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RESEARCH DISSERTATION “CONSUMER BANKING BUSINESS STRATERGY OF ABBANK PERIOD 2010 - 2015” Author: Program: 14th Intake: Tutor: Adviser: Hanoi: Ms Phan Thu Hien MBA 2005 – 2007 Mr Vu Tri Dung Mr Pham Anh Dung December 2009 STABLE OF CONTENT COVER TABLE OF CONTENT LIST OF ABBREVIATIONS LIST OF TABLES PREFACE CHAPTER 1: THEORETICAL BACKGROUND ON BUSINESS STRATEGIC MANAGEMENT. 1.1. 1.1.1. 1.1.2. 1.2. 1.2.1. 1.2.2. 1.2.3. 1.3. 1.3.1. 1.3.2. 1.3.3. 1.3.4. 1.4. 1.4.1. 1.4.2. 1.5. 1.5.1. 1.5.2. 1.5.3. Overview of strategic management Definition Strategic Management Process Mission, Vision, Core Values Vision Mission Core Values Strategic Analysis Macro Environment Analysis Industry Environment Analysis Internal Environment Analysis SWOT Matrix Strategic Selection Corporate Strategy Business Strategy Implementation and Evaluation Organizational structure Controlling System Building Action Plan 6 6 8 8 8 8 9 9 9 11 14 15 16 16 17 19 19 20 20 1 2 4 5 6 CHAPTER 2: SITUATION OF BUSINESS STRATEGY OF ABBANK 2.1. 2.1.1. 2.1.2. 2.1.3. 2.1.4. 2.2. 2.2.1. 2.2.2. Business Overview General Information Organization structure Product & services Business situtation of year 2008 Influence of macro envirnment factors Political, legal, policy factors Economic factors 21 21 21 22 23 25 25 25 2 2.2.3. 2.2.4. 2.2.5. 2.2.6. 2.3. 2.3.1. 2.3.2. 2.3.3. 2.3.4. 2.3.5. 2.4. Social and cultural factors Population & labour force Technological factors Integration factors Analysis of industry environment factors Threats from new banks Threats of substitute Threats of customers Threats of suppliers Industry rivalry Comparison of ABBANK’s internal environment with two competitors 26 27 27 27 28 28 28 29 29 29 30 CHAPTER 3: IMPROVE THE BUSINESS STRATEGY OF ABBANK, PERIOD 2010-2015 3.1. 3.1.1. 3.1.2. 3.2. 3.2.1. 3.2.2. 3.2.3. 3.3. 3.3.1. 3.3.2. 3.3.3. 3.4. 3.4.1. 3.4.2. Building and selecting the business strategy: S.W.O.T Analysis G.R.E.A.T Analysis Implementation orientation and scope of the business strategy for card products and services of ABBANK Orientation of long term priority strategy Objectives of the card business strategy of ABBANK Implementation scope of the strategy Detailed action plan Plan of HR strategy Plan for R&D team set up Plan for cards product & services Plan of R&D team set up: Supervision and evaluation of the business strategy implementation Supervision of business strategy implementation Adjusting the business strategy and the action plan 40 40 41 42 42 42 42 48 49 49 50 51 51 52 CONCLUSION REFERENCES LIST OF ABBREVIATIONS ACB ADB AFTA ANZ ATM Asia Commercial Bank Asia Development Bank Asian Free trade Area Australia and New Zealand Bank Automatic Transfer machine POS QD-NHNN SBV ODA SIBOR Point of Service Decision of VN State Bank State Bank of Vietnam Official Development Assistance Singapore Interbank offered rate 3 CD GDP HSBC IMF ISO IT L/C POS Table 2.1 Table 2.2 Table 2.3 Table 2.4 Table 2.5 Table 2.6 Table 2.7 Table 2.8 Table 2.9 Certification of Deposit Gross Domestic Product Hong Kong Shanghai Bank Corporate International Monetary Fund International Standard Organization Information Technology Letter of Credit Point of sale SMS SOCs T.Os WTO USD VND NPL ATM LIST OF TABLES Short Massage Service State owner Companies Transaction Offices World Trade Organization United State Dollar Vietnam dong Non Performance Loan Automaticed teller machine LIBOR London Interbank Offered rate Current organization of ABBANK Growth of fund mobilization and credit of ABBANK The business result of ABBANK Outlook of Vietnam economic period 2010 – 2013 Market Opportunities Population growth rate Phân tích tổng hợp cơ hội & thách thức từ các tác động của môi trường vĩ mô Phân tích tổng hợp cơ hội & thách thức của các tác động đến từ môi trường ngành Comparison the performance of ABBANK and Competitors Comparison of core competencies among ABBANK and its competitors Evaluation and comparison of core competencies among ABBANK and competitors Evaluation on the overwhelming competencies of ABBANK and competitors Table 2.10 Table 2.11 Table 2.12 Table 3.1 Table 3.2 Table 3.3 Table 3.4 Table 3.5 Table 3.6 Table 3.7 Table 3.8 S.W.O.T Analysis of ABBANK Bảng tổng hợp phân tích mô hình G.R.E.A.T Phân tích mô hình BCG tiềm năng thị trường thẻ Phân tích phân khúc khách hàng mục tiêu sử dụng dịch vụ thẻ Phân tích cơ cấu khách hàng và kế hoạch phát triển trong 5 năm Bảng xây dựng kế hoạch triển khai nhân sự R&D cho khối bán lẻ Bảng xây dựng kế hoạch tổ chức công việc của R&D Kế hoạch phát triển sản phẩm, dịch vụ thẻ 2010 – 2015 4 PREFACE The financial market of Vietnam is now more and more developed in terms of scale, formulation, quality and the market participation structure. According to the WTO road map and Vietnam American commercial agreement, Vietnam commits to treat fairly among the domestic and foreign banks on banking services, eliminating all limitations of access to the domestic banking market. However, in comparison with the foreign banks, the Vietnam banking system is still weak in many aspects such as capital, management experience, business, technology, quality and variety of services and risk management as well. This requires each commercial bank to have suitable solution for development and competitiveness enhancement, mastering the domestic market and reaching to the international financial market. Among which, the formation of big banks with multi-functions and diversified business, which can adapt well to quick changes in the modern world is now becoming a rational demand and an indispensible tendency. On the other hand, the competition among the domestic commercial banks as well as the rivalry between domestic banks and financial institutions are aggressive now. On the banking and finance market, more and more investment funds, insurance companies, urban banks are founded and the Vietnam stock market is exciting. All those phenomenon result in many financial investment channels which are of choice to the enterprises and individuals. Financial institution is fighting directly with banks on fund mobilization and investment and the competition in the banking sectors is tougher and tougher. In the light of the above practice, for sustainable survival and development, Vietnamese banks need to build up a suitable development strategy which is matching well with the practical features in every development stages. Besides, the world financial crisis and the global economic downturn since end of 2007 has given considerable impacts on Vietnam’s banking sector. This crisis is also a chance for us to have a broader and more practical view on all the threats, opportunities, strengths and weaknesses of the commercial banking sectors, which posed a critical need of commercial banks for reviewing and planning their own development strategy. With the topic of “Strategic Management”, I conducted this study on a bank, where I am now working for, in an aim to apply knowledge obtained during the training program in analyzing and suggesting solutions on business strategic management. With the above reasons, I decided to select the title: “Improving the business strategy, duration 2010-2015 of the An Binh Joint Stock Commercial Bank” in a wish to contribute to the sustainable development of the An Binh Joint Stock Commercial Bank in such a trend of regional and global integration. 5 CHAPTER I THEORETICAL BACKGROUND ON STRATEGIC MANAGEMENT ACTIVITIES OF AN ORGANIZATION 1.1. Overview of strategy and business strategy What is a strategy' 1.1.1. Definition 1.1.1.1. The definition of strategy is a long term plan of action designed to achieve a particular goal or set of goals or objectives. Strategy is management's game plan for strengthening the performance of the enterprise. It states how business should be conduct to achieve the desired goals. Without a strategy management has no roadmap to guide them. Creating a strategy is a core management function. It must be said that having a good strategy and executing the strategy well, does not guarantee success. Organizations can face unforeseen circumstances and adverse conditions through no fault of their own. Strategy can be simply defined as a plan aiming at achieving competitive advantage that cannot be replicated by competitors. A good strategy with effective implementation can help managers and staffs of all levels well define the objective, recognize the action orientation and contribute to the success of the organization. On contras, an organization without a clear strategy and direction will be a boat without the monitor. In order to better understand definitions of strategy, we can go through some view points of famous economists: View point 1: Strategy is a special plan G. Arlleret - “Strategy is the definition of roads and means to reach to an established objectives through policies” Gluecl - “Strategy is a type of comprehensive and general plan which is designed to ensure the achievements of organization’s objectives” Alain Threlart said “Strategy is an art which the enterprise use to fight against competition and win” M.Porter said “Strategy is the art of building sustainable competitive advantage to self defense” View point 2: Strategy is an art - So, these authors consider strategy as an art of competition and business development Viewpoint 3: Strategy is both a plan and an art. “Business strategy is an art of coordinating all the activities and controlling them in order to achieve the long term objectives of the enterprise”. “Business strategy is an art of designing and organizing means in order to reach to long term objectives of the enterprises, ensuring the adaptation to the change of business environment” 6 Via above viewpoints, we can realize that the strategy relates to objectives of an organization, strategies must be of helpful to the organization in obtaining established objectives. However, the formulation and decision of strategy according to the objectives are not enough; the strategy should put the concrete action into the right time with certain resources in order to realize the objectives. The strategy of the organization includes not only what the organization wants to perform, but also the approaches to complete the task. A separate action is simply not a strategy. All strategies should heading for the objectives of the organization and are established on the basis of internal resources (strengths, weaknesses), external factors (opportunities, threats) So, in conclusion, we can define generally the strategy as followed: “Strategy is a wide range of complex actions in order to mobilize all the resources of the organization to achieve a certain goal” 1.1.1.2. What is business strategy' Business Strategy is a term used in business planning that implies a careful selection and application of resources to obtain a competitive advantage in anticipation of future events or trends. Business Strategy is concerned more with how a business competes successfully in a particular market. It concerns strategic decisions about choice of products, meeting needs of customers, gaining advantage over competitors, exploiting or creating new opportunities etc. According to Fred R.David “Business strategy is a mean to achieve long term objectives” We can say that the business strategy is actually means which enable the enterprise to achieve long term goals. Business strategy does not aim at mapping out detailed action plan, but they are general program, solutions on efficient mobilization of all resources in order to realized defined goals. In general, business strategy can be defined as followed: Business strategy is a range of commitments and actions that a company uses to achieve a competitive advantage by exploiting core competencies on a certain market 1.1.1.3. Fundamental issues of business strategy: Business strategy needs to define 3 critical issues which are: Who to serve Which demand to satisfy How to satisfy the above demand Role of business strategy: Business strategy help the enterprise to realize clearly their goals, objectives, direction which will serve as the premises and lodestar for all the business and production activities of the enterprise. Business strategy enables the enterprise to realize and capture all the business opportunities, at and at the same time proactively overcome all the threats on the competitive market; 1.1.1.4. - 7 working out policies and determinations on business and production activities which are going along with the market movements. The business strategy should contribute to the enhancement of efficiency in using resources; strengthen the competitive position of the enterprise for the long term sustainable development of the enterprise. 1.1.2. Strategic Management Process: Strategic management process is a chain of activities, including commitments, determinations and actions of an enterprise in order to obtain the strategic competitive advantage; sustainable competitive advantage with the above average profit. Strategic management process can be divided into 4 stages: Stage 1: Defining the objectives of an enterprise on the basic of building Mission, Vision, and Core Value by reviewing and analyzing environment factors to identify threats, opportunities, weaknesses, strengths, core competencies and competitive advantage. Stage 2: Building and Selecting suitable strategy for the enterprise Stage 3: Implementing the strategy Stage 4: Reviewing and evaluating the strategic management Vision; Mission; Core Values 1.2. 1.2.1. Vision: Vision is a mental image of the possible and desirable future state of the organization. This image, which we call a vision, may be as vague as a dream or as precise as a goal or a mission statement. Vision which elevates the energy, enthusiasm and self-esteem of everyone in the company while ensuring that everybody sees a benefit in following the vision... So what is a vision' : Corporate vision is a short, succinct, and inspiring statement of what the organization intends to become and to achieve at some point in the future, often stated in competitive terms. Vision refers to the category of intentions that are broad, all-inclusive and forward-thinking. It is the image that a business must have of its goals before it sets out to reach them. It describes aspirations for the future, without specifying the means that will be used to achieve those desired ends.” 1.2.2. Mission: A mission statement is an organization's vision translated into written form. It makes concrete the leader's view of the direction and purpose of the organization. For many corporate leaders it is a vital element in any attempt to motivate employees and to give them a sense of priorities. A mission statement should be a short and concise statement of goals and priorities. In turn, goals are specific objectives that relate to specific time periods and are stated in terms of facts. The primary goal of any business is to increase stakeholder value. The most important stakeholders are shareholders who own the business, employees who work for the business and clients or customers who purchase products and/or services from the business. 8 So what is the mission' : The mission defines the fundamental purpose of an organization or an enterprise, basically describing why it exists and what it does to achieve its Vision. A corporate Mission can last for many years, or for the life of the organization. It is not an objective with a timeline, but rather the overall goal that is accomplished over the years as objectives are achieved that are aligned with the corporate mission” Mission can be different about the length, business values and business objectives. The mission is the reason for the existence of the company on the market, who you are and which product or service you will bring to the customer and public. All the decision during the process of strategic planning and the management of company should be always aligned with the mission statement” The mission statement can be the motivation for the employees when the objectives and core values of the company are communicated with the customer and public. 1.2.3. Core Value: Core values are all for which the company can not pay with money or change. All core values will create a premise to formulate the regulations of the company. The core values can be defined as followed: A system of beliefs influencing the behaviors among people and groups of people. Core values are the soul of the organization; Efficient values which has been attached deeply within the organization. Core values are necessary and long term regulations:  Working out decision and action of an organization;  Not a cultural or detailed action;  Do not serve the financial objectives and short term advantages;  The organization will want to keep the core values even when the mission has been changed. Core values don’t care the population; they got the true value and huge importance for the insiders of the organization. 1.3. Strategic Analysis. All the activities of the organization are influenced by factors of macro environment (general environment) and micro environment (industry environment and internal environment), so in order to plan a strategy for the organization, we will need to analyze all the environmental factors and their impact on the activities of the organization... 1.3.1. Macro environment analysis. Macro environment analysis will help the organization to realize and evaluate: Opportunities (O) of the environment which the organization can exploit and the Threats (T) which the organization can overcome. Then, it enables the organization to build a clear business mission, identify the long-term feasible objectives and design a suitable strategy with the business objectives. 9 We can use the PEST model to analyze the macro environment. This model use factors such as Political, Economics, Socio cultural & Technological They are four factors which affect directly economic sectors, these are external elements of the enterprise and the industry, and the industry must be affected as a natural element. Enterprises which are based on the impacts will give out suitable policies and business activities. 1.3.1.1. Political and legal factors: These are factors which can affect all the business sectors in a region, political and legal factors can create danger for the survival and development of any industry. When doing business on an administrative unit, enterprises will be forced to follow all the political and legal factors at that region... Stability (politics, foreign affair): The regime with high stability will create good favor for the business activities and on the other hand, it will give bad affect on the business performance on its region. Tax policies (Import-export tariff, consumption tax, income tax…): will affect the revenue and profit of the enterprise. Laws (Law of investment, Trade law, Labor law, Anti-monopoly law, anti-dumping law…): which can have big affect on the enterprise' The government’s policy can have influence on the enterprise in a way that it can create advantages or challenges for the enterprise. For example: trade policies, industry development policies, economic development policies, tax policies, competition management policies, consumer protection policies… - 1.3.1.2. Economic factors: Enterprise needs to pay attention to the economic factors in both long-term and short term and the government’s intervention in the economy. Normally, enterprise will base on the economic factors to decide investments on industries and regions. State of the economy: Every economy has its own circle, in certain stage of the economic circle; the enterprise will have their own suitable decisions. Factors influencing the economy: interest, inflation… Government economic policies: law of basic salary, government economic development policies, and preferential policies for industries: tax reduces assistance… Economic future prospects: GDP, GDP growth, GDP growth on investment… 1.3.1.3. Cultural and social factors: Each nation or territory has its own cultural and social factors which are the features of the consumers in that region, Cultural factors are value which formulates the society, which can facilitate the survival and development of the society. However, we can not deny the cultural exchanges of different cultures and nations, which can change the consumption psychology, lifestyle and create the development prospective for the industries. 10 Beside culture, social factors also draw interest of enterprise in market research, social factors will divide the public in to different groups of customers, each group have its own feature, psychology, income… such as: Average age, health state, nutrition condition, hygiene Average income, income allocation, living conditions Lifestyle, education, viewpoints on beauty, living psychology 1.3.1.4. Technological factors: Relating to the degree and direction of the technological progress or innovation which happen in the society, including products, technological process, new materials, general degree of the scientific activities, basic scientific innovations. Beside fundamental factors according to the above PEST model, nowadays, when doing the market research, people normally bring about the global factors (integration factors) which become the micro economic factor influencing on the industry. 1.3.1.5. Integration factors: No one can deny the globalization trend and this trend does not solely create opportunities for enterprises, nations in the business and production development. Globalization created competitive pressure, with competitors comes from all the regions. The integration process enables the enterprises to adjust in order to suit with the comparative advantages, labor allocation of the region and the world. What important is that integration process will facilitate the elimination of trade barriers. Enterprise will have opportunities to engage in business with partners who are far away in term of geography; customers of the enterprise are not only domestic market where the enterprise is operating, but also customers from all around the world. - 1.3.2. Industry environment analysis. There are many models for industry environment analysis, among which the five competitive forces model of M. Porter is the most popular. This model analyzes the industry environment via the evaluation of 5 forces which influence the activities of organization, including: 11 New Entrants The Threat of New Entrants into the Industry Suppliers Bargaining Power Bargaining Power Customers Rivalry (Internal competition) Threat of Substitute Products or Services Substitutes 1.3.2.1. The Bargaining Power of Suppliers: The bargaining power of suppliers is also described as the market of inputs. Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm. Suppliers may refuse to work with the firm, or, e.g., charge excessively high prices for unique resources. Suppliers, if powerful, can exert an influence on the producing industry, such as selling raw materials at a high price to capture some of the industry’s profit. Their influence depends on the products and services provided by them. The degree of influence depends very much on following factors: Supplier switching costs relative to firm switching costs Degree of differentiation of inputs Presence of substitute inputs Supplier concentration to firm concentration ratio Employee solidarity (e.g., labor unions) 1.3.2.2. Bargaining power of customers: The bargaining power of customers is also described as the market of outputs: the ability of customers to put the firm under pressure, which also affects the customer's sensitivity to price changes. The power of buyers is the impacts the buyer has on a producing industry. In general, when the buyer is strong, the buyer sets the price. - Buyer concentration to firm concentration ratio Degree of dependency upon existing channels of distribution 12 - Bargaining leverage, particularly in industries with high fixed costs Buyer volume Buyer switching costs relative to firm switching costs Buyer information availability Ability to backward integrate Availability of existing substitute products Buyer price sensitivity Differential advantage (uniqueness) of industry products RFM Analysis 1.3.2.3. The Threat of New Entrants to the Industry: A new entrant to the industry is a brand new competitor or maybe a new brand from on old competitor. A new competitor to your industry may erode some of your customer base, your challenge is to determine if it is likely that a new competitor will come along and try to steal your customers away. New competitors are restricted by up front capital costs, access to technology or requirements to obtain licenses then your market position is likely to be protected. However, if there are no barriers to entry your position could be weakened. Profitable markets that yield high returns will draw firms. This results in many new entrants, which will effectively decrease profitability. Unless the entry of new firms can be blocked by incumbents, the profit rate will fall towards a competitive level. Entry barriers are: - The existence of barriers to entry (patents, rights, etc.) Economies of product differences Brand equity Switching costs or sunk costs Capital requirements Access to distribution Customer loyalty to established brands Absolute cost advantages Learning curve advantages Expected retaliation by incumbents Government policies 1.3.2.4. The threat of substitute products: The existence of products outside of the realm of the common product boundaries increases the propensity of customers to switch to alternatives: - Buyer propensity to substitute 13 - Relative price performance of substitutes Buyer switching costs Perceived level of product differentiation 1.3.2.5. Competitive Rivalry: What is important here is the number and capability of the competitors – there are many competitors, and they offer equally attractive products and services. In tradition economic model, competition among rival firms drives profit to zero. But competition is not perfect and firms are not unsophisticated passive price takers. Rather, firms strive for the competitive advantage over their rivals. The intense of rivalry among firms varies across the industries. In pursuing a competitive advantage over their rivals, a firm can choose from several following competitive moves: - Changing the price – raising or lowering the price to gain a temporary advantage Improving product differentiation – improving feature, implementing innovations in the manufacturing process an in the product itself. Creatively using the distribution channels – using a distribution channel that is novel in the industry Exploiting the relationship with suppliers. - - The intensity of rivalry is influenced by following industrial characteristics: a large number of firms, slow market growth, high fixed cost, high storage cost or high perishable products, low switching costs, low level of product differentiation, high strategic stakes, high exist barriers, a diversity of rivals, industry shakeout 1.3.3. Internal Environment Analysis. The Internal Analysis of strengths and weaknesses focuses on internal factors that give an organization certain advantages and disadvantages in meeting the needs of its target market. Strengths refer to core competencies that give the firm an advantage in meeting the needs of its target markets. Any analysis of company strengths should be market oriented/customer focused because strengths are only meaningful when they assist the firm in meeting customer needs. Weaknesses refer to any limitations a company faces in developing or implementing a strategy ('). Weaknesses should also be examined from a customer perspective because customers often perceive weaknesses that a company cannot see. Being market focused when analyzing strengths and weaknesses does not mean that non-market oriented strengths and weaknesses should be forgotten. Rather, it suggests that all firms should tie their strengths and weaknesses to customer requirements. Only those strengths that relate to satisfying a customer need should be considered true core competencies. The internal analysis is a comprehensive evaluation of the internal environment's potential strengths and weaknesses. Factors should be evaluated across the organization in areas such as: Valuable ability and trade secret 14 - Valuable tangible assets Valuable human assets Valuable intangible assets Alliance or partnership with the partners Key competitive capacity Results from internal environment analysis are the definition of resources and core competencies from which the enterprise can build the competitive advantage and strategic advantage for the enterprise. 1.3.4. SWOT matrix: 1.3.4.1. SWOT matrix and selection of an optimum strategy SWOT matrix is a strategic planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats. The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection. If the analysis target of SWOT is a business strategy, the research objective is improving the enterprise performance; SWOT can be understood as followed: Strengths: Maintain, develop, use as leverage Weaknesses: Improve attributes of the person or company that are harmful to achieving the objective. Opportunities: Good anticipation of external conditions that is helpful to achieving the objective. Threats: external conditions which could do damage to the objective. SWOT is a very powerful tool enabling the enterprise to find out the problem or make decision, reviewing the decision in business organization and management. On the fact, the SWOT application in building business plan, strategic planning, competition evaluation, market survey, product development and also in the study reports…which are selected by many enterprises. SWOT analysis can build a better understanding for the enterprise on its: resource strengths, resource weaknesses, best opportunities and basic threats. Via SWOT analysis, enterprise can draw out a conclusion on the approach to mobilize resource in a certain internal and external situation of the enterprise. 15 SWOT matrix - - S: Strengths Strong strategy Strong finance Good reputation Market leading Using strengths to capture the Core competencies opportunities Price advantage Strong advertisement Production innovation skills Good customer relationship Good product quality Alliance or joint venture W: Weaknesses WO Strategy - No clear strategic orientation - Out-of-date equipments - Poor accounting, high bad debts - Total spending is higher than the competitors Limiting the weakness and - Lack some fundamental skills capture the opportunities and resources - Loss - Production troubles - Poor R&D - Narrow product lines - Poor marketing skills 1.4. Selecting the priority strategy: 1.4.1. Corporate strategy: Table 1.3.4. SWOT Analysis Synthesis: O: Opportunities T: threats Serving more groups of - More new competitors customers entering the market Expanding to the new - Losing revenue to the geographic regions substitute products Expanding the product line - Slow market growth Moving the skills to a new - Conflict in movements products of foreign exchange rate Vertical integration and commercial Expanding to gain more policies market share from the - New expensive competitors regulations Buying the competitors - Vulnerability in front of Alliance or join-venture to business enlarge the coverage - Customer or buyer have Expanding to exploit new more advantages opportunities. - Transition of Expanding to improve the customers’ demand brand/image - Demographic changes SO Strategy ST Strategy Using strengths to limit the affect of threats WT Strategy Limiting the weaknesses and avoiding threats 16 Corporate strategy refers to the overarching strategy with regard to long-term aims and objectives of a company and ways of achieving them by allocation of resources in order to meet the expectation of shareholders. Corporate strategy includes detailed actions which a company carries out to gain the competitive advantage via selecting and managing a group of different business activities and competition in certain industries and product market. 1.4.1.1. Differentiation strategy: This strategy is suitable for enterprise which can not achieve their growth objectives in the current production industry with current products on the market. This type of strategy include: Vertical differentiation strategy, horizontal differentiation strategy, combined differentiation strategy 1.4.1.2. Focus growth strategy: They are key strategies aiming at improving popular products or markets without change of the input elements. Three strategies to select focus growth include: market penetration strategy, market development strategy, product focus strategy. 1.4.1.3. Integration development strategy: This strategy is suitable for organization within strong production industry, with a fear that focus growth can not be realized due to the market saturation. Two corporate strategies heading for integration growth include: Forward integration strategy and backward integration strategy. 1.4.1.4. Decrease strategy : This strategy is suitable when the enterprise need to concentrate to enhance the productivity after a period of fast development, when the longer term development opportunities are no longer available in the period; other more attractive opportunities are following. There are 4 types of this strategy: Simple justification strategy, capital withdrawing strategy, harvesting and payment. 1.4.2. Business strategy: Business strategy refers to the aggregated strategies of analysis single enterprise in order to achieve a sustainable competitive advantage and long-term success in its chosen arenas or industries. 1.4.2.1. Cost Leadership Strategy: This generic strategy calls for being the low cost producer in an industry for a given level of quality. The firm sells its products either at average industry prices to earn a profit higher than that of rivals, or below the average industry prices to gain market share. In the event of a price war, the firm can maintain some profitability while the competition suffers losses. Even without a price war, as the industry matures and prices decline, the firms that can produce more cheaply 17 will remain profitable for a longer period of time. The cost leadership strategy usually targets a broad market. Some of the ways that firms acquire cost advantages are by improving process efficiencies, gaining unique access to a large source of lower cost materials, making optimal outsourcing and vertical integration decisions, or avoiding some costs altogether. If competing firms are unable to lower their costs by a similar amount, the firm may be able to sustain a competitive advantage based on cost leadership. Firms that succeed in cost leadership often have the following internal strengths: Access to the capital required making a significant investment in production assets; this investment represents a barrier to entry that many firms may not overcome. Skill in designing products for efficient manufacturing, for example, having a small component count to shorten the assembly process. High level of expertise in manufacturing process engineering. Efficient distribution channels. Firms that succeed in cost leadership often have the following internal strengths: Each generic strategy has its risks, including the low-cost strategy. For example, other firms may be able to lower their costs as well. As technology improves, the competition may be able to leapfrog the production capabilities, thus eliminating the competitive advantage. Additionally, several firms following a focus strategy and targeting various narrow markets may be able to achieve an even lower cost within their segments and as a group gain significant market share. 1.4.2.2. Differentiation strategy: A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition. The value added by the uniqueness of the product may allow the firm to charge a premium price for it. The firm hopes that the higher price will more than cover the extra costs incurred in offering the unique product. Because of the product's unique attributes, if suppliers increase their prices the firm may be able to pass along the costs to its customers who cannot find substitute products easily. Firms that succeed in a differentiation strategy often have the following internal strengths: Access to leading scientific research. Highly skilled and creative product development team. Strong sales team with the ability to successfully communicate the perceived strengths of the product. Corporate reputation for quality and innovation. The risks associated with a differentiation strategy include imitation by competitors and changes in customer tastes. Additionally, various firms pursuing focus strategies may be able to achieve even greater differentiation in their market segments. 18 1.4.2.3. Focus strategy: The focus strategy concentrates on a narrow segment and within that segment attempts to achieve either a cost advantage or differentiation. The premise is that the needs of the group can be better serviced by focusing entirely on it. A firm using a focus strategy often enjoys a high degree of customer loyalty, and this entrenched loyalty discourages other firms from competing directly. Because of their narrow market focus, firms pursuing a focus strategy have lower volumes and therefore less bargaining power with their suppliers. However, firms pursuing a differentiationfocused strategy may be able to pass higher costs on to customers since close substitute products do not exist. Firms that succeed in a focus strategy are able to tailor a broad range of product development strengths to a relatively narrow market segment that they know very well. Some risks of focus strategies include imitation and changes in the target segments. Furthermore, it may be fairly easy for a broad-market cost leader to adapt its product in order to compete directly. Finally, other focusers may be able to carve out sub-segments that they can serve even better. 1.5. Implementation and Evaluation: 1.5.1. Organizational structure: All organizations need an organizational structure to carry out and manage its strategies. The structure of an initial organization is shaped according to the strategic options of the organization and when it’s established, the structure will give impacts on current strategic performance as well as future strategic selection. The organizational structure will figure out: Relationship, procedures, control system, responsibility and decision making process which feature the organizational structure. The job need to be done and how to do it when the organization built up strategy or strategies. The organization want to realize its mission, vision need to build up an efficient organizational structure, which will bring about: Stability: The ability which is necessary for managing daily fixed process as well as the forecasted process. Flexibility: Bring about the ability to develop competitiveness, at the same time being flexible in allocating resources for activities to achieve necessary competitive advantage. Organization usually changes their structure when its size and complication are increasing. There are 3 fundamental types of structure: Simple structure: In this structure, the enterprise owner who is also the direct managers of all the important decision, and the supervisor of performance of all staffs. This structure is suitable for the focus strategy and business strategy. 19 - Functional structure: The role of Chief Executive Officer (CEO) and functional managers will appear in this model. This structure will be suitable with both corporate strategy and business strategy. Multi-sections structure: in this structure, the managers of all levels in the organization will divide the responsibility of all functional managers in daily activities and business strategy. Functional departments will operate like centers of profit/ cost. This structure will be working well in an organization via diversifying. - 1.5.2. Controlling system: An organization needs controlling activities in order to guide the strategic implementation, enabling a good comparison between the practical results with the expectation. At the same time, suggest solutions to improve and prevent when the organization achieve the results which do not meet the expectation. Normally, there are two ways to control the organization: Strategic control: Referring to the matching between what the organization should do (Opportunities from external environment) and what the organization can do (competitive advantage of the organization). The strategic control will evaluate the focus of organization on procedure to implement the strategies. Financial control: Via measurement of financial ratios such as: ROI, ROA… These ratios are better than expectation and on growth trends; the organization can implement the strategy successful. - Depending on the strategic option, organization can have different controlling methods, example: big multi-businesses corporation using cost leadership strategy to focus on finance control, while the company and business units use the differentiation strategy to focus on strategic control. 1.5.3. Building action plan: In order to implement the strategy, organization need to work out the detailed action plan for each stage. Action plan building will help the organization to control the progress and results of each strategic stage, then make necessary adjustments to keep track with the strategic objectives. The action plan will help the organization to prepare and allocate resources investment proactively and efficiently. 20 CHAPTER II CURRENT BUSINESS STRATEGY OF AN BINH JOINT STOCK COMMERCIAL BANK OVER THE LAST PERIOD 2.1. Overview of the AN BINH joint stock commercial bank. 2.1.1. General information: An Binh joint stock commercial bank (ABBANK) was found according to the Permission Certificate No 0031/GP-NHNN dated 15/04/1993 by the General Director of The State Bank of Vietnam. Full name Abbreviation Website Charter Capital Head quarter : An Binh Joint Stock Commercial Bank : ABBANK : www.abbank.vn & www.youcard.vn : 2.850 billions dongs : No 170 Hai Ba Trung, District 1 , HCMC Logo Slogan : : Our solutions, Your smiles ABBank’s current network includes 82 branches and transaction offices (01 transaction center, 11 branches, and 70 branches and sub-branches) cover almost all the big cities and provinces of Vietnam. Strategic partners of ABBank are big corporations and banks which are operating in Vietnam and abroad such as: the biggest bank of Malaysia – May bank, EVN, Gleximco… ABBANK strives to build a strong brand with internal strengths, transparent performance, and social associations in business activities. With the objectives of becoming one among the five leading joint stock commercial banks in Vietnam and striving for the 1st position in terms of modernization, professionalism and prestige after 5 years. ABBANK has put the whole system online through modernization with the core banking software, which is in partnership with Temenos in 2008. Step by step, ABBANK has built and improved the regulations on professional performance and procedure. It also pays special attention to risk management as well as modernization of domestic international payments procedure. 2.1.2. Organizational structure of ABBANK The current organizational chart of ABBANK is multifunctional form. The detailed functions of departments are following: 21 Table 2.1: Current organization of ABBANK BOARD OF CONTROLLER SHAREHOLDERS’ MEETING BOARD OF MANAGEMENT BOARD OF DIRECTOR Main Branch Hanoi Branch Da Nang Branch Can Tho Branch Vung Tau Branch Binh Duong Branch Bac Lieu Branch Gia Lai Branch Sơn La Branch Hai Phong Branch Quang Ninh Branch HR A&F Department Retail Banking Corporate Banking Law & Compliance External affairs Internal control Financial Investment Board of strategic client development Admin Dept. Core banking Center IT center Card Center International payment center Accounting Dept. Operation Division Risk Management EXECUTIVE SECRETARY - Shareholders’ meeting: The highest powerful agency, the shareholder meeting is conducted one a year when the fiscal years is finished or unexpected meeting according to the regulation. Board of Management: The board of management is working according to the principle, based on the combination of the collective management with the management and direction of the Chairman of Management Board and strengthens the responsibility of each management board member. Chairman of the Management Board: Chairman of the Management board is the legal representative of ABBANK. Management system of ABBANK includes:  Board of Management includes the General Director, Deputy General Directors, Chief accountant and the supporting system includes operation director, departments, and boards, headquarter and centers. Professional divisions include 9 fundamental divisions: Corporate banking, retail banking, risk management, Capital source and investment, Core banking system, IT center, Card center, HR… Leading each division is a division manager elected by the general director. The general director will assign the deputy general directors to take over the functions of division managers. -  2.1.3 Products and Services of ABBANK: Products, services of ABBANK are established and divided into groups according to the classification of customers. The corporate banking, individual banking, investor banking.. 22 - Corporate banking: ABBANK provides corporate with all-in financial-banking products and services such as loans, factoring, guarantee services, import/export financing, account services, trade services… Individual banking: ABBANK provides individuals with fast and complete credit products as well as flexible savings products such as installment loan for house/land purchase or house renovation; installment loan for house/land purchase with tenor up to 30 years and life insurance for consumer; installment loan for car purchase; unsecured loan for consumption; installment loan for manufacturing; working capital financing; flexible secured loan for consumption; YOU saving products: interest rate based on actual deposit days, escalating savings,… and payment services, internal and external remittance… Investor banking: ABBANK provides individual and corporate investors with authorized services as well as investment consultancy. ABBANK particularly provides corporate investors with services such as financial consulting, consulting and guarantee on bond issuance, acting as agent of bond issue. ABBANK’s competitive features are recognized by the provision of flexible, effective and safe financial solutions with friendly service; focus on customers’ needs and satisfaction in the development of any business models and organizational structure; ensuring of excellent and consistent service delivery based on standard technology and process as well as skilled staffs Up to 30/06/2009, the performance of ABBANK is following: - - 2.1.4. The business situation and result in 2008 and first 6 months of 2009: Total Asset Fund mobilization Total credit Over due debts Bad debts : 13.747 billions dongs : 7.245 billions dongs : 6.538 billions dongs : 273.10/ 2.705 (10,60%) : 2,5% : 0.8% Table 2.2: Growth of fund mobilization and credit of ABBANK (Unit: billions dongs) No 1 Ratio Fund Mobilization By term - Non term - Term of less 12 months - Term of over 12 months By client - Corporate - Individual Credit activities By Terms - Short-term - Medium-term - Long-term By customer - Corporate - Individual Credit quality Up to 31/12/08 7.245,356 1.304,112 5.578,702 362,253 3.802,121 3.443,235 6.538,980 3.391,161 1.421,688 1.726,131 4.117,438 2.421,542 Up to 30/6/09 11.658,451 2.331,690 8.160,916 1.165,845 6.138,727 5.519,724 8.618,731 4.476,332 1.876,628 2.265,771 6.055,056 2.563,674 Plan of 30/6/09 8.756,876 1.751,375 3.940,594 3.064,907 4.037,808 4.719,068 7.780,354 4.034,946 1.691,584 2.053,823 5.115,943 2.664,411 Growth on 31/12/2008 Absolute % 3.827,644 53% 1.027,578 2.582,214 803,592 2.336,606 2.076,489 2.079,751 1.349,141 646,807 83,802 1.937,618 2.322,105 78% 46% 221% 61% 60% 32% 39% 45% 4.8% 47% 96% % of plan 133% 133% 207% 38% 152% 117% 111% 87% 91% 66% 118% 96% Rate of profit/ charter capital 2.1.4.1. Fund mobilization and credit: 2 3 23 No Ratio - Over due debts(%) - Bad debts (%) - Medium & long term credit (%) - Short term credit(%) - Risk provision deduction Up to 31/12/08 2,95% 1,5% 48% 52% 81.229 Up to 30/6/09 2,5% 0,8% 45% 55% 4.740 Plan of 30/6/09 2,2% 0,5% 55% 45% 4.034 Growth on 31/12/2008 Absolute % -0.45% -15% -0,7% 47% 7% (91%) 3% (73.845) 123% 39% % of plan 29% 104% 117% On fund mobilization: Total mobilized fund up to 30/6/2009 reached 8.618,731 billions dongs, 2.901,575 billions dongs more than plan (The plan up to 30/6/09 is expected 7.780,354 billions dongs), went up 111% the whole year plan (The plan until the end of the year for mobilized fund is 11.073.000 billions dongs). In the total outstanding mobilized fund, the exceeding amount is mainly coming from the corporate fund mobilization (increase by 2.100,919 billions dongs) The mobilized fund structure include mainly the term of less 12 months, amounted to 6.882 billions dongs/ 7.245 billions dongs (accounting for 95%). Outstanding credit up to 30/6/2009 is 8.618,731 billions dongs, exceeding 838,377 billions dongs over the plan (The expected figure to 30/6 is 7.780,354 billions dongs) and reach 111% the whole year plan (Total outstanding credit according to the whole year plan is 10.460.000 billions dongs). The total exceeding outstanding credit come mainly from corporate clients ( amounted to 2,100.919 billions dongs). In the credit structure, the proportion of long term credit accounts for 48%. ABBANK built and completed the domestic payment system in the whole system via channels such as CITAD, AGRIBANK. For international payment, transactions are totally handled at the payment center, which marks ABBank among the first commercial banks in Vietnam conducting central international payment activities, handling transactions at the center. Thanks to that, the risk is minimized, the payment service quality is increased, and the prestige of ABBANK is therefore strengthened on the international market. On Credit: - - 2.1.4.2. Payment activities: 24 2.1.4.3. Business results: Table 2.3: The business result of ABBANK (Unit: millions dongs) No 1 Ratio Total revenue - Revenue from interest and similar sources - Revenue from services - Revenue from foreign currency trading - Revenue from securities trading - Revenue from securities investment profit - Revenue from stock buying profit - Others Total spending - Spending for interest and similar items - Spending for services - Spending for trading foreign currency - Spending for securities trading - Spending for securities investment - Spending for stock buying - Others - Operational spending (Besides staff spending) - Spending for staffs - Spending for other activities Profit before tax Up to 31/12/08 1,671.980 1,494.819 45.785 6.548 5.695 56.098 34.862 7.463 Up to 30/6/09 1,877.116 1,644.301 52.653 7.203 7.404 75.732 50.550 8.209 1,699.132 1,285.179 30.001 15.522 34.929 17.685 19.485 0.812 145.317 115.453 34.595 175.991 Difference (Absolute) 205.136 149.482 6.868 0.655 1.709 19.634 15.688 0.746 138.294 61.199 6.000 4.024 4.556 8.025 5.333 0.193 18.954 23.091 6.919 89.867 Difference (%) 12% 10% 15% 10% 30% 35% 45% 10% 8% 5% 5% 35% 15% 83% 38% 25% 15% 25% 25% 104% 2 1,560.838 1,223.980 24.001 11.498 30.373 9.660 14.152 0.773 126.363 92.362 27.676 86.124 3 (Source: Report on business result 6 months of 2009 of ABBANK) Up to 30/6/2009, the profit gained is 175 billions dongs/ 215 billions dongs as planned, reached 82%, mainly focus on the deposit interest, credit interest and profit from investment and bond trading. 2.2. Analysis the influence of the macro environment factors: 2.2.1. Political, legal, policy factors: - Vietnam is always ranked at the high level in terms of political stability in comparison with some other countries in the region and all over the world. Besides, over the last few years, the legal system is continuously improved, which lay a good premise for FDI attraction and bring about good opportunity for credit organization to expand customer network. Due to international integration requirements, over the last few year, policies on tax, financial management, State Bank, Government is more and more improved and gradually adapt to the international public, which create favorable conditions for credit organizations to enjoy a more and more transparent legal system, and at the same time they can prepare necessary conditions to compete with the strong foreign competitors. On the other hand, policies which adjust the financial market of Vietnam are still not completed and changing. This can be considered a disadvantage of the banking operation. In the end of 2006, when Vietnam officially became WTO member, the economy saw tremendous growth. However, on the verge of 2008, the macro economy experienced instability. The unexpected price increase and fluctuation of steel, petrol, cement, fertilizers, processing materials…. caused many difficulties for the economy. Besides that, the monetary tightening policy by the government has limited the credit source provided to the economy, the banking system faced difficulty in terms of liquidity, mobilized fund and credit as well. The credit growth rate in 2008 is lowest in the last 5 years, increased only 14.32% compared to 2007. Regarding the credit quality, the over due debts - - 2.2.2. Economic factors: - 25 amounted to 2.497 billions dongs up to 12/2008, accounting for 9.06%, among which the bad debts is 886 billions dongs, accounting for 3.14%, the loss debts is 231 billions dongs, accounting for 0.85%. (Source : ABBANK’s study) - 2007-2009 is a difficult period of the economy when it has to cope with the financial crisis and economic downturn originating from financial crisis in US in 5/20007. The monetary policies are loosening with caution of the State Bank of Vietnam and the 4% interest similus package since early 2009 by the government has come in to effect. So far, the world as a whole and Vietnam in particular has overcome the bottom of the crisis. GDP of Vietnam showed some growth signals and will probably achieve impressive recovery. (according to the forecast of The State bank of Vietnam for 2009, economic growth might reach 5%, and the figure could be 6% - 6,5% for 2010) Following some experts, after the similus package by the government, the recovered economy shows strong growth, which might lead to high inflation rate (According to the forecast of the State Bank of Vietnam, the inflation rate is about 6%-8% in 2009 and less than 10% for 2010), if the government don’t work out the solutions to constraint the inflation efficiently, there might be a threat of turmoil in the monetary market. Charter 2.4: Outlook of Vietnam economic period 2010 - 2013: Real GDP growth (%) Consumer price inflation (av, %) Budget balance (% of GDP) Current account balance (% of GDP) 3-month treasury rate (av, %) Exchange rate D:US$ (av) 2010 5.0 8.0 -8.3 -11.1 6.6 18,200 2011 6.8 8.5 -7.5 -9.7 7.0 18,241 2012 6.9 8.0 -6.3 -6.7 7.0 18,277 2013 7.5 7.8 -5.2 -4.9 7.0 18,343 - - Charter 2.5: Market Opportunities GDP (US$ bn at market exchange rate) GDP per head (US$ bn at market exchange rate) Personal disposable income (US$ bn) Household consumption (US$ bn) Household consumption per head (US$ bn) 2.2.3. Social and cultural factors: - 2010 97.3 1,109 40.8 62.2 710 2011 103.4 1,166 46.3 70.5 800 2012 119.9 1,340 51.8 79.6 890 2013 132.5 1,466 57.4 89.6 990 Vietnamese society is more and more developed, the living standard of the people is better, which heighten the consumption demand for a better lives of themselves and their family. Some parts of the population with stable income, mainly young families, are now familiar with the consumption credit card. In another aspect, the habit of using cash still exists in large part of the Vietnamese consumers which lead to limitation in applying new individual financial services. This can be considering a difficulty for the strategy of increasing proportion of retail banking in the bank’s performance. - 26 2.2.4. Demographic factors and labor source: - Vietnamese population probably increase at the average rate of 1%/year during 2010-2013, which make the total population of 90,4 millions people over 86.1 millions people in 2008. The huge labor force and the young population structure is a precious asset of Vietnam, which will together with the improved economy and more employment opportunities become the momentum of consumption development. Besides, the urban population is increasing at higher rate that geographic expansion in big cities, plus the population immigration from rural areas to towns to seek employment will contribute to the expansion of individual consumption market. Charter 2.6: Population growth rate (Million) 2003 Total Male Female Period averages (%) Population growth Working age Population growth Labour force growth 81.8 40.5 41.2 2008 86.1 42.2 43.9 2004 - 2008 1.0 2.3 2.7 2013 90.4 43.8 46.6 2010 - 2013 1.0 1.7 1.6 - 2.2.5. Technological factors: - Banking technology has gain tremendous achievements over the last few year. Thanks to this new technology, banking transaction become more convenient, faster and safer. Vietnamese banks are on the race for application of advanced international technology (application of information technology in almost all activities, replacing the magnetic stripe card with the smart card which is safer, implementing the application of core banking system, internet banking services, SMS banking…) 2.2.6. Integration factors: - The banking and finance are among the sectors which are strongly open during the international economic integration of Vietnam. Foreign banks are, therefore, will have various activities in Vietnam and are treated fairly according to the international standards of WTO. Banks also have to face the pressure of technological innovation, enhancement of management capacity in order to adapt to the new competitor. However, integration also opens new opportunities for domestic banks to approach the foreign capital, technology, management experience and market. Integration also made Vietnamese financial market more dependent on the changes of the world economy. This is a challenge and also an opportunity for domestic banks. - - 27 Charter 2.7: Analysis of opportunities and challenges from macro environment effections Opportunities Challenges Cạnh tranh mạnh từ các ngân hàng ngoại được phép hoạt động với chính sách mở cửa Tốc độ và pham vi thay đổi thói quen của khách hàng Stable political situation of Vietnam More and more improved legal framework Vietnamese economy on the way to recover, high growth rate. Development momentum from international Thói quen tiêu dùng tiền mặt của một bộ phận lớn người tiêu dùng economic integration. Opportunities to improve local bank competitiveness from approaching technology, capital, HR, management knowledge, international market Developed society, enhanced living standards, changing consumption behaviors and attitudes. Khả năng đầu tư tài chính và tốc độ cầu từ thị trường Sự thay đổi mô hình và tính chuyên nghiệp trong hoạt động 2.3. Analysis of industry environment factors: 2.3.1. Threats from new banks: - According to WTO membership commitments, the banking sectors will be gradually open with a 7 years road map. Banking industry have seen fundamental changes when foreign financial institutions can hold the shares of Vietnamese banks (HSBC 20% of Techcombank; Maybank 15% …) and the appearance of 100% foreign banks (United Oversea Bank, Maybank, Indochina Bank, Mizuho Bank …) Barriers for the appearance of domestic banks are more and more when the government suspends the permission for establishment of new banks since 8/2008. Besides regulations on charter capital, continuously profitable periods, newly set up banks should also be closely supervised by the state bank of Vietnam. However, this can not prevent eligible and capable enterprises to enter the industry providing that the government will allow the bank formation again. - 2.3.2. Threats of substitute - For corporate clients, the threats of substitute are not big because this group would need the assistance of banking system in payments transaction, factoring… in order to ensure the transparency and convenience. If there’s any change, this group can only change for another bank, but not a non-banking services. It’s different for the consumption clients. The habit of using cash make the Vietnamese familiar with keeping cash at home or withdraw the money from the account (if any) to spend for consumption. The withdrawal system and automatic payment at public transaction points are still poorly functioning. Beside bank deposits, Vietnamese consumers have other saving options such as: reserving the foreign currencies, stock trading, insurance services, investment in precious metals - - 28 (gold, diamond…) or investment in land & property. Bank interest is not always attractive to the consumers. 2.3.3. Threats of customers - A recent outstanding event, which is related to the power of customer, is the consensus of banks on applying ATM using fee while the consumers don’t agree. Both banks and consumers have their own reasoning, but apparently it affects badly the customers’ satisfaction and trust. Via this context, we can consider that the power of customers to banks is not low in Vietnam. The most important is that: the survival of banks relies very much on the fund mobilized from customers. If they can not attract the money from customers, banks will be rejected. In the mean time, as mentioned above, the threats of substitute for retail bank in Vietnam are rather high. With the low switching cost, the customers don’t lose anything if they want to move their money out of the banks to invest in other items. Due to the features of banking sectors, which require advanced technology application in the management and operation, most of the technologies and facilities are imported from foreign suppliers. For the moment, Vietnamese banks are proactive in investing for its technological facilities and equipments and selecting their suitable suppliers. This will partly reduce the power of equipment and facilities suppliers when they can not dominate the whole market, but they have to compete with other suppliers. However, when they spent a huge amount on system, the bank will not want to change the supplier because it would be very costly, which will sure increase the power of the suppliers who won the bidding transaction. Although the economic crisis slows down the growth rate, and affects negatively the banking sector, Vietnamese market potential is still huge. The temporary impacts from the economic crisis will pose banks many difficulties in finding new customers. But, when the crisis is over, the degree of rivalry among banks will sharply increase given such a highly potential market of Vietnam. The rivalry degree of banks goes up with the appearance of 100% foreign banks. The foreign banks have their own market segment with specific target, which mainly include enterprises from their home country. They served those customers since long time in different markets and when their customers moved to Vietnamese market, the banks also open their own representative to retain the customers. The foreign banks are also suffering from same constraints of domestic banks, typically the limitation of stock borrowing, bad debt in property credit. In addition, foreign banks have advantage on service infrastructure, which is much more professional with better facilities. - 2.3.4. Threats of suppliers - - 2.3.5. Industry rivalry - - 29 Bảng 2.8: General analysis of opportunities and challenges from influence of industry environment factors Opportunities Challenges The support of state policies which aim at Threat of increased inflation after the economic stabilizing the activities of banking sector recovery Fast development of banking technology and its application from the open policy Competitive pressure in finance is increasing due to the integration process with gradual elimination of entry barriers Banking services are more various and highly competitive Competition with other financial institutions on substitute products. The development of society with advanced living Influence of fluctuation in foreign exchange rate standard. Changes of consumption attitudes which is out of control The habit of using cash of the population majority. 2.4. Analysis of ABBank’s internal environment in comparison with its two competitors: Via my working experience at ABBank, I selected 2 banks with bigger charter capital than ABBANK’s ACB joint stock commercial bank (ACB) and Vietnam Technological and Commercial Joint- stock Bank (Techcombank). Their success on the Vietnamese financial market can be considered as a challenge. Via comparison and analysis of internal environment factors of these two banks, we can identify the strengths and weakness of ABBank. Table 2.9: Comparison the performance of ABBANK and Competitors Up to 31/12/2008 (billions dong) according to business report 2008 Ratio 1. Charter capital 2. Mobilized fund 3. Credit 4. Total assets 5. Profit 6. Business network ABBANK 2.750 7.245 6.538 13.494 86 70 transaction points TECHCOMBANK 3.642 51.895 26.019 59.360 1.600 169 transaction points ACB 6.355 74.118 34.832 105.306 2.560 226 transactions points I selected the year of 2008, because it’s a difficult time for both world economy and Vietnam economy, but the banks have made their full efforts to maintain the good business results. However, it’s not sufficient if the evaluation is purely based on financial ratios. In order have an overall analysis of competitive advantage and disadvantages of ABBANK over its competitors, I made a comparison on core competencies of different banks, and based on that to define suitable business strategy for ABBANK during 2010-2015. 30 Table 2.10: The comparison of core competencies among ABBANK and its competitors Criteria Vision Slogan Core values Strategic shareholder Customer ACB “Leading retail bank of Vietnam” “The people’s bank” “Continuously innovative and harmonized benefits of stakeholders” Connaught Investors Ltd, Dragon Financial Holdings Ltd, Standard Chartered Hong Kong, IFC, World Bank & J.P.Morgan Whitefriars Inc. - Individuals, SMEs - 1999 to 2001: ACB implement the modernization programs with the banking information system, computerize all the banking transaction and operate the core banking system TCBS - 2002 - 2003: ACB implement the switching software and card management system (CMS) … - 2003 - now: Currently, ACB gradually improved technological applications in developing services and products such as: Home Banking, Internet Banking, Call Center 24/7, gold trading center, stock trading center TECHCOMBANK “No 1 retail bank in Vietnam” “Create value, share success” “Customers are the base for all activities” HSBC – The top bank in the world ABBANK “Friendly retail bank, multifunctional business in the financial group form” “Deliver solutions, receive smiles” “Outcome - Responsibility – Creativity – Service style” EVN and Maybank – The biggest bank of Malaysia with world level scale, - Individuals and enterprises based on strategic partnership - 2007: Outsourcing for card management system based on the Way4 solutions of Openway - 2008: ABBANK complete its project of implementing core banking technology with the solution of Temenos - T24 version. - 2009: Implement T24 Gateway to match with the development of Internet Banking & SMS Banking - 2009: Commscope group and Quang Dung technology company has organized the ceremony of accreditation on the successful application of smart management solution SYSTIMAX –IPatch solutions which save the cost for HR and ensure high security - Individuals and SMEs - 2001 - 2003: Techcombank decided to invest in Core Banking system of Temenos (Switzerland) and proved their technological level on the card market of Vietnam - 2004 - 2005: Launched the new Switching and Card Management System of Compass Plus (Russia) - 2005 - 2007: successfully implement the internet payment services to both individual and corporate customers with the RSA, Token key system. - 2009: Launched Fast-MobiPay, OTAC technology to verify the one-time-use password Technology 31 Retail services - Card product and service : Domestic credit cards (with connection with partners such as SaiGon co-mart/ SaiGon tourist, Mailinh)/ International credit card (VISA&Mastercard)/ Payment card, domestic withdrawing card (E-card)/ International Debit card (ATM2+ VISA debit& Mastercard Dynamic) - The system of card agency: 4,000 payment points which accept the cards issued by ACB and other cards with brand of VISA/MASTERCARD/ JCB - ATM system: ACB Implement … ATMs, which accept both domestic cards and international cards such as VISA/MASTERCARD/JCB - Loan services: secured loans and unsecured loans ((Signature) – overdraft facility for the company’s staffs who receive their salary via card for purpose of consumption, investment, installment payment for house/car… -Payment and saving services: by foreign currency or VND, term or non term - Domestic and international remittance services … - Banking internet services/ Home Banking/ Phone Banking: Transaction at home - Card products and services: International debit and credit card such as VISA debit, domestic debit card f@stÁccess, F@stAccess-I, Techcombank VISA debit & credit, international credit card and note accumulative Vietnam Airlines Tecombank VISA debit. - The system of card agency: nearly 2,000 payment points, which accept the cards issued by Techcombank and other cards with brand of VISA/MASTERCARD/ JCB - ATM system: Implement … ATMs, which accept both domestic cards and international cards such as VISA/MASTERCARD/JCB - Loan services: installment loans for house/ car purchase, study abroad or domestic study, overdraft facility for the company’s staffs who receive their salary via card -Payment and saving services: by foreign currency or VND, term or non term - Domestic and international remittance services … - Multifunctional account services: manage the account details, remittance within and outside the system, set up the automatic response on InternetBanking - Card products and services: Debit card YOUcard, International debit card ABBANK VISA debit. - The system of card agency: Nearly 200 payment points issued by ABBANK & other domestic cards based on Banknetvn & Smartlink - ATM system: ABBANK implement nearly 100 ATMs which accept all domestic cards and other international cards of Banknetvn & Smartlink. - Loan services: installment loans for house/ car purchase, study abroad or domestic study, overdraft facility for the company’s staffs who receive their salary via card -Payment and saving services: by foreign currency or VND, term or non term - Domestic and international remittance services … - Multifunctional account services: Electricity bill payment services on ATM/POS/Counters and automatic payment via account 32 Corperate banking services - Deposit services: Flexible, with bonus interest, term deposit with flexible interest. … - Credit service: Low interest loans, flexible interest loans. Overdraft facility for the purpose of business, investment, capital finance, capital flow, export finance… there are many programs financing the SMEs - International payment services: transmittance, collection, letter of credit … - Financial services: Payroll/Commission Services, Bill Payment, Assets management, cash collection … - Financial transaction: gold, securities, foreign currencies … - Internet Banking/ Phone banking for enterprises - Deposit services: Flexible, with bonus interest, term deposit with flexible interest. … - Credit service: Low interest loans, flexible interest loans. Overdraft facility for the purpose of business, investment, capital finance, capital flow, export finance… there are many programs financing the SMEs - International payment services: transmittance, collection, letter of credit … - Financial services: Payroll/Commission Services, Bill Payment, Assets management, cash collection … - Financial transaction: gold, securities, foreign currencies … - Internet Banking/ Phone banking for enterprises - Card products and services: International debit and credit card such as VISA debit, domestic debit card f@stÁccess, F@stAccess-I, Techcombank VISA debit & credit, international credit card and note accumulative Vietnam Airlines Tecombank VISA debit. - The system of card agency: nearly 2,000 payment points, which accept the cards issued by Techcombank and other cards with brand of VISA/MASTERCARD/ JCB - ATM system: Implement … ATMs, which accept both domestic cards and international cards such as VISA/MASTERCARD/JCB - Loan services: installment loans for house/ car purchase, study abroad or domestic study, overdraft facility for the company’s staffs who receive their salary via card -Payment and saving services: by foreign currency or VND, term or non term - Domestic and international remittance services … - Multifunctional account services: manage the account details, remittance within and outside the system, set up the automatic response on InternetBanking 33 Preferential programs - Card issuance supporting programs: preferential on card issuance fee and other relating fees. - Card payment encouragement programs: applied to holders of MasterCard, VISA when they do shopping at big shopping malls such as Parkson, Diamond Plaza, and Citimart… - Other transaction encouragement programs: Reduce the transaction fee of gold trading, bonus deposit, remittance with gift and interest bonus The appearance frequency of bonus programs, gift of ACB is high, averagely 4-5 programs/ month - Card issuance supporting programs: preferential on card issuance fee and other relating fees. - Card payment encouragement programs: applied to holders of MasterCard, VISA when they do shopping at big shopping malls such as Parkson, Diamond Plaza, and Citimart… - Other transaction encouragement programs: Reduce the transaction fee of gold trading, bonus deposit, remittance with gift and interest bonus The appearance frequency of bonus programs, gift of ACB is high, averagely 3 programs/ month Customer services - Standard of customer services: at any transaction point, the customers will receive a consistent ACB style, which is professional, quick and for the benefit of customers - Service priority: The big customers are provided VIP card to get priorities in VIP service room at transaction point of ACB on national scale - Call center 24/7 system: product consultancy, card registration receiving, gold trading orders, and solving claims. - Launching of priority banking service corner: Special banking service with supports by convenient facilities, which can bring about comfort for customers in dealing with highly qualified customer service executives, who provide full services to the big customers - Service improvement programs: improve the sales forces, service quality of banking staffs by the evaluation system at the counter so that the customer can evaluate the service quality - Call center 24/7: provide solutions services, answer questions and analysis of customer information via phone. - Deposit services: Flexible, with bonus interest, term deposit with flexible interest. … - Credit service: Low interest loans, flexible interest loans. Overdraft facility for the purpose of business, investment, capital finance, capital flow, export finance… there are many programs financing the SMEs - International payment services: transmittance, collection, letter of credit … - Financial services: Payroll/Commission Services, Bill Payment, Assets management, cash collection … - Financial transaction: gold, securities, foreign currencies … - Internet Banking/ Phone banking for enterprises - Standard of customer services: our efforts, customers’ solutions. - Service priority: Big customers are granted VIP cards to get priority in services at VIP transaction room in the whole system of ABBANK, but the program was not really efficient. 34 Product R&D - Service cooperation: ACB fully exploit the cooperation with partners to provide more added services and open new customer care programs such as Vietnam Citimart, Parkson, Diamond Plaza, Saigon Tourist - Establishment of R&D center: for the retail banking and corporate banking - Study, develop and launch new Stateline fully packaged products and services. - Study and implement channels to supply efficiently products and services to potential customers. Acknowledgement and evaluation of financial institutions: - 1997 - 2000, ACB is awarded the best agency by Western Union - 2001 - 2002, ACB is the only joint stock commercial bank is eligible for Fitch ratings - 2002, ACB was selected to implement the SMETP financing project which is funded by JBIC. - 2003, ACB is granted the best Asian Pacific quality prize by the APEC quality organization. - 2006, ACB is awarded the best retail banker by the Asian Banker and was selected as the best bank of Vietnam by the Euromoney magazine - 2007: ACB was honorably granted the prize of “The best Asean enterprise” by Asian Business Consultancy Council - 2008: ACB is elected as the best bank of Vietnam by Euromoney magazine 2007 - 2009: ACB is honorably granted the best bank of Vietnam by Euromoney magazine 2009 Brand - Service cooperation: ACB fully exploit the cooperation with partners to provide more added services and open new customer care programs such as Vietnam Airlines, NOKIA, MobiFone, Bao Viet, and Prudential… - - Establishment of R&D center: for the retail banking and corporate banking - R&D for new Stateline fully packaged products and services. - R&D for new channels to supply efficiently products and services to potential customers. Acknowledgement and evaluation of financial institutions: - 2006: Receiving the award for international payment from the bank of NewYorks, Citibank, and Wachovia. - 2006: Moody’s, the world top ranking reputed organization has declared reputed ranking for Techcombank, the first joint stock bank of Viet Nam ranked by Moody’s. - 2007: Receiving award “Top Trade services 2007”- award given by Ministry of industry and Commerce for typical enterprises, operating in trade services that Viet Nam committed to implement as joining WTO - 2008: Receiving Golden Star Award 2008 given by young enterprises association - 2008: Receiving award “reputed securities trademarks and the top Joint stock company of Vietnam” given by securities committee. - Service cooperation: at moderate degree, new projects are now revised and tested, the potential of strategic partners and shareholders are not fully used. - There is no specialized R&D center, the research activities are overlapped by other tasks, and are not receiving sufficient attention in order to develop new product. Acknowledgement and evaluation of financial institutions: - 2007: Receiving the award for international payment from the bank of NewYorks, Citibank, Wachovia - 2007: ABBANK was granted the award of golden ball – the best banker for the bank with fast development of high tech products and services by the organizer of Banking Expo - ABBANK was elected as the best agent of bond issue in Asia by Asia Money - ABBANK concluded strategic cooperation agreement with May bank – the largest bank in Malaysia - 2009: ABBANK receive the award of golden brand 35 Memer companies and partners - ACB securities- ACBS: 100% Direct investment - ACB - ACBA: 100% Direct investment - ACB - ACBL: 100% Direct investment - ACB - ACBC: 100% indirect investment by the member companies - International card organization: VISA, MASTERCARD - Insurance company: Prudential, AIA, Bao Viet - remittance company: Western Union - Payment network: BanknetVN, Smartlink - Strategic partner: Standard Charter bank Techcombank - TCBS: 100% Direct investment - TCBA: 100% Direct investment - AMC: 100% Direct investment - Fund management company: 100% indirect investment by the member companies - International card organization: MASTERCARD/ VISA - Insurance company: Prudential, AIA, Bao Viet - remittance company: Western Union - Payment network: BanknetVN, Smartlink - Strategic partner: HSBC - Total staffs: 4.224 - Qualification: University and above ~ 85%, College 15%. - Executive training: at the private training center of Techcombank & professional training programs organized by HSBC - New staffs: Orientation course, introduction of Techcombank’s products and services, professional courses … (426 courses with 11.631 participation rounds …) - Average salary: 8,800,000 dongs/month - HR policies: Priority on HR development, enhancing the competencies and committing for long-term. - ABS: 100% Direct investment - ABA: Direct investment - ABL: 100% Direct investment - ABF: 100% indirect investment by the member companies - International card organization: VISA - Insurance company: Prudential, AAA, - remittance company:: Western Union - Payment network: BanknetVN, Smartlink - Strategic partner: May bank - Total staffs: 1.651 - Qualification: University and above ~ 75%, College 25%. - Executive training: at the private training center of ABBANK & professional training programs organized for managing staffs at Faculty of business administration – National university of Hanoi or self-training on E – Learning - New staffs: Orientation course, introduction of ABBANK’s products and services, professional courses … (30 courses with 586 participation rounds …) - Average salary: 5,500,000 dongs/month - HR policies: HR is valuable assets of a bank, ABBANK commit to offer a dynamic and professional working environment. HR - Total staffs: 6.598 - Qualification: University and above university ~ 87%, College 13%. - Executive training: at the private training center of ACB & professional training programs organized by IFC or self-training on E – Learning - New staffs: Orientation course, introduction of ACB’s products and services, professional courses… (373 courses with 19.086 participation rounds …) - Average salary: 8,500,000 dongs/month - HR policies: ACB create all opportunities for each individual to develop their career 36 Finace Up to 31/12/2998: - Charter capital: 6.355 billions dongs - Total Asset: 105.306 billions dongs - Total mobilized fund: 74.118 billions dongs + individual deposit: 91% + Institution deposit: 9% - Total outstanding credit: 34.832 billions dongs + Individual credit: + institution credit: - Total profit before tax: 2.560 billions dongs + Profit from credit: 32% + Profit from services: 22% + Profit from investment: 46% - All member of the management board and the management staffs are working with high responsibilities, passion for the stake and development of the organization and every individual - The management board work efficiently and creatively with the collective consensus on important decisions. - ACB board of management understands and commit that the sustainable business development of the organization is closely attached to the Corporate social responsibility and the community development. Up to 31/12/2998: - Charter capital: 3.642 billions dongs - Total Asset: 59.360 billions dongs - Total mobilized fund: 41.459 billions dongs + individual deposit: 72% + Institution deposit: 18% - Total outstanding credit: 26.018 billions dongs + Individual credit: ++ institution credit: - Total profit before tax: 1.600 billions dongs + Profit from credit: 53% + Profit from services: 15% + Profit from investment: 32% - The board of management confirms its commitments on building techcombank a private corporate culture, developing a Vietnamese bank with international standards, providing the global services and strategic partners are efficient accompanies. Up to 31/12/2998: - Charter capital: 2.705 billions dongs - Total Asset: 13.747 billions dongs - Total mobilized fund: 7.245 billions dongs + individual deposit: 48% + Institution deposit : 52% - Total outstanding credit: 6.538 billions dongs + Individual credit: 30% + institution credit: 70% - Total profit before tax: 65 billions dongs + Profit from credit: 53% + Profit from services: 15% + Profit from investment: 32% - Members board of management and directors of ABBank are successful people on the market with good management experience. - Board of management and leaders of ABBANK hold strategic relationships which support well for the strategic business planning of ABBANK’s operation. - Collect building the corporate of ABBANK Leadership & management (Source: Annual report 2008 of ACB, Techcombank & ABBANK) 37 From the above analysis, I evaluate and compare strengths, core competencies and overwhelming competencies among banks to work out the competitive advantages and disadvantages of ABBANK. Table 2.11: Evaluation and comparison of core competencies among ABBANK and competitors Grading scale 1 – 10/ 1 is the lowest, 10 is the highest Criteria Technology Product and service Sales skills Customer services Brand Corporate culture Highly qualified HR R&D Finance Leadership Management Total ABBANK 8 6 8 5 6 6 8 6 6 9 7 75 Current competitors ACB Techcombank 9 9 8 8 8 8 8 7 8 7 7 7 8 8 8 8 8 8 8 8 8 8 88 86 Table 2.12: Evaluation on the overwhelming competencies of ABBANK and competitors (Grade: Yes: 1 point; No: 0 point) Criteria Technology Product and services Sales skills Customer services Brand Corporate culture Highly qualified HR R&D Finance Leadership Management Strategic partners Total: Valuable Yes 1 1 0 1 1 1 0 1 1 0 1 1 1 0 No 0 1 0 0 0 0 0 0 Unique Yes 1 No 0 Long enough distance Yes No 0 0 0 0 0 0 0 0 0 1 0 1 Success factors Yes 1 1 0 0 0 1 0 1 1 0 1 No 0 0 Result /4 3/4 0/4 3/4 0/4 1/4 1/4 2/4 0/4 2/4 4/4 0/4 4/4 21/40 Via Table 2.11 Evaluation of strengths and core competencies, it’s obvious that ABBANK have lower grade than its two competitors, which affirm the current position of ABBANK in the 4th ranked group of banks in the ranking of different groups of Vietnamese banks about domestic operation. By which, we can see that the weakness of ABBANK are relating to technology and product, customer service and R&D. This difference is a big challenge for ABBANK to become the leading retail bank of Vietnam among the commercial joint stock banks up to 2020. However, with strengths such as excellent leadership. Potential strategic partners and good HR with professional sales skills, ABBANK have many opportunities to develop with its true capacity. 38 - Excellent leaders   Leaders with strong influence in Vietnam, over 20 years of experience in business and politics. Good relationship with the government, strategic partners and big domestic and foreign organizations. EVN: contribution of 30% of ABBANK’s charter capital with the nationwide network and customer database of over 15 millions customers who are electricity consumers. Maybank: Contribution of 20% of ABBANK’s charter capital, with the largest scale in Malaysia and presence on over 20 nations all over the world; strong commitment of resource sharing, engagement in direct management at ABBANK and special assistance in technology, products and services Other strategic partners: Geleximco, Prudential, PVFC & CMC … - Strategic partners:    - Young HR with excellent sales skills Core banking system is developed on the T24 solution of Temenos. Table 2.12: Analysis on sustainable competitive advantage of ABBANK showed us the temporary competitiveness of ABBANK regarding products, services, after sales services, R&D are weak, and the client sources are poor, without loyalty. The products and services of ABBANK are not various, which result in low business efficiency, in terms of: Unreasonable capital structure (the short term equity account for big proportion) while the credit structure include more long and medium term loan, which cause the unbalance to happen regularly. Regarding income structure, the big proportion come from traditional products which are mobilized fund and loans, while these domains suffer the most from the economic crisis, inflation as well as changes of state policies. The rate of profit over the turnover is low in 2008 in comparison with current competitors and competitor in higher level groups of banks. - To succeed on the Vietnamese financial market and gain the sustainable competitive advantage, ABBANK need solutions to mitigate the weaknesses as analyzed above and take full advantages of sustainable and overwhelming strengths such as leadership, HR, strategic partners.a 39 CHAPTER III BUSINESS STRATEGY FOR ABBANK TO BECOME ONE AMONG TOP 05 JOINT STOCK BANK OF VIETNAM DURING 2010-2015 3.1. 3.1.1. Building and selecting the business strategy: S.W.O.T Analysis: After external and internal analysis, I continue to develop SWOT matrix to find out strengths and weaknesses in the relation with opportunities and challenges of the external environment: Table 3.1: S.W.O.T Analysis Opportunities (O) - Stable economy and politics which overcome the crisis and achieve good growth - Market potential is still big with 22 millions of people in 500 big and small cities. - Average income per capital in cities is ~ 6 millions/month and keep raising - Fast development of modern technology - Development of a various retail system Combination (S-O) Threats (T) - Competitive pressure from domestic and foreign competitors. - Habit of using cash in consumption is still popular in majority of population. - The threat of inflation from the economic crisis in 2007 is still high, which create constraints for the consumption demand. - The state banks have traditional and long time relations with big corporation and enterprises Combination (S-T) S W O T Strengths (S) - Strategic partners of ABBANK - Exploit efficiently the - Develop cooperation with are big corporations, whose available technology retailing system to have the potential might be fully background to create and fully packaged after sales exploited develop differentiated services. - Leaders with long experience products and services which in various domains; are better suitable with the - Commitment to modern consumption trends. technology investment and - Exploit the customer database application; of EVN to expand the market - Young and highly adaptive HR. share - HR with good sales skills while the products and services are still weak and poor Weaknesses (W) Combination (W-O) Combination (W-T) - Brand is not strong while the - Exchange training of - Pushing for promotion promotion activities are still managing staffs and expert activities to develop ABBANK limited with Many Bank in Malaysia brand - Can not exploit efficiently the big potential customers and 40 - strategic partners - Can not exploit efficiently the invested technology system. - The management mechanism is still weak an incomplete - R&D activities are not well organized, lack of a long term product development strategy - Weak customer service, lack of customer segmentation and systematic customer care services in the whole system. - Products and services are not diversified, no differentiated; the target customers are not well defined. 3.1.2. G.R.E.A.T Analysis: Based on the S.W.O.T analysis, we could identify and analyze internal strengths and weaknesses of ABBANK and from external opportunities and threats, we can define some basic strategies which might be interesting to the organization. However, in short-term, it’s necessary to select an optimum strategy by qualitative evaluation on different aspects of strategies from S.W.O.T model: Profitability, risk management, implementation expense, feasibility and the implementation time of strategies when they come in to effect. Table 3.2: G.R.E.A.T Analysis (Grading scale of 1-5, 5 is the highest) Selected strategies Development of special products and services Training exchange, appointing Maybank’s R&D manager 5 3 3 5 5 21 Connection to the retailing system Ratios Connecting to the EVN’s customers database Brand promotion Profitability Risk Management Expenses Feasibility Timing Total 5 5 5 5 5 25 5 4 4 5 5 23 5 3 4 4 5 20 5 4 2 3 5 19 41 So, according to the G.R.E.A.T model, current priority strategies are: Development of differentiated products and services Connecting to the EVN’s customer database Training exchange, appointing R&D manager from Maybank Above priority strategies are not solutions for all business activities of the bank, I therefore selected a specific product line – Card products and services – to build the business strategy, from which we can build a concrete business strategy which can be applied on other financial products and services of ABBANK on the basis of customer databases, products and services features as well as other long term competitive factors of ABBANK over its competitors. 3.2 Implementation orientation and scope of the business strategy for card products and services of ABBANK 3.2.1 Orientation of long term priority strategy: - Customer strategy: Exploit the potential corporate customer database to develop the salary payments via account and card services, using the powerful relation of ABBANK with strategic partners in electricity industry. Differentiated Product and service strategy: :Leading in features of card products and services and customer care policies which are differentiated thanks to the advantage on modern technology and long term private strengths of ABBANK such as domestic and abroad strategic partnership and alliance with partners such as Maybank and EVN HR Strategy: Building research team to develop card products and services, they should be capable to make analysis and synthesis of the market information, both domestic and abroad, propose initiatives for development of product portfolio, various card services to response to the development orientation of retailing market, regarding card payment. Objectives of the card business strategy of ABBANK: - - 3.2.2 - Becoming one among 5 top commercial joint stock retailing banks in Vietnam in 2015 Accounting for 30% of the Vietnam’s card market with 2 millions issued cards units in 2015 Building stable profit sources in the banks, including the profit from retailing banking which account for 15% of the total profit. Implementation scope of the strategy: 3.2.3 3.2.3.1 Strategy for selecting the target market and customer segmentation: a. Evaluation the market potential of Card business in Vietnam: 42 Table 3.3 BCG analysis of potential card market Industry growth rate High Star Question Low Cash Cows Dogs High Market share Conclusion: Card market is a star market: High industry growth rate: 300%/ year in recent 3 years. Low Market potential is huge with total population in big cities is 22 millions people. Up to 30/06/2009, total number of cards issued by the whole system includes domestic and foreign banks (mainly focus on the big cities) are around 7 millions cards. By which, the rate of active cards is averagely 45%, equal to 7,6 millions of cards. So the market potential is 14,3 millions of cards. Suggestion: ABBANK should consider card as key products in their retailing system b. Evaluation of customer segmentation feature by the income level and working title Table 3.4:Analysis of the segmentation features of card user High Winner (I) Winner (II) Question (III) INCOME OF POTENTIAL CUSTOMER Medium Winner (IV) Average business (V) Loser (VI) Low Profit producer (VII) High Loser (VIII) Average Loser (IX) Low POTENTIAL DEMAND ON THE CARD PRODUCT OF ABBANK Conclusion: ABBANK need to focus its development, provision, marketing on customer groups (I), (II), (III), (IV), (V), (VII) Among which, groups (I), (II), (III) and (IV) account for 20% in the customer structure, but bring about 80% of profit for the bank. 43 c. Characteristics of potential customer group: Group (I), (II), (III) account for 5% in the total customer structure of ABBANK – VIP Customers People with high position and big influence in the society: Politic and social actors Successful businessmen: top leader or managing people of enterprises and organization such as board of management, board of directors, directors, deputy directors, chief accountant… High earning ( 50 millions dongs per month) and living standard are very high. The good they use can reflect their image and value, the high demand for quality and customer care services of differentiation and advanced level. They represent their organization, enterprises to use ABBANK’s services and sometime the bank is successful in providing the trust investment services in trading gold, stock and foreign currency for this group. They have short time to receive the information, so the message should be short, coherent and persuasive. In many cases, we need to turn to influence of others whose close relationship with them to approach and conquer this customer group. Corporate relationships can affect this target. Group (IV), (V) account for 25% in the total customer structure of ABBANK – Middle class customers People holding position of manager or deputy manager and above in organizations and enterprises Have good and average income and above ( 15 millions dongs/month) with good living standard, they have demand for life convenience by individual loans. They care quality of goods and services, at the same time concern about price and always expect that the goods and services are worth for the money paid. These services can be charged given that the quality requirements are met. Concern for the efficiency and solutions of products and services. Convince this group of customer is not much different from proving the product utility. Besides, another important factor is regulations of the organization can influence this group. Group (VII) accounting for 70% in total customer structure of ABBANK – Popular customers: They have an average income at enterprises, companies… … There income is just enough for family consumption, simple and popular entertainment and leisure. They are staffs in enterprises using financial services of ABBANK. They are cautious in selecting the goods and price is well considered as decisive factors in purchasing. This group of customer care about saving the money and spending just enough for family and themselves. They are influenced easily by their boss’ decision, so the sales via leadership and management level are the best efficient approach. The organization’s decision might affect the purchasing decision of the customer for the card products, especially the payroll payment via account transfer, potential of this group account for 80% of the total customer structure. Focusing on development of customers who receive salary on their account. This is a source of highly loyal customers with the potential of cross selling other financial products and services of ABBANK: 44 - - - - - d. Market and customer development strategy of ABBANK: - - Table 3.5: Analysis of customer structure and development plan in 5 years Customer growth plan (Unit : Thousand of people) Group Enterprises with financial relation with ABBANK EVN Corporation and its member companies Shareholders are individuals and institution of ABBANK Cooperation with retail chains on the connecting card products Individual uses the financial services of ABBANK Current customers TOTAL Structure 2010 40% 15% 5% 80 30 10 2011 120 45 15 2012 200 75 25 2013 360 135 45 2014 600 225 75 2015 800 300 100 15% 30 45 75 135 225 300 20% 40 60 100 180 300 400 100 5% 100% 10 200 15 300 25 500 45 900 75 1,500 2,000 From above customer analysis, ABBANK can define which card products and services can meet well the customers’ demand, selling methods and marketing approach as well as how to use influence of others in the purchasing decisions of each customer group. 3.2.3.2 Strategy of differentiated product and service development: The leading strategy about differentiation of products and services, plus the optimum customer services based on the competitive advantage on modern technology and strengths which can not be imitated by its competitors in long-terms such as strategic cooperation, domestic and abroad alliance strategy with partners are Maybank, EVN, and Prudential … a. Provide the products and services that the potential customer need: Base on the analysis of customers and their characteristics, we suggest ABBANK to conduct the R&D activities for smart card product and service packages which can satisfy customers as followed: Group (I), (II), (III) – VIP customers: Top concern of customers for card products and services is international card services (credit card, debit card) with brand of AMERICAN EXPRESS/ VISA/MASTERCARD/JCB/DINER CLUBS. With the international credit card, there should be policies of granting the credit card with highest line in comparison with its competitors for this group of customers. Types of Card for this group include TITANIUM/PREMIUM/DIMOND/GOLD. 45 - The prestigious payment system which accept and apply good card holders care policies such as Hilton, Metropole, Melia, Sofitel...Various luxurious resorts such as Furama, Vinpearl land… chains of jewelry shops, fashion shops, perfume shops… The top service package with priority on the luxurious tour registration, VIP flight booking for traveling, studying abroad and domestic and international business strip. ABBANK implemented strategic alliance with big tourist companies in Vietnam and airlines such as Vietnam airlines, Pacific airlines, Air Asia – Strategic partners of Maybank, and they are quite familiar with VIP customers care program. There should be good care and access such as private 24/24h phone line, the special reception corner with good consultancy at the customer care center of the bank in 3 regions: Northern region, Central region, Southern region. Benefit the customer care policies with valuable and surprising gifts on special occasions and anniversary dates such as birth day of spouse, children … The service package is designed well, with various caring channels and combination of many programs of partners, the entrance and maintenance fee can bring about good revenue for ABBANK. Group (IV), (V) – Middle class customers: The top concern of this group is utilities, various payment features based on the high technology The set of domestic and international credit cards with link to the deposit account to supply the domestic demand for cash or spending without cash as well as the demand of spending without cash internationally. Supply insurance services to protect the consumers in case the card and PIN code are badly used, which can cause loss of money in the account. The international card payment services to develop internet based payment – Ecommere when this group of customers is familiar with information technology and they can self protect for safe use. This service package is simple, convenient at reasonable charge Group (VII) – popular customers: Meet the simple demand such as receive payroll via account and card withdrawal at any places and any time over all Vietnam. This service package is simple and user friendly with a fundamental charge plus many fee discounting programs to appeal and maintain the customer loyalty with ABBANK’s products and services. Product of card alliance with the retailing chains: - - - - - e. Providing products and services to develop the branch and potential market in the future: The development potential of retailing system in Vietnam: on the basis international retailers such as Wal - mark, 7-Eleven, Big C, Metro …is the opportunity for all banks in general and ABBANK in particular to develop the card products which are based on the alliance of different brands for the same target customers in order to improve customer care and increase their loyalty. Besides retailing system, there are also airlines, famous fashion brands, luxurious perfume…to be considered for product alliance, especially with prestigious brands with high purchasing frequency because the consumers are caring for the quality, service and prestige of suppliers. - 46 - This market is quite popular abroad with co brand card products such as Singapore Airlines, Cathay Pacific connected to American Express, 7-Eleven connected to CHASE and VISA … Only few banks participate in this potential market such as Vietcombank with Vietnam airlines, ACB with SaiGontourist and Techcombank with Vietnam Airlines. Alliance card products for students to transfer or receive money for living expenses and tuition fee - Students who stay far away from home account for 75% of total number of students in a university, therefore this group have the demand of transferring and receiving money from and to their family The traditional methods which is based on the postal system is no longer used, it’s now the trend that the students open a bank account to receive money from their parents. With this group of students, they care about efficient transferring with competitive charge and convenience. This group of students will become future potential customers of the bank when they finish study. This group should receive good attention of the bank for 1 product line, the bank’s card services Currently, strong players in providing these services are SEA bank, VIBBank, BIDV and Agribank. The market is still open because the implementation approach of banks is not well structured, what could be seen is only the number of cards issued. The alliance card products for the people who work abroad.: Number Vietnamese coming to Malaysia, Singapore, Thailand, Philippine....to work is very popular. This group of customer has a high demand of transferring money to their family. The total amount of money that is transferred to Vietnam from group of abroad Vietnamese is very big and increasing. Main methods: via big remittance firms such as Western Union, Money Telegram … or informal and black market. This is a potential service market, the source of foreign currency for banks, especially ABBANK with the competitive advantage of Malaysian Bank which is the biggest bank of Vietnam with presence on more than 20 nations all over the world. Develop a R&D team on retailing products and services in general and card products and services in particular. Sumsung statement: “Our biggest asset is the talent staffs which are able to develop market leading products and bring about new values for the consumers. 36000 people, accounting for 26 % of our workforce, contribute to the creation and development of future products. They are now working in 42 research institute all over the world, with continuous training and updating for managing position in the future. Research institutes are closely coordinated to develop strategic technology for the future as well as unique technology to form new market trends.” R&D human resource at SAMSUNG Electronics increase by 20% every year and will come over 50.000, more than 30% of the total staffs, in 2010. This resource will decide our ability in the digital technology revolution, in the context of continuously changing information technology market” (Theo www.samsung.com) - 3.2.3.3 HR strategy: 47 US president Barack Obama said in a speech at the annual meeting of the National Academy of Sciences: " US spend 3% of its GDP( 420 USD dollars) on scientific research and development. He also emphasized that US is now lagging behind some other nations in scientific research, that’s why he want to invest more in scientific research and development to keep US science always leading, not lagging as it was in recent decades.” (According to: ICTNews - TechNewsWorld) Those statements by an international prestigious firm in high tech electronics and the US president Barack Obama reaffirm the importance of HR policies dedicated for R&D team of an organization. ABBANK is not exceptional. Therefore, with the R&D HR development strategy, ABBANK should be awarded of the following requirements: Establishing the R&D center which help to research retailing products and services for the enterprises. Mission: marketing research, market trends, competitors, products, which are highly adaptive to the current domestic and international context, launching the new products and services with enclosed programs. The current force of 2 people is too small, which is a shortage for developing the market, customers using cards of ABBANK. It’s required to increase the number of people over years, which goes along with the strategy of retail banking development of ABBANK. Participating in the training course which was co-organized with May bank, which relate to the function and responsibility of the center The HR policies, salary and bonus should be considered core values of retail banking and corporate banking and become the true core of banking retail bank – business strategy of ABBANK in next years. The success of business strategy of ABBANK’ retail banking depends very much on the solutions proposed by this team. I apply the S.T.A.R.S model to build the detailed action plan: S. Steps: Steps and tasks to be done T.Timining: Progress plan A. Aesstence: Assistant R. Responsibility: Key responsible person S. Success contenis: criteria for success evaluation. - - 3.3 Detailed action plan: 48 3.3.1 Plan of HR strategy: Table 3.6: Plan of HR implementation for retailing banking domain STEPS TIMINING ASESSTENCE RESPONSIBILITY SUCCESS Building the HR strategy with May Bank Building remuneration scheme Recruiting R&D manager from Maybank Recruiting R&D experts Assignment Quarter I/ 2010 Quarter I/ 2010 Quarter II/ 2010 Quarter II/ 2010 Quarter II/ 2010 Quarter II/ 2010 CEO, Maybank CEO Maybank Retail banking HR Maybank HR HE HR HR Building 5 years strategy Consensus on the deal Managing staff from May Bank Forming of R&D team HR training 3.3.2 R&D theoretical level CEO with full power in the team Domestic and abroad R&D Management training Table 3.7: Action plan of R&D activities Plan of R&D team set up: STEPS TIMINING ASESSTENCE RESPONSIBILITY SUCCESS Building the product development strategy for next 5 years HR is specialized by products or programs Implementing the task according to project models Checking the progress and quality of project Coordinating with different sectors and department to launch the services Actualizing the committed scheme Checking the working quality Quarter IV/ 2009 Quarterly Daily Weekly R&D management R&D team R&D management R&D team R&D management R&D team R&D management R&D team Building the 5 years strategy Reasonable and efficient work assignment table Working progress R&D management Implementation progress Ensure time to market of products Daily R&D team Quarterly R&D management Satisfaction and loyalty of staffs Fulfill the plan Daily R&D management 49 3.3.3 No I Plan for cards product & services: Table 3.8: Development plan for card products and services during 2010 - 2015 Portfolio of products and services Card product Domestic debit card/ YOUcard debit International debit card/ VISA debit Connect card Internacional credit card/ VISA credit International credit card/ Mastercard credit Smart card issuance and payment X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 2010 2011 2012 2013 2014 2015 II Member of international card organization Accept payment with VISA/Master Accept payment with JCB/ Diners Accept payment with American Express X X X X X X X X X X X X X X X II Development of ATM & POS services Nationwide electricity bill payment Developing the payment services of deferred payment for telecom industry Insurance fee payment services Other payment services ATM based deposit services X X X X X X X X X X X X X X X X X X X X X X X X X X X X X IV Mobile services Prepayment for mobile phone fee Transfer services on mobile phone Bill collection on mobile phone services X X X X X X X X X X X X X X X X V Internet services E-commerce payment connection X X X X X X 50 Online purchase with cards Bill collection connection Online bill payment services VI Alliance for preferential expansion, card acceptance Insurance Airlines Chain of hypermarkets, supermarkets, wholesale Chain of fashion shops Chain of restaurants VII Sales channel development Via VNPOST Via member companies of EVN Via chain of retailers Via universities Via labor exporting centers Via tourist centers X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X 3.4 Supervision and evaluation of the business strategy implementation 3.4.1 Supervision of business strategy implementation: Supervision: it’s a process of checking information on inputs, outputs and information treatment Evaluation: it’s the task of evaluating the results concerning different factors: efficient and maximized resources, technological adaptation, saving progress, budget under control, product launch, distribution channels, marketing channels, customers’ perception and satisfaction. Evaluation methods:    Self compare with previous time (Before – After). Before the strategy and after the strategy, how is the situation changed' Compare with competitors in the same market, the same product (in the same business environment). Compare with the average figures of 10 leading companies in the same industry, at the same products (might not be the same business environment) - 51 Comparison and evaluation of the strategy should be conducted according two all above three approaches, normally focus on the before-after approach. 3.4.2 Adjusting the business strategy and the action plan: Evaluation of business strategy implementation can be adjusted based on the information of input and out puts and the information treatment. The adjustment will be done when the evaluation result take into account the evaluation time of following factors: efficient and maximized resources, technological adaptation, saving progress, budget under control, product launch, distribution channels, marketing channels, customers’ perception and satisfaction. Adjustment methods    Adjustment to increase the ratios Adjustment to decrease the ratios Cancel the project - 52 CONCLUSION There is a famous quote concerning strategic planning: “There’s a strategic objective for a group, but there is no generic strategy for the group” I decided to propose and analyze one particular product line, the card products, because with a concrete problem, I would like to contribute my understanding to the top leaders and middle managers of ABBANK in solving a general exercise in order to obtain the strategic objective of retail bank – Working out the business strategy of ABBANK during 2010 – 2015. Card products and services are core products of ABBANK’s competitors. Therefore, ABBANK should consider them as core values of its smart and satellite financial services offered to customers. The solutions suggested in this thesis can be considered as a perfect “chopstick” which can satisfy its users. Regarding to this “chopstick”, if the same theoretical background is applied for other chopsticks, we will finally get a package of qualified chopsticks. Similarly, with the strategic objective of becoming one among top 5 retail commercial joint stock bank of Vietnam, ABBANK need to understand clearly and thoroughly the above approach of chopstick production and apply flexibly it on different products, and services. ABBANK will surely succeed in the end. With my full efforts, knowledge and experience at the current position, I do hope that this small thesis might be a reference source for ABBANK’s sustainable development. Firstly, I myself can be a small chopstick which always self improve in my job create positive influence on my colleges. We all together commit to make ABBANK become the friendly retail bank of all people. 53 REFERENCES [1]. Liam Fahay & Robert M.Randall (2009), “Portable MBA – Strategic Management”. [2]. Fred R. David, Principle of strategic management, Statistical publishing house HCMC, 2003. [3]. Annual Report 2008 of ABBANK [4]. Business Report of 6 first months of 2009 of ABBANK [5].Development orientation of ABBANK (2009). [6].ABBANK’S Website www.abbank.vn [7]. Annual Report 2008 of Techcombank [8]. Annual Report 2008 of ACB. [9].Business forum (2008), “Draft of new regulations on the conditions of bank establishment: is there still any opportunity'” [10].Economic Development Magazine(2007), “Vietnamese Commercial Banks: Strengths – Weaknesses – Opportunities – Threats”. [11].Internet sources [12]. Annual report of card association 54