Topic analysis of honda vietnam a joint venture company

Analyzation of Honda Japan’s reasons for choosing joint venture as entry mode at that time of entry...5 1.. Honda Vietnam Company is a joint venture between 3 partners: Japan Honda Motor

NATIONAL ECONOMICS UNIVERSITY

School of Advanced Education Programs

-o0o -INTERNATIONAL BUSINESS CBA300

GROUP ASSIGNMENT

TOPIC:

ANALYSIS OF HONDA VIETNAM - A JOINT VENTURE COMPANY

Group members:

Lê Ngọc Hà

Nguyễn Ngọc Minh Khuê

Bùi Thị Thùy Linh

Bùi Sơn Minh

Hà Việt Nga

11201163 11205636 11205714 11206059 11202701

Class: Advanced Finance 62C

Instructor: Assoc Prof Dr Bùi Huy Nhượng

Hanoi – November 2022

Table of Contents

I Background of Honda and its member partners 3

1 Background of Honda Japan 3

2 Background of Honda’s partners 3

II Analyzation of Honda’s joint venture partner selection in Vietnam 4

III Analyzation of Honda Japan’s reasons for choosing joint venture as entry mode at that time of entry 5

1 The motive for entering the country 5

2 Characteristics 6

3 Vietnamese local partner 6

IV Analyzation of Honda’s factors affecting joint venture partners 7

1 Culture 7

1.1 In the products of Honda Vietnam itself (products, safe, fuel-efficient, and highly friendly environment,…) 7

1.2 In activities charity, support, other social activities, in the way of business, in how company employees treat customers… 9

2 Strategic traits 10

2.1 Building brand identity system 10

2.2 Development strategy 10

2.3 Brand promotion communication 11

3 Organizational traits 13

3.1 Size 13

3.2 Market power 13

3.3 Innovation process 14

3.4 Organizational image 14

3.5 Organizational skills 14

4 Financial traits 15

4.1 Profit of Honda Vietnam from 2018 to 2019 15

4.2 Profit of Honda Vietnam in 2021 16

References 18

I Background of Honda and its member partners

1946: when the most common mode of transportation was the bicycle Soichiro Honda developed the concept of using these engines as power for bicycles The new bicycle was an instant hit, with orders coming in and stocks running out It was incorporated as a Honda Motor Company in 1948 and began producing motorcyclesin 1949

Honda Vietnam Company is a joint venture between 3 partners: Japan Honda Motor Company (42%), Thailand Asian Honda Motor Company (28%), and Vietnam Engine and Agricultural Machinery Corporation (30%) Thailand Asian Honda Motor Company: established in Thailand in

October 1964 as a motorcycle distributor In 1996, the company took on the role of Honda’s ASEAN Regional Headquarters

Honda Vietnam: In March 1998, after building the first factory

manufacturing motorcycles in March 2005, Honda Vietnam officially received the license from the Ministry of Planning and Investment to allow the production and assembly of automobiles in Vietnam:

 Honda Motorbike: Motorbikes are the vehicle used for nearly 90% of cars big

city Up to now, Honda Vietnam has 6 manufacturers and assemblers of vehicles and vehicle parts

 Honda car: Honda Vietnam is known as a famous motorcycle manufacturer

and a prestigious automobile manufacturer in the Vietnamese market

Vietnam Engine and Agricultural Machinery Corporation - Joint Stock Company (VEAM): established on May 12, 1990 with the central goal of

Vietnam's mechanical industry is the industrialization and modernization of agriculture and rural areas

II Analyzation of Honda’s joint venture partner selection in Vietnam

Honda Japan had carried out numerous research in Vietnam to develop a specific plan for broadening its business to a Southeast Asian country The company then established a joint venture with Vietnam Engine and Agricultural Machinery Corporation (VEAM) in March 1996 although Honda is financially capable of building a new business on its own in Vietnam

VEAM used to operate under the Ministry of Industry and Trade, thus this is

a state-owned company This characteristic had provided numerous advantageous privileges for itself at that period of time in Vietnam In 1996, foreign corporations were not entirely welcomed as an attempt to protect domestic businesses when 100% foreign ownership was not permitted by the Vietnamese government Therefore when foreign corporations desire to expand their business to Vietnam, establishing a joint venture with a local company was the only legal option

When Honda and VEAM participated in creating a partnership, Honda owned 70% of the joint venture and managed the main business’ operation while VEAM only acted as a supporter in land ownership and headquarter construction

As a matter of fact, Honda transferred its own manufacturing chain directly from Japan, thus VEAM could not contribute to the technology in producing Honda’s motorcycles when 15 subsidiaries of VEAM were not qualified to become components suppliers for the joint venture

Establishing a joint venture with a state-owned company had gained Honda various benefits, especially in terms of taxation Honda has been exempted from tax for 4 years, halved the tax rate for the next 4 years, and 25% tax rate for the following 15 years

III Analyzation of Honda Japan’s reasons for choosing joint venture as entry mode at that time of entry

1 The motive for entering the country

The entry of Honda into Vietnam might be seen as a result of several forces, one of which is the size of the Vietnamese market With a population of 74 million people and the motorcycle as the main transportation means, Vietnam is definitely

an attractive market

The second factor that had an impact on Honda’s investment in Vietnam is the protection of the local market A 60 per cent tariff rate applied on imported complete motorcycles is an effective incentive for a market-seeking FDI project The third factor was the other attractive incentives that the Vietnamese government offers foreign investors with ambitions to develop the local automobile and motorcycle industry Honda Vietnam Co., Ltd, for example, was granted a four-year corporate income tax holiday, followed by a further four years

at half the normal rate, and after 15 years of operation, a rate stabilised at 25 per cent

2 Characteristics

With advancements in engine technology as the most important in the industry, and advanced engineering capability to meet demands of escalating safety restrictions and environmental regulations, the industry has been improving at a rapid pace R&D expenditure in all business segments of Honda has been around 5.5 percent of net sales during the last 10 years In the financial year ended March

2001, expenditure for R&D in the motorcycle segment alone was about 8% of motorcycle sales worldwide

3 Vietnamese local partner

The local partner in Honda Vietnam Co., Vietnam Engine and Agricultural Machinery Corporation (VEAM), owns a 30% share in the joint venture VEAM is

a State General Corporation that was set up in 1995 by merging (simply combining) activities of 15 individual State-run production/research units The corporation is under the control of the Ministry of Industry The Prime Minister assigns the General Director, the Minister of Industry assigns the Vice-General Directors, and the Minister of Finance assigns the Head Accountant

VEAM's enterprises stretch all over the country and produce various things like multi-purpose engines, agricultural machinery, tractors, automobiles, motorcycles, and equipment for on-land and water transportation By 2002, it employed about 7000 workers It is also the local partner in some joint ventures with foreign investors such as Toyota, Suzuki, and Ford amongst others

The main contribution of the local partner in Honda Vietnam Co is the property in terms of land-use rights, and its political position in the machinery industry Informal regulations in this sector have changed over time In the early 1990s, with the Government's objective of attracting foreign investors into the automobile and motorcycle industry, few FDIs were allowed to take the form of 100% foreign owned Later, the joint venture with Vietnamese enterprises was effectively the only choice for FDI in this sector In this circumstance, VEAM emerged as the most politically suitable partner

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It is also a surprise that none of the 15 subsidiaries of VEAM could become

a local parts supplier to the joint venture In fact, the joint venture has developed business relationships with other local producers for their component supplies

IV Analyzation of Honda’s factors affecting joint venture partners

Although Honda is a company that established in Japan, but it always upholds the value of the country it come to in many aspects listed below:

1.1 In the products of Honda Vietnam itself (products, safe, fuel-efficient, and highly friendly environment,…)

 Inside the factory:

Emphasis on environmental protection: Since the early 20s, Honda has received the certificate of environmental management according to ISO 14001

In 2003, the Company focused on activities to improve the working environment for employees with activities such as reducing temperature, dust, CO2, setting up a noise reduction system and central air conditioning system to keep the working environment fresh Thanks to the central air conditioning system, the temperature at the working site is always maintained below 30oC even though the outdoor temperature is 40oC All dust and gas in the welding process are collected and treated to ensure a clean working environment This system has

contributed to reducing the CO2 concentration in the workshop from 5107 mg/m3

in 2003 to 1403 mg/m3 in 2004 and lower than 900 mg/m3 in 2005, 2006 At any

of our plants Honda, trees are stacked in a very scientific way to create a healthy living space while supporting noise reduction Currently, the noise in the factory is mostly controlled at 50% of the permitted standards in Vietnam The factors of microclimate, light, and temperature are also strictly controlled periodically by the company to ensure that the parameters always meet Vietnamese standards They suck and process all the dust in stages such as production, fabrication, welding …

 Outside the factory:

Honda Vietnam pays special attention to waste treatment and recycling technology Honda Vietnam is the first factory in Vietnam to invest in a modern, closed incinerator equivalent to the incinerators of advanced countries such as Italy, Japan, America With an investment cost of over 2 million USD, especially the company's waste incinerator with modern technical design ensures no dioxin emission (the agent that causes cancer, birth defects, deformities, ) Up to now, with the daily recycling of 600 kg of waste ash as an additive to cement, Honda Vietnam has completely eliminated landfill waste The Company's environmental policy is "Limit use - Do not discharge hazardous substances into the

environment" With the increase of the production capacity of the motorcycle factory and the addition of a car factory, HVN has invested and upgraded the domestic wastewater treatment system in the factory from meeting the needs of 2,000 people to now 4,000 people

1.2 In activities charity, support, other social activities, in the way of business,

in how company employees treat customers…

The campaign "I love Vietnam" of Honda Vietnam Company was born in August 2003 with 3 messages: Safety, Quality and Social activities Honda Vietnam always thinks that their business should be responsible for the development of Vietnamese society

Honda always creates campaigns to emphasize that traffic safety is everyone's happiness Programs with this content take place in educational settings and across the country Customization culture: One thing they always uphold is equality between cultures Coming to Vietnam, Honda Vietnam upholds

Vietnamese cultural values but does not obscure Japanese cultural factors For Honda Vietnam, it is necessary to create value for this country so that consumers can feel secure and have confidence in using their products

2 Strategic traits

2.1 Building brand identity system

Currently, the Vietnamese motorcycle market is extremely exciting with many motorcycle manufacturers competing fiercely such as: Honda, Yamaha, Suzuki, SYM, Piaggio However, among them, Honda dominates with more than 70% market share The image of the motorcycle has been associated with the Honda brand, as evidenced by the fact that when it comes to motorbikes, Vietnamese people often call it Honda, not motorbike

This proves that the Honda brand has gone deep into the subconscious of Vietnamese people The name "HONDA" - both strong and unique, the font is designed with red capital letters showing strength and creativity With an extremely eye-catching and familiar logo Looking at this logo, everyone knows that this is the logo of Honda Vietnam

2.2 Development strategy

 Low-cost strategy

Honda's goal is to create a competitive advantage by creating products at the lowest cost Honda offers Wave alpha motorcycles priced from VND 13,000,000, durable quality, compact design suitable for the needs of rural consumers - low

income This low-cost competitive strategy has helped Honda capture the rural market of 70% of Vietnam's population

 Differentiation strategy

With any product line, Honda always innovates designs and techniques to suit consumers Honda also introduced into the Vietnamese market a high-quality product line such as SH motorcycles and most recently CPX This is a high-end product line with many unique and outstanding features These products are aimed

at high-income customers, young people, who like trendy and classy products

 Strategic focus

Some product lines are suitable for female customers such as convenience and fashion while the price is only average The car is very easy to use, no need for clutches, gears, or a large storage box that can hold many important things This type of car has many rich, unique, and luxurious designs, suitable for the personality of young people, especially women Honda Vietnam Company has launched a new type of scooter called Click, and then respectively: Air Blade (4-2007), Click Play (9-2008), Lead (12-2008) Therefore, Honda scooters are more and more popular