Theoretical background
In today's highly competitive business landscape driven by global economic integration, Vietnamese companies across various industries are confronted with intense rivalry from well-established international competitors with significant financial resources This challenge is particularly pronounced in the banking sector, where VietinBank Branch Ba Dinh is still adapting to the competitive pressures posed by other commercial banks in the market.
VietinBank, a prominent player in executing the State's monetary policies aimed at controlling inflation and stabilizing the monetary market, must seize the right opportunities to develop competitive advantages amid increasing competition and the need for capitalization to enhance economic growth.
In order to develop a competitive advantage, as well as increase competitiveness in the banking system, VietinBank Branch Ba Dinhshould well create formulate
Objectives of the study
- Organizing and reviewing literature and theories of strategic management;
- Analyzing and evaluating business performance of VietinBank Branch Ba Dinh;
- Proposing strategic solutions for VietinBank Branch Ba Dinh in 2012- 2015 period.
Object and scope of the study
- Scope: within the Vietnamese market during the period of 2012- 2015.
- Objects: Formulation of Retail banking system decelopment strategy of VietinBank Ba Dinh
Retail banking can be considered as a strategic business unit (SBU) of VietinBank Ba Dinh because of the following reasons:
- Retail Banking department (“Department”) is an independent and fully functional department operated as both cost and profit center of the branch.
The department operates with its own budget and marketing strategy, while also analyzing its competitors and managing its workforce VietInBank Ba Dinh meticulously calculates and monitors the department's financial contributions.
Methodology of the study
OVERVIEW OF BUSINESS STRAEGY
Michael Porter defines business strategy as the development of a distinctive and valuable position that encompasses differentiation and selective exchange characteristics, enabling enterprises to concentrate their resources effectively and gain a competitive advantage.
In doing business, enterprises must have strategies, deploy strategy, make reasonable decisions, control their activities, taking advantages of opportunities and weaknesses, overcome threats and enhance competitive strength.
1.1.1.2 Basic characteristics of business strategy
- Business strategy is to clearly define basic objectives and business orientations of an enterprise in each period.
- The orientativeness objective of strategy aims at ensuring continuous and stable development in the volatile business environment.
- Business strategy helps ensure maximum mobilization and optimal combination of resource use of enterprises at present and in the future, promote strengths and grasp opportunities to gain competitive advantage.
- Business strategy is reflected in a continuous process.
- Business strategy always has aggressive spirit and gaining victory in the business market.
Many types of strategies are used in an organization; however, there are three levels of strategies used:
- Corporate level strategy: sets out objectives and business activities of a company, making policies and basic plans to realize these objectives.
- Business level strategy: determines business environment of the Company, market segment and products for each type of market.
- Functional level strategy: Determines solutions and plans for each business fields.
1.1.3 Affecting factors to strategies of an enterprise
The macro-economic environment significantly impacts enterprises and industries, particularly the banking sector Key variables influencing this environment include GDP, inflation rates, base interest rates, credit system availability, and overall income and consumption capacity.
(2) Technological environment: Technological environment has a strong influence on business activities of banking system because technology can support bank by quickly, favorably and accurately supplying services.
The socio-cultural environment encompasses various socio-cultural factors that significantly influence people's lives and behaviors, thereby impacting demand structures, consumer behaviors, and consumption trends.
(4) Demographic environment: Population, gender, age, geographical distribution, community of ethnic groups and income distribution.
(5) Political – legal environment: includes a system of viewports, policies of the state, legal system, especially the laws related to business, political movement within the country and in the world.
The global environment encompasses significant international political events, the characteristics of institutions, and fundamental cultural aspects within global markets It also involves related markets, current market changes, trends in regionalization, and the economic relationships among countries and regions, all of which directly impact strategic management.
Michael E Porter, a renowned strategy theorist from Harvard Business School, developed the Five Forces Model to assist managers in identifying the opportunities and threats within their industry (Porter, 1980) This framework serves as a valuable tool for strategic analysis, allowing businesses to better understand competitive dynamics and market positioning.
Table 1-1: Five Forces Model by Michael E Porter
M.Porter indicates that the stronger these forces are, the more they will constrain the capacity of existing enterprises in raising price and gaining higher profit The strength of five forces may be changed over time when industry conditions change.
The threat of new entrants in the market is significant, as these newcomers often possess advantages such as economies of scale, substantial capital resources, unique product differentiation, cost advantages, and effective access to distribution systems These factors enable them to capture market share and compete effectively within the industry.
(2) Bargaining power of suppliers: Bargaining power of suppliers includes scale, monopoly and bargaining power in the market and capacity of supplying products and prices.
The bargaining power of buyers significantly impacts a company's operations, as it is influenced by the number of customers and the leverage that individual buyers have over the enterprise's products and services.
Competitive rivalry among existing firms
The emergence of substitute products and services can significantly impact a business's strengths, as customers may discover alternative ways to accomplish tasks that the enterprise traditionally handled.
The competitive landscape of an industry is defined by the number of rivals and their ability to compete effectively Key factors influencing the strength of competition include the industry's scale, its structural dynamics, and the capabilities of the competitors involved.
(1) Financial resource analysis: Finance, the most basic resource of an enterprise includes equity, mobilized capital, liquidity, revenue, profit, etc.
(2) Marketing capacity analysis: Structure of customers, potentiality of product and service consumption, diversification of quality, market share, customers’ preference, post-sale services, customer care services, etc
Human resource analysis evaluates the quality of human resources by examining professional qualifications, work processes, and essential soft skills, including foreign language proficiency, computing abilities, communication skills, presentation techniques, and decision-making capabilities.
Organizational level analysis encompasses various critical elements, including the organizational structure, internal communication systems, and control mechanisms It involves evaluating internal inspection and auditing processes, as well as the strategic planning systems in place Additionally, it examines the capacity, interests, and ethical considerations of managers and administrators, alongside their strategic management capabilities Effective resource distribution and arrangement are also essential components of this analysis, ensuring optimal organizational performance and alignment with strategic goals.
(5) Infrastructure: Transaction center, points-of-sales; customer serving equipments; internal facilities; payment system, computer system, etc.
(6) Technological and scientific capacity: Technology includes machine, equipment, information management system, payment system, etc help reduce the time for operation and raise accuracy.
(7) Diversification of products and services serving customers: The diversification of products and services both creates opportunities to use products of customers and satisfy their demand.
1.2.1 Strategy formulation by SWOT analysis
According to SWOT analysis, strategy formulation consists four steps, namely:
Step 1: Formulating objective/vision of the enterprise
Establishing a clear vision and mission for the enterprise is essential for assessing its current operational scale and identifying future business opportunities The primary goal of strategic planning is to formulate actionable plans that guide the organization in both the medium and long term.
Gathering and assessing data from both the external and internal environments is essential for identifying opportunities, threats, strengths, and weaknesses This process involves analyzing the interactions between various environmental factors The final step is to evaluate the optimal combination of opportunities and available resources to maximize potential benefits.
This is the recognition of suitable and corresponding strategies between resources and capacity of an enterprise with its operating environment.
Identifying strategic alternatives aligned with the company's strengths, weaknesses, opportunities, and threats, as analyzed in the SWOT Matrix, is essential for developing a strategy that effectively utilizes the company's resources and capabilities.
Figure 1.1: Process of strategy formulation by SWOT
1.2.2.1 External Factor Evaluation (EFE) Matrix
There are five steps to establish EFE Matrix:
Step 1: Listing key opportunities and threats that may have influence on the success of the enterprise in the industry or its fields of operation