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 firms with substantial financial resources This challenge is particularly pronounced in the banking sector, where Agibank's North Hanoi Branch struggles to adapt to the competitive pressures posed by other commercial banks in the market.
Agribank plays a crucial role in executing the State's monetary policies, focusing on controlling inflation, stabilizing the monetary market, and fostering economic growth However, to thrive amid competitive pressures and capitalization demands, the bank must seize opportunities to cultivate its competitive advantages.
In order to develop a competitive advantage, as well as increase competitiveness in the banking system, Agribank – North Hanoi Branch should well create formulate
Objectives of the study
- Organizing and reviewing literature and theories of strategic management;
- Analyzing and evaluating business performance of Agribank – North Hanoi Branch;
- Proposing strategic solutions for Agribank – North Hanoi Branch in 2010- 2015 period.
Object and scope of the study
- Scope: within the Vietnamese market during the period of 2010- 2015.
- Objects: Strategies for expanding and developing credit service for small and medium–sized enterprises in Agribank – North Hanoi Branch.
Methodology of the study
- Data offered by Agribank – North Hanoi Branch including annual reports, performance reports, equity and liability reports and other related data;
- Data collected from financial reports, internet, newspapers and magazines, etc relating to the banking markets and other commercial banks
- Research methods of secondary data reviewing the market’s scale, structure and trends;
The comparative method is a widely used approach that analyzes the relationships between various variables, whether absolute or relative This method examines these relationships across different time periods or between distinct entities, such as comparing one bank to another.
- Individual evaluation method: analysis of each issue, indicator, and phenomenon; and a comprehensive analysis assessing all the Bank’s activities.
5 Structure of the capstone project report
“Strategy on expanding and developing credit service for small and medium-sized enterprises at Vietnam Bank for Agriculture and Rural Development – North Hanoi Branch in 2011 - 2015 period”
Chapter 1: Theoretical background of business strategy formulation
Chapter 2: Real situation of credit service for small and medium-sized enterprises at Agribank – North Hanoi Branch
Chapter 3: Strategy expanding and developing credit service for small and medium-sized enterprises at Vietnam Bank for Agriculture and Rural Development – North HanoiBranch in 2011 - 2015 period.
OVERVIEW OF BUSINESS STRAEGY
Michael Porter defines business strategy as the development of a distinctive and valuable market position This involves differentiation and selection based on exchange characteristics, enabling a company to concentrate its 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 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.
- Business strategy is often built in a long period (3,5,10 years).
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 accessibility, 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 factors that significantly influence people's lives and behaviors, thereby shaping 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 significantly impacts strategic management, encompassing key international political events, institutional characteristics, and fundamental cultural aspects within global markets Additionally, the dynamics of changing markets, trends in regionalization, and economic relationships among countries and regions play a crucial role in shaping strategic decision-making.
Applying five forces model by Michael E Porter: Michael E Porter is a theorist and practician of strategy at Harvard Business School, he set out a framework to help
(Michael E Porter, Competitive Strategy, New York: Freepress, 1980) The framework of Michael E Porter is called five forces model represented via following diagram:
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, product differentiation, cost advantages, and access to established distribution systems These factors enable them to capture market share and challenge existing competitors effectively.
(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 an enterprise's business activities, as it is influenced by the number of buyers and the negotiating strength of individual customers regarding products and services.
The emergence of substitute products and services can significantly impact a company's strengths, as customers may discover alternative ways to achieve their goals that bypass the need for the enterprise's offerings.
(5) Industry competitors: The core of this factor is the number and competitive capacity of competitors in the same market The strong or weak levels of competition
Competitive rivalry among existing firms
Threat of substitute products concern following criteria: scale of the industry, structure of the industry, competitors, etc.
(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 a workforce based on professional qualifications and essential soft skills Key competencies include foreign language proficiency, computing abilities, effective communication, presentation skills, and decision-making capabilities.
An effective organizational level analysis encompasses various key components, including the organizational structure, internal communication systems, and control mechanisms It also involves internal inspection and auditing processes, strategic planning systems, and the capacity, interests, and ethical considerations of managers and administrators Additionally, assessing strategic management capabilities and ensuring the rational distribution and arrangement of resources are crucial for optimizing organizational performance.
(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.
PROCESS OF STRATEGY FORMULATION
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 outline actionable plans for both the medium and long term, ensuring sustainable growth and success.
Gathering and analyzing data on both the external and internal environments is essential for identifying opportunities, threats, strengths, and weaknesses This process involves assessing the potential interactions between these factors The next step is to evaluate the optimal alignment between available opportunities and organizational resources to maximize effectiveness.
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 crucial for developing a strategy that leverages the company's resources and capabilities effectively.
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
Step 2: Assigning weight by a rating scale from 0.0 to 1.0 (from not important to very important) for each factor The importance of each factor depends on the influence of those factor on business fields of the enterprise Total weighted score of all factors must be equal to 1.0
Step 3: Assigning a rating to each factor Rating should be between 1 and 4 Rating indicates how effective the firm’s current strategies respond to the factor 1 = the response is poor 2 = the response is below average 3 = above average 4 = superior. Step 4: Multiplying each factor weight with its rating This will calculate the weighted score for each factor
Step 5: Adding all weighted scores for each factor to calculate the total weighted score for the company.
The total weighted score in the evaluation matrix ranges from 1 to 4, with a score of 4 indicating that the company effectively addresses opportunities and threats A score of 2.5 reflects an average response to these factors, while a score of 1 signifies a weak response Importantly, the total weighted score is independent of the number of factors considered in the matrix.
Competitive Profile Matrix must be carried out via 05 steps:
Step 1: Listing about 10 key factors having influence on the competitiveness of enterprises in the industry
Step 2: Assigning weight from 0.0 (Not important) to 1.0 (Very important) for each factor Total weighted score of all factors must be equal to 1.0
Step 3: Assigning rating from 1 to 4 for each factor, the rating of each factor depends on the capacity of the enterprise to each factor, in which 4 is good, 3 is quite good, 2 is average and 1 is weak.
Step 4: Multiplying each factor weight with its rating to calculate the weighted score for each factor.
Step 5: Adding all weighted scores for each factor to calculate the total weighted score for the company.
Evaluation: Comparing total weighted score of the enterprise with its major competitors in the industry to evaluate the enterprise’s competitive capacity.
1.2.2.3 Internal Factor Evaluation (IFE) Matrix
The establishment of a IFE matrix follows 5 steps:
Step 1: Listing key internal factors
Step 2: Assigning weight by a rating scale from 0.0 to 1.0 (from not important to very important) for each factor with the total weighted score of factor equal to 1 The importance depends on the objective of the enterprise without identifying these factors as strengths or weaknesses of the enterprise.
Step 3: Assigning a 1 to 4 rating to each factor 1 = a major weakness; 2 = a minor weakness; 3 = a minor strength; 4 = a major strength
Step 4: Multiplying each factor weight with its rating to calculate the weighted score for each factor.
Step 5: Adding all weighted scores for each factor to calculate the total weighted score for the company
The evaluation of the matrix yields a total weighted score between 1 and 4, independent of the number of key factors assessed A score below 2.5 indicates that the company exhibits weaknesses in its internal factors, while a score above 2.5 suggests that the company demonstrates strength in these areas.
The IE matrix serves as a strategic management tool that evaluates an enterprise's operating environment and strategic position by analyzing both internal and external factors.
SWOT analysis is a crucial strategic tool that categorizes internal factors of an enterprise into Strengths (S) and Weaknesses (W), while external factors are classified as Opportunities (O) and Threats (T) This framework aids in understanding key issues and supports decision-making in organization management and business operations.
List strengths of the enterprise
Use strengths to maximize opportunities
S-T strategies : Use strengths to minimize threats Weaknesses (W)
List weaknesses of the enterprise
Minimize weaknesses by taking advantage of opportunities
Minimize weaknesses and avoid threats
1.2.2.6 Quantitative Strategic Planning (QSPM) Matrix
The QSPM Matrix leverages input data from EFE, IFE, and SWOT analyses to objectively determine the most attractive strategy for an enterprise to pursue in order to achieve its objectives The process of creating a QSPM involves several key steps that facilitate strategic decision-making.
- List external opportunities/threats and internal strengths and weaknesses into the matrix These factors are directly taken from EFE and IFE matrices.
- Filling the corresponding figure with each factor into the rating column of EFE andIFE matrices.
Analyzing tools such as the SWOT Matrix and BCG Matrix is essential for identifying alternative strategies that enterprises should contemplate By systematically recording these strategies in a QSPM Matrix, businesses can effectively categorize and prioritize them into distinct groups, ensuring a coherent approach to strategic planning.
The attractiveness score is a metric used to evaluate various strategies, with a scale ranging from 1 to 4 A score of 1 indicates that a strategy is not attractive, while a score of 2 suggests it is somewhat attractive A score of 3 reflects that a strategy is reasonably attractive, and a score of 4 denotes a highly attractive option These scores allow for a comparative analysis of each strategy's appeal within its respective group.
- Calculate sum total attractiveness score of each strategy for each critical success factor by multiplying rating with attractiveness core in each row.
- Summing total attractiveness score of each strategy The higher the sum total attractiveness score is, the more appropriate the strategy is.
Alternative strategies Base of attractiv eness score
Sum total attractiven ess score
ROLE OF BUSINESS STRATEGY FORMULATION TO ENTERPRISES
- Business strategy helps enterprises to recognize its objective and orientation to set the base and guideline for its business and production activities.
A well-defined business strategy enables companies to identify and capitalize on opportunities while effectively addressing market threats By analyzing the external environment, businesses can make informed strategic decisions that allow them to adapt to changing conditions and enhance their competitive edge.
- Business strategy makes contribution to raising efficiency of resources, enhancing competitive position of enterprises and ensuring its sustainable development.
- Business strategy creates a firm bases for the formulation of appropriate policies and business environment in accordance with changes of the market.
INTRODUCTION OF AGRIBANK – NORTH HANOI BRANCH
2.1.1 Process of establishment and development
AGRIBANK – North Hanoi Branch was established on September 5, 2001, under Decision No 342/QD/HDQT-TTCB by AGRIBANK’s Management Board Located at No 266, Doi Can Street, Ba Dinh District, Hanoi, this first-class branch plays a crucial role in mobilizing capital and providing loans to customers in the Hanoi area.
After nearly a decade of growth and development, the Branch has significantly enhanced its organizational structure and the functionality of its various boards and departments Currently, it comprises 8 functional departments and 8 transaction offices, demonstrating its expanding capabilities.
2.1.2 Organizational structure of the Branch
Figure 1.3 -Organizational structure of the Head Office
Demand deposits in both VND and foreign currencies are available for organizations and individuals, offering a range of savings options These include demand savings, fixed-term savings with interest paid at maturity, fixed-term savings with prepaid interest, and ladder term savings that feature increasing interest rates over time Additionally, options for monthly accumulative savings and term savings with flexible principal withdrawal are also provided, catering to diverse financial needs and preferences.
(a)- Short-term loans include following services:
Loans against valuable papers; short-term loans for production, business operation of organizations, individuals and households; loans for crop season intervals; loan for issuing credit card; commercial overdraft, etc
(b)- Medium-term and long-term loans include following services:
Consumer loans encompass a variety of financial options, including loans for new construction, home repairs, renovations, and upgrades, as well as purchasing residential properties They also cater to individuals working abroad and those seeking vehicle financing or funding for overseas education Additionally, short-term loans are available for production and business operations In terms of guarantees, options include bid guarantees, performance guarantees, payment guarantees, pre-payment return guarantees, counter guarantees, and product quality guarantees, among others.
Foreign currency trading consists of following products: overseas remittance; cross- border payment; foreign currency trading; L/c opening and payment, etc.
Domestic payment; money transfer; check service; card services, SMS banking; Vntopup, etc.
Table 2.1 Results of capital mobilization at AgriBank - North Hanoi Branch in 2008-
% Total fund resources by term 5.641 100 6.064 100 7,50 7.103 100 17,13
II By characteristics of fund resources 1-Funds mobilized from individuals
2- Funds mobilized from business enterprises
3-Funds mobilized from credit institutions
III By types of currencies
(converted) 1.102 19,53 1.236 20,38 12,16 1.223 17,22 (1,05) (Source: Annual Reports of Agribank- North Hanoi Branch in 2008-2010 period)
Table 2.2 Results of credit activity at AgriBank – North Hanoi Branch in 2008 – 2010 period
3-Business and production households, private enterprises and other units
(Source: Annual Reports of Agribank- North Hanoi Branch in 2008-2010 period)
The development of various financial products and services, including cards, mobile banking, and internet banking, has gained significant attention Currently, over 35,000 cards have been issued and actively used, while nearly 10,000 customers are utilizing mobile and internet banking services.
Table 2.3 Financial results of AgriBank – North Hanoi Branch in 2008 – 2010 period
Amount Amount Amount Amount % Amount %
REAL SITUATION OF CREDIT SERVICE FOR SMALL AND MEDIUM-SIZED
2.2.1 Scale of credit service for small and medium-sized enterprises
Table 2.4 The number of small and medium-sized enterprises having credit relation with AgriBank – Hanoi North Branch
(Annual Reports of Agribank- North Hanoi Branch in 2008-2010 period)
The data table reveals a consistent annual increase in the total number of enterprises maintaining credit relationships with the Branch Notably, small and medium-sized enterprises (SMEs) represent a significant portion of these enterprises, comprising between 73.64% and 87.99% of the total.
The number of big enterprises in 2010 decreased by 11 enterprises compared to 2009 because:
According to Decree No 90/2001/ND-CP, small and medium-sized enterprises (SMEs) are classified as businesses with a registered capital not exceeding VND 10 billion and an average workforce of up to 300 employees.
According to Decree No 56/2009/ND-CP, small and medium-sized enterprises (SMEs) are classified as businesses with a maximum registered capital of VND 100 billion or an average workforce of up to 300 employees.
Enterprises with registered capital between VND 10 billion and VND 100 billion were once classified as large enterprises, but following changes in 2009, they are now categorized as small and medium-sized enterprises This reclassification reflects a shift in classification rather than any indication that these businesses have severed their credit relationships with Agribank – North Hanoi Branch.
Table 2.5 Results of credit service with small and medium-sized enterprises in 2008 –
(Source: Report on credit activity for small and medium-sized enterprises at AgriBank North Hanoi Branch)
Between 2008 and 2010, the outstanding loans for small and medium-sized enterprises (SMEs) rose significantly, with their share of total enterprise loans increasing from 31.19% to 37.99% This growth in outstanding loans reflects the Branch's commitment to expanding financial support for SMEs.
Table 2.6 Branch’s turnover from lending, loan collection and outstanding loans from enterprises in 2008- 2010 period
Loan collection turnover from SMEs 432 578 818 145 33,7 240 41,6
(Source: Report on credit activity to SMEs at AgriBank – North Hanoi Branch)
Look at the table of data, we can see that lending turnover from SMEs tends to increase: it was VND 775 billion in 2009, up VND 181 billion (equivalent to 30.4%) compared
2008, and up VND 160 billion in 2010 (equivalent to 20.62%) compared to 2009
Loan collection turnover in 2009 increased VND 145 billion (up 33.7% ) compared to
2008, especially up 41.6% in 2010 compared to 2009
Guarantee turnover also soared sharply This is form of credit service with very low cost and can make use of capital for business and production activities of enterprises.
The rise in the aforementioned criterion can be attributed to the improvement of Vietnam's economy in 2010 compared to 2009 Concurrently, the Bank has focused on fostering the development of small and medium-sized enterprises (SMEs), especially as several large economic groups, such as VINASHIN, faced significant loan volumes and associated risks.
Capital turnover reflects a bank's ability to effectively organize, manage, and utilize credit capital, highlighting the quality of its credit services in meeting customer demands A higher capital turnover indicates superior efficiency in leveraging credit resources.
Table 2.7 Credit capital turnover of SMEs in 2008-2010 period
Average outstanding loans of SMEs 508 687 844
Loan collection turnover of SMEs 432 578 818
(Source: Report on credit activity to SMEs at AgriBank – North Hanoi Branch)
The capital turnover of the Branch from 2008 to 2010 exceeded 1, indicating a strong capacity to meet the borrowing needs of SMEs while maintaining stability This reflects a high quality of loans provided during this period.
2.2.3 Non-performing loans of SMEs
The ratio of non-performing loans (NPLs) to total loans is used to evaluate the quality of credit of a credit institution.
Table 2.8 Non-performing loans of enterprises and SMEs Unit: VND billion
Non-performing loans of SMEs 30 43,6 41,6
Non-performing loans/total loans (%) 2,49 2,81 2,39
Non-performing loans/total loans of SMEs (%) 5,11 5,55 4,61
(Source: Report on credit activity to SMEs at AgriBank – North Hanoi Branch)
The ratio of non-performing loans to total loans for SMEs has shown a decreasing trend, dropping from 5.55% in 2009 to 4.61% in 2010, although it still remains relatively high This decline may be attributed to several underlying factors.
- Financial crisis and global economic recession started from 2008, affecting Vietnam’s economy, especially SMEs.
The macro-management of the State Bank of Vietnam is raising concerns as inadequate oversight has led joint-stock commercial banks to compete aggressively in exceeding the ceiling interest rates for fund mobilization This competition is resulting in increased lending interest rates, which adversely impacts enterprises, particularly small and medium-sized businesses.
- High non-performing loan ratio also results from the appraisal qualification of credit staff in the general context.
2.2.4 Potential of banks in the region
Table 2.9 Competitive profit matrix of competitors
5 The number of transaction offices 8 4 2
ANALYSIS OF ENVIRONMENT FACTORS AFFECTING CREDIT SERVICE
- Vietnam’s political environment is rated as quite stable The Government has made a lot of efforts in managing economic-politic-social, internal affair and external affair policies
- Vietnamese government promulgated Decree No.56/2009/ND-CP on supporting SMEs with production premise, technological capacity enhancement, human resources, financial, market promotion, etc
- Hanoi, the center of politics, economics, culture, commercial, tourism and service, is honored and rewarded the title “the City for Peace” by UNESCO
Since 2008, Vietnam's economy has experienced challenges due to the global economic recession, but it is now on a path to recovery In the first half of 2010, the country achieved a GDP growth rate of 6.78%, and projections for the first six months of 2011 estimate a growth rate of 5.6%, indicating a positive trend in economic performance.
In 2010, the economic sector with direct foreign investment successfully navigated challenges and difficulties, achieving significant results in registered investment capital, realized capital, and enterprise working capital This sector continued to play a crucial role in contributing to the overall performance of Vietnam's economy.
- Hanoi has a high economic growth rate and GDP growth rate in 2010 reached 11%, over 1.5 times higher compared to 6.7 % of 2009, and approximate to 10.9% in 2008 and 11.2% in 2007
Hanoi's GDP per capita has reached VND 37 million, with the state economic sector contributing approximately 45% of GDP, a decrease from 52.1% in 2005 In contrast, the non-state sector has increased its share to about 38%, up from 31.8% in 2005, while the foreign-invested sector has slightly risen to 17% from 16.1% Throughout the year, the state sector experienced a growth rate of 9.3%, the non-state sector grew by 14.9%, and the foreign-invested sector climbed by 16.8% Notably, the recovery in industrial production is evident, with growth rates of 12.4%, 13.9%, and 13.7% in the first three quarters, exceeding 14% in the fourth quarter.
The target and mission of country development in five years (2011 – 2015) in the Eleventh Vietnam Communist Party Congress documents in striving to achieve some major targets:
From 2011 to 2015, the economy experienced an average growth rate of 7.0 – 7.5% per year, with industrial and construction output growing at 7.8 - 8% and industrial output at 2.6 - 3% annually The GDP structure comprised agriculture (17 - 18%), industry and construction (41 - 42%), and services (41 - 42%), with high-tech products contributing 35% to GDP The trained labor force reached 55%, and export values rose by an average of 12% per year, while efforts were made to balance trade by 2020 Social investment capital averaged 40% of GDP, with capital mobilization for the State Budget at 23 - 24%, reducing overspending to 4.5% of GDP by 2015 Employment in rural areas aimed to increase by 1.8 - 2 times compared to 2010, with a population growth rate of about 1% By 2015, GDP per capita was projected to reach USD 2,000, average life expectancy was 74 years, the proportion of households below the new poverty line decreased by 2% annually, and forest coverage reached 42 - 43%.
(Quoted from Eleventh Vietnam Communist Party Congress documents).
The major economic targets of Hanoi:
Between 2011 and 2015, the goal was to achieve an average GDP growth rate of 8-9% per year while simultaneously reducing the percentage of households classified as below the new poverty line by 1-1.2% annually This involved enhancing the investment and business environment by ensuring fairness, transparency, and creating favorable conditions for enterprises across all economic sectors.
(Quoted from Directive No.23/CT-UBND dated July 17, 2009 on formulating five-year economic development plan (2011-2015)
- Commercial banks have used core banking system quite prevalently, helping significantly improve banks’ internal activities such as accounting, risk management, customer crediting rating, etc
Agribank is committed to investing in innovative banking technology to enhance business administration and create a sophisticated banking service system Currently, Agribank is in the process of finalizing the second phase of the Interbank Payment and Customer Accounting System (IPCAS) modernization project, which is supported by the World Bank As a result, Agribank is now fully equipped to offer modern, advanced, and convenient banking products and services to both domestic and international customers.
In August, the Hanoi Authority announced the expansion of the city's administrative boundaries, resulting in an increased area of approximately 3,324.92 km² and a population reaching up to 6 million This significant growth positions Hanoi as one of the 17 largest cities globally.
Hanoi includes 10 urban districts; 1 town: Son Tay and 18 districts
Ethnic groups include Kinh, Hoa, Muong, Tay, Dao, etc.
As of June 2011, the city's population reached approximately 6.76 million, reflecting a year-on-year growth of 2.1% By May 31 of the same year, there were 49,833 live births, with a notable 7.3% of these being third children, totaling 3,660.
According to the latest statistics, Hanoi has over 100,000 SMEs with the chartered capital of above VND 976,855 billion
Vietnam's membership in ASEAN, APEC, and the WTO has opened numerous opportunities for its enterprises, allowing them to invest, access advanced technology, and benefit from non-discrimination in international trade However, this also introduces various challenges in the realm of international competition.
2.3.1.2 Micro-environment/industrial environment analysis
The competitive landscape in the banking sector is becoming increasingly challenging, with diminishing relative advantages among commercial, non-state, and foreign banks Since 2006, the State Bank has received 25 applications for the establishment of joint stock commercial banks and 33 for branches of foreign banks and wholly foreign-owned banks As of May 2008, two joint stock banks, Lienviet Bank and TienPhong Bank, have been licensed to operate, along with three foreign subsidiaries The State Bank is currently reviewing the remaining applications.
7 files for share of commercial bank establishment approved in principle
A large capital bank serves as a power bank, offering a wide range of banking products and services to customers The capital of these banks is primarily derived from equity investments and deposits from organizations, enterprises, and individuals This financial strength enables banks to effectively manage and distribute their resources.
- Group 1: Commercial banks having State-invested capital that can be highly competitive metropolitan areas consist of resources, networks and service providers including Vietcombank; VietinBank, Agribank and BIDV.
- Group 2: Share of commercial banks having high adaptability, providing good service are Sacombank, Techcombank, ACB, etc.
Agribank stands as Vietnam's largest commercial bank, distinguished by its extensive capital, assets, and customer base As a key pillar of the national economy and a leader in financial markets for agriculture and rural development, Agribank operates over 2,200 branches and transaction offices nationwide This reputable bank is widely trusted by its customers, reinforcing its vital role in the financial landscape.
In Hanoi, Agribank has 616 points of sale, with 45 branches, 251 transaction offices and
320 ATMs Agribank - North Hanoi Branch is the 1st rank, one of the 10 branches top leading in Vietnam Agribank system with a network of eight transaction offices and 14 ATMs.
(3) Bargaining power of buyers (customers):
Currently, Agribank has a large number of customers with over 10 million individuals,
Agribank has strengthened its competitiveness amid integration challenges, supported by a network of 30,000 businesses The bank's primary customer segments include households and individuals, state enterprises, private businesses, and foreign-invested enterprises.
Small and medium enterprises (SMEs) play a crucial role in the economy, primarily consisting of private businesses, and are recognized as one of the most dynamic sectors Providing loans to these enterprises offers significant economic advantages for banks, both financially and non-financially, leading to future revenues that will represent a substantial portion of the banks' overall income.
Banks face significant competition from various investment alternatives, including gold, foreign currencies, real estate, and securities, which serve as common substitutes for their products and services.
ORIENTATION ON EXPANDING AND DEVELOPING CREDIT SERVICE FOR
3.1.1 Motto of AgriBank – North Hanoi Branch
Brand value: The operation of AgriBank – North Hanoi Branch aims at sustaining and developing the brand of AgriBank in general and AgriBank – North Hanoi Branch in particular.
AgriBank – North Hanoi Branch is committed to fostering continuous, effective, and sustainable growth and income for its employees, while aiming to establish itself as the premier branch within the AgriBank network.
Customer is the source of existence: AgriBank – North Hanoi Branch always appreciates customers and directs to customers with a professional and modern serving styles
Honest and transparency: AgriBank – North Hanoi Branch always pays attention to risk management, internal control and raising transparency and honesty in all activities of the whole system.
3.1.2 Objective of business strategy by 2015
- Fund resources: grows 15 -17% on average
- Outstanding loans: grows 10 -12% on average
- Non-performing loans: is sustained at below 3%/total loans
- Income-expense difference: increases by 10% on average
- Income: Ensuring salaries for laborers and including incentives in salaries.
SELECTING STRATEGY ON EXPANDING AND DEVELOPING CREDIT
From evaluation on Strengths – Weaknesses of AgriBank – North Hanoi Branch, the group sets up SWOT Matrix as follows:
1 Stable political and legal environment
3 High and stable GDP growth
5 Increased in number of newly-established enterprises
6 Opportunities of accessing and transferring modern technologies
7 Populated population of Hanoi, high demand for banking products and services
2 Increased entry of foreign banks in Vietnam after WTO accession
3 Increase in number, scale and quality of joint-stock commercial banks
4 Substitute products like securities, gold, etc.
5.Exodus of talented people to joint-stock commercial banks and foreign banks
6 Shortcomings in management capacity of SMEs Strengths
1 High fund sources, proactiveness in mobilization and interest rate
2 Good credit supply to customers
SO strategies + Raising quality of fund sources, reducing capital expense by strongly developing enterprise customers with the focus on SMEs.
WO strategies + Grasping and forecasting changes in legal and macro- management environment to change business strategy suitably
We are committed to developing credit services tailored for SMEs, with a focus on supporting manufacturing and processing enterprises that contribute to job creation in the community By leveraging new technology and enhancing our capacity to introduce innovative products, services, and utilities, we aim to better satisfy customer demands Additionally, we draw on risk management and administrative expertise from foreign banks to strengthen our offerings.
+ Training and improving leadership capacity for managers
+ Diversifying list of products and streamlining the cost for inputs and outputs to meet customers’ demand.
3 Having no right in recruitment
4 Having not established performance appraisal system
+ Analyzing potential competitors and grasping new products to timely cope with new entrants
+ Innovating and creating differentiated products + Establishing compensation mechanism for management staffs
+ Building a customer information management system to limit risks
WT strategy + Suggesting AgriBank to flexibly empower branches and transaction office by management qualification and business performance.
+ Applying modern banking technologies to enhance internal risk management and transparency management in transactions
+ Building and completing transaction offices both in terms of infrastructure and staffs+ Improving organizing and training for the staff to meet requirements of integration
Table 3.2 Strategic Position & Action Evaluation matrix (SPACE)
Criteria Score Average score Note
AgriBank – North Hanoi Branch has financial strength: High fund sources and profit
This criterion is rated with 6 scores
AgriBank – North Hanoi Branch ensures to sufficiently meet payment demand of customer This criterion is rated with 4 scores.
Capital adequacy ratios are sustained at reasonable level and rated with 4 scores.
AgriBank – North Hanoi Branch has 8 transaction offices which are limited and have not met actual demand This criterion is rated with 3 scores.
Products and services have not been diverse, and remained lack of competitiveness, thus, rated with 4 scores
AgriBank – North Hanoi Branch is a Bank with a strong branch, rated -1 score
The economy in the recovery and development stage along with political stability create favorable conditions for enterprises, rated with - 1 score
Legal system of banking sector is still asynchronous and unsuitable with International standards and common rules, rated with -3 scores
3 Inflation, exchange rate, interest rate -4
Inflation rate, exchange rate and interest rate have complication movements; however, the Government has made effort to stabilize exchange rate and interest rate, rated with - 4 scores
At present, entry barriers are very high, constraining new entrants, rated with -1 score
1 Industry growth rate 4 Banking sector always has high growth rate, rated with 4 scores
2 Important role with the economy 6
Banking is one of the entities leading the economy to develop effectively, rated 6 scores
3 Capital scale of the sector 6 Banking sector has a large scale of capita, rated with 6 scores
We have: FS + ES = 4.66 + (- 2.25) = 2.41; IS + CA = 5.33+ (- 2.66) = 2.67
Representing on SPACE Matrix, strategy of AgriBank – North Hanoi Branch at aggressive position:
Figure 3.1: Strategies on SPACE Matrix
AGRIBANK – North Hanoi Branch possesses strong financial capabilities and a competitive edge To capitalize on external opportunities while addressing internal weaknesses and mitigating external threats, it is advisable for the branch to adopt an aggressive strategy Specifically, the focus should be on expanding and developing credit services for small and medium-sized enterprises (SMEs) during the 2011-2015 period.
In the scope of this project, the group has selected two key strategies related to the project, namely:
Strategy 1: Expanding and developing credit service for SMEs
Strategy 2: Expanding and developing loans for consumers, individuals and production households
Base for total attractiveness score
Expanding and developing credit service for SMEs
Expanding and developing credit service for consumers, individuals & production households
Total attractivenes s score External factors
1 Stable political and legal environment 3 4 12 4 12 Having the same response
2 Open economic environment 1 3 3 4 4 Having the same response
3 Supporting policies from the Government 2 4 8 1 2 The first strategy better responses to this criterion
4 Populated population, potential market 3 4 12 3 9 The first strategy better responses to this criterion
5 Demand for banking services 3 3 9 2 6 The first strategy better responses to this criterion
7 Scale and quality development of banks 2 3 6 2 4 The first strategy better responses to this criterion
8 Fierce competition in attracting talented people 2 3 6 3 6 Having the same response
9 Increased risks in integration process 2 2 4 3 6 The first strategy worse responses to this criterion
10 Customers’ requirements for quality of banking products and services
3 3 9 2 6 The first strategy better meets this criterionInternal factors
1 Technological and communication system 2 2 4 2 4 Having the same response
2 Good financial situation and credit supply 3 4 12 2 8 It is more effective to focus on the first strategy
3 Ensured quality of the staff 3 3 9 2 6 The first strategy will be more appropriate
4 Brand prestige 4 3 12 2 8 The first strategy will be more appropriate
5 Wide network 2 3 6 3 6 Having the same response
6 Interest gained 2 3 6 2 4 The first strategy brings more interests
7 Dependence on AgriBank 2 3 6 3 6 Having the same response
8 Operating cost 3 4 12 2 6 The first strategy saves more cost
9 Poor image promotion 2 3 6 3 6 Having the same response
10 Business risks 2 2 4 2 4 Having the same response
3.2.4 Determination on strategy of AgriBank – North Hanoi Branch in 2011 – 2015 period
Utilizing SWOT and QSPM matrices, the analysis reveals that the strategy for expanding and developing credit services for SMEs holds a higher attractiveness score Consequently, the AgriBank – North Hanoi Branch has formulated a comprehensive business strategy for the years 2011 to 2015.
Table 3.4 Selected strategy and supporting strategy
1 Strategy on expanding and developing credit service for SMEs
Taking advantages of brand and supporting policies of the Government for SMEs
2 Strategy on optimizing credit risk
Using new technology and making use of analysis capacity of information system to manage credit risks
3 Strategy of diversifying investment portfolios
Based on the number of current customers, analyzing groups of customers and groups of credit products and forecast risks in the future
SOLUTIONS TO IMPLEMENT THE STRATEGY ON EXPANDING AND
- Reviewing and evaluating each credit products, which are being established in terms of size and quality, as well as predicting its risks.
- Adjusting and regularly replace credits of the high-risk products with the low-risk ones, or those which never been implemented at AgriBank- North Hanoi Branch
AgriBank's North Hanoi Branch has yet to implement or prioritize the development of effective credit products, despite the success of similar offerings by other financial institutions This lack of attention and uniformity in establishing competitive credit solutions may hinder the branch's growth and market presence.
Regular training and retraining in credit operations, along with a strong understanding of business finance and law, are essential for credit officers to enhance their skills and improve team performance Effective analysis of business finance plays a crucial role in the appraisal process, enabling the creation of accurate credit facility proposals and minimizing future risks.
- Dividing management according customer groups, especially selected good ones who have deep understandings of corporate finance to work in business credit groups.
- Decentralizing access and management with various types of businesses: SMEs are assigned to the Transaction Management Lending Department, the head office will manage SMEs lending more.
To strengthen management and credit control, it is essential to regularly communicate ethical guidelines to officials This practice helps prevent misleading and false loan applications from clients, ensuring that lending decisions are accurate and informed.
- Establishing independent evaluation of credit staffs, with a regular task to capture, analyze and process customer information for assessment tasks, branch-level credit.
3.3.3 Expanding the network and attracting customers.
We are conducting a thorough review and analysis of the effectiveness of each transaction office within our network This assessment aims to enhance and expand our transactions, particularly focusing on high-priority developments in emerging urban areas, a strategy we refer to as "going in advance."
To enhance service quality and effectively meet customer needs, AGRIBANK - North Hanoi Branch must focus on developing a professional team characterized by strong qualifications, a sense of responsibility, a serious working style, and a commitment to honesty and transparency with customers.
+ AGRIBANK - North Hanoi Branch should improve its procedures towards convenience and friendliness with customers, making customers feel comfortable when dealing with the bank.
Every transaction office at AGRIBANK's North Hanoi Branch is required to have a dedicated staff member responsible for offering professional guidance and addressing client inquiries This ensures that the interests of both customers and the bank are effectively safeguarded.
3.3.4 Improving organizational model and boosting quality of human resources
To enhance its organizational model, AGRIBANK - North Hanoi Branch must streamline its structure to align with the current and future scale of the company The restructured organization should be compact and efficient, ensuring smooth and secure operations.
- Improving the quality of human resource: Rapidly and effectively implementing and deploying the training and retraining of staff, consolidate staff in the whole ofAGRIBANK system - North Hanoi Branch.
- Adopting strategies to attract talents: Building special treatment policy for professional staff, the staff with high experience in management.
- Building a work system and an effective, specific and clear division of labor in order to evaluate accurately the work performance of employees.
AgriBank – North Hanoi Branch operates on the principle of prioritizing customer satisfaction by adopting a professional and modern approach The branch actively engages with customers through direct interviews and satisfaction surveys to identify areas for improvement and address any weaknesses.
AgriBank's North Branch in Hanoi is enhancing its brand presence through various media channels, including television, local radio, leaflets, porters, and billboards The strategy targets office workers and leverages annual customer conferences to engage with clients, addressing their proposals and needs that the bank has not effectively met in a timely manner.
- Improving website quality of AgriBank- North Hanoi Branch to provide fully information about products and services of the bank.
ROADMAP FOR IMPLEMENTING STRATEGIC SOLUTIONS
Reducing credit to the group of high-risk products
Converting credit to other products with low risk
Establishing an independent appraisal team
Training in-depth in corporate finance
Raising the role of management and work
3 Expanding network and attracting customers
Checking and analyzing efficiency of each point-of-sale
Establishing customer service division at each transaction office
Enhancing quality of customer services
4 Completing and improving qualify of human resources
Improving quality of human resources
SOME RECOMMENDATIONS
Lending to SMEs is crucial for economic growth, as it not only generates profits for banks but also supports the development of enterprises To enhance SME lending, collaboration is essential among banks, SMEs, and relevant agencies, including the Government and the State Bank of Vietnam.
3.5.1 Recommendations to the State and the Government
To ensure a stable business environment, it is essential for the State to establish a long-term macro-economic framework that supports political and socio-economic stability By fostering a reasonable and sustainable macro-economic environment, the government can effectively stabilize the overall economy and promote growth.
To foster integration into the international economy, it is essential to promptly establish a comprehensive legal system that aligns with international standards This approach will create an enabling environment for enterprises, particularly small and medium-sized enterprises (SMEs), to thrive and operate effectively within the legal framework By ensuring stable and equitable development across all economic sectors, we can promote fair opportunities for businesses of all sizes.
- Having close regulations in establishing enterprises, supervising the situation that enterprises are established massively without capital for operating or operating ineffectively.
- Completing dispute settlement mechanism related to loan insurance and treating mortgages Promulgating legal document to accelerate compulsory sale of mortgages at banks.
3.5.2 Recommendations to the State Bank of Vietnam (SBV)
To enhance the effectiveness of monetary policies, it is crucial to flexibly adjust both monetary and fiscal strategies This involves regulating open market operations, rediscounting, and refunding, while ensuring a close integration of monetary and fiscal policies Such a coordinated approach will enable better control over all cash inflows in the economy, particularly those originating from the State Budget and non-banking financial institutions.
The State Bank of Vietnam (SBV) aims to evolve into a true central bank by enhancing its relative independence from the government This transformation is designed to improve the efficiency of monetary policy and to strengthen the SBV's role and self-reliance in the formulation and management of these policies.
The State Bank of Vietnam plays a crucial role in overseeing and regulating the activities of credit institutions, ensuring their operations are secure and effective By promoting thorough inspections and supervision, the bank helps prevent unhealthy competition within the sector, fostering a stable financial environment that benefits both institutions and consumers.
Enhancing the credit information system is crucial for mitigating risks in the banking sector By upgrading and expanding customer information databases, banks can ensure the accurate and timely supply of information, thereby addressing the issue of insufficient customer data Additionally, it is recommended that the State Bank of Vietnam (SBV) establish regulations to facilitate the exchange of credit information among banks, further strengthening the overall credit information framework.
3.5.3 Recommendations to Vietnam Bank for Agriculture and Rural Development
- Improving proactiveness to branches and transaction office in business activities on the basis of potentials and internal forces of each branch.
- Having encouragement policy for branches with effective operation, bringing high profit for the Bank. with current regulation pursuant to the operating characteristics of AgriBank and International common rules
- Regularly opening training and knowledge fostering classes to enhance professional qualification for the staff to catch up with the current development trend of finance- banking sector.
- Quarterly marking credit rating of branches to have orientations for the branches in each stage of development.
The Vietnamese economy and financial market have increasingly integrated into the global economy While Vietnamese enterprises have experienced significant growth in both quantity and quality, they also face numerous challenges, difficulties, and potential risks.
From 2011 to 2015, the Vietnamese economy will experience significant changes in its competitive landscape, shifting from a domestic to an international focus During this period, the commercial banking system in Vietnam will support enterprises as they navigate the challenges of international economic integration This necessitates that commercial banks, including AgriBank – North Hanoi Branch, prepare for integration and development to remain competitive.
AgriBank's North Hanoi Branch must implement timely changes to navigate challenges effectively and foster appropriate growth Building genuine strengths and establishing the right strategic direction are essential for thriving in a competitive environment.
The AgriBank - North Hanoi Branch conducted an opportunity analysis to assess its potential risks, strengths, and weaknesses, leading to the development of a business strategy for 2011-2015 To effectively implement these strategies, the branch should focus on diversifying credit investments, enhancing appraisal quality, expanding its network to attract customers, improving its organizational model, and upgrading staff qualifications through targeted marketing solutions Additionally, it is essential for the branch to consistently monitor and evaluate the outcomes of these strategies to ensure timely adjustments are made.
Group 7- Gamba.X0210- thank to ETC Center, teacher who taught and graduated guideline and gave career enthusiasm to transmit experience to MBA student.