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CAPSTONE PROJECT REPORT PLANNING BUSINESS STRATEGY OF SAIGON J.S COMMERCIAL BANK – NGHE AN BRANCH UNTIL 2020 Group - Class: GAMBA 01.V03 Phan Tri Nghia Truong Minh Hung Nguyen Duc Tri Dau Anh Tuan NGHE AN 2011 TABLE OF CONTENT ABBREVIATIONS LIST OF DIAGRAMS, CHARTS AND TABLES ASSURANCE ACKNOWLEDGEMENTS…………………………………………………….8 INTRODUCTION ………………………………….…………………………9 The necessity of the research topic………………………………………….9 Research objectives…………………………………………………………10 Thesis and scope…………………………………………………………….10 Research methodology…………………………………………………… 10 Structure…………………………………………………………………….10 CHAPTER 1: THEORETICAL FRAMEWORK FOR BUSINESS STRATEGY …………………………………………………………………12 I FUNDAMENTAL GROUNDWORK FOR STRATEGY AND MODERN BUSINESS STRATEGY………………………………………………………12 1.1Concept and role of strategy……………………………………………….12 1.1.1 Concept…………………………………………………………………………… 12 1.2 Role of strategy……………………………………….………………………… 13 1.2 Characteristics of business strategies:…………… ……………………13 1.3 The types of business strategy…………………… ….………………… 14 1.3.1 Classified as strategic business-level: ………………….……………………14 1.3.2 Classified as the content of strategy: .14 1.3.3 Classified as strategic process 14 1.3.4 Strategic business practices in the banking activities………………………15 1.4 Strategic business practices in the banking activities…………… ……….15 1.4.1 Strategy to strengthen market share:…………………….…………… 15 1.4.2 Strategy to diversify distribution networks:………….… ………….…… 15 Niche 1.4.3 strategy: ……………………………………………… ………………… 15 strategy…………………………………… 1.4.4.Differentiation ………………… 15 Strategy 1.5 formulation proces……………………………………… ……….15 1.5.1 Information collection………………………………………………………… 15 1.5.2 Combined application………………………………………………………… 15 1.5.3 Strategy selection……………………………………………………………… 16 1.5.4 Strategic planning……………………………………………………………….17 1.5.5 Strategic plan selection……………………………………… ………… 17 1.5.6 Strategic decision……………………………… …… …………………17 1.5.7 Strategy realization……………………………………………………….18 1.5.8 Monitoring and assessment of strategy realization……………………… 18 1.6 Strategic analysis tools…………………………………………………….19 1.6.1 Information collection: 1.6.1.1 External Factor Evaluation (EFE) Matrix………………………… 19 1.6.1.2 Internal Factor Evaluation (IFE) Matrix………………… …………20 1.6.2 Combined application 1.6.2.1 Strategic Position and Action Evaluation matrix-SPACE matrix….21 1.6.2.2 SWOT matrix………………………………………………………….22 1.6.3 Strategy selection……………………… .…………………………… …22 CHAPTER II: ANALYSIS OF THE BUSINESS ENVIRONMENT SCB’s NGHE AN BRANCH………………………………………………………….24 2.1 OVERVIEW OF SCB .24 2.1.1 The formation and development of SCB’s Nghe An branch.………………24 2.1.2 The organizational structure of SCB’s Nghe An branch………….……… 26 2.1.3 SCB’s products and services………… …………………………….……… 37 2.1.3.1 Fund mobilization 2.1.3.2 Credit 2.1.3.3 Results of the business operations of the SCB over the years 2008 2010 2.2 Analysis of external environmental factors affecting the business activities of SCB’s Nghe An branch………………………………………… 34 2.2.1 Macro environment analysis of SCB’s Nghe An branch ……… … …34 2.2.1.1 Political- legal environment…………………………………………… …34 2.2.1.2 Economic environment……………………………………………………………… 36 2.2.1.3 Cultural-social environment ………………………………………… …38 2.2.1.4.Technological environment……………………………………………………40 2.2.1.5 Human resources environment………………………………………………41 2.2.2 Analysis of micro environment…………………………… .…………….42 2.2.2.1 Analysis of competitive rival………………………………………………… 42 2.2.2.2 Analysis on customers…………………………………………………… ….47 2.2.2.3 Analysis on alternatives…………………………………………………… 48 2.2.2.4 Analysis on potential risks of opponents .49 2.3 Opportunities and challenges…………………… …………………… 49 2.3.1 Oportunities……………………………………………… ………… …49 2.3.2 Challenges…………………………………………… ………………… 50 2.4 Analysis on the matrix for evaluation of external factors (EFE)…… 51 2.5 Analysis of internal environment of SCB’s Nghe An branch………… 52 2.5.1 Human resource of SCB's Nghe An branch………………… …………52 2.5.2 Financial capability of SCB’s Nghe An branch…………………… …54 2.5.3 Evaluation on marketing skill…………………………………… .… … 55 2.5.4 Evaluation of core banking software technology of the SCB’s Nghe An branch2.6 Evaluation of core banking software technology of the SCB’s Nghe An branch……………………………………………………… ………………61 2.5.5 Strengths and Weaknesses of SCB’s Nghe An branch………… … …62 2.5.5.1 Strengths…………………………………………………………………… …62 2.5.5.1 Weaknessess…………………………………………………………………….62 2.5.6 Matrix on internal factors of SCB’s Nghe An branch (IFE)…………… 63 2.4 Analysis on the matrix for evaluation of external factors (EFE) 2.5 Analysis of internal environment of SCB's Nghe An branch CHAPTER III SELECTION OF STRATEGY AND SOLUTIONS FOR IMPLEMENTING BUSINESS STRATEGIES OF SAI GON COMMERCIAL JOINT STOCK BANK – NGHE AN BRANCH……… 65 3.1 Orientation of strategies of SCB……………… 65 3.2 Selection of strategies………….………………………………… ….… 67 3.2.1 SWOT matrix of SCB’s Nghe An branch……………….… …… ….…67 3.2.2 SPACE matrix 69 3.2.3 QSPM matrix…………………………………………………………………….71 3.3 Strategic solutions…………………………………………….………… 73 3.3.1 Solutions on manpower…………………………………………………………73 3.3.2 Solutions on market…………………………………………………………… 76 3.3.3 Solutions on marketing…………………………………………………………77 3.3.4 Solutions on finance…………………………………………………………….80 3.3.5 Solutions on organization…………………………………………………… 81 CONCLUSIONS……………………………………………………………….84 REFERENCES……………………………………………………………… 85 I.BOOK……………………………………………………………………… 85 II OTHER PUBLICATIONS……………………………………………… 85 III.WEBSITE………………………………………………………………… 85 Names and assignments of members…………………………………………86 ABBREVIATIONS SWOT SWOT Matrix: Strengths, Weaknesses, Opportunities and Threats EFE Matrix of the external factors IFE Matrix of the internal factors QSPM QSPM Matrix SPACE Matrix of strategic position GDP Gross domestic product SCB’s Nghe Saigon J.S Commercial Bank - Nghe An Branch An branch State Bank of State Bank of Vietnam Vietnam LIST OF DIAGRAMS, CHARTS AND TABLES DIAGRAM Diagram 1.1: Process of forming a business strategy 18 Diagram 1.2: Organizational structure of SCB’s Nghe An branch 27 TABLE Table 1.1: The business operating results of SCB’s Nghe An branch over years of 2008, 2009, 2010 Table 1.2: Some financial Criteria s of SCB’s Nghe An branch during 2008-2010 period Table 1.3: Criteria of SCB’s Nghe An branch and other opponents Table 1.4 Picture matrix of competition 28 33 42 45 Table 1.5: Matrix for evaluation of external factors (EFE) 51 Table 1.6: Personnel structure of SCB NA 52 Table 1.7: Indicators finance SCB Nghe An Branch 54 Table 1.8: Some operational of criterias of the payment services of SCB’s Nghe An branch 58 Table 1.9: Matrix on internal factors (IFE) 63 Table 1.10: SWOT Matrix 67 Table 1.11: Space Matrix 70 Table 1.12: QSPM Matrix 71 ASSURANCE We assure: Theme “Planning business strategy of Saigon J.S Commercial Bank Nghe An Branch until 2020” is the theme performed by our Research Team The data relating to Saigon Commercial Bank - Nghe An Branch were provided by the own unit Vinh, March, 2011 THE IMPLEMENTATION AUTHORS TEAM ACKNOWLEDGEMENTS We would like to extend our sincere thanks to SCB’s Nghe An branch which supported us enthusiastically during the process of providing data as well as held the working sessions in order to make business strategy for the enterprise Besides, we would like extend our sincere thank to the professors and doctors who have given us the skills and knowledge of the corporate governance throughout the entire course THE AUTHORS TEAM INTRODUCTION The necessity of the research topic On implementing Vietnam’s policy toward developing a multi-component socialist-oriented economy in the period of industrialization and modernization, commercial banking system in Vietnam has constantly renewed and grown, particularly in recent years, Vietnam's banking sector has seen a great development Banking structure is becoming more various, including National Commercial Bank under the central bank, Commercial Joint-Stock Bank, JointVenture Bank, representative offices and branches of foreign banks, Bank for Social Policy New types of services provided by such banks for Vietnam’s economy are becoming more modern, which has significantly contributed to bringing the banking system more and more competitiveness Currently, the system of Joint Stock Commercial Banks is the leader in the strategies for modernization, competitiveness improvement and market domination in Vietnam In present-day context, commitment to integration into the WTO must be complied rigorously, the modernization and the enhancement of the domestic banks’ competitiveness are a very important condition Saigon Commercial Joint Stock Bank’s branch in Nghe An (SCB’s Nghe An branch) is based in this province in early time By harnessing the potential of the location as well as taking advantage of it, the branch have achieved positive business results and gradually asserted its position compared to other units in the same industry However, in current context, the size of the network and affiliates of banks has been increased as well as gradually penetrateby many branches of foreign banks which created a very competitive pressure on all banks operating in Nghe An, among which is SCB Therefore, the formulation of business strategies in line with the evolution of SCB’s Nghe An branch is becoming an essential and urgent issue Therefore, the Team selected the theme “Planning a business strategy of Nghe An Branch of Saigon J.S Commercial Bank until 2020” as the theme of dissertation - the big Assignment of the Team Research objectives: The study will focus on business results at SCB’s Nghe An branch in recent years and the results of performance of business strategy, then it will recommend various solutions to expand its business banking services Thesis and scope The research’s thesis is the result of business operations as well as its implementation of business strategies in the past years SCB’s Nghe An branch Its theme focuses on theoretical and practical aspect of business results, it will also recommend many strategies which need implementing in the coming period in order to improve SCB and competitiveness of SCB’s Nghe An branch The study’s scope: limited to Vietnam's banking sector, the characteristics and the operations of SCB as well as its main rivals in recent years Research methodology The study will mainly use synthetic methods of analysis, statistics, comparison: business activities of SCB’s Nghe An branch will be broken down into separate parts, the study will use overviewing methods associated with systematic manner 10 - SCB’s Nghe An branch should make a recruitment plan right now Accordingly, experienced staff will be annually recruited to train new staff, then use these labours for establishment of transaction departments at districts and towns SCB’s Nghe An branch should give priority to select local people at the area where one branch will be opened Because it will be easy for market understanding after expanding the transaction department and create the strong attachment of its staff to operations of SCB’s Nghe An branch for the reason of favourable working place b, Training - Implement training and re-training for all banking staff Training programmes shall be frequently implemented at levels: Training management staff at branch level shall be implemented through the bank’s training programmes Training intermediate management staff will be implemented by teachers of the training center Training staff and personnel will be implemented by intermedia management staff and branch leaders or teachers of the training center Along with training, there should be a periodic operation checking regime to find out skilled staff to promote them to higher positions at suitable moments and unqualified ones who should be re-trained  - To request the SCB to make the best use of investments by strategic shareholders and groups of economic co-operations such as Swiss economic co-operation Commission (Seco) and the Global Finance Group of Switzerland, the GMG, to re-train leaders and managers as well as core employees for the SCB’s Nghe An branch so as to get a higher version This solution is done to help SCB face with competitions by other “highly experienced” foreign banks Human resource management, salary and priority: Make the description of tasks and table for criteria of job for each position so that employees know what they have to to contribute their efforts, try their best and get qualifications to have a higher rank (according to the description of 73 tasks) At the same time, the bank can monitor, make an exact assessment on assignment of each person, give awards, timely appoint and prevent the unexpected transfers of labors to other banks Implement good policies on salaries and attractive wages in order to attract more and more talents for SCB’s Nghe An branch Make plans for salary payments, bonus and allowances according to operational results with a strong mechanism of decentralization for strategic business units– SBU) Set up a better salary and reward regime to encourage faithful banking staff, especially reward regime to customer care staff (sale staff) who make contributions to turnover obtained c, Appointment and arrangement for human resources: Make a five-year plan for the group of executives and intermediate managers to therefore have a basis for the planned training and improvement to ensure the operation and realization of strategies of SCB’s Nghe An branch by 2025 Each managerial position plays an important role; especially those are in charge of credits A part from having good public relations, such leaders must be very professional to be able to prevent unexpected risks leading to material consequences for the bank So, SCB’s Nghe An branch is required to build a mechanism of appointment based on their capacity and performance not on years of services; making an assessment on their capacity according to criteria of operation, qualification and profession to therefore let these executive to willingly accept to changes in their terms of office Implement the policy of specialists: in reality, many professional officers are not good at administration and management So, the bank has to carry out the policy of specialist and highly pay for these professionals And these specialists have to carry out some scientific studies - During operation, leaders shall observe and judge the working efficiency of staff to find out qualified staff for training and promote them tot higher positions 74 - Depending strong points of staff, leaders should make appropriate assignments to promote their strong points and limit their weak points in order to set up a strong personnel system 3.3.2 Solutions on market Continue the extended network to potential districts of the province In the first place, according to population and housing survey conducted in 2009, Quynh Luu (190,000 people) and Do Luong (130,000 people) districts are selected for opening its sub-branches before moving to other neighboring districts to provide banking services to customers Request the Saigon Commercial Joint Stock Bank (the holding bank) to improve the co-operation with other banks in order to carry out the interconnection of ATM cards to serve the e-payment and transactions between SCB and other banks Make co-operations other partners and customers to carry out the cross-sales of banking services and products according to strategic combination of the width Contact and have a quick access to car distributors in Vinh City such as Honda, Toyota or Nissan to create mutual beneficial co-operations in business 3.3.3 Solutions on marketing To successfully implement the targets for market development throughout the province, the ACB Nghe An has to continue the activation of brand and trademark as well as development of products in order to meet at its maximum the demands of existing customers and the exploitation of potential of Nghe An province, particularly Vinh City When the trademark of SCB’s Nghe An branch is well known, a strong and enterprise financial standing is reached and the confidence of customers is won over, SCB’s Nghe An branch can easily expand its market to reach other districts of the province In order to realize the target, it is required to firstly analyze opportunities of products to exploit the existing customers and new products for the market growth in both depth and width The 75 analysis on policies of products and market of the SCB’s Nghe An branch is as follows: Products Conventional New categories categories Strategies for improved efficiency Develop products in The strategies for of conventional market Supply business existing Old new new products and banking to the depth in the products of services previous Maintain market; enhance market for customers conventional market the conventional with both old and with new higher new products and the conventional quality products Market according banking services customers Selling conventional products in a New new Develop new market market Launching products in a new with Expanding market conventional and new products market share for and services existing products Continue to sell Improve conventional all categories of products, develop new market products and for new products expand the market share for existing 76 categories On the basis of its strong points recognized with products for persons with the age of more than 50 as a unique trademark of SCB’s Nghe An branch in combination with highly cultural Vietnamese family tradition, a survey on market has been conducted to show that the aged people have their money from savings, accumulation and giving from their descendants So, SCB’s Nghe An branch activate these programs for relatives of aged people with the age of more than 50, with whom the bank is in relation in the province If the bank successfully implements these programs, the bank can occupy the existing market share and become the community’s bank Based on the enhanced advantage of the mentioned product, SCB needs make the best use of time to launch banking services and products for modern women to activate its brand of SCB as a cultural trademark The market segment on the product basis is shown in a manner that the financial service is more and more developed and various So, SCB has to diversify its package products for its customers As for market segment according to locations, SCB needs to develop the network according to plan and procedures as mentioned in order to exploit existing products and provide more new categories for customers As for external market: the general policy is the development of assiatance services for exports As the international clearing by SCB is allowed to be carried out from the April of 2006, the trademark of SCB is still uncommon in the international market SCB has to therefore carry out a buffer step for the development of assistance for exports in order to gradually build its brand in the international community This will be the basis for the development of banking services to serve the exports 77 Solutions for rates, SCB’s Nghe An branch should apply various interest rates of mobilization and bank loans with high competitiveness based on general regulations issued by the Saigon Commercial Joint Stock Bank in relation with local regulations to ensure the mobilization and loans as planned Build a prior policy on prices for VIP-class customers Solutions for advertisement and marketing The organized marketing process is rather important and necessary to make package products as stated above As for the preparation, each unit (branches and sub-branches) make a list of existing customers according to groups of enterprises and individuals in wich enterprise customers are classified into smaller groups for each package of products such as: groups of export-import customers, groups of distributors or groups of income administration organizations Besides, units have to make a list of potential customers, who are in current transactions with partner banks, and collect information of these customer to see which bank they are doing transactions with, what are products to be transacted? And what is the mechanism of the transaction? After the preparation of banking services, package products and lists of existing and potential customers, these units should organize their sales as follows: As for existing customers, salespersons are also in charge of public relations, consultants and transaction staffs These staffs provide and show up package products and services for customers so that they know the utilities of each product for easier usages As for potential customers, teams for marketing and research for development should have their first contacts because these are important customers Contact persons must know well their banking services and products to avoid any errors while working with such potential customers 78 Apart from direct marketing of banking services and products, SCB’s Nghe An branch should carry out brands activations and show-ups on the television, radio, sponsorship programs for scholarships, donation of tone chairs, marathons, especially by quality of services provided by young, dynamic and professional staffs of the bank 3.3.4 Solutions on finance In order to realize the strategies for extension and development of market, SCB’s Nghe An branch is required to have a strong and enterprise financial sources However, the financial management by SCB-Nghe An is subject to the control by the Saigon Commercial Joint Stock Bank according to legal regulations and document issued by the State Bank of Vietnam To build a strong and enterprise financial standing, is is a must for SCB’s Nghe An branch to improve and enhance its capital mobilization and policy of bank loans for high efficiency In order to achieve the target of extension of market share, the average rate of the mobilization of capitals is ensured to reach 32 and 27% in periods from 2011- 2015 and 2015 – 2020, respectively so that the mobilized capital will be VND 10,531.8 billion by 2020 and high efficiency of bank loans with the rate of 29% and 26 in periods from 2011- 2015 and 2015 – 2020, respectively If so, the financial standing of SCB’s Nghe An branch is ensured so that the bank can deal with damages due to bad and negative rumors as the last time To realize the financial strategy in order to ensure enterprise and strong financial standing of the SCB for extension of market, SCB’s Nghe An branch must operate efficiently And the bank has to focus on issues as follows:  Improve the ability to mobilize capitals in the province in comparison with opponents;  Have an access to new segments of customers through useful banking services and products; 79  Structure low interest rates of mobilization such as deposits as a measure to lower expenses;  Supply bank loans of professional interest rates for individual customers and higher rates as for both medium and long-term customers in order to raise the margin between inputs and outputs;  Balance the funds and use of capitals to avoid capital stabilization for higher prime costs conducted by the Headquarter 3.3.5 Solutions on organization The targets of this solution are to eliminate internal weak points (W) as limited networks of branches in order to make the best use of existing opportunities of the market like high potential of retails As stated above, one of most currently significant weak points of the SCB’s Nghe An branch is the limited network which is now formed by only existing sub-branches in 20 districts with more than 2.3 million local people It is really an urgent for SCB’s Nghe An branch to expand its retail network with its orientation of becoming a retail bank The SCB’s Nghe An branch has to build up a strong and powerful network in this period in order to realize its planned target of becoming the most selected modern retail bank by 2020 The network of SCB’s Nghe An branch is considered to be too small in comparison with financial standing in terms of charter capitals Vinh will be the most modern city in Northern Central Region of Vietnam with the trend of future development as planned by the Government The population will be on the growth as a result of new coming and settlements and the scale of the city is therefore expanding So, the SCB’s Nghe An branch has to quickly occupy the existing market share where there has existed no subbranches of banks One important thing is that the extension of sub-branches in districts and towns will impair the efficiency of the bank due to costs and expenses However, in the view of our authors, SCB’s Nghe An branch will lose its opportunities to improve the standing position if it is not quick because many other commercial banks are expanding their networks In order to speed up the 80 efficiency of the extension of sub-branches, the authors propose major criteria for the selection of placement of sub-branches as follows (according to hierarchy):  Total balance of mobilization and loans of all banks operating in the province  GDP for each person in the province  Total population of the province  Features of ages of the population So, by the extension of the network, CB Nghe An can provide more retail products 81 CONCLUSIONS Banking and financial market of Vietnam has been strongly developed in recent years, especially after out integration into World Trade Organization (WTO) It brought Vietnam both business opportunities and potential risks and challenges; especially in banking and financial field Unequable situations of world economy which has been slowly recovered after crisises and shortcomings in macro-economic administration of the state have created difficulties in restructuring works in business management and administration Under such circumstances, in order to exist and affirm its position in Nghe An province particularly and Middle area generally, it is necessary to establish a development strategy for SCB’s Nghe An branch up to 2020 in order to create orientation and obtain long-term target following which it will become the leading bank in Nghe An province and making SCB ranked at TOP of leading commercial joint stock banks in Vietnam 82 REFERENCES Vice Professor, PhD Le The Gioi, PhD Nguyen Thanh Liem, PhD Tran Huu Hai (2009), STRATEGIC ADMINISTRATION, Statistical Publisher Vice Professor, PhD Ngo Kim Thanh, Vice Professor, PhD.Le Van Tam (2009), STRATEGIC ADMINISTRATION, National Economic University Publisher Vice Professor, PhD Nguyen Thi Lien Diep, Ma Pham Van Nam (2006), BUSINESS STRATEGIES AND POLICIES, Labour – Social Publisher, Ho Chi Minh city Alex Miller (1998), STRATEGIC MANAGEMENT rd Ed Irwin/McgrawHill Thomas L Wheelen, J.David Hnger(2004), STRATEGIC MANAGEMENT AND BUSINESS POLICY 9th Prentice Hall Peter Wright, Mark J Kroll, John Parnell (1996), STRATEGIC MANAGEMENT : CONCEPTS AND CASES 3rd Ed Prentice Hall Henry mintzberg, James Brian Quinn, John Voyer (1995), THE STRATEGY PROCESS, Collegiate Ed/ Prentice Hall David A Decenzo, stephen P Robbins (2002), HUMAN RESOURCE MANAGEMENT, 7th Ed John Wiley & Sons 83 Jeffrey A.Mello (2006), STRAGEGIC HUMAN RESOURCE MANAGEMENT, 2st South West, Thomson Other publications Annual Report 2007, 2008, 2009 of SCB’s Nghe An branch Financial Statement of SCB’s Nghe An branch 2007, 2008, 2009 Websites http://www.strategy-business.com/ Names and assignments of members Full name Phan Tri Nghia Assignments Directly contact SCB NA to reach agreement in contents and ask for relevant documents Undertake general management and assign works for the entire group Make an draft outline Establish main criteria up to 2020 Review working contents of members Nguyen Duc Tri Write the Preambale, Summary of Chapter and Chapter to write Chapter and Conclusions, Design slides for Presentation Analyze the financial situation of SCB NA On behalf of the group to present the topic Truong Minh Hung 84 Make opinions for detailed outline Prepare Chapter and analyze the external environment Collect financing and accounting documents and other relevant documents Make opinions for other parts Dau Anh Tuan Participate in writing macro-environment Collect images and figures for illustration Build and analyze manpower and potentialities Collect documents on macro environment Make opinions for detailed outline 85 ... points reach 2.9 > 2.5; It is insisted that Eximbank’s Vinh branch have opportunities to strongly develop their activities in Nghe An market Eximbank’s Vinh branch is capable enough to stand