Building a business strategy for Vietfund management until 2017

TRƯỜNG ĐẠI HỌC MỞ TP. HCM UNIVERSITÉ LIBRE DE BRUXELLES HO CHI MINH CITY OPEN UNIVERSITY SOLVAY BRUSSELS SCHOOL MBAVB4 TA NGOC PHUC BUILDING A BUSINESS STRATEGY FOR VIETFUND MANAGEMENT UNTIL 2017 MASTER PROJECT MASTER IN BUSINESS ADMINISTRATION (PART-TIME) Tutor’s Name :Dr. NGUYEN MINH KIEU Ho Chi Minh City (2011) i COMMITMENT I hereby, Ta Ngoc Phuc, committed my honesty for my thesis preparation and the content was written by myself with information retrieved and obtained from reliable sources. The information was re-produces from publication information and clearly indicated with no plagiarism violation. I also certify that the substance of this thesis has not already been submitted for any degree and is not currently being submitted for any other degree or qualification. Signature: HoChiMinh City Ta Ngoc Phuc Date: December 2011 ii ACKNOWLEDGEMENT This thesis could not have been done without the inputs and contributions of many people deserved to be named here. Firstly, my deepest gratitude goes to my Supervisor, Dr. Nguyen Minh Kieu, who was always very dedicated, provided me with valuable advices, recommendations throughout my thesis and his ceaseless encouragement helps me to get through quickly and efficiently to the finish line. Furthermore, this thesis would not be fully completed without the valuable knowledge that I comprehended from the MBA program, Vietnam - Belgium in general, and from Strategy subject in particular. My gratefulness also goes to all Solvay Professors from my MBA course and to Prof. Georges Wanet who instructed me Strategy. Secondly, I owe a debt acknowledgement to my boss, my mentor, Mr. Tran Thanh Tan, C.E.O of Vietfund Management for inspiring me to go beyond ordinary practice, knowledge, experiences and guide me from the first phase of company strategy formulation. I would particularly like to thank my colleagues in Investment and Research division of VFM, Dragon Capital for their support related to data collection. My sincere appreciation is extended Mr. Serge Bywaski, program coordinator of Vietnam-Belgium program for his precious knowledge and great support throughout my study in MBAVB4 course. Specially, my sincere thanks go to my friends for their enthusiastic support for this thesis and for their comments, reviewing, proposing corrections from the early stage of my thesis. I would like to thank all persons who contributed one way or another to this final result, thanks for their kindness, excellent support and willingness to share their experiences and knowledge about fund management. I, therefore, dedicate this work as a gift to them all. iii SUPERVISOR’S APPROVAL I hereby certify that this thesis, submitted by Ms. Ta Ngoc Phuc, conforms to acceptance standards and is fully adequate in scope and quality to fulfill this thesis requirements for the degree of Master of Business Administration. Supervisor Date Dr. Nguyen Minh Kieu v EXECUTIVE SUMMARY VietFund Management (VFM) is a pioneer and leader of local fund management companies in Vietnam, offering a wide range of investment products and services. VFM’s products fulfill the varying needs of both private and institutional investors domestically and abroad. Established in July, 2003 from an initial base of VND 8 billions (US$0.52m) managed by 8 staffs, nowadays the total assets under VFM’s management are about US$220 millions. VFM is managing 4 investment funds (3 of them have been listed in Ho Chi Minh Stock Exchange) and providing discretionary investment portfolio management for institutional and individual investors. The always and ultimate goal of VFM is to maintain leading position in Fund Management business in Vietnam profitably and sustainably. The total asset under management (AUM) is the first and most important criterion to define the strength of a FMC and affirm its leading position (as nearly 100% income of each FMC comes from fund management fee). Hence, how VFM could increase its AUM in long term run is a strategic question that the Company has to address. It’s not too difficult to define key initiatives that have to take to hit the goal, which are: (a) fund raising; (b)investment value; (c) acquisition or take over other funds. But the important thing is what should be the right strategy to execute, especially for the period 2012-2017 when overall economic conditions locally and globally are not favorable to fund industry. In the context of Vietnam’s economic is still faced with difficulties in general, Vietnam stock market is in industrial recession together with the lack of legal framework… and still unable to find out strong foundation to recover, it is realized that different industry face with different challenges. How to foster and perform this goal with absolute professionalism and integrity, VFM needs to be driven by an appropriate and challenging long-term strategy with the commitment to the vi sustainable development of the environment, society and economy of Vietnam. In the such real currently situation of Vietnam stock market, how financial institutions, banks, securities companies, FMCs can suffer, resist or survive is still an unsolvable issue. To make business viable, sustainable, unscathed under financial crisis, to adapt challenges to the growing use of environmental, social and governance investment criteria, to capitalise on relevant trends…are major issues to financial investment companies target. In search of a stable growth, VFM may find substantial growth, even seize in some moment. The thesis, therefore, digs deeply in analyzing the internal and external environment of the company to figure out the most appropriate business strategy to obtain company’s goal. Base on key findings of the analysing secondary data, interviewing management team and key staffs of Vietfund Management as well as other prominent Financial Institutions, differentiation strategy is recommended to be suitable strategy for VFM to pursue its business goal, especially for the period 2012-2017. “If you're not faster than your competitor, you’re in a tenuous position, and if you’re only half as fast, you’re terminal.” a notable quote of George Salk indicated a successful company invest in planning strategy will help to establish a business direction and focus on specific strategies and actions will improve performance. To execute this, the firm focuses on indentifying and evaluating events beyond the company’s immediate control. The company should know where it is, what its competitors do, then do faster and faster in a prudent and smart way. Every one knows that their company needs a strategy to move forward. But how fast you find out your right strategy and execute it will decide the winner. vii TABLE OF CONTENTS COMMITMENT i ACKNOWLEDGEMENT ii SUPERVISOR’S APPROVAL iii COMMENTS FROM PROFESSIONAL MENTOR iv EXECUTIVE SUMMARY v TABLE OF CONTENTS vii LIST OF ABBREVIATIONS xii LIST OF TABLES xv Chapter 1: INTRODUCTION 1 1.1. RATIONALE OF THE STUDY 1 1.2. PROBLEM STATEMENT 2 1.3. RESEARCH METHODOLOGY 3 1.3.1 Objectives 3 1.3.2 Research questions: 4 1.3.3 Data collection method 5 1.4. SCOPE, ASSUMPTIONS AND LIMITATIONS OF THE STUDY 6 1.5. DEFINITIONS OF TERMS USED IN THE STUDY 6 1.6. FRAMEWORK OF THE STUDY 9 Chapter 2:LITERATURE REVIEW 12 2.1. STRATEGY 12 2.2. STRATEGIC MANAGEMENT 15 2.3. STRATEGY ANLYSIS TOOLS 15 2.3.1 SWOT analysis: 16 2.3.2 PEST analysis: 17 viii 2.3.3 PORTER’S FIVE FORCES MODEL 17 2.3.4 Generic strategies to counter the five forces 18 2.3.5 PORTER’S generic strategies 20 2.4. STRATEGY FORMULATION PROCESS 23 2.4.1. Mission and vision 23 2.4.2. Environmental analysis 24 2.4.3. Strategy formulation and strategic choice: 25 2.4.4. Strategy implementation: 25 2.4.5. Evaluation and control 26 Chapter 3: EXTERNAL ENVIRONMENT ANALYSIS OF VIETFUND MANAGEMENT 27 3.1 MACRO ENVIRONMENT ANALYSIS 27 3.1.1 Political, governmental and legal factors 27 3.1.1.1 Vietnam Political outlook: 27 3.1.1.2 Government’s policies 27 3.1.1.3 Legal condition towards new products development in Vietnam 28 3.1.2 Economic factors 28 3.1.2.1 Overview of the global economy: 29 3.1.2.2 Overview of Vietnam economy: 29 3.1.2.3 Vietnam enterprises operate under crisis: 30 3.1.2.4 A look into the future( period of 2011-2012 and to 2020): 31 3.1.3 Social, demographic and environmental factors 35 3.1.3.1 Vietnam individual and institutional investors’ trends and habits of investment 35 3.1.3.2 Investment obstacles in Vietnam 36 3.1.4 Technology 37 3.2 MICRO ENVIRONMENT ANALYSIS 38 3.2.1 Industry and market overview 38 3.2.1.1 Define the market: 38 ix 3.2.1.2 Role of Vietnam fund industry, its challenges and attractiveness : 47 3.2.2 Trends 66 3.2.3 Industry competitiveness and competitors analysis 72 3.2.3.1 Barriers of entry: low 72 3.2.3.2 Threat of substitute products: low to moderate 73 3.2.3.3 Bargaining power of buyers: low to moderate 73 3.2.3.4 Bargaining power of suppliers: low 74 3.2.3.5 Competitors analysis: moderate 74 3.3 SUMMARY OF COMPANY’S OPPORTUNITIES AND THREATS 76 3.3.1 Opportunities 76 3.3.2 Threats 77 Chapter 4: INTERNAL ENVIRONMENT ANALYSIS OF VIETFUND MANAGEMENT 79 4.1. COMPANY’S PROFILE 79 4.1.1. Introduction of VFM’s Partners – Dragon Capital & Sacombank Group 79 4.1.2. Introduction of Vietfund Management: 81 4.1.3. Vision and Mission 82 4.2. ORGANIZATION STRUCTURE 82 4.2.1. Organization chart 82 4.2.2. Human resources 84 4.2.2.1. Human resource in financial industry 84 4.2.2.2. Human resource in VFM 85 4.3. BUSINESS OPERATION 85 4.3.1. Products & Services 85 4.3.1.1. Product: 86 4.3.1.2. Services 95 4.3.1.3. Product development trend: 96 4.3.1.4. Product development opportunity: 97 x 4.4. TARGET MARKET/ MARKET SEGMENTATION 98 4.4.1. Target market 98 4.4.1.1. Pension and open ended fund, a new track 101 4.4.1.2. Time for FMCs consolidation and close-ended fund is no longer a favor 101 4.4.2. Target customers and segmentation: 102 4.5. BUSINESS OPERATION AND PERFORMANCE 104 4.5.1. Marketing 104 4.5.2. Finance 105 4.5.3. Business Development 106 4.5.4. Investment 106 4.5.5. Trading 107 4.5.6. Research and Analyst 107 4.5.7. Back office 108 4.5.8. Risk management 108 4.6. VIETFUND MANAGEMENT STRENGTHS AND WEAKNESSES 108 4.6.1. Strength 108 4.6.2. Weakness 110 Chapter 5: DEVELOPING AND FORMULATING STRATEGY FOR VIETFUND MANAGEMENT 112 5.1. REDIFINING COMPANY’S MISSION AND VISSION 112 5.2. SWOT ANALYSIS 113 5.3. SWOT strategies 117 5.4. KEY SUCCESS FACTORS 120 5.5. VFM POSITIONING TO MARKET UNTIL 2017 121 5.6. SHORT TERM AND LONG TERM STRATEGY FORMULATION 121 5.7. STRATEGY IMPLEMENTATION 122 [...]... areas: (1) accounting information system (2) financial reporting and analysis, (3) working capital management, (4) fixed asset management, and (5) capital structure management This limitation is necessary and appropriate to financial management practices of SMEs in Vietnam, given information available for research Assets under management or AUM is a type of financial service which is used to estimate... financial establishments and while doing this they use assets under management instead of revenue 8 Assets under management (AUM) is a financial term used by those within the financial services industry such as mutual funds, hedge funds, private equity funds, money management, investment management, wealth management, and private banking businesses as a measurement of how much money they are managing... It is about behaving ethically and providing a good reputation for the company (CSR ref.) • Strategy as the systematic application of rationality: strategy is applied rationality to the organization of a business As a consequence urge and intuition are not admitted • Strategy as the use of simple rules: strategy here derives from practice and experience and is the application of a certain set of simple... as well As technology improves, the competition may be able to leapfrog the production capabilities, thus eliminating the competitive advantage Additionally, several firms following a focus strategy and targeting various narrow markets may be able to achieve an even lower cost within their segments and as a group gain significant market share • Differentiation strategy A differentiation strategy calls... Internal Analysis External Analysis /\ /\ Strengths Weaknesses Opportunities Threats | SWOT Matrix • Strengths A firm’s strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage • Weaknesses The absence of certain strengths may be viewed as a weakness • Opportunities The external environmental analysis may reveal certain new opportunities for profit and... Chapter 4 – Internal analysis This chapter will show an overview about the company and its performance, then come to analyze the internal environment of the company to indentify the strengths and weaknesses Chapter 5 – Strategy formulation Based on the current situation analysis mentioned in Chapter 3 and Chapter 4, business strategy will be recommended, examined and evaluated Objectives and strategy. .. investors who may be individuals or companies or other organizations, which is 7 managed and invested as a whole, on behalf of those investors This investment fund is professionally managed by the fund management company and closely monitored by the regulators What is a Fund Management company? Fund management company is a type of the financial intermediary institution, dedicated to establish and manage investment... money has been newly invested Client assets are transactional assets, which are used as collateral for specific transactions, e.g margin accounts It is common to calculate the key figure NNA growth, which shows the NNA in relation of the previous AUM balance on an annualized basis NNA growth can also be referred to as organic growth What Is a Close-Ended Fund? According to 2011 Investment company fact... long-term health of the enterprise Tactical decisions deal more with the day-to-day activities necessary for efficient and smooth operations’ The below figure 2.1 demonstrate the framework for strategic management Figure 2.1 Framework for strategic management 2.3 STRATEGY ANLYSIS TOOLS 16 2.3.1 SWOT analysis: A useful summary technique for summarizing the key issues arising from an assessment of a businesses... the market Success hurdles are included in all plans, which can be measured against a range of factors including payback period and net present value To accommodate the unpredictable markets, business strategy must be directional not precise; dynamic not static Business strategy serves as a map, with built-in flexibility for continuous recalibration The downtrend of the stock market had a strong impact . portfolio management for institutional and individual investors. The always and ultimate goal of VFM is to maintain leading position in Fund Management business in Vietnam profitably and sustainably findings of the analysing secondary data, interviewing management team and key staffs of Vietfund Management as well as other prominent Financial Institutions, differentiation strategy is recommended. their marketing efforts: a solid marketing, sales and client relations team able to execute a well-constructed strategic plan. To prepare ahead for rapid change in the Vietnam financial market,