GRIGGS UNIVERSITY
GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM
CAPSTONE PROJECT REPORT
BUILDING BUSINESS STRATEGY
OF AN BINH COMMERCIAL JOINT STOCK BANK FOR THE PERIOD 2010-2015
Class: GEMBAO1 E01 Group: No 5
Students’ name:
Trang 2ACKNOWLEDGEMENT
First of all, the group of authors would like to express our deep gratitude to: The lecturers of the MBA training program of United State Griggs University - who provide knowledge; Managers and staff of the Centre for Educational Technology and Career Development - Hanoi National University(ETC)-who are enthusiastic and indispensable helpers in the process of learning;
The authors would also like to thank the Managers and staff of An binh Joint Stock Commercial bank- who are main supporters in the process of studying about the situation of the enterprise; And especially, Board of Management of the Electricity of Vietnam (EVN)- who create the opportunity, finance, provide the support of time so that members of the group can join and complete the training course
Trang 3TABLE OF CONTENTS ACKNOWLEDGEMENT "ĐH ch, 3 LIST TT J1EIEREVIAOTTO MT so - susnantanooniti và di S5600186 200146 554008940 (G02/850H1.01324S8E:dE TEĐNSIĐDNGGE05 6 BRSSN900.)2255 155 all 8 IIISN9)000/60)30.16 2010111 e 9 lý," <£.18/687/7)0555.5,77 , socornee eaemremeemenanser een arenes geass 10 Chapter 1 BASIC ARGUMENTS ON BUSINESS STRATEGY OF THE ENTERPRISE
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2.1 Overview of An Binh Commercial Joint Stock Bank ee cette eee 43
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2.1.2 Establishment and đevelopment process of ABBANK 43 2.1.3 Milestones of chartered capital growth cà nhe 45 2.1.4 Organizational structure of ABBANK Ăn re 45 2.1.5 Products and services of ABBANK Q nh HH ke, 48 2.2 Analyze and evaluate the situation and business performance of ABBANK 48 Zidad, ISUSUNESS PUSHES OE ALE ANT concn saumnercerne ecvarermmeersnumeur scare error eros 48 2.20 Capital mobilization and lending ccc: ssc: canes cama cern mmensmmmemns 51 PC 9ư pc vo ri0 0 1n 52 2.2.4 Development of Information TechnoÌÒY - . -s nành nghiệt 53 2.2.5 Development of nefworking - - - + 2k HH HH ng net 54 2.2.6 Operation of international PayiMenl sic cscescscscece a scenes smsvemeemancsnmrommeensarveonin 54 2.2.7 Development of card sySfeIm - nh nH HH HT re 53 2.2.8 Risk mamagement 0 0 cccccccccccceceeneeeeseececeseeeeeneceeseaeeceaeeesseteceueeseneeesteetenss 55
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Trang 42.4.2 Economic environmen(t coccce cuueteuueceaucotececutceereereres " 61
2.4.3 Cultural and social enVironme€n( à cà ceehhe 64 2.4.4 Technology €nviFr0Onm€TI -ĩcc2 2c ST ng Tnhh 67 2.5 Analysis on factors of the banking sector of Vietnam cc cành cho 67 2a Threat Trem Tew GHATS s esaoseentnn bi nay gu tt SH HE NNGH tE19/002 8091898 8L2N0NN t2ISSSI3Đ7DBS888 67 "y2 Nay 26) ii 8n n6 68 2.5.3 The bargaining power of Buyers THT Đà TH ng KT HT ch HkHy 68 2.5.4 The bargaining power 0Ÿ SuDDÌI€F c2 SH ra 69 su (A114ÌWýSÌS ffỶ EGTHDEHÍÍOYA e neo na nhu sự nhiag ưEEShDPGBRGUEIEED GGISIG S46 NEINGE ee RAMONES HUEB 69 2.6 Analysis of internal factors of ABBANK HH He, 76 2.6.1 Factors of technology, product and service quïfy -.-c cccssesieniieere 76 1.» Ta@EDT' @Í GHNÍDTHET IEEFV GD run Hưng msrees nh /G0000011020G0505D00001050SG02ESSIRĐEGGISG00NEHIESESIGGMGE8 77 P8 vàn cớ 78 2.6.4 Corporafe CuÌfUF€ - c1 2n S191 TT TH n TH KH TH HT HT HH 79 2.6.5 Human reSOUuFC€S Q0 0 21 1nn HS TT TH TT ng ki 79 2.6.6 Research and development (R&D) - L2 ng ky 81 2.6.7 Financial factor 2.0.0.0 ccc cecceceeceeecesceeeeeesaeeesaeeeeseceeaeeeeesnteeeeeeneeeieesnseeneees 81 2.6.8 Leadership and managỹ€m€nf - - - s1 vn ng ngư 84 2.7 Identify strengths & weaknesses and opportunities & challenges of ABBANK 86 2mimi: NI FETIDEBS dú hà 2k, 0g R16 <0088600 32016 4L08880136-101G0s6a10811858018.4828509008.cã.2ĐĐE.ĐNE30108935060000809193 86
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STRATEGY OF ABBANK FOR THE PERIOD 2010-2015 - c 52 cScccecesrsee 90 3.1 Summary of analysis results in Chapter 2 Ăn SH ghe, 90
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3.3 Propose business strategies for ABBank - c ch HH Hết Đã 3.4 Select the business strategy for ABBANK cehHHhHherrree 94 3.5 Business strategy of ABBANK ïn the period 2010-2015: - -c se 95 3.5.1 Mission of ABBANK 0 = 95 3.5.2 Vision of ABBANK sti 0S SSI: Nt WS SEAN SS NCHS OE 85 3.5.3 0600/0100) 70006 95 3.5.4 Business strategy of ABBANK LH n nghệ 96 KhSŠk)/20 020) 11 e 97
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Trang 5ABBANK ATM CITAD GDP ISO POS MIS SMS USD WTO VND Vietinbank BIDV VCB, Vietcombank Agribank TCB, Techcombank HSBC SOCBs JSCBs ACB STB, Sacombank MB LIST OF ABBREVIATIONS
An binh bank- An Binh Joint Stock Commercial Bank Automatic Transfer machine
Centre for Information Technology and Development Gross Domestic Product
International Standard Organization Point of Service
Management information system Short Massage Service
United State Dollar
World Trade Organization Vietnam dong
Vietnam Joint Stock Commercial Bank for Industry and Trade
Bank for Investment & Development of Vietnam Bank for Foreign Trade of Vietnam
Bank for Agriculture and Rural Development of Vietnam Technological and Commercial Joint- stock Bank
Hongkong Shanghai Bank Corporate State-owned commercial banks Joint Stock Commercial Banks Asia Commercial Bank
Trang 6EAB Habubank VP bank VIB ANZ SBV
Eastern Asia Bank
Hanoi Building Commercial Joint Stock Bank Viet nam commercial joint
enterprises
Viet nam International Bank
Australia and New Zcland Bank State Bank of Viet nam
Trang 7Table 1.1 Table 1.2 Table 2.1 Table 2.2 Table 2.3 Table 2.4 Table 2.5 Table 2.6 Table 2.7 Table 2.8 Table 2.9 Table 2.10 Table 2.11 Table 2.12 Table 3.1 Table 3.2 Table 3 3 LIST OF TABLES SWOT Matrix Model GREAT
Chartered capital of ABBANK
Several financial indicators of ABBANK 2006-2008
Income Statement of ABBANK 2006-2008 Capital mobilization of ABBANK 2006-2008 Outstanding loans of ABBANK in 2006-2008 List of some companies contributed by ABBANK
Demand of investment loans for power works of EVN in 2010- 2015
Number of banks in 1991-2008
Basic financial indicators of competitors in 2008
Structure of ABBANK human resources based on qualifications Evaluation the surpassing capability of ABBANK
Evaluate and compare strengths and core capacity of ABBANK Analysis of SWOT matrix
Trang 8LIST OF FIGURES, GRAPHS
Figure 1.1 The strategic management process
Figure 1.2: Model of five competitive forces created by M Porter Figure 2.1 Organization chart of ABBANK
Figure 2.2 Chart of GDP growth rate of Vietnam Figure 2.3 Chart on comparison of Cash/M2 ratio
Figure 2.4 Market share of bank mobilization and lending in 2000-2008
Figure 2.5 Comparison on branches & transaction offices of commercial banks in 2008
Figure 2.6 Chart on equity of commercial joint stock banks in 2008
Figure 2.7 Chart of comparison of total assets of commercial banks in 2008 Figure 2.8 Chart of NPL of commercial banks
Trang 9INTRODUCTION
1 Necessity and meaning of the theme
With its open-door economic policy and that Vietnam officially entered the World Trade Organization (WTO), these have created new opportunities and challenges for the whole economy as well as Vietnamese enterprises
Under WTO committments, Vietnam will fully open the financial and banking field in 2011 The level of competition in the banking sector is forecast to become harsher and harsher as there will be more 100% foreign invested banks established to operate in Vietnam
A fact is set forth that Vietnamese banks are, at present, taking the advantage of
Opportunities of the integration of the international economy and preparing their
luggages to cope with those challenges
With the banking sector, in the recent period, to meet the demand of capital for economic development, to satisfy client requirements on financial and banking service products, Vietnamese banks have ceaselessly developed themselves in scale, network expansion, non-stop improvement, increasing the quality of service products at the same time built up more new service products These banks have been competing and accepted the competition for existence and development
Especially, in the period from late 2007 and early 2008 to present, either the world or Viet nam did experience complicated developments and severe consequences of the global financial crisis: World economic growth slowed down; many developed countries such as the United State of America, Japan and EU member nations suffered from economic recession; there were a drop in global trade and world-wide stock markets, an abnormal fluctuation in global prices; and bankruptcy, liquidation or merger of series of big financial institutions in the world A series of banks in which there are also such American big banks as Lehman Brothers, CIT Group which have already applied their petitions for bankruptcy protection Economies in the world have got to shoulder and confront to overcome the crisis
Because of wide openness of the economy, Vietnam could not avoid impact of complex developments of the world economic environment
Trang 10Domestically, the macroeconomics had to face a lot of adverse factors such as increasing inflation and trade deficit, the slowdown in economic growth and difficulties in manufacturing and operations of enterprises
When the economy of Vietnam is affected by the world financial crisis, the banking sector is also affected hardly
In the context of market fluctuations, difficulties and risks, Vietnamese banks in general need to admit and totally assess their activities, compare with targets and Strategies set forth, analyze to find out the cause to explain the success or failure in each operating field On that basis, these banks will have to build their own business Strategy so that they are able to catch opportunities, overcome challenges, develop their strengths, reduce weaknesses, prevent risks during the process of operation to target growth and development, increase the value for stakeholders and meet the demand of clients better and better
An Binh Commercial Joint Stock Bank (ABBANK), which was transformed from a rural bank into the urban bank by the end of 2005, is of the group of commercial joint stock banks It experienced in 2008 with difficulties and challenges as its operating results did not meet the expectation of shareholders And the bank is preparing its development strategy for the next stage
In addition, among members of the group there are shareholders of the bank and also work for the Electricity of Vietnam (EVN) — strategic shareholders of An Binh Bank With the wish to apply knowledge during the process of the training program of Master of Business Administration (MBA) at Griggs University in practice, after discussions and exchanges, members of the group 5 have agreed to choose the theme: Building the business strategy of An Binh Commercial Joint Stock Bank for the period 2010-2015
Through analyzing strengths and weaknesses of ABBANK, opportunities and threats from the external business environment, proposals are raised to build the business Strategy for the bank
It is hoped that research results of the group will be useful and meaningful to ABBANK
2 Study objectives:
Trang 11- Study and systematize basic arguments on strategic management to build the business strategy for ABBANK;
- Analyze and evaluate the operating situation and business environment of ABBANK, from that select the business strategy for the bank in the 5-future-year period
- Propose solutions to implement the business strategy as selected 3 Scope of study:
- The study object is An Binh Commercial Joint Stock Bank
- Scope of study: It is limited in the banking sector of Vietnam, characteristics & the operational situation of ABBank in recent years and some bank competitors
4 Study method:
- The theme is to mainly apply the method of comprehensive analysis, statistics and comparison
- Method of data collection: Based on real materials of ABBank, there are also data references supported by documents of the State Bank of Vietnam(SBV), several commercial banks and others
5 Structure of the theme It includes the followings - Introduction
- Chapter 1: Basis of arguments on business strategy
- Chapter 2: Situation analysis of An Binh Commercial Joint Stock Bank
- Chapter 3: Propose solutions and give recommendations to build the business strategy for ABBANK
- Conclusion
Trang 12Chapter 1
BASIC ARGUMENTS ON BUSINESS STRATEGY OF THE ENTERPRISE 1.1 Overview of strategy and business strategy
1.1.1 Definition of strategy
The definition of strategy was born in the Greek ancient time This term naturally has the far-reaching source in the military field The strategy is generally thought to be the leading art of the general staff in order to obtain the victory in a war
In the past time, there were many viewpoints of authors on strategy
In 1962, Chandler- one of the first progenitors of the theory of strategic management defined the strategy as: determining basic & long term targets of a certain enterprise and applying a series of actions as well as allocating necessary resources to carry out this target” (Chandler, Alfred D., Jr (1962), Strategy and Structure, Cambridge, MA: MIT Press)
Till 1980s, James B Quinn put forth a definition which was more general as follows: Strategy is the pattern or plan of combining essential targets, policies and a series of actions in a general manner of consolidation” (Quinn, J., B (1980) Strategies for Change: Logical Inscrementalism Homewood, Illinois, Irwin)
In the book “Exploring Corporate Strategy”, the authors namely Johnson and Scholes defined the strategy as follows: "Strategy is the orientation and scope of a certain organization in a long term to gain the advantage for the organization through formatting resources in the changing environment and to meet the demand of market and satisfy the expectation of concerned parties" (Johnson, G., Scholes, K (1999) Exploring Corporate Strategy 5" Ed Prentice Hall Europe)
And the author William J’ Glueck said: "Strategy is a united, comprehensive and combined plan designed to ensure that basic targets of the enterprise will be carried out”
According to the opinion of the author Michael Porter: Strategy is an art which builds firm competitive advantages to defend
Alain Charler Martinet said: Strategy designed by a certain enterprise sketches out development orbits in a firm and long term manner so around these orbits, its exact
Trang 13The word “strategy” is construed in a variety of meanings Minzberg summarized meanings applied by scholars for the strategy and gave 5 main definitions of strategy, those are “5P” of strategy: Plan, Ploy, Pattern, Position and Perspective
From the above opinions we can see: The strategy is closely attached to the target of an enterprise Defining the strategy is to help the enterprise to realize its target set forth The strategy does not include separate actions but they must be a series of actions and decisions must be closely connected to each other All strategies must aim at targets of the enterprise and they must be set up on the basis of internal resources of the enterprise and external factors that have an impact on the enterprise
In brief, we can give a general definition on strategy as follows:
Strategy is a coordinated series of actions which involve the deployment of resources to which one has access for the achievement of a given purpose
1.1.2 Business strategy
1.1.2.1 Definition on business strategy:
From the middle of the 20" century, the term "strategy" was publicly applied in terms of macro- and micro-economy In the macro-management aspect, strategy is applied to indicate basic, comprehensive and long term development plans on main orientations of a sector, field or territory
In the aspect of micro-management, strategies are aimed at developing and attaching to the meaning of business So in enterprises, it is often said about “business strategy” So what is the business strategy?
There are various definitions on business strategy:
- Business strategy is a general action plan which is put forward realizing targets of the enterprise The strategy is a combination of targets and policies as well as pians which are mainly set to achieve
- Business strategy is an optimal choice to combine measures (using the strength of the enterprise) and the time (opportunity, challenge) with space (sector, location of action) under the analysis of the business environment and capability of resources of the enterprise to reach basic and long term targets in accordance with the trend of the enterprise (Nguyen Khoa Khoi, Dong Thi Thanh Phuong (2007), Strategic Management, Statistical Publishing House)
Trang 14Business strategy is An integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in Specific product markets
1.1.2.2 Some characteristics of business strategy
- Business strategy is often designed to clearly define basic targets, management directions of each enterprise in a certain period and it is fully construed in all business and production activities to ensure that the enterprise develops in a continuous and firm manner (more than | year)
- Business strategy is required to ensure to maximally mobilize and combine the the development and use of resources in the enterprise at present and in the future, developing advantages and catching opportunities to gain the advantage in the business market
- Business strategy must be reflected throughout a continuous process from building the strategy and organizing to carry out, check, evaluate and adjust the strategy
- Business strategy must be thought to win in the business market (required to fully take the advantage to win a victory)
- Business strategy is often built for a rather long term (3 years to Š years) and the trend is to go down as it depends on specific characteristics of each sector
1.1.2.3 Basic matters in business strategy
The business strategy is required to solve three basic matters as follows: - Who will be the object aimed at?
- What demand will it be satisfied?
~ How will be these demands satisfied? 1.1.2.4 Role of business strategy
~ First, the business strategy helps a certain enterprise clearly see opportunities and advantages of business, making the best of them to put forth strategies and policies of development to obtain targets as set
~ Second, the business strategy helps managers forecast unexpected events and risks at the present and in the future and then set forth appropriate policies to proactively cope
with
- Third, the business strategy helps managers use present resources of the enterprise and allocate them in an effective and appropriate manner
Trang 15- Fourth, the business strategy combines functions in the best manner in the organization in order to obtain its general target
1.1.3 Process of strategic management 1.1.3.1 What is the strategic management?
Strategic management can be defined as an art and science and it establishes, executes and evaluates decisions related to functions that allow a certain organization to attain targets set forth (Fred R David (2006), Concepts of strategic management- Statistical Publishing House)
Strategic management focuses on combining the management, marketing, finance and accounting, production, research & development (R&D) and information systems in business lines to obtain the success of the organization
1.1.3.2 Process of strategic management
Trang 161.2 Vision, mission and core value 1.2.1 Vision
Strategic vision is the biggest aspiration of the owner on the future of his enterprise Speaking about the vision, it means that it describes the future with some special methods so it becomes better than a reality The vision of business strategy 1s always a big challenge for the enterprise It describes about people and the organization different from the present so that is the prospect they will achieve in the future
A vision often starts from what leaders pay their most interest and they commit to realize it Margaret Thatcher ever said: leaders were responsible to enlighten the path leading to the future and then look for the assistance from all people to create that future A vision is seen to be effective when it includes the followings:
- Make the inspiration: Statements on vision must influence on staff in terms of intellect and emotion
- Be obvious and lively: If the vision of business strategy or a lively picture can be thought in mind, you will have a better opportunity to obtain
- Show a better future: Leaders have to help staff see what they will acquire if reaching that vision There will be linked to the vision for staff when they see benefits by
realizing that strategic vision
1.2.2 Mission
The mission of a company is a definition applied to determine corporate targets and reasons that the company comes into existence and development Its mission is the declaration with the society and it proves the usefulness and meanings of existence in the society
In fact, the declaration and mission of the company just focus on making clear a very important matter: "What is the target of the business of a company?” The scope of the mission declaration is often related to the product, the market of technological client and philosophies that the company is pursuing Therefore, it can be said that the declaration of mission shows the meaning of the existence of an organization, what they want to become, clients that they want to serve, modes they operate
A mission has its contents:
e Customer: Who is the consumer of products and services supplied by the company?
Trang 17e Market: What market does the company compete in?
Âô Technology: Is the technology the top care of the company?
e Interest in other important matters: they are survival, development and profitability: Does the company have any tie with other business targets or not? ¢ Philosophy: What are the basic belief, value, aspiration and philosophy priories of
the company?
e Self-evaluation: What are special capacities or main advantages of the company? * Interest of public image: Is the public image a main interest of the company or
not?
¢ Interest of staff: What is the attitude of the company given to staff? 1.2.3 Core value
Core value is all what a company cannot make payment or change Core values create a foundation to set up regulations in the company Core values can be defined as
follows:
- It is a belief system which influences on behaviors between person to person or among groups;
- Core values are the "soul" of the organization;
- They are effective values which are deeply attached to the organization
- Core value helps establish the organizational psychology and then it can support or eliminate the individual psychology
- Core values are long term instruction rules as required:
+ To help orient decisions and actions in a certain organization; + Those are not cultural actions or specific activities;
+ It is not constructed for financial targets or short term opportunities;
+ The organization wants to keep the core value even when its mission is already changed
- They are long term and necessary principles of a certain enterprise — set of detailed instruction rules which cause a deep influence on what people think and act in the enterprise
Without care of public opinion, the core value has a real value and it is very important to people in the enterprise Core values are several rare instruction rules leading to a
Trang 18great impact possibility and they are the soul of the organization; those values are aimed to guide all actions
Core values have the depth and those are very important values Those values have little change under the change of the market On the other hand, enterprises will change the market if it 1s necessary to keep their actual core values
1.3 Strategic analysis
1.3.1 Analysis of the external environment 1.3.1.1 Analysis of the macro-environment * Analysis of the economic environment
Enterprises and sectors are always impacted by the status of the macroeconomic environment Hence, the enterprise needs to study the economic environment so recognize its changes, tendencies and strategic implications
There are four important factors in the macroeconomic environment: they are the economic growth, interest rate, exchange rate and inflation rate
The economic growth is a factor which directly impacts enterprises Also it leads the explosion of the spending of the customer so this reduces the pressure of competition in a certain sector, creating the opportunity for enterprises to expand the market and gain higher profits On the contrary, the economic downturn leads to the spending reduction of the consumer so it creates the pressure of competition on the enterprise and it also reduces value and profit
High inflation and interest rates are a threat to the enterprise High inflation will reduce economic activities and high interest rates affect the amount of goods sold if the customer has to borrow to finance shopping activities and the enterprise has to get loans for business loans
Exchange rate directly impacts on the competitiveness of enterprises in the global market
* Analysis of politic and legal environments:
Political and legal environments, including regulations, rules and operations of state agencies that affect the operation of enterprises Political institutions keep the orientation, dominating activities in the society, including production and business activities The political and legal environments belong to the group of macro factors and they have a strong and deep impact on production and business activities of the
Trang 19enterprise These factors affect the enterprise in different directions We can create real Opportunities, obstacles and even risks against the enterprise
* Natural environment
The impact of natural conditions for business decisions has long been recognized by companies Although at present with their modern technologies, people use less material sources but natural resources become scarcer and scarcer This directly affects activities of the enterprise Especially from 1990s to the present, the natural environment is clearly deteriorating and it is a challenge for almost enterprises in various fields
* Cultural and social environment:
Every enterprise operates in a certain cultural and social environment Enterprises and the cultural and social environment have a close relationship and interaction The society provides resources that enterprises need and it consumes their service products Cultural and social fields can affect strategic decisions such as selecting sectors and commodities, selecting the brand, color, style and changing the channel of distribution
* Scientific and technological environment
There include factors that affect new technologies, create new products and market opportunities Environmental factors can have a two-sided impact against decisions of business strategy and they have not only created opportunities but also produced risks for enterprises On the one hand, it allows enterprises to make high quality and low cost products, increase of labor productivity to create competitive advantage; on the other hand, the rapid development of science and technology makes the cycle of technology innovation occur quickly There is an increasing rate of investment costs in research and development
1.3.1.2 Analysis of the sectorial environment
The crucial point when building the competition strategy is to consider a company in correlation to its environment
Michael E Porter has built the model of five competitive forces to analyze the competitive environment of a business line This model helps managers identify opportunities and risks that their enterprises must cope with in a certain sector
In the research framework of the theme, the authors use this model to analyze the sectorial environment of the enterprise
Trang 20POTENTIAL ENTRANT | Threat of new entrants V INDUSTRY COMPETITORS SUPPLIERS BUYERS LZ ` Rivalry among Existing firms 4p Threat of substitute products/services | SUBSTITUTES | Barrgaining Power of suppliers 7 \ siaAng Jo Jomog suluredsieg |
Figure 1.2: Model of five competitive forces created by M Porter * The competition between enterprises in the same sector:
In a certain sector, enterprises often compete with each other for product quality, pricing, timing that often makes product quality improved, product price decreasing, time of supply fast As a result, the profit and interest of suppliers runs down Some forms of competition, particularly price competition, are often unstable and they will probably make the whole sector lose profitability The competition is the driving force to develop the economy, but in terms of the sector, the competition makes the profitability of the sector decrease rapidly The competition between enterprises in the sector is considered as the competitive pressure so the fiercer the competition is, the more the interest is There are many factors to determine the competitive intensity in the sector and it is specified as follows:
Trang 21~ [here is a slow growth in lines of business and sectors - Fixed cost or storage and maintenance costs are high
There is a shortage of differentiation or low shift cost There is a rapid increase of capacity
- Competitors have the same characteristics
- Big strategic challenges: if winning, the winner will gain a lot, but if losing, the loser will suffer from any big loss so it leads to a fierce competition
- High exit barriers: Properties and equipment are highly specialized; fixed exit costs are high; there is a correlation between this business unit and that business unit in the Same company; barriers are associated to the emotion and limitations of the society and the government
To evaluate competitors, it is necessary to collect actual data on each present competitor in a meaningful way Data collected to be used include:
- Who are competitors? Organize and structure the sales department - Financial capacity of the business group
- Services products, including the price and quality of service - Market share possessed by compctitors
- Target market and activities of competitors on the market - Technology applied by competitors
Information resources will provide details on competitors of the enterprise and from that the enterprise understands how stronger or weaker its competitors are, for instance those are the price, product, market, technology Then the enterprise can adjust its limitations or promote its strengths in an effective manner
* The bargaining power of the Buyers
Enterprises sell their products to customers so in that relationship, customers often use their power to give unfavorable conditions for those enterprises That condition threatens the interest of a certain producer in the sector so customers are considered as a competitive pressure
Factors that create the power of the customer include:
- This group of customers has a high concentration or they buy large volumes of goods compared with sales of the seller If a customer buys a large amount of goods, he will give adverse conditions, but the enterprise still has to accept it
Trang 22A certain product that group buys accounts for a large proportion of the total buying cost and this is a key factor to stimulate the use of the negotiation power of the customer
Products that are standardized or have a small cost of shifting will produce convenience for the buyer to choose the seller and create a greater power for the buyer
~ The profit of this group is low so they try to reduce their buying cost
— The product is not important to the buyer about the quality of product or service - Customers have enough information
- If a customer is a retailer, he is likely to impact the behavior of the consumer * Threat of substitute products or services:
Normally, there are substitute products due to the impact of science and technology and people make new products which are better than previous products If a new product was born, it would threaten producers who are making their current products in the same sector Hence, new products are considered as a possibility of competitiveness
* The bargaining power of suppliers
In the process of production and business activities, enterprises have to buy production factors from suppliers In that trading relationship, suppliers set out Getrimental conditions to these enterprises and those adverse conditions create the pressure to affect profitability So the right of negotiation is considered as one of the
competitive forces Factors that create the power of the suppliers are:
- The group of suppliers has its higher centralization, monopoly, fewer suppliers but more buyers
- This group does not carry the pressure of substitute products
— Products and services provided by a supplier are input factors important to business Operations of the purchaser
* Threats of potential entrants in the sector
If a company enters a new industry, it will bring new potentials: advanced technology, high-quality human resources, strong financial potential and wide network of
distribution That creates the competitive advantage of product and service and there is
Trang 23To assess the competitive pressure, it is required to apply the entry barrier to enter the sector This is a set of factors and conditions to prevent and limit new competitors from participating in the sector The barrier objectively exists in the sector There are main barriers to prevent any penetration in the sector as follows:
- Economic efficiency due to the big scale: The bigger the scale of production is, the more the cost is saved; there is a condition to expand the scope of operation in the chain of values in the sector If a certain enterprise runs for many years in the sector, it has its regular customers and large-scaled productions so it saves costs If an enterprise enters the same sector, it often has its small scale of production but high cost
- Differentiation of products: Each enterprise provides its unique products so a new enterprise entrant in the sector is required to create its special products
- Capital requirements: Joining in the industry is required to have a large amount of capital; if a minimum amount of capital is required to be higher, entry barriers are high in the sector
~ Conversion cost: It is a cost that the customer has to pay when changing any providers so the higher the cost is, the higher the barrier is
- It is difficult to penetrate into distribution networks because monopolistic networks are usually possessed by some big enterprises in the industry
Generally, enterprises in the sector compete with each other, but when there is any new enterprise entrant, existing enterprises in the sector tend to group together to eliminate the new entrant If the threat is high, enterprises fight it fiercely
1.3.2 Analysis of the internal environment of the enterprise
That is the analysis and recognition of strengths and weaknesses of the enterprise compared with requirements and tasks of production and business activities with its competitors
Internal environment analysis requires collecting and processing information about finance, organizational structure, personnel, research and development, marketing and business performance of such organization
An enterprise’s internal environment is composed of elements within and under the control of the organization
By studying the internal environment, firms identify what they can do
Trang 24Components of Internal Analysis Leading to Competitive Advantage and Strategic Competitiveness include: resources( tangible and intangible), capabilities, core competencies
By exploiting their core competencies or competitive advantages, firms create value Firms create value by innovatively bundling and leveraging their resources and capabilities
Core competencies, in combination with product-market positions, are the firm’s most important sources of competitive advantage Core competencies of a firm, in addition to its analysis of its general, industry, and competitor environments, should drive its selection of strategies
* Resources
Resou:ces are a firm’s assets, including people and the value of its brand name and represent inputs into a firm’s production process, such as: Capital equipment; Skills of employees; Brand names; Financial resources; Talented managers
Tangible resources include financial resources, Physical resources, Technological resources, Organizational resources
Intangible resources include Human resources, Innovation resources, Reputation resources,
* Capabilities:
- Represent the capacity to deploy resources that have been purposely integrated to achieve a desired end state
- Emerge over time through complex interactions among tangible and intangible resources
- Ofter are based on developing, carrying and exchanging information and knowledge through the firm’s human capital
* Core Competencies: Resources and capabilities that are the sources of a firm’s compeitive advantage They emerge over time through an organizational process of accumulating and learning how to deploy different resources and capabilities
Core Competencies are activities that a firm performs especially well compared to compe:itors and through which the firm adds unique value to its goods or services over a long 9eriod of time
Trang 251.3.3 Summary of SWOT analysis
SWOT analysis is the most common method used in planning the strategy in general, especially for those sectors that have the sensitive response to changes of factors in the macro environment and the micro environment
Model of SWOT analysis model is widely applied in planning the strategy SWOT is the model to argue strategic solutions based on the analysis of combining factors in and out of the enterprise
The model is applied through a number of steps as follows:
- Step 1: Identify and evaluate opportunities and challenges of the environment for the development of the enterprise This process is conducted on the basis of comprehensive analysis of all elements of the environment at different levels, from the sartorial environment, the macro-environment and the international environment to indicate what opportunities are, what challenges are and assess the impact of each opportunity and challenge to the development of the enterprise
- Step 2: Assessing strengths and weaknesses is based on the analysis of value chain of the enterprise to make evaluation for each field of operation
- Step 3: It is to analyze the relation of internal and external factors to assess risks which can weaken the strength or not and it is called as a backward analysis (TWOS) - Step 4: It is required to produce a SWOT matrix table and strategic solutions
A SWOT matrix has 9 cells, including 4 cells containing key elements (S, W, O, T), 4 Strategic cells (SO, WO, ST, WT) and 1 blank cell
SWOT matrix is established as follows:
+ List opportunities arising from the outside environment that the enterprise can develop
whe - List direct threats from the outside of the enterprise
4 - List key strengths within the enterprise
+ - List typical weaknesses within the enterprise
+ Combine internal strengths and external opportunities and propose an appropriate SO Strategy and then fill in the correlative cell This strategy promotes the strength to take the advantage and it is also the most favorable strategy that the enterprise desires
Trang 26+ Combine internal weaknesses and external opportunities and propose an appropriate WO strategy and then fill in the correlative cell This strategy makes good the weakness by catching the outside opportunity
+ Combine internal strengths and external threats and propose an appropriate ST Strategy and then fill in the corresponding cell This strategy takes the advantage of its Strength to deal with any external threats
+ Combine internal weaknesses and external threats and propose a WT strategy which ls set to minimize the effect of the internal weakness and prevent any external threats Table 1.1 SWOT Matrix
Opportunities (O) Threats (T) l 1 SWOT analysis 2 2 Strengths (S) Combine SO ST coordinate l l 1 2 2 2 Weaknesses (W) Combine WO Coordinate WT 1 1 1 2 2 2
This process sets up 4 pairs of coordinated strategy - Coordinate SO- maxi-maxi strategy:
It is the strategy using internal strengths in the organization to take the advantage of external opportunities for expansion, development and diversification
- Coordinate ST- maxi - mini strategy
It is the strategy using strengths of the organization to avoid hazards and reduce the impact of risks threatening this situation and it is much hampered by external conditions
- Coordinate WO- mini-maxi strategy
Trang 27It is the strategy to improve internal weaknesses by taking the advantage of external Opportunities
- Coordinate WT- mini - mini strategy
It is the strategy coordinated between weaknesses and risks of the organization It is necessary to minimize its weaknesses and avoid threats by giving defense plans This Situation shows the weakness in the inner sector on the unfavorable surrounding condition
1.4 Selection and construction of business strategy 1.4.1 Business strategies in practice
1.4.1.1 Company level strategies * Strategy of centralized growth
It is required to concentrate resources to develop one or several business units or business lines that the enterprise has many competitive advantages
Those are main strategies to improve common products or markets without changing any elements When pursuing this strategy, the enterprise is mainly to development Opportunities available with products regularly produced or popular markets by doing what it is doing better
Advantages: High productivity, low cost, high quality, high market share, high competitive advantage and simple management structure
Disadvantages: High risk, big investment, low flexibility, high tendency of standardization leads to the rigid change
This strategy can be conducted in the following forms:
- Market penetration: It is aimed to find how to grow current products with bold efforts of marketing
— Market development: It is aimed to find how to grow by entering new markets with existing products
- Product development and innovation: This is a growth by expanding the existing market for new products
* Strategy of integration growth
It is a type of development strategy by strengthening the control or holding the ownership of one or more enterprises
Trang 28- Vertical integration: There are two front and backward directions:
+ Backward integration: It is related to finding growth by possessing or controlling Supply sources
+ Front integration: It is to find growth by achieving the ownership or control and increase strong functions or approach the final market like the distribution system - Horizontal integration: It is to take over competitors in the same sector
* Strategy of diversification growth:
It is a growth strategy by penetrating into a new business field and expanding more and more new industries
Diversification strategy includes the following strategies:
- Concentric diversification: It is the strategy to search for growth by offering new products or services in a new market but having the close relation of production technology and marketing system of the enterprise
- Horizontal diversification: It is the strategy to search for growth by bringing out new products and services in the market where they are not related to available products and services
- Mixed diversification: this strategy seeks growth by offering new services and products which are not associated with existing services and products in the new market; they may be new technologies or even switch to a new sector
* Declination strategy:
It is applied to the product in the final stage of the life cycle, including products whose competitiveness is weak and whose attraction is too low in the sector
When the enterprise needs to group it to improve production conditions after a certain period of rapid growth; when there are no longer opportunities and capability of long- term development in a certain period; during the term, there are many economic fluctuations and other opportunities which are more attractive than opportunities the enterprise is pursuing so the declination strategy is chosen and it exists in different forms:
- Cost cut: It is to streamline the management, cut costs of research & development (R&D), training costs and close representative office
~ Strategy of harvest: It is the collection of measures and priority policies of immediate benefits despite its long-term impact
Trang 29- Withdrawal of capital: It is to gradually sell some production facilities, technological lines, machines and equipment which bring no benefit to achieve long-term changes in the framework
- Strategy of dissolution: It is to eliminate all activities It is the most extreme form of the declination strategy when the enterprise no longer exists
1.4.1.2 Business unit-leveled strategy
* Strategy of cheap price and bulk volume (leading the sector with low cost)
Low-cost strategy is based on the capability of the enterprise to provide lower-cost products or services compared with competitors The goal is to win a significant cost advantage compared with other competitors to eventually turn into tools to attract customers and gain a bigger market share
The advantage of this solution is that the enterprise keeps at a low price so it can expand its market share and gain the higher profit than the average profit of the imdustry
Iiowever, this solution also has disadvantages such as it is a rather big investment as tlhe enterprise has to acquire its advanced equipment and then it can improve labor productivity Other enterprises can lower the cost to complete so it creates a price war By focusing on reducing the price of product and service, the enterprise does not pay attention to the change of need of the customer
* Strategy of differentiation
- Solution on differentiating product and service: It means to create products and services with properties of identity, bringing a new value to consumers because other enterprises do not have it and then customers trust and use
he advantage of this solution is that the product of the enterprise has its own identity properties so the customer usually pays much attention to those properties instead of prices and the enterprise can keep a special position in the market while other
enterprises cannot do it
‘Ihe application of this solution can get a relatively high profit and it is used to deal with competitors However, it has its disadvantages as follows:
Ifa certain enterprise wants to differentiate the product, it will have to invest capital in clesign and special materials so it makes the price rise
Trang 30The buyer can pay a certain price for the differentiated product If it is because of the differentiation, the price of goods is too high so other enterprises can apply a low-cost solution to compete
As the price is different, it is difficult to sell in a big quantity to quickly expand market share
* Strategy of centralization
This is a solution which centralizes resources in a certain market, a certain group of customers or a regional market to build a certain advantage and status of the enterprise in the market there
Conditions to implement this solution are:
- In the industry, there are customers who have special needs or in that area there are customers who have special needs
— Corporate competitors do not apply solutions to focus resources in that market
If a certain enterprise actually has its weak capability of business, is will not be able to do business on a large scale
+ Advantages of this solution are:
The business objective is concentrated and the management is simple and convenient So it is possible to centrally use talents and material resources of the enterprise
It is possible to deeply go into technical and professional research
It is proficient to master the market situation, customers and the competition so it is possible to enhance the real strength of the enterprise, building the advantage for the product
As the product is specialized at a high level, it is possible to produce the effect of the big scale and thereby lower the cost and increase the profit
+ The disadvantage of this solution is that when the market has any change and a certain new technique or the substitute product appears, the demand of this product will reduce and the enterprise will meet big difficulties and risks
+ When applying this solution, it is noted:
Competitors which operate in a widespread business aspect can bring your market area into the scope of their activities and enter into your market
Trang 31When in the market a certain substitute product appears or the consumer’s preference changes, the concept of value changes, political, social, economic, legal, cultural, technological environments change so they can make the structure of market change and the advantage of the solution of gathering resources will disappear
1.4.1.3 Functional strategies * Marketing strategy
Marketing strategy is a part of the business strategy The mission of this strategy is to convince the customer to buy products and services of the enterprise
Marketing can be described as a process of identifying, forecasting, setting and satisfying product and service needs of the customer
There are many overlaps between the general strategy of the entire company and the marketing strategy Marketing evaluates the need of the consumer and the possibility of the company to achieve a competitive advantage in the important market Most of planning strategies are related to marketing parameters such as market segment, market growth, possibility of market expansion etc Sometimes it is difficult to distinguish the general strategy planning of the company and the planning of marketing strategy
Marketing plays an important role in implementing strategic business plans of the company in several ways
First, marketing provides a context which leads strategic planning activities to achieve a competitive advantage with key customer groups Second, marketing help strategy planners identify market opportunities and assess the capacity of the company to achieve a competitive advantage Finally, marketing provides solutions to complete Strategic objectives of each business unit
* Production Strategy
- Strategy of production is the duty to determine which products should be produced, quantity of product types and distribution of facilities or other production resources to effectively make the product to supply in the market Here is the main field of activity which highly influences the success of the enterprise
The strategy of product and service is to provide products to satisfy market needs and tastes of the customer in each period The strategy of product and service is the backbone of the business strategy The higher the level of production and business is,
Trang 32the fiercer the market competition is as the role of product strategy becomes more important If there is no product strategy, there will be no pricing strategy, distribution Strategy, communication and promotion strategy If it is the wrong product strategy, it will lead to the failure of a variety of other marketing activities
* Strategic technology
The strategy is set to solve such matters as technology selection, selection and analysis of product development policies, improve existing technologies and products
Technology factors significantly affect the business strategy of the enterprise and the change of technology also affects the life cycle of product and service Therefore, the enterprise needs to have appropriate considerations of technology and create Opportunities for the enterprise in developing products and services
* Strategy of human resources
It is the strategy to identify the need of human resources for development, then finding Out policies on recruitment, training, development and appropriate use of human resources for production and business activities
In ways to create the competitiveness of the company, the advantage through human resources is considered as a fundamental factor Human resources are considered as fundamental resources and the decision of all times Human resources are a key sustainable and unchanged factor in all organizations
The relationship between the enterprise and employees is one of the important factors to create the success of the enterprise, particularly that is in the high competition context of business activities Therefore, building the strategy of human resources in a long term and oriented manner will be a basis for plans of training and developing human resources of the enterprise
The organization of human resources is an important role and it depends on the level of awareness and management of the enterprise to decide how to implement the Strategy business most effectively Managers need to constantly retrain and improve the knowledge of business management in the market-oriented mechanism and boost the capability of operating the enterprise to ensure the sustainable development
Trang 33Strategy of finance includes directions of scale and capital sources for investment, mobilization and effective use of available capital sources to implement objectives set
forth The financial strategy also includes the following contents:
- Select the channel to mobilize capital, the method to raise capital, sales and profit
targets
- Where and how much to make a long-term investment capital in accordance with each stage of business to achieve high efficiency
- Manage financial activities; be active, creative to apply accounting rules into the close and dynamic management of accounting
1.4.2 Construction of main objectives of the strategy The process of building objectives is identified through steps:
- Define strategic tasks: What sector and product will be the business of the enterprise and activity fields that the enterprise is looking toward
- Define objectives of the enterprise and those of each business field
- The system of objectives: It is the system of results that the enterprise needs to achieve in each period through criteria of quantification
Appropriate types of objective must meet six criteria: specificity; flexibility; measurability; Feasibility; Consistency and rationality
1.4.3 Selection of strategy
Through the analysis of SWOT matrix it is required to propose strategies for the enterprise In this theme, the group of authors selected such business strategy through the model GREAT
Table 1.2 Model GREAT Criteria Of Strategy Strategy Strategy Strategy which 2 3 4 a Score | Product | Score | Product | Score | Product | Score | Product |G: Gain | R= Risk _ | E : Expense | A: Achievable | 1: Time
_Total Source: McGraw Hill C ompany( 2007), Strategy 1.00
With the method to evaluate and score on the basis of comparing between the Gain (G), the Risk (R), the Expense (E), the Achievable (A) and the completion time (T) of
Trang 34Strategic plans in terms of factors in calculation of the importance, the best strategy will be selected
1.4.4 Solutions of strategy implementation
It is how to turn the business strategy into actions and reach convergence; it is very difficult to have a good business strategy; making it a reality is much more difficult Implementation plan will have to ensure the consistency of objectives and activities if it is desired to be effective
a Solution to change the organizational structure:
The enterprise can survive and operate normally with a good organizational structure As a new Strategy is outlined, a new historical stage of the enterprise is about to begin and of course task objectives will change The current structure does not fit anymore and it is required to have necessary changes in conformity with the new strategy of the enterprise
b Solutions development investment:
To successfully implement the strategy, the enterprise must build the mechanism to diversify patterns of investment to promote all resources and meet the development needs of the business
c Financial solutions and capital mobilization:
- To successfully implement the strategy, it often requires the full amount of capital needed It is necessary to identify sources and capability to mobilize capital, mobilization plans to implement the strategy
- To enhance the capacity of financial management and analysis of financial Statements has a significant importance in the implementation of the strategy because it allows the enterprise to consider results expected by different measures and methods
ad Solution of science - technology:
- It is aimed to increase investment in science - technology and management and apply appropriate technology in the industry to improve the efficiency of investment, production and business activities
- It is required to apply information technology in the process of production and business activities
e Human Resource Solutions:
Trang 35Training and improving the professional level of skilled and high-responsibility staff is respected to meet the development requirement of the enterprise
1.5.5 Assessment of strategies and implementation measures
This is the last step of the process of strategic management, it expresses how it bring about results necessary to achieve objectives and it promotes the implementation of business objectives and help clearly orient the prospect of business achievements in the coming time
It is required to check and evaluate the strategy to provide information, contributing to Create the basis for strategic planning in the next period The process of testing and evaluation includes the following contents:
- Define test content: check quantity, quality, time and cost This step is done as soon as the strategy is planned during the process of implementation and after the completion of the strategy
- Set up standards for checking
- Define the system on measuring results; this measurement system determines the outcome of parameters needed to check in contents as regulated This measurement system includes procedures, processes, equipment used to measure performance at all levels and all places in the enterprise
- It is required to compare achieved results with standards in order to assess whether the enterprise has activities given in any wrong direction before, more or less misleading to learn causes and find ways to adjust
- It is to find remedies and this action is necessary and inevitable in the process of Strategic management because it ensures the adaptation timely to changes of the environment and the successful implementation of strategic objectives
1.5 Some issues on building business strategy for commercial banks
The banking sector is a specific business field and it has a special importance in the clevelopment of the economy of a country but it is also very sensitive to fluctuations of clomestic and international economic - political - social environments
Wherever commercial banks are also of the biggest intermediate financial group and they are financial intermediaries in almost economic transactions
It is required to build any the business strategy for banks as follows:
1.5.1 Mission
Trang 36The business mission of a bank is defined as the business purpose of the bank The business mission is to answer the question: "What does the bank exit and do business
for?"
A business mission is the first appropriate standard which is the orientation of customer under absolutely logical arguments and the customer is thought to define the existence of the bank because they are willing to pay the bank for its services Their success or failure will affect business performance This also depends on capability to maintain to work closely with customers
In fact, the business mission of the bank should be made in writing Subject to each bank, the business mission can vary in length, content, size and specific feature
Hlowever, there is a structural pattern so banks can base on it to write the mission of business for themselves Most experts of strategy believe when writing this text it is required to pay attention to and select the following features as important components: - Customers: Who are customers of the bank? They are enterprises or individuals or both? It is important that the bank must make clear "target customers"
- Services: What are products or services provided by the bank? Does the bank provide a variety of services or just a certain group of services? What are main services of the bank?
- Technology: Does the bank have to see technology as the biggest concern? It the technology the leading factor of the bank to improve and upgrade to enhance productivity and quality of banking services? Are the technology of payment and the delivery of services strengths of the bank?
- Business position of the bank: Where does the bank stand in the market? In general, leading banks have this expression in their business mission and banks are in the Competitive market and it is not possible to mention in the mission
- Market: Where is the target market of the bank? The scope of activity is of the local, regional, national or international markets In which the bank has got to confirm its specific object in the focus area
- Interest in human resource: What is the behavior and attitude of the bank about human resources? The bank has its policy in recruitment, development, stimulation, applause, attraction of qualified staff and it also provides better working conditions and wage regime subject to their productivity and attachment, promising opportunities
Trang 37of promotion and it ensures a long-term employment, comfortable working atmosphere, spirit of cooperation and mutual respect
- Competitive advantage of the bank: Each bank has its certain competitive advantage in the market For example, the history of establishment and activities, service quality, staff, a variety of products, the cost, distribution system However, the mission of the bank only indicates strengths and characteristics of the bank than its competitors For example, generally new bank participants in the market do not have the advantage of history and experience
In short, these standards are based as the framework to prepare a business mission for banks and they will achieve a higher significance if the business mission is made clear, impressive and communicated effectively to strategy makers, managers and bank staff 1.5.2 The objective of the strategy
Objectives written in the business strategy are defined as achievements that the bank needs to acquire when pursuing its mission during the relatively long period of operation (over one year) Long-term goals are essential to the success of the bank because they show results needed to achieve while pursuing their business mission It is required to support the assessment of achievements, creating the capacity to promote business activities, showing priorities in selecting and organizing the implementation of the strategy
The important requirement in determining strategic objectives is to ensure that those objectives must be exact Next it is necessary to determine a certain list of the most meaningful targets At the same time it is required to arrange them in order of preference, but it is not to make a list without the order of purposes
1.5.3 Analyze the business environment and identify opportunities and threats The business environment of the bank is the situation in which the bank executes business operations and it is affected by this situation The business environment of the bank can be described by a series of factors considered as external impacts to business activities of banking organizations Of those factors, most of their impact is objective and the bank 1s difficult to control and can adapt to them
* Factors of analysis include:
- Economic factors: These factors are impacted by economic cycles, rate of inflation, growth speed of GDP, the prospect of business lines related to the use of bank capital,
Trang 38shift structure between economic sectors and level of price stability, interest rate, balance of payment and foreign trade
- Elements of politics, law and state policy: The banking sector is strictly controlled in terms of the law compared with others Policies affecting bank activities such as competition policy, bankruptcy, merger and organizational structure, regulations on lending, deposit insurance, credit risk reserve, regulations on scale of equity stipulated in the banking law and regulations on guiding the implementation of the law In addition, monetary policy, financial policy, taxation, exchange rates, debt management of the State and concerned agencies like Central Bank, Ministry of Finance also impact on the operation of the bank
- Factor of cultural and social environment: They are long term and unchanged problems; there is great value in analyzing the strategy such as culture of consumption, habit of using banking services in the life, habit of savings, investment and behavior in the relationship of communication, expectation of life, religion community, ethnicity and labor trends
- Factor of technology: The rapid change of information technology becomes a breakthrough of competitiveness in the banking sector
- Factor of population: Those are factors of population structure in age, gender, income, living standard The rate of population growth, population size, the possibility of shifting population among economic sectors and between urban and rural areas,
- Natural factor: Scarcity of resources, capability of production in different natural areas, the problem of environmental pollution, shortage of energy or wasting natural resources can affect the bank whether it makes decisions of investment and lending or
not
- International factor: Because of the trend of economic globalization, it leads to the regional or global integration between economies Therefore, it is required to follow- up and capture the world economic trend, detect potential markets, learn about evolutions of political and economic information about new technologies and experiences of international business
- Competitors are operating: Bank competitors are competing and applying tricks to increase their competitive advantage and gain each other's market share They are
Trang 39commercial banks, insurance companies, finance companies, assistance funds The level of competition depends on the number and size of institution participants in the market
- Customers: They are a factor to determine the survival of banks in the competitive environment There is no identity in bank customers and they are both depositors - providing capital and borrowers - use of bank capital and other financial services - Potential competitors: financial and non-financial institutions may mutually penetrate into services supplied to customers In addition to existing competitors, it is required to be aware of potential competitors in the future such as insurance companies and other financial institutions
- Market of replacement: There are fewer substitute banking services, but in the certain extent there are still markets and customer trends instead of using traditional banking services like deposits or lending so they shift to trends such as:
+ It is the trend to invest in securities markets instead of opening the bank account of savings
+ It is the trend to invest in the real estate market
+ Tt is the self-funding trend by issuing shares and bonds instead of bank loans
1.5.4 Analysis of internal environment and determination of strengths and weaknesses
It is the internal environment or it is to analyze conditions and resources in the bank The concept of resources includes different factors: human resources, materials, technologies, organizational machinery, service policies, finance, marketing The bank must try to carefully analyze factors of resources to properly identify strengths and weaknesses so on that basis it must also try to take the advantage of strengths and eliminate weaknesses to gain a maximum advantage in the strategy
- Marketing factor: They are factors related to the research of market, customer and system of marketing information It is the competitive position in the market; it is to identify target customers, diversifying products and banking services, prices (interest rate) and others
- Factor of human resources: The quality of leadership and managers, professional qualifications, communication, spirit of responsibility, enthusiasm, and professional
Trang 40ethics of labor force, working environment, recruitment policies, experience and dynamism of employees etc , all these factors create the strength for the bank
- Financial factor: It is the possibility to mobilize deposits and borrowings on financial markets, sources of equity capital, liquidity, structure of profitable assets, financial scale and the profitability of the bank , reflecting the bank's advantage over rival banks
- Factors of facilities and equipment for service: They are the position of the bank, branches and transaction offices in the convenient position, modern equipment used to serve customers fast and conveniently and the level of modern technology of the bank
It is required to carefully make analysis and set a summary of elements of resources based on the importance so it allows the bank to discover strengths and weaknesses to analyze matrixes of strategy In terms of technique, it is required to appropriately Classify strengths and weaknesses to determine
1.5.5 Building the business strategy
Basic tasks of the process of setting up strategies are: - Propose potential business plan
- Analyze and select plans to find out any feasible business strategy Make decision to select a certain business strategy
1.5.6 Selection of strategy
It is required to take consideration to ensure an optimum requirement before making a decision on selecting any strategy so the bank needs to consider and review on the basis of:
- Making the most advantage of the industry and the advantage of the bank itseif - Compliance with long-term goals
- Compliance with the financial capacity and expertise of the bank
- Attitude and opinion of leaders of banks; especially that is any viewpoint given to the risk
- Taking the advantage of external funding sources
- The level of influence that can cause reactions from other financial institutions
- Defining the time: If there is an appropriate period for "open door" strategy, it is necessary to decide to make investment in that opportunity and if not, the strategy