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Chapter I: General theories of business strategyChapter II: Analysing the actual state of VIBChapter III: Develop a general business strategies for VIB period 20152020, realization solutions and conclusion.To achieve its targets and business strategy period 20092013, VIB needs to develop a comprehensive action program, comprising very specific operational parts and affairs
DEVELOPING A GENERAL BUSINESS STRATEGY OF VIETNAM INTERNATIONAL COMMERCIAL JOINT STOCK BANK (VIB) PERIOD 2015-2020 FOREWORD Reason for choosing topic: The event of Vietnam joining the World Trade Organization (WTO) marked a great turning-point for Vietnam’s economy Opportunities are waiting for the enterprises who know how to invest, search and utilize However, existing alongside with opportunities are always threats, dangers, challenges, and risks that can arise at anytime and they will make businesses face with difficulties if there is no full preparation for courses to deal with them With competitions happening more and more severe and violent in the market, each business should prepare readily with effective courses in order to exist and develop solidly A corporation with sound and suitable business strategies, being able to lean on internal forces to make use of opportunities coming from external environment or to avoid risks, restrict weaknesses will certainly be strong enough to compete and stand firmly in the market 2009 is the 3rd year that Vietnam’s economy joined WTO more and more wholly, among that the most important thing is that the presence of banks with 100 percent foreign fund Opportunites and threats are waiting for banks, including Vietnamese International Commercial Joint Stock Bank (VIB) While domestic banks are expanding their networks, the establishment of domestic banks and the existence of banks with 100 percent foreign fund will lead to more severe competitions For VIB, in the conditions where the economy always changes with many chances but also several challenges, the competition in banking industry is increasingly severe with the participation of foreign banks, and direct competitors is domestic commercial joint stock banks, to create a firm and stable position will require a lot of efforts to maintain the market share and develop more Nonetheless, VIB has distinguished itself as a star in the joint stock bank system by applying modern organizational and management models, strategies of establishing brand image with the guideline “Managing according European style, trading according to Eastern philosophy” (According to a Board of Directors Chairman in power) Depending on available advantages of the brand name of VIB and internal forces which is the determination and singleness of mind of the Board of Directors, Board of Management, and staffs, VIB was successful in building and carrying out the business strategy period 2003-2007 So as to maintain its position and continue pursuing the objective of leading VIB to become one of the top five joint stock banks of Vietnam and to harmonize with the new era – era of globalization, VIB needs to develop strategies to make it expand faster, firmly, safely and effectively together with restructuring the system corresponding to customer-oriented product lines With these reasons, our group has decided to choose the topic “Developing a general business strategy of Vietnam International Commercial Joint Stock Bank (VIB) period 2015 - 2020” to research Goal and meaning: - Goal: Using researched theories combined with analyzing practices to bring up effective business strategies for VIB from now to 2013 - Meaning: According to scientific foundation, this research project came into being with the desire of contributing some strength for the chosen institution – Vietnam International Commercial Joint Stock Bank (VIB) Object and area of research: - Research object: Business strategies of businesses - Research area: Banking environment, competitors’ strategies, and business strategies of VIB Research method: By several methods like quantitative and qualitative methods, combined with analysis, statistics, and expert method, the coursework was carried out for research at VIB bank to gain the most comprehensive and exact results Based on that basic, our group are then able to bring out effective strategies Topic’s struture: consisting of foreword and conclusion, the essay’s structure consists of three parts: Chapter I: General theories of business strategy Chapter II: Analysing the actual state of VIB Chapter III: Develop a general business strategies for VIB period 2015 - 2020, realization solutions and conclusion CHAPTER I GENERAL THEORIES OF BUSINESS STRATEGY 1.1 – Notions and role of business strategy in corporations: 1.1.1 Some notions about business strategy: The terminology “strategy” started from military field In military, strategy is defined as: the art of combining military forces, mental and economic politics mobilized to win over the enemy Though, nowadays, the term “strategy” are used frequently in business field Although it started long ago, there has not been an absolutely exact and sufficient definition for this term Some notions about business strategy are as follow According to Michearl Porter, a professor of Havard University: “Business strategy is the art of creating competetive edges” Like that, business strategy is one of means to compete among corporations; it is a way for corporations to attain the proposed objects by creating competitive edges, or equivalently, by creating strengths, opportunities, dangers, challenges, etc, thus point out suitable solutions to succeed in business As the consultation group of Boston Consulting Group (BCG) stated: “Business stratedy is the division of corporations’ available resources and take the competitive position.” This means that corporations, by analyzing its resources and business divisions then dividing its resources in the most effective way, point out objectives and tactics to realize those objectives with the greatest effect to generate dominance to compete According to Alain Charles Martinet: “Strategy is the art corporations use to prevent competition and gain success.” Hence, strategy is to sketch out firm and lasting evolvement orbits, around those orbits may be able to organize right decisions and actions of corporations In business environment, the term “strategy” mostly arises from basic laws Yet, applying this term always fails due to lack of knowledge about its nature and use Therefore, it is difficult to get a united definition about “strategy” because of two reasons: (1) strategy consists different aspects, and (2) strategy has individuality, it changes with circumstances of each business, in each typical branch However, there are at least three types of strategy in business world, which are: strategy or normal strategy, corporate strategy, and competitive strategy Figure 1.1: Strategy Therefore, there are many definitions about strategy, but focused on four main areas: plan, model, position and prospect In accordance with these points of view, strategy is: (1) A plan showing what to from one thing to get another thing (2) A lasting activity model, for example a company which always promotes costly products, it is using the strategy “focusing on objects with high income” (3) Position, which indicates decisions of bringing special goods or services to special markets (4) Future prospect, which is line of vision and orientation which helps corporations or organizations expand 1.1.2 Role of business strategy A defined business strategy is equivalent to corporations answering these following questions: The corporation - Where is it standing? - What does it want to do? - What does it have to do? - What will it do? - How will it so? From specifying the current standing point, developing business strategies will give us the answer for where the corporation wants to go and by which method it can go, if any Business strategy points out objectives and directs corporations to operate effectively Strategy helps a corporation utilize resources rationally, creating a competitive position for its products in the market, find its strengths and make use of them to create edges, also find out the disadvantages to limit and overcome them Additionally, strategy helps corporations take advantages of chances, always in an active position in face of environmental changes These days, in the market economy where competitions among competitors inside and outside some particular industry are serious, businesses not only have to exert all its strength to perfect its internal functions effectively, but also have to be dynamic, flexible in its activities to adapt to market’s complex changes This situation requires corporations to be more long-sighted for its own improvement A practical problem is that strategy is the factor that helps corporations improves For this reason, it is necessary to start a plan by pointing out the future prospect, including exact position, and how it can achieve it with a carefully established plan In the long-term, everything will change Decisions and actions of the model mark a change from the beginning to the success 1.1.3 Business strategy models: 1.1.3.1 - Linear strategy model: The linear model concentrates on planning activities A model is called linear because it comprises activities which are in sequence, oriented and in logical order of a planning process According to linear point of view, strategy consists of: integration of decisions, operations, and plans set up and oriented to the organization’s objectives Both the objective and the method of achieving it are the result of strategic decisions In order to achieve the objective, the organization may change its link to surrounding environment, such as changing products, transferring markets, or carrying out other business activities Terms associated with the linear model include: forming a strategic plan, establishing the strategic sytem, and performing the strategy The linear model describes high-level managers as people with the ability of changing organization Surrounding environment is a group of difficulties caused by competitors Through a process of appropriate decisions, the high level manager defines the target, develop alternative plans to achieve the target, assess the chance of success of each plan, and decide the plan to operate In this process, the manager makes use of future trends and conditions benefit for commercial activities and avoid or have methods to prevent the disadvantages As the model is developed for businesses to make profit, the two important conclusions considered are profit and productivity If the purpose of the planning process is the corporation’s success, it is needed to ensure that all decisions of the top manager will be operated completely in the organization This assumption enables proposed ideas to become realistic actions The second assumption of the model starts from the characteristic of timeconsuming and future directing of the planning process In other words, today’s decision are given by believing in future conditions Decisions may be carried out after a few months, or even a few years In order to believe that the time given to making decision is not wasteful, it is necessary to believe that business environmental changes are predictable One more assumption is that the most important result of a strategy is that each institution is able to define some goals and complete them Linear model is used less and less since strategy problems are increasingly severe not only because they are connected with several management aspects, but also due to changes of technical, economic, information, social variables 1.1.3.2 - Adaptation strategy model Adaptation strategy model is defined as being interested in improving the ability of combining opportunities and risks of business environment with the corporation’s resources and its ability to exploit these opportunities The predicted corporation will continue to assess internal and external conditions The result of assessment are the appropriate adjustments in the organization or in related environments in order to create a suitable combination between the environment’s opportunities and risks and the corporation’s ability and resources Adaptation strategy is based on some assumptions Corporations and environment are connected more closely than linear model Environment is more dynamic and more difficult to predict in adaptation model Business environment includes: competitors, trend, and relevant factors (become more and more important) While linear model assumes that corporation has to face business environment, adaptation model assumes that corporation changes in line with business environment Adaptation model uses more variables and have greater modification ability than linear model Nevertheless, many still believe that the realistic business world is much more complicated 1.1.3.3 - Interpretive strategy model Until now, interpretive strategy model’s parameters have not been completely clear However, this model is mainly based on factors of social relationship The social relationship standpoint considers a corporation as a mixture of cooperation agreement between each individual and voluntariness The existence of a corporation depends on the ability of attracting labors sufficient for suitable benefits for all parties This model also assumes that reality is not something objective or exogenous, but is taken shape through a process of social impacts, in there everyone’s feeling is reliable, adjusted and replaced corresponding to others’ feelings Strategy in interpretive model can be defined as a oriented metaphor or a orientation frame allowing the institution’s important factors to understand it and its surrounding environment On this basis, these important factors are encouraged to believe and act in the orientation of creating beneficial effect for businesses Interpretive strategy, like adaptation strategy, assumes that corporations and business environment relate closely to each other Still, in interpretive strategy, the corporation’s leader forms opinions of each individual in the corporation and people to be involved as well as the corporation’s products However, the leader does not perform physical changes to the products Change in opinions leads to a greater trust for the corporation or its products About this point, interpretive model equals to adaptation model A noticable difference between adaptation model and interpretive model is the approach to complexity of each model Adaptation model tries hard to solve the complicated problem of structure, the most significant is the conflict and changes of demand for the corporation’s products Interpretive model emphasizes on the complicated problem of attitude and awaremess of parties related to the corporation 1.2- The process of developing general business strategy: The general business strategy is outlined based on the corporation’s vision expression, have the nature of directing all the activities of the corporation and thus, have the nature of lasting strategy Consists of these following steps: 1.2.1 Choosing the corporation’s mission and main targets: A corporation’s mission and main targets provide the background to set up the strategy The mission states the reason of an organization’s existence and shows what it will Main targets determine what the business wishes to satisfy in the medium- and long-term 1.2.1.1- Mission: Mission is a message expressing the essential value of a business It illustrates the business’s importances and contributions in both business and life aspects; it shows the corporation’s business motto, its position in the world, and the points it commits to obey Mission has to be concise but imply adequately basic meanings, has to be be encouraging and represents a long-term stability Some expressions about mission for reference: Merck: We are in the business of preserving and improving human life All of our actions must be measured by our success in achieving this Apple: To make a contribution to the world by making tools for the mind that advance humankind McKinsey: The purpose of McKinseyand Company is to help leading corporations and governments are more successful 1.2.1.2 -Vision: Vision is a message specifying mission to an encouraging goal It shows the essence of vital innovations to the corporation, make the corporation believe in the future and it targets to the goal, make the impossible possible Some expressions about vision for reference: “Achieving the goal, before this decade is out, of landing a man on the moon and returning him safely to earth”President John Kennedy, 1961 “48 hours to assemble and deliver a car” Toyota “Beat Coke” Pepsi “Maru-C” (Encircle Caterpillar) Komatsu 10 New organizational structure Ban kiểm soát 80 In previous periods, VIB’s system operated separately in each transaction points (branches, transaction offices), which means business units, by its own, executed business, developed customers by means of each person’s personal relationships, did not follow any particular strength or industry but developed mixed In the process of business execution, they did not receive any support or care from group directors, or from support divisions of head office’s departments Now, regional organizational model will replace single branch organizational model as current This model will correct notably limited issues in management, and support efficiently for business units, walk abreast with branches to develop customers and the industry It enables VIB to control the size and efficiency as well as concentrate high-level leaders in managing strategic problems A very important responsibility of the high-level leaders, apart from supporting and managing branches’ commercial activities, is together with the system to develop industrial policies, and orient business units to develop as the proposed plan 81 COO (Processing center) Manager of corporate customers Credit admin Manager of retail group Concentrativ e operations support Regional manager of corporate customers Credit assessment at regional level Regional manager of retail group Manager of medium branches Business manageme nt Sales representat ive RM of SME/BCFDI I Head of credit transactions department Industrial expert RM assistant of SME/BCFDI RM of retail group Head of branch transactions department Controller Retail credit specialist Ho’s staffs Regional center’s staffs Manager of medium branches Mobile sales team Treasurer Figure 3.1: New regional branch organizational model 82 Manager of small branches provides services at branches and support RMs Bank teller Staffs of credit transactions department Regional center’s staffs Manager of medium branches Manager of small branches Expect to divide into commercial regions, as below: - Region 1: Hanoi, Vinh Phuc, Viet Tri, Thai Nguyen - Region 2: Ho Chi Minh city, Vung Tau - Region 3: Hai Phong, Hai Duong, Quang Ninh, Thai Binh - Region 4: Vinh, Thanh Hoa - Region 5: Da Nang, Hue, Quang Ngai - Region 6: Nha Trang, Quy Nhon, Đac Lac, Lam Dong - Region 7: Dong Nai, Binh Duong, Tay Ninh - Region 8: Can Tho, An Giang, Kien Giang, Dong Thap, Ca Mau The division of commercial regions will mainly depend on business tradition, or field and industry of business Like that, VIB will carry out assigning new leaders appropriate to the new model: - Structure by group: will have group directors (wholesale banking group directors, retail banking group directors) - Regional structure: each region will have a regional director responsible for each specific business operations area (wholesale banking regional directors, retail banking regional directors) - Under regions are branches and transaction offices: will have wholesale banking directors, retail banking directors of branches and transaction offices These managers are required to have the following criteria: Have at least year experience in banking sector Have worked at managerial positions for at least years Have education level above university Have good moral nature The process of assigning staffs will be organized in the principle of equality and explicit, promoting maximally VIB’s current staffs’ abilities This new organizational model has a more rational structure, it allows to improve the degree of cooperation and increase abilities for branches; all levels report clearly with specific tasks of relationship managers, focus on improving business and 83 service providing operations; centralize some functions of credit/support transactions at branches; incline toward the organization focusing on improving labor productivity and improve work efficiency 3.3.2.2- Reform branches and customer welcoming manner Branches will have new style and organizational style consistent with the brand name VIB Before, customers coming to trade at bank office spaces did not know whom they have to meet to be satisfied or to be cleared up their needs, had to wait but d id not know for how long But now with the new style: When customers step into VIB’s office space, there will be customer information area, welcome them warmly by a service ambassador, there will be a queue ticket machine at the entrance – and waiting time will be shown in a digital screen; customers are instructed about necessary proceedings relating to the bank; there will be automatic banking devices, waiting areas, counters for VIB customers and at least one RM always in the waiting room to advise and quickly satisfy customers’ needs Branch director’s room will be at a location that is easy to observe staffs’ activities This new style will bring a comfortable feeling to customers while waiting, they will be cared when dealing with business and will certainly feel pleased and secure when satisfied The required task now is to carry out re-designing the office face, reception desk welcoming customers, operations officers’ operation area, racking system… 84 Sales manager Business support, FX, money management Business manager Support sales – grasp opportunit ies for important products or developme nts in the industry Product experts Study about the industry to find out + Macro trend + Speed, orientation… of development of main competitors + Credit risks + Opportunities to develop financial products Support walk-in sales and support RMs Support credit administration department After-sales services /products Industry research team Visit customers together Support administrativel y lending process (not directly be in contact with customers) Serve transactions and basic needs Customers Figure 3.2: Business model of SME services focusing on providing comprehensive solutions 3.3.2.3-Build a new model in business and customer services: The new model will enable the customer relationship manager to promote maximumly their selling ability, free most of back-office work to concentrate on finding customers, contacting with customers, attracting good customers to transact with VIB This RM will be in charge of introducing and selling all products and services VIB is offering for a customer or a group of customers Corporate customer group’s manager can also cross selling products of personal customer group and 85 vice versa RMs will be evaluated their working efficiency and be paid business salaries at the end of the month depending on the month’s achieved results (number of new customers, growth of liabilities in the month, net revenue from profits and service charges, bad debts ratio…) and will not be restricted with bonus ceilings Head office (Manage credit/Channel head) Supervise and encourage sales efficiency Support in planning sales Regional retail manager Managers of small and medium-sized agents Regulate sales flow Cross-sell and up-sell to existing customers Support RMs in administrative work Head office (Manage credit/Channel head) Mobile sales team or partners Coordinate with RMs of BCFDI/SME group to sell products to staffs of customer companies Support in specific sales campaign with automobile and real estate partners Support administrativel y lending process (not directly be in contact with customers) Serve transactions and basic needs Customers Figure 3.3: Retail business model focusing on attracting new customers 86 3.3.2.4- Develop branches’ operation process, describe staffs’ job So that the new organizational and business model at branches and transaction offices operates smoothly and effectively, the essential task is to instantly carry out rebuilding branch operation process in a clear and logical orientation; develop operation processes for each operation part, develop a job description for each job position, title This is the process that requires the participation of consultant experts, high-level managers and head of business units in the entire VIB’s system The job description will be developed based on main roles and responsibilities of some specific position, title: Branch managers - Lead and manage selling activities - Take charge of developing retail business - Support selling & banking services for the business customer group - Ensure good service quality Bank tellers - Money depositing/withdrawing transactions - Payment transactions - Take advantage of opportunities for cross selling products - Introduce customers to RMs to cross sell products - Operate with a service ambassador role Controller - Perform supervising function and support over the counter transactions (direct, examine, authorize, supervise both directions) relating to bank tellers and customer services - Support branch vice managers in operations and customer services Retail RMs: - Main role is flexible selling team - Sell products to customers/partners’ company/private house 87 - Self-motivated cross sell and up sell to existing customers - Communicate and cooperate internally to increase the rate of VIB’s product consumption Corporate customers (Senior RM) - Self-motivated build and maintain relationships with SME and big corporate & FDI customers - Assess credit - Make detailed working plan every term and analyze customers to determine sales opportunities Corporate customers (Credit expert - Junior RM): Support RMS in attracting and serving corporate customers - Cooperate with RMs of big corporate & FDI/SME group to perform credit reports - Provide services door-to-door for customers - Maintain relationships with existing customers and attract new customers 3.3.2.5- Complete the planning process of branches In recent years, the business planning process has not been performed really well, not exploited the development potential as well as management ability of business units, sometimes, it has put too much hope in business units, and thus assigned targets too high for their ability The assigning and receiving the business plan between Head office and business units has not really intersected at one point New method is: months before the end of the fiscal year, business units carry out developing business plan for the following year, register targets with the Board of management; the Board of management also develops business targets for the whole system; the Board of management considers business units’ business targets, discusses and unify business targets with business units; business unit directors carry out assigning business targets to directly under branches and transaction 88 offices, and to each staff Develop, supervise and speed up business activities as the plan 3.3.2.6- Improve human resource quality Invest in human capital - Equip knowledge, improve working ability of staffs - Develop staff training programs - Tools and processes to manage productivity - Attract talents from other financial institutions Effect-oriented working culture - Build a clear and quantifiable staffs’ productivity indicator system (KPI) - Promote and raise salary depending on working results; reward appropriately excellent staffs (above the market’s average level) - Develop human resource improvement programs Penetrate key values to staffs - Customer-oriented, - Self-motivated – Creative, - Cooperate – Share, - Honest – Reliable, - Strictly obey 3.3.2.7- Develop the project of reallocating the bank Business activities are done in the orientation of: - Improving risk management ability - Using technology to increase productivity - Improving business process - Having appropriate marketing strategy Reallocate the bank With this project, VIB will have a sound brand name foundation, a clear new brand characteristic, and a distinct and impressive new brand image 89 VIB’s new bring idea is “Connecting people” This idea means that: VIB will be a customers’ valuable partner for life with the location of brand is announced specifically that: VIB is one of Vietnam’s leading joint stock banks that always put customers in center of activities VIB’s professional staffs build long-term relationships with customers by listening to them and working with them with a cooperative, open and devoted spirits We understand thoroughly market’s demands, have a global vision and commit to simplify all transactions and this help us support customers in planning for the future, realizing dreams and focusing on important matters of life With this location, if consider VIB as a human being then the human being VIB will have characteristics: honest, caring, modern, effective, and understanding – the brand characteristic that VIB wants to emphasized, and central is the devotion of the bank and staffs to all transactions, in all circumstances with customers, colleagues, and partners 3.3.2.8- Concentrate on performing strategic levers and development route - Sales and services model - Develop sales and services model - Sales/new customer development planning tools - Form business targets - Marketing and brand strategies - Develop new branch model - Complete the process at branches - Make business plan at branches - Define and create customer segments - Design a product package for each customer object - Corporate customers and personal customers association program - Branches’ new form and organizational method 90 - Develop business strategy not through branches - Product developing programs - New organizational structure - Improve and manage the system’s operational efficiency - Skill developing programs - Develop electronic system to manage human resource - Organize IT system - Improve management ability - Manage risks - Update internal audit system - Banking management report system - Treasury Development route - Branch model with new form, organizational method and process will be applied in July 2009, yet will not be developed on a large scale in the whole system but at first will be piloted at some business units in Hanoi, after Ho Chi Minh City - The process of shifting to new model is expected to take or years - So that VIB’s new business strategy will be successful, the most important thing is the unanimous determination of all staffs performing the development and conversion process All staffs need to: Adapt with new role and responsibility and other changes Have an open spirit in acquiring new things, and accepting changes Propose ideas, and discuss to learn from experience - Regional management model are being designed and will be piloted - Establish a change management office to support the entire system in the bank reform project 91 CONCLUSION According to Professor Michael Porter – a master economic strategy thinker – on the occasion of a visit to Vietnam in 2008, in the suggestion for Vietnam, he suggested that in the short-term, Vietnam’s competitive strategy could depend on the strengths of low price labor force, abundant natural resources and specific agricultural products In the long-term, Vietnam could develop competitive strategies based on culture, favorable geographical position, in the orientation of making Vietnam be an exchange gate with other countries; developing Vietnam to the logistics base of the area and the world, or turning Vietnam into a tourist country They are Vietnam’s distinct values from many other countries in the global competitive strategy In the aspect of corporation, he believed that the current economic crisis was an opportunity for companies and corporations to recognize correctly their development strategy in the future This is also the time for banks to examine and return to their actual business advantages However, in the process of expanding the current competitive strategy, at commercial banks there are still many barriers and VIB itself is facing They are: (1) The system organizational model and management ability are organized in traditional model Management ability still has many limitations compared to current requirements of commercial banks; (2) Charter capital is still low compared to the average capital of a commercial bank in the world; (3) Banking technological standard is limited and outdated; and (4) Bank staffs’ abilities have not been satisfied the requirements of affiliation and market mechanism As we analyzed above: In the state of Vietnam economy joining WTO, businesses or banks, when operating in an open economy and international affiliation, will face challenges They are challenges from economic environment In the integration conditions, macroeconomic environment here is not limited to a single country’s economic environment but it also implies international economic environment, is the global joint economic growth or recession With the essay’s put problems of 92 Vietnam’s banking industry and VIB in particular, to remain and grow in the next period, VIB’s bank and organizational system restructuring, and changes in business strategy are essential and sound With the point of view “Changing makes success”, VIB’s changes in its business strategy will aim to goals, such as: (1) Become dominant over competitors in providing new solutions to satisfy customers’ needs; (2) Nourish the effective orienting culture, businessman spirits, and be explicit and open in VIB’s working environment; (3) Bring about stable and attractive values for shareholders; and (4) Support community and social development With that point of view, we can affirm that developing new business strategy for VIB from 2009 to 2013 will help VIB overcome difficulties and create a solid foundation VIB’s development in the new era, with new vision and missions 93 94