Tài liệu The analysis of card business operations during at bidv and establishment of card business strategy for the 2010 – 2015 period

PROJECT REPORT TOPIC: The analysis of card business operations during at (BIDV) and establishment of card business strategy for the 2010 – 2015 period. Strategic Management 1 CONTENTS Page List of tables and index 6 INTRODUCTION 8 CHAPTER I: RATIONALE 10 1.1 Overview of card and card business at Commercial Banks 10 1.1.1 Overview of Card 10 1.1.2 Card classification 10 1.1.3 Card business at commercial banks 13 1.2 Business strategy 14 1.2.1 Concepts 14 1.2.2 Process of business strategy establishment 14 1.2.2.1 Vision of missions and values 14 1.2.2.2 Analysis of business environment Macro-environment 15 Industry environment (the M. Porter 5 competitive force model) 15 1.2.2.3 Analysis of internal environment Determination of core internal factors Performance of internal estimation 15 15 16 1.2.2.4 SWOT analysis 16 1.2.3 Selected business strategies 18 1.2.4 Organization of business strategies performance (the functional strategy execution) 18 1.2.5 Estimation of business strategies 18 CHAPTER II: ANALYZING THE REAL SITUATION OF CARD BUSINESS ACTIVITIES IN BIDV IN THE PERIOD Strategic Management 2 BETWEEN 2006 - 2009 20 2.1 About Bank for Investment and Development of Vietnam (BIDV) 20 2.2 The retail banking operation at BIDV 23 2.3 The real situation of card business operations at BIDV 25 2.3.1 Card business activities in Vietnam market 2.3.1.1 Result of card business activities in Vietnam market 25 25 2.3.1.2 The main characteristics of the card market Vietnam for the period 2006-2008 27 2.3.1.3 Limitations of market card in Vietnam 28 2.3.2 Analysis of card business activities in BIDV in the period between 2006-2009 29 2.3.2.1 Results from card business activities 29 2.3.2.2 Analyse the situation of the payment network 36 2.3.2.3 Assessment of card product development 41 2.3.2.4 Analysis of technology to support card business 42 2.3.2.5 Analysis of card risk management 43 2.3.2.6 Analysis of management, organizational models and human resources 44 2.3.2.7 Analysis of the status of Marketing 46 CHAPTER III: COMPETITIVE STRATEGIES ESTABLISHMENT FOR CARD BUSINESS OF BIDV FOR THE 2010 – 2015 PERIOD 3.1 51 Vision and missions of Bank for Investment and Development of Vietnam 51 3.1.1 General vision and mission 51 3.1.2 Vision for Retail banking operation 51 3.2 Establishing some objectives and visions for BIDV’s card Strategic Management 3 business operations until 2015 52 3.3 Establishment of card business strategy 54 3.3.1 Analysis of macro-environment 55 3.3.1.1 Economic environment 55 3.3.1.2 Technological environment 55 3.3.1.3 Demographic environment 55 3.3.1.4 Socio-cultural environment 56 3.3.1.5 Governmental, legal and political environment 58 3.3.1.6 Global environment 58 3.3.2 Industry environment 59 3.3.2.1 Current competitors 59 3.3.2.2 Potential competitors 61 3.3.2.3 Suppliers 62 3.3.2.4 Customers 62 3.3.2.5 Alternative products 63 3.3.3 Analysis of internal environment, difinition of strengths and weaknesses 63 3.3.3.1 Strengths 63 3.3.3.2 Weaknesses 64 3.3.4 SWOT matrix for building business cards activities 3.3.4.1 Summary of external business environment analysis 65 65 3.3.4.2 Synthesis estimates opportunity's impact with respect to enterprise. 3.3.4.3 66 Synthesis estimates threat's impact with respect to enterprise. 66 3.3.4.4 Integrated analysis environment internally 67 3.3.4.5 The SWOT matrix 67 3.3.4.6 The EFE Matrix 69 3.3.4.7 The IFE matrix 70 Strategic Management 4 3.3.4.8 The I-E matrix 70 3.4 Selection of business strategies 71 3.5 Organization of business strategies performance 72 3.5.1 The human resource solutions 72 3.5.2 The financial solutions 74 3.5.3 The administration solutions 75 3.5.4 The technology solutions 75 3.5.5 The risk management solutions 76 3.5.6 The Marketing solutions 77 3.5.6.1 Solutions of products 77 3.5.6.2 Solution for development of card acceptance network 80 3.5.6.3 Solution of distribution channels 81 3.5.6.4 Solution of commercial promotion or communication 82 3.6 Estimation of business strategies 82 CONCLUSION 83 REFERENCE 84 List of tables Strategic Management 5 Table 2.1: Some performance results of BIDV as of 30/11/2009 Table 2.2: Results of the retail banking activities during the 2006-9/2009 period Table 2.3: Data of trading card market of Vietnam from 2006- June/2009 Table 2.4: Data of trading card activities in BIDV in the period between 2006- first 6 months of 2009 Table 2.5: Number of debit cards according to area Table 2.6: Number of POS according to area Table 2.7: Number and exchange sales on ATM BIDV Table 2.8: Results on the ATM card payments Banknetvn BIDV Table 2.9: Results of Visa payment card on ATM BIDV Table 2.10: The effective performance of ATM network in the region Table 3.1: Objectives of core plans Table 3.2: Target for building business card period 2010-2015 Table 3.3: Summary of external business environment analysis Table 3.4: Synthesis estimates opportunity's impact with respect to enterprise Table 3.5: Synthesis estimates threat's impact with respect to enterprise Table 3.6: Integrated analysis environment internally Table 3.8: The EFE Matrix Table 3.9: The IFE Matrix Table 3.10: The IE Matrix Table 3.11: Planning the implementation of technology solutions to 2010 Table 3.12: Plans of products until 2012 List of index Index 2.1: Organization chart Index 2.2: Number of Debit card BIDV between 2006- September/2009 Index 2.3: Number of debit card of BIDV in comparison with main competitors Index 2.4: Number of POS BIDV between 2007- September/2009 Index 2.5: Number of POS of BIDV compared to main competitors Strategic Management 6 Index 2.6: The net fee of BIDV’s card service between 2006- the first 9 months in 2009 Index 2.7: Number of ATM of BIDV in Vietnam market Index 2.8: The growth and number of sales transactions on the ATM BIDV period 2006 to 2009 (projected 2009) INTRODUCTION Strategic Management 7 In recent years, many economic and politic events have marked the success of Vietnam’s economy. In the integrating situation with many opportunities and challenges, banks has shown its importance in developing economy, especially in changing the market which is naturally considered as cash-based as in Vietnam. Card service has become one of bank’s advantages and made up a noticeable proportion of banks’ service income. Thus, from 2006-2009, there is an upward trend in the number of banks (including small commercial banks) which have joint card market in Vietnam. In 2009, this number increased twice as much as that of 2006. This indicates that card service is getting more and more important in the development strategy of banks, especially when there are a lot of difficulties in improving traditional products. Therefore, the competition between banks in card market is getting harsher. Being one of the five largest commercial banks in Vietnam, Bank for Investment and Development of Vietnam (BIDV) has shown its leading role in many fields, products and bank services. In addition to advantages of a wholesale bank, BIDV also realizes opportunities and potential to develop in retail banking including card service. Making use of the advantages of the brand, BIDV has gradually approached customers of this service and with great effort and study to improve the quality of service, BIDV has formed its position in the 5 leading units in trading card field. Trading card also brings BIDV high income in the total income of the banks. However, with the unstable situation of card market, BIDV also faces a lot of difficulties and challenges in competing with current and potential competitors in market. To contribute to the more development in trading card of BIDV as well as increase the prestige and belief for customers when using card service, especially increase competitive capacity of BIDV in exploiting the market which has a lot of potential customers, the team has carried out the study: “The analysis of card business operations during the 2006 – 2009 period at Bank for Investment and Strategic Management 8 Development of Vietnam (BIDV) and establishment of card business strategy for the 2010 – 2015 period” The aims of the study Generalization of basic arguments regarding the cards and card business, competitive strategy, business strategy and functional strategy. Specifying the real situation of card business at BIDV during the 2006 -2009 period, analyzing the real situation and shortcomings in operation. Establishing the card business strategy for the 2010 – 2015 period, analyzing the functional strategies with the aim of improving the card business performance at BIDV, in which the analysis of Marketing strategy shall be focused. Object and range of the study: About the trading card activity in Bank for Investment and Development of Vietnam and some domestic commercial banks. Methodology Basing on the dialectical materialism in cooperation with statistics, analysis and synthesize, compare data. Struture of the study Apart from the introduction and conclusion, the structure of the study is divided into 3 chapters: Chapter I: Rationale Chapter II: Analyzing the real situation of trading card activities in BIDV in the period between 2010-2015 Chapter III: The card business strategy establishment at BIDV for the 2010 -2015 period CHAPTER I: RATIONALE Strategic Management 9 1.1 Overview of card and card business at Commercial Banks 1.1.1 Overview of Card Responding to strong economic growth and more complex and diversified methods of goods exchange among different industries and different countries in the world, bank’s currency units therefore is developed accordingly to meet Customer’s demand of payment and depositing money. Besides, the world is currently enjoying outstanding achievements of information technology. Information technology has especially brought numerous advantages to banks in creating and improving their modes of payment. It is undeniable that the creation and development of bank card has become one modern an convenient instrument nowadays. In 1949 one businessman whose name is Frank Mc Namara has invented the first card called Dinners Club, which is the beginning of later card boom such as Amex (American Express) created in 1958, Bank American; Later in 1960 Visa card, or JCB in Japan in 1961, and Master Card in 1966 with name Master Charge have been issued by International Card Association through its members all over the world. Although card has been in existence for a long time, functions and advantages of various types of card of different banks are not the same. Therefore, one common definition of bank card is not concluded. Overall, bank card could be understood as follows: “Bank card is one non-cash payment instrument issued by bank. It is issued to customer to pay for goods or services provided, or to withdraw cash at automatic teller machines or agent banks within deposit account balance or credit limit agreed between card issuing bank and card holder. Card invoice is bill of debt by card holder to Merchant.” 1.1.2 The classification of card 1.1.2.1 Based on card issuer The card issued by bank: the card is issued by bank to customers so that they can use their accounts or the accounts granted by bank for making payment or using banking services. Strategic Management 10 The card issued by non-bank institutions: the card is issued by non-bank institutions with the payment process and scope that is similar to the card issued by banks such as Amex, JCB. 1.1.2.2 Credit limits Gold Card: this type is issued to customers on demand of making the payment of big amounts, particularly for businesspeople. This card type has various features. The regulations of cash drawing and consignation limits are dependent on each region as well as each country. Standard Card: this is the most basic type and also the most common at present. According to statistics, there are about 160 million people using standard cards daily all over the world. The card limit depends on the regulation of each bank. Normally, it is USD 1,000. 1.1.2.3 Card-making technology Embossing card: the card is made on the embossment technique, accordingly, the necessary information are embossed on the card. Thus, only a little information is embossed and easily counterfeited, and currently, such card types are rarely used. Magnetic stripe card: The card stores information basing on the magnetic stripe, and just contains the fixed information not encrypted, thus its safety is poor and it is easily counterfeited. Also, very little information is achieved on the card type. “Smart card”: This type is equipped with the electronic chip to store information and can reach up to 200 of the last transactions with the high safety and it is very difficult to counterfeit thanks to the encryption. 1.1.2.4 Based on using scope International card: The card is issued by domestic banks but used for making payments inside and outside the territory or issued in foreign countries but used for inland payment. For example, ANZ Card, HSBC card, etc. International card is paid by strong foreign currencies. Domestic card: The card is issued by domestic banks and used for domestic payment in local currencies. Strategic Management 11 1.1.2.5 Based on the nature of payment Credit card: It is also called the delayed debit card, in which the cardholder is entitled to use the card for making payments of goods and services and for drawing cash in the credit limits approved by the issuing bank in accordance with the contract. Debit card: This card has direct relationship and has been associated with the deposit account of card holder. This card type shall be immediately deducted from the cardholder’s account upon the goods and services purchase; at the same time, it shall be processed to the account of agencies accepting card. The debit card has two types including online and offline. Cash card: This card is used for drawing cash at ATM machines or banks. Based on the specialized function of drawing, the amount of money in each time shall be shortly deducted from the cardholder’s account. 1.1.2.6 Based on objects in charge of payment Individual card: This card type is issued to individuals who have demand and satisfy conditions to open card at banks. The cardholders are responsible for paying expenditures via the card by their own money or they can request for issuing subcards. Individual card authorized by a company: This card type is issued to individuals and organizations. The company who undersigns for issuing cards authorizes an individual to use and take the responsibility for payment of expenditures via the card by company’s money sources.. 1.1.3 Card business at commercial banks 1.1.3.1 Issue operation Card issuance in banks is governed by applicable legal regulations of local country and general conventions of international card association. Besides, rules and decisions of bank’s board of directors will play an important role. Bank’s card issuance includes process of management and implementation of card issuance, utilization and debt collection from customer. These three processes play Strategic Management 12 essential role and should be paid attention. Each of them is closely related to customer service and bank’s risk management. Financial institutions and issuing banks have to develop regulations on card utilization and debt collection, such as minimum payment, date of statement printing, due date, fees and interest rate, maximum credit limit and preferential policies. There are different types of card issuance in banks. However, two most popular types are new issuance and re-issuance. While issuing card, banks obtain not only issuance fee from card holder but also interchange fee from bank of settlement through international monetary association. This is the basic profit of financial institutions and card issuing banks. With this income, card issuing banks develop programs of interest exemption and other incentives in order to enlarge the number of customer and increase revenue. 1.1.3.2 Card payment Card payment is implemented when card holders trade and/or do business at Merchants, Automatic Teller Machines ATM and/or agent banks. While card issuance is carried out only by bank, almost all members on card market participate in card payment. Card holder use card to pay for goods and services or withdraw cash at Merchant or agent bank. Merchant or agent bank has to check card validity on receipt in terms of: expiry date, embossed factors on card, logo, symbol of international card, card holder’s signature. If this information is valid, Merchant will deliver goods or services to Customer after processing card transaction. Merchants and agent banks will send card invoice to Settlement bank. Settlement bank will summarize all card transactions and transfer data to international card association (for international card). Payment procedure is conformed as below:  International card association records Credit to Settlement bank’s account Strategic Management 13  International card association is responsible for informing Debit to Issuing bank  Settlement bank make payment to International card association  Issuing bank sends account statement to card holder Card holder makes payment to Issuing bank or Issuing bank will record Debit to card holder’s account if card holder has account at Issuing bank. Card payment does not stop at recording Credit to Merchant as commitment. Profit on card payment is large out of total business profit, so competition in this area is harshly. Therefore, banks always have to implement suitable marketing programs and good customer services as well as provide free additional services and advantages to Merchants in order to enhance their competitive strengths. 1.2 Business strategy 1.2.1 Concepts There have been many definitions of a business strategy, however, it should be understood that the business strategy is one set of goals and policies decided by one corporate with regard to the entrepreneur location method for improving its profit and establishing economic values for owners and shareholders. The business strategy enables us to answer two key questions in the corporate performance, including: “Which markets should an entrepreneur take part in?” and “How is the competitive strategy of an entrepreneur performed?” Thence, the strategy is understood as “a series of complex activities to mobilize organizational resources from an agency that helps obtaining a certain goal”. 1.2.2 Process of establishing business strategies 1.2.2.1 Vision of missions and values In order to establish a development strategy for an entrepreneur, we need to clearly identify the vision of that entrepreneur in future, and missions which the entrepreneur must perform as well as which core values need directing towards. The specific determination of above contents shall specify ambitions of the entrepreneur. Besides, the statement made by the entrepreneur shall create a Strategic Management 14 foundation for the whole works of development strategy planning, and represent core values of the entrepreneur to determine regulations and principles under the sustainable foundation for an agency. 1.2.2.2 Analysis of business environment Macro-environment Economic environment (economic growth, inflation, interest rate, exchange rate, etc.) Technology environment (application of new scientific technology, impacts of new technology into business environment) Social and cultural environment: Social and cultural values influence on political, economic, law and demography environment and therefore, decide business environment. Demographic environment: Demography is not only an issue of one country but also a global concern. Especially in the current context of economic integration, enterprises should pay attention to this environment. Political, legal environment: Enterprises should analyze, forecast business regulations in relation to state management and applicable laws. Global environment: Good analysis of global environment will help enterprises to take proactive position in international economic integration. Industry environment (M.Porter’s 5 competitive forces model) Mentioned in theory of professor Michael E.Porter (Harvard Business Management), industry environment analysis should focus on following contents: analyzing current competitors, analyzing potential competitors, analyzing supplier, analyzing customer, analyzing alternative products. 1.2.2.3 Analysis of internal environment Determination of core internal factors In fact, each entrepreneur cannot estimate all factors in its internal aspects due to the large number of factors. Therefore, in order to estimate the internal situation of an entrepreneur, it is necessary to determine core internal factors and major factors. Strategic Management 15 The aspects which we can review and estimate the internal environment include: Finance, administration, development research, marketing, information system, technology, and risk management. Performance of internal estimation Regarding target, the assessment of internal environment is to find out strengths and weaknesses in the entrepreneur’s internal environment and thence, it is possible to provide necessary solutions. Internal factors which need to be estimated include: Management, marketing, financial accounting, production and task, technology, and information system. 1.2.2.4 SWOT Analysis After analyzing factors of macro-environment and business environment, the entrepreneur should clearly determine opportunities and threats from external environment as well as strengths and weaknesses in the entrepreneur’s internal environment to formulate bases for considering and establishing orientations and strategic plans. One of the most common techniques is the SWOT matrix-based analysis. The steps: Step 1: The analysis of internal business environment, strengths and weaknesses, building evaluation matrix Internal environment (IFE). Internal environment Level importance (1) (2) List the factors of internal business environment Sort (3) the most to score from 0 important to 1, the higher weakness = 1, the score the Weaknesses = 2, more important strong = 3, the factor most important strong = 4 Strategic Management 16 Important point (4) (4) = (2)*(3)  1.00 Highest total score is 4, the lowest is 1, average 2.5, The higher score indicates strong on internal business. Step 2: The analysis of the business environment, opportunities and threats to build the matrix evaluation of External environment (EFE). External Level environment importance (1) (2) Factors listed in the business environment outside of the enterprise to score from 0 to 1, the higher the score the more important factor Sort Important point (3) (4) the little reaction= 1, the medium reaction= 2, the above average (4) = (2)*(3) reaction = 3 and the strong reaction = 4  1.00 Highest total score is 4, the lowest is 1, average 2.5. The higher score indicates more businesses respond better to the environment. Step 3: The total of results and construction SWOT matrix. Step 4: Develop a matrix Internal - External (I - E). Step 5: Select from the identification of strategic business position in the matrix IE. If business is located in the blue selection strategy S-O. If business is located in the yellow selection strategies and W- O, S-T. If businesses are in the red selection strategy W-T. Internal environment IFE Strategic Management 17 Strong External environment EFE Medium Weak High Average 2.5 Low 1.2.3 Selected business strategy Strategically selected to ensure suitable environmental conditions; Compliance with foreign policy viewpoints and methods of management Board of Directors and Board of Directors of the company; Compliance with the financial capacity material and personnel of the enterprise. 1.2.4 Organization of business strategies performance (the functional strategy execution To organize the implementation of business strategy, enterprises need to build functional strategies including human resource strategy, financial strategy, management strategy, technology strategy, risk management strategy, motivative development strategy, marketing strategy. 1.2.5 Estimation of business strategies Once establishing a business strategy, entrepreneurs also have to acknowledge that they sometimes need to make strategic adjustments if necessary. Amendments which are massively widespread should be avoided, but it is also required to consider the necessity to adjust in mandatory situations. Also, the estimation of strategy performance is a good opportunity for reviewing strategies of an entrepreneur. Under many circumstances, although one established strategy which seems to be completely logical and reasonable, it cannot be performed efficiently just due to some certain reasons such as lack of resource or unsuitable resource or poor information system, etc. While organizing implementation, the entrepreneur Strategic Management 18 needs to test and review specifically as well as to have reasonable intervention or correction. However, modifications should be performed after having comprehensive estimations and careful considerations as well as seeing that the new strategy can bring more benefits than the current strategy by far. CHAPTER II: ANALYZING THE ACTUAL SITUATION OF TRADING CARD ACTIVITIES AT BIDV IN THE PERIOD 2006 - 2009 2.1 Introduction to Bank for Investment and Development of Vietnam (BIDV) Strategic Management 19 6 years after the establishment of National Bank of Democratic Republic of Vietnam, on April 26, 1957, the Prime Minister signed the Decision of establishing Vietnam constructing bank (former of Bank for Investment and Development of Vietnam (BIDV)), one member of Vietnam bank system. During the 52 year history, whatever name it is called, whatever model Bank for Investment and Development of Vietnam (BIDV) is operated, it has been always a leading soldier in the frontline of finance, contributing to Vietnam’s development. Bank for Investment and Development of Vietnam (BIDV) is a State’s enterprise of special rank which is organized in the form of State general company (Group) that has united system including 112 branches and companies throughout the country, 3 VID-PUBLIC BANK VID-PUBLIC BANK units in cooperation with foreign countries ( 2 banks and 1 company), contributing (VPB) (VPB) capital with 5 credit organizations. LAO-VIET LAO-VIET BANK BANK The main operation and traditional activity of Bank for (LVB) Investment and (LVB) Development of Vietnam (BIDV) is to invest in developing projects to carry out VIETNAM-RUSSIA VIETNAM-RUSSIA Joint-Ventures Joint-Ventures BANK (VRB) main economic development program of the country. Carry out fully service of a BANK (VRB) bank serving all economic components and has close relations with Partners enterprises, BIDV-Vietnam general companies. BIDV always banks and payment relation with 50 BIDV-Vietnam Partners Investment Management Investment Management broadens retail relations with more than Joint-Venture Joint-Venture Company Company (BVIM) (BVIM) banks all over the world. Some performance results of BIDV as of 30/11/2009 400 BIDV BIDV Tower Tower Joint-Venture Joint-Venture Company Company Unit: VND in bill Items 2005 Banks 2006 2007 108 2008 Transaction 11/2009 108 Branches/ Branches/ Transaction Banks Centers Centers Total assets 117.976 158.165 201.382 242.316 279.234 Owner’sBIDV equity 3.150 4.428 8.405 9.969 NA BIDV BIDV Information Information192.584 Total outstanding loans 79.383 93.453 126.616 BIDV 154.176 Technology Technology Center Fund mobilization 85.747 106.496 138.233 166.291Center212.722 Administrative Administrative Units Units Profits before tax 296 650 2.103 2.142 4.669 BIDV BIDV Training Training Center Center Table 2.1: Some performance results of BIDV as of 30/11/2009 (Source: - the BIDV annual report) Organization chart LAO-VIET BANK (LVB) LAO-VIET BANK ( Strategic Management Subsidiaries Subsidiaries (wholly-owned) (wholly-owned) 20 BIDV BIDV Leasing Leasing Company Company (I, (I, II) II) (BLC) (BLC) BIDV BIDV Insurance Insurance Company Company (BIC) (BIC) BIDV BIDV Securities Securities Company Company (BSC) (BSC) BIDV BIDV Asset Asset Management Management Company Company (BAMC) (BAMC)