FUNDALMENTAL PROBLEMS ABOUT BUSINESS STRATEGY
Business strategy of commercial bank
Since 1988, the definition of commercial banks has evolved, yet they are generally understood as government-licensed financial intermediaries that provide loans and accept various types of deposit accounts, including those that facilitate cheque transactions.
Commercial banks play a crucial role in the financial system by specializing in accepting deposits, granting loans, and offering payment services They operate within the framework of the law and are influenced by the overall growth of production and trade in the economy.
2010 Law on Credit Institutions defined as following:
Commercial banks are permitted to carry out all banking operations and some other business operations for profit-making purpose
Commercial banks are authorized to conduct a wide range of banking activities and additional operations as outlined by the Law on Credit Institutions, all aimed at generating profit.
1.2.2 Basic operations and characteristics of business activities of commercial banks
* Basic operations of commercial banks
+ Accepting demand deposit and time deposit by VND and foreign currency.
+ Accepting saving deposits with plentiful and attractive forms: demand savings and demand savings by VND and foreign currency, rewarding savings, savings withdraw principle flexibly, ladder savings…
+ Short term loan by VND and foreign currency.
+ Medium term, long term loans by VND and foreign currency.
+ Import, export sponsor, discount of export goods dossiers
+ Co-sponsor and contributed loans for large projects, the long completion time
+ Sponsor loan, trusted according to the programs: Viet – German (DEG, KFW); Taiwan (SMEDE) and framework financial agreements
+ Guarantee and reguarantee (domestics and overseas): guarantee of putting a bid, guarantee of implementing contract, payment guarantee, guarantee of paying advance, issuance guarantee…
+ Issuing, paying import credit letter, notification, confirmation, paying import credit letter
+ Internal transfer and external transfer.
+ Payment order, collection order, cheque.
+ Paying salary through account, ATM.
+ Selling and buying foreign currency (Spot, Forward, Swap…)
+ Selling and buying valuable papers (governmental bonds, Treasury bill, trading bill…)
+ Collecting and paying cash in VND and foreign currency.
- Card service and electronics bank:
+ Issuing and paying international credit card.
+ ATM card service, cash card.
+ Internet Banking; Telephone Banking; Mobile Banking; SMS Banking…
+ Contributing equity, cooperate with credit organizations and internal financial institutions and external financial institutions
+ Investing in the capital market, internal and external monetary market
+ Exploiting life and nonlife insurance
+ Renting strong box, gold management, precious stone management, valuable papers, patent.
+ Financial rental through fianancial rental company.
+ Brokerage, deposit, payment agent, issuing securities through Securities Limited Liability of VietinBank; receiving, managing and exploiting assets through Debt Management and Asset Exploit Company.
To meet the increasing demands of customers and foster development and integration with regional and international markets, VietinBank maintains a clear vision for investment and growth, concentrating on three key areas of focus.
* Characteristics of banking business operation
Modern economics examines business activities through the lenses of both microeconomics and macroeconomics, reflecting the principles of economic management This dual approach is also applicable to the analysis of the modern banking system, where the Central Bank operates primarily at the macro level, while commercial banks and other financial intermediaries focus on business activities.
Understanding simply, banking business is to implement production activities, purchase monetary finance service products of banks aimed at maximizing profit.
Considering generally, our research has given some typical characteristics of banking business in the modern market economy as following:
Firstly, banking business is the activity of getting profit base on satisfying the demands about exchange means and services, payment, savings, deposits, investment sponsor…, for agents in the economy
Secondly, business objects of banks are money, financial assets and direct services related to ownership, production, management circulation, cash usage and financial assets in the economy…
Thirdly, banking business is to implement activities linked to financial intermediary institutions operating in the financial market
Fourthly, business operation of each bank is affected significantly by the factors of business environment.
Fifthly, banking business activity is highly monopolistic and risky
1.2.3 The necessity of business strategy of commercial banks
Developing an effective business strategy is crucial for the success and growth of banks, serving as a foundational element for sustainable operations Without a well-defined strategy, banks may struggle to maintain stability in their business activities A business strategy acts as a guiding compass, playing a significant role in shaping banking production and ensuring long-term viability The importance of a business strategy in banking operations is underscored by its ability to drive performance and adaptability in a competitive environment.
* Banking business activity is highly systematical:
The banking system serves as the "midwife" of the economy, encompassing various types of banks, credit institutions, non-banking credit organizations, micro-financial organizations, and people’s credit funds Operating both domestically and internationally under the Law on Credit Institutions, these organizations influence one another and significantly impact the socio-economic landscape.
So, banking operation contributes to the development of social economy, given objectives must be built first, in which focusing on the impact of market.
In the banking finance system, every activity is driven by specific demands that must be balanced This balance reflects the ongoing needs across various departments within individual banks and the broader banking system, encompassing investment, credit, and banking-finance services.
Characteristic of this balance is self-balance, there is no fixed balance or permanent balance, and it always moves to create new balance through the development process.
Banking system is developing more and more, as a result many balanced relations with new balanced levels appear, therefore the self balance is also very high
So building the objective of quarter, year, period with the large balance will promote positive balance and create the quick development for banking system.
* Management functions of state in the banking – finance field
In the market economy, the role of state in the task of building, organizing and exciting important monetary and finance activities.
The state formulates and implements policies and regulations to effectively manage financial and banking activities, as well as the overall economy By harnessing and optimizing potential financial resources, the state encourages their utilization to enhance economic operations This approach fosters coordinated development aimed at achieving both common and specific objectives.
Developing a robust business strategy is essential for commercial banks to achieve their objectives and foster growth Effective management of this strategy ensures that banking operations align with planned goals, mitigating potential market risks while maximizing profitability.
1.2.4 Nature and foundation to build, plan business strategy of commercial banks
1.2.4.1 Nature of building the business strategy of commercial banks.
Developing a business strategy for commercial banks involves effectively utilizing tools, equipment, and technology to identify and implement the strategic goals of the bank and its various departments during the designated strategy period.
Nature of planning business strategy is to build specific business strategy in a specifically identified period
It is essential to differentiate between planning strategy and building plans Building plan documentation relies primarily on historical data and experience, while strategic planning incorporates past data, current information, and future predictions Furthermore, plans are static and adaptable, whereas strategies are more dynamic and aggressive in nature.
1.2.4.2 Foundation to build the business strategy
Developing a business strategy for a commercial bank requires a solid foundation, as it is a subjective endeavor grounded in objective principles In a market economy, it is essential for commercial banks to establish their strategies based on key foundational elements to ensure effective proposal and implementation.
Business environment includes objective factors, they will affect on the business activity of banks about scale, business quality of the banks, including some main contents as following:
- Guidelines, policy, laws of state for the economy in general and for banking sector in particular
- Political environment: stabilizing or instabilizing.
- Technological factor: Technological science of the whole economy in general and banking technology in particular affect on the operation of banks.
- Scale and quality of market, the ability of controlling market and customers of banks.
The growth of banks is heavily influenced by the scale and quality of the market they operate in, which features various banking institutions Each bank carves out its niche through competition, allowing them to specialize in specific areas of the financial landscape.
- Factors belong to society and culture
- Factors, natural conditions affect on operation of banks.
Capability of a bank is assessed base on the equity of banks, experience of banks, technological facility, organizational structure, human resource source, intelligence technology, management and administration system.
The operation of banks significantly impacts the overall economy, leading to legal regulations governing their scale and activities based on available equity Consequently, the objectives of commercial banks are closely tied to their equity levels, which serve as a crucial legal foundation for expanding banking operations.
ROLE OF BANKING BUSINESS STRATEGY FOR COMMCERCIAL BANK
In the market mechanism, strategic planning is crucial as it guides managerial decision-making The significance of banking business strategy is highlighted through its various components.
1.3.1 The task of planning business strategy plays an orientation for operation of bank in specific business environment
In the evolving landscape of business, particularly for commercial banks, strategic orientation is crucial for guiding managerial decisions As market scales expand, corporations must prioritize high-quality offerings to meet increasing customer demands in both quality and quantity To thrive, banking services must align with customer needs, necessitating accurate predictions and informed decision-making to minimize risks and seize optimal business opportunities.
1.3.2 Business strategy plays basic role in building and implementing the short-term plan, building and carrying out specific policies
A successful strategy outlines long-term objectives and necessitates specific steps to achieve them To facilitate this process, short-term plans are developed, breaking down the necessary actions into manageable stages based on timeframes, which include yearly, quarterly, monthly, and weekly goals.
Giving policies to create measures must always base on demands required by strategic objective.
1.3.3 Business strategy is foundation to control and assess specifically the effectiveness of administrative activity
Effectiveness of administration must be measured, assessed and finding the positive or negative causes affected on the business result.
Developing a business strategy involves establishing criteria to evaluate the effectiveness of administrative tasks While the profit-to-equity ratio is a key indicator of a bank's performance, it is essential to also focus on objectives such as customer attraction, market share, and qualitative factors, which can be more significant than quantitative measures Therefore, comparing business results against these defined objectives is crucial for assessing the effectiveness of banking administration.
Chapter 1, group studied the reasoning problems and finished the main following contents:
This article systematically explores fundamental theories related to banking and commercial banks, with a focus on the essential components of business strategy It covers the necessity and definition of business strategy, its foundational principles, procedural steps, and the standards for calculation within the context of commercial banking Additionally, the capstone project report highlights the significant role that business strategy plays in the success and operational efficiency of commercial banks.
CURRENT SITUATION OF BUSINESS STRATEGY OF
VIETINBANK– NINH BINH BRANCH 2.1 OVERALL BUSINESS ACTIVITY OF VIETINBANK– NINH BINH BRANCH
2.1.1 Mission, vision and core value and business philosophy of Vietinbank
VietinBank aims to be Vietnam's premier banking and finance group, dedicated to offering a diverse range of products and services that meet international standards, ultimately enhancing the quality of life for its customers.
- Vision of VietinBank: becoming a leading modern and effective banking finance group in the country and overseas
+ Every activity focuses on customers.
Being active, creative, and dedicated are essential qualities for professionals in today's modern workplace Workers have the right to strive for excellence and to receive recognition and respect for their hard work and dedication It is important to honor and appreciate individuals who demonstrate outstanding performance and commitment.
+ Being safe, effective, sustainable, international standard.
+ Solidarity, cooperation, share and social responsibility
+ Prosperity of customers is the success of VietinBank.
2.1.2 Process of establishment and development of Vietin Bank – Ninh Binh branch
The Ninh Binh branch of Vietinbank, established on January 12, 1994, under Decision number 411/QD-NHCT, operates as a dependent unit of Vietinbank It possesses its own seal and functions in accordance with the authorization from Vietinbank, as well as adhering to the Law on Credit Institutions and the regulations set forth by Vietinbank.
Ninh Binh Bank for Industry and Trade run by Executive Director and Executive Director is responsible before the chairman of Board of Management of VietinBank
Organization structure includes: Board of Director and 10 divisions, group;specifically: Customer Division; Accounting Division; Budget Monetary Division;
Administrative Division; Checking Division; Risk Management Group, Service General Group and Informatics Division and 3 exchange divisions Ninh Thanh; Gia Vien; Yen Khanh.
Accouting division and transaction division have their own seal to do professional activity as regulated
Graph 2.1: Organizational structure of Ninh Binh Vietinbank
(Source: Vietinbank Ninh Binh Branch – 2010)
* Business activities of Vietinbank Ninh Binh
- Branch has got the main task: buying and selling foreign currency directly, credit and banking service in Ninh Binh.
- The main business activities of Vietinbank Ninh Binh are as following:
+ Developing and accepting saving accounts, payment of organizations, individual of all economics objects in domestics and overseas by domestic currency and foreign currency
+ Issuing certificate of balance, bonds, banking bill and different forms of mobilizing capital according to regulation of Vietinbank.
+ Receiving sponsor source, commission funds of government and intenal and external economics organization.
+ Loan of internal financial and credit institution according to Vietinbank
A cc ou nt in g D iv is io n
The Customer Division Risk Management Group encompasses various services, including the General Group and Informatics Division, as well as the Transaction Division and Monetary Division Additionally, it involves the Administrative General Division and the Internal Controlling Checking Division, ensuring comprehensive oversight and effective risk management across all divisions.
+ Short term loan, medium term loan and long term loan by domestic currency and foreign currency for customers to meet the capital demand for production, service, life development investment
+ Capital sponsor for import and export corporate.
+ Guarantee for economics corporate and organization
Besides, Vietinbank Ninh Binh has got other activities:
- Foreign currency trading: selling and buying foreign currency, international payment and other services about foreign currency according to the foreign currency management mechanism of Government, Central Bank, Vietinbank.
- Service business, automatic transfer machine, credit card, accepting discount for valuable papers, payment card
- Implementing agent receives security order, insurance service and other tasks assigned by the chairman.
2.1.3 Overviewing the current situation of Vietinbank Ninh Binh
Vietinbank Ninh Binh engages in a comprehensive range of banking services, focusing primarily on capital mobilization and loan activities The bank employs traditional methods for capital mobilization, including savings accounts, bond and bill issuance, and balance certificates, while also attracting payment deposits from various entities such as economic organizations, corporations, individuals, and local residents.
Vietinbank Ninh Binh focuses on loan operations for various customer types, including state corporations, individual enterprises, joint stock companies, limited liability companies, and foreign-invested firms The branch has shown a continuous increase in business activity, with results for the year ending September 30, 2010, surpassing those of 2009 and 2008, as illustrated in Table 2.1.
Table 2.1: Some main business criteria of 2008-2009 and to the year of 30 th
- Medium and long term loan 786 1.408 1.438
Source: Report of Vietinbank Ninh Binh
2.2 CURRENT BUSINESS STRATEGY OF VIETINBANK NINH BINH 2.2.1 Macro economics environment affects on business strategy of Vietinbank Ninh Binh
Macro economics environment affects on all corporate, including Vietinbank Ninh Binh The effect of macro economics on operation of the branch expresses at some main following contents:
* Reviewing macro economics situation of 2010.
In 2010, following a challenging global financial crisis, Vietnam's economy began to recover, achieving a GDP growth of approximately 6.7% The agricultural sector grew by 2.6%, while industry and construction saw an increase of 7.6%, contributing to a GDP per capita of nearly $1,160 Capital sources rose by 12.9% from 2009, accounting for 41% of GDP Additionally, total receivables increased by 12.7%, ensuring expenditure demands were met and helping to reduce the budget deficit to below 6% Government debt stood at about 44.5% of GDP, with external debt at 42.2% and public debt at 56.7%, all remaining within safe and controllable limits.
Flexible monetary policy has significantly contributed to economic growth and inflation control, achieving key objectives such as a 20% increase in total payment means and a 25% rise in outstanding credit The exchange rate is managed based on market principles, with operating loan interest rates determined by market mechanisms Additionally, the securities market has reached a capitalization rate of nearly 31.6% of GDP.
Total export volume increased by 19,1%, controlling import very closely, export volume increase by 16,5%, trade deficit was about USD 13,5 billions.
Prodution develops, ensures the equilibrium status, the task of controlling price, preventing speculation is encouraged, the stable price, the price increase is about 8%, contributed to the macro economics stabilization
* Social culture has developed, social welfare is ensured.
In recent years, the average income per capita has risen to approximately 1.365 million VND, marking an 8.9% increase and resulting in the creation of 1.6 million new jobs Additionally, training programs have equipped 1.7 million individuals, with 40% of the workforce now trained Efforts to reduce poverty in the 63 poorest districts have been implemented effectively, leading to a 1.85% decrease in the poverty rate Significant advancements in health and education have occurred, with a focus on promoting socialization to enhance facilities and expand the educational network Furthermore, cultural, informational, and sports initiatives have flourished, positively impacting various aspects of life and enriching the emotional well-being of the community through diverse artistic expressions.
* Technological science gets positive results.
In 2010, over 300 new technological sciences companies were established, doubling the number from 2009, indicating rapid growth in the tech market The number of registered inventions also increased twofold, while protective licenses rose by 15%, leading to the creation of more than 30 new plant varieties This surge in research activities and the application of technology significantly enhanced labor productivity and product quality.
* Social politics is stable, the law is being improved and synchronous
Preventive activity and struggle win the enemies and criminals are paid attention to, positive and effective Political security is stabilized which creates safe and advantageous investment environment in ASEAN.
CURRENT SITUATION OF BUSINESS STRATEGY OF
CURRENT BUSINESS STRATEGY OF VIETINBANK NINH BINH
Macro economics environment affects on all corporate, including Vietinbank Ninh Binh The effect of macro economics on operation of the branch expresses at some main following contents:
* Reviewing macro economics situation of 2010.
In 2010, following a challenging period of financial crisis and recession, the global economy began to recover at a slow pace Vietnam's economy notably rebounded, achieving a GDP growth of approximately 6.7%, with the agricultural sector growing by 2.6% and industry and construction by 7.6% The GDP per capita reached nearly $1,160, while capital sources surged by 12.9% compared to 2009, accounting for 41% of GDP Total receivables increased by 12.7% from estimates and by 17.6% from the previous year, helping to reduce the budget deficit to under 6% Government outstanding debt stood at about 44.5% of GDP, external national debt at 42.2%, and public debt at 56.7%, all remaining within safe thresholds and under control.
Flexible monetary policy has effectively stimulated economic growth while managing inflation, achieving key objectives such as a 20% increase in total payment means and a 25% rise in outstanding credit The exchange rate is managed based on market principles, and loan interest rates operate according to a deal mechanism Additionally, the securities market has reached a capitalization rate of nearly 31.6% of GDP.
Total export volume increased by 19,1%, controlling import very closely, export volume increase by 16,5%, trade deficit was about USD 13,5 billions.
Prodution develops, ensures the equilibrium status, the task of controlling price, preventing speculation is encouraged, the stable price, the price increase is about 8%, contributed to the macro economics stabilization
* Social culture has developed, social welfare is ensured.
In the past year, the average income per capita rose to approximately 1.365 million VND, marking an 8.9% increase and resulting in the creation of 1.6 million new jobs, with 1.7 million individuals receiving training, bringing the trained labor force to 40% Efforts to reduce poverty in the 63 poorest towns have been implemented effectively, leading to a 1.85% decrease in the rate of poor households Significant advancements in health and education have been made, with a focus on promoting educational socialization to enhance facilities and expand the education network Additionally, culture, information, and sports have seen considerable growth, positively impacting various aspects of life, while artistic endeavors have enriched cultural diversity and enhanced the emotional well-being of the community.
* Technological science gets positive results.
In 2010, over 300 new technological sciences companies were established, doubling the number from 2009 The technological market experienced rapid growth, with registered inventions increasing twofold and protective licenses rising by 15% This surge led to the creation of more than 30 new plant varieties The strong development of research activities and the application of technological sciences significantly enhanced labor productivity and product quality.
* Social politics is stable, the law is being improved and synchronous
Preventive activity and struggle win the enemies and criminals are paid attention to, positive and effective Political security is stabilized which creates safe and advantageous investment environment in ASEAN.
Legislative activities and the issuance of legal policies are prioritized, with timely and coordinated laws, parliamentary resolutions, government decrees, and ministry guidance This approach fosters a conducive legal environment for business operations, attracts investments, and ensures social security, order, and safety.
* Economics and natural situation of Ninh Binh province.
Since its reestablishment in 1992, Ninh Binh province has transformed from a predominantly agricultural region into a rapidly developing economy Over the past three years, the province has seen significant growth in its economic structure, with a swift expansion in industry and tourism services, while agriculture has gradually declined Ninh Binh is increasingly attracting both domestic and foreign investment, particularly in sectors such as cement production, steel treatment, rock quarrying, and construction materials These developments have positively influenced the investment climate, enhancing capital mobilization and services for commercial banks.
* Impact of economics globalization on Vietnam:
In 2006, Vietnam marked a significant milestone in international economic integration by becoming the 150th member of the World Trade Organization (WTO) and securing permanent normalization of trade relations with the United States By 2010, as the chair of AIPA and ASEAN, Vietnam successfully hosted high-level conferences, including ASEAN 17 and ASEAN + 3, which involved key nations such as China, Japan, Korea, Russia, and the United States These events underscored Vietnam's growing status and role on the global stage, facilitating deeper economic integration and expanding cooperative relationships with various countries worldwide for mutual benefit.
Vietnam is committed to integrating into the global economy by joining the WTO and AFTA, while adhering to principles of trade liberalization The country is dedicated to a consistent path of open reform, focusing on enhancing the quality of domestic business investment.
Integration enhances Vietnam's economic potential by boosting export and import activities, attracting foreign investment, and modernizing technology This fosters a fair and competitive business environment for both domestic and international companies.
The state plays a crucial role in shaping the economy by establishing an environment conducive to growth, primarily through direct instruments In this context, financial and monetary policies emerge as key macroeconomic tools, while the banking sector evolves to offer more diversified and higher-quality services.
Vietnam is actively expanding its international market for goods to mitigate economic damage caused by trade protectionism and potential economic sanctions from other nations This strategic approach aims to safeguard the country's economy in the face of trade disputes and political tensions, ensuring sustainable growth and resilience in the global marketplace.
However, integrating into WTO, Vietnam also faces large challenges as following:
Vietnam is gradually reducing its import tax in line with the Common Effective Preferential Tariff (CEPT) of the ASEAN Free Trade Area (AFTA), leading to decreased protectionism for domestic industries This shift necessitates economic adjustments to keep pace with the rapid advancements in trade, investment, and technology transfer.
The second challenge in the reform of state-owned enterprises lies in the difficulties faced in the industrial and service sectors As globalization progresses, the influence of state-owned enterprises diminishes due to reduced government investment, leading to the necessity for underperforming units to either scale back production or shut down entirely.
Opening the goods and service markets presents a significant opportunity for banks to expand their business This shift encourages Vietnamese commercial banks to enhance their management qualifications, improve their asset and liability management, and adopt international risk management standards Additionally, it drives banks to increase their capital base, optimize capital utilization, and innovate new banking products and services.
2.2.2 Procedure of building strategy of VietinBank Ninh Binh
In terms of development, the strategy of VietinBank Ninh Binh contributed an important role With the role of a financial provider Expanding the operation of
VietinBank Ninh Binh plays a vital role in enhancing the financial landscape of the region by mobilizing domestic resources, generating employment opportunities, and improving access to financial services for residents This initiative fosters an environment for businesses to establish and grow, aligning with the bank's comprehensive business strategy that supports regional development.
Graph 2.2: Procedure of building strategy of Vietinbank Ninh binh
Procedure of building strategy of Vietinbank Ninh binh includes 6 steps:
Secondly: Identifying opportunities and threats for Vietinbank Ninh binh.
Table 2.2: Analyzing business environment of Vietinbank Ninh Binh
Macro environment analysis Micro environment analysis
- Development level of financial market of Vietnam
- Social demand and tendency about financial service
- Competitive condition and attraction of banking sector
- Predicting competitive level in banking sector
- Estimating the change in structure when using banking service in Ninh Binh
2 Analyzing the current business activity
3 Points, wishes, expectations of leaders
Building organization plan and assigning to implement strategy
Table 2.3: Opportunities and threats of Vietinbank Ninh Binh
- Vietinbank Ninh binh has got many opportunities to expand market and give additional banking service products which are more diversified, utility and operate in a safer and more effective way.
- Opportunities for Vietinbank Ninh Binh to restructure customers, improve the quality of assets portfolio
- Opportunities to approach the most advanced banking technology.
- Opportunities to improve competitive ability
- Opportunities to operate base on the actual market principles, competition in an equal play ground
- Market share is gradually narrowed, customers leave.
ASSESSMENT ABOUT BUSINESS STRATEGY OF VIETINBANK NINH BINH
The current business strategy of VietinBank Ninh Binh has yielded significant results, as evidenced by data from 2008, 2009, and up to September 30, 2010 These results highlight the effectiveness of the bank's strategic initiatives during this period.
VietinBank Ninh Binh's business strategy from 2008 to September 30, 2010, has yielded significant results, demonstrating its effective approach tailored to various customer segments across different industries The bank has played a crucial role in supporting private sector enterprises through strategic fund mobilization and lending practices.
Graph 2.1: Funding source and outstanding
Source: Report of VietinBank Ninh Binh
The above result is expressed by some specific content as following:
Investment in medium and small private enterprises is growing in scale and proportion, significantly enhancing the capital structure of economic components This trend is illustrated in Graph 2.2.
Graph 2.2: Outstanding of economics components
Source: Report of VietinBank Ninh Binh
Graph 2.2 illustrates the significant growth in credit capital investment for medium and small private enterprises at VietinBank Ninh Binh, with an increase from a planned 59% to an actual 59.5% in 2008, and a rise from a planned 77.2% to 88% in 2009.
- Outstanding structure of loans diversified , the proportion of medium and long term loans reached 59%, in 2009 reached 68%, outstanding is positive tendency Looking at the graph 2.3.
Graph 2.3: Outstanding bases on time
Source: Report of VietinBank Ninh Binh
Loans base on economics sector transferred into the direction of investing in many different sectors
VietinBank Ninh Binh recognizes the critical role of a robust business strategy in banking operations Consequently, the bank has prioritized accessing and investing funds while enhancing customer services, aiming to boost overall business efficiency and achieve significant growth across all professional sectors.
In 2009, the credit investment strategy for private enterprises shifted significantly, with long and medium-term loans accounting for 68% of outstanding loans This change reflects a deliberate move away from funding state-owned enterprises, leading to a rapid increase in loans allocated to medium and long-term private enterprises.
VietinBank consistently maintains high credit quality, as evidenced by its overdue debt ratio, which remains lower than that of regional commercial banks and the overall banking system.
Investing in capital for corporate activities, spanning production, processing, and export, is a strategic solution that fosters collaboration between VietinBank Ninh Binh and businesses This partnership not only enhances operational efficiency but also strengthens business strategies for mutual growth and success.
VietinBank Ninh Binh is dedicated to fostering strong relationships with its customers by building trust and brand loyalty in its loan, payment, and banking services The bank consistently maintains and grows its base of strategic and traditional customers each year.
VietinBank is focused on expanding its service development environment by increasing investment in a diverse range of customers, including borrowers and those utilizing domestic and international payment services, guarantees, salary payments, card services, and consultancy This strategic direction is crucial for achieving the bank's future business objectives related to service enhancement.
VietinBank Ninh Binh is enhancing operational efficiency by transitioning investment structures and expanding loan offerings for customers who contribute to positive changes This strategy aims to establish a suitable and effective investment framework while mitigating risks Additionally, the bank is committed to diversifying its product range and modern banking services to better meet customer needs.
- Improving activity scale: pushing up service activity, expanding market, market share, improving the status of branch in the province
Enhancing staff qualifications through comprehensive training and retraining programs is essential for keeping employees updated on critical areas such as legal regulations, market trends, project analysis, risk management, and product packaging This continuous education not only equips them with the necessary skills for effective cross-selling but also introduces them to new knowledge regarding international connections, ultimately fostering a more competent and adaptable workforce.
- Efficiency of society and economics: contributing positively into implementing economics objectives of local
Investing capital plays a crucial role in societal development and stabilization by enabling businesses to grow and generate more employment opportunities, particularly for untrained labor in rural areas This investment not only creates income but also boosts consumption, driving the growth of markets, especially in agriculture and rural sectors, ultimately contributing to a more stable and prosperous society.
Credit plays a crucial role in enhancing business capabilities for customers by enabling them to sustain and expand their production efforts It facilitates the renewal of technology and equipment, leading to improved product quality and the ability to update product codes This financial support ultimately strengthens their competitive edge in an evolving market and fosters economic integration.
To enhance clarity and prevent misunderstandings, the capstone project report of the group integrates the analysis and assessment sections, ensuring a cohesive examination of both the existence and the underlying causes of the issues addressed.
Besides achieved results, implementing business strategy of VietinBank Ninh Binh has got some existences and their causes are mainly as following:
ORIENTING BUSINESS ACTIVITY OF VIETINBANK – NINH BINH BRANCH
3.1.1 Orienting the activity of Joint stock commercial bank Vietnam for industry and trade.
In the context of deep integration into international economics, particularly within the competitive banking sector, VietinBank aims to establish itself as a leading institution in Vietnam while gaining recognition regionally and globally Therefore, the bank's overarching goal and development strategy focus on enhancing its status, capabilities, and competitiveness.
Becoming the modern banking and financial group and the leading bank in the country and overseas
- Diversifying the structure of equity with renewal objective, improving management ability, increasing charter capital
- Business activity base on the trading principles and marker principles
- Applying international laws in management, administration and business
- Improving intelligence technology, modern banking technology to be foundation for developing new services according to modern banking
- Ensuring the transparency in every activity
- Developing business towards multi-function, providing products and services according to international standards
- Identifying the human resource is the most “capital asset” to have training, development policy and used suitably
*Objective to the year of 2015
On the general objective and strategic orientation given by Board of Management, the objective to the year of 2015 of VietinBank as following:
- About finance and safe activity to the year of 2015
Table 3.1: Criteria about finance and safe operation to the year of 2015
Revenue after tax/assets (ROA) 0,58
Revenue after tax/equity (ROE) 12
* Strategic objective to the year of 2015
In the context of international economic integration, Vietnam's banking sector, particularly VietinBank, faces both significant opportunities and potential threats To navigate this landscape, VietinBank has set a strategic objective for 2015 centered on "development, safety, and efficiency." This strategy emphasizes expanding liabilities and equity, restructuring organizational frameworks, modernizing technology, enhancing management capabilities, implementing effective risk management, and focusing on the development of retail banking products.
- "Integration and sustainable development and international standard”, in which focuses mainly on increasing comprehensive competition ability, restructuring basic activity of banks, implementing sustainable growth
VietinBank is recognized as a leading bank in Vietnam, primarily engaged in credit, payment, investment, and various other services It excels in providing high-quality banking and retail services at competitive costs, utilizing effective distribution methods to ensure optimal customer satisfaction The bank is focused on enhancing the scale and operational efficiency of its subsidiaries and joint ventures while maximizing potential and expanding its market share.
3.1.2 Orienting business activity of VietinBank Ninh Binh
On the base of orienting of VietinBank, from the actual situation, banking business environment and its capability; VietinBank orients business activity to the year of 2015, specific as following:
- Continue growth and stabilize funds:
VietinBank is enhancing its brand and status by leveraging its diverse strengths and flexible fundraising options to boost fund growth for businesses.
+ Increasing the stability of funds gradually; pushing up mobilizing medium and long term funds; balancing the period in mobilizing funds and loans, being positive in using fund effectively
+ In coming years, safe credit growth is still the measure of improving the best efficiency investment
Expanding safe credit is a crucial necessity for VietinBank Ninh Binh, as it aligns with the bank's growth objectives and enhances the average outstanding credit per capita This strategy not only supports the bank's overall scale but also serves as a vital measure to secure income sources, particularly in a region where developing service income is challenging.
VietinBank is focused on expanding credit while enhancing its quality, ensuring that the rate of bad debt remains below the permissible threshold of 0.1% of outstanding loans This strategic approach aims to prevent a significant increase in bad debt, safeguarding the bank's financial health.
- Improving and developing new and effective service products base on utilizing intelligence technology equipments, advanced technology qualification suitable for demands of customers in the future.
To enhance international payment and foreign currency operations, it is essential to develop a strategic investment policy focused on technology and human resources This approach will enable us to effectively support and advise potential clients on skills, technology, and expertise in import-export payment processes By doing so, we aim to attract and increase the number of customers utilizing our international payment services.
To enhance cost-efficiency in business operations, it is essential to strengthen management practices, boost workforce productivity, and upgrade material facilities and equipment Adhering to industry regulations and procedures, along with comprehensive financial accounting and risk management, is crucial Furthermore, ensuring and improving staff income is key to fostering a motivated and productive workforce.
To optimize funding sources, it is essential to maintain and leverage existing customer relationships, including deposits from corporations, economic organizations, individuals, and government agencies Special attention should be given to sectors with stable income, such as administrative bodies and the military Diversifying the customer base, types of currency, and fundraising schedules can help mitigate reliance on large funding sources and minimize risks associated with interest rate fluctuations in the market.
Credit customers should prioritize long-term investment projects that have received approval while maintaining relationships with traditional clients Efforts should include increasing advertising and attracting new customers with strong financial capabilities and viable investment projects Additionally, it is essential to continue growing medium and long-term credits while emphasizing short-term credit, particularly in sectors like export, agriculture, and rural development, which are supported by the Party, Government, and Central Bank Furthermore, there should be a focus on reducing outstanding loans in ship transportation and limiting loans for securities and real estate.
- Orienting about organization, training and developing network:
To meet the growing demands of our expanding business network, VietinBank is implementing a structured recruitment process that includes organized examinations This approach aims to attract and hire skilled professionals, ensuring we build a high-quality workforce capable of supporting our business scale and development.
+ Improving the training quality, retraining labor and considering the activity of retraining with diversified and suitable forms are the main measures to improve the qualification of staffs
To enhance market presence, it is essential to develop a robust network while simultaneously improving the quality of transaction points and divisions This includes equipping facilities with necessary materials and optimizing working conditions to ensure functionality and reliability By implementing multifunctional capabilities, businesses can significantly boost efficiency and build customer trust.
Table 3.2: Some activity criteria of VietinBank Ninh Binh
In which: Deposits of citizen 1.700 2.000 2.240 2.650 3.250
* Proportion to total funding source 12% 14,2% 15,6% 17,1% 17,4%
Proportion to total funding source 12% 13,6% 14% 14,5% 15,2%
In which: Medim-long term outstanding 2.380 2.840 3.070 3.350 3.600
Foreign currency outstanding in VND 1.200 1.000 700 550 450
Revenue of international payment (1000 USD) 40.000 45.000 50.000 55.000 65.000
Revenue of buying and selling foreign currency 30.000 35.000 40.000 50.000 60.000
3.2 SOLUTIONS TO FULFILL BUSINESS STRATEGY OF VIETINBANK –NINH BINH BRANCH TO THE YEAR OF 2015
SOLUTIONS TO PERFECT BUSINESS STRATEGY OF VIETINBANK –
To achieve effective business development and successfully implement strategic objectives, it is crucial to prioritize both strategy planning and its organized execution At Vietinbank Ninh Binh, there is a noticeable gap in the administration of business strategies, where the focus on strategy formulation overshadows the subsequent management and implementation phases This oversight has led to confusion and a passive approach in management practices Therefore, establishing a tailored administrative procedure for developing business strategies that aligns with specific conditions is essential for success.
Corporate strategy administration involves a series of decisions and actions aimed at planning and executing strategies to achieve corporate objectives This process consists of three key phases: strategy planning, strategy implementation, and the evaluation, assessment, and adjustment of strategies.
From the above content, with specific condition of Vietinbank Ninh Binh should choose a model of 6 steps strategic administration according to 3.1 graph
Objective of this step is to analyze business strategy, identify the
2 Analyzing internal environment of banks
3 Points, wishes, expectations of leaders
Organiz ing and impleme nting strategy
Checking and assessing opportunites and threats of Vietinbank Ninh Binh.
Development level of financial market of Vietnam
Social demand and tendency about financial service
Legal environment is related to banking operation
Competitive conditions and attraction of banking sector
Predicting competitive level in banking sector
Predicting the customers structure using banking service
- Analyzing opportunities and threats of Vietinbank Ninh Binh.
Having more opportunities to expand market, develop and diversify banking services which are more useful, safer and more effective.
Opportunities to restructure customers, restructure the credit portfolio, improving the quality of assets portfolio.
Opportunity to access modern technology, improving qualification and administration ability.
Operating base on the trading principles and market, international law. + Threats:
Market share is narrow, losing good customers
Administration and management qualification is difficult, banking service is less diversified, less utility and intelligence technology is limitted
Severe competition in attracting qualified labors, especially high level labors (braindrain).
Competitive ability of the economy and of corporates is weak, the transperancy is not high, the awareness of obeying law is limited.
Job experience, market economics knowledge, advanced banking business of staffs system is very limited
Step 2: Analyzing internal environment of bank:
Analyzing internal environment of bank identifies strengths, weaknesses compared with competitors
- Strengths of VietinBank Ninh Bình:
Trademark of VietinBank (reliable, famous)
More than 15 years of operations, building a good customers foundation, safe business activity
VietinBank established a tracsaction office aimed at solving all transactions about trading finance, international payment.
System of young staff, basic and enthusiastic training course, systems of management staffs meet the working demand.
Headquarter, transaction offices have convenient positions, and it the the only bank increases the transaction time to 18 hours in a day and working on Saturday
Honest specialized staffs and managerial staffs
- Weaknesses of VietinBank Ninh Bình:
Management mechanisim cooperated between Headquarter and branches; among divisions, groups in the branch is not good.
Price policy (interest rate, fee) is not flexible.
Staffs lack of experience of working group
Not having got outstanding services, service operation is not concerned suitably
Marketing, quản lý bán hàng, kỹ năng tiếp thị khách hàng còn hạn chế.
Building and implementing business strategy is formalism
Step 3: Combining analysis between internal environment and external environment and expectations of leaders
Focusing the result of analyzing environment and internal banking for leaders of banks to take into consideration
Objectives of this step include:
- Using SWOT model to form strategies and choice the suitable strategy for each business period
1 Trademark of VietinBank (powerful, trustworthy)
2 More than 15 years of operations, having good customers foundation, safe business acitivity.
3 VietinBank established the transaction office aimed at solving all transactions related to trading sponsors, international payment
4 Young staff system, basic tranining, enthusiasm, the system of mangers meet the demands of jobs.
5 Headquarter, transaction offices have got convenient places, and it is the only bank which increase the transaction time to 18hours and works on Saturday’s morning
6 System of managerial staffs and professional stafss are
1.Mechanisim of management, combination with Headquarter and branches; among divisions, groups in the branch are not good
2.Price policy (interest rate, charge) is not flexible
3.Staffs, employees lack of experience of working group. 4.Not having got many outstanding service products, service operations are not concerned
5.Marketing, sales management, advertising skills are limitted.
6 Building and implementing business strategy is formatic . honest
1 Having many opportunities to expand market, developing and giving banking service products which are more diversified, more useful, safer and more effective
2 Opportunities to restructure customers, restructure the credit portfolio, improve the quality of asset portfolio.
3 Opportunities to approach mordern banking technology, improving qualification and ability of management
4 Operating base on trading and market principles, international law.
1 Keep the main status, improving gradually the status in the provinces .
2 Building investment strategy in industrial zones in provinces, the big projects and big customers .
3 Expanding investments for small and medium enterprises, traditional villages.
4 Diversifying the banking service products, developing gradually retail banking service.
1 Proposing with VietinBank to improve the professional mechanism in the tendency of increasing the active for branches about their authorizations about charge and interest rate.
2 Issuing the internal operation rule in the branch.
3 Training, recruiting the qualified staffs.
4 Building and implementing administration information system base on international standards
1.Market share is narrow down, loses customers
2 Administration and executive qualification is difficult, the banking service products are simple, less utilities and limits application of intelligence technology
1 Continue to keep the trademark by improving the quality of service products:
2 Strengthening training and retraining course for staffs
3 Rearranging the machines, operating system
4 Exploiting the business advantages from the operation
1 Implementing the regulations about risk management of VietinBank base on international laws
2 Focusing on investment in market groups which have got high efficiency.
3 Being credit trusted service for banks and internal and
3.Serve competition in attracting qualified labors, especially high level labors.
4.Competitive ability of the economy and of corporate is weak, the transperancy is not hight, the awareness obeys law is limited.
5.Operating experience, the knowledge about market economics, modern banking business of systems of staffs are very difficult scale
5 Exploiting the advantage from network of branches which are expanded whole provinces international financial institution
4 Building the recruitment standards of the branch, being suitable for the reality and regulation of VietinBank.
5 Pushing up the application of intelligence technology
Based on the analysis of the SWOT matrix, we aim to leverage the strengths and threats (S-T) to enhance Vietinbank Ninh Binh’s advantages while effectively addressing challenges This strategic approach is essential for achieving the objectives established by both the Vietinbank Head Office and Vietinbank Ninh Binh.
Implementing a strategy involves a series of activities, including identifying business policies and creating short-term plans that effectively allocate resources This process requires careful analysis of the interplay between different elements and the development of operational solutions, along with ongoing monitoring and adjustments to the strategy.
This step involves the continuous and periodic evaluation of strategy implementation results By analyzing these outcomes, we can assess the suitability, feasibility, and effectiveness of the strategy, allowing for necessary adjustments to be made for optimal performance.
3.2.2 Expanding the forms of mobilizing funds suitable for each period
Implementing effective business development strategy is shown, when having a stable and sustainable funding source
In today's banking landscape, mobilizing funds is a crucial aspect of retail banking, making it essential for VietinBank Ninh Binh to implement strategies that attract more customers and enhance its market share in fund mobilization Given that customers are highly sensitive to interest rates and transaction benefits, they carefully evaluate what they gain from their banking investments Therefore, VietinBank Ninh Binh must adopt innovative fund mobilization methods tailored to its unique circumstances to meet customer expectations and leverage its potential in the market.
For individual saving service, it can add some new forms of mobilizing such as:
Saving for the future is an ideal option for customers with a steady income, allowing them to allocate a portion of their earnings to monthly or quarterly savings accounts This approach enables individuals to accumulate funds for future goals while benefiting from competitive interest rates offered by banks, tailored to their chosen payment schedule This service is highly popular among the community, with many customers opting to take advantage of it.
Time savings accounts offer a tiered interest rate structure, where the interest rate increases progressively based on the duration of the deposit The longer the funds are deposited, the higher the interest rate earned If the account holder chooses to withdraw their funds before the maturity date, they will receive the increased interest rate that corresponds to the length of time the deposit was held.
Time savings accounts offer a tiered interest rate structure, where higher deposit amounts yield increased interest rates The interest earned is equivalent to the standard rate for time deposits, enhanced by a corresponding increment based on the total deposit amount.
Withdrawing a portion of the principal before maturity allows for flexible access to funds while still earning interest on the withdrawn amount at the applicable rate for the duration of the actual deposit The interest on the remaining principal continues to be calculated based on the initial terms, ensuring that you maximize your savings while enjoying the benefits of liquidity.
Customers benefit from time savings and the flexibility of a floating interest rate, allowing them to avoid interest rate risks associated with fixed deposit terms When they choose to settle their deposits early, they are not required to repay the interest earned at the end of each period This approach enables customers to enjoy higher interest rates for the actual duration of their deposit, enhancing their overall returns.
Remittance savings refer to the practice of Vietnamese individuals working abroad sending money back home for savings This service caters specifically to labor export workers who wish to securely deposit their earnings in Vietnam.
Life savings products blend insurance and banking, catering to citizens' needs for managing their accumulated funds to secure their future as they age or in the event of losing their ability to work By offering such products, banks can leverage the benefits of consistently gathering stable funding over the long term, thereby enhancing their medium and long-term funding structure.
While individual accounts may not be viewed as a primary source for medium and long-term funding, they play a crucial role in fostering stable and sustainable financial growth at a low cost VietinBank Ninh Binh should expand this product into a diverse range of offerings, tailored to meet the varied needs of customers and enhance asset management opportunities.
An overdraft account allows customers to spend beyond their available balance, providing them with a designated overdraft limit This financial product offers the flexibility of accessing additional funds without the need for formal loan applications, making it a convenient option for managing expenses Customers are required to pay interest on the amount overdrawn, but the straightforward conditions for using this service enhance its appeal for those seeking seamless banking solutions.