Reason for choosing topic Market economy and trend of internationalization of most sectors offer opportunities and challenges for all enterprises in the world. In order to take proper steps in the business, managers of each enterprise must have proper knowledge and skills of management and strategy planning. This issue is crucial for the success or failure of the enterprise when competition is becoming fierce and its scale has not been limited in each region. Like other enterprises, Vietnam Prosperity Bank (VPbank) have experienced and suffered effects of world recession.
In orser to take strong steps for bringing success, we chose the topic "Building up the business strategy in the period of 2011-2015 for Vietnam Prosperity Bank-VP Bank. Object and scope of research The object of research is the business strategy of the Vietnam Prosperity Bank -VPBank. The scope of research is business activities of the VPBank which is compared and collated with that of other competitors within activities of VPBank. Purpose of research The purpose of the research assignment is systematizing and generalizing theoretical issues of business strategy, analyzing business status and current business strategy of the VPBank, then proposing solutions to complete the business strategy in the period of 2011-2015 in order to make VPBank become one of the biggest retail banks in the banking system.
Research Methodology + Literature research from secondary sources such as books, newspapers, magazines, websites, reports published by the Bank + Qualitative research + Survey 1 1. The main structure of Assignment Besides the introduction and the conclusion, our group's assignment includes three chapters: Chapter 1: The basic theories of strategic management applied in the banking sector. Chapter 2: Building up business strategy in the period of 2011-2015 for Vietnam Prosperity Bank-VP Bank ". Chapter 3: Solutions to strategy implementation in the period of 2011-2015 for Vietnam Prosperity Bank-VP Bank.
2 CHAPTER I: THE BASIC THEORIES OF STRATEGIC MANAGEMENT APPLIED IN THE BANKING SECTOR 1. The concept and process of strategic management: 1. The concept of strategy: Johnson and Scholes: "Strategy is the long-term direction and scope of an organization in order to gain a competitive advantage through formatting its resources in a changing environment, to meet the needs of market and satisfy the expectations of stakeholders ". Business strategy is a general long-term plan or a general action plan for deploying resources to achieve the planned objectives of the business ensuring compliance with environmental change.
"Strategy of a bank is a comprehensive and long - term program of activities in order to create a certain development of that bank, is a pre-commitment to the basic and thorough goals that a bank should achieve and important resources allocation to achieve those goals in the future operating environment "( Banking Management and Business coursebook - Banking Institute - 2002) 1. Strategic Management: Strategic management is a systematic process of strategy building, developing, control and evaluation in order to achieve goals set by business. The tasks of strategic management: Consists of five tasks that are closely related to each other and are described as follows: Figure 1. The task of strategic management 3 (Source: In according to "Five tasks of strategic management", Strategic Management coursebook - Statistical Publishing House, 2009) 1.
Strategic management process: Strategic management process includes commitments, decisions and actions that companies need have to achieve strategic competitive advantage, sustainable competitive advantage and above-average return. Strategic competitive advantage is an advantage a company gains when building and implementing a strategy which offers value for the company. Sustainable competitive advantage is an advantage a company gains when developing a strategy which its competitors can not have. Sustainable competitive advantage creates the advantages that the current competitors and even potential competitors could not gain.
Above-average return is profit exceeding what investors expect to get from other investments of similar risk. Strategic management process: 4 (Source: In according to " Strategic management process" - the Strategic Management Coursebook - Griggs University) 1. The order and content of business strategy: Business strategy building is the process of identifying the tasks, the basic goals of business activities of enterprises by the best methods to implement those goals and tasks. The order and content of the strategy include: - Defining the vision, mission and goals: Indicate what the vision and mission of the enterprise are? Where the current position of enterprise and its desired location in the future are.
What its long-term goal is? 5 - Assessing the external environment: This includes information collection and assessment of macro environment and sector environment. - Assessing internal environment (internal sector environment), including information collection and assessment of internal environmental. - Analyzing and choosing strategy. Defining the functions (defining business mission) and strategic business objectives: Business Mission: The business mission of a bank is its purpose of business, the reason for its creation, survival and development.
The first proper business mission is customer orientation because as a perfectly logical reasoning, customers are people who decide the existence of the bank and only they are willing to pay for the services the bank provides. The success or failure of customers affects the business results of the Bank. This one depends on its ability to control and maintain relationships with customers. Strategic Objective: Strategic business objective is the specific states or results that the bank desires to achieve in pursuit of its business mission in a relatively long-term period of operation.
Target defining is a crucial step in the strategy formulation process. Because the right objective determining will enable the right orientation of strategic actions that determines the next steps of the strategy formulation process as well as implementation. Its objectives is also the basis of strategy evaluation and adjustment. Objectives when building must meet the requirements of SMART (Specific, Measurable, Achievable, Realistic and Time).
Strategic objectives of banking activities can be classified as follows: - Quanlitative objective: means a pre-commitment to results shown by the specific properties that a bank needs to achieve after each period of business, such as its specialization, product and service quality, reputation, position on the market. 6 - Quantitative objective: Shown in the target groups: + Profitability: ROA, ROE + Sales, scale of operation: loan or mobilising sales, the number of new facilities, number of staff, number of customers, number of account. + Market dominating objectives: market share. External environment analysis: External environment is the factors that may affect the performance of the business objectives desired to achieve.
Analyzing the external environment includes macro environment and sector environment analysis. This division significantly facilitates the importance identifying of factors which have different levels of impact on the operation of the bank. Macro environment and banking activities Macro environment affects all sectors of business, but not necessarily in a certain way, including: (1) economic environment; (2) the political, legal environment; (3) sociocultural environmental; (4) demographic environment; (5) technological environment; (6) the global environment. These above factors impact on the banking sector as follows: - Economic environment: This factor have the greatest impact on operation objectives and business results of the Bank.
It affects the ability to create value and income of the bank. Therefore, this factor should be specially focused. These are factors influenced by stages of economic cycle, inflation rate, GDP growth rate, prospects of the businesses using bank capital, transforming structure among economic areas, the degree of price stability, interest rates, exchange rates, balance of payments and foreign trade. - The political and legal environment: should always be carefully analyzed because the nature of the bank is a financial intermediary and its activities have an important influence on the national financial system.
The banking sector is also under more strict control of the state than other sectors. The monetary policy of the government also needs to be constantly interested in the analysis process. 7 - Sociocultural environment: includes many issues that are little changeable, lasting, and of great value in strategic analysis such as the consumption culture, routine use of banking services during the life, saving practice. A business strategy which is not consistent with socio-cultural factors will surely fail.
- Demographic environment: includes population size, age structure, geographical distribution, education, income, etc. that affects the Bank's objectives especially the identification of customers, recruitment, etc. - Technological environment: Among banking activities, technological factors become disruptive factor in competition. So it is necessary to grasp new technological trends in order not to be left behind and lose competitive advantage.
- Global Environment: Due to the globalization trend of the economy leading to regionally or globally economic integration. Therefore, it is necessary to track and grasp the trends of world economy, detect potential markets, explore the evolution of politics and economy by the new technology information and experience of international business. Sector Environment and the banking activities: Sector environment is a series of factors directly affecting the bank as well as its competitive and reaction actions. The sector enterprises are influenced by their own micro environment including: (1) competitors, (2) customers, (3) suppliers, (4) potential competitors, ( 5) alternative products.
In banking sector, these factors may be shown as follows: - Competitors: with the trend of loosening regulation that creates increasingly competitive pressure among banks to each other as well as among other financial institutions such as insurance and finance companies,etc. Level of competition depends on number of financial institutions participating in the market, the growth of sector, trend of cost and position of the bank. Therefore, when analyzing the competitors, it is necessary to pay attention to some aspects such as what they want to reach, what they are doing and can do, how their influence the market and what their strengths and weaknesses are? 8 - Customers: a factor determines the survival of banks in competitive environment. For banking activities, there is no consistency between customers because they can be both a supplier of operating capital and people who use the funds and other financial services.
When analyzing customers should pay attention to: the trust of customers, relationship history with the bank, loyalty, their attitudes to banking services, bargaining and paying power, the understanding of process and service, capability of scale investment, income and business stability, interest sensitivity, etc. - Suppliers: Are those who supply products and services for the bank. For banking activities, suppliers sometimes are the customers also that is special for this sector. The bank purchases products from suppliers but sometimes resells its other services.
When analyzing suppliers, it is necessary to pay attention to the objects sending the money to the bank. This is the important thing creating sustainable development and competitive advantage for the bank. - Potential competitors: In the future, operational boundary between banks and financial institutions could be erased and exist mutual penetration of the services provided for customers. Consequently, apart from curent competitors, it is important to pay attention to the potential competitors in the future such as insurance companies, building societies, the distributors of wholesale and retail goods, etc.
- Alternative products: Among banking services, alternative services are less than the other sectors, however, in some extent, it still appears, for example, trend of the stock market, gold, real estate investment instead of saving deposits, trend of self-financing by stock and bond issuance instead of borrowing. In summary, analysis of macro-environmental and micro-environmental factors will allow enterprises to clearly identify what opportunities (O) must be used up and what challenges, risks (T) offered by changes of the five forces must be faced, from then build up appropriate strategies. Identification and evaluation of opportunity and risk from the external 9 environment affecting enterprises that will allow enterprises to build a clear business mission, determine the feasible long-term goals, design suitable strategies and suggest appropriate policies in order to achieve planned objectives. Internal environment Analysis: Internal environment analysis or actual condition and resource analysis of the bank is the analysis of elements, systems inside the bank that is possible to mobilize and control for business activities.