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William J. Ardrey IV

University of Western Australia

Amal Karunaratna

University of Adelaide

Michael Keane

University of Southern California

Track 6: Entrepreneurship, Innovation and Large and Small Business Marketing Key Words: International Bank Marketing, Entrepreneurship, Innovation, Marketing Information Systems, Knowledge Management.

Abstract Incumbency in financial services is a significant barrier to entry for small players in any market, and nowhere is this hurdle more significant than in Southeast Asian Transition Economies, where newly created private sector banks compete with their well established, state-owned rivals. Based on the literature on international bank marketing, incumbency can be overcome by entrepreneurial bankers through astute management of bank marketing strategy, coupled with innovations to better share knowledge about customers. This exploratory study, undertaken in Vietnam’s turbulent financial marketplace, combines empathic design and semi-structured interview research techniques used in financial services research to provide guidance for bank marketing strategy. Results suggest that a combination of factors create market orientation among Vietnamese private sector and entrepreneurial “joint stock banks4”, who are less well capitalized than their state owned competitors. Only through employing innovations, technology and market training can entrepreneurs hope to compete against incumbent government banks, multinational players, and other local rivals. Analyses of marketing orientation and organizational design of sales and marketing functions suggest the need for closer integration between marketing and risk management systems, technologies, procedures and controls, and integration of new innovations to compete effectively in the Vietnamese marketplace.


The capitulation of the North Korean government to the inevitability of joining the global financial system signalled the dying gasp for centralised financial planning in transition economies. Through the May, 2003 North Korean issuance of bonds to finance government operations, this last holdout of communism echoed the path to financial sector liberalisation initiated in Eastern Europe, and followed in Asia by China and its SEATE neighbours (Economist 2003). With liberalisation of markets comes opportunity, and a new breed of entrepreneurs has come to enter the financial services market in a range of transition economies, and nowhere is the innovative opportunity for small business more pronounced than in Vietnam’s turbulent and reforming financial sector. In this study, thebehaviour of new and entrepreneurial ANZMAC 2003 Conference Proceedings Adelaide 1-3 December 2003 818 entrants into the financial services market, namely private ‘Joint Stock Banks,” is analysed based on a mulit-method market research initiative based on market research methodology appropriate to SEATE’s (Reddy & Reddy 1997; Vu & Speece 1995;

Shultz 1997). Results suggest that a market orientating, the dependent variable for this study, is a result of training and competitiveness with global and state-owned incumbents.

Literature Review:

Entrepreneurship in general remains problematic in transition economies, as the legacy of state control and central planning remains in markets ranging from Eastern Europe, to Asian and Southeast Asian economies moving from Marx to market in orientation. In SEATE’s, the very definition of entrepreneurship remains problematic, and often confused with small family businesses and petty trading by the under-employed. A useful definition for this study is the pursuit of opportunity without regard to resources currently controlled, and often requires high degrees of tolerance for risk, for innovativeness, and for leading small companies against entrenched incumbents (Stevenson, Grousbeck, Roberts and Bhide 2000). The importance of market orientation in business, in entrepreneurship and in the financial services has been well documented in the literature (Brigham & Hourston 1997; Cao 1995; Moshirian 1998; Mulhern 1998). Financial services are defined as activities, benefits and satisfactions connected with the sale of money. For transition and developing economies, pioneering research by Chan (1993) and Ennew, Wright and Kirnag (1996) have linked market orientation with successful performance.

Entrepreneurial success in Vietnam faces two theoretical problems, coupled with the practical problem of competing against the government-owned banks in a market where “capital markets” remain politically undesirable among many factions of the Communist Party of Vietnam leadership (Shultz, Pecotich & Le 1994; Templer 1999.

The first theoretical problem is incumbency (Chandy & Tellis 2000), which gives many benefits to larger players, such as multinational banks (eg., Citibank) and government banks (eg., Vietcombank). In any market, attacking the industry leader is a marketing strategy fraught with risk. Incumbents have numerous advantages of brand recognition, size, financial stability, experience, and market power which can be used to delay beneficial innovations introduced by more nimble In the financial services sector, incumbents have even more power because their significant financial and intellectual capital, as well as the technology to help manage knowledge and understanding. Success in Asian financial markets especially relies increasingly on a number of complex market challenges, including understanding of customers and markets, lending risks, returns, and environmental changes in global capital markets (Sapin & Nachuk 1997; Sasakawa 1997).. The second theoretical problem is innovation, or doing things in a new, different or more efficient manner (Khalil 2000). It is possible for both small entrepreneurs and larger banks to innovate (Brigham & Houston 1997).

A possible way out for private sector bankers competing in Vietnam is offered by adopting a market-oriented strategy to differentiate them from their larger competitors through designing radically new products demanded by the market, and by implementing marketing information systems to know more about their customers and thereby delivering the right products and services in a method superior to their state owned competitors. Justification for this approach can be found through Entrepreneurship, Innovation and Large and Small Business Marketing Track 819 combining the literature and strategies from the fields of financial services marketing, with the marketing of innovative and high technology products (Day 1993; 1999;

Deaton 1989). In transition economies, research on the influence of marketing on performance of banks and other organisations also suggests that a combination of marketing, with proper application of knowledge management, innovation and technology may be most appropriate for private sector entrepreneurs competing in a challenging marketplace Bednar, Reeves & Lawrence 1995; Economist 1995; Meidan 1996; Sasakawa 1997).

A snapshot of the Vietnamese marketplace is provided in Table 1, below. “Joint Stock Banks,” or privately owned banks, began emerging in Vietnam in 1996, under the various laws, decrees and circulars promulgated by the State Bank of Vietnam.

Joint Stock Banks compete with state owned banks (Vietcombank), foreign banks (Citibank), and joint venture banks such as the Vina-Siam Vietnam-Thai alliance.

The current marketplace for Joint Stock Banks is listed below:

–  –  –

Many joint stock banks face competitive, capitalisation, and related difficulties, as well as a general lack of market orientation. According to this Deloitte (2000) analysis, both the small size and dynamic behaviour of Joint Stock Banks suggests they qualify as “entrepreneurs.” For this study, an exploration of which factors determine market orientation is undertaken in a multi-site, multimethod market research initiative in Vietnam in the turbulent 2002 financial market.

Conceptual Development.

It is proposed that a number of independent variables (see Table 2) combine to determine market orientation (Dependent Variable: OUTWARD). These independent variables include the following, described below.

–  –  –

Based on the literature above, an instrument was developed in English, with 1-9 scales measuring the dimensions above, as well as general background categorical information on the bank in question, and the position of the respondent within the organisation. This instrument, suitable for respondent-completion, was translated and back-translated into Vietnamese according to the requirements of strong cross cultural research methods (Brislin, Lonner & Thordike 1973; Salzberger, Sinkovics && Schlegelmilch 1998; Shultz 1997)

Research Methods:

In cooperation with the World Bank and State Bank of Vietnam, 6 banks were randomly selected from the State Bank of Vietnam list of licensed “joint stock banks,” or private banks licensed to take deposits and make loans in Vietnam in January, 2001. Six managers at six banks were approached initially for interviews Entrepreneurship, Innovation and Large and Small Business Marketing Track 821 about the overall market orientation of their banks and also asked to complete a short questionnaire, and 5 banks chose to participate, thus one-organisation chose not to respond, Within organisations, non-response involved two managers refused to cooperate for this study, resulting in 28 managers participating out of 30 contacted.

The respondents within the sample are analysed and this analysis is attached in Table 3, below.

–  –  –

Data were collected, coded, and entered into the SPSS software program. These research methods were initiated based on the literature on market research in Vietnam and other transition economies (Shultz 1997; Shultz, Pecotich & Le 1994; Vu and Speece 1996). Stepwise regression as elected as an analytical tool appropriate to exploratory marketing research.

Conclusion and Discussion:

Data analysis indicated two potential models to explain the factors integral to market orientation. Using step-wise regression, “Model 1” and “Model 2” regressed the dependent variable OUTWARD against all other scaled items on the premise of investigating what contributed to market orientation. Model 1 has the explanatory variable of MKTIS, or the knowledge management function proposed by Menon et al (2000). MKITS offers a Beta of 0.802 (t=6.83, p0.000), and an adjusted R2 of

0.643. Model 1 has a much larger F value, and is easier to interpret.

Model 2, however, has an adjusted R2 of 0.716, and three variables which explain OUTWARD, namely MKTIS (b=0.288, p0.05), COMPINT (b=0.309, p0.05), and CREDIT (b=0.305, p0.05). Thus, while Model 1 is simpler and easier to interpret, Model 2 has greater explanatory power and indicates that international competitiveness, and credit analysis key to success in banking, are additional requirements to the ability to use and apply knowledge about markets. Interestingly, information systems and knowledge management contribute to both models, however the more powerful model also requires sound credit standards and competitiveness. It is clear that international competition is setting standards in Vietnam that local banks are required to follow for success. It is also important for further research, with a larger sample size, to be undertaken to permit more generalization from study conclusions. Market orientation has become a critical tool for success for these innovative financial services providers.

ANZMAC 2003 Conference Proceedings Adelaide 1-3 December 2003 822


Decker, W & Kazeh, K (1992) “How Customers Choose Banks,” Journal of Retail Banking, 14 (4), 41-44.

Day, A. & Wills, G. (1989) “Critical Issues in Bank Marketing Today,” International Journal of Bank Marketing, 7, 13-33.

Ennew, C., Wright, M. and Kirnag, J. (1996) “The Development of Bank Marketing in Eastern Europe: The Case of Slovakia,” Services Industry Journal 16 (4) 443-457.

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McGraw Hill.

Menon, A. and Varadarajan, P. (1992) “A model for marketing knowledge use within firms,” Journal of Marketing, 55 (Oct) 53-71.

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Entrepreneurship, Innovation and Large and Small Business Marketing Track 823

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