GRIGGS UNIVERSITY
ee ee 1
CF Global Advanced Master of Business Administration
CAPSTONE PROJECT REPORT BUILDING UP A RETAIL BANKING BUSINESS STRATEGY IN PERIOD OF 2009-2013 FOR VIETNAM INTERNATIONAL
COMMERCIAL JOINT STOCK BANK (VIB)
Group No 5
Nguyen Thị Thanh Thuy Le Van Minh
Nguyen Thi Dieu Linh
Phung Anh Tuan
HANOL, 01 - 2010
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Trang 2ACKNOWLEDGEMENT
We would like to express our gratitude to all those who have contributed to and who gave us the possibility to complete our Capstone Project Report named “BUILDING UP A RETAIL, BANKING BUSINESS STRATEGY IN PERIOD OF 2009- 2013 FOR VIETNAM INTERNATIONAL COMMERCIAL JOINT STOCK BANK (VIB)”
We are deeply indebted to our lecturers Ass Prof Dr Ngo Kim Thanh, MBA Sandy Ewart and The Advisory Board whose communicate valuable knowledge as Well as help, stimulating suggestions and encouragement helped us in all the time of research for and writing of this project report
We want to thank the Vietnam International Commercial Joint Stock Bank (VIB) for giving us permission to commence this project in the first instance, to do the necessary research work and to use bank data
We are bound to the ETC Center and all the lecturers for their stimulating support and encouragement
Last but not least, we would like to give our special thanks to our family, our
friends and colleagues whose patient love enabled us to complete this work Commitment
Trang 3TABLE OF CONTENTS
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International Joint Stock Bank (VIB) l6
2.1 Overview on V tema IHGFERRHONAI HA cua in cdá1ilidveeeecsasaaasesadgl l6
2.1.1 General introduction, mission and commitment of VIB 16
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2.2.1 International financial — monetary crisis & world economic
Pe aoe meen 19
2 POO On Ve) iwi eee oe ee 20
2.2.3 Environment for activities of Vietnam banking sector Lo 2.2.3.1 Context and activity trends of Vietnam banking sector 25 2.2.3.2 Structure and size of Vietnam banking industry 28 2.2.3.3 Rivalry evaluation in Vietnam banking industry 30 2.2.4 Overview on the Vietnam retail banking market ao 2.3 Opportunities and Threats for Vietnam retail banking operation 39 23.1 Opportunities of the retail barking Operanion so sinsiisscsswscanunnascie 39 Zn UUPCAS Ol Wie TU iments ion REE 42 2.4 Internal analysis of Vietnam International Bank (VIB) 43 2.4.1 Structure organization, products and operations of VIB .5 43 2A Ai), SUCIS QUBARIZANOR, oc ctctaaticcer aire eensamnaxcledim 43
Trang 5bolas VALS 8 DO TT hi BE NGÃ scuvsuibavfGOQ th\êNGhđGUGãv3tdAng 44 2.4.1.3 Performance of VIB in retailing bank services 45
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2.4.3.1 Regarding VIB’s position in Vietnam Commercial Joint Stock
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Trang 6Chapter3- Building up a retailing business strategy for VIB in the period of 2010 —
2013 = Salutions and Performance Schedule ccnrasismenineassrensnwns 58
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3.2.2 Specific plan for VIB retail bBanking setvices tO 20 LÀ suecooieee 64 3.2.2.1 Business objectives of retail banking in each period 64
3.2.2.2 The strategy orientation and operation methods 64 Si G1fä†16> 3ÿ TriplefticiitsiGR BBIH[DPlE sosseeeaozaayaaa-eeagzasusssasCilldusiG0BEbESàihiii 65 ii |: sme ONENMION.: cmnemees 65 343¡LxÌ J€f6†ffnrliftế Le EafÐet DUSEOIGÙE sua cua eves 65
3.3.1.2 Organization model re-structure on the direction of customer —
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Trang 73.4.2.1 Setting up a project team on new business strategy model
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3.4.2.2 Communication
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Trang 8LIST OF TABLES LĐo | Table No Table’s Name LÍ _
| lại SWOT Matrix
Lạ Zak Forecast on Vietnam basic economic indicator in 2010 — 2013 ey 22 Number of banks in the period of 1997 — 2007
la | 23 Data on growth criteria of Vietnam banking industry 200 - 2007 Lạ 2.4 Loan market share in the period of 2000 — 2007
ry Bud Mobilization market share in period of 2000 — 2007 7 25 Performance of retailing business of VIB
8 a VIB’s SWOT Matrix
lạ| , 3.2 Business objective of retail banking in each period 10 Jud Distribution Channels of VIB
Trang 9
No LIST OF FIGURES a Figure No Figure’s Name 4 Ll Strategy Types
2 bạo Strategy Implementation 4 dul VIB’s Retail Bank Region
l8 52 VIB Business Units
6 3.3 Project team on new business strategy model
LIST OF GRAPHS
No Graph No Graph’s Name
; 4 Lek Vietnam Retail Banking market Z Zak Customer rate of banking service
_ 3 2.3 Loan Expansive level
Trang 10PREFACES
Nowadays the international economic integration is indispensable trend in developing countries For Vietnam, the international! integration is a proper and significant direction, acting as a premise for constructing the position in the international arena and bringing series of opportunities to the prompt and sustainable development for the national economy
However, the integration also gives out big threats to Vietnamese enterprises; especially the commercial banks — the special enterprises operating in monetary- credit fields To conquer the threats and optimizing good opportunities, Vietnam Commercial Banks are required to select a sound direction, applying a sensible and timely business strategy
The banking integration requires Vietnamese Commercial Banks to promptly launch their coverage development, technical investment and management improvement Modern technology, management competence and abundant financial potential of overseas banks will be the basic advantages, creating competition in the banking industry resulting in the Vietnamese banks’
capital increase, technical investment, management reform and modernization of
the payment system to improve performance and competitiveness
It is possible to say that in such a cut- throat competition and difficult coniext as present, any banks who take a proper strategy, optimize opportunities and well match with the threats will be the winner and their position in the world financial banking market will be stable
Trang 11members are working in the financial- banking industry being one of the managerial staffs of VIB, we decide to select and make a research on:
“BUILDING UP A RETAIL BANKING BUSINESS STRATEGY
IN PERIOD OF 2009 - 2013 - FOR VIETNAM INTERNATIONAL COMMERCIAL JOINT STOCK BANK (VIB)”
1 Subjects of the study:
The global financial crisis and economic depression including Vietnam lays enterprises in a new period where they request to activate a more professional, better management style and take a more prudent orientation strategy Besides, involvement of many domestic and international credit institutions into the financial- banking market with diversified products and services in the past time makes the domestic banks to take a proper strategy to adapt and develop in a high competitive market
In such context, Vietnam International Commercial Joint Stock Bank, a member operating in Vietnam banking association, has prepared for the next development in all fields VIB Bank carries out a significant program to modernize comprehensively the consumption network, effectively supported by the professional and dedicated staff to create strengths to the bank with commitment on service quality assurance VIB Bank trademark is expected to be worthy with a title
of “dedicated bank”’
According to the domestic and international experts “Vietnam retail market is extremely attractive” Therefore, objectives of the commercial joint stock banks in general and VIB Bank in particular are “How to provide the best retail banking services” By investigating the overview of retail bank service, achievements and
restrictions of Vietnam commercial joint stock banks in general and VIB Bank in
Trang 122 Scope and objectives of the study:
The thesis analyzes the retail banking situation in VIB Bank through factors
such as strategy, trademark, product, personnel organization structure, finance and
technology, and so forth Thence, it is expected to identify strength and weakness of VIB Bank Thanks to analysis on the international business environment, the
external socio- economic and politic environment, VIB Bank can sketch their retail
banking operations as well as solution to implement such strategy in the most
effective manner
Through SWOT matrix model, our group confirms that SO strategy is the optimal strategy for retail banking operation of VIB Bank What are objectives of the strategy? What are the contents of the strategy? Which solutions set out for the strategy formulation? These questions will be answered in this thesis
3 Research methodology
The main research methodology of the thesis is to apply theoretical model
on strategy management in an enterprise to employ in a specific condition of VIB
Bank to plan a master business strategy
The secondary data collection method is mainly applied in the thesis including:
- Internal data of VIB Bank
- External data collected from the State Bank of Vietnam, Bank Association, Financial Statement, and Annual Reports of some commercial banks in Vietnam
- Sources from newspaper, internet
- Some references, home and abroad lecture materials on strategy management module
Trang 134, Design of the study:
Excluding the prefaces and conclusion, the study includes 03 main parts: Chapter I: Literature review on business strategy
Chapter II: Analyzing the current retail banking services in Vietnam International Commercial Joint Stock Bank (VIB)
Chapter IH: Building up a retail banking business strategy of VIB in period
Trang 14CHAPTER I
LITERATURE REVIEW ON BUSINESS STRATEGY
i.1 Concepts and role of corporate business strategy 1.1.1 Some concepts on business strategy
Accessing to the 21° Century, the world witnessed the impressive starts with
significant innovation in the global business environment such as new technology
launch, increasingly strict quality control regulations, unexpected environmental fluctuation and so forth Corporate operation must associate with panorama of the world economics, the regional and international integration by searching and developing comparative advantages to be the winner in the increasingly severe competition in the nation and the world In such content, each company has their own new opportunities to exploit and threats to be prevented and restricted Therefore, in order to adapt with high performance business environment, enterprises in general and Vietnamese enterprises in particular must have the strategic thinking, i.e long- term vision to ensure the corporate existence and development
“Strategy” term is derived from the military In the strategic military, it is interpreted as an art of cooperating mobilized military, political, spiritual and
economic forces to win the enemy However, the term is widely used in many business fields
Trang 15challenges, etc, thence, working out proper solutions to keep the dominant position
in business
According to consulting group of Boston Consulting Group (BCG): “Business strategy is an allocation of available resources to change the balance of corporate available resources and convert the competitive advantage toward their company” That means by analyzing their resources, corporate departments and allocating resources optimally, effective solutions have been worked out to achieve the set targets with highest performance to create the competitive advantage
Alain Charles Martinet described “Strategy is an art which companies apply to compete and win” Like this, strategy is used to sketch sustainable and long- term development orbit Corporate exact decisions and actions can be arranged surrounding such orbit
In business environment, “strategy” term is almost derived from basic laws However, the term application is often failed due to poor understanding on nature
and how to use this term Therefore, it is very difficult to obtain a consistent
Trang 16Although there are many definitions on strategy, it generally focuses on 4 main categories namely plan, model position and prospect In other words, strategy
is:
The destination which companies strive to obtain in a long term (orientation) What market companies have to compete and which types of activities companies take in such market (market, scale)?
How companies do to have better performance against rivals in such markets (advantages)?
Which resources (skills, assets, finance, relations, engineering competence,
and equipment) need to be able to compete (resources)?
External factors affect the corporate competitiveness (environment)?
Which values and expectations that internal and external senior managers need (capital contributors)?
1.1.2 Roles of business strategy
Business strategy of the companies is determined as the companies answer the questions
Enterprises:
+ Where are they?
+ What do they want to do? + What do they need to do? + What will they do?
+ How does it?
By determining where the companies stand, the formed business strategy will give the answer about where the companies wish to reach and how they can reach it The business strategy describes corporate objectives and orientation for
Trang 17The strategy supports effectively companies applied it, creating an advantage position in market, the strategy facilitates companies to find out their strengths and weakness to develop or restrict, respectively Thanks to strategy companies are always in the active position against the environment changes
Nowadays, in the market economy with fierce competition of internal and external rivals, companies must not only make great effort to perfect the internal functions but also be dynamic and flexible in their operations in line with the market’s complicated changes This situation requires companies to have far- sighted vision for their development The strategy is a key to the success of companies Therefore, it is supposed to start a plan by giving out a future prospect including the exact position and how to achieve it with a comprehensive and logical plan Decision and operation of the model mark the changes from the initial steps to the success
1.1.3 Business strategy models 1.1.3.1 Linear strategy model
The linear strategy model focuses on planning It is called linear because it encloses sequential, oriented and logical activities during planning
In accordance with the linear point of view, the strategy includes an integration of decisions, actions or plans set out and oriented toward the organization’s objectives Both objectives and way to achieve it are the results of the strategic decision In order to achieve the set target, the organization can modify their affiliates with surrounding environment such as product modification, market transition or application of other operations Terms associated with the linear strategy model include strategic planning, strategic system formation and strategy performance
Trang 18difficulties set by rivals Through making a logical decision, the senior manager identifies objectives, works out alternative solutions to achieve the target, evaluates success possibility of each solution and decides the implementation measures
The linear mode! is increasingly less used because the strategic problems become more complicated not only in terms of various management aspects but also changes of variables of specifications, economic, information, society and so forth
1.1.3.2 Adaptive strategy model
It is defined that an adaptive strategy model concerns developing possibility to combine opportunities and threats of business market with corporate resources and capacity to exploit that opportunities
Companies are forecasted to continue evaluating the internal and external conditions Evaluation results are the proper adjustment in the organization or in
relevant environments to create the logical combination between opportunities and
threats of environment and the corporate and resources
Adaptive strategy is based on some hypothesizes Companies and environment have a closer relation compared with the linear model However in the adaptive model, environment is flexible and difficult to forecast The business environment encompasses rivals, trends and relevant partners (having increasingly important role) In the linear model, companies must face with business environment, whereas the adaptive model supposes that companies change as per
business environment
The adaptive model uses many variables and has higher modification possibility against the linear model However, it is thought that the business world
is still much more complicated
Trang 19The interpretive strategy model is mainly based on the soctal relation factors The social relation views consider company as a combination of cooperative commitments among individuals based on willingness The corporate existence depends on capacity of attracting sufficient human resources with proper benefits for parties
This model supposes that in fact, no objective or exogenous things are available formed through a process of the social impacts in which feelings of each person is reliable, adjustable and alternative as per feelings of other persons
Strategy in the interpretive model can be identified as an oriented or guided metaphor enabling the organization’s important elements to understand the organization and the environment Thanks to that, the important elements are encouraged to be believed and performed to bring benefits to companies
Like the adaptive strategy, the interpretive strategy supposes that companies
and business environment are closely related However, in the adaptive strategy,
corporate leaders fix perspectives of individuals in the company as well as future- related individuals and products However, the leaders do not carry out the physical modification on products Opinion change orients toward the higher reliability to company or the company’s products With that point, the interpretive strategy is coincident with the adaptive strategy
A distinctive feature between the adaptive model and the interpretive model is approach of each model in terms of complexity The adaptive strategy makes great effort to settle a complicated problem regarding the structure, especially the corporate product conflict and demand change The interpretive strategy emphasizes on attitude and awareness of corporate- related parties
Trang 20The comprehensive business strategy is constructed based on the corporate vision and long-term strategic orientation for all operations of the company It includes:
1.2.1 Selection of the corporate main mission and objectives
The corporate main mission and objectives offer a context for strategy formulation The strategy describes existence reason of the company and what to perform Whereas, the objectives determine what the company expects to satisfy within the medium and long term scope
1.2.1.1 Mission
Mission refers to a message embodying the corporate core value It represents what important and contribution of company in terms of business and life, the corporate business principle, corporate position in the world and commitments which the company will comply with
The mission should be concise and comprehensive in terms of fundamental meaning but it also embodies encouragement and long term stability
1.2.1.2 Vision
Vision refers to a message specifying the Mission into an encouraging target It describes necessity of the survival improvements for the corporate, become possibility
1.2.1.3 The business objectives
Objectives are set by developing the company’s mission, but more separate and specific Objectives can be set for long term or middle and short term
Long term objectives can be: profitable capability, productivity, competitive position, staff development, technology leader, or social responsibility, etc
Trang 21Middle and short term objectives (under | year) are clearly and time limited Short term objectives are required to be detailed, measurable, reality and utmost important are aimed to realize the long-term objectives
1.2.2 The external environment analysis and evaluation
The external environment analysis aims at
‘olitical Factors ỹ sie
acknowledging the corporate opportunities and threats Qui: Ea from the external environment Three external ị environment types which are closely interrelated
ocultural Factors
include macro environment, national environment and
hnological Factors the on-going industry environment
The opportunities and threats are identified by data analysis on changes in the on-going industry environment or the environment to be penetrated The opportunities can be market development potential, market gap, close position to the material sources or inexpensive and qualified human resources The corporate threats can be the narrow market, increasingly fierce competition, possible amendment on policies, political instability in the key markets or new technology development resulting in the corporate facilities and
production lines are on the risk of being backward
1.2.3 The internal environment analysis
Aims of the internal environment analysis are to find out the corporate strengths and weakness
Trang 22network poor labor relationship mismanagement with the international experience or backward products or services against rivals, etc
The results of the internal and external environment analysis are the comprehensive outcomes of the business environment study and evaluation It includes the business environment in a geological limit (politics, society, economics, environment, and culture), the industry trends (science and technology, technology, supply sources, etc); market situation (demand, consumption, trend forecast); competition situation (main rivals, potential rivals, capacity, strengths and weakness, forte and foible, current position and on-going strategy)
1.2.4 Selection of business strategy
The corporate business strategy refers to the development orientation and construction of the competitive advantages based on understanding and situation analysis implemented in the above steps The enterprise can select strategy such as under the 3 strategy groups as:
° The Cost domination strategy (lowest price)
° Concentrative strategy (Only focusing on a certain market segment or a market; or Only focusing on a certain product group.)
° Distinctive strategy
SWOT - based analysis approach
SWOT analysis mainly aims at identifying strategies which are oriented,
suitable or corresponding between the corporate resources and capacity with the environment demand where the enterprise is operating
Trang 23| SWOT Matrix | Opportunities (O) | Threats (T) | | + | ! Strengths (S) | Combination | Combination (S/T) | (SIO) | Weakness (W) Combination Combination (W/O) (W/T)
Table 1.1 SWOT Matrix
SO combination strategy is obtained due to main strengths and opportunities of the enterprise It is important that the enterprise must develop their strengths to maximize opportunities
ST combination strategy is obtained due to main strengths and threats of the enterprise Here, the enterprise must develop their strengths to conquer the threats
OW combination strategy is obtained because the enterprise maximizes opportunities to overcome the weakness
WT combination strategy is obtained because the enterprise strives to mitigate weakness to avoid threats
1.2.5 Strategy implementation
Strategy implementation is an action plan to deploy all activities that the
enterprise will carry out together with achievements by the milestones it needs to achieve the general goals The plan also includes a proper organization structure and control system to put the strategy into practice The following diagram can
Trang 25CHAPTER Uf
ANALYZING THE CURRENT RETAIL BANKING SERVICES {IN VIETNAM INTERNATIONAL JOINT STOCK BANK (VIB)
2:1 Overview on Vietnam International Commercial Joint Stock Bank
2.1.1 General introduction, mission and objectives of Vietnam International Bank (VIB)
Vietnam International Joint Stock Company (abbreviated name is Vietnam International Bank - VIB) has the head office in No 198B Tay Son street, Dong Da
district, Hanoi; incorporated in accordance with Decision No.22/QD/NHS5 dated
25th January, 1996 of the Governor of the State Bank of Vietnam Founder shareholders of VIB include Vietcombank, Agribank, successful individuals and
businessmen in the home and abroad
Over i3 years of establishment and operated on 18th September, 1996, VIB increasingly develops and affirms its position in the home financial market With initial charter capital of 50 billion VND, up to now its charter capital increases in 2,400 billion VND with total assets of more than 50 thousand of billion VND VIB is ranked on the first by the State Bank of Vietnam in accordance with the Vietnam banking system rating standards in many successive years
During its operations, VIB takes the business strategy modifications in iine with the domestic and international environment Especially in period from 2004 to 2008, VIB sucessfuly deployed its business strategy with motto of “always offer
added value to customers”’
Vision: “Vietnam International Bank (VIBank) becomes the most creative
Trang 26> For customer: Providing outstanding creative solutions to maximize customer’s demand
“We acknowlege that the satisfaction and success of customers Is the key to our sucess We highly appreciated customers’ confidence We are committed to serving with convenient, quickly, confidentially, safely; diversified products with competitive price”
>For staff: Building a effective corporate culture, business spirirt and openness working environment
“We acknowlege that one of the most important assets determining the success of VIB Bank in the mission to serving customers is the human resources We are committed to offering each staff the professional working environment with trust and respects for everyone, performance- based working culture which honnors good results and performers, opportunities for professional and career development”
>For shareholders: Providing attractive and sustainable value for
shareholders
‘Shareholders are the true owners of VIB Bank, they have had absolutely confidence in us In return for this confidence, we guarantee to bring the suistainable growth investment value; the bank development with long term perspective; the Bank development as a responsible institution for the social development”
> For social community: Actively contributing to the development of the community
VIB is responsible for the development of the social community
Objectives: becoming one of top 3 leader commercial bank in Vietnam in 2013
Trang 272,1,2 Highlights in the history of development
® In 1996; It was incorporated and put into operation with the initial charter capital of 50 billion VND and 23 employees;
® In 2004:
¢ The restructure project was completed with new structure mechanism and business processed in accordance with the international standards
@ Issuance of the domestic debit card “Connect 24 hours-value” nationwide via Vietcombank
° In 2006:
¢ Core Banking project was successfully implemented (the SYMBOLS universal banking system by SunGard System Access) This was the most modern project up to now in Vietnam
¢ “VIBank Values” domestic card was issued
® In 2007:
It officially released MasterCard and VISA
¢ It established the comprehensive cooperation with PVFC, PVI and VFC With motto of “Always offer added value to you”, VIB is ceaselessly making great effort to become a companion with customers VIB is awarded with many prizes, highly appreciated by the domestic and international organizations such as: ° Prize of “Bank having the best payment operation” awarded by Citi Bank Group (in successive four years: 2004-2007)
° Prize of “Bank with the outstanding international payment operation 2007” awarded by HSBC
Trang 288 Receiving the title Vietnam Excellent Brand in 03 successive years selected
by Vietnam Economic Times
@ The retailing bank with the highest satisfaction (in 2008) ° Receiving the famous trademark winner cup
° Being ranked the third out of the top 500 largest Vietnamese private enterprises (2007) ° Prize of Gold Globe selected by the State Bank of Vietnam
° Prize of “Famous National Competitive Trademark” awarded by The Intellectual Property Bureau
2.2 Analysis of impacts of business environment at all levels
2.2.1 International financial-monetary crisis and world economic recession In 2008, the world economy witnessed a year full of fluctuations The global economic crisis was originated from U.S., and then spread out to other countries in Europe and Asia The countries with the most developed economies are also heavily affected as Germany, France, Britain, Italy and then Japan, China The small and developing countries are also affected from developed countries such as
Indonesia, Thailand and Vietnam
Another characteristic of this economic crisis is that it was rooted from the collapse of banks and financial institutions, and then spread out to other sectors that originated from the U.S then spread out to other countries The banks which are famous brands in the U.S such as Lehman Brothers; the leading financial groups in Wall Street as Morgan Stanley, Merill Lynch, Goldman Sachs shortly before most energetically active are also affected strongly, got large losses and government intervention; CitiGroup, one of the leading banks, also has a great difficulties and has got to cut off staff; the leading Financial — Insurance Group such as AIG also in similar situation , the U.S government must support hundreds of millions of
dollars Some banks in the UK, Switzerland, Spain (UBS, Northern Rock, and
Credit Suisse) are in the wheeling state
Trang 29Slow production, high rate of unemployment as recorded in the history
makes series of major economies in the World fall into recession such as the U.S
Germany, Japan, Korea, Singapore To rescue the economy from crisis, Government of many countries in the World has launched a range of solutions mainly on the financial — monetary sector - life-line of every nation’s economy, that is typical of FED lowering interest rates in the 0 - 0.25%, Japanese Yen interest rate lowing down to 0.1%, ECB lowing down Euro interest rates to 2.5% to stimulate economy growth
The forecast on world economy of world leading economists as follow: ° The world economy continues to be negatively affected by debt crisis that are lower than standard and the successive breakup of world financial system ° Asian economic development slowed; U.S., Japan and Europe are growing low ° Inflation is going to increase
° USD is likely to recover against Euro and other strong currencies ° World stock markets become gloomy and are able to recover in 2010
° Gold price fluctuations are very complex and affect the financial — banking markets ° Oil prices tend to fluctuate irregularly and at a high level
° Food and energy crisis is pushing world to the danger of recession 2.2.2 Economy of Vietnam
In 2008, in the context of world economy recession and global financial crisis, high inflation Vietnam's economy is negatively affected and starts entering difficult period Economic growth (GDP) decreased level of 6.28% Inflation increased to the high record 19.89% - if compared with 12/2007, and approximately 23% - if compared to the average consumer price in 2007 In 2008, State Bank of Vietnam has changed eight times the basic interest rate (LSCB) which has the time up to 14% In ten months, Vietnam's economy inflation is over 20% Therefore, Government must take eight measures and solutions to curb and
Trang 30However, in 2009 the risk of inflation remains latent; export becomes hard, the results in seven months of 2009 have decreased to 13.4%, import tends to increase, aS a consequence, trade deficit also tends to increase (only in seven months of 2009 trade deficit is 3.4 billion USD) which affects overall balance and puts pressure on exchange rates; Foreign investment remains difficult; budget deficit rise
" Forecasting the basic economic indicators of Vietnam 2010 - 2013 In that context, Vietnam economy has joined WTO relatively extensive Therefore, with the world economy situation, they will immediately affect Vietnam economy Economists revealed the forecast on Vietnam basic economic indicator in 2010 — 2013 through following datasheet: Criteria 2010 2011 2012 2013 GDP 6.5% - 7.5% 7% - 8% 7% - 8% 7.5% - 8.5% CPI 10% - 15% 8% - 12% 8% - 10% 8% - 9%
Exchange rate (3%/year) 16,832 -18,158 17,000-18,339 17,170-18,523 17,342 -18,708
Account interest rate 10% - 14% 8% - 12% 8% - 12% 8% - 12% Securities: VN-index (point) 600 — 800 800- 1100 900- 1200 1000 — 1300 FDI (billion USD) 70 - 80 75 - 90 75 — 95 80 - 100
FH (biHion USD) 4-5 5-6.5 7-10
Gold price (million VND) 19-21 2.0-2.2 2.0 -2.3 21225
Developing the ts
Developing the ¬ 5 Sharply
Real estate ; municipal Developing
Trang 31In socialist oriented market economy of Vietnam, the political, social and
legal environment plays extremely important factors that could affect any
businesses
Therefore, with more than 20 years experience in country renovation (from 1986 — 2006), it can be predicted the political, social and legal environment of Vietnam in the coming periods as follows:
° Institutional and political stability
° Social stability facilitates business activities Intellectual standards of people are improved Western future trends, particularly among young people become popular
° Vietnam has open policy and great innovation in legal system but it is still low institutional legality
° Law on Credit Institutions will be revised in future towards the application of international rules (OECD regulation of bank management, provisions of Basel [J in line with Committee of Bank Supervision)
° Administrative mechanism is heavy, bureaucratic and inefficient
° System of state enterprises operates inefficient but still has a great influence due to State’s support The equalization of state enterprises takes place increasingly rapidly
ˆ Ths mall and medn small and medium enter «Dd 3 3 œ n3 5 te tn D tn "+ ise ưa œ (n¬ strong A t3 S ta
" Forecast Technology Environment:
Objectives, development trends of Vietnam information technology and
communications to 2010 and growth aims to 2020 have been determined as follows
° Formation and development of Vietnam’s electronics with e-citizens, e-
government, e-businesses, e-business transaction and e-commerce to achieve fairly
Trang 32° By 2010, telephone density reaches 32-42 telephones per 100 people, including fixed telephoned density reaching 14-16 set per 100 people: density of Internet subscribers reaching 8-12 subscribers per 100 people: percentage of using the Internet reaching 25-35%; 100% communes having telephone lines; 70% of communes getting internet access; 100% of districts and most communes in the key
economic areas offered internet broadband services
° By 2020, telephone density reaches 50 telephones per 100 people in which fixed telephone density is 20 telephones per 100 people and over 30 mobile phones
per 100 people
* 50-70% enterprises apply IT applications and communications to
management activities, operations, brand promotion, marketing, market expansion
° Transaction and e-commerce environments are formed and developed rapidly Predicted that 25-30% of total transactions of economic sectors are made through e-trading and e-commerce system E-commerce transactions in 2010 increases 10 times compared with 2002
e All state ministries, administrative agencies, provincial and district administrations are connected to internet broadband
«" Forecasting demography:
second position in Asia and 57% of population under 25 years of age Vietnam's population growth rate increased slow in the last centuries and started to increase rapid since the beginning of 20" century as common trend of the world but it also
owns its specific characteristics In 1921, there were only 15.6 million, 1939: 19.6
million 2000: over 77.6 million, 2008: nearly 86.2 million Vietnam has become landless, crowded population (in nearly 200 countries and territories, Vietnam ranks 65th in area, 13th in population, population density also surpassed the 260 people / km2- ranked 35th in the world) Vietnam population is classified in the
Trang 33voung population group (in 2005 percentage of population under 15 years of Vietnam accounting for 26.3%, this rate in Asia: 21%, Europe: 16%) This is abundance source of labor, economic potential of the country
(Source: Economic Magazine and Forecasting of February 2009- third week)
® Structure of male and female workers: Female labor force ranked third and
is likely to play increasingly important role Currently, Vietnam women contribute a huge development in the country, expressed in higher percentage of females in labor force With more than 50% of population and nearly 50% of workforce, more and more women participate in most areas of social life and hold important positions in the State organizations Presently, there are 33.1% of women in Parliament (XII term) - the highest portion in Asia and is one of countries with the highest female delegates in National Assembly in the world; number of women participating People’s Councils at all level over 20% More than 90% of women can read and write Female with university degree is 36.24%, master degree 33.95%; Doctor degree 25.69% Women predominate in some sectors such as
education, health and services In professional works, women dominate in literature,
language, medicine and pharmacy, social sciences, natural sciences and economics ° Demographics based on urban/rural criterion: according to General Statistics
Office of Vietnam in 2005, Vietnam is the 13th most populous country in the world
with 83,119,900 ,119,900_neonle,-of which 27% live in-urb
Annual population growth rate is of 1.18% The most populous city of Vietnam is Ho Chi Minh City and Hanoi capital Most cities across the country are in the urbanization trend Therefore, population in these areas will be growing rapidly Population living in cities distributed unevenly: Population in urban areas accounted for 73% of which 72% are concentrated in big cities
Trang 34For the consumer trends that can direct the bank in the next time we got the following data: If you get a 100% rate, the level of consumption or service usage in their daily lives are the corresponding rates as follows: ° Mobile phone: 96,3% e ATM card: 50,9% ® Savings: 29% ° Internet access: 23% ° Domestic travel: 20% ° Lending: 9% ° Abroad travel: 3,5%
The population growth rate in Vietnam will bring some new consumer trends and changes in the next 10 years In particular, the strong increase in labor force (those who make decisions of consumption) and small household type will stimulate consumption Consumption economy becomes a major factor in overall economy Forecast population growth and migration to urban will bring consumption economy in Vietnam to new heights Currently, there have up to 80% of Vietnam consumers tend to shop at supermarkets, advanced trade centers A modern shopping habit increased from 9% in 2005 to 14% in 2007 and is expected to reach about 24% in 2010
Z.Z2.3 Environment for activities of Vietnam banking sector 2.2.3.1 Context and activity trends of Vietnam banking sector * Context and activities of Vietnam banking sector:
In recent years, Vietnam's banking system has developed rapidly both in scale and quality State Bank has many efforts in conducting monetary policy,
stable exchange rates, interest rates and inflation curb, which contributes to
economic stability and creates conditions for economic growth at levels higher, ensures the safe, efficient, sustainable development integration into the wider world
Trang 35economy Especially after the WTO accession Vietnam's banking system has expanded very quickly and there are certain important contribution to the construction of the country building national infrastructure, taking care business teams, contributing to development of agriculture, industry and services
Vietnam Government has made great efforts to make banking sector healthy through the implementation of Scheme of Banking Consolidation and Redress (1998) and Scheme of Restructuring Commercial banks (2001) to strengthen finance, market discipline in banking operations and improve competitiveness of banking system Banking reform program also received important financial and technical support from international community, particularly WB, ADB, IMF and
Government of other countries
Until now, basically, state commercial banks have been healthy financial
situation and at the same time, they increase charter capital and scale, quality assets Social policy lending are separated from commercial lending and ending the status of state management agencies intervene in business activities of credit institutions to ensure credit institutions, including state commercial banks implement the principles of business market and maximize profits The autonomous business right, self-responsibility to finance and other risks become increasingly institutionalized and made clear fairly effective, especially in the share holder banking sector and branches of foreion banks Government established Bank for Social Policies and Bank for Development assistance to perform tasks of lending and crediting political objects of the state State commercial banks are audited internationally and periodically and other commercial banks have been independently audited every year, at the same time make public information about
financial status and activities
Trang 36institutions The basic banking knowledge constantly is standardized and integrated unity based on modern information technology to support concentrating management and administration of commercial banks Electronic payment systems that banks are put into operation in 2002, and information technology infrastructure of the banking industry is modernized gradually, which create an important step contributing to promoting development of new banking services, especially payment services and e-banking (internet banking, telephone banking, ATM, credit cards, debit cards ) Currently, banking sector is entering modernization of banking and payment systems, Phase II Therefore, Vietnam commercial banks increasingly operate with professionalism and international prestige
The structure of commercial banks is modernized Operation scale and
distribution channels continue to expand more reasonable Business performance of credit institutions has improved markedly, most credit institutions gain profit from
business activities
* Trends of banking sector:
Currently there are too many banks in Vietnam but there is not any bank, which is strong in terms of international aspect General, banks have been racing each other to expand its network scale to mobilize more capital (developed by width) This lead to the situation that banks are competing fiercely with each other in -ored
(depth) At the same time, banks expand its scale but due to the lack of qualified human resources, management and strategic planning could not keep up-scale development
Banking services will be consolidated; banks will pay more attention retail segment Among them, the securities lending service, buying gold, or buying real estate will be focused and develop more In addition, there will be better care to individual customers In 2009, retail segment will be the fierce fighting between the commercial banks There will be a range of new services launched when large investment segments hide higher risk
Trang 37a
Commercial banks together with State Bank of Vietnam involve in the djustment of exchange rates
2009 is the year for taking precautions to loans of banks This government will make the banks more solid, investment will not spread, but concentrated Consequently, the ability to get benefit is higher, besides that avoid unnecessary risks Perhaps the activities of banking sector will not brilliant but ability to recover
Cc apital will be high and the currency will become liquid + The trends of banking market:
The financial institutions non-bank will dominate central location of the bank Brach model becomes obsolete if it is not adjusted, rationalized to increase efficiency
Banking business model based on relationship are becoming mainstream Technology development is based on market-orientation and economic
benefit scale
Associating transactions is more growing which moves from cross-selling to
inclusive selling and cross buying trends
Relationship increasingly complex between Bank - Customer - Vendor - Networks E-bank - a channel plays increasingly important in business banking
2.2.3.2 Structure and size of Vietnam banking industry * Structure of Vietnam Banking Industry:
Trang 38* Size of the banking market:
Following is the data on growth criteria of Vietnam banking industry from 2003 to 2007: Unit: Thousand of billion VND Criteria 2003 2004 2005 2006 2007 Nominal GDP 613 qs 839 974 1,144 Total credit account 207 240 553 694 1,069 outstanding Total deposit 321 423 sào 764 1,146 Credit growth 28% 42% 32% 25% 54% Deposit growth 26% 32% 32% 37% 50% (Source: IMF, ADB - 2008) Table 2.3
* Market share structure of the banking industry from 2000 to 2007: Operation market share among banking blocks witnessed a sharp transition from State commercial bank to Commercial Joint Stock Bank in recent years, especially in 2006 and 2007 It was demonstrated by following table:
Trang 39Mobilization market share in period of 2000 — 2007 T | 2000 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | 2007 | "State owned 77% | 80% | 79% | 78% | 75% | 759% | 69% | 59% | banks | | Commercial J.S 11% | 9% 10% | 11% | 13% | 16% | 22% | 30% banks Foreign banks 10% | 10% 9% 9% 10% 8% 8% 9% Other financial 1% 1% 1% 1% 2% 2% 1% 2% institutions (Source: ADB - 2008) Table 2.5
2.2.3.3 Rivalry evaluation in Vietnam banking industry
It is supposed to apply Michael Porter’s model (Porter’s 5 forces) to review Vietnam banking market and analyze rivalry forces, development trends as well as operation opportunities to create a proper competitive advantage suitable with
resources of banks
* Threats from new entrants
Where new entrants are easily to take part in, rivalry will be increasingly
high Threats from new entrants will depend on “height” of adhesion barrier
According to commitment of WTO’s adhesion, the banking will be gradually opened within 7 years roadmap The banking industry obtains the basic changes when the overseas financial institutions can hold shares of Vietnam banks and appearance of 100% foreign capital banks
Trang 40According to commitment in the AFAS framework of ASEAN, Vietnam was required to completely remove regulations on limiting capital contribution rate,
service and transaction value of overseas banks since 2008
There are five 100% foreign capital banks incorporated in Vietnam However, when considering quantity of overseas bank having representative offices
in Vietnam and foreign banks having shares in the domestic commercial banks,
number of 100% foreign capital banks will increase in the future
Barriers for appearance of domestic banks are heightened after the Government suspended temporarily issue of new bank establishment license on August, 2008 In addition to regulations on charter capital, the period must be continuously profitable, new entrants must be closely supervised by the State Bank of Vietnam However, this will not prevent the eligible enterprises to participate into the banking industry when regulations on banking establishment license are reactivated by the Government
Adhesion barriers also demonstrated in the market segment, target market where the available banks aim at, trademark value as well as customer base, loyalty of customers constructed by banks These were especially important because it would decide survival of a bank wishing to adhere to Vietnam market
When the available banks construct a reliable trademark with effective and
distinctive financial products and services with abundant and ioyai customers, the
switching cost to attract customers of new entrants will be extremely high, thence, they must carefully consider before making decision on market participation In fact in Vietnam banking market, switching cost is generally low due to banks fail to create a distinctive feature on product and service strategy
A factor which can partially increase the switching cost and create competitive advantage for the available banks is the distribution system New entrants will face with many troubles in finding a satisfactory location for their
head office as well as transaction centers because the attractive and convenient