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Strategy for developing retail banking service in South East Asia Commercial Joint stock Bank in period of 2012-2016

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GRIGGS UNIVERSITY

GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

STRATEGY FOR DEVELOPING RETAIL BANKING SERVICE IN SOUTH EAST ASIA

COMMERCIAL JOINT STOCK BANK IN PERIOD OF 2012-2016

Group Number: 01 - Vu Van Khiem

- Le Ngoc Diep - Bui Thi Quynh Nga

- Nguyen Viet Hung

- Do Thi Ngoc Van Class: X0310

HANOI: 2012

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@ SeAB ank Kết nối giá trị cuộc sống

CONFIRMATION OF SOUTHEAST ASIA COMMERCIAL BANK (SEABANK) We, Soutiest Asia Commercial Bank confirm that we agree the research group including the

members mentioned below to be allowed to use the public data, documents as well as contact with the operation fact to study about the business strategy about Retail Banking of SeAbank, serving the

research purpose of the group to complete the MBA course: 1, Do Thi Ngoc Van

2 Nguyen Viet Hung

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ACKNOWLEDGEMENT

On behalf of the group, we would like to send gratitude to dedicated support of lecturers in Center for Educational Technology and Career Development ETC, Post University Department Ở Hanoi National University; Griggs University Ở The Us

We also expressed our thanks to General Director of South East Asia Commercial Joint Stock Bank, Manager in Planning Ở Investment department, Financial Ở Accounting department providing data for completion of this capstone project

Although the group tried our best to well do this capstone project, due to limited knowledge, this capstone project has limitations Thus, the group wishes to receive significant contribution of lecturers, colleagues and friends for the most

effect

COMMITMENT

Group 01 Class X0310 commit this is our own research project Data given in this capstone project is honest and has been not published in any scientific projects

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TABLE OF CONTENTS A CN AI LG L1: TC II TT Đ xenssetioEcs001060013180010006006i930S61635GG0QI3)3816-lÔlkggmnisidtgnigiirgEA01/6/4020-S0806 1 151,01 ĐỊT? CN TIÊN TỔ naeeseseasurdiiobisiouogtiat4326030552000000ág06000il00/100/40004081810140861Glassasg il LIST OF SYMBOLS AND ABBREVIATIONS sccscseccexcsuns Seca 02G V L0 LỊ ặ HP l2) TL HH EuaaeaeaanbdeiatiliennnasnisaersioidaiototbiSGONGGS.G.0D4GVGAGHSAG0GE0048 VI KẾT HE Có 16I1 bo: L U, HÀ xasngneoe ging T000002000NG 8003000100030381000130000165S090/68:0009i61801msguiaqgioutlioittgst2000/00G000051 1 CHAPTER 1: OVERVIEW ABOUT STRATEGIC MANAGEMENT AND RETAIL BUSINESS IN COMMERCIAL BANK sacimcienscortemenenamamncmnannuns 5 1,1 Theories about building atid managing SIE BY ssccanscncurrnmamccrnamnennnans 5 1.1.1 Concept about strategy and strategic managemenIt -ềề-ề- 3 1,1,5 Une role đặbuHiing statEe1? THỂ GHIEDTÍN seeeeeiatduadeiddielieesnedanossrsssgea 6 1y 1+1 CHÍ ẨY cangevgiotsketd tiGiDL000400111kngndiunngugptuoptzS900BNIB/010/0040.6000888g00i610508/000n68i5808034 014 6 Lạ chổ HT KẾ cu nggg hit Gabi0NEikoSBA899000 00/65 1lamngi2iage i0sggiSg504409008510005905G0 400401830800 6 1u2: RIEPđậ GI YESGBTGHIIHIE SE HE Ẽ ca nggỹỮaagggn nh A1046:41/26 0 hx840080000/8042800G02030/200366.06 Zz lz2,L Aựi8lvzTu tiilEtiil GHVITO HO cnccnccncommanmmnanuniniimanmnensncenseness Z Lực L1 AIHCEG E770 0H16 eeeeeeeddesinnruaenagiioniiortgotklpi8ik4G80100000031040680900000104 7 [tied ok DOLCE (0fỳY TÍNH ngaaadaabdiidiikdidosonbrarionguioastOtSGGGESIGIRGBHGDIGI-GL.20000066 9 12 THHSEH] GHVINGHHC HE ngeeuuntdooasoiiptliettiodlgioleisst84G00004 5488004i68aseinugkguuicd-HI20660 11 [,3 Tools used to atialy ze aid GEICO SIRRIERY ncnecicicncmnmemnnmneamn nemananuuiaain 13 1.3.1 KHEEfTiảI P 8ẠGđT E.vHiinlofi Matrix UP cccnmmnmnwnreommemnmmmanmnans 13 1.3.2 Extemal Factor Evaluation Matrix (BFE) ssisssaiinuxennvovenvennnsnconcapvnceawi 14 BoP LT Ti VÌ Ea nang nndeenasoooyontorirdSttstisgtob4btf0KGE40006 AA HOPE icant 15 BF As ETB Ế Ga adaaBtdueaseseesrnsgraagtotiihtooptoggSfBIG0/400038/S40L010001083840000080868H0ilaa 16 [4 Retail BUSINESS OPSrations 11 COMMERCIAL DANK cccnscccessnnnverrccnmenmsenenusanies 17 1.4.1 Concept about retail business in commercial bank 52 i? li F.EETTFGS DĨ TEIHDR DifiHiE SENVI0E ccceeraneemiimmmnmmmmnn 18 CHAPTER 2: ANALYZING OPERATIONAL ENVIRONMENT OF SEA BANK ET RAL; EEG ENACT BI VL crc rennet renner tata acco 21

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2.1 General Iinformation about SeabankK - - - cv TT 2 11k khen ray 21

2.1 Mistery about Toundahon anid CEveOaient sissies dinsxaicomncmnemnnormnaicarenoniame 21

iskoo DI MII HE 2nd OTERO ccm iene 21

Dodod IRCA] DATS SEFVICRS BHG HEGOHBGaeseaedaddtanioisaBiGA0nlg01ã030g0.00010di0lgi 23 SPE YE I I cererasnccnnnca sects smamese easement cata comes magne 24 2.2 Analyzing operational environment Of SCA BANK sss sicwisuevineminsannnnrsnmenniesnonennvnvsn Zo zin 1 PORPGUIAL CUTOUT BIASES cseesoeseseedoiodsoGlbksoigtisslzsgiGsaod006100302.380se oo Jods ll, MGRED êfiwWlf(ffểf@fHE [PS | TH 6Ì ceeveseeededdidiatstỞbiddgieMdskrde wee 20 2.2.1.2 Micro environment analysis (Michael PorterỖs five forces model) 28 Dud) 3 | XI6ỉ Hai Factor Evnludlidii: WAAR sisi nanacornsnsnecromncnveomnnniencenaisanviens 35 Dabok, THLĐETTNI ERiVifGfiiifieff 001W Bế sueweedaeadaardiibissiikledkeliecidERdiAslaibheaeskossaossagg 37 Dodie.) Vee GORI GIUED GD ueeeoddedeseecdsertiudtgieooptbiioioidibtttiiiigiodtfG đã su Sa: Đ1UNTTHIT FESHEDUE tungggua nỹgicdtl8t00611l0nnsxaniosdeckbossiekoiggi091380101466104046080000000006/6 45

cl P RA TẾ song ein a TRL Nie TRS 46

Dae II EITE 8G fEpuliioii GỀ ĐH cu deaanddeodiatdiidisiaGidilitdsilikiod6bdBilỏsssssssuex 49 2.22.5 internal Factor Evaluation Matrix LF EB eeeeerdrdridiedddoiaiiadrigusỎ 50 2.2.3 SWOTT analysis for retail banking operation in SeABank 52 Khi ft SE KTD CHẾ -vụngogsuiigssi-RSARGSkGu4008/0018/030G00Gi24/0000060004300/138ng00G030g462ùnbaaroegrnuoe 52 Pigs WEARS OD sesesnsinneadtdpoisingyiilcthflieslieSGSI31031000/80100090040100010600003403081i50200)-0/0GguẤ6 56 cu n? ST ỢTTTHTT TẾ ngu and tt ng tiiesnnnnnuangttdoarnksltostsolg NARADA a7

Ee i) a 59

garde SWOL MAIN OT SOA BSI cuaenaanadeoiaaddooibnciiltdetiidkdgt lASGSNGSGiesoeaosaa 61

CHAPTER 3: SELETING STRATEGIES AND SOLUTIONSỖ FOR

IMPLEMENTING BUSINESS STRATEGY IN TERM OF RETAIL BANKING SCR VICE OF SEABANK IN PEKIQD OF 2012-2016 8 1 Tho n 69 3.1 The long term development orientation of SeA Bank .c 69 3.2 Selecting business strategy in term of retail banking service 71

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3.3 S0INHONS TGf TfiBlbtieniiib: SH GD TÊN eeeeeeastieiidOdilelGGG400001000-0000006004304033đil00 76 3.3.1 Complete organization structure for retail banking serVICẠ 3.3.2 Promote researching, diversifying and developing retail banking service 77 3.3.3 Diversify distribution channel and enhance efficiency 79 3.3.4 Strengthen communication and marketing for retail banking service 81 St KGhilwtiapi T0f tifilotifetfHib SN ĂGET cueseseaseniiossduosgsesgsiott6U304380016280881640800406 81 kiêu Do bụ bà LÍ bói TY sugggngssdgigG8S8H4001/GUEGI0/46(3015380EMugRiGhictiiqiangiisgssgitstioSIEUSnSg05246.6)40400002/01/00008/ 008186 85 REFERENCES

ANNEX

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LIST OF SYMBOLS AND ABBREVIATIONS No ỔSymbol - Meaning | ADB Asia Development Bank 2 |ATM | Automated teller machine

3 BYE External factor evaluation matrix

| 4 !GDP - 'Gross domestieprodutL ssỞ =5 |JIFE Internal factor evaluation matrix

| 6 | NHBL Retail banking 7 |NHIM Commercial bank

ậ MIC Ministry of Information and Communications 9 |POS Point of sale

10 | PPP Purchasing power parity

II | SeABank South East Asia Commercial Joint Stock Bank 12 | WB World Bank

I3 | WTO World Trade Organization

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LIST OF FIGURE AND TABLE

List of figure

ge SE YG de=enaaedaninniisisodnsaogttgSkoEGSI0I104/000IV3AG0H0101Pu0080808G010141G283040083IB 9 Figure 1.2) Michael PorterỖ s five Tones W006 ecencscmiswenmeneaeanmnsutniieonamnnnnaeoncnnuns 10 Figure 2.1: Oreanization Strocture Of SCA DANK siccscesssnencenanomemnmnnnsneniuaanarmmcarenes 22 Figure 2.2: Retail banking products of SeABank ss CUS a ea Rh in 23 Figure 2.3: Growth rate of customers in périod of 2008-20 TÚ iiiiiiiiieee 30 Figure 2.4: Growth tate dG[ cústofiers tị 200D TÚ eaveeasaoiaedrdioisgdaroskondasosa 38 [Figure 2.5: Growth rate of active cards in period of2008-2010 - 39 Figure 2.6; Credit srowth raie Tắ ĐEPIGU B1 2008-50 1U uiiiaiiieiiiaiisioiidsoso 40 Figure 2,7: Charter capital of commercial Banks EH 2Ó TỦ ceceeeseeasaseeidelaiadde, 54 Figure 2.8: Open coefficienct of Vietnam GCOnOiMy (Yo) weesaisssisisncnnnsscecesrsnccesarverencneys 58

List of table

ỔTablel lt Ts Comipined SAU ceeaeeesesessadsdorediobdisegbolgfsciitltỏtos9eoEB4048040300300080040E06 15 De Le BW ARE saaaeaeeidotiaiidoipuioagiatdbliSG0GiA88430661384180000xssgqu090500160380/6080200M80y 17 Table 2.1; Esternal Factor valuation Matis BPE srcccnnosnnmmansmmewenemmmimenas 36 TBĐIE 5:2? TERGTHOR 6ifilif0N SG Ủ TneeaeaaaeiseiidioikiiidirikioirgloibiodtgbMGi301660303ã6n 47 THBÌe 2.3: Ff(0iioial 0DftiiHoni TH 2009-20 LŨ cuuauataatiiáidb0i6802Lseissanadoksssioiosagidougrg 48 1HĐDIE 2.5Ã: IHfGFHNHI PWETóF val Wall Mane ncconmsnumammnmunnnianemiaumaannamnicenien 5]

100 ZOOS WOT MTR Of SEAR icin mEAtmmmnn 62

TROIS 35 LE er Ha ung eeseeensndedrseeninoroSiseeteeqsoensadgose 73 Table 3.2 Roadmap for implementing retail banking service in_ period

Đi 21 k1 1 sagag ccm aca a eam 82

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INTRODUCTION

1.1 Context and necessity of the subject 1.2 Context of subject

Recently, together with industrialization and modernization, the process of urbanization in Vietnam has strong development According to estimation, growth rate of urbanization in Vietnam is about 30% Furthermore, Vietnam is the nation having stable growth rate of GDP at 6-8% year since the world economy faced up with difficulties resulted from financial crisis Accompany by the economic development is social development Vietnam becomes one of countries the most development of information technology and internet in the world From the above reasons, it creates favorable conditions for development of retail banking services and products Nevertheless, with the existence of more than 100 commercial banks as present, in order to have sustainable development and mark position in market, banks must have right and sustainable development strategies on the basis of analyzing internal factors, influences of external environment to retail banking service business

1.2 The necessity of subject 1.2.1 Reality

South East Asia Commercial Joint Stock Bank is one of the largest commercial banks in Vietnam at present After more than 7 years of foundation and development, the bank continuously expands their operations with annual growth rate up to 18% The significant contribution to growth of SeABank over the past year is development of retail banking service In accordance with development of economy, scientific technology; retail banking services become attractive business model for Vietnamese banks In order to maintain this market share, banks also face up with many difficulties and threats resulted from integration process

1.2.2 Reasons to select topic

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commercial banks in general Having awareness of that importance, there have been some researches and conclusions about this operation such as:

Topic: ỘDeveloping retail banking service in Vietnam, reality and solutionsỢ, Associate Professor Ở Doctor Nguyen Dac Hung Ở Banking Academy This topic provided the general view about operations for developing retail banking service at commercial banks as well as introduced solutions to improve above Operations with banks in general

Topic: ỘRetail banking services in Vietnam in integration processỢ, Doctor Nguyen Van Tien Ở Vice Dean of Banking Faculty, Banking Academy The topic pointed out risks for retail banking products, the opportunities for banks in integration process

Topics had meaningful conclusions about retail banking operations in general In order to apply them into building strategy for a specific bank in this area, the topic ỘStrategy for developing retail banking service in South East Asia Commercial Joint Stock Bank in period of 2012-2016Ợ was selected with the aims at proposing right strategies for SeABank to expand market share in retail banking area as well as control threats from this business model

2 Objectives of capstone project

From analyzing operations of SeABank from 1994 up to now, the subject applied theories of strategic management into business activities in general and retail banking in particular Furthermore, the subject also drives to following three

specific objectives:

+ To manage human resource and capital effectively + To promote quality of retail banking service

+ To expand market share in retail banking operation

In which, human resource and capital management is considered as key factor about service quality and market share expansion in area of retail banking

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3 Researching objects and scope

Topic focused on researching operations of building business strategy of SeABank in general and retail banking in particular

Researching scope is business activity of SeABank with comparison with business activity of other competitors within industry including, Sacombank, ACB, Techcombank and Dong A Bank

4 Researching methods

Topic used theories about strategic management into analyze primary and

secondary information Additionally, provided information comes from following sources:

+ Consulting ideas of experts in finance and real estate area

+ Trading result in general and retail banking service in particular from 2001

up to now

+ Information from newspaper, magazine and internet

Information and data from above sources were analyzed and summarized to

introduce strategies for SeABank in retail banking service In order to have these

strategies, capstone project used following tools and methods:

+ External factor evaluation, internal factor evaluation and SWOT matrix + Michael PorterỖs five force model, PEST model

5 Meaning of capstone project

This topic is built on the basis of theories relating to strategic management and application of theories to analyze strengths, weaknesses, opportunities and threats of SeABank From that, identify reality, build, select and propose solution implementing business strategy for SeABank in period of 2012 - 2016

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6 Structure of capstone project

Apart from introduction, conclusion and annex; this capstone project 1s divided into three chapters as following:

Chapter 1: Overview about building business strategy and retail banking service business in commercial banks

Chapter 2: Analyzing business environment of retail banking service area in SeABank

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CHAPTER 1: OVERVIEW ABOUT STRATEGIC MANAGEMENT AND RETAIL BUSINESS IN COMMERCIAL BANK

1.1 Theories about building and managing strategy

1.1.1 Concept about strategy and strategic management

"Strategy" is a concept having been presented and widely used in many areas for a long time ỘStrategyỢ was first used in military filed, then moved to politics Since 50-60s of the 20 century, the concept of strategy was used in socio-economy area "Strategy" is usually understood as the way and methods solving given tasks in comprehension, overall and long term United Industry Development Organization (UNIDO) said that: "Normally, a development strategy may be described as a draft for development process in order to gained defined goals for a term from 10 Ở 20 years; it drives strategy planners in mobilizing and distributing resources In general, we can say that strategy provides a vision of an expected development process and consistency in methods of implementation Furthermore, strategy may be foundation for comprehensive development plan in short term, midterm or a general recognition without binding of insiders in that term about outlook, challenges and satisfaction"

There are many definitions about strategy Fred R David, in his view, (2003) strategy consists of means reaching long term goals According to Michael E Porter (1996), strategy is creation of valuable and unique position including different

operations

Generally, concepts and definitions about strategy, despite being different in expression, always cover following contents:

+ To define short term and long term goals of enterprise + To propose and select predetermined plans

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is defined as a collection of decisions and actions implemented via results of planning, enforcing and evaluating strategies It is designed to gain long term."

1.1.2 The role of building strategy for enterprise 1.2.1.1 Gains

Many researches show that: if enterprises have obvious business strategy, they will have more feasible action program rather than the ones not having strategy or obvious one Business strategy is guideline for action of enterprise As a result, enterprise will gained predetermined goals Furthermore, business strategy is bridge to make short term goals deviated from long term ones The development of enterprise is compatible and comprehensive Thus, gains of strategy and strategic management have been surveyed in many nations, industries and the new companies with different size In summary, we have following three features:

- Business strategy and strategic management help enterprise have specific action program to gained predetermined goals

- Business strategy helps enterprise define central goals

- Business strategy helps enterprise have specific and in time measures meeting changes in business environment

Nevertheless, in order to achieve above gains, it is a must for enterprise to have thorough analysis about their position, role, internal features as well as opportunities and threats coming from business environment

1.2.1.2 Risks

In addition to remarkable gains brought by business strategy, business strategy and strategic management also hide certain risks

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is defined as a collection of decisions and actions implemented via results of planning, enforcing and evaluating strategies It is designed to gain long term."

1.1.2 The role of building strategy for enterprise 1.2.1.1 Gains

Many researches show that: if enterprises have obvious business strategy, they will have more feasible action program rather than the ones not having strategy or obvious one Business strategy is guideline for action of enterprise As a result, enterprise will gained predetermined goals Furthermore, business strategy is bridge to make short term goals deviated from long term ones The development of enterprise is compatible and comprehensive Thus, gains of strategy and strategic management have been surveyed in many nations, industries and the new companies with different size In summary, we have following three features:

- Business strategy and strategic management help enterprise have specific action program to gained predetermined goals

- Business strategy helps enterprise define central goals

- Business strategy helps enterprise have specific and in time measures meeting changes in business environment

Nevertheless, in order to achieve above gains, it is a must for enterprise to have thorough analysis about their position, role, internal features as well as opportunities and threats coming from business environment

1.2.1.2 Risks

In addition to remarkable gains brought by business strategy, business strategy and strategic management also hide certain risks

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The economic knowledge will help managers determine the effects of an enterprise to the country's economy, the impact of the economic policy of government to business activities of enterprises Additionally, stability of economy first and mainly as stabilize the national finance, monetary and control inflation These are the issues attract concern of enterprise and directly related to their business and production efficiency

Political: The nature of the bank is a financial intermediary and its activities have an important influence to the national financial system Thus, the bank is subject to strict control of the state than other sectors The political factors have more and more affect to operations of banks, including the point system, the policy of government, legal system, diplomatic trends of government and the political happenings in the country, regional and worldwide

Social: Socio Ở cultural environment includes norms and values accepted and respected by a society or a particular culture The changes of socio-cultural factors are part as consequence of long-term impact from other macroeconomic factors, so it fluctuates more slowly than other factors Some features that administrators need to pay attention are: the impact of socio-cultural factors society have long-term and more subtle than other factors, sometimes it is difficult to identify On the other hand, the scope of the impact of socio-cultural factors is large society: "it determines how people live, work, produce and consumer products and services." Additionally, aspects forming socio-cultural environment have strong influence to the business activities such as notions of ethics, aesthetics, lifestyle, occupation; customs, practices and communication system; priority attention of society; the level of awareness, general education of society

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date and creates pressure for banks to innovate technology promoting competitiveness Furthermore, the introduction of new technology increases the pressure threatening the existing banks in the industry The explosion of new technology, making the technology life cycle tend to shorten, thus increases pressure to shorten the depreciation period than before Political - Stability of politics - Labor law - Tax law Economic Social - Changes of GDP - Population, - Interest rate, inflation demography

rate - Income distribution Technological Development of new technologies |

Figure 1.1 PETS model

Source: Strategic Management, Fred, David

1.2.1.2 Micro environment

Micro environment is defined with each specific sector Enterprises within industry are under influences of micro environment including: (1) Rivals; (2) Buyers; (3) Suppliers ;( 4) New entrants; (5) Substitute products In regard to banking sector, above factors are shown as following:

Rivals: In the current integration trend, competition among banks as well as financial institutions such as insurance, finance company is increasingly fierce The understanding of the competitors has a significant importance for banks for many reasons The first, rivals decide the nature and extent of competition or tips in gaining advantages

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fixed cost structure and diversification level of product The existence of these factors tends to increase the demand or desire of banks to achieve and protect their market share So, they make the competition fiercer and fiercer

Buyers: buyer is inseparable part in competitive environment The trust from buyers may be the most valuable asset of bank That trust is resulted from satisfying demands and tastes of customers in comparison with rivals

Suppliers: Banks must have relationship with organizations supplying different resources such as materia], equipment, labor and finance

New entrants: the new entrants in industry may be factor declining profit of bank since they make use of the new production capacity with expectation to gain market share and essential resources It is noticeable that re-purchasing other with intention to build market share is symbol of new entrant

Substitute products: Pressure from substitute products controls earning potential of industry since the highest price is under control Most of the new substitute products are resulted from technological break out In order to have success, banks must pay attention and spend suitable resources to develop or apply new technologies into their strategy New entrants Bargaining power of Rivalry among Bargaining power of buyers suppliers competing firms Substitute products

Figure 1.2: Michael PorterỖs five force model

Source: Strategic Management, Fred, David

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1.2.2 Internal environment

Analyzing internal environment is the analysis of factors and system inside the bank that can control, mobilize and determine whether banks can do, and the feasibility of their strategies The internal factors of bank include human resources, facilities and technology, organizational structure, policies, services, finance, In order to ensure feasibility of strategy, when building strategy, we have to assess the situation, identify the strengths and weaknesses then the ability to distinguish or competitive advantages of bank Internal analysis of the bankỖs activities is carried out on following aspects:

Human resource: This factor is extremely important and indispensable in any organization Competitiveness of human resources is reflected in such factors as: the level of training and qualifications of professional expertise, motivation and connection to enterprise, public awareness and working style Additionally, human resources play the key role in all stages of the process from building, implementing and monitoring strategy

Finance:

Financial status, financial indicators reflect the effectiveness and capability of organization Financial condition of bank reflects not only the capacity of banking activities in the past but also the ability of banks to develop in the future The financial indicators are often interested in performing the financial analysis in the strategy include the current ratio (total fixed assets / liabilities), quick liquidity (Current assets-inventory) / Current Liabilities), indicators of leverage (debt), operational indicator (the total turnover of total capital and floating capital) and indicator reflecting profit capacity

Infrastructure and technology:

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Technology is the most important factor among needed infrastructure in bank The automated machinery and equipment shorten operation time; improve accuracy, convenience of banking services Furthermore, technology provides foundation for banks to deploy modern services Technology in ban includes management information system and risk reporting system within bank

Culture and reputation of the bank:

Organizational culture plays an increasingly important role in the formation of each organization Each bank should make its rnembers understand the goals and action viewpoint That will boost the bankỖs members strive to achieve common objectives set out

The reputation of bank also has significant contribution to the successful implementation of objectives of the bank Reputation is an invisible value that bank has been forming during the process of long term development A bank having more reputation in market will be more accessible to new markets and introduction of new products is accepted more easily Nevertheless, it is difficult to create as well as keep and foster that reputation

Internal management: The organizational structure is an important indicator to reflect the allocation of bankỖs resources appropriate to the scale and level of bank management, specific features of industry and market requirements or not The

organization structure of banks is reflected in the division of departments,

operational units, subsidiary units and relationship among departments

After analyzing the internal capacity of the bank, strategic planners make meaningful comparisons That is comparison reflecting the development of bank and its strengths in the relation with rivals within industry

Comparisons done under the three basic ways:

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- IndustryỖs standard based comparison: that is comparison about banking activities against standards of industry and the main rivals It shows the position of bank in industry

- Recognizing the core successful factor of industry: that is some factors with significant influences to success of bank in industry

1.3 Tools used to analyze and select strategy

The anaiysis and selection of strategy is making subjective decision based on subjective information to define possibly selected operation process Thanks for those; the bank may fulfill functions and goals with the most effect The current strategies, objectives and mission of bank, plus internal and external information control will make foundation for forming and assessing strategy with feasible

selection

At present, there are many popular matrixes in analyzing strategy such as

BOSTON matrix, G.E matrix, Internal and External evaluation factor matrix (I.E),

GS matrix and SWOT matrix Nevertheless, in this capstone project, we would like to focus on analyzing based Internal and External evaluation factor matrix (I.E) and SWOT matrix

1.3.1 Internal Factor Evaluation Matrix (IFE)

Internal evaluation factor matrix (IFE) summarizes important strengths and

weaknesses of business departments as well as overall enterprise IFE matrix is

developed in five steps:

Step 1: Make a list of factors crucial to the competitiveness of enterprises in an industry (usually from 10 to 20 factors)

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Step 3: Assign a rating from | to 4 for each factor (actually point to a wider range) Mark the biggest weakness when sorting by one, the smallest weakness when sorting by 2, the minimum strength as classified by 3 and biggest strengths when sorting by 4 So, this is the point of reflecting competitiveness of each factor in enterprise against rivalsỖ

Step 4: Calculate weighted score for each factor by multiplying the weight of that factor with the corresponding rating

Step 5: The toiai weighted score for all factors in the matrix is given by summing the number of relevant factors of each enterprise The total score shows that, this is the absolute competitiveness of enterprises

Accordingly, if the total weighted scores of all factors to be included in the

IFE matrix are 4, the enterpriseỖs competitiveness is absolute If it is between 2.50

and above, it shall be absolutely competitive on average In contrast, the total number of points in the IFE matrix is smaller than 2.50, the absolute competitiveness of enterprises is lower than average

1.3.2 External Factor Evaluation Matrix (EFE)

External Factor Evaluation Matrix (EFE) helps us summarize and quantify influences of environment to enterprise Similar to the step of analyzing Internal factor evaluation matrix IFE, in order to analyze EFE we also follow five steps:

Step 1: Make a list of factors crucial to the competitiveness of enterprises in an industry (usually from 10 to 20 factors)

Step 2: Assign the a weight from 0.0 (not important) to 1.0 (most important) for each factor It should be noted, the importance assigned to the factors show relative importance of those for the success of the enterprises in industry Total importance of factors listed is 1

Step 3: Assign a rating from | to 4 for each factor (actually point to a wider range) Mark the biggest weakness when sorting by one, the smallest weakness when sorting by 2, the minimum strength as classified by 3 and biggest strengths

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when sorting by 4 So, this is the point of reflecting the adaption of enterprise to threats and opportunities from environment

Step 4: Calculate score for each factor by multiplying the importance of that factor with the corresponding classification scores

Step 5: The total weighted score for all factors in the matrix is given by summing the number of relevant factors of each enterprise

Accordingly, if the total weighted scores of all factors to be included in the IFE matrix are 4, the enterpriseỖs competitiveness is absolute If it is between 2.50

and above, it shall be absolutely competitive on average In contrast, the total number of points in the IFE matrix is smaller than 2.50, the absolute

competitiveness of enterprises is lower than average 1.3.3 IE Matrix

IE matrix is used to analyze operational environment of enterprise, the competitive position of enterprise in industry and the economy in general IE matrix is established from results of IEF and EFE matrix In which:

(1) Results of EFE are put on vertical axis (y) (2) Results of IFE are put on horizontal axis (x)

Matrix is divided into 9 cells demonstrating competitiveness, position of enterprise in sector environment as well as in macro-business environment from low to high and strong to weak It is in particular as following:

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The cell IV, V, VI shows the average level of competitiveness of enterprises, the enterprises in this region should not apply expansion strategy Strategies that enterprises in the area applied are to retain the existing market share to limit the negative impacts from external environment The cell VII, VIII, IX shows the positions of enterprise, the business sectors come to an end, at which, enterprises gradually withdraw from the industry and move into new business With enterprises positioned in the cell I, they should take advantage of market opportunities, build the right strategy to expand operations, take advantage of market opportunities and improve the competitive position

1.3.4 SWOT matrix

SWOT is the abbreviation of: Strengths, Weaknesses, Opportunities and Threats SWOT analysis model is the result of survey from more than 500 enterprises having the largest revenue selected by Fortune and carried out in Stanford research institute in 60-70 decades This is to find out t

he reason why many enterprises failed in implementing plan The research group had Marion Dosher, Ts Otis Benepe, Albert Humphrey, Robert Stewart and Birger Lie SWOT model introduces the four basic strategies named: (1) SO (Strengths - Opportunities): strategies based advantages of enterprise to make use of market opportunities (2) WO (Weakness - Opportunities): strategies based capacity overcome weaknesses of enterprise to make use of market opportunities (3) ST (Strengths - Threats): strategies based advantages of enterprise to avoid threats of market (4) WT (Weakness - Threats): strategies based capacity overcome or control weaknesses of enterprise to avoid market threats

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Table 1.2: SWOT matrix - Use strengths to avoid | Minimize weaknesses and ỔStrengths (S) Weaknesses (W) SWOT matrix

có Opportunities (O) SO strategy WO strategy

ie Use strengths to make use | Overcome weaknesses by

Is of opportunities making use of

|

| - opportunities

P Threats (T) ST strategy WT strategy

| |

- threats Source: Strategic Management, Griggs University avoid threats

1.4 Retail business operations in commercial bank

1.4.1 Concept about retail business in commercial bank

The term of Ộretail bankingỢ is original from the English name as Retail banking According to literal sense in providing retail banking service, it means to provide products to consumers with small amount

Vietnam Bank for Investment and Development defined that: ỘRetail banking service includes transactions of bank with customers as individuals and small and medium enterprisesỢ

According to World Trade Organization (WTO): Retail banking service is the typical type of service in bank where individual customers may exchange at branches of bank to conduct services such as: saving, account inquiry, mortgage, credit card, debit card and other attached services

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cirectly access to banking service via means of information and technology and e- telecommunication.Ợ

From above concept, we can see that retail banking service is the typical and ropular type of service in a commercial bank and considered as part forming rroducts and services of a simple to multi-functional commercial bank In addition, we also see the subject of retail banking as individuals and small and medium enterprises Therefore, service is simple, easy to perform and regular This is a condition for retail banking service to develop in the future

Retail banking service in Vietnamese banks:

- Capital mobilization: payment deposit, saving deposit

- Retail credit service: consuming loan, business loan and overdraft loan

- Other retail banking services: insurance, card, payment Ở money transfer, guaranty, investment management and commission, salary payment, so on 1.4.2 Features of retail banking service

- Retail banking service has diversified customers

The first feature and easy to recognize when accessing retail banking service as the main subject of this service is individuals, small and medium enterprises, frivate companies, limited companies and joint venture ones These companies lave effect in business, revenue and profit grow stably and demand on expand production and business Furthermore, they have favorable conditions to access alvanced technology It can be said that, this is market with large scale and dversity in income, education, favor and taste Therefore, when providing service, tie bank should locate their customer and customerỖs need to introduce the most siitable products as well as customer care policies

- Value and size of transaction

In retail transaction, although the number of customers participating in transaction is crowded, the value in each transaction is small since these services provide consumption and most people Thus, banks must pay attention to develop s:rvices based modern information technology basis All of these are aimed at

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meeting diversified demands of customers; improving utilities of product as well as helping the bank well manage operations in transaction

- Transaction charge

Since the main customers of retail banking are individuals, organizations, households and small and medium enterprises; the allocation of customer is not concentrated With respect to retail credit service, value of loan is small, spreading with simple method In regard to consuming loan, the size of this contract is small leading to high lending cost Additionally, cost for pricing and monitoring loan is high As a result, the interest rate of consuming loan is higher than the one in commerce and industry area Besides, in order to provide products and services to customers the most quickly, banks must invest a large amount of initial capital to found transaction points and modern information technology system

- Operations of commercial banks develop based high technology and the role of marketing becomes more and more important

Another particularly important feature decides the expansion and development of retail banking service as application of scientific and technological achievements into banking activities Coming from diversified psychology and qualification of individuals, they want to have both the best service and save time Furthermore, they have desire to be served anytime having demand Therefore, promoting investment for information technology is necessary and remarkable At present, thanks for development of scientific technology and e-telecommunication, banks may provide more and more retail banking services to all customers; payment via automated teller machine, at home banking service, via telephone, internet or automated money transfer for instance

- Distribution system of retail banking service is rich and diversified

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CHAPTER 2: ANALYZING OPERATIONAL ENVIRONMENT OF SEA BANK IN RETAIL BANKING SERVICE

2.1 General information about Seabank

2.1.1 History about foundation and development

Founded in 1994, the Southeast Asia Commercial Joint Stock Bank - SeABank is one the first Vietnamese commercial joint stock banks Proud of its achievements of the past few years SeABank has been ceaselessly perfecting its products and services to pursue the policy of sustainable development, aiming to be among the leading commercial joint stock banks in Vietnam

With comprehensive innovation, SeABank has created an effective and seamless plan for development, particularly in making the bank modern and multifunctional With comprehensive innovation, SeABank has created an effective and seamless plan for development, particularly in making the bank modern and multifunctional Based on the state-of-the-art banking technology, our products and services have been improved to fully meet the customer needs The application and development of modern banking services are regarded as vital to the integration process to help the bank become more competitive Bearing in mind the application of advanced technology is the key success factor

With the achievements during last year, SeABank was honored with many noble titles, including Certificate of merit granted by the Prime Minister, Most Admired ASEAN enterprises Ở ABA 2010, Top 300/500 of Vietnamese largest enterprises, Top 85/500 of largest private enterprises in Vietnam, Top 44/1000 of largest corporate income tax payers in Vietnam, etc

2.1.2 Structure and organization

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In order to mark position and develop in that condition, SeABank had a close organization structure In which, Directorate and employees consolidated and implemented strategic goals of the bank in general and the goal becoming leading retail bank in Vietnam in particular The organization structure of SeABank is shown particularly via following figure:

Source: HR department, SeA Bank Figure 2.1: Organization structure of ScABank

Directorate is the most senior administration board of the bank The te

introduce development strategies for all system The head office of bank undertakes general management functions about human resource and policies for system

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Meanwhile branches are the direct units not only being independent but also onplying with general rules of system to orient to general goals of bank

2.1.3 Retail banking services and products

Similar to many units in finance sector, SeABank supplies different services and products meeting diversified and ceaseless demands of customers In particular vith retail banking service, SeABank focused on the two main market segments aane individual custemers and small and medium enterprise customers Products and services in retail banking area of SeABank are shown on following figure:

Retail banking products

For individual customer For small and medium enterprises

Source: Retail block, SeAbank Figure 2.2: Retail banking products of SCABank

With the main products mentioned above, in 2011, SeABank has provided

se-vices to more than one hundred thousand individual customers and made more thin two hundred thousand commercial transactions for customers as small and

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and economic integration, retail banking products and services of SeABank will continue to be developed and upgraded matching to overall strategy of the bank

There are some reasons for SeABank to choose both individual and enterprises customers for retail banking products:

The first reason come from the demand of retail banking products from individuals, together with the development of technology and modernization, more and more banking services were launched and showed its converniences to customers then the demand for these products also increased

The second reason for increasing of retail banking services for individuals are the income created by providing services for individuals, the income for individual are: Saving accounts, cards, phone banking, credit, etc

Realizing the important roles of individual customers to development of banks SeABank set its target to expand retail banking for both individual and enterprise customers

2.1.4 Vision and mission

With the guideline to become the leading retail bank in Vietnam, to provide secure financial services for consumers as well as to contribute expanding market share and profitability, Seabank has a clear vision and mission for the coming years

Vision: To develop the bank based retail banking model, gradually create a specified investment banking model and become multi-function, modern financial banking with outstanding features about product quality and trademark prestige

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2.2 Analyzing operational environment of SeABank 2.2.1 External environment analysis

2.2.1.1 Macro environment (PEST model)

Ợ Political

Political condition in general: Vietnam is one country having the most stable politics in the world The stability of politics creates development opportunities enterprises operating in the provinces of Vietnam Together with political stability is the speed of opening and integration to create conditions to attract investment capital, expand market share as well as acquire technology from abroad For SeABank, political stability creates favorable conditions for their operations Besides, speed of opening the economy also provides more opportunities for SeABank to access foreign market and attract investment capital

Legal documents for banking activities: The legal environment of banking activities has not really suited to actual conditions The legislations on banking

activities are primarily built on the basis of manual transactions with a variety of

paper and complex business procedure Meanwhile, retail banking service development requires application of new technologies and modern as well as quick business processes With the growth rate of services as present, many legal regulations have proved inadequate and not included all of professional, making it difficult for banks to want to deploy new services However, state banks and Ministry of Finance in Vietnam are trying their best to improve the legal system in the field of retail banking service business In the following years, SeABank will be approaching a more liberal legal framework for business

Ừ Economic:

It can be said that Vietnam is a potential market to develop retail banking services The economy of Vietnam has made great progress over the years, with growth rate of 7-8%, always at the height of Asia Consuming market size of Vietnam is becoming attractive to a population of over 88 million people, ranked

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who are easy to get familiar with the modern mode of payment Furthermore, the average income per capita estimated in purchasing power parity (2006) reported up to $ 3,000 According to the General Department of Statistics, income per capita per month in reality increased by 64% in comparison with 2009, taking with the target of an average monthly per person increased 62% On the other hand, educational level is constantly being improved with a literacy rate of population above 90% The application of Internet fixed phone, mobile phones have grown very rapidly and reached high level of the region

Ừ Social:

In Vietnam today, the trend of urbanization increases the population in major cities quickly at a rate of 1% / year By 2009, urban population accounted for more than 30%, the proportion of people at working age was quite large, accounting for more than 52% of the population We have over 70% of urban households in Vietnam earning an annual average of VND 57 million Besides, VietnamỖs

consumer market has been becoming more attractive, the TNS Viet cycleỖs data

showed the material development from 1999 to 2009 as follow: less than 15% of

urban households had income from 3 million or less, while over 45% of households

had income from 4.5 to 20 million / month Consumption trends of people have associated with our country's science and technology after the United States and Singapore on growth

Tend to use services are more and more, with more than 88 million people,

only 20% of them opened accounts at banks At the banks, the growth rate of services within three years was on average of 30% / year The forms of enterprises, products supporting for consumption of people increased, the financial companies, financial leasing, and banks coordinate with vendors to promote provision of service products to consumers

Ừ Technological:

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45 machines/100 people (6 / 2007) The number of Internet users continued to increase significantly The incomplete statistics proved that, in 2007 there was 18.5 million of Internet users, 2008 was 21 million and in 2010, this number was up to about 31.5 million ICT Index Report in 2007 listed 13.7% of households had computers and 6.5% of households had Internet connection The number of enterprises having e-commerce website was up to 4790 and as of late 2007, the average revenue of an ecommerce website was 500 million / month, on average each customer spent 320,000 / year for sale online Particularly in the field of online games, game dealing worth up to 70 billion / month According to data of Ministry

of Planning and Investment, the number of telephone subscribers at the end of

September 2011 was 81.4 million subscribers, of which 81% was mobile phone subscribers Survey of an organization showed that, at present, scale of retail banking market in Vietnam is small, only 20% of people opened a bank account but in the future, this number will continue at rapid growth In addition, the stability and development of macro-economic environment creates tremendous potential for the development of retail banking services in Vietnam Demand for banking services is growing, especially in urban areas Furthermore, the development of technology and telecommunications boom with fierce competition among suppliers also makes people easy to access to modern facilities like Internet, ATM Therefore, banks will have development in services Density for the banking system in Vietnam is still very low compared to other countries in the region Currently, the density of using banking system in Vietnam is over 10% on average and higher in urban areas While this density in Thailand or Malaysia is 70-80% This suggests that the market opportunity of retail banking in Vietnam is huge

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2.2.1.2 Micro environment analysis (Michael PorterỖs five forces model)

Ừ Threat of new entrants

The increase of domestic banks: The establishment of commercial banks in Vietnam is not met many obstacles That is the reason why the number of commercial banks has increased rapidly in recent times Despite having been just founded for ten years in area of retail banking service, commercial banks providing retail banking services are up to more than hundred Nevertheless, to entry sector and become a reputable unit to customers, new banks will face many obstacles and they will not cause much difficulty for the expansion of market share of SeABank

Entry threat of foreign banks: The threat from the new bank will depend on the "high" of barriers to entry Under the WTO commitments, the banking sector is gradually opening up in the routine for seven years The banking sector has made fundamental changes when foreign financial institutions may hold shares in the banks of Vietnam and the emergence of 100% foreign capital banks Since 2006, Vietnam has gradually removed restrictions on share rates in the banking sector s of the foreign financial institution as committed in the Trade Agreement with the United States According to the commitments under the Asean Framework Agreement on Services (AFAS) of ASEAN Association, Vietnam had to completely remove the provisions on controlling the rate of contribution of capital, services value of the transaction from foreign banks since 2008

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However, that will not prevent enterprises having enough conditions from participating in banking sector once Government allowed re-establishment of bank Entrance barriers are also reflected through market segmentation and target market that existing banks are targeting, brand value as well as customer base, customerỖs loyalty that banks have built These are particularly important because they will determine the viability of a bank looking forward to entering Vietnam market

Look at Vietnam's banking sector in the context of Vietnam and the world: it is

covering by economic crisis The strict entrance barriers make the threat from new banks in the future quite low Once the world economy has recovery with open of banking sector under WTO commitment and other organizations, the existence of new banks is almost certain

> Threat of substitute products

For corporate customers, the risk from being replaced is not high since this customer kind needs clarity as well as vouchers, bills in the package of banking services If trouble occurs during use of products and services, customers often switch to another bank because of these reasons instead of looking for outside banking services

For consuming customers, on the other hand, the habit of using money makes Vietnamese consumers keep money at home or if they have an account, once they have money on account, they will withdraw all for use Government agencies and enterprises pay salary through bank accounts in order to promote the non-cash payment, contribute to financial transparency for every citizen But the locations to accept card payments are most of the restaurants, luxury shopping areas where people are not always to purchase

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In addition to the form of saving in bank, Vietnamese consumers have many other options such as holding foreign currencies, investing in securities, mode of insurance, investing in precious metals (gold diamonds, etc.) or investing in real estate Interest rate from bank does not always attract consumers At this time for instance, gold price is on hot, sudden increase or decrease during the day, while the U.S dollar in the free market also changes, the interest rates of most banks is only at 14% a year

Thus, with the subject as corporate customer, the risk of repiacing the retail banking products is not high; however, in regard to products for individual customers, SeABank faces up more threats from substitute products The substitutes for individual retail banking services will be on growth when financial market lacks of stability and psychology to use money of people is at high level

>Ừ Bargaining power of buyers

After over 17 years of operations, SeABank has attracted a large number of customers and constantly increased over the years The number of customers in ỔSeABank is shown by the following chart:

104.000

2006 2007 2008 2009 2010

Chart 2.3: Growth rate of customers in period of 2008-2010

Source: General Department, SeA bank

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In the competitive environment of financial service market, despite the increasing number of customers, the power of customers also affects to the business strategy of SeABank Recent events concerning about the power of customers was probably the banks charge ATM use while consumers do not agree In this case, banks and customers also have their arguments but obviously it has remarkable influences to satisfaction and trust of customer Thus, it is not the reason we underestimate power of customers in banking sector in Vietnam

The most important thing is that: the survival of banks based on capital raised from customers If banks are no longer attracting capital flow from customers, they will of course be eliminated Meanwhile, as mentioned above, the replacing threats of banks in Vietnam in regard to consumer customer, the threat of replacing is quite high With low switching costs, customers do not almost lose anything if they want to transfer their capital from banks and invest in a different place Therefore, to succeed in the retail banking sector, SeABank should have specific strategies to improve the quality of products and services as well as distribution channels and access customers

>Ừ Bargaining power of suppliers

The concept of supplier in banking sector is quite diversified They may be shareholders provide capital to banksỖ operations, or companies responsible for maintaining the system or ATM machines, companies providing banking software, human resource provision system At present, SeABank is investing equipments and selecting suppliers depend on their conditions This contributes to reduction of supplierỖs power when they cannot provide a large market but must compete with other ones

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cficiency of SeABank in expanding network of clients The shareholders may aid for development of retail banking products including: Societe General Retail Bank (f France (20% stake), Mobifone (development cooperation in mobile banking), PV Gas (Development of retail banking services to the oil companies)

One of the sources having a large impact on the quality of retail banking (perations is labor force Along with the explosion of the commercial banking system, banks are looking for qualified labor force in area of retail banking The scarcity of senior labor in banking industry is becoming more serious when banks ae expanding its network to dominate market For human resource issues, SeABank focuses on attracting talent and train the best personnel from developing evailable human resources

> Rivalry among competing firms

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