CapstoneProject_G5.GaMBA.M0111 Page 1 CAPSTONE PROJECT REPORT FORMULATING BUSINESS STRATEGIES FOR RETAIL BANKING
BUSINESS OF JOINT STOCK COMMERCIAL BANK FOR INVESTMENT
AND DEVELOPMENT OF VIETNAM
IN THE PERIOD OF 2013 - 2017

Class: GaMBA.M0111
Group 5:
1. Pham Viet Anh
2. Nguyen Hoai An

Hanoi, November 15
th
, 2012
GROUP OF AUTHORS CapstoneProject_G5.GaMBA.M0111 Page 3

LIST OF TABLES

Table 1.1
SWOT Matrix
Table 1.2
Quantitative Strategic Planning Matrix (QSPM)
Table 2.1
Account outstanding of different banks
Table 2.2
Mobilizing capital from individual deposit
Table 2.3
Position of banks in domestic debit card
Table 2.4
Position of banks in international credit card
Table 2.5
Position of banks in POS

Figure 2.1
The organizational structure of BIDV
Figure 2.2
Vietnam’s GDP growth rate from 2005-2011
Figure 2.3
CPI growth of Viet nam from 2005–2011
Figure 2.4
Total assets scale of BIDV compared to other banks
Figure 2.5
Total equity scale of the BIDV compared to other banks
Figure 2.6
Gross profit of BIDV compared with other banks
Figure 2.7
The distribution channel systems of branches
Figure 2.8
The ATM and POS distribution channel systems
Figure 2.9
The credit rating options (BEINorm) CapstoneProject_G5.GaMBA.M0111 Page 4

CONTENTS
INTRODUCTION 6
CHAPTER I: THEORETICAL FRAMEWORK FOR BUSINESS STRATEGY
FORMULATION 9
1.1 Basic concepts of strategy and business strategy: 9
1.1.1 Definition of strategy: 9
1.1.2 Business strategy: 9
1.1.3 The roles of business strategy 10

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3.2 Strategy selection for the development of retail banking of BIDV in the
period of 2013 - 2017 62
3.2.1 Summarization of the strategies from SWOT analysis 62
3.2.2 Selecting business strategies for retail banking of BIDV – using
QSPM matrix 62
3.3 Strategic solutions 65
3.3.1 Solutions of investing in equipment and IT system 65
3.3.2 Product and service solutions 66
3.3.3 Customer solutions 69
3.3.4 Distribution channel solutions 70
3.3.5 Solutions in terms of supporting policies 72
3.3.6 Developing and reinforcing the human resources, building BIDV
corporate culture 72
3.3.7.Enhancing the marketing programs for retail activities 74
3.4 Implementation Plan 75
CONCLUSIONS 81
REFERENCES 82
CapstoneProject_G5.GaMBA.M0111 Page 6

INTRODUCTION
1. The necessity of the research topic:
The focus of expansion and development of the retail sector will be the
decisive factor affecting the leading role of commercial banks in the future. This is an
inevitable trend of the banking sector in Vietnam when the international economic
integration is more intensive and competitive, the utility needs of people are the


CapstoneProject_G5.GaMBA.M0111 Page 7

our knowledge to contribute to the overall development of the bank.
2. Research purposes:
- Systematize a theoretical basis for business strategy and effective methods to
choose appropriate analysis models for business strategy formulation
- Apply this theoretical basis to focus on situational analysis and capacity
evaluation of the BIDV in the deployment of retail banking services.
- Propose solutions and recommendations for further development of the bank's
retail banking activities.
3. Subject and scope of the research:
- Subject: Retail Activities at the Bank for Investment and Development of
Vietnam.
- Scope of research: the entire system of the Bank for Investment and
Development of Vietnam.
Retail banking can be considered as a strategic business unit (SBU) of BIDV
because of the following reasons:
 Retail banking department (“Department”) is an independent and fully
functional department operated as both cost and profit center of the branch.
 BIDV has fully delegated authority and responsibility to a director of the
department who reports directly to the Management Board of BIDV.
 The Department has its own budget, marketing plan, competitors as well as
manpower. The contribution in terms of money of the department is clearly
calculated and monitored by BIDV.
BIDV implement retail banking activities since 2009 and has independent parts
management and implementation of retail banking activities. However, the retail
banking activities are spontaneous and haven’t a clear strategy
4. Research methodology:
The data were collected and compiled from the annual reports, financial

1.1.1 Definition of strategy:
There are many different definitions of strategy; opinions of approach have
steadily converged to create a relative united definition of strategy: strategy can be
understood as “a coordinated series of actions which involve the deployment of
resources to which one has access for the achievement of a given purpose”
Whatever approach we apply in each perspective and definition, there are three
common characteristics of strategy:
- Establishment of an overall course of actions to wards the long-term goals in
the future;
- Key policies and measures to implement the program;
- Establishment of action sequences, ways to proceed and allocate resources to
achieve the goals.
1.1.2 Business strategy:
1.1.2.1 Definition of business strategy
Business strategy is business-orientation with goals in a long time period along
with policy systems, measures and ways to allocate resources to achieve the objective
of the business in the corresponding period of time.
Thus, the business strategy of an enterprise must be goal-oriented, long-term
and must be done as a deliberate process.
1.1.2.2 Classification of business strategy
There are many ways to classify business strategy, which creates diversity in
the methods of implementing business strategy.
Classification of business strategy by levels:
- Corporate-level strategy
- Business-level strategy
- Functional-level strategy
Classification of business strategy by strategic process:
- Orientation strategy
- Action strategy



Source: Strategic management Textbook–Griggs University
Internal
enviroment
Strategic Intent
Strategic Mission
External
enviroment
Strategy formulation

Business -
level strategy
Competivity
Dynamics
Corporate -
Level Strategy
Acquisitions
and
Restructuring
International
Strategy
Cooperative
Strategy
Strategy implementation

- Strategic objectives(the desire of business).
- Business Environment(the external constraints of the enterprise).
- Enterprise Competencies(the internal constraints).
1.2.3 Analysis of external environment
The objective of the analyzing the external environment is to identify
opportunities and challenges for enterprises, to find ways to deploy and capture
opportunities from the environment, and to avoid the necessary challenges for the
enterprises.
The scope and content of the environment analysis include: analysis of the
macro environment and micro environment, also known as environmental sector.
1.2.3.1 Macro environment analysis – PEST model
The analysis and synthesis of elements exist outside the enterprise affect the
survival and development of enterprises. Enterprises need to realize the opportunities
and challenges from objective environment, they also need to adapt, and promote
environmental changes. The macro-environmental factors:
 Analysis of legal and political factors (P)
Politics are political factors and circumstances in which their operations affect
the enterprises. These factors include: the political regime, the regime of political
parties, political organizations, the motto of the Party and State's policies, socio-
political atmosphere.
Law is the legal system relating to business, including the State's legal, legal
awareness of the judiciary, law enforcement agencies and businesses.
The impacts of political and legal environment on business activities of the
enterprises are extensive, sometimes are decisive factors. In general, if a country is

CapstoneProject_G5.GaMBA.M0111 Page 12

stable in terms of politics with clear and consistent policies, good political
atmosphere, strict law, enterprises can develop a healthy and stable business
environment.

figure: CapstoneProject_G5.GaMBA.M0111 Page 13

Figure 1.2: The Five Forces Model of Michel E.Porter
Competitive forces
(Michael E. Porter, 1980s)
Existing
Competitors
Rivalry within
the industry
Potential
competitors
Threat of
new entrants
Substitutes
Threat of
Substitutes
Buyers
Bargaining power of
Buyers
Suppliers
Bargaining power of
suppliers

Source: Strategic management Textbook–Griggs University
- Competitive pressure from existing competitors: The competition among firms
in the same industry reveals the patterns of competition, the nature of competition.
Competition relates to the elements of an industry’s characteristics, structure of

1.2.3.3 External factor evaluation matrix – EFE
The external factor evaluation matrix helps strategists summarize and evaluate
the information of economic, social, cultural, demographic, geographic, political,
governmental, legal and technological factors. There are five steps to develop an EFE
Matrix
- Step 1: Make a list of 10 to 20 factors of opportunities and threats that
influence the success of the business in the industry as identified in the process of
external environment analysis.
- Step 2: Each factor will be given a weight of importance from 0.0 (not
important) to 1.0 (very important). This classification shows the respective
importance of each factor to the success of the business. The total value of the weight
for all factor’s level of importance must be 1.0.
- Step 3: Assign a rating between 1 and 4 to each factor that decides the
business success to evaluate how the current business strategy responds to that factor:
4 = the response is superior, 3 = the response is above average, 2 = the response is
average and 1 = the response is poor. These ratings are given based on the
effectiveness of the current business strategy. Thus the ratings in this step bases on
firm size, while the second step bases on the industry.
- Step 4: Multiply each factor’s weight with its rating to calculate the weighted
score for each factor.
- Step 5: Add all weighted score of all factors to identify the total weighted
score for the company.
The total score of the matrix does not depend on the number of factors in the
matrix, the highest score is 4 and the lowest is 1. If the total weighted score is 4, the
business response well to opportunities and threats, if the total weighted score is 2.5,
the business has average ability to response to opportunities and threats. If the total

CapstoneProject_G5.GaMBA.M0111 Page 15

weighted score is 1, the enterprise response poorly to external opportunities and

on: the ability to mobilize short-term and long-term capital; total capital of the
enterprise; the flexibility of capital investment structure; utilization of financial
strategies; ability to control cost reduction; effective accounting system, cost
planning, financial planning and profit, etc.

CapstoneProject_G5.GaMBA.M0111 Page 16

1.2.4.5 Marketing capability
Marketing can be described as a process of identifying, forecasting, setting and
meeting the desired demands of the consumers towards products and services.
Marketing includes 9 basic functions (1) customer analysis; (2) buying; (3) selling;
(4) products and services planning; (5) pricing; (6) distribution; (7) market research;
(8) opportunity analysis; (9) social responsibility. The successful implementation of
the marketing function will help us to identify and assess the strengths and
weaknesses of marketing activities.
1.2.4.6 Internal factor evaluation matrix – IFE
This strategy formulation tool summarizes and reviews the important strengths
and weaknesses of a business unit, and it also provides the basis for identifying and
assessing the relationships among these units. An IFE Matrix can be developed in
five steps:
- Step 1: Make a list of 10 to 20 elements including the strengths and
weaknesses that affect the development of the business.
- Step 2: Assign a weight of importance that ranges from 0.0 (not important)
and 1.0 (all- important) to each factor. The weight indicates the relative importance
of that factor to being successful in the industry. Regardless of whether it is an
internal strength or weakness, the factor is considered the most influential to the
performance of the organization must be the most important ones. Total value of all
weights is 1.0.
- Step 3: Assign a 1-to-4 rating to each factor to indicate whether that factor
represents a major weakness (rating =1), a minor weakness (rating – 2), a minor

- Creating corporate culture supporting strategies
1.2.7 Review and adjustment
A rigid and inflexible strategy will not be suitable when the external or internal
environment of the business changes. So the strategists need to review, evaluate and
adjust the strategy implementation. The criteria to evaluate strategies:
- Consistency.
- Appropriateness.
- Feasibility.
- Advantages.
Successful evaluation allows businesses to take advantage of internal strengths,
exploit external opportunities, realize and cope with external threats as well as
overcome internal weaknesses before they become hazardous.
1.2.8 SWOT Matrix
1.2.8.1 General theory of SWOT
While PEST analysis is a tool related to external factors, SWOT analysis
focuses on the internal changes related to the external factors.
SWOT is an extremely useful tool that helps us understand the problems or
make decisions related to the organization, management as well as business
activities. In other words, SWOT is a framework that helps us to review the
strategies, determine the position and direction of a company, analyze business

CapstoneProject_G5.GaMBA.M0111 Page 18

proposals or any ideas related to the interests of the business. SWOT analysis is a key
to strategic development, clarifying the internal strengths of the organization;
weaknesses, opportunities as well as challenges from external environment.
1.2.8.2 SWOT Matrix
SWOT Matrix is used to synthesize the research on external and internal
environment of a business (or an industry). Analysis of the external environment
helps to discover opportunities and threats to the business. Internal environment

business’s strengths to cope
with or avoid external
threats
Weaknesses (W)
1
2
3
WO Strategies
Strategies to overcome the
business’s weaknesses to
take advantage of external
opportunities
WT Strategies
Strategies to overcome
weaknesses of the business
to avoid external threats

In the current context of globalization, economic and cultural exchanges with
other countries are inevitable and enterprises also face risks in the market. SWOT

CapstoneProject_G5.GaMBA.M0111 Page 19

analysis will help businesses measure and evaluate accurately before deciding to
enter the international market.
1.3 Business strategy selection
1.3.1 Generic competitive strategies
Enterprises pursuing corporate-level strategies try to achieve competitive
advantage, better performance and above average return. They often choose from
three generic strategies: Cost-leadership, Product differentiation and Focus.
1.3.1.1 Cost-leadership strategy

highest Sum Total Attractiveness Score will be selected.
Table 1.2: Quantitative Strategic Planning Matrix (QSPM)
No
Key factors
Weight
Alternative strategies
Strategy
1
Strategy
2
Strategy
3
AS
TAS
AS
TAS
AS
TAS

External factors

1
1 2 …
rd
2012.
 Certificate of business registration No. 0100150619, first registered on April
2
nd
1993, changed the thirteenth time on April 27
th
2012, issued by Hanoi
Department of planning and investment
 The structure of charter capital of Joint Stock Commercial Bank for
Investment and Development of Vietnam was approved by the Prime Minister,
in decision No. 278/QDD-TTg, dated March 7
th
2012
Shareholder structure
No.
Shareholder
No. of share
Percent
age
1
State Bank (represent state budget)
2.203.607.796
95,76%
2
Staff members
12.808.600
0,56%
3
Public

1957, with the
primary functions of distributing and managing the capital from state budget
for basic construction plans in all economic and social fields.
- On September 11
th
1994, the Prime Minister issued decision no. 654/QĐ-TTg
about transferring the responsibility of state budget and credit distributing
from BIDV to the Central board (belongs to Ministry of finance); on
November 18
th
1994 the Governor of State Bank of Vietnam issued decision
No. 293/QĐ-NH9, which allowed BIDV to diversify its functions as a
commercial bank. BIDV has conducted critical stages of structure
reorganizing and business direction to become a multifunctional commercial
bank, aiming at gaining high profit.
- After 55 years of development, BIDV has become one of the biggest four
commercial banks in Vietnam, organizing activities in the format of a joint
stock commercial bank where the state budget controls the largest share.
Organizational structure
The current organizational structure of BIDV is displayed in the following figure: CapstoneProject_G5.GaMBA.M0111 Page 23

Figure 2.1: Organizational Structure of BIDV
Board of Management
& Chief Accountant
ALCO Commitee
Wholesales
Banking
Retail Banking
& Network
Treasury
Risk
Management
Operations
Finacial &
Accounting
Business
support
Corporate
Banking Dept
Investment Dept
Finacial
Institution Dept
Corporate Product
Development Dept
Retail Banking
Development Dept
Branch
Management Dept
Card Center
Treasury Dept
Credit Risk
Management Dept

Dept
Trade Union
Office
Party Office
Credit Management
Dept
Trade Finance
Operation Center
Equitization Project
Management Dept
Representative
in Myanmar
Representative
in Campuchia
Representative
in HCM City
Representative
in Danang City
IT Center
Training School
Risk Resolution Commitee
Credit Management Commitee
The orther Council/Commitee
Supervisory Board
IT Commitee
Council/Commitee
Credit Commitee
Whole Owner
Subsidiaries


the application of market economy principle in banking industry since 2011. Also in
2007, Vietnam opened the gates for foreign banks after the country join WTO, which
opens a new playground for all banks. Foreign banks are able to libertize their
activities in finance sector while the domestic ones are bound to continuously
improve their products and services to compete in the open market
Legal factors
The legal foundation for banking activities has been improved and paid more
attention since the issue of the legal system for banking activities, dated December 12
1997, after two former legislative codes of Vietnam Banking Law and Credit
Organization Law replaced the previous ordinance from May 23 1990. Most recently,
the Vietnam Banking Law and Credit Organization Law have been edited and
approved in the XIIth Congress, and then it came into effect from January 1
st
2011.
Besides, the Government and State Bank also issued various policies to manage
and control the economy to ensure the monetary security. Many policies have great

CapstoneProject_G5.GaMBA.M0111 Page 25

impact on all the banks’ activities. Examples of those are Resolution 11 of the
Government regarding the major solution to control inflation, stabilize the macro
economy and social security; requirement of ceiling interest rate for credit
institutions; requirement of the maximum proportion for credit growth and required
reserve, etc.
There are some decisions that support the development of the banking system,
such as: proposal for payment with cash, requirement of salary payment through
banking account, legal codes on electronic transactions, electronic signature,
electronic crime, and high technology crime. Those policies reduce the technological
crime and serve as the framework for the expansion of electronic banking, as well as
the well being of banking activities in general.