Key areas, causes of FDI firm performance in binh duong industrial zones a qualitative approach

Correspondents described how the managerial ties, market orientation, human resource and supply chain contribute to differentiation advantage, cost advantage and in turn lead to sustaina

KEY AREAS, CAUSES OF FDI FIRM PERFORMANCE

IN BINH DUONG INDUSTRIAL ZONES

A qualitative approach

In Partial Fulfillment of the Requirements of the Degree of

MASTER OF BUSINESS ADMINISTRATION

KEY AREAS, CAUSES OF FDI FIRM PERFORMANCE

IN BINH DUONG INDUSTRIAL ZONES

A qualitative approach

In Partial Fulfillment of the Requirements of the Degree of

MASTER OF BUSINESS ADMINISTRATION

In Finance

by Ms: Vo Kim Chung ID: MBA06004 International University - Vietnam National University HCMC

Acknowledge

I would like to express my sincere gratitude to my advisor Dr Nguyen Van Phuong for his continuous support, patience, motivation, enthusiasm, and immense knowledge His guidance help me in all the time of research and writing this thesis

I am also grateful to research participants for taking time to answer my questions Their inputs are very valuable to my thesis I sincerely appreciate all my friends for their willingness to help and support me

Most especially to my family, thank you for giving me strengths and love to overcome all the difficulties Without them, I could not have completed this thesis

Plagiarism Statements

I would like to declare that, apart from the acknowledged references, this thesis either does not use language, ideas, or other original material from anyone; or has not been previously submitted to any other educational and research programs or institutions I fully understand that any writings in this thesis contradicted to the above statement will automatically lead to the rejection from the MBA program at the International University – Vietnam National University Ho Chi Minh City

Copyright Statement

This copy of the thesis has been supplied on condition that anyone who consults it

is understood to recognize that its copyright rests with its author and that no quotation from the thesis and no information derived from it may be published without the author’s prior consent

© Vo Kim Chung/ MBA06004/2012-2014

Table of Contents

CHAPTER ONE - INTRODUCTION 1

1 Background 1

2 Problem statement 8

3 Research objectives 11

3.1 General Objective 11

3.2 The specific objectives of the study 11

4 Research questions 12

5 Rationale 12

6 Thesis structure 12

CHAPTER TWO – LITERATURE REVIEW 14

1 Managerial ties 14

2 Institutional advantages 16

3 The RBV framework 17

4 Market orientation 19

4.1 Customer orientation 19

4.2 Competitor orientation 19

4.3 Functional coordination 20

5 Human resource management 21

6 Supply chain management 22

6.1 Supplier management strategy 23

6.2 Development strategy of customer relationship 24

CHAPTER THREE – RESEARCH METHODOLOGY 27

1 Study design 27

2 Data collection, analysis, and writing 30

3 Results 37

3.1 Theme 1: Support capacity of local government 38

3.2 Theme 2: Ties with top managers of the other firms 45

3.3 Theme 3: Market orientation 47

3.4 Theme 4: Supply chain 49

3.5 Theme 5: Human resource 51

3.6 Theme 6: Institution advantage 52

3.7 Theme 7: Differentiation/ cost advantage 53

3.8 Theme 8: Firm performance 56

CHAPTER FOUR – DISCUSSION 58

1 Discussion 58

2 Conceptual model 59

CHAPTER FIVE – CONCLUSION AND RECOMMENDATION 62

REFERENCES 68

APPENDIX 78

List of Tables

Table 1: FDI by economic sector (cumulative as at end of 2012) 4

Table 2: FDI projects licensed and registered capital, by country of origin (Accumulation of projects having effect as of 31/12/2010) 6

Table 3: FDI projects licensed by province (cumulative as at end of 2012) 8

Table 4: Characteristics of the interviews 29

Table 5: Topics covered by the interview guide 31

Table 6: Challenge themes in firm performance 31

List of Figures

Figure 1: Yuan Lu, Lianxi Zhou, Garry Bruton and Weiwen Li’ model (2010) 18 Figure 2: Julie Juan Li and Kevin Zheng Zhour’s model (2009) 18 Figure 3: Conceptual model depicting impacts of managerial ties, market orientation, human resource and supply chain on firm performance 61

Abstract

This paper investigates the current issues of FDI firm in Binh Duong industrial zone, Vietnam By conducting an extensive qualitative study comprised of 11 in-depth interviews with Executive managers and general director, we identify eight main themes that emerged from the data concerning the specific contents for FDI firm in Binh Duong industrial zone Correspondents described how the managerial ties, market orientation, human resource and supply chain contribute to differentiation advantage, cost advantage and in turn lead to sustainable firm performance In addition, respondents also noted challenges associated with implementing differentiation advantage, cost advantage Based

on prior studies and these challenges, we propose a conceptual model of managerial ties, market orientation, human resource and supply chain in FDI firm in Binh Duong industrial zone as influenced four main factors - managerial ties, market orientation, human resource and supply chain Changes in any of the four factors can potentially influence both differentiation advantage or cost advantage and overall firm performance

The proposal and research approach have been approved by two discussion committees including members from Binh Duong Department of Science and Technology, Department of Planning and Investment, Department of Industry and Trade, Department of Labour, War Invalids and Social Affairs, and Economic Department of Binh Duong People’s Committee due to the suitability with the industrial development orientation of the province in May 2014

Keywords: Managerial Ties, Market Orientation, Human resource, Supply Chain, Foreign

Direct Investment (FDI) and Firm performance

CHAPTER ONE - INTRODUCTION

1 Background

Developing economies are experiencing massive institutional transformations, which present substantial opportunities and challenges for entrepreneurial firms attempting to grow their businesses Furthermore, many developing economies are moving to market-based policies as a way of stimulating economic growth and reducing poverty In doing so, most industrial sectors in such economies are experiencing rapid structural changes, increased environment uncertainty and unbalanced growth These dynamics have inevitably shaped the managerial methods and the decision-making processes of many entrepreneurial firms These could include decisions regarding how a firm pursues entrepreneurial opportunities and how customer value is created and delivered As such, firms' entrepreneurial orientation and market orientation activities take on instrumental relevance in such economies Firms' entrepreneurial - and market-oriented efforts are internal firm capabilities that,

it is argued, can boost the success of entrepreneurial firms in challenging

environments (Lee et al., 2001; Webb et al., 2011)

Vietnam, a developing country, is currently not out of that flow of massive institutional transformations, since 1986 Foreign direct investment has been an important driver of economic growth in Viet Nam and is an integral part of the important economic liberalization process that is emerging from the country’s ongoing transition from being a planned economy, a process that was initiated in 1986 with the Doi Moi reform Viet Nam has adopted a somewhat hybrid development trajectory (e.g., Beresford 2001, Fforde and Vylder 1996), often referred to as a “socialist-oriented market economy” (Le 2008)

Firms’ performance, therefore, is important to the wealth and economic health

of the whole country when they decided to shape a new era for economic development

In that, the roles of managerial ties and market orientation in emerging economies can enable a firm to achieve better performance Institutional theory and social capital theory to enrich our understanding of the beneficial effects of market orientation, contending that network ties are important informal governance mechanisms that minimize the impact of institutional voids (North, 1990; Peng, 2003), such that network ties become increasingly relevant to firms when legal and regulatory institutions are less effective in regulating economic exchanges (Granovetter, 2005; Sheng et al., 2011) As such, they posit that because formal business-supporting institutions in emerging markets are under-developed (London and Hart, 2004), network ties (defined here as entrepreneurs' social ties with governmental authorities and with managers in other firms) may be a major facilitator of the effectiveness of firms' strategic orientation activities (Bruton et al., 2008; Li and Zhou, 2010)

As mentioned, institutional advantage is another factor to be concerned The significance of institutional advantage is proven by the effect of boosting firm performance, which was researched in China with the participation of foreign firms (Li & Zhou, 2010) Institutional advantage does not lead directly to superior performance; instead, it first leads to differentiation and cost advantages that consequently enhance performance It helps a firm obtain a unique position and gain a cost leadership (Burgess & Steenkamp, 2006) Managerial ties help firms achieve an institutional advantage, which in turn enhances differentiation and cost advantages and consequently firm performance (Peng & Luo,2000) Entrepreneurial firms in emerging markets that suffer from institutional voids are able to increase the benefits of their entrepreneurial - and market-oriented activities by leveraging social ties with

governmental institutions to gain preferential access to valuable market information and resources, and to obtain official support for entrepreneurial innovations with fewer institutional delays In addition, because of the under-developed market-supporting systems in emerging markets, firms' entrepreneurial - and market-oriented capabilities can be facilitated by leveraging ties with managers in other firms including suppliers, customers and competitors In emerging markets such ties: allow sharing of resources and market wisdom; reduce supply and distribution costs through smooth coordination of logistical efforts; and minimize partner opportunism (Li and Zhou, 2010; Sheng et al., 2011)

Besides market orientation, managerial ties and institutional advantage, human resources and supply chain management are other factors leading to firm success; but they accomplish that success in different ways These factors affect performance through differentiation and cost advantages, whereas the latter leads to an institutional advantage, which in turn benefits performance through differentiation and cost advantages Several studies indicate supply chains directly influence the differentiation and cost of a firm's products and services and its exposure to risk and improving supply chain management practices has a positive impact upon improved firm performance (Mark Johnson, Simon Templar, 2011) On the other hands, human capital also relates strongly to performance (Crook, T Russell; Todd, Samuel Y.; Combs, James G.; Woehr, David J.; Ketchen Jr., David J, 2011); Becker et al (1997) suggested employee skills, attitudes and employee behaviors to form discretionary effort, which in turn affects business performance

By joining the World Trade Organization (WTO) in December 2006, Viet Nam had further opened its economy to be able to receive higher FDI inflows Vietnam increasingly emerges as an alternative destination for the multinationals

enterprises, as illustrated by Intel’s decision to build a chip assembly and testing plant

in Vietnam, and the appearance of outsourcing activities (Chaponnière, Jean-Raphael; Cling, Jean-Pierre; Zhou, Bin, 2008) By 2012, Viet Nam registered around 211 billion USD of total registered capital from over 14,500 FDI projects The sectoral composition of FDI in Viet Nam is mainly concentrated in manufacturing, and real estate As Table 1, Manufacturing alone accounts for the largest share of the number

of FDI projects (58.0 per cent of the total) and this volume highlights some potential for intra and inter-sectoral linkages and spillovers

Table 1: FDI by economic sector (cumulative as at end of 2012)

Sector

Number of valid projects

Total registered capital (mill USD)

Accommodation and food service activities 331.00 10,605.8

Electricity, gas, stream and air conditioning

Mining and quarrying 78.00 3,182.0 Wholesale and retail trade; Repair of motor

Fiancial, banking and insurance activities 76.00 1,321.7 Water supply, sewerage, waste management

Professional, scientific and technical activities 1,336.00 1,101.5

Administrative and support service activities 114.00 193.3

Source: General Statistics Office, Viet Nam

Most FDI in Viet Nam comes from Asian countries As at the end of 2012, of the total accumulated capital of effective FDI projects in Viet Nam, seven of the ten largest foreign direct investors came from Asian countries, namely Japan, China (Taiwan Province), South Korea, Singapore, China (including Hong Kong), Malaysia and Thailand (See Table 2) The invested capital by these countries accounts for more than half of accumulated FDI in Viet Nam, with US and European investors playing a less important role With this pattern of diversification of investors, Viet Nam is reducing the risk of depending on particular countries for FDI Foreign investment has

been established unevenly in the various cities and provinces of the country, the six biggest recipients of FDI being Ho Chi Minh City, Hanoi, Dong Nai, Baria- Vung Tau, and Binh Duong (See Table 3); these provinces account for nearly 50 per cent all foreign investment flows at the national level With this pattern of diversification of investors, Viet Nam is reducing the risk of depending on particular countries for FDI Foreign investment has been established unevenly in the various cities and provinces

of the country, the six biggest recipients of FDI being Ho Chi Minh City, Hanoi, Dong Nai, Baria- Vung Tau, and Binh Duong; these provinces account for nearly 60 per cent all foreign investment flows at the national level

Table 2: FDI projects licensed and registered capital, by country of origin

(Accumulation of projects having effect as of 31/12/2012)

Number of projects

Total registered capital (in USD million)

Table 3: FDI projects licensed by province (cumulative as at end of 2012)

Number of projects

Total registered capital (USD million)

North Central area and Central coastal

Source: General Statistics Office, Viet Nam

2 Problem statement

In recent years, foreign investment has poured into Viet Nam, in the form of either joint ventures or wholly-owned subsidiaries, with an attempt to grab the huge potential of this growing market Vietnam increasingly emerges as an alternative destination for the multinationals of this sector, as illustrated by Intel’s decision to

build a chip assembly and testing plant in Vietnam, and the appearance of outsourcing activities (Chaponnière, Jean-Raphael; Cling, Jean-Pierre; Zhou, Bin, 2008)

The impressing growth of FDI flow into Vietnam has also become a growing concern in Vietnam's economic literature While a large number of recent empirical studies investigate the triangular relationship between inward FDI, international trade and economic growth of Vietnam, there are only a few works examining the main determinants of FDI into Vietnam In this vein the pioneer work is develop by Nguyen and Haughton (2002), who investigate the impact of US - Vietnam Bilaterlal Trade Agreement (BTA) on FDI flow into Vietnam

In a survey work, Mirza and Giroud (2004) tend to analyze the motivation of firms investing in Vietnam as well as identify several country specific characteristic attracting FDI flow into Vietnam According political, stability, government policies, local market size and quality of labour force have made Vietnam become a well-known destination on the world FDI map However, according to Nguyen and Nguyen (2007), the contribution of Mirza and Giroud (2004) suffer many critical issue since it

is based on a data sample quite small, only consisting os twenty - two foreign invested form in Vietnam, Nguyen and Nguyen (2007) also provide an empirical analysis of the determinants of FDI distribution across Vietnam's province The argue the in term

of FDI provincial distribution, market size, labour force and infrastructure play an important role in attracting inward FDI to Vietnam By contrast, government policy captured by the provincial competitiveness index (PCI) does not seem to be a key FDI determinant at the provincial level

In addition, in recent years, some empirical studies on the factors affecting firm performance, such as the research find that both managerial ties and market orientation can lead to firm success in China—but in different ways (Julie and Kevin,

2009) Market orientation enhances firm performance by providing differentiation and cost advantages, whereas managerial ties improve performance through an institutional advantage (i.e., superiority in securing scarce resources and institutional support) Institutional advantage, in turn, leads to differentiation and cost advantages and consequently superior performance Moreover, capabilities could be a mediator linking resources and the international performance of entrepreneurial firms in an emerging economy (Lu et al., 2010), in which the researcher was able to demonstrate support for the mediating role of capabilities in the relationship between resources and international performance

In their research, Wang et al (2011) offered empirical support for utilizing resource management theory to investigate the effects of managerial ties They expanded on the social ties literature by suggesting the mediating effect of resource acquisition on the managerial ties– performance relationship They also incorporated contingency theory to better understand the boundary conditions of the managerial ties literature and resource management perspective The study had pushed future research

to deepen our understanding of the mediating and moderating mechanisms of managerial ties in emerging economies Additionally, Li et al (2012), made a contribution in giving an integrated view of organizational learning, social relationships, and opportunity capture

Basing on empirical evidences, the researcher argues that both managerial ties and market orientation can lead to firm success Managerial ties foster firm performance through an institutional advantage, whereas market orientation enhances performance by achieving differentiation and cost advantages in the Vietnamese emerging economy However, the situation in Vietnam generally and Binh Duong specifically could be different from previous study, esp for FDI enterprises operation

in Vietnam Therefore, it is a need to know how firm performance will be affected by those analyzed factors, which is believed to put a helping hand in the development policy of Binh Duong province, showing how we could strengthen the government – firm relationship to achieve the highest goal of each party

The topic “KEY AREAS AND CAUSES OF FDI FIRM PERFORMANCE

IN BINH DUONG INDUSTRIAL ZONES” is chosen to clarify the situation and

further suggestion will be given for a stable development

3 Research objectives

3.1 General Objective

Generally, the study shows the roles of managerial ties, market orientation, human resource and supply chain in an emerging economy of Vietnam and investigates in the current issues of these factors as well as their impacts on the competitive advantage of a firm, esp FDI firms in Binh Duong province

3.2 The specific objectives of the study:

 To provide an overview of the current issues of Managerial ties, market orientation, human resource and supply chain at FDI firms in Binh Duong Industrial zone;

 To contribute in illustrating underlying explanations about how Managerial ties, Market orientation, Human resource and Supply chain help firms achieve differentiation advantages or cost advantages to enhance firm performance;

 To give practical recommendations for governmental authorities and firms, after analyzing the empirical findings in Binh Duong province, which is believed to be able to reflect how the policies could be developed and how government authorities and firms could interact with each other for mutual benefits and long-term relationship

4 Research questions

From problem statement, the study raises the following research question:

 Do managerial ties, market orientation, human resource and supply chain have positive effect on FDI firm performance in Binh Duong?

 What are current issues of managerial ties, market orientation, human resource and supply chain of FDI firms in Binh Duong?

 What are the causes of current issues occurring of FDI firms in Binh Duong?

5 Rationale

Based on prior studies and our findings, we propose a conceptual model of differentiation advantage or cost advantage in FDI enterprises in Binh Duong industrial zones, Vietnam as influenced by four main factors: (1) Managerial ties; (2) market orientation; and (3) Human resources and (4) Supply chains Changes in any of the three factors can potentially impact both differentiation advantage and cost advantage; then the overall organizational performance is affected as a result Unlike many previous studies on the relationship between each of independent factors and overall organizational performance, we propose a more practical model to investigate influences of all interactions among factors as well as each factor on overall organizational performance, which is suitable to the current situation of Binh Duong province

In order to achieve the research objective to have an overall look at the current circumstance and to find ways in solving appearing problems, we structure the remainder of the sections as the next part

6 Thesis structure

Chapter 1: Introduction

The introductory section will look at the reasons and factors what initiated the research It will provide the general background of the research, aims and objectives, scope and limitations which are expected from the research and give the overview about the structure of this study

Chapter 2: Literature review

This chapter builds internal validity and reliability, raise theoretical level, and sharpen the research model It will begin to introduce the concepts Managerial ties include government support and ties with the other firms, Market orientation, Human resource, Supply chain, Critical success factor and some previous research results

Chapter 3: Research methodology

This section will describe how the author studies a problem through general means which can help to achieve the goal of the study Methodology section will introduce overall methodological approaches and indicate how they fit the overall research design

Chapter 4: Discussion

In this chapter, discusses the findings of the study, reports the results of qualitative research approach, how to mine the data for all possible analytic ideas and theoretical avenues that have the potential to develop conceptual model

Chapter 5: Conclusion and Recommendations

This section will describe the implications and conclusions of the research are delineated and future research suggestions and directions based on this study are presented

CHAPTER TWO – LITERATURE REVIEW

1 Managerial ties

Managerial ties refer to“executives' boundary-spanning activities and their associated interactions with external entities”(Geletkanycz and Hambrick, 1997: 654) Because economic actions are deeply embedded in networks of interpersonal relations, ties are important means for coordinating exchanges (Granovetter, 1985) Managers can use the social capital inherent in managerial ties to influence theallocation of resources and shape economic actions (Batjargal & Liu, 2004) The economic transitions make the role of ties more evident In other words, managerial ties substitute for reliable government and the established rule of law (Xin and Pearce, 1996) Empirical studies further find that ties with government officials, as well as with top managers at other firms, positively affect firm performance (Peng and Luo, 2000)

Managers function through their vital ties to the external entities on which their firms depend In this sense, managers are brokers armed with useful ties and contacts (Geletka-nycz and Hambrick, 1997) For example, closer ties with government officials (e.g., political leaders, officials in industry bureaus and regulatory and supporting organizations) help firms achieve more institutional support such as interpreting regulations, enforcing contracts, settling negotiations, and erecting entry barriers to counter the threats and uncertainties inherent in a transitional economy (Peng and Luo, 2000) In addition, ties with government officials help firms obtain scarce resources, such as access to capital, land, and human resources Although market-based mechanisms have been introduced into Vietnam, state regulatory regimes still exert considerable influence on firms' operations and Vietnam

local government still retains the power to allocate scarce resources and grant projects (Nguyen, Ngoc A and Nguyen, T.,, 2007)

Because foreign firms are unfamiliar with the prevailing social norms and practices in local market, they may suffer from a liability of foreignness, the additional costs of a firm operating in an overseas market that a local firm would not incur (Ramasamy et al., 2006) Network with local managers at other firms helps overcome this liability For example, tight linkages with suppliers enable the firm to acquire quality materials and services and timely delivery Connections with top managers at other firms in the same industry facilitate information exchange, which sometimes can reveal scarce“insider”information (Li et al., 2008) That is, ties with the business community provide opportunities for shared learning, the transfer of inside information, and resource exchange to adapt to the unfamiliar market In summary, managerial ties with government officials and the business community enable firms to achieve superiority in terms of gaining support and scarce resources

We further argue that institutional advantage leads first to differentiation and cost advantages and then to better performance First, an institutional advantage enables a firm to secure scarce resources more effectively than its competitors can Because of the “economics of shortage”of production factors (e.g., materials, capital, labor, information) in many emerging economies (North, 2005), a firm can achieve a differentiation advantage if the scarce resources it acquires are unavailable to others Even if the resources are available to others, a firm with an institutional advantage can acquire them at a lower cost, which grants the firm a cost advantage Second, because

of the weak legal institutions, the interpretation and reinforcement of rules and regulations are subject to local authorities 'discretion (Luo, 2007) If a firm can obtain legitimacy, social support, and approbation from the government, it likely builds a

unique corporate and brand image Furthermore, the social capital generated from institutional support signifies the reputation of and goodwill toward a firm, which helps the firm conduct business more efficiently than others in fast transitioning

environments in which opportunistic behavior is salient (Peng et al., 2005)

2 Institutional advantages

Although extant literature has mainly focused on differentiation and cost advantages, recent research suggests that in emerging economies, competitive advantage often arises from nonmarket, institutional connections (Guillen, 2000; Peng

et al., 2005), which they refer to as institutional advantage A review of this literature suggests that institutional advantage offers essentially two benefits: superiority in obtaining scarce resources and superiority in gaining support from dominant institutions

First, as the Chinese market, Vietnamese market also is characterized by underdeveloped capital markets, a scarcity of skilled labor, and a lack of reliable market information (Li et al., 2008), business success rests critically in a firm's ability

to secure scarce resources Guillen (2000), for example, finds that close ties within business groups enable firms to gain a resource advantage including securing technology and knowhow, arranging financial packages, obtaining land and establishing plants, hiring and training workers, and so forth With this advantage, business groups excel in repeatedly entering a variety of industries, which is difficult for new entrants to duplicate or overcome (Li, 2005)

Second, because market-supporting institutions such as legal systems and stable political structures are particularly difficult to develop in emerging economies (North, 2005), support from dominant institutions is critical for business success For

example, the Vietnamese government still plays a highly significant role in shapping, and even interfering in, economic actions through its initiation of new regulations and policies, grants of special permits, and imposition of various restrictions (UNIDO, 2011) Therefore, institutional support represents political capital that helps build a firm's public reputation, social legitimacy, and political effectiveness and that the firm can use to seize potential opportunities or counteract threats (Peng et al., 2005) In summary, institutional advantage offers a firm both tangible (i.e., securing resources) and intangible (i.e., support from dominant institutions) benefits

3 The RBV framework:

According to the resource-based view (RBV), a firm's competitive advantage stems from its unique assets and distinctive capabilities (Barney, 2001) However, a firm's unique resources do not automatically translate into superior performance; rather, unique resources lead to market positional superiority which then lead to superior performance (Barney, 2001; Zhou et al., 2008) Competitive advantage literature commonly points to two types of positional superiority: differentiation and cost (Porter, 1985) Cost advantage, or cost leadership, arises when the firm operates

at a lower cost than its competitors but offers a comparable product The primary cost drivers include economies of scale, capacity utilization, and process management, etc Differentiation advantage is achieved when customers consistently perceive a firm's offerings as superior to those of its competitors A firm can differentiate itself in various ways, such as providing superior service, offering innovative features, developing a strong brand name, launching effective promotion, and so on

Previous research models:

The research of Julie Juan Li and Kevin Zheng Zhour (2009) describe both managerial ties and market orientation can lead to firm success—but in different ways Market orientation enhances firm performance by providing differentiation and cost advantages, whereas managerial ties improve performance through an institutional advantage (i.e., superiority in securing scarce resources and institutional support)

Figure 1: Yuan Lu, Lianxi Zhou, Garry Bruton and Weiwen Li’ model (2010)

The research of Yuan Lu, Lianxi Zhou, Garry Bruton and Weiwen Li (2010) investigates the relationships between capabilities, resources, and international performance among entrepreneurial firms in an emerging economy, indicate the mediating role of capabilities in the relationship between resources and international performance

Figure 2: Julie Juan Li and Kevin Zheng Zhour’s model (2009)

4 Market orientation

Many studies have strongly advocated that firms should adopt a market orientation to achieve competitive advantage Market orientation places the highest priority on the profitable creation and maintenance of superior customer value (Slater and Narver, 1995) It includes three behavioral components customer orientation, competitor orientation, and inter functional coordination and emphasizes the need for the entire organization to acquire, disseminate, and respond to market intelligence from both buyers and competitors (Zhou et al., 2008)

4.1 Customer orientation:

A customer orientation emphasizes understanding target customers sufficiently

to continuously create superior value for them (Narver and Slater, 1990) Because customers' needs change rapidly, a customer orientation requires a clear understanding

of both the present and future demand dynamics of target customers With its external focus on collecting, analyzing, and disseminating information about customers, a customer oriented firm can anticipate its customers' changing needs and respond to them through continuous innovation (Zhou et al., 2009) With the knowledge of what customer desire, a customer-orientedfirm can make its market offerings more appealing by adjusting its marketing mix Because customer orientation aims to achieve longterm customer satisfaction, the firm is highly motivated to provide offerings that uniquely meet the particular needs of its target market (Day, 1994)

4.2 Competitor orientation:

A competitor orientation focuses on watching competitors closely, matching the marketing initiatives of competitors quickly, and understanding both the shortterm strengths and weaknesses and the long-term capabilities and strategies of current and

potential competitors (Narver and Slater, 1990) Because its emphasis is to“meet and beat the competition,”a competitor orientation enables a firm to compare its capacities and offerings with those of its competitors After scrutinizing its value chain compared with that of its competitors, the firm can identify possible ways to streamline and reduce costs (Porter, 1985) Moreover, with a clear understanding of its own and its competitors' strengths and weaknesses, the firm may choose to pursue a unique, untapped position and achieve a differentiation advantage (Day, 1994)

4.3 Functional coordination:

Finally, inter functional coordination focuses on the dissemination and use of market information through coordinated efforts across the whole firm and emphasizes the collective use of the organization's resources to deliver superior customer value (Narver and Slater, 1990) The basic idea is that every employee of a company can contribute something of value to customers, so if the firm can coordinate and integrate its financial, human, and other resources, it can provide goods and services that better suit its customers' needs In addition, by improving cooperation among different departments, inter functional coordination can lead to greater efficiency and thereby decrease production and administration costs (Jaworski and Kohli, 1993) With its three behavioral components (customer orientation, competitor orientation, and inter functional coordination), a market orientation enables the firm to respond to market intelligence in a timely and efficient manner and deliver superior value to meet the unique needs of its market Thus, it is a source of cost and differentiation competitive advantages

5 Human resource management

As the research of Paul and Anantharaman, 2003, human resource practices will ‘‘cause’’ higher performance, the fact that see ‘‘how’’ something is done is supposed to be much more important compared to just ‘‘what’’ has been done The intervening steps in the human resources management (HRM) performance relationship is considered to be important in the further argument of Becker and Gerhart, 1996

The human resources management -outcomes are separated in to ‘‘employee skills’’ (employee competences, cooperation), ‘‘employee attitudes’’ (motivation, commitment, satisfaction) and ‘‘employee behavior’’ (retention, presence) from Paauwe, 2004; Lepak et al.,2006 Human resources management influences performance in relation to contextual factors from the external environment such as business strategies (Schuler and Jackson, 1987), the ‘‘resource-based view’’, i.e., HRM influences performance according to the human and social capital held by the organization (Barney, 1991), and the ‘‘AMO theory’’, i.e., HRM influences performance in relation to employees ability, motivation and opportunity to participate (Appelbaum et al., 2000) Specifically, the theoretical frameworks used for explaining the HRM-performance relationship did not provide a specific structure that defines the precise mechanisms through which HRM policies influence business performance (Wright and Gardner, 2003) This research design did not consider the intervening steps, or the mediating variables, between HRM policies and business performance

By the deep interview, the research explores the reality in FDI enterprises’ judgment about the Vietnamese labor in the current circumstance For example, suggested that HRM policies shape employee behaviors that consequently have an impact on business performance Wright and Snell (1998) suggested that HRM policies improve

employee skills that affect employee behaviours, which in turn have an impact on business performance At the other hand, Becker et al (1997) suggested employee skills, attitudes and employee behaviors to form discretionary effort, which in turn affects business performance

Furthermore, although it was accepted that HRM is positively related to organizational performance, there was a great need for additional evidence to support the HRM-performance relationship from different contexts Hence, this research conduct the interview for 11 FDI firms in Binh Duong industrial zone to find out the true story about the essential of human resource management to the firms’ performance and the requirement of FDI firm for Vietnam labor Specifically, while a few investigations have been initiated in other parts of the world such as in emerging markets and in transitional countries, the literature highlights that most of studies examining the relationship between HRM and organisations performance have been conducted in the United States and to a lesser extent in the United Kingdom Therefore, the question that arises is whether the US/UK-oriented models, however appropriate they might be for Vietnamese This paper investigates how HRM influences organizational performance in the Viet Nam manufacturing context Therefore, it would be interesting to push forward the debate on the HRMs role in improving organizational performance to countries such as Vietnam

6 Supply chain management

With the increasing demand of consumers for the quality, variety of products and customer service, the rising prices of raw materials became significant challenge for many firms especially for FDIs who have almost import In the research released

in 1980, Porter said that latest weighs the importance of the consumer and the ability

to link the needs with the capabilities of providers will optimize product distinction and limit costs Then in 1985, Porter continued to develop the theory and point out its eastern partnership to competitive advantage of business The research laid the foundation for the development of strategic supply chain management and its relationship to the competitiveness and performance of the business

Based on the materials of research on supply chain management strategy and its relationship to business operations, there are two notable impacts aspect that is: strategic management and strategy development to customer relationships

6.1 Supplier management strategy:

Nowadays, the purchase of materials with acceptable prices from suppliers becomes more difficult Supplier management strategy is crucial for a firm to achieve competitive advantage in terms of cost This requires a comprehensive approach to manage the business interactions between a company and its suppliers According to Inman and Hubler 1992, by strategically managing the supplier, a lot of businesses successfully form a block key supply to ensure the quality of products purchased as well as time saving Recent studies have also shown that the management of the distribution system could be set stably in order to achieve the objectives of sustainability, improvement of efficiency and improve the ability to provide and serve the customers The partnership can be viewed as a necessary component in the process

of exchange among the members of the distribution channel allowed the members of the distribution system to achieve the objectives set out and best meet the expectations

of the consumers in the end According to Joffre et Koenig (1992), the coordination in the distribution process is a prerequisite to develop between enterprises in terms of resources as well as the efforts of the relationship Perspectives of cooperation in

relation to exchange is one of the effective means to develop and control or reduce competition among the subject More than that, it would be advantaged for cooperation to the members of the distribution system, efforts to achieve the objectives of sustainability, improvement of efficiency in the relations and improve the ability to provide and serve the customers

6.2 Development strategy of customer relationship:

In a recent survey of European manufacturers, Van Hoek (1999) pointed out that to speed up the distribution process and improve customer service, manufacturers

as well as the retail business today have to raise the flexibility, credibility in the transportation and distribution top out of structure and supply chain management One

of the strategic objectives of the function of the transportation and logistics is to reduce inventory in the supply chain, at the same time maintain or improve customer service (Houlihan 1988; Jones and Riley, 1987) A supply chain can complete this task

by effectively redistributed product in the distribution system by using suitable delay strategies and effective speculation (Davis 1993; Pagh and Cooper, 1998; Scott and Westbrook 1991) some researchers have focused on the relationship between customer relationship management strategy and operations of the business For example, Deshpande, Farley, and Webster (1993) found that customer orientation was positively related to the company activity Ellinger, Daugherty, and Keller (2000) examined the relationship between the performance of distribution and service company activity (including consideration of corporate profit, sales growth and customer satisfaction) and indicate a relationship incredibly active Therefore, the research and exploration of influence factors other relations strategy will contribute to improve the supply chain management process for efficient enterprises and sustainable development in emerging economies like Vietnam

Supply chain management is a developing stage of the logistics (logistics) The economic and Social Commission for Asia and the Pacific (Economic and Social Commission for Asia and the Pacific-ESCAP) noted that logistics has evolved through three phases: phase 1 – distribution (Distribution) that is managed in a systematic way the activities related to each other in order to supply products goods to the customers most effectively This phase consists of the following business activities: transport, distribution, storage of goods, warehouse management, packaging, labeling, packaging Phase 2-system is Logistics: this phase coordination management of both sides on the same system as providing materials and product distribution Phase 3 is the period of supply chain management According to the ESCAP then this is the strategic concept of governance relations chain from raw material suppliers-manufacturers-to consumers Supply chain management concepts focuses on developing relationships with partners, incorporating tight between producers with suppliers, consumers and other stakeholders such as the shipping companies, warehouse, logistics and information technology companies

For the company, supply chain management are very large because it solves both the input and output of the business effectively By changing the input material or optimising the rotation of materials, goods and services, supply chain management can help to save costs, increase business competitiveness There are many companies have reaped great success thanks to know the strategy and appropriate management solutions In contrast, there are some companies failed because the wrong decision as picking the wrong source of material, choose the wrong warehouse location, calculating the amount of the reserves is inconsistent shipping organization, confusing, overlapping (Mabert and Venkataramanan 1998)

Many studies have explored the relationship between direct and indirect supply chain management strategies and operations of the business In the survey of North American manufacturers, Stank, Keller, and Daugherty (2001) points out that supply chain management leading to the improvement of logistical services The more unified supply chain, the higher the production that company will reach(Armistead and Mapes 1993)

But there is a lot of research has been conducted tax issues related to the importance of supplier management as well as customer relationship management, but the interactions between them worship as the level that affect the success of the management of supply chains and business operations has no been implemented specifically With an emerging economy, Vietnam's Binh Duong in General and in particular, our research, the effective relationships between the factors the impact of supply chain management strategy will create a solid foundation for the long-term development of the industry and promote the process of attracting foreign investment

in the integration and improvement of the high economic position

CHAPTER THREE – RESEARCH METHODOLOGY

1 Study design

The proposal and research approach have been approved by two supreme committees due to the suitability with the industrial development orientation of the province in May 2014 Based on approved factors and expertise’ suggestions, the interview structure was shaped and conducted with the participants of 11 head of companies in Binh Duong industrial zones The research is expected to figure out and solve current problems affecting firms’ performance of companies in the area, as the requirement of Binh Duong Department of Science and Technology, Department of Planning and Investment, Department of Industry and Trade, Department of Labour, War Invalids and Social Affairs, and Economic Department of Binh Duong People’s Committee

The researcher tried to contact with many corporation to arrange appointments with potential research participants A letter briefly describing in details the purpose of the study and the planned interview was sent by email to participants Follow up by telephone was made 1 or 2 weeks after the letter, to participants who had not yet responded We initially contacted with 30 participants, but many of them did not reply

Of the 30 corresponds, 11 correspondents agreed to have an interview Informed consent was discussed in detail at the beginning of the interview We conducted the interviews from May to July 2014, participants also required us to assure that we would not use any sensitive stories during the conversation to against them Therefore, all respondents are assured that their voluntary participation will remain anonymous

Participants were purposively selected to cover different industrial fields, specialties, and nationality (see Table 1) Industry specialties were chosen as textiles, apparel, footwear and support industry

Qualitative interviews were conducted with 11 in-depth interviews with two director and their assistant from paper company, one director and his assistant from chemical company, one director his assistant from plastics company, one director furniture company, one finance manager from apparel company, one finance manager and his assistant from textiles company, one finance manager his assistant from footwear company; one manager assistant from a chemical company, one human resource manager from a stuffed animals company Research participants were in Binh Duong province, Vietnam, with ages ranging from 33 to 55

The interviews were semi-structured and the interview guide contained the topics to be covered (Table 2) and suggestions for key questions The sequence of topics depended on the answers received, and the interviewer made sure that all topics were covered, using prompts Managerial ties, market orientation, human resource, and supply chain are thought to contribute in differentiation and cost advantages of the firm, as the information gathered from the interviews Each interview took between 60 and 90 minutes, most interviews were recorded with the permission of the participants being interviewed After the interviews, the recordings were transcribed into computer files Interviewees were asked about their own evaluation of in business performance and differentiation advantage or cost advantage of firms in Binh Duong in general and their firm in particular To facilitate the interview conversation, each participant received a list of related issues to achieves differentiation advantage and cost advantage of FDI firms, which included themes such as general information of his/her firm, demography, ties with government, ties with the other firms, market orientation, human resource and supply chain and others

Table 4: Characteristics of the interviews

Number of respondents (n =11) Sex

Speciality where working

Manufacture of wearing apparel

Manufacture of textiles

Manufacture of paper and paper products

Manufacture of chemical products

Manufacture of plastics products

Manufacture of furniture

Manufacture of footwear and related products

Manufacture of stuffed animals

1

1

1

2 Data collection, analysis, and writing:

Evidentiary and adequacy are main concern for rigor in qualitative study It means that the researcher need a sufficient time in the field and extensiveness of the body of evidence through conducting and using data (Creswell, 2007) The interviewer used both unstructured and standard, semi-structured interview guides including open-ended questions to both frame the interviews and permit direct investigation of additional information in the expert interviews and case studies

All of the interview transcripts are rigorously read and coded in the style of previous studies approach to data analysis This qualitative design enables me to meet the objectives of the research that permit investigation of the different problems occurring differentiation advantages, cost advantages of firms in Binh Duong industrial zones Qualitative approach is chosen because it enables us to explore the natural research that experts’ and companies’ perspectives about differentiation advantages, cost advantages are multidimensional, making them difficult to investigate quantitatively (McAlearney, 2006) Furthermore, using qualitative approach enables us to explore both experiences and predictions of experts and organizational representatives, and provide much more information about the multi facets of differentiation advantages, cost advantages of firms’ challenges in Binh Duong industrial zones During initial or “open coding” process, I follow Strauss & Corbin (1998) to mine the data for all possible analytic ideas and theoretical avenues that have the potential to develop our conceptual model Besides, we also use other