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X0310 - GROUP GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT BUILDING BUSINESS STRATEGY FOR VIETNAM MARITIME COMMERCIAL JOINT STOCK BANK FROM 2012 TO 2015 Group Number: Class: GaMBA01.X0310 Student’s name: 1- Nguyen Manh Hung (GL) 2- Nguyen Hong Lam 3- Tran Thi Hoai Thu 4- Vu Thanh Thuy 5- Ngo Anh Son HANOI: 2011 X0310 - GROUP ACKNOWLEDGEMENT In the first words, I would like to send my best thankfulness to teachers and professors in Centre for Educational Technology and Career Development – Higher Education – Vietnam National University, America Griggs University for creating the best favorable situation for all trainees during the whole course, especially, when we carrying out this capstone project report Our group also thank to Board of Directors of Vietnam Maritime Commercial Joint Stock Bank and related sections for guiding enthusiastically and providing necessary data for us to complete this report Despite of trying our best in studying and collecting data, the report still have some unavoidable shortcomings We sincerely hope to receive comments of teachers and friends to makes it more meaning full COMMITMENT Our group commit that this is our special work Data and figures in this report are accurate, our analysis and conclusions have not been announced in any other scientific research Hanoi, Nov 22nd 2011 Nguyen Manh Hung Group Leader X0310 - GROUP TABLE OF CONTENT ACKNOWLEDGEMENT .2 TABLE OF CONTENT LIST OF FIGURES AND TABLES LIST OF ABBREVIATIONS INTRODUCTION Necessity of the research Research objectives 3 Methodology Research structure CHAPTER 1: LITERATURE REVIEW OF BUSINESS STRATEGY 1.1 Definition of business strategy 1.1.1 What is strategy? 1.1.2 What is business strategy? 1.2 Types of business strategy .3 1.3 Process of building business strategy 1.4 Tools to build a business strategy 1.4.1 Five forces model of Michael Porter .3 1.4.2 PEST model 1.4.3 SWOT model 1.4.4 EFE & IFE matrix 1.4.4.1 Internal Factors Evaluation .3 1.4.4.2 External Factors Evaluation 1.4.5 GREAT matrix ….….….….….….….….….….….….….….….….….… 24 CHAPTER 2: ANALYSIS BUSINESS SITUATION OF VIETNAM MARITIME COMMERCIAL JOINT STOCK BANK 3 X0310 - GROUP 2.1 Introduction of Maritime Bank 2.1.1 Establishment and development 2.1.2 Vision, mission and core value 2.1.3 Products & services 2.2 External environment analysis 2.2.1 Macro environment according to PEST model .3 2.2.1.1 Political condition .3 2.2.1.2 Economic condition 2.2.1.3 Social condition 2.2.1.4 Technology condition .3 2.2.1.5 PEST model 2.2.2 Banking sector environment 2.2.2.1 Overview of Vietnam banking system 2.2.2.2 Competition in Vietnam banking market (5-force model) 2.2.2.3 Competitor review (SWOT of competitor) .3 2.2.3 Analysis external factors (EFE) 2.3 Internal environment analysis .3 2.3.1 Internal factors of Maritime bank 2.3.2 Analysis internal factors (IFE) CHAPTER 3: RECOMMENDATIONS TO BUILD BUSINESS STRATEGY FOR VIETNAM MARITIME COMMERCIAL JOINT STOCK BANK IN 2012 – 2015 3.1 Objective and development orientation of Maritime Bank from 2012-2015 3.2 Building business strategy for Maritime bank in 2012-2015 3.2.1 SWOT analysis .3 3.2.1.1 Strengths 3.2.1.2 Weaknesses X0310 - GROUP 3.2.1.3 Opportunities 3.2.1.4 Threats 3.2.1.5 SWOT matrix 3.2.2 Strategy selection by Great Model 3.2.3 Recommendations to implement chosen strategy 3.2.3.1 Personal customer segment .3 3.2.3.2 Corporate customer segment CONCLUSION .3 REFERENCES X0310 - GROUP LIST OF FIGURES AND TABLES Figure 1.1 Type of business strategy Figure 1.2 Process of Building Business Strategy Figure 2.1 Chartered capital of Maritime Bank over years Figure 2.2 Maritime Bank’s product & services Figure 2.3 Vietnam & Asean Growth Rates: Pre-crisis vs Now Figure 2.4 Inflation dynamics of Vietnam during the last four years .3 Figure 2.5 Vietnam Index of Macroeconomics Stability from 2006 to 05/2011 Figure 2.6 Market share of Vietnam commercial banks Figure 2.7 Gross NPL ratios of Vietnamese banks from 2003 to 2008 Figure 2.8 Key indicators of Vietnam banking system from 2006 to 2008 Figure 2.9 Five-force model of Vietnam banking market Figure 2.10 Maritime Corporate Bank loan & deposits Figure 2.11 Operation of Maritime corporate bank Figure 2.12 Number of customers & retail deposits of Maritime Bank Figure 2.13 Direct Sales Force Process of Maritime Bank Figure 2.14 Operation of Maritime retail bank Figure 2.15 Spent of mass media of Vietnam commercial banks 2010 Figure 2.16 Comparison in Marketing activities of Vietnam JSBs Table 1.1 Five-force model of Michael Porter Table 1.2 SWOT matrix Table 1.3 TOWS Strategic Alternatives Matrix .3 Table 1.4 Example of IFE matrix .3 Table 1.5 Example of EFE matrix Table 1.6 GREAT matrix 24 Table 2.1 Basic performance measures of Maritime Bank Table 2.3 Vietnam macro environment in PEST model Table 2.4 Foreign strategic stakes in Vietnamese banks Table 2.5 SWOT analysis of Sacombank Table 2.6 SWOT analysis of Habubank X0310 - GROUP Table 2.7 SWOT analysis of Eximbank Table 2.8 Competitive Profile Matrix (CPM) Table 2.9 EFE Matrix of Maritime bank Table 2.10 Maritime Bank IFE model .3 Table 3.1 Maritime Bank’s development objective Table 3.2 Maritime Bank SWOT matrix Table 3.3 GREAT model to choose business strategy for Maritime Bank .3 Table 3.4 The comparison of suggested strategies X0310 - GROUP LIST OF ABBREVIATIONS ACB ANZ ATM CBI CEO FDI GDP HDI HSBC JSC KPI QCA ROA SBV SME WTO VND Asia Commercial Bank Australian and New Zealand Bank Automated teller machine Consumer Behavior and Insights Chief Executive Officer Foreign Directed Investment Gross Domestic Products Human development index Hong Kong and Shanghai Bank Corporation Joint Stock Company Key performance indicators Qualitative Comparative Analysis Return on Asset State bank of Vietnam Small and medium sized enterprises customer World Trade Organization Vietnam dong X0310 - GROUP INTRODUCTION Necessity of the research 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, and 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 Until now, Maritime Bank has grown strongly, sustainably and created customer’s faith The current chartered capital is 7.000 billion VND and total asset reach 120.000 billion VND Number of branches increase rapidly from 16 branches in 2005 to 200 branches at the end of 2011 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 2012 to 2015 with the clear and detail orientation so that they can achieve the objective to become one of the biggest commercial joint stock banks in Vietnam Regarding this objective, the capstone project authors choose the topic “Building business strategy for Vietnam maritime commercial joint stock bank from 2012 to 2015” X0310 - GROUP 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 Methodology The project is the combination of a great theory “strategic management” on practical business strategy building of a big corporation To be successful in applying this theory, researchers used both qualitative and quantitative method in studying These methods are: - Collecting and analyzing method - Comparative analysis method - Specialist analysis method - Economic statistic method Research structure The research is divided in main parts as following: - Chapter 1: Literature review of business strategy - Chapter 2: Analysis business situation of Vietnam Maritime Commercial Joint Stock Bank - Chapter 3: Recommendations to build business strategy for Vietnam Maritime Commercial Joint Stock Bank in 2012 to 2015 10 X0310 - GROUP branch to experiment Priority Banking services for VIP customers Looking at the data of joint-stock commercial banks which are headquartered in Hanoi, you may find that: indicator ROE of Maritime Bank stood in top highest among joint-stock commercial banks from 2008 to 2010 Maritime has enjoyed rapid growth in recent years doubling its market share in total assets to approximately 1.5% by end of year 2010 but approximately half of this growth has come through the interbank book Maritime has been growing fast over past years but is still small in terms of total assets – Number JSB position reached in 2010 Asset growth has been driven substantially by the growth in interbank lending where Maritime has reached a leading position while Maritime’s gross loan volume is still nascent 3.2.1.5 SWOT matrix According to the SWOT analysis above, SWOT matrix is built as follows: Table 3.2 Maritime Bank SWOT matrix 69 X0310 - GROUP SWOT MATRIX Opportunities: The potential market is very huge Resources of savings is plentiful People’s consuming power is growing Young people prefer to use wide varieties of banking services The political situation of Vietnam is stable, GDP is always above 6% per year, the Government and the State Bank regulate the economy well, businesses are up because of supporting package on interest rates by the government, and as a result, people are consuming more There’s no strong and professional commercial bank in Vietnam Threats: Vietnam's current leading joint-stock commercial banks such as ACB, Sacombank, Techcombank already have a clear mandate and planning route and determine customer target and gather resources to develop this customer target Foreign banks which have strong potential of finance, high technology, skillful human resource, long-established prestige are breaking into Vietnam Investment in Core-banking requires much money and time Strengths: S – O Combination : S – T Combination MSB has created a strong network with - S1, S2, S3, S5 + O1, O2, O3, O4, O5 : - S1, S2 + T1, T2 : The competitive both personal & individual customers Take advantage of strength of the scale, pressure from domestic and foreign Modern Core-Banking system with financial capacity and operating network, banks is increasingly rapidly various functions, customers can MSB focuses on accelerating the retail Basing on its own internal forces, deposit and withdraw money at any banking activities as this is the new market MSB could push the cooperation transaction points of MSB which is under the development stage  with other banks  M&A trend  Good human resources with highMarket development strategy 70 X0310 - GROUP educated staffs and management skills Maritime Bank has built a stronger brand name thanks to the new marketing strategy at the early of 2010 The birth of the Direct Sales Force injected new blood into the traditional trading method of Maritime Bank Weaknesses: Has no specific development strategy Transaction offices only focus on mobilizing capital No ISO and quality management systems implemented synchronously system-wide of Maritime Bank Limited capital resources to provide credit and finance projects of giant State-owned co operations and groups which have huge demand for capital A half of assets of Maritime Bank is located on the interbank market Products & services are not diversified in comparison with other banks S4 + O5, O6: Strength MSB brand name to Development by integrating be a strong and professtional bank in comparison with international banks  Market development strategy S2, S5 + O3, O4: Promoting the development of modern products and services based on informational, technological development  Operation diversification W – O Combination: W – T Combination : - W1, W2, W6 + O1, O2, O3, O4, O5: - W1, W2, W6 + T1, T2 : MSB has to Based on increase in market demand, MSB diversify its business activities to be will carry out restructuring its business able to compete well with the increasingly rapid development of operation, diversifying products  other banks  Operation Operation diversification - W3, W4, W5 + O6: Improve quality of diversification system management & requires having effective measures to improve its capacity of risk management, control their retail banking activities to avoid the moral hazard and operational risk  Operation management 71 X0310 - GROUP 3.2.2 Strategy selection by QSPM Model The Quantitative Strategic Planning Matrix is a strategic tool which is used to evaluate alternative set of strategies The QSPM incorporate earlier stage details in an organize way to calculate the score of multiple strategies in order to find the best match strategy for the organization The QSPM model below showed that in the current external and internal resources, MSB should choose the market development strategy The strategy’s contents include the expansion of retail market and retail products, exploitation of strengths of scale, financial capacity and operating network MSB focuses on the retail banking activities as these are newly develop market Then MSB will restructure the business operation and supply more products to its customers Key factors Weight Table 3.3 QSPM model to choose business strategy for Maritime Bank Internal factors Human 0.20 resource Strong brand 0.15 name Good relation 0.10 with customer Technology 0.15 development Management 0.20 quality Product 0.10 diversify Operation 0.10 network External factors Market 0.20 potentiality Saving 0.20 resources Market development Strategies Operation Operation diversification management Development by integrating AS TAS AS TAS AS TAS AS TAS 0.40 0.40 0.40 0.20 0.45 0.30 0.30 0.15 0.30 0.10 0.10 0.20 0.30 0.45 0.15 0.15 0.40 0.20 0.40 0.20 0.20 0.20 0.10 0.10 0.30 0.10 0.10 0.10 0.40 0.40 0.20 0.20 0.20 0.40 0.40 0.40 72 X0310 - GROUP No prominent brand name in banking Foreign banks High cost Domestic banks Sum total attractive score 0.15 0.15 0.15 0.15 0.30 0.25 0.10 0.10 1 0.50 0.10 0.10 1 0.50 0.10 0.10 1 0.25 0.10 0.10 0.25 0.20 0.10 3.80 3.40 2.05 2.55 3.2.3 Recommendations to implement chosen strategy Market development is a marketing technique aimed at increasing a company's market in order to widen the customer base for the purpose of selling more products There are several approaches that can be used to make a market larger, ranging from capturing customers of rival companies to expanding to a previously unserved segment of the market These practices are organized and driven by marketing personnel who can work within a company or be consulted specifically to assist with market development When a company believes that it has a need to increase the size of its market, the first step is usually a development of a profile to find out what segments of the market are currently being served This study includes an analysis of the kinds of customers the company has and what those customers are buying This information is used to develop an efficient and comprehensive market development strategy Companies must use cost effective strategies so that they not end up spending more money developing a market than they could potentially earn by expanding the market We divided the market into main sectors: Personal customer & corporate customer For each market segment, we propose recommendations to develop its scale as following 3.2.3.1 Personal customer segment Product development: - Design attractive current products 73 X0310 - GROUP - Develop more products to meet increasing demand of individuals Especially, issue international debit card: Maritime Bank need to appeal about 100,000 customers in the first year to balance with the cost to become the member of MasterCard group (annual fee is 3,848 million VND) - Simplified structure: Simple pricing structure may apply for a package of many products will bring a plenty of new opportunities for Maritime Bank - Implement monthly settle bill service to compete with other banks that begin to implement this service Develop sales channel: - Arrangement and operation processes at the branches to maximized the value of each customer assessing with bank, which helps bank meet customer’s demand and make good impression - Introduce the operation model in which lengthen working hour to make convenience for customer when having transactions with Maritime Bank - Provide to the service of withdrawing cash at retail shops which is one of the most effective method to widen network Its effectiveness has been proved by the banks’ success in the huge financial markets such as the US, the UK, German and many nations in the world Have never any banks in Vietnam provide this service so Maritime Bank is the pioneer in this field, which has the considerable promotional effectiveness for Maritime Bank in financial market In addition to, it also helps Maritime Bank to establish the closer relationship with retail partners who are the target customer in SME group - Improve internet and telephone banking service: It is necessary for Maritime Bank to use a friendly and natural website to maximize effectiveness and allow users find all necessary information immediately - Build mobile sales staff: It is necessary to recruit competent staff that can help bank to enhance its prestige Mobile sales staff must be independent and enthusiastic 74 X0310 - GROUP Develop operation and technology: - Build process to open account in 10 minutes: this recommendation is introduced because it is proved by reality that time to open account in the branches can be reduced by transferring preparing and confirmation steps to the processing centre and the staff only the necessary processed when customers are waiting for - Introduce the transaction confirmation service through SMS which helps Maritime Bank compete with other banks having modernized technology to increase the convenience and reduce cost for customer - Design the mechanism of dealing with problem within day which requires to import all customer’s complaint at any channel to database with detail information so that customer’s problem can be solved at the soonest - Combine the consistent channel of customer management: It is necessary to define clearly about role of each selling channel in the identified selling channel strategy to help Maritime Bank have more opportunities to sell its products by combining the media channel with customer and using customer information from many sources - Exploit the new version of mobile payment technology Develop risk management system: - Risk management system in operation requires the strict policy and organizational structure, transparent standard and incentive system, and regularly report - Institutionalize risk management system in operation to ensure high quality standard Build evaluation checklist for the branches’ operational effectiveness: this checklist should include many levels to have clearly evaluation, and evaluation for each branch It also should have the figure so that employee can compare themselves with others and with bank’s 75 X0310 - GROUP objectives Another part in the checklist is the figure showing comparison among braches in term of established objectives 3.2.3.2 Corporate customer segment Develop product: - Develop lending products: More choice for secured asset to combine to secured asset pricing and the higher lending level per secured asset allow us to offer the higher limit; fee from added value service/product together with products can balance to added interest In fact that Standard Chartered Bank lends SME in Indonesia without security - Design and introduce campaigns to build band name effectively (can be performed at the same time with personal customer) Develop sales channel:  Establish staff of customer management It is the fact that Asia banks not have the satisfactory selling model for SME, not meet the demand of customers Therefore, if we choose the various selling way taken by customer management staff, it may satisfy SME’s demand The advantage of this staff is that they have good knowledge about product, credit requirement, general knowledge about the industry, long term relationship with customer, and take responsibility for customers  Build lending centre for SME in each geographic area will bring some benefit for bank such as saving time of traveling to check, customer management staff will focus on each area, customer will be served better  Internet and telephone banking services which are effective is the operated program in total system for both business categories: personal customer and corporate customer Develop operation and technology: 76 X0310 - GROUP - Process to shorten the processing time Nowadays, Vietnamese customers have more and more expectation about the time of processing loans Depend upon credit limit, Wachovia decides to grant credit within 24 hours, Chase needs hours, and Bank of America needs hours to hours to decide - Simplified documents: the successful implementation the action plan of simplified documents may save a considerable time and resource - Build collecting debt department and negotiation with customer with the best quality Skill of these staff are different from skill of customer management staff or collecting debt staff because these employees have a widen knowledge about industry or specialization about financial restructure and implement all added values for customer Added to the list is the objective point of view, another important characteristic of this group Debt processing of the staff which needs to be designed and implemented before loans are not paid, includes warning system, processing and observation - Making plan, design and organized workshops for corporate customer: A training program for SME’s owners will provide knowledge in many field for enterprise’s owners who are the potential customers of Maritime Bank The training program may be Marketing strategy for SME, Management skills for SME, Discuss about method to build band name, and other social responsible activities Develop risk management system: - Establish risk guarantee model QCA (as mentioned in the part of manufacturing companies) - Institutionalized the risk management in operation (the corporate-wide action plan for both corporate and personal customers) 77 X0310 - GROUP 3.2.4 Working methods and working Plan: 78 X0310 - GROUP 79 X0310 - GROUP 80 X0310 - GROUP CONCLUSION Maritime Bank has developed and grown up continuously in quality and quantity for the last 20 years although it has not had a clear business strategic or development orientation to any customer However, from the opinion of author group, to make Maritime Bank slogan “Creating sustainable value” come true requires bank to build and implement a market development strategy focusing on high income customers and SME customers Author group believe that the capstone project with the convincing arguments and studies, careful analysis will help Maritime Bank build the business strategy developed deeply, guide for the bank serve for the target customer belonging to the suitable market segment in the present and future conditions of Maritime Bank and other competitors as well 81 X0310 - GROUP REFERENCES All documents that provided by Lecturers Daniel A Wren (5th Ed.) [2004] The history of Management Thought- John Wiley & Sons, Inc John Viljoen & Susan Dann (4th Ed.) [2003] Strategic Management – Prentice Hall Bowman, C& Asch, D 1996, Managing Strategy, MacMillan Business, London State Bank’s reports of operation of Vietnamese Commercial joint stock bank in 2008 State Bank’s reports of operation of Vietnamese Commercial joint stock bank in 9/2009 Maritime Bank annual reports in 2008, 2009, 2010 Maritime Bank Financial reports in 10/2011 Annual reports in 2008, 2009, 2010 of VCB, AgriBank, ANZ, ACB, Techcombank 10 Financial reports in 2010 of VCB, AgriBank, ANZ, ACB, and Techcombank 11 Maritime Bank operation reports Online references http://www.msb.com.vn http://viet.vietnamembassy.us/tintuc http://www.saga.vn/view.aspx?id=16084 http://dantri.com.vn/c76/s76-335795/giai-ma-loi-nhuan-cua-cac-nganhang.htm http://www.doanhnhan360.com/Desktop.aspx/Thi-truong-360/Tai-chinh360/Sau_2_nam_VN_gia_nhap_WTO_NH_noi_yeu_the/ http://acb.com.vn www.standardandpoors.com 82 X0310 - GROUP 83 ... Vietnamese banks Table 2.5 SWOT analysis of Sacombank Table 2.6 SWOT analysis of Habubank X0310 - GROUP Table 2.7 SWOT analysis of Eximbank Table 2.8 Competitive Profile Matrix... 2.2.2.3 Competitor review (SWOT of competitor, CPM) a Saigon Thuong Tin CJSB (Sacombank) Saigon Thuong Tin CJSB (Sacombank) was incorporated in early 1992 It has been listed on the Ho Chi Minh City... capital Weight Maritime Bank Ratin Weighted g scores 4=2*3 Sacombank Ratin Weighted g scores 6=2*5 HabuBank Ratin Weighted g scores 8=2*7 EximBank Ratin Weighted g scores 10=2*9 0.1 0.3 0.3 0.2 0.4