UNIVERSITY
(5RIGGS pa nộ sty
CAPSTONE PROJECT REPORT
PERFECTING BUSINESS STRATEGY OF LIEN VIET COMMERCIAL
Trang 2, Lien Viet Bank 9 NGAN HANG LIEN VIET
TO WHOM IT MAY CONCERN
Lien Viet Commercial Joint Stock Bank hereby confirms that: Group 7 — Class GaMBA 01.MOl1 includes 04 members:
1 Tran Ngoc Tuan 2 Dang Hoang Ha 3 Tran Manh Cuong 4 Vu Duc Hung
Has joined to research and apply course knowledge to analyze and propose solutions on business strategic management in LienVietBank with the theme “Perfecting the business strategy of Lien Viet Commercial Joint Stock Bank for 2010 — 2015 period”
Trang 3TABLE OF CONTENTS COVER PAGE TABLE OF CONTENTS ABBREVIATIONS LIST OF TABLES INTRODUCTION
CHAPTER) I1: ARGUMENTATIVE BASIS ON — STRATEGIC MANAGEMENT IN THE ENTERPRISE
1.1 Overview of strategic management 1.1.1 Definitions
1.1.2 Process of strategic management
1.2 Mission; Vision; Core Value 1.2.1 Mission 1.2.2 Vision 1.2.3 Core value 1.3 Strategic analysis 1.3.1 Analysis of macro-environment
1.3.2 Analysis of sectoral environment 1.3.3 Analysis of internal environment
1.3.4 Summary of SWOT analysis 1.4 Selection of preferential strategy 1.4.1 Corporate level strategy
1.4.2 Business level strategy
1.5 Implementation & evaluation 1.5.1 Organizational structure
1.5.2 Control system
1.5.3 Route construction for implementation
CHAPTER 2: PRESENT SITUATION OF BUSINESS STRATEGY OF LIENVIET COMMERCIAL JOINT STOCK BANK
Trang 4to 1.1 General information
t© 1.2 Organizational structure of Lienviet Bank
to 1.3 Products and services of Lienviet bank
to .1.4 Business performance in 2008 and the first half of 2009
2.2 Analysis & evaluation of LienViet Bank’s present business strategy 2.2.1 Current strategic commitments of LienVietBank
2.2.2 Analysis of macro-environment impacts
2.2.3 Analysis of sectoral environment impacts 2
2.2.4 Analysis of LienVietBank’s internal environment
5 Current business strategies
2.2.6 Current organizational structure & control system
2.3 Comments and evaluations on implementing the business strategy of
Lien VietBank
CHAPTER 3: PERFECTING BUSINESS STRATEGY OF LIENVIET
COMMERCIAL JOINT STOCK BANK FOR 2010 — 2015 PERIOD
3.1 Corporate development orientation
3.1.1 Table of summary of SWOT analysis 3.1.2 Development orientation 3.1.3 Objectives 3.2 Perfecting strategic commitments of Lien VietBank 3.2.1 Mission 3.2.2 Vission 3.2.3 Core Value
3.3 Perfecting business strategy of Lien VietBank in 2010-2015 3.4 Solutions for perfecting strategy of LienVietBank
3.4.1 Technological solutions 3.4.2 Human resources solutions
Trang 53.4.6 Research & Development (R&D)
3.4.7 Solution for organizational development and expansion of business lines 3.4.8 Conditions for strategic implementation
Trang 6LVB MB T echcombank HSBC ALCO MSS ATM GDP ISO TQM IT L/C ODA POS SMS WTO USD VND SATRA SASCO CITAD ABBREVIATIONS LienVietBank - Lien Viet Commercial Joint Stock Bank Military Bank
Technological and Commercial Joint- stock Bank Hongkong Shanghai Bank Corporate
Assets and Liabilities Committee Mobivi Securities Settlement Automatic Transfer machine
Gross Domestic Product
International Standard Organization Total Quality Management
Information Technology Letter of Credit
Official Development Assistance Point of Service
Short Message Service World Trade Organization United State Dollar
Vietnam dong
SAIGON TRADING GROUP
Southern Airports Services Company
Trang 7Table 1.1 Table 1.2 Table 2.1 Table 2.2 Table 2.3 Table 2.4 Table 2.5 Table 2.6 Table 2.7 Table 2.8 Table 2.9 Table 2.10 Table 2.11 Table 2.12 Table 2.13 Table 3.1 LIST OF TABLES
SWOT analysis summary
General strategies in the model “Five competitive forces” by Michael Porter
Growth of LienVietBank’s fund mobilization and lending
Business performance results of LienVietBank (unit; VND billion) The comparison of operating situation of LienVietbank and
competitors in the year 2008
The comparison between the core capacity of LienVietbank and
other competitors
Evaluation the key capability of against rivals
Evaluation the surpassing capability of LienVietBank General business plan in 2010 — 2012 (unit: billion VND, %)
Plan for mobilization (unit: billion VND, %)
Credit operation activity (unit: billion VND,%)
Plan to increase total asset — capital (unit: billion VND.%) Plan for Profit (unit: billion VND.%)
Business targets in 2013 — 2015 (unit: billion VND.%) Summary and analysis of business plan targets in 2010-2015
(unit: billion VND,%)
SWOT analysis table of LienViet Bank
Trang 8INTRODUCTION 1 The necessity of the theme:
Vietnamese financial market is at present growing more both in scope form, quality
and structure of market participation Under the process of accessing World [rade Organization WTO and Vietnam — US trade agreement Vietnam undertakes to fairly treat local and foreign banks in terms of banking services to remove limits to access into the local banking service market However, compared with foreign banks, the system of Vietnamese commercial banks still has such weaknesses as financial resources, experience of management business, technology quality and service as well as incapacity of risk prevention [his requires each commercial bank to apply appropriate remedies to develop improve competitiveness seize the control of the local financial market and expand into the international financial market In which, establishing big banks which have multi-purpose and the capacity to catch up with fast changes in the modern world has been becoming a necessary demand and an indispensable tendency
On the other hand, the competition among domestic commercial banks as well as the system of banks and local financial institutions is happening fiercely In the market of finance and banking, there are more and more investment funds insurance companies, urban banks that are newly established and the securities market of Vietnam is taking place eventfully All these things create more financial and investment channels for enterprises and people to choose These financial institutions have the direct competition with banks in raising capital investment and the competition is just also fierce in the banking industry From the above reality in order to exist and develop sustainably, Vietnamese commercial banks have to construct their strategy of development in accordance with the specific industry from time to time
In addition, the world financial crisis & economic downturn have caused considerable impacts on the banking sector of Vietnam This crisis is also an
Opportunity for us to have a more comprehensive and practical view of all risks
Trang 9opportunities, strengths and weaknesses of the system of commercial banks in the
ccuntry This also creates an essential demand against commercial banks to ccmsider and make their strategy of development
Ir the program of training International Master of Business Administration at the Us University GRIGGS, with the theme “Strategic Management”, our team 7 Is asigned to undertake a major exercise through a project in connection with a catain local enterprise to apply course knowledge to analyze & create solutions on stategic management With these reasons, at the same time in the team there Is a member who is working for Lien Viet Joint Stock Commercial Bank so our team
his agreed to decide and choose the theme “Perfecting the business strategy of
Len Viet Commercial Joint Stock Bank for 2010 — 2015 period” aimed at cctributing to the sustainable development of Lien Viet Commercial Joint Stock Bink — LienViet Bank in the current tendency of regional & global integration 2.Study objectives:
- Systemize theoretical matters in terms of strategic management
- Analyze & evaluate the situation of strategic execution in the enterprise in the past time
- Set forth solutions to perfect the strategy in LienVietBank for 2010 — 2015 period
3.Object & scope of study:
- Object: Business strategy of LienVietBank
- Scope of study: In the market of Vietnam, it is applied from 2010 — 2015 4.Study method:
It's to apply qualitative methods as follows:
- Apply methods to study available documents (secondary documents) to consider scope, structure and tendency of market movement
- Study investigate survey to collect primary data
Trang 10It is expected to help business leaders to re-consider tendeney and business plan so
with those matters, it is based to prepare a business strategy in 2070 3015 to increase competitiveness and ownership value
6 Layout of the theme:
In addition to the introduction and conclusion, main contents are included in 03 chapters:
- Chapter 1: Argumentative basis on strategic management in the enterprise - Chapter 2: Present situation of business strategy of LienViet Bank
- Chapter 3: Perfecting the business strategy of LienViet Bank for 2010-2015 period
7 Assignments undertaken by team members:
Based on contents & structure of the theme mentioned above our team 7 agrees to provide team members with assignments as follows:
Team members Chapter Section |
Tran Ngoc Tuan Introduction | Chapter | 1.3: 1.4; 1.5 | m Chapter 3 3.1; 3.3 ee Ị Vu Duc Hung Chapter | alg lad | Chapter 2 2.2.4 pe Chapter3 43.200 |
Dang Thi Hoang Ha Chapter 2 2.1; 2.2
Chapter 3 Collect & Select the data of VB
ma a | ee _and the banking sector
Tran Manh Cuong Chapter 3 3.4: 3.5: 3.6
ma _ Conclusion _ |
Trang 11CHAPTER 1
ARGUMENTATIVE BASIS ON STRATEGIC MANAGEMENT IN THE ENTERPRISE 1.1 Overview of strategy and business strategy
1.1.1 Definitions
1.1.1.1 What is the strategy?
Strategy is simply known as a plan to create a competitive advantage for a certain organization compared with its competitor The strategy must be understood as what the enterprise is doing and preparing its plan to achieve A good strategy will help managers and staff to define any objectives recognize the line of acuion and contribute to the success of the organization On the contrary, if a certain enterprise does not have any specific strategy or operation orientation, it will be like a boat without sailor To further recognize strategy definitions, let's see some economic viewpoints as follows:
Point of view 1: Strategy is a special plan
- G Arlleret - “Strategy is aimed to define ways and means to achieve
objectives set through policies”
- D.Bizrell and group of authors - “Strategy is a general plan leading or
orienting a certain enterprise to achieve expected objectives It is the basis to
prepare policies and operating skills”
- Gluecl - “Strategy is a united, comprehensive and general plan designed to ensure that enterprise objectives will be executed’
Point of view 2: Strategy is an art
- Alain Threlart said “Strategy is an art that an enterprise uses to against competition and win the victory”
- M.Porter said “Strategy is an art applied to establish firm competitive
advantages to defend”
Trang 12Therefore, these authors consider the strategy as an art to compete in the market and
develop the enterprise
Point of view 3: Strategy is both a plan and an art
- “Business strategy is an art to combine and control activities to achieve long
term objectives”
- “Business strategy is an art designed to organize means to achieve long term objectives in accordance with the change of the business environment”
Through these viewpoints, we can see the strategy related to enterprise objectives and if a strategy is established it will have to help achieve objectives set forth However, it is not enough to prepare and decide any target-based strategy and it must provide specific actions from time to time to realize targets The strategy does not only provide what an organization wants to execute but it is also the way to execute these things A separate action Is not just a strategy The strategy must be a series of actions and decisions in terms of close connection All strategies must be aimed at enterprise objectives and established on the basis of internal resources (strengths and weaknesses), external factors in the outside environment (opportunities and threats)
In short, we can define the strategy in a general manner:
“Strategy is a series of integrated actions to mobilize resources in a certain organization to achieve a certain objective.”
1.1.1.2 What is a business strategy?
As mentioned above the strategy related to objectives if a strategy Is established it will have to help a certain enterprise to achieve its objectives set forth However the business strategy is more related to how the enterprise can succeed in a specific market It is related to strategic decisions on product selection, customer satisfaction, gaining competitive advantage compared with competitors develop and create new opportunities and so on
According to Fred R.David itis “Strategy of business ts means to achieve long term
Trang 13Itis possibly said that the business strategy is means to help enterprises to achieve
Img term objectives [he business strategy is not aimed to specifically guide how to do, but it is a general program which provides solutions to effectively mobilize resources to realize objectives
Tie business strategy can be generally defined as follows: The business strategy is aseries of commitments and actions that a company applies to gain a competitive
alvantage by developing core capacities in a certain market
11.1.3 Basic matters of business strategy:
Tie business strategy must define three basic matters: Who is targeted?
- What demand it is satisfied?
- How these demands are satisfied?
11.1.4 Role of business strategy:
It helps to recognize targets and orientations as guidelines for production and
business activities
It helps to catch and take any advantage of business opportunity at the same time it creates active measures to overcome dangers and threats in the market It contributes to improve how to effectively use resources and enhance the competition position to ensure sustainable development
It creates stable foundations so as to set forth policies and decisions on production and business in accordance with market movements
11.2 Process of strategic management
Tie process of strategic management is a series of activities including cammitments, decisions and actions to achieve such advantages of strategic campetition and sustainable competition and profit at an above-average level
Itz:an be divided into 04 phases:
Trang 14define risks opportunities, strengths, weaknesses then core capacity and competitive advantage of the enterprise
- Phase 2: Construct & select an appropriate strategy for the enterprise (strategy
making)
- Phase 3: Execute the strategy
- Phase 4: Check & evaluate the execution of strategy
2 Mission, Vision and Core value
12.1 Mission:
D:fining a declaration of mission in an appropriate manner contributes a very inportant role into the success of a certain brand name At first, it creates an inportant basis to appropriately choose targets and strategies for the company On th: other hand, it has the effect to create and strengthen the brand name in the social ptblic as well as draw attraction from such concerned objects (as customers, slareholders, agencies, suppliers, bankers, governments ) The enterprise thoroughly knows its mission so that it will have opportunities to succeed more than ary companies which do not clearly express their existence
A good mission declaration must be made on the basis of customer orientation m:aningful expression, product benefit, service and corporate activities
Waat is the mission? The mission is a declaration aimed to announce the exstence of an enterprise and it also defines values and enterprise control rules; it Ss a primary part of the process of making strategy
Mssions can be different in length and they talk about business, targets and values Tie corporate mission is the reason why the company exists in the market: who are ya and what products and services will you bring back for customers and the
piblic Decisions in the process of making strategy and the control of the company
mist be always in accordance with the declaration of mission”
Trang 151.2.2 Vision:
Vision is a lively brand image which will be likely in the future When mentioning a certain intention or a strategic target, we often consider it as a future image It comprises the meaning of an excellent and ideal standard It is selected among one of the most wonderful values of a brand name With its unique property it implies to create something special
So what is the vision? The vision is “A declaration of vision is a report which says
about the position in a certain company you expect to achieve The declaration
provides the future of the company where you achieve your objectives Vision declarations can be different in length; it is possibly a short sentence and it can be a long paragraph but it is required to define your final target”
1.2.3 Core value:
Core value is all what a company cannot make payment or change Core values create a foundation to set up regulations in the company Core values can be defined as follows:
- Itis a belief system which influences on behaviors between person to person or among groups:
- Core values are the "soul" of the organization:
- They are effective values which are deeply attached to the organization
~- Core value helps establish the organizational psychology and then it can support o: eliminate the individual psychology
- (Core values are long term instruction rules as required:
+ To help orient decisions and actions in a certain organization: + Those are not cultural actions or specific activities:
+ [tis not constructed for financial targets or short term opportunities:
+ The organization wants to keep the core value even when its mission ts
Trang 16- They are long term and necessary principles of a certain enterprise — set of detailed instruction rules which cause a deep influence on what people think and act in the enterprise
Wthout care of public opinion, the core value has a real value and it is very inportant to people in the enterprise Core values are several rare instruction rules le:ding to a great impact possibility and they are the soul of the organization: those vaues are aimed to guide all actions
Core value have the depth and those are very important values [Those values have litle change under the change of the market On the other hand enterprises will chinge the market if it is necessary to keep their actual core values
1.3 Strategy analysis
Ech enterprise has all activities which are impacted by factors from the macro-
ervironment (the common environment) and the micro-environment (the sectoral
erironment & internal environment) so to prepare any strategy for the enterprise woneed to analyze how environmental factors influence on the enterprise
1.:.1 Analysis of macro-environment
Aualysis of macro-environment helps recognize and evaluate: O Opportunities in th: environment a certain enterprise can take advantage and T - Threats that enerprise can have to cope with Next, it allows to organize and construct specific buiness tasks, define long term and feasible targets and design a strategy in acordance with business targets
W: can use such a model as PEST to analyse the macro-environment This model us’s factors as follows:
Political (Institution-Legislation)
Economic
‘ Sociocultural
Trang 17These are four factors which directly influence on economic sectors as they are out of tie enterprise and the sector The sector has to suffer from its impact considered as objective factor Based on impacts, enterprises will put forth policies and bus ness activities in an appropriate manner
1.3.1.1 Political (Institution — Legislation) factors:
These factors have the influence on all business lines in a certain territory Ehey can also tareaten the existence and development of any sector When operating in a certain administrative area enterprises will have to conform to institution and legisletion factors in that area
- Siability: We need to consider stability in political and diplomatic conflict factors in institution and legislation If a certain institution has high stability, it wll create good conditions for business and if not, a conflict will happen and impact business activities in the territory
- Tix policies: Policies on ex-import duties, consumption tax and income tax wll impact the revenue and profit of an enterprise
- Relevant laws: Law on investment enterprise law labor law antitrust law anti- dumping law
- Pelicies: State policies will cause a certain impact to enterprises so it can create ary profit or challenge These policies include trade policy industry development policy, economic development policy, tax policy and policies on campetition regulation and consumer protection
1.3.1.! Economic factors:
Enteririses need to pay attention to economic factors in aspects of short term, long term nnd government interference in the economy
Often based on economic factors enterprises will decide to make investment in lines ind sectors of business
- Eonomic situation: Every economy has its own evcle and during a certain priod of the economic cycle enterprises will make their own decisions in an
aypropriate manner
Trang 18- There are such factors to impact the economy as: interest, inflation
- Economic government policies: basic wage law, government strategies on economic development, preference policies: tax reduction, subsidy
- Future economic outlook: speed of growth GDP increase GDP rate per investment
1.3.1.3 Sociocultural factors:
Each nation or territory has its specific cultural values and social factors and these factors are customer characteristics in those regions
Cultural values are to create a society so they can make that society exist and develop Therefore, cultural factors are often protected in a close manner and especially they are spirit cultures However, we cannot deny cultural interferences The cultural interference will change consumption psychology, lifestyle and create the prospect of development in different sectors
In addition to culture, social characteristics also make enterprises pay attention when surveying the market Social factors will divide the community into customer groups and each group has its own different characteristics psychology income cle:
- Life expectancy, health status, regime of nutrition, diet - Average income, distribution of income
- Life style, knowledge, viewpoints of aesthetics and life psychology - Living conditions
1.3.1.4 Technological factors:
Related to the level and direction of technological advance or innovations in the society there are products, technological process or new materials: common level of science and scientific advances in a basic manner
In addition to basic factors under the above PEST model nowadays when surveying the market, the globalization factor (integration) is often considered becoming a macro factor which impacts the sector
Trang 19It is not denied that the globalization is a tendency which does not create the opportunity for enterprises and countries in developing productions and businesses - The globalization creates pressures of competition so competitors come from
different regions The integration process will make enterprises adapt to advantages of competition labor assignment in the region and the world
- The importance is when the integration is executed trade barriers will be gradually removed so enterprises have more trade opportunities with their business partners which come from different geographic areas and_ their customers are not only local but also foreign customers coming from different
areas
1.3.2 Analysis of sectoral environment
There are many models to analyse the sectoral environment and in which it is popular that there is the model “Five forces of competition” by M.F Porter
This mocel is applied to analyze the environment through evaluating US forces which affect activities in the enterprise as follows: \ fi Suppliers Bargaining power of suppliers Potential entrants % Threat of new entrants Industry competitors C) <—~— _ Buyers | Rivalry among existing firms Ba ng THỰ # Threat of substitute products or services Substitutes
1.3.2.1 Competition pressure from suppliers:
Suppliers can cause the pressure on enterprises as follows:
Trang 20which will create the pressure of competition to affect all production and business activities in the sector
Scope of supplier: Suppliers which have their big scale of operation will gain a stronger position than customers
Quantity of appropriate substitute products: the pressure of a supplier will go up if there are a few appropriate substitute products
High quantity of individual customers compared with big customers: Suppliers will have more pressure than individual customers
The product importance of a supplier in the success of a customer: A product of the supplier plays a very important role in activities of the customer so the supplier will cause a higher pressure
The level of cost is applied to converse the product if it is required to replace the supplier: The supplier will have its higher pressure if the level of cost so that the customer converses to use any other product is rather high
The penetration of a supplier in the business field of a customer: If the supplier has the capacity to enter the field where the customer is operating so it will make a higher pressure than that of the customer
1.3.2.2 Competition pressure from Buyers:
Buyers make a pressure of competition which can directly impact all production and
business activities in the sector
Buyers cause a pressure to the enterprise on price, quality of product or service attached and they control the competition themselves in the sector through the decision of buying
The customer has his increasing right of negotiation when:
There are a limited number of buyers who are big customers Buyers consume most of products in a certain sector
The buyer account for a high rate of annual revenue of a seller Expense to change into using any other product is low
The buyer has enough information on market and business lines of the seller
Trang 21- The buyer has the capacity to enter a certain sector of the seller 1.3.2.3 Competition pressure from potential competitors:
According to M-Porter potential competitors are enterprises which have not yet existed in the sector but they can cause any impact on the sector in the future Plow much or little pressure potential competitors make in the sector is subject to the followings:
- Sector attraction: This factor is shown through such criteria as rate of return quantity of customers and quantity of enterprises in the sector
- Barriers of entry: they are factors which make the accession into a certain sector more difficult and more expensive (scope advantage; product difference: demand of capital; cost of conversion; access to distribution channels; disadvantage of cost; government policy; possible action)
1.3.2.4 Pressure of competition from substitute products:
Substitute products and services are aimed to meet the same demand as those
products and services in the sector
The threat from substitute goods increases when: - Cost to converse any product for the buyer is low - Price of substitute product is lower
- Quality & effect of substitute product are better than those used now
Those products which are especially and highly evaluated by customers will be slightly influenced by the threat
1.3.2.5 Pressure of competition in the internal sector:
Enterprises which are operating in the sector will directly compete with cach other to put pressure on the sector and create a certain intensity of compeution The intensity in the sector will go up when:
- There are many competitors or competitors have the same strength
- That sector has its sluggish or declining growth: All competitors find out the way to increase competitiveness to exist in the market
Trang 22- Fixed cost or store cost is high: It is a rare possibility to converse into other sectors or other products
- It is a rare chance to create any difference or low conversion cost: Competitors have similar operations products prices after-sale services
- When the strategic benefit is high: All competitors find out the way to exist in the market
- Exit Barriers: Like entry barriers, exit barriers are obstacles in the path of an organization which wants to leave a given industrial sector (including factors involved in technology, high investment capital, redundancy costs, government and other relevant stakeholders, strategies and plans)
1.3.3 Internal environment analysis
An enterprise's internal environment is composed of elements within and under the control of the organization Internal environment analysis requires collecting and processing information about finance, organizational structure, personnel research and development, marketing and business performance of such organization
An assessment of an organization’s internal factors is frequently made through appraisals on functional business divisions of such organization including managerial board, marketing department, financial and accountant department, manufacturing/professional department, research and development department information system, organizational structure, implemented and implementing Strategies
Internal environment analysis enables a firm to identif¥ its strengths as well as weaknesses and then to select strategies that take best advantage of the strengths and minimize the weaknesses
Strengths are things that a company is good at or attributes that help a company to enhance its competitiveness, including:
Trang 23- Valuable human-assets
- Valuable organizational assets - Valuable intangible assets
- Forming alliances or cooperating with partners - Prominent key competences
- Important competitiveness
Internal environment analysis results in the identification of a firm’s resources, capabilities and core competence in order to generate its competitive advantage and strategic competitive advantage
1.3.4 Summary of SWOT analysis
SWOT is an acronym for Strengths Weaknesses Opportunities and Threats It is a very helpful tool that enables us to study issues or make decisions on organization management as well as business In imaginable words SWOT is a theoretical framework to be used as a basis for reviewing all strategies identifying an organization’s/firm’s position and direction, analysing business proposals or any idea relating to its benefit And in fact, the use of SWOT in build a firm’s business plan, strategic planning, assessing rivalries, carrying out market research, developing products and research reports has been increasingly selected by firms SWOT analysis brings companies a clear awareness of:
- Its strengths - Its weaknesses
- Its best opportunities - Its fundamental threats
SWOT analysis enables a company to determine which one is the best to be done to mobilize its resources based on its internal and external conditions
Trang 24_— O:Opportunities - Expand additional groups |
of customers - Develop its
new geographical areas - txtend product lines - Transfer skills to a product - Vertical integration SWOT Matrix - Expand in order to gam the market share from competitors - Take over the competitors of its presence new opportunities of its brand name/image S-O strategies Strong strategy HHealthy finance (Good reputation Market Leader (Unique techniques IPrice advantage Strong advertising
Skills in innovating production (Good customer services
Better product quality
‘Alliance or joint ventures
Use strengths to take Without Wi Weaknesses Inexplicit strategic | W-Ostrategies - orientations Obsolete equipments Bad = accountant, high — non- performing debts Overall cost is higher than that of the rivalries Lack of basic skills/competence Gaining loss
Face problems in production Lag behind in R&D
Narrow product lines Weak marketing skill
Minimize weaknesses and take advantage of opportunities L2 ¬ presence 1m new
- Form alliances or Joint-
ventures for improvement
- Develop in order to exploit advantage of opportunities - Develop for enhancement | - Appear - Change many new entrants - Losing turnover because of substitution products - Low growth of the market - Untavourable changes of foreign exchange rate and trade policy - Costly new regulations - Vulnerable — to effect
Trang 251.4 Sdection of preferential strategy 1.4.1 -orporate level strategy
They ire specific activities that a company wants to do to achieve its compeutive advanage by selecting and managing a group of business activities and compeution in sone certain sectors and markets
1.4.1.\ Strategy of diversification:
This srategy is suitable for companies that can not reach their growth goals in curren production with their existing products and market This type of strategy includ:s: Concentric diversification strategy, horizontal diversification strategy conglamerate diversification strategy
1.4.1.2 Focus development strategies:
Focus development strategies are core strategies aimed to improve normal products or makets without making any change in factors
There are 3 types of strategies for selection of focus development including
marke ing penetration strategy, market development strategy and product
develcpment strategy
1.4.1.3 Integration strategies:
This type of strategy is suitable to enterprises which operate in a strong production sector but hesitate or cannot perform one of the possible focus development Strategies because of the saturated markets
2 corporte level strategies for the integration development are forward integration Strategy ind backward integration strategy,
1.4.1.4 <ndgame strategies :
This sraegy is appropriately applied when companies find it necessary to focus on
improvitg their capacity after the period of rapid development: when long term
Trang 261.4.2 3usiness level strategy
Each :nterprise defines its own position in a certain field where it operates by taking its available advantages Michael Porter said if a certain enterprise has any advanage, it will be based on two aspects: advantage of cost and differentiation By applyng these advantages enterprises will pursue such three general strategies as: lead in cost, differentiation and focusing They are called as general strategies becaue they do not depend on any enterprise or sector
Table 1.2 General strategies in the model “Five competitive forces” by Michael Portei (Source: Nguyen Thanh Thao, “Brandname strategy applied according to the thory of Michael Porter”) Competitive advantage
sdpesgese inn AL OSE aes Differentiation
Strategy on cost | Strategy on
leadership differentiation
‘cope ———————————_—+~x
Strategy on focusing Strategy on focusing | Lee arias ec (low cost) (differentiation) |
1.4.2 Cost leadership strategies:
This srategy focuses on activities aiming to manufacture goods, services of features accepable to customers at the lowest cost which is lower than rivalries’ production cost «f the same goods and services with characteristics also acceptable to
custoners
This srategy is understood to maintain the lowest cost in the industry or in the marke If enterprises pursue this strategy they should have:
- Cpital for investment into technology useful for cost reduction - Efective operational process
- Lew cost basis (labor, raw materials, equipments )
The liggest risk for application of this strategy means that not only your organzation can have an access to cheap resources As a result, other competitors
Trang 27can competely copy your strategies The importance ts if you are able to keep the cost lowe than that of competitors for a long time or not?
1.4.2.2 Dfferentiation strategies
This stratgy focuses on a set of actions designed to manufacture goods services (al an acceptble price) that customers perceive as being different from competitors’ products n ways that are significant to them
The core ‘ontent of this strategy 1s to make your products, services different trom and mor attractive than rivalries’ products/services (in terms of appearance features, arability, service quality, brand name image )
To be sucessful in performing this strategy, enterprises should have: - Effecive R&D process as well as good product innovation process - Abiliv to provide high quality products/services
- Efficint marketing and selling activities in order to assure customers*
percetion of differentiation and benefits
Enterprise who conduct such strategy must be wit and wise in the development of new prodcts Otherwise, they will give some of their markets to other enterprises pursuing ne below-mentioned differentiation focus strategy
1.4.2.3 Ficus strategies:
This stratgy refers to a set of action designed to produce goods/services for fulfilling emand of a specific competitive market segment
Enterprise who attempt to carry out this strategy only concentrate on niche markets that are small market segments with particular features Their competitive advantage are formulated basing on deep understanding of specific market characteritics and ability to provide goods services fit for such characteristics However.focusing on a small market matching its resources and capabilities is not complete) safe because large enterprises with better resources are still able to enter this segmnot
Trang 28Before such threat, such organizations should continue creating differentiated advantages (by reducing cost or differentiating products/services) in an effort to bring additional value to customers in their segments
Consequently, the differentiation focus strategy composes of 2 particular strategies that are Cost Focus strategy and Differentiation Focus strategy Which strategy to be selected depends on the enterprises’ strengths and capacities
1.5 Implementation and Assessment 1.5.1 Organizational structure :
Every enterprise is in need of a model of organizational structure in order to execute and manage its strategies The organizational structure of an organization Is Initially formulated in accordance with its strategic selection And after such establishment, the structure will have effect on present strategic activities as well as selection of future strategies The Organizational structure reveals:
- Relationship, procedures, control systems, authority and decision-making
process in a formal manner
- Things to be done and how to be done when the enterprise has completed its strategy/strategies
An enterprise that wants to accomplish its missions and visions should possess an effective structure which possibly brings about:
- Stability: Ability to manage daily working process in a fixed and predictable basis
- Flexibility: Offering opportunities of building competitiveness and being flexible in allocating resources for activities to create essential compeulive advantage
Trang 29- Simple structure: In this structure, the owner of an enterprise is also a manager who directly makes all important decisions and monitor all operations while tts
employees help the manager to implement his right of supervision,
[his structure ts fit for focus strategies and business division level strategies - Functional structure:
The role of chief execuuve officers (CEO) and managers of functional departments can be observed in this structure which is suitable for corporate level strategies and business division level strategies
- Multi-division structure:
In this structure, high level leaders of the organizations decentralize responsibility to division managers in daily operations and in business division level strategies planning Functional divisions run as profit/cost centers,
This kind of structure ts only suitable when the enterprise develops through diversification
1.5.2 Control system :
It is necessary for an enterprise to build a control system in an effort to introduce the execution of strategies and indicate how to compare actual results with anticipated results and make proposals on adjustment and prevention when the organization does not accept such difference between actual and expected results Normally, there are 2 ways to control an enterprise:
- Strategic control: It relates to the investigation of matching between what should be done (opportunities form the external environment) and what could be done (its competitive advantage) Strategic control will give assessment on Which level the organization should focus on procedures to execute its Strategies
Trang 30Subject to the chosen strategies organizations carry out different ways of control for example: -arge multi-sector firms use the low cost strategy in an attempt to control their finance while small enterprises and business divisions apply the differentiatior strategy on purpose of focus on controlling strategies
1.5.3 Constrict route for implementation:
To execute ary selected strategy organizations need io set forth a specific route of impiementatin from time to time
Building impementation schedule will facilitate the organizations to control the progress as vell as results of each strategic period and make proper adjustment matching straegic goals therefrom This action will also enable the organizations to prepare and alocate investment resources in an active and effective way
Trang 31CHAPTER 2
PRESEDT SITUATION OF BUSINESS STRATEGY OF LIEN VIET COMMERCIAL JOINT STOCK BANK
2.1 Introducton of Lien Viet Commercial Joint Stock Bank
2.1.1 Genera information:
Lien Viet cimmercial joint stock Bank (LienVietBank) was established in
accordance wth the business license No 91/GP-NHNN dated March 28", 2008 by
the Governor >f the State Bank of Vietnam (SBV)
Full name in Vietnamese : Ngân hàng Thương mại Cô phần Liên Việt Abbreviation 1ane in Vietnamese : Ngân hàng Liên Việt
Abbreviation 1ane in English : LienVietBank
Website : LienVietBank.net
Chartered captal : VND 3,300 billion
Headquarters : No 32, Nguyen Cong Tru street, Ward I, Vi Thanh town, Hau Giang province
đ® Vv
Logo: VJ
Lien Viet Bank
NGAN HANG LIEN VIET
Slogan : Link to develop together
At present, the btal branches and transaction offices of Lienviet bank reach 17 ones
(including | tarsaction center 7 branches and 9 transaction offices) mainly situated in such big cites as Hanoi, Ho Chi Minh Hau Giang Dung Quat
Its shareholders and strategic partners are giant financial and banking organizations operating in Yittnam and abroad such as: Him Lam corporation Sai Gon trading group (SATRA, Southern airport service company (SASCO): Vietnam bank tor agriculture and ural development (Agribank), Wells Fargo bank (America), Credit
Trang 32LienVietBark heads to build its strong brand name basing on bringing its internal strengths ino full play running transparently, sticking to the motto Society in business W th the aim of being in the top ten of the commercial banks within the first 3 years afer establishment but striving to be a leading bank ino terms of
modernization, professionalism and trustworthiness in operation, |ienviet bank has
just succcssfully implemented online system throughout the bank on the basis ct modernization with core banking softwares with I-FLEX From the very first days of setting forth its working regulations and professional process, Lienviet bank applied standard mznagement system ISO-9000 to the banking industry and paid special attention to risk management as well as modernization of domestic and international
settlement overations
2.1.2 Organizational structure of Lienviet Bank
Organizational structure of Lien Viet bank now follows the model of functional
structure Functions of specific divisions are as follows:
- Genera assembly of Shareholders: It is the top decision-making unit Its meeting takes place every one year upon the end of the fiscal year or suddenly
occurs is regulated
- Board of directors: It works on principle, combining collective leadership and managenent of the chief of board of directors and heightening responsibility of each menber in the board of directors
- Chairnan of Board of directors: Chairman of Board of directors is the legal represeitative of Lien Viet bank, except for delegation in International relationship procedural issues disputes liquidation bankruptes that are under the conpetence of General director
- LienvitBank’s board of management includes:
+ Boarl of management (General director deputy general directors chief
accomtant) and a system assistant to General director (Director of
Trang 33+ Operational divisions including such 8 divisions as: Business customer
individual customer risk management Treasury and investment technology
information, resources development operation supervision support bach operational division is led by a division manager appointed by General director General director can designate deputy general director as managers of the operational divisions
a The total number of employees in its whole system as of June 30", 2009 amounts to : c - £ h: sz
573 people, out of which 92% is at university and postgraduate degree
2.1.3 Products and services of Lienviet bank
Preducts and services of Lienviet bank are established and divided into groups in the direction of customer categorization: institution customers, corporate customers
individual customers
Institution customers: including financial organizations — state-owned commercial banks, joint stock commercial banks and foreign banks with deposit and loans in the interbank market, forex dealings, securities investment and trade, correspondent bank service, trade finance, co-finance-trust, deposits, asset management, lending, treasury services
Corporate customers: Lien Viet bank provides enterprises with such services as lending, support service in the field of import-export, guarantee, domestic and international settlement, forex dealing
Individual customers: Lien Viet bank offers individual customers following services: savings, loans for consumption settlement confirmation of financial health, card, foreign currency exchange overseas national currency exchange payment
2.14 Business performance in 2008 and the first half of 2009 :
Asof 30/6/2009, Lien Viet bank enjoyed its business performance as follows:
Total assets - VND11.697 billion
Trang 34Total outstanding loans Profit/Chartered capital Overdue loans Bad debts > VNDS.464 billion - 338.2 : 0.9999 : 0.0195 2.1.4.1 Fund mobilization and lending: 3.300 (10.290) Table 2.1: Growth of LienvietBank’s fund mobilization and lending (Unit: VND ‘a2 billion)
ar eae Growth as Results as |
Results Results as compared to | compared |
No Indicators 31/12/20 as of of 2009 | 31/12/2008 Plan 2 to 3 08 30/6/2009 incre % planning -ment (%) | l Fund mobilization | 3,800 7,823 | 9,500 4,023 106% 82.3% By terms | | | - Demand deposits | 1.164 | 2.170 | -Under 12 monthterm 2.569 | 5.477 | -Over 12 monthterm | 67 | 176 | By customers | | | | | - Credit institutions | | | | - Economic 953 3,216 1.750 | 2.263 | 237% | 184% | organizations 2,087 3,561 5,000 | 1,474 | 71% | 71% | - The public 760 1,046 2,750 286 | 38% 38% | 2 Lending 2,674 5,464 6,685 | 2,790 | 104% 81.7% | By term | - Short term 2,491 4,735 | | - Medium term 164 665 | | | - Long term 19 64 | | | | By customers | | | | - Credit institutions 259 | 1.339 36S 1.080 417% 367%% -~ Economie _ organizations 2,002 | 3.057 4.700 1.055 $3% 65% — >The public - 413 1.068 1.620 655 159% 66° 3 Credit quality | - Overdue debt ratio (%) | 0 0.99 ae: - Non-performing loan | | | | | | ratio (%) | 0) 0.01, <0O5 | |
- Ratio of medium and | | | |
long term lending (%) 6,82 | 13.3 <20 | | |
- Risk provision | | | | |
(VND billion) 5,02 8.56 | |
- Ratio of secured | | |
Trang 35(Source: LienVietBank's report on business performance in the first half of 2009) In terms of fund mobilization:
As of 30/6/2009 total fund mobilization stood at) VNID7.823 > billion a
VND1,900 billion increase over the plan (VND5.920 billion was planned to obtain as of 30/6/09) and reached 82.3% of the year plan (planned to gain VND 9,509 billion by the end of the year) Out of the total mobilized capital, the amount exceeding the plan was mainly raised from the inter bank market (an increase of VND 1,946 billion) In terms of fund mobilization structure by term, funds under 12 month term accounted for the main share, reaching VND7,647 billion compared to the total of VND7,823 billion (equivalent to 98%)
In terms of lending:
As of 30/6/2009, the total outstanding loans were VND5.464 billion, up VND1,204 billion compared to the plan (planned to reach VND4.260 billion by June 30'", 2009) and accounted for 81.7% of the year plan (VND 6.685 billion) Of which, the excessive outstanding loans mainly came from lending in the interbank market (increased by VND 1,030 billion)
With respect to lending structure by term, medium and long term loans
accounted for 13.3% (6.82% as of 31/12/2008) If loans in the interbank market
were excluded, this figure was 17.6%
2.1.4.2 Settlement:
LienVietBank built and completed domestic setthement system through such channels as CITAD AGRIBANK VCB Regarding international payment center, Which make the bank become one of the pioneer commercial banks in Vietnam who has conducted concentric international settlement activities processing all transactions at the center This helps the bank to minimize risks, improve settlement quality and enhance its prestige in the international market 2.1.4.3 Business performance results:
Table 2.2: Business performance results of LienVietBank (Unit: VND billion)
Trang 36No Indicators | Resultsasof - HH -:.: l Revenue 686.163
- Interest income from deposits 190.857
- Interest income from loans 178.996
- Interest income form securities and investment 127.664
- Services income 5.059
- Forex dealing turnover 10.828
- Revenue from securities trading 172.040
— _[-Otherincomes U/712
2 | Expense | 347.992 |
- Interest paid for deposits | 203.058 |
- Interest paid for borrowings 19.972 |
- Service expense | 2371 |
- Forex dealing expense | 2.599“
- Expense for securities trading | 1.740 |
- Operational expenses (excluding payment for staff) | 69.746 |
-Paymentforstatf - 8506 |
3 Profitbeforetax — - / | 338.171
(Source Lienvietbank's report on business performance inthe first half of 2009)
As of 30/6/2009, its profit recorded VND338_ billion/VND447_ billion reaching 72.4% of the target, mostly from deposit interest income, interest income of loans and investment, bond trading
2.1.4.4 Network development:
In 2008, Lien Viet Bank formally opened 11 transaction points, including 01 transaction center, 05 branches and 05 transaction offices, mainly placed in such provinces as Hau Giang province (01 transaction center), Ha noi city (03 branches 5 transaction offices), Ho Chi Minh city (02 branches)
In the first 6 months of 2009 LienvietBank ran 02 more branches (Dung Quat branche in Quang Ngai city and Cho Lon branch in Ho Chi Minh city) and 4 transaction offices, increasing its total number of branches and transaction offices to
17 ones (O01 transaction center 7 branches and 9 transaction offices)
Trang 37Right after establishment Lienvictbank set up its own way own action strategy with targets of being the number one in terms of modernity, acliveness Innovation, professionalism and trustworthiness in an effort to build a well-known brand named Lienvietbank
In its development strategy, Lienviet Bank aiming to be one of the ten largest banks in Vietnam formulates a value system in order to affirm its position with high commitments, including:
Mission : Bringing the best benefits to Lien VietBank, shareholders and society
- Making contribution to the sustainable growth and security of the commercial banks system in Vietnam Working together with the state bank of Vietnam and the government
to overcome troubles in short term contributing to the
national economic development in the long term
- Being there for customers, delighting customers with full capital that is reasonably customized to their needs Acting for development, existence and honesty of both customers
and the bank
- Creating the most favourable conditions for staff advisors collaborators communicators and the whole bank” grand family
Vision : No | in Vietnam in terms of modernity, professionalism
and activeness, innovation and trustworthiness
- LienVietBank strives to position itself to be in the top ten of the joint stock commercial banks in Vietnam within its first 5-year operation
Trang 38The core values =: All from human being, for human being-Promoting
Lien VietBank brand image
Creativity-Connectivity- Value sharing
- Sustainable development continuous advance
- Law abiding ~ Solidarity — Transparency - Integrity
Business philosophy: Customer focused e-banking
- Safety — Efficiency - Trustworthiness - Law-abiding
- Society in business
- New ideas-new human resources-new action-new products - Implement professional, scientific and long term strategies
neither imitate nor encourage bubble growth
- Adhere to the top-notch administration principle in every activity: Plan — Do — Check — Act
- Put Blue ocean strategy into operation: Ready to conduct business with any high pressure; keeping partners, without rivalries Seeking for Lienvietbank’s own path
2.2.2 Analysis of macro-environment impacts: 2.2.2.1 Institution - Legislation —Policy factors:
- Vietnam is always ranked highly in terms of politic stabilization in comparison with many countries in the region and the world The nation is now committing to a stable politic regime Additionally, for the past years its laws system has been continuously built, completed in terms of width and depth, which is a necessary condition for attracting investment of enterprises, notably of foreign investors and a good opportunity for credit institutions to expand customers increase their market share in order to grow as well as promote development
investment
Trang 39- Because of requirements from international integration policies relating to tax,
financial and banking management of State bank of Vietnam the government
have been recently improved and gradually in dine with the international
community, which ts a favourable condition for credit insututions to enjoy a more fairly and transparently legal regime as well as prepare essential conditions for their competition with foreign strong rivalries once the commitments to opening financial market take effect
- From other views, Policies regulating the financial market in Vietnam are still incomplete and changeable This forms disadvantages for the banks’ operation 2.2.2.2 Economic factors:
- At the end of 2006, thanks to Vietnam's official WIEO membership its economy observed the vigorous growth However in 2008 Vietnam's economy had to face up with big challenges In 2008 there were many uncertainties in the macro-environment Inflation was high Price soar and abnormal changes of steel, petrol, cement, manure, materials for processing and so on, led to various difficulties for the economy Moreover, the tightened monetary policy of the government resulted in the limitation of credit provision for the economy and pushed the whole banking system into troubles in terms of liquidity, fund mobilization and credit investment as well The 2008's credit growth rate of the banks was the lowest in the recent 5 years increasing by only 14.32% against 2007 Regarding credit quality overdue debts were valued VNID2.497 billion as of December 2008, accounting for 9.06% of which non-performing loans were VND 886 billion made up for 3.14% loans in danger of loss were VND231 billion equivalent to 0.85% (Source Research and development department of
LienVietBank)
Trang 40encourage offering interest support of 4°%o Irom the bepinnine of 3009 hàs obtained good fruits So far the world in general and Vietnam in particular have
passed the bottom of the crisis which is a delighted sign for the banking
activities,
- Vietnam’s GDP showed a recovery sign and is expected to experience a spectacular revival (State bank of Vietnam predicted that the year of 2009 will enjoy the economic growth rate of 5% and 6%-6.5% in 2010) This is also an encouraging sign for the banking sector
- As forecasted by several experts, after the Government’s packages of demand encourage, the economy will recover and in fact observed the sign of strong growth Consequently, there will appear a possibility in which the inflation rate increase too rapidly (State bank of Vietnam predicted that the inflation rate may be 6-8% in 2009 and below 10% in 2010) If the government takes no measures to curb the inflation effectively, there will exist a danger of disorder in the monetary market, imposing serious impact on the operation of the banking
system
2 2.2.3 Sociocultural factors:
- | Vietnam’s society is increasingly developed, the living standards of people are increasingly improved, the thinking that working for money savings gradually disappear, people now work for serving their current consumption needs in order to improve their own living standards A part of the public who have stable income, mainly young families start to get accustomed to consume by credit (buying houses, cars by installments ) which facilitates the development of financial and banking services
- However, the habit of using cash which is decreasing still exists among the mass of the Vietnam’s consumers, leading to restriction in application of new financial services to individual customers of the banks This is a trouble for the