Swot analysis in strategic planning a case study of vietcombank,graduation thesis

STATE BANK OF VIETNAM BANKING ACADEMY FOREIGN LANGUAGE FALCUTY -***** - GRADUATION THESIS TOPIC: SWOT ANALYSIS IN STRATEGIC PLANNING - A CASE STUDY OF VIETCOMBANK Student Class Course Lecturer : DUONG HOANG GIANG : ATCD - K15 : 2012 -2016 : TRAN THI XUAN ANH (Ph.D) Ha Noi, May 2016 i ACKNOWLEDGEMENT I would like to express my deepest appreciation to my advisor, Ph.D Xuan Anh for the continuous support of my study and related research, for her patience, motivation, and immense knowledge I could not have imagined having better advisor and mentor for my study, without her guidance and persistent help this thesis would not have been possible Besides my advisor, I would like to thank my teachers in Foreign Faculty in Vietnamese Banking Academy for their great help in theoretical issues, but also for their insightful comments and encouragement In addition, my sincere thanks goes to Mr Pham Dinh Dung - my business management teacher, who provided me clear outlook for business management that motivates me to choose this research topic I thank the JSC Bank for Foreign Trade of Vietnam for helpful great sources of information to be used in my thesis I also thank Banking Academy library for permission to use researched charts and graphs I thank my fellow roommate for the stimulating encouragement, for the sleepless nights they were supporting me before deadlines, and for all the fun we have had in the last four years In particular, I am grateful to my classmate for enlightening me the first glance of research Last but not least, I would like to thank my family: my parents for supporting me spiritually throughout writing this thesis and my life in general ii ABSTRACT The main aim of this thesis is to study how SWOT model is integrated in company‘s strategic planning, with direct application on the case of Vietcombank- one of the particular business in Vietnam economy The problem statement relies on understanding how does this may help managers make decisions on the basis of external and internal environment analysis In order to comply with these objectives, a research case was built, based on the instance of Vietcombank, which has always been adopting these SWOT model and has great impact in its operating strategies The challenge faced translates how SWOT model, when strategically analyzed, can provide multidimensional point of views Normally, manager bases on his/her subjective assessment to conclude how factors influence business or how weight it is to organize concerning elements as their importance levels Another challenge is the difficulty in finding realistic data, especially administration data as it is private in every firm and business Therefore, this study only provides approximate results The thesis is structured in four main chapters: (1) Introduction, referring to aim, scope and methodology; (2) Literature review, addressing the academic background of SWOT model and Michael Porter‘s theories of strategic planning; (3) Research methodology and data analysis, presenting supportive research method and applying Vietcombank’s SWOT practices; (4) Proposal and conclusion; discussing feasible strategies for bank’s operation iii TABLE OF CONTENTS ACKNOWLEDGEMENT i ABSTRACT ii TABLE OF CONTENTS iii LIST OF TABLES AND FIGURES v LIST OF ABBREVIATIONS vi THE DETAIL RESEARCH CHAPTER I: INTRODUCTION I The urgency of topic II Research objects III Research purposes IV Research tasks CHAPTER II: LITERATURE REVIEW I SWOT model II SWOT analysis External environment .8 Micro environment 12 Internal environment 14 CHAPTER III: RESEARCH METHODOLOGY AND DATA ANALYSIS 19 I Research Methodology 19 SWOT analysis 19 EFAS and IFAS supporting method 20 Gather and process information methods 20 II Data analysis 22 Part I: General overview of JSC Bank for Foreign Trade of Vietnam (VietcomBank) 22 Part II: External environment analysis of VietcomBank 27 Part III: Internal environment analysis of VietcomBank 51 Part IV: SWOT MODEL AND REVIEW 58 Chapter IV: PROPOSAL AND RECOMMENDATION 60 I Strategy proposal for Vietcombank 60 iv S-O strategies 60 W-O strategies 61 S-T strategies 62 W-T strategies 63 II Recommendations for Vietcombank 64 CONCLUSION 67 REFERENCES 69 APPENDICES 71 Appendix A: Supporting matrices 71 Appendix B: SWOT Synthesis 74 v LIST OF TABLES AND FIGURES Table 1: General analytical steps 19 Table 2: Revenue and revenue growth rate of banking sector 27 Table 3: Sector average ROE 28 Table 4: Capital raising ratio from main suppliers (2013-2015) 38 Table 5: SWOT synthesis 58 Figure 1: SWOT framework Figure 2: Macro environment Figure 3: Porter’s Five Forces Model 13 Figure 4: Porter’s value chain 15 Figure 5: Information gathering technique 21 Figure 6: Vietnamese Credit/GDP and credit growth rate 28 Figure 7: Vietnamese GDP growth rate 29 Figure 8: Sector revenue and GDP growth rate 30 Figure 9: Macro-factors affect VCB operations 32 Figure 10: Interest rate and inflation in Vietnam from 2011- 2015 35 Figure 11: Vietnam FDI indicator 2011- 2015 36 Figure 12: Total assets and Capital of Vietcombank, Vietinbank and BIDV (7/2015) 41 Figure 13: Profits of Vietcombank, Vietinbank and BIDV (7/2015) 42 Figure 14: Operating indicators of Vietcombank, Vietinbank and BIDV (7/2015) 43 Figure 15: Equity and capital growth rate of Vietnam credit institutions (2014) 45 Figure 16: Five competitive forces of Vietcombank business environment 46 Figure 17: Vietcombank Capital raising (2011-2015) 51 vi LIST OF ABBREVIATIONS SWOT: Strengths, Weaknesses, Opportunities, Threats JSC: Joint stock company WTO: World Trade Organization EFAS: External Factor Analysis Summary IFAS : Internal Factor Analysis Summary M&A: Mergers and Acquisitions SBU: Strategic Business Unit(s) SBV : State Bank of Vietnam ROE: Return on Equity 10 ROA: Return on Assets 11 GDP: Gross Domestic Product 12 ATM: Automatic Teller Machine 13 FDI: Foreign Direct Investment 14 (A)FTA: (ASEAN) Free Trade Area 15 TPP : Trans-Pacific Partnership Agreement THE DETAIL RESEARCH CHAPTER I: INTRODUCTION I The urgency of topic Competitiveness is an inevitable tendency in the economy, especially in integrating period, when internal protectionism has gradually been replaced by competition between both domestic and foreign businesses Every single enterprise participating the market must be governed by economic competitiveness rule while the non-market follow state-enterprises have been losing their influence to the market As the effect of globalization, the opening period has brought us a huge opportunity to exchange our economy and culture Being a member of WTO, there are big chances for enterprises to participate in the global multi-aspect competitive market, which give opportunities but threats Under such circumstance, business entities need to clarify strengths and weaknesses, opportunities and threats before setting out their strategies for business operation SWOT helps enterprises well-evaluate their resources and fluctuation of market accurately before starting up a supposed-beneficial strategy or accessing to the global economy How else could people plot a course without that starting information? For a business looking to formulate a new strategic path, a SWOT analysis provides that starting information The company inventories strengths, weaknesses, opportunities and threats where the SWOT acronym comes from and from this determines strategic goals Eventually, with the company's advantages and disadvantages newly revealed by the SWOT analysis, a business can produce a focused and refined strategic plan to generate new business and achieve company goals As the important of SWOT analysis in business, the knowledge of VCB business operation and the urgency to respond to the challenges confronting banking sector to defend business position, topic “ SWOT analysis in VCB” was chosen as the expectation to provide readers “from general to specific view” of business activities in one of the Vietnamese biggest banks II Research objects Research subjects of the thesis are to apply SWOT analysis to business operation evaluation and to suggest some strategies for VCB Specifically, it is to state and analyze the aspects related to banking sector, especially to VCB, given the external strengths and opportunities in the context of market competitiveness Conduct such research will provide VCB as well as other banking entities where they would pose threats and how they improve their weakness, thus propose strategies to create and sustain their position in the sector III Research purposes This thesis provides a qualitative analysis of the banking activities of VCB The main focus of the study is an in-depth analysis of relevant factors of business, economic and marketing environment that determine VCB‘s competitiveness The main research questions of the study are: What is SWOT analysis? Which term that SWOT can be applied in to banking sector? Which businesses has VCB involved in? Which internal and external factors that are favorable and unfavorable have influenced VCB the most? How are they connected and what are the directions and effects on volume of transactions, loans and investments? How has the VCB been able to build up and sustain a competitive advantage against other competitors? The answers to these questions are of central concern to both VCB’s managers and investors who take interest in banking sector IV Research tasks To accomplish this thesis, the following tasks have been implemented step-bystep:  Figure the theory of SWOT analysis 61 of capital at present to take advantage of “rising water” effect, and Chinese investors have gradually lost the confidence of local businesses Along with penetrating to develop regional and international markets, Vietcombank should strengthen their position in Vietnamese market where other commercial banks have been making dramatic improvements to take over market share In the period after equitization, Vietcombank has always been among top banks that have great influence in the market However, as the statistics indicate, most branches network of Vietcombank are concentrated in developed areas of banking and finance system Meanwhile, in many rural areas, Agribank should be the widest network and biggest market share captor To access retail market, Vietcombank will need to expand their branches to reach rural areas W-O strategies Vietcombank is one of the banks that have strong financial capability in Vietnam market However, there is a huge disparity in financial resources between Vietcombank and foreign banks Participating international market requires a broad understanding of institutions, legislation system and risks that may encounter, though these requirements are quite limited in commercial banks To be more active in development process, Vietcombank needs to overcome these weaknesses in order to take advantage of great opportunities Seizing opportunities has always been leading strategy of Vietcomank In last period, bank has signed a strategic partnership agreement with Japan's Mizuho Corporation, ranked 17th in the world largest assets banks That corporation would help guide Vietcombank for strategic development as well as take investments in technology and human resource With this opportunity, Vietcombank can learn to manage and operate market policies of international partners while taking advantage of the relationship for development 62 Technology development has always been a prerequisite for differentiation of labor productivity, and this is true for the whole banking industry With investments of millions dollars per year for baking technology, Vietcombank operational network has very extensive spread in the community Banking products accompanied by technology always create professionalism and differentiation to banks, while providing the utility of time and money for customers The use of internet services in product supplying would create more promising breakthrough for the banking sector Unwieldy working structure is always the weakness of the state-owned commercial banks after equitization With a huge number of staff accompanying by wide infrastructure system, Vietcombank has met many difficulties in controlling performances of many parts, therefore it can easily lead to stagnation in the management process Vietcombank should take advantage of the intervention from large institutions to restructure their external “engines” and increase working efficiency of staff S-T strategies Economic integration facilitates for numerous foreign companies operating in banking sector grant access to Vietnamese market With the advantages of capital and operational experience, foreign enterprises always proved to be dominant even when competing with core operations of banking sector Without proper attention, large banks in Vietnam are easily to be lulled right on their main market Beside to the entry of foreign banks, Vietcombank will need to pay attention to the threats from substitute products such as insurance, securities, or the policy of M&A from large corporations to manipulate and take control on domestic beings On the other hand, risk management issues should take more positive outlook from the bank To be able to compete with foreign banks, Vietcombank should take advantages come from the bank With the working environment is rated as "dynamic and ideal" along with the accumulated experiences over many years, Vietcombank should set up 63 policies to attract high-quality human resources, because such employees are the target of foreign business as they want to take over new markets One advantage is that technology system has been developing and constantly upgraded However, Vietcombank needs to allocate their resources for both purposes: improve the quality of innovative products and services; invest in internal management systems and operational risk calculation For the indirect competitors that provide substitute products, Vietcombank could apply the strategy as other banks: Developing in co-operation with certain product lines For example, in addition to provide international payment product, Vietcombank might cross-sell insurance products of Prudential to create prerequisites for cooperation as well as for strengthening sales W-T strategies In the course of operations, Vietcombank has spent relentless efforts to improve the quality of business and to reduce the weaknesses come from the bank themselves However, there are remained certain gaps that threaten the development of the bank The greatest weakness may present as the risk of being merged by large financial conglomerates, which may be considered as a matter of survival for any enterprise in time of competition On the other hand, to penetrate into outside market, it requires huge resources from the financial ability of Vietcombank to ensure that they can compete with international firms Obviously, solving such two threats would be precondition for Vietcombank to change the face of their banking operations To maintain and strengthen the foothold, Vietcombank needs to maintain great potential Financial capacity is one of the Vietcombank long-term objectives planned right from the restructuring time However, an individual bank can hardly improve their financial capacity in a short time That capacity should be slowly improved through restructuring activities, as diversifying forms of capital mobilization, decreasing the proportion of short-term loans and developing consumer lending sector 64 In addition, to improve operating system that are quite redundant, Vietcombank administrators should take connection and co-operation with other businesses and organizations that operating in banking sector to exchange experiences as well as construction methods and distribution of resources II Recommendations for Vietcombank After analyzing Strengths, Weaknesses, Opportunities, Threats in Banking system in general and in Vietcombank in particular as well as summarizing SWOT model, there are some personal recommendations for the bank in planning up banking operation strategies in the future Competitive repositioning: Personally, Vietcombank in the coming period should focus on their best products and services to take advantage of increasing market share and attracting customers In addition, the bank should continue restructuring management to enhance operating and governance capacity Specified oriented business strategies: Although Vietcombank has proposed their mission, vision and business philosophy but they not really have specific core activities It is recommended for Vietcombank business philosophy as "sustainable growth, effective risk management, high profitability and good financial indicators maintaining, investment in human resources and technology" Industrial structure orientation: The bank should focus on their strong fields such as finance and bankinginsurance- international payment Vietcombank should take advantage of scale and market share to attract more customers Development orientation: - Research and develop new products and services with the application of advanced technologies into business operations 65 - Strive to become leading financial group in Vietnam while expanding market to developed countries such as China, Malaysia, Singapore, Efficiency operation: - Minimize operating costs to reduce lending rates to expand the scope of the customer - Increased efficiency of capital using - Minimize risks and provide benefits to customers Define target customer groups: large financial conglomerates, import/export businesses, people with high consuming demands Innovative activities: - Bring customers new products and services with high differentiation - Research and supply modern technology to shorten processing services Internal reforming - Process of managing activities should be clear, transparent, scientific, efficient, time and cost saving - Customer management procedure: To help find and expand customers more efficient and to serve customer‘s demands That procedure is determined by examining information on customer’s income, age, - Innovation process: Application of improvement and development of products and services that can help penetrate new market and customer of Vietcombank Customer care: Along with the focus on strategic customers, Vietcombank needs to pay attention to comprehensive solutions, which are providing good products and services in order to attract new customers and expand business network It is needed to clearly identify target customers for the goals of development Vietcombank should keep building up their reputation to gain credibility from customers and create their own loyal customers In addition, providing services for particular customers at home would be a wise strategy for expressing appreciation to their loyalty 66 Financial management: - It is obligatory to manage banking risks and reduce operating costs Besides, bank should focus on renewing and improving working condition to maximize customer value - Increase equity and keep the safe operations Training and development: - Working resources: Training high quality staff with good skills in market reaction, quick adept to new knowledge and technologies to support strategies for the bank in time - For information: Information systems, networks and infrastructure need synchronous investment to support the ability to develop competitive advantage - Organizational system: Vietcombank should accelerate building friendly working environment as to promote brand development and evaluate opportunities in the future while developing teamwork and interaction between departments in the company 67 CONCLUSION SWOT analysis model is a useful instrument to help businesses analyze the external environmental factors that affect businesses (opportunities and threats) as well as the elements of the internal environment (strengths and weaknesses) SWOT Analysis is one in five steps of forming a business strategy: Identifying strategic objectives; conducting SWOT analysis; analyzing the implementation of the strategy; implementing strategies; evaluating and making strategic adjustments SWOT helps businesses set out strategies for effective business development and gradually establish their brand reputation with certainty and sustainability Vietnam's banking market has developed over the history of 70 years (since 1945) with the fast development as market demands has always been growing With the accession to international free trade agreements, banking sector has had great opportunities to outreach business network throughout the world Besides, the development of banking technology in the world has brings positive signals, as every economic entities can be linked throughout the internet banking system The banking system has its chance to expand and build up relationships while businesses also get benefits from foreign investment funds when participating in the financial system of the partner banks Never in history has international economic trading took place so actively However, banking system is regarded as the leader of the economy since the business always contains hidden risks Opportunities for developing are always numerous but the risks of competition as well as the take-over are also huge Taking advantages of opportunities and reducing business risks must always be on top priority of strategic planning in the current period As one of the first banks to lay the foundation for the development of the banking network, Vietcombank has always been in leading position of the “cash services” of Vietnam Despite the fact that there are weaknesses in operations and management, the 68 bank keeps on improving themselves in the restructuring phase To overcome their weaknesses, Vietcombank needs to take more investments in resource development, improve the quality of local services and enhance marketing activities, advertising and sales These strategies that can fully be implemented based on large capital and strong financial resources of Vietcombank Although this thesis has attempt to take deep analysis of SWOT model in the field of management and business banking services of Vietcombank, it could not go closely to all strengths, weaknesses, opportunities and threats in banking operations In addition, acquiring the internal information deep inside Vietcombank is also a difficulty that the author cannot solve directly and specifically Therefore, the scope and depth of the research has not been entirely met the whole issue and occasionally be subjective If these problems were solved, the results would bring further generalization, more accurate strategy for Vietcombank in competing in the banking market 69 REFERENCES Vietnamese references Báo cáo tổng kết năm Ngân hàng thương mại cổ phần Ngoại Thương Việt Nam (2010-2015) Báo cáo tổng kết năm Phòng nhân Ngân hàng Vietcombank PGS.TS Lê Văn Tâm, PGS.TS Ngô Kim Thanh : Giáo trình Quản trị doanh nghiệp, NXB Đại học Kinh tế quốc dân, năm 2008 PGS TS Nguyễn Ngọc Sơn: Giáo trình Quản trị chiến lược, NXB Giáo dục Việt Nam, năm 2010 Vương Giang:” Định hướng phát triển ngành ngân hàng giai đoạn 20152020”, viết trang sbv.gov.vn, tháng 1/2015 Ths Đường Thị Thanh Hải: “Nâng cao lực cạnh tranh ngân hàng thương mại Việt Nam”, viết trang tapchitaichinh.vn, tháng 04/2015 “Báo cáo đánh giá mức độ phát triển cạnh tranh ngành ngân hàng”, tác giả Phạm Cao Minh, đăng báo cáo chi tiết MBS tháng 5/2015 Báo cáo tình hình quản trị ngân hàng Vietcombank tháng đầu năm 2015 Số liệu tổng cục thống kê Việt Nam 70 English references Company analysis: determining strategic capability- Per.Jenster & David Hussey, 2002 SWOT Analysis Idea, Methodology and A practical Approach- Nadine Pahl & Anne Richer, 2009 Competitor Analysis in Financial Services- Ian Youngman, 2998 Websites www.vietcombank.com.vn www.tradingeconomics.com www.gso.gov.vn www.sbv.gov.vn www.investopedia.com www.cafef.vn www.adb.org www.worldbank.org www.hvnh.edu.vn 10 www.thoibaonganhang.vn 71 APPENDICES Appendix A: Supporting matrices EFAS MODEL OF VIETCOMBANK Opportunities Market expansion Residential income increase Weight Ranked Score 0.1 0.3 0.05 0.1 Stable politics and law 0.1 0.4 Banking Equitization 0.05 0.1 Wide distribution network 0.1 0.3 Developing Banking E-commerce 0.1 0.3 Large demands of capital 0.1 0.2 0.1 0.4 Threats Intensified Industry competition Substitutions 0.05 0.15 Consumption patterns 0.05 0.1 Merger and acquisition threats 0.05 Asynchronous infrastructure 0.05 0.1 Risk of interest, liquidity, credit, 0.1 0.4 Total 100 0.1 72 IFAS MODEL OF VIETCOMBANK Strengths Advanced Technology Weight Ranked Score 0.05 0.15 0.1 0.2 0.05 0.1 High reputation and credibility 0.2 0.4 Support from government and 0.1 0.3 0.2 0.6 0.05 0.1 Unwieldy working structure 0.1 0.2 Weaknesses in risk 0.1 0.3 0.05 0.1 Appropriate organizational culture International co-operation State bank of Vietnam Weaknesses Small scale and weak financial capacity Experience limitation management Incompatible product combination Total 2,45 73 IE SYNTHETIC MODEL OF VIETCOMBANK IFAS- Internal factors Strong EFASExternal High Medium factor Low Average Vietcombank Weak 74 Appendix B: SWOT Synthesis SWOT strategic combination Strengths Weaknesses - (S1) Strong brand and - (W1) Weaknesses in high reputation international financial - (S2) Large scale of total capacity assets - (W2) Marketing - (S3)Wide distribution inexperienced businesses network - (W3) Unwieldy working - (S4) Ideal working structure environment - (W4) Lack of risk - (S5) Strong business management strategies background - (W5) Incompatible - (S6) Highly experienced product combination staff and officers - (S7) Advanced technology Opportunities S+O strategies W+O strategies - (O1) Stable politics and - (S1)+(S2) +(S3)+(O2): - (W1)+ (W2)+ (O3)+ laws diversification strategies (O6) : Associate with large - (O2) Economic to international businesses partnerships - (O3) Extensive banking - (S1)+(S3)+(S5)+ (O3) - (W2)+ (W5)+ (O4): network +(O5) : Penetration into Diversify high -(O4) E-commerce regional market technological products and integration 75 technology services - (O5) International trading - (S3)+ (S6)+ (S7)+ (O3): - (W3) + (W4) + (O6): and payment with large Take advantage of foreign Branch expansion organizations aid to restructure working - (O6) Large foreign engines investment S+T strategies Threats T+ W strategies - (T1) Intensified industry - (S4) +(S5)+ (T1) : - (W1)+ (T3) : Improve competition Attract high quality labor financial capacity to avoid - (T2) Substitutions - (S6)+ (S7)+(T4) : Use being merged - (T3) M&A threats high technology to - (W3)+ (T5) : Coordinate - (T4) Market risks calculate and minimize with other banks and - (T5) Asynchronous market risks enterprises to exchange infrastructure - (S1)+ (S2)+ (T2)+ (T3): experiences in Co-operate to promote management and resource cross-selling and up- distribution selling