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GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT FORMULATING BUSINESS STRATEGY FOR MARITIME BANK FROM 20202025 TABLE OF CONTENTS List of abbreviations List of table List of figure Introduction INTRODUCTION Chapter I: 11 Theory 11 1.1.Definitions, related concepts and steps to build strategic management: .12 1.1.1.Definitions and the processes of strategic management 12 1.1.2.External Environment Analysis 14 1.1.3.Internal environment analysis 20 1.1.4.Corporate level strategy 23 1.1.5.Organizational structure and controls 27 1.2.Methodology 28 Chapter II: 30 OVERVIEW OF mARITIME BANK AND THEORICAL BACK GROUND 30 2.1.Overview of Maritime Bank .30 2.1.1.Establishment process 30 2.1.2.Vision, mission, core value (according to http://www.msb.com.vn/a-gioi-thieu/bsumenh-tam-nhin-gia-tri-cot-loi ) 31 2.1.3.Products and Services of Maritime Bank 32 2.1.4.Customers 32 2.1.5.Human Resources .33 2.1.6.Awards achieved .36 2.1.7.Committed action of Maritime Bank .36 2.1.8.Development orientation of Maritime Bank from 2010 to 2015 37 2.2.Analyze the general environment in Vietnam 39 2.2.1.Demographic environment .39 2.2.2.Economics Environment 40 2.2.3.Legal-political environment .42 2.2.4.Socio-cultural environment 44 2.2.5.Technical environment .46 2.2.6.Global environment 48 2.3.Analysis economic, financial, and banking environment in Vietnam 49 Figure 2.3.a: Trend of products .53 Figure 2.3.b: Forecast of market segment 53 Total weighted score of 2.52 indicates that the business has average ability to respond to external factors 57 2.4.Analysis of the internal environment of Maritime Bank 57 Information about Maritime Bank’s operation: 57 Maritime Bank has developed quickly, however total assets of Maritime Bank are still small in comparison with other commercial bank, you can see it clearly as chart which provided bellow: 57 58 Maritime Bank has the same speed development of loan as total assets As you see in the follow chart gross loans of Maritime Bank are lower than average level, while lending money is one of the most important activities in banking industry It means that Maritime Bank need to improve itself to get into top in the future: 58 Overall of Maritime Bank in corporate banking field: .59 Corporate lending acting as the main driver of Maritime’s asset growth 59 Short-term loans form the bulk of business lending with long-term lending largely limited to traditionally preferred sectors – transport and communication 59 SME lending comprises the dominant portion of asset book and is growing over large corporate 59 Branches act as the single channel of customer acquisition and fulfillment 59 60 Overall of Maritime Bank in retail banking field : 60 Nascent but fast growing retail banking operations with short term deposits as main driver of growth 60 Low cross-selling rates offering significant potential for growth 60 Relatively small branch footprint concentrated in areas of high economic wealth 60 Customer acquisition largely driven by leveraging business banking/ shareholder relationships 60 Resource, competence, core competence and value chain analysis: .61 2.4.1.Several information related to main competitors of Maritime Bank 64 2.5.The present business strategy of Maritime Bank 68 Chapter III 70 Formulating business strategy for Maritime Bank .70 from 2010-2015 70 Before decide to formulate business strategy, we will analyze SWOT of Maritime Bank .70 3.1.Objective and development orientation of Maritime Bank from 2010-2015 79 3.2 Build the business strategy for Maritime Bank from 2010-2015 82 a.Personal customer: 86 b.SME customer 87 3.3 Recommendations to implementing action plans 90 CONCLUSION 98 1.http://www.msb.com.vn/a-gioi-thieu/bsu-menh-tam-nhin-gia-tri-cot-loi ) 100 LIST OF ABBREVIATIONS ACB Asia Commercial Bank ANZ Australian and New Zealand Bank ATM Automated teller machine CBI Consumer Behavior and Insights CEO Chief Executive Officer FDI Foreign Directed Investment GDP Gross Domestic Products HDI Human development index HSBC Hong Kong and Shanghai Bank Corporation JSC Joint Stock Company KPI Key performance indicators QCA Qualitative Comparative Analysis ROA Return on Asset SBV State bank of Vietnam SME Small and medium sized enterprises customer WTO World Trade Organization VND Vietnam dong VNPT Vietnam Posts & Telecommunications LIST OF TABLE 16 Figure 1.3.2.1: Value chain analysis 23 Table 1.1.5: Comparison between owners and managers 28 Figure 2.1.5: Organizational structure of Maritime Bank 35 Table 2.4.1c: EFE matrix 57 Table 2.4.1b: IFE matrix .63 Table 2.4.2a: operate criteria of commercial stock banks .66 Table 3.1: Maritime Bank’s objectives .80 Table 3.2.a: Service products offered to personal customers .83 Table 3.2.b: Service products offered to economic organizations 85 LIST OF FIGURE Figure 1.1.1: Strategic management 14 Figure: 1.1.2.1: environment analysis 16 Figure 2.3.c Current satisfaction level across competitive dimensions 54 Figure 2.3.d Number of SME and Large corporate throughout Vietnam 56 Figure 2.3.e Total assets of top JSBs 58 Figure 2.3.f Gross loans of top JSBs 58 Figure 2.3.g Customer deposits of top JSBs .59 Figure 2.3.h Current business model 60 Figure 2.4.2: Forecast incremental increase .64 Table 2.4.2b: operate criteria of commercial stock banks .67 Figure 2.4.2.c Comparison in sale products 67 Figure 2.4.2.d Comparison in quality of services 68 INTRODUCTION Subject: Formulating business strategy for Maritime Bank from 2010 – 2015 Company overview: - Vietnam Maritime commercial joint-stock Company - Head office: 521 – VIT tower – Ba Dinh district - Hanoi City - Main business sectors: Banking - The products are mainly distributed in all over country Rationale Banking and Finance is a completely open field in Vietnam’s joining WTO commitment with year itinerary The former Vice Governor of the State Bank, Mr Phung Khac Ke, said that domestic banks must rapidly implement the plans to increase competencies so that they can face with the cut-throat competition Foreign banks have good reputation, good management skills, and big advantage in capital and technology and good access method as well so that they can attract customers right after penetrating Vietnam market The pressure will increase when foreign banks are allowed to take part in money interbank and foreign exchange markets Vietnamese banks, however, have advantage in business culture, hard working employees, and national-wide subsidiary network to all corners in Vietnam Vietnam commercial bank system is changing clearly in scale, service quality, service products, banking technology and competitive level and so on after years of integration It shows that economic development orientation in general and banking system in particular are right and suitable with development rules of market economy Maritime Bank also follows this rule At the end of 2008, total asset scale increased 87%, market capital call increased 88%, credit investment increased 72%, bad debt reduced 0.5%, financial investment increased 96%, operation profit increased 94%, and pre-tax profit increased 82% in comparison to the beginning of this year The number of branches increased from 16 (in 2005) up to 100 (in the middle of 2009) and is expected to reach number 130 at the end of this year (according to the annual report of Maritime Bank in 2008) However, the rapid development also has the potential risks which need to be prevented by banking system Therefore, Maritime Bank needs to build a business strategy in years, from 2010 to 2015 with the clear and detail orientation so that they can achieve the objective to become one of the biggest banks in Vietnam Regarding this objective, the capstone project authors choose the topic “Formulating the business strategy for Maritime Bank from 2010 to 2015” Research Objectives Find out a suitable business strategy for Maritime Bank in the next period together with solutions for the feasible and efficient implementation of this business strategy by follow activities: - Applying the theories of business strategy analysis and its application, we will analyze environmental factors and their effect on the business of Maritime Bank in order to know the business opportunities and threat analysis - Base on internal environment analysis to define the strengths, weaknesses, mission, vision, objectives… to find out and suggest a business strategy for Maritime Bank in the next period together with solutions for the feasible and efficient implementation of this business strategy Capstone project limitations We have only some weeks to finish this capstone project, it means that we have all this time to analyze years before and the forecast of next years so it is absolutely that it can appear some faults or not the detailed yearly action plans of the company Expected outcomes - Define clearly the theoretical background on business strategy and its application in operations of the Bank - Define clearly the current situation in order to build analysis business strategy together with suitable implement solutions in period of 2010-2015 Structure of the capstone project The contents divided into three main parts as followings: - Chapter 1: Theory - Chapter 2: Maritime Bank’s strategy over the last 18 years - Chapter 3: Formulating the business strategy for Maritime Bank from 2010 to 2015 10 • What should this offering to be improved to be more attractive to you? • We have just gone through with you … offerings, how you like this total offering? o Really excited o Nice to have o Do not care Additional questions: • • Suppose this combination is offered, how much interest rate you expected? Why?  0.5% less than market rate  Market interest rate  0.5% higher than market rate Suppose we would give you this offering with the requirement of minimum combined balance on the account,  Would you like to use it? Why / why not?  If yes, then how much the minimum balance would be? - How about … •  USD50,000  USD40,000  USD20,000  USD10,000 Suppose you have options for USD delivery service  keeping the minimum balance in your account to a fixed amount to get unlimited delivery of USD,  paying a flat monthly fee for delivery service  which one you prefer? - For flat fee, how much should it be? In brief, • If a bank designs an offering exactly as you need, will you move your CASA (Current and saving account) deposit / keep most of your money to that bank? Why and why not? If the offering bank is a JSB (Joint Stock Bank) and not SOCB (State owned commercial bank), will you move your CASA deposit to that bank? If no, why? 109 For corporate banking - SME Research objectives: To understand consumers’ broad business plans and needs of SME owners To test banking value propositions (one for the right SME owner) including - The transaction management centric value proposition - The cash flow centric value proposition - Trade centric value proposition To polish these propositions Note: Each value proposition will be tested with the appropriate SME owner: - The transaction management centric value proposition will be test with SME which frequently has to deal with cash transaction (e.g retail distribution etc…) - The cash flow centric value proposition will be tested with SME which has the need to to deal with short term borrowing, mostly with working capital (e.g manufacturing, trading etc…) - The trade centric value proposition will be tested with SME which import and export products and deal with the issue of receiving the products at one end and delivering the cash to another end (e.g trader) 110 INTRODUCTION • Role of CBI • Respondents’ self introduction:  Name, background  Name of enterprise - Industry segment - Ownership structure - Chartered capital - Annual turn over - Years of service - Numbers of employees - Based city BUSINESS PLAN AND BANKING NEEDS • How you find your business currently? How’s you satisfied/ unsatisfied about it? • What are your broad plans for your business in the next 2-3 years?   Could you please tell us in details your plan for your business in 2-3 years? What triggers those plans? If having more than one plan, how you prioritize them? • With that broad plan in mind, what kind of support that you will need? (both banking / non banking related) • What kinds of banking services are you using?  List all the services with different banks (if any) offering those services  How are you happy/ unhappy with your currently used banking services?  At what bank are you having these services? 111 • Do you have any concerns with your current banking services?  Please tell me most frustrating things about banking you have faced?  What are you doing to deal with these annoyances?  Thus, what you expect from bank to help to solve these annoyances? Tailor made question [For the transaction management centric value proposition] Your day to day transaction management business with us What kind of offering you will be looking for? [For the cash flow centric value proposition] Your short term and long term borrowing business What kind of offering you will be looking for? [For the trade centric value proposition] Your trade finance business What kind of offering you will be looking for? • Referring to your plan, you think any banking support/ services could help you to fulfill your plan?  Moderator to note if above concerns are considered / raised VALUE PROPOSITION TEST Moderator to note that SME would be test with appropriate proposition Core value proposition • First impression? • How you understand offering? • Moderator to clarify the focused element to get the better understanding on  How is it decoded?  How is expectation for those elements?  Such as for “Transaction management” proposition, further probe on: - “convenient”, “fast”, “at your door step”, “at time of your convenience”? 112 • How you use it for your business? In what situation will you use it?  What benefits can you have from this offering? - How relevant it is? - How much does it improve your concern? • How you like this offering?  Must have  Good to have  Do not care Additional service test (This is only applicable when respondents ask about these additional services) Moderator to ask different additional service according to different proposition, for example of transaction management proposition: • How you like this additional service? • For the fee, how much you expect? why this? “Should-have” features Suppose the above offering would be combined with one of following features, how you think about them Moderator to probe each additional feature one by one • First impression • Like/ dislike it? • How you use it? • How much you like it?  Must have  Good to have  Do not care 113 You have gone through all the features, please tell me how you rank them in term of likeability? Why such ranking? In brief, • How would you like to have your personal wealth management (deposits and investment options) with us with such combined offering? • With such offer, you think you would move your employee payroll account to this bank? • If we design an offering exactly as you need will you move your relation ship to our bank, why and why not? There are some results that we got for example: 114 115 Annex Some information about competitors A Chau Commercial Joint-stock Bank (ACB) Since the date of 10 Sep 2009 ACB’s charter capital is 7.705.743.780.000 VND The distribution network channels: include 218 branches and transaction departments nationwide; 2,377 agents accepting payment through ACB Card Center (May, 2009); 673 agents of quick delivery center ACB-Western Union (May, 2009) Subordinate companies are: Security Company ACB (ACBS); Asset Management and Usage A Chau Bank (ACBA); Financial leasing A Chau Bank (ACBL) Cooperated companies are: Guard Service Joint-stock Company A Chau Bank (ACBD); Building Joint-stock Company ACB (ACBR) Joint-venture Company: Jewelry Sai Gon Joint-stock Company ACB- SJC (contributing capital with SJC) Organizational Structure • Fields : Personal client, Enterprise client, Budget, Business Development, Operation, Human management, Information Technology; • Boards: Checking-Internal Control, Strategy, Quality assurance, Policy and credit management • Departments: International Relation, Asset evaluation (within General Director) As of 30 Sep 2009, the total number of staffs is 6.587 people Staffs with undergraduate and graduate level occupy 93%, frequently trained in terms of professionalism at separate training center of ACB In 1998-1999, ACB was sponsored by International Finance Company (IFC) a technical assistance to improvement of staff working capacity and performed by Far East Bank and Trust Company (FEBTC) of Philippine In 2002 and 2003, directing level has attended several courses concerning bank management of Bank Training Center 116 Professional process: All professional process has been standardized according to ISO 9001: 2000 Technology ACB has initially performed online services since October, 2001 through the tTCBS- The Complete Banking Solution in which the database can be centralized and processed according to real time-limit Strategy Shift from simple rule strategy into a competitive strategy of differentiation is made Direction for retail bank (direction for personal client and small and medium enterprise) Foreign shareholder (Share holding ratio: 30%) Connaught Investors Ltd (Jardine Matheson Group), Dragon Financial Holdings Ltd., Standard Chartered APR Ltd., Standard Chartered Hong Kong, International Finance Company (IFC) of World Bank and J.P.Morgan Whitefriars Inc Members of international card organization: Visa, MasterCard Payment card of co-brand: Saigontourist; Saigon Co-op; Mai Linh Taxi; HSBC; Vera; VDC; Viettravel; Citimart Life insurance through bank: Prudential, AIA Technical assistance: IFC has spent a budget of 575.000 USD for the technical assistance program with the aim to improve managing and directing capacity of ACB, done in 2003 and 2004 Standard Chartered Bank is performing a comprehensive technical assistance for ACB which will be implemented in years (since 2005) International credit rating: 117 Since 2001, Fitch (international rating organization) evaluated to rate ACB In 4/2004, Fitch evaluated individual capacity of ACB by mark D, and rated according to external assistance by 5T Rewards: Labor Award nd level presented by state president; Flag competition of state bank; The best Vietnamese bank 2009 presented by ASIAMONEY; The best Vietnamese bank 2009 by EUROMONEY; The best Vietnamese bank 2009 by Finance Asia; The best Vietnamese bank 2008 (Euromoney Magazine); The best Vietnamese bank 2007; Flag competition presented by the Government; "Potential youth leader of Vietnam in 2007" (Mr Đo Minh Toan – Deputy General Director of ACB); The most satisfied retail banking service 2008; The best Vietnamese bank 2009 by GLOBAL FINANCE and so on (According to http://acb.com.vn) Comparison with Maritime Bank: We use: • Symbol ☺ to describe advantage • Symbol ☻ to describe equal Some main criteria Charpter capital Network Professional process Technology Brand name Products & services Current strategy ACB Maritime Bank ☺ ☺ ☺ ☻ ☺ ☺ ☺ ☻ ☺ ROA 118 Techcombank Since Sep 2008, Techcombank’s registered capital has been 3,165 trillion VND in which HSBC accounts form 20% Techcombank has introduced new modern products, services with multifunction such as automatic deposit machine (ADM), projects to modernize technology such as increasing software system of Corebanking version T24.R7 Techcombank is the member of two biggest card association Smartlink and BankNet, connect ATM system with HSBC – the strategic partner, perform the free number of customer service (support 24/7)1800 588 822; introduce the same brand name card Techcombank – Vietnam Airlines – Visa Techombank’s vision until 2010 is to aim to become the leading urban banks in creditability, quality and effectiveness (According to http://techcombank.com.vn/) Comparison with Maritime Bank: We use: • Symbol ☺ to describe advantage • Symbol ☻ to describe equal Some main criteria Charpter capital Network Professional process Technology Brand name Products & services Current strategy Techcombank ☺ ☺ ☻ ☻ ☺ ☻ ☻ ROA 119 Maritime Bank ☻ ☻ ☻ ☻ ☺ Vietcombank Until the end of 2006, Vietcombank has developed as a multifunctional banking model with 58 branches, transaction department, 87 transaction offices and subsidiaries nationwide, representative offices and subsidiary in foreign countries, with the 6,500 staff In addition to, Vietcombank contributes capital, joints with other domestic and foreign units in many business fields such as insurance, real estate, investment funds, etc Vietcombank’s total asset at the end of 2006 was approximately 170 thousand trillion VND (approximately 10.4 trillion USD), total debt surplus reached 68 thousand trillion VND (4.25 trillion USD), and owner’s capital reached more than 11,127 trillion VND meeting the requirement of minimum capital safety 8% according to the international standard On Nov 2nd, 2007 Standard & Poor's Ratings Services claimed the ranking of Vietcombank at BB/B, stable potential and internal competence at D level Credit ranking of Vietcombank is equivalent to the national credit ranking It is also the highest rank of S&P to a financial institution in Vietnam S&P’s ranking reflects the important role of Vietcombank in Vietnam banking market and supporting potential from government when necessary Like other domestic banks, Vietcombank’s credit ranking is constrained by the ceiling level of national credit, asset’s quality, profitability and limited capital safety in comparison to the international standard as well From the point of view of S&P, it is necessary for Vietcombank to diversify its revenue structure, control the growth rate to guarantee for operation safety The promising ranking of Vietcombank will be improved together with the increasing asset quality process Equitization and choosing suitable strategic investors are the positive factor affected to Vietcombank’s ranking In ranking report, S&P emphasizes on the important role and effect of Vietcombank in Vietnam banking system with the comparative advantages and market share of mobilizing capital, payment services, card services and judges that Vietcombank will maintain the top position in the domestic market in the future together with strengthening all factors of operation after equalization 120 Since the end of Dec 2006, Vietcombank’s total asset reached 170,000 trillion VND (approximately 11 trillion USD), owner’s capital and funds reached more than 11,200 trillion VND (nearly 700 million USD) Vietcombank is also the commercial state bank having the highest profit rate – more than 3,400 trillion VND before tax profits (after-tax profit is 2,472 trillion VND) International ranking company Standard & Poor's (website: www.standardandpoors.com) is one of three ranking organizations admitted by Stock and Exchange Committee (SEC) (others are Fitch Rating and Moody’s) Established in 1860 in the United States, Standard & Poor's is the most longestablished company operating in credit ranking field Standard & Poor's is also the ranking company with the largest scale (more than 8,500 employees working in 21 countries in the world), the biggest customer’s quantity with more than 1,400 banks and 111 nations ranked The indicators of Standard & Poor's like S&P 500, S&P Global 1200 are admitted and used widely in the international financial community On May 2nd, 2007, the international ranking Fitch Ratings announced officially to increase the individual ranking level for four biggest commercial state banks of Vietnam Bank of Investment and Development of Vietnam (BIDV), Vietnam Industrial and Commercial Bank (Vietinbank) and Agriculture and Rural Development Bank (Agribank) is increased up to “D/E” from the previous level “E” while Vietcombank’s rank is increased from “D/E” to “D”, the highest level in comparison to other Vietnam banks According to Fitch’s evaluation, support ability of these four banks will continue to be kept at level “4” with the commitment from Vietnamese government to be always ready to support for these four banks However, the support level is limited because of the low financial capability based on national ranking at level ‘BB-‘(BB minus) The increase of the level shows the positive development recently of the bank According to Fitch, Vietcombank is evaluated higher than other banks because of the positive results of clearing asset table, restructuring owner’s capital and opening trading activities 121 Aims to become the leading financial corporation in Vietnam and become the famous bank in the area and in the world in the next decade, diversified operation, combination with market economic factors, implement well the slogan “bring you success” in the circumstance of Vietnam in general and Vietnam banking system in particular, Vietcombank has build the development strategy to 2010 with the details as follows: Increase competence, competitiveness by increasing CAR indicator reached to 10-12%, and other important indicators according to the international standard, reaching the ranking level “AA” according to the standard of international ranking organizations Complete restructuring process to have the modern scientific organizational model which is suitable with the objective and guarantee business effectiveness, control risk, can supply the diversified banking services/products meeting the increasing requirement of market economy and demand of all customers (According to http://vcb.com.vn/About/General.aspx, the introduction) Comparison with Maritime Bank: We use: • Symbol ☺ to describe advantage • Symbol ☻ to describe equal Some main criteria Charpter capital Network VCB Maritime Bank ☺ ☺ Professional process Technology Brand name Products & services Current strategy ☻ ☺ ☻ ☺ ☺ ☻ ☻ ☺ ROA 122 ANZ ANZ provides all kinds of banking service meeting all demand – from personal financial products to innovative corporate financial solutions The professional staff who are equipped to deliver international customer care and to provide tailored banking consultancy to individuals and business ANZ is Australia’s leading bank in Asia who has been doing business and helping communities in the region for over 30 years In Vietnam, ANZ has been providing banking services for the last 15 years ANZ is famous for the satisfaction of customers to the bank The staff is fluent in both English and Vietnamese Drawing on regional and local experience, ANZ consults and helps both Vietnamese and expatriate customers about a broad range of financial services ANZ network in Vietnam • branches and transaction departments • representative office • Nationwide ATM system • Large EFTPOS network Global ANZ ANZ was established in Australia 150 years ago Since then ANZ has developed to become the big international financial and banking corporation ANZ is also the leading bank of Australia in Pacific-Asia Nowadays, ANZ is one of 50 biggest banks in the world With thousands of retails, modern operate system, leading technology in the world, deeply financial solution and a real commitment with community, AZN has been chosen by million customers in the world to become the truthful partner 123 ... July 7th, 2009, ACB’s profit was 1,200 trillion VND, Techcombank’s profit was 1,031 trillion VND, 9000 trillion VND for Sacombank and Eximbank is 813 trillion VND) (According to http://dantri.com.vn/c76/s76-335795/giai-ma-loi-nhuan-cua-cacngan-hang.htm)... growth rate and the stable factors of economics and politics (According to http://viet.vietnamembassy.us/tintuc/story.php?d=20010202121501) 2.2.2 Economics Environment Vietnam economy faces with... tax until the end of March 2010 to ensure Vietnam’s economic growth in 2010 (http://vietbao.vn/Kinhte/Se-tiep-tuc-goi-ho-tro-lai-suat/65180069/87/) The examples mentioned above show that government