Luận văn thạc sĩ quản trị kinh doanh quốc tế MBA (214)

2 TRÌNH ĐÀO TẠO CHƯƠNG THẠC SĨ QUẢN TRỊ KINH DOANH QUỐC TẾ Global Advanced Master of Business Administration CAPSTONE PROJECT REPORT TOPIC: FORMULATING BUSINESS STRATEGY FOR BANKING ACTIVITIES OF VIETNAM BANK FOR AGRICULTURE AND RURAL DEVELOPMENT (AGRIBANK) IN THE 5-YEAR-PERIOD FROM 2011 - 2015 Members: Nguyen Ngoc Quang Nguyen Thuy Trang Nguyen Duc Cuong Tran Thi My Linh Vu Van Hau CLASS: GaMBA01.X0210 - GROUP HANOI, 2011 GaMBA01.X0210 - Group CONTENTS ACKNOWLEDGEMENTS LETTER OF THANKS .5 LIST OF FIGURES LIST OF TABLES LIST OF ABBREVIATIONS INTRODUCTION CHAPTER I: THEORIES ON BUSINESS STRATEGY 11 1.1 BUSINESS STRATEGY – DEFINITION, ROLES AND ATTTIBUTES 11 1.1.1 Definition 11 1.1.2 Roles of Business strategy 11 1.1.3 Attributes 11 1.2 PROCESS FOR BUSINESS STRATEGY BUILDING 12 1.2.1 Vision and Mission: 12 1.2.1.1 Vision: 12 1.2.1.2 Mission: .12 1.2.2 Environment Analysis .13 1.2.2.1 Analysis of External Environment 13 1.2.2.2 Analyzing the Internal Environment – core competencies 16 1.2.3 The strategic choice 17 1.2.4 The strategic implementation 17 1.2.5 Analyzing and evaluating the results .18 1.3 DEVELOP MATRICES TO CHOOSE THE BUSINESS STRATEGY .18 1.3.1 The External Factor Evaluation (EFE) Matrix 18 1.3.2 The Internal Factor Evaluation (IFE) Matrix 18 1.3.3 The Strength-Weaknesses-Opportunities-Threats (SWOT) Matrix .18 1.3.4 The Internal - External (IE) Matrix 19 1.3.5 The Quantitative Strategic Planning Matrix (QSPM): 19 CHAPTER II: AGRIBANK’S BUSINESS ENVIRONMENT SITUATION 20 2.1 GENERAL INTRODUCTIONS 20 2.1.1 The Establishment and Development of AgriBank 20 2.1.2 The Organization Structure and Main Businesses 21 2.1.3 The business performance 21 Formulating Business Strategy for Banking Activities of Agribank to 2015 GaMBA01.X0210 - Group 2.2 ANALYSIS OF EXTERNAL ENVIRONMENT 23 2.2.1 Macro-Analysis – PEST Model 23 2.2.1.1 Political/Legal (P) 23 2.2.1.2 Economic Environment (E) 24 2.2.1.3 Socio-economy (S) .27 2.2.1.4 Telecommunication and Information Technology (T) 28 2.2.2 Micro factors – Five Forces Model of M.Porter .28 2.2.2.1 The current rivals 29 2.2.2.2 The Potential Rivals .35 2.2.2.3 Bargaining Power of the customer .37 2.2.2.4 Bargaining power of the supplier 38 2.2.2.5 The threat of substitute products 39 2.2.3 The Opportunities and Challenges 39 2.2.4 Agribank’s External Factor Evaluation-EFE Matrix 40 2.3 ANALYSIS OF INTERNAL INVIRONMENT 42 2.3.1 Organization Structure 42 2.3.2 Human Resources .43 2.3.3 Marketing strategy 45 2.3.4 The Management strategy 45 2.3.5 Finance and Accounting 46 2.3.6 Research and Development 48 2.3.7 Information Technology 48 2.3.8 The strengths and weaknesses from the internal environment .49 2.3.9 Agribank’s Internal Factor Evaluation – IFE Matrix 50 2.4 AGRIBANK’S STRENGTH-WEAKNESS-OPPORTUNITY-THREAT (SWOT) MATRIX 51 2.5 AGRIBANK’S INTERNAL AND EXTERNAL(I-E) MATRIX 54 CHAPTER 55 BUSINESS STRATEGY AND SOLUTIONS OF AGRIBANK UP TO 2015 55 3.1 AGRIBANK’S TARGET TO 2015 .55 3.1.1 Vision, Mission and Operating Principle 55 3.1.2 General targets 55 3.1.3 Particular Targets up to 2015 56 3.2 STRATEGY CHOICE 57 3.2.1 Analysis of the Quantitative Strategy Planning Matrix (QSPM) 57 3.2.2 Choosing suitable strategies to the current model and business target .62 Formulating Business Strategy for Banking Activities of Agribank to 2015 GaMBA01.X0210 - Group 3.3 SOLUTIONS TO IMPLEMENT BUSINESS STRATEGY IN THE PERIOD OF 2011 - 2015 62 3.3.1 Solution of market and market share 62 3.3.1.1 Market segment 62 3.3.1.2 Customer segment 64 3.3.2 Solutions of business model, network and human resource development 66 3.3.2.1 Restructure the business at Headquarter and Branches .66 3.3.2.2 Solution of the human resource development .67 3.3.3 Solutions of Finance and Safety .69 3.3.3.1 Supplement Chartered Capital; widen the capital scale to meet the CAR in accordance with objectives 69 3.3.3.2 The reasonable growth of total assets always ensures the appropriateness of the term structure of assets and liability 70 3.3.3.3 Enhance assets quality 70 3.3.4 Solution of liability 70 3.3.4.1 Analyzing the scale and structure of liability .71 3.3.4.2 Strengthening mobilized funds in rural areas for agriculture and rural area .71 3.3.4.3 Further study the capital costs in urban areas especially in highly competitive areas to provide appropriate policies to mobilize 71 3.3.4.4 Develop policies to mobilize capital in accordance with the State policies and the market situation, the tastes of the depositors and the business strategy of Agribank .71 3.3.5 Solutions of improving the quality and risk management .72 3.3.5.1 Credit risk management .72 3.3.5.2 Liquidity risk management 73 3.3.5.3 Market risks 73 3.3.6 Solutions of developing information technology .75 3.4 IMPLEMENTATION SCHEDULE .76 3.5 SUGESSTIONS TO THE GOVERNMENT AND REGULATORY AUTHORITIES 76 CONCLUSION .79 REFERENCES .80 Formulating Business Strategy for Banking Activities of Agribank to 2015 GaMBA01.X0210 - Group ACKNOWLEDGEMENTS We pledge that the report “Building business strategy for banking activities of AGRIBANK in the 5-year-period from 2011 to 2015” is our own research All contents and results of the report are true and have not been published in any other researches Data and figures used in the report are accurate and their sources are all clearly stated Hanoi, 02 October 2011 GROUP OF AUTHORS Nguyen Ngoc Quang (Group leader) Nguyen Thuy Trang Nguyen Duc Cuong Tran Thi My Linh Vu Van Hau Formulating Business Strategy for Banking Activities of Agribank to 2015 GaMBA01.X0210 - Group LETTER OF THANKS We would like to say thanks to AGRIBANK has enthusiastically supported us in the process of providing data as well as working sessions to make strategic business strategy for the bank Besides, we would like to thank the Professors and Doctors who have given us the skills and knowledge of corporate governance throughout the entire course This knowledge is the basic foundation necessary for us to write this topic as applied in practical work In particular, we sincerely thank the Academic Council of Griggs University has guided us in the process of conducting research Hanoi, 02 October 2011 GROUP OF AUTHORS Nguyen Ngoc Quang (Group leader) Nguyen Thuy Trang Nguyen Duc Cuong Tran Thi My Linh Vu Van Hau Formulating Business Strategy for Banking Activities of Agribank to 2015 GaMBA01.X0210 - Group LIST OF FIGURES Figure 1-1: Process for Business Strategy Building .12 Figure 1-2: Model of External Environment 13 Figure 1-3: Michael E Porter Five Forces Model 15 Figure 2-1: Organization Chart of Agribank 21 Figure 2-3: GDP Growth rate and the Economic Sectors in 2000- 2010 period .24 Figure 2-4: GDP per Capita in the period of 2000 – 2010 .25 Figure 2-7: Scale of Assets, Chartered Capital, Funds Mobilization and Credit in 2010 of Agribank and its three main Competitors 31 Figure 2-8: Some criteria of profitability, CAR and Bad Debts in 2010 of Agribank and its main Competitors 32 Figure 2-9: Number of Branches type and in 2010 of Agribank and its competitors 33 Figure 2-10: Agribank’s Market share of Banking Deposits in 2010 33 Figure 2-11: Agribank’s Market share of Loans in 2010 .34 Formulating Business Strategy for Banking Activities of Agribank to 2015 GaMBA01.X0210 - Group LIST OF TABLES Table 1-4: Competitive Profile Matrix (CPM) .15 Table 1-5: SWOT Matrix .18 Table 1-6: Quantitative Strategic Planning Matrix - QSPM 19 Table 2-2: Agribank’s core indicators in the period of 2005– 2010 22 Table 2-5: Forecast of Economist on the Vietnam economy’s prospect 27 Table 2-6: The business indicators of Agribank over the rivals in the 2008 – 2010 period 30 Table 2-12: CPM of Agribank and main Competitors 34 Table 2-13: Agribank’s External Factor Evaluation-EFE Matrix 41 Table 2-14: Number of trained employees 44 Table 2-15: The training results 44 Table 2-16: Organization Structure of Agribank in the period of 2005 – 2010 44 Table 2-17: The business result of Agribank .47 Table 2-18: The liquidity of Agribank 48 Table 2-19: Agribank’s Internal Factor Evaluation – IFE Matrix 50 Table 2-20: Agribank’s Internal Factor Evaluation – IFE Matrix 51 Table 2-21: Internal and External (I-E) Matrix .54 Table 3-1: Some Targets on Finace and safe opration 56 Table 3-2: Investment structure by the economic components 57 Table 3-3: Agribank’s Quantitative Strategy Planning Matrix (QSPM) .58 Table 3-4: The criteria of customer segment .64 Table 3-4: Implementation schedule 76 Formulating Business Strategy for Banking Activities of Agribank to 2015 GaMBA01.X0210 - Group Formulating Business Strategy for Banking Activities of Agribank to 2015 3.3.2 Solutions of business model, network and human resource development 3.3.2.1 Restructure the business at Headquarter and Branches  Establish an advisory division under Board of Executive Establish an advisory department of the Executive Board to improve the expertise and support operations – legal in resolving important influential issues to an entire system The department include the leading experts in the industry having indepth knowledge of specific areas, monitoring of internal and external changes to consult the Executive board handling the key issues, warning the risks and proposing the development orientation the consulting division must be established are:  Credit Advisory Committee  Advisory Committee of Risk Management;  Asset Liabilities Committee (ALCO);  Look at some of the new establishments: Firstly, to improve the credit quality and monitor the bad debt rate, Agribank will modeling credit management at the head quarter and branches Accordingly, the credit department at Headquarter will be split into three instead of one as before Business credit will manage all credit activities in the system with extensive branch networks, including:  Credit policy division: research, propose, advice the Board to issue regulations and policies related to credit operations  Evaluation Committee: re-evaluation of the loans beyond the right to award credit of the branches director  Credit risk management division: to study and capture information about the industry, investment sector then warning; risks assessment of project investment, plans for over right of the branches; monitoring structure, investment sector, the credit activities of the branches in the system for timely warning and limiting credit risk in investment for the entire system The bad debt monitoring unit of the Credit Risk Management is established with tasks of making the control criteria and standards for these loans are required to monitor and set out the required measures to recover from the customer or sale of assets  Improve the controlling functions of the investment division at the Headquarter to the branches activities Set up the developing strategy for restructuring of operations of financial leasing companies of Agribank  Complete the operation of the branches Enhance the competitiveness of the network at the urban area  Consider and rearrange the branches and transaction offices The ineffective operation merged with the larger branches, minimize the number of inefficient branches but not beneficial for the whole system, causing waste and reduce its competitiveness within the network; the situation that many branches operate on the same street will not happen Build up a network of branches including full-service and primary branches and transaction offices with the less number of products and services GaMBA01.X0210 - Group  The application of KPI in the whole system set up its own balance sheet for the transaction office to be able to assess business performance, thereby recommending appropriate corrective measures  Specifying the functions of branches and transaction offices by the number of products and services offered or the limit to increase accessibility and sell products to avoid competing against each other in the same system of Agribank Assessing the market share of Agribank branches in each area properly gauge the competitiveness of the system, the ability to supply products to customers Maintain the network at the rural area  Developing the additional transaction offices in the areas of business conditions in order to dominate market shares and access to numerous customers in all regions and areas across the country  Rearrange a number of branches in the administrative areas of no condition of business development Merger and dissolute some less efficient transaction offices  Setting up a transaction system comes with a network of large corporations such as the corporation of postal and telecommunication, electricity to enhance cooperation and cross-selling products Build up the projects for crossselling products with a large network of corporations On the basis, the design of the standard package with specific characteristics can provide 3.3.2.2 Solution of the human resource development  Recruitment Analyze the annual and long-term labor requirements to build a standardized process of recruitment Set up a combination process of recruitment, training and employment Actively promote the employment opportunities at Agribank for the graduates To recruit the prospected staff in the future, Agribank cooperates with the University specialized in finance, banking enable these institutions to aware of the requirements Organize the workshops to discuss the capacity enhancement for the graduates and help schools put their needs for training in their curriculum With the promotion and cooperation mentioned above, Agribank’s training opportunities will be exploited by the young staff having capacity and growth prospects  Human resource management - - Develop job descriptions and preparing specific plans for implementation: Develop specific job titles for each position in each unit, reflecting the work content, including job description for leadership; Identification and regulations written work content for each position outlining the main activities, the job evaluation criteria, capabilities and requirements of education minimum problem and reporting channels Develop procedures to assess the results of work to fit the job description Change the basic mechanism of personnel: shift from mechanism to recruit not firing mechanism to the work performance and fire if needed The employees Formulating Business Strategy for Banking Activities of Agribank to 2015 68 GaMBA01.X0210 - Group have been recruited to work in Agribank must meet the job requirements, otherwise will be dismissed Applying this mechanism to encourage the employees to actively strive to complete tasks and avoid passivity, dependence of some current employees  Compensation and benefit Building the right mode of remuneration for the employees and the employer apply KPI criteria on the operation and the cost allocation method Accordingly, set up the wages by labor productivity The employees who have better performance than requirements would be promoted The promotion assessment is the basis of considering the specific requirements of the job description  Training The identification of training needs to be done according to strategic orientation, on the basis of actual demand for standardization officers, planning officials - Decentralization of training objects: The actual number of employees is crowded, at uneven levels and training needs is large and diverse so the decentralization of training objects who will contribute to solving the defining issues in the design of training content - Determine the training contents: Determining the training contents for each training course, define the criteria and guidelines to unify the content used in courses at Agribank - Developing the high quality lecturers: In addition to searching, selection of the outside lecturers and continue training to improve the quality of part-time lecturers Firstly, building up the resource of professional lecturers from the number of part-time lecturers and employees having academic titles at Agribank to be more active in training, control of teaching quality and cost effectively Standardized the system of training materials: Compile the training materials that are uniformly in whole system The compiled material must be adopted by the Scientific Council adopted before using and regularly reviewed to ensure complete training quality - The post-training management: Provide guidelines for the testing, inspection and certification for each training course assessment procedures of effective training and combine the evaluation of performance and vote regularly for the participants of training courses The achievement of two groups of solutions on market, market shares and organizations, networks, human resources development: Agribank will meet the targets on market, market shares and the investment targets in the economic areas and sectors During the implementation of these two solutions, the greatest difficulty that Agribank facing: - The fierce competition with the state commercial banks, Joint Stock commercial banks, State-owned commercial banks in the area, especially in Formulating Business Strategy for Banking Activities of Agribank to 2015 69 GaMBA01.X0210 - Group 3.3.3 Hanoi and Ho Chi Minh city and the emergence of an increasing number of joint-stock commercial banks and foreign Bank - The merger of subsidiaries and innovative human resource management mechanism poses major problems for the appointment, dismissal or removal from office and fired However, the implementation of solutions will support and enhance effectiveness of each solution With a focus on training to improve the employees’ capacity and the advantage of the large number of employees, Agribank will have opportunities to build a qualified team across the country Simultaneously with the merger of inefficient subsidiaries in two competitive areas in Hanoi and Ho Chi Minh City, Agribank’s branches will increase their competitiveness along with training will basically build up a reputation, brand and enhance the competitive advantage of Agribank Also, take advantage of government supports in agriculture and rural areas, Agribank will improve the position to face the fierce competitiveness over current and potential rivals In contrast, with the requirements set out in the fierce competition, Agribank can apply the management mechanisms of dismissal the incompetent employees and merging inefficient branches The customer segments will provide the basis for the development of products and services in accordance with demand which affirmed the capacity and create the image enable Agribank maintain urban market and enhance its roles in rural market Solutions of Finance and Safety 3.3.3.1 Supplement Chartered Capital; widen the capital scale to meet the CAR in accordance with objectives  Supplementing the Chartered Capital from internal resource of Agribank - To maintain profit growth per year not less than 15%, additional equity capital from the distribution of annual net profit, maximum 62% of net profits each year: + To set up funds (additional reserve for Chartered Capital, the financial reserve funds, development funds) and in 2015 reached 19,000 billion dongs Recovery of outstanding debts + group II from 300 billion to 400 billion to set up funds (additional reserve fund additional capital, the financial reserve funds, development funds) and in 2015 reached 19,000 billion dongs + Recover the outstanding debts of group II from 300 billion to 400 billion + Additional special interest bonds from 710 billion to 1,300 billion + Business lines and / or divestments in subsidiaries - Issuance of bonds with a reasonable interest rate charged to eligible Tier II - Proposed list of fixed assets (houses and land use rights) to evaluate capital supplementation for the level II  Submit to the State Bank of Vietnam to get the Chartered Capital supplement to ensure the minimum capital adequacy ratio In terms of large scale of total assets, the requirement of higher credit growth (10-15%/year) for the country economic development, especially agriculture and rural development In the context of unrealized Agribank’s equalization, the solution to Formulating Business Strategy for Banking Activities of Agribank to 2015 70 GaMBA01.X0210 - Group 3.3.4 increase Chartered Capital from internal resources is from undistributed profits and provision …is not enough to reach 9% according to the regulations of State bank of Vietnam To achieve capital adequacy ratios above the minimum 10% in 2015, Rural Agribank needs assistance from the state budget for Chartered Capital supplement each year from 10,000 to 12,000 billion 3.3.3.2 The reasonable growth of total assets always ensures the appropriateness of the term structure of assets and liability The scale, structure and quality of asset are the ability to be financially sustainable and decide the existence and development of Agribank To ensure the growth of total assets, Agribank should focus on well implementing State policies for investment and economic development; Step up lending to all economic components, especially agriculture and rural development, maintaining growth rates and investment loans from 10 to 15% Regularly analyze the assets structure and liability under the model of maturity (Maturity Model), the gap-sensitive rates (Gap Analysis) to promptly adjust the credit portfolio, to manage investment liquidity, interest rate risk management 3.3.3.3 Enhance assets quality - Maintain profitable assets account for 80-90% of total assets, reduce the proportion of internal receivable accounts, bad debts, strengthen and improve credit quality, lower costs, provisioning of credit risks - The assets classification, provisions are under conservative principle, regular assessment and classification of debts are recoverable Actively supervise recovery and closely manage the debts have been dealing with risks + In order to achieve targets of profitability and safety, the divisions must be thoroughly conservative principles, particularly in assessing the quality of asset portfolio to take measures to urge the recovery of debts, bad debt and have a policy of discrimination in customer strategy Identify correctly and fully redundant costs and timely restructuring of the remaining expenses to achieve profitability targets and provisioning as prescribed + Regularly assess and classify the debts followed by XLRR, increase the rate of debt recovery was handled by the provisions Follow-up details XLRR debt to each debt has XLRR both principal and interest Fully making statistics to ensure assets safety and improve recovery - To apply the system of internal credit rating consistent in the system of Agribank to assess clients fully quantitative and qualitative factors Also frequently add, adjust to suit changes in the international accounting standards (the standards on financial instruments: IAS32, IAS39) Solution of liability 3.3.4.1 Analyzing the scale and structure of liability Analyze the scale and structure of liability to maximize the strengths and overcome weaknesses in the funds mobilization Accordingly, the solutions form the funds mobilization given in each stage matching the requirements of the business Formulating Business Strategy for Banking Activities of Agribank to 2015 71 GaMBA01.X0210 - Group Mobilized funds play an important role in the liquidity of the system and ensuring the credit investment for the socio-economic development, striving to raise capital over 90% of liability Maintain and sustain stability in the liability, continue to focus on medium and long term deposits of 45-50%, with term deposits of over 70% of liability 3.3.4.2 Strengthening mobilized funds in rural areas for agriculture and rural area Emphasis on the capital raised in the rural market to reduce costs and create active in business, striving to raise capital in rural areas of 40% of the total mobilized funds: - Coordinate with other social organizations, such as the Women, Youth, Farmers, War Veterans to establish saving funds for customers - Research the psychological, basic needs and activities as well as farmers' crops to make products specific funding for farmers 3.3.4.3 Further study the capital costs in urban areas especially in highly competitive areas to provide appropriate policies to mobilize The mobilized capital in urban areas is moving to rural for lending is still mainly Agribank strives to remain capital in urban areas at 60% of total liability Urban area is competitive in all aspects between commercial banks and financial institutions from interest rates to incentives for customers’ deposits That’s why Agribank must specifically study on capital cost to provide the products and suitable customers’ policies to the needs of urban residents Simultaneously with the policies and regimes of interest rate particularly at the headquarter, awarded point or organize the emulation movement of mobilized funds between branches in the system to encourage the application in the urban area having large mobilized funds, able to support and undertake capital requirements in the rural areas 3.3.4.4 Develop policies to mobilize capital in accordance with the State policies and the market situation, the tastes of the depositors and the business strategy of Agribank  Policies of interest rate Continue to apply the interest rates policies for the branches, study interest rate in the market to define the flexible policy of interest rates attracting customers, in accordance with changes in market interest rate in each period Interest rates will be as same as the deposit interest rate terms of the commercial banks and other credit institutions in the same area, the branches based on financial ability, competitiveness to define interest rates in line with the tastes of customers  Develop incentives to attract customers: There is a customer segment to adopt preferential policies on interest rates, the use of banking services Suitable promotion to each customer segment: traditional customers, clients with large savings, long-term, businesses, residents Add more conveniences for the mobilized products such as withdraw money everywhere, wages Formulating Business Strategy for Banking Activities of Agribank to 2015 72 GaMBA01.X0210 - Group 3.3.5 payment through accounts, ATM cards, Home banking, Mobile Banking, and Internet banking Solutions of improving the quality and risk management Stage 1: Improve and upgrade risk management model in order to meet the practical requirements for risk management and towards international standards (in the year 2011 to 2013) 3.3.5.1 Credit risk management - Model The credit department divided into different professional independent functions such as sales function - customer relations department (customer contact, negotiation, marketing ), credit risk management functions - the credit risk management division (analysis, evaluation, forecasting, measuring, periodically re-evaluate ) and operational functions - the debt management division (processor records management, monitoring and supervision of loans, collect debts, interest) According to clearly define the functions, duties and liabilities of each component to ensure objectivity in evaluating the quality of work, as a condition for processing the signal credit risk quickly, efficiently and timely The credit risk management division must regularly monitor, evaluate and analyze the bad debts depending on the actual loans to the appropriate remedial measures at head office and branches Even if customers have outstanding credit of group also regularly analyze and monitor each client's repayment for each loan to predict the possibility of bad debts arising and the precautions promptly and avoid risks to the bank Where clients use loans for wrong purposes cannot afford to carry debt sale of assets to recover the debt - Putting into operating the system of internal credit ratings is the basis in formulating policies on customer credit limits and measures to secure loans, credit-oriented to each client - Developing the project of analysis for all sectors in economic / fundamental areas as a basis for measuring risks and determining credit limits in sectors / areas - Developing the systems to assess risk on the balance structure and using this system to establish credit limits for different sectors in relation with limit of credit risk in the overall may be acceptable as well as target related to profitability Restrict loans to the high-risk arena such as real estate, steel and cement If the branch lending to these sectors, they must be approved by headquarters The credit risk management at Headquarter regularly monitors the investments of the branches in the sectors and alerts in the investment field for each branch and Managers of Agribank in the entire system - Enhance the exploitation of information from Credit Information Center of the State Bank of Vietnam with a new package of risk warning for overall assessment of credit activities in the entire system, especially about good customers that the outstanding debt is low risk group but have bad debt or bad Formulating Business Strategy for Banking Activities of Agribank to 2015 73 GaMBA01.X0210 - Group debt signal of other credit institutions Through the collected information, the direct guidelines and solutions will be sent to every branch to minimize the potential credit risks in the business of Agribank - Tighten the loans conditions, especially the new borrowers such as the increasing the customer equity in projects, strict control of the security property and the loan limit for loans without security properties for the client to avoid loss of capital for banks - Applying the derivatives to prevent the credit risk effectively such as securitized loans, credit swap contracts (Credit Swap), the option contract credit, required bonds 3.3.5.2 Liquidity risk management - A quantitative assessment of the liquidity, management framework of liquidity risk and liquidity risk supervision: Monitoring liquidity through maturity analysis, the cash flow statements, analysis of liquid assets, aggregate loans signed but not yet disbursed and predictable cash flows - Focus on controlling liquidity The management of daily liquidity will be managed by a department in charge of capital concentration To set up a liquidity subcommittee under the planning division to be in charge of daily works All businesses reports for liquidity management department at Headquarter - Provide process of analysis and recommendations on the liquidity of Agribank Analysis and management the liquidity status (surplus or deficit) in all phases (short, medium and long-term); forecast and manage cash flow and potential plans; analysis of market conditions, the competitive environment (the number of rivals, the number of new products are introduced); the demand for loans on the market and liquidity of the market - Develop a contingency plan for the period of pressure on liquidity (reserve liquidity crisis) Set limits, major objectives such as objective of statutory reserves, surplus-oriented capital in the short term, medium-and long-term, limitation to the amount and high variable rate of debt, limitation of cash flow deficits are predicted in the different phases Store information on the changes of the money in and money out Building models to support the projected liquidity requirements - To comply with strict regulations on the proportion of banks to ensure safety in activities; the reserve ratio specified in the payment system 3.3.5.3 Market risks  Foreign Exchange risk - Remain a proportion of assets and liabilities in foreign currency assets, maintenance of net foreign currency position at a reasonable level; Employees are trained to analyze and predict the factors that affect exchange rate fluctuations of all currencies Base on that, Agribank will make decisions on the contracts of Foreign currency; Formulating Business Strategy for Banking Activities of Agribank to 2015 74 GaMBA01.X0210 - Group - Development and use of financial instruments that able to minimize risks in foreign exchange activities, such as forwards contracts, futures contracts, swap transactions in foreign currencies, options Development tools of foreign exchange risk management to reach international standards  Risk of interest rate - Provide methods for determining interest rate risk through interest rate gap analysis - Determine the type of interest rate risk and set up policies and procedures to manage interest rate risk; all the branches must report on interest rate risk related to assets and liabilities and implement regular assessment of the ability to minimize interest rate risk - Setting limitation and targets such as limitation on the different rate; the acceptable minimum distances (differences between the cost of debt and profitability of the assets in the new business) - Using the method of managing interest rate risk as the deviation chart of reprising gap, duration analysis, sensitivity coefficient Stage 2: Standardize the risk management model by the international standards (Basel II the implementation system of standard methods) will be implemented from 2014 The consultants will reassess the situations of risk management system of Agribank They indicate the area need to improve in the risk management and the causes of such shortcomings and comparing with the requirements of international standards on risk management A system of criteria will be developed with the requirement on risk management and strategic business orientation The model of active risk management apparatus in accordance with the characteristics and situation of Agribank is proposed Set up policies, processes, models and tools to fulfill the type of risk management such as credit risk, liquidity risk, operational risk, market risk * The achievements of three above solution are the implementation the financial solutions and safety operation, liability solution, risk management enable Agribank to achieve the target on finance and controlling the bad debts, enhancing the credit activities and improve safety in business activities The most difficulties for the implementation of these three solutions that Agribank facing: - The fluctuations of economy in Vietnam and the world leads to a change in regulation on monetary policy of State Bank of Vietnam - The current operation, especially the credit activity are developing by small size, low quality with potential risks - The fierce competition between credit institutions in Hanoi and Ho Chi Minh city However, as the above analysis, the implementation of synchronized solutions, especially solutions of organizational model, network, human resource development for the merger to improve competitiveness of the branches, concentrating on training and recruit talents and the establishment of some division the risk warning, strengthen Formulating Business Strategy for Banking Activities of Agribank to 2015 75 GaMBA01.X0210 - Group 3.3.6 forecasting activities will create premises and facilities for Agribank to minimize the difficulties in the implementing solutions to achieve the financial targets in the period 2011 to 2015 Solutions of developing information technology  Improving the information technology systems to meet business and management requirements, especially e-banking services to directly communicate with the customers and supporting systems to make decisions - Implementing E-Banking system for all banking services including account information, statements, transfers, payment bills, application of loans the use of security systems and authentication has been implemented as OTP, PKI, chip card - Develop and implement a data warehouse system The analytical applications based on Data Warehouse allows the divisions to analyze customers, modeling trend and analyze the profitability by using data compiled from the daily transactions (MIS) and from many other sources - Develop and implement systems of customer relationship management (CRM) Firstly, update the comprehensive customer information on the current CIF then build a fully customer relationship management system This is the main tool for the banking industry to remain market share and generate growth - Implement an enterprise information system to support Agribank in making management decision timely At the same time building business portal and collaboration environment to enhance the knowledge sharing and business innovation  Strengthening the management of information security to ensure safety for all technological systems, assets for banks and customers - Audits of information technology systems to detect vulnerabilities and close most vulnerable holes Based on considerations of current resources and priorities of the security issues, Agribank need to enhance the security of daily activities - Building Center of operation and monitoring of information security across the bank Establish management systems of information security - Applying the international standard of information security (ISO 27001) in Information Technology systems to confirm the ability of security and confidentiality of information technology system and quality of products and services providing to customers  Standardize the processes of information technological, service management, upgrading information technology center - Gradually build systems and processes to standardize basic processes of information technology system To establish information technology processes and applies standards to implement the projects successfully, Agribank should build and continually improve information technology processes including basic organizational processes and project procedures Formulating Business Strategy for Banking Activities of Agribank to 2015 76 GaMBA01.X0210 - Group - Develop standard KPI (Key Performance Indicator) to measure the performance of information technology system effectively Develop and apply risk management processes in information technology investment - Adjust the Information Technology Center respectively to support development of new technology system Annually making self-assessment of information technology strategies and self-improvement The results of implementing the solutions on information technology: a solid basis and foundation for the achievement of other solutions on information technology is particularly important factor to define the services quality in the banking sector The solutions on information technology are done and are Agribank’s tool in supervising the operation as well as other risks that may occur in the credit and other business activities 3.4 IMPLEMENTATION SCHEDULE To ensure that the supervising and evaluating the effectiveness of strategic solutions, Agribank should comply with the following schedule Table 3-4: Implementation schedule No Solutions 2011 2012 2013 2014 2015 AND REGULATORY Solution of market and market share Solutions of business model, network and human resource development Solutions of Finance and Safety Solution of liability Solutions of improving the quality and risk management Solutions of developing information technology 3.5 SUGESSTIONS TO THE GOVERNMENT AUTHORITIES  Suggestions to the Government - Setting up and improving the regulatory environment to be stable, uniform, and consistent in the banking operations In order to create favorable conditions for the banking operation, the Government should proceed to review the legal documents that is overlaps and inconsistent in the promulgation and enforcement in line with the practices and international standards Currently, the Law on Credit Institutions was promulgated and came into effect on 01/01/2011 The Government should continue to build and complete laws including the Law on Deposit Insurance, Law on safety monitoring of banking activities to be the legal basis and orientation activities for the banks Study and modify the Formulating Business Strategy for Banking Activities of Agribank to 2015 77 GaMBA01.X0210 - Group regulations on foreign exchange, debt classification, the safety rate in line with international practices and standards as well as the actual conditions in Vietnam - Consider carefully the establishment of new banks and non-bank financial institutions Enhance the roles of management and supervision of the State Bank of Vietnam for non-bank financial institutions and credits institutions - Create a stable business environment, equality for banking activities Rearrange the State owned enterprises to supplement their own equity Currently, the State owned enterprises in general and defense enterprises engaged in economic in particular are trading on very low State own equity Therefore, the liability for the business is from banks However, this will reduce profits and competitiveness of State own enterprises and very unbalanced financial risk to the bank To overcome this situation, the Government should quickly rearrange the State owned Enterprises and plans to supplement the liability to maintain the leading role of the State economic sector Create a fair business environment between enterprises in all economic sectors, ensuring fair competition; the prescribed performance audit regime is required so that the financial information providing to the bank for analysis and evaluation is more reliable and reduce risks in credit activities of the banks - Approve the supplementation of Chartered Capital to Agribank to enhance the competitiveness, strengthen the capital adequacy ratio towards the minimum level prescribed under Basel - Further restructuring of credit toward the concentration of capital for efficient projects in the field of production, exports, agricultural and rural development; Promote the supporting activities of the enterprises, households and individuals in the field of agriculture and rural areas through the interest rate support, support to reduce losses of post harvest  Suggestions to the State Bank of Vietnam (SBV) - Improve the policies and legal documents of banking sector: SBV reviews the legal documents, promptly finalize the fully system of policy and the legal documents for implementing the Law of State Bank, Law on Credit Institutions to ensure the safe, dynamic and efficient operations of the banking system In particular, SBV should set up monetary and credit policy meeting the requirements of market economy; closely monitor macroeconomic developments, the market's signal to make necessary adjustments in operating monetary and credit policy for no major fluctuations in interest rates, exchange rates create more detrimental to the banking activities; Implementing solutions of operating the conservative and flexible monetary policy to create a stable macroeconomic environment, economy development, and controlling inflation Formulating Business Strategy for Banking Activities of Agribank to 2015 78 GaMBA01.X0210 - Group - Strengthening the inspection of observing the provisions in the activities of commercial banks, and take measures immediately and resolutely to any violations to prevent violations and make orientations for other commercial banks, typically operating violations in funds at interest rates exceeding the prescribed ceiling rate of SBV - Closely monitor the observance of regulations on ensuring the solvency and other adequacy ratio of the banks by Circular 13 and Circular 19; improve the governance in commercial banks in which the risk management to meet equity adequacy ratios and the safety standards approaches to international standards is concentrated - Continue with the policy to support investment in developing production and business activities in agriculture and rural areas such as the policies of rediscount funds with low interest rates, low required reserve ratio Formulating Business Strategy for Banking Activities of Agribank to 2015 79 GaMBA01.X0210 - Group CONCLUSION The Business strategy plays a very important role to the survival and growth of enterprises in general and to Agribank in particular No business strategy, the enterprises can hardly survive and build a solid long-term foothold in the market Identify and select the inappropriate competitive strategies makes the enterprise go astray and it is difficult to adapt to market fluctuations and cannot be sustainable development By analyzing the macro environment and industry environment in banking activities enable Agribank to make use of the advantage and to overcome the challenges Especially, the deep meta-analysis and evaluation of the internal factors defines the strengths to develop in the competitive environment and to overcome weaknesses in the operation of Agribank From that, we have applied some models of modern strategic management to identify, formulate and select the most suitable strategy to Agribank in banking environmental conditions in the period of 2011 to 2015 Thereby, we have specific solutions and comprehensive roadmap for implementing the selected business strategies We hope that our studies with useful ideas will be able to contribute to the development of business activities of Agribank We believe that, if the solutions are applied effectiveness, Agribank will fulfill the strategic target set for 2011-2015 Formulating Business Strategy for Banking Activities of Agribank to 2015 80 GaMBA01.X0210 - Group REFERENCES Griggs University, Strategic Management book Fred R David, Concept review of Strategic Management - Statistics Publishing House Dr Le The Gioi; Dr Nguyen Thanh Liem; MSc Tran Huu Hai, Strategic Management-Statistics Publishing House (2009) University of National Economics - Editor: Prof Dr Le Van Tam, Strategic Management book - Statistics Publishing House (2005) Fred R David, Strategic Management (Concept and Case) Peter S Rose, Commercial Bank Management - Financial Publishing (2004) Internal Information of Agribank Vietcombank; Vietinbank; BIDV , annual report in2008 - 2010 MHB Securities company, Banking Analysis Reports - May 11th 2009 10 Bao Viet Securities company, Banking Analysis Reports July 7th 2008 11 Au Viet Securities company, Report on thematic analysis of bank stocks 12 Journal of Science and Technology – Danang University no 5(40).2010, raise the competitiveness of the commercial banks in Vietnam 13 Dr Nguyen Thi Kim Thanh, development orientation to regional banks in 20 (no 21/2010) – Institute of Strategy Bank - State Bank of Vietnam 14 The information on the economic, social, banking on the Internet Formulating Business Strategy for Banking Activities of Agribank to 2015 81 ... Strategy for Banking Activities of Agribank to 2015 GaMBA01.X0210 - Group Formulating Business Strategy for Banking Activities of Agribank to 2015 GaMBA01.X0210 - Group LIST OF ABBREVIATIONS USA :... commercial banks gain a large proportion among the group of commercial banks are ACB, Sacombank, Techcombank Figure 2-10: Agribank’s Market share of Banking Deposits in 2010 (Source: State Bank... 34 GaMBA01.X0210 - Group (Source: State Bank of Vietnam) The strategy of the commercial banks mostly focuses on the retail banking market Some leading commercial banks such as ACB, Sacombank