Business development strategy of joint stock commercial bank for investment and development of vietnam chuong duong branch in period 2017 2020

I am also grateful to Joint Stock Commercial Bank for Investment and Development of Vietnam - Chuong Duong Branch BIDV Chuong Duong for their support in my research and data provided for

Master’s Thesis

Business development strategy of Joint Stock Commercial Bank

ACKNOWLEDGEMENTS

I assures that this thesis is the researching work of myself The data of organizations and individuals are referenced and used as prescribed The result presented in this project is honest and has not been published in any public works

I would like to thank Nantes University of Nantes and International School - Vietnam National University, Ha Noi for giving me and my classmate opportunity to participate in this course The staffs of ISVNU have dedicated to support organizing activities, facilities, and help us during the course In addition, the course is designed

in a reasonable way so we are acquired a lot of knowledge, relationships and opportunities to share informations and learn from the experiences of fellows in programs

I would like to show our appreciation to all lecturers and coordinators in the program for their sharing of academic knowledge and practical experiences, methods

of assessment, as well as problem solving skills needed during the course for me to be able to complete this cohort Thanks for the suggestions lecturers gave us in the time

of doing research

I am also grateful to Joint Stock Commercial Bank for Investment and Development of Vietnam - Chuong Duong Branch (BIDV Chuong Duong) for their support in my research and data provided for their favorable conditions, cheers, encouragement and help me during the process of cohort to have good results in this graduation thesis

To complete this assignment, I will not avoid the shortcomings I look forward to the opinions from the advisor, lecturers and classmates to complete this study and make contribution to business development strategy of Joint Stock Commercial Bank for Investment and Development of Vietnam - Chuong Duong Branch in the future

Sincere thanks!

TABLE OF CONTENT

TABLE OF CONTENT 3

INTRODUCTION 6

CHAPTER 1 THEORETICAL BASIS FOR BUILDING BUSINESS STRATEGIES 10

1.1 Overview of Strategic Management 10

1.1.1 The concept of strategy 10

1.1.2 Business Strategy and the strategy selection 10

1.1.2 The basic features of the business strategy Error! Bookmark not defined 1.2 Strategy Planning Error! Bookmark not defined 1.2.2 Analysis of the external environment Error! Bookmark not defined 1.2.2.1 Macro Environment Analysis - PEST model + + 14

1.2.2.2 Analysis of the industry and competitive environment 18

1.2.2.3 Analysis of competitors Error! Bookmark not defined 1.2.3 Analysis of the internal environment 23

1.2.4 SWOT matrix 24

1.2.5 Selection strategies through QSPM matrix 25 CHAPTER 2 BUSINESS ENVIRONMENT ANALYSIS OF JOINT STOCK COMMERCIAL BANK FOR INVESTMENT & DEVELOPMENT OF VIETNAM-

CHUONG DUONG BRANCH (BIDV CHUONG DUONG)Error! Bookmark not

defined

2.1 Overview of Joint Stock Commercial Bank for Investment & Development of

Vietnam- Chuong Duong Branch Error! Bookmark not defined 2.1.2 The principal business activities of BIDV Chuong Duong Error!

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2.1.3 Organization struture of BIDV Chuong DuongError! Bookmark not defined

2.1.4 Some business operation indicators of BIDV Chuong Duong Error!

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2.2 Analysis of the external environment 30

2.2.1 Analysis of the macro environment (PEST) 30

2.2.1.1 Politics - law environment (P) 30

2.2.1.2 Economic environment (E): 31

2.2.1.3 Cultural environment - social (S) 32

2.2.1.4 Environmental technology (T): Error! Bookmark not defined 2.2.2 Banking industry analysis (Five Force) Error! Bookmark not defined 2.2.2.1 The power of customer Error! Bookmark not defined 2.2.2.2 The power of suppliers Error! Bookmark not defined 2.2.2.3 The potential competitors Error! Bookmark not defined 2.2.2.4 Threat of substitute products Error! Bookmark not defined 2.2.2.5 Existing competitors Error! Bookmark not defined 2.3 Analysis of internal environment of BIDV Chuong DuongError! Bookmark not defined 2.3.1 The supporting activities Error! Bookmark not defined 2.3.1.1 The organizational structure and human resourcesError! Bookmark not defined 2.3.1.2 Technology and equipment systems Error! Bookmark not defined 2.3.2 Analysis and evaluation of business operations BIDV Chuong Duong Error! Bookmark not defined 2.3.2.1 Financial Capacity Assessment Error! Bookmark not defined 2.3.2.2 Marketing and sales activities of BIDV Chuong Duong Error! Bookmark not defined 2.3.2.3 Management activities in BIDV Chuong DuongError! Bookmark not defined 2.3.2.4 Risk Management Error! Bookmark not defined CHAPTER 3IMPLEMENTATION SOLUTION FOR SELECTED STRATEGY 62

3.1 BIDV Chuong Duong’s Strategic development orientation until 2020 Error!

Bookmark not defined

3.1.1 Vision Error! Bookmark not defined

3.1.2 Mission Error! Bookmark not defined 3.1.3 Core values Error! Bookmark not defined 3.1.4 Motto of operations Error! Bookmark not defined 3.1.5 Target customer segment Error! Bookmark not defined 3.2 SWOT matrix for BIDV Chuong Duong Error! Bookmark not defined

3.2.1 Strategy 1: Differentiation in terms of service quality (SO-01) 66

3.2.2 Strategy 2: Focus on the exploitation of the customer resource from the strategic shareholder (SO-02) Error! Bookmark not defined 3.2.3 Strategy 3: Finding strategic investors which are large international financial and banking corporations to make use of their brands, management capability and so on to improve the competitiveness (SO-03).Error! Bookmark not defined 3.2.4 Strategy 4: Restructuring to reduce the bad debt ratio (ST-1) Error! Bookmark not defined 3.3 Selecting business strategy for BIDV Chuong DuongError! Bookmark not defined 3.4 BIDV Chuong Duong’s strategy implementation roadmapError! Bookmark not defined 3.5 Solutions and budget planning for BIDV Chuong Duong’s strategy implementation Error! Bookmark not defined 3.5.1 Bad debt treatment Error! Bookmark not defined 3.5.1.1 The specific solutions 71

3.5.1.2 Incentive and reward schem Error! Bookmark not defined 3.5.1.3 Developing good customers 73

3.5.2 Budget planning……… 73

CONLUSION 82

REFERENCE………83

2.3 The basic data operations of the competition in 2014 40

2.5 Evaluation of the impact of external factors on BIDV Chuong Duong

2.8 Summary of main business operration indicators 55 2.9 Summary of some bad debt customers in BIDV Chuong Duong 57 2.10 Summary of strengths and weakness of BIDV Chuong Duong 63 2.11 Matrix of assessment of environmental factors within the

3.12 Quantitative Strategic Planning Matrix for BIDV Chuong Duong

3.13 Financial indicators of BIDV Chuong Duong in 2017 – 2020 75 3.14 Strategy implementation roadmap and budget planning 79

INTRODUCTION The reason for topic selection

In recent years, the financial industry in Vietnam has been impacted by the introduction and development of domestic and foreign banks That rapid development

of the banking system makes operation of banking sector more difficult and intensely competitive, especially in the two big cities, Hanoi and Ho Chi Minh City

In fact, from late 2015 until now, the banking industry is in extremely difficult situation because of the bad impacts of the world economy crisis in general as well as the economic situation in Vietnam in particular that lead to the loss of liquidity, higher bad debt, high potential loss of capital, professional ethics harm and inconsistent regulations with the growth of the market They are main causes that affected the operation and effectiveness of the banking sector and Joint Stock Commercial Bank for Investment and Development of Vietnam – Chuong Duong branch is not exception

Joint Stock Commercial Bank for Investment and Development of Vietnam – Chuong Duongbranch is a business unit of Joint Stock Commercial Bank for Investment and Development of Vietnam, over the years has constantly improved and made efforts to penetrate to local area to survive and develope in accordance with the strategy and direction of the system

Stemming from mentioned fact in combination with the knowledge learned from the program Master of Finance-Banking-Insurance (Southeast Asia), through University

of Nantes FBA program, practical experience of myself, all reference materials, and opinions from fellows and economists, I would like to choose the research topic

"Business development strategy of Joint Stock Commercial Bank for Investment and Development of Vietnam – Chuong Duong branch in period 2017 – 2020" (Hereinafter

referred to as “BIDV Chuong Duong”)

Objectives of the study

This study aims to build business strategy for specific BIDV Chuong Duong with following detailed objectives:

 Identify strengths, weaknesses, opportunities faced by BIDV Chuong Duong ;

 Assess the strategic position of BIDV Chuong Duong to build competitive position of BIDV Chuong Duong compared to competitors, other bank branches, in Hanoi

 Develop business strategy for BIDV Chuong Duong in next period 2017-2020

On this basis, I will use rationale for strategy and business strategy and application

of the model for construction, planning and strategy analysis in case of BIDV Chuong Duong As a result, the study offers recommendations for BIDV Chuong Duong in choosing business strategy and successful implementation such strategy

Methodology of the study

The thesis uses the following methods:

 Qualitative method for case study of BIDV Chuong Duong

 Data: Primary (expert opinion .) and secondary (from other sources such as journals, banking statements, statistical report, internet )

 Method for data collection: direct interviews of leading experts and opinion gathered through interviews and surveys to collect opinions of experts currently working in mother bank BIDV and experts in banking sector (specialists in policy, strategy, risk management )

 Specific method: On the basis of information obtained from the survey interviews, data associated with the financial statements, business plans of BIDV Chuong Duong against the competitors in Hanoi and publications on socio-economic situation of Vietnam I have applied the methods and tools learned in FBA course – University of Nantes

Scope of the study

This study just focuses on analysis, contribution for business strategy of BIDV Chuong Duong

I focus on data analysis of BIDV Chuong Duong and competitive branches of other banks in Hanoi for comparision combined with data from the State Bank of Vietnam detailed for Hanoi area These data can be obtained from 2014 to 2016 And the scope

of this study just could be applicable in one particular bank branch

Significance of the study

- Apply theories learned in the FBA program – University of Nantes to build the business strategy with specific cases of BIDV Chuong Duong

- Build and develop a business strategy suitable for BIDV Chuong Duong to maximize the strengths of BIDV Chuong Duong , take advantage of market opportunities (focus resources towards best chance of the market)

- Become reference to other studies

Limitations of the study

- This study focuses on building and developing business strategies for BIDV Chuong Duong so all conclusions drawn as well as the strategy selection applied only to BIDV Chuong Duong

- It’s required additional research to apply the conclusions or strategies for other sectors or other companies

The structure of the study

Introduction

Chapter I: Rationale for business strategy construction and selection

Chapter II: Analysis of the business environment for BIDV Chuong Duong

Chapter III: Business strategy development and selection as well as implementation

solutions applicable for BIDV Chuong Duong

CHAPTER 1 THEORETICAL BASIS FOR BUILDING BUSINESS STRATEGIES

1.1 Overview of Strategic Management

1.1.1 The concept of strategy

The term "strategy" is derived from the Greek word "Strategos" used in the military, according to Von Clausewitz Calr, 19th century "war planning and the formulation of campaign strategy." Since the '60s of 20th century, the strategy can be applied in the field of business and the term "Business Strategy" was born The concept of business strategy developed over time and was approached in different ways

Today, the concept of strategy is used popularly and considered the foundation for the operation of the business There are many concepts of strategy as:

"The strategy is to identify goals, long-term underlying purpose of the business and the application of a sequence of actions as well as the allocation of resources needed to implement this goal" (Chandler, A (1962) Strategy and Structure Cambrige, Massacchusettes MIT Press)

Strategy is the model for the targets, intention and plans to achieve those goals

(Kenneth, 1965)

"Strategy is the pattern or plan to integrate the major goals, policies, and action sequences into a cohesive whole is a coherent way" (Quinn, J., B 1980 Strategies for Change : Logical Incrementalism Homewood, Illinois, Irwin)

Johnson and Scholes define strategy in the environment having a lot of rapid change: "Strategy is the direction and scope of an organization in order to gain long-term competitive advantage for the organization through the format of its resources in

a changing environment, to meet market demand and to satisfy the expectations of stakeholders "(Johnson, G., Scholes, K (1999) Exploring Corporate Strategy, 5th Ed Prentice Hall Europe)

In summary, whatever the way approached, the nature of the business strategy is sketching future picture of the business in its region and the ability for the organization to achieve certain goals

1.1.2 Business Strategy and the strategy selection

Business strategy is:

- The most important part of the whole strategy of the business

- The direction of the business operations

- The major targets for businesses

Business strategy is the way or methods of business in competition, it specified products and services that businesses produce or render; scale and resource for production; profitability and growth prospects of business

Business strategy is the most important part of the whole strategy of the business Other parts of the overall strategy must be based on the business strategy to build and calibrate

Business strategy is extremely important for the existence and operation of the business It sets out the key objectives, which help to mobilize both short and long term resources It ensures all plans are not misleading A good business strategy helps the business get more profit, set a stable position in the market and proactively adapt

to the environment So the enterprise needs to build a business strategy suitable with each condition and circumstance This is a necessary requirement for any enterprise

The advantage of the business strategy: the strategy can be considered as a

combination of business environment, capacity as well as targets of the business In other words, in the life of the business, strategy is one kind of art relating to designing and organizing all resources to achieve long-term goals (i.e economic objectives), the relationship with a changing and competitive environment

Strategy identification is a vital task for the survival and development of all enterprises as the enterprises need to know about business environment in order to survive and thrive in the market economy

The strategy is interpreted as a comprehensive plan of business It lays out the development trend in the long run, draws out key objectives of the company, outlines the basic resources and suggests ways to deal with uncertainties of businesses in a competitive environment Following that, the strategy is a basic and radical plan with defined tasks (positioning) the resources, create a united resource to focus on the target and utilize the power of the organization to implementation of that goal

Competitive strategy helps businesses capture market opportunities and create a competitive advantage by applying the limited resources of the business in an

effective method to achieve targets and forces businesses to consider and determine the direction for operation

The business environment changes rapidly and creates opportunities and risks in the future (business strategy will help businesses better to leverage opportunities and reduce risks related to the business environment)

Business strategies help businesses better to prepare and deal with all the market movements

Business strategy also helps to reduce the risk and enhance the ability take advantage of emerging business opportunities

The basic features of the business strategy

Business strategies often determine the basic objectives and direction of the business in each period and fully applicable in all aspects of the business operations to ensure the continous development and stability (greater than 1 year)

- Business strategy to ensure to mobilize and combine the exploitation and utilization of enterprise resources in the present and future, promoting the advantages and seize the opportunity to gain commercial advantage in the market

- Business strategy must be reflected throughout a continuous process from strategy construction, implementation, testing, evaluation and adjustment

- Business strategy must be set to gain the advantage position in the market (to utilize all the advantages to win)

- Business strategies are usually built for a relatively long period (3 years to 5 years) and tend to shorten down depends on the characteristics of each industry Basic task of the business strategy is that the strategic managr must address three following issues:

+ Who will be the subject of the business?

+ Which demand will be met?

+ How will above demands be satisfied?

1.2 Strategy Planning

1.2.1 The process of strategy development

Diagram of business strategy development process

Strategic goal, vision & mission

The strategic goal (SMART goal)

The building of the strategic goals of the business is extremely important asthey are goals for the enterprise to achieve and measure the completion of the target so the business could allocate adequate resources Thus each strategic goal should have the following characteristics:

- Should be specific accuracy (Specific)

- Should be measurable (Measurable)

- Must be challenging but can be done (Achievable)

- Should be directed to the important issues, result-oriented (Relevant)

- Should specify a period of time can be achieved (Timed)

SMART is the acronym for the interesting set of criteria that a viable target goals that

have to be done

Vision (Vision)

All business and organization have their unit's vision which presents the principles and long-term oriented operation of the business The objective of the business from time to time may change, but the vision, principles of business should

The Strategic Management Process

External environment

Internal environment

Group level strategy

Global strategy

Collaborati

on strategy M&A

Enterprise Management Structure and Supervision

Leadership strategy

Start-up and Innovation

Feedback

Competition strategy with profit above average level

be oriented for long-term period and must be disseminated throughout the enterprise for each member to understand, be proud of and implement in the business operation All of these constitute what we call business cultural

Vision statement is a message specifying the mission into a highly motivated target, highlighting the need for improvements that are vital for businesses, creating

the confidence in the future and aming to make the impossible possible

 Mission (mission)

A strategic plan starts with a defined mission of the enterprise According to Mintzberg: "The mission presents basic functions of an organization in the society in terms of goods and services that organization serving its customers."

Mission statement is the message embodied in the core values of the business

It expresses the important contribution of business to the society, it is the motto of the business and shown location of the business in the marketplace and especially presented what business commitments Mission statement is often concise but meaningful, highly motivated and shown the long-term stability

1.2.2 Analysis of the external environment

To provide strategic business feasibility, after identifying business goals, enterprises must conduct analysis and evaluation of the influence of external environmental factors to the implementation of the goals

Business activities are in connection with a specific environment consisting of many factor affecting the business activities such as: macroeconomic, legal, cultural, technology, micro elements (environment sector), competitors

1.2.2.1 Macro Environment Analysis - PEST model + +

In fact, all industries and businesses operate in the macro environment including economic, technological, cultural, social, demographic, political, legal and international factors The changes in the macro environment can directly impact any particular force in the industry, which may affect relatively to other forces and to itself also, eventually change the attractiveness of an industry The scope and content of environmental analysis including: analysis of the macro environment and analysis of micro environment, also known as the industry environment

Page 15

The scope and content of environmental analysis, including: analysis of the macro environment and micro environment analysis, also known as the industry environment

In this content, I would like to introduce 3-level analytical model applicable for inside and outside enviroment:

Source: Lecture note for

Strategy management at NEU

Economic environment (Economic)

In every country, macroeconomic situation presents how healthy and prosperous the economy is and always causes impacts to businesses and industries Enterprises need to study it to predict changing trends which affect the business and industry

There are four important factors of the macro-economic environment that businesses need to consider: economic growth rate (GDP), interest rates (Interest), foreign exchange (Exchange rate), inflation (inflation)

Analysis of the economic environment evaluates factors affecting supply and demand

of products and services, evaluate the movement of such factors and is expected to draw the market demand and supplying ability of the business for the study period

Politics– legal enviroment (Political)

Any countries or territories are under certain political conditions so legal and politics factors also have major impact on the opportunities and external challenges to the business This is the way businesses can influence government, and conversely

Econ omy

Poli tic /Leg

al issu

es Te

ch nol og

y

Interna tional enviro ment

Culture /Social issues

Populati

on /Labour force

Potentia

l competi tor Suppli

er omer Cust

Current competit

or

Alterna tive goods

Comp any

how government affects them The coutinous change of this factor significantly affects competition

Cultural - society enviroment (Social)

The cultural factors - such as social habits, customs, concepts, consumer trends, ethics, aesthetics, cognitive are usually long-term and more subtle than other factors

so sometimes even hard to recognize In other hand, the impact of cultural factors is often in a large scope: "it determines how people live, work, produce and consume products and services" It creates habit in consumption, basic demands and affects the way business operating or supply The understanding of cultural - society enviroment is very important for the manager in management of organization

Technology environment (Technology)

Technology changes can create new products, increase productivity and meet increasing demands, make existing products may be obsolete overnight, and create a series of new products Thus, technological change includes creation and destruction, both opportunities and challenges

Therefore, the analysis and forecasting of technological change is very important and urgent than ever The emergence of electronic, information technology, and biotechnology is a typical example In fact, technological change affects business

in many aspects, including price, market supply and demand, and even change consumer behavior or production Managers need to pay constant attention to technology changes as well as investment in technological advances

The natural environment and demographics (+)

Climate and ecological factors are what businesses also need concern because they also change the factors related to production and consumption Today, climate changes not anticipated such as warming of the earth, elnino, etc, sometimes threat businesses with seasonal cycle

Global environment (+)

The developing trend of globalization: Globalization is the process of forming

an unique world market, the global financial system, expand economic and science - technology exchanges between countries and solve the political problems in the whole world Globalization creates conditions for economies to develop, promotes the exchange of goods, services, capital and labor

I could summarize the macro environment analysis in the following table:

Political

Political Stability Antitrust law, priority sectors Taxaion law

The philosophy of adjusting labor laws

Policy and educational philosophy

labor laws Policy and educational philosophy

Economic

inflation rate interest The trade balance State budget balance

Individual savings rate The corporate savings GDP

Changes of product concept

Distribution of income

Communities Distribution of income

Global

environment (+)

Important political event The global market The accession to WTO

New industrial countries The difference of culture and

institutional characteristics

Conclusion: The main objective of the macro environment analysis is to

identify the changes, the trend expected from the factors of the external environment With the focus on issues in the future, the analysis of the external environment allows enterprises to realize real opportunities and challenges to the business

1.2.2.2 Analysis of the industry and competitive environment

To build a business strategy, one important point is that the business should be considered in relation to operation environment correlateing to the business, analyzed and forecasted competitive forces in the industry to identify opportunities and challenges for enterprises

To see clearly the image of competitive pressures of the industry, we need to apply the model 5 forces of Michael Porter

5 forces model of Michael E Porter

Michael E Porter, a professor at the Harvard School of Business Administration, has a framework to help managers identify the opportunities and risks that businesses face in one industry (Michael E Porter, Competitive Stratery, New York : Freepress, 1980) Framework of Michael E Porter called five forces model of competition, is shown in the following diagram:

M.Porter pointed out that the stronger the force, the more limited the ability of existing firms to raise prices and get higher profits According to Porter's model, a strong competitive force can be considered as a threat, because it would reduce

Risk from potential competitors (2)

Competitive pressures from existing competitors (1)

profits The strength of the five competitive forces can change over time, as industry conditions change

The task set for the administrators is to be aware of the opportunities and risks brought by changes of five competitive forces to set up corresponding strategy Moreover, it is likely the chance to a business through strategy selection shifting the power of one or more competitive forces to advantages for its own organization

(1) Competitive pressures from existing competitors

The scale of competition existing in the same industry: the weaker the competitors, the more opportunities to increase sales and earn profit and vice versa, when the current competition goes from a stronger competitor, the competition on price is significant, and all about price competition leads to injuries Thus, the intensity of competition between firms in the same industry creates huge challenges with profitability

(2) Risk from potential competitors

The enterprises will enter the industry in the future and also become competitors (potential) are also considered as significant competitive force, and it is called potential competitors This is the business currently operate in other industries, but competition will be created in case they decide to join the industry This is a great challenge for existing businesses in the industry In general, existing firms in the industry attempts to prevent the attendance of potential competitors into the industry

(3) The power of buyers

In other words, we call it the bargaining power of buyers The buyer of a business may be the end user, the distributor to end users and wholesalers or retails The buyers can be viewed as a challenge as they require for price decreament or higher quality and better service In contrast, in easy buyers, businesses will have the opportunity to raise prices and earn higher profits Buyers can raise their demanding

or not depending on their relative power with the business

(4) The power of suppliers

Although the business is customer of the supplier but bargaining power of suppliers is a competitive force as they now have the ability to raise prices or reduce the quality of products and services they provide which might leads to reduction of sales and profitability of the business Conversely, if the supply is weak, this would

give businesses an opportunity to push prices down and require more for quality improvement Like the buyer, the power of the supplier having against the business depending on the relative power between them

(5) The alternative products and services

One of the competitive forces in Porter's model that challenges or threats from substitute products These products can satisfy the needs of the customer so replace products of the business

Substitutes products are prevailing by its distinct characteristics The existence

of these alternative products is a strong competitive threat, limiting the ability to raise prices high and thus limits the profitability of the business Conversely, if the business has little equivalent alternative product (in case of weak alternative products), and other factors are normal, businesses will gain the opportunity to raise prices and increase profit As a result, its strategy will be designed to gain this competitive advantage

Analysis of industry environment on the basis of 05 competitive forces, shows the attractiveness of the industry in terms of potential earning ability based on full or outstanding capital In general, the stronger the competitive forces the less potential profit for businesses in the industry An unattractive industry has a low entry barriers, suppliers as well as buyers with strong bargaining position, strong threat of competition from substitute products and high intensity of competition in the sector Such features of the industry will cause major difficulties for the business to create new value and make return more than average figure

1.2.2.3 Analysis of competitors

To evaluate the competitiveness of the enterprise on the market, the strategic

manager will use CPM Matrix Enterprise will pick out the key success factors for an organization then select competitors to compare with the score after weighting

To construct a matrix of competition image, 5 steps should be taken:

Step 1: Make a list of 10 factors that influence critically to the competitiveness

of firms in the industry

Step 2: Classification the important level from 0.0 (not important) to 1.0 (very

important) to each factor The importance of each factor depends on the level of the

factors that affect the competitiveness of businesses in the industry The total number

of classifications assigned to the factors must equal 1.0

Step 3: Classification from 1 to 4 for each factor determining the success of the

business based on the assumption how the current strategy of the company respond to this factor As such, 4 is for good reaction, 3 is reacted reaction, 2 for medium reaction medium and 1 is poor response The coefficients are determined by expert method based on the results of business activities

Step 4: Multiply the importance of each factor with its classification to

determine the total mark for that factor

Step 5: Sum of the critical factors to determine the total mark for the

organization (the highest score that one organization can achieve is 4, the lowest average of 1.0 and 2.5 is average)

The result of these factors lets the business know their competitors in terms of their current situations and their positions in the market

From the above transcript, the business could identify its strengths and weaknesses compared to its competitors and thereby overcome the weakness and develop strengths

Matrix of integrated assessment of external environmental fact- EFE

Assessment of external environmental factors is the ongoing process and requires the participation of all administrators and departments The first is to gather sufficient information about environmental factors in the industry and the macro environment, then use quantitative methods (EFE matrix) and the predictability of the business to assess the opportunities/challenges and measure the reaction abilities of the business The process of developing EFE matrix consists of 5 steps:

Step 1: Identify and make a list of 10 to 20 factors (opportunities & threats)

having a crucial role to the success of the company

Step 2: Assess the importance for each factor from 1.0 (most important) to 0.0

(not important) To evaluate the importance of this factor, we rely on impact (extent and duration) of each factor to the current strategic position of the company, the sum mark of all these important factors must be equal to 1

Step 3: Grading each factor from 4 (Highlights - good) to 1 (poor) based on how

the current strategic direction of the company in response to this factor

Step 4: Multiply the importance of each factor with ranking points to determine

the mark of each factors

Step 5: Total mark of all external factors to determine the total mark of the

company Total mark ranges between 4.0 (Good) to 1.0 (Poor) and 2.5 is the average value

Matrix for integrated assessment of external environmental factors (EFE)

Strategic factors (1) Important level (2) Ranking (3) Total mark/factor (4) Note Opportunity

Threat

Total mark 1.0

(Source: Rationale about strategic management – Fred.David)

1.2.3 Analysis of the internal environment

To adapt to the external environment change, the business needs and such changes need to be considered with internal factors within each business The identification of internal strengths and weaknesses help the business to build an effective business strategy The number of internal factors inside the enterprise is huge and diversified Therefore, to evaluate the environment within the enterprise, we need

to point out the major factors in the enterprise which represent the operations inside of the business

Internal factors are very important in every business strategy and business objectives set out After taking into account internal factors, managers need to establish strategic elements matrix to have a close look at the ability to react and recognize strengths and weaknesses That will help enterprises maximize strengths to exploit internal resources and prepare to confront the weaknesses and find ways to improve this weakness IFE Matrix will help this strategy works

IFE matrix could be formed and developed through 5 steps:

• Step 1: Make a list of 10 to 20 elements, including the strengths and weaknesses that

affect the basic operations of the business

• Step 2: Classification importance level from 0.0 (not important) to 1.0 (very

important) to each factor to the success of businesses in the industry Total importance grade of all factors must equal 1.0

• Step 3: Determine the weight for each factor with scale of 1 to 4, where 4 is very

strong, 3 point is pretty strong, 2 point is pretty weak, 1 is very weak

• Step 4: Multiply the importance grade of each factor with its weight to determine the

mark of each factor

• Step 5: Plus all the factors to determine the total mark of matrix

Assessment: in case total mark of matrix between point 1 to point 4, it will not

depend upon the number of factors in the matrix

- If the total mark less than 2.5: the Company has weak internal factors

- If the total mark more than 2.5: the Company has strong internal factors

Matrix for assessment of internal enviromental factors (IFE)

No Main factors Importance level Weight Mark

There are eight steps involved in designing the SWOT matrix

Step 1: List the major opportunities outside of the company

Step 2: List the basic threats outside of the company

Step 3: List the basic strength within the company

Step 4: List the weaknesses within the company

Step 5: Combine the internalstrength with external opportunities and record the results

SO Strategies in the appropriate box

Step 6: Combine the internal weaknesses with external opportunities and record the results WO strategy

Step 7: Combine the internal weaknesses with external opportunities and record the results of the ST strategy

Step 8: Combine the internal weaknesses with external threats and record the results

 ST strategies companies use strengths to cope external threats

 WT strategies to overcome the weaknesses to reduce the risk from outside The most important thing is that the administrator needs to determine exactly where the strengths, weaknesses, opportunities and challenges of the organizations

1.2.5 Selection strategies through QSPM matrix

According FERD R David, QSPM matrix uses input from all matrices introduced in the previous section as EFE, IFE, photo competition, SWOT and key strategies to evaluate the best alternative strategies To develop a QSPM matrix, we need to go through 6 steps:

Step 1: List the opportunities / threats and other important external strengths /

weaknesses within the company Matrix includes at least 10 critical success factors outside and 10 factors inside the company

Step 2: Classification each inside and outside success factors

Step 3: List all the strategic plans that the company considering Gather the strategies

into separate groups if possible

Step 4: Identify the attractions of each strategy Only strategies within a group will be

compared with each other Number attractions are categorized as follows: 1 - Do not attractive; 2 – Little attractive; 3 - Quite attractive; 4 - Very Attractive If the success factors will not be graded if do not affect the choice of strategy

Step 5: Calculate the total number of points, the result of the classification score (step

2) the number of points (step 4) in each row

Step 6: Calculate the total points for each strategy The higher score indicates, it is the

more attractive strategy

CHAPTER 2 BUSINESS ENVIRONMENT ANALYSIS OF JOINT STOCK COMMERCIAL BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM –

CHUONG DUONG BRANCH 2.1 Overview of Joint Stock Commercial Bank for Investment and Development of Vietnam – Chuong Duong branch

2.1.1 General Information

Joint Stock Commercial Bank for Investment and Development of Vietnam– Chuong Duong branch has officially operated since 01 October 2013, it is under the first branch of under the branch of Joint Stock Commercial Bank for Investment and Development of Vietnam, after more than 03 years of operation, BIDV Chuong Duong has been developing steadily and achieving many encouraging results Currently the headquarters of Chuong Duong Branch at 41 Hai Ba Trung street, Tran Hung Dao ward, Hoan Kiem Dist, Ha Noi city The area of BIDV Chuong Duong's operation is mainly in the districts of Hanoi

Starting from 3 saving rooms and an transaction office with 98 employees, transaction points, namely savings and transaction offices and branch offices and 98 employees After more 3 years, BIDV Chuong Duong has been upgraded into 3 transaction offices, increasing the total number of transaction offices is 4 rooms Anh now BIDV Chuong Duong has five transaction offices in Hanoi

The number of employees at BIDV Chuong Duong branch to 31December 2016 up to

105 people with expertise and skills trained in the spirit of professional, honest and friendly customer service

2.1.2 The principal business activities of BIDV Chuong Duong

As a major branch of BIDV, BIDV Chuong Duong offers a full range of products and services of a modern bank BIDV Chuong Duong serves all economic organizations, individual clients in the Hanoi area and other regions of the country where the branch can be managed and monitored

The main products and services:

 Deposits for organizations and individuals

 Loans to businesses and individuals, households

 The domestic and international payment service

 Foreign Exchange and Derivatives

 The trade finance products

 The credit guarantee products

 The international and domestic debit card and credit card

 Funds services, collecting money at the business location

 Cash remittances via Western Union

 The electronic banking services (of Mobile & InternetBanking)

2.1.3 Organization struture of BIDV Chuong Duong

AL MANAGEME

NT

UNIT OF INTERNAL MANAGEME

NT

UNIT OF RISK MANAGEME

NT

Vice Director

Risk manageme

nt division

Individu

al client transact ion division

Manageme

nt and treasury division

UNIT OF TRANSACTIO

N MANAGEME

NT

Transaction offices

General function of the Division

1 Division is the focal point of suggestions, advise and assist the branch’s director in

working out plans, working programs, measures and solutions for the performance of tasks

falling under its assigned functions and tasks, guiding documents , Legislation in the field of

business assigned

2 Actively implementing the assigned tasks; To directly carry out, handle and perform

operations in the assigned field, in accordance with the regulations, competence and

professional procedures, contributing to the fulfillment of business tasks of the entire branch

To take full responsibility for the correctness, accuracy, truthfulness, safety and

efficiency in the scope of the assigned office, contributing to ensuring safety and improving the

efficiency of the whole branche’s operation

3 Work closely with other units in the branch according to business processes; To be

responsible for the comments made by the functions and duties of the Department for Business

and General Affairs of the Branch

4 Organization of archives, management of information (collection, processing,

archiving, analysis, confidentiality, supply .) to synthesize and make reports and statistics

within the scope of tasks of Division in order to to serve the management of the Branch, mother

bank, and the request of the State management agencies

5 Regularly improve the method of working, training, training staff about the style of

transactions, professional skills and professional ethics to improve the quality of customer

service, meeting development requirements Keep prestige, create image, nice impression about

Branch / BIDV Researching, proposing to improve the application of information technology

to the assigned management Regular self-examination of the performance of assigned business

6 Building solid collective, solidarity, complying with labor rules, collective labor

agreement, participating in emulation movements, contributing to building strong branches To

well train the staff of the Divisions to contribute to human resource development of the branch

2.1.4 Some business operation indicators of BIDV Chuong Duong

Table 2.1: Some key indicators of BIDV Chuong Duong in period 2014-2016

Unit: VND billions

Indicator 2014 2015 2016

2.2 Analysis of the external environment

2.2.1 Analysis of the macro environment (PEST)

2.2.1.1 Politics - law environment (P)

In recent years, especially two years ago, the world economy and domestic economy faced many difficulties, the country faces a number of problems existing for

a long time such as high inflation rate, high interest rates, high production stagnation, many businesses shut down, dissolution, bankruptcy, purchasing power declining market, the inventory at a high level; real estate market freeze, bad debts tend to increase In this context, the State Bank has been very active in operating the tools

of monetary policy on the basis of strict monitoring of macroeconomic variables to stabilize the currency market

The promulgation of Decree 24 has handled the shortcomings, limitations of mechanisms and policies to manage the gold market provided by Decree 174/1999/ND-CP in context of the instable macro-economic and volative price of gold Decree 24 has created a new legal framework for the management of gold trading activities, gradually organize the operation of gold market, especially gold piece market to stabilize the gold market

The State Bank issued Circular 02 providing regulations for loan classification and provision of the organization in the tightening direction compared with Decision No

493 and Decision No 18 amending Decision No to help credit institutions in rehabation and handling bad debts However, to support credit institutions and enterprisesSBV has delayed the effective date of Circular 02 from 06.01.2013 to 01.06.2014 is to create conditions for enterprises to approach loans, enhance credit activities in the economy, create the reasonable interest rates and solve difficulties for business, while also helping credit institutions have enough time to prepare and build implementation schedule to follow full terms of Circular 02 and implement solutions to reduce bad debt, improving credit quality

According to my opinion, public policy is not really stable, change frequently and applicable for short-term that make difficulties and challenging for organizations to adapt

2.2.1.2 Economic environment (E):

Year of 2014 took place in the context of the world economy slowly recovered after the global recession The largest economy development towards accelerating growth but there are many risk factors in adjusting monetary policy Business production is under pressure from the economic and political uncertainties of the world market, coupled with the difficulties from previous years have not been resolved thoroughly as the pressure on capital absorption capacity of the economy Not high; Bad debt pressure is heavy; Slow domestic consumption; Management capacity and competitiveness of enterprises are low In that context, the Government and the Prime Minister issued many resolutions, directives and decisions aimed at stabilizing the macro economy, removing difficulties and improving the business environment, creating growth momentum, ensuring Social security work Banking activity in 2014 continues to face difficulties: bad debt ratio has declined but still high, the quality of credit has not been as expected However, the targets achieved in the past year show certain advances in the implementation of the bank's monetary policy: Total liquidity as of December 22, 2014 increased by 15.99% Compared with December 2013 (the same period in 2013 increased by 16.13%); Credit for the economy increased by 12.62% (same period of 2013 increased by 12.51%); Fund mobilization increased by 15.76% (same period in 2013 increased by 17.23%); High foreign exchange reserves; Exchange rates are controlled within the band

The economy of 2015 took place in the context of uncertain global markets, the world economy still faces huge risks with unpredictable factors

Gross domestic product (GDP) in 2015 is estimated to increase by 6.68% compared to

2014, of which the first quarter increased by 6.12%; Second quarter increased by 6.47%; Third quarter increased by 6.87%; Fourth quarter increased 7.01% This year's growth rate is higher than the target of 6.2% set and higher than the increase of the years 2011-2014 [1], showing a clear recovery of the economy In the 6.68% increase of the economy as a whole, agriculture, forestry and fishery increased 2.41%, down from 3.44% in 2014, contributing 0.4 percentage point to the increase general; The industrial

and construction sector increased by 9.64%, much higher than the 6.42% growth of the previous year, contributing 3.2 percentage points; The service sector increased by 6.33%, contributing 2.43 percentage points

Up to December 18, 2015, credit growth reached 17.02% compared to the end of

2014, the highest increase since 2011; Capital mobilization of credit institutions increased 13.49%; Total payment means increased by 13.6% The liquidity of the commercial banking system has been further improved, ensuring the payment and payment capacity of the system, contributing to controlling inflation and stabilizing the macro economy The average exchange rate of the Vietnamese dong against the

US dollar remained stable after fluctuations in mid-August 2015

In 2016, the total means of payment increased by 16.47% over the end of 2015 (same period last year increased by 13.55%), although higher than the same period but the total means of payment has not put pressure on Inflation, basic inflation stable At the same time, capital mobilization of credit institutions increased 16.88% (the same period in 2015 increased 13.59%), helping credit institutions to stabilize liquidity, ready to meet the demand Credit to the economy and secure credit / deposit ratio; The credit growth of the economy was 16.46% indicating that the capital absorption capacity of the business was relatively good and the bank's interest income improved positively

Currently, deposit rates are relatively stable Interest rates in VND are common at 0.8% -1% pa for demand and time deposits of less than 1 month; 4.5% -5.4% pa for term deposits from 1 month to less than 6 months; 5.4% -6.5% pa for term deposits from 6 months to less than 12 months; Terms over 12 months at 6.4% -7.2% per year The common lending rates in priority areas are 6% -7% pa for short, 9% -10% pa for medium and long term Interest rates for normal business lines are 6.8% -9% pa for short term; 9.3% -11% pa for medium and long term In general, the credit structure is continuing to focus on priority areas such as agriculture, exports, supporting

industries, small and medium enterprises to effectively support economic growth

2.2.1.3 Cultural environment - social (S)

Hanoi is the capital of Vietnam with an area of 3328.9 km and also has the second largest population of over 7 million people Administrative organizations are allotted across 10 districts, 01 town and 18 district suburbs The average income level

of Hanoian in 2014 was 46.6 million/capita/ year, increasing 4.7 million compared to

2013, GDP growth was 8.2% lower than the set target of 10%

Hanoi area is a convenient location with road traffic system, maritime, river and air modernization therefore very favorable for the development of cultural and trading domestic and abroad Due to above favorable conditions so cultural activities, social activities, health and education centers, commercial centers, headquarters of many organizations are all located in Hanoi and create a vibrant and active environment

In 2015, the growth of Hanoi is 9.24%, higher than in 2014 (8.8%); 17/20 reached and exceeded the plan; Interest rates fall; Capital mobilization and credit debt surges; Inflation is controlled Budget revenue is estimated at 146,585 billion VND, gaining 103.5% of the estimate; Mobilize more social investment

In 2016, the total circulation of goods and services of social consumption of Hanoi reached 2.131 trillion, up 10% over 2015 Exports reached 10.613 billion USD, up 1.3% over the same period, Of which, local exports reached 8.1143 billion US dollars, up 1.5% Investment capital in the city of Hanoi in 2016 reached 277,950 billion, up 10%, of which capital from local state budget managed 31.687 billion, up 45.9% compared with the same The focus is on speeding up key projects and will continue to increase in 2017

With these advantages, 2017 will be the year of the strong, comprehensive and synchronous movement in terms of awareness and action of the entire Party, government, business community and people in the capital To create an investment and business environment conducive to the Capital's economic development, both in quantity and quality, and to increase the technology content

of each product; Promote the export of services and focus more on the comparative advantages that Hanoi owns

BIDV Chuong Duong has grasped the strengths that have planned to develop the network around the city over the years so far BIDV Chuong Duong has 5 transaction points in the city and the direction of development in the coming time will Expanded to meet the needs of customers using the products and services of BIDV Bank

BIDV Chuong Duong is concentrating in the market trends and consuming habits of the people in the area:

 People have the habit of using cash in transactions and are afraid or scared

of expanding business by loans or external funding so they do not use much products offered by banks

 In case need fund to finance for their needs, they ofter ask from the relatives

in stead of approaching the bank because the administrative procedures is a major barrier to access to bank

 The customers in high age are afraid to use the advanced of the modern technology in payment so it is difficult to diversify products used by these customers But young customers tend to use payment cards so this is an opportunity for banks to locate the product strategy for the younger generation in the future

In summary, it can say that the cultural-social environment of Hanoi is very convenient for the development of banking industry but the bank must also strengthen risk management, promote the communication, improve service quality, increase awareness and build the trust from people with the bank

2.2.1.4 Environmental technology (T):

Hanoi is the capital so it is also the center of economic, cultural, social, activities with concentration of intellectuals, civil work, offics, students and youth That will be an opportunity for banks in Hanoi to apply modern banking services such

as e-banking, mobile banking, internet banking

In banking industry, information technology has been widely used in business such as the use of core banking software (CORE BANKING, card systems, ATMs, electronic payment systems The acquirement and application of new technology in banks in Vietnam are very high and the awareness of bankers increased should be advantageous for technology development in banks However, such technology still depends on overseas sources so the costs are high which push the cost of IT investment in banks rising

Conclusion: There are following opportunities and challenges drawn out from

analysis and evaluation of macro environment via PEST model:

Opportunity: The political stability, complete legal system, the appropriate

monetary policy will impact positively on the economic development of a country Those policies reflected in the activities of the banking system

So the restructuring of the banking system and business will create good conditions for good credit institutions and enterprises which have abilities to adapt with the environment The development of economy will be under the control of the state bank

Challenges: legislation system is not really complete and consistent with the

international standards and practices

The imbalance of macroeconomic, trade deficit and instable inflation rate increases risks to economic activities and threatens the banking system, especially bad debts in the bank In order to restructure the banking system and stabilize national economy, we need to remove all the weaknesses including the SOEs to build a strong and efficient economy

2.2.2 Banking industry analysis (Five Force)

Table 2.2: 5 force analysis of M Porter applicable with banking in dustry in

Vietnam

2.2.2.1 The power of customer

Based on existing customers and potential customers, we can classified into following main groups:

Risk from potential competitors

- Foreign banks

- Domestic banks intented to

be established -Interbank payment organizations

Competitors in the same

industry:

- State Owned Banks

- Joint Stock Banks

- Foreign Banks

Alternative products:

-Financial companies, Funds, Social funding

- Securities companies, Gold and gem companies

- Payment services

Buyers

- Attractive price offered by other banks

- Atractive products offered by other organizations

- Enterprises: The power contractors, SME customers having loans, deposits and using, payment service and other banking services in many areas These customers are relatively loyal and have potential usage of various services

- Individual clients include:

+ Officers, employees and workers of the power companies, companies and organizations having long relationship with BIDV Chuong Duong and paid salary through the card system of BIDV Chuong Duong as Tran Anh, Dong Anh Mechanical Engineering, branches of EVN in Hai Ba Trung districts These customers having good relationship with branch will be a customers database for BIDV Chuong Duong

to mobilize cheap deposit and cross-sale other products and services for individuals

+ Households and traders having business operation in Hanoi area BIDV Chuong Duong always identify market segments according operating area, industry to manage and develop customer base in a effective way, for instance with customers of the traditional villages such as Bat Trang pottery, kneeling gold, silver, leather Kieu

Ky, Le Mat Snake Village, customers in the petroleum sector, ticket agents and consumer goods

+ The number of current customers consists of 20,000 individual customers and households, 4,000 corporate customers However, But the actual number of regular transactions is 250 There are only 20 large corporate customers and 420 VIP individual customers has brought about 70% of the profits for BIDV Chuong Duong such as Lifestyle Joint Stock Company, Viettel Corporation, State Capital Investment Corporation (SCIC), Thai Thanh An Company, Union University) and other individual customers with home loans, business loans more than 5 billions

+ Currently, BIDV Chuong Duong serves 1,357 individual borrowing customers (excluding 1,000 customers using credit cards), and 562 corporate borrowing customers Overall, the growth of number of borrowing customer remains low The power of borrowing customers at BIDV Chuong Duong is higher than other State Owned Banks but lowers than that of other Commercial Banks The advantage

of good source of short-term source and qualified services have help BIDV Chuong Duong to approach large corporate customers and individuals having demand for banking products and services

+ BIDV Chuong Duong’s mobilization of fund from the residential areas, from businesses, organizations, financial institutions and directly affected by such customers The power of such customers with the bank is relatively strong because the bank exist and grows on the basis of mobilization The risk relating to the change of bank of customers is relatively high due to the sensitivity of interest rates and the flexibility of the term deposit

2.2.2.2 The power of suppliers

+ The suppliers of transmission and technology equipment: Although the market has a number of vendors, but the technology and transmission equipments of BIDV Chuong Duong is mainly provided by strategic partner of BIDV: Vietnam Posts and Telecommunications Group (VNPT) This co-operation brings benefits to both parties Currently, the branch is also quite dependent on this provider Dependence level: medium

+ The suppliers of management software: BIDV Chuong Duong totally depends on the management software of the head office BIDV in generai and BIDV Chuong Duong in particular - both use the system with core software program - Silverlake (SIBS), an online system helping information processing safety, quick, and accurate

+ The leasor of office and branch: office leasing market with office facilities suitable with the bank's operations (such as position, premises, infrastructure ) at a reasonable cost and term is relatively limited so the power of suppliers is big It is relatively difficult for the branch to find new premise as well as expand transaction network

+ The service supplier such as warranty and maintenance of computer equipment, software copyrighted by Micorsoft is CMC – BIDV’s shareholder, and Lantabrand interior designing company create images for BIDV system These suppliers had relationship with BIDV from the first time of the bank and always give the best benefits to BIDV compared with other competitors, otherwise BIDV do not use

their services any more so the power of these suppliers is moderate with BIDV

2.2.2.3 The potential competitors

Barriers to the panatration of new banks from domestic is heightened after the government suspended to license for new banks establishment since May 8/2008 as

well as requirement for restructuring the banking system The potential competitors of BIDV Chuong Duong mainly come from the movement and new establishment of new transaction offices or Headquarter of commercial banks in the region that BIDV Chuong Duong located

Besides, according to the WTO commitments, the banking sector will be gradually opened so the number of banks with 100% foreign investment will increase in the future Foreign banks with market experience, strong capital, technology, management will be main competitors for BIDV Chuong Duong

2.2.2.4 Threat of substitute products

- A place for receiving salary (wages, benefits, pensions )

- A place to keep money (savings )

- A place to make payment

- A place to borrow money

- A place for remittance activities

The finance companies, financial leasing, credit funds with products similar to the bank including loans, deposit, retail banking …

The securities companies, fund management companies, Gold exchange companies: more than 100 companies of this kind with a large base of customers also having products that can replace banking products such as repo, and trustee services other consulting services

The type of credit funds, bank policy

The other informal forms: Retail installment, spontaneous lender …

The company made the payment service: VNPOST, PayNet, VNPAY This is

a new type business based on technology and also considered as alternative products

The private gold stores, pawn, credit union funds

For corporate customers, the risk relating to replacement is not very high due to these customers require clarification as well as adequate set of invoices, bills If trouble occurs, the customer tends to switch to another bank instead of looking to services outside the bank

For individual customers, the risk relating to replacement is very high because

of the inconvenience from payment process and cash preference so they want to keep and use cash rather than banking services Even at the supermarket, consumers have to