Building business strategy for bank for investment and development of Vietnam (BIDV) Nghe An branch from 2010 to 2015

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM CAPSTONE PROJECT REPORT BUILDING BUSINESS STRATEGY FOR BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM BI

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION

PROGRAM

CAPSTONE PROJECT REPORT

BUILDING BUSINESS STRATEGY FOR

BANK FOR INVESTMENT AND

DEVELOPMENT OF VIETNAM (BIDV), NGHE AN BRANCH FROM 2010 TO 2015

Group: 5

1.Vo Thi Minh Sinh - Leader

2 Hoang Viet Hung - Member

3 Nguyen Văn Do - Member

4 Nguyen Van Hai 2 - Member

5 Nguyen Khac Diep - Member

HA NOI, 2010

TABLE OF CONTENTS

TABLE OF CONTENTS 2

LIST OF ABBREVIATION 5

LIST OF TABLES 6

LIST OF FIGURES 7

PREFACE 8

CHAPTER I 11

BUILDING BUSINESS STRATEGY FOR BUSINESS UNIT 11

1.1 Business strategy 11

1.1.1 Definition 11

1.1.2 Roles of business strategy 12

1.1.3 Types of business strategies 14

1.1.3.1 Concentrate Growth Strategy 14

1.1.3.2 Basic competitive strategy 14

1.1.3.3 The competitive strategies for organizations 15

1.2 Strategy building procedure 17

1.2.1 Mission and Goals 18

1.2.2 External environment analysis 19

1.2.3 Internal environment analysis 20

1.2.4 The analysis technique and strategic selection 21

1.2.4.1 External factor evaluation matrix (EFE) 21

1.2.4.2 Internal factor evaluation matrix (IFE) 22

1.2.4.3 Competitive profile matrix 23

1.2.4.4 SWOT Analysis 23

1.2.4.5 Internal – External Matrix 25

1.2.4.6 QSPM Matrix 26

CHAPTER II 27

THE FACT OF BUSINESS ENVIRONMENT OF BANK FOR INVESTMENT AND DEVELOPMENT OF VIETNAM, NGHE AN BRANCH 27

2.1 Typical characteristics of banking services business and experience from building business strategy of domestic and foreign banks 27

2.1.1 Typical characteristics of banking services business 27

2.1.2 Experiences from building business strategy of domestic and foreign banks 29 2.1.2.1 Experience from building business strategy of Industrial and

Commercial bank of China (ICBC) 29

2.1.2.2 Experience from building business strategy of Vietnam bank for Agriculture and rural Development 30

2.1.2.3 Lesson for building business strategy of BIDV, Nghe An Branch 31

2.2 Overview of Bank for Investment and Development of Vietnam, Nghe An Branch 32

2.2.1 General introduction 32

2.2.2 Functions, tasks and business activities 32

2.2.3 Core products and services 32

2.2.4 Structure of BIDV Nghe An 33

2.3 Analysis of external factors influencing the operations of BIDV, Nghe An branch 33

2.3.1 Mega-environment/ Macro environment 33

2.3.1.1 Econonomic element: 34

2.3.1.2 Sociocultural element 37

2.3.1.3 Legal-political element 40

2.3.1.4 Natural element 41

2.3.1.5 Technological element 42

2.3.2 Task environment/ Micro environment 44

2.3.2.1 Rivalry 45

2.3.2.2 Bargaining power of customers 51

2.3.2.3 Bargaining power of suppliers 53

2.3.2.4 Threat of new entrants 54

2.3.2.5 Threat of substitute products/services 54

2.3.3 Evaluation on opportunities and threats 55

2.3.4 Matrix evaluation of external factors (EFE) 56

2.4 Analysis on internal factors of BIDV Nghe An 58

2.4.1 Human resources 58

2.4.2 Marketing 61

2.4.3 Analysis of BIDV business activities 64

2.4.3.1 Capital mobilization 64

2.4.3.2 Credit 66

2.4.3.3 Services 70

2.4.4 Organizational structure and management capacity 71

2.4.5 Financial capability analysis 72

2.4.6 Information systems analysis 75

2.4.7 Strengths, weaknesses assessment 75

2.4.8 Matrix evaluating the internal evaluation (IFE) 76

2.5 The need to build the business strategy of BIDV Nghe An 79

CHAPTER III 81

BUSINESS STRATEGY OF BIDV, NGHE AN BRANCH FROM 2010 TO 2015 81

3.1 Strategic plan selection 81

3.1.1 SWOT Matrix 81

3.1.2 IE Matrix 84

3.1.3 Strategic selection of QSPM Matrix 86

3.2.Contents of business strategy of BIDV, Nghe An branch from 2010 to 201588 3.2.1 Business targets 88

3.2.2 Contents of business strategy of BIDV- Nghe An branch from 2010 to 2015 88

3.3 Implementation solutions of BIDV Nghe An 89

3.3.1 Human resource development and training 89

3.3.2 Marketing 91

3.3.3 Technology 93

3.3.4 Restructure business activities of BIDV 94

3.3.5 Product developments and supervisions 95

3.4 Implementation phases 96

3.4.1 Phase 1 (2011 – 2012) 96

3.4.2 Phase 2 (2013 – 2014) 97

3.4.3 Phase 3 (2015) 98

3.4.4 Strategic solutions implementation (Action plan): 100

3.5 Recommendations 104

3.5.1 For Congress, Government 104

3.5.2 For State Bank Of Vietnam 104

3.5.3 For Bank of Investment and Development of Vietnam 105

CONCLUSION 106

REFERENCES 107

APPENDIX 109

LIST OF ABBREVIATION

NHTMVN Vietnam Commercial Bank Ngân hàng thương mại Việt Nam

VCB Joint Stock Commercial Bank

for Foreign Trade of Vietnam

Ngân hàng thương mại cỏ phần ngoại thương Việt Nam

ACB Asia Commercial Bank -

Nghe An Branh

Chi nhánh Ngân hàng Á châu Nghệ An

NN&PTNT Vietnam Bank for Agriculture

and Rural Development

Ngân hàng Nông nghiệp và phát triển Nông thôn

BIDV Nghe

An

Bank for Investment and Development of Vietnam - Nghe An Branch

Chi nhánh Ngân hàng Đầu tư và Phát triển Nghệ An

BIDV Bank for Investment and

Development of Vietnam

Ngân hàng Đầu tư và Phát triển Viê ̣t Nam

LIST OF TABLES

Table 2.1 The number of credit institutions at the time of 31/12/2009 45

Table 2.2 Network activities of credit institutions at the time of 31/12/2009 46

Table 2.3 The factors affecting the choice of bank customers 47

Table 2.4 Assessing the competitiveness of Nghe An BIDV compared with other banks 48

Table 2.5 The number of customers in Nghe An BIDV 2007-2009 52

Table 2.6 Matrix EFE of BIDV Nghe An 56

Table 2.7: Number of staff in BIDV Nghe An, 2007-2008 59

Table 2.8 capital mobilization and Capital mobilization market share of Nghe An BIDV from 2007 to 30/6/2010 64

Table 2.9 Outstanding of Nghe An BIDV and banks in the rgion of Nghe An from 2007 to 30/6/2010 67

Table 2.10 income of service activities of Nghe An BIDV from 2007 to the end of the first half of 2010 70

Table 2.11 Total assets and capital mobilization in 2007-2009 73

Table 2.12 Pre-tax profit of the branch 2007-2009 73

Table 2.13 Pre-tax profit of the branch 2007-2009 74

Table 2.14 IFE Matrix of BIDV Nghe An 77

Table 3.1 SWOT matrix 81

Table 3.2: QSPM Matrix 86

Table 3.3: Selected strategy is in prior order 87

Table 3.4 : Estimated financial criteria from 2011 to 2015 109

Table 3.4 : Estimated financial criteria from 2011 to 2015 110

Table 3.5 Income statement from 2011 to 2015 110

LIST OF FIGURES

Figure 1.1 Tasks of strategic management 13

Figure 1.2 Business strategy building procedure 18

Figure 1.3 External environment 20

Figure 1.4 SWOT analysis 24

Figure 1.5: Importance Mark in IE Matrix 25

Figure 2.2 Market share of capital mobilization of BIDV Nghe An comparing with other banks in Nghe An province in 2009 49

Figure 2.3 Market share of services of Nghe An BIDV and other banks (2009) 51

Figure 2.4 Customer structure of BIDV Nghe An in 2009 52

.Figure 2.5 Human resource structure of BIDV Nghe An, 2009 59

Figure 2.6 Human resource structure of BIDV Nghe An towards experiences 2009 60

Figure 2.7: Capital mobilization structure of Nghe An BIDV compared with other banks in the same area 65

Figure 2.8: outstanding credit structure of Nghe An BIDV and banks in the region of Nghe An Province 67

Figure 2.9: structure of outstanding loan of groups 68

Figure 3.1 IE matrix of BIDV Nghe An 85

Figure 3.2 IFE matrix - EFE matrix of BIDV Nghe An 85

Figure 2.1 Organizational structure of BIDV Nghe An 109

PREFACE

1 The necessity of selecting the research topic

Today, International economic integration is an inevitable trend for economically developing countries wanting rapid access to advanced economies For Vietnam, international economic integration is important and is the proper direction to position Vietnam in the International business arena by offering many opportunities for sustainable and rapid development of the economy

Confronted with the requirements of development and economic integration of Vietnam and the world, the Vietnamese government has made commitments to international financial institutions to open financial markets and banks in Vietnam Competition and international economic integration requires commercial banks to change traditional business practices to meet the requirements of new international business climate In the context, the commercial banks have to modernize, play a key role in the monetary financial market, create competitive capacity, and quickly adapt the process of integration and development

To achieve the initiative in the integration process, overcome challenges, and take advantage of good opportunities requires NHTMVN to analyze their strengths and weaknesses This will dictate appropriate strategy for each stage of development to be consistent with the trend on the principle of ensuring national interests and enterprises

In the general context, to survive and grow, BIDV Nghe An belongs to BIDV, also needs to build and implement updated business strategy BIDV Nghe An focuses

on scale expansion, technological modernization, diversification and improvement of modern banking products and services based on advanced technologies; market- based management reform; building, standardizing the entire business operation process and risk management; renewal management, gradually building prestigious bank in area and over the world; competitive capacity, efficiency, safety, availability of capital,

investment expansion to meet the needs of industrialization and modernization of the country

Successful building and implementation of business strategy is an urgent need, and is a mission for the existence and development of banks in general and BIDV Nghe

An in particular From such a practical situation, the team has chosen the topic:

"Building a business strategy for the Bank for Investment and Development in Nghe

An 2011 to 2015 and implementing solutions” We hope that the research will contribute to improve business efficiency and put BIDV Nghe An on a new position in BIDV system in detail and the system of commercial banks in Vietnam in general

2 Research Purposes

Based on the research methodology, the authors give further analysis, generalize the basic theory of business strategy, along with analysis and assess the actual operation of BIDV Nghe An in order to build business strategy for the BIDV Nghe An from 2011 to 2015 and propose some implementation solutions which bring the BIDV Nghe An to be one of the strong branches among system of BIDV and Nghe An province

3 Objects and scope of research

- Objects of the research includes BIDV Nghe An staffs, customers, products, business operations, and factors affecting the business strategy of BIDV Nghe An

- The research scope of the project is limited in building business strategy for BIDV

- Sources of information: Topic is used secondary information from newspapers, the Internet and reports from BIDV Nghe An, State Bank of Nghe An Province

5 The theoretical meaning and practice

Topic is based on the theories relating to strategic management and applies the theories to analysis strength - weakness, opportunity - threat of BIDV Nghe An, then to develop business strategies and to propose solutions for these strategies, especially in the context of Vietnam's accession to WTO and fully implement commitments on the banking sector in 2015

6 Structure: The research paper includes the following three chapters:

 Chapter 1: Methodology of rationale of the business strategy of business

 Chapter 2: Analyzing business environment fact BIDV Nghe An in the recent past

 Chapter 3: Business strategy of BIDV Nghe An from 2011 to 2015 and implementing solutions

CHAPTER I BUILDING BUSINESS STRATEGY FOR BUSINESS UNIT

1.1 Business strategy

1.1.1 Definition

In the market economy, every business will start its business operation process

by establishing goals to be achieved in the long term And to be able to achieve these objectives, the leaders need to set out the different means and the ways to achieve that goal; it also means that managers must build a specific business strategy for their

enterprises

There are many different opinions on business strategy, Fred R David said:

"Strategy is the means to achieve long-term goals." Meanwhile, Bruce Henderson, strategist at the same time as founder of Boston Consulting Group has linked the concept of strategy with competitive advantage Henderson wrote, "The strategy is a prudent plan of action to combine and develop competitive advantage of the organization The difference between you and competitor is the basis for your advantage "

According to Chandler – who is one of the first to initiate strategic management theory- said "business strategy of a business is determining the long term and basic objectives and purposes and apply a sequence of actions as well as the allocation of necessary resources to implement this goal

Therefore, it is obvious that there are many different views on the strategy Each concept included different aspects and is according to level In Our opinion, to understand and the most common, strategy may be understood as the means or a written explanation on the operation orientation to achieve business objectives set out

in the long term There are three levels of business strategy needed identified include:

- Corporate level strategy: Toward the purpose and scope of the organization overall

- Business level strategy: Related to how to compete successfully in the specific market

- Functional level strategy: Help the corporate level strategy and the Business level strategy effectively implement due to all components such as resources, processes, people, and the necessary skills

1.1.2 Roles of business strategy

Business strategy is especially important for the formation, existence, and

development of the business Business strategy is seen as a guideline for the operation

of enterprises, is an important element to create success for enterprises The role of

business strategy is reflected in the following:

Business strategy helps businesses identify the purpose and orientation of the enterprise, is a basis, a guideline for all business activities of enterprises Without strategy, enterprises will not identify the target, its orientation during the operation, which will not mobilize human and material resources to promote the strengths of business

Business strategy helps businesses understand and take advantage of business opportunities, while there are proactive solutions to overcome the risks and threats in the process of business competition Thanks to business strategy, enterprises can provide plans to succeed in the competitive process, particularly in market economy and integration Through business strategy, enabling businesses to apply limited resources to generate superior results to achieve goals set out, to help businesses identify the path and direction to create competition advantages against rivals

Business strategy contributes to improving the efficient utilization of resources, enhancing the competitive position of enterprises, and ensuring the sustainable

development of enterprises Through business strategy, helping businesses make the

best use of financial resources, human resources, infrastructure, information technology, and brand All these factors will maximize the business power and use the most effective way to achieve the objectives set out

Business strategy creates a solid basis for making policy and reacting in accordance with the market fluctuation Changes in the business environment generate

opportunities and threats in the future, business strategy will help businesses take

advantage of opportunities and reduce risk, help businesses better prepare to deal with

and lead the market changes

Business strategy helps enterprises reduce risk and enhance the ability of businesses to take advantage of business opportunities when they appear

Business strategy plays a central role in the development of unique products, which helps empower businesses and increase the confidence of customers and partners for businesses

Figure 1.1 Tasks of strategic management

(Source: Lecture of strategic management subject – Associate Professor.Dr Ngô

Build strategy

to achieve the targets

Assess implemen

t, monitor, and repair

adjustment

Improve/

change (if necessary)

Repair

(if

necessary)

Repair (if necessary)

Improve/

change (if

Restore 1,2,3,4 (if necessary)

Enforce and administr ate selected strategy

1.1.3 Types of business strategies

1.1.3.1 Concentrate Growth Strategy

Concentrated Growth strategy is strategy directly aimed at serving the needs of the

customer groups or restriction segment, including three basic strategies:

Market penetration is strategy to exploit existing market and existing customer

base of business through such forms as increase in the number of sales employees, and

increased spending for advertising and promotion strategy Market penetration aims to

increase market share for products or services available in a defined market This strategy is used when the current market is not saturated and still contains potential for product and service of the enterprise; market shares of competitor‟s declines but sales

of whole sector increases

Market development: is a strategy related to the development of an existing product

or service in a new market or geographic area This strategy is used when enterprises have the ability to research and penetrate market, especially in foreign markets; enterprise production capacity has not been depleted and distribution network in new markets is reliable, good quality, reasonable cost

Product development: through investment in research and development, the

enterprise has the capacity to launch an improved product, modifying from the existing

products This strategy is used when the enterprise's products are saturated or during preparation of saturation (products are in the final stages of product life cycle); enterprises are operating in high growth sectors, improvements, and application of high technology competitive situation

1.1.3.2 Basic competitive strategy

a Cost leadership strategy

Cost leadership strategy is a strategy to provide products or services that has

characteristics accepted by customers with the lowest cost in relation to all competitors The purpose of cost leadership strategy is to serve better than competitors, with the

purpose of providing products and services with the lowest possible cost compared to

other competitors

b Differentiation strategy

Differentiation strategy is to create strategic competitive advantage of companies by creating products (goods or services) that the customer perceives as being different compared to products offered by other competitors This difference

best serves customers when the competitors can not do the same thing With this

strategy the company must offer products with unique and specific features and create high value to consumers The difference is new to competitor The company's products have outstanding characteristics, and customers may be willing to accept the products

of company with a higher level of competition for differences

1.1.3.3 The competitive strategies for organizations

Though at the same company, each business unit has different market share in the market

a Market- leading unit

- Strategies to expand the total market demand: Searching for new geographical areas to sell, new clients, developing new tools, encouraging the use of more products

- Defense Strategy: Helping business unit lead the market and keep its position on the current market The market leading unit has always been threatened by other

competitors, especially those units with a challenging position in the market Thus, business units have continued to defend against the attacks of competitors

- Market share expansion strategy: By purchasing or acquiring small competitors‟ business units, attempt to capture the market share of major competitors

b Business units with market challenges

Taking advantages of the market leading business and other competitors to increase market share or enabling to do business parallel with the competitors and not touching the other competitors To implement attack strategy, business units need to perform the following steps:

- Determine which of your competitors to attack and targets of attack strategy

- Select appropriate strategy to attack on the front, flank, or siege

c Business unit under markets:

This business unit does not want to deal with rivals or to challenge the leading

market due to insufficient resources, fear of loss, costly expenses etc They sought to

evade competitors by following the market-leading players through the simulation

d Market haven business unit

- These units are always looking for only one few safe and potentially lucrative segments to harbor To succeed on narrow market segments, they often make typical specialization strategies

- Specialization based on the end user: Depending on the industry in which business units hiding market to choose a customer type wishing to use the product or service

- Specialization in stages in the process of production, product distribution: the business unit can choose details of components of a completed product, a complementary product

- Specialization based on customers: Specialization by customer: Select customers

by demographic criteria to serve customers with high, medium, or low income, or age

of customers

- Specialization based on sales region: Select a geographic area to serve as domestic

or international market

- Specialization based on feature of products: High quality and luxurious or average

- Specialization based on products of each sector: According to one or several items

in large industries

- Specialization based business services that competitors do not offer

1.2 Strategy building procedure

Business strategy has to ensure existence and development of the enterprise The

strategy is unique, is built on competitive advantage foundation, performing the link

between business and environment, emphasizing the development of business

Business strategy building procedure is the first step in strategic management The procedure of building strategy includes the following contents:

Figure 1.2 Business strategy building procedure

(Source: Lecture of strategic management subject – Associate Professor.Dr Ngô

Kim Thanh)

1.2.1 Mission and Goals

Every corporation must determine the mission and goals of their operation In

another words, business must show their purpose to exist A good business objective

needs to be developed through a serious working process by taking the opinion of staff committee The mission of an organization is the operation purpose, is the reason for the establishment, existence and development of an organization The mission of a business answers the question: what is the organization start up and exist for? The

Mission & Goals

External factors

analysis (Opportunities and

threats)

Selection and building strategies

Internal factors analysis (core resources, capacity)

Business strategyCorporation strategy

Strategy change

Suitability of strategy, structure, and control

Organizational

structure

Control designFunctional strategy

objectives are the specific performance which the organization wants to achieve in a certain period of time

1.2.2 External environment analysis

To ensure business strategy to bring high feasibility, after determining the business goals, enterprises must analyze and assess the influence of external environmental factors to the implementation of their business‟ objectives

The process of analyzing the external environment includes analysis of macro and micro Analysis of the macro includes the following elements: economic elements: character and targets, direction of economic and social development, GDP and GDP per capita, inflation, personal income, interest ; Legal- political elements: political sustainability, the perfection of law, the Government behavior to competition, monopoly and economic sectors, the Government and enterprise relationship ; Social and cultural elements: change in acknowledge of cultural value, living style, education, health service, income distribution, geography and society, quantity and family structure ; Technological elements; Natural elements and global elements

Micro environment includes Analysis of rivals which understand competitors‟ strategy, targets, strengths, and weaknesses; besides, business analyzes customers‟ characteristics, development trend and also analyzes groups, scale, needs, and direction

of customers

Analysis of environmental factors will allow businesses to clearly identify opportunities and threats that businesses will face, thus helping business give the direction, appropriate solutions to take advantage of the chances and overcoming challenges The researchers gave EFE matrix to evaluate the external factors

Figure 1.3 External environment

(Source: Lecture of strategic management subject – Associate Professor.Dr Ngô

Kim Thanh)

1.2.3 Internal environment analysis

Internal analysis is the next step of the process of building a business strategy to find out the strengths and weaknesses of the organization By using the Internal

analysis, the enterprise can launch the strategy to achieve competitive advantage, and

take advantage the strength of the business, the strength of the resources and capability

of building and maintaining sustainable competitive advantage for businesses

Internal analysis is focused to assess and analyze the following: financial

performance: human resource, management, organizational structure, marketing,

research and development, information technology; internal control

Internal analysis enables enterprises to realize the strengths and weaknesses of the business, from which to build strategies to optimize the strengths and weaknesses

Technological

element

Threat of new entrants

Threat of substitute products/services

Bargaining power of suppliers

Rivalry

Bargaining power of customers

Legal-political

element

Natural element

Sociocultural element

Economic element

Internation

al element

1.2.4 The analysis technique and strategic selection

After identifying the goals and mission, external and internal factors analysis, to develop business strategy, business analyzes and selects strategy This process uses the following matrix:

1.2.4.1 External factor evaluation matrix (EFE)

To assess the external factors that affect business, people use the external factor evaluation matrix EFE evaluates, synthesize and summarize the main opportunities and risks from the major external factors These factors affect the business operation Thereby business administrators will be able to assess the level of response to their business opportunities, risks in order to make suitable judgments If they are favorable

or difficult to the company To build this matrix we have to follow five steps below:

- Step 1: List factors: Gather a list of external factors then divide factors into two

groups: opportunities and threats

- Step 2: Assign weights: Assign a weight to each factor The value of each

weight should be between 0 and 1 (or alternatively between 10 and 100 if you use the 10 to 100 scale) Zero means the factor is not important One or hundred means that the factor is the most influential and critical one The total value

of all weights together should equal 1 or 100

- Step 3: Rate factors: Assign a rating to each factor Rating should be between 1

and 4 Rating indicates how effective the firm‟s current strategies respond to the factor 1 = the response is poor 2 = the response is below average 3 = above average 4 = superior Weights are industry-specific Ratings are company-specific

- Step 4: Multiply weights by ratings: Multiply each factor weight with its rating

This will calculate the weighted score for each factor

Step 5: Total all weighted scores: Add all weighted scores for each factor This

will calculate the total weighted score for the company.[1] A total important point in maximum of 4.00 and the lowest is 1.00 Total average score of 2.50 Total important points lower than 2.50 indicates that business has poor response to changes from the external environment and on the contrary, the total important point higher than 2.50 indicates the company is quite sensitive to business environmental business

1.2.4.2 Internal factor evaluation matrix (IFE)

Matrix has been developed to identify the strengths and weaknesses of the business The process of setting up a matrix is similar to the process of developing the external factors evaluation matrix, but substitute above assessed factors by the strengths and weaknesses of the business

Creating an IFE matrix is an intuitive process which works conceptually very much the same way like creating the EFE matrix The IFE matrix process uses the five steps below

- Step 1: Key internal factors: Making a list os factors is crucial to the

competitiveness of the company (between 10 and 20 elements)

- Step 2: Weighting: Assigning a weight to each factor The value of each weight

should be between 0 and 1on a scale from 0.0 to 1.0 (increasing level of importance) with a total score of the factors of 1.0 Critical levels are based on the importance of the factor to the company, regardless of these factors with strengths or weaknesses

- Step 3: Rating: Classifying from 1 to 4 for each factor that represents a score

showing the internal characteristics of the company to that factor Score 1 is a major weakness (rating = 1); score 2 is a mior weakness (rating = 2),while score

3 is a minor strength (rating = 3), and score 4 is a major strength (rating = 4)

[1 ] How do I create the EFE matrix Retrieved September 20, 2010, from

http://www.maxi-pedia.com/EFE+matrix+external,

Therefore, these scores reflect the competitiveness of each factors of the business compared with competitors in the sector

- Step 4: Multiplying: Scoring each factor by multiplying the importance of that

factor with the corresponding classification scores (The scores can be seen in step 2 and step 3)

- Step 5: Summing: The total score in the matrix is given by adding the scores of

all corresponding factors of each company This total score shows the absolute competitiveness of the company

The highest total score is 4, the lowest is 1 and the average score is 2.5 Accordingly, if the total score of all factors in the list of the IEF matrix is from 2.50 or more, the business has an absolute competitiveness above average This also indicates the business has a strong internal environment In contrast, the total score in the IFE matrix

is smaller than 2.50, the absolute competitiveness of enterprises is lower than average, suggesting that the business has a weak internal environment

1.2.4.3 Competitive profile matrix

In all events and trend, environment can affect the formation of business strategy; which the effect of competition is often considered the most important Competitive profile matrix is used to identify major competitors and their advantages and disadvantages

1.2.4.4 SWOT Analysis

The aim of using SWOT analysis is to give the strategies which can be applied

to match with the strengths, weaknesses, opportunities, and threats of the business entity This does not mean all listed strategies are carried out by the business entity The process of using SWOT analysis of the business entity given following:

- Listing the external opportunities and threats and the strengths and weaknesses of the business entity

- Combining the internal strengths with the external opportunities is to construct

SO Strategy: Bring into

the internal strengths is to make use of opportunities from the external

environment

WO Strategy: Overcome

the weaknesses of the business entity by making use of the opportunities

ST Strategy: Make use of

the internal strengths is to get over the threats from the external environment

WT Strategy: Decrease

the effects of threats from the external environment and restrain the weaknesses

simultaneously

1.2.4.5 Internal – External Matrix

IE Matrix (Internal – External Matrix) puts the different capacities of one business entity in one table divided into 9 squares This figure constructed bases on 2 main aspects:

- Sum of important mark of IFE is indicated in X axis

- Sum of important mark of EFE Matrix is indicated in Y axis

- The company has to construct IFE and EFE Matrix which is the foundation to establish its own IE Matrix

- X axis show the importance of IFE Matrix

 If Mark is from 1.0 – 1.99, means: The internal factors are weak

 If Mark is from 2.0 – 2.99, means: Average

 If Mark is from 3.0 – 4.0, means: Strong

 -Y axis show the importance of EFE Matrix

 If Mark is from 1.0 – 1.99, means: weak

 If Mark is from 2.0 – 2.99, means: Average

 If Mark is from 3.0 – 4.0, means: Strong

Figure 1.5: Importance Mark in IE Matrix

Weak 1.0 – 1.99

 If the company capacity is allocated in squares I, II, IV: should be developed and constructed

 If the company capacity is located in squares III, V, VII: Should be maintained

 If the company capacity is located in squares VI, VIII, and IX: Should be harvested or rejected

1.2.4.6 QSPM Matrix

Using QSPM helps choose and decide business strategies This method is using the data collected from input stage to evaluate the application of the strategies given in

combination stage The steps needed to construct QSPM Matrix are followings:

– List out the opportunities/threats, strengths and weaknesses of the business entity Assess the importance of each factor listed according to the certain evaluation mark (From 1 to 4) In other words, identifying the mark, then evaluate importance of each factor to the business entity

– Select the typical strategies given at combination stage Assess each strategy basing on factors, opportunities, threats, strengths and weaknesses listed according to the mark from 1 to 4

– Calculate the mark of each strategy by summing the multiplication of importance mark of each factor and importance mark of each strategy Comparatively, evaluate and select the strategies basing on importance mark of each strategy, The strategy with the highest mark is used by priority

CHAPTER II THE FACT OF BUSINESS ENVIRONMENT OF BANK FOR

INVESTMENT AND DEVELOPMENT OF VIETNAM, NGHE AN BRANCH 2.1 Typical characteristics of banking services business and experience from building business strategy of domestic and foreign banks

2.1.1 Typical characteristics of banking services business

Banking is a business entity which concentrates on monetary services The characteristics of business activities in banks are different from these of other business, models, the typical factors of the activities affect the strategy process, and thus, when constructing and carrying out the business strategies of banks, the managers must consider the following basic factors:

Potential demand for using banking services : is the important factor which

assure the success of the business entities in general and banking in particular, the potential demand for using banking services is constructed by the following factors:

- The change in population structure, the increase in population, the increase in quantity of industial zone, new city zone, which leads to the increase in number of business entity and individual having demand for banking services also go up

- GDP and GDP per person, average income of citizens over years If GDP incrases quickly, the average income of citizens increases, then the demand for using banking services will increase as well

- The development of the economy is the the factor which affects the demand for using banking services, in this time when there is economic development, the unemployment rate is low, which increases the demand for using banking services

- Structure indicator of payment reflects the regularity of using banking services

by the citizens

If The demand scale of the customers is largee, the banks can make use of such

a big scale, impove their business activities and services

The management from State Bank of Viet Nam : The state Bank of Viet Nam

is the entity managing activities of banks, the management activities of SBV influence business activities of banks directly Hence, business strategy of banks depend much

on policies of SBV When SBV applies any policy, the banks have to adjust their activities in order to adapt with that policy In other words, banks are the tools to carry out the monetary policies in the economy When banks develop the strategies, they

have to comply with law and regulation given by the SBV

Development of the related industries and support : The development of the

related industries and support, for example, securities, insurance, information technology… have a significant effect on business activities of banks In developed economy, with the strong development of insurance, securities, these factors are pushing the development of business activities in banks When the secrities market develops, banks become the ideal service supplier for the securities market, for instance, underwriting, securities advisory service, broker… When the secrities market and insurance develop, there is demand for banking services, increase the development

of banking services

Competitors : Banking activities have typical characteristics in which the

relationship and reputation of each bank affects the reputation of the banking industry Therefore, the existance and development of competitors affects directly business activities of each bank.In contrary, banks can both compete and coordinate the reputation of the banking industry The failure of individual banks affects the integrity

of the whole credit institution system This bad effect takes place quickly and circulates with high speed, with large scope, spread over the whole industry The typical example

is the financial crisis 1998-1999

2.1.2 Experiences from building business strategy of domestic and foreign banks 2.1.2.1 Experience from building business strategy of Industrial and Commercial bank of China (ICBC)

Established in 1984, Industrial and Commercial Bank of China – ICBC is currently the largest commercial bank in China By the end of 2009, ICBC broadened the activities network through 20 nations and global with 162 transaction branches Since 2006, the bank was listed on Shanghai and Hongkong exchange, ICBC has become a commercial bank with the largest market capitalization, , the bank was listed

on Shanghai and Hongkong exchange, ICBC has become a commercial bank with the largest market capitalization, largest profit, largest number of customer depositing money, trademark is valued in highest rank The total assets of ICBC is 1,250 billion USD, much more than that figure 2 years ago (881 billion USD) The competion among

the Chinese banks considerably increases when the process of WTO integration is

developing Thus, To improve the postion in finance and banking market, ICBC constructed and carried out special business strategies which is called ebanking development strategy according to the model „cement and mouse‟

To be intelligent and smart like „a mouse‟, ICBC upgrated its ebanking twice during the last 2 years and achieve transaction value which is 4 billion yuan(482 million USD) per day since 12/2003 ICBC is leading supplier in ebaking payment of telephone and mobile phones in domestic market

Along with lauching PR strategies about the convenience of e-banking, ICBC approved the most important improvement to save time in process of pay monthly invoices, avoid lateness fines, and improve information security Most of large banks in China also apply the similar PR strategies with ICBC but they did not carry out these at the same time The banks like to change banking service structure from serving at branches, sending monthly financial document to ebanking which because this service

is convenient not only for customers but also the banks, namely, decrease expense alot

The first thing concerned by ICBC and other banks in China as well is trying to get signatures of mollions of customers not only for e-banking, but also for other finance and banking services ICBC is trying to supply services with better quality for millions of customers, for instance, individuals, corporations, Chinese companies.According to ICBC, inspite of good quality of technology, service and management, ICBC needs more time and patience to persude Chinese people that by clicking on their website, the customers can get more choices and convenience with the same safety as directly at the bank This is the place where „cement‟ approve their helpfulness in e-baking strategy of other bannks in China

As a result, thanks to the caution and firm as „cement‟, ICBC bring about comfort for customers when they exchange information, help customers secure data and the customers are served any time through electronic service channel To ICBC, the intendency and development of e-banking contributes to the current success of ICBC

2.1.2.2 Experience from building business strategy of Vietnam bank for Agriculture and rural Development

Vietnam bank for Agriculture and rural Development (VBAD) was established

on March 26th, 1988 Nowadays, VBAD is one of the large banks which succeeded in broadening its network.VBAD always assures that strategic planning and constructing business plan is the basic stage which decides the success of the bank activities VBAD has been broadening and developing the network over the urban areas in order to attract funds to be invested in the rural areas The fund mobilized from urban areas makes up for a large proportion in total capital of the bank

VBAD has been prioritising investment into modernising the banking technology through out implementing project IPCAS which connect online network among all 2200 branches in all over the country, a range of banking service products

supplied, for example, isa card, mobile banking, SMS banking

Invest and develop human resources, in accordance with the programs in which the staff is trained in professional skills and advanced trainings are for the management officers The best qualified staff was recruited and trained for their assigned work at strategic business unit The board of management of VBAD highly appreciates the role

of strategic work in their bank development, which was in need of long-term investment

2.1.2.3 Lesson for building business strategy of BIDV, Nghe An Branch

From the research, analysing 2 banks, the largest bank in China (ICBC) and VBAD Viet Nam, the author group draw the following lessons for BIDV Nghe An in constructing business strategies :

The first : Business strategy guides activities for each business entity in general and for each particular commercial banks Thus, each bank should select its own suitable business strategy, which decides the success of the bank

The second : The bank has to do research, analyse and realise the development

of market demand, recongnise the potential needs in the future to develop products which meet these demands The bank has to make use of the external opportunities, promote the avalable strengths in order to lauch out the suitable strategies

The third: Marketing Strategy is an inseparable part of this strategy and is built with the aim to support general business strategy of the business entity

The fourth : Human resource working is considered as the most important factor deciding the suitability and soundness of business strategy A good business strategy must be derived from strategic national team trained, professional, dynamic and must

be supported and contributed from opinions of all staff at all levels in business

2.2 Overview of Bank for Investment and Development of Vietnam, Nghe An Branch

in 1995, the Bank for Investment and Development of Vietnam switch to operating the functions of a state commercial bank Bank branch for Investment and Development of Nghe An is a branch under the Bank for Investment and Development of Vietnam under the Business Registration License No 106198 dated 02/6/1993

2.2.2 Functions, tasks and business activities

BIDV Nghe An assumes the following tasks : monetary business, lending, banking services and other activities, for instance, foreign exchange business, gold, finance advisory, entrust, entrusted, as agents in the areas related to the activities of the commercial banks, supplying insurance services as predescribed by law, providing services which are preserving precious objects, papers, leasing safes, mortgages and other services as predescribed by legality

Vision, Mission of BIDV Nghe An in 2015 is striving for a owner bank, sector business, operating under international practice, the quality on par with advanced banks in the area Purpose, activities of BIDV Nghe An is to become qualified bank - leading reputation in Nghe An Province

multi-2.2.3 Core products and services

There is a wide range of sevice products of BIDV Nghe An Apart from traditional products is deposit and lending, BIDV lauches modern banking service products The core service products can be divided into 3 groups :

Group 1 : The debit asset operations like payments as deposits, saving deposits,

term deposits, bonus plans, savings accumulation and distribution of public bonds,

ATM payments, the interbank deposit

Group 2 : The business assets such as lending, underwriting, discounted export vouchers, foreign currency trading

Group 3: Banking services such as centralized capital management, export and

import payments, Internet banking, BSMS banking, BIDV at home, Vntopup, insurance, securities, VNPay,

The debit asset operations raise fund for the activities of the bank The credit assets and services are business products which bring about profit for the bank In this profit, the interest revenue accounts for largest propotion of the branch profit

2.2.4 Structure of BIDV Nghe An

Please have a look at Figure 2.1 Structure of BIDV Nghe An (at appendix part)

As a branch level I under the Bank for Investment and Development of Vietnam, after converting by TA2 organizational model, the organizational structure of BIDV Nghe An was held by the organizational model of modern banks , consists of five volumes:

- Operation Department: including 04 department

- Risk management Department: including 01 department

- Customer Relationship Department: including 03 departments

- Attached Department: including 4 transaction departments and 2 saving departments

- Internal management Department: including 4 departments

2.3 Analysis of external factors influencing the operations of BIDV, Nghe An branch

2.3.1 Mega-environment/ Macro environment

The following factors of mega-environment affect the bank:

2.3.1.1 Econonomic element:

The accession of Vietnam to the WTO in 2006 and a wave of new direct investment inflows and indirect investment showed that the economic reform process is very impressive, especially the free trade and investment The innovation has brought the success of the economy, which is the annual average growth of 7.5% during the past decade, one of the fastest growth rates in Asia

Apart from the unfavorable factors, especially the consequences of financial crisis and global economic recession, in the period 2011-2015 Vietnam also has many advantages from the economic recovery and development of global economy after the crisis, which will provide opportunities to promote trade and attract foreign investment The size and economic potential of the country has been improved from earlier times Political stability – social stability is a solid foundation for growth

The goal for next five years is to develop the economy with fast speed and sustainable development, with GDP growth is 7-8% per year, the poverty rate according to the new rate decreases by 2-3%, the size of GDP at current prices at about

$ 200 billion in 2015, by which per capita GDP reached about 2100 USD The size of GDP at current prices is about $ 200 billion in 2015, by which GDP per person reaches about 2100 USD Estimated economic structure in GDP in 2015 is 40-41% of industry and construction, 40-42% of services, and 18-19% of agriculture, forestry, and fisheries

Economic growth is high, people's lives are improved to create more favorable conditions for sustainable development of bank and to more fully exploit potential market in the country

For Nghe An Province:

Assessing the period 2005-2010, Nghe An has fundamental advantages: Many major projects were approved by the government (about economic development - the Western society in Nghe An, developing Vinh City become the center of economic and

cultural North Central region).Resources accumulated from previous years, which creates a strong base for economic development Sustaining economic growth is maintained and moves towards the right direction, production and business in the sectors continue to grow Demonstrated by the following basic criteria:

- Growth rate of GDP in five years from 2005 to 2010 reached 9.54% Average GDP is 13.85 million VND/ person/ year, which increases 2.4 times compared with the first term (2005)

- The economic structure has shifted in a positive way The proportion of agriculture decreased from 34.41% in 2005 to 28.87%, the proportion of industry and construction increased from 29.30% to 33.47%, the proportion of service sector increased from 36.29% to 37.66% in 2010

- Service sector grows with high speed, broadens in diverse and wide areas, some sectors achieve higher development speed more than given target: service production value achieves has an average increase of 13.47 % in 5 years / target of 11 -12% The value of exports in the province increased the annual average of 22.90%, target of 20-25% The other sectors and services, such as telecommunications transport, banking develop repidly, basically meeting and exceeding the targets

- Attracting investment is positive step, creating a driving force of economic – social development: Attracting more than 224 investment projects with total registered capital of 51.7 trillion, in which there are some large-scale projects Total social investment capital mobilized reaches 75-76 trillion, the target of VND 70-75, trillion increase 2.7 times compared that in five years ago, in which the resources mobilized from the population accounts for 20%, 5.5% of foreign investment

Period 2005 - 2010, in spite of many difficulties, but economy and society of Nghe An province is still quite developed The economic structure continues to move

in the right direction With the current economic growth of Nghe An province, in

which the service sector develops rapidly, broadens in diverse and wide areas which are favorable conditions for banks to invest and expand their operations thoroughly

Some indicators in economy in period 2010 - 2015 of Nghe An province: GDP annual in period 2010-2015: 10,5- 11,0%; economic structure by 2015: 39- 40% of Industry - construction , 38-39% of service, 21-22% of agriculture, forestry and fisheries; export turnover is 500-550 million USD by 2015; GDP per capita in 2015 estimated to reach 1500-1600 USD The total investment from society is estimated about 160.000- 180.000 billion VND in period from 2010 to 2015

Nghe An strives to become centre of commercial services, tourism, finance banking and , insurance, education and health of the North Central region in 2015 The total flow of goods increases by 16-18% per year on average

Bringing the banking system and credit institutions in Nghe An province becomes the strong banking system and the financial and monetary centers North Central region

With these criteria in the period 2010-2015, GDP growth in Nghe An will be higher than the average growth rate of the country, GDP per capita improved Economic growth is high; people's lives are improved to create more favorable conditions for Nghe An BIDV to develop its services

Quantity of enterprises in Nghe An increases considerably through the years In five years (2005-2010) the number of newly established enterprises has increased 6.3 times compared to that number of 8 years ago, the number of registered business enterprises the annually in the period 2007-2010 is 1000 enterprises, they are mostly small and medium enterprises According to estimation, by the end 2010, number of enterprises in the province of Nghe An increases to 8100 Besides a high growth in the number of enterprises, Nghe An province also focuses on developing projects In the list of 75 projects calling for investment in 2008-2010, there are 29 in the field of industry and construction, cement production for cement production, construction

materials, mining, and processing products from stone The remaining projects invited pouring capital into agriculture, tourism, and trade Nghe An is also calling for investment in 22 projects in tourism, ecotourism totaling nearly $ 250 million from now to 2015.The remaining projects requires capital into agriculture, tourism and trade Nghe An is also calling for investment in 22 projects in tourism, ecotourism with total

of nearly $ 250 million from now to 2015

With the growing number of enterprises and investment projects, there is an increase in demand for banking services such as payment, underwriting, leasing, card service, foreign exchange trading, which helps BIDV Nghe An operation grow their business through the development of demand for banking services from businesses and demand for capital of investment projects

2.3.1.2 Sociocultural element

Social and cultural environment affects people‟s lifestyle, needs, and interests It can be said that as environmental factor, cultural influences the overall operations of the Bank Culture affects a range of strategic issues such as selecting business, selecting target market, selecting a common strategy, decisions about the overall objective of the Bank and business Culture is an objective, and a motive as well for the development of society Cultural impact on economic activities is very broad and complex Vietnam has a charming cultural national identity, however, in recent years due to the integration process, many foreign cultures have penetrated into Vietnam, especially in the large urban areas, the middle class and youth have been highly influenced about lifestyle, way of thinking That has impacted consumer behavior, their purchasing power: popular trend towards foreign products, brand, quality and value of the product Educational level of Vietnam is increasingly improving, with Vietnamese consumers not only demanding with material value but also nonmaterial values, especially the banking service products This factor needs attention when creating development strategies for the bank

Vietnam is one of the nations with high population According to the report of the Steering Committee of the census, by 0.00 on 04.01.2009, the total population of Vietnam is 85,789,573, in which the urban population is 25,347 262 people (accounting for 29.6%) and 60,415,311 people (accounting for 70.4%) in rural areas With this population, Vietnam is the 3rd most populous country in Southeast Asia (after Indonesia and Philippines) and 13th among the world's most populous country Population rate increases, mean that there is a potential increase in demand, but it does not mean that the market develops unless there is enough purchasing power If population growth causes excessive pressure on economic development and poverty occurs, this can narrow the market The population in our country is high and this rate

is increasing over years, which means that the potential domestic market has not been exploited yet Moreover, fully exploiting the domestic market is also a task of strategic nature which is important for banks to stabilize currency markets, compete with foreign banks, and also expand the market beyond world

Nghe An is one of 23 provinces with the highest birth rate over the country, with a total population of 3,113,055 people (on 31/12/2009), the population increases more than 35,000 people on annual average Nghe An province is the fourth populous country, population density in 2007 is up to 186 people per km² Since 2007, the population structure of Nghe An is entering phase "area population structure ," predicts that by 2015, the percentage of population in working age reaches maximum, accounting for 64.3% relative 2.2 million in the working age population compared with 3.4 million of Nghe An

Cultural and social care have been positive changes, material life and spirit of the people are gradually improving;

Nghe An strives in 2015, labor force training over 55% of the total social labor; 80% of agricultural labor is trained in technical training Creating jobs and attracting workers for 35,000 to 40,000 people on average per year The rate of poverty reduction

is 2.0% per year on average Constructing at Vinh City and Cua Lo Town as Center university training, vocational training of the North Central region

Spending habits of people in Nghe An is also the shift from spending on their to improving living standards and enhance both physical and living conditions Confidence in the banking system has been increasingly improved Vinh city with strong growth in recent years which is the area with many sources of idle money market and is the main market of banks in Nghe An province

Personal incomes tend to increase; and Demand for consumer loans first requires investments and people investing money will want to earn interest on their savings Thus, they will find financial and banking markets Since then the demand for banking products and services will flourish

One advantage by cultural factors brought to the commercial bank of Vietnam is

to like dealing with the psychology of Vietnam's banking people in Nghe An In terms

of competitiveness, it is clear that the Vietnam commercial banks are not nearly as competitive as the foreign banks, but this psychological factor will be a “thousand of gold opportunity " which State commercial banks are interested in

From the point of view of strategic management, psychological factors should be fully exploited at the current stage to attract the attention of customers and promote high quality products and services to retain customers in long term

Habit of using banking services of people in Nghe An has not been positively changed because the population of Nghe An is mainly located in rural areas so people are still unfamiliar to banking services, cash using habits of the majority of people in Nghe An prevails and difficult to change This is a factor limiting the potential development of the banking services of banks in general and in particular BIDV Nghe

An

2.3.1.3 Legal-political element

It can be said that Vietnam is a country which is considered a stable political country People trust in the line and policy of the Party and State, feel safe to invest and develop business Work to ensure political security and order, social security and the fight against crime is enhanced State Government and we are always interested in policies that encourage the development of the banking sector in Vietnam Since the open economy, financial markets - banks so far, the government and our country have continued to improve the legal system of the Bank expressed the State Bank Law and the Law of credit institution founded in 1997 and amended and supplemented to

improve more on 15/06/2004

Legal system of Vietnam is not really perfect but the government and Congress have made great efforts and built complete legal environment to create favorable conditions and encourage enterprises in general and in particular banks to develop in

an even, competitive environment In coming years there will be more significant changes in economy, law and State management, which affects the financial system and banking Particularly, under open economy and WTO commitment, omitting regulations and limiting the scope of activities of foreign banks will have a direct impact on the banking system of Viet Nam

In the management and administration, the State Bank of Viet Nam has done relatively well conducting monetary policy and stable currency value; promote economic growth, and ensuring banking system stable development The tools of monetary policy used are indirect tools such as open market operations, foreign currency swap Interest rates and exchange rates are more flexible according to the market and regulated by the state Foreign exchange management mechanism, payment operations, and credit are increasingly more flexible, enhancing the autonomy of banks