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1.3 Process of developing business strategy for commercial banks
1.3.1 Defining the mission
The mission of a commercial bank is defined as the business purpose of the bank. The business mission answers the question:
Banks exist and perform business activities in the market for what? The objectives of the business strategy are defined as the achievements that the bank needs to achieve in pursuing its mission over a relatively long period of operation. Requirements for the relevance of the target:
– Specificity: What issues need clarification regarding the objectives? What’s the progress like? and the end result to be achieved? The more specific the goal, the easier it is to plan a strategy to achieve that goal. Specificity includes the quantification of goals, the goals need to be defined in the form of specific targets.
– Consistency: the goals set out must be compatible with each other so that the process of achieving one goal does not interfere with the achievement of other goals. Contradictory goals often cause conflicts within the enterprise, so it is necessary to prioritize the order of goals. However, the goals are not completely consistent with each other, then there should be compromise solutions in the implementation of the set goals.
– Measurable: the set goals must be calculated based on the indicators, compared with other objectives to select the appropriate target.
– Feasibility: a goal set must be achievable, otherwise it will be adventurous or counterproductive. Therefore, if the goal is too high, the performer will be discouraged, if the goal is too low, it will not work.
– Challenging: the set goals are always challenging because there is a possibility that they can be achieved before the difficulties that may occur in the process of achieving the goals.
– Flexibility: the goals set must be able to adjust to the changing environment in order to avoid threats and take advantage of opportunities. However, when changing objectives, caution must also be exercised because this change must be accompanied by corresponding changes in relevant strategies as well as action plans.
1.3.2 Analysis of the external environment
184.108.40.206 Macro environment
Macro environment is the general factors of economy, politics, law, state, culture, society, population, nature, the world that have any influence on the business in general and the industry. banking and finance in particular.
* Natural factors Natural factors include: energy, natural resources, water… these factors can create opportunities as well as challenges for businesses in general and the banking and finance industry. goods in particular.
* Social factors All businesses must analyze social factors to identify potential opportunities and threats. Social factors often change or progress slowly, making them sometimes difficult to recognize. Social factors include: quality of life, lifestyle, consumer flexibility, occupation, population, population density, religion…
* Economic factors Economic factors have a great influence on businesses, because these factors are relatively broad, so businesses need to be selective to identify specific impacts that have the most direct impact.
Major economic effects typically include:
Interest Rate: Interest rates can affect the demand for a business’s product. The interest rate is very important when consumers regularly borrow money to pay for their purchases of goods. The rate of interest also determines the cost of capital and thus the level of investment. This cost is a key factor in determining the viability of the strategy.
– Exchange rate: The exchange rate is the comparison of the value of the domestic currency with the currency of other countries. Changes in exchange rates have a direct impact on the competitiveness of products produced by enterprises in the international market. The change in the exchange rate also greatly affects the prices of the company’s import and export products.
– Inflation rate: inflation rate can disturb the economy making economic growth slow down and currency fluctuations become unpredictable. As such, investment activities become purely coincidental affairs, and the future of business becomes difficult to predict.
– International exchange relations: Changes in the international environment bring many opportunities for foreign investors while also increasing competition in the domestic market.
* Political factors
– legal Factors of the political environment
– The law strongly affects the business activities of enterprises, especially in the banking and finance industry. Political stability is identified as one of the important prerequisites for business activities of enterprises.
The change of the political environment may favorably affect one group of businesses but inhibit the development of another group of businesses and vice versa. A complete, unbiased legal system is one of the non-economic preconditions of business. The degree of perfection, change and law enforcement in the economy have a great influence on planning and organizing the implementation of business strategies of enterprises.
The political-legal environment directly affects the business performance of the enterprise because it affects the products, lines of business, business methods… of the enterprise. Not only that, it also affects costs: production costs, circulation costs, transportation costs, tax rates… especially import-export businesses are also affected by the government. international trade policies, quotas assigned by the State, protection laws for enterprises engaged in business activities.
In summary, the political – legal environment has a great influence on improving business efficiency of enterprises by affecting the operation of enterprises through a system of legal tools, economic regulation tools. macro…
* Technological – technical factors
Advanced technical and technological level allows enterprises to actively improve the quality of goods and labor productivity. These factors affect most aspects of the product such as: product characteristics, product price, and product competitiveness.
As a result, enterprises can increase their competitiveness, increase the turnover of working capital, and increase profits to ensure the expanded reproduction process of the enterprise. In contrast, low technology level not only reduces the competitiveness of enterprises but also reduces profits and inhibits development.
In short, technical factors allow enterprises to improve labor productivity and product quality, thereby increasing competitiveness, increasing capital turnover, increasing profits, thereby increasing business efficiency. .
The microenvironment includes factors within the industry and are external to the organization that determine the nature and degree of competition in that industry.
Specifically, the microenvironment has five basic elements: competitors, buyers, suppliers, potential new entrants, and substitutes.
* Potential entrants (potential competitors)
Potential competitors are businesses that are not currently in the industry but have the potential to jump into business in that industry. New entrants in the industry can be a factor in reducing the firm’s profits as they introduce new production capacities and desire to capture a share of the market.
Therefore, active companies find ways to limit potential competitors from entering their business. However, there are a number of obstacles for businesses outside the same industry who want to jump into the industry:
– Customers’ preference for old products because of advertising, branding, product quality and after-sales service issues.
– Difficulty in reducing costs when starting to jump into another industry.
– The efficiency of large-scale production and business.
* Substitute products
Substitute products are products of existing competitors, this is a constant pressure and a direct threat to the business.
Substitute products are products of enterprises in the same or different industries that satisfy the same consumer need.
Thus, the existence of substitute products creates a great competitive pressure, which limits the price a business can set and thereby limits the profit of the business.
Conversely, if a firm’s products have few substitutes, the firm has an opportunity to raise prices and earn more profits. Especially, substitute products can appear within the enterprise.
* Price pressure of customers.
Customers are seen as a competitive threat when they push down prices or when they demand better quality of products and services which increases a company’s operating costs.
Conversely, if the buyer has weaknesses, it will give the company an opportunity to increase prices and make more profits. Pressure from customers is based on several criteria:
– Customer focus or not.
– Is the business a major supplier?
– Customer loyalty.
– Customer’s ability to find substitute products.
– Conversion costs.
– Possibility of vertical integration.
* Price pressure of suppliers
Suppliers are considered a threat to businesses when they can push up the price of goods supplied to businesses or reduce the quality of products provided, change payment conditions, delivery conditions… affect the price, the quality of the product, thus affecting the profitability of the business.
Businesses often have to deal with organizations that provide different sources of goods and inputs such as labor, equipment and finance.
Factors that increase pressure from suppliers are similar to factors that increase pressure from customers:
– The number of suppliers is small, it is difficult for enterprises to choose suppliers.
– The product the company needs to buy has very few types of products that can be substituted.
– Whether the enterprise is the main customer of the supplier or not.
– Whether the supplier is centralized or not, that is, if the suppliers are concentrated, the pressure from the supplier will be higher, the business will be at a disadvantage.
1.3.3 Analysis of the internal environment
The internal environment or analysis of the actual conditions and resources of a bank that an organization can control about:
– Financial resources: Ability to raise capital from deposits and loans in financial markets, own capital, solvency, profitable asset structure, financial size, and profitability of the bank.
– Quality of operation: the bank’s business activities are profitable, achieving business plans and being able to fulfill the set targets.
– Elements of facilities, service equipment:
The location of the bank, the transaction office is in a convenient position for doing business, modern equipment and technology to serve customers.
The bank has several transaction points in the area, has met the needs of customers.
Leadership quality, professional qualifications, communication, sense of responsibility, enthusiasm, professional ethics of the workforce, workplace atmosphere, staff recruitment policy, experience Experience and dynamism of employees are all factors that create strengths for the bank.
are factors related to customer market research and marketing information systems.
Competitive position in the market, identification of target customers, diversification of banking products and services, bank interest rates…
1.3.4 Analysis and selection of strategies
220.127.116.11 SWOT matrix analysis
The SWOT analysis model is a very useful tool for understanding and decision making in any situation for any business organization.
SWOT is an abbreviation of 4 words Strengths (strengths), Weaknesses (weaknesses), Opportunities (opportunities) and Threats (threats). SWOT matrix analysis is a subjective assessment of data arranged in a SWOT format in a logical order that is easy to understand, to present, to discuss and to make decisions, that can be used in every decision-making process.
SWOT templates allow for thought provoking rather than being based on habitual or instinctive responses. The SWOT analysis template is presented in the form of a matrix of 2 rows and 2 columns, divided into 4 parts: Strengths, Weaknesses, Opportunities, and Threats.
What is your advantage? What job do I do best?
What resources do I need and can use? What advantages do others see in you? Must consider problems from the perspective of themselves and others. Need to be realistic, not modest. Advantages are often formed when compared with competitors.
For example, if all competitors offer high quality products, a manufacturing process of such quality is not an advantage but a necessity to survive in the market.
What can be improved? What job do you do the worst? What should be avoided? The matter must be considered on an internal and external basis.
Other people can see weaknesses that I don’t see myself. Why can competitors do better than me? At this point, you have to realistically recognize and face the truth.
Where is the good opportunity? What interesting trends do I already know? Opportunities can arise from technological and market changes whether international or narrow, from changes in government policy related to the company’s field of operation, from change the social pattern, population structure or fashion structure…, from events taking place in the area.
The most useful search method is to review your strengths and ask yourself if they open up any new opportunities. It is also possible to do the opposite, examine your weaknesses and ask yourself if there are opportunities that arise if they are eliminated.
– Threats: What obstacles are right?
What are the competitors doing? Have the specific requirements of the job, product or service changed? Does technological change pose any risk to the company? Is there a problem with past due debt or cash flow? Is there a weakness threatening the company? These analyzes often help figure out what needs to be done and turn weaknesses into prospects.
|Strengths (S) first. 2. 3.||Weakness(W) first. 2. 3.|
|Chance (O) first. 2. 3.||Risk (T) first. 2. 3.|
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