Background
As results of the global financial and economic crisis, maybe, Vietnamese bank system has never coped up with as many challenges as in 2010.
The government aims to boost credit lending to stimulate investment and consumption, addressing the risk of economic decline through an urgent policy package However, caution is necessary to mitigate the threat of high inflation There is also a need to increase foreign currency availability and capital sources for businesses, particularly as domestic revenue and state budget resources decline, alongside financial support from foreign investments and exports Additionally, maintaining stable foreign currency reserves and adapting to market liberalization and competition is essential, ensuring timely and flexible policy responses to rapid and unpredictable changes in both domestic and international environments.
The State Bank's direction and operations must align with the essential functions of the banking sector, catering to the diverse and growing needs of businesses and society amidst escalating market competition Additionally, these efforts should adhere to the macroeconomic objectives and operational framework set by the Government.
All together creates a picture about the colorful market of Vietnamese banks in
In 2010, Vietnamese banks faced essential requirements for renovation and strategic development planning This involved addressing diverse pressures while fostering stability, proactivity, intelligence, and courage among both the collective and individual members within the banking community.
Necessity
Practical basis of the capstone project report
This capstone project report provides an overview of the current construction and strategic management of Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank) It identifies the bank's strengths and weaknesses, as well as the opportunities and challenges it faces for future development.
The research team analyzes the outcomes of previous development strategies and considers both global and domestic conditions from 2010 to 2015 to formulate a strategic development plan for VietinBank for the 2011-2015 period.
Reasons for choosing the topic
The Vietnamese commercial banks have undertaken significant measures to enhance their registered capital, address bad debts, and innovate their administrative and operational mechanisms, in line with the Prime Minister's initiatives to reorganize state-owned and joint-stock commercial banks.
Effective strategy management enhances human resource quality by implementing reorganization projects and solutions that boost competitiveness in the context of international economic integration These initiatives align with the commitments made under the US-Vietnam trade agreement and Vietnam's accession to the WTO, particularly in the opening of financial service markets.
Before the reorganization project, Vietnam Commercial Joint Stock Bank for Industry and Trade (VietinBank) faced significant challenges, including high levels of bad debt and limited financial capacity within the country's commercial banking system In recent years, VietinBank has implemented various strategic measures to address these issues and adapt to new business conditions, notably through its equitization in 2010 However, the competitive landscape has posed considerable challenges for VietinBank among other Vietnamese commercial banks Consequently, this study focuses on developing a business strategy for VietinBank for the period of 2011-2015, aimed at addressing the pressing needs for reform in the banking sector and enhancing the bank's competitiveness.
Meaning of the capstone project report
From 2011 to 2015 and beyond, the Bank has developed a long-term strategy with clear objectives that are widely communicated across all functional departments This strategy also outlines the necessary human resources required to effectively implement these goals.
This strategy is constructed as a commitments of VietinBank with the customers.
Carrying out careful analysis on the environment, risks and potentials and techniques for changing potentials into actual strength of VietinBank.
The strategy also indicates internal restrictions of VietinBank in implementing this strategy.
VietinBank has integrated the implementation of its strategic approach into daily operations, ensuring that the appropriate mechanisms are in place This method fosters engagement among individuals, departments, and branches, promoting effective execution of the bank's strategy.
Goal of the capstone project report
Studying, systematizing basic arguments on Strategy managementto be the basis for constructing the business strategy for VIETINBANK;
This article focuses on assessing the operational conditions and business environment of VIETINBANK to formulate a strategic business plan for the next five years It also offers recommendations for effectively implementing the chosen business strategy.
Object and scope of the study
Object of the study
This capstone project report focuses on VietinBank, emphasizing key areas such as human resource development, brand enhancement, service quality management, and investment strategies aimed at market share expansion.
Scope of the study
- The object of the study is Vietnam Commercial Joint stock bank for Industry and Trade
- Scope of the study: is only restricted within the Vietnam banking sector,features and operation situations of VietinBank in the recent years and some competitors.
Methodology
- The capstone project report mainly use the methodology of general analysis, statistics and comparison.
- Method of data collection: basing on actual documents of VietinBank with reference to data from documents of State bank of Vietnam, some commercial banks and other related documents.
Overview on the strategey and strategy adminstration
Strategy
Strategy, derived from the Greek term for military planning, refers to the art and science of orchestrating resources to achieve victory over adversaries Initially rooted in military applications, strategy encompasses the planning and control of large-scale operations to exploit weaknesses and secure success Over time, the concept has transitioned into the economic realm, influencing both micro and macroeconomic strategies This includes socio-economic development plans and sector-specific strategies, such as those in mechanical and chemical industries Ultimately, strategy involves defining long-term objectives, creating action programs, and allocating resources to achieve the goals of economies, sectors, or enterprises in the future.
There are many definitions of strategy, each definition has more or less meanings different from others depending on the opinions of each author:
In 1962, Chandler defined strategy as the process of establishing an enterprise's fundamental long-term goals and objectives, along with the necessary actions and resource allocation to achieve them He is recognized as a pioneer in the field of strategic management theory.
By the 1980s, the field of strategic management had matured, leading Quinn to provide a broader definition of strategy He described strategy as a cohesive framework that integrates an organization's primary goals, policies, and action sequences into a unified plan.
In 1999, Johnson and Scholes defined strategy as the long-term direction and scope of an organization, emphasizing the importance of achieving a competitive advantage by effectively configuring resources in a dynamic environment to meet market demands and satisfy stakeholder expectations.
The various definitions of strategy highlight the need for comprehensive understanding across different sectors Mintzberg's 5 Ps of strategy provide a framework that encompasses key aspects of strategic management, emphasizing the importance of a holistic approach to effectively navigate this domain.
- Plan: some sort of consciously intended course of action.
- Pattern: consistency in behavior, whether or not intended
- Position: "match", between organization and environment
- Perspective: an ingrained way of perceiving the world
- Ploy: a specific maneuver intended to outwit an opponent or competitor.
Strategy encompasses various sectors and its definitions vary based on different levels The precise understanding of strategy at each level is influenced by individual perspectives Generally, there are at least three distinct levels of strategy that can be identified.
- Company level strategy: Aiming at the general purpose and scope of the organization.
- Strategy at business unit level: Relating to competitive method on the particular markets.
Functional strategies, also known as operation strategies, are essential for effectively implementing business unit and company-level strategies They focus on optimizing resources, processes, human capital, and necessary skills to enhance overall operational efficiency.
Currently, with the intention of globalization of activities exceeding the national border, the global strategy is as the selection to face with the international business issues.
Strategy management
Strategic management involves the decisions and actions that shape a company's long-term effectiveness, encompassing ongoing activities such as environmental monitoring, strategy formulation, implementation, and evaluation This process focuses on assessing external opportunities and threats while considering internal strengths and weaknesses, ensuring a comprehensive approach to achieving organizational goals.
Strategic management has its roots in business policy, focusing on long-term objectives and strategies Unlike traditional business policy, which primarily directs internal operations, strategic management encompasses a broader perspective by integrating organizational functions while also considering external environments This shift in focus highlights the importance of strategy in navigating both internal and external factors, leading to the preference for the term "strategic management" over "business policy."
Strategy management contains obligations with close relation:
Developing a strategic outlook is essential for defining a company's future vision and direction This long-term approach not only clarifies the company's orientation but also instills a sense of purposeful action, ultimately shaping its identity in the marketplace.
Making targets – changing strategy outlook into detailed result that company has to achieve.
Building strategy aims to achieve the target
Implementing targets is selected effectively.
Assessing implementation and carrying out amendments of long-term outlook and orientation, target, strategy or performance on the basis of experience and changes, new ideals and opportunities
Research indicates that organizations implementing strategy management achieve superior outcomes compared to those that do not When an organization's environment aligns with its strategy, the resulting structure and processes enhance overall efficiency The benefits of strategy management have been validated across companies of various sizes, highlighting three key aspects of its effectiveness.
- Making the strategic outlook of company
- Focusing on important issues of strategy
- Improving awareness of rapid changes of environment
However, in order to have effectiveness, strategy always needs a official process and it starts with such questions as:
- If there is no change, How is organization after 1, 2, 3, 5 and 10 years? Does your questions accepted?
- If the answers are unacceptable, which administration actions should be done? What is risk and concern?
Importance of making strategy for company
Advantages of strategic administration
Research indicates that the implementation of strategy management significantly enhances organizational performance compared to those that neglect this process When an organization's environment aligns with its strategy, it positively influences efficiency through its structure and processes The benefits of strategy management have been evaluated across various companies of different sizes, highlighting three key areas of impact.
- Making the strategic outlook of company
- Focusing on important issues of strategy
- Improving awareness of rapid changes of environment
However, in order to have effectiveness, strategy always needs a official process and it starts with such questions as:
- If there is no change, How is organization after 1, 2, 3, 5 and 10 years? Does your questions accepted?
- If the answers are unacceptable, which administration actions should be done? What is risk and concern?
Administrators must be educated to prevent unexpected negative consequences of making strategy
Firstly, the time of strategic administrators may affect negatively control obligations Administrator must be educated by planning for their obligations to take time for their strategic actions
Strategic decision-makers must ensure close collaboration in strategy implementation to foster accountability for their decisions It is essential for strategic administrators to be trained to define clear commitments that decision-makers and junior staff can effectively execute.
Strategic administrators should be trained to effectively communicate and manage the disappointment of junior staff when expectations are not met Juniors often experience frustration during brief strategic planning periods, which can stem from the acceptance of proposals and the anticipation of increased rewards.
Making administrators sensitive with negative consequences is posible and adjustment by effective means aims to reduce consequences Owning to that, potentiality of making strategial plan will be promoted
2.2.1.2 Responsibility ofmaking strategy of company
Making strategy of company is not hollow words It takes an important role in stable development of company
Intelligent employers have practical awareness that the best result must be achieved for success These results bring challenges to small employers and their employees
To maximize profits and effectively target the right audience, many businesses overlook the importance of a strategic outlook, opting instead for short-term goals This narrow focus can hinder growth and lead to stagnation in business development.
As an employer, evaluating the ideal business involves understanding your target customer, analyzing your income streams, and ensuring the feasibility of your strategies Identifying your target audience is crucial for tailoring your offerings, while a clear assessment of your revenue helps gauge financial health Additionally, it's essential to develop strategies that are not only innovative but also practical and achievable to ensure long-term success.
Important role of strategic outlook
Neglecting the importance of a strategic outlook can jeopardize your business's success due to external factors By developing a clear strategic vision, you empower yourself to take control of your enterprise and take responsibility for the decisions you make.
A strategic outlook represents the voluntary direction of your business, fostering belief and action among employees and customers alike By effectively communicating your strategic vision, you can align your offerings with customer needs, ultimately driving company growth through the delivery of desired products and services.
When developing a strategic outlook for your company, it's essential to evaluate various factors that influence your services and products, as well as your public contributions and customer relationships Focusing intently on each of these elements will enhance your clarity and direction, leading to a more effective strategy.
Smart employers can imagine clearly and focus on an ideal enterprise You should attract your employees to implement some things that never happen in the past
As a successful employer, you should not only focus on thinking of enterprise orientation but also help other feel easier to contribute to general success You will
Strategy Management create an active and creative environment with comfortable working style but still effective
In order to make the strategic outlook, you must use 6th sense to think of future and remove present belief temporarily
With strategic outlook and clear character, you should implement detailed and necessary steps to affect positively enterpise, making them become a company you want.
Research methods and strategy construction process
PEST model
This model identifies four external factors that directly impact the economy, influencing enterprises as objective entities Based on these effects, businesses can develop appropriate policies and strategies to navigate their economic environment effectively.
This factor has outlook that affects all economies in the region Institution and law may threat existence and development of any economy.
When working in a environment, enterprises must follow law of that region
+ Stability: we will consider the stability based on conflict of politic, foreign affair of legal institution The institution with high stability will facilitate business and vice-versa
+ Tax: Policy of export tax, import tax, consumption tax, income tax, etc., will affect income and profit of enterprise
+ Related law: Law in investment, law on enterprise, law on labor, law on antitrust, law on antidumping, etc.,
State policies significantly impact enterprises, presenting both opportunities and challenges Key areas of influence include trade policies, development strategies, economic regulations, tax frameworks, competition adjustments, and consumer protection measures These policies shape the business landscape, affecting how companies operate and compete in the market.
Enterprise should pay attention to long term and short term economic factors and Government’s interruption to economy
Normally, enterprise makes decision based on economic factors
- Economic status: Each economy has its cycle of development Enterprise will have different decision in different cycles
- Effects on economy: Interest, inflation
- Government’s economic policy: Law on basic salary, Government’s economic development strategy, preferential policy such as tax reduce, allowance, etc.,
- Economic prospect in the future: Growth speed, GDP growth, GDP ratio on investment capital, etc.,
In the early 1990s, the British economy faced a crisis, prompting businesses to engage in price wars by cutting labor costs and doubling advertising expenditures to boost consumption However, this strategy backfired, negatively impacting consumer sentiment As incomes declined, investments in secondary goods, such as security equipment, were significantly reduced.
Nations have private social and cultural value which creates characteristic of customer in that region
Cultural values play a crucial role in shaping society and driving its development, with a particular emphasis on safeguarding spiritual culture For instance, in Islamic countries, certain foods like hamburgers are not consumed due to cultural beliefs However, cultural exchange among nations is inevitable and beneficial, as it influences consumer mentality and lifestyle, ultimately fostering development opportunities for countries.
In recent years, Vietnam has experienced a significant cultural exchange, particularly with the influence of Korean culture This is evident in the popularity of Korean hairstyles, makeup trends, fashion choices, and even motorbikes among Vietnamese youth, all of which have been inspired by Korean films.
Besides cultural factors, social factors are also concerned by enterprise when researching market Social factors classify community into various goups of customer with different characters, mentality, income, etc.,
- Life expectancy, health status, nutrition,
- Lifestyle, knowledge, opinion on aesthetics and life
In Germany, the high income and excellent living standards contribute to a preference for single life among many individuals, who often seek to avoid the responsibilities of family life As a result, German businesses are increasingly catering to this demographic by offering a variety of services, clubs, and products designed specifically for singles.
Our world is rapidly evolving with technological advancements that continuously reshape products and services Over the past 30 years, computers have transitioned from mere calculation tools to independent workforces Additionally, the shift from film-based cameras to digital technology has rendered traditional film production obsolete Notably, communication technology has significantly reduced geographical barriers, connecting people like never before.
In the 1960s and 1970s, Japan gained global recognition for its significant advancements in human resources and technology, establishing itself as a leader in research and development (R&D) Today, Japan continues to excel in GDP research, driven by effective collaboration between government and enterprises This partnership fosters innovation in new technologies and materials, positively impacting the economy.
The rapid growth of technology has led to a significant reduction in the time required to double microprocessor speeds, decreasing from several years to just 2-4 years This shift reflects the evolving landscape of technological advancements and the accelerated pace at which manufacturers are now operating.
The advancement of strategy management in computers has led to significant increases in microprocessor speeds, reaching 3.4GHz over the past decade, driven by chipsets like Core i5 and i7 As technology and software continue to evolve, even a new computer can quickly become outdated.
- Effect of information technology and internet on business.
A part from above factors, enterprises consider globalization macro fator when researching market
It is obvious that globalization is the tendency of the world but it fails to create chances for enterprises and nations to develop their business
- Globalization creates pressure of competition for countries in all regions. Integration will make countries have adjustment to fit with comparative advantages, labor appointment of region and in the world
Integration is crucial as it gradually eliminates trade barriers, allowing businesses to engage with partners across distant locations This expansion enables companies to reach customers beyond their domestic markets, tapping into opportunities in various regions worldwide.
Michale Porter's Five Forces of Competitive Position Mode
Michael Porter is a famous strategic administrator of Harvard University In the book "Competitive Strategy: Techniques Analyzing Industries and Competitors", he expresses opinion on competitive pressure in business.
- Competitive pressure of hiden competitors
- Competitive pressure of internal business
- Competitive pressure of relative parties
External Factor Evaluation Matrix (EFE)
The EFE Matrix analyzes external factors to identify and summarize the opportunities and risks present in the business environment, influencing operational decisions This tool enables business leaders to evaluate how effectively their company can respond to these external elements, determining whether they serve as advantages or disadvantages To create an effective EFE Matrix, one must follow five essential steps.
- Step 1: Make a list of 10 - 20 chance factors and the risk is mainly that you can affect mainly to the success of businesses in industry / business sector
In Step 2, assess the significance of each element on a scale from 0.0 (not important) to 1.0 (very important), considering their impact on your specific venture industry or business sector Ensure that the cumulative importance score of all elements totals 1.0, reflecting their relative influence on your manufacturing or trading activities.
In Step 3, assign key numbers from 1 to 4 for each factor, reflecting the degree of each company's response to the elements A rating of 4 indicates an excellent reaction, while a 3 signifies an average response A score of 2 represents a below-average reaction, and a rating of 1 denotes a weak response The weight of each factor is determined by the intensity of the company's reaction.
- Step 4: The importance of each factor with its weight to determine the number of elements
- Step 5: Sum of all factors to determine a total score of the matrix.
Assessment: Total score of the matrix does not depend on the number of elements in the matrix, the highest and lowest points 4 points 1.
Internal factor evaluation matrix (IFE)
Internal factors play a crucial role in shaping business strategies and objectives Strategic administrators must evaluate these factors to create a strategic matrix, which helps identify potential responses while recognizing strengths and weaknesses This process enables businesses to leverage their internal strengths effectively and address any weaknesses To develop an External Factor Evaluation (EFE) matrix, one must follow a structured five-step approach.
- Step 1: Make a list from 10 to 20 factors, including the advantages and disadvantages that affect the basic business, to the business goals that were set out.
In Step 2, assign an importance rating to each factor on a scale from 0.0 (not important) to 1.0 (very important), reflecting their influence on business success within the industry Ensure that the total importance of all factors sums to 1.0.
- Step 3: Determine weights for each factor in the points from 1 to 4, where 4 is very strong, 3 points is quite strong, two points are prettyweak, a point is very weak
- Step 4: The importance of each factor with its weight to determine the number of elements.
- Step 5: Sum of all factors, to determine the total score matrix
BCG Matrix
The Boston Consulting Group (BCG), founded in 1963 by Bruce Henderson, is a prominent American strategic consulting firm recognized as one of the top three in the world alongside McKinsey and Mercer BCG specializes in developing business strategies, corporate strategic planning, and marketing strategy planning, primarily catering to CEO-level executives.
Many prominent consulting firms, particularly the major auditing giants, do not specialize in management consulting, which focuses on strategic advice The distinction between these two fields of consultancy is highlighted by their respective names.
In the 1960s, BCG leveraged its own experiences and those of its employees to develop two pivotal models, one being a theoretical framework and the other a more advanced variant.
BCG's extensive experience advising large multinational companies reveals a significant trend: production costs generally decrease over time as companies accumulate operational experience This phenomenon, known as the experience curve, illustrates the correlation between cumulative production experience and efficiency, suggesting that companies become more adept at managing production costs as they grow.
The disparity in production costs between competing companies like Coca-Cola and Pepsi can be attributed to the accumulated experience and expertise that some firms have developed over time, while others have not been able to achieve the same level of knowledge in manufacturing their products.
A company with 20 years of experience in product manufacturing can expect to reduce production costs by 20% during its 10th to 20th year; however, these costs will never reach zero.
The Experience Curve highlights that companies can gain significant cost advantages by enhancing their production experience through increased market share By focusing investments on rapidly boosting market share, businesses can position themselves to achieve long-term benefits that will outweigh initial costs, making this strategy essential for competitive success.
New trends in the strategies of the great country which has been confirmed
=> hitting the market in order to gain as much market share as possible, it can be the loss in the first period of time, however can be offset later
This theory was based on a principle of economics - The efficiency of scale (economies of scale)
The BCG Matrix, developed in the late 1960s, is a strategic tool that analyzes a company's portfolio based on the Experience Curve and Product Life Cycle This matrix, also known as the Growth/Share Matrix, helps assess a company's ability to generate cash by categorizing its products according to their market share and growth potential.
And the names of the four parts of the matrix respectively: star, question mark, Cash Cow and Dogs.
Companies must assess the growth rate and market share of each product to effectively position them within the BCG matrix This analysis enables the identification of four fundamental strategies offered by BCG for product management.
To enhance market share, the company must reinforce its investments in product development, often prioritizing long-term goals over short-term profits This approach is particularly relevant for products categorized as Question Marks, where strategic focus is essential for future growth.
- Hold: This strategy applies to products in the Dairy Cow (Cash Cow) in order to maximize profitability and generate cash
The Harvest strategy aims to generate short-term profits by implementing cost reductions and price increases, potentially compromising long-term goals for the product or company This approach is typically aligned with managing products that have a lower market share or exhibit slow growth, often referred to as "cash cows." While it can be applied to products in the "question mark" category, it is crucial to avoid allowing them to regress into "dog" or "star" classifications, as the future of these products remains uncertain.
Waiver (Divest): The objective is to give your product or business unit does not have the profitability to focus resources on certain products or parts with
Strategy Management greater profitability This strategy applies to the product in question mark and certainly can not become a star and the product is in the Dog
The BCG matrix simplification strategy focuses on two key factors: product growth and market share It posits that achieving higher growth requires increased allocation of resources and investment This framework is not limited to products; it can also be utilized to analyze divisions or subsidiaries within a company, facilitating effective redistribution of resources across the organization.
SWOT matrix
SWOT analysis is an invaluable tool for managers, enabling them to enhance efficiency, reduce stress, and improve decision-making capabilities while maximizing personal productivity.
SWOT Analysis is a very strong analysis technique to identify the strong and weak points to figure out the Opportunities and Risks
Using it in business context, it helps you to define the market steadily.
SWOT analysis is a powerful tool that enables businesses to identify and leverage opportunities while gaining a clear understanding of their weaknesses By thoroughly assessing these weak points, companies can effectively manage and mitigate risks that may otherwise go unnoticed.
Utilizing SWOT analysis alongside a comparative assessment of your competitors allows you to develop a strategic plan that highlights your unique strengths, setting you apart in the marketplace and enhancing your competitive edge.
To carry out SWOT analysis, note and answer the questions relating to:
The strong point and weak point often generate from your internal organization.
Opportunities and threat often relates to external factors Thus, we can consider SWOT an important tool thanks to its generality for an organization.
SWOT analysis is very simple but also very important mechanism for assessing strong and weak points as well as opportunities, threat faced by the enterprises
Successfully apply this shall provide you the good situation analysis and assessment
Business strategy buidling procedure
Effective business strategies are derived from the company's vision statement, serving as a guiding framework for all operations and ensuring long-term strategic alignment This process encompasses several key components: defining the mission, articulating the vision statement, establishing business objectives, conducting a situation analysis, formulating a business strategy, and developing an implementation plan.
A mission statement encapsulates the core values of an enterprise, highlighting its key contributions to both business and society It outlines the company's business policies, its position in the global market, and its commitments to stakeholders.
A vision statement transforms the mission statement into an inspiring target, emphasizing essential improvements for businesses It fosters belief in the future of the organization and strives to make the impossible achievable.
Business objectives typically focus on financial targets, expressed in specific monetary amounts like USD or VND, along with defined timelines Examples include goals such as "achieving xxx dollars in profit by 2011" or "beginning to generate profit before the end of 2011."
A comprehensive situation analysis evaluates the overall business environment by examining the macro environment, including political, social, economic, environmental, and cultural factors It also assesses industry trends related to scientific advancements, technology, and supply chains Additionally, the analysis considers the market situation, focusing on demand, consumption capacity, and forecasting Finally, it evaluates the competitive landscape by identifying main and potential competitors, analyzing their strengths and weaknesses, current positions, and the strategies they are implementing.
A business strategy outlines the direction and competitive advantage of an enterprise, rooted in thorough understanding and assessment Companies can explore various strategic options to enhance their market position and achieve their goals.
• Concentrate in a certain group of commodity.
Is the action plan for implementation of activities that the enterprise would carry out together with progress on each milestones that the enterprise needs to achieve common goals.
ANALYSIS OF SITUATION – ENVIRONMENT – STRATEGY –BUSINESS OF VIETNAM JOINT STOCK COMMERCIAL BANK FOR
Overview of Vietnam Joint Stock commercial Bank for Industry and Trade 21
Overview of VietinBank
Name : Vietnam Joint stock Commercial Bank for indutry And Trade.
- On 26 March 1988 Establish specialized banks
- On 14 November 1990 change to Vietnam Specialized bank for Industry and Trade
- On March 2009 change to Vietnam Joint Stock Commercial Bank for Industry and Trade
Functions and missions of VIETINBANK
Engage in interdisciplinary business activities encompassing finance, currency, credit, banking, and non-banking services while adhering to legal regulations Focus on consistently enhancing bank profits and contributing to the implementation of national monetary policies, all aimed at fostering the economic development of the country.
Business activities of VIETINBANK
- Recieve current and time deposit in VND and foreign currency from organizations and individuals
- Receive savings deposit under attractive forms: current and time savings in VND, reward savings,
- Short-term lending in both VND and foreign currency
- Medium-term and long-term lending, discount of export document set
- Co-finance and lend big projects with long return of capital
- Supporting lending, commission according to the project: Taiwan (SMEDF); Vietnam-German (DEG, KFW) and frame credit agreements
- Overdraw and lend for consumption
- Join capital in a business, coordinate with national and international credit organizations and financial institutions
- Invest in both national and international capital and currency markets
Guaranty and re-guaranty (domestic and international): tender guaranty, guaranty for contract implementation, payment guaranty
- Issue, pay for import letter of credit; inform, confirm and pay for import letter of credit
- Ex-import Collection, Collection for Document Against Payment (D/P) and Document against Acceptance.
- Transfer money nationwide and world wide
- Collection and spending and cheque commission
- Pay salary for businesses through account and ATM
- Pay for oversea national currency exchange
- Buy and sell foreign currency (Spot, Forward, Swap…)
- Buy and sell valuable documents (Government bond, treasury bill, trade paper )
- Collect, spend cash in VND and foreign currency
- Safe box for hire to securely keep gold, silver, valuable documents and patents
- Issue and pay for by domestic as well as international cards (VISA, MASTER CARD…)
- Internet Banking, Phone Banking, SMS Banking.
- Exploit life insurance and non-life insurance
- Being broker, self-business, issuance guaranty, management of investment list, security consultancy and deposit
- Receive, manage and exploit distrainment through debt management and asset exploitation company
To meet the growing demands of customers while fostering development and integration with regional and international markets, Vietnam Joint Stock Company for Industry and Trade has strategically focused its investments and development efforts on three key areas.
Organizational Structure of VIETINBANK
Vietinbank is proud to be a big trade bank with key role in Vietnam bank system.
Vietinbank has a nationwide network including 150 Transaction services, branches and more than 900 transaction offices/savings fund
The landscape of independent accounting firms includes six key players: a finance leasing company, a security company specializing in industry and trade, a debt management and asset exploitation firm, an insurance member company, a fund management member company, and a company focused on gold, gemstones, and human resource development.
Diagram 2: Organizational Structure of apparatus and operation of
Diagram 3: Organizational Structure of administrative apparatus of
Transaction services, branches level 1 and level 2
Service Branch level 1 Representative office
Carrer unit Company directly under Vietinbank
Transaction office Saving fund Branch level 1 Transaction office Saving fund
Chief Accountant Internal examination system
Being the founding member and partner of INDOVINA Bank
Having relationship with more than 850 large bank and financial institutions worldwide
Vietinbank is the first Vietnamese Bank which is granted ISO 9001:2000 Certificate
Vietinbank is also member of Association of Vietnam banks, Asian banks, Society of Worldwide Interbank Financial Telecommunication (SWIFT), issuance and payment system of international VISA and MASTER
Vietinbank is leading bank in applying mordern technology and e-commerce in Vietnam.
Vietinbank continuously researches and improves existing products and services as well as develop new ones aim at meeting customers's demand the best.The total number of officers is 13.000 people.
Analysis of outside environmenta of VIETINBANK
Macro-Environment
In today's dynamic environment, the banking system, including Vietinbank, faces numerous opportunities, challenges, and risks that require continuous adaptation To thrive and grow, Vietnamese banks must effectively respond to key factors such as political, economic, social, cultural, and technological changes.
3.2.1.1 Influences of Politics and Law
Vietnam's stable political environment, characterized by a single communist party and a united ethnic population, provides an ideal backdrop for banking operations This stability is particularly beneficial for Vietinbank, fostering a conducive atmosphere for growth and development in the financial sector.
- Government has made a favourable legal corridor for banks to operate like issuing and gradually improve the following laws:
+ Laws on Vietnam's state banks issued in 1997 and completed in 2003
+ Laws on credit organizations issued in 1997 and complete in 2003
- Government issued set of civil laws, land laws which inlcude very clear regulations about mortgage asset borrowing, transaction decrees for ensuring borrowing that help bank's lending safe
- Established Vietnam deposit insurance company to protect the rights of depositors
- The banking sector established Vietnam banks association to share experience and help each other in payment and healthy competition.
Vietinbank, a prominent state-owned commercial bank, has successfully attracted significant foreign investment, including funds from sources like ODA, Japan's JICA, and Germany's BEG This financial institution is also designated to manage capital for essential national projects, encompassing sectors such as hydroelectricity, cement, and petroleum.
Recent discrepancies between credit organization law and civil law have posed challenges for banks' interest operations, ultimately limiting the overall effectiveness of the banking system, particularly for Vietinbank.
Civil law aims to regulate excessively high interest rates, while credit organization law and state bank regulations emphasize that the pricing of monetary commodities, such as interest and exchange rates, is determined by supply and demand dynamics in capital and monetary markets Despite this, civil law sets legal standards for personal conduct, ensuring that individuals, enterprises, and credit organizations are subject to the same regulatory framework.
+ According to civil law: lending interest rate of credit organizations is not more than 150 % over basic interest of Vietnam state banks in every period
+ According to credit organization law: lending interest rate between credit organizations and customers is as per agreement between them
- Government used to allows to establish many banks in mass quantity in 2006-2007 that made competition among domestic banks become more severse.
In recent years, both global and domestic economies have faced significant challenges due to inflation and fluctuating prices, which have notably impacted the financial and banking sectors, including Vietinbank.
In 2010, Vietnam's GDP grew by 6.78%, while the Consumer Price Index (CPI) surged nearly 12%, indicating a recovering domestic economy and favorable conditions for bank investments However, the first quarter of 2011 saw a potential resurgence of high inflation, with the CPI rising to 6.12%, significantly impacting banking operations, particularly in capital mobilization.
State currency management policies have tightened the money supply by cutting budget spending and reducing investment Consequently, the State Bank is maintaining interest rates for capital mobilization below 14% per year, which poses challenges for banks in raising capital and results in decreased business effectiveness.
The international economy is currently challenged by several adverse factors, including political instability in North Africa, a public debt crisis in Europe, and the devastating tsunami in Japan, which collectively hinder economic growth in Southeast Asia and globally.
Major investment projects and companies are increasingly choosing Vietinbank for their deposit, borrowing, and payment needs, recognizing the bank's significant potential to meet their service requirements This trend is poised to foster further development for Vietinbank.
In recent years, Vietnam's economy has experienced robust growth, averaging 7.5% annually, with a notable increase of 6.78% in 2010 This economic expansion has led to a continuous rise in per capita income, which was approximately $1,160 in 2010 High-income individuals predominantly reside in major cities and industrial zones, significantly impacting the development of Vietinbank.
Vietnam has a high population density, with a total population of 85,789,573 as of April 1, 2009, making it the third largest in Southeast Asia and the 13th largest in the world This substantial population presents a significant market opportunity for banking services, which plays a crucial role in Vietinbank's growth and development.
The intellectual standards of the Vietnamese population are continually rising, placing them among the top ranks globally Known for their friendliness and adaptability, Vietnamese people are open to embracing banking services This positive attitude significantly influences Vietinbank's strategy to introduce innovative products tailored for all age groups.
High-income individuals in urban areas exhibit a significant demand for automobiles, housing, and various consumer goods, often necessitating bank loans to meet these needs This trend represents a substantial credit market opportunity for Vietinbank's growth and development.
The current economy is driving increased integration in the scientific sector, particularly through the adoption of advanced technologies from the global arena, with a strong emphasis on applied information technology across various domestic industries This trend significantly impacts the application and enhancement of technology within Vietinbank's operations.
Banking environment
The banking sector in Vietnam has seen significant growth in recent years, comprising a diverse range of economic and financial organizations engaged in currency, credit, and various services Currently, the domestic banking market features 19 credit institutions alongside numerous foreign banks, leading to intense competition as these entities strive to expand their scale and networks In Vietnam, there are five distinct types of commercial banks that are actively developing within this dynamic market.
+ State Joint Stock Comercial Bank holding over 51% of capital
+ State Joint Stock Comercial Bank holding less than 51% of capital
These banks possesses both strong points and weak points, certain competitive strategies to exist and develop They are also direct and increasingly severse competitors of Vietinbank, such as:
Vietinbank faces competition from state trade banks of similar scale and standing, including Agribank, BIDV, and state joint stock commercial banks with over 51% ownership, such as VCB and SGB These institutions compete with Vietinbank across various sectors.
With substantial capital resources, they will engage in competitive investments across various sectors, including electricity, telecommunications, petroleum, coal, mineral extraction, steel production, and the development of industrial zones.
- With large network and long trademark, they will be competitive in:
+ Pay for oversea national currency exchange
- With strong financial and capital potential, frequently receive foreign capital sources, they can make cheap services as well as low lending interest rate.
- With team of professional officers, prestige of international payment, they will be competitive in:
Competitors are Joint Stock Comercial banks with small scale but young and skilled employees such as ACB, Sacombank which are competing with Vietinbank in the followings:
- They are banks having small scale, little experience but they are very
"thirsty" capital, so they will try to mobilize it by any way , especially sale
Strategy Management promotion, higher interest over Vietinbank's Their ability to increase mobilization capital has recently been higher than Vietinbank's
- Due to little capital amount, they focus on lending small enterprses, consumption lending
- Serving attitude and quick operation of employee of these banks are better than those of Vietinbank
Retailed services of these banks are increasingly marketed, maintained better than Vietinbank, so in recent years their rate of collecting service fee has been higher than Vietinbank
With large foreign currency source, low interest rate, modern knowledge and equipments for transaction and payment, foreign banks compete with Vietinbank in:
+ International payment + The ability to provide banking products and services for foreign companies which are investing and working in Vietnam
+ The demand for international payment of domestic big economic groups
Table 1: ASSESSMENT TABLE OF STRONG - WEAK POINTS OF
STRONG AND WEAK POINTS IN COMPETITION OF BANKS
Large-medium- small investment lending
Prices and interest rates costs
International payment Services Service attitude
Good Med Weak Good Med Weak Good Med Weak Good Med Weak Good Med Weak Good Med Weak Good Med Weak
As obove table, we see Vietinbank are ranked second in the seventh largest bank in Vietnam, and still is weak in two areas of international payment services.
Vietnam's accession to the WTO has led to the implementation of laws that create a level playing field for foreign banks, allowing them to operate on equal terms with domestic institutions This shift is essential as foreign banks often possess competitive advantages across various sectors, enhancing the overall banking landscape in the country.
+ Many small joint stock commercial banks will merge into one to expand scale and finanical potential in competing with big banks
+ Many financial groups will combine to form a new bank
+ Many financial groups will issue stock to mobilize capital
These banks will join banking sector that increases severse competitiveness.Picture 1: Comparision among Vietinbank's main activities
(Bank Top ranking in 2009 of VietNam Credit)
With the scope of organization of the State bank system at the moment, they shall be divided into the following groups:
A group of State Commercial banks account for 51% of regulatory capital:
At the moment there are 5 banks as follows:
- Bank of agriculture and rural developement
- Bank of investment and development of Vietnam
- Bank for foreign trade of Vietnam
- Vietnam joint stock commercial bank for Industry and Trade
The prominent banks in Vietnam have established a long-term presence through their extensive branch networks and unique strengths in specific sectors The Bank of Investment and Development of Vietnam excels in investing in commercial technology and supporting small to medium-sized enterprises The Bank for Foreign Trade of Vietnam specializes in international payments, foreign currency transactions, and banking services Meanwhile, the Bank of Agriculture and Rural Development focuses on lending for rural agricultural initiatives, and the Mekong Housing Bank is dedicated to financing housing projects.
A group of state joint stock banks does not get involved in capital contribution
Short-term, small-scale banks like Sai Gon Thuong Tin Bank and Asia Commercial Bank demonstrate strong financial capacity and high safety factors These institutions benefit from foreign capital contributions and staff training, resulting in effective management and administration Their innovative products have allowed them to quickly capture market share, particularly in the rapidly growing sector of small consumer lending.
A group of foreign and joint venture banks
Since the State Bank of Vietnam implemented policies to open up commercial activities, banks have effectively mobilized capital and improved lending quality, currently maintaining a low default rate of approximately 0.2% of total outstanding accounts This has allowed them to enhance their service quality and achieve better outcomes compared to local banks.
Foreign banks primarily target major cities and industrial areas, employing diverse and professional advertising strategies This approach effectively promotes their services, quickly reaching customers and meeting the demands of those seeking advanced banking solutions.
Several local banks, including Asia Commercial Bank and Sacombank, are collaborating with foreign banks like HSBC through capital contributions, technology integration, and banking training initiatives.
Therefore, the fact requires Vietinbank to do research and evaluation on the impacts and take measures to deal with the competitiveness at the moment and in the future.
To enhance its competitiveness, Vietinbank must develop unique strategic measures, as it faces intense rivalry from banks employing similar business methods and targeting the same customer base This is particularly crucial in the context of major competitors like Agribank, BIDV, and Vietcombank Continuous market research and adaptability to changing strategies are essential for Vietinbank to achieve optimal effectiveness in its operations.
The operation cycle experiences over the stages of establisment- development- restructure- satiation- depression The stages shall be presented as follows:
The establishment of the banking sector in Vietnam began in 1946, following the country's independence, when Uncle Ho signed a decree to create a one-level bank This development progressed with the establishment of a two-level banking system in 1988, leading to the formation of specialized banks By 1991, the Vietnam Bank for Industry and Trade was established, and on July 3, 2009, it was transformed into the Vietnam Joint Stock Commercial Bank for Industry and Trade.
Since 1988, particularly following the equitization of the Vietnam Bank for Industry and Trade, the institution has shifted from relying solely on state budget capital to actively mobilizing funds from various economic sectors for lending and diverse business activities in credit and banking services With 89% of its regulatory capital now sourced from these sectors, the bank has continuously pursued reforms and effectively implemented restructuring initiatives since 2000.
2005) and reformation for improving quality (2006-2009) to create breakthough in scope and quality as well, which shall be strong foundation for the bank in the period of 2010 to 2015.
At the moment, the state commercial bank is equitizing and modernizing bank activities, so the competitiveness will appeare including:
- Competitiveness in capital mobilization and lending investment
- Competitiveness in service fee rate
- Competitiveness among foreign and local banks
Analysis of EFE matrix- external factor of Vietinbank
This article analyzes the current and predicted external business environment of Vietinbank, utilizing an external factor matrix to summarize the various factors that impact the bank's operations.
Table 2: SUMMARY OF EXTERNAL FACTORS OF VIETINBANK
NO Environmental factor Accumulative debt= 1
Possibiliy Mark to deal with level 1
Possibiliy to deal with level 2
Possibiliy to deal with level 3
Possibiliy to deal with level 4
1 Exchange rate of foreign currency 0.03 X 0.09
6 Price of local and foreign banks services 0.15 X 0.3
7 Application of technology in banking 0.06 X 0.12
8 Industrial zone has formed newly invested projects 0.05 X 0.15
9 Law and regulations related to banking activities 0.3 X 0.9
Oppoturnity and challenges
Thanks to the evaluation and analysis of business environment, we shall recorgnize a number of oppoturnities to Vietinbank:
- Vietnam economy in recent years has continuously developed with the greates growth when Vietnam joined WTO, which was a favorable condition for bank.
- The state policies always create favorable conditions in legal aspect for banking.
- People’s living has been more and more improved, thus the need for banking has been more and more greater.
The state has established significant industrial zones and advanced key sectors including electricity, hydroelectricity, cement, and mineral exploitation This initiative has fostered an open environment for both local and foreign banks, enhancing the investment landscape and promoting growth in the banking sector.
Despite advancements, banks have struggled to meet customer needs in various sectors, particularly in providing adequate capital for forestry, aquaculture, and agriculture Additionally, the availability of specialized services remains limited, exemplified by the fact that ATMs are predominantly located in major cities and industrial areas, leaving underserved regions lacking essential banking facilities.
Together with favorable oppoturnities for bank activity, there are challenges bank must deal will as follows:
In recent times, the global economy has faced significant challenges, particularly with the bankruptcy of major American banks, which has had repercussions worldwide, including in Vietnam In 2008, Vietnam experienced double-digit inflation, and although inflation stabilized in 2009, it continued to pose obstacles for businesses Looking ahead, the years 2011 and 2012 are expected to bring various financial and banking challenges, necessitating careful analysis and strategic development to navigate these issues effectively.
With the current open banking policy in Vietnam, numerous foreign banks have entered the market, and several domestic banks have been established in recent years, intensifying competition in the financial sector.
Despite the modernization of banking services, traditional practices like cash transactions and limited foreign language support remain prevalent Additionally, many customers are still not accustomed to the latest banking products, highlighting a gap between innovation and user familiarity.
The Vietnamese economy has experienced significant fluctuations recently, with rising and falling prices impacting various export sectors due to the global economic crisis Additionally, the economy faces challenges from diseases and natural disasters, which have substantial effects on banking activities.
- In recent years the development of real estate market and securities market and gold transaction floor also have impacts on banking activity.
Analysis of internal environment of Vietinbank
In recent years, the banking sector has experienced significant developments and transformations The rapid growth of newly established joint stock banks has been particularly notable Since 2008, both global and local economies have undergone complex changes, presenting numerous opportunities for the banking industry, while also introducing a range of challenges.
With their own plan and strategy, each bank has its own evaluation, analysis and solution to bring about sustainable development
After 5 years for the strategy 2005-2010, Vietinbank has had good developement in scope and quality as well, made best use of oppotunities and had suitable policies to overcome difficulties such as business challenges Over the past time Vietinbank has good treatment in recovering bad debt, which clarifies finance,good quality credit, successful implementation in the first stage: Bank
Strategy Management modernization, especially in 2009 the bank has been successfully equitized to create favourable conditions in business in the future
VIETINBANK's success is largely attributed to its robust organizational structure, which categorizes its functions into four key areas: banking, company operations, enterprises, and joint ventures This framework has been crucial for the bank's successful equitization Alongside ongoing organizational restructuring, VIETINBANK has continuously enhanced its management systems to align with developmental needs The bank has also developed a comprehensive institutional plan and issued professional documents that establish a cohesive legal framework compliant with both national laws and international standards This strategic approach positions VIETINBANK for swift adaptation and integration into global markets.
- The equitization shall be implemented in active maner In December
In 2008, Vietinbank launched its initial public offering (IPO) for shareholdings, marking a significant milestone in its financial journey By May 2009, these shares were officially listed on the securities market Subsequently, on July 3, 2009, Vietinbank completed its equitization process, progressively transitioning to operate as a member of the Vietnam Bank Finance Group.
- Strongly restructuring bank, developing and improving activity effectiveness of memebers: the strategic orientation shall be clearly presented in the growth speed in main sections of VIETINBANK in the period 2005- 2010.
VIETINBANK's business activity has shown instability, significantly impacting its balance sheet In 2006, an excess of available funds led to a high reserve level, while in 2007, a focus on enhancing investments resulted in a notable growth rate However, this growth declined in 2008 Despite these adjustments being reasonable to align with business changes, they indicate a lack of proper attention to strategic orientations.
The alignment of business goals with quantifiable results was effectively achieved, as evidenced by the annual plan's adjustments reflecting a clear upward trend The actual outcomes exceeded the strategic targets, demonstrating successful implementation However, the annual business plan requires regular, minor adjustments that significantly impact branch operations, highlighting the need for enhancements in the planning adjustment process.
The annual plan management at VIETINBANK has presented challenges in effectively aligning targets with income from debt collection However, the practical outcomes achieved through this process have provided valuable insights and experiences for the bank.
VIETINBANK actively clarify and public business activities, as a pioneer in application of international standards Since 1996 VIETINBANK has continued to implement independent international audit and declared report results In 2006,
VIETINBANK has distinguished itself as the first bank in Vietnam to engage a top global verification organization for certification at the national level With guidance from Ernst & Young, VIETINBANK has successfully aligned its internal credit ranking with Article 7 of Decision 493, ensuring compliance with international standards and receiving certification from the State Bank.
Vietinbank is continuously expanding its network, now boasting 1,093 units—an increase of 146 since 2009—across 63 provinces nationwide The bank has established relationships with over 800 banks and global financial institutions In 2010, Vietinbank opened a representative office in Frankfurt and Berlin, Germany, which is anticipated to commence operations in the second quarter of 2011.
Vietinbank, positioned as the second largest bank in the nation, leverages its extensive network to enhance communication and advertising efforts This allows the bank to effectively introduce and provide a wide range of services to customers, including ATMs, international credit cards, ATM cards, and internet banking solutions.
However, the service products of Vietinbank are still similar to other banks, have not been distinguished from others.
Vietinbank has been actively expanding its local operations while strengthening partnerships with international institutions The bank has opened representative offices in Africa and Europe, and is simultaneously enhancing its international payment services.
Vietinbank has successfully managed and implemented international finance projects, including DEG from Germany and JICA from Japan, to generate capital for small and medium-sized enterprises, thereby creating job opportunities for local workers.
Vietinbank is committed to strengthening partnerships across Africa, Europe, Japan, China, and ASEAN countries, positioning itself as a leader in international cooperation for local economic growth The bank has successfully established a joint venture with INDOVINA Bank in Hanoi, which is currently operating effectively, further enhancing its role in fostering economic development.
3.2.4.3 Supply of bank service products
3.2.4.3.1 Research and creation of products and development of new products
VietinBank is a leader in capital mobilization, effectively utilizing both Vietnamese Dong and foreign currencies In addition to local capital mobilization, the bank strategically attracts foreign capital through various borrowing methods, including commercial loans, capital contribution borrowing, payment limit-based borrowing, trade agreement loans, and long-term capital contributions.
Strategy Management and foreign and local capital mobilization, the mobilizing capital of Vietinbank spent on investment become greater
Since 1996, the Vietnam Joint Stock Commercial Bank for Industry and Trade has implemented a strategic development plan aimed at enhancing investment and focusing resources on research and product development This approach has gradually reduced the "credit monopoly" within the banking system The bank has seen significant growth in services like international and local payments, guarantees, and foreign currency transfers, which have shifted the revenue structure towards an increased reliance on service fees and monetary trading.