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CAPSTONE PROJECT REPORT BUSINESS STRATEGY PHASE 2012 – 2017 OF DONG DA BRANCH – VIETNAM INTERNATIONAL COMMERCIAL JOINT STOCK BANK (VIB) Quach Thanh Nam Dang Ngoc Tuyen Pham Thi Bich Truong Duong Duc Tuyen Class: X0810 Hanoi, 2011 GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT BUSINESS STRATEGY PHASE 2012 – 2017 OF DONG DA BRANCH – VIETNAM INTERNATIONAL COMMERCIAL JOINT STOCK BANK (VIB) Group Number: 06 Student’s name: Quach Thanh Nam Dang Ngoc Tuyen Pham Thi Bich Truong Duong Duc Tuyen HA NOI 2011 ACKNOWLEDGEMENT Over two years of study, research with Lecturers of international business management Master program, which is held jointly between U.S Griggs University and Hanoi National University, we have obtained profound knowledge of business management such as finance, personnel, marketings On the basis of knowledge learned, group has built the topic "Business Strategy period 2012 - 2017 of Dong Da Branch Vietnam International Commercial Joint Stock Bank", which is the distilled knowledge equiped by the Lecturers and program during the past two years Group would like to express our sincere thank to the Lecturers, staff of ETC center who create all favorable conditions for our group to complete the program group in a convenient and efficient manner ACKNOWLEDGMENT .3 LIST OF TABLES PREFACE TABLE OF CONTENTS CHAPTER 1: THEORY ON BUSINESS STRATEGY MANAGEMENT 10 1.1 Overview on business strategy 10 1.1.1 Concept of business strategy 10 1.1.2 Role of business strategy 11 1.1.3 Strategy classification 11 1.1.3.1 Company – level strategy 12 1.1.3.2 Business unit strategy 12 1.1.3.3 Functional strategy .12 1.2 Steps in strtategy building 13 1.2.1 External environment analysis of business 13 1.2.2 Internal environment analysis of business 16 1.2.3 Matrix SWOT .19 1.2.4 Matrix QSPM .19 CHAPTER 2: ANALYSIS OF STRENGTHS, WEAKNESSES, OPPORTUNITIES, CHALLENGES OF DONG DA BRANCH - VIB .21 2.1 Overview of Vietnam International Commercial Joint Stock Bank (VIB) 21 2.1.1 Formation and development of VIB 21 2.1.2 Establishment and development of Dong Da Branch – Vietnam International Commercial Joint Stock Bank (VIBDD) .22 2.1.3 Common strategy of VIB 22 2.2 Macroscopic business environment analysis (PEST) 24 2.2.1 Legal & political factors 24 2.2.2 Economic factor 25 2.2.3 Socio-cultural factor 25 2.2.4 Information technology factor 25 2.3 Analysis of bank competitive environment (5 competitive forces by M Porter) .26 2.3.1 Bargaining power of suppliers 26 2.3.2 Threat of substitute products 26 2.3.3 Threat of potential entrants 27 2.3.4 Bargaining power of buyers .27 2.3.5 Threat of existing firms .28 2.4 Internal analysis of Dong Da Branch (VIBDD) – Vietnam International Commercial Joint Stock Bank VIB 30 2.4.1 IT and modernization factors of bank 30 2.4.2 Financial capability 30 2.4.3 Organization structure and business network .32 2.4.4 Personnel 34 2.4.5 Products and services 36 2.5 Analysis of opportunities, threats, strengths, weaknesses of VIBDD (SWOT) 39 2.5.1 Opportunities .39 2.5.2 Threats .40 2.5.3 Strengths .41 2.5.4 Weaknesses 42 2.6 Building matrix for assessment of opportunities, threats, strengths, weaknesses 43 2.6.1 EFE matrix 43 2.6.2 IFE matrix 44 2.6.3 CPM matrix 45 CHAPTER 3: STRATEGY FOR DONG DA BRANCH – VIETNAM INTERNALTIONAL COMMERCIAL JOINT STOCK BANK, PHASE 2012 – 2017 46 3.1 Growth orientation of VIB Dong Da 46 3.1.1 Development orientation of VIB 46 3.1.2 Development orientation of VIBDD 46 3.1.3 Growth target of VIBDD till 2017 47 3.1.3.1 Overall target 47 3.1.3.2 Concrete target of the strategy 47 3.1.3.3 Comparing VIBDD’s strategy and VIB’s strategy 48 3.2 Strategic selections of VIBDD till 2017 49 3.2.1 Building strategy based on TOWS matrix 49 3.2.2 Strategy selection (QSPM matrix) 51 3.2.3 Budget for strategy implementation 53 3.3 Solutions .54 3.3.1 Personnel solution 54 3.3.2 Close coordination between business units 55 3.3.3 Making development and customers care plan 56 3.4 Proposal 57 3.4.1 VIB should build a personnel training system 57 3.4.2 Building an effective approval procedure 58 3.4.3 Building the proper interest rate, exchange rates and fees 59 CONCLUSION 60 REFERENCE DOCUMENTS 61 LIST OF TABLES STT 7 10 11 NAME OF TABLES CHAPTER External economic environment Example on external factors evaluation matrix EFE Five competitive forces of M Porter Example on CPM matrix Example on IFE matrix Example on SWOT matrix Example on QSPM matrix CHAPTER Some financial indicators of banks Comparison and assessment table Evaluation of strength, weakness of the competitive factors Financial data table of VIB Financial data table of VIBDD Business units chart Organization chart of VIBDD Number of branches by years EFE matrix IFE matrix CPM matrix CHAPTER SWOT matrix QSPM matrix PAGE 13 14 15 16 18 19 20 28 29 29 31 32 32 33 34 43 44 45 50 51 PREFACE Necessary aspect of the research topic In recent years, the world and Vietnam economy is in a crisis, high inflation, exchange rates, interest rates change sharply, payment risk appears more and more, businesses fall into difficulties and many have bankrupted In the difficult economic conditions, VIBDD is a business unit of VIB Bank system, which is in strong transition from organizational structure model, appearance to the inside operation VIBDD need to find their own direction in order to minimize the negative impact from the economy, and promote strength, take the opportunity to develop For a correct direction, and internal and external issues of VIBDD should be studied and considered carefully through the objective listing, analysis Our theme uses scientific analysis tools of such factors in a qualitative and quantitative manner to point out the strengths, weaknesses, opportunities and threats of VIBDD and simultaneously build the business strategy with the solutions for implementation of the strategic Target The study of VIBDD’s business strategy in the coming period is to apply theory to business practice The study allows to indicate clearly the positive and negative effects with their impact to the business activities of VIBDD The problems that VIBDD have experienced limiting development are identified and analyzed, the cause is found to take measures to handle Study methodology Research methodology is an integrated approach based on statistics, which sum and make analysis to compare with the actual situation in VIBDD; development orientation of industry, field of operations along with the professional opinions through published sources of data, result of market survey and research to clarify and concretize the research’s content Research objective and scope Objective of the research is the business strategy of VIBDD period 2012 to 2017, this is the stage predicted that the economy of Vietnam and the world escape the crisis The topic is used on the basis of analysis of practical issues associated with strategic theory to develop a business strategy for VIBDD period 2012 to 2017 Theme content The theme is divided into big contents: Chapter 1: Theory on business strategy management Chapter 2: Analysis of strengths, weaknesses, opportunities, threats of Dong Da Branch – VIB Chapter 3: Strategy for Dong Da Branch – VIB period 2012 - 2017 With a team of experienced leadership, stable staff, with the strong support of VIB system, VIBDD needs to develop more in size and bring its available potential into play As one business unit of VIB, VIBDD takes the goals and vision of VIB for development orientation, and in the period from 2012 to 2017 VIBDD will become the major business center of VIB 3.1.3 Growth target of VIBDD till 2017 3.1.3.1 Overall target For VIBDD Towards 2017, VIBDD will become a major business center of VIB system Becoming a unit with good, prestigious business quality contributing benefits to VIB Bring benefits to customers Provide products and services fit the needs and time of customers Benefits to employees Building a qualified, honest staff who having a strong attachment to the unit, always ready and wholeheartedly caring customers 3.1.3.2 Concrete target of the strategy Improving business indexes To become a major business center, VIBDD should reach the certain size suitable with ground regulations and overall size of other business units: - Total account outstanding: 1,500 billion VND; - Annual profit: 60 billion VND; - The capital mobilization balance:1,000 billion VND - Overdue loans (NPL) limited at 1% Existing customers care and expansion of new customers For the business grows, the first thing is to take care of current customers because they are the foundation to implement completely the business targets and expand additional customers Moreover, the cost for existing customers care will be less costly than expanding a similar new customer These costs included time, finance and human resources - Develop a customers care plan through the most important activity is to grasp customers’ demand so that products and services can be provided timely; - Divide customers into segments by sector groups, utilizing the advantages of VIBDD’s customer base to expand more new customers; - Make close coordination between the two units of enterprise customers and individual customers for common customers care, on the one hand, and for utilization of ties to expand new customers, on the other hand Improvingbenefits for customers To accomplish these goals, staff is a crucial subject, having a good staff will be the basis to complete the business objectives - To build a friendly, comfortable working environment taking targets as management tools; - To organize training, improval of knowledge and skills for staff; - To raise incomes; - To create promotion opportunities for employees 3.1.3.3 Comparing VIBDD’s strategy and VIB’s strategy Features which are similar to VIB’s overall strategy - VIBDD’s strategy must follow VIB’s orientation because VIBDD is a business unit of VIB system; - VIBDD implements VIB’s vision; - VIBDD also aims to provide customers, shareholders and employees with maximum benefits; - VIBDD also takes VIB's core values as its core values; - Type of products and price frame which are determined for the whole system by VIB system Features which are different from VIB’s overall strategy - VIBDD’s strategy is only a small strategy: developing a medium-scale branch into a large-scale branch; - VIBDD takes advantage of the branch’s strengths and the market opportunities in the area to cope with the weaknesses and challenges and from there build its own strategy; - To implement its own strategy, VIBDD has different goals for each stage of development; - On the basis of the branch’s advantages and market features, VIBDD actively provide products to the market Furthermore, the product quality depends much on staff, therefore, VIBDD is completely capable of providing quality products to the market if having good personnel; - About price, VIBDD can change price level following VIB’s allowed price frame On the other hand, VIBDD can simultaneously increase or reduce price level outside allowed price frame of each product in one product group, but must ensure the principle of "ensuring profitability or profit rate of that product group" 3.2 Strategic selections of VIBDD till 2017 3.2.1 Building strategy based on SWOT matrix SWOT MATRIX SWOT MATRIX Opportunities (O) Large customer base at the area of VIBDD’s headquarter; Ability to extend VIBDD’s network of transaction rooms is large; VIBDD’s goodwill is large; Well order and security in Dong Da district; Other banks’ difficulties in establishing more branches; Small banks cannot survive in economic conditions today Threats (T) The economic crisis strongly affects VIBDD; State-owned banks dominate the market shares; Increased bad debts, and decreased resource mobilization due to economic crisis Strengths (S) Weaknesses (W) Taking advantage of the size of VIB’s strong growing system; Taking advantage of VIB’s increasing capital scale to develop customer base; Providing most available banking products and services; HR remains stable; and high spirit of solidarity; Favorable business location; Large customer base Model of thoroughly divided into business units; High fees and interest rate; inflexible application to different customer group; Newly appointed leader whose reputation and experience are not much; Staff failed to keep pace with size change; No consistent strategy of developing customer base; No consistent plan of customer care; Poor staff training COMBINATION S – O COMBINATION W – O Focusing on current market to expand scale (S2,S5,S6,O1,O6); Focusing on building plans of customer care and developing customer base to fully exploit current customer base (W5,W6, O1, O6); COMBINATION S – T COMBINATION W – T Taking advantage of capital scale of VIB system Training personnel to enhance quality of service to to maintain business operations (S2,T3);; Selecting favorable products and low-risk industries to finance to gain competitiveness and reduce risks (S3, T2, T3) gain competitiveness and manage risks (W4, W7, T2, T3) 3.2.2 Strategy selection (QSPM matrix) Through the above analysis one can find that current business opportunities are numerous, but there are many weaknesses in VIBDD so the question is how to select appropriate strategies for next years Existing market entry Main elements Weighting Opportunities Dong Da district is one of the key economic point of Hanoi The growth of VIB system enables VIBDD to expand its network Because of playing the central role in the economy, VIBDD in particular have advantages to develop Dong Da District has safety conditions A majority of the population in the area where VIBDD’s headquater locates has a habit of using cash Many new banks have difficuties in establishing new branchs or transaction offices in surrouding area of VIBDD The crisis creates opportunities for VIBDD to attract good clients to its branch Threats The difficulties from crisis pressurized on VIBDD and its own Score Products difference Total scores Weighting Stable maintenance Total scores Score Weighting Total scores Score 1% 0.01 1% 0.01 2% 0.02 1% 0.02 1% 0.02 2% 0.04 1% 0.01 1% 0.01 2% 0.02 1% 0.02 1% 0.02 2% 0.02 2% 0.04 1% 0.02 2% 0.02 10% 0.4 7% 0.21 6% 0.18 10% 0.4 6% 0.18 7% 0.21 2% 0.02 2% 0.02 2% 0.02 customers Branches of state banks with the advantages will be more favorable in the developing of customer The difficulties from crisis greatly affects the amount of capital raised, the increasing interest rates and bad debt ratio Strengths VIBDD mostly meet the needs of customers in all areas VIBDD, thanks to VIB’s rapid growing capital, secures its funds loans VIBDD’s products are very diversified Stable personnel Advantageous location Big base of customers 3% 0.06 3% 0.03 2% 0.02 8% 0.24 8% 0.24 4% 0.08 2% 0.04 6% 0.18 5% 0.2 2% 0.06 2% 0.06 8% 0.32 2% 3% 2% 3% 2 0.06 0.06 0.04 0.06 10% 8% 2% 3% 2 0.4 0.24 0.04 0.06 6% 5% 2% 6% 3 1 0.18 0.15 0.02 0.06 2% 3% 1 0.02 0.03 2% 3% 1 0.02 0.03 1% 3% 0.02 0.09 15% 0.3 10% 0.3 9% 0.18 7% 0.14 7% 0.21 7% 0.14 10% 0.3 5% 0.05 5% 0.1 5% 0.1 6% 0.06 5% 0.1 5% 100% 0.1 2.53 5% 100% 0.1 2.51 7% 100% 0.21 2.40 Weaknesses Spliting business units High interest and fees Newly-appointed leader Personnel can not catch up size development There is no a unified strategy on customers expansion There is no a strategy on customers care Staff training is not good From the results of the matrix shows that VIBDD should select strategy ”FOCUS ON MARKET” as development strategy for the period 2012 - 2017 3.2.3 Budget for strategy implementation Fund for staff salary Human resources plays an important role in the implementation of VIBDD’s strategy Therefore, it is necessary to have a salary fund to ensure the essential needs of everyday life of staff Average annual salary fund (million VND) Salary level/month Group Group Group Group Group Group Group Total Number of employees 25 18 17 10 6.5 5.5 Total salary/year 2 4 22 600 432 816 480 156 198 300 2,982 Training costs HR is an important link in the chain providing service to customers and implementing strategies Thus, the quality of personnel must be raised through training Annual training costs (million VND) Training class Expertise skills Intensive skills Soft skills Total Number of classes 12 12 Cost/class Total cost 10 20 10 120 120 120 360 Other costs Annual other costs (million VND) Other costs Travel and communication costs Rent business location Depreciation R&D costs Total Amount 132 1,800 1,000 200 3,132 Aggregate budget VIBDD’s annual budget for strategy is 6,474 million VND These costs shall be accounted into VIBDD’s business expenses and to break even, the minimum annual revenue must be 6,500 million VND 3.3 Implementation solutions 3.3.1 Personnel solution Personnel is an extremely important issue for a enterprise doing service business like banks VIBDD’s strengths are its has a stable staff but the size has changed rapidly, the addition of new personnel can not meet immediately with such development, so VIBDD should implement the following number of solutions: - Due to new personnel so they need to be trained to grasp basic work VIBDD should send such personnel to participate in training courses of the system for them to learn the general structure of VIB, necessary operations between departments, sections, services & products that VIB can offer customers; - To establish working groups including old and new staff This will create advantages, first: The experienced staff will guide new staff in working, the new personnel allowed to directly their job will have the opportunity to learn the job fast Second: reducing work pressure for the old staff because simple tasks will be assigned to the new staff to do, the old staff will be able to other more-specialized works, such as customer care, new customers expansion, potential market research Third: To enhance the old staff’s role, now they not only their work but also learn how manage othe personnel, their role is elevated to another level creating new feelings in work and bringing into play their capability, creation - That the staff instruct direct work among themselves is extremely important, however, to become systematic it needs concentrated training and guidance VIBDD should organize concentrated training courses at the unit with the instructor is the leaders Working skills should be disseminated in common skills of all employees with the goal of providing services to customers in a unified manner Furthermore, business policies often change according to fluctuations in socio-economic situation, so all personnel should know and understand clearly to applying in their work 3.3.2 Close coordination between business units To develop, VIBDD must be a united bloc focusing in one direction and the important point is that the individual customers bloc (RB) and enterprise customers bloc (WB) shall have a close cooperation through the following methods: - Regular exchange of information through the general meeting at VIBDD; - Two business units hold joint meetings on sales and services at the unit with the common subject to find the business development actions and joint implementation; - Leaders of the two units should be those who follow the work and supervise the cooperation between the business staff of two units ; - Developing mechanisms of business effciency division explicitly based on the contribution of each block; - Organizing of meetings and exchanges off working time between the business staff to enhance understanding, solidarity 3.3.3 Making development and customers care plan There should be a unified customers care and expansion plan in order to maximize resources and take advantage of customer base and reduce risks - Based on existing customers with a certain business lines, VIBDD should take it as the basis for selecting business being well developing or having development potential in the future to find more new customers; - Next step is to best take care of current good customers because, on one hand, they are bringing profits for VIBDD, keeing such customers will save cost far more than to seek a similar customer, when, on the other hand, provided good quality services proposing these customers to help introduce new customers in the same business is fully capable of being implemented; - Other way is that the customers’ customers can be found based on input and output contracts, through operation of payment accounts, VIBDD can directly contact to find out the needs, introduce services and may offer transaction; - Additionally, customers expansion can be made based on regions such as handy craft villages, industrial zones - Once a relationship with customers has been established, it should develop special care mechanisms with quality service, with attention to the important dates of such customers - The key point is that there should be a mechanisms to monitor the works to ensure the programs and plans successful Each program should have specific plans, disseminate and assign tasks to each business staff, meanwhile, organize the monitoring through reports and business data Besides, the leadership should grasp the difficulties during works implementation for working out treatment solutions; - And finally, there should be a mechanism to recognize the efforts and contributions of staff in business development in order to create momentum for them to try their best to work 3.4 Proposal 3.4.1 VIB should build a personnel training system Staff training is routine work of the system but it has not meet the demand, still inadequate: - Out-of-date, commonplace programe: The training program on new products is almost just stop at the introduction of those products, not deeply analyzing the characteristics of the products Not only that, the lecture document does not have many practical examples to illustrate its content That lack of connection between theory and practice making little efficiency to the personnel trained, low efficiency, the purpose of training employees to work better limited - The training program for staff having not many new skills: Bank staff are those who provide direct services, their tasks are to attract customers, provide advice them how to use the service name best However, this skill is completely missed in the training programs, there is not a training program for staff to practice sales skills and customer care - With managerial level, there virtually is no customed training program for them The senior officers have to study by themselves, spend their own costs for participation in programs held by other Management skills they have obtained are from actual work or learn from other sources that is not available in the training system - Besides, the training programs does not divide subjects to be trained, in contrary, in many cases mixing between new and senior staff, between normal and resource staff - There is no mechanism for assessing the quality of staff before and after being trained VIB system should correct the inadequacies to have an efficient, cost-saving training program bringing benefits to bank 3.4.2 Building an effective approval procedure Due to VIB system is in the transition, ever-incresing size, organizational structure is not really complete and overlaped Furthermore, the department, divisions have a lot of work to do, so it is very much limited to cooperation with other departments, divisions or with branches in the system Consequently, there are a lot of works are delayed, including the approval To be able to offer customers the best services, it is important to determine the time of approval of customers’ request, since this affects the business opportunities and money of customers So each department, division participating in handling customers’ demand must have specific time limit to complete the work, take it as a basis for quality assessment, set up mechanisms for monitoring, issueing warning or punishing if those departments, divisions have not fulfilled the tasks Furthermore, the approval should take into account efficient factors of customers and what benefits they will bring to VIB, the dealing process with VIB, the customers’ prestige, the customers’ mortgage property neutralizing these factors to determine the priority order of approval, one can not equate customers as current mechanisms 3.4.3 Building the proper interest rate, exchange rates and fees Interest rates, exchange rates and fees applied uniformly throughout VIB system and unconformable point of this mechanism is it is applied on large scale for all customers, the only difference is only little preference in interest rates, and there is almost no preference in the exchange rate and other fees Customers have different sizes, different benefits bringing to VIB, different mechanisms should be applied, on one hand, it facilitates customers to reduce bank costs, to compete with other banks to keep customers and expand new customers, on the other hand CONCLUSION From 2012 to 2017 will be the post-period of economic crisis, world and Vietnam economy will recover, businesses will continue to reinvest and grow Recognizing the opportunity, with the strengths of VIB system in general and VIBDD in particular such as capital resoureces, personnel, organizational structure, services products should focus on promoting VIBDD should enhance to seek and expand customers, size and market share It can be said that this is a great opportunity for VIBDD to have a breakthrough in competing with other banks in the same area, on one hand, confirming the position of the branch in VIB system, on the other hand Hence, the entire staff of VIBDD plus other resources focusing on the strategy "current market entry", this is the basic strategy by 2017 of VIBDD./ ./ REFERENCE DOCUMENTS English: - Arthur A Thompson, Jr & A.J.Strickland III (1997), Strategic ManagementConcept and Cases, The McGraw-Hill Companies, Inc Vietnamese: - Annual Report 2010, the press reported of the Banks: VIB, MB, Maritme Bank, Techcombank - Fred R David (2000), Concepts of strategic management, Statistics Publishing House - Rowan Gibson (2002), Rethinking the future, translated by Vu Tien Phuc, Ocean Marine, Phi Hoanh, Youth Publishing House, Ho Chi Minh City - Michael E Porter (1996), Competitive Strategy, Publisher of Science and Technology ... commercial banks in Vietnam which were Investment Bank (BIDV), the Agricultural Bank (Agribank), Vietcombank (VCB) and Industrial and Commercial Bank(Viettinbank ) Thus, the Bank appears to be exclusive... apprearance Currency unit:Billion VND No Description Owner’s equity Total assets Military VIB Techcombank Bank Maritime Bank 8.200 7.300 9.389 8.000 100.000 100.000 177.000 150.000 Account oustanding... to strong pressure of the same size banks Comparison and assessment table No Index VIB MB Techcombank Maritime Bank 7.5 Total assets 6 Account outstanding 7 Capital mobilization Profit 6.5 Total