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CAPSTONE PROJECT REPORT
“BUILDING BUSINESS STRATEGY FOR BUSINESS BANKING DIVISION AT VIETNAM TECHNOLOGICAL AND COMMERCIAL JOINT STOCK
BANK — TECHCOMBANK IN THE PERIOD 2013 — 2017”
Class: GaMBA- X0211 Group: 2
Students:
Ms Nguyen Thi Minh Hao Ms Tran Thu Hien
Trang 2GRIGGS GaN(BA.XO27] Group 2 TABLE OF CONTENTS
CHAPTER I: THEORIES ON BUILDING OF THE CORPORATE BUSINESS STRATEGY 9 1.1 Overview on strategy and business SfFA{€ØV LH HH HH HH HH 9 1.1.1 Basic concepfs on stratèy and stratèy manaØ€ITT( o5 555 5< s39 se 9 1.1.2 ‘The: Dusimess SÉFAÍCUY si c2ccvvccscS2AsYsE.oEbsedsesslssasesEgsasassessgsssssEbgbgleSESuda 96596u66653/56G66 11 1.1.3 Roles of the business strategy ccsscsciccssscsceisssasessiessssescsccsensssessccssssacsesesscsnsvenssseasseonss 12 1.2 Process of building an sfraf©ØV nh HT nh ng HH HH HH 13 1.2.1 Vissions and businesS SÉT4fCØÌCS G0 Họ Họ cọ 0 00 15 1.2.2 Strategic QOaIS .cc.ccocsserenreonssvorsenssnnsseasensssvorenesenneensseaeseneseesenssosecssrseassessosesessovessses 16 1.2.3 External enyironmenf äI4ÌYSÏS - << << s9 9 9 0 0000608 16 1.2.4 Industry environment analysis (Porter?s Five Foree Model) s«««s« «« 17 1.2.5 Internal Assessment ÁI4ÌÏYSÌS cọc cọ HH HH 000001 4 18 1.2.6 The SWỌT matfFÌX 0G SG Ấ HỌ Ọ TT TH HH 00009 07 20 1.3 Selection of the business straf€gØy - ác HT nh nh nh nh th nh nh tru 21 1.3.1 Alternative Strategies Define and Exempplified <- s«s««ss< esesseseesese 21 1.3.2 Analysis and selection of the SfF22fCEV 0G 0 gọn Họ 000 8.0 22 1.3.3 Buidling of action plans and solutions for execution of strategi€s 24 CHAPTER II: FORMULATING BUSINESS STRATEGIES FOR BUSINESS BANKING DIVISION AT TECHCOMBANK BY 20107 ccsscsssccconsssvsssesencaneacsseecssncavacenesmnnneresavareeserenseneerveres 25
2.1 Overview of Techcombank and Business Banking Division . -<«« 25 2.1.1 Overview of TecheombannÌk o5 << < s9 000 00000090 25 2.1.2 Overview of Business Banking Divisionn - G0 gen g0 29 2.1.3 Business lines of Business Banking DiViSỈOI o7 G G5 SG G G5 S0 0.9 9 5ø 30 2.1.4 Visions, missions and strategic objectives of BBD nhe 34 2.2 External Environment ÁHãÌVSÌS::ssssscosseiaeninndaidoitiniodiaitDAEDoSGL5441500548 3653465886632 37 2215 General Environment Analysis (PEST Model) .:csscssscsssessssesssesssssesssessseeees 37 2.2.2 Industry Environment ÁIaÌSiS << sọ HH n0 0001 04 43 2.2.3 Competitive Analysis (Porter’s Five — Force mOd€Ì) 55c 5 «5s <s se esse 46 2.2.4 Summary of Opportunities and Threats - The External Factor Evaluation (EFE) Matrix 57
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2.2.5 The Competitive Profile Matrix (CPM), che 58 2.3 The Internal Assessment AnaÌySÌS c0 Họ n0 000006 59
2.3.1 MP 1214101112177 59
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2.3.7 Summary of strengthen and weakness — The Internal Factor Evaluation (IFE)
matrix 74
2.3.8 The Sustainable Competitive AdVanfAỢC: co o0 Họ nọ g0 v00 76 CHAPTER III: SELECTING BUSINESS STRATEGIES FOR THE TECHCOMBANK’S BBD HY TU? ngansetnndiirendiiugttiitdrtadisytgiiiilLáS6Gii8608166390645588Y 05810165106 62940 6Agiilà đi S1ax4836 S8lã34:28Ng57L45GEXESTIAGSE01808 77
3.1 Summary The Strengths - Weaknesses — Opportunities — Threat (SWOT) matrix 77 3.2 Selecting Business Strategies for the Business Banking Division by 2017 82 3.3 Recommendations and solutions for strategic management for the Business Banking
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33:1 Prodtict/service developiients ussesiseccrccsrsecnsemsesscceesncsesnccsemnnesonescesonsaemaneeneseeeses 87
3.3.2 Group solutions of Market PenetrafÏOI:: <5 G G0900 990 0 0 v6 9
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INTRODUCTION 1 Why this topic?
Small and medium enterprises (SMEs) play important roles in any economy or any country They represent the majority in corporate forms in any country According to the General Department of Statistics in Vietnam, SMEs cover 97% of firms in
operations in 2012, and had their significant conbtribution to Vietnam’s GDP (40%) Moreover, we can observe that with small amount of capital and small size of
operations SMEs showcase their flexibility and prompt transformation in any business model they operate throughout Vietnam, providing the balance of all economic sectors SMEs also provide jobs for 50% of the workfoce in Vietnam and play key economic roles in many cities and provinces With such roles, many countries in the world and Vietnam designed their policies or incentives and provides the SMEs with various financial support to promote the development of SMEs
The economic and financial crisis causes a global consequence on all economic and financial aspects, resulting in a lack of financing supplies to business All firms are in deep need of capitals to finance for their business and the financing support from banks become more important for the existence and success of SMEs because SMEs have limited resources and small size of business Various researches and statistics indicated that the access to capital by SMEs is harsh and only 30% of the SMEs could obtained financing from banks in Vietnam
Techcombank is one of the leading banks in Vietnam, specialized and focused in the target customers being individuals and SMEs It has been recognized and accepted by its excellent financial products which are designed for SMEs, a market segment which provides the bank with lots of business potentials and profits In addition, this business strategy is also designed in line with the State of Vietnam’s policies and incentives for SMEs With a business mission of "joining force with small
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and medium enterprises to maintain the sustainable business development" and
ensuring the practical business outcome, Techcombank needs to build a sound business
strategy, supported by the comprehensive market analysis and assessments of the bank’s competencies against its the rival firms, through which it can demonstrate and showcase its professional services and competencies of a leading and sustainable bank in Vietnam
With the abovementioned reasons and along with the equipped knowledge obtained from this MBA course and practical experience of the team, we selected the topic: “Building the business strategy for Business Banking Division at Vietnam Technological and Commercial Joint Stock Bank (Techcombank) for the period of 2013 - 2017” with the need to apply the lessons and knowledge learned into practice
2 Objectives of research:
- Summarizing of the theoretical analysis on the business strategy and effective methods to be applied to analyze the business models and to propose the adequate option for the business strategy;
- Applying the theories to analyze the Techcombank’s current business status and competencies in implementing the credit activities for SMEs; and
- Building the business strategy and proposing recommendations or solutions on banking services for SMEs at Techcombank
3 Scope of research:
- Business activity to be covered by the research: Credit activity for SMEs at Techcombank
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strategy for that division, which can be considered as one of the Techcombank’s Strategic Business Units because it meets the following conditions:
+ It has its own target customers and rival firms;
+ Its finance is managed separately from Techcombank; and + It has its own human resources and organizational structure 4 Method of research:
This report was prepared with the statistics and figures provided in various annual reports, financial statements, corporate profiles or summaries archived or collected from Techcombank’s website and other banks in Vietnam, information or statistics announced by the State Bank of Vietnam, and books, magazines, journals and training materials
We also received valuale comments and support from varius managers at Techcombank in our analysis of the matrices
We selected the statistic method, analytical method, compatible method, induction method and collection method to conduct this report
S$ Method of analysis:
- The statistic method: This method was carried out based on the information collected from various public sources;
- The compatible method: This method was used to compare various business operations of Techcombank with its rival firms;
- The analytical method: This method was used to analyze the macro economy and business environment in order to assess the pros and cons in the banking
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- The induction method: This method was used to assess the details and determine various important aspects so that the conclusions can be made on the important analysis
- The matrix-analysis method: This method used the SWOT matrix in order to build a business strategy which could combine series of customized strategies by integrating all internal strengthes and weaknesses at Techcombank as well as all external opportunities and threats to Techcombank The TOWS matrix was built from the analysis of the SWOT matrix
The External Factor Evaluation (EFE) Matrix, Internal Factor Evaluation (IFE) Matrix and Quantiative Strategic Planning Matrix (QSPM) were also used in this report to determine the corporate competencies in order to select the adequate business strategy at Techcombank
6 Structure of the research:
In addition to the introduction, conclusion and reference, this report includes three
chapters:
Chapter 1: Theories on building of the corporate business strategy
Chapter 2: Formulating Business strategies for Business Banking Division at Techcombank by 2017
Chapter 3: Selecting Business strategies for Business Banking Division at Techcombank by 2017
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CHAPTER It: THEORIES ON BUILDING OF THE CORPORATE BUSINESS STRATEGY
1.1 Overview on strategy and business strategy
1.1.1 Basic concepts on strategy and strategy management
Johnson & Scholes (2002) defined the strategy as the determination of an orientation and scope of operations for an organization for a long term view, in which the organization must obtain the competitiveness by integrating the resrouces in a challenging environment to optimize the satisfaction of market needs as well as the desire or interest of all factors which are relating to that organnization
However, Porter (1996) defined the strategy by hamornizing the activities of an organization to create the competitive advantages, core values or differences against the rival firms In this dedinition, the strategy of an organization is to create a difference in competition, from which an organization can build and execute what other organizations or competirors have not
Porter (1996) appreciated the nature of the strategy of an organization from which an organization can build and achieve its own competitive advantages, and such a strategy only exists and operates in that organization with a strategic view to build an unique position or to establish the differences in an environment or market in which that organization operates
Strategic management can be defined as the art and science of formulating, implementing, and evaluating cross-functional decision that enable an organization to achieve its objectives (David, 2011) According to this theory, the business strategy of an organization focuses on the integration of the business management with marketing, accounting and finance, production and operations, human resources, research and developemtn, IT, etc in order to achieve the desired goals of that organization
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Various researches showed that business strategies exist at different levels within a firm, accrossing from the firm as a whole (a group of its subsidiaries or affiliates) to each and every dividion or employee working for that firm
The strategy could be understood as the chain of activities designed and executed by management decisions made by managers with a view to achieve the long term competitive advantages against the firm’s rival firms In the business environment, including the market and relevant rival firms, the business strategies provide a firm with consistent business behaviors In practice, business strategies of a firm represented a selection or a trade-off which attempts to obtain long term strategic goals
In any angle, the strategy of a firm will resolve the following issues:
e Where will the business activities of a firm be conducted within its long term goals or policies? And everybody knows that these goals and policies are subject to changes as per the decisions of the managers or stakeholders or even the public community or legislative changes
e Which market or what business activities or products will the firm operate or have the competition?
e In what way, do the business acitivies of a firm perform better than its rival firms in the same market?
e What are necessary or allocate resources (properties, skills, financials, technologies, human resources, brandname, goodwill, etc.) invested by the firm to create the competitive advantages?
e Will the external factors (legal, political and economic environment, etc)
have any impact on the competitiveness of the firm?
e What are values and expectations of the stakeholders and related parties?
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GRIGGS Privewsity GaMBANU2QT1 — Group 2 1.1.2 The business strategy
1.1.2.0, Definition of the business strategy
According to Boston Consulting Group, the business strategy is an allocation of available resrouces of an organization with an aim to change the competitive balance, channeling the advantages to the organization
However, Porter (1996) argued that the competitive business strategy is a combination of the expected business goals with measures that a firm needs to find or apply in order achieves such goals David (2011) further supported this approach by considering “the competitiveness” is the foundation of any business strategy or business decision
The practice for years indicated that the sound business strategies helped firms to achieve success in any competition or any market or any specific products in a long term run Business strategies involve all corporate or management decisions made by managers or stakeholders with respect to the allocation of resources selection of products or markets, meeting customers’ needs, enhancement of core values in order gain the competitive advantages as well as to create new opportunities or new values or break-through, etc
1.1.2.2 Feature of the business strategy
Competitiveness is one of the typical features of any business strategy As such, an effective and successful business strategy of a firm must always ensure that the firm gains the most favourable or best comptetive advantages over its competitive in the
same market
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Classification of business strategies helps managers to build and apply them properly in any business practice or situation which enable the firm to gain appropriate competitiveness within the expected goals
Business strategies can be classified in the following aspects: e Visions
e Missions
e Objectives/Goals
Or we can classify the business strategies according to the time frame:
e Short term strategies (02-03 years and more often they are functional strategies)
e Medium term strageties (5-10 years, and they are important ones covering many activities and projects)
e Long term stragegies (10 years or more, and they represent a milestone or forecast for the firm in the future)
Or we can have business strategies classified by their functions or performance: e Business strategies for the specific business department or dividion e Business strategies for functional activities
e Overall business strategies for all business activities and operations for a firm or a group
1.1.3 Roles of the business strategy
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Business strategies help the firms to:
e share the visions of the firms’ management with their superior or subordinate management teams;
e demonstrate the consistency and focus on all business policies and
decisions, enhancing the effective use of resources in business;
e determine the priority or allocation of resrouces for strategic businesses; and
e build the appropriate organizational structure to support the business or to formulate the detailed business plans
1.2 Process of building an strategy
David (2011) pointed out that the building an stragegy is one of the important steps in the strategic management at firms Building an strategy with desired visions and missions involves the consideration of external factors (opportunities and threats) against internal factors (strengths and weaknesses), coping with long term business goals and standby business strategies, and is ultimately the selection of an appropriate strategy This task could also include the decisions to be made on execution of business transactions or cease of business operation, or methods on which resources are allocated, entry of foreign markets, business expansion or joint venture with other business partners or protection of being acquired by the rival firms
A firm should have results or answers for the following questions when it wants to formulate a business strategy:
e What will the firm become in the future (goals or objectives)? e What is the current status of the firm (SWOT analysis)?
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The results or answers of the above questions help managers or stakeholders to determine and build the most suitable business strategies from time to time to achieve the business goals and objectives
The Strategy — formulation Analytical Framework is illustrated in the Figure 1.1 and Figure 1.2:
Figure 1.1: The Strategy — formulation Analytical Framework
STAGE 1; THEINPUT STAGE
External Factor Competitive Internal Factor
Evaluation ( EFE) Profile Evaluation (IFE)
Matrix Matrix (CPM) Matrix
STAGE 2: THE MATCHING STAGE
Strengths-Weaknesses- Strategic Position and — Boston Consulting Internal-External Grand Strategy Opportunities-Threats Action Evaluation Group (BCG) (IE) Matrix Matrix
(SWOT) Matrix (SPACE) Matrix Matrix
STAGE 3; THE DECISION STAGE
Quantitative Strategic Planning Matrix (QSPM)
(Source: Fred R David, 2012, Strategic Management, Concept and Cases 13" edition)
Trang 14GRIGGS GaM{(BA.NO211 Figure 1.2 The process of strategic business management External — 8 Environment ———> a Strategic Intent s Strategic Mission | Internal FC Environment | |
Stratèy Formulation Stratèy Implementation
+| [Business-Level| | Competitive Corporate-Level Corporate Structure Ÿ 3 Strategy Dynamics Strategy Governance & Control
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Acquisitions & International Cooperative Strategic Entrepreneurshi
Restructuring Strategy Strategies Leadership & Innovation et " | | = N | về [| Strategic ee = š Competitiveness “Ss Above Average eae se va ~ TT Returns The Strategic Management Process ˆ , 3 (7/21) ~
1.2.1 Vissions and business strategies
David (2011) noted that statements in visions and missions of a firm demonstrate the information appreciating the formulation and existence of the enteprise’s goals and philosophies, determining the differences with other firms From time to time, firms may build different strategies, making adequate statements on Visions and missions with their strategic objectives and goals
Hughes K et al (2005) considered missions of a firm as ways to determine goals
and reasons on the birth of that firm, and at the same time this indicates the existence
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and development of firm in the society or community Via statements of the visions, firms select their products, markets, customers and values that they persuit with However, the firms’ strategies could be customerized or tailored from time to time to meet the strategic goals
Vissions of a firm are the image that the firm expects to become in the future They represent expectations and orientation for the firm’s development, and integrate with the firm’s stage of business or entire life or business of the firm Via the visions, firms can build the business strategies which are adequate with their competencies 1.2.2 Strategic goals
Strategic goals represent the value of an anterprise, formulated to meet the stakeholders’ or managers’ expectations and interest, considerating the external factors and internal factors in the relevant market or business practice
1.2.3 External environment analysis
The analysis of external factors - the Political, Economic, Social and Technological analysis (PEST) helps firms to determine opportunities and threats to them or their business strategies, through which firms can implement and capture the business opportunities from external environment as well as limit or get rid of the challenges for the enteprises
This analysis often includes analysis of macro environment of the market or analysis of micro environment of the market which are called as the specific business
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Figure 1.3 Relationship between Key External Forces and an Organization
Relationships Between Key External Forces and an Organization 4 Campet ion à Suppliers Dastrubur ors Creditors Custormen Employees Comnmnaan at 1s Managers AN ORGANIZATION'S
Stock holders OPPORTUNITIES AND
Labor unzans THREATS Gowermenss Economic forces
Seeial, culrural, demographic, and
envituement natural forces
Pohtical, legal, and powernmental forces
Techemablig ical forces Tru'c Axwex tát cons 3 Special interest groups Products Services Markers Naeural envoronmment `¬ Competitive forces
(Source: Fred R David Strategic Management Concepts and Case 11" edition)
1.2.4 Industry environment analysis (Porter’s Five Force Model)
Arcording to Porter, the nature of competitivenessin a given industry can be reviewed by model of five forces:
Figure 1.5: The Five — Forces Models of Competition
The Five-Forces Model of Competition
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4
(Source: Fred R David Strategic Management Concepts and Case ¡3ˆ edition) > livalry among competing firms
z Potential entry of new competitors
> Potential development of subsitute products » Bargaining power of suppliers
> Bargaining power of buyers
Using this model, there are three steps to indicate the competition that the company can make acceptable profit in a given industry:
- 1‘: indentify key elements of each competitive force that impact the firm 2™: Evaluate how strong and important each element is for the firm
- 3": Decide wether the collective strengthe of the elements is worth the firm enterting of staying in the industry
To summarize the external environment analysis, we use the External Factor Evaluation (EFE) matrix in order to find the Opportunities and Threats to the company as Well as the clearly competition of the company in the industry
1.2.5 Internal Assessment Analysis
The analysis of the internal factors helps firms to determine and evaluate the key strengthes and weaknesses on business operations, management skill sets, marketing, financials, accounting, productions and operations, researches and developments, IT, etc in such firms This task often focuses on the following matters:
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ihe anaiysis of the corporate resources heips the enteprises to determine and evaluate the available resources/assets or the resources to be mobilized within the firms The analysis should focus on the following key resources:
- Financial capabilities, business experiences
- Infrastructure, goodwill or brandname
- Human resouces, skills
- Technologies, equipment and knowhow - IT
1.2.5.2 Researches and developments
The successful investment in R&D activities help firms to keep their pioneed or break-through position in their business, creating more competitive advantages over the rival firms in the markets This is a typical feature of the big firm’s strength and small
firm’s weakness
lễsyii xs) sate Business and production capacity
The business and production funtions of a firm include the transformation of inputs into products or services The production of products or provision of services with premium quality and competitive prices will provide firms with benefits in which they can sell more products or services to customers, generating more revenue and profits
Financial capability
The functions of the financial division cover the financial analysis and planning, checking of financial implementation and performance of the firm The financial division often has significant influence within the firm When the managers make Various analysis on financing and accounting, they must focus on the short term
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strategies and long term strategies on capital mobilication, total capital sources of the firm, the flexibility of investment capital structure and application of financial strategies, control of costing, effective accounting practice to be used and applied for the costing process, and financial and profit planning, etc
Marketing capability
The functions of marketing department or division include the making of analysis, planning, execution and audit of the execution of the programs, maintaining the relationships and communicating with customers on a mutual benefit Therefore, these tasks involve the adjustment of levels, timeframe and nature of operating strategies for the firm
Once the analysis of internal factors completed, the managers should build the matrix of Internal factors in order to determine the strengthes, weakenesses and the internal relationships of departments/divisions of the firm
1.2.6 The SWOT matrix
David (2011) considered the SWOT matrix (strengthes — weaknesses — opportunities - threats) as an basic, improtant tool that managers should use to make various analysis and strategies for the firms for setting business goals/objectives for the firm and methods or measures to be applied to acchieve such goals/objectives
Trang 20GRIGGS Figure 1.5 The SWOT matrix ŒGuAfB.1 VUĐ2TT- Group 2 SWOT Matrix HELPFUL _ HARMFUL (for your objective) (for your objective) Strengths Weaknesses Threats (Source: business-docs.co.uk )
The SWOT analysis and matrix help managers to have the comprehensive
Overview on their firms’ business, which help them to maintain the best available resouces and mobilization of the resouces for the firms
1.3 Selection of the business strategy
1.3.1 Alternative Strategies Define and Exemplified
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Forward Intergration: Gaining ownership} or increased control over distributior or retailers Backward Intergration: Seeking ownership or increased control of a firm’s suppliers Horizontal Intergration: Seeking ownership or increased control over competitors
Market Penetration: Seeking increased market share for present
products or services in present markets through greater marketing efforts Market Development: Introducing present products or services into new geographic area
Product development: Seeking increased sales by improving present
products or services or developing new ones
Related Diversification: Adding new but related products or services Unrelated Diversification: Adding new, unrelated products or services
Retrenchment: Regrouping through cost and asset reduction
to reverse declining sales and profit
Divestiture: Selling a division or part of an organization
Liquidation: Selling all of a company’s assets, in parts, for
their tangible worth
1.3.2 Analysis and selection of the strategy
David (2011) pointed out that the execution of the strategies is the foundation of long term business goals for the firms In selecting the sound business strategies, firms often adopted the Quantitative Strategic Planning (QSPM) Matrix as a high-level strategic management approach to evaluate the possible business strategies A QSPM
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helps to provide managers with an analytical method for comparing feasible alternative actions He also suggested to complete the following steps fora QSPM:
Step 1: Provide a list of internal factors strengths and weaknesses Then generate a list of the firm's key external factors opportunities and threats
Step 2: Having the internal factors ready, identify strategy alternatives that will be further evaluated
Step 3: Each key external and internal factor should have some weights in the overall scheme
Step 4: Determine the Attractiveness Scores (AS) in the QSPM to indicate how each factor is important or attractive to each alternative strategy AS is determined by examining each key external and internal factor separately, one at a time, and asking the following question:
Does this factor make a difference in our decision about which strategy to pursue?
If the answer to this question is yes, then the strategies should be compared relative to that key factor The range for AS is 1 = not attractive, 2 = somewhat attractive, 3 = reasonably attractive, and 4 = highly attractive If the answer to the above question is no, then the respective key factor has no effect on our decision If the
key factor does not affect the choice being made at all, then the AS will be 0
Step 5: Calculate the Total Attractiveness Scores (TAS) in the QSPM Total Attractiveness Scores are defined as the product of multiplying the weights in Step 3 by the AS in Step 4
The TAS indicates the relative attractiveness of each key factor and related individual strategy The higher the TAS, the more attractive the strategic alternative or
critical factor
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Step 6: Calculate the Sum Total Attractiveness Score (STAS) by adding all [AS in each strategy column of the QSPM This STAS reveals which strategy is most attractive to a firm Higher scores point at a more attractive strategy, considering all the relevant external and internal critical factors that could affect the strategic decision
1.3.3 Buidling of action plans and solutions for execution of strategies
Building the adequate strategies for firms do not ensure the success of such strategies at any implementing stages (David, 2011) The practice showed that the successful strategies require professional mangement skills, proper implemting stages, co-ordination of all individuals and departments/divisions of the firms
This process will focus on the following key management issues:
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Setting up of goals on timeline or deadlines
Allocating of adequate resouces (financials, human resoiuces, etc) Setting up of corporate rules and polices
Manging of conflicts and designing of solutions Managing of resistance to changes
Creating a corporate culture to support the strategies Evaluating of execution of strategies for different stages
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GaMBA.NO211 Group 2
CHAPTER II: FORMULATING BUSINESS STRATEGIES FOR BUSINESS BANKING DIVISION AT TECHCOMBANK BY 2017
2.1 Overview of Techcombank and Business Banking Division
2.1.1 Overview of Techcombank
Name Vietnam Technological and Commercial Joint Stock Bank
Short Name TECHCOMBANK
Logo TECHCOMBANK €%
Head Office 191 Ba Trieu street, Hai Ba Trung dist., Hanoi, Vietnam Telephone (84.4) 3944 6368
Website https://www.techcombank.com.vn
Vietnam Technological and Commercial Joint Stock Bank, commonly known as Techcombank, is one of the leading joint stock commercial banks in Vietnam Since establishment in 1993, Techcombank has experienced strong growth and market performance for its 19 years Techcombank also has a strong and sound finance base, with a highly development in total asset and revenue
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(Source Techcombank Annual Report 2012)
Techcombank has HSBC as the foreign strategic shareholder, with recent ownership is 20%, the maximum allowable shareholding to a foreign bank
With HSBC as the strategic shareholder, Techcombank has a strong and sound financial base Techcombank has a network of 316 branches which spead across the
cities and provinces in Vietnam, with dedicated services of its workforce of over 7,000
professionally trained staff
Techcombank has a very well positioned as a premium financial services institution in the country and the capability to provides customers and busines partners with value added products and banking services
» History and corporate milestone of Techcombank
1993 Established at 27 Sep 1993 with the initial registered capital of VND 20
billion
The head office was at 24 Ly Thuong Kiet, Hanoi, Vietnam
2001 Signed a contract with a leading software supplier Temenos Holding
NV to implement new banking software GLOBUS over the network of
Techcombank to meet the growing demand from customers (Globus,
T24, Temenos)
2006 HSBC acquired 10% sharing capital at Techcombank and become the
strategic shareholder of Techcombank
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HSBC increased the sharing capital to 15 %, directly and sufficiently supported Techcombank’s operations
The first and only bank approved the achievement in technological application and leading in market developing measures
HSBC increased its share capital to 20 % at Techcombank with total investment of 3.165 billion Dong in September 2008
Implemented projects on technological modernization, including the Upgrading of the core banking system to sample T24 (phrase 1)
Implemented projects on technological modernization, including the upgrading of the core banking system to sample T24 (phrase 2)
Deployed a number of transformation initiatives in general, announced the Bank’s Missions, Visions and Core Values Simultaneously, the Bank implemented its business and management model restructuring and transforming corporate culture (phrase 1)
Deployed a number of transformation initiatives in general, announced
the Bank’s Mission, Vision and Core Values Simultaneously, the bank
Trang 27GRIGGS ~ Organization of Techcombank Figure 2.1: Organization structure of Techcombank Nomunation & Remuneration Committee Representative Office in Southerm region Reptesentalive Office in Central regiur * s Har ) #15, De “ikdal l8 aa Barking Banking n1 Owisor Iron aca 70 SHAREHOLDERS’ MEETING BOARD OF DIRECTORS CEO BOARD OF MANAGEMENT ompilance, Operational! Risk BOARD OF SUPERVISOR AUDIT, CONTROL & COMPLIANCE and Legal Division Risk Division
chết vai Director of Operation Onision Datribution Bướngss an
Ow moe the South Diviwon GaN{bA N02 11 Group 2 ExcO Assets and Liabilities Committee Senior Credit Committee Financial Investment Committee Property Investment Committee IT Investment Committee Product Committee } < Hưman Marketing Creuit Corporate Resources Diauon Accepnce — Services
vien Division Divison
(Source: Techcombank Annual Report 2012)
As a key part to the success of the Bank, Business Banking Division has been constantly growing in both quality of service and product system, to best meet the needs of the corporate customer now trading with Techcombank and the corporate
customers will come to Techcombank in the next time
Business Banking Division, absolutely is a Strategy Business Unit (SBU) of Techcombank This can be made clear through the information below, of about its own Orgarnization Structure, Financial reports, Human Resource, Customer segment
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GaNIBANO2 711 (77017) 2
2.1.2 Overview of Business Banking Division
Name Business Banking Division (BBD) — Vietnam Technological
and Commercial Joint Stock Bank
Office Level 14", 191 Ba Trieu Str, Hai Ba Trung Dist, Hanoi
Telephone (84.4) 3944 6368
Website https://www.techcombank.com.vn
» History and corporate milestone of Business Banking Division
January 2010 Techcombank established the SME Division —
Functions: Managing and exploring the potential customers whose
income from USD1 million to USD50 million
November 2012 Techcombank changed the name of division to Business Banking Division
Functions: Managing and exploring the potential customers whose
income from USD1 million to USD30 million
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GuMBA.N0211 - Group 2
Figure 2.2 The Organization of Business Banking Division
HEAD OF BUSINESS BANKING DIVISION r Head of BBD South
Business Business Customer Business Business
pater, core bee cee ee
Department : North ‘i North về Department South _ South a
2.1.3 Business lines of Business Banking Division
** Products and Services
As a crucial part of the success of Techcombank, Business Banking Division (BBD) develops products and services to support SMEs and loyal customers in the face of economic challenges BBD has a wide range of products and services to meet the needs of its customers Some of key products and services include:
> Deposit:
Trang 30(Ca \ƒ? | YOO] ] Croup 2 GRIGGS 4 P| TIEN GU'l THONG MINH TECHCOMBANK €> t (Deposit Product “B Plus” - Source: Business Banking Division - Techcombank) > Credit:
Supporting customers to grow their business by providing sound solutions through flexible and stable financing source;
Vay ‘Vay siéu toc sieu té
LẦN ĐẦU TIÊN KHOẢN VAY
ĐƯỢC CAM KẾT TRẢ LỜI TRONG LÀM VIỆC thơng In nỗ trợ LÝ THỊ CẮM NHUNG Tel 08 39116868 - £ Email ory Btac nex Ï gạt trấn lun đồnh Mobile 092: 7+ inti Ks KHON ‘oe ' TECHCOMBANK @>
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- Monetary management and liquidity: Managing customers’ cash flow effectively and on time by providing various products and services through multiple channel; and,
- International payments: Fast and professional international payment services thanks to the relationship with more 12,000 bank dealers in 134 countries; documentation discount up to 95%
In 2011, the BBD gained the positive results through the provision of diversified, flexible and package products and services to SMEs customers These products and Services include package financing, supplier financing; distributors financing, and
Overdraft facilities
The BBD assisted and facilitated the launching of tailor-made products that give SMEs customers access to stable capital at Techcombank iéu 4 linh hoq†12 Vốn 12 tháng Vay đơn giản
d Linh hoạt tơi ưu + - - NY 2 Ẳ Thang >
)—1 Vén nhan ngay Wu da) lon
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hy” _— Œa11\/051 \02717 Group 2
The BBD assisted and facilitated the increased its facilities for priorities of focused production and industries in line with the policies and incentives of the Government, including essential commodities, commercial products, chemicals,
fertilizers, health care, etc
The BBD also invests in research and development of new products in
accordance with the needs and nature of business of the customers However, the
banking products and services are quite easy to imitate or copy More often when a bank launching a new product, the product with similar characteristics to other banks were copied within a short period of time This makes it difficult for BBD to approach new customers, threatening the success of the new products or services at
Techcombank
In order to facilitate the development of SME customers’ business, BBD implemented services that help to focus on a number of industries or business sectors This was done to ensure particular services to each custmer segment BBD made specific investment in those industries or sectors determined as focal targets, enabling the better understanding of each industry’s or sectors’ characteristics so that BBD can develop the specialized products or services that best served the needs of each segment
industries or sectors
“* Customers:
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GRIGGS ¬ sử ‘ GaMBA XNO27T1 Group Z
By the end of 2012, the BBD served 47.325 enterprises throughout Vietnam The result did not only show the confidence that corporate customers that served by BBD but also showcased the effective business decisions that have been made by BBD in a year of continued economic uncertainty
«* Sale and distribution:
The BBD provides services and products to customers through a network of over 300 branches nationwide and a professional team from the retail management
To better serve customers and improve the quality of services, BBD restructured number of the branches in 2011, enabling them to service SMEs customers Accordingly, Techcombank selected branches in 19 major cities and provinces to receive professional support from BBD and retail managmenet to service SMEs customers This represented the significant investment and effective strategic decision made by Techcombank 2.1.4 Visions, missions and strategic objectives of BBD “+ Visions: Techcombank is the most prefered and leading bank for SMEs in Vietnam, presented by:
e Best bank in terms of “main partner” which is most preferred and
recommended by SMEs in selected segments (based on independent 3rd party’s market research)
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GRIGGS GuMBA NOQT] ~ Group 2
“+ Missions
e To be the preferred and most trusted financial partner of corporate customers, providing them with a full range of financial products and services
e To provide employees with a great working environment where they have multiple opportunities to develop, contribute and build a successful career “+ Objectives:
e Customers are served promptly and on time with their business circle and opportunities
e Requirements, conditions toward customer are described specifically and easy-understanding Product/service offering process are clear, customer can
follow progress and results at each period
e Customers are served by professional teams who deeply understand their business field and advise them the right solution promptly with enthusiastic and thoughtful behavior
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GRIGGS GaMBANO211 (Group) 2
Figure 2.3: Long- term objectives of the BBD Indicators 2012 2013 (forecast) 2014 2015 Deposit 19,332 19351 22,253 25,591 Loan 25,318 29,519 33,062 38,021 NPL 511 2,873 1,719 1,331 NPL ratio 2% 9.73% 5.2% 3.5% Off Balance 8,664 1,559 1,871 2,433
Profit before tax 339,285 407,142 529,285 688,071
(Source: Business Banking Division)
Of these information above, the Percentage of NPL (9,73%) is calculated under Current regulations, and are not calculated in accordance accordance with the Circular 02.2013
The Forecast for NPL ratio in 2014, 2015 is feasible The basis for making
forecasts include:
- The policy of the bank to restructure the repayment period of loans unpaid - Plan to promote mining activities of the company management and mining assets Techcombank (Techcombank AMC)
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GRIGGS GaNIBA NOT! Croup z |
Figure 2.4: The proportion of NPL components Others 31% production ang processing of agricultural products 10% clothing materia (cotton fabric thread.) 9% producing, transmission and ~~ distribution of electricity 3% construction of public facilities _/ 3% Processing manufacturing other materials 7% producing of chemicals and _” fertilizers 3% RealEstate Business 4% Construction of industrial parks exploitation of oil and gas 6% 6%
(Source: Business Banking Division)
In the next step in solving the NPL situation, BBD will:
- Enhance the coordinate with Techcombank AMC in collecting operation - Strengthen the Credit control before and after disbursement
- Setup a specialized team for the recovery and handling of bad debt 2.2 External Environment Analysis
2.2.1 General Environment Analysis (PEST Model) > Political, Governmental & Legal Environment Political, Governmental
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see GaNIBA NOT] Group a
With open diplomacy, Vietnam is willing to co-operate with all countries in the world, helping local banks and business comunities receive a lot of attention and investment from the foreign countries In addition, this policy also helps the foreign enterprises to approach and partner with local enterprises in the fields of business, creating great demand for international payments or trade finance from banks
Legal Environment
The legal environment for financial and banking activities are increasingly improving and strengthening, enabling the regulators to effectively and closely manage financial and banking activities Laws such as the Law on Credit Institutions, the Law Enterprises, Law on Investment, etc are the key legal ground for all business activities
of the banks and SMEs
Besides, there are many policies manage and operate general economic, security national currency with far-reaching effects of the economic sectors in general and banking system In particular, it can be told: the 11" Resolution of the Government about mainly solutions to curb inflation, stabilize the macro economy, security and social stability; the 13" Resolution on several removing solutions for production, business, market support, were issued on 10" May 2012 initially have a positive effect to the operation of business enterprises, especially SMEs, BBD’ s customers The year of 2013 will be a year that these impacts more pronounced and enterprises bravely invested will produce more, meaning that the volume of transactions and the quality between enterprises and Techcombank (BBD) will be improve better than 2012
In addition, the Regulation on the compliance ceiling interest rate mobilize capital of the Credit Institutions; regulations on the maximum rate of the credit growth (the
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¬ HA ngự
GRIGGS way , GaN{BA \NO27 7 Group 2
overall growth rate of the system banking sector in 2013 stands at 12%, lower than the 17% applied in 2012 ), and the regulations on compulsory reserve ratio
In the years of 2010 — 2012, there were many laws and decrees issued with aims to support the financial and monetary market It expected that in the next period, State
and Government of Vietnam will be continue to intervene into the financial markets,
banking system through various laws and regulations
Also, some activities have a direct impact on the banking market has been developed and approved in previous years, such as the scheme on restructuring of banking system The year of 2013 is the year of implementation those all documents, along with the administration of implementation
The contents of which are evaluated directly affect on the banking system in general and Techcombank in particular, are the regulations on loan classification and provision, NPLs problem solving, mobilization, asset valuation rules and regulations on the rights and responsibilities of borrower, etc They will have particular affect on the business operations of Techcombank and its customers
> Economic Environment
The year 2012 witnessed the decline and instability in economic growth all over the world, including Vietnam They are the political instability in the Middle East, the debt situation of the European countries and concerns about the possibility of world economic recession of financial institutions and business communities around the
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~ ¬
GRIGGS sors GaMIBANO211 Group 2
of recovery for the world economy, but it is not clear whether the world economy was going through a period of crisis
Affected by the global economic crisis and the implications of overheated growth in the period 2006-2008, the GDP growth in Vietnam in recent years has been decline and the expectation of economic operators in the country GDP in 2012 was 5.03% compared to the same period in 2011 This is the lowest growth rate in the period 2005 - 2011 and much lower than the expected 5.5% 1*' Quarter of 2013, GDP figures published is 4.98%, posing challenges for economic operators in the national economic recovery
Figure 2.5: The GDP growth rate 2005 — Q1.2013
The GDP growth rate (% / year) | 9.00 ` ~`_- 8.00 _——_e_ 7.00 6.25 —-'_ _ pane | | 6.00 5.32 | | | 1 | 3.00 — ——=—— - ~ — kẽ — 2.00 i ; 00 — — — - ——————————— 2005 2006 2007 2008 2009 2010 2011 2012 Q1.2013 —@— 2005 —®— 2006 4®-2007 —® 2008 —®— 2009 | —®— 2010 2011 82012 Q1.2013
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GRIC „Cự
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of the gold market Various researchers and analysts said that gold market is the main cause and problem affecting economic growth of Vietnam in 2012
In addition, the 2010-2012 period witnessed the peak instability when interest rates in the market up to 24%, rates continued to increase in 2011, the gold market churn when there are the increase and discounts for large gap
Period 2011 - 2012 also was a period that real estate business in Vietnam were declined and frozen The phenomenon of the real estate bubble burst leads to affect
chain related industries such as construction, materials, steel industries this increases
the risk of bad debts for the banking system in general and Techcombank in particular Through some quick analysis above, we can see the difficulties and uncertainties in Vietnamese economic environment All of these factors will be impact and influence on the business of Techcombank in general and the BBD in particular > Social, Cultural demographic and nature environment
Vietnam is a country in Southeast Asia, with bold oriental culture The majority of Vietnam's population comes from rural areas, is not familiar with the approach of banking products, especially products with high technology elements However, with the hard work of learning the new technology, there are increased numbers of Vietnamese people accessed to modern banking products day by day This is a good opportunity for banks to improve the products and services of high technology, attracting or increasing demands from customers