GRIGGS UNIVERSITY
GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM
CAPSTONE PROJECT REPORT
BUSINESS STRATEGY CONSTRUCTION
FOR VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE
IN THE PERIOD OF 2012 - 2015
GROUP 08 - Class X0610
List of students:
Nguyen Thi Ngoc Mai (Leader) Pham Minh Hai
Do Ngoc Bich Le Thi Nga
Trang 2Vietinbak
Date, Xb /03./ 2
CONFIRMATION Vietinbank confirm:
Ms Pham Minh Hai, the Deputy Director of My Hao Branch of Vietinbank along with the members of group No 8 — GaMBAO1.X0610- Global Advanced Master of Business Administration — Griggs University already fact-finding and gain digital data source of Vietinbank over here in order to terminate report “Business strategy construction for Vietnam joint stock commercial bank for industry and trade in the period 2012-2015”
Respectfully
Trang 3APPENDIX
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I[.General background necessIty and target significance of the researched
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CHAPTER II: ANALYSIS OF OPERATION ENVIRONMENT AND CURRENT BUSINESS SITUATION OF VIETNAM JOINT STOCK
COMMERCIAL BANK FOR INDUSTRY AND TRADE .- 20 TIH,/ QOVERVTEKW ON VIETINHA NT se ceaddaadgdakidioaAi¿„-dse 20
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IV./ EXTERNAL ENVIRONMENT ANALYSIS OF VIETINBANK 25
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CHAPTER III: DEVELOPMENT STRATEGY PLANNING FOR VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY
AND TRADE IN THE PERIOD OF 2012 - 2015 -o-cĂccccceeeriei 61 VI./ Goal, orientation, mission, vision of VIETINBANK: 61
1./ Goal, orientation of the Government for the banking industry in general: 61 2./ Target development of credit institutions (CIs) and strategic orientation GF 2018 eee 62
3./ Mission, vision and operational obJectives of VIETINBANK: 62 VII./ Construction of the matrix and selection of business strategies: 62 1/ F@fiii 5W C1: TT xesseeseesendktcbsobipii6id6003i04i602005083460865403305000336088630086 62 sứ PUIERNDØRLDE AI RỦ HHỶÊN guguaaauaaoettrttrddtetnoanttirogaroeorouaaessaynesesll 68 VIII./ Solutions of strategic impÌlemenfafion: - se, 70 lự S6IUđS lị Đl6fEG86 455016 HitH GGIH ý narreeiieeỷisỷsrrriienrssnsnsseensessoilissidesandigh 70 dị ,PUDIHEW SONIHDHE 1 exensardidzebddioriadinksi01016016003900041050001000S661400BNHGEGDIGIGIGDAGGEDHHB 7] SCOPES: Ai SV CSC SOLOS creme Thổ 4/ Solution Of CUSIOMEr SEPVICE QUALILY® sc sisccsccnsscomsnermmnmanasermarenemnepen 73 OC, nveeaaaereenensrnrrsoaaagregrrerssnsraangsnssssnensrnliiibilibtligisdiitgiliessil qa 6) Operation NENVOTK SOLON .iiscnnncin te 74
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Trang 6INTRODUCTION PART
I / General background, necessity and significance of researched subject: 1 / General context:
2011 is a year which the world economy as well as the domestic economy must face with many difficulties
The world economy continues to have complicated development: Political, social fluctuations in some countries such as Middle East and Africa affects to increase strongly oil prices, gold price, food and some raw basic materials; global financial markets, particularly, the euro area is still unstable; inflation starts rising highly in some countries in the region where is important import market of our
country
Domestically, our society-economy continues to face difficulties and challenges, even larger than last year forecast of inflation, macroeconomic stability and social security GDP growth tends to slow down, lower than the
same period in 2010; prices, inflation, interest rates increase higher than the
inflation index and the margin of the business and the situation of dollarization and use of gold for business, making payment tools become more popular and serious; exchange rate changes strongly, gold prices rise; foreign exchange reserves decrease
The simultaneous implementation of three objectives (inflation control, stabilization of macro-economy, ensuring of social security) and economic growth target in 2011 meets much difficulties, challenges; results depend on very many factors of the determination and consensus of the entire society, on the capacity, effectiveness and efficiency of the operation, the successfully implementing organization of the Party's guidelines and Resolution 11/NQ-CP, 24-02-2011 of the Government The impacts of measures to control inflation, stabilize macro-economy, in addition to the positive side, there may be side effects reducing the growth rate, affecting the real estate market, property market, monetary, liquidity and safety of some commercial banks
Trang 72./ Necessity and significance of the research:
In the context of the business environment is fully volatile, difficult and potential of very high risk, the Vietnamese banks generally are necessary to acknowledge to review comprehensively aspects of their activities, in comparison with the objectives and strategies set out, analyzing to find the cause to explain the success or failure on each aspect of the bank itself On such basis, banks will have to build a business strategy for their own to be able to grasp opportunities, overcome challenges, promote strengths, control weaknesses and prevent risks in the process of the business operation to aim at growth and development target to add value to shareholders, meet customer needs better and better Vietinbank is a bank that has just shifted from to the state-owned bank to the model of joint stock commercial bank with many new challenges in the integration environment
3 / The purpose of the subject is to develop and select business strategies for Vietnam Joint Stock Commercial Bank for Trade and Industry in the period of 2012-2015 Through the analysis of business environment to clarify the internal strengths, weaknesses, opportunities and threats from the external enterprise From then to make recommendations and proposals for building the business strategy of the bank
As the staff working at Vietinbank, we wish to apply the knowledge gained during the participation of master training program of business administration of Griggs University on the fact of our work environment, therefore, Group 8 has unanimously selected the topic of "Business strategy construction for Vietnam Joint Stock Commercial Bank for Trade and Industry in the period of
2012-2015"
4 / Subject and scope of research: 4.1 Studied subject:
Studied subject in this exercise is VietinBank on the aspects: human resource development, brand development, management and improvement of service quality, the investment development and expansion work of market share
Trang 8Limited to Vietnam's banking sector characteristics & activities VietinBank situation in recent years and some competitors
5 / Methodology
- The thesis mainly uses general analysis, statistical comparison methods
- Method of data collection: Based on the actual documents of VietinBank, referring to the data from the documents of State Bank of Vietnam, some commercial banks and other related documents
6 / Structure of the thesis: Including the following parts: - Introduction part
- Chapter 1: Basic principles
- Chapter 2: Current situation and operating environment of Vietinbank
- Chapter 3: Business strategy planning for Vietinbank and trade in the period
of 2012-2015
Trang 9CHAPTER I: BASIC PRINCIPLE
Il./ OVERVIEW OF STRATEGY AND STRATEGY MANAGEMENT
1 Strategy:
There are many definitions for the strategy:
-According to Chandler, the strategy is "the identification of long-term fundamental goals, purposes of the enterprise and the application of a sequence of actions as well as the distribution of necessary resources to implement this
goal" (Chandler, Alfred D., Jr in 1962, Strategy and Structure Cambridge,
MA: MIT Press)
-According to James B Quinn, the strategy is defined in a more general nature: Strategy is a model or plan to integrate the major goals, policies, and action sequences into a cohesive whole ina tight way "(Quinn, J., B (1980) Strategies for Change: Logical Instrumentalism Homewood, Illinois, Irwin)
-The strategy word is understood by many means Minzberg has summarized the meanings of the strategy word which have been used by scholars and giving five main meanings of the strategy word, those are "SP" of the Strategy: Plan, Ploy, Pattern, Position, Perspective
-From the points of view above, we can see: strategy is linked to the business’s objectives The establishment of strategy helps the business achieve the target set Strategy is not a separate action but is a series of actions, decisions with intimate relationships with each other All strategies should be aimed at target
of the enterprise, it is established on the basis of internal resources of the enterprise, the external factors that affect the business
-In summary, we can offer a broad definition about strategy as follows: The Strategy is a series of complicated actions to mobilize resources of an organization which may have to achieve a specific purpose
2 Strategic management
2.1 Concept of strategic management
Trang 10an organization to achieve the objectives set out (Fredr David, Concepts
Strategic Management-Statistical publishing House, 2006)
-Strategic management focuses on integrating the management, marketing financial accounting, manufacturing, research and development and information systems and business areas to achieve the success of the organization
2.2 Role of strategic management for the enterprise
- In the condition of market volatility today, more than ever there is just one thing that businesses can know for sure that is the change Strategic management likes a direction, a direction to help these organizations overcome the waves in the marketplace, reaching the future by their efforts and ability Business strategy is designed to help the business focus to best adapt for long- term changes
- Strategic management helps an organization able to more active instead of being passive in defining their future, it allows an organization to be able to
be proactive and influence in the environment it works and so, using all its
capabilities to control and beyond natural variables
- Strategic management creates for each one to be important awareness Both management and employees understand and are committed to implement the business objectives Once people in the business understand that such business is doing and why it’s so they feel like they are a part of the business, they will commit to support all activities of the business
3 Basic issues of business strategy:
- Business strategy must clearly define the basic objectives which need to be achieved in each period and must reflect in all aspects and all levels of production and business activities of the enterprise
Trang 11- Business strategy of the business is reflected in a continuous process from strategic construction to strategic implementation, evaluation, adjustment and check
- Business strategy is implemented and built for a relatively long time (usually for 3 years, 5 years, 10 years .)
Those features can be said that in the market mechanism, the development, implementation of business strategy is especially important for the survival and development of the business because:
- It helps the business identify its purpose, direction as a basis for determining whether an enterprise must do business in what orientation and when they reach certain goals
- The fluctuations of the market always create chances and risks, building implementation strategies to help companies capture, take advantage of
opportunities to overcome the risk, the market's pitfalls
- Development and implementation of strategies create a solid basis for business to make right decisions in accordance with the market place
- Development and implementation of strategies help decide to improve the efficiency of using resources, strengthen competitive position to ensure the sustainable development of enterprises
4 Strategy formulation process:
In fact, a process of comprehensive management strategy has three main components, which are shown in the picture below:
Trang 124.1 Identification of business mission
The report of the business mission is statement of "reason for existence" of an organization It answers the central question "What is our business?" The business mission statement is clearly essential to establish the objectives and prepare an effective strategies "(Drucker, 1970)
4.2 Evaluation of external factors
The environmental factors have a tremendous impact because they affect all subsequent steps of the strategic management process The environment of business includes the macro environment and micro environment (industry environment) 4.2.1 Study of the macro environment: PEST model: Figure 1.2: External environment Demographic
Source: Documents of strategic management lecture
* Political — legal factors
This is factor which influences to all business industries on a territory, political
factors could endanger the viability and growth of any industry Political - legal environment affects greatly to improvement of the business performance of the enterprise by affecting the operation of the business through the legal instruments, macroeconomic regulatory instruments When trading on an administrative unit, the businesses will be required to comply with the political
factors in that area
Trang 13* Economic factors
- Enterprises should pay attention to economic factors both in the short term, long term and the government’s intervention to the economy
- Usually, the businesses will be based on economic factors to decide to invest in sectors and regions
+ The state of the economy: Any economy is always cyclical, in a certain stage of economic cycle, the business will have the appropriate decisions for itself + Factors affecting the economy: interest rates, inflation,
+ Economic policies of the government: Law on the basic wage, the economic development strategies of the government, the incentive policies for the industries: Tax reduction and subsidiary
+ Economic outlook in the future: growth rate, increase in GDP, GDP ratio on
investment
* Socio-cultural factors
- Each country or territory has its cultural values and typical social factors, and these factors are characteristics of consumers in such area
- The cultural values are values creating a society, can foster that society to
develop and exist Therefore, the common cultural factors are often protected
very closely in size and especially the spiritual cultures But, we can not deny the cultural intersection of other cultures in the countries This interference will change consumer psychology, lifestyle, and create prospects for the industries - In addition to the culture and social characteristics also make businesses concern as studying the market, the social factors will divide the community into customer groups, each group has the different characteristics, psychology, income :
+ Average life, expectancy, health, nutrition, food + Average income, income distribution
+ Lifestyle, education, views on aesthetic, psychological life + Living conditions
* Technological factors
- The revolution of technology, various new technologies are created and integrated into the products and services
Trang 14- Investment of the government and enterprises on R & D work: - Speed the technology cycle, the percentage of obsolete technology: - The impact of information technology, internet business activities
In addition to the basic elements on, when the market research, the factors enterprises must become a global macro factors affecting the industry
* Integration factors:
No one can deny globalization is the trend, and this trend does not create opportunities for businesses, nations in developing production and business - Globalization creates competitive pressure, the competition comes from all areas Integration process will make the enterprises adjust in accordance with comparative advantages, division of labor in the region and the world
- It is important that as integrating, trade barriers will gradually be removed, businesses have the opportunity to trade with partners in distant geographic areas, customer of the business at this time is not only the domestic market where the business is doing business but also the customers come from all over * Demographic factor:
The distribution of population and living standards between urban and rural areas is also affecting factors
4.2.2 Study of industry environment:
Analytical model of most most influence to evaluate the nature of competition
in an industry is Five Forces Model of Michael Porter, which is described
below:
Trang 15Potential Entrants | Bargaining power Threat a ine of suppliers entrants Industry TT | Sapp bes Competitors cằm Buyers Rivalry amone 5 Existing firms Bargaining power of Buyers Threat of substitute products or services Substitutes (1) Threat of new entrants:
(2) Threat of substitute products: (3) Bargaining power of suppliers: (4) Bargaining power of buyers (5) Intensity of competition:
Analysis of environmental factors shows that the opportunities and threats that businesses will have to encounter from which to build strategies to take advantage of the opportunities and avoid or lessen the effects of threats After analyzing each separate element of the environment, the task of strategic managers is to provide a general conclusion about the essential factors which
bring opportunities and uncertainties of the environment *Competitive profile matrix (CPM):
Of all the factors that may affect the business, the impact of competition is often considered the most important Competitive profile matrix is an
extension of external factor evaluation matrix in the case of importance,
classification and general critical points have the same meaning The total score which is evaluated by the competitors is compared with the sample companies The factors will be listed in this matrix including: market share, competitiveness, financial position, product quality, customer loyalty The classifications show the way in which the business strategies respond to each
Trang 16factor of competitor: importance with 3 is best and 3 is above average, 2 is average and | 1s poor Table 1.1: Matrix CPM Bank competition Bank Bank competition Vietinbank External 1 competition 2 3 ; Weight :
actors Important mportant Important Important Rating ™ Rating Rating Rating
score score score score pl II| Opportunities Threats Total score 1 |
*External factor evaluation matrix of (EFE)
EFE Matrix evaluates external factors, synthesizes and summarizes the primary opportunities and threats of the external environment affecting the operation of the business Thereby helping the corporate managers evaluate the business’s response level for the opportunities, threats and making judgments about the external factors as favorable or difficult for the company To build this matrix needs to perform 05 following steps:
Step 1: Make a list from 10 to 20 factors of opportunities and threats which you suppose that they are able to influence mainly to the success of the enterprise in business industry / field
Step 2: Sort the importance on a scale from 0.0 (not important) to 1.0 (very important) for each factor The importance of each factor depends on the influence of such factors to the field / industry that your business is producing / trading The total score of the importance of all the factors must be equal to 1.0
Step 3: Determine the weight from 1 to 4 for each factor, the weight of each factor depends on the degree of reaction of each company for the factors, of which 4 is best response, 3 is reaction over average, 2 is average response, | is weak response
Trang 17Step 4: Multiply the importance of each factor with its weight to determine
the score of factors
Step 5: Sum score of the all factors to determine the total points of the
matrix
Rating: Total score of the matrix does not depend on the number of factors in the matrix, is highest is 4 and lowest is 1
Table 1.2: EFE matrix Score
The level | The level | The level | The level
External | Weight Point
No of of of of
factors converted
response | response | response | response capability | capability | capability | capability 1 2 3 4 Py Opportunities II |Threats | | Total point 1 bọc.)
4.3 Evaluation of the internal firm
As the process of analyzing the internal operations of the business which managers know and actively control, through the analysis shows the strengths and weaknesses in the business of firm to develop strategies to promote the strengths and overcome weaknesses The environmental analysis requires to collect and handle information on: production, management operations, financial operations, human resources, research and development, marketing and information systems of the business
* Internal factor evaluation matrix (IFE)
Internal factors are considered very important in every business strategy and objectives that the business has proposed, after considering internal factors, the strategic manager needs to make the matrix of these factors with the aim at
Trang 18considering the possibility to react and recognize the strengths and weaknesses From there to help the business maximize strengths and prepare the internal resources to confront the weaknesses and finding ways to improve these weaknesses In order to form a matrix IEF needs to perform the following five
steps:
-Step 1: Make a list from 10 to 20 factors, including the primary strengths and weaknesses affecting the business, to goals the business set out
-Step 2: Sort the importance from 0.0 (not important) to 1.0 (very important) for each factor The importance of these factors depends on the degree of influence of such factors to the success of the business in the industry The total important score of all factors must equal 1.0
-Step 3: Determine the weights for each factor in the point range from | to 4, where 4 is very strong, 3 is quite strong, 2 is quite weak, | is very weak
-Step 4: Multiply the importance of each factor with its weights to determine the score of factors
-Step 5: Sum up score of all the factors, to determine the total score of the matrix Table 1.3: Matrix IFE Point Score No Internal main factors Weight converted I Strengths ẲẨeee°eeseeee©° ẲẨees°e©ee°eeesee Total score 1 4.4 Strategic choice
The strategic selection is making the subjective decisions based on objective information, to identify the process of operation which may choose thanks to them companies can fulfill their responsibilities and goals Goal must ensure science, consistency and continuity, must ensure
Trang 19advanced realism, flexibility Goals must be clearly defined on the time of implementation and should determine by quantitative indicators Goals are classified according to time including short-term goals and long-term goals Goals are classified according to characteristics including fast growth targets, stable growth objectives and decline growth targets
4.5 Combined Matrix (SWOT):
- SWOT Matrix is a tool that combines the internal and external factors to form the matrix of strengths - weaknesses, opportunities - threats
-A combination of internal and external important factors is the most difficult task of developing a SWOT matrix, it requires good judgment, and will not have a best combination Usually, companies will pursue the strategies WO, WT or ST for them to stay in a position which can apply SO strategies
To conduct SWOT analysis, write down and answer questions related to:
Strengths; Weakness; Opportunities; Threats
-Strengths and weaknesses are often derived from the inner of your organization Opportunities and threats are usually connected with external factors Therefore, it can be considered SWOT is an important tool due to it has large covering range for an organization
Table 1.4: SWOT Matrix O: Opportunities T: Threats SO strategies ST strategies
S: Strengths Use of strengths to take Use of strengths to limit the
List out the strengths advantage of opportunities impact of threats
- WO strategies WT strategies
W: Weakness , ;
Limit weaknesses to take | Limit weaknesses and avoid List out the weaknesses "
advantage of opportunities threats
4.6 QSPM matrix: Matrix QSPM use information obtained from the matrix in stage 1 and the matrix stage 2, from which to have an objective assessment for business strategy can be replaced
Trang 20Table 1.5: QSPM Matrix Main factors Classifica Strategy 1 Strategy 2 tion AS TAS AS TAS Basis of attractive point Internal factors = External factors | Sum total attractive score | L———
With AS is attractive score and TAS is total attractive score Classification for the factors in the same classification level in EFE and IFE
matrices Attractive score (AS) will be from 1 (not attractive) to 4 (very attractive) Calculating attractive score (TAS) by multiplying the score of
classification with attractive score
The group presents some basic theories on business strategy and tools will be applied to analyze and develop business strategy for the period of 2012 - 2015 for Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietinbank)
Trang 21CHAPTER II
ANALYSIS OF OPERATION ENVIRONMENT AND CURRENT BUSINESS SITUATION OF VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE II / OVERVIEW OF VIETINBANK:
1./ General information of Vietnam Joint Stock Commercial Bank for Industry and Trade
Name: Vietnam Joint Stock Commercial Bank for Industry and Trade English name: Vietnam Joint Stock Commercial Bank for Industry And Trade
Abbreviation: VIETINBANK
Establishment:
March 26 1988 Establishment of the specialized banks
November 14 1990 Renamed into the Industrial and Commercial Bank of Vietnam July 03 2009 Renamed into : Vietnam Joint Stock Commercial Bank for Industry And Trade Chartered capital: VND 20,230,000,000 2 / Functions and tasks of VIETINBANK
Multi-industry and multi-field business on finance, monetary, credit,
Trang 22- Cards and electronic banking - Other activities
4 / Organizational structure of VIETINBANK:
- Vietinbank is a large commercial bank, which plays an important and pillar role of Vietnam banking sector
- Vietinbank has developed an operations network comprising of 01 head office, 01 transaction center; 150 branches (of which 02 branches in foreign countries) and over 1,000 transaction offices/savings account Total number of employees of the entire system is more than 18,000 people
- Vietinbank has 07 independent accounting companies including Vietinbank Leasing Company, Vietinbank Securities Company, Vietinbank Asset Management Company, Vietinbank Insurance Company, Asset Exploitation and Debt Management Company Limited; Gold Jewelry company Limited; Union Company Limited and three non-productive activity units as Vietinbank Information Technology Center, Vietinbank Card Center, Human resources Training and Development school
- Vietinbank is founder and venture partner of IndovinaBank
- Vietinbank has a dealer relationship with over 900 banks and Financial
Institutions in over 90 countries and territories worldwide
- Vietinbank is official member of Vietnam’s Banker Association, Asian
Banker’s Association, Society for Worldwide Interbank Financial
Telecommunications (SWIFT), Visa and Mastercard International Services
Association
- As the first bank in Vietnam opened its branches in Europe which marked the boom development of the Vietnam financial market on the region
Trang 23Chart 2.1: Organizational structure: CN NHI Chart 2.2: Organizational and managerial structure of the headquarter Assisting apparatus General Director
Chart 2.3: Organizational structure of Transaction center, branch
Trang 24Deputy Director DELI TEE ANT OLE OOS OR, 5 Business operation results
Table 2.1: Vietinbank’s results of business activities in 2011
Unit: billion dong ROE Increase 2011 Plan of Implementation | Implementation Targets compared | Shareholder in 2011 in 2011 to 2010 (%) Meeting Total assets 460,241 367,712 Zan 441,000 Mobilized 422,955 339,699 24.5 408,000 funds Debt balance 430,359 349,068 23 419,000 and investment NPL ratio 0.74% 0.66% <3% Profit before 8,105 4,598 76.3 5,100 tax Equity 29,502 18,372 60.6 36.02 In which chartered 20,230 15,172 33.3 20,000-25,000 capital ROA 1.96% 1,2% 0 1.2% 25.10% 22.1% 0 16-18%
~VIETINBANK has constantly expanded its scale of operations over the years, as of 2011, total assets are approximately VND 460,241 billion classified as the
Trang 25top of the domestic banking system Although in 2010, 2011 are years the world and domestic economy are more complicated, business production is difficult VIETINBANK has tried a lot to implement possively the Government’s guidelines, supporting interest rates to the economy, carrying out stable business which achieves or exceeds the targets
- For profit, it always achieves results of the next year higher than previous year From 2008 to date, VIETINBANK’s business effectiveness has had good growth, particularly business results by 31/12/2011, profit before tax is VND 8105 billion which exceeds proposed shareholder resolutions The earned profit above is due to significant contribution from credit and investment operations
- Despite the difficult economic conditions, raising capital sources of banks continue to drop, especially on the market 1, Vietinbank still remains growth of 24% This helps Vietinbank ablway stablize on liquidity does not fall into the whirlpool of race of interest rates on the market 1 (mobilized from the population, economic organizations) or loans on the market 2(interbank market)
- Credit growth and investment of Vietinbank also increases 23.1% contributing in large part to the bank's profits in 2011 Thus, after nearly three years of officially moving its operation to the model of joint stock bank has gained encouraging achievements Growth targets are high, business operation
is quality, safe and efficient
- Besides, Vietinbank continues to innovate and upgrade the organization, management and simultaneoulsy accelerate the equitization process Training to improve the quality of human resources, promoting investment and technological innovation, improving the quality of products and services, controling bad debt The result is that although credit growth and investment is at a high level, bad debt of Vietinbank is still under control and low at 0.75% compared to the industry average about 3.6 -3.8% in late 2011
- Vietinbank is also leading business to contribute to the implementation of the work of social security From 2007 to date it has funded over VNF 1,500
Trang 26billion of which it funded VND664 billion in 2011 Vietinbank is also the bank which is continuously ranks in the Top 10 businesses who pay taxes in Vietnam In recent years
For market share:
VietinBank is one of the largest banks in Vietnam with a market share of loans accounting for 11.6% of the whole system, the market share of mobilization accounts for 12% of the whoe system and as one of the leading banks in the area of mobilization of domestic currency In the field of card issuance, VietinBank’s market share accounted for 18% of domestic credit card market and 23% of international credit card market in the country in 2010 In the context of instable economy, unfavorable exchange rates and fierce competitive conditions when large state-owned banks have lost their customer market share for stock commercial banks, VietinBank has still obtained success in increasing the market share held by more than 13.5% market share of trade and export finance and remittance pay of 05 early months of 2011, an increase of 1.5% compared to 2010 In 2011, Vietinbank’s sales of import payment was $ 10.6 billion and export payment of Vietinbank was $8.4 billion, the balance of monthly average guarantee was $678.3 million However, with market share above is not commensurate with the potential and advantages of the system
IV / EXTERNAL ENVIRONMENT ANALYSIS OF VIETINBANK
1 / Macro-environment analysis according to the PEST model:
Macro environment is general factors an economy, politics, law, government,
culture and society, population, nature, world that affect all business industries
and all of financial institutions In the business environment of the bank, such as factors of economy, law and policy often influence the most powerful and direct to the activities of the bank
1.1 Influence of Politics - Law:
Trang 27environment for the operation of the banking sector im gencral and VIETINBANK in particular
- The government has made good legal framework for the banking activities as enacted and gradually completed the laws such as the Law of the Vietnam State Bank: Law on Credit Institutions; at the same time, the Government has promulgated Civil Code, Land Law in which there are very clear rules on collateral for loans, and the transaction decrees of loan guarantee which help loan investment activities of the bank be guaranteed safety However many provisions of the Acts are overlapped and not unitied affecting the operation of the Bank in general and VIETINBANK in particular
- The license for too many Joint Stocks Commercial Bank activities in the years of 2006-2007 made "explosive" activity in both size and diversity of the banking system in recent times which have potential risks and great risk directly impacting on the safety and health of the commercial banking system It is an important cause leading to the restructuring of the banking system to prevent systematic risk in 2011 with the first merger of 03 banks as Vietnam Tin Nghia Bank, Saigon Commercial Bank and First Bank
- In 2011, the Government has issued Resolution 11 with the target of concentrating on controlling inflation, stabilizing macro-economy, ensuring social security State Bank implement tight, cautious monetary policy, harmonious coordination between monetary and fiscal policies to control inflation; administration and control to ensure credit growth in 2011 is less than 20%, the total payment mean is about 15 to 16%; Focus priority on credit capital for business development, agriculture and rural development, export and supporting industries, small and medium enterprises, reduction of speed and the proportion of credit loans by non-productive sector, especially in the area of real estate and securities These are macro-economic policies impacting deeply
and widely on activities of commercial banks, Vietinbank included
1.2 / Economic impact:
- In the end 2010, the world economy had more positive signals, the economic growth of Vietnam achieved positive results, the whole year 2010,
Trang 28GDP reached 6.78% - 6.5% exceeding the target of Government - still in the group of relatively high growth in the region and the world, in which all sectors industries have achieved higher growth rate than the previous year
Chart 2.4: GDP growth speed of the economic areas in the period of 2000 to 2010 12.00% + 10.00% + 8.00% 4 6.00% 3 400% 3 2.00% 4 0.00% ¥ Ỹ 5 ¥ ¥ = = i Ỹ Ỹ 2000 2001 2002 2003 204 200 2006 2007 2008 2009 2010 —— Agriculture and forestry —@—Industry and construction —+— Sendo GDP
(Source: Vietnam General Statistics Office)
With this result, per capita GDP reached USD 1160 in 2010, higher than previous years and tended to gradually increase in 10 recent years
Chart 2.5: GDP per capita in the period of 2000 to 2010 1400 1200 | toe 11 ne 1000 ei 800 + os 639 724 TH sas 42 40 a 400 + IIHHHI 0 + x + + T T T Y 7 * + 2000 2001 2002 2003 204 200 2006 207 +2008 209 2010 Source: IMF Country Report No 06/52, February 2006; IMF Country Report No 10/281, September 2010; Report to the Prime Minister about the economic - social situation in 2010
and missions 2011
Trang 29-However, turning in 2011, the growth of the countries with rising economies still have high growth, average 6.3 % (as reported by World Bank), but the problem of inflation is in danger of spreading globally In 5/2011, China's inflation rate was up to 5.5%, the highest record in 34 past months The inflation of India and Russia is approximately 9%, many other countries have high inflation in two figures The main reason is because prices of world fuel material commodities rise, especially erratic fluctuations of fuel prices Chief economist of the International Atomic Energy Agency (IAEA) said that if the world oil price reaches 120 USD/barrel, the world economy could fall in the second recession
- New challenges of the world economy have had negative impacts on the
economy of Vietnam Under such circumstance, in 2011, the Government has
implemented various synchronious measures to focus on inflation control, stabilization of macro economy, ensuring of social security, in which the clearest measures are shown at the Resolution 11/NQ-CP The implementation of the Government’s Resolution 11/NP-CP has helped the economy in six first months of 2011 achieved positive results: the economy maintained growth
momentum with GDP growth estimated at 5, 6%, revenue increases, deficit
reduced, exchange rate, foreign exchange market gradually stabilized, foreign reserves increased, social security was concerned But in 2012, our economy will continue to face challenges:
+ The first is inflation Inflation in Vietnam has increased highly and lasted throughout 5 last years Vietnam's inflation has many causes, including monetary policy, fiscal policy and price control issue
+ Second is a matter of high interest rates causing the internal economy reviving as domestic production business is more difficult
These difficulties affect largely the business operation of banking system in general and Vietinbank in particular
1.3 / Cultural, social effects
- Vietnam in recent years has have continuous economic growth compared to the region and the world, with growth averaging of 7.5%/year, in 2010
Trang 30growth was 6.78%, people's income continued to rise In 2011, the average income per capita is approximately $1130, the people with high-income are mainly in large cities and industrial areas where the market share has a great influence on the Bank's products and services, here are factors greatly affecting the operation of VIETINBANK
- The people's intellectual standard is increasing The process of urbanization is taking place rapidly With income and living conditions are improved more, customers demand increasingly high, complicately and extremely diverse in the use of banking products and services Customers demand from the bank products and services of high quality with the convenience of many products of modern banking services of banks can not meet This is challenge opportunity for banks in the improvement and development of products to capture and meet such requests
However, the cash use routine of payments is still very popular among the people This is a challenge for the banking industry to change this habit
1.4 / Technological impact
- Currently, the economy is increasingly expanding the integration of advanced science - technology from the world into the country especially in the field of information technology applica for all industries in the country This is factor affecting the application of technological innovation in the business
operation of VIETINBANK
- Advanced scientific and technological level has been applied to fields in
the operation field of the banks on the world to achieve highly effectiveness mow it’s integrated into the country as favorable condition for the operation of tthe bank accessing modern equipment, machinery and new technology which is replaced by manual labor It has created for the Bank to develop products and services which are diversified and mordern to meet better market demands This factor will affect VIETINBANK in modernizing its technology and research to offer new banking products and services
- To be able to compete with foreign banks with advantages in technology, clomestic banks must continuously improve their technology Also, transfer of
Trang 31technology and automation between banks increases, resulting in joint venture to support the new technologies together However, investment in technology of banks is still independent, with no need to connect, share resources and communicate with each other, reducing the effectiveness of interbank information systems as well as reducing customer benefits such as information
connection problems in the card account and system credit between banks, - Another factor is that the telecommunications and_ information
technology system still have many disadvantages Quality of national network, data transmission is unstable, slow speed, high cost, impacting on information technology system and the quality of banking services Changes in technology affect business operations of the bank strongly
1.5 Impact of integration:
Economic integration is an development opportunity for nations also creating many challenges must face to survive and develop
+ Integration creates opportunities for banks to diversify business services to meet the needs of the business and the public
+ Opportunities to attract investment from abroad in the areas of capital, technology and management Participation in capital of foreign enterprises in Vietnam's banking is a inevitable trend Through capital investment, they also invest in banks in terms of technology and management
1.6 Impact of demographic factors:
According to Vietnam General Statistics Office: Average population of the country in 2010 was about 86.93 million people, increased 1.05% compared to 2009 In particular, the population in urban areas is 26.01 million people, accounting for 29.9% of the total population, increased 2.04% compared to last year, the population in rural areas was 60.92 million
Income and living standards between urban and rural areas and ethnic minorities remain great distance The average of an urban household consumes &5% more than rural households
Spending proportion of 80% of the poorest population is increasingly decreased, while the proportion of spending of the richest households is
Trang 32¡increased According to 2006 data spending difference in per capita between the richest and poorest households was 4.54 times The disparity in income can imake a great pressure of urbanization and migration to the cities
The changes in geography, demographics, culture and society affect the introduction of products and services as well as network development plan of the bank
2./ Analysis of industry environment:
- Property of Vietnam's banking sector continues high growth in the period of 2010-2050 According to the forecast of PWC, the asset proportion of ‘Vietnam banking sector over the world will increase from 0.2% in 2009 to
1.4% in 2050, while growth rate of average annual assets in period of 2010 - 2050 of Vietnam banking sector is forecasted to gain 9.3%, higher than many
countries in Asia such as Indonesia, Korea, China and Japan and on par with
India The rapid growth in size of assets of Vietnam banking sector in the next wears, one side shows good development prospect of the industry but on the other hand also requires improving the quality of asset management to achieve profitability corresponding to that scale
- Credit growth will be maintained at prudent level: Actually, what happened in 2010 shown that the hot credit growth and quality control of bad loans is one of the main causes leading to inflation and asset bubble as present
‘Therefore, starting from 2011, the State Bank has limited the growth of credit,
especially with some high-risk sectors in order to overcome the above situation We believe that, in the following years, the State Bank will continue to be caustious with general credit policy of the whole industry and not letting the Situation of hot growth happen in recent years
- Intense competition from foreign banks will force the local banks to
continue to improve technology, corporate management and transparency
‘Advantage of technology is fundamental for the foreign banks to provide the Products and services which are more sophisticated and more useful, since then tio develop strongly the array of retail banking and achieving higher profit margins than local banks In particular, the development of card services is one
Trang 33of the spearheads of this business array According to the evaluation of State Bank, in 2010 there was 80-85% transactions in cash done by the individual customers, while card transactions accounted for only about 5% The reason is explained due to no proper investment of the domestic commercial banks in ATM and POS systems However, at the end of 2010, Banknet and Smartlink, the two largest card alliances in Vietnam inter-connected the network of ATM and POS for the banks belonged the two systems, while Banknet and VNBC (Vina smart card JSC) also inter-connected to the POS system in 11/2010 We think this is an evidence that shows the local commercial banks are making their effor to improve their technology systems to meet the demand for payment cards and online transactions of customers under the pressure competition of foreign banks Through the issuance of Credit Institution Act 2010, the State Bank has also shown its determination to improve transparency and management capability of local banks, focusing on further strengthening the organization and management of Credit Institutions to aim at closer approach to
international standards Also, Circular 09 prescribes the disclosure of
information which is currently taken opinion to complete and replace in the direction of expanding the scope and classification of objects regulated This is also a prerequisite to improve transparency in the operation of enterprises in general and banks in particular in the near future
2.1 / Position of Vietinbank in the industry:
So far, VietinBank is now one of four largest commercial banks in the market with 10% of total assets of the entire system, the market share of captial mobilization accounts for 12% market share of loans accounting for 11.6% of
the entire system, network of branches and transaction offices nationwide ranks
second after Agribank With a good brand and strong relationships with many traditional customers, along with strong financial background, VietinBank has always been one of the leading banks in Vietnam
Trang 34Chart 2.6: Activity network of VietinBank and other banks
Source: Annual report of banks | 2500 2000 15OO 1000 soo Chart 2.7: Correlation between total assets and chartered capital of 500000 430000 400000 350000 300000 250000 200000 150000 100000 5OOOO 500000 450000 -400000 350000 300000 250000 200000 150000 100000 50000
VietinBank with other banks in 2010
Total Assets (VND billions) Chartered capital (VND billion)
Source: Financial statement of the Banks in 2010 + 25000 20000 isooo 10000 sooo
Chart 2.8: Correlation between total assets and chatered capital of VietinBank with other banks in 2010 25000 20000 15000 %
mg Total assets (billion donp)—~##— Chartered capital (billion dong)
Source Financial statements of the Bank in 2010
Trang 35Chart 2.9: Property, outstanding, Mobilizing 499 002 300.000 200 000 100.000 Total assets Debt balance Mobilization «x BIDV @ VCB ® CTG
Total assets / Debt balance / mobilization of 3 banks till the end of 03/2011 (Data consolidated in financial statements)
Indicators of total assets, loans, capital mobilization are led by Vietinbank (CTG), followed by BIDV and Vietcombank
Chart 2.10: CAR, Bad debt (CAR: minimum capital adequacy ratio) 42%ơ 410%+ Â j5 8%- 6%- 3.94% oe — 2.6 —NG * 2%- " 444% 0% T T ' BIDV VCB CTG =cm CAR «em
(Data till the end of 03/2011)
Table 2.2: Compare CAR Rate between BIDV, VCB and CTG BIDV VCB Vietinbank CAR 10.28% 10% 9.86%
Bad Debt (bio dong) 7,403 7,478 S952
Bad debt ratio 2.67% 3.94% 1.44%
Trang 36-Bad debt (debt of groups 3-4-5) of BIDV and Vietcombank is equivalent with more than VND7.400 billion, while Vietinbank is less than VND 4,000 billion -In terms of bad debt ratio over total debt balance, Vietinbank is lowest reaching 1.44% Vietcombank and BIDV are 3.94% and 2.67%, respectively
Chart 2.11: Human resources scale 21000 18000 15000 12000 = BIDV #8 VCB 9000 = CIG 6000 3000 0 Quantity of staff
By 30/9/2011, Vietinbank (CTG) has more than 18,300 employees, 1.5 times more than VCB BIDV’s employees are more than 16,500 people
Trang 37Table 2.3: Compare profit between BIDV, VCB, CTG Unit: Billion VND BIDV VCB Vietinbank PBT in 2010 4.626 5,479 4.598 PBT of 9 month in 2011 3,182 4.615 A be Net profit of 9 months in 2 53] 3.479 4.494 2011 ROA of 9 months 0.64% 1.04% 1.08% ROE of 9 months 10.27% 12.19% | 18.48%
- In 2010, VCB with profit before consolidated tax is largest, reaching early VNDS5500 billion BIDV and Vietinbank’s profit are approximately the same (~
VND4600 billion)
-In the first 9 months of 2011, the profits of Vietinbank soared to about
VND6,000 billion, higher than 30% in 2010
-VCB reached VND4615 billion, profits may increase strongly in Q4 when accounting profit from the sale of shares of Shinhan Vina Bank
-BIDV reached 3182 billion dong of profit before tax of 9 months According to published information of equitization, PBT of first 11 months of BIDV reached VND4100 billion
2.2 / Competitors in the industry
- In recent years, we see the banking business operation has had many
developments and new changes, business activities of ne establishment joint-
stock banks have an exceptionally high rate of growth, the foreign Banks invest and joint venture in Vietnam Especially from 2008 back, the world and domestic economy has many complicated changes which have created many new opportunities and challenges for the Bank's activities The banks emulate the scale growth, expand network of activities, creating competition increasingly fierce Today, our country is forming five types of commercial banks including:
Trang 38+ Joint Stock State Bank holds over 51% in capital
+ Joint Stock State Bank holds below 51% in capital
+ - Foreign joint venture bank
ons - 100% foreign capital bank
These banks have their own weaknesses, strengths and own competitive strategies to survive and grow These are the direct competitors and fiercer for VIETINBANK for example:
Trang 39* Competitor is Joint Stock Commercial Banks with the smaller operating scale but has professional staff, the compact, flexible model, modern core bank as ACB, Sacombank, Techcombank are competing with VIETINBANK in areas such as banking services, interest rates, retail product
* Foreign competitors: such as HSBC, JP Morgan there are advantages in financial resources, stable foreign currency, modern technology, professional Staff
2.3 Potential competitor:
- Under WTO commitments, the banking sector will be gradually opened in
the route for 7 years So far, the number of foreign banks with representative offices in Vietnam, the foreign banks with equity in the domestic commercial
banks, banks with 100% foreign capital are increasing in the near future
- In early 2010, Vietnam's banking system had 22 commercial banks with
capital of less than VND3,000 billion, however, by 12.14.2010, the State Bank was
allowed to extend the dealine of raising capital by the end of 2011 This decision has reduced funding pressure promptly in the banks in 2010 and created the basis for plans to raise capital more successfully in 2011
-In addition to potential rivals in the banking system Vietinbank also has to deal with other potential competitors such as fund management companies Securities companies insurance companies that are potential competitors in fund
raising, especially the capital mobilization from the population
2.4 Bargaining of customers:
Customers in the banking sector is not the same as those in other business line: they are service users and providers So loyal customers will create an advantage for the banks, seizing this matter, with many positive measures such as application of new technologies, applying preferential rates, diversifying products, implementing policies for customers, meeting the capital needs of customers Vietinbank always watches, and goes with enterprises, to solve
difficulties in production and business, in the capital use of the units and
economic organizations to create confidence to customers Banks increasingly offer more products with high competition, customers have more choices and
Trang 40they change to using the services of other banks which are relatively easy On the other hand, each bank also has strategy of marketing and customer care very attentively Therefore, Vietinbank must try their best to find new clients, preventing the focus on some large customers to spread risk and reduce their ability to negotiate on discounts of services
2.5 Bargaining of suppliers:
- State Bank of Vietnam: commercial bank system is dependent and affected by the policy of the State Bank of Vietnam through the compulsory reserve rate discount rate interest rate policy and management of foreign
currency reserves
- Organizations and individuals: Although the role of organizations and
individuals with deposits at banks is important for operational activities of such bank, but their bargaining power is not high because the concentration level is not high Deposits from the economic organizations of Vietinbank in 2011 reached 115.4 trillion (making up 27.3%) mobilization from the population
reached 147.9 trillion (35%) deposit from financial institutions was 159.7 trillion
(37.7%)
- Banks: Vietinbank has cooperation and joint ventures with other banks to Support mutual development
2.6 Threats from substitute products
-By end of 2011, securities and real estate market in Vietnam was in the quiet phase, the gold market had not changed much, investors tended to send idle money in the bank to get interest rate and stability However, when the market returns to its stable, they are substitutes which are really significant for
investors In addition, the insurance companies now with more versatile
products with high interest rates similar to savings products of banks if banks do not have any strategy in raising capital they will lose easily share by the increasing utilities exceed the deposit interest rate
-For lending products, at present, it has the stock market, enterprises can issue stocks and bonds to raise funds for their operating activities, such as limiting the
Credit activities of the bank