STRATEGIC MANAGEMENT FUNDAMENTAL THEORY 3
STRATEGY AND ITS ROLE
Strategy involves defining an organization's long-term goals and creating specific action plans that effectively utilize resources to achieve these objectives It serves as a cohesive framework to implement these goals Business strategies can encompass geographical expansion, operational diversification, product promotion, cost reduction, and mergers or acquisitions As Michael E Porter states, "Strategy is the art of building solid competitive advantages to maintain a strong position in the market."
- Assist enterprise identify purposes and directions in order to select solutions for reaching goals
- Assist enterprise make decisions in accordance with variable business market in order to improve productivity and efficiency
- Assist enterprise identify opportunities and challenges, strengths and weaknesses in order to adjust, grasp at opportunities and develop measures for preventing from threats .
- Assist enterprise choose advantage competitiveness, appropriate directions in order to operate stability and growth to improve capability as well as competitive position.
The strategic management process is consistent across all levels, encompassing market analysis, goal and mission identification, strategy selection, implementation, and supervision This discussion focuses on strategic management at three fundamental levels: enterprise, business unit, and functional unit.
Enterprise-level strategy focuses on aligning an organization's overall goals with its growth potential, ensuring sustainable development This strategic approach outlines long-term objectives and guides the enterprise's direction, which may include market penetration, product development, and joint ventures to foster expansion.
3.2.Strategy for business unit level
In an enterprise, the strategy at the business unit level focuses on specific markets or products, outlining how to compete effectively within those sectors It defines the competitive position of each business unit and emphasizes the efficient allocation of resources In a market-oriented economy, marketing activities are crucial for linking functional units to develop differentiation and low-cost strategies, enhancing the overall competitiveness of the enterprise.
3.3.Strategy for functional unit level
Every enterprise comprises various functional units, including business, human resources, accounting and finance, and manufacturing Functional strategy focuses on the organization of these units to effectively execute enterprise-level strategies.
Functional unit strategy indicates targets and short-term action plans which are used by functional areas to achieve functional units’ short-term and enterprise’s long-term goals.
In addition, functional unit strategy aims to settle two matters relating to functional areas First, it satisfies operational environment for functional areas. Second, it coordinates with differential function policies.
In a market-oriented economy, a well-defined business strategy is essential for survival and growth amidst constant change Successful companies demonstrate that larger enterprises tend to be more resilient and quicker to adapt in competitive environments These businesses implement effective action plans that capitalize on available opportunities while minimizing risks by leveraging their strengths and addressing internal weaknesses.
Enterprise strategy is designed in a three-step process as follows:
Diagram 1.1: Developing enterprise strategy process
Enterprises set both long-term and short-term goals, with long-term objectives taking time to achieve, while short-term targets are specific and measurable within a year Consequently, developing and implementing strategic plans is a crucial responsibility for leaders An effective strategy should align with the enterprise's vision, core values, and mission.
Strategic analysis is the study on factors which affect the enterprise production process These factors are external environment and internal enterprise.
It is necessary for enterprise to analyze each factor in detail to have an overall view
PEST is an analytical tool relating to enterprise’s macro factors and external business environment.
- Politics factors: How do we consider the government characteristics and political environment stability? Will government policies affect legal system and regulations on business, tax, trade policies and tariff
- Economic factors: The problems of business cycles, economic growth, inflation and interest rates, unemployment rate, etc
- Social factors: Considering the population growth rate, age, lifestyle, consumption habit, working culture, religion, and gender role, etc
- Technology factors: The impact of technology, research and development activities and technology transfer matters.
External environment analysis involves assessing trends and events outside an enterprise's control, highlighting both opportunities and risks that can influence strategic planning By understanding these external factors, such as economic conditions, cultural shifts, political legislation, technological advancements, and competitive dynamics, businesses can develop effective strategies to capitalize on opportunities while mitigating potential risks.
PEST is an analytical tool relating to enterprise’s macro factors and external business environment.
- Politics factors: How do we consider the government characteristics and political environment stability? Will government policies affect legal system and regulations on business, tax, trade policies and tariff
- Economic factors: The problems of business cycles, economic growth, inflation and interest rates, unemployment rate, etc
- Social factors: Considering the population growth rate, age, lifestyle, consumption habit, working culture, religion, and gender role, etc
- Technology factors: The impact of technology, research and development activities and technology transfer matters.
Each industry has differential competitive forces M.Porter had set up a five- competitive forces model in order to assist managers in analyzing industrial environment
Table 1.2: five-competitive forces (M.Porter)
The number of suppliers directly influences their competitive pressure and bargaining power over businesses A limited number of suppliers can exert significant impact on enterprises, while a larger pool diminishes this influence Additionally, the significance of suppliers is determined by factors such as the quantity and variety of products offered, their adaptability, and the costs associated with switching suppliers.
Customers play a crucial role in determining an enterprise's success or failure, encompassing both consumers and distribution systems They exert pressure on the pricing, quality of products, and services offered by businesses Additionally, customers contribute to competitive dynamics through their scale, negotiation power, and the ability to substitute products and commodities Notably, large distributors possess significant negotiation power, allowing them to influence internal operations within enterprises.
2.3.3.Analyzing competitive pressure from replacement products:
A replacement product effectively meets consumer demand while competing with existing industry offerings, thereby exerting pressure on businesses within the market As the ability of these products to replace current options grows, competitive pressure intensifies Additionally, shifts in market demand play a crucial role in heightening this competitive threat.
2.3.4 Analyzing competitve pressure from hidden rival:
Hidden rivals are potential competitors that have yet to enter the industry but are expected to do so in the near future The influence of these hidden rivals on the market varies based on the industry's attractiveness, the barriers to entry, and the responses of existing firms.
2.3.5.Analyzing competitive pressure from rivals in the industry:
Enterprises that interact directly with one another significantly influence their industry, intensifying competition The structure of an industry can either be distributed, where numerous companies participate without any single firm dominating, or concentrated, where a few companies possess strong governance capabilities.
In an enterprise, human resources are as crucial as financial capabilities, as they encompass both employers and employees Effective leadership management skills play a pivotal role in determining an enterprise's success or failure When employees possess strong capabilities, they can produce high-quality products and enhance overall efficiency and productivity Evaluating human resources typically involves assessing factors such as quantity, structure, education, and qualifications.
An effective enterprise strategy must align with the organization's financial capacity To assess financial strength and profitability, analyzing the enterprise's financial reports is essential Additionally, understanding the scale and capital structure of investments in new projects is crucial for maximizing operational effectiveness.
INTRODUCTION ON LIENVIETPOST BANK
Lien Viet Post Joint Stock Commercial Bank (LienVietBank) was established under operation license No 91/GP-NHNN on March 28, 2008, by the Governor of the State Bank of Vietnam Following the investment from the Viet Post and Telecommunication Corporation and the integration of Vietnam Postal Saving Services Company, Lien Viet Bank was officially renamed Lien Viet Post Joint Stock Commercial Bank As a result, the Viet Post and Telecommunication Corporation emerged as the largest shareholder of LienVietPost Bank.
LienVietBank, founded by Him Lam Corporation, Saigon Trading Group (SATRA), and Southern Airports Services Company (SASCO), boasts a chartered capital of VND 6,010 billion and total assets of approximately VND 55,200 billion as of October 30, 2011 It is recognized as one of the ten largest joint stock banks in Vietnam.
LienVietPost Bank collaborates with major financial institutions, both domestically and internationally, including Agribank, Wells Fargo, Credit Suisse, and Oracle Financial Services The bank aims to strengthen its brand by leveraging internal resources, ensuring transparent operations, and fostering social connections within its business activities.
There are several bank operations in LienVietBank as follows:
To effectively mobilize capital, financial institutions utilize various methods, including accepting deposits, issuing deposit certificates, bonds, and other valuable papers Additionally, they may borrow from other credit institutions and secure short-term loans from the State Bank, along with other capital mobilization strategies compliant with regulatory guidelines.
+ Credit: finance credits to organizations, individuals such as loans, discount of valuable papers loans, gurantee, financial leasing and granting credit forms following provisions.
In addition to capital contributions and purchasing shares of enterprises, activities include participating in currency and business markets, establishing subsidiaries, engaging in entrusted activities, acting as agents in banking operations, and offering insurance services.
In addition, the LienVietPosBank is also granted to operate in providing foreign exchange services (providing international payment, implementing foreign exchange transactions on foreign markets) and investing in international markets
Table 2.1 The LienVietBank main figures as of 31/12/2010 is as hereinafter:
Profits before tax 444 VND billion 540 VND billion 759 VND billion
Profits after tax 444 VND billion 540 VND billion 683 VND billion
70 VND billion 200 VND billion More than 400
(Source: Provided by LietVietPostBank’s Finance and Accounting Department, International Relations and Business Unit, Developing Networks and Human Resources Department.)
MACRO ENVIRONMENT ANALYSIS
Since the initiation of economic reforms in 1986, Vietnam has experienced significant positive changes, transforming from a primarily agricultural economy into a developing nation By 2010, the average GDP per capita reached $1,168, reflecting this growth Furthermore, the country has witnessed a rapid increase in urbanization rates.
The Vietnamese economy is currently facing significant challenges due to a global economic crisis, marked by high inflation risks projected at 18% in 2011 and growing macroeconomic instability As inflation rises, economic growth is slowing, with fluctuating gold prices and sharply declining foreign exchange reserves In response, the government has enacted resolution No 11/NQ-CP on February 24, 2011, aimed at curbing inflation and stabilizing the economy Key measures include implementing strict monetary and fiscal policies, reducing public investment and budget deficits, promoting production and exports, controlling the trade gap, and enhancing social security.
Despite a slight decrease in inflation, the consumer price index (CPI) remains elevated, rising 0.36% in October compared to September 2011, and showing a significant 17.05% increase since December 2010, according to the General Statistics Office Additionally, purchasing power parity has declined, and businesses are struggling to secure bank loans due to high credit interest rates and an unstable exchange rate Furthermore, the trade deficit continues to be substantial, while efforts to reduce public investment have proven to be ineffective.
In a report presented by H.E Bui Quang Vinh, Minister of Planning and Investment, the National Assembly Standing Committee highlighted that approximately 48,700 enterprises registered for dissolution or suspended business operations during the first nine months of 2011.
In 2010, the unemployment rate for working-age individuals was reported at 2.88% by the General Statistics Office However, the Employment Department of the Ministry of Labour, Invalids and Social Affairs revealed that by mid-2011, the number of people registered as unemployed had surged to 146,538, marking a staggering 131.1% increase compared to the same period in 2010 Additionally, 119,095 individuals applied for unemployment insurance, reflecting a 179.19% rise from the previous year It is important to note that the actual unemployment rate may be even higher, as these statistics do not account for seasonal and part-time workers.
The banking sector is the backbone of the economy, and in Vietnam, the Commercial Bank system is closely regulated by the State Bank To combat inflation, the government issued resolution No 11/NQ-CP on February 24, 2011, aiming to increase commercial banks' credit growth rate to 20% while limiting outstanding loans for non-production purposes to below 16% by year-end High inflation has eroded public confidence in the Vietnamese dong, leading to soaring deposit and loan interest rates exceeding 20% and 25% per year, respectively Consequently, businesses struggle to secure bank loans due to elevated interest rates and stringent disbursement conditions, while individuals face restrictions on accessing loans because of the State Bank's non-production lending limits Economic and financial experts predict that banks will encounter significant challenges in their operations moving forward.
Recently, Vietnamese economy has faced many difficulties due to serveral causes as follows:
+ Objectively, it has been impacted from the world economy situation
Vietnam's economy has faced persistent challenges due to inherent limitations and weaknesses, resulting in prolonged periods of economic downturn The slow adaptation of growth patterns and economic structure has contributed to ongoing issues with high inflation and macroeconomic instability in recent years.
During adulthood, people receive a numerous culture, perceptions, hobbies and behaviours cores through family and society Culture has strong influence on consumer purchasing behaviours
As Vietnam experiences economic growth, the disparity between the wealthy and the impoverished is widening High and middle-income individuals, primarily residing in major cities, prioritize quality and service over price This affluent demographic is a key focus for banks, which actively cater to their financial needs.
According to the General Statistics Office, Vietnamese population was around
In 2010, Vietnam's population reached 87 million, with 44 million individuals aged 60 and above, representing 50.6% of this demographic By 2017, it was projected that the percentage of the Vietnamese population aged 60 and older would increase to 10% of the total population, indicating that Vietnam has a relatively young population overall.
Vietnamese consumer habits are undergoing significant changes, with a noticeable shift towards improved quality and quantity in purchasing Young families are increasingly adopting a spending-oriented lifestyle, prioritizing consumption over savings.
The uneven distribution of the population leads banks to focus their activities, such as capital mobilization and lending, primarily in major cities With evolving consumption habits, an increasing number of individuals are seeking bank loans for purposes like shopping, travel, and education.
The telecommunication industry is experiencing rapid infrastructure growth, making mobile phone ownership accessible to everyone, including those in rural areas, due to significantly reduced prices and calling fees In response to competitive pressures and the need to develop advanced products and services, banks are prioritizing the modernization of information technology and enhancing their application systems.
Technological advancements play a crucial role in enhancing banking systems by improving the management and expansion of products and services Moreover, these innovations facilitate better risk management, equipping bank managers with essential tools to make informed decisions.
The information technology infrastructure of banks is outdated and fails to align with modern banking needs The existing application systems do not adequately support the development of new services, and automation levels are insufficient to meet managerial demands for efficient Internet Banking operations.
In Vietnam, banks that leverage advanced technology gain a competitive edge in earning customer trust, especially when their services are comparable The technological advancements have strengthened the banking system's integration with key economic sectors, notably e-commerce, retail, securities, and telecommunications.
ANALYZING ENVINRONMENT IN BANKING SECTOR
By the end of 05/2008, Vietnamese credit institutions system 05 state-owned commercial banks, social policy bank, development bank, 06 joint-ventures banks,
36 joint stock commercial bank, 44 foreign bank branches, 10 financial companies,
13 financial leasing company Credit insitutions can be divided by 4 main groups such as state-owned bank; joint stock commercial bank; foreign banks and branches and financial and insurance institutions.
The state-owned commercial and joint stock banks in Vietnam include prominent institutions such as the Joint Stock Commercial Bank for Foreign Trade of Vietnam (VCB), Vietnam Joint Stock Commercial Bank for Industry and Trade (VietinBank), Bank for Investment and Development of Vietnam (BIDV), Bank for Agriculture and Rural Development of Vietnam (Agribank), and Mekong Housing Bank (MHB) These banks are characterized by their extensive scale and diverse range of activities, along with significant capital resources and established relationships with numerous clients, particularly state-owned enterprises and corporations.
1.2 Joint Stock Commercial banks group
Currently, there are 36 joint stock commercial banks that emerged after the state-owned commercial banking group Although these banks typically have smaller capital scales and operational scopes, several, such as ACB, Sacombank, Techcombank, and Eximbank, have experienced rapid growth due to effective business strategies, positioning them as direct competitors to LienVietBank Their broad operational scale and adaptability to diverse customer needs, combined with flexible mechanisms and attractive policies, enhance their competitive advantages and help them attract skilled employees.
1.3 Foreign, joint venture and foreign branches banks group
Banks in this group possess advanced banking technology skills and experience, enabling them to offer modern banking products and services However, their limited scope of activities hinders their ability to compete with LienVietBank Despite this, changes in the banking system may soon position these banks as significant rivals to LienVietBank, especially as they expand their networks and gain the ability to operate across all business activities like domestic banks.
The financial and insurance institution group has experienced significant growth due to the emergence of various domestic and foreign insurance companies, financial firms, capital funds, and fund management companies As this group expands, the market share for capital mobilization among traditional banks is likely to diminish Customers now have diverse investment options beyond traditional bank deposits, including securities, insurance products, and investment trusts.
Competition is a phenomenon associated with the market-oriented economy.
Competition plays a crucial role in enhancing productivity and efficiency within organizations, driving the development of production and business activities It fosters healthy social relationships and significantly influences the positioning, survival, and sustainable growth of each entity Commercial banks face intense competition, not only from other banks but also from various credit institutions, as they vie for customers and market share in mobilizing and lending, as well as offering banking products and services to the economy However, competition among commercial banks exhibits unique characteristics that set it apart from other industries.
Currency trading is highly sensitive to various factors, including economic, political, social, psychological, and cultural influences Even minor changes in these elements can significantly impact the overall business environment Consequently, banks must strategically compete to gradually expand their customer base and market share However, they cannot prioritize competition over compliance with the law, as the collapse of a single bank could have far-reaching effects on the entire financial system.
Banks engage with various economic and social entities by mobilizing deposits, providing loans, and offering a range of financial products and services They serve individual customers by opening accounts, making their stability crucial for the overall banking system If a bank encounters business difficulties or risks collapse, it can negatively impact the entire banking sector, which is undesirable for all banks Therefore, it is essential for banks to not only compete but also collaborate to foster a healthy environment and mitigate systemic risks.
Bank activities are integral to various social and economic aspects, necessitating the avoidance of risks that could destabilize the entire system The State Bank must implement stringent supervision and establish an effective management and early warning system to mitigate potential risks Given these unique characteristics, competition among banks should not result in weakening or takeovers, as seen in other business sectors within the economy.
The cash flow activities of banks are interconnected across multiple countries, facilitating commercial operations globally The banking sector is influenced by various domestic and international factors, with financial infrastructure and information technology playing pivotal roles Furthermore, competition within the banking system is regulated by a multitude of rules and practices from different countries, necessitating a higher level of competitiveness that demands stricter standards compared to other industries.
1 3 Factors impact on commercial banks’ competitiveness
There are several factors influencing on competitiveness capacity of a commercial bank:
Newly-established commercial banks bring fresh potential to the market, driven by their motivation to capture market share They benefit from learning experiences of existing banks and accessing a wealth of market statistics and forecasts Consequently, established banks may see a decline in their market shares, despite being unaware of the capabilities of these newcomers Moreover, these new banks implement innovative strategies and strengths that current banks may lack insight into, further intensifying competition in the financial sector.
- Current banks: this are permanent concerns of the banks in doing business.
The presence of competitors significantly influences the future business strategies of banks, compelling them to consistently innovate their technology and enhance service quality to succeed in a competitive landscape.
In the banking sector, pressure from customers presents a significant challenge as individuals, economic organizations, and other banks act as both buyers and sellers While depositors and those opening transaction accounts expect higher interest rates, borrowers seek lower costs for loans This creates a conflict for banks, which must balance effective profit generation with the need to attract and retain customers by offering competitive interest rates Consequently, banks face difficulties in establishing future operational strategies and orientations.
The emergence of intermediary financial institutions has challenged the advantages of commercial banks by offering both innovative financial services and traditional products, leading to increased competition and a broader market for consumers This shift has resulted in a decline in the growth rate and market share of commercial banks However, as these banks gain experience in navigating competition, they are likely to become more robust and adaptable, enhancing the overall strength of the banking system in the face of economic fluctuations Additionally, internal factors such as leadership management, financial stability, technological capabilities, employee quality, organizational structure, and the bank's reputation significantly influence their competitive edge in the market.
In the face of high inflation, banks are challenged to decrease non-productive loans while adhering to the State Bank's requirement of controlling capital mobilization at 14% per year, which complicates liquidity Despite these challenges, LienVietPost Bank views this situation as an opportunity to strengthen its position in the current financial landscape.
3 Analyzing external factor evaluation matrix (EFE)
EFE matrix is used to evaluate external factors which relates to organation in order to make appropriate strategies
Table 2.2.External Factor Evaluation matrix (EFE)
Government’s regulations on stricter bank activities
The increase of using products and banking services habits The increase of unemployment rate
Changes in technologyHigh inflation rate 0,0415 42 0,163
Increasing fierce competition The increase of using products and banking services habits
Changes in human resourcesIncome distribution unequal in geography
Competitors strengthen promotion programmes Changes in technology
0,1504 24 0,316 resourcesIncome distribution unequal in geographyCompetitors strengthen promotion programmes
The increase of unemployment rate
High inflation rateChanges in human resources
Through the above analysis table, we can see that the LienVietPostBank is at average level of effective respond strategies to external factors.
4 Competitive Profile matrix analysis (CPM)
The matrix establishment seeks to assess LienVietPostBank's competitive standing against key players in the banking sector, specifically targeting joint-stock commercial banks such as ACB, Techcombank, and Sacombank Due to the unique operational mechanisms of state-owned commercial banks, LienVietPostBank faces challenges in competing effectively at this stage.
ANALYZING LIENVIETPOSTBANK’S INTERNAL ENVIRONMENT
Established just over three years ago amid Vietnam's economic challenges due to the global financial crisis, LienVietPost Bank has adhered to a business philosophy centered on "Safety - Efficiency - Law Respectability." Since its inception, the bank has experienced significant growth in key indicators, including total assets, profits, dividends, and its network system.
With robust financial resources, cutting-edge technology, strategic leadership, and a dedicated workforce, LienVietPost Bank is poised to establish itself as a leading joint stock commercial bank in Vietnam's retail banking sector.
The Viet Post and Telecommunication Corporation's investment in LienVietBank, alongside the value of Vietnam Postal Saving Services Company, has unlocked the potential to leverage over 10,000 post offices across the country As a result, LienVietPost Bank and AgriBank have emerged as the two largest banking networks in Vietnam.
LienVietPost Bank's head office oversees a comprehensive network comprising operation centers, branches, and transaction offices As of October 31, 2011, the bank employed approximately 2,000 staff, reflecting a significant growth of 35% compared to 2010 and an impressive 163% increase from 2009.
LienVietPost Bank's board of directors consists of seven members, led by Chief Executive Officer Mr Duong Cong Minh Each director oversees specific committees, including the Post Office Management Committee, Strategy and Business Committee, Human Resource, Technology and Cost Management Committee, Credit and International Relations Committee, and the Legislation, Risk Management, and Anti-Money Laundering Committee.
LienVietPost Bank is led by General Director Mr Le Hong Phong, supported by 11 Deputy General Directors overseeing various departments These departments include Funding, Post Office Management, Card and E-banking, Strategic Customers, Business and International Relations, Customer Services, Legislation, Risk Management and Anti-Money Laundering, Verification, Enterprise Development, and Finance.
At branches, there are several units such as: General Affairs unit; Customer relations unit, Credit management unit, budgetary accountant unit, Postal saving management unit and subsidiaries.
The bank has several transaction areas including 01 Transaction, 31 branches, and 32 subsidiaries and saving unit in nation-wide.
With the specific assigning responsibilities to each department and individual, it has increased the bank efficiency in management capacity and operation
LienVietBank boasts a significant advantage over other banks due to its extensive network of branches, transaction offices, and postal savings systems across the country This widespread presence enables LienVietPost Bank to effectively reach and serve customers in all provinces.
LienVietPost Bank leverages its ability to provide large-scale services, including money transfers and payment solutions, which positions it strongly against other joint-stock commercial banks in the industry.
The bank's strategy focuses on expanding its operational area with a moderate density to effectively serve customers across all transaction units while minimizing costs This approach also helps to prevent competition among branches for the same customer base, a prevalent issue in the banking sector today.
Each transaction unit features a minimum frontage of 7 meters, strategically positioned along the main road These units have been redesigned to serve as spacious offices, enhancing the trust and positive image of the LienVietPost Bank brand.
The bank is newly formed thus its staff team is relatively young and inadequate experiences.
Besides, the management of additional postal saving units on a large scale throughout the country is also a challenge for the bank.
Transaction offices in major cities such as Hanoi and Ho Chi Minh are predominantly leased, which limits the bank's flexibility in lease terms and often leads to challenges in negotiating renewal prices.
Following the issuance of Circular No.13 and Circular No.19 by the State Bank, along with new regulations on prudent ratios for credit institutions, the banking sector has faced challenges in achieving profit targets due to efforts aimed at lowering interest rates and curbing inflation These changes, compounded by adverse global market conditions, have significantly impacted financial institutions in areas such as capital raising, credit, and customer base expansion Despite these challenges, LienVietPost Bank has demonstrated remarkable resilience, achieving impressive growth in both operational scale and net profits The bank has effectively managed to control credit risks, keeping non-performing and overdue loans at minimal levels.
II Deposit at state-owned 139.508 209.856 400.319 906.852
III Deposing at other credit
1 Government and State Bank liabilities 953.304 1.275.681 2.601.385 500.000
2 Deposit atfrom other credit institutions 3.808.480 12.381.256 16.573.900
5 Capital financing and investment trust 35000 40.000 50.000
(Sources: Accounting Department, LienVietPost Bank)
LienVietBank has demonstrated remarkable growth, with total assets soaring from 7,452 billion VND in 2008 to over 56,000 billion VND by October 31, 2011 Initially established with a charter capital of just 3,300 billion VND, the bank's equity has impressively risen to over 7,430 billion VND in just over three years.
By 31 st October 2011, the total mobilizing capital of the Bank reached 42,654 VND billion which had growth up 12,233 VND billion and equivalent to 40% in comparison with the time of 31 st December 2010 Mobilizing from resident and economic organizations gained 25,580 VND billion, accounting for 60% of the total fund Loans from the State bank and other credit institutions were 17,074 VND billion accounting for 40% the total mobilized capital
Despite starting operations during a challenging economic period marked by intense competition in capital mobilization, LienVietPost Bank has achieved stable and well-developed fund mobilization through the dedicated efforts of its staff and effective management strategies As reported in 2010, the bank's capital structure consisted of 40.48% from customer deposits, with 86.47% sourced from economic organizations and 13.53% from individual residents, totaling 1,666 billion VND.
1 Interest income and similar incomes 595.326 1.108.678 2.489.081 6.220.532
2 Interest expense and similar expenses (54.371) (452.177) (1.264.774) (4.476.714)
4 Net interest from services activities 138 10.388 32.735 8.798
5 Net interest from foreign exchanges trading 1.119 22.804 49.513 106.883
6 Profit/loss on securities trading 107.552 5.693 (222) (11.994)
7 Net interest from securities investment 185.87 17.239
8 Net interest from other activities 60.035 9.323 3.944 39.276
9 Income from mobilizing fund and investment in shares 34
11 Profit net before provision for risks 456.326 568.595 816.410
12 Provision expenses for credit risks (12.738) (28.542) (57.510) (232)
16 Basic earnings per share (VND/shares) 1.344 1.607 1.871
SUMMARY
LienVietPost Bank demonstrates strong financial capability with total assets of 56 trillion VND, loans exceeding 12 trillion VND, and chartered capital of 6.01 trillion VND Unlike many other joint stock commercial banks struggling with capital for loans, LienVietPost Bank not only maintains high liquidity but also actively participates in credit granting through the interbank market.
- Distribution system: with over 10.000 transactions in nation-wide
LienVietBank stands out among commercial banks in Vietnam due to its extensive network, which effectively mobilizes idle capital from citizens and enhances access to banking services This broad reach optimizes capital mobilization through postal savings The bank's leadership team, comprised of experienced professionals with backgrounds in various banks, enables LienVietBank to recognize its strengths and weaknesses, facilitating the development of targeted strategies The rapid growth in scale, operational efficiency, and brand value serves as clear evidence of the capabilities of LienVietBank's leaders.
- Create unique products and business model: Since its establishment,
LienVietBank has pioneered the "Phu Tam Nong" model, becoming the first joint-stock commercial bank to invest in agricultural credit development This innovative approach fosters collaboration among the State, farmers, enterprises, scientists, journalists, and banks, with LienVietBank serving as an intermediary for lending and debt collection Since the project's launch, the bank has disbursed nearly 5 trillion VND, with loans for agriculture, exporting, and industrial support comprising 61%, 24.6%, and 14.4% respectively The initiative has supported approximately 1,500 individual customers and nearly 300 private enterprises in the agricultural sector, establishing a new business model and direction for LienVietBank, despite its figures being modest compared to Agribank.
LienVietBank has strengthened its reputation and position in society through its connections with large state-owned corporations, various groups, and local citizens Recognized as a dynamic and community-focused bank, it is committed to social responsibility and serves as a trustworthy partner for individuals and organizations alike.
LienVietBank, a newly established unit, recognizes the critical role of modern technology in its development and has made significant investments in information technology As a result, it became the first joint-stock commercial bank to successfully deploy its Core Banking project within just three months, marking the shortest implementation time on record Additionally, LienVietBank pioneered the use of a GPS security system and has integrated a nationwide network with advanced technological infrastructure, establishing a clear competitive advantage in the banking sector.
Since its establishment, LienVietBank has made significant contributions to charity, positioning itself as a dynamic and sustainable development bank It is recognized not only for its innovative banking services but also for its commitment to community involvement, providing social aid for natural disasters, poverty alleviation, and expressing gratitude through various initiatives.
- Staffs practical experiences: most of LienVietBank staffs are very young.
Particularly since integrating with postal savings services company, most postal workers still follow government working style which is inefficiency and weak in the bank's operations such as lending, payments
The postal savings network lacks experience in banking operations, primarily focusing on capital mobilization Initially, LienVietBank integrated only 200 employees from the postal savings system To restore normal functionality, it is essential to maintain an "active crossover" between the postal service and the bank, allowing both entities to operate in tandem and charge each other for services This synchronization of activities demands significant time, effort, and financial investment.
Significant investment in technology, equipment, and human resources is essential for enhancing postal savings transactions, as their IT systems lag behind those of other banks To establish 10,000 nationwide transactions, substantial time and financial resources will be necessary for upgrading IT infrastructure, training personnel, and developing effective mechanisms.
As a newly-established institution, LienVietPostBank has a smaller total asset base compared to other commercial banks.
LienVietBank's credit development is significantly lagging behind its mobilization growth, with outstanding loans exceeding 12 trillion VND compared to nearly 49 trillion VND in mobilized funds The limited credit growth imposed by the State Bank has resulted in a low credit balance, adversely affecting the bank's performance This situation has led to a smaller customer base compared to competing banks, creating challenges in capturing market share The lack of customers ultimately impacts business revenues and profits from essential services such as money transfers, payments, account maintenance, and cash deposits.
The funding structure of LienVietBank is unsustainable, with only 18% of total deposits and borrowings, amounting to 8,800 billion VND, coming from stable savings deposits by residents This low proportion poses significant challenges for the bank, especially when economic organizations withdraw funds for their production and business activities.
The limited variety of products and services offered by the Bank is largely attributed to recent restrictions on credit growth, which have hindered its focus on development and innovation As a result, there has been insufficient improvement in the quality of banking services.
- Expanding network opportunity: Thanks to integration with the Vietnam
LienVietBank, through its Postal Saving Services Company, has rapidly expanded its network to nearly 10,000 transaction points across all 63 provinces in the country This extensive reach has facilitated the deployment of essential services such as mobilization, loans, and money transfers, creating significant opportunities for customers nationwide Additionally, leveraging its existing system for network expansion has allowed the bank to dramatically reduce operational costs.
LienVietBank is implementing a strategic plan to become the largest retail banking network in Vietnam Despite the challenges posed by the economic crisis, the banking sector in Vietnam holds significant potential As a rapidly developing economy with a high growth rate compared to global standards, Vietnam is poised to facilitate easier access to banking services for both businesses and residents.
- Increasing total assets oopportunities: besides of total assets increase from the mergence, the bank can also make the most of capital mobilized from residents in all provinces.
LienVietBank has the potential to enhance its brand value through the well-established "Postal Savings" brand, recognized by millions nationwide, adding significant intangible assets to its portfolio.
SELECTING STRATEGY FOR LVP IENVIETBANK
Development orientation
Between 2011 and 2015, the Vietnamese economy is expected to encounter significant challenges, including inflation, macroeconomic stabilization, and growth hurdles During this period, commercial banks will likely struggle with trading operations due to the implementation of tightening monetary policies.
The developing orientation of Lien Viet Post Bank phase 2011 –2015 is focused on the following factors:
In business operations, it is essential to exercise patience in development and avoid unnecessary expansion Emphasizing risk management and adhering to legal safety indicators are crucial for sustainable growth Post-merger, effective implementation of savings services and robust capital mobilization are key Interbank lending should be utilized to support liquidity while ensuring a reasonable profit margin Additionally, it is important to limit non-production credit and maintain the newly established organizational structure of a "Board of Directors managing the banking industry."
- Strengthening payment service not using cash and exploiting market:
Targeting underserved markets, the initiative aims to reach rural areas and individual business households across the country, addressing the gaps left by traditional banks due to network and management constraints.
In the upcoming period, the Bank aims to enhance cashless payment services for sectors related to social insurance operations, customs, electricity, water, and telecommunications Additionally, it plans to introduce a card payment system specifically for peasant households.
The focus on developing and applying technology is essential for enhancing banking services, particularly through the integration of CoreBanking software at post-saving points By continuously modernizing banking technology and utilizing cost-effective solutions, banks can improve customer access to products and services via mobile networks and the Internet Modern technologies facilitate the creation of new, user-friendly products that save customers time and money These offerings are designed with diversity in mind, catering to various customer needs and preferences, emphasizing the principle of "creating products that people need rather than what the bank offers."
- Building corporate culture: Basing on three norms that are “rules, creation, and humanity”
+ Disciplines: Complying with the State’s laws; charters, statutes, regulations, procedures, and decisions of the Bank; obeying the superiors’ decisions; well executing and completing tasks assigned by the superior
Creativity involves the ability to innovate and implement meaningful changes in the development process while fostering both personal and collective values It requires a continuous pursuit of better solutions and an ongoing commitment to enhancing professional knowledge and management skills Additionally, it is essential to establish mechanisms that encourage learning and improvement among employees, respecting their talents and providing opportunities for those who are dedicated and capable.
Humanity is at the core of all endeavors, emphasizing that all actions should originate from and serve people This involves fostering a corporate culture rooted in morals, charity, justice, and responsibility, while also prioritizing the spiritual and material well-being of employees Ultimately, business must intertwine responsibility towards shareholders with a commitment to societal welfare, creating a harmonious connection between society and commerce.
Since 2011, LienVietBank has shifted its business strategy from a multipurpose wholesale and investment focus to becoming a retail bank, aiming to serve the banking needs of everyone To achieve this development strategy, the bank has established specific goals to guide its progress.
LienVietPost Bank is establishing a retail banking model that offers multifunctional services aimed at becoming a bank for everyone This initiative is supported by the Vietnam Postal Saving Services Company, which has made a capital contribution equivalent to its value By leveraging post savings and money services, the bank is focused on expanding financial services to every commune, district, and province across Vietnam, ensuring a robust and competitive market while adhering to legal standards.
- It is strived that the dividend of shareholders will be over 15% per year.
- Taking care of the employees’ life; having determination to following the goal
“Living by way, enriching by reward”; paying people by the job in term of connecting interests and responsibilities and work effectiveness.
- Connecting society with business; renovating social and charity operations; interest rate and implementing the “three farming points” policy: Agriculture – Rural areas – Farmers.
- Continuing to modernize banking technology in the connection with post and telecom system; developing the technology in service and handy software, and new and effective management and administration technology.
LienVietBank is committed to developing cultural standards that enhance management effectiveness, executive performance, and overall business efficiency By prioritizing people and fostering a professional, modern, and innovative work environment, the bank aims to operate in a prestigious, effective, and safe manner.
- Expanding relations of joint venture and connection to develop and gradually internationally graduate
1 Building strategy from TOWSSWOT matrix
Leveraging the SWOT matrix theory discussed in Chapter 1, Section 2.5, we analyze the strengths, weaknesses, opportunities, and threats facing LienVietBank This analysis forms the foundation for developing a strategic growth plan for Lien Viet Post Joint-venture Commercial Bank for the period of 2011 to 2015.
2 Having advantage of scale and network
4 Having quite new products and business models
5 Image and brand have been affirmed.
1 Employees’ capacity not satisfying requirements
2 Inexperienced post-saving transaction system
3 Big investment cost after merging
5 Structure to mobilize capital not ensuring the stable factor
1 Expanding network and market share
2 Chances of growth and development
4 Increasing brand value and profit
5 Development chance because of difficulties of competitive opponents
1 Strategy to develop the market focusing on “three farming points” area
2 Merging or buying backequititions banks in difficulties but having good debit and credit quality
1 Strategy to develop banking products and services
2 Strategy “Standing firmly in the market”
1 Operating cost remarkably increases after merging
2 Difficulties in integrating two systems to work compatibly
3 Difficulties in checking and supervising work
4 Being influenced by economic regression
5 Building strategy depends much on the
1 Strategy to strengthen marketing operations
2 Strategy to invest in technology
1 Strategy to manage human resources and training
2 Strategy to tighten spending and improve the capacity of risk management
LienVietPost Bank, despite being newly established, is poised for growth in its market presence Leveraging its strong distribution network and financial capabilities, the Bank aims to expand its reach in rural areas, urban centers, and among customers in industrial and export processing zones.
LienVietPost Bank prioritizes the “three farming points” area as part of its long-term strategy, recognizing its significant potential for agricultural and aquaculture development due to favorable natural conditions With an increasing demand for capital to expand production, the growth of agriculture is expected to stimulate supplementary operations such as recycling, processing, and export Consequently, there is a rising interest in the Bank's products and services among these sectors Leveraging its extensive network, LienVietPost Bank aims to effectively utilize its strengths to enhance the sale of its offerings in this vital economic area.
Urban areas represent a highly competitive landscape for banks, where customer demands are both numerous and elevated For significant clients such as the Mineral Coal Group, Oil and Gas Group, and Insurance companies, LienVietPost Bank should leverage its member units within these groups The bank's development strategy must prioritize product and service quality, adhering to the principles of being "Not fast but reliable; striving to please and satisfy customers." Given the substantial potential for capital mobilization in urban settings, it is crucial for the bank to maximize its capabilities in capital development.
Many enterprises are thriving in industrial and export processing zones across major urban areas like Hanoi, Ho Chi Minh City, and Hai Phong These zones present significant opportunities for banks to cater to potential customers who utilize a variety of banking products and services To effectively attract these clients, banks should implement tailored policies regarding interest rates, fees, and comprehensive service offerings.
1.2 Strategy to merge and equititionsbuy back: