Group assignment Rocket group:

1. 2. 3. Duong Thien Kim Nguyen Van Khoa Yen Mai Linh 4. 5. 6. Nguyen Thi Ngoc Bich Nguyen Thi Bao Khanh Pham Nam Tran

COMPETITIVE STRATEGY OF ACB (ASIA COMMERCIAL BANK)

1. 1.1. Industry overview and company profile: Overview about banking industry in Vietnam

Vietnam Banking covers the industry structure, local and foreign banks, industry performance, chartered capital, bank cards, ATM cards and credit cards. It also covers the market trends and outlook for the industry, credit growth and lending rates, policies and regulations, domestic partnership, international remittances, internet and mobile banking, and private banking, plus comparative matrix and SWOT for the industry local and foreign leading players: Bank of Investment and Development (BIDV), VietinBank (CTG), VietcomBank (VCB), Asia Commercial Bank (ACB), and Sacombank (SCB). Vietnam Banking provides insights of the structure and performance of the industry. There are four types of commercial banks in Vietnam namely the 5 state-owned credit institutions, 39 joint-stock commercial banks, 5 joint-venture banks and 33 foreign banks. At the moment, the competition in Vietnam banking is tougher since foreign inroads.

According to the report, Foreign inroads means tougher competition for Vietnam banks 11 Sep 2008 Thanh Nien, the State Bank of Vietnam (SBV) has licensed two foreign banks to establish subsidiaries in Vietnam, which will prompt tougher competition in Vietnam's finance market. HSBC and Standard Chartered are the first foreign banks being licensed to open 100%-foreign-owned subsidiaries in form of one-member limited liability companies in Vietnam.

Ray Ferguson, general manager in charge of Southeast Asia of Standard Chartered, said that "with equal rights and obligations like domestic banks, Standard Chartered will quickly expand our network across Vietnam and bring to consumers absolutely new-generation banking products and services."

Such an event will expectedly open a new competitive period in Vietnam's banking sector. According to Luu Duc Khanh, general director of the An Binh Commercial Joint Stock Bank (ABBank), foreign banks left domestic banks for hundreds of years, hence, they have much experience in new markets. Foreign banks will surely increase their retail market share in Vietnam. This is a good impetus for development of domestic banks and Vietnam's banking sector.

The entry of foreign banks will benefit customers most. Ly Xuan Hai, general director of the Asia Commercial Joint Stock Bank (ACB), said "the appearance of foreign banks is inevitable during the international integration. Vietnam's financial environment will become more competitive, particularly the retail market. Consumers will have more options for more diversified and higher quality banking products and services. This has been forecasted and domestic banks have made preparations in advance."

Assessing preparations of domestic banks for this competitive period, PhD. Nguyen Van Thuan, head of the HCM City Open University's Finance-Accounting-Banking Department, said although having known the entry of foreign banks in advance, domestic banks have not yet made good preparations. In the first phase, foreign banks will not increase much market share but they will take cautious steps because the most challenging thing for them is human resource. It is impossible to have high-quality human resource immediately. Foreign banks will mainly focus on developing their products in cities, selecting high-income customers."

After becoming a 100%-foreign- owned bank in Vietnam, HSBC plans to expand operation in some strategic locations such as Hanoi, HCM City, Da Nang, Can Tho, Binh Duong and develop retail financial services and products such as credit cards, investment management, real estate loans, e banking and so on.

Absolutely, we can see that how to enhance the competitiveness in banking right now is the most important question for banks at Vietnam, especially in domestic banks.

To get acknowledgement of the competition in business in Vietnamese context, Vietnam banking will be analyzed more closely to see the impact of the competitiveness on evolution of enterprises, and Asia Commercial Banks ACB will be chosen as the representative case study.

1.2.

Overview about ACB

Add: Tel: Email: Website:

442 (848)

Nguyen 3929 0999

Thi

Minh

Khai, Fax:

Dist (848)

3, 3839

HCMc 9885

acb@acb.com.vn www.acb.com.vn

Establishment and Authorized capital Establish in 1993 as a small private bank with VND20 billion capital and 27 staffs. From Dec. 3, 2010 authorized capital of ACB is 9,376,965,060,000 VND

Products and Service:

y

Consumer banking: Account (current and savings account, time deposit in VND, USD, Gold

and other currencies,), Credit (consumption loan, business loan, unsecured loan,), Cards (domestic & international credit card, visa/master credit card,..) and others
y y

Treasury: foreign exchange, money market, fixed income and physical gold trading Corporate banking: payment and cash management, supply chain financing, tailored product

upon customers need,

Distribution channel:

Including 291 branches and transaction offices:

At HCMc: 1 head office, 31 branches and 104 transaction offices At the Northern area: 15 branches and 61 transaction offices At the middle area: 12 branches and 24 transaction offices At the Western area: 9 branches and 10 transaction offices At the Eastern area: 4 branches and 20 transaction offices

Franchise Value

More than 270 branches and sub-Branches nationwide ACB has 310 ATMs on its own ACB joined 3 bankcard alliances: Banknet, Smartlink and VNBC.ACB Card owner can access to more than 8,000 ATMs in Vietnam Through its network, ACB provides full services to customers: Asset Management, Real Estate, Leasing, Securities

Subsidiary

ACB Securities Company (ACBS). ACB Asset Management Company (ACBA). ACB Leasing Company (ACBL). ACB Capital Company (ACBC)

Business process: to follow ISO 9001: 2000.

Technology

ACB applied online transaction since 10/2001 through TCBS - The Complete Banking Solution. They are also a member of SWIFT Society for Worldwide Interbank Financial Telecommunication, to make sure customers are served 24/24 per day. ACB used financial services of Reuteurs such as:

Reuteurs

Monitor

and

Reuteurs

Dealing

System.

Strategy

ACB has switched from simple rule strategy to a competitive strategy of differentiation.

Shareholders: Dragon Financial Holdings Ltd., Standard Chartered APR Ltd., Standard Chartered Bank (Hong Kong) Ltd., Red River Holding, PXP Vietnam Fund, Vietnam Lotus Fund Ltd., T.I.M Vietnam Institutional Fund, KITMC Vietnam Growth Fund 2, KITMC Worldwide Vietnam, KB Vietnam Focus Balance Fund, Vietnam Emerging Equity Fund Ltd., Greystanes Ltd., Spinnaker G.O Fund Ltd., Spinnaker G.E.M Fund Ltd., Spinnaker G.S Fund Ltd., J.P.Morgan Securities Ltd. and J.P.Morgan Whitefriars Inc.

Independent

Audit:

PricewaterhouseCoopers

(PWC).

2. Core Competencies of ACB: 2.1. Prestige Brand name: ACB has been voted by Asian Money journals (specialist banking and finance Journal) in many years as "The Best Bank in Vietnam". Besides, they also received a series of titles by the prestigious magazine and consumers in the country as "most satisfied retail banking services". ACB has become a strong brand both at local and abroad, among the top 100 strongest brands in Vietnam. So far ACB is the first bank in Vietnam that received three awards in one year by famous international journal s which are the Financial Times Group's Banker, The Asian Banker, and awarded Asian Money. Brand and reputation of ACB has been confirmed not only local market but also in other countries which helping ACB to gain customer trust, mitigate risks related to billing, and support in developing market and new products and services. 2.2. High quality work forces: Total staff of ACB are 6,200 people including staff have university degrees and above accounted for 93%. ACB staffs are always having professional training at the training center of ACB. ACB is financed by an international financial company (IFC) to open an professional training program for employees conducted by FAREAST BANK AND TRUST COMPANY (FEBTC) which is a bank of

Philippines. Besides, ACB's senior management continued to receive the award as "One of the most promising 100 young leaders in Asia-Pacific and the Gulf". 2.3. Strong capital and market share: The size of the ACB charter capital reached VND 6,355 billion with more than 20,000 shareholders increased 318 times compared to it was established. ACB's total banking assets is in the 5th of the entire banking system in Vietnam, accounting for 10% share of savings mobilization in the country, over 57% market share of international credit cardholders, and the majority market share of Western Union money transfer in Vietnam 2.4. Diversified services and wide network: ACB offers customers over 200 basic products and services (equivalent to more than 600 add -on products) and reviews by customers as the best services providing bank and the wide network bank. Until now the number of agent banks of the ACB in the world is 628 banks and financial groups. 2.5. Modern technology: ACB has always taken the lead in technological innovation. They started online banking transactions from Oct 2001 through management of retail banking (TCBS-The Complete Banking Solution). In the software application, ACB has partnered with Microsoft for advice and suppliers of software reliability of information technology. Besides, ACB also applied a wide range of new payment systems and services in their system. 3. SWOT Analysis

4.    

Strategy objectives Efficient management, reasonable profitability, and sustainable growth is the key foundation

for ACBs strategy: Management: Focus on strengthening risk management skills, productivity management, cost

control and eliminating waste. Business performance: Keep ROE not less than 30% as commitment to shareholders Growth: Increase its scale at the rate of 35%.

Industry main indicators      Growth rate of capital mobilization: 18-20%/year Growth rate of credit: 18-20%/n m Capital ratio of medium-and long-term: 33-35% (of the total of mobilized capital) Ratio of bad debt : 5-7% (of total outstanding) Ratio of minimum capital adequacy: 8%

5.

FIVE FORCES analysis

Degree of rivalry

- In Vietnamese economy, the banking industry has the highest growth rate compared to many other industries. Due to Vietnam is developing country then demand of financial services is huge and banking still is the main channel to supply capital to businesses.

- Because banking is protected by government then competition in this industry is still not really strong then the quantity of foreign investors join this industry is limited, leading to profitability by the monopoly is still large. - The banking industry just meets only a small fraction of the diversified demand in financial transactions. - The effects of economic crisis led to banks having difficulty in finding new customers, leading to increased intensity of competition

- Increased competitive intensity due to the presence of groups of 100% foreign capital banks. - Foreign banks have their own customer segments from their country and not face barriers such as limited securities lending, bad loans in real estate lending. They has the advantage in superior services infrastructure, professional customer service, better technology, especially the ability to connect with global networks in many countries

- To compete with foreign banks, domestic banks also invested in technology infrastructure, products and services,... Advantages of domestic banks are close relationships with customers. Domestic banks are flexible in lending to the their VIP customers Threat of Substitutes For corporate customers, the threat of substitutes is not high because they need regular

documents such as invoices, vouchersin their financial activities with banks. If they have trouble during using products and services, customers often switch to another banks instead of looking for other substitue chanels. For consumers, the threat of substitues is different. Vietnamese still remain the habit of using

cash when paying then it will take long time for consumer using debit/credit card instead of cash. - Apart from the savings in banks, consumers also have many other alternatives suc as holding h foreign currencies, securities investment, investing in precious metals (gold, diamonds ...) or investing in real estate. Buyers bargaining power Regarding to banking services, the revenue of the banks mainly based on capital raised by

customers. If banks can not attract capital inflows of customers, the bank will of course be eliminated. Meanwhile, the risk of replacement of the bank in Vietnam, for consumer customers, is high. With low switching costs, customers are easy to transfer their funds from banks and invest in other substitues. Suppliers bargaining power

Suppliers in the banking sector is quite diverse. They may be the shareholders who provide

capital for banks, or is the company who is responsible for ATM system maintenance. Currently, most of banks choose equipment supplier base on their real conditions. This reduced the power of equipment suppliers because they must compete with other ones. However, if banks officially choose supplier, they will not want to change anymore because this is too costly and this does increase the power of the equipment suppliers who have won the contracts. In general most banks are invested from another bank. Power of investors will increase highly

as if they have enough stock and the merger with investment bank is possible. In another aspect, the investment bank will have an impact on the invested bank. Barriers to entry - Since the key position of the banking sector for the development of the economy, Government still control banking activities through state bank. This is both opportunity and also a challenge for businesses in the banking sector.

- Despite economic crisis, the banking sector is still predicted to have the high growth rate. However, the profitability of the banking group will not be the same. Requirements for financial control increase when joining banking sector such as high standard

capital, regulations on transfering stock, personnel quality, the opening of branches / networking).

6.

Recommendations for ACB

Based on the above analysis about the internal & external factors of the case, we propose some following recommendations to build up the sustainable competitiveness for ACB: Service diversification & differentiation:        crisis Customer relationship marketing and localization trend Retail sector expansion Investment banking exploitation Additional services differentiation

Cash flow enhancement & technology transformation: Raise the capital from external investor OR Co-operate with foreigner corporation

Risk management & corporate government: Invest on people & process. Asset and control the risk related to the change of macro policies and post-financial

The MKT strategy which focus on building the long-term relationship with customers and maximize the advantage of a local bank with international standard.