2010 GLOBAL ADVANCED MBA PROGRAM CLASS GaMBA X01 GROUP NUMBER 7 CAPSTONE PROJECT REPORT IMPROVEMENT OF BUSINESS STRATEGIES OF VIETNAM INTERNATIONAL BANK ( VIB ) FOR THE PERIOD 2010 - 2013 Do Thuy Nga Le Thi Ha Phuong Doan Quang Hung Tran Hong Quang Duong CLASS GaMBA-X01 HANOI 2010 1 GaMBA - X01 – Group 7 TABLE OF CONTENTS GROUP 7’S COMMITMENT.7 Reasons for topic choice. 8 Purposes of study.8 Methodology of study.8 Contribution of topic of study. 8 Structure of topic. 10 RATIONALE FOR BUSINESSES OF COMMERCIAL BANKS – THEORETICAL ISSUES ON STRATEGIC MANAGEMENT 1.1 Rationale for businesses of commercial banks.1 Concept of commercial banks, their establishment and development.2 Roles and functions of commercial banks.3 Operation principles of commercial banks .1 Capital limit principle.4 Commercial operations under the State’s management.4 Operations of commercial banks.
Definition of strategic management .3 Roles of Business Strategies and necessary of Strategic Management.1 Roles of Business Strategies.2 Necessary of Strategic Management.4 Tasks of Strategic Management.5 Process of Strategic Management.1 External environment analysis.2 Environmental sector analysis.3 External factor evaluation matrix.2 External factor evaluation matrix of Organization.1 Internal factor evaluation matrix of Organization.28 3 Strategy's tools for construction and selection.1 Identify strengths and weaknesses threats and opportunities.32 4 Business strategy selection and construction .1 General strategy of Michael Porter.2 Advantages and risks of implementing this strategy.34 5 Implementation and evaluation.3 Roadmap for implementation.38 3 GaMBA - X01 – Group 7 CHAPTER II. 40 ACTUAL SITUATION OF BUSINESS STRATEGIES OF VIETNAM INTERNATIONAL BANK OVER THE PAST TIME 1 General introduction about Vietnam International Bank (VIB)).1 Overview of VIB.2 Assessment on VIB’s current business strategies.1 Commitments on VIB’s current strategies.2 Analysis of external environmental impacts on VIB’s businesses.3 Analysis of competition situation according to M.3 Within the banking industry.4 Threat of substitute banking products and services.5 Customers and banking services.58 2 Analysis of Internal environmental impacts on VIB’s businesses.1 affection of internal environmental factors in the business environment.2 A general evaluation of the capability of VIB.1 Comparing the situation of activities of competitors and VIB.2 Comparison between VIB and competitors by method of scoring.3 Capacity assessment of VIB.4 Business strategy in period from 2009-2013.71 4 GaMBA - X01 – Group 7 CHAPTER III.75 SOLUTIONS FOR IMPROVING BUSINESS STRATEGIES OF VIB IN THE 2010-2013 PERIOD 1 Orientations of VIB.75 2 SWOT analysis table.76 3 Development orientation of VIB.80 4 Planning for Business strategies of VIB in the 2010 – 2013 period.1 Finance and business solutions.2 Human resources solutions.89 5 Improvement of organizational structure.2 Implementation route of solutions. 94 CONCLUSION AND RECOMENDATION. 98 5 GaMBA - X01 – Group 7 GROUP 7’S COMMITMENT To do this article, Our group have collected informations through the available documents such as annual financial statements, Business Plans, Structure of VIB, in addition, We also performs self collecttion of the necessary informations used for Our analysis and arguments.
We would like to commit to applying our consensus unanimously to take the highest result in the Presentation of Capstone Project Report. We appreciate a lot if Our Group can receive the valuable guidance from Teachers so that Our Report can become more successful. We would like to thank the team and the following individuals for their supports during the process of gathering documents as well as complete implementation of this article 1. Leaders, Management in Head Office of the Vietnam International Bank 2.
The Teachers , Staffs of faculty training and employment system Center in Hanoi National University Once again, Thank you so much ! Yours sincerely, Tran Hong Quang Duong Do Thuy Nga 6 GaMBA - X01 – Group 7 Le Thi Ha Phuong Doan Quang Hung 7 GaMBA - X01 – Group 7 INTRODUCTION 1. Reasons for topic choice Along with the process of socio-economic development, Vietnamese commercial banking system has increasingly expanded and diversified. Before 1988 the current commercial banks were specialized commercial banks and they have become commercial banks after1988. And the system of State-owned commercial banks, joint-stock commercial banks has always been growing up to now.
By the end of 2009, in addition to credit institutions (including thousands of Credit Funds, financial companies, postal savings institutions, etc.), there was also a powerful banking system in the whole country. This system included five Commercial and state-owned joint stock commercial banks, 39 joint stock commercial banks, branches of joint-venture banks, and banks with 100% foreign capital. Total assets of the whole system were approximately 120% of the whole country’s GDP. Activities of the commercial bank system have contributed positively to the economic development of Vietnam.
During its establishment and development, the Banking system has experienced ups and downs in some banks were merged or their business licenses were revoked. Most banks have been profitable until now. The VIB is also a chain link in the Banking system and among the top five Joint Stock Commercial Banks in Vietnam. In order to develop in an increasingly competitive environment with the development of domestic banks and participation of Foreign Banks in Vietnamese market, the direct competitors have formed alliances with foreign banks.
In addition, the rapid changes of the local legal environment and the challenging domestic economic environment were two factors which affect directly the Banking system and require Vietnam International Bank to make quick changes accordingly. Facing such urgent requirements, VIB was aware of the importance of changes since 2003 and its leaders and staff have built, deployed and implemented successfully the business strategies for the first period (2003-2007). 8 GaMBA - X01 – Group 7 To maintain its position and pursue the goal of making VIB become one of the Top 5 joint stock banks in Vietnam and to catch up with the new period - the period of international economic integration, it is necessary for VIB to build strategies to accelerate its sustainable development, safely and efficiently in parallel with restructuring its apparatus in accordance with the product line focusing on customers. Therefore, VIB continued deploying its business strategies for the second period (2008-2013).
However, facing the storms of financial crisis in 2008 and 2009, some of VIB’s business strategies were no longer suitable with the reality. Considering the above issues, and the fact that ¾ of our members are working in Banks of which 2/4 of us is working at Vietnam International Bank, we have decided to choose the topic “Improvement of business strategies for Vietnam International Bank in the 2010-2013 period” Basing on the Business Strategies built by VIB Staffs, and the knowledge we obtained during the MBA program, our team has built and improved the business strategies effectively. Purposes of study Analyzing and assessing business strategies of Vietnam International Bank in the 2008-2013 period as well as strengths and weaknesses of such strategies; Proposing solutions and suggestions to improve Business strategies of Vietnam International Bank; 3. Methods of study Using quantitative and qualitative methods, comparison methods, statistical methods, summarizing methods combined with diagram and table system to present theoretical and practical contents.
Contribution of topic to study 9 GaMBA - X01 – Group 7 This topic of study will systemize activities of Commercial Bank in respect of theory and efficiency and develop methodology to analyze and assess activities of the Bank. It also helps the Bank’ Leaders review the actual situation of its business orientation and plans in the 2008 - 2013 period, and help increase VIB’s competitiveness and accumulated values. Structure of topic In addition to the introduction and Conclusion, the main content of Report consists of 3 chapters: Chapter 1: Rationale for businesses of Commercial Banks- Theoretical issues on Strategic Management. Chapter 2: Actual situation of business strategy of Vietnam International Bank.
Chapter 3: Solutions and suggestions for improving Business strategies of Vietnam International Bank in the 2010-2013 period 10 GaMBA - X01 – Group 7 CHAPTER I RATIONALE FOR BUSINESSES OF COMMERCIAL BANKS - THEORETICAL ISSUES ON STRATEGIC MANAGEMENT 1. Rationale for businesses of Commercial Banks 1.1 Concept of Commercial Banks, their establishment and development */ Concept of commercial bank: According to Peter S. Rose in the book named Commercial Bank Management, “Bank is a type of financial institution offering a list of the most diversified financial services, especially credit, savings and payment service, and performing the most financial functions among business institutions of the economy. Whether in any form, the Bank is an enterprise “making specialized products.” They are specific measures taken by commercial banks to supply or readily supply services for customers in need.
These measures are set into a unified, logical and interactive system instituted in the writing form, regulating mutual interactions among actions in the fields of law, information technology, finance, administration, etc. in order to constitute the value base for the relationship between of the bank (its staff, member units) with customers, as well as constitute a complete technology in customer service. Within the scope of this thesis, the Commercial Bank can be understood as an Enterprise whose regular business lines are to provide most diversified financial services, especially credit, savings and payment service.2 Roles and functions of commercial banks The roles and functions of commercial banks have close relationships with each other. This relationship contains the causal factor.
The functions serve as the backbone. If the functions are not carried out, the roles cannot be brought into play. 11 GaMBA - X01 – Group 7 Basically, commercial banks function as financial intermediaries in the market economy. They mobilize capital from the places where capital is excess and temporarily unused to places which lack and need capital for production and business activities of the economy.
When performing its functions, banks can impact the economy on the scope of activities of both natural persons and legal entities. That role can be: - Capital movement will create a dual benefit - that is mobilizing capital for production, contributing to economic growth and resolving social problems. This meaning is truly great even in micro and macro aspects. In the macro aspect, this movement will create a balance between economy - growth - inflation – job criteria.
Also, the movement will create sources of income in the form of interest income for owners. - Through the capital movement in the economy, the State will apply tools to regulate the economic development at its discretion. - Thanks to this intermediary function, banks can organize operations to create revenues for themselves. Scientists and economists say that banks are lifeblood of the economy.
We can interpret this opinion in the form of an image: the financial intermediary function is the heart and banking operations are the blood vessels carrying blood to feed the body. Operation principles of Commercial Banks 1. Capital limit principle: The principle of operation within the actual capital is the most basic principle in banking operations, and forces banks to think, plan and orient their activities. It also has to enhance the interest of banks in mobilizing capital and stepping up competition to attract capital.
The race for capital sources will stimulate banks to seek more effective and efficient measures to invest in the capital mobilized. Therefore, the capital movement into operations will be more effective, getting more stable development and higher profitability.2 Self-control: The second most important principle that commercial banks must comply is the self-control of Commercial Banks and the responsibility for their businesses. The economic self-control can be interpreted as the freedom to choose the way to use the bank’s own capital and mobilize capital in an effective way for both society and the Banks itself.3 Equality principle: The relationship between customers and the Bank is based on the market basis of equality and mutual benefit; relationships, liquidity and risks must be formed in the market basis. Commercial operations under the State’s management: This is the fourth principle.
In the market economy, banking system is structured into two levels: Central bank is the bank of banks – which is Tier-1 bank and a commercial banking system. According to law, the Central Bank (in Vietnam, it is the State Bank) regulates banking activities.