Competitive strategies the case for Visa card of Techcombank

VIETNAM NATIONAL UNIVERSITY, HANOI
SCHOOL OF BUSINESS
Vu Thi Kim Thu
COMPETITIVE STRATEGIES
THE CASE FOR VISA CARD OF TECHCOMBANK
Major: Business Administration
Code: 60 34 05
MASTER OF BUSINESS ADMINISTRATION THESIS
Supervisors: Dr. Pham Thi Nhuan
A Icl Gb
Hanoi - 2009
11
TABLE OF CONTENTS i
LIST OF FIGURES vi
ACKNOWLEDGEMENTS viii
ABSTRACT ix
TÓM TẨT xii
INTRODUCTION XV
1. Research Problem Statement XV
2. The objectives of the study xvi
3. Scope of the study xvi
4. Methodology of the study xvii
5. Limitation of the study xvii
6. Contribution of the study xvii
CHAPTER 1: LITERATURE REVIEW 1
1. Overview of Competitive Strategies
1
1.1. Competitive strategies 1
1.2. Categories of competitive strategies 2
1.2.1. Cost Leadership Strategy 2
1.2.2. Differentiation strategy 3

1.2.3. Focus Strategy 4
1.3. The importance of Competitive Strategy 6
TABLE OF CONTENTS
2. Process to formulate Competitive Strategy 6
2.1. Vision and Mission 8
2.1.1. Mission 8
2.1.2. Vision 8
2.1.3. Strategic objectives of a company 8
2.2. External Analysis 9
2.2.1. Macro Analysis (PEST model) 10
2.2.1.1. Economic factor 11
2.2.1.2. Technological Factor 11
2.2.1.3. Political and Legal Factors 12
2.2.1.4. Social Factors 12
2.2.2. Industry Analysis (Five forces model) 13
2.2.2.1. Threat of New Entrants
14
2.2.2.2. Rivalry among existing firms 15
2.2.23. Threat of Substitutes 15
2.2.2.4. Bargaining Power of Buyers
16
2.2.2.5. Bargaining Power of Suppliers 17
2.2.3. Summary of macro analysis 18
2.2.3.1. Opportunities and rank of opportunities
18
2.2.3.2. Challenges and rank of challenges 19
2.3. Internal Analysis 19
2.3.1. Value Chain Model 20
2.3.1.1. Primary Activities 21
2.3.1.2. Support Activities 22

2.3.2. Identification of Core Competences and sustainable Competitive
advantages 23
2.4. Formulation and Choice of Competitive Strategy

26
CHAPTER 2. STRATEGIC ANALYSIS AND FORMULATION OF
COMPETITIVE STRATEGIES FOR VISA CARD OF TECHCOMBANK

29
1. Background of Techcombank and Visa Card of Techcombank

29
1.1. Techcombank Overview 29
1.2. Visa card of Techcombank 32
2. Analysis of Techcombank Visa cards
39
2.1. External Analysis 39
2.1.1. Macro Analysis: PEST model 39
2.1.1.1. Economic factor: 39
2.1.1.2. Social Factor 44
2.1.1.3. Political and Legal Factor 49
2.1.1.4. Technology Factor 52
2.1.2. Industry Analysis (Five forces model) 54
2.1.2.1. Threat of entrance 54
2.1.2.2. Rivalry among existing firms 57
2.1.2.3. Threats of Substitutes: 62
iii
2.1.2.4. The power of buyers 63
2.1.2.5. Bargaining Power of Suppliers
64

2.1.3. Opportunities and Threats 67
2.1.3.1. Opportunities 67
2.1.3.2. Threats 68
2.1.3.3. Ranking of Opportunities and Threats for Techcombank
69
2.2. Internal Analysis 70
2.2.1. Value Chain Model 70
2.2.1.1. Primary Activities 70
2.2.1.1.1. Operation 70
2.2.1.1.2. Sales and marketing 71
2.2.1.1.3. Customer services 79
2.2.1.2. Supporting activities 81
2.2.1.2.1. Infrastructures 81
2.2.1.2.2. Technology 82
2.2.1.2.3. Human resources 86
2.2.1.2.4. Research and Development 91
2.2.2. Identification of Core Competences and sustainable Competitive
advantages 95
2.2.3. Strengths and weaknesses 97
2.2.3.1. Strengths 97
iv
2.2.3.2. Weakness 97
2.2.4. SWOT matrix 99
CHAPTER 3. SELECTION OF APPROPRIATE COMPETITIVE STRATEGIES
FOR VISA CARD OF TECHCOMBANK AND PROPOSED ACTION PLANS
FOR THE CHOSEN STRATEGIES 102
3.1. Vision/Mission 102
3.2. Selection of appropriate competitive strategies for visa card of
Techcombank 102
3.3. Proposed action plans for chosen strategies 104

CONCLUSION 110
REFERENCE Ill
APPENDIX 1 112
APPENDIX 2 114
V
Figure 1.1. Process of formulating competitive strategies 7
Figure 1.2. Business environment 10
Figure 1.3. Five forces model 14
Figure 1.4. The value chain model 21
Figure 2.1. Total number of international cards from Techcombank

37
Figure 2.2. The number of Techcombank cards and payment revenue by POS 38
Figure 2.3. Techcombank Visa card clasified by region 38
Figure 2.4. GDP Growth rate 40
Figure 2.5. Estimate Techcombank Visa card marketshare

43
Figure 2.6. The estimated Vietnamese population 44
Figure 2.7. Estimated GDP per capita 2010-2015
45
Figure 2.8. The Visa card product life cycle
57
Figure 2.9 international card market share 59
Figure 2.10. POS network 66
Figure 2.11. Five forces model of Techcombank visa card

67
Figure 2.12. Market share in customer awareness 73
Figure 2.13 VN POS market share 82

Figure 2.14. VN ATM market share 82
Figure 2.15. The interest level of new product 92
Figure 2.16. Value chain model of TCB Visa cards 94
LIST OF FIGURES
Table 1.1. Evaluation sheet assessing each opportunity to a company 18
Table 1.2. Evaluation sheet assessing challenges to a company
19
Table 1.3. Assessment of Techcombank strengths and core competences

24
Table 1.4. Assessment of dominant competencies: valuable, scare, hard to imitate,
security distance, success factors, and results
25
Table 1.5. SWOT matrix 26
Table 1.6. GREAT model 27
Table 2.1. The main financial indices in 2008
31
Table 2.2. Some main features of Techcombank Visa Debit Card
36
Table 2.3. Estimate demand of International payment cards in Vietnam

43
Table 2.4. Compares some indicators of Techcombank with those of some main
rivals in card product in 2008 61
Table 2.5 Assesment of Techcombank’s strengths and core competences

95
Table 2.6. The sustainable competitive advantages
96
Table 2.7. SWOT matrix for visa card of Techcombank

99
Table 3.1. GREAT model 103
LIST OF TABLES
INTRODUCTION
1. Research Problem Statement
As a 15th member of World trade organization (WTO) from at the end of 2006,
Vietnamese economy has opened strongly, integrated deeply and widely in the
global economy. In the near future, Vietnam enterprises will face the high pressure
of competition not only from domestic enterprises, but also from foreign
enterprises who will take part in the Vietnamese market.
It has been clearly demonstrated that the services of banks are quite similar, or in
other words have little differences. Therefore it is easy for customers to change
bank to bank or to open 1 or more accounts at 1 or more bank at the same time even
they never use the account. That is waste of banking resources. Vietnam
Technological and Commercial Joint Stock Bank (Techcombank) has been
developing for more than 15 years and now it is evaluated being among one of 3
leading joint stock banks in Vietnam. After a quite long time of being found and
developing, it is the right time for the Bank’s stockholders and business managers
take many new issues in business managing and long term competitive strategy into
consideration. Techcombank currently is focusing on retail banking services which
are also focused by many other banks in Viet Nam.
Although Techcombank became the official member of Visa International Services
Association since May 2005, the first Visa debit card was issued by Techcombank
in December 2006 and credit cards in 2008. Although, the card market in Vietnam
has develop fast in recent years, as being the follower in the market, Techcombank
still has to build many special programs to attract customers in this field. The bank
aims to create its card image connecting closely to Visa image then Techcombank
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decides to name its card Techcombank Visa. And the bank also wants whenever
customers talk about Visa then they think immediately Techcombank.

From 2010, with the much more opening for financial and banking sectors, the
domestic banks must face the extremely sharp competitive pressure from not only
the domestic banks, but also the high experience and capability international rivals.
It is the fact that every bank cannot be successful without preparing the long-term
suitable and strong strategies to readily compete. And Techcombank is not an
exception.
With hope of finding the appropriate Techcombank visa card strategies to help
Fechcombank to be the champion in the more and more harsh competitive
environment, I have chosen the topic of my thesis: “Competitive Strategy - The
case for Visa card of Techcombank”.
2. The objectives of the study
To research the available background of strategy and competitive strategies;
the analysis model of both external and internal business environment; and the
process of formulating the competitive strategies to choose the best for the banks.
To identify the necessary to formulate appropriate competitive strategies for
Techcombank visa cards and choose the most effective competitive strategies for
Techcombank visa card for next 5 years.
To provide recommendations and main action plan for Techcombank to
compete successful in the harder competitive environment.
3. Scope of the study
Focus on analyzing, formulating and selecting the competitive strategies for visa
card products of Techcombank for next 5 years.
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4. Methodology of the study
Collecting materials and economic & financial data via various sources like
newspapers, websites (Techcombank, Ministry of Planning and Investment ),
journals, reports, books
Qualitative methods for case study of Visa card of Techcombank
Being guided by some experienced people who have knowledge of this issue
Descriptive and analysis method: analyzing, comparing and combining.

5. Limitation of the study
The study only focuses on analyzing Visa card for Techcombank in Vietnamese
market in next five years. The results of this study are specific and only applied for
visa card of Techcombank in next five years. This study has just referred for others.
If others would like to apply this study’s results, they need to research more or
research in other thesis. Besides, there are manv other strategic theories (strategy in
global industry, strategy in emerging industry ) which are not mentioned and
analyzed in this thesis. The chosen competitive strategies which are referred in this
study need have time to demonstrate in reality. The implementation of action plan
sometime is affected by subjective thinking; hence the results may not reach as a
plan.
6. Contribution of the study
Research to find out the appropriate competitive strategies and propose some
recommendations and action plans in order to implement successful the chosen
strategies. Thesis hopes to contribute much to the sustainable development of both
Techcombank visa card in particular and Techcombank in general in the context of
deeply integration economies over the world with many opportunities as well as
many threats and difficulties for Vietnamese business, especially in financial and
banking sector.
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CHAPTER 1: LITERATURE REVIEW
1. Overview of Competitive Strategies
1.1. Competitive strategies
“Competitive” is not a new concept. It is used in many fields and viewed from
many different angles (both positively and negatively). It is worldwide
acknowledged competition and considered competition as both environment and
driving forces for socio-economic development. Competition now has regarded
as a tough competition among business owners in a certain market in order to
win customers and the market itself, thereby selling a great deal of goods and
gaining high profit. Business owners involve businessmen, enterprises,

economies or countries.
The term “strategy” was firstly used in military and literally meant how military
forces were used to win a battle. In business, the term “strategy” can be
understood as “a plan that attempts to define a position for the business that
utilizes the competitive advantages that the business has over its competitors” or
as “a way to achieve an organization’s objectives and missions”.
“Competitive strategies” are known as a system of commitments and actions,
which help enterprises, obtain competitive advantages by directing their
dominant capacities to a specific market. Competitive strategies answer the
question o f how to compete against competitors.
Competitive competence of enterprises involves their own strength and
advantages that they can mobilize to maintain and promote their rank in the
market as compared with other competitors in a long time. Moreover,
Competitive competence of enterprises represents their determination to get
higher profit. An enterprise can trade in one or more products or services; thus, it
is necessary to distinguish between competitive competence of enterprises and
that of product/ service. While competitive competence of enterprises is defined
as above, competitive competence of product/ service is decided by its market
share.
1.2. Categories of competitive strategies
According to Michael Porter, three types of generic strategies are likely to be
chosen to cope with competition: cost leadership strategy, differentiation
strategy, and focus strategy. Three types of strategies derive from the aim of
controlling the market and the desire to control competitive advantages. The
selected strategies will have much important to determine the business success or
failure.
1.2.1. Cost Leadership Strategy
Cost leadership strategy is a course of action so as to supply products or services
whose qualities are accepted by the customers with the lowest cost as compared
with other competitors.

Enterprises choose cost leadership strategy to run the business better than their
competitors by supplying mass production with lower cost in any circumstance.
Enterprises follow this strategy do not aim at higher quantity of products but
lower cost than those who follow differentiation strategy. They do not try to be
the top rank in their field by creating the differences. They just make the
differences in case customers have demand. Besides, they do not pay attention to
segment the market and often supply products to mass customers, as it is costly
to meet different demands in the market.
Advantages. Companies which follow cost leadership strategy can compete with
competitors with their cost advantage. If there is an increase in industrial
competitiveness, companies in industry will change to compete in cost. In this
situation, companies which followed cost leadership strategy in advance will
have more competitive advantage than the others. Those companies are also less
affected when suppliers raise cost and when customers require to lower price as
large-scale production can reduce cost. Moreover, those companies have great
market shares and desire to buy in a large number of materials from suppliers;
therefore, they have more right to bargain with suppliers. Finally, companies
with low cost effectively prevent the entry of potential competitors.
Disadvantages. Competitors can imitate manufacturing methods with lower cost.
Besides, the advanced manufacturing technology can reduce the company’s
advantages with lower cost. Additionally, if the company does not adapt with
market change timely, the change in “customers’ taste” put it into the risk of
losing profit.
1.2.2. Differentiation strategy
The strategy aims at creating the differences and gaining competitive advantages
by creating products or services with original and important characteristics of
which are recognized by customers. Thus, the company is able to charge for
those products or services higher than the normal rate, and get higher profit than
the average. In general, companies which follow differentiation strategy often
divide the market into smaller ones. To make differences, these companies need

to base on the functions of researching and developing, and the effectiveness of
customer services. However, focusing on making differences does not mean that
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cost controlling is not important. Controlling cost and maximizing revenue help
to bring more profit to the company.
Advantages: The companies which follow differentiation strategy take less risk
of being competed by other opponents on account of the customers' loyalty to
their brand. They have no pressure from customers as they provide customers
with unique products and/ or services. Additionally, the pressure from the
suppliers does not matter much as company can afford the increasing cost of
input to ensure the needed differences. Finally, customer’s loyalty is a high
barrier to prevent the threats of both potential rivals and substitute products.
Disadvantages: The companies can hardly maintain the differences in a long
period of time as well as instability as their competitors can imitate their
products. Another risk is that customers don’t accept the differences of
company’s products/ services and their high price. These may lead to the failure
of differentiation strategy.
1.2.3. Focus Strategy
Unlike the above-mentioned strategies, focus strategy is only used for a certain
group of customers or a certain segment of the market. Focus strategy bases on
the specific market following geographic area, kind of customers or line of
products.
Once a company chooses a segment of the market, it is necessary for that
company to follow a focus strategy, using methods of differentiation or cost
leadership. If a company use focus strategy on cost leadership, it will compete
with the cost leader in the cost leader’s disadvantage segment. If a company use
focuses strategy on differentiation, it will employ the differentiation strategy
4
explained in point 1.2.2 in one or more segments of the market. Moreover,
focusing on a small group of products, companies will be able to develop their

business faster than those who follow differentiation strategy on a large scale.
Companies following focus strategies often set up their market shares in one
segment. This strategy creates a chance for business owners to find out and
exploit the lack within the market by manufacturing, developing and improving
products that meet customers’ demand.
Advantages: A company can compete with rivals within the industry as it
provides products and services that its rivals do not. This helps the company
cover a great number of customers as they cannot buy such products and/ or
services from other companies. However, it is under its suppliers’ pressure. The
company just needs a small amount of material; therefore, it suffers when the
cost of input is increased. On the other hand, potential competitors and substitute
products put little pressure on the company as they have to find the way to
destroy customers’ loyalty.
Disadvantages: Those who follow focus strategy just have concentration on a
segment of market; hence manufacturing in small quantity. Therefore, their
manufacturing cost is higher than those who follow cost leadership strategy and
differentiation strategy. Those with focus strategy are likely to lose their market
when the development of technology helps those who follow cost leadership to
meet customers’ demand, and when those with high production capability
following differentiation strategy scramble their market.
5
13. The importance of Competitive strategy
Competitive strategies play a significant role in business activities as they
determine the business success or failure. Nearly all the enterprises who do not
c early and properly define their own long-term strategies or who choose wrong
bjsiness direction will fail to run the business. Some of such enterprises even
become bankrupt.
Ir the market economy, with the development of technology and increasing
living standards, competition is becoming fiercer and fiercer; customers are
becoming more and more demanding and sophisticated. With proper competitive

strategies, a company takes the initiative and be more active in forecasting
market changes. As a result, it proposes timely solution suitable with the
business environment and its internal resources. Furthermore, the suitable
ccmpetitive strategies will strengthen the company’s capacity of competing with
its rivals to ensure its long-lasting existence and sustainable development.
Competitive strategies are important to be flexible. Within the implementing
pncess, competitive strategies are necessary to be regularly monitored and
adjusted, even changed so as to be suitable to specific situations and conditions.
2. Process to formulate Competitive Strategy
Tt promote stable development, it is essential for a company to build a feasible
methodical and complete process of strategies. In so doing, the company must
de'ine its own strength, competitive advantages and weakness, in which
competitive advantage is believed to be the central factor that influences the
process of analyzing and establishing strategies. Competitive advantage may
in'olve leaders' strategic vision, leaders’ capability, financial resources, human
6
resources, technology, relationships with business partners, customer network,
and adaptive ability, etc. Basing on these factors, the leaders generate the
objectives relating to practical experiences, as well as internal and external
env ironment of their enterprises.
Vision
Mission
Internal analysis
Value chain model
Sustainable Competitive
Advantage Identification
Process
Cost leadership
Differentiation
• Attribute

Ị
• Image
• Customer Service
Focus
• Cost focus
\ • Differentiation focus
External analysis
(Macro analysis, industry S W O T
analysis) .j
„ . ■ ■ Strategic choice
> Opportunities I 3
> Threats
Strategy
Implementation
and Adjustment
Figure 1.1. Process of formulating competitive strategies
7
2.1. Vision and Mission
2.1.1. Mission
L’ach company has its own mission even though it is not officially announced.
Mission represents the core value of a company. Through mission, a company is
known for its socio-economic contribution, business orientation, global rank, and
commitments. Speech of mission must be brief and condense, yet involve all
basic contents, be encouraging, and prove long-term stability.
2.1.2. Vision
Company’s vision is ability to forecast and generalize changes as well as
opportunities to the company in far future. Forecasting situations in far future
helps the company to avoid some risk, find suitable direction, and exploit
business opportunities.
A vision involves:

Determining a direction for the future
Paying attention to customers' benefits
Being practical
Creating impetus
Being fully presented
Beine regularly monitored and evaluated
2.1.3. Strategic objectives of a company
It is very important to build up strategic objectives of a company. The objectives
must ensure the following features:
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Be proper and can measure
Relate to important issues
Be challenging and feasible
Have time to achieve
Provide tools to assess the management’s operation
2.2. External Analysis
The purpose of external analysis is to see how external factors impact the
company. External analysis forecasts opportunities and challenges to company
business.
External analysis includes: macro-analysis and micro-analysis (industry analysis)
9
Political and Legal
Environment
Technological
environment
Potential
competitors
Supplier power
Rivalry Buyer power
Substitutes

Demographic
Environement
Socialist
Environment
Figure 1.2. Business environment
2.2.1. Macro Analysis (PEST model)
In fact, industry and enterprises co-exist in a macro-environment, including:
economy, technology, socio-culture, law and politics factors. Changes in macro-
environment may directly affect any component in an industry; and then affect
the industry itself.
External analysis aims at investigating what a company is good at and what it
should change. Whereby, the company can catch up with the opportunities
timelv from its environment and predicts challenges it can encounter with. The
company then determines “attacking” strategy or “defending” strategy to each
affective factor. As a result, opportunities are effectively exploited and potential
10
risks are reduced. With external analysis, a company anticipates the future trend;
thus, external analysis must be conducted before internal analysis. Many
companies assess their strength and weakness before anticipating their
opportunities. However, successful enterprises affirm that they investigate
opportunities in their environment before assessing their own strength and
weakness in such opportunities. Understanding business environment play an
important part in making a plan. Having a comprehensive grasp of aspects in
general environment, the leaders are able to anticipate all external factors that are
likely to affect the future of the company.
2.2.1.1. Economic factor
Macro-economic factors determine the clarity and prosperity of an economy.
These factors always have an influence on enterprises and industry. Thus,
enterprises must do research on macro-economic factors in order to recognize
changes, trends and their strategies aims.

The influence of the economy on a company may alter its ability to create its
values and revenue. Important components of macro-economic environment
includes: economic growth rate, interest rate, exchange rate, and inflation rate.
The impact of these factors may bring challenge or opportunities to a company.
In other case, it may bring challenge to this company but opportunities to that
one. Besides mentioned factors, economic factors involve unemployment rate,
financial policy, currency, GDP, GDP per capita, etc.
2.2.1.2. Technological Factor
This group of factors has a big, direct and high influence on competitive
strategies of a company. Technological development is likely to lead to the
backwardness in products after one night. Furthermore, such development brings
potential new lines of products with lower cost, better quality and higher
productivity. Therefore, technological development carries both creativity and
backwardness, both opportunities and challenges.
When technological factors are investigated, it is necessary to pay attention to
fund for research and development, intellectual property, copyright protection,
and national policies on technologies.
2.2.1.3. Political and Legal Factors
Political Factors refer to government policies such as the degree of intervention
in the economy, the political orientation, political stability, investment
incentives, business regulations relating to labor and environment, goods and
services a government want to provide, the extent of subsidy, priorities in terms
of business support. Political decisions from a government can impact on many
vital areas for business such as the education of workforce, quality of
infrastructure.
Legal Factors are legal regulations of a government in using labor, treatment to
employees, minimum wages, recycling, etc. These laws can affect a firm’s costs,
and the demand for its product.
2.2.1.4. Social Factors
Like technological development, social changes also carry opportunities and

challenges. In medium and long term period, the kinds of factors that quickly
change along with the adoption of cross-cultural habits bring a great number of
opportunities. Consuming attitude, structural composition by ages, work office
and families also need to be taken into consideration.
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Besides, it is important to take into account on social factors that divide the
community into different groups of customers. As a result different segments of
the market are formed, creating various opportunities for companies to gain
profit because different groups of customers have difference in psychological
characteristics, interests, living habits, knowledge, aesthetic point of views and
income.
ỉn brief \ the purpose of macro-analysis is to recognize changes and trends arising
from external environment. With the aim of discovering the future trend, macro
analysis helps companies to anticipate new opportunities and challenges.
2.2.2. Industry Analysis (Five forces model)
Industry analysis is carried out to see how intensive the competition in a given
industry is. It is very important for managers to understand the industry in which
their firms operate in to compete for resources, customers, sales and profits. Five
forces Model of Micheál Porter is the most common analytical tool to help
manager formulate appropriate strategy.
According to Micheál Porter’s model, a company is under influence of five
factors within its industry, in other words, five competitive forces:
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r
h
Threat of
lUbstitUB!
'1
Figure 1.3. Five forces model
Micheál Porter states that the stronger these forces are the bigger limitation in

increasing price and higher profit a company has. The manager is responsible to
be aware of opportunities and challenges deriving from these five competitive
forces; whereby formulating corresponding strategies.
2.2.2.1. Threat of New Entrants
Potential rivals are companies which are new in the industry, or companies
which are not already in the industry yet have capacity to take part in that. These
rivals bring challenges to current companies. Current companies have tried to
prevent potential competitors from taking a share in their industry as the more
enterprises co-exist in one industry the tougher the competition is. In other
14