DELAWARE STATE UNIVERSITY MASTER OF BUSINESS ADMINISTRATION, HANOI, VIETNAM CAPSTONE PROJECT REPORT DEVELOPING A BUSINESS STRATEGY FOR VIETBANK HANOI BRANCH FROM 2011-2015 Prepare by: Nguyen Thi Hong Hanh HANOI 2011 ACKNOWLEDGEMENT First and foremost, I would like to express our gratitude and sincere appreciation to the board of directors, professors and lecturers of Center for Educational Technology and Career Development (Vietnam National University) and Delaware State University for their helpful guidance, inspiration, suggestions and facilitation throughout the course of my research and studies. Appreciation is also extended to managers of Vietnam Thuong Tin Joint – Stock Commercial Bank, Hanoi Branch as well as specialized departments for providing me valuable research data and sharing practical experiences and constructive ideas on the subject. Last but not least, I would like to show my deepest gratitude to my families and friends for their understanding and supports. During the completion of this work, encountered obstacles were overcome thanks to their encouragement and suggestions.
Although best efforts have been made; the report might have shortcomings due to time limit. I truly appreciate professional feedbacks from professors and lecturers on the report in order to put it into practice successfully. Developing a business strategy for VietBank Hanoi Branch TABLE OF CONTENT ACKNOWLEDGEMENT. Rationale of the research.
Research objective and application.4 CHAPTER I: BASIC CONCEPTS OF STRATERGIC MANAGEMENT APPLIED FOR BANKING SECTOR. Concepts of strategy and strategic management. Concepts of Strategy. Concepts of strategic management:.
Theoretical models in business strategy. Analysis of external environment. Analysis of internal environment. 8 CHAPTER II: BUSINESS OPERATION OF VIETBANK, HANOI BRANCH.
Overview of VietBank – Hanoi Branch. Overview of VietBank – Hanoi Branch’s development. Organizational structure of VietBank Hanoi. Business operation of VietBank Hanoi.3 Net service incomes.
15 Developing a business strategy for VietBank Hanoi Branch 3.4 External relations activities.5 The results of business operation from 2009 to June 2011. Analysis of Vietbank Hanoi’s operation. Analysis of external environment. Analysis of macro environment.
Political-legal environment. Social-Cultural Environment. Analysis of micro environment. Analysis of opportunities and threats.
Analysis of opportunities (O). Analysis of threats (T). Matrix of external factor evaluation (EFE). Analysis of internal environment.
Analysis of internal environment of VietBank Hanoi.32 Developing a business strategy for VietBank Hanoi Branch 2. Analysis of strengths and weaknesses. Internal Factor Evaluation Matrix (IFE). Competitive profile matrix.
General evaluation of strategy implementation. The necessity to develop a business strategy for VietBank Hanoi.41 CHAPTER III: DEVELOPING A BUSINESS STRATEGY AND IMPLEMENTATION SOLUTIONS FOR VIETBANK FOR 2011 – 2015. The objectives of VietBank, Hanoi Branch up to 2015. Vision, mission and core value.
Overall objective of development of VietBank. Using Matrixes to build up and choose business strategy. Using SWOT Matrix to build up business strategies. Chosing a business strategy.
Solutions for strategy implementation.46 Developing a business strategy for VietBank Hanoi Branch 1. Solutions for human resources development. Attract and retain talents. Recruitment and workforce training.
Training and retraining staff. Develop human resource management, wage and remuneration policy. Implement marketing mix. Solutions for organizational restructuring.
Customer relationship block. Risk management block. Internal control block. Develop business culture.
62 Developing a business strategy for VietBank Hanoi Branch LIST OF FIGURES Developing a business strategy for VietBank Hanoi Branch Figure 1: Strategic management tasks.5 Figure 2: Michael Porter’s Five Forces Diagram.6 Figure 3: Strengths – Weaknesses, Opportunities – Threats Matrix (SWOT).8 Figure 4: Organizational structure of VietBank Hanoi.11 Figure 5: Credit structure classified by industry from 2009 up to June 2011.14 Figure 6: Outstanding loans classified by industry in the first 6 months of 2011.14 Figure 7: The structure of net service incomes.16 Figure 8: Distribution of transaction points in Hanoi (June 2011).26 Figure 9: Comparison of business results (2010).27 LIST OF TABLES Table 1: GREAT Matrix.8 Table 2: Capital mobilization from 2009 to June 2011.12 Table 3: Classified Credit Structure.13 Table 4: The structure of net service incomes.15 Table 5: VietBank Hanoi’s income statement.17 Table 6: Criteria for position comparison of VietBank and other competitors.26 Table 7: EFE Matrix.30 Table 8: Employment structure classified by qualifications up to 30/06/2011.32 Table 9: IFE matrix.35 Table 10: SWOT Matrix. 36 Table 11: Assessing business strategies by GREAT criteria.42 Developing a business strategy for VietBank Hanoi Branch LIST OF ABBREVIATIONS VIETBANK Vietnam Thuong Tin Joint Stock Commercial Bank SWOT Strengths, Weaknesses, Opportunities, Threats EFE External factor evaluation IFE Internal factor evaluation GREAT Gain, Risk, Expense, Achievability, Time P.T Policy, Economics, Social, Technological Developing a business strategy for VietBank Hanoi Branch INTRODUCTION I. Rationale of the research After Vietnam’s WTO participation, operations of foreign banks and financial institutions in Vietnam have been expanded. In 2011, all restrictions imposed on foreign banks’ operations must be removed according to a commitment made by Vietnam as one of conditions to fully acquire WTO membership.
The increasingly fierce competition from foreign banks would be a “useful kick” for renovation of Vietnamese banks otherwise they might loose in the own playing field. So far, 5 joint – venture banks, 5 100% foreign – owned banks, 48 branches of foreign banks, 8 financial leasing companies, 56 representative offices are operating in Vietnam. They are/belong to large and highly accredited and competitive foreign banks and credit institutions. Foreign credit institutions serve as a channel for the movement of modern banking technologies and advanced banking management practices to Vietnam while supplying significant capital for Vietnam’s banking and finance sector.
It is the major motivation for Vietnamese commercial banks to further improve themselves. Once Vietnamese banks are not well prepared and remain low competitive, inevitably they will be merged or sold. Only banks with high competitiveness and good management system may survive and grow further. After 3 years of operation, Vietnam Thuong Tin Joint – Stock Commercial Bank, Hanoi Branch (VietBank Hanoi) has gained certain achievements in terms of human resources, financial resources, technology… The branch, however, still show some weaknesses that must be overcome in order to improve its competitiveness i.
inappropriate organizational structure, ineffective marketing activities, poor corporate culture etc. Because of the above – mentioned reasons, it is critical for VietBank Hanoi to conduct a research and propose solutions for operation during the period 2011 – 2015. It will not only help VietBank Hanoi to grow steadily and further promote achievements but 1|Page Developing a business strategy for VietBank Hanoi Branch also to be able to confront with challenges and take advantage of opportunities arising from Vietnam’s regional and international economic integration. That’s the reason why we carried out a research on the subject “Developing a business strategy for VietBank Hanoi for 2011 – 2015”.
Research objective and application The purpose or the research is to examine the current business strategy of VietBank Hanoi and suggest applicable business strategies and implementation plans for 2011 – 2015. The research topic is practical and might be applied to VietBank Hanoi’s operation. Research methodology Primary and secondary data was collected for the purpose of analysis. Primary data: Collected from sources such as documents, regulations, guidelines, policies, orientations issued by the State Bank of Vietnam and Vietnam Thuong Tin JSCB.
Secondary data Data extracted from the database of VietBank’s branches and relevant sectors Statistics published by statistical offices and ministries In addition to periodical business reports issued by VietBank Hanoi, the data was collected from open sources such as: internet, publications on the subject of classic theories of strategic management.: Marketing Management Book by Philip Kotler. Report structure Introduction: General overview of the current context, rationale of research, research objectives and application possibility; research methodology. Main report includes 3 chapters 2|Page Developing a business strategy for VietBank Hanoi Branch Chapter 1: Basic concepts of Strategic Management Chapter 2: Analysis of business operation of VietBank Hanoi Chapter 3: Solutions, recommendations and conclusion 3|Page Developing a business strategy for VietBank Hanoi Branch MAIN REPORT CHAPTER I: BASIC CONCEPTS OF STRATERGIC MANAGEMENT APPLIED FOR BANKING SECTOR I. Concepts of strategy and strategic management 1.
Concepts of Strategy Kenneth Andrews was the first to highlight the term in his classic book “The Concept of Corporate Strategy”. He said strategy is what an organization has to do taking into consideration its own strengths and weaknesses while facing opportunities and challenges. Bruce Henderson – a strategist and co-founder of Boston Consulting Group linked the concept of strategy to competitive advantage in which “Competitive advantage” helps a firm outperform its rivals by delivering greater economic values to its customers. Porter – the father of competition theory – said that: First, strategy is the creation of a unique and valuable position, involving a different set of activities.
Second, strategy is making trade – offs in competing. Third, strategy is creating fit among a company’s activities. According to the text book “Strategic Management” by GaMBA (Sept 2009), Business Strategy is defined as an overall long-term plan or a general plan of action which helps the company to take full advantage of resources to achieve its predetermined goals within a challenging environment. From the cited concepts, we can see that strategy is strongly linked to a company’s business objectives.
Strategy is how to perform a set of closely related activities and decisions and select implementation method for the activities and decisions. A business strategy must exploit strengths (resources and capacity) and take into account opportunities and challenges. 4|Page Developing a business strategy for VietBank Hanoi Branch 2. Concepts of strategic management: Strategic management is a process of analyzing current environment, forecasting future environment; determining mission, goals and strategic program, implementing strategy; examining and assessing the strategy to effectively use resources to achieve pre-defined objectives.
Strategic management consists of 5 closely – linked tasks as follows: Figure 1: Strategic management tasks Formulate Monitor, Develop Implement Set goals strategy to Evaluate vision and & and take and achieve mission Execute corrective objectives goals & strategy action objectives Revise if Improve/ Revise if Improve/ change if Recycle needed change if 1,2,3,4 needed needed needed if needed (Source: “Five tasks of strategic management”, Strategic Management Textbook – Statistics Publishing House 2009) This is an ongoing activity to establish and maintain strategic direction and operations of an organization as well as daily decision – making process to deal with changing situations and challenges arising from business environment. Theoretical models in business strategy To develop effective and appropriate business strategies for each developing stage of a business, it is important to investigate and analyze internal and external environment surrounding the business to find out strengths, weaknesses, opportunities and challenges, forming a base for strategy selection. There are a variety of models and 5|Page Developing a business strategy for VietBank Hanoi Branch matrix applicable for the formulation of strategy. However, the most generalized, practical and applied models are PEST model, Michael Porter’s five forces model EFE Matrix, IFE SWOT BCG Matrix Within the scope of the report, the following theoretical models will be chosen to analyze the business operation of VietBank Hanoi in Chapter 2, and form a basis to propose solutions and recommendations in Chapter 3.
Analysis of external environment Analysis of external environment of VietBank Hanoi includes analysis of micro and macro environment. -PEST model including institutional – legal, economic, socio-cultural, technological factors will be applied to analyse macro environment. Michael Porter’s five forces model analyzes 5 factors influencing businesses: the bargaining power of suppliers, the bargaining power of buyers, the threat of new entrants, the threat of substitute products or services and the threat of existing rivals. The model will be used in analyzing macro environment.
Figure 2: Michael Porter’s Five Forces Diagram 6|Page Developing a business strategy for VietBank Hanoi Branch -EFE Matrix (External Factor Evaluation Matrix): after analyzing external environment, EFE matrix will be used to evaluate external factors affecting VietBank Hanoi’s operation in order to select an optimal business strategy. EFE Matrix is established sequentially in five steps: -Step 1: make a list of external factors playing a major role in the business sector, including opportunities and challenges.