Five Competitive Forces That Determine Industry Profitability

The author analyzes the general structure of the industry, competitors, market signals, competitive moves, customers and suppliers, industry structure and industry dynamics. After the author presents theories on competitive strategies in fragmented industries, emerging industries, towards saturation and decline, the author makes decisions on strategy. In particular, in this research, the author presents and analyzes the analysis of competitors and the structure of the industry. The leading factor that determines the profitability of the enterprise is the attractiveness of the industry and competitive strategy. The law of competition is expressed through the following 5 sources of pressure:

Potential new competitors

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Threats from competitors

Industry competitors

Competition among existing competitors

Supplier

Buyer

Supplier Power

Buyer Power

The risk of substitute products and services

Alternative products

Figure 1.1. Five competitive forces that determine industry profitability

Source: Excerpt from the book “Competitive Strategy” [ 51, p.35]

This analytical framework helps the thesis implement the competitive strategy of the commercial bank branch through studying the behavior of competitors and competitive factors and competitiveness.

The above works have provided the theoretical basis for competition at all levels: National competition, business competition, building competitive strategies and at the same time affirming that the most important thing for any business organization is to build a competitive advantage for sustainable development. The works have affirmed that competitive ability is becoming more and more important because it is the "support" for industries and businesses to improve competitive ability. On the other hand, the works have also affirmed: Nowadays, competitive advantage does not rely much on the presence of natural resources and unskilled labor but mainly develops based on the ability to innovate and upgrade the level of science and technology, especially in the field of banking business activities, which also needs to be studied in depth.

- Chakravathi Raghavan, Sun (2002), “New Basel Accord draft raises concerns over unfair competition” [47], Switzerland. This is a work that summarizes and analyzes new contents in the international regulatory framework for banking (International Regulatory Framework for Banks - Basel III). The author analyzes the draft of new procedures in Basel III on minimum capital adequacy and supervision of banking activities. This document has very practical significance in the field of research on regulations and sources of competition of commercial banks in Vietnam, especially the young branches of state-owned commercial banks when participating in WTO integration.

- The book " Blue Ocean Strategy " (translator Phuong Thuy, Labor Publishing House) by W. Chan Kim and Renée (2007) [53], The authors have proposed "Blue Ocean Strategy" including: Creating a market without competition instead of competing in the existing market; making competition unnecessary instead of defeating competitors; creating and capturing new needs instead of exploiting current needs; disrupting rather than balancing value/cost and placing all business activities in a strategy of pursuing both differentiation and low cost instead of just pursuing differentiation or pursuing low cost. Through the practice of Southwest Airlines, Curves import-export company and Starbucks and studying more than 150 examples of development and expansion of companies from small to large in 30 industries over 100 years, the author proposes

tools and frameworks for analyzing blue oceans. Shows six specific ways to help companies build a “blue ocean strategy,” including: Redrawing market boundaries, closely monitoring key competitors; Focusing on big factors, not small details; viewing the competitive environment through the needs of customers; Don’t focus on current customers, but look for new ones

potential new customers; establish strategic priorities, innovate customer-relevant technology to create more value; overcome internal organizational and operational obstacles into strategy, link commitments, explanations, realistic expectations and consensus. It can be said that this is a project that has created a giant leap in value, a systematic approach that has outlined a solid new path for the enterprise to success.

- Journal article by Do Van Tinh (2005) on "Improving the competitiveness of enterprises in Da Nang City today" [42]. After studying the competitiveness of enterprises in the process of international economic integration, through identifying and evaluating internal problems, overcoming limitations, promoting the strengths of domestic enterprises since "entering the market", the author analyzed the current situation of difficulties and the level of support from the State, giving comments on the gap between current competitiveness of enterprises and the requirements of competition in the integration process. The author proposed basic solutions to guide enterprises to develop sustainably, build, maintain, use and create their own advantages to meet the increasing needs of customers. The author studied seven internal (endogenous) factors, including: Scale of operation; business strategy; building and protecting brands; market research and selecting target markets; Management and operational capacity; costs of research and development of new products; technological level and human resources. External factors (exogenous): Economic, political, cultural and social institutions that affect the ability to participate or terminate business operations.

Through the current situation of competitiveness of enterprises in Da Nang City: Technology equipment, market price, brand, products are still low (more than 90% of enterprises are small and medium sized), financial potential is weak,

Raw materials still depend on imports..., The author has proposed a number of solutions: Strengthening mixed marketing activities for market research, market share; determining products and services that need to be produced and traded; determining

Effective distribution channels; strengthening advertising, marketing and using services that stimulate market purchasing power... In which, the solution to build, nurture human resources and promote vocational training for employees in enterprises is extremely necessary and urgent. The author proposes the "Blue Ocean strategy" to build a business strategy and master competition, not in the traditional way (increase product quality and reduce prices because that only gradually reduces profits). Building a perfect competitive strategy is the only way to eliminate competitors is to "stop trying to beat them" , instead "compete by association, open up new directions to exploit market gaps, increase consumer demand" . Thus, enterprises will create new product value and higher prices, enterprises can capture a larger market share.

Although the research project is in the city of the province, through the current situation and solutions, the thesis continues to inherit the research on business strategies of commercial bank branches in Hanoi city.

- Doctoral thesis in economics by Nguyen Vinh Thanh (2005), University of Commerce on "Some solutions to improve the competitiveness of Vietnamese commercial enterprises in the new period" . The author believes that: "Competitiveness shows the strength and advantages of an enterprise compared to other competitors in best satisfying the demands of customers to gain increasing benefits for the enterprise in the domestic and foreign competitive environment" [39, p.27]. The author has systematized eight indicators to measure the competitiveness of commercial enterprises, including: Market share; financial position; management and leadership; ability to grasp information; product quality; product and service prices; distribution channels and labor force qualifications. The author has systematized two groups of factors that directly and indirectly affect the competitiveness of commercial enterprises, which are domestic factors and international factors. Through analyzing the current situation of

Factors constituting the competitiveness of Vietnamese commercial enterprises and factors affecting the competitiveness of commercial enterprises, based on survey data, actual investigation of 175 enterprises, the Author delves into and analyzes the current state of competitiveness. From there, the Author has summarized and evaluated quite objectively and deeply the limitations and causes of limitations to draw accurate conclusions about the current state of competitiveness of Vietnamese commercial enterprises. On that basis, the Author proposes a system of highly feasible solutions and recommendations to improve the competitiveness of Vietnamese commercial enterprises in the coming time.

The solutions of the thesis only stop at awareness and guiding principles, there are no detailed and specific solutions to encourage healthy competition.

Monopoly control by specific policies according to the legal framework to create a level playing field for market participants, including commercial bank branches. The thesis will continue to specifically research this issue.

- Reference book "Economic policy and competitiveness of enterprises" by Dinh Thi Nga (2011), National Political Publishing House - Truth. The author argues about the competitiveness of enterprises: "Competitiveness of enterprises in the short term is the ability of enterprises to attract and effectively use production resources, create products with price, quality and uniqueness, and have the ability to compete with similar products on the market to gain a corresponding market share. In the long term, competitiveness is the ability to create profit growth through continuously introducing new and different products to the market" [20, p.27]. The author has systematized policies affecting the competitiveness of enterprises, including five policies: Tax, indirect tax, direct tax; public investment to develop infrastructure, education - training and science - technology; credit; trade promotion, exchange rate; and coordinated economic policies. The author synthesizes the experiences of some countries using economic policies to enhance business competitiveness such as: In 1970, the Korean Government used import tax exemption and tax reduction to support the development of agricultural and industrial sectors; promoting exports.

high added value and technology to ensure that natural resources are not exhausted and supply and demand are balanced. Or, China has used a tax refund policy for steel billets, iron, finished steel products... to create favorable conditions for businesses. Through that situation, the author has specifically analyzed in detail the current situation of the impact of Vietnam's economic policy system on the competitiveness of enterprises. In which, there are six positive impacts and five negative impacts of indirect taxes and three positive impacts and three negative impacts of direct taxes that support and orient the goal of improving competitiveness for enterprises... From there, the author has analyzed and evaluated the overall policy system and proposed six perspectives to perfect the economic policy system and specific solutions to perfect the state's economic policies including: Tax, credit, public investment, trade promotion, exchange rate, policy process and six solutions from the enterprise side to improve the competitiveness of Vietnamese enterprises.

- Report of the Central Institute for Economic Management and the Asian Competitiveness Institute of Singapore on "Vietnam's National Competitiveness 2011" [46]. Based on E. Porter's model of analyzing competitiveness, the Report synthesized the role of competitiveness, noted the interaction between factors, and did not impose any assumption that any factor plays a more important role. The Report presented the core factors in the analysis of competitiveness and argued that productivity is the main driving force for sustainable development. Productivity is the result of the synthesis of factors formed under the impact of participants in the economy. Some factors are grouped into macro competitiveness, determining the business environment of enterprises. These factors include the quality of social infrastructure and political, cultural and social institutions as well as macroeconomic policies and business capacity. In addition, when analyzing the NLCT, the Report also analyzes the natural comparative advantages to evaluate and position the NLCT through the strengths and weaknesses of Vietnam through macro and micro fundamental factors, including: Management quality; provision of public services; sustainable development and business expertise, the dynamism of industry clusters; quality of infrastructure or level of domestic competition...

The above report is the result of the thesis, providing evaluation criteria and factors affecting the competitiveness of commercial bank branches in the following part.

- Workshop of Vietnam Chamber of Commerce and Industry - Can Tho Branch (2012) on "Improving the competitiveness of Mekong Delta provinces" [28]. In the workshop, businesses suggested that in the current period, it is necessary to focus on training and retraining to improve the qualifications of human resources, first of all, the pioneers of ministries and branches, promote administrative reform, end the harassment of businesses and people, invest in building socio-economic infrastructure, especially trade; support businesses to innovate equipment, invest in technology, focus on producing products with large markets, high competitiveness, meeting domestic consumption and export needs...

The workshop also commented that the competitiveness of Vietnamese enterprises has developed a lot compared to before, but is still very limited compared to the requirements, there have not been many breakthroughs in technology development, and working with foreign countries to improve competitiveness. Accordingly, many opinions believe that the competitiveness of Vietnamese enterprises in the international market is still at a low level, not very stable and still vulnerable to the disease of the global market. The workshop pointed out a set of indicators to evaluate the competitiveness of enterprises through six Ts, including: Money (capital); talent (management and labor capacity); information (output and input information); personality (connectivity); credit (trust in business) and Technology (investment in technology development). Experts emphasize that human resources are an important factor to improve competitiveness but are currently the "weakness" of Vietnamese enterprises: More than 43% of business leaders have a level of education below high school, only nearly 3% of business owners have a master's degree. Although Vietnam's human resources have a comparative advantage in terms of scale and low cost, their technical expertise is still low: 36.4% of trained workers, 22.4% of technical workers with degrees, leading to low labor productivity.

Through the conclusion of the workshop, the thesis will select a set of business competitiveness indicators, rebuild indicators suitable for the evaluation criteria, suitable for the current situation of competitiveness of commercial bank branches.

- National workshop of Communist Review in collaboration with the Ministry of Industry and Trade, National Committee for International Economic Cooperation (2012) on "Competitiveness of Vietnamese enterprises after 5 years of joining the WTO" [36]. The workshop content includes seven groups of issues on competitiveness: The Party's viewpoints and policies on enterprises in the integration process; experiences of countries that have gone before; influencing factors; handling the relationship between economic components; obstacles that need to be resolved; advantages and disadvantages and solutions to accelerate the process of economic restructuring. The workshop affirmed: "In the integration process, Vietnamese enterprises are facing many difficulties and challenges, requiring each enterprise to innovate and improve its competitiveness to successfully achieve the goals of industrialization, modernization, and international integration" [36]. To encourage the improvement of the competitiveness of enterprises in the integration period, the State needs to:

Firstly, creating a transparent and equal legal corridor for production and business enterprises . This is an important factor for the existence and development, because only enterprises are the main subjects and the state only plays the role of creating a business environment (state management policies and mechanisms at the macro level, finance, infrastructure, etc.) To meet this requirement, the state needs to promote reform, reduce administrative procedures, towards building an e-government for the people, serving businesses; resolutely fight against bureaucracy and corruption; implement transparency and fairness. In addition, the state needs to support information and communication, contributing to transparency and enhancing prestige in state management activities for businesses.

Second, create conditions for enterprises to access financial resources . Diversify credit and guarantee support policies, expand financial services, gradually increase the proportion and scale of medium and long-term loans, flexibly expand forms of collateral such as: real estate, vehicles, stocks, etc., develop and expand tax policies to support the development of small and medium enterprises, especially in the agricultural, forestry and fishery sectors.

Third, orient small and medium enterprises to develop concentratedly according to specialized chains . Build specialized concentrated models of enterprises.

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