan Thi Thu Ha, 2004)

From the above understandings, it can be seen that retail banking is the type of banking services serving individuals, households and SMEs through the traditional distribution system (network of branches, transaction offices) and modern distribution system (means of information technology, electronics and telecommunications)

1.1.2 Characteristics of retail banking services

Customers using retail banking services are individuals, households, and SMEs

Target customers of retail banking services are individuals, households and SMEs These customers are different in age, occupation, consumption behavior, etc., so the demand for retail banking products and services is often diversified

Customers with high education level are more interested in the value and utilities that retail banking products bring On the contrary, customers who have fewer transactions with banks are more interested in the interest rates, prestige, and brand

of the banks providing the services

The number of customers is large

The continuous increase in the population in the country and the world is one

of the factors that make the volume of retail banking customers go up Since the customers are mainly individuals, households and SMEs which account for a large proportion in the population structure, the potential of this market is huge

The value of transactions is usually small

The value of retail banking transactions is usually much smaller than that of wholesale banks due to the needs and characteristics of retail customers

The system of distribution channels is wide

Since the number of retail customers is large and dispersed, it is necessary for banks to build a wide system of distribution channels in order to meet customers’ needs in time and reduce unnecessary costs (travel expenses, waiting expenses, etc.)

Retail banking products are abundant and diversified

Since retail customers are different in education level, income, gender, social status, etc., the demand for products are also different Therefore, banks often diversify their retail banking services and products to satisfy different customer segments, giving customers more choices when they have demand for the services

Retail banking is based on information technology basis

Apart from traditional distribution channels, retail banking services are mainly provided to customers through modern distribution channels such as Internet, ATM, POS, etc To deploy these distribution channels, commercial banks need to apply information technology in a synchronous way This is the basis for banks to increase the utilities and features of retail banking products and provide retail services quickly, accurately and in time in order to save time for both banks and customers

Retail banking depends on marketing activities

Target customers of retail banking are individuals, households and SMEs These customers have lower ability to approach banking services than large customers Therefore, marketing activities play an important role in promoting and introducing images, products and services to these customers

1.1.3 Main retail banking services

1.1.3.1 Capital mobilization from individual customers

This is the main product and service at commercial banks which contributes to forming the capital to serve the credit needs of customers The characteristics of capital mobilization from individual customers are as follows:

- Activities of mobilizing capital from individual customers are carried out through payment deposits, savings deposits and valuable papers Customers mainly locate in urban areas where the economy, industry and services are developing

- The interest rates for capital mobilization from individual customers are not consistent among locations and times The determination of interest rates is based

on the economic and social conditions, average interest rate and demand for capital

in the mobilized areas

- The cost of capital mobilization from individual customers is higher than the cost of capital mobilization from economic organizations and credit institutions The causes of the above characteristics are due to the different structures of mobilized capitals and the different levels of competition among locations

1.1.3.2 Individual loans

Loans to individual customers are also one of the main operations of commercial banks and are the main source of income for the banks through the loan interests The more the economy develops, the higher the demand of individual customers is This creates opportunities for banks to expand their loans and increase the proportion of individual loans in the total outstanding loans The characteristics

of individual loan products at commercial banks include:

- Large and growing market potential: The growing population volume, the developing economy, the demand for shopping and consumption to improve the life quality of individual customers and households are the premises to expand the retail lending market of commercial banks

- Retail customers using loan products are often interested in the benefits and the value that the loans bring rather than the interest rates on the loans

- Since the repayment (principal and interest) is deducted from the periodical income of customers, the ability to repay depends on many factors such as health, work, salary, etc Therefore, the standard on health and stable work is always a condition of deciding the credit of the banks

- High interest rates: The value of retail customers' loans is often small and dispersed to offset the operating costs (appraisal costs, loan management costs, capital mobilization costs, risks, etc.) Banks often apply higher interest rates for retail customers than those for large corporate customers

- The lending technique is quite simple and does not require highly trained staff

- The information provided by customers is usually not high quality due to many subjective opinions of customers and the information is not verified

1.1.3.3 Card services

Bank card services are a modern personal finance product that brings a lot of benefits to users: money transfer, money withdrawal, account inquiry, bill payment, etc The roles of providing card services of banks are:

- Card services contribute to increasing the income of commercial banks, helping banks diversify their products and services and increasing the functions and utilities for users

- Deploying and providing card services help banks reduce risks in their business activities since each card transaction has a small value but the number of transactions is large Therefore, the risks are shared for many small customers and banks are able to resolve the changes in time when the risks arise

- Card services help commercial banks increase their position and reputation

in the market and confirm the advanced technology of the banks

1.1.3.4 Overseas remittance

Overseas remittance is one of the activities of commercial banks serving the transfer of money from overseas individuals to domestic individuals At present, the government's incentive policy has created more opportunities for commercial banks

to expand their overseas remittance market and improve the efficiency of retail banking services

The amount of legal overseas remittance is transferred to the country through four channels:

- Credit institutions operating in foreign exchange activities;

- Remittance service companies;

- Post and telecommunication enterprises;

- People entering Vietnam bringing overseas remittance

Sources of overseas remittances in banks’ remittance activities include:

- Overseas Vietnamese people send overseas remittances to relatives in Vietnam;

- Laborers working under term contracts in foreign countries transfer their incomes back to Vietnam

- Remittance transferred from export goods: Individuals, households or SMEs exporting goods to foreign countries open accounts in banks to receive foreign currency

1.1.3.5 Online retail banking services

Online retail banking services allow individual customers, households and SMEs to use banking services through modern distribution channels such as telephone, internet, network equipment, etc

Online retail banking services have made significant contribution to the expansion retail market of commercial banks, promoted the efficiency of distribution channels, saving time and money and creating convenience for both customers and banks

Online retail banking services have the following roles and utilities:

- Using online retail banking services, customers can actively pay bills of services (electricity, water, rent, etc.), transfer money and do online shopping without having to go to the bank

- Customers can easily manage their account information: account inquiry, balance checking, statement printing, etc

- Customers can order and sell securities from the distance in the securities investment market and easily follow the fluctuations of stock price to make quick and appropriate decisions

- Customers can look up information on exchange rates, interest rates, stock price fluctuations, etc

- Using online retail banking services contributes to increasing the features and utilities for customers, saving travel time and costs and minimizing customers’ waiting time to carry out transactions

1.2 Retail banking strategies

1.2.1 Overview of strategy

1.2.1.1 Concept of strategy

The term “strategy” was formed in the military field to show the commanders’ skills and arts in using military forces, large-scale plans and decisions that benefit a belligerent party to win the final battle In the war, the strategies are more artistic than scientific since "strategy is the art of commanding the means to win" or

"strategy is the art to fight at the dominant position"

Later, the term “strategy” was used in the economic field to show ways of business cooperation and competition in the market In many ways, an economic strategy is similar to a military strategy; that is, both of them use their strengths to exploit the opponents’ weaknesses Their basic difference is that in economics, strategies are formed, enforced and evaluated with competitive assumptions whereas military strategies are based on antagonistic contradiction assumptions

In business, the term “strategy” is understood as a way to compete or cooperate among business people in order to create a firm position in the market

and gain a lot of profits In business administration, the concept of strategy is broader and concretely expressed through the following concepts: (1) Strategy is like a plan since it represents a series of consecutive actions or a predetermined way

to be able to fit practical conditions; (2) Strategy is like a model since an organization's strategy reflects the structure and trends that people intend in the future; (3) Strategy is like a prospect This concept refers strategy to basic goals and future prospects of the strategy

For enterprises, a strategy is like a system of decisions to shape goals or milestones that they aim at A strategy sets out policies and plans for implementing the goals It determines the type and business ideas of an enterprise

1.2.1.2 Sources of strategy

In a typical organization, the strategies can be formed from the following sources:

a) Starting from the superiors

This is a top-down plan drafted by the leadership, normally with an urgent purpose to guide subordinates in specific action programs This type of strategy stems from the main business tasks and objectives of the enterprise with the program-based management method or the intentional strategies of the Board of Directors

b) Suggestions from the subordinates or the superiors

In practice, there are special cases in which the leaders are forced to flexibly respond to deal with unusual situations At this time, the superiors can suggest to the subordinates to settle or the subordinates can suggest to the superiors to propose

a plan or make a situation decision Then this decision or plan becomes the later troubleshooting strategy

1.2.2 Retail banking Strategy

1.2.2.1 Concepts

Business strategy

According to the traditional approach, business strategy is considered a unified, coordinated, comprehensive plan to ensure the accomplishment of an enterprise’s basic goals This means that an organization's business strategy is the result of a reasonable process that produces specific plans Business strategy involves setting the long-term basic goals of enterprises and choosing the course of action to allocate needed resources to accomplish those goals

According to Alfred Chandler (Harvard University), strategies define the basic, long-term goals of enterprises, select the mode or course of action, and allocate the resources needed to achieve those goals

M Porter believes that strategies to cope with competition are a combination

of the goals that need to be achieved and the means that enterprises must seek to achieve those goals

Through the above concepts, it can be seen that the nature of business strategy

is to set goals, methods and means to achieve the goals over a long period of time

Retail banking strategies

Based on the concepts of business strategy above, retail banking strategies can

be understood as the establishment of retail business goals of commercial banks in the long term, the planning on methods and process of action (diversifying retail products, expanding distribution channels, improving product quality, etc.) in order

to reach targets on sales, market share and customer volume that have been determined

1.2.2.2 Role of retail banking strategies

In a fierce competitive market economy, commercial banks that want to succeed in developing retail banking business must have a proper and clear strategy Banks’ leaders must be aware of the changes in the retail market, find the key factors to success, know the advantages of their banks, understand their competitors

and customers’ desire for retail products, know how to approach the market in order

to make creative decisions in implementing activities or cutting back on activities at certain times and places

Retail banking strategies are considered an important tool in the implementation of business objectives of commercial banks Retail banking strategies provide banks with a specific and effective business direction, which is a guideline for all the functional activities and helps commercial banks to promote their competitive advantages and develop their market share in providing retail banking services

Retail banking strategies ensure the sustainable development of commercial banks They help commercial banks to be active in the development of retail business since business strategies not only help commercial banks seize the opportunities in time and promote their strengths, but also has the ability to prevent, minimize risks and overcome the weaknesses in the business of retail products

In addition, retail banking strategies also contribute to improving the efficiency in using available and future resources, enhancing the competitive position of commercial banks in retail business and ensuring the continuous and efficient development of the banks Retail banking strategies create the premise and solid basis for banks to make appropriate decisions on business development such as: building medium and short-term plans, expanding distribution channels, diversifying products, purchasing equipment and technology, training and improving quality of human resources, etc

1.2.2.3 Retail banking business strategies

There are many types of business strategies in general and retail banking strategies in particular However, the thesis only focuses on studying strategies that are classified based on the scope of strategies Accordingly, there are two types of strategies including general strategies and section strategy (price strategy, product strategy, distribution strategy and promotion strategy)

a) General strategy

General strategy is a strategy that addresses important and lasting issues for the retail banking of commercial banks This strategy determines the overall business operation of the banks and is the basis for the banks to achieve their planned retail banking goals

The general strategy is built based on the bank's overall goals, existing resources and current business environment In order to ensure the feasibility of the strategy, banks need to develop clear and specific business strategies that are suitable for each stage The basic task of the general strategy in the retail banking business includes:

+ Building a system of regulations, policies and assignments to ensure that each objective in the developed strategy is concretized;

+ Building a system of database; investing in information technology to meet the needs of research and development of new products, increase the features, utilities, level of safety and quality of retail banking products and services;

+ Building a system of products that meets the market demand and is suitable with the bank's resources in each period; promoting the bank’s position and satisfying the maximum demand of customers;

+ Training a team of service deployment, especially the technical and IT staffs

to minimize the interruptions in transmission lines and promptly handle technical incidents in the process of transaction implementation

In order to ensure the efficiency of e-banking services, the general business strategy must be concretized in each business plan at each stage At the same time, banks must have a clear and specific roadmap to implement the general strategy Normally, the roadmap for implementing the general strategy in retail banking services of commercial banks is divided into the following stages:

- The stage of investing in building and perfecting the system of facilities and developing operation networks such as ATMs, Non-cash POS, Kiosk Banking, branches, transaction offices, etc

- The stage of building a system of policies, risk management mechanism and modern payment system to meet the demand for fast and accurate services and ensure the safety for transactions

- The stage of researching and expanding retail products according to market demand, finishing, upgrading, increasing the features and utilities of the products, applying modern technology systems into banking business and researching hi-tech products

b) Section strategies

(1) Price strategy

When choosing services, consumers always consider the costs they have to pay compared to the benefits they receive For example, with deposit products, customers will compare the interest that a bank pays them with the possible profits they receive when using money for other investment purposes With credit card products, customers will consider the convenience of using cards and the cost that the bank charges for each transaction

Therefore, price strategy is one of the retail banking strategies of commercial banks When building the price strategy, commercial banks have to calculate the prices of services so that they are in accordance with the quality of the products and services provided to customers in order to satisfy the maximum satisfaction of customers Price strategy is the most effective tool to create competitive advantage for banks in retail banking business

(2) Product strategy

The objective of the retail product strategy is to help banks increase the number of products provided to customers, create the richness and differences in financial services and create more selections for customer when they need to use the services

The key requirement of product strategy is to create a variety of retail banking products and services and develop new products In the implementation of product strategy, banks can research and create completely new products for the market and

customers or can launch new categories of products (copied from other banks) but already exist in the market

The product strategy for retail banking products and services will help diversify the portfolio of products and services of banks, making differences in the market It also helps banks improve their competitive position and minimize their losses since the risks will be shared to different types of products

The development and implementation of product strategy for retail services must come from the market demand, the competitive environment and the requirements for business expansion of banks The product strategy for retail banking will bring many benefits to banks, helping banks expand and develop their market share in retail banking This is reflected in the role of product strategy as follows:

- The product strategy for retail banking helps banks spread the risks and improve their profits and income

- The product strategy for retail banking helps banks better meet the needs of customers, creating a premise for banks to expand their market and increase the customer volume This is the basis for increasing the revenue and profits from retail banking business

- The product strategy for retail banking promotes the development of banking services Banking services always have a close relationship and mutual impact on each other Therefore, the deployment of retail product strategy will create the motivation to develop other products

- The retail product strategy helps to increase the competitive ability and advantages of banks in the market In a fierce competition environment, commercial banks focus all their resources on exploiting the potentials of the retail market To survive and develop, banks must differentiate themselves from other competitors in order to attract customers The product strategy will provide customers with more features and utilities and is the most effective measure for banks to improve their competitive ability, scale development and business expansion

(3) Distribution strategy

Distribution strategy is built and implemented to provide retail banking products and services to customers when they need Distribution strategy creates a bridge between banks and consumers and is how commercial banks approach the market and supply products Therefore, distribution strategy is the ways and measures that commercial banks bring their retail banking products to customers Distribution strategy is one of the factors determining the success of banking business in general and retail banking in particular In the context of strong economic development and booming growth of information technology, commercial banks not only have to focus on building distribution strategies on traditional channels (branches and transaction offices), but also have to expand their distribution strategies through modern channels (ATMs, telecommunication networks, POS, etc.)

+ In terms of distribution strategy through traditional channels: Banks need to develop a plan to synchronize the system of machines and equipment (computers, printers, desks, etc.) and a plan to train the staffs who directly work with customers

at distribution channels

+ In terms of distribution strategy through modern channels: The implementation of this strategy will bring many benefits to customers and banks by reducing the volume of work to be handled, saving time and costs and increasing the accuracy of transactions In order to build and deploy this strategy, banks must invest heavily in technology systems, limit transaction disruptions due to system failure or transmission problems, focus on training and standardizing technicians and IT staffs in order to increase the safety and efficiency of online retail transactions and improve the level of security of customers’ information

(4) Promotion strategy

The characteristics of retail banking depend mainly on sales promotion strategies of commercial banks since retail banking users are individuals, households and SMEs These groups of customers have a lower ability to access

banking services than wholesale customers Therefore, building promotion strategies is essential in retail banking business of commercial banks

Promotion strategies in retail banking business of banks include strategies of introducing and promoting the banks’ image, products and services to customers, helping customers approach and select products that are suitable for their personal needs and become long-term customers of the banks

Through promotion strategies, commercial banks can promote their images and introduce their retail products to target customers Increasing the level of customers’ understanding about the products is the premise to help banks attract customers and expand the customer volume

When promotion strategies are implemented effectively, detailed promotion plans on contents, promotion programs, timing and implementation frequency will help banks improve their efficiency in retail banking services by increasing the customers’ awareness of the products

1.2.2.4 Factors affecting retail banking business strategies of commercial banks

a) External factors

Economic environment

Economic environment is one of the objective factors influencing the building

of retail banking business strategies at commercial banks Depending on the changes of the economic environment, commercial banks must develop appropriate business strategies, namely:

- When the economy grows steadily, sustainably with high annual growth rate make people's income will increase and their lives will be improved The demand for spending, shopping and expanding production of customers will increase and customers go to banks to meet their needs (deposit, borrowing money for business, borrowing money for personal spending, etc.) At this time, the retail banking strategies of commercial banks should focus on product strategy in order to diversify retail products to meet the needs of customers

- On the contrary, when the economy fluctuates in the negative direction with economic recession and high inflation, the decrease in people’s income level will lead to the decrease in their demand for shopping and consumption In addition, the economic recession makes people tend to buy gold and foreign currencies to store rather than borrow money to invest and expand business In this stage, banks need

to adjust their pricing strategy (lower interest rates and increase deposit rates) to attract customers to use the products and services

Legal and political environment

Banking industry has a great impact on the prosperity or the collapse of the economy, so it is under strict supervision of the State through the system of legal documents As a result, legal and political environment has a great influence on banking activities in general and retail banking business strategies in particular For retail banking services, there are more and more new products with modern technology and high levels of intelligence Therefore, the completion of legal framework is essential to help banks orient the development of retail sector and set specific goals to build appropriate business strategies Therefore, if the political and legal environment is perfect and synchronous, it will be to create a basis for commercial banks to develop business strategies that are appropriate to their objectives and realities

Socio-cultural environment

Socio-cultural environment includes all factors such as consumption habits, people's education level, customs and habits, income, etc These factors have certain impacts on the retail banking business strategies of commercial banks Therefore, banks have to adjust their strategies so that they are suitable for these factors

When their education and knowledge are improved, people will easily recognize the benefits of retail banking products and the demand for these services will be higher In addition, if their income levels are improved, they will also have more demand for shopping and consumption to improve their life quality At this

time, banks need to focus on building product strategies (diversifying products and improving product quality) to meet customers’ needs

On the other hand, if customers have a habit of storing cash or using cash to pay for consumption needs due to distrust in banking services, commercial banks need to focus on building both price and promotion strategies to improve customers’ understanding of the utilities as well as the functions of retail products and create a premise to attract customers to use the services

To sum up, all elements of the socio-cultural environment affect the banking business strategies of commercial banks Therefore, when building their business strategies, commercial banks have to do the market research well by studying the characteristics and psychology of customers to have appropriate strategies

b) Internal factors

Quality of human resources

Human resources are the most important factor in the development process of

an organization In order to increase competitiveness and meet the need of expanding business scale, organizations need a strong force of human resources in terms of both quantity and quality, from staffs to managers Good development and training of staffs, especially the team future of managers, is a crucial task in the journey of actualizing ambitions for sustainable development and breakthrough of each bank To develop a retail banking network, strategy developers should focus

on improving the quality and specialization of the staffs in the retail sector in terms

of qualification, transaction styles, as well as awareness of the importance of retail services

Banking technology

Digital technology is considered as a crucial premise to support banks in developing retail banking products and services, contributing to improving the efficiency of banking management and data exploitation In the near future, banking services tend not to be limited in traditional space (direct banking transactions) but will aim at applying modern technology and online transactions For the retail

banking to be successful, one of the decisive factors is that banks need a vision and development strategy as well as implementation methods to promote the strengths

of modern technology and create new products, services, and utilities for customers, especially in the context where online transactions will be more dominant than direct transactions

be affected

Market research

Market research is conducted to collect necessary information about the market, environment, customers’ needs and potentials of competitors It is the basis for banks to select the target market in retail banking and is also the premise for banks to build business strategies suitable for the market and customers

If the market research is done effectively and accurately assess customers’ demand and market potentials, the retail banking strategies will be highly feasible since they meet the needs of the market However, if the market research produces inaccurate judgments, it will lead to negative effects on the building of strategies Inappropriate business strategies will not be suitable for the market and thereby reduce the feasibility of the strategies

1.2.2.5 Theoretical framework

The thesis focuses on studying section strategies in retail banking business at commercial banks, so the theoretical framework of the thesis includes: Price strategy, product strategy, distribution strategy and promotion strategy The theoretical framework is approached as follows:

Figure 1.1: Research theoretical framework 1.3 Experience in the retail banking business of some banks and lessons drawn for BIDV

1.3.1 Experience of Vietinbank

Strictly follow the directions on retail banking development set by the State Bank of Vietnam and the Board of Directors, during its process of formation and development, Vietinbank always focuses all resources on promoting retail banking

in order to exploit the maximum potential and size of the market Therefore, the results of the bank's retail banking business always exceed its target In 2017, the retail credit sales reached 133.769 billion VND, corresponding to 105% of the plan and increasing by 23.2% compared to 2016 The bank's retail market share is always high compared to other commercial banks (the market share was 17.8% in 2017) These positive results were thanks to the following activities:

- Vietinbank has continuously renewed and simplifying the procedures to facilitate customers' transactions At the same time, the bank sets the direction for developing retail activities at all transaction offices and branches managed by the

bank with the investment in technology projects such as LOS and Corebanking Sunshine to improve the quality of online retail banking services to better meet the needs of customers

- During the course of operations, Vietinbank has stepped up the research and development of hi-tech and modern retail products and aimed at new generation customer groups such as security services with Token and payment services via smartphone (M-POS) The bank continuously upgrades its e-banking services to meet customers’ needs anytime and anywhere

- Considering human factor as factor creating the success for retail business, Vietinbank has continuously changed the personnel to create the most appropriate personnel structure for business In addition, the bank regularly conducts training and retraining courses on new retail banking products and services and courses on improving service quality and communication with customers In 2017, the bank organized 1,187 short-term training courses with 3,365 participants

- In order to increase the customers’ satisfaction as a premise to expand the volume of retail customers, Vietinbank has guided employees to study and grasp detailed information about each customer group Thanks to this, the staff of the bank has a thorough understanding of customers from personal information, family, age, occupation, etc The understanding of each customer creates favorable conditions for Vietinbank staff to consult and advise customers with suitable retail products and services, enhancing customers’ satisfaction and creating opportunities for the bank to boost their retail business

1.3.2 Experience of Vietcombank

Taking into account the development trend of banking business, since its foundation, Vietcombank has attached importance to the development of utility banking services and invested in modern technology to provide new retail products and services As a result, the retail banking activities at Vietcombank have always achieved high results The annual retail revenue of the bank is always 25-30% of total income of the bank The market share is always in top 2 or top 3 compared to

other commercial banks Apart from the strengths on technology, prestige and brand names, to achieve these results, Vietcombank has taken the following measures:

- During the process of operation and development, Vietcombank constantly researches and deploys new retail products and services meeting the needs of customers in operating areas and being friendly with distribution channels managed

by the bank Currently, the bank is providing totally 118 retail products and services

in different fields such as capital mobilization, consumer loans, card services, personal investments, insurance services, e-banking services, and so on

- Compared to other banks, Vietcombank was the first bank to apply banking system to serve retail customers, starting with online banking VCB-iB@nking and banking services via message VCB-SMS B@nking This helped the bank achieve its competitive advantages and lead the market in 2013; 2015; 2017

e For card services, Vietcombank also made differences compared to other commercial banks since it was the only bank to issue debit and credit cards with five major brands: Visa, MasterCard, American Express, JCB and UnionPay In addition, the bank also deployed more than 20 other card products to serve domestic customers and create the diversity helping customers in choosing the products

- In addition, Vietcombank has built a very good customer care policy with an independent customer service department Customers calling the bank will advised, guided, and introduced information related to products for free At the same time, the queries and complaints of customers are also satisfactorily resolved by the customer service department and customers don’t have to wait too long to connect with the telephone operator

1.3.3 Lessons drawn for BIDV

Based on the success in the retail banking strategy at some commercial banks, the lessons drawn for BIDV are as follows:

Firstly, focus on developing technology, researching and deploying new and modern retail products and services for high-level customer groups

Secondly, renew the professional process; simplify the procedures and documents to facilitate the customers and enhance customer satisfaction

Thirdly, build a management apparatus; arrange personnel in departments reasonably to ensure the right people with right professional expertise for the jobs Fourthly, organize short-term training courses for the staffs who work in retail services, especially for new staff and in the period of launching new products Fifthly, improve the quality of customer service; thoroughly grasp information about customers who are using retail banking services at the bank, especially traditional customers and loyal customers

Sixthly, establish a customer care department operating independently from other departments in the company to improve the effectiveness of consultancy, guidance and introduction of products to customers and improve the effectiveness

of solving customers’ complaints

CHAPTER 2: REALITY OF RETAIL BANKING STRATEGIES OF

BIDV

2.1 Introduction of BIDV

2.1.1 History of foundation and development

Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV) is a special state-owned enterprise which plays a leading role in providing banking services for the investment and development sector in Vietnam and is one

of the five largest state-owned commercial banks in Vietnam

On April 26, 1957, the Prime Minister signed the Decree No 177/Ttg establishing the “Bank for Construction of Vietnam" at the Ministry of Finance, replacing the "Fundamental capital allocation department" The initial task of the bank was to pay and manage capital allocated by the State for fundamental construction in order to implement the socio-economic development plans and support the struggle for national defense

In order to improve the operation mechanism of the bank, on June 24, 1981, the Government issued Decision No 259/CP on changing the Bank for Construction of Vietnam under the Ministry of Finance into the Bank for Investment and Construction of Vietnam under the State Bank

On October 14, 1990, the Chairman of the Council of Ministers issued Decision No 401/CP establishing the Bank for Investment and Development of Vietnam to replace the Bank for Investment and Construction of Vietnam On November 26, 1990, the Governor of the State Bank issued Decision No 104NH/QD approving the Charter on organization and operation of BIDV The bank gradually shifted to operation under the market mechanism The state budget allocated for investment in fundamental construction decreased significantly The State provided investment capital to the bank so that the bank implements the lending regulations on the basis of calculating the ability and timing of capital and interest repayment and gradually reduced the allocation activities

In 1994, BIDV was re-established under Decision No 90/Ttg dated March 07,

1994 of Prime Minister On January 23, 1995, the Governor of the State Bank issued Decision No 79 QD/NH5 stipulating BIDV as a state-owned commercial bank, in addition to its function of mobilizing medium and long-term capitals from the country and abroad to invest in economic and technical development, currency trading, credit and banking services In 1999, the government decided to move the allocation operation to the Ministry of Finance Since then, BIDV has become a real commercial bank and operated like many other commercial banks

From a specialized bank under the Ministry of Finance, BIDV has become a strong banking system and one of the leading state-owned commercial banks in Vietnam From the first eight branches and 200 employees on establishment, BIDV currently has 190 Level-1 branches in all provinces in the country and 1 foreign branch (BIDV Yangon - Myanmar) The total number of employees is about 24,000 people There are two subordinate units: BIDV Staff Training School and Information Technology Center; 9 subsidiaries: BIDV Securities Company (BSC), BIDV Financial Leasing Limited Company – SuMi TRUST (BSL), BIDV Insurance Corporation (BIC), BIDV Asset Management Company Limited (BAMC), Bank for Investment and Development of Cambodia (BIDC), BIDV International Limited Company (BIDVI), Bank for Investment and Development of Cambodia (BIDC), Laos Viet Insurance Company (LVI), Laos - Vietnam Joint Venture Bank (LVB); 04 joint venture companies: BIDV Tower Joint Venture Company (BIDV Tower), Vietnam - Russia Joint Venture Bank (VRB), Vietnam Aircraft Leasing Company (VALC), BIDV MetLife Life Insurance Limited Liability Company; and 6 offices of commercial presence abroad in Laos, Cambodia, Myanmar, the Czech Republic, Taiwan and the Russia

2.1.2 Organizational structure

BIDV's organizational structure includes the General Meeting of Shareholders, the Board of Supervisors, the Management Board (Strategy and Organization Committee, Risk Management Committee, Research Center, etc.), the Board of

General Director and the Chief Accountant (General Director, Deputy General Directors, Chief Accountant, Asset-liability Committee (ALCO), Credit Committee, Units of Business and Risk and Member Units)

The Management Board has the highest authority and is on behalf of BIDV to

exercise the rights and obligations of BIDV which are not under the authority of the General Meeting of Shareholders The members of the Management Board are appointed by the General Meeting of Shareholders in accordance with each period

General Director is the legal representative in the bank's operations and is

responsible before the law for the bank’s activities

The member units of BIDV include:

- Dependent accounting branches: can take the initiative in activities of business, finance, organization and personnel and are partly authorized in the development of investment and mobilization of investment capital and establishment of directly under units At present, BIDV has 190 first-level branches

in all provinces and cities across the country

- Independent accounting members: are directly responsible for their business These businesses have ties in terms of obligations and interests with the Corporation and have the right for autonomous business and finance as independent legal entities, including financial leasing companies, securities companies and debt management and asset exploitation companies

- Joint ventures: are established with the capital contribution between BIDV and foreign partners and operate in banking and insurance sectors

- Non-productive units: include BIDV staff training school, information technology center and electronic payment center operating under the regulations approved by the General Director These units conduct internal accounting, are financially supported by the bank and generate revenue from carrying out service and research contracts

2.1.3 Business results