Business development strategy of joint stock commercial bank for investment and development of vietnam chuong duong branch in period 2017 2020

 Cohort 2015– 2017 Master’s Thesis Business development strategy of Joint Stock Commercial Bank for Investment and Development of Vietnam – Chuong Duong branch in period 2017 – 2020 Author: Ngo Thi Ngoc Anh Supervisor: Dr Mai Anh  Hanoi, June 2017 Page ACKNOWLEDGEMENTS I assures that this thesis is the researching work of myself The data of organizations and individuals are referenced and used as prescribed The result presented in this project is honest and has not been published in any public works I would like to thank Nantes University of Nantes and International School Vietnam National University, Ha Noi for giving me and my classmate opportunity to participate in this course The staffs of ISVNU have dedicated to support organizing activities, facilities, and help us during the course In addition, the course is designed in a reasonable way so we are acquired a lot of knowledge, relationships and opportunities to share informations and learn from the experiences of fellows in programs I would like to show our appreciation to all lecturers and coordinators in the program for their sharing of academic knowledge and practical experiences, methods of assessment, as well as problem solving skills needed during the course for me to be able to complete this cohort Thanks for the suggestions lecturers gave us in the time of doing research I am also grateful to Joint Stock Commercial Bank for Investment and Development of Vietnam - Chuong Duong Branch (BIDV Chuong Duong) for their support in my research and data provided for their favorable conditions, cheers, encouragement and help me during the process of cohort to have good results in this graduation thesis To complete this assignment, I will not avoid the shortcomings I look forward to the opinions from the advisor, lecturers and classmates to complete this study and make contribution to business development strategy of Joint Stock Commercial Bank for Investment and Development of Vietnam - Chuong Duong Branch in the future Sincere thanks! Page TABLE OF CONTENT TABLE OF CONTENT INTRODUCTION CHAPTER THEORETICAL BASIS FOR BUILDING BUSINESS STRATEGIES 10 1.1 Overview of Strategic Management 10 1.1.1 The concept of strategy 10 1.1.2 Business Strategy and the strategy selection 10 1.1.2 The basic features of the business strategy Error! Bookmark not defined 1.2 Strategy Planning Error! Bookmark not defined 1.2.2 Analysis of the external environment Error! Bookmark not defined 1.2.2.1 Macro Environment Analysis - PEST model + + 14 1.2.2.2 Analysis of the industry and competitive environment 18 1.2.2.3 Analysis of competitors Error! Bookmark not defined 1.2.3 Analysis of the internal environment 23 1.2.4 SWOT matrix 24 1.2.5 Selection strategies through QSPM matrix 25 CHAPTER BUSINESS ENVIRONMENT ANALYSIS OF JOINT STOCK COMMERCIAL BANK FOR INVESTMENT & DEVELOPMENT OF VIETNAMCHUONG DUONG BRANCH (BIDV CHUONG DUONG)Error! Bookmark not defined 2.1 Overview of Joint Stock Commercial Bank for Investment & Development of Vietnam- Chuong Duong Branch Error! Bookmark not defined 2.1.2 The principal business activities of BIDV Chuong Duong Error! Bookmark not defined 2.1.3 Organization struture of BIDV Chuong DuongError! Bookmark not defined 2.1.4 Some business operation indicators of BIDV Chuong Duong Error! Bookmark not defined Page 2.2 Analysis of the external environment 30 2.2.1 Analysis of the macro environment (PEST) 30 2.2.1.1 Politics - law environment (P) 30 2.2.1.2 Economic environment (E): 31 2.2.1.3 Cultural environment - social (S) 32 2.2.1.4 Environmental technology (T): Error! Bookmark not defined 2.2.2 Banking industry analysis (Five Force) Error! Bookmark not defined 2.2.2.1 The power of customer Error! Bookmark not defined 2.2.2.2 The power of suppliers Error! Bookmark not defined 2.2.2.3 The potential competitors Error! Bookmark not defined 2.2.2.4 Threat of substitute products Error! Bookmark not defined 2.2.2.5 Existing competitors Error! Bookmark not defined 2.3 Analysis of internal environment of BIDV Chuong DuongError! Bookmark not defined 2.3.1 The supporting activities Error! Bookmark not defined 2.3.1.1 The organizational structure and human resourcesError! Bookmark not defined 2.3.1.2 Technology and equipment systems Error! Bookmark not defined 2.3.2 Analysis and evaluation of business operations BIDV Chuong Duong Error! Bookmark not defined 2.3.2.1 Financial Capacity Assessment Error! Bookmark not defined 2.3.2.2 Marketing and sales activities of BIDV Chuong Duong Error! Bookmark not defined 2.3.2.3 Management activities in BIDV Chuong DuongError! Bookmark not defined 2.3.2.4 Risk Management Error! Bookmark not defined CHAPTER IMPLEMENTATION SOLUTION FOR SELECTED STRATEGY 62 3.1 BIDV Chuong Duong’s Strategic development orientation until 2020 Error! Bookmark not defined 3.1.1 Vision Error! Bookmark not defined Page 3.1.2 Mission Error! Bookmark not defined 3.1.3 Core values Error! Bookmark not defined 3.1.4 Motto of operations Error! Bookmark not defined 3.1.5 Target customer segment Error! Bookmark not defined 3.2 SWOT matrix for BIDV Chuong Duong Error! Bookmark not defined 3.2.1 Strategy 1: Differentiation in terms of service quality (SO-01) 66 3.2.2 Strategy 2: Focus on the exploitation of the customer resource from the strategic shareholder (SO-02) Error! Bookmark not defined 3.2.3 Strategy 3: Finding strategic investors which are large international financial and banking corporations to make use of their brands, management capability and so on to improve the competitiveness (SO-03).Error! Bookmark not defined 3.2.4 Strategy 4: Restructuring to reduce the bad debt ratio (ST-1) Error! Bookmark not defined 3.3 Selecting business strategy for BIDV Chuong DuongError! Bookmark not defined 3.4 BIDV Chuong Duong’s strategy implementation roadmapError! Bookmark not defined 3.5 Solutions and budget planning for BIDV Chuong Duong’s strategy implementation Error! Bookmark not defined 3.5.1 Bad debt treatment Error! Bookmark not defined 3.5.1.1 The specific solutions 71 3.5.1.2 Incentive and reward schem Error! Bookmark not defined 3.5.1.3 Developing good customers 73 3.5.2 Budget planning………………………………………………………… 73 CONLUSION 82 REFERENCE………………………………………………………………………83 Page LIST OF TABLES Table Page 2.1 Some key indicators of BIDV Chuong Duong in period 2014 - 2016 2.2 force analysis of M Porter applicable with banking in dustry in 29 Vietnam in period 2017-2020 34 2.3 The basic data operations of the competition in 2014 40 2.4 Matrix picture competition (CPM) 41 2.5 Evaluation of the impact of external factors on BIDV Chuong Duong (EFE) 47 2.6 Financial statement 2014– 2016 50 2.7 Income statement for year 2014– 16 54 2.8 Summary of main business operration indicators 55 2.9 Summary of some bad debt customers in BIDV Chuong Duong 57 2.10 Summary of strengths and weakness of BIDV Chuong Duong 63 2.11 Matrix of assessment of environmental factors within the BIDV Chuong Duong (IFE) 3.12 63 Quantitative Strategic Planning Matrix for BIDV Chuong Duong (QSPM) 72 3.13 Financial indicators of BIDV Chuong Duong in 2017 – 2020 75 3.14 Strategy implementation roadmap and budget planning 79 Page INTRODUCTION The reason for topic selection In recent years, the financial industry in Vietnam has been impacted by the introduction and development of domestic and foreign banks That rapid development of the banking system makes operation of banking sector more difficult and intensely competitive, especially in the two big cities, Hanoi and Ho Chi Minh City In fact, from late 2015 until now, the banking industry is in extremely difficult situation because of the bad impacts of the world economy crisis in general as well as the economic situation in Vietnam in particular that lead to the loss of liquidity, higher bad debt, high potential loss of capital, professional ethics harm and inconsistent regulations with the growth of the market They are main causes that affected the operation and effectiveness of the banking sector and Joint Stock Commercial Bank for Investment and Development of Vietnam – Chuong Duong branch is not exception Joint Stock Commercial Bank for Investment and Development of Vietnam – Chuong Duongbranch is a business unit of Joint Stock Commercial Bank for Investment and Development of Vietnam, over the years has constantly improved and made efforts to penetrate to local area to survive and develope in accordance with the strategy and direction of the system Stemming from mentioned fact in combination with the knowledge learned from the program Master of Finance-Banking-Insurance (Southeast Asia), through University of Nantes FBA program, practical experience of myself, all reference materials, and opinions from fellows and economists, I would like to choose the research topic "Business development strategy of Joint Stock Commercial Bank for Investment and Development of Vietnam – Chuong Duong branch in period 2017 – 2020" (Hereinafter referred to as “BIDV Chuong Duong”) Objectives of the study This study aims to build business strategy for specific BIDV Chuong Duong with following detailed objectives:  Identify strengths, weaknesses, opportunities faced by BIDV Chuong Duong ; Page  Assess the strategic position of BIDV Chuong Duong to build competitive position of BIDV Chuong Duong compared to competitors, other bank branches, in Hanoi  Develop business strategy for BIDV Chuong Duong in next period 2017-2020 On this basis, I will use rationale for strategy and business strategy and application of the model for construction, planning and strategy analysis in case of BIDV Chuong Duong As a result, the study offers recommendations for BIDV Chuong Duong in choosing business strategy and successful implementation such strategy Methodology of the study The thesis uses the following methods:  Qualitative method for case study of BIDV Chuong Duong  Data: Primary (expert opinion ) and secondary (from other sources such as journals, banking statements, statistical report, internet )  Method for data collection: direct interviews of leading experts and opinion gathered through interviews and surveys to collect opinions of experts currently working in mother bank BIDV and experts in banking sector (specialists in policy, strategy, risk management )  Specific method: On the basis of information obtained from the survey interviews, data associated with the financial statements, business plans of BIDV Chuong Duong against the competitors in Hanoi and publications on socio-economic situation of Vietnam I have applied the methods and tools learned in FBA course – University of Nantes Scope of the study This study just focuses on analysis, contribution for business strategy of BIDV Chuong Duong I focus on data analysis of BIDV Chuong Duong and competitive branches of other banks in Hanoi for comparision combined with data from the State Bank of Vietnam detailed for Hanoi area These data can be obtained from 2014 to 2016 And the scope of this study just could be applicable in one particular bank branch Significance of the study - Apply theories learned in the FBA program – University of Nantes to build the business strategy with specific cases of BIDV Chuong Duong Page - Build and develop a business strategy suitable for BIDV Chuong Duong to maximize the strengths of BIDV Chuong Duong , take advantage of market opportunities (focus resources towards best chance of the market) - Become reference to other studies Limitations of the study - This study focuses on building and developing business strategies for BIDV Chuong Duong so all conclusions drawn as well as the strategy selection applied only to BIDV Chuong Duong - It’s required additional research to apply the conclusions or strategies for other sectors or other companies The structure of the study Introduction Chapter I: Rationale for business strategy construction and selection Chapter II: Analysis of the business environment for BIDV Chuong Duong Chapter III: Business strategy development and selection as well as implementation solutions applicable for BIDV Chuong Duong Page CHAPTER THEORETICAL BASIS FOR BUILDING BUSINESS STRATEGIES 1.1 Overview of Strategic Management 1.1.1 The concept of strategy The term "strategy" is derived from the Greek word "Strategos" used in the military, according to Von Clausewitz Calr, 19th century "war planning and the formulation of campaign strategy." Since the '60s of 20th century, the strategy can be applied in the field of business and the term "Business Strategy" was born The concept of business strategy developed over time and was approached in different ways Today, the concept of strategy is used popularly and considered the foundation for the operation of the business There are many concepts of strategy as: "The strategy is to identify goals, long-term underlying purpose of the business and the application of a sequence of actions as well as the allocation of resources needed to implement this goal" (Chandler, A (1962) Strategy and Structure Cambrige, Massacchusettes MIT Press) Strategy is the model for the targets, intention and plans to achieve those goals (Kenneth, 1965) "Strategy is the pattern or plan to integrate the major goals, policies, and action sequences into a cohesive whole is a coherent way" (Quinn, J., B 1980 Strategies for Change : Logical Incrementalism Homewood, Illinois, Irwin) Johnson and Scholes define strategy in the environment having a lot of rapid change: "Strategy is the direction and scope of an organization in order to gain longterm competitive advantage for the organization through the format of its resources in a changing environment, to meet market demand and to satisfy the expectations of stakeholders "(Johnson, G., Scholes, K (1999) Exploring Corporate Strategy, 5th Ed Prentice Hall Europe) In summary, whatever the way approached, the nature of the business strategy is sketching future picture of the business in its region and the ability for the organization to achieve certain goals 1.1.2 Business Strategy and the strategy selection Business strategy is: Page 10 + Always renovate and innovate solutions by combining existing values and new initiatives + Develop an unique approach to the problem + Create difference to increase benefits for shareholders and customers of BIDV  Fourth: Friendly – Sympathetic + Honest and sincere in communication + Open to each other + Trust and respect internal and external people  Fifth: Service attitude + Identify and turn target customers into loyal customer + Always aim for long-term cooperation by sharing and providing solutions for mutual benefits + Always serve customers with the best service-oriented attitude 3.1.4 Motto of operations BIDV Chuong Duong appreciates enthusiastic, friendly and profesional customer-oriented service attitude So, BIDV Chuong Duong’s motto is “Share opportunities, share success” and positioning the difference in the market is giving the customer a more quality experience 3.1.5 Target customer segment BIDV Chuong Duong’s current targets are categorized into: corporate customers, retail customers and To corporate customers: BIDV Chuong Duong will provide full financial and banking product and service package such as: loan products, factoring, guarantee, export and import financing, account products, trade finance, favorable service package prioritized for corporate customers, SME financing… To retail customer: BIDV Chuong Duong provides full package of flexible, safe and efficient saving and credit products like: Consumption financing with colateral, Entrusted loan, Home equity loan, Production financing, Working capital financing, Auto loan, Overseas study financing… and services of domestic and overseas transfer and payment…on a quick manner Tor customers with FDI from Japan: With the advantage of deep understanding of the group of FDI customers from Japan, BIDV Chuong Duong has researched and deployed many optimal products exclusively for this customer Page 63 3.2 SWOT matrix for BIDV Chuong Duong Base on the internal and external environment analysis, I have developed a SWOT matrix for BIDV Chuong Duong as followed: SWOT analysis SO strategies Opportunities WO strategies Use internal strengths to take opportunities O1 Stable political and legal environment; Fix weaknesses to take external opportunities SO-01: Differentiation of service quality Use strengths S2, S3 to take opprotunities O2, O6 SO-02: Focus to extract values from the customers with FDI from Japan Use S1, S4 to take O1, O3, O4 SO-03: Search for strategic investors that are big foreign financial and banking corporations to enhance competitiveness via their brand, potentials and experiences Use S1 to take O2, O7, O4 O2 high GDP growth rate Opportunity leadership is the leader, have technology foreign banks O3 Policies of Demand-pull and encouraging investment with high ROI O4 Opportunity of joint venture to expand market share O5 Government’s economy restructuring policy O6 Located in Hanoi O7 Attract foreign investors Strengths S1 to transferred and experience sharing from visionary management strategy O W W1 Activity W2 customer service Marketing, sales W3 Trading Network S2 Company culture S3 Qualified human resources Weakness (Weakneses) S T W4 Technology systems, information W5 Pricing policy is not flexible S4 Relationships with srategic customers W6 Giám sát chất lượng tín dụng W7 R&D Threats) ST Strategy Use strengths to avoid challenges ST-01: Strategic Restructuring BIDV Chuong Duong to minimize bad debt Use strengths S1 S2, S3 to cope with the challenges T4 To reduce the NPL ratio at BIDV Chuong Duong T1 The foreign banks with large capital, modern technology, quality good service T2 Competition from foreign banks and domestic banks T3 threat from the economic crisis, global debt crisis, the impact of the difficult economic inflation affects people's income WT Strategies Overcoming weaknesses, reduce external threats T4 NPL sectors: finance, real estate, construction, increasing T5 The new products and services of the big banks and more T6 Pressure innovative technologies and processes T7 Scarcity of highly qualified human resources T8 The demand for quality banking Page 64 Page 65 Based on the analysis of BIDV Chuong Duong’s internal and external environment, SWOT matrix helps to summarize BIDV Chuong Duong’s strengths, weaknesses, opportunities and threats to identify strategic alternatives that enable the bank to take advantage of strengths, opprotunities to minimize weaknesses and avoid threats There are several alternatives for BIDV Chuong Duong that come from SWOT analysis: SO-01: Differentiation in terms of service quality SO-02: Focus on exploiting clients with FDI inflows from Japan is growing rapidly (about 70%), focusing on trusts, fiduciary and asset management At the same time, BIDV Chuong Duong is negotiating with major Japanese partners to seek strategic shareholders of BIDV (S-O) SO-03: Searching for strategic investors who are big foreign financial and banking corporation to enhance competitiveness via their brand, management competence… ST-01: Restructuring BIDV Chuong Duong to minimize bad debt rate 3.2.1 Strategy 1: Differentiation in terms of service quality (SO-01) With supports from strategic shareholders, strategic relationships, and determination of BIDV Chuong Duong ’s staff: Develop product package specified for major customer: overdraft, co-branding payment card, contractor product, payment services, remittance… Improve infrastructure, profesional staff and services Combine the two above factors to develop product packages that are specifically designed for different customer targets Differentiate customer services 3.2.2 Strategy 2: Focus on the exploitation of the customer with FDI fund from Japan (SO-02) The number of FDI customers from Japan has grown rapidly, focusing on trust, fiduciary and asset management At the same time, BIDV Chuong Duong is also negotiating with major Japanese partners to seek growth opportunities in terms of capital mobilization, lending and profitability 3.2.3 Strategy 3:Finding strategic investors which are large international financial and banking corporations to make use of their brands, management capability and so on to improve the competitiveness (SO-03) Page 66 Currently, BIDV Chuong Duong has a policy to widen business relationship with financial corporations, international and domestic funds to increase fund and widen the marketshare This is a backup step if the government plicies on deinvestment Besides, when there is cooperation with big shareholders who are experienced in financial and banking services, BIDV Chuong Duong can speed up its development process 3.2.4 Strategy 4: Restructuring to reduce the bad debt ratio (ST-1) Make directions of and evaluate credit portfolio on the basis of the bank’s risk management and control targets Establish and develop risk management tools - Check credit ranking quality - Implement model of centralizational credit management to ensure the customer record - checking quality and time - Re-evaluate loans, trustment and collaterals to recheck loans’ classification and to specialize in the loan process - Speed up the credit approval and customer record process Monitor post and pre disbursement’s steps - Increase monitoring and make timely forecast directions of market changes to increase effectiveness - Restructure operating system: + Newly build and complete policies and processes to have new stable organisation structure with higher capability management staff + Focus on building, maintaining and completing functions of card operation, international payment to increase security, to reduce risk, to provide customers with more useful functions and to bring the profit from services fro branch The common target of the restructuring is to achieve “better position” for BIDV Chuong Duong before the threat of increasing bad debt ratio Thanks to that, BIDV Chuong Duong can perform efficiently on the basis of their set missions, visions and strategies In short, the main contents that BIDV Chuong Duong needs to focus on to restructure bad debt are as follows: Firstly, adjust operating structure: adjust the structure of strategic targets, business fields and industries covered in BIDV Chuong Duong ’s lending portfolio Page 67 Focus on business fields, product types, business areas to bring most profit and effectiveness; other product types, industries and areas would be eliminated or limited in the portfolio Secondly, adjust the organization structure to make it simpl; based on operation adjustment, reallocate tasks, functions, responsibility and rights of each división, management position and tittle Only remain necessary divisions, management positions and tittles Thirdly, adjust personell and hierachy structure: adjust policies and hierachy through reasonable check and change of working process, policies and regulations Create resources and reallocate resource usages following direction of savingness to overcome the difficult time 3.3 Selecting business strategy for BIDV Chuong Duong 3.3.1 Strategy selection based on QSPM matrix This QSPM matrix uses inputs from IFE and EFE matrix and helps rating the attractiveness of different alternatives: Table 3.1: Quantitative Strategic Planning Matrix for BIDV Chuong Duong Duong Restructure BIDV Chuong ST-01 management competence take advantage of brand and Search for foreign investors to SO-03 FDI fund from Japan Exploit of the customer with SO-02 Weight service quality Key factors Differentiation in terms of No SO-01 Strategic alternatives AS TAS AS TAS AS TAS AS TAS I Internal factors Management structure 0.15 0.30 0.60 0.30 0.60 Corporate culture 0.1 0.20 0.30 0.20 0.40 Human resource 0.2 0.60 0.80 0.60 0.60 Relationships with strategic clients 0.2 0.60 0.60 0.80 0.80 Customer service activity 0.05 0.15 0.20 0.15 0.15 Sales and Marketing 0.05 0.20 0.20 0.20 0.15 Transaction network 0.05 0.15 0.15 0.15 0.20 Page 68 IT system 0.05 0.15 0.15 0.15 0.15 Inflexible pricing policy 0.05 0.10 0.15 0.15 0.10 10 Credit quality monitoring 0.05 0.10 0.10 0.15 0.15 11 R&D activity 0.05 0.15 0.10 0.10 0.20 Total 1.00 II 3.35 2.95 3.50 External factors Stable 2.70 legal and political environment with high GDP growth 0.08 0.24 0.24 0.24 0.24 0.07 0.14 0.21 0.21 0.21 0.07 0.14 0.21 0.21 0.21 0.07 0.21 0.14 0.28 0.28 0.09 0.36 0.27 0.27 0.27 0.09 0.36 0.27 0.27 0.27 0.08 0.24 0.24 0.16 0.24 0.06 0.12 0.18 0.18 0.18 0.06 0.12 0.18 0.12 0.12 rate Opportunities of technology transfer and experience sharing from foreign banks Policies to pull and encourage investments Opportunities to affiliate and joint venture to expand market share The Government’s restructuring demand economy program companies to supports market’s enables restructure and healthy development Hanoi is the centre of political, commercial and cultural activities so that BIDV Chuong Duong has advantages to develop faster than other branches locally Hanoi is attractive to foreign investors; thus BIDV Chuong Duong has many opportunities to attract investment from international investors The number of foreign bank branches in Hanoi with strong finance, technology and customer service is increasing Increasing competition from foreign Page 69 and domestic banks in Hanoi Threats from economic downturns, 10 debt crisis, high inflation that affects 0.05 0.10 0.10 0.15 0.20 0.05 0.15 0.10 0.10 0.20 0.05 0.10 0.15 0.15 0.10 0.06 0.12 0.18 0.24 0.18 0.06 0.12 0.12 0.12 0.18 0.06 0.12 0.24 0.24 0.18 customers’ income and operations Bad debt of finance, real estate, construction 11 industry rises significantly, affecting the bank’s capital supply and customers’ solvency 12 Big banks’ offerings are getting more diverse More pressure of technology and 13 process innovation to catch up with foreign banks’ development pace 14 Short of highly qualified human resource Increasing and rapidly changing 15 demand of product and service quality Total 1.00 Total Attractiveness Score 2.64 2.83 2.94 3.06 5.34 6.18 5.89 6.56 Through QSPM matrix, BIDV Chuong Duong should choose the following strategies: As the result, " Restructuring BIDV Chuong Duong to minimize bad debt" strategy with the highest score will be the best choice at this moment In addition, the strategy that focuses on exploiting the clients from strategic shareholders have the second appeal Combining the two groups we will select strategy " Restructuring BIDV Chuong Duong to reduce the rate of bad debt "and "Exploit of the customer with FDI fund from Japan " as BIDV Chuong Duong’s strategy for the period 20172020 3.4 BIDV Chuong Duong’s strategy implementation roadmap Table 3.2: Financial indicators of BIDV Chuong Duong in the period 2017 – 2020 Page 70 Indicator 2017 2018 2019 2020 Total assests 6.000 6,600 7,200 8,000 Total outstanding balance 5.000 5,500 6,000 6,500 Service fee 70 77 80 100 Net profit 100 115 135 160 ROA (%) 1.3 1,17 1.9 2.0 Bad debt rate (%) 4,5 4.0 3.0 2.5 13 18 25 135 240 280 310 Number of transaction points Number of employees 3.5 Solutions and budget planning for BIDV Chuong Duong 3.5.1 Bad debt treatment 3.5.1.1 The specific solutions + With the groups of customer having NPLs from bucket to 5: These groups are at high risk of losing principal so it’s very important to analyze clearly that: the cause of NPL is subjective or objective, customers are still operating or not, customer’s business lines are still promising or not, what are the current and future sources for loan repayment and these sources are feasible or not… These are the steps that debt collection officers and departments to re-evaluate customers and report to department’s leaders and Board of directors to review and make solutions: - In case that the customers aren’t able to repay loans, no longer operating and don’t have any income to repay the bank, the bank should conduct necessary procedures such as: allow third party to dispose collateral, reduce the overdue interest or normal interest depending on the co-operation of customers… If the customers not co-operate, BIDV Chương Dương must bring these cases to the court to sell the collaterals for definite settlement - In case that due to influence of market, existing customers face difficulties in doing business, selling inventory, lack of funds The bank should have policies to support if customers can provide sufficient information and business plans by which the bank could design funding package that is suitable with customer's Page 71 operating situation to support customer to overcome difficulties and the bank can collect the debt gradually There are some specific solutions, such as:  Extend the time that customers have to repay the principal and interest but generally, only principal is extended and the customers must pay interest monthly  Continue to disburse for the evaluated projects and plans if the cash flow is good and the disbursement rate is negotiated with customer so the bank also can collect the debt gradually and the customers have fund to cover the operating cost  Support customer by reducing interest and service charge when using guarantee issuance service + With the group of customers having NPLs from bucket to 2: These groups have NPLs in control but if the bank doesn’t have a good monitoring and management solution, there is the risk that bad debts can arise anytime To minimize the risk, the bank should have the solutions to prevent and control as the following: - Monthly, branch lists the overdue loans and invites department’s leader and relationship manager to report on customer’s operation, repayment ability if there is any case that customer faces difficulties and the bank has to have a greater understanding of customer’s information and make recommendations to support customer and thereby predict risks occurring Therefore, the branch and the department will have the right decisions to continue to support customer or not or to inform customers to prevent insolvency happening and situation that dozens of bank come to collect the debt, which causes losing image - For units with overdue debts in excess of the specified branch should stop disbursed to the unit to focus on debt settlement is also measures to maximize the resources they recover debts through which the new members understand the responsibilities and powers in the lending and avoid bad debt when push responsibility In addition to the above remedies, BIDV Chuong Duong must to be flexible with the purchase of bad debt as trustee for the debt purchasing company, rollovers to clients to other organizations these are not measures mainstream banking system is Page 72 the wizard that banks should be very dangerous for the banking system, especially at this time of professional ethics of the banking system is to decline 3.5.1.2 Incentive and reward scheme Now, the bad debt in the banking porfolio is usually done by professionals lending profiles now incurred bad debt is transferred to or concurrently with parts rather than to professional debt collectors are not Therefore need policies to recruit and pay staff in the department handle debt is an appropriate way to encourage employees to new debt In addition to the basic salary of the staff should also be entitled to the percentage of bad debt is the debt collectors will work more efficiently Currently BIDV Chuong Duong’s NPL rate is 1% reward for the recovery of bad debts in group and above but apply to branches not applicable to individuals not so effective There should be more specific policies reward the overdue loan 3.5.2 Developing good customers Besides work on handling bad debt to reduce bad debt ratio the better development of new customers to increase balance is also important because banks have been developed or not, the customer must therefore BIDV Chuong Duong research should focus on an object or group with which to increase profits is to control risk For customers with FDI from Japan: At present, BIDV headquarter has a strategy committee to manage clients who are FDI contractors from Japan so BIDV Chuong Duong through these customers to access loans When the source of money on BIDV Chuong Duong is confirmed and submitted Surveillance is also important because if you not closely monitor the transaction of customers, when the customer money flow is withdrawn for the wrong purpose will affect the ability to pay customers repayment at Bank Table 3.3: Strategy implementation roadmap and budget planning Activity Responsible Timeline Deliverables I Bad debt treatment Established Debt Settlement Committee of members: Board of Chairman and professional Directors and The HO consult 6/2017 the settlement to avoid the backlog Page 73 debt settlement affiliates also Credit Committee because there is no fixed other members rotating mechanism each unit incurred bad debt Employment lawyers, police, courts, procuracy as the HR department original to work in Debt and Board of Settlement unit Recruiting 6/2017 the right people and learn directors about the process, the types of laws Classify bad debt customers to Board of directors decide solutions and work and with HO to handle Credit Committee Objective or to subjective, 9/2017 collectible or not 12/2017 Regular review of overdue The debts from two or more Board of directors delinquency groups delinquency with information up to from date and debt Credit Weekly the Committee cause and situation, measures customer is certified banker to prevent and treat the debt incurred dance group Not bad debts incurred new loans To assess the effectiveness of the NPLs Board of directors and Monthly and reduce the NPL ratio old route to 2% per year for years to Credit less than 1% of Committee bad debt II/ Customer development Responsible Make a list of Potential Transaction Timeline Deliverables Weekly report Ensure 03 new customers to marketing and Offices customers product introduction business staff Monitoring and caring Weekly customers to control the loan quality reports Scoring of specialists Board Directors of and customers for a for to provide incentives and assess Page 74 performance business units of staffs Evaluate the effectiveness and Board of Assess by KPIs efficiency of the staff workers Directors and thereby making appropriate business policy reported units to follow up Every week send the results of each staffs for their awareness of efficiency and effectiveness enhance to working motivation Currently, the budget for bad debt disposal is mainly salary for staffs of this depepartment and additional participants in charge of this work The expenses for handling bad debts is approved case-by-case including: reduction of interest in term, overdue interest, the cost of hiring police officers, lawyers, the cost of warehousing The arising expenses are recorded to appropriate expense items or other expenses for the branch For example: To capture a car for a bad debt, the cost is about 10 million but not recorded as operating cost but business development cost Page 75  In the business environment that is attractive but highly competitive with many types of banks, finance companies and other financial institutions, especially when Vietnam joined the WTO, the development and selection of appropriate business strategy will be very important and plays as a key factor to ensure the survival and success for each bank and credit institution Appropriate business strategies can help the bank to maximize the strengths to overcome its competitors in the market This trend requires that BIDV Chuong Duong should have timely adjustment to stand firmly and develop in the spiral competitive environment Therefore, BIDV Chương Dương needs to build a strong force, a proper orientation to adapt to the environment On the basis of SWOT analysis of BIDV Chuong Duong , the authors came up with business strategies for BIDV Chương Dương that need to be done immediately and consistently in long term To implement such strategies, BIDV Chuong Duong has to focus on the group of solutions: Building financial solutions and develop network, human resources, the marketing, technology, restructuring the organizational structure, building corporate culture, building facilities However, the business environment is always changing, so BIDV Chuong Duong should regularly examine and evaluate the implementation of the solutions to adjust appropriately My thesis only forcuses on the investigation, analyzing, evaluating the situation, building and selecting the appropriate competitive strategy, and proposing a number of options for implementation of the selected strategy The evaluation of the implementation of the business strategy set depends on the actual implementation and management process Due to constraints of time and other resources needed, the study still has certain restrictions that need to be improved So, we hope to receive contributions from the Council, lecturers and classmates to complete further research with a desire to contribute a small part in the development of BIDV Chuong Duong Once again, I would like to thank Dr Mai Anh, and Board of directors of BIDV Chuong Duong branch for giving the best conditions for me to study and complete the FBA course Page 76 REFERENCES Annual report 2014– 2016 of BIDV Chuong Duong Concepts of Strategic Management and case studies (Economic Publishing House 2015) - Fred R David Ngo Kim Thanh, textbook for Strategic Management , Publishing House of National economics university - Ha noi, 2011 Ngo Kim Thanh & Le Van Tam, case stydies for Strategic Management, Publishing House of National economics university - Ha noi, 2009 Le The Gioi & Nguyen Thanh Liem; Tran Huu Hai, Strategic Management, Statistical publisher, 2008 Nguyen Ngoc Huyen, Competitive Strategy in the Global Economy, Strategic Management, Publishing House of National economics university - Ha noi, 2009 Websit: shb.com.vn; Website: vib.com.vn; Website: mbbank.com.vn; 10 Website: BIDV.vn 11 https://gso.gov.vn 12 https://vi.wikipedia.org Page 77 ... 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