Strategic plan for applying customer relationship management (CRM) in VPBank

ĐẠI HỌC QUỐC GIA HÀ NỘI TRƯỜNG ĐẠI HỌC KINH TẾ LÊ THỊ THANH TÂM STRATEGIC PLAN FOR APPLYING CRM IN VPBANK LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH NGƯỜI HƯỚNG DẪN KHOA HỌC: TS Nguyễn Ngọc Anh Th.S Meghnad Shetty Hà Nội – 2007 ĐẠI HỌC QUỐC GIA HÀ NỘI TRƯỜNG ĐẠI HỌC KINH TẾ LÊ THỊ THANH TÂM STRATEGIC PLAN FOR APPLYING CRM IN VPBANK Chuyên ngành: Quản trị kinh doanh Mã số: 60 34 05 LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH NGƯỜI HƯỚNG DẪN KHOA HỌC: TS Nguyễn Ngọc Anh Th.S Meghnad Shetty Hà Nội – 2007 TABLE OF CONTENT Abstract………………………………………………………………………… i Tóm tắt………………………………………………………………………… ii Acknowledgements…………………………………………………………… iii List of table and chart………………………………………………………… .vi INTRODUCTION 1 Necessity of the thesis Objectives of the thesis Methodology Structure of the thesis CHAPTER 1: THEORICAL FRAMEWORK 1.1 The definition of customer relationship management (CRM): 1.1.1 Definition of customer relationship management: 1.1.2 Comparison between relationship and transactional marketing: 1.2 The principle of CRM 1.3 The element of CRM: 11 1.4 The characteristics and the challenges of CRM: 15 1.4.1 The characteristics of CRM: 15 1.4.1 The challenges of CRM: 16 1.5 Ideas support CRM: 17 1.5.1 The statistics of Harvard-Business review in December, 1995: 17 1.5.2 Pareto's Principle - The 80-20 Rule: 17 1.6 The benefits of CRM: 18 1.6.1 Long-term profitability 18 1.6.2 Lower costs 18 1.6.3 Repeat customer often cost less to service 18 1.6.4 Opportunities for cross-selling 18 1.6.5 Defection less likely 19 1.6.6 Employee retention 19 1.6.7 Family influence 19 1.6.8 Word of mouth marketing 19 1.7 The reason why CRM fails: 21 CHAPTER 2: BACKGROUND ON VIETNAM BANKING MARKET AND VPBANK SITUATION ANALYSIS 25 2.1 Overview of Vietnam Banking Market 25 2.1.1 Background 25 2.1.2 Commercial Banks' Market 27 2.2 Situation of VPbank 30 2.2.1 Vision 30 2.2.2 VPbank’s mission, strategy and performance results in 2001-2005… 31 iv 2.2.3 2.2.4 SWOT analysis 42 Value chain analyis 48 CHAPTER 3: RECOMMENDATIONS TO BUILD A STRATEGIC PLAN FOR APPLYING CRM IN VPBANK 3.1 VPBank competitive advantages and general strategy from 2006-2010…53 3.2 Application plan of CRM in VPBank: 57 3.2.1 The first phase: Build foundation for CRM 60 3.2.2 The second phase: Deploy CRM 65 3.2.3 The third phase: CRM development 77 3.2.4 Conclusion 79 v LIST OF TABLE AND CHART Table 2.1- VPBank Financial statement analysis in 2001-2004 Table 2.2- Total mobilized funds in the market I in the period 2001-2004 Table 2.3- List of VPBank’s competitors’ software names Table 2.4- The equity growth rate of banking system and some commercial banks Table 2.5- KPI to evaluate the performance of bank Chart 2.1– Financial statement analysis Chart 2.2- Profit structure in VPBank Chart 2.3- Profit in the first six months of 2005 Chart 2.4- Mobilizing fund grow rate in 2003-2004 Chart 2.5- ROE comparison vi INTRODUCTION Competition in Vietnam business environment increases rapidly, especially when opening the economy By approval of operation of economic partners, competition between industries and units of industry is significantly rising Besides that, expanding economic integration requires firms to improve quality of products and services in order to create competitive advantages There is high competitiveness between commercial banks in inter-bank market Competitiveness is really carrying out between state banks and joint stock banks, two biggest bank system in Vietnam Moreover, joint venture banks and foreign banks are emerging as potential competitors in the banking market Foreign banks will absolutely create high pressure on Vietnamese banks When foreign banks are free to operate in Vietnam, they will be big competitors of not only state banks but also joint stock banks This is reason why Vietnamese banks have to apply modern technology in payment and management and diversify services in order to create competitive advantages Vietnam joint stock commercial bank for private enterprises (VPBank) is entirely businesses under high competitiveness pressure It is difficult for VPBank to compete against state banks because the government protects the state-owned banks State banks have many advantages under government‟s protection and they definitely drive financial market Furthermore, some joint stock competitors have high capital and large market as well as wide distribution channel To become one of the top five biggest joint stock banks in Vietnam, VPBank must prepare its competitive strategy in next period in order to explore potential markets and enhance its competitive advantages Necessity of the thesis Joint Stock banks (JSBs) systems in Vietnam are significantly competing with State-owned banks (SOBs) system Because of being result of opening the economy as well as characteristics of economy system, JSBs are controlled by Central Bank much more tight than SOBs Besides that, set up after SOBs they are really weak in infrastructure, competitive capacities and supported policies Furthermore, when Vietnam becomes member of the World Trade Organization, Joint Stock Banks will face increasingly competitive pressure by foreign banks that have much more high power of finance and technology Vietnam joint stock commercial bank for private enterprises (VPBank) is one of JSBs operating in Vietnam banking market It is entirely difficult for VPBank to compete with SOBs However, VPBank is opposing increasing competition of Joint Stock competitors in order to exist and development Moreover, I have been working in VPBank, one of the first Joint Stock banks in Vietnam, as an officer for nearly three years Objectives of the thesis Based on defining difficulties of VPBank in terms of competing with not only other non-state banks but also state-owned banks, the research will significantly find out a relevant competitive strategy for VPBank in the period from 2006 to 2010 and answer Why VPBank should apply CRM as a competitive tool To get the general objective the research thesis will take detail objectives: i) examining main effects of external and internal environment on VPBank‟s operation; ii) finding a relevant competitive strategy for VPBank in next five-year period and the relationship between VPBank new competitive strategy and CRM; and iii) how to apply CRM at VPBank Questions To achieve these objectives above, the dissertation will answer three key questions follow: 1) What factors have significantly affected operations of VPBank? 2) What will be competitive strategy for VPBank in 2006 – 2010 and the relationship between the new strategy and CRM? 3) How to apply CRM solution? Methodology To find a relevant strategy for VPBank, the thesis will analyze competitive advantages based on analyzing SWOT and value chain Data is definitely collected from secondary data source They are government‟s reports, Central Bank‟s annual reports, legal documents related to banking system, VPBank‟s Annual reports, VPBank‟s surveys and banking articles Besides that, the research uses data collected from other Joint Stock Banks and State-owned Banks The research also uses comparison and contrast methods in order to answer the research questions Structure of the thesis To regard to the research topic, the research is clearly divided into three chapters including: Chapter 1: Theorical framework Chapter 2: Background on Vietnam banking market and VPBank situation analysis Chapter 3: Recommendation on competitive Strategy of VPBank in 2006-2010, and how to apply CRM solution as a competitive tool CHAPTER 1: THEORICAL FRAMEWORK The evolution of marketing The word marketing is derived originally from Latin “mercatus”, which means marketplace It comes from the word “mercari”, which means, “to trade” The word can also be somewhat confusing If you ask people what marketing is, many will respond with a variety of words such as selling, advertising, promotion, targeting, or marketing research The fact is that marketing encompasses all of these and yet many other activities and it is concerned with the identification of marketing opportunities The traditional view on marketing with the concept of 4ps: Price, Product, Place, and Promotion, was originally constructed by Niel Hopper in 1964 This approaches that has then over the years been further developed by a number of authors These four elements are regarded as the traditional marketing mix and the marketing mix approach constitutes a production-oriented definition of marketing where transactions are put in the focus From the early 1980s an alternative approach to marketing theory and practice was gaining power, namely relationship marketing The term itself can be traced back to the service marketing literature, through arguably it can be said to have originated in industrial marketing In the scope of industrial marketing this shift from traditional marketing towards relationship marketing are occurring and several scholars are claiming that this is a paradigm shift in marketing defines relationship marketing in the following way: “Marketing is to establish, maintain, and enhance relationship with customers and other partners, at a profit, so that the objectives of the parties involved are met This is achieved by mutual exchange and fulfillment of promises.” In its earliest forms, relationship marketing focused simply on the development and cultivation of long-term, profitable, and mutually beneficial relationships between an organization and a defined customer group However, the concept quickly broadened to encompass internal marketing in acknowledgement that the successful management of external relationships was largely dependent on the alignment of supporting internal relationships 1.1 The definition of customer relationship management (CRM): 1.1.1 Definition of customer relationship management: As already stated, the change of the business environment and the evolution of marketing to adapt to these changes have led to that the way companies organize themselves has switched from product-based to customer-based structures A key driver of the change is the advent of customer relationship management-CRM, which underpinned by information systems convergence and the development of support software, promises to significantly improve the implementation of relationship marketing principles From another perspective, CRM is a strategic view of how to handle customer relations from a company perspective The strategy deals with how to establish develop and increase customer relations from a profitability perspective Based upon knowledge about the individual customer‟s need and potential, the company develops customized strategies describing how different customers should be treated to become long-term profitable customers The basic philosophy underlying CRM is that the basic of all marketing and management activities should be the establishment of mutually beneficial partnership with customers and other partners in order to become successful and profitable In order to more efficiently manage customer relationships, CRM focused on effectively turning information into intelligent business knowledge This information can come from anywhere inside or outside the firm and this requires successful integration of multiple databases and technologies such as the Internet, call center, sale forces automation, and data warehouse There is no universal explanation of what CRM is, since the area is fairly new and still is developing It is therefore important to ... examining main effects of external and internal environment on VPBank? ??s operation; ii) finding a relevant competitive strategy for VPBank in next five-year period and the relationship between VPBank. .. that this is a paradigm shift in marketing defines relationship marketing in the following way: “Marketing is to establish, maintain, and enhance relationship with customers and other partners,... external relationships was largely dependent on the alignment of supporting internal relationships 1.1 The definition of customer relationship management (CRM): 1.1.1 Definition of customer relationship