Solutions to improve the competitiveness of bank for investment and development of vietnam so giao dich 1 branch

Presenting in a comprehensive and systematic way the theoretical bases on competition and competitiveness, researching experiences in enhancing competitiveness at major bank in the world. Evaluate, analyze, synthesize objectively, scientifically and logically the current competitiveness of BIDV So giao dich 1 Branch. Proposing solutions to improve competitiveness of BIDV So giao dich 1 Branch. In order to improve competitiveness, banks have many different solutions, however, in order to associate with the practicality at BIDV So giao dich 1 Branch, the topic only goes into depth analysis and offers core solutions include solution to improve human resources, solutions to differentiate products and services, marketing solutions, customer policies, technology solutions and indentity trademark solutions

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

-

TRẦN THANH BÌNH

SOLUTIONS TO IMPROVE THE COMPETITIVENESS OF BANK FOR INVESTMENT AND DEVELOPMENT OF

VIETNAM - SO GIAO DICH 1 BRANCH

GIẢI PHÁP NÂNG CAO NĂNG LỰC CẠNH TRANH CỦA NGÂN HÀNG TMCP ĐẦU TƯ VÀ PHÁT TRIỂN VIỆT NAM - CHI NHÁNH SỞ GIAO DỊCH 1

LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

HÀ NỘI - 2020

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

-

TRẦN THANH BÌNH

SOLUTIONS TO IMPROVE THE COMPETITIVENESS OF BANK FOR INVESTMENT AND DEVELOPMENT OF

VIETNAM - SO GIAO DICH 1 BRANCH

GIẢI PHÁP NÂNG CAO NĂNG LỰC CẠNH TRANH CỦA NGÂN HÀNG TMCP ĐẦU TƯ VÀ PHÁT TRIỂN VIỆT NAM - CHI NHÁNH SỞ GIAO DỊCH 1

Chuyên ngành: Quản trị kinh doanh

Mã số: 8340101.01

LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH

NGƯỜI HƯỚNG DẪN KHOA HỌC: TS HOÀNG ANH TUẤN

HÀ NỘI - 2020

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………

TABLE OF CONTENTS

DECLARATION i

PREFACE 1

INTRODUCTION 3

CHAPTER 1: THEORY OF COMPETITIVENESS OF COMMERCIAL BANKS 5 1.1 The concept of competitiveness 5

1.2 Factors affecting competitiveness: 6

1.2.1 Macro environment 7

1.2.2 Industry Environment (Michael Porter’s Five forces model) 9

1.2.3 Enterprise (bank) 12

1.3 Competitive evaluation criteria 16

1.3.1 Criteria for evaluating the competitiveness of enterprises in general 17

1.3.2 Criteria for avaluating the competitiveness of banks in particular 18

1.4 Lessons from improving the competitiveness of banks in the world 24

1.4.1 Lessons from the world financial crisis in 2007 – 2008 24

1.4.2 Lessons from developing and improving the competitiveness of world banks in the current period 26

CHAPTER 2: CURRENT SITUATION OF COMPETITIVE CAPACITY AT BIDV SO GIAO DICH 1 BANCH 29

2.1 Overview of BIDV So giao dich 1 Branch 29

2.1.1 The process of formation and development 29

2.1.2 Orgnization Structure 30

2.1.3 Business results in recent years of So giao dich 1 Branch 31

2.2 Assessment of competitiveness of BIDV So giao dich 1 Branch 36

2.2.1 Assessment of external factors affecting the competitiveness of BIDV So giao dich 1 Branch 36

2.2.2 Assessment of competitiveness of BIDV So giao dich 1 Branch 42

CHAPTER 3: SOLUTIONS TO IMPROVE COMPETITIVENESS OF BIDV SO GIAO DICH 1 BRANCH 61

3.1 Trends and forecasts for the banking market in the coming years 61

3.2 Orientation and strategic vision of BIDV 66

3.2.1 Orientation and strategic vision of the entire BIDV system 66

3.2.2 Objectives and orientation of So giao dich 1 Branch 67

3.3 Solutions: 68

3.3.1 Overall solutions to improve competitiveness 68

3.3.2 Main solutions: 72

3.4 Recommendations to the State Bank of Vietnam and Head Office of BIDV 84 3.4.1 Recommendations to the State Bank of Vietnam 84

3.4.2 Recommendations to the Head Office of BIDV 85

CONCLUSION 87

REFERENCE LIST 88

APPENDIX 1 QUESTIONNAIRE IN ENGLISH 89

PREFACE

In a market economy, competition is an indispensable rule to survive and develop The trend of international integration and globalization is taking place strongly and deeply, along with the continuous development of science and technology with the industrial revolution 4.0 affecting all political and economic fields social life Besides providing opportunities for developing economies like Vietnam to integrate into the world economy, thereby speeding up economic growth and technological innovation, Globalization also presents many great challenges, especially the risk of further economic lag due to limited competitiveness

In recent years, Vietnam's banking industry has been developing rapidly, gradually moving deeper into the process of international integration Vietnam's participation in the World Trade Organization (WTO), the signing of free trade agreements, especially the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), opens up many opportunities and brings many risks and challenges

The competition between banks becomes extremely fierce, not only competition among local banks but also between domestic banks and foreign banks with strong financial potential, technology, management level In the past, a series

of famous banks, but with weak operations and unprofitable businesses, were forced

to merge into Sacombank

Therefore, improving competitiveness is an urgent requirement for banks to exist, stand firm and develop, and affirm their position in the region and the world Improving competitiveness is a vital factor not only for small-sized commercial banks but also for large state-owned commercial banks such as BIDV, Vietcombank, Vietinbank in the context of international integration with the appearance of a series of foreign banks with financial capacity, high management level, modern technology, and experience

At Joint Stock Commercial Bank for Investment and Development of Vietnam (BIDV), So giao dich 1 Branch is the leading branch, leading the whole BIDV system Therefore, improving the competitiveness of BIDV So giao dich 1 Branch in the context of the current market is extremely urgent, is the basis for pioneering, is a model for BIDV branches to apply, thereby improving improve the overall competitiveness of the whole BIDV system

INTRODUCTION

1 The necessary of the thesis:

In a market economy, competition is an indispensable rule for survival and development The trend of international integration and globalization is taking place strongly and extensively, it is necessary for Vietnamese banks to meet the capacity

to stand firm and compete with foreign banks

In recent years, the Vietnamese banking industry has developed rapidly, step

by step moved deeper into the international integration process Vietnam's participation in the World Trade Organization WTO, signing free trade agreements, especially the Comprehensive and Progressive Agreement for Trans-Pacific Partnership CPTPP opens up many opportunities and brings many risks and challenges The competition among banks has become extremely fierce, not only competition among domestic banks but also competition between domestic banks and foreign banks with strong financial potential technology, management qualifications Over the past time, a series of well-known banks with poor performance and loss-making business have been forced to merge and restructure Therefore, enhancing competitiveness is an urgent requirement for banks to survive, stand firm and develop, and assert their position in the region and internationally Improving competitiveness is vital not only for small-scale commercial banks but also for large state-dominated commercial banks such as BIDV, Vietcombank, Vietinbank in the context of international integration with the emergence of a series of foreign banks with financial capacity, high management skills, modern technology, extensive experience

Bank for Investment and Development of Vietnam (BIDV) – So giao dich 1 Branch is a key branch, leading the whole BIDV system Therefore, improving the competitiveness of BIDV So giao dich 1 Branch in the context of the current market

is extremely urgent, is the basis for pioneering, is a model for BIDV branches to apply, thereby improving the overall competitiveness of the whole BIDV system

2 Overview of research situation

There are many articles and studies on the competitiveness of the banking industry, commercial banks in general However, these articles only research and offer general solutions The introduction of solutions to improve competitiveness for each specific bank is different, depending on external factors as well as internal factors and characteristics of each bank

This topic will assess the actual competitiveness of BIDV So giao dich 1 Branch, thereby offering specific, feasible solutions to be applied in practice at BIDV So giao dich 1 Branch

Methods of statistical analysis

Methods of general analysis

- Chapter 3: SOLUTIONS TO IMPROVE COMPETITIVENESS OF BIDV

SO GIAO DICH 1 BRANCH

CHAPTER 1: THEORY OF COMPETITIVENESS OF COMMERCIAL

BANKS

1.1 The concept of competitiveness

Economic competition is a competition between economic actors in order to have advantages in production and consumption and through which maximum benefits can be obtained

In the market economy, competition can take place between actors within the industry, and can also take place between actors of different industries

(According to Marxist-Leninist Political Economy - Associate Professor Dr Ngo Tuan Nghia Chairman of the Compilation Council in 2019)

Terms of competition:

Competition: According to economist Michael Porter, competition (economy)

is gaining market share The essence of competition is to seek profit, which is higher than the average profit that the business has The result of the competition process is the equilibrium of profits in the industry in the direction of deep improvement leading to lower price consequences

From a commercial perspective, competition is a battle between businesses and businesses to gain customer acceptance and loyalty

Competitive advantage: Competitive advantage is the possession of specific

values that can be used to seize opportunities and make profitable business When it comes to competitive advantage, it refers to the advantages that a business (micro level), a country (macro level) have and can have, compared to their competitors There is also the term sustainable competitive advantage, which means that the business must continually provide the market with a special value that no competitor can provide

(According to Competitive Advantage - Michael Porter)

According to Baumol, Panzar and Willig (1982), a firm's competition is assumed to include not only all its current competitors but also potential competitors ready to enter the industry one day Future Therefore, an enterprise that

has a competitive advantage or maintains a competitive advantage is that it is implementing a strategy without any existing or potential competitors at the same time (According to The Literature On The Conformity of the Concept of Entry Barriers in Competition Strategy Theory - Barney, McWilliams, & Turk, 1989)

Competitiveness: Competitiveness of an enterprise is an expression of the

strength and advantages of the enterprise compared to competitors in the best satisfaction of customer requirements to earn higher and higher profits by exploiting, using force and advantages inside and outside to create products and services that attract consumers to survive and develop, gain higher profits and improve their position compared to with competitors in the market

Competitiveness of the business is created from the power of the business and is the internal element of each business Competitiveness is not only calculated by the criteria of technology, finance, human resources, corporate governance organization but the competitiveness of enterprises is associated with the advantages of the products that the business offers market The competitiveness of enterprises is tied

to the market share it holds

Competitiveness can also be understood as the ability to survive in a business and achieve some desired results in terms of profit, price, income or quality of products as well as its ability to declare exploit existing market opportunities and create new markets

1.2 Factors affecting competitiveness:

A business in its operation process is influenced by its surroundings and its impact Therefore, the competitiveness of enterprises depends not only on the enterprise itself but also on objective factors from the environment around the business Factors affecting competitiveness of enterprises are divided into 3 basic groups: macro environment, industry environment (according to Michael Porter), enterprises

1.2.1 Macro environment

Macro environment is the operating business environment, including factors affecting the existence and development of enterprises: economy, politics and law, socio-culture, nature, technology

 Economic factors:

This is a factor that has a great influence and is the most important factor in the business environment of any business including banks Economic factors include the growth of the economy, interest rates, exchange rates, inflation rates

A growing economy will create momentum for businesses to grow, increasing population demand leading to an increase in the rate of investment capital accumulation in the economy, a high level of investment attraction, and competition The picture is getting more and more fierce The large market is a good opportunity for businesses to take advantage of opportunities, rise to dominate the market, and also a challenge for businesses with no clear goals, no reasonable strategies

On the contrary, when the economy is in a recession, unstable, the psychology

of people is panic, the purchasing power of people declines, businesses have to reduce output, must find ways to keep customers, win customers, sales, Profit will also decrease, while the competition in the market will become more fierce

Factors such as interest rates, inflation rates, exchange rates also affect the financial capacity of the business

 Political and legal factors

Politics and law are the foundation for economic development as well as the legal basis for businesses to do business in any market

Politics and law have a great impact on the development of any business, especially import-export businesses

Political stability and legal system will create a favorable environment for enterprises' long-term business activities, which is a basis for ensuring favorable and equal conditions for enterprises to participate in competition

Without political stability, there will be no stable, long-term and healthy economy The law regulates directly the operation of every business in the economy Enterprises always need a stable economy, a strict and clear legal environment, protecting the interests of businesses, individuals and organizations in the economy

 Social factors

Social factors include lifestyle, customs, consumer attitudes, educational level, religion and aesthetics These factors determine the behavior of customers, consumers, their views on products and services, thereby directly affecting the results of production and business activities of the business To survive and compete in the market, businesses must follow the same social factors Understanding and assessing social factors is the basis for enterprises to conduct market segmentation, thereby offering business strategies and solutions to provide products and services that meet the needs of the market, improving its competitiveness

 Technology factors:

Science and technology have a strong impact on the competitiveness of enterprises through deciding the price and quality of products and services Today, along with the 4.0 technology revolution, science and technology are considered as one of the most important factors, determining the survival of enterprises as well as the competitiveness and dominate market share Science and technology development affects the nature of competition Previously, competition was mainly

on selling prices Now, in addition to selling prices, the quality of products and services is focused by businesses The same type of products and services,

customers are willing to pay a higher amount for products and services that bring more utilities, added value, and higher technology content

On the other hand, science and technology help businesses process information quickly, accurately and efficiently In this day and age, any business that wants to succeed needs to have a system of collecting, processing, storing and transmitting information accurately, adequately, quickly, effectively on the market and for competitors

1.2.2 Industry Environment (Michael Porter’s Five forces model)

Industry environment includes enterprises in the same industry engaging in production and business activities The industry environment is also understood as the competitive environment of enterprises, according to Michael Porter including the basic elements: Competitors, buyers (customers), suppliers, potential competitors, substitutes (Competition Strategy Book - Michael Porter )

 Competitors:

In a business environment where many businesses offer a range of products and services that will lead to the inevitable competition, businesses come up with strategies to attract customers and increase market share Enterprises need to know their competitors so that they can have an effective competition strategy The nature and intensity of competition among enterprises in the industry depend on the following industry characteristics:

- The number of competitors, the number of large companies: The number of large companies increases competition, because there are more firms while the total number of customers and resources remain constant The competition will be stronger if these firms have the same market share, leading to competition for market dominance

- Growth rate of the industry: When the market grows slowly, businesses must compete more aggressively to capture market share In a high growth market, businesses are still able to increase their revenue, possibly only due

to the expansion of the market

- Fixed costs: High fixed costs usually exist in a economies of scale, which means that costs decrease as production scale increases When the total cost

is only insignificantly larger than the fixed costs, businesses must produce close to the total capacity to achieve the lowest cost per unit of product Thus, businesses will have to sell a huge number of products on the market, and thus must compete for market share, leading to increased competition intensity

- High cost of storage or perishable product characteristics This feature makes manufacturers want to sell goods as quickly as possible If at the same time other manufacturers want to sell their products, the competition for customers will become fierce

- Low cost of goods conversion When a customer easily switches from one product to another, the level of competition will be higher because manufacturers have to try to retain customers

- Level of product differentiation: Low level of product differentiation will lead to a high level of competition On the contrary, if the products of different enterprises have markedly different goods characteristics, the competition will be reduced

- The ability to change strategy: The ability to change strategy is high when a business is losing its market position, or has the potential to gain more profits This situation also increases the competitiveness of the industry

- High "exit" barriers This feature makes businesses incur a high cost, if they want to give up on producing products So businesses are forced to compete

to survive This barrier makes a business forced to stay in the industry, even when the business is not very favorable A common barrier is the specificity

of fixed assets When factories and equipment are highly specialized, it is difficult to sell those assets to other industries

 Buyers (customers)

Customers are the ones who decide the consumption of products and services of enterprises Pressure from customers mainly comes in two forms: asking for

discounts or asking for better service quality This makes businesses compete with each other, leading to the loss of industry profits The pressure from customers comes from the following conditions: when the number of buyers is small, when the buyer purchases a large number of products and concentrates, when the buyer accounts for a large proportion of the seller's output, the products are not differentiated and are basic products, customers threaten to integrate backward, industry products are not important to the product quality of buyers, customers are well informed

 Provider:

(For the bank the provider will be the input: customers deposit money )

Supplier may dominate business operations due to dominance or monopoly power of some suppliers

Suppliers can assert their power by threatening to raise or lower the quality of products and services provided These changes will affect production costs, product quality, profits, thereby affecting the competitiveness of enterprises

Pressure from suppliers will increase if: only a small number of suppliers; When replacement products are not available; When a supplier's product is an important input to the customer's operation; When a supplier's product is different and appreciated by the buyer's competitors; When the buyer incurs a high cost due to changing suppliers

 Potential competitors:

Potential competitors are those who will either be new to the industry in which the business is operating or in the manufacturing of alternative products and services When new businesses come in, competition will be fierce Old businesses will then have the advantage of products, capital, fixed costs, network of distribution channels will react fiercely to new businesses However, new businesses often have more advantages in technology, product quality, methodical marketing strategies, applying many measures to gain market share will be a great pressure for existing businesses, create a higher competitive advantage

Therefore, old businesses will have to have effective and timely competition solutions in order not to lose market share

 Alternative products

Replacement products and services are similar products and services that customers can choose to replace the products and services that businesses are providing Substitute products will reduce the profits of the industry because the highest price is controlled Without paying attention to substitutes, businesses will not catch up with the increasingly diverse and abundant changes of the market

1.2.3 Enterprise (bank)

The competitiveness of enterprises in addition to the external factors as mentioned above depends greatly on the business itself The competitiveness of enterprises is the combination of available and mobilizable enterprise resources including human resources, financial resources, physical resources, organizational management and experience , trademark…

 Human resource:

Human resource is a very important factor, bringing creativity in the organization Manpower level is reflected in the management level of leaders at all levels, the professional qualifications of staff members, the level of cultural ideology of members in the enterprise This is a factor creating diverse products and services, high gray matter content, bringing many utilities, high quality services thereby increasing the prestige and reputation of products, services, businesses will create a firm position in the market and achieve sustainable development

An enterprise with strong human resources in terms of professional skills, technical awareness, labor enthusiasm will be able to become a leading enterprise, although other factors are not favorable

In a service business such as a commercial bank, the human element plays an important role in demonstrating the quality of the service The staff of the bank is the person who directly gives customers the feeling of the bank and its products and services, while creating customers' trust in the bank These are important

requirements for the bank staff, thereby helping the bank capture market share as well as increase business efficiency to improve its competitiveness

 Facilities

The system of modern facilities and advanced technology suitable to the scale of business activities of the enterprise will contribute to improving production and business capacity, labor productivity, raising the quality of products and services, reducing product costs leads to a corresponding price reduction in the market,

thereby helping to increase competitiveness for businesses Today, technology has become a secret weapon in the competition of businesses

Physical resources include:

- System of factories, headquarters, machinery and equipment

- Distribution network: branches, shops, vehicles, agents

- Technological and technical system

- Supply: affects cost

- Geographical location: impact on production and transport costs

For the operation of banks, the network of branches, representative offices, transaction offices will help the bank expand its operation to many areas The large number of bank branches not only helps the bank reach more customers, attract more capital for the bank, but also makes it more convenient for customers to use banking services such as money transfer, receipt payments…

In the banking sector, technology is increasingly playing a role as one of the banks' most important competitive advantage resources The role of technology in banking activities is shown:

Banking technology includes not only professional technologies such as electronic payment systems, retail banking systems, ATMs, etc but also management information systems and systems risk report within the bank Especially in the context that the information technology industry in general and banking technology in particular develop rapidly today, the ability to upgrade and innovate technology is also an important indicator reflecting the technological capacity of a Bank

The application of technology is one of the factors that makes the difference between banks, creating the power to increase the competitiveness of commercial banks Today, commercial banks are developing high technology applications, and using translation products of technological nature as a measure of competition, especially in the field of payment and other electronic products and services

 Management Capacity:

Each business must have a separate organizational structure, appropriate to the characteristics of business activities The organizational structure should be set up

in a flexible manner, adapting to changes in business environment and other fluctuations

In any business, the role of leader and manager is very important, deciding the success or failure of the business because they hold all the resources of the organization, outline the strategic and main directions, policies, work plans, policies, and decisions that affect the entire business

Enterprises with a reasonable organizational structure, good management skills will operate efficiently, save many costs, lower costs of products and services, increase profits and improve competitiveness

For banks - a field with lots of risks and when risks occur, it will have serious consequences, the management, control and management capacity of leaders plays a very important and clear role in ensuring the efficiency and safety in banking activities Leadership vision is a key factor for the bank to have a sound business strategy in the long term

 Experience

Experience will help businesses accurately predict market demand in each period, so that businesses will be proactive in production and business activities, avoiding inventory status, capital stagnation

However, the experience needs to be applied flexibly depending on the specific conditions and circumstances of the market and enterprises, which are suitable and practical and feasible

 Brand and reputation:

Brand and reputation are considered an important intangible resource that creates the competitive power of every business Brands have the ability to greatly influence the consumption of products and the provision of services by businesses Formed primarily from activities, products, services and communications with stakeholders, reputation is a result of market capacity that has been valued by

stakeholders for many years A well-known and valuable brand is an application of reputation to form a competitive advantage

To get a brand, businesses need to work long and continuously A brand accepted by customers is both a success If you can, this is a big competitive advantage that your opponent can hardly get

As an industry where the quality of products and services is not much different, the uniqueness and distinction to distinguish between different banks is very difficult to create, so the reputation and reputation become a In the intangible resources are very important, creating great advantages for banks in competition If

a bank is more reputable and reputable than its competitors, it is capable of expanding market share, increasing sales, contributing to its profits

Operations in the banking sector are always associated with that bank's reputation factor, consumer psychology is always a decisive factor to the survival of the bank's operation with the chain effect due to psychology of consumers

Therefore, the reputation and reputation of the bank is a huge internal factor, which determines the success or failure of that bank in the market Increasing market share, expanding operation network, increasing income depends greatly on the reputation of the bank

However, the reputation of the bank is only created after a long time through the form of ownership, staff, the application of high-tech products, the full and satisfactory response worthy of consumer needs

Today, in addition to their reputation and reputation, banks must also show their interconnectedness in their business activities, the event of a bank cooperating with

a reputable credit institution and other reputation in the market, or the close cooperation between banks or financial institutions, big economic groups also contributes to enhance the competitiveness of that bank in the market

1.3 Competitive evaluation criteria

Assessing the competitiveness of enterprises is a necessary job, because each enterprise can set competitive objectives and strategies suitable to the current operational status of its business

1.3.1 Criteria for evaluating the competitiveness of enterprises in general

The most obvious criterion to evaluate competitiveness for enterprises is the financial indicators Some evaluation criteria:

- Business growth rate by revenue

Revenue growth rate = (Revenue of this period - Revenue of the previous period) / Revenue of the previous period x 100%

- Business growth rate by profit

Profit growth rate = (Profit in this period - Profit in the previous period) / Profit

in the previous period x 100%

- Market share of the enterprise

+ Market share of enterprise = Enterprise turnover / Total revenue consumed in the market

However, this criterion is difficult to guarantee the accuracy when determining it because the enterprise market is very large, making it difficult to accurately determine the revenue of other enterprises in the market

+ Enterprise market share = Business revenue / Revenue of the strongest competitor

(Choose from 2 to 5 strongest enterprises depending on the characteristics of each competitive field)

This is the indicator that most accurately reflects the competitiveness of enterprises, supporting the planning of production and business strategies,

- Criteria for assessing profitability of enterprises:

This is an indicator reflecting the efficiency of production and business activities

of the enterprise The higher the profitability of the enterprise indicates that the enterprise has good operational and management capacity, brings high profits, and

is competitive in the market

+ Profit / turnover ratio (ROS) = Profit after tax / Revenue

+ Profit / equity ratio (ROE) = Profit after tax / Equity

+ Profit / total assets ratio (ROA) = Profit after tax / Total assets of the enterprise

1.3.2 Criteria for avaluating the competitiveness of banks in particular

a) Criteria to evaluate the competitiveness of a bank

For banks, in addition to the evaluation criteria as above-mentioned enterprises, due to their specific business activities, there are a number of separate competitiveness assessment criteria for banks

 Financial capacity:

The financial capacity of the bank plays a very important role, reflecting the strength and business ability of a bank at a given time Indicators of financial capacity of the bank:

- Profitability:

This is the most important indicator for every business including banks, reflecting the efficiency of the bank's business operations When the bank operates efficiently, profitably, and large profits are left, it will be possible to set aside reserve funds, invest in expanding its network of offices, transaction offices and system investments technology, improve reputation, create trust for customers, thereby improving the competitiveness of the bank Criteria for assessing profitability of the bank: Return on equity (ROE), return on total assets (ROA), return on revenue (ROS)

- Own capital and capital adequacy ratio:

Equity is a self-owned resource that a bank owner owns and uses for business purposes in accordance with the law; equity capital is also created in the business process in the form of retained earnings Although accounting for a small proportion of the total capital of the bank, it is the first basic factor determining the existence and development of a bank On the other hand, equity capital is the most stable and long-term capital source, creating the bank's reputation, trusting customers and maintaining solvency in case of losses The own capital is also the basis for calculating the prudential ratios and financial indicators in banking business activities

According to the regulations of the Basel Committee (Basel Banking Supervision Committee), the own capital of a commercial bank must reach at least 8% of the bank's total risk of conversion (CAR)

- Quality of property:

Assets that reflect the use of the bank's capital, including cash, deposits at other banks, investments, credit (loans), fixed assets, and other assets Among them, credit is the most important factor, reflected in the size of outstanding loans and the quality of outstanding loans Banks with good quality of outstanding loans (group 1 loans) will have effective business operations, not having to make provision for risks, so their financial capacity is stronger Banks with poor debt quality, high bad debt ratios and bad debts will lead to the risk of setting up risk provisions, even leading to capital loss, thus reducing financial capacity and capacity operational forces and competitiveness in the market, even banks have had to go bankrupt, merge

- Scale and ability to raise capital:

The ability to raise capital reflects the reputation and capacity of the bank A reputable bank in the market, with a variety of products to raise capital, many modern utilities, competitive interest rates will attract customers to send money Normally banks that are established for a long time and have capital contributed by the State will be trusted by customers to choose to send money

- Liquidity:

Ratio of immediately payable assets / ratio of payable assets immediately

- Ability to prevent and combat risks:

Banking business is exposed to many risks: credit risk (risk when the bank cannot fully recover loan principal and interest), market risk (interest rate risk, exchange rate risk, ), liquidity risk (risk of insolvency in the bank) and operational risk (risk due to internal processes, people and systems) When the ability to prevent risks is low, in case of risks, banking activities will face difficulties, reducing the bank's competitiveness The bank's risk level is usually measured by 2 indicators:

+ CAR (Capital Adequacy Ratio) is the ratio of equity / total assets at risk of conversion (According to Basel Credit Supervisory Board) CAR must meet 8% of international standards The higher the ratio, the stronger the financial capacity, the greater the ability to create credibility and trust with customers

+ Credit quality: overdue debt ratio / total outstanding loan The lower the ratio, the better the credit quality, the healthy financial situation and the low credit risk

 Operational capacity:

The main activities of commercial banks include: mobilizing capital, credit and providing other products and services The ability of the bank to carry out the above activities is one of the criteria to assess its competitiveness

- Ability to raise capital:

Capital mobilization is an important task of commercial banks, deciding business scale Banks with large capital mobilization ability have the prospect of expanding their market share in credit, investment and other services in order to increase profits and improve their competitiveness The bank's ability to mobilize capital is assessed through a number of criteria such as capital mobilization market share, capital mobilization growth rate, competitive deposit interest rate, diversification of term deposits and agreement convenient when dealing, effective marketing programs

- Credit and investment activities:

Credit and investment activities are the key business activities of commercial banks to generate profits, especially in developing countries like Vietnam Good commercial credit and investment activities will bring a lot of profits to the bank, develop its ability to raise capital, improve business efficiency and thereby enhance its competitiveness Some commonly used criteria for evaluating credit activities

+ Quality of outstanding debt: Bad debt ratio = Outstanding bad debt / total outstanding debt

- Developing other products and services:

Each bank has its own goal of developing activities and services to give itself an advantage in such a product or service As the economy grew, so did banking services to meet the increasing and diverse requirements of customers This activity brings a significant income for the bank and contains few risks In developed countries, income from service intermediaries accounts for over 50% of the bank's income The diversification of social life together with the progress of science and technology requires commercial banks in addition to price competition, to constantly explore and develop new and diversified types of services diversify banking products and categories to better meet customers' needs, increase market share and increase profits for banks

Proportion of revenue from services = Service income / total profit

 Technology applicability:

Today, banks are developing high-tech products, using technology-translated translation products as a measure of competition, especially in the field of payment and other products other electronics products

The indicators reflect the bank's technological capacity: Quantity and quality of current technology; ability to upgrade and innovate technology,

 Human Resources:

The competitiveness of human resources of commercial banks must be considered on the following criteria:

- Regarding the number of employees:

In order to expand the network to increase market share and serve customers well, banks must have a sufficient workforce However, it is also necessary to compare this indicator in relation to the network system and business performance

to recognize the labor productivity of employees in the bank

- Regarding labor quality:

The quality of human resources in a bank is reflected in the following criteria:

+ Education level of labor force: including education level and supporting skills such as foreign language, information technology, communication, presentation, decision making, problem solving, etc Criteria This is quite important because it is

a platform showing the ability of employees in the bank to learn and grasp the job to perform professional skills

+ Administrative skills for managers; professional qualifications and professional skills for employees: this is an important criterion determining the quality of services that banks provide to customers The Bank needs a team of good executives to help the apparatus operate effectively and a staff with high professional skills, capable of advising customers to create trust with customers and press bank icon These are the key factors that help banks compete for customers Therefore, the quality of human resources plays an important and decisive role in the competitiveness of a bank The quality of human resources is a result of past competition and it is also the competitiveness of the bank in the future Having a good team of executive officers and staff, who are capable of creating and implementing strategies will help the bank operate stably and sustainably It can be affirmed that the sufficient and quantitative human resource is an expression of the Bank's high competitiveness

 Management and organizational structure

Often, assessing the management, control and management capacity of a bank is considered to evaluate the standards and strategies that the bank develops for its operations High operational efficiency, growth over time and the ability to overcome uncertainties are evidence of the bank's high governance capacity

Some criteria showing the bank's management capacity are:

- Business strategy of the bank: including marketing strategies (building prestige, brand), market segmentation, product and service development,

- Organizational structure and ability to apply effective bank management

- Growth in business results of banks

 Branch network

The network of branches, representative offices and transaction offices will help the bank expand its coverage to many areas This index is calculated by the number

of branches, transaction offices, POS mounting points, ATMs, etc

 Reputation of the bank

Reputation and reputation of the bank are internal factors that determine the success or failure of the bank The reputation of the bank is only created after a long period of time by fully and adequately meeting the needs of consumers, creating trust for customers

b) Criteria to assess the competitiveness of a bank branch

A bank branch is a dependent accounting unit of a bank, performing business functions, bringing profits: capital mobilization, lending, and other banking products and services: payment, guarantees, trade finance, cards

Because it is a dependent unit of a banking system, so the number of indicators

to evaluate the competitiveness of a bank branch will be less than the criteria for evaluating the competitiveness of the whole banking system Some criteria that cannot be applied to a bank branch such as: Return on equity (ROE), rate of return

on total assets (ROA), equity and capital adequacy ratio Yes (CAR), liquidity Some criteria for evaluating the competitiveness of a bank branch will be similar to the criteria of the bank's competitiveness, specifically:

+ Debt structure = Short-term debt balance (Mid-long-term debt balance) / Total outstanding loans

+ Quality of outstanding loans: NPL ratio = Bad debt / total outstanding loan

- Develop other products and services:

Proportion of revenue from services = Service income / total profit

• The ability to apply technology

• Human Resources:

- The number of employees

- Labor quality

• Management qualifications and organizational structure

- Business strategy of the bank branch: including marketing strategy (reputation building, branding), market segmentation, product and service development,

- Organizational structure and ability to apply effective banking governance

- Growth in the bank's business results

• Branch network

This target is calculated according to the number of transaction offices, POS installation points, ATMs

• Reputation of the bank branch

1.4 Lessons from improving the competitiveness of banks in the world

1.4.1 Lessons from the world financial crisis in 2007 – 2008

The world from 2007 to 2008 witnessed the global financial and economic crisis with the collapse and bankruptcy of a series of large banks, falling stock, and devalued currencies major in the US and many European countries, stemming from the financial crisis in the US The root cause of the crisis was the explosion of subprime loans Subprime loans are loans to people with low creditworthiness such

as unstable jobs, low social status, bad credit history, potential risks repayment of debts due

The banks promote subprime loans from oversupply of mobilized capital, subprime lending is a solution to solve all excess capital to maximize profits Although subprime loans have a high level of risk, but in return, interest rates are very attractive, bringing many profits to the bank

When the economy operates ineffectively, rising interest rates create a burden of repaying debts for low-income and unemployed people, the risk arises when a series

of borrowers are squeezed and sold assets The value of collaterals such as real estate declines leading to irrecoverable bank loans A series of banks suffered losses

of billions of dollars such as Citibank (21 billion USD), Merrill Lynch (25 billion USD), UBS (18 billion USD), Morgan Stanley (10 billion USD), JP Morgan (2.2 billion USD) , Bear Stearns (US $ 2 billion), Lehman Brothers (US $ 1.5 billion), Goldman Sachs (US $ 1.3 billion) Lehman Brothers went bankrupt after 158 years

of operation and one of the top 5 leading investment banks in the US Merrill Lynch must resell to Bank of America Goldman Sachs and Morgan Stanley have also shifted from an investment banking model to a general bank model so that they can mobilize capital through savings deposits, to ensure the existence of the market Washington Mutual was sold to JPMorgan Chase after the stock price fell 95% in value

The US government must also rescue another big bank, Citigroup Accordingly, the Government has injected an additional $ 20 billion to the bank as well as a guarantee of a total value of $ 306 billion for subprime loans of Citigroup

In Europe, two major British banks, Northern Rock, Bradford & Bingley, were nationalized, while another large bank, HBOS, was acquired by another competitor The three largest banks of Iceland, Kaupthing, Landsbanki and Glitnir, are also nationalized

Many other banks in Europe would also have disintegrated without the timely intervention of the government such as Fortis and Dexia Bank of Belgium, Hypo Real Estate of Germany

So it can be seen that the banks in the US and Europe fall into failure, even leading to bankruptcy, besides some objective causes from the market, the main causes stemming from management policies and strategies wrong business, namely loose management in lending operations Excessive lending for subprime loans in a short time leads to the loss of credit quality control, losses, and loss of capital for banks This is one of the most expensive lessons for any bank in the course of business operations, competition in the market, especially in the context of integration and development today

1.4.2 Lessons from developing and improving the competitiveness of world banks

in the current period

As of 2019, Bank of America has total assets of US $ 2,434 billion, revenue of

US $ 96.39 billion; net income of 28.1 billion USD Bank of America (BOA) consistently ranks among the best banks in the world

The overall strategy of BOA is to maximize profits and grow revenue through business models and intensive growth strategies, minimizing costs Among BOA's business models, online banking is a way to maintain and strengthen competitiveness through technological innovation BOA's goal is to grow strongly, increasing market share with major competitors such as JPMorgan Chase, Citigroup, and Wells Fargo

Strategically located as one of the largest financial service banks, BOA operates

in a diverse range of commercial banking, investment banking, asset management and insurance industries

One of BOA's business strategies is to provide products and services that bring added value to customers Customers can access financial data sources through BOA's website system and mobile banking application to use online services Based

on these strategies, BOA's competitive advantage is strengthened through its online operations This business model optimizes BOA performance by increasing customer convenience through online options The introduction of advanced information technologies through this business model helps BOA optimize transaction processing speed and operational efficiency, increasing customer satisfaction with its financial services

Besides, one of the common strategies to improve BOA's competitive advantage

is cost control Cost control requires targeting the low cost of providing financial services to maximize your profits

Another strategy for increasing competitive advantage for BOA is the differentiation and focus strategy BOA provides high quality services to make a difference With the advantage of being one of the largest banks in the world, BOA strongly penetrates the market, strengthening the development and expansion of new customers of many different subjects

Along with that, BOA focuses on developing product diversification, constantly providing new financial products and services, developing markets, to ensure the competitive growth of financial services business

b) HSBC

HSBC is one of the 10 largest banks in the world, based in London, England HSBC is a leading international bank with high market access HSBC maintains a privileged position in high growth markets, especially in Asia and the Middle East with assets of US $ 1.4 trillion in 2019 The competitive strategies and market expansion of HSBC during the past time are implemented by:

Invest in developing products and services related to payment and cash management, which are the key products and services with outstanding facilities of HSBC

Expanding the development of trading networks with 64 international markets accounting for 90% of GDP, global trade

Improving financial strength HSBC is a strategic advantage of HSBC HSBC maintains a strong capital source and high liquidity

Perform customer care, support customers when making transactions

HSBC carried out restructuring according to 3 contents: Restructuring to grow

by reshaping the ineffective operations of the Group; Reinvest capital by restructuring growth opportunities and strengths, including Asia, the Middle East, the UK .; Create a simpler, more effective and empowered organization that ensures that we can work together more effectively and serve our customers better

HSBC has won the following awards: Best Global Trading Awards 2019; The bank

is the market leader in global and commercial finance; Best Asian private bank 2019

c/ Japan (Mitsubishi UFJ -MUFJ)

MUFJ is the fourth largest bank in Japan in the world, established on January 1,

2006, after the merger of Tokyo-Mitsubishi Bank, Ltd and UFJ Bank Ltd MUFG

is one of Japan's three "megabanks" (along with SMBC and Mizuho)

MUFJ's operations include retail banking, corporate banking and investment banking, the core of Mitsubishi UFJ Financial Group

Constantly expanding network with 772 transaction offices in Japan and 76 offices overseas MUFJ's customers, in addition to traditional Japanese customers, also have many foreign businesses

MUFJ creates competitive advantage through the following strategies:

Professional in real estate business: MUFJ includes professionals with extensive experience in not only real estate business, but also real estate finance, global market and other businesses MUFJ has policies to retain talented people, often with the sharing of experience and knowledge in the organization

Experience: MUFJ inherited many years of business experience from the former Mitsubishi Trust Group (established in 1927), MUFJ has a system of information for many customers and large projects

Expanded third party network: MUFJ has set up an expanded third party network This network includes property managers, leasing managers, financial institutions, etc MUFJ focuses on developing credit activities, lending to many projects and businesses

CHAPTER 2: CURRENT SITUATION OF COMPETITIVE CAPACITY AT

BIDV SO GIAO DICH 1 BANCH 2.1 Overview of BIDV So giao dich 1 Branch

2.1.1 The process of formation and development

Bank for Investment and Development of Vietnam (BIDV) was established on April 26, 1957, is the oldest commercial bank in Vietnam

BIDV's history of construction and maturation is a path associated with each historical period of national defense and construction of Vietnam BIDV contributed

to the recovery and economic recovery after the war (1957-1965); carrying out the strategic task of building socialism, fighting America's destructive war in the North, supporting the South, fighting to unify the country (1965-1975); Building and developing the country's economy (1975-1989) and Implementing the renovation of banking activities to serve the industrialization and modernization of the country (1990 - present) BIDV always plays the role of a shocking force on the monetary and financial front, serving the country's development investment

Currently, BIDV continues to be one of the largest banks in Vietnam with total assets as of the end of 2019 reaching VND 1.46 million billion; equity capital of over VND 60,000 billion; capital mobilization scale of 1.3 million billion dong, up 12%; credit balance: 1.1 million billion dong, up by 12% Profit before tax in 2019 reached VND 10,768 billion, an increase of 14% compared to 2018 The ratio of return on assets (ROA) reached 0.61% and the return on equity (ROE) reached over 15%

In 2020, BIDV aims to grow by 14.5% and credit by about 13% The consolidated profit before tax target is 12,600 billion dong, up by 17% NPL ratio is controlled lower than 1.6%

BIDV So giao dich 1 Branch (BIDV SGD1) is the largest branch of BIDV system, established on March 28, 1991 for the purpose of solving overall problems for BIDV at that time:

- Evaluation and lending of development investment projects spread across the country or along routes such as railway projects, roads, electricity, post and telecommunications, etc

- Serving construction organizations operating in a region or the whole country

- BIDV has just entered commercial activities, so it needs to have a "special branch" to test new operations, thereby drawing experience and directing the implementation of the whole system

Over nearly 30 years of operation, So giao dich 1 Branch has become a strong brand, a reliable address of corporations, corporations, organizations and individuals With a long history and good service quality, So giao dich 1 Branch has been trusted by many units, State economic groups and large enterprises such as: Investment and Business Corporation SCIC State capital, Vietnam Oil and Gas Group, Viettel Military Telecommunications Group, Vietnam National Oil and Gas Group, Vietnam Coal and Mineral Industry Group (TKV), Vietnam Electricity (EVN) , Vietnam Textile Corporation…

For BIDV system, So giao dich 1 Branch has always played a leading and pioneering role, being one of the leading units of BIDV system in terms of performance and labor productivity, which has been approved by the State awarded noble titles "Labor Hero", "Labor Medal 1, 2, 3"

2.1.2 Orgnization Structure

So giao dich 1 branch consists of 20 units, including 05 affiliated Transaction Offices, the total number of branch staff to date is 288 people, of which officers with university and postgraduate degrees account for over 98% of total cadres The current organizational structure of the Branch is as follows: The organizational structure of the branch is divided into blocks, in blocks with sections and divisions The organizational structure of a Branch consists of:

- Board of Directors: Director and 7 Deputy Directors

- Customer Management Division: Corporate Customers 1,2,3,4,5 Department and Individual Customer Department 1, 2

- Risk Management Division: Risk Management Department 1, Risk Management 2

- Operations: Credit Administration Department, Customer Transaction, Treasury Management and Services

- Internal management: Financial Planning Department, Administration Department

- Dependent blocks: Quoc Tu Giam, Ton Duc Thang, Lotte, Kham Thien transaction offices

2.1.3 Business results in recent years of So giao dich 1 Branch

In recent years, So giao dich 1 branch has always promoted its role as a leading branch in the BIDV network as well as one of the largest bank branches in the capital Business operations of Exchanges 1 have sustained growth and expansion in terms of capital mobilization, credit scale, service revenue, especially profit, with strong growth in 2019 reached VND 1,168 billion, an increase of nearly 19.79% compared to 2018

Summary of business targets of So giao dich 1 branch in the last 3 years:

Unit: billions VND

% 2019/2018

1

Deposit at the end of

the period 32,969 37,720 14.41% 45,189 19.80%

2 Credit Blance at the

end of the period 19,900 23,263 16.90% 27,765 19.35%

Profit of BIDV So giao dich 1 Branh from 2015 to 2019

 Deposit:

Deposit activities have grown steadily and increased over the years with an average growth rate of 17% in the last 3 years In the development trend associated with international integration, closely following the direction of BIDV Headquarters, in addition to maintaining the traditional customer base, So giao dich

1 Branch has focused on Deposit activities and development of individual customer base associated with sustainable growth

Unit: billions VND

1 Deposit from Financial

2 Deposit from enterprises 23,078 26,404 31,632

3 Deposit from individuals 5,275 7,544 10,393

Deposit Structure Chart (1-2-3)

- Credit scale and structure:

The credit scale of So giao dich 1 Branch is constantly growing over the years and is the largest credit branch in the Northern area of the BIDV system Credit balance at the end of 2019 of the Branch was VND 27,765 billion

Credit Balance Chart

- Regarding credit structure:

+ According to customers:

The branch has implemented the policy of expanding the retail credit scale, finding customers, implementing many policies to attract and reach customers Structure of outstanding loans to economic organizations / retail outstanding loans

by finding seeking to develop business and business customers to lend working capital for production and business activities to regularly increase the ratio of short-

term debt, accordingly, the ratio of medium- and long-term outstanding loans only remain below 50% of total outstanding loans

+ Credit structure by industry:

In line with BIDV's industry-oriented credit as well as other credit directives,

So giao dich 1 Branch has strictly complied with the Head Office's regulations on controlling lending for business investments real estate and securities led to significant changes in credit structure By the end of 2019, the Branch's outstanding loans were concentrated in several key areas such as processing and manufacturing industries (29%), wholesale, retail, repair of cars and motorcycles (19%), construction (20%), production and distribution of electricity, gas, hot water (10%) and outstanding loans for the real estate business have fallen below 5%

- Regarding credit quality:

Outstanding loans in group 1 (standard debt) of the Branch reached 96% of the total outstanding loans This shows that the credit balance of the Branch mainly focused on reputable, capable and effective customers to limit risks, increase credit efficiency and quality At the same time, the debt ratio of Group 2 of the Branch has also decreased significantly over the years, currently only at nearly 4% Regarding the bad debt ratio, the branch with low NPL ratio accounted for only 0.08% of the total outstanding loans, showing that the Branch always ensures the growth target associated with credit quality control

 Service

Towards the operation of a modern commercial bank, the service activities of

So giao dich 1 branch have been focused on developing and there has been a strong and comprehensive development in both quality and quantity, the lines New modern services tend to grow higher than traditional service lines

Net revenue from services has witnessed a remarkable growth, reaching a high profit The proportion of revenue from translation accounts for an increase in the profit of the whole branch, increasing from 19.08% in 2017 to 23.89% in 2019 Details of specific products and services are as follows: