CAPSTONE PROJECT REPORT
BUILDING BUSINESS STRATEGY FOR THE VIETNAM BANK FOR
AGRICULTURE AND RURAL
DEVELOPMENT- DO SON BRANCH IN THE PERIOD 2013 TO 2018
Class: GaMBA.M0611 Group 5 1 Pham Van Hieu
Trang 2VIETNAM BANK FOR AGRICULTURE AND RURAL DEVELOPMENT DOSON BRANCH
Address: No 8, Ly Thanh Tong, Do Son District, Haiphong city
CONFIRMATION LETTER
Haiphong, 23” June 2013 To: Master of Business Administration program
Center for Education Technology and Career Development - Hanoi National University
Subject: Comments of Vietnam Bank for Agriculture and Rural Development — Do Son Branch (AgribankDo Son) on Capstone of Group 5.GaMBA.M0611,
Griggs University
Agribank DoSon has fully done to support for Group 5 - GAMBA M0611 when
they conducted the capstone “Building business strategy for the Vietnam bank for Agricultural and Rural Development — DoSon Branch in period 2013 to 2018".This group is allowed to use the Agribank DoSon’s document for group’s capstone project
Members of group has expressed their enthusiastic working attitude, has closely
Trang 3ACKNOWLEDGEMENT
After a serious hard time of studying, we have completed this research
We would like to express our special gratitude to lecturers, Master of
Administration course, Griggs University, the Center for Education Technology and
Career Development - Hanoi National University, who enthusiastically taught us and equipped theoretical knowledge and study methods to carry on this paper
We would like to send our sincere thank to staffs of The Vietnam Bank for Agriculture and Rural Development or Agribank — Do Son Branch for their useful supports to provide information data to accomplish this project
We declare that the data cited in the work is used as requirements The results
Trang 4Tabblie of Contents
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Trang 5ANALYSIS ON BUSINESS PERFORMANCE OF AGRIBANK DO SON IN
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2.2 Analysis of the external environment factors of Agribank - Do Son Branch
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Trang 7LIST OF FIGURES Figure 1.1: Porter’s Five Generic Strategies
Figure 1.2: M.Porter’s five forces
Figure 1.3: The Strategy - Formulation Analytical framework Figure 2.1: Orgnizational chart
Figure 2.2: Structure of income of Argibank Do Son Branch Figure 2.3:Profit after tax in 2010-2012
Figure 2.4: Forecast about economic Vietnam in the report in 12th June/2013
Figure 2.5: The growth of economic development Do Son district
Figure 2.6: The growth rate in sectors Do Son district
Figure 2.7: Structure of GDP by sectors in 2012
Figure 2.8: The structure of the population of Do Son district in 2012 Figure 2.9: Credit growth through the years
Figure 2.10: Monthly interest rate in 2012 and 2013
Figure 2.11 : Net Profit Loans through the years
Figure 2.12: Structure of customers in 2012 Figure 2.13: Total assets in 2010-2012 Figure 2.14: Total of loans
Trang 8LIST OF TABLES
Table 1.1: SWOT Matrix Table 1.2: QSPM matrix
Table 2.1: Income statement — Agribank Do Son in 2010 and 2012
Table 2 2: Compare Agribank and its rivals
Table 2.3: Competitive Profile Matrix (CPM)
Table 2 4: External Factors Evaluation matrix (EFE)
Table 2.5:Labour structure of Agribank — Do Son Branch in 2010-2012 Table 2.6:Consolidated Balance Sheet
Table 2.7:Total capital resources mobilization
Table 2.8: Financial indicators
Table 2.9: Internal Factors Evaluation matrix (IFE)
Table 3.1:SWOT matrix Table 3.2: QSPM matrix
Table 3.3: Forecast on income and profit in 2018
Trang 9INTRODUCTION 1 Significance of the research
Banking sector is one of the sectors that is affected most strongly by the trend of international economic integration Integration can bring more opportunities as well as_ challenges for banking sector in VietNam Currently, Vietnam's banking system has a broad network of provinces and cities nationwide and a growing number of new banks have been established for the intensity of fiercer competition than ever
To overcome these challenges and take advantage of opportunities, thereby enhance its competitive position in the market, banks must make appropriate business strategy in each period, at different stages of development It is more
important that these strategies must be consistent with global trends based on the
principle of balancing national interests Therefore, the business strategy is urgent for
a bank today
From that fact, our group has chosen the topic "Building the business strategy of the Bank for Agriculture and Rural Development of Vietnam (Agribank) — Do Son
Branch in the period 2013-2018 "
2 Subject and scope of research
+ Objective: Business activities and market development of Agibank Do Son
+ Scope: Market of exploiting and providing banking service in Agribank Do Son and
its rival
3 Objective of research
- Reviewing system of a theoretical basis for business strategy and method to select effective business strategy
- Utilizing theories on the situational analysis and evaluation of the company's
Trang 10- Basing on analysis of the capacity of company to recommend business development strategy for Agribank Do Son from 2013-2018
4 Method of research
- Method of dialectical materialism and historical materialism
- Secondary information collection: Analysis, evaluation and synthesis
- Information Processing Method: Using the method of modeling, causal analysis, descriptive statistics to analyze the results of the business performance of Agribank Do Son; Combining to use methods in courses: Strategic Management, Human
Resources, Marketing, Operations Management
5 Structure of research
Chapter 1: Theoretical background of business strategy
Chapter 2: Analysis on business performance of Agribank Do Son
Chapter 3: Business strategy selection and solutions of Agribank Do Son from 2013-
2018
r7
Trang 11CHAPTER I: THEORETICAL BACKGROUND OF BUSINESS STRATEGY
1.1 Theory of business strategy 1.1.1 Definition of business strategy
here are many different views on business strategy we can divide into some
groups:
+ Business strategy as an art
- Alain Threlart said: ”Strategy is the art that companies use to fight and win the competition” - M.Porter: ”Strategy is the art of building a solid competitive advantage to defense” These authors considered the business strategy as an art to compete and develop business
+ Business strategy as a management
- G Arlleret showed: Strategy is the determination of the paths and the means to achieve the goals identified through the policy
- D Bizrell and his fellows: Strategy as general planning to guide or direct
company to the desired target It is the basis of the operational policies and procedures
- Gluecl : Strategy is a consistent, comprehensive and integrated plan, which is
designed to ensure that the objectives will be implemented
There are many different views on strategy One of the most common is that : "strategy is a complex series of actions to mobilize the entire resources of an organization or individual in order to achieve a certain purpose."
Strategy is an art of design and organizations to achieve long-term goals
which are in the relationship with the changes of the business environment and competitiveness
1.1.2 The role of business strategy
- Planning: The business strategy contributes to improving the efficiency of using resources, reinforcing the enterprise's competitive position in the market and
Trang 12
ensuring the sustainable development for the enterprise Simultaneously to create firm foundations for making policies and decisions on business suitable with market
changes
- Forecasting: Help managers realize clearly opportunities and potential challenges in the present business environment or in the future so that they can analyze and predict
environment business conditions in the future, to make the best of opportunities, minimize risks, increase competitive capability and to get great achievements
- Controlling: Help enterprises have a better business strategy through using Systematic approach, create base for increasing connections and integration among members in materializing enterprise’s targets
1.2 Types of business strategy 1.2.1 Corporate-level strategies Strategy Definition Forward Integration Gaining ownership or increased control over distributors or retailers Backward Seeking ownership or increased control of a firm’s suppliers Integration Horizontal Seeking ownership or increased control over competitors Integration
Market Penetration Seeking increased market share for present products or services
in present markets through greater marketing efforts
Market Introducing present products or services into new geographic area Development
Trang 13Diversification Unrelated Diversification Adding new, unrelated products or services
Retrenchment Regrouping through cost and asset reduction to reverse declining
sales and profit
Divestiture Selling a division or part of an organization
Liquidation Selling all of a company’s assets, in parts, for their tangible worth
1.2.2 Business-level strategies
Porter’s Five Generic Strategies
Type 1: Cost Leadership—Low Cost Type 2: Cost Leadership—Best Value Type 3: Differentiation
Type 4: Focus—Low Cost Type 5: Focus—Best Value STRATEGIES Cost Leadership Differentiation Focus Type Ki bi, _ Large Z < A = i = Š | > small Type 3 Type 4 j
Figure 1.1 Porter’s Five Generic Strategies
(Source: Griffin, Competitive Strategy, 2005)
Trang 14
1.3 Strategy Formulation
Strategy formulation is the first stage of strategic management, this stage includes
developing vision and mission statement, identifying external opportunities and threats, evaluating company internal strengths and weaknesses, developing alternative
strategies, selection strategies which benefits the business
1.3.1 Analyze the macro environment - PEST model
While M-Porter's five forces model focuses on analysis of the business environment, PEST studies the impacts caused by the macro environment factors, including:
Political Economics Sociocultural Technological
These four factors directly exert impact on the economic industries, they are external factors of the enterprise and industry, and the industry has to endure such impacts as objective factors The enterprises, which operate under such impacts, will make
suitable business policies and activities
1.3.1.1 Political environment
The policies made by State will affect the enterprise as well as international telecommunications service providers; they may give profit or cause challenges for
the enterprise, such as policies on trade, industry development, economic
development, tax, policies on competition regulation, consumer protection
1.3.1.2 Economic environment
Macro-economic environment determines the health and prosperity of the economy, it
always cause an impact to the business and industry Enterprises must study the change of economic environment to realize the changes, trends and its strategic implications Economic environment shows the nature and direction of the economy in which enterprises are operating The impact of major economic: inflation, interest
rates, the stage of economic cycle, the balance of payments, fiscal policy and monetary
policy
Trang 15
1.3.1.3 Socio-culture environment
Every country, territories all have their own typical cultural value and social factors
which are characteristics of the customers at such places Therefore, to develop and
make full use of the potential of the market, enterprises are forced to study cultural
traditions, lifestyle market, the lifestyle changes of the market, in order to make timely suitable strategy The consumption characteristics, custom, lifestyle or culture
of each locality and ethnic groups will have influence on the demand and taste of consumers who consume enterprises’ products
1.3.1.4 Technology environment
Technological changes in production methods, raw materials affect on the life cycle of the product, these changes may promote or inhibit enterprises, so it should be
regularly evaluated
1.3.1.5 Natural environment
1.3.2 Analyze industry environment — M.E.Porter’s five forces
The "Five competitive forces model" of Michael Porter can be considered as one of the most effective tools for the enterprises to investigate correctly the origination of
Trang 16New entrants Threat of new entrants r Bargaining Industry competitors Bargaining power of power of suppliers buyers Supplier Buyers 2 QZ Rivalry among existing firms A Threat of substitute products and service Substitute Ss
Figure 1.2 M.Porter’s five forces
(Source: lecture of Master of Business Administration — Griggs University)
According to Michael Porter, the intensity of competition in the market in any
industry is affected by five competitive forces:
The Ist : pressure from potential competitors
- Competitive pressure coming from the opponent's efforts to achieve a better
position, more market share, higher sales and competitive advantage
- Factors affecting competition: slow growth or declining demand and
overproduction; low transfer costs; competitors increased and there is a difference in 3ize and competitiveness Product has little difference Opponents have diverse
strategies and objectives
- Competition will weaken as: increased demand; loyal customers; higher product conversion costs; companies in the industry are rare or intense competition for market share Number of enterprises is small, small scale - enterprises have little affect - Tool to beat the competition and attract customers: Catalog, design diverse
sroducts; quality product better The brand image is more attractive; affordable
Trang 17
reasonable price; widening distribution network; ability to serve customers the best,
widespread advertising media
The 2nd: Pressure from existng competitors
- The risk of more intense competition: low market entry barriers; number of competitors entering the market and a number of their resources to help them become
rivals; existing companies penetrate the network market where they have
notpreviously been involved; increased demand of buyer or other companies in the industry can not compete with the entry of new competitors
- Weak competition: high entry barriers: The few number of competitor and limited
resources; buyer demand growth slows; companies in fierce competition with the
arrival of the new competitors
- Tool against intrusion: The scale advantage; requirement of capital / resources
special; Distribution limited; policy barriers from the law; Tariff Barriers
The 3rd : pressure from suppliers
The power of suppliers is likely to decide the conditions of their transactions with enterprises, represented by: The concentration of suppliers, the level of input
standardization, cost of supplier change as well as increasing risk of merging between
suppliers and manufacturing units In the sector environment, the power of suppliers
will be increasing when:
+ Few numbers of suppliers and these suppliers have big scale because the number
and scale of supplier decides on competitive pressure, negotiation power of supplier over the industry, enterprise
+ The supplier has a low capability of substituting products and the transmission into other products spends too much cost and time
+ The supplier's products play an important role on customers The 4th : pressure from alternate products
- This pressure increases as: good substitutes available or emerging products;
attractive price of substitutes; substitutes with equivalent function or better;
Consumers bear lower costs when switching to substitutes
Trang 18
- This competitive pressure is weak as: substitutes is not good or not available; high- priced substitutes; Consumers bear higher costs when switching to substitutes
The Sth : pressure from customers
The customer is a competitive pressure, which can directly influence the whole business activities of the sector The customer can make pressure on price, product
quality, and attached services and are themselves the controller of the industry
competition through buying decisions Similar to pressure from supplier, the buyer's power also increase when:
+ Few number of buyers and being big customers
+ Consuming major part of products and making up a big portion of the
enterprise's annual sales
+ Cost of changing into other products is relatively low + There is enough information about the enterprise
- The pressure decreases when: Customers buy items infrequently or small quantities;
Cost of switching to another brand is high; sellers brand has a major impact on
buyers; The products creates important quality or value to buyers
In summary, analysis of the business environment is extremely important for
companies Business environment, including macroeconomic environment and industry environment The goal of the analysis is to identify opportunities and threats,
on the basis of which the management make rational decisions
1.3.3 Analyze internal environment
For a comprehensive overview, in addition to analysis of the external environment to
orient businesses identify opportunities and threats, the managers need to focus on the internal environment to understand more the strengths and weaknesses in your
organization
1.3.3.1 Analyze resources
Trang 19Infrastructure
Human resources
Machinery
Technology
Research and development (R&D)
Research and development efforts can help business keep the leading position in the industry or vice versa, making the lagging behind the leading enterprises Therefore,
enterprises must constantly change in technological innovation related to technology, products and materials
1.3.3.3 Production resource
Manufacturing, one of the main activities of the enterprise associated with the
creation of products, strongly influences on the success of the business The production of relatively high-quality products with a relatively low price will bring
many benefits to business because the products are easier to sell, to save financial
resources, to create a positive attitude among employees
The content should be noted when analyzing production are: the price and the level of
materials supply, inventory turnover, the arrangement of the means of production, performance and cost of the equipment, cost and technological capabilities compared to the industry and the competitors
1.3.3.4 Financial resource
The finance department has a function: analyzing, planning and supervising the
implementation of the financial plan and the financial situation of enterprises Finance department has a profound impact across the enterprise When analyzing the financial
and accounting factors, managers should focus on the followings: the ability to
mobilize short-term and long-term capital; total capital; flexibility of capital structure;
utilization financial strategies; ability to control cost reduction; effective accounting system and for cost planning, financial planning and profit
Trang 20Identify customer needs, establish and lead innovation process, Collaborate with
other research and development activities to accelerate the implementation of new products, and it is the most important factor affecting the success of the product; help businesses show the new trends which quickly become leverage, turn them into opportunities, make strategic development and sustainable growth of the company
1.4 Tools of strategy formulation
According to Fred R David, Process of formulating and selecting strategy consists
The input stage \
External Factor Competitive Internal Factor
Evaluation Matrix Profile Matrix Evaluation Matrix three stages: The matching stage
Strengths- Boston Consulting External — Internal Grand Strategy
Weaknesses- Group Matrix (BCG) Matrix (IE) Matrix
Opportunities- Threats Matrix
The decision stage
AC Quantitative Strategic Planning Matrix (QSPM) JJ
Figure 2.3: The Strategy - Formulation Analytical framework
Source: Fred R David, Strategic Management Concepts and Cases, Figure 6-2, P1222
Stage 1 The input tools require strategists to quantify subjectivity during early stages of the strategy-formulation process Making any decision in the input matrices
regarding the generate and evaluate alternative strategies Good intuitive judgment is always needed in determining appropriate weights and ratings
Stage 2 The matching stage of the strategy-formulation framework consists of five
‘echnique that can be used in any sequence: the SWOT matrix, the SPACE matrix,
‘he BCG matrix, the IE matrix, and the Grand Strategy Matrix These tools rely upon
Trang 21
information derived from the input stage to match external opportunities and threats
with internal strengths and weaknesses Matching internal and external critical
success factor is the key to effectively generating feasible alternative strategies
Stage 3 Analysis and intuition provide a basis for making strategy-formulation decisions The matching technique just discussed reveal feasible alternative strategies The Quantitative Strategic Planning Matrix (QSPM) uses input from stage 1, analyses and matching result from stage 2, analyses to decide objectively among alternative
strategies The QSPM is a tool that allows strategists to evaluate alternative strategies
objectively, based on previously identified external and internal critical success factors The QSPM requires good intuitive judgment
1.4.1 External Factor Evaluation Matrix (EFE matrix)
External Factor Evaluation (EFE) Matrix allows evaluating major influence of the external environment on the enterprise EFE Matrix is deployed through five steps: Step 1: Listing key external factors affecting the enterprise’s operation
Step 2: Assigning a weight from 0.0 (indirect, least important) to 1.0 (direct, most
important) for each factor The classification shows the corresponding importance of factors to the success of the enterprise in the industry
Step 3: Assigning a rating from 1 (weak response and influence) to 4 (strong response
and influence) for each critical success factor to show the response of the enterprise’s
current strategy to these factors
Step 4: Multiplying the weight of each factor with respective rating to determine the total weighted score
Step 5: Adding the total weighted score of factors with the sector of the enterprise
Thhe average score is 2.5 If the total weighted score is lower than 2.5, it shows a weak
response If it is above 2.5, it will show a strong and positive response to the emterprise
1.4.2 Internal Factor Evaluation Matrix (IFE matrix)
Imternal Factor Evaluation Matrix (IFE): A summary step in conducting an internal strategic management audit is to construct an internal factor evaluation( IFE) matrix
Trang 22
This strategy formulation tool summarizes and evaluates the major strengths and
weaknesses in the functional areas of a business, and it also provides a basis for
identifying and evaluating relationships among those areas An IFE matrix can be developed in five steps:
Step 1: List key internal factor as identify in the internal-audit process Use a total of
from 10 to 20 internal factor including both strengths and weaknesses List strengths first and then weaknesses
Step 3: Assign a weight that ranges from 0.0 (not important) to 1.0 (all- important) to
each factor The weight assigned to a given factor indicates the relative importance of the factor to being successful in the firm’s industry The sum weights must equal 1.0
Step 3: Assign a 1 to 4 rating to each factor to indicate whether that factor represents a major weakness (rating = 1), a minor weakness ( rating = 2), a minor strengths (rating=3) or a major strengths (rating=4) Note that strengths must receive a 3 or 4
rating and weaknesses must receive a 1 or 2 rating Ratings are thus company —based,
whereas the weights in step 2 are industry-based
Step 4: Multiply each factor’s weight by its rating to determine a weighted score for
each variable
Step 5: Sum the weighted scores for each variable to determine the total weighted
score for the organization
1.4.3 Competitive Profile Matrix (CPM)
Competitive Profile Matrix is formed to give out comparison between enterprises with its major competitors in the industry The comparison is based on factors affecting the competitiveness of enterprises in the industry It helps managers
recognize the strengths and weaknesses of the enterprise compared to its competitors, define its competitive advantages and weaknesses needing to be overcome There are five steps to form a Competitive Profile Matrix:
Step 1: Listing about 10 key factors have strong influence on the competitiveness of enterprises in the industry
Trang 23
Step 2: Assigning a weight from 0.0 (not important) to 1.0 (very important) for each factor The weight of each factor depends on its influence on the competitiveness of enterprises in the industry The total weighted score of all factors must be equal to
1.0
Step 3: Assigning a rating from | to 4 for each factor The rating of each factor
depends on the enterprise’s response to each factor, in which 4 is superior, 3: above
average, 2: average, 1: poor
Step 4: Multiplying the weight of each factor with its rating to find out the weighted
score of each factor
Step 5: Adding the weighted score of all factors to find out the total weighted score of
the matrix
Evaluation: Comparing the total weighted score of the enterprise with its major
competitors in the industry to evaluate its competitiveness
1.4.4 SWOT Matrix
While PEST analysis tools related to external factors, SWOT matrix focuses on the internal changes related to the external factors
SWOT is a very useful tool to clarify the problem or making decision in the
organization, as well as in business management In other words, SWOT is theoritical
framework upon which we can review the strategy, determine the position and direction of a company, analyze business proposals or any ideas relating to the
Trang 24The weaknesses opportunities (WO), the strategies aim to improve weaknesses by taking advantages weaknesses of external opportunities;
The strategic strengths threatened (ST): The strategies use strengths to avoid or reduce the impact of external threats;
The risk of strategic weakness (WT): The strategies to improve the weak points in
order to avoid or reduce the impact of external threats
According to Fred R David, to build the SWOT matrix, we go through eight steps:
Step 1: List the firm’s key external opportunities Step 2: List the firm’s key external threats
Step 3: List the firm’s key external strengths
Step 4: List the firm’s key external weaknesses
Step 5: Match internal strengths with external opportunities and record the resultant SO strategies in tha appropriate cell
Step 6: Match internal weaknesses with external opportunities and record the resultant WO strategies Step 7: Match internal strengths with external threats and record the resultant ST strategies Step 8: Match internal weaknesses with external threats and record the resultant WT strategies
Some important aspects of a SWOT matrix is a strategy that select variable, not
decide what is the best strategy For exemple, note that both the internal/external
factor and the SO/ST/WO/WT strategies are stated in quantitative terms to the extent
possible
Opportunities (O) Threats (T)
O,: List the opportunities in theT) : List the threats in the order of SWOT MATRIX order of importance importance
O;: Tạ:
Oa: lĨạ:
Trang 25Strengths (S)
S-O Strategies S — T Strategies
Si: List the strengths in the ;
; Use internal strengths to exploitUse strengths to avoid threats order of importance ; ¬ ;
business opportunities of thefrom the enterprise's external
5 external environment for creatingenviroment
2:
business success OS cịị
Weaknesses (W) ;
; ; iW; — O Strategies W-T Strategies
W}: List the weaknesses in the - ; oi Limit weaknesses to exploit theMinimize risk and avoid the order of importance có oe business opportunities broughtthreats from the outside 25c ly from outside enviroment of the enterprise Fe wee É%
Table 1.1: SWOT Matrix
In globalization, opening up, exchanging economy and culture with other countries is inevitable and risks for small businesses SWOT analysis will help businesses "weigh - select - measure - count" correctly before you decide to enter the
international market
1.4.5 Quantitative Strategic Planning Matrix (QSPM)
According to Fred R.David, QSPM Matrix uses input information from IFE Matrix, EFE Matrix, Competitive Profile Matrix, SWOT Matrix and Grand Strategy Matrix to
objectively evaluate which is the best strategic alternative Six steps to develop a
QSPM Matrix:
Step J: Listing important external
strengths/weaknesses of the enterprise
opportunities/threats and internal
Step 2: Assigning a weight to each internal and external critical success factor This step is similar to IFE and EFE matrices
Step 3: Listing strategic alternatives that the enterprise should consider to implement
Gather strategies into sep arate group if it is possible
Trang 26
Step 4: Finding out the attractiveness score (AS) of each stategy The attractiveness score is rated as follows: 1- not acceptable; 2- possibly acceptable; 3- probably acceptable; 4- most acceptable If the success factors do not have influence on the strategy selection, do not mark them
Step 5: Calculating the total attractiveness score (TAS) by multiplying the weight
(step 2) with the attractiveness score (step 4) in each row
Step 6: Calculating the sum total attractiveness score by adding all total attractiveness
scores in each strategy column of the QSPM Higher scores point at a more attractive Strategy Table 1.2 QSPM matrix Available Strategies No Factors Weight | Strategy 1 Strategy 2 Strategy n AS | TAS’ | AS | TAS AS | TAS External factors Inernal factors Total 1.5 Strategy implementation
Strategy implementation implies making the strategy work as intended or putting the organization’s chosen strategy into action Strategy implementation includes designing the organization’s structure, distributing resources, developing decision making process, and managing human resources
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1.6 Strategy evaluation
Strategy evaluation is the final step of strategy management process The key strategy evaluation activities are: appraising internal and external factors that are the root
Trang 28CHAPTER II ANALYSIS ON BUSINESS PERFORMANCE OF AGRIBANK DO SON IN THE PERIOD OF 2013 -2018
2.1 Overview of Agribank Do Son
2.1.1 Overview of Agribank 2.1.1.1 Introduction
Viet Nam Agriculture and Rural Development bank was established by decree
dated 26.03.1988 53/HDBT of the Council of Ministers (now the Government),
Operating under the Law on Credit Institutions Vietnam
Today, Viet Nam Agribank and rural development Bank — Agribank- a leading commercial banking plays key role in developing Vietnam’s Economy, especially
investment in agriculture, farmers and rural areas
Agribank is Vietnam’s largest bank in term of capital, asset, personnel staff, network operations and customer numbers
2.1.1.2 Vision and Mission + Vision
- Maitaining the leading commercial bank in Vietnam advanced in region and high reputation in international area
- Ensuring to promote region intergration and international cooperation, taking advange of the maximum finacial, technical, and advanced technology support from foreign country, and the financial institutions of international banks Ensuring efficient operation stability and sustainable development
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- Constructing Bank in two-tier banking model focus to management of the organization and management model customer groups and types of products and services
+Mission : Agribank plays key and mainstream role in Vietnam’s currency
market Adapt during World economic intergration, become the first commercial
bank in the region with high reputation in the international market 2.1.1.3 Achievements
+ Result
- Agribank has 560.000 billion VND total assest , is the largest bank and put
away BIDV -— the second largest bank nearly 70.000 billion VND
- Agribank has total investment captial over 513.000 billion VND ; 29.605 billion capital and operating network throughout country with 2.400 branches, Human resource more than 42.000 million equal to Human resource of 3 big orther banks Vietcombank, Viettinbank and Sacombank
- In 2012, Agribank mobilised more than 540.000 billion VND capital from other credit institution and from population, with total loan capital of over 480.000 billion VND make long gap with the second place respectively BIDV- 180.000 billion and up to 160.000 billion
- Althought the highest outstanding loan in the bank system, Agribank’s bad
debt is also at the one of highest level of the State owned commercial bank
According to figues, Agribank’s bad debt was 5.8 percent at 31/12/2012, approximately 28.000 billion VND, accouting for 10 percent of total bad debt of whole system The bad debt ratio of Agribank is also higher 2 times than the rating bad debt of BIDV and Vietcombank and four times than the rating with Vietinbank
- Capital adequacy ratio at least late 2012 Agribank is 9.49% - lower than the
awerage 14% of the whole system and also lower than the average 10.45% of the bank
group State commerce Capital adequacy ratio of at least Agribank only slightly higher than the group of finance companies, lease at 9.37%
+ Achievement
— Top ten Viet Nam Golden Star
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- Top ten commercial services bussiness exellence (Ministry of Trade) - Top ten of the 500 highest business in Viet Nam (ranked by VNR 500) - The stable development business (Ministry of trade)
- The UNESCO cutural business (UNESCO)
- Reputation Branch- the gold quality production are voted by Vietnamese consumer
- The bank has Exellence international quality of payment
And Agribank has achieved many other awards over the years 2.1.2 Introduction of Agribank Do Son
2.1.2.1 Establishment and development process
Do Son District in Hai Phong City was established by Decree No 145/ND-CP Government When established, Do Son district had only a joint stock commercial bank State commercial banks, which are shares of Trade of Vietnam (Viettinbank) Over time, the position of the Do Son District is improving Services of Tourism is
developing, Urban outlook spacious, clean, people's life gradually improved
Therefore, the demand for banking servicehas also increased and the district demand
Hai Phong city to establish a branch bank for Agrbank
Agribank — Do Son was established by decision dated 10.07.2002 of the President 245/QD/HDQT board Agricultural Bank and Rural Development Vietnam
active in the organization and regulation of the activities of agricultural bank branch
and rural Development of Vietnam The head office of Agribank Do Son is located at 8 Ly Thanh Tong street- Do Son District — Hai Phong city
In recent years, in order to survive, survive and thrive in the market
mechanism Agribank -Do Son has branch network expansion initiative to raise funds and meet credit needs of the economic sectors in the district
After 11 years of striving, building and gradually mature, Agribank — Do Son goes up with firmly steps on the comprehensive development of the capital raising, investment growth and improving credit quality application, cash collection, expanding foreign economic relations and develop diversified services
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Despite many obstacles and difficulties, Agribank — Do Son resolutely implement innovation in businessg, especially in operating direction, from being
accustomed to the subsidy mechanism, dependence and level above, does not focus
on the quality of the business, leading to this focus that every member of Agribank —
Do Son branches are really interested in is the last business efficiency, especially
credit quality
To prepare for regional and international integration, Agribank - Do Son have
gradually modernized banking activities that concentrate on the payments, electronic
transfers to the customer, so far every need customers of transfering money in and out of the system is done on the day of work, even if only for a short time with high safety and accuracy
Promoting Tradition 11 years of construction and growth, before renewal
requirements of the economy in the integration process, Agribank - Do Son will
promote the achievements and expriences in the initial management business practice along with the help of the grant, the industry and the effort to unite of officers and
employees Agribank — Do Son will develop sustainable and gain greater achievements
2.1.2.2 Business lines
Agribank- Do Son branch has main business lines :
+ Mobilizing Capital
- Receiving deposits in Vietnam dong and foreign currencies of all individual and organizations domestic and abroad with the flexible, diversity interest rate to meet the need of customers
- Issuing the valuable papers: certificates, bonds, promissory notes, bills
- Receiving funding and commissioned capital from the Government, local
authorities and other economic organizations or individual in the country and abroad in accordance with the Agricultural Bank
- The forms of capital mobilization in accordance with the Agricultural Bank
Trang 32Including: short-term loan, medium-term and long-term economic
organizations or individual, household
- Loan for officers live of workers and employees, loan for student, loan for
export labor
- Get entrusted fund, entrusted loan, even domestic capital investment + Forex-Trading
Mobilizing capital and lending, foreign exchange, international payments,
financial guarantee, discounting and rediscounting of document and other services on
foreign policy foreign exchange management of the Government, the State Bank and
the Agricultural Bank
+ Provision of payment services and treasury, including:
- Provide the means of payment
- Make payment services for domestic customers
- Perform the service and payment collection
- Implement the collection and distribution service to the customer in cash
Implement other payment services follow to prescription of the State Bank and
the Agricultural Bank
Abusiness and trading activities in the field of TWJ money, credit and banking
services have these functions Agribank - Son always enhance capital accumulation
and investment expansion units with economic development in all sectors of production, freight traffic, creating jobs contribute to stabilizing the flow the
implementation of the monetary and industrialization - modernization of the country
2.1.2.3 Organization framework
+ Structural framework
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DEPUTY DIRECTOR
Figure 2.1 Organizational chart (Source : Agribank Do Son) + The function of the department:
- Director: general charge and direct the department of branches and transaction offices under
- Deputy Director : the annual authorization of the director of the department and transaction offices attached to a job
-Administration &Human Resource department :
* Develop and implement rules and regulations of the bank
* Perform tasks related to personnel, such as salaries, social insurance, NGI
allows
* To advise the Executive Committee in the development and implementation of recruitment plans, training, training and human resources management of the entire branch
* Implementation of the administrative management for operations of the branch * Direct the work of administrative office as prescribed
Trang 34* There are tasked lending process and lending regime prescribed, in
collaboration with the specialized departments of the branch handling the work
related to business operations under the direction of credit of directors
* Perform credit transactions Economic analysis by sector, economic and
technical training, the customer lists to select safety measures for business and
achieve high efficiency Regular classified loans, delinquency analysis, causes and
propose corrective
* Perform credit evaluation work Collect, manage, provide information for the
assessment and prevention of credit risk
* Perform reporting regime prescribed
- Accounting Department
* Internal Accounting:
«* Implementation of management accounting and _ internal expenses such as salaries for staff
«* Aggregate revenue and expenditure reports monthly, quarterly and annual reports to the board of directors
* Accounting transactions
«* Handling transactions such as receiving deposits from businesses and individuals, the social and economic organization
** To perform operations on non-cash payments as authorized to collect, payment order, checks, transfer checks
“* Organization fully documented, accurate and timely by
economic transactions arising on business funding and capital use «* Organizing clearing and interbank payments
“* Prepare the balance sheet date, week, month, quarter, year, and submit a report to the superior bank
- Forex Trading Department :
* Payment by the export method: evidence from the letter of credit (L / C), the form of payment collection, electronic funds transfer
* Purchase and sale of foreign currency exchange
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* Non-commercial payments: money transfer * Funding Trust
* The function of this dept is more advisory director in planning the
implementation of the control regime, policies, rules and regulations in the operation of credit, currency entire branch
* Check the results of the implementation plan of the functional departments
throughout the branch to report to the director To the people, to receive applications from whistleblowers, the director approved, the track error correction
* Make the task of standing committee against corruption, embezzlement and
wasteful practice thrift branch
- Business plan Dept :
* Statistic reported capital plan
* Search, access to expanded customer lending, undertake credit transactions arising implement policies and mechanisms for the credit
* Links to the credit expansion and implementation of this agreement for all affiliates
* Directly to the evaluation of small-scale projects, medium and large * Perform other operations such as underwriting
2.1.2.4 Operation Business Result
Socio-economic situation in the area of the branch in the past few years has been a steady growth Relatively high economic growth, political- social security continue to keep up Therefore, the resultof business performance has changed
dramatically
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Table 2.1: Income statement — Agribank Do Son in 2010 and 2012
Unit: Million ong (Source: Agribank Do Son) 2012/2011
No Items 2010 2011 2012 Value | Percent
Interest income and similar
{joe 24,788 | 27,542 | 27,747 | 204 0.74
Interest expense and
3 _| Siiular expenses -20,819 | -23,132 | -18,616 | 4,515 | -19.52
y | Net Interest Income 3,969 4410 | 9130 | 4720 | 10703
Income from service 3 | activities 2,326 2584 | 4554 | 1,970 | 76.22 a | PXpenses of services -379 -422 -724 | -302 | 71.75 Profit (loss) from I, | Operations services 1,946 | 2163 | 3,830 | 1,667 | 7709 Profit (loss) from operating foreign im S5 MHỆ2Emöippl6 1765 | 1962 | 1207 | -755 | -3849 Profit (loss) from trading nợ |E9ESS0065 300 334 -55 -389 | -116.4 Profit (loss) from yy | IOVSSEHEHLSEoWGjiles -479 -532 1626 | 2/158 | -405.4 Income from other g | MOVIES 609 677 346 -331 | -48.94
6 _| Other operating expenses -207 -230 -588 | -358, | 155.81
Profit (loss) from other
vg | RCUVDNSS 402 A47 -243 690 | -154.3 Income from capital
contribution and share
vir | Purchase 589 655 339 | -316 | -4833
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Operating expenses VII -4396 | -4884 | -6477 | -1593 | 3262
Net profit from business
activities before provision
py | Hee exact nek 4,098 | 4,554 | 9,357 | 4,803 | 105.48
Provision expense for x | ee ase -256 -285 | -I,086 | -801 | 281.17 xị | Proñt before tax 3842 | 4269 | 8271 | 4,002 | 93.75 7 {meen Ex 537 597 | -1843 | -1246 | 2089 8 Deferred income tax 15 15 #ụ, | 0IOHARSE toc 3305 | 3,672 | 6,442 | 2,770 | 75.45
Trang 38Interest income and similar income in 2012 only increased 204 million dong over 2011 equivalent to 0.74% However, due to good management, interest expense and similar costs decreased (4,515 million dong in 2012 decreased compared to
2011), the net interest income in 2011 increased more than 10% compared to the year
2010 and 2012 increased compared to 2011 Net interest income in 2011 of 4,410 million dong the 2012 has increased 107.03% to 9,130 (million dong That is the reason of the growth in net interest income over interest income and similar income
Structure of income, income from credit (interest and similar income) accounted for 80% - 86% of total income, income from service activities tend to increase over the years Therefore, income from credit remains the dominated one in Agribank Do Son | | Profit after tax | 7,000 6,442- 6,000 5,000 | 4,000 a5 3,672 3,000 + 2,000 - 1,000 + 0 4 2010 2011 2012
Figure 2.3 Profit after tax in 2010-2012
Agribank Do Son had a successful year in 2012 in the field profit after tax has mcreased 75.45% over 2011 In 2011, profit after tax went up by 11% compared with
2010 Profit after tax in 2011 was 3,672 million dong,while in 2012 it was 6,442
(million dong) increased 2,770 million dong compared to 2011
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2.2 Analysis of the external environment factors of Agribank - Do Son Branch 2.2.1 Analysis on Macro environment (PEST model)
2.2.1.1 Political and legal environment
The political situation in Do Son district is stable, the district leadership has
promoted the coordination and exchange of information in creating opportunities for employees,ensure democracy, openness in all activities within the scope , functions, duties
and powers prescribed by law The policy of local encourageto support the exchange of
business activities in the area of development
The operationsof the Bank shall be governed by law In recent years, domestic economic is slowly growth, accompanied by the freezing of the real estate market and the difficulty of the construction business enterprise, making bad loans of the banking system increased The policy, legal decrees mainly help resolve bad debt of the banks Specifically, in each period to comply with the regulations on interest rates, reserves, lending limits In particular, the decree must be followed by two dominant powers the whole banking system
On 27.05.2013, the State Bank of Vietnam (SBV) issued Circular No 12/2013/TT - SB amended some articles of Circular No 21/1/2013 dated 02/2013/TT-NHNN Governor of regulations on asset classification, deduction, provisioning methodology and the use of risk reserve to handle risks in the activity of credit institutions and branches of foreign banks According to the the circular was isued from 01 May 2014 06 "Press
release of the central bank said:" The time is adjusted effect of Circular 02 to facilitate businesses access bank loans, credit support to boost the economy by lowering interest
rates and removing constraints to business, while helping to credit institutions branches of foreign banks are more active time building roadmap and prepare adequate conditions
apply Circular 02
Through Decree No 41/2010/ND-CP April 12, 2010, in credit policy for the
development of agriculture and rural development Credit policy for the development of agriculture and rural development is a system of measures and policies of the State to
encourage the lending credit institution, investment in agriculture and rural development in
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order to move economic structure in agriculture, rural infrastructure development, poverty
reduction and gradually improve people's lives
2.2.1.2 Economic environment
- GDP growth of VietNam
In the report on Global Economic Prospects (GEP) announced on 12/06, World Bank (WB) forecast GDP growth of Vietnam in 2013 was 5.3%, lower than the 5.5% estimated in the report on Jan/2013 but higher than the 5.2% growth in 2012
At the same time, the World Bank also forecasts GDP growth in 2014 and 2015 in
Vietnam reached 5.4%, lower than the estimates published in January/2013 respectively, 3.7% and 6% Figure 2.4 : Forecast about economic Vietnam in the report in 12th June/2013 Est Forecast 00-08" 2010 2011 2012 2013 2014 2015 Vietnam
GOP at market prices (% annual growth) â 6.8 6.4 6.2 Đ.2 5.3 5.4 5.4
Current account bal/GDP (%) 88 -38 0.2 §.9 56 3.3 1.0
Source : World Bank - Monetary Market
Government bond market, bonds and open market operated strongly in 2012 primarily
from lower credit growth expectations while raising capital grow strongly
On the primary bond market, the total amount of State Treasury bonds and government-guaranteed issuance in the primary market reached 167.59 trillion dong, up
60% compared to 2011 Similarly, Bondmarket also has a number of receivers with the
state treasury bills issuance reached 33.2 trillion higher than the release of 3 years ago - Results of the implementation of the economic indicators of the Do Son District in
2012
In 2012 Do Son District has basically completed tasks: economic budget mission, management of urban environmental resources, social- culture tasks, inspection tasks,
judicial, administrative reform, strengthen the construction and administration,