Strategic Management of Agribank

ABSTRACT In the present age, big cities in Viet Nam are growing at a rapid pace, especially in the frugals, as a result many banks are established including imprecate of Agriculture and Rural Development of Vietnam.Founded on 26/03/1988, Agribank has al looks played the leading role in Vietnams economic development with 1034 correspondent banks in 95 countries and territories (since 12/2009). In the new period, Agribank constantly improve their competitiveness to principal(prenominal)tain the depend unity position of commercial banks and the dominant role in farm(a) and awkward financial mart, serving farmers, agriculture and rural areas. To become the member of Group finance and coasting in the country, Agribanks st prisegy is associated with the sustainable development of customers, banking, partners and communities.Based on the data obtained from a small-scale interview carried out within Agribanks employees and reviewed literature, our projects team analyze Agribanks str ategic management. Another key point of this tarradiddle is providing recommendations to improve its authorization and efficiency. It is hoped that this empirical report can bring the readers with a much detailed look at the Agribanks strategic Management. TABLE OF CONTENT Abstract1 I. Executive summary 3 II. Introduction of the caller 3 III. Managerial function.. 4 IV.Literature review.. 5 V. strategic management.. 6 1. Step 1 tar piddleing the banks goal. 7 2. External Analysis7 3. Internal Analysis9 VI. Conclusion and recommendation. 12 References. 14 I. Executive summary This report was commissioned to analyze, appraise and also to give recommendation about the Strategic management of Bank of Agricultural and Rural Development of Vietnam. The research draws attraction to AgriBanks current missions and goals guidance on renovating and ontogenesis banking technology in a modisation manner.Further investigations give a deck up analysis about AgriBank and conclusions about their status are come upon Internally, Agribank has quite a lot of strengths such as large name of gross capital, high prestige, modern facilities, as surface as some weaknesses alike bad financial capability and low operation effectiveness. Besides, externally, Agribank also has many opportunities peaceful political status, economy recovery, the freshness of the domestic commercialize, and has to do it with lots of threats from competitors, impairment of substantially-qualified employees, or governmental policies. After carefully evaluated, Recommendations are given AgriBank should penetrate the market strategies to get higher instruction execution by focusing its sources of pitying being and facilities on Main market. AgriBank should also expand the market strategy, which is to take advantage of its available products and suffices to enter a new market in site to expand market share, get more output and approach new possible customers. II. Introduction of the compa ny Agribank is the largest bank in terms of fund resources, number of employees, assets, operation meshwork and customer bases with reputation not only in local market but also international market.Agribank has al manners foc gived on the innovation and application of banking technology in favour of business administration and the development of an advanced banking service ne 2rk. As the report of Agribank. com. vn As of November 2011, Agribank had the total asset of VND 5240,000 cardinal, total equity of VND 22,176 billion, total outstanding loans of VND 414,464 billion, total fund resource of VND 478,000 billion, total lag of 35,000 people, 2,ccc branches and deed offices.Agribank is one of the leading bank in Viet Nam in terms of receipt and implementation of orthogonal projects, especially from World Bank, Asia Development Bank, European Investment Bank and French Development Agency. At present, Agribank is serving 10 million household and 30,000 enterprises. With the pos ition of a leading commercial bank in Viet Nam, Agribank has sh profess its nifty efforts and contribution greatly to the nations industrialization and modernization as well as economic development. Due to its location and market share, Agribanks target market is Vietnam, especially in rural areas.About target customer, in the first off period, its target was people who did the agricultural work. However, nowadays, Agribank has no target customer as it welcome everyone who provide capital and invest in many handle other than agriculture. III. Managerial function In the context of a profound and comprehensive integration, to make a difference in how well Agribank performs as well as to cope with this uncertain incident, Bank of Agriculture and Rural Development of Viet Nam need strategic management.Hoang Thu Hien one of the staffs of Agribank pointed out that One of Agribanks strategies is making great efforts in fund mobilization from both local and foreign sources and maintai n the credit growth at a reasonable level. Another way is giving priority in investment in agriculture, farmers especially to farm households with agricultural, forestry, fishery and salt production. She also reveals that those strategies is built in the period 2000 2010 by a group of financial experts hired by Agribank. They are still used today and other details of the strategic management are kept as secret database of the bank.The frequent strategy of Agribank this period is it go forth put forth a number of solutions which are following the form _or_ system of government of the Government and the State Bank of Viet Nam on monetary policy in 2011 and for coming years (n. d. ). First of all is speeding up the fund mobilization from different sources for serving agriculture, farmers and rural areas then setting up the progress on implementing the Circulation 13, 19 of SBV on safe index for credit institutions or following the SBVs Governor and sexual intercourse agencies for adding fund in 2011 and developing strategy on international cooperation and foreign fund projects for 2010-2015.Secondly, Agribank has completely changed into Ltd Company with 100% capital of State and pushing up the modern banking technology based on IPCAS II which is used to develop the new products and services with high note to better serve the customers. Thirdly, Agribank is trying to purport the staff about the core cultural values including honesty, discipline, creativity, quality and efficiency. Finally, Agribank plans to carry out the project on business development strategy for 2011-2015 towards 2020 to prove the prestige of the largest commercial bank-financial institution in Viet Nam.IV. Literature review Regarding Strategic management, many scholars engender researched about it so as to find out the best way to establish strategy and manage it. Stephen P. Robbins and Mary Coulter with Management tenth edition have drawn the approximately detailed and comprehensive personation of Strategic Management. According to their theory, strategy is plans for how an organization lead do what its in business to do, how it will compete successfully, and how it will attract and satisfy its customers in site to achieve its goals (Stephen amp Mary 2009, p. 163). And then strategic management is defined as what managers do to develop an organizations strategies. There are trio reasons why strategic management is important which are stated that it makes a difference in how well an organization performs, it is necessary to cope with uncertain situation and to provide organizational goals for each part of the organization to work toward. After clarifying the importance of strategic management, those two authors draw a big picture of the strategic management process.There are all 6 steps in the process which the first 3 are most important. The first step is to identify the organizations current mission, goals and strategies. Mission is defined as a statement of the purpose of an organization and goals are understood as measurable performance targets. Identifying those concepts will help the organization draw a general elbow room to follow. The next two steps can be combined as SWOT analysis which analyze 4 main factors strengths, weaknesses, opportunities and threats.It can also be defined as doing external analysis environment around the organization and its effect- and inbred analysis the organizations specific resources and capabilities. The next step namely Formulating strategies is make after(prenominal) all the analysis and is to establish a detailed path for the organization to follow. The last 2 steps are about implementing and evaluating the strategies that have been built up in the last step. Agreeing with those two authors theory, we have conducted interview and done some research and analysis about Agribank Vietnam. V. Strategic ManagementTo research about the companys strategic management, we are required to conduct the first three steps of Agribanks strategic management process. Our project team will identify the Agribanks missions and goals and do the internal (SW) along with the external (OT) analysis. Furthermore, the recommendations will be set up to uphold the strengths, overcome weaknesses, maximize opportunities and eliminate any threats or turn them into opportunities. 1. STEP 1 IDENTIFYING THE ORGANIZATIONS CURRENT commission AND GOALS To maintain the leading bank, provide the modern and high quality products nd services, meet the demand of customers and subjoin the non-credit income, Agribank is focusing on renovating and developing banking technology in a modernization manner. That is its mission in 2011 and for the coming years The Agribank An Phu pointed out that Agribank expects to reach the goals for 2012 as follows the fund resource increases by 15-17% compared with 2011, outstanding loans rises by 11-12%, the rate of loans to agricultural and rural areas is 70%, NPLs below 3%, non-credit income goes up by 10%, CAR complies with international standard.In general, Agribanks goal is bringing prosperity to the customer. 2. impertinent ANALYSIS After deciding the mission and goals of Agribank, the important thing is to conduct an external analysis, which includes the two components the general and the specific environment. Each factors in the components maybe an opportunity or a threat to Agribank, basing on how they can strike Agribanks market. A. Opportunities As to mention about the general environment, it is reported that the demesnes and Vietnams economy are recovering from the crisis and are predicted to be growing in the near future.A recent bind from the famous BBC (9 October 2012) has reported What is happening is a re-balancing of our economy. We have created a million net new jobs and we are now a net exporter of cars, but it is a slow process. With the economy flourishing, Agribank has an opportunity to expand the market size and provide more services to the customers. In addition to the countrys economy recovery, Agribank also benefits from the fact that Vietnam has officially entered the WTO. By joining the worlds economic flow, Agribank has more chances to meet big partners and to develop itself.For example, the bank can learn from the foreigners about the new technology and inquire their way of operative and technical skills. And, as to mention the political conditions, Vietnam is a peaceful country with no terrorists or civil wars which encourages the development of law and economy, and Agribank can make use of this to complete their working system. The opportunity for Agribank does not only come from the general environment but also the specific environment, especially from the customers.According to the Standard Charter Banks CEO, saying to baomoi online newspaper (Phuong 2009), Vietnam has a young and fresh banking market, which is not fully exploited. He also points out that in the recent years, the number of banking service users rises gradually and it will continue to rise in the next 5 years. Furthermore, according to the vietnamplus. vn (Son 2009), Vietnams average age tends to become higher, consequently, many people will begin to consider saving for their pension plan.Agribank can take advantage of this opportunity to reach more to the customers need. B. Threats Besides the opportunities, there are also threats that Agribank has to deal with. The fact that Vietnam has entered the WTO also brings along the trouble of the market share being dgetsized because Vietnam banks and companies are now freely get investments from foreign companies. It will also increase the competition between Vietnam and other WTO countries, creating great tension to Agribank. In addition to this, the Government policies are also putting Agribank under pressure.The current ceiling engagement rate is kept really low at 9% started from 11th June, but its also predicted to be lower, according to Dr. Vu Di nh Anhs analysis (Thanh 2012). This policy makes it hard for Agribank and other banks to mobilize capital from people, and so on earn less profit on lending other companies money. In addition to the general environments influences, the specific environment, too, holds some menaces. The number of competitors growing rapidly in todays time of high-technology, following with the decrease in number of high-quality employees is current problems that Agribank have to face.Nowadays, joint-stock company banks such as Vietcombank, Vietinbank or ACB bank are playing their leading roles in banking industry in Vietnam, alluring a large number of users comparing to AgriBank. Not as powerful as JSC Banks, but the banks with foreign investments like the Standard Charter Bank being equipt with higher quality and credit funds and non-bank credit organizations are acting as the harbingers to Agribank. According to Vietnam Credit Information and Rating Companys report (Thanh 2012), 32 banks are rated to be highly competitive.Unfortunately, Agribank is not listed. Adding to the threats from competitors, the upcoming workforce in banking being estimated to be really large but cannot be so sure about the quality is also a trouble for Agribank. The best workers tend to chase for high position with high salary in foreign countries or other bank rather than Agribank while the rests are not really well-trained. In general, the threats to Agribank are surpassing the opportunities that the bank can get, but its strong banking business is predicted to be growing. 3. INTERNAL ANALYSISBeside external analysis, it is also very important to explore and assess the internal factors of Agribank which are its strengths and weaknesses. Understanding about those internal elements will give us the knowledge of Agribanks ability to take benefit from the opportunities and to face the threats. A. Strengths The first and the most powerful strength of Agribank is that it has the largest total capital, t he biggest operation network and the hugest source of labors and customers in Vietnam. According to the article 3 ngan hang thuong m? i nha nu? c co v? n di? u l? tren 1 t? USD on gafin. n (23 March 2012), a familiar website for investors, Agribank is the commercial bank that has the greatest amount of total capital in Vietnam which is over 29. 606 billion VND. It is an advantage for Agribank as it can invest in a lot of fields and activities with its huge capital. About its operation network and source of labors and customers, Agribank has over 2. 300 branches and office and 37. 500 staffs all over the country. Moreover, according to the official website of Agribank (n. d. ), it also signs contract with other foreign banks from Laos, Cambodia and China to expand its market.Another strength is that it is the unique and main bank that focuses on the field of agriculture and rural areas. In Vietnam, only Agribank is the commercial bank that is nurtured and get the hangled by the gove rnment to develop agriculture and support agricultural workers. Vietnam is the country that has the main focus on agriculture and producing food so that this market share would be a big benefit for Agribank. Moreover, Agribank is considered as having the low rank of risk due to its support from the government and it also has the prestige of a governmental bank with tradition and experience.This advantage can gain the customers place that not all other rivals can do. Last but not least, one more strength of Agribank is that its high technology applying in its infrastructure. To approve this point, the article Viettel va Agribank ky k? t th? a thu? n h? p tac toan di? n on danviet. vn (D? c 2011) states that from November 20th, 2011, Viettel would coordinate with Agribank totally with its telecommunication infrastruction. The combination of those two giants will be an extreme advantage for Agribank to upgrade its system and bring better products to its customers. B. WeaknessesIt is undeniable that Agribank is one of the strongest banks in Vietnam at this time however, it still has its own weaknesses that need improving to get the highest performance. The first alarming weakness is its bad financial capability. Although its system is modern and successful in Vietnam, Agribanks financial control is still weak compared to the global standard. Stockbiz. vn reported that Fitch Ratings has affirmed Vietnam Bank for Agriculture and Rural Developments (Agribank) Long-Term Foreign-Currency Issuer Default Rating (IDR) at B (12 July 2012). The Outlook is Stable.At the same time, the agency has affirmed Agribanks Viability Rating (VR) at ccc and Support Rating Floor at B. A full rating breakdown is provided at the end of this release. Also according to this rating agency, Agribank has low rank of risk thanks to the support from the government, not from its own ability. The banks reported non-performing loans (NPLs) are the highest among domestic peers. Its low level of re serves, together with a high level of special mentioned loans (SMLs) and a slower economic backdrop, is likely to keep credit costs elevated in the near- to medium-term.As a result, Fitch expects the banks profitability to remain low, given also potential margin squeeze from a regulatory cap on lending rates on the agriculture sector. Therefore this weakness may not affect Agribank immediately in the domestic market, but if it wants to expand to the oversea market, it has to improve its financial capability a lot. Another clear weakness of Agribank is that its operation effectiveness is not high enough. Although the bank was established in 1988, it still hasnt made huge impact on Vietnams agriculture.Farmers still do the farming work with traditional methods and do not use much technology in working. The rate of poor households in rural areas is still high after years. This weakness could be very dangerous as it would lose the customers and governments trust, which can reduce its t otal capital. One last weakness of Agribank is that its human resource is huge but not qualified enough. There is a sad truth in Vietnam that people who have social relationship with some big men inside the company are likely to get the job. And Agribank is not an exception.Due to this terrible truth, many people who are not educated well enough still have good job and decide the destiny of the bank. Therefore, its human resource can not satisfy the requirement of the global standard, which would be a disadvantage for it when expanding to the bigger world. VI. Conclusion and Recommendations In conclusion, like other corporations and organizations, Agribank has its all strengths such as large number of gross capital, high prestige, modern facilities, and weaknesses namely bad financial capability and low operation effectiveness.Beside these internal factors, Agribank also faces up with opportunities peaceful political status, economy recovery, the freshness of the domestic market, an d threats from competitors, issue of well-qualified employees, or governmental policies. Therefore, based on the analysis of SWOT and the wholesome interview of sole employee, we have drawn up the strategies for Agribank to achieve more success in the next five years. 1. Penetrating market strategies In this strategy, we would focus our resources of human and facilities on Main market to get higher performance.To get the strategy accomplished effectively, some methods must be applied such as Improving the mobilization capital by allowing wide range of maturities, or periods, interests rate or accumulated interests. Furthermore, the bank can also try to attain sponsored -agricultural projects or projects of supporting small and average-scale business. Another method is improving the quality of credit service by using up the qualification of the staff to do research on reducing some steps of procedures so that the performance duration will be minimized which makes it faster and mor e convenient to deposit.Another effective solution is diversifying and developing the quality of the services because at the moment most of Agribank products are traditional ones, so it is less competitive. Therefore, the bank should introduce new advanced and convenient services and products to ensure the ability of serving customer efficiently. This method also heightens the administrative status of the management. 2. Expanding market strategy This is the strategy in which Agibank would take advantage of its available products and services to enter a new market in order to expand market share, get more output and approach new potential customers.There are some methods that can be applied, the first one could be intensifying the process of constructing material facilities or, in detail, purchasing necessary assets especially IT equipments, strongboxes, electric generators. Secondly, it could develop the network by establishing more transaction posts which help popularize brand name . Thirdly, Agribank can enhance the quality of the staff by focusing on recruiting, introducing new reserving reward policies, retraining the current staff to get higher qualification and ability.Furthermore, in the period of expanding to new market, Agibank may appoint the most important and experienced cadres (skillful employees) to new brands in order to make sure that new brands can operate effectively. Beside those, Agribank should speed up marketing operations/ activities because marketing plays an important role in popularizing and giving products to the public. Some methods for developing marketing performance are for products, improving traditional products and services, shortening procedure of transaction, and bringing new benefits to customer.For location, it can choose the most convenient location so that customers can easily make transactions. For advertisement, it is advisable to use radio, television, newspaper and the internet as the important way to advertise the b ank. Furthermore, it is the way we serve that is one of the most means of advertisement to customers. Last but not least, we recommend to reinforce the control of internal activities which means that does not merely check the account or the asset of the bank but verify the quality of credit, the efficiency, safety so that administrator can easily find out and re-correct defects and mistakes.References Agribank An Phu official website n. d. , D? nh hu? ng phat tri? n c? a Agribank Vi? t nam, viewed 17 November 2012, http//agribankanphu. com. vn/vn/company/details/dinh-huong-phat-trien-cua-agribank-viet-nam6. html Agribank Vietnam official website n. d. , Agribank phat tri? n b? n v? ng vi s? th? nh vu? ng c? a c? ng d? ng, viewed 17 November 2012, http//www. agribank. com. vn/101/786/gioi-thieu/dinh-huong-phat-trien. aspx Agribank Vietnam official website n. d. , M? ng lu? i ho? t d? ng Agribank hon 2300 Chi nhanh, Phong giao d? ch tr? dai cung hinh ch? 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