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THESIS SUBJECT IMPROVEMENT OF DEVELOPMENT STRATEGY FOR INTERNET BANKING SERVICE OF VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE, PERIOD 2015-2020... Strategy Assessment

THESIS SUBJECT

IMPROVEMENT OF DEVELOPMENT STRATEGY

FOR INTERNET BANKING SERVICE

OF VIETNAM JOINT STOCK COMMERCIAL BANK FOR

INDUSTRY AND TRADE, PERIOD 2015-2020

i would like to express our sincerely gratitude to our lecturers for MBA Program, of America who have given us a lot of valuable and new knowledge during our course helping us to create a close connection between theory and practice The lecturers have also instructed and supported us for successful completion of this Capstone project

We also extend our sincere thanks to the Directorate of Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank) and our colleagues who have provided us with required information and assisted us during the preparation of this document

2

CONTENT 3

LIST OF ABBREVIATIONS 6

LIST OF FIGURES AND TABLES 6

Introduction 7

CHAPTER 1 10

GENERAL PRINCIPLES IN BUSINESS STRATEGY 10

1.1 An overview of business strategy 10

1.1.1 Definition 10

1.1.2 Significances of developing a business strategy 10

1.1.3 Business strategic management process 11

1.2 Vision, mission and value 13

1.2.1 Vision 13

1.2.2 Mission 13

1.2.3 Value 14

1.3 Business strategy analysis 14

1.3.1 Macro environment analysis 14

1.3.2 Sectoral environment analysis 17

1.3.3 Value Chain analysis 19

1.3.4 Summary of SWOT analysis 20

1.4 Development and selection of business strategy 21

1.4.1 General competitive strategy 21

1.4.2 Business strategy selection 24

1.5 Business strategy implementation 25

1.5.1 Structural implementation 25

1.5.2 Strategy control system 27

1.5.3 Strategy Assessment 28

CHAPTER 2 29

THE CURRENT SITUATION OF DEVELOPMENT STRATEGY OF INTERNET BANKING SERVICES AT VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE 29

2.1 Overview of Vietnam Joint Stock Commercial Bank for Industry and Trade 29

2.1.1 General information 29

2.1.2 Summary of the formation and development 30

2.1.3 The result of business activities of VietinBank 33

2.2 Real situation of Vietnam Joint Stock Commercial Bank for Industry and Trade in the last few years 36

2.2.1 Opportunities and challenges 36

2.2.2 Strengths and weaknesses of VietinBank 38

2.2.3 Competitive advantages of VietinBank 40

2.3 The current situation of development trategy of Internet banking services at Vietnam Joint Stock Commercial bank for Industry and Trade 41

2.3.1 Overall bank development strategy 41

2.3.2 Internet banking service development strategy 43

2.3.3 Advantages and disadvantages of strategy of Internet banking service development .55

2.3.4 Implementing strategy of Internet banking service development 56

CHAPTER 3 59

IMPROVEMENT OF DEVELOPMENT STRATEGY OF INTERNET BANKING SERVICES AT VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE PERIOD 2009 - 2012 59

3.1 Orientation of Internet banking services at Vietnam joint stock commercial Bank for Industry and Trade 59

3.1.1 Orientation 59

3.1.2 Objectives 60

3.2 Vision, missions and values of Vietnam Joint Stock Commercial Bank for Industry and Trade 61

3.2.1 VietinBank’s vision 61

3.2.2 VietinBank’s missions 61

3.2.3 VietinBank’s value 62

3.3 Selection of development strategy of Internet Banking to 2012 64

3.3.1 Demand for Internet Banking service in Vietnam 64

3.3.2 Development strategy for Internet banking service to 2012 of Vietnam Bank for Industrial and Trade 65

3.4 Some solutions to improvement of Internet Banking services development strategy of VietinBank period 2009 - 2012 65

3.4.1 Strengthen financial capacity 66

3.4.2 Modernize banking technology 66

3.4.3 Improve management capacity, operation and human resource development .67

3.4.4 Increase quality of customer service 69

3.4.5 Diversification of Internet banking products and services on the basis of modern technology 70

3.4.6 Strengthening risk management in Internet banking activities 71

3.4.7 Building strategies of production development, marketing and bank’s brand proliferation, products proliferation and transaction network development 72

3.5 Implementation of development strategy of Internet Banking services in Vietnam Joint Stock Commercial Bank for Industry and Trade period 2009 - 2012

73

3.5.1 Plan of implementation 73

3.5.2 Assessment, inspection 75

CONCLUSION 76

REFERENCES 77

LIST OF ABBREVIATIONS

VietinBank Vietnam Joint Stock Commercial Bank for Industry and Trade SWOT Strengths – Weaknesses – Opportunities - Threaths

LIST OF FIGURES AND TABLES

Figure 2.1 Chart of VietinBank’s organization

Figure 2.2 Chart of market share of VietinBank in comparison with banks of Vietnam

Table 2.3

The main financial indicators of VietinBank period 2004-2008 Figure 2.4 Structure of banking service in Vietinbank

Figure 2.5 Diagram of account development of customers in banks

Figure 2.6 Table of number of Internet users

Table 3.1 Expected number of customers using Internet banking service of

VietinBank till the year 2012

as well as other financial institutions such as insurance, financial leasing, financial investment and securities Development of information technology-based banking services, i.e e-banking, is an indispensable and objective trend for integration into the world’s economy E-banking, typically Internet banking, brings about great benefits for customers, banks and the economy owing to its utilities and accuracy in transactions

In such general trend, in order to maintain performance and growth, Vietnam Joint Stock Commercial Bank for Industry and Trade is making its efforts to catch up with the modernization process in banking sector and not only to improve and better

its traditional professional competence but also focus on development of modern banking applications, of which e-banking is one of the leading goals to meet requirements for competitiveness enhancement, integration and development However, the current development of e-banking in Vietnam Joint Stock Commercial Bank (VietinBank) for Industry and Trade has been coping with difficulties and shortcomings It is a pressing issue to work out a sound strategy for its successful exploitation and development of e-banking service helping VietinBank to maintain its position and brand-name in the market

Therefore, with an aim to enhance quality of banking services for Vietnam’s banks in general and for VietinBank in particular, we choose the topic

“Improvement of development strategy for Internet Banking Service of Vietnam Joint Stock Commercial Bank for Industry and Trade, period 2015-2020” for the

research of our Capstone Project in economic master

Our research contents comprise three chapters:

• Chapter 1: General principles in development strategy.

• Chapter 2: Current status of development strategy for Internet banking service

of Vietnam Joint Stock Commercial Bank for Industry and Trade

• Chapter 3: Improvement of development strategy for Internet Banking Service

of Vietnam Joint Stock Commercial Bank for Industry and Trade, period 2009-2012

We do hope that the research will be useful in practice an help Vietnam Joint Stock Commercial Bank for Industry and Trade to have a sound and effective strategy to develop its Internet banking service in new stage

3 Research objectives

- To further study in theory a business strategy

- To assess the actual status of Internet banking services of Vietnam Joint Stock

Commercial Bank for Industry and Trade

- To propose solutions for improvement of development strategy for Internet banking services of Vietnam Joint Stock Commercial Bank for Industry and Trade, period

2009 - 2012

4 Research Contents

The study and analysis of Internet Banking Service of Vietnam Joint Stock Commercial Bank for Industry and Trade aims to propose a number of feasible solutions for development strategy of the service for Vietnam Joint Stock Commercial Bank for Industry and Trade

5 Research scopes, methodology and data collection

- The research is carried out at the Division of Internet Banking Service - Vietnam Joint Stock Commercial Bank for Industry and Trade

- Use the Qualitative and Quantitative methods

- Collected data and information includes performance reports of divisions and head office of Vietnam Joint Stock Commercial Bank for Industry and Trade during the period 2005 to 2008

- Data processing by excel (or SPSS if required)

- Mainly base on dialectical and historical materialism, statistic method, comparative analysis and other methods for conclusion on the set goals

6 Scientific and practical approach

• To systematize all the basic theoretical on strategic management

• To assess opportunities, threats, strengths and weaknesses of Vietnam Joint Stock Commercial Bank for Industry and Trade which will be a ground for basic development of Internet banking service of Vietnam Joint Stock Commercial Bank for Industry and Trade

• To propose solutions so as to improve the development strategy for Internet Banking Service of Vietnam Joint Stock Commercial Bank for Industry and

Trade, period 2009 – 2012

CHAPTER 1 GENERAL PRINCIPLES IN BUSINESS STRATEGY

1.1 An overview of business strategy

1.1.1 Definition

The nature of strategy is to stretch out future image of an organization in its business performance and capacity The common opinions of scholars in modern business strategy is that in current variable conditions, strategy is briefly and generally defined as follows: “Strategy is a series of complex activities to mobilize resources of

an organization to obtain its desire goals” (1) (Strategy Management Textbook, Griggs University, USA) Strategy is considered to be an organizational management process with strategic thinking: Good strategy is not enough, but the capacity to effectively implement the strategy is the key for the success of an enterprise Business management is strategic This is the current common viewpoint in approaching to strategic management

Accordingly, a business strategy is defined as “a commitment and action that a firm utilizes to gain competitive advantage by exploiting its core capacity in a specific market”(2) (Strategy Management Textbook, Griggs University, USA)

1.1.2 Significances of developing a business strategy

It can be said that in market mechanisms, development and performance of business strategy play a vital role to the existence and growth of a company

Significances of business strategy for a company are shown in following aspects:

(1) Business strategy helps an enterprise to clearly define its goals and tracks

in the future and acts as guideline for all activities of the enterprise

(2) Business strategy enables a company to take its business opportunities and

at the same time to have measures in actively coping with risks and threats

in business environment

(3) Business strategy helps to enhance the effective utilization of resources, improve the company’s position and ensure the continual and sustainable growth of the enterprise

(4) Business strategy creates stable bases for a company to make decisions in compliance with the market’s changes It forms firm grounds for research and performance, investment in fostering staff, market expansion and product development

1.1.3 Business strategic management process

Strategic management process includes:

that a company needs to achieve:

 Strategic competitive advantages

 Sustainable competitive advantages

- Sustainable competitive advantages are obtained when a company develops a strategy that its rivals can not develop (Creating advantages that the current and potential rivals are not able to develop).

- Above-average profits means the profits that exceed what the investors expect from other similar-risk investment

In short, strategic management process is illustrated in the following diagram:

Strategy development Strategy implementation

External

environment

Strategic intention Strategic mission

Internal

environment

Dynamic competition

Group-level strategy

International Strategy

Competitive Strategy gaining above-average

profits

Company Management

Structure and control

Leadership Strategy

Business establishment and Renovation

Internal

environment

Dynamic competition

Group-level strategy

International Strategy

Competitive Strategy gaining above-average

profits

Company Management

Structure and control

Leadership Strategy

Business establishment and Renovation

Internal

environment

Dynamic competition

Group-level strategy

International Strategy

Competitive Strategy gaining above-average

profits

Company Management

Structure and control

Leadership Strategy

Business establishment and Renovation

Internal

environment

Dynamic competition

Group-level strategy

International Strategy

Competitive Strategy gaining above-average

profits

Company Management

Structure and control

Leadership Strategy

Business establishment and Renovation

Internal

environment

Dynamic competition

Group-level strategy

International Strategy

Competitive Strategy gaining above-average

profits

Company Management

Structure and control

Leadership Strategy

Business establishment and Renovation

Internal

environment

Dynamic competition

Group-level strategy

International Strategy

Competitive Strategy gaining above-average

profits

Company Management

Structure and control

Leadership Strategy

Business establishment and Renovation

1.2 Vision, mission and value

(1) Core ideology: presents what an organization protects or supports

and the reasons for existence

(2) Envisioned future: is what an organization desires Envisioned future

is obtained once organization changes

1.2.2 Mission

Mission is a key order on the way that an organization recognizes the requirements of the relevant parties Mission is also regarded as a basis for meeting the vision Mission focuses on the want to change the organization Mission is the target and order to free the organization’s resources, yet it is possibly to be achieved

in a specific period of time

There is a consensus among the scholars and managers that each company should have clear awareness on its orientation, better if joined with its vision and mission

Mission describes organization in business environment, its customers, essential skills needed for meeting the vision’s requirements If vision focuses on ideals and goals of the organization, mission describes vision in a manner of less abstract and more practical Mission is more concrete than vision It comprises large orientation in which the enterprise targets to achieve or meet the vision in a specific period Mission is the very way that an organization applies to fulfill its vision in specific condition Mission represents a brief on customers, main products and services and orientation of an enterprise in a specific period

However, it is also noted that mission should not be so great that it can not be conducted If so, it will destroy confidence of the organization’s members A challenging goal shall be possibly fulfilled although it forces the managers to try to improve competence with exceptional efforts.

1.2.3 Value

The core values are basic and sustainable principles for an organization Among the guideline principles, few principles are free from time-constraint Core values do not need external advocacy; they are meaningful and significant to the internal organization

Large-scale companies should define its own core values that are not binding with current environment, competition requirements and management method

1.3 Business strategy analysis

1.3.1 Macro environment analysis

While the five-pressure model by M-Porter goes to detail analysis of sectoral business environment, PEST studies the influences of factors in macro environment These factors includes:

(1) Political factors: These factors lay a great influence on all economic sectors in a

territory The political factors may overwhelm the existence and growth of any economic sector Doing business in an administrative unit, enterprises are forced to comply with its political and legal regulations

+ Stabilization: We will study the stabilization in political and diplomatic conflict of the political institutions The political institutions with high stabilization will create favorable conditions for business performance In contrast, unstable and conflicting institutions will lay bad impacts on business performance within its territory

+ Tax regulations: Taxes on import, export, consumption and income… will affect to revenue, profits of a company

+ Relevant laws and regulations: Investment law, law on enterprises, labor code, anti-monopoly law and anti-dumping law…

+ Policies: Government’s policies will affect to enterprises, they can help to generate profits or challenge the enterprises They include policies on trade and commerce, sectoral development, economic development, tax, competition regulating, customer protection…

(2) Economic factors: Enterprises should pay attention to economic factors in

short-term, long-term and the Government’s interference to the economy Commonly, enterprises will base on economic factors to decide their investment in specific sector and business areas

+ Economic status: Any economy has its own cycles; in each stage of the economy, the enterprises will have their own appropriate decisions

+ Factors influencing to economy: interest rate, inflation…

+ Government’s economic policies: Regulations on basic salary, Government’s economic development strategies, incentive policies for enterprises: tax cuts, subsidy…

+ Future economic prosperity: GDP growth rate, GDP proportion per investment funding…

(3) Social and cultural factors: Each country, territory has their own social and

cultural features The customers in those regions are featured by those factors

Culture values are parts of a society and foster that society for its existence and development Therefore, the cultural factors are always carefully and strictly preserved, especially the spiritual culture values Yet, it can be neglected the cross-culture from other cultures into a nation Such cross-culture will make change to the customer behavior, life style and create development prosperities to economic sectors

Apart from culture, social features are also taken into consideration by enterprises in conducting market research; social factors will distribute social community into customer groups, each group will have different psychological features and income…

+ Average life-span, health condition, nutrition, eating and drinking

+ Average income, income distribution

+ Life style, knowledge, aesthetical viewpoint, psychology

+ Living condition

(4) Technological factors: The whole world is the technological revolution, a number

of new technologies have been invented and integrated into the products and services + Investment by Government and Enterprises into R&D: the coordination between Government and enterprises in research for new technologies and new materials… will have active effects to the economy

+ Technology speed and cycle, proportion of outdated technology

+ Influence of information technology, internet to business performance

Apart from the basic factors as specified above, now the enterprises should take global factor as a macro factor affecting to sectoral economy while conducting market research.

(5) Integration factor: Globalization is inevitable tendency that will not create

opportunities for enterprises and nations in production and business development + Globalization generates pressure of competition from rivals all over the regions Integration process forces enterprises to adjust their performance in accordance with competitive advantages, labor distribution in region and the world

+ As integrated into the world economy, trade barriers will be gradually removed and enterprises will have opportunities to do business with partners living far away from them; their customers are not only in domestic market but also from all over the world

1.3.2 Sectoral environment analysis

The strategy maker is required to have analysis and forecast of competitive forces in sectoral environment to find out opportunities and threats for the enterprises The five-force model by M.Porter helps strategists to carry out the analysis

(1) Potential rivals: Potential rivals include the enterprises currently not having

competition in the same industry but possible becoming rivals if they decide to chose and enter the industry Those are threats to current enterprises

The level of advantages and disadvantages of entering an industry for a potential rivals largely depends on entrance barrier of that industry

(2) Competitive rivalry within the industry: The second force in Porter’s five forces is

the intensity of rivalry among competitors in the same industry If the competitors are weak, the enterprise has chance to raise prise and earn more profits In contrast, if the

competitors are strong the price competition is remarkably fierce, all the price competition leads to vulnerability

(3) Bargaining Power of Customers: Customers are regarded as a competitive threat

when they force enterprises to reduce price or require for higher quality products or better service On contrary, when the customers are subordinate, the enterprise will have chance to raise price for more profits Customers may the consumers or the distributors (wholesalers, retailers)

Customers bargaining power is likely to be high when:

• The supplying industry comprises a large number of small operators and customers are a small number

• Customers buy large volume

• Supplying industry depends on customers

• Customers can switch to another suppliers with low cost

• Customers buy different products from a number of suppliers of the same time

•

(4) Bargaining Power of Suppliers: Suppliers are regarded as a competitive threat

when they can raise the input price or reduce quality of products and services they provide which reduces the profits of enterprises in the industry

Supplier bargaining power is likely to be high when:

• The supplier is unique, even exclusive

• There are no other suppliers

• The enterprises are not significant and preferential customers of the supplier

•

(5) Substitutes: The last force in Porter’s five-force model is a threat from alternative

products Alternative products are other substitutes that can fulfill customer’s demand The basic features of substitutes are their predominance in distinct characteristics to the replaced products Such threat should by controlled by regular analysis and monitoring of advanced technology and technique, especially technology and product renovation

1.3.3 Value Chain analysis

Value chain is a series of activities that create and build value Products pass through all activities of the chain including main and supplement activities in order and at each activity the product gains some value

- Service: Activities designed to improve or maintain product value This includes all areas of service such as installation, after-sales service, complaints handling, training, replacement and modification

1.3.3.2 Supplement activities

- Procurement: This function is responsible for all purchasing of goods, services and materials It also includes equipment for use during the production process

- Technology Development: it comprises essential activities to raise quality of products and production process Technology is in different forms such equipment, fundamental research and procedure design, products and service

- Human Resource Management: it includes activities relating to recruitment, hire, training, development and payment to employee

- Firm Infrastructure: It includes activities such as general management, planning, finance, accounting, legal support and relation with Government’s bodies to support all the value chain Through its infrastructure, companies define their opportunities and challenges, resources and capacity as well as support to basic potentiality

Each activity should be considered in a correlative relation with capacity of rivals Accordingly, each company should evaluate whether its activity is dominant, equivalent or subordinate to that of rivals

1.3.4 Summary of SWOT analysis

SWOT is an abbreviation for:

• Strengths:

• Weaknesses:

• Opportunities:

• Threats:

On making strategy, it should be associated:

 Strengths and weaknesses of a company

 Best opportunities and threats to the development of the company

It not really necessary that a company pursues the best opportunities but instead

to develop its competitive advantage by studying the appropriateness between its strengths and coming opportunities In some cases, a company can overcome its

weaknesses to gain attracting opportunities T develop a strategy based on SWOT analysis, we should combine the opportunities, threats, strengths and weaknesses to form a strategic plan for the company

Strategic combination WO: taking advantages of external

opportunities to overcome weaknesses

1.4 Development and selection of business strategy

1.4.1 General competitive strategy

The purpose of a business strategy is to create differentiation of a company in

a correlative relation with its rivals In order to locate itself, a company shall decide whether to operate in a differentially manner or have differential activities compared

to its rivals

1.4.1.1 Cost domination strategy

The strategy includes a number of activities to produce goods or services whose features or characteristics that are acceptable to customers with lowest cost and is equivalent to that of the rivals’ cost to produce goods and services of the

similar utilities Specifically:

- Relatively standardized products

- With many utilities accepted by customers

- Lowest competitive price

1.4.1.2 Cost leadership strategy

- Competing with current rivals: cost-based competitive advantages

• Rivals are hesitant to price-base competition

• Few rivals for price competition leading to high profits

- Negotiating power of customers: can be lessened by declining the price below rival’s, obtaining the bargaining powers from the customers to suppliers

- Negotiating power of suppliers: can be lessened by the followings:

• Accept increasing costs due to low position of competitive price

• Buy with large volume

- Potential threats from new entrants: Pressure can put to new entrants as:

• The new entrants need to have large-scale firm so as to offer competitive price

• Need time to experience over a period of time

- Substitute products: The leading firm in terms of price need to be well allocated to:

• Invest and become the first firm to offer substitute products

• Buy inventions of potential substitute products

• Lowering price to maintain competitive advantage

- Threat of competition:

• The procedures applied for production and distribution of products and services may be outdated due to the renovation of rivals

• Focusing on cost reduction can be bartered by customer’s awareness in creating differentiation

• The competitors with their own potentials may imitate strategy of the leading firm in cost

market-1.4.1.3 Differentiation strategy

The strategy includes a number of activities which are necessary to produce goods, services (at an acceptable price) that the customers find them differential and the differentiation is significant to them Specifically:

 They are generally not the standardized products, services

 Be suitable with customers who appreciate the differentiation other than low price

- Rival’s competition: Deal with rivals by obtaining the customer’s loyalty for name of differentiation other than low competitive price

brand Bargaining power of customers: can be lessened as the really differential products will restraint the sensitiveness to price raise

- Negotiating power of suppliers: can be lessened by following measures:

• Accept price rise due to higher marginal profit

• Product price can be raised given the supplier’s price as the customers are faithful to brand-name of the suppliers

- Potential threats of new entrants: can be dealt with as:

• New products need to have dominant features than the products that have been circulated in the market

• New products need to have, at least to say, equivalent utilities to the proved products but lower price

- Substitute products: be in better positions compared to the substitute products as: the faith to distinctive brand-name may be reduced their trials to other new products

or decision to change suppliers

1.4.1.4 Focus strategy

The strategy requires a number of activities to be done to produce goods and services for a segment of certain competitive market:

- Certain customer groups: Young persons or adults

- Different segment of a product line: Professional handicraftsman and self-makers

- Different market segments:

Type of focus strategies:

• Cost-based focus strategy

• Differentiation-based strategy

For implementation of a focus strategy, firms need to carry out a number of basic activities and actively support to build up and maintain competitive advantage and obtain the above-average profits

1.4.2 Business strategy selection

As a business manager, you need to have a strategy to be successful Business strategy plans for farther future of the firm Firm managers may possible neglect and ignore business strategy as they are so busy with their current works In this case, you will not know how to locate your business and where it is now With a good strategy, you will set the practical targets and clearly know how to do to gain these targets in the future Strategies decide the firm’s future or the firm will loose its position to rivals in the future However, the first thing needed to be done before preparing a

business strategy for your firm is to analyze your Strengths, Weaknesses, Opportunities and Threats or in other word SWOT.

SWOT analysis helps to provide useful information in mobilizing resources and firm’s capacity the for competitive business environment in which the firm is performing business Therefore, it is a tool for strategy selection

GREAT model is also popularly applied in analysis and selection of business strategy for a firm, the components of this model includes:

G: Gain – gained benefits

R: Risk

E: Expense

A: Achivebility

T: Time – Time allowable to implement the set targets

Apart from the two above-mentioned models for business strategy selection, there area other models such as the strategy selection model by M.Kinsey which focuses on strong, medium or weak competitiveness; strategy business model of business units based on product’s cycles; or the matrix model of Quantitative Strategic Planning Matrix (QSPM)…

1.5 Business strategy implementation

1.5.1 Structural implementation

Structure is the ground for the firm’s organization Structural organization of a firm is collective of professionalized units with certain obligations and authorities, their relation and interdependence are arranged within levels to ensure the implementation of management functions and obtaining the share goals of the firm

Organization structure is designed into management units and levels Management units are separate and professionalized with certain management functions Management level mentions the unification of all management units that reflects the functional partition in lateral direction while the number of management levels reflects the functional partition in vertical direction

Significant roles of organizational structure are shown on two aspects:

- Coordinating performance of the staffs so that they can work together to carry out the strategy in the most effective manner in order to generate competitive advantage.

- Encouraging staff and building up a mechanism to encourage staff to learn for new working method

Organization structure includes the following types:

(1) Simple structure: The structure is usually applied for small firms in production

area or products relating to a separate market unit

(2) Functional structure: The structure is applied for highly growing firms

Functional structure helps to collect a group of staff sharing the same knowledge and experience or utilizing the same physical source

(3) Product-based structure: In a business strategy, a firm is required to diversify its

business performance, i.e product diversification In order to implement this strategy, the strategists have to organize its structure and staff as per product category

(4) Business location structure: A firm can set up its business activities and facilities

in many different geological regions This helps the firm to meet the customer’s demand in different regions and reduce the freight expense

(5) Customer-oriented structure:

(6) Strategic business unit structure: For this structure, a firm is organized according

to its product – market segments This model is suitable for large-scale companies with multi-activities at certain performance levels

(7) Muti-divisional structure: This structure aims to develop a firm and diversify its

products while all their business activities are put under control

(8) Complex structure: Most of the firms need to apply a complex structure which

combines two or more single structures as mentioned above

(9) Matrix structure: This structure was first applied in high-tech industries such as

space and electronic industries Those firms develop a number of new products in unstable competitive environment and with highly increasing speed of product development Therefore, the firms need to have a competent structure in order to meet

the requirements for their strategies

1.5.2 Strategy control system

Strategy control system refers to systems of setting up goals, measuring and feedback that help strategists to assess whether the firm gains the achievements in product quality, innovation, fulfillment of customer’s demand and successful implementation of strategy

There are types of strategy control systems are follows:

1.5.2.1 Market control

It includes the control of share price, investment paybacks and transferring price Market control is considered to be the most objective measure for controlling outputs which is conducted by setting up a pricing system to measure and assess the performance efficiency Therefore, market control is just effective if the firm can set

up objective financial measures for assessing its performance

1.5.2.2 Quality control

When there is no comparative system (among enterprises and units), market system can not be applied to allocate resources The firms have to seek for other controlling measures Quantity control is regarded as the easiest and cheapest measure Quantity control is obtained as a firm schedules and sets rational goals for different units and individuals

1.5.2.3 Management control

Management control is performed by setting up a series of principles and procedures to manage activities and behaviors of functional units and individuals For finance controlling, what a firm expects is not to determine the particular goals but to determine the best measures so as to obtain the firm’s goals Furthermore, finance controlling not only includes principles and procedures but also involves budget

using and standardization of activities Measures for finance controlling are required

to match the selected strategies as the strategies may change by time leading to the changes of procedures and principles

1.5.2.4 Group and company’s culture control

It refers to the control measure through a series of standards and internal value

of a firm Group control aims at self-control within a group Accordingly, each group member is aware of its responsibilities for carrying out the works with best results and for the sake of the firm’s benefit

It is really a big challenge for the firm’s leaders to determine the suitable controlling measure so as to ensure strategy implementation and improve the firm’s structure The controlling measures are required to enable the firm in assessment and modification of its standards and goals for strategy implementation Those types of controlling measures shall support each other’s and ensure not to have interest conflict among different levels in the firm

1.5.3 Strategy Assessment

Strategy assessment is the final stage of the strategic management process that aims to determine the discrepancies in goals, measures, and methodology and implementation outputs compared to the initial schedule, so that the status, causes and recommendation for strategy measure are introduced

Therefore, management assessment includes all stages and activities of strategic management ranking from goal planning, plan preparation to implementation The nature of strategy assessment is management and monitoring The final results of strategy assessment are used for business management at all stages

Requirements for strategy;

• Shall be implemented in accordance with different design stages of Viet Hung;

• Ensure flexibility

• Ensure contingency

• Focus on important points, theoretical and important contents

CHAPTER 2 THE CURRENT SITUATION OF DEVELOPMENT STRATEGY OF INTERNET BANKING SERVICES AT VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE

2.1 Overview of Vietnam Joint Stock Commercial Bank for Industry and Trade

2.1.1 General information

Transaction name of Vietnam Joint Stock Commercial Bank for Industry and Trade

Vietnamese name : Ngân hàng Thương mại Cổ phần Công thương Việt NamEnglish name : Vietnam Joint Stock Commercial Bank

for Industry and Trade Abbreviation in English : VietinBank

Type of business : Joint Stock Commercial Bank

Scope of work : Finance - Insurance - Investment

Target : To become a strong banking financial corporation

2.1.2 Summary of the formation and development

Vietnam Bank for Trade and Industry (VietinBank) was established in 1988 after separating from the State Bank of Vietnam As one of four largest state commercial banks in Vietnam, and being ranked as one of 23 special businesses in Vietnam, VietinBank with total assets accounts for more than 25% market share in the entire Vietnam banking system Capital of Vietinbank are always growing through the years, and increased considerably from 1996, reaching more than 20% per year on average, particularly when increased 35% compared to previous years The total workforce in VietinBank is 14 thousand people

VietinBank has a nationwide sales network with 1 exchange, 140 branches and

185 transactions offices, 428 transaction points and savings accounts, 750 automatic teller machines (ATM) There are 3 independent accounting companies: Finance Leasing Company Securities Joint Stock Company, Company of Debt Management and Assets Exploitation and 2 units: the Center of Information Technology and School of Training and Developing Human Resource for VietinBank

- As a founding member of the Credit Financial Institutes:

• Saigon Bank for Industry and Trade

• Indovinabank (First venture bank in Vietnam)

• Vietnam International Finance Leasing Company-VILC (First International Finance Leasing Company in Vietnam).

• Asia Insurance Joint venture company-Vietnam Bank for Industry and Trade.

- As an official membership of:

• Vietnam Banking Association (VNBA)

• Banking Association in Asia Area (AABA)

• Banking Association in Southeast Asia

• Association of Finance Telecommunications Interbank (SWIFT)

• Association of international VISA, MASTER card

• Vietnam Chamber of Commerce and Industry (VCCI)

• Association of the APEC finance institution giving loan for business small and medium enterprises

• Association of Vietnam small and medium enterprises

VietinBank has signed 8 Credit Framework Agreements with the countries like Belgium, Germany, Korea, and Switzerland and had agent relations with 735 great banks of 60 countries in all continents

- Vietinbank is pioneering in the application of modern technology and commerce in Vietnam

e Vietinbank is the first commercial bank operating Supporting Commercial Processing Center based on International standards, Center for Storing Data, School for Training and Developing Human Resources

Main customers of VietinBank are economic organizations, general corporations, big economic corporations, small and medium enterprises, business individual or individuals requiring loans to do business or just deposit savings or electronic money transfer, online payment

At the present, VietinBank are in the process of the world economic integration Main business activities of VietinBank are:

6 ATM service ( at the present, there are 2 millions using this service)

7 International credit card issuing and payment service: Visa, Master

8 Service of foreign currency business

9 Electronic banking service

10 Overseas remittance money transfer service

11 Insurance

12 Finance leasing

13 Other services: Investment and Finance Consulting; investment portfolio management, consultancy, securities depository;…

Figure 2.1 Chart of VietinBank’s organization

Source: VietinBank’s annual report

Figure 2.2 Chart of market share of VietinBank in comparison with banks of Vietnam

Source: VietinBank’s annual report

2.1.3 The result of business activities of VietinBank

In the context of worldwide crisis of financial markets, big economies are on degradation In domestic side, the price index increased 22.9% on average, stock market and real estate declined considerably in terms of value and liquidity, VietinBank always actively promotes the role of a big state commercial bank, implement exemplarily national monetary policy solutions policy, contributing to achieving the managing objectives of the Government and State Bank of Vietnam about inflation curb, stable macro economy and social security assurance

With sensitive administration and good prevention of possible risks control, in

2008 Vietnam Bank for Industry and Trade basically completed the major objectives and tasks proposed from the first months of the year: safe, effective, sustainable development, 18% total assets increase, more than 10,000 billion Vietnam dong self capital, higher and more stable financial criteria and capital security rate compared those in 2007, the continuing expansive network Year 2008 is the year marking 20 years of construction and development, Vietnam Bank for Industry and Trade has implemented successfully big events whose meanings are very important

Banking business is one of special business activities which has the specific characteristics With its own efforts, in 2008, Vietnam Bank for Industry and Trade achieved certain results

Capital mobilization till 31/12/2008 reached 174,600 billion, which increased

by 17% compared with 2007 Total economy and investment balance debt reached 162,347 billion at the end of the year 2008, which increased by 18.2% compared with previous year, bad debts made up only 1.09% of the total balance debt As being a traditional bank serving corporation, large corporation, Vietnam Bank for Industry and Trade continues to achieve cooperative agreement with the client By the end of

2008, Vietnam Bank for Industry and Trade signed with 4 partners namely: Vietnam National Coal – Minerals Industries Group, Maritime General Company, Vietnam National Petroleum Corporation and Vietnam Express Corporation

Total payment of Vietnam Bank for Industry and Trade in 2008 reached 6.2 million transactions, increased by 29.4%, with total revenue of 2.8 million billion, which increased by 29.1% compared with 2007 Vietnam Bank for Industry and Trade developed many relating services and products such as card transaction conversion into Incas, Home Banking, and bilateral payment with Development Bank, General Department of Taxation…

Overseas remittance activities achieved good results, which creates more forms

of collaboration with exporting workers companies in some countries where many people live and work in such as the USA, Malaysia, South Korea, Taiwan, Middle East, and carry out 2 more faster money transfer product such as Xpress Money and IME, sales from remittance payments in 2008 reached 900 million USD, up 27% compared with the previous year, accounting for more than 11% of the total amount of remittance to Vietnam

In 2008 Vietnam Bank for Industry and Trade issued more 870 thousand cards, which brought the total number of issued ATM cards to nearly 2 million cards, attracting more 416 billion dong deposit Owners of E-Partner card can make transaction in 742 ATM machines of VietinBank and 4000 ATMs of Banknet and Smartlink Furthermore, VietinBank also issued over 3900 international credit cards,

up 94% compared with the previous year Sales of cards’ payment were over 626 billion dong, up 40% compared with 2007

The total number of customers using Electronic Banking Service (includes

In which, customers using service e-banking in 2007 remain at only modest number:

2543 customers Therefore, in 2008 e-banking services of VietinBank made a rapid step

And in order to develop and improve available related services to meet the increasing demand of customers, and create momentum for the development and integration with regional and nationwide countries, Vietnam Bank for Industry and Trade always has a strategic vision in investment and development Vietnam Bank for Industry and Trade offers new products and services, and pays special attention to the development of modern financial products and services (such as e-banking services)

to improve facilities for customers, focused on economic research and analysis to find optimal solutions for limited resources management to achieve the goals set out effectively

Table 2.3: The main financial indicators of VietinBank period 2004 - 2008

Unit: Billion VND

Indicators 31/12/2004 31/12/2005 31/12/2006 31/12/2007 31/12/2008

Total loan balance

for loans and

Profit / average total

2009, VietinBank has continued to confirm its strong brand when officially joined the stock market, attracting and building great confidence to both domestic and foreign investors

The period from now to 2012 is the timeline when Vietnam will open completely its doors for banking and finance sector as it committed to the WTO That opens not only for domestic investors, but also the foreign ones This is the opportunity for domestic banks in general and VietinBank in particular to increase capital, acquire knowledge, experience and modern technology in terms of management and banking activities

In addition, not only for banks, the WTO’s entry also creates opportunities and promotes domestic enterprises actively compete in the market to survive and develop, expand theirs operations regionally and internationally These domestic and foreign enterprises will become potential customers of the bank Bank are a service providers,

as a result, banks and financial and crediting institutions will have good conditions of development when customers - who use their services do business successfully and grow continuously

With the efforts of the Government and State in recent years, Vietnam's economy has been growing well, people's lives have been improving remarkably, the indicators of economy - society - people have been increasingly improving.

Telecommunications infrastructure is being constantly expanding continuously improved, which creates a strong foundation for the development of electronic commerce in general and electronic banking in particular

Awareness of the society is being improved and enhanced gradually

Legal corridor for electronic commerce and electronic transactions has been formed and gradually has been implemented in life, and continued to improve

Non-cash payment which is oriented by the Government is gradually building culture of non-cash payment in people’s daily life

 Challenges:

Competition and new technologies mastery race, quick products and services provision to the market are unique characteristics of electronic banking, in which the highlight is Internet banking In traditional banking activities, the deployment of application of banking services is usually conducted to test and improved for a long time before bringing out to the market With Internet banking, due to pressure, of competition, new applications and products are accepted by banks in a shorter trial time Therefore, for the development of new applications in Internet banking, to build

a suitable development strategy, risk analysis, security assessment are challenges in banking activities

High technology dependence, more electronic banking integration on computer systems, equipment of information and technology and the Internet have allowed to handle efficiently online electronic transactions This helps to reduce errors and frauds arising in traditional craft processing environment, however, it increases the dependence on design, architecture, link and operation scale of Information and Technology system

The dependence on third parties, the application of information and technology increase the technical complexity in the process of operation, ensure security, expand relations and cooperation with Internet services providers, the communications company and other technology partners (third party) whose products or services do not belong the control of the bank.

Crimes on the Internet, high-tech crimes who can steal account information, personal information are increasing, which requires VietinBank to pay attention to the security control, customers’ attestation, data protection, tracking auditing procedures and the privacy of customers

Acceptance of people is also a very important issue in the development of electronic banking services in general and Internet banking in particular In fact, nowadays, payment in cash has become the habit of people Therefore, changing habit with an aim to gradually bring Internet banking services to life is a challenge for banks in general and VietinBank in particular

2.2.2 Strengths and weaknesses of VietinBank

 Strengths:

- VietinBank is a large commercial bank playing an important role in Vietnam's banking market with strong brand and great influence to investors and the people Especially, Vietinbank brand is highly appreciated by foreign organizations

- VietinBank has wide network spreading all over the country with a Stock Exchange,

150 branches and more than 700 transaction offices/ points in all provinces and cities Especially, Vietinbank has School of Development and Training Human Resources that other banks do not have

- Customer subjects of VietinBank are all economic sectors, including organizations, businesses and individuals In particular, for small and medium enterprises in Vietnam, Vietinbank has been recognized as the strongest bank in providing financial services, which is financed by many large international organizations such as JIBIC,

EC, KFW, ADB for lending, job creation for many classes of workers

VietinBank is the pioneer bank extending loans to five economic sectors Since then, rising long and medium term ratio from 3% initially to 40% Capital from Vietinbank is key lever to help many enterprises to develop strongly and stably, such

as some key economic sectors such as oil and gas, telecommunications, coal, cement, Transportation The bank is also the main supplier of finance for many large enterprises, helping to boost exports for sectors such as: Textile, leather and footwear, marine products processing, agricultural products

- VietinBank are Vietnam leading commercial bank in the application of modern technology and electronic commerce into banking activities, including business and management activities Since 1995, Vietinbank has made electronic money transfer system, becoming the pioneer in building a modern payment system, meeting the demand of quick capital flows to customers, creating brand and increase source of revenue

- Products and services are diverse, quality meets the needs of customers using banking services Since 2001, Vietinbank has been one of the first commercial bank to introduce card products to market, developing nationwide network of thousands of ATMs, providing automatic banking services 24h/day , attracting nearly 2 million users using cards issuing by the bank In addition, the bank is also implementing Internet Banking service, Telephone Banking service, there have been other modern and high utility products and services such as telecommunications service charges, online transportation, SMS, V.N Pay

In 2008, Vietinbank was the first commercial bank in Vietnam to handle focus management center on import and export activities to international standards, which creates conditions for best banking services for businesses manufacturing import and export business in the country

Foreign currency business, rapid overseas remittance development account for

8 to 10% of shares of the whole sector

- The system of documents, regulations, strict procedures is in accordance with current laws of the State