Competitive strategies the case for visa card of techcombank

VIETNAM NATIONAL UNIVERSITY, HANOI SCHOOL OF BUSINESS Vu Thi Kim Thu COM PETITIVE STRATEGIES THE CASE FOR VISA CARD OF TECH CO M BANK Major: Business Administration Code: 60 34 05 MASTER OF BUSINESS ADMINISTRATION THESIS Supervisors: Dr Pham Thi Nhuan A Icl Gb Hanoi - 2009 11 TABLE OF CONTENTS TABLE OF C O N T EN T S i LIST OF FIGURES vi ACKNOWLEDGEMENTS viii A BSTRACT ix TÓM T Ẩ T xii INTRODUCTION .XV Research Problem Statement XV The objectives of the stu d y .xvi Scope o f the study .xvi Methodology of the study xvii Limitation of the study xvii Contribution of the study .xvii CHAPTER 1: LITERATURE R E V IE W 1 Overview o f Competitive Strategies 1.1 Competitive strategies 1.2 Categories of competitive strategies 1.2.1 Cost Leadership Strategy 1.2.2 Differentiation strategy 1.2.3 Focus Strategy 1.3 The importance of Competitive Strategy Process to formulate Competitive Strategy 2.1 Vision and Mission 2.1.1 M ission 2.1.2 Vision 2.1.3 Strategic objectives o f a com pany 2.2 External A nalysis 2.2.1 Macro Analysis (PEST m odel) 10 2.2.1.1 Economic fac to r 11 2.2.1.2 Technological Factor 11 2.2.1.3 Political and Legal Factors 12 2.2.1.4 Social Factors 12 2.2.2 Industry Analysis (Five forces model) 13 2.2.2.1 Threat o f New E ntrants 14 2.2.2.2 Rivalry among existing firm s 15 2.2.23 Threat o f Substitutes 15 2.2.2.4 Bargaining Power o f Buyers 16 2.2.2.5 Bargaining Power o f Suppliers 17 2.2.3 Summary o f macro an aly sis 18 2.2.3.1 Opportunities and rank o f opportunities 18 2.2.3.2 Challenges and rank o f challenges 19 2.3 Internal A nalysis 19 2.3.1 Value Chain M o d e l 20 2.3.1.1 Primary A ctivities 21 2.3.1.2 Support Activities 22 2.3.2 Identification of Core Competences and sustainable Competitive advantages .23 2.4 Formulation and Choice o f Competitive Strategy 26 CHAPTER STRATEGIC ANALYSIS AND FORMULATION OF COMPETITIVE STRATEGIES FOR VISA CARD OF TECHCOM BANK 29 Background of Techcombank and Visa Card o f Techcombank 29 1.1 Techcombank Overview 29 1.2 Visa card of Techcombank 32 Analysis o f Techcombank Visa c a rd s 39 2.1 External A nalysis 39 2.1.1 Macro Analysis: PEST m o d e l 39 2.1.1.1 Economic factor: 39 2.1.1.2 Social Factor 44 2.1.1.3 Political and Legal Factor 49 2.1.1.4 Technology F a c to r 52 2.1.2 Industry Analysis (Five forces model) 54 2.1.2.1 Threat of entrance 54 2.1.2.2 Rivalry among existing firm s 57 2.1.2.3 Threats of Substitutes: 62 iii 2.1.2.4 The power o f buyers 63 2.1.2.5 Bargaining Power of Suppliers 64 2.1.3 Opportunities and T h reats 67 2.1.3.1 Opportunities 67 2.1.3.2 T hreats 68 2.1.3.3 Ranking o f Opportunities and Threats for Techcom bank 69 2.2 Internal A nalysis 70 2.2.1 Value Chain M o d e l 70 2.2.1.1 Primary A ctivities .70 2.2.1.1.1 O peration 70 2.2.1.1.2 Sales and m arketing 71 2.2.1.1.3 Customer services 79 2.2.1.2 Supporting activities 81 2.2.1.2.1 Infrastructures 81 2.2.1.2.2 Technology 82 2.2.1.2.3 Human resources 86 2.2.1.2.4 Research and Development 91 2.2.2 Identification of Core Competences and sustainable Competitive advantages .95 2.2.3 2.2.3.1 Strengths and weaknesses 97 Strengths 97 iv 2.2.3.2 2.2.4 Weakness 97 SWOT matrix 99 CHAPTER SELECTION OF APPROPRIATE COMPETITIVE STRATEGIES FOR VISA CARD OF TECHCOMBANK AND PROPOSED ACTION PLANS FOR THE CHOSEN STRATEGIES 102 3.1 Vision/Mission 102 3.2 Selection of appropriate competitive strategies for visa card of Techcombank 102 3.3 Proposed action plans for chosen strategies 104 CONCLUSION 110 REFERENCE I l l APPENDIX 112 APPENDIX 114 V L IST O F F I G U R E S Figure 1.1 Process of formulating competitive strategies Figure 1.2 Business environment 10 Figure 1.3 Five forces m odel 14 Figure 1.4 The value chain model 21 Figure 2.1 Total number of international cards from Techcombank 37 Figure 2.2 The number of Techcombank cards and payment revenue by PO S 38 Figure 2.3 Techcombank Visa card clasified by region 38 Figure 2.4 GDP Growth rate 40 Figure 2.5 Estimate Techcombank Visa card marketshare 43 Figure 2.6 The estimated Vietnamese population 44 Figure 2.7 Estimated GDP per capita 2010-2015 45 Figure 2.8 The Visa card product life cycle 57 Figure 2.9 international card market share 59 Figure 2.10 POS netw ork 66 Figure 2.11 Five forces model of Techcombank visa card 67 Figure 2.12 Market share in customer awareness 73 Figure 2.13 VN POS market share 82 Figure 2.14 VN ATM market share 82 Figure 2.15 The interest level of new product 92 Figure 2.16 Value chain model of TCB Visa cards .94 LIST OF TABLES Table 1.1 Evaluation sheet assessing each opportunity to a com pany 18 Table 1.2 Evaluation sheet assessing challenges to a com pany 19 Table 1.3 Assessment of Techcombank strengths and core competences 24 Table 1.4 Assessment of dominant competencies: valuable, scare, hard to imitate, security distance, success factors, and results 25 Table 1.5 SWOT m atrix 26 Table 1.6 GREAT model 27 Table 2.1 The main financial indices in 2008 31 Table 2.2 Some main features of Techcombank Visa Debit C a rd 36 Table 2.3 Estimate demand of International payment cards in Vietnam 43 Table 2.4 Compares some indicators of Techcombank with those of some main rivals in card product in 0 61 Table 2.5 Assesment of Techcombank’s strengths and core competences 95 Table 2.6 The sustainable competitive advantages 96 Table 2.7 SWOT matrix for visa card of Techcombank 99 Table 3.1 GREAT model 103 INTRODUCTION Research Problem Statement As a 15th member o f World trade organization (WTO) from at the end of 2006, Vietnamese economy has opened strongly, integrated deeply and widely in the global economy In the near future, Vietnam enterprises will face the high pressure o f competition not only from domestic enterprises, but also from foreign enterprises who will take part in the Vietnamese market It has been clearly demonstrated that the services of banks are quite similar, or in other words have little differences Therefore it is easy for customers to change bank to bank or to open or more accounts at or more bank at the same time even they never use the account That is waste of banking resources Vietnam Technological and Commercial Joint Stock Bank (Techcombank) has been developing for more than 15 years and now it is evaluated being among one of leading joint stock banks in Vietnam After a quite long time of being found and developing, it is the right time for the Bank’s stockholders and business managers take many new issues in business managing and long term competitive strategy into consideration Techcombank currently is focusing on retail banking services which are also focused by many other banks in Viet Nam Although Techcombank became the official member of Visa International Services Association since May 2005, the first Visa debit card was issued by Techcombank in December 2006 and credit cards in 2008 Although, the card market in Vietnam has develop fast in recent years, as being the follower in the market, Techcombank still has to build many special programs to attract customers in this field The bank aims to create its card image connecting closely to Visa image then Techcombank XV decides to name its card Techcombank Visa And the bank also wants whenever customers talk about Visa then they think immediately Techcombank From 2010, with the much more opening for financial and banking sectors, the domestic banks must face the extremely sharp competitive pressure from not only the domestic banks, but also the high experience and capability international rivals It is the fact that every bank cannot be successful without preparing the long-term suitable and strong strategies to readily compete And Techcombank is not an exception With hope of finding the appropriate Techcombank visa card strategies to help Fechcombank to be the champion in the more and more harsh competitive environment, I have chosen the topic of my thesis: “Competitive Strategy - The case for Visa card of Techcombank” The objectives of the study To research the available background of strategy and competitive strategies; the analysis model of both external and internal business environment; and the process of formulating the competitive strategies to choose the best for the banks To identify the necessary to formulate appropriate competitive strategies for Techcombank visa cards and choose the most effective competitive strategies for Techcombank visa card for next years To provide recommendations and main action plan for Techcombank to compete successful in the harder competitive environment Scope o f the study Focus on analyzing, formulating and selecting the competitive strategies for visa card products o f Techcombank for next years XVI SWOT model help to formulate the strategies which take advantage o f strengths & opportunities, overcome weaknesses and decrease the challenges Follows are some strategies we can apply for TCB Visa card in the period o f 2010-2015: - S O I: Differentiation focus strategies on developing Visa cards - S02: Increase the product quality o f payment card services by means o f exploiting maximum the high technology with professional staff, make value added to products - ST1: Developing sale-man staff in all branches - ST2: Develop Visa card acceptance network focus on the North, Da Nang and HCMC market - W O l: Cost leadership at target markets - W 02: Develop network in the South market - W 03: Training the basic product knowledge for all staff o f Techcombank - WT1: Focus on appropriate investment in marketing activities Conclusion on chapter Chapter gets in close research and evaluation o f the macro & micro economic factors and Techcombank internal factors Basing on all above factors, there are some proposed strategies which can be applied in TCB Visa card The analysis, evaluation and formulation the strategies are implemented through following steps: - Applying model o f PEST and five forces of Michael Porter to analyze the macro and micro (industry) environment: Through PEST and five forces model, the macro and industry factors, which are able to affect the Visa card market in general and TCB Visa card in particular, are systematized, analyzed and 100 evaluated deeply in order to find out the opportunities, threats and competitive pressure for TCB visa card business - Applying value chain model to internally analyze Techcombank and TCB visa card This analysis provided the overall and obvious picture of the TCB visa card business process From this analysis, we find out the main strengths and weaknesses which are foundation to formulate the competitive strategies for TCB visa card product - Apply SWOT model to combine all results o f analysis and evaluations Basing on SWOT matrix and in order to take advantage o f strength & opportunities, overcome the weakness and decrease the threats, some competitive strategies for TCB visa card has been formulated However, because of limited resources, Techcombank can not apply all above strategies and solutions in TCB visa card development or try one by one For these reason, we will apply the GREAT model in chapter in order to select the optimal competitive strategies for Visa card o f Techcombank in the period of 2010-2015 101 ì CHAPTER SELECTION OF APPROPRIATE COM PETITIVE STRATEGIES FOR VISA CARD OF TECHCOM BANK AND PROPOSED ACTION PLANS FOR THE CHOSEN STRATEGIES 3.1 Vision/Mission Vision towards 2015: Techcombank is making endless efforts to be ranked as the top bank o f Viet Nam in trust, quality and effectiveness Techcombank would like to become the No provider o f retail banking services in Vietnam With strategic vision to be No provider o f retail banking services in Vietnam by 2015, Techcombank made a 5-years strategy from 2010 to 2015 with key objectives: 4M customers with million cards by 2015 600 branches, transaction agents and network o f electronic banks Amongst top banks nationally in customer service No bank in term o f brand awareness in metropolitan Vietnam Internal goals: investing into technology to create competitive advantages, promoting managing information system, continually improving the system by quality management program, training human resources and creating attractive environment Goals in TCB Visa cards issuing: 3.2 - Techcombank becomes one o f the best visa card issuers in Viet Nam, - 20% market shares by 2015 Selection of appropriate competitive T echcom bank 102 strategies for visa card of To select the most achievable strategies, we applied GRET model SOI S02 ST1 ST2 W 02 W 03 WT1 Gain 4 3 4 Risk 4 5 3 Cost 4 4 Achievable 5 3 Time 3 3 23 20 22 21 13 10 14 20 WOl bound Total Table 3.1 GREAT model Based on analysis results mentioned above, the strategies to develop visa cards for Techcombank in next years are: SOI, S02, ST1, ST2, WT1 which mainly belong to the differentiation focus strategy, increase the quality o f selling and marketing and develop the acceptable networks in focus target segments Vietnam is an increasingly competitive market There are many opportunities for significant growth in Vietnamese financial market At present, there does not appear to be a clear financial market leader with superior products With the TCB visa cards’ objective to reach 20% market share of international cards to 2015 in case o f more and more fierce competition in banking sectors, Techcombank needs to have a highly focused, targeted & efficient marketing and differentiation focus strategy for TCB visa cards to gain competitive advantage Differentiated products with clear benefits can deliver target customers In order to encourage customer to use Visa card, Techcombank also has to develop usage programs and improve features to meet customer demand Techcombank need to care much about the technology to make Customer Convenience, enhance customer value and benefits The implementation of overall strategies support to Techcombank in holding the North market expanding in the HCM city market, increase the customers' familiar to Techcombank visa card brand-name, attracts much more customer use and believe in Techcombank visa card, make Techcombank meet its objective “One o f the best visa card issuers in Viet Nani" 3.3 Proposed action plans for chosen strategies Follows are the action plan o f the chosen strategies for next five years All action plans have based on both two target customer groups and the target locations 104 trategies ferent us tegies Activities D eadline Research and analyze each o f customer Before groups based on income, consume habit, age 06/2010 structure Develop Personality o f Product Before 06/2010 Pricing (Fully analyze pricing, Revise and Before implement pricing changes) 06/2010 Design promotions around the personality Before (Incentive, Insurance, Discounts, Reward) 06/2010 Communicate, disseminate promotion Before information for customer, employee, 09/2010 m erchants Design Compensation and appraisal programs Before 08/2010 Provide training programs On regular basic 105 M an pow er Expected O utco R&D and Recognize the ta Marketing customer groups department TCB visa card R&D Recognize department suitable/unique personality for e o f target custo groups R&D and Have a competi Marketing prices department Marketing Get an attrac department promotions Sale and Make all emplo and target custom marketing department know ab promotion information HR All employees department be motivated to w Line harder with hig Managers performance a HR and Have a qualified marketing professional department employees Line Managers trategies Activities List systems requirem ent ^Review technology requirements Identify saps between requirements and current infrastructure, Propose a list o f systems developments) Provide resources (Estimate human and financial requirements, with vendor and Finance, Recruit and train IT staff, Some enhancements may require vendor support, hnology provem ent Additional IT staff may be required) Im plem ent change ('Carry out systems developments, Train users on the new features) Web site (Analyze the current web site, Redesign site for Convenience & usage, Promote online applications, Online applications for current accounts, cards and overdrafts, Special deals for online applications) Communicate very clear targets for each branch Develop a branch (customer services, advance sales skills) D eadline Before 02/2010 M an pow er Technical Department Before 03/2010 Have a g Technical resources Department and HR implement chang department Before 05/2010 Make all users Technical use new system Department combine all related departments Have a convenie Technical and high techno Department website customers Before 06/2010 One time/year sales training plan On product knowledge, regular basic 106 Management board and Line managers a HR department Line E xpected O utco Recognize technology needs system Each branch clear and suit target to strive fo Enhance sale s for all sale man branches trategies Activities D eadline Hire trainers On regular basic Produce training materials On regular basic Make a plan to hire stores to sell the cards Before 4/2010 Make a plan to recruit sale staff numbers up to Before 2015 4/2010 veloping -m an f in all nches Incentive and measurement program Design reward and incentives programs with Before HR 5/2010 Design and implement measurement Before 5/2010 Announce the incentive program and train 6/2010 staff Rationalize existing locations based transaction volume and fee revenue i on Before 3/2010 M an p o w e r managers a HR department E xpected O u tc o Find professi trainers a HR department Have a qua training materials Sale mangers Sale mangers Hire a good store sell the visa cards Have a clear pla increase sale staff Have attrac rewards incentives motivate sale man Find out the wa measure quickly correctly results sale mans Make all sales know incen programs Management Find the g board potential location Related target markets departments HR department Sale mangers HR department Sale mangers HR department - 107 trateg ies velop Visa d eptan ce w o rk in noi, n an g and MC k e ts T1 p ro v e k e tin g ctiveness Activities D eadline Evaluate new potential locations in target Before markets 5/2010 Implement the new ATM design across the Before network and improve the ATM maintenance 5/2010 programs Improve functionality o f ATM (cross sell Before offer, passbook update, phone card recharge, 6/2010 deposit, advertisem ent ) Evaluate the current marketing effectiveness Before 3/2010 Design marketing message (focus fast, Before accurate & convenient service) 4/2010 Promote the marketing programs (loyalty 6/2010 program, bonus on purchase, co-operate contract with Pacific Airlines programs, integrated marketing, etc) Design sale promotion for customers and Before merchants 5/2010 Redesign and produce brochures Develop differentiated posters and banners 108 Before 5/2010 Before 5/2010 M a n p o w e r Ị E x p ected Outco Management board Related departments r~— • ' Marketing and technical department Technical department Marketing Department Marketing Department Marketing Department Recognize marketing needs Have an interes marketing messag Marketing Department Get a suitable promotion motivate custom and merchants Have an attrac brochures Have an attrac and unique po Marketing Department Marketing Department trateg ies D eadline Activities i Display product promotion banners inside and 6/2010 outside all branches, and in partner locations (supermarkets, elevators ) Evaluate the current channels for advertizing Before 4/2010 M an power Marketing Department Marketing Department Implement TCB visa marketing program in 6/2010 main channels for right persons On Track results and follow-up regular basic 1 Marketing Department a Marketing Department and related departments E xpected O u tco and banners Make all custo know the prog through banners Determine s main channels implement marketing progra Know the results are some proposed action plans that may help Techcombank to step-by-step promoting Techcombank V in Vietnamese market There are, o f course, a lot o f works that must if want to make the dream ‘Custom Visa say Techcombank Visa card’ become true 109 C O N C L U S IO N The deeply integration trend and strong economic development over the world as well as the powerful improvement of technology have created the sharp and eventful business competition environment The year o f 2008 which was elapsing marked the largest crisis in the history of financial and banking industry with breaking up the range o f large financial systems over the world In Viet Nam, the global financial crisis which caused the economic recession affected much in Vietnamese enterprises' business and brings many banks to the verge of bankruptcy It’s also the time for domestic banks as well as Techcombank to review the overall strategies, their weaknesses, improve their activities, objectives and the process to readily prepare to face the competition which will be more and more critical from 2010 With the vision toward 2015, Techcombank would like to become the best banking retailer and one o f the best visa card issuers in Viet Nam Basing on the above analysis in this thesis, it is really a Techcombank ambitious objectives but essential and be able to if Techcombank can take advantage of opportunities, promote its strengths and overcome its weakness To implement the chosen strategies successfully, it is required to commit among shareholders, board o f directors, managers and all staffs o f Techcombank The commitments have to specific as an actions and policies to implement successful all proposed ambitious objectives 110 I REFERENCE MBA Teaching materials o f HSB Business Strategy, Statistic publisher, Hanoi, 1999 Michale Porter (1985), “Competitive Advantage: Creating and Sustaining superior performance”, New York: Free press Michale Porter (1980), “Competitive Strategy: Techniques for analyzing industries and competitors”, New York: Free press Measure Techcombank brandname’s strength - Hoang Khoa Research 9/2006 Data o f Marketing department - Techcombank “Mờ cửa dịch vụ ngân hàng vào năm 2010” of Le Xuan Nghia - Director o f banking development strategy Department at www.vietnamnet.vn Annual Report of Vietnam State Bank 2007 Visa International Services Association, 2007, “Annual report” 10 Vietnam Technological and Commercial Joint Stock Bank, 2008, “Annual R eport’ 11 Visa International Service Association website: www.visa.com 12 ACNielsen Survey, March 2007, “ Vietnamese Consumer Survey” 13 Techcombank website: www.techcombank.com.vn 14 Ministry of Planning and Investment: www.mpi.gov.vn APPENDIX MẢU PHIÉU LÁY Ý KIẾN PHỎNG VÁN CHUYÊN GIA Với mục đích tham khảo ý kiến chuyên gia ngành nhằm thực luận văn thạc sỹ quản trị kinh doanh với đề tài: “Chiến lược cạnh tranh - Nghiên cứu tình thẻ Visa Ngân hang Techcombank”, mong nhận hồ trợ Ong/Bà thông qua việc trả lời vào phiếu lấy ỷ kiến vấn để luận văn có giá trị nghiên cứu thực tiễn Đ ẻ rmhị Ơng/Bà vui lịng đánh giá theo sổ điểm (thang điểm từ đến 10) cho tiêu chí Điểm cao chứng tỏ đánh giá Ông/Bà Ngân hàno, Cana cao Tiêu chí 1: Khả vốn Tiêu chí 2: Lãnh đạo quản lý Tiêu chí 3: Nguồn nhân lực Tiêu chí 4: Cơng nghệ Tiêu chí 5: Dịch vụ khách hang Tiêu chí 6: Marketing Tiêu chí 7: Thương hiệu danh tiếng Tiêu chí 8: Mạng lưới Tiêu chí 9: Sản phâm thẻ Visa (Thương hiệu, mức phí, thủ tục đăng ký, giá trị tăne thèm) 112 Tiêu chí đánh giá Techcombank íKha vẻ vôn ILãnh đạo quản lý ĩNguồn nhân lực (Công nghệ Đ ịch vụ khách hàng M arketing irhương hiệu danh tiêng ỈSVlạng ỉưới Sản phâm thẻ Visa NH: - Thương hiệu - Mức phí Thủ tục đăng ký Giá trị tăng thêm t Những đôi thù VCB ACB G h i chú: Tiêu chí Ỏng/Bà khơng có sở đánh giá chuẩn xác, xin vui lòng ghi M/A Tĩrân trọng cảm ơn hồ trợ ông/bà H ọ tên: C c vụ: D o n vị công tác: 113 APPENDIX RESULTS Candidates: 30 candidates who are customers using visa card o f Techcombank candidates who are workins in marketing, sale departments in Personal financial services department o f Techcombank candidates who are working in other banks C rite ria c Capital Techcom bank 8,21 management 9,6 L Leaders and c capability Ỉ Human resources Technology cCustom er services NMarketing BBrandname and reputation NNetwork VVisa card product: - - Brandname - - Card charges - - Register procedures - - Added value VCB 9,92 8,32 Rivals ACB 8,93 9,25 9,63 9,7 9,87 7,21 8,62 8,82 7,32 9,72 7,46 6,54 9,89 9,98 8,91 8,52 8,42 9,72 7,15 9,1 8,56 8,12 9,56 9,23 9,89 9,75 9,12 9,86 9,56 9,78 9,29 9,22 14 ... and the process of formulating the competitive strategies to choose the best for the banks To identify the necessary to formulate appropriate competitive strategies for Techcombank visa cards... OF COMPETITIVE STRATEGIES FOR VISA CARD OF TECHCOM BANK 29 Background of Techcombank and Visa Card o f Techcombank 29 1.1 Techcombank Overview 29 1.2 Visa card of Techcombank ... card product o f Techcombank 28 CHAPTER STRATEGIC ANALYSIS AND FORMULATION OF COM PETITIVE STRATEGIES FOR VISA CARD OF TECHCOMBANK Background of Techcombank and Visa Card of Techcombank 1.1 Techcorn