530 Global Business Environment ASSIGNMENT 1

In this report, will analyze the key factors driving globalization such as the analysis of the key factors in cost, market, environment and competition that drive global trade and trade. Indepth analysis of the impact of key factors on the global business environment on benefits and challenges. Identify the strategic complexity associated with operating in a global environment. Explain the complexity of the strategic challenges that organizations face when operating in a global environment supported by concrete examples. Critical analysis of strategic challenges in the context of risk and diversification and supply chain flow strategies. Critically evaluate the global business environment, including the opportunities and challenges faced by the organizations. Moreover, Prudential insurance company will be chosen to clarify how the impact of globalization affects the development of enterprises

ASSIGNMENT 1 FRONT SHEET

Summative Feedbacks: Resubmission Feedbacks:

Internal Verifier’s Comments:

Date:

Signature & Date:

Contents

I Introduction 6

II Analyze the key factors which drive globalization 6

2.1 Defination globalization 6

2.2 Yip’s framework 9

2.2.1 Defination 9

2.2.2 Application to Honda Motor in VietNam 11

III International economics integration 15

3.1 Influence of Organizations, Agreements and World Association on Honda automobile industry in Vietnam 15

3.2 International scale of good 16

3.3 Transportation 17

3.4 Insuarance 17

3.4 Industrial properties copyright 18

3.5 International trade law 18

IV Global Economics 20

4.1 Free Trade Area 20

4.2 Customs Union 20

4.3 Common market 21

4.4 Economic Union 21

V Global supply chain 21

5.1 Sourcing 22

5.2 Production 23

5.3 Distribution 24

VI SWOT and Pestel of Honda Motor 26

6.1 SWOT 26

6.2 PESTEL 27

VII Compare the Honda Vietnam automobile market with China 28

VIII Global supply chain between Vietnam and China 30

IX Conclusion 33

X References : 33

I Introduction

In this report, will analyze the key factors driving globalization such as the analysis of the key factors

in cost, market, environment and competition that drive global trade and trade In-depth analysis ofthe impact of key factors on the global business environment on benefits and challenges Identify thestrategic complexity associated with operating in a global environment Explain the complexity of thestrategic challenges that organizations face when operating in a global environment supported byconcrete examples Critical analysis of strategic challenges in the context of risk and diversificationand supply chain flow strategies Critically evaluate the global business environment, including theopportunities and challenges faced by the organizations Moreover, Prudential insurance companywill be chosen to clarify how the impact of globalization affects the development of enterprises

II Analyze the key factors which drive globalization

2.1 Defination globalization

The spread of goods, technology, knowledge, jobs across borders and national culture isglobalisation Economically, the economic interdependence driven by free trade is reflected by thisphenomenon

Globalization is a phenomenon of economic, social, cultural and political significance

1 Economically: enabling businesses to take advantage of competitive benefits, reducing labour

prices, costs of materials, and attracting more consumers A major part of foreign trade istransnational businesses Because of their scale and far-reaching trading networks, they aremultinational corporations working in more than one nation and wielding immense influence

In developed countries, transnational companies offer employment and training, but they areoften blamed for the kinds of jobs they provide the amount of wages in developing countriesand the environmental effects of their activities

In a globalized economy, countries with high labor standards will have higher labor costs andvice versa, countries with low labor standards will have lower labor costs This creates

inequality in trade performance - firms in these countries cannot compete on a commonground in terms of labor costs

The disparity in labor costs between developed and developing countries has causedlaborintensive businesses to be relocated from developed countries (where labor costs arehigh, high working conditions) to developing countries (where labor costs are low andworking conditions are less stringent)

The market mechanism will set labor standards by itself Employers who pay low wages, haveunstable working conditions, and poor remuneration for employees will lose skilled andexperienced workers and will not have a team stable labor From there, the competitiveness

as well as the profitability of businesses will be reduced

Employees have more choices at work; The working scope is not limited in one country butcan be moved to another country The movement of labor in the process of globalization isthe solution to the disparity in working conditions and labor demand between rich and poorcountries

The context of trade liberalization will help reduce tariff barriers and promote more and morecountries to participate in international trade Producers and suppliers of products andservices may be exposed to wider and more diverse consumer markets Consumers also havemore opportunities to choose better goods at more competitive prices

For example : Parts from other nations are used for some vehicles In the United States, anautomobile that is assembled can import parts from Japan, Germany or South Korea As the

US has to pay for some parts from around the world, wait for them to be delivered and thenbegin regional development, this provides a whole new route for trade

2 Socially: From consumerism to the arts and sciences, social imperialism is visible in the

parallels in social patterns between cultures Social globalization has traditionally involved the

constant dispersion, whether civilly or by coercion, of values and religious views Mostnotably, however it is characterized by the growth in contact between individuals fromvarious parts of the world A reduced affinity between individuals in the same area is alsocountered by this

For example : Good examples of social globalisation could include internationally popularfilms, books and TV series The Harry Potter/ Twilight films and books have been successful allover the world, making the characters featured globally recognisable

3 Culturally: it reflects the exchange between cultures of ideas, values and creative expression

and also represents a single pattern of world cultural growth

For example : The Silk Road is the trade route between China and the Mediterranean Searegion It allows exchange of not only goods but also culture and knowledge As merchantsunderstood Chinese culture through their trading activities, appreciation of Chinese culturebegan to grow beyond Chinese borders

4 Politically: approach intergovernmental bodies such as the United Nations and the World

Trade Organization

For example : Examples of trade blocs are the European Union, the WTO and G8 Theseorganizations help to spread ideologies like democracy, protect human rights, intervene tosolve misunderstandings and aid in international agreements and it also refers to the growth

of the worldwide political system, both in size and complexity

5 Social protection gender America culture

In the period of globalization In the United States, social protection is provided through both public andprivate contributions and exhibits a trifurcated structure involving employers, employees and thegovernment.11 The Social Security Act of 1935 set the foundation of the current social protection system

in the US, which includes three main provisions: old age and disability insurance, unemploymentinsurance and cash assistance for female-headed families with dependent children

At the time of its establishment, the US system was based on the male breadwinner model, wherecaregiving is assumed to be a female responsibility Means-tested programs provided the basic needs ofsingle-mother families until (re) marriage or the children grew up A series of historical changes,

however, have to challenging the persistence of the male breadwinner model Over time, mothers haveincreasingly joined the labor force, the number of marriages has declined and the number ofsinglemother families has increased (Albelda 2011) In addition, the decline in manufacturing in the era

of globalization has reduced the number of jobs that pay breadwinning wages sufficient to support anentire family (Bernhardt et al 2008)

From a gender perspective, the most important reform in the US social policy was the introduction in

1996 of the 'Personal Responsibility and Work Opportunity Reconciliation Act' — commonly known as'welfare reform.' It replaced a cornerstone of the New Deal, known as the 'Aid to Families withDependent Children,' with the new 'Temporary Assistance to Needy Families Program.' This newprogram has to provide greater incentives to find employment by setting limits on the duration ofgovernment support.12 In addition, this program targets enforcing work, marriage and reducing the size

of the welfare state (Abramovitz 2006)

The reform introduced stricter rules to the so-called ‘workfare, 'which included performing unskilledpublic work as a precondition to receive welfare benefits during the periods of surplus To limitnonmarital births, states were allowed to deny aid forever to children who were born while their motherwas on welfare

Market : Assess to what degree there are:

• Homogeneous desires of customers

• Requires for multinational clients

• Worldwide

• Transferable approaches to marketing

This decides the foreign or local business characteristics

Cost : Consider the degree to which the cost variables drive towards globalization of the industry:

• Large-scale and broad-based economies

• Experience and learning

• Efficiencies in procurement

• Logistics Advantageous

• Chances for Arbitrage

• Strong cost of research-and development (R&D)

Competition : Consider the degree to which the cost variables drive towards globalization of the industry:

• Countries Interdependent

• Competitors worldwide

Government/Environment : Evaluate the degree that governments have:

• Favorable regulations on trade

• Popular norms of technology

• Popular regulations in manufacturing and marketing

• Pushing for the globalization of business

2.2.2 Application to Honda Motor in VietNam

Profile Honda Motor Company in Viet Nam

Founded in 1996, Honda Vietnam is a joint venture between Honda Motor Company (Japan), AsianHonda Motor Company (Thailand) and Vietnam Engine and Agricultural Machinery Corporation with 2industries Main products: motorcycles and cars After more than 20 years in Vietnam, Honda Vietnamhas continuously grown and become one of the leading companies in the field of motorcyclemanufacturing and prestigious car manufacturers in the Vietnamese market

With more than 10,000 employees, Honda Vietnam is proud to bring customers high quality products,dedicated services and contributions to a healthy traffic society With the slogan "The Power of Dreams",Honda wishes to share and fulfill the dream with everyone through creating new joys for people andsociety There is a large scale enterprise in the Vietnamese market

VISION TO 2030

Become one of the leading automakers in Vietnam

Becoming one of the firms with the highest sales and customer satisfaction index in Vietnam

Become one of the firms with a team of highly qualified and trained staff

MISSION

For the automotive retail industry: Changing the automotive retail industry in the region towardsserviceoriented, customer-centricity in all activities, processes and standards, bringing exciting andunreasonable experiences doubt for customers

For employees: Becoming a Company gives all members equal opportunities to work and promote allabilities, worthy of being a place for all members to stick and develop their careers

For partners: Always build and develop relationships with partners on the basis of equality, respect andmutually beneficial cooperation

Besides the core values of the Honda brand such as "Quality - Durable - Reliable", Honda Vietnam alsomakes a strong impression on customers, especially in the automotive segment In addition to design,technology is one of the important factors contributing to the formation of the core value of Honda cars

Market drivers:

The needs of customers in Vietnam like the desire to use Honda car products with high quality in featuresand performance but with low cost and competitive source compared to other brands According to thestatistics of August 2020, Honda is ranked 5th in comparison with other major car manufacturers Thebrand is distributed in the Vietnamese market by opening many branches all over Vietnam, especiallywith many large showrooms in big cities such as Ho Chi Minh and Ha Noi There are many forms ofdistribution, but most of the supply and distribution are mainly for Vietnamese use and not yetdistributed globally The marketing methods are widespread and popular but still have not achieved highefficiency because the tastes of Vietnamese customers are still confused between Honda automakercompared to other big brands

 The market is mainly domestic in Vietnam, but in order to achieve higher economic efficiency, thestrategy must consider global distribution

Cost drivers :

Honda automobile company in Vietnam has advantages in scale and production In March 2005, HondaVietnam officially received the license from the Ministry of Planning and Investment to allow automobileproduction and assembly in Vietnam - marking an important milestone in the development of theCompany Starting automobile business in 2006, after just over 1 year, Honda Vietnam has successfullybuilt factories, dealership network, sales training, service, and safe driving programs for dealers staff andlaunched the first model Honda Civic in August 2006 So product development costs are high because themajority of Honda cars also have to be imported from abroad Transportation costs were previouslyvery high, but in recent years, the only automobile factory of Honda Vietnam is fully equipped with thesame machinery and equipment as Honda factories in other factories other countries with specialcriteria attach special importance to quality, safety and environmental friendliness Moreover, thefactory is also equipped with an engine assembly line with the desire to gradually localize HondaAutomotive products

 Having strong advantages in scale and production, high product development costs, but theadvantage of reduced transportation costs

Competition drivers :

There are global and domestic competitors such as big players from Toyota, Hyundai, Kia, Mazada,Mitsubishi, etc Therefore, competition is very stressful because in Vietnam market, customers are stillconfused about choosing between suitable product lines High imports and market sales also achievedcertain achievements As the CR-V in 2019 takes the place of the City to become Honda's best-selling car,the order will be repeated in 2020 The transition of distribution form, from Thai imports to domesticassembly in the first half 2020, causing the CR-V's business to lose continuity Vehicle sales are thereforenot high, even letting Hyundai Tucson rise to number one in the segment in terms of market share Most

of the imports are for the Vietnamese market, so export is something that Honda Vietnam cars can not

do compared to the big players in the international market Competition for domestic automakers isinterdependent as well as quality and price, accompanied by tariffs and transportation costs that have astrong impact on the effects of competition

 There are many big competitors, changing the import into domestic export with many costbenefits, export is not possible yet Competition between car manufacturers has similarities

Government drivers:

Trade barriers are decreasing, but import of Honda cars from abroad still incurs very high tariffs

Technical standards are becoming unified between factories operating around the world and evenVietnamese territory in terms of investment and equipment to operate production

=> Global strategy in automobile manufacturing industry

Most aspects will be global, but with the Honda car factory in Vietnam, the distribution channels are stillfor Vietnamese users

Opportunity

During the period of globalization, tax rates have been gradually reduced from time to time The highesttax rate was in 1991 at 100% for other passenger cars and imported goods This tax reduction is part ofthe import tax reduction schedule according to WTO commitments Import tax on Honda cars will begradually reduced, by 2018 it will be 0% From now to 2018 is a long time, this gradual reduction willavoid sudden "shock" for domestic automobile manufacturing and assembling enterprises and also givethem time for businesses This will lead to finding ways to develop, be able to compete with foreignbusinesses and ultimately survive in the period of international economic integration

Challenges

The problem is what Honda automobile industry has to do in the current globalization stage, when theskill level of workers is still not high, foreign investment capital has no more than 100 projects millionUSD to Vietnam while there are some projects up to 220 million USD in countries like Laos, Cambodia?According to statistics, the country currently has 397 enterprises participating in the automobile sector,including 51 automobile assembly enterprises (13 state-owned enterprises, 23 private enterprises and 15foreign-invested enterprises), 40 enterprises producing frames chassis, bodywork, bodywork, 210companies producing spare parts and 97 repairing companies Design capacity reached 458,000vehicles / year, the largest assembled product is trucks (46.9%), followed by vehicles with less than 9

seats (43%), the rest are passenger cars and specialized vehicles Most businesses still only importcomponents for assembly, but have not focused on investment in manufacturing spare parts, increasingthe percentage of investors Vietnamese brand car products are still counting on the fingers

III International economics integration

3.1 Influence of Organizations, Agreements and World Association on Honda automobile industry in Vietnam

Recommendations on the content of Decree 116 issued from October 2017, FDI enterprises, includinglarge manufacturers such as joint ventures Toyota, Ford or Honda, rarely mentioned contributions to theitems to spend the development of Vietnam's automobile industry in the direction of the Government.Instead, there are requirements to lift some regulations to clear the way for car models, especiallyproduced in two Southeast Asian countries, Indonesia and Thailand, to enter Vietnam

In the development orientation, the automobile industry of Vietnam is considered as an importantdriving force to promote the industrialization and modernization of the country, automobile productscan serve both domestic and export needs However, according to economic experts, the goals of theVietnam automobile industry development strategy are on the localization rate, the volume ofdomestically produced vehicles or the development of supporting industries if only based on pillars FDIautomobile businesses are still quite far away This can be seen through the numbers, Honda Vietnamhas a product portfolio with more imported car models than assemblies Honda Vietnam has up to 5/6models not produced domestically

Among the international organizations and commitments that Vietnam participates in, for autoconsumers, the ASEAN Trade in Goods Agreement has been the most interested in the past three years.Import tax rate on CBU products originating from intra-bloc countries has decreased sharply since 2016and has officially reached 0% until now Briefly referred to in another way, since January 1, 2018, ASEANimported cars will officially become "duty free" goods when they fully satisfy the mandatory conditionsunder the agreement content This tax reduction roadmap has created special effects in the Vietnameseauto market over the past time, especially for Honda Vietnam, which is not eligible for tax exemption, so

the models are still transferred Their best-selling cars are imported instead of locally assembled to savecosts

Regarding investment cooperation between Vietnam and Japan, since 2008, Vietnam has made efforts toattract more foreign investors through the signing of Free Trade Agreements (FTAs), thereby improvingthe environment domestic business In which, the Vietnam - Japan investment cooperation relationshiphas emerged as a feature, the two countries have signed many programs, declarations and initiatives.Through the FTA, the automotive industry in Vietnam, especially carmaker Honda has many benefitssuch as being able to freely trade goods and cut tariffs for raw materials between the two sides of Japanand Vietnam

3.2 International scale of good

In the process of globalization, Vietnam's foreign policy will be most clearly concretized by participating

in economic and political organizations in the world Vietnam is already a member of many internationaland regional economic and political organizations We are already a member of the World Bank (WB),the International Monetary Fund (IMF), At the inter-regional level, we are an active member of theAsia Economic Cooperation Forum - Pacific (APEC), Asia - Europe Cooperation Forum (ASEM), Association

of Southeast Asian Nations (ASEAN) And the extremely important event is that we have officiallyjoined the Organization World trade (WTO)

 The Ministry of Industry and Trade of Vietnam also issued a Draft Resolution on solutions topromote Vietnam's supporting industries in the direction of reducing taxes with engines andgearboxes to 0% by 2025, the equivalent level committed in the Trade Agreement goods ASEAN(ATIGA) This will assist Honda Vietnam automobile enterprise in maintaining automobileproduction and assembly activities in Vietnam These are also components with a highpercentage of value in the value component of complete cars, so the reduction of import taxrates on these products also helps Honda automobile enterprises save costs, lower costs forproducts, towards the interests of consumers

3.3 Transportation

In the context of globalization, the need to import raw materials for domestic production will also incurmany other costs such as transportation costs, customs clearance costs, port costs, insurance fees The

cost of infrastructure services for industrial production such as electricity, telecommunications, seaports,and transportation in Vietnam is also assessed as higher than the average of regional countries Forexample, national telecommunications charges Vietnam's economy is 80% - 50% higher than othercountries in the region (Thailand, Malaysia, Indonesia, Singapore), the container sea freight is 40% - 50%higher than that of Malaysia and Singapore According to preliminary statistics, in addition to costs fortransportation services and other normal costs, an enterprise in the process of exporting and importinggoods via sea or air has to incur about 20 additional fees, The charge method is also different for eachport and shipping agent

 According to Honda auto dealers in Vietnam, it takes 3-4 months from placing an order with asupplier to having a car delivered for 3-4 months for cars imported from ASEAN and about 5months for non-ASEAN countries If they are re-imported in March 2018, cars will not be solduntil mid-year Because importing CBU vehicles to Vietnam still incurs tariff costs, port costs andusually the cost of vehicles imported to Vietnam through customs transport, it is very high Inorder to have a car in the Tet holiday, many customers have switched to buying locally assembledcars, the sales of cars from Honda Vietnam has increased significantly

3.4 Insuarance

During the period of globalization, local insurance companies began to face wider competition - not onlyfrom the country, but also from the region and from international corporations Vietnam Now, this isgreat news for customers After all, they now have the opportunity to choose from a wide range ofproducts and services that best suit their individual requirements To enhance their competitiveadvantage, insurance companies in Vietnam have also adapted their offerings to make them moreattractive This can range from improving coverage to reducing premiums to competing directly withforeign conglomerates For example, the introduction of large financial insurance Insuarance intoVietnam competed directly with Bao Viet Insurance through a signed WTO agreement

 As for the Honda Vietnam automobile industry, insurance costs are also strongly affected duringthe globalization period Instead of the usual practice of choosing insurance through apartnership with a single insurance provider But since the trend of globalization is introduced

into Vietnam, the choice of insurance is more likely to become competitive because of thebenefits and benefits of the supplier

3.4 Industrial properties copyright

Industrial property rights are the laws of industrial property or in other words, the synthesis of legalregulations governing social relations arising after human creation of intellectual products andconsidered by the law are industrial property objects In this sense, industrial property rights areproperty rights to intangible assets, on the other hand, industrial property rights also include provisions

in international treaties to which Vietnam is a signatory

 Honda Motor Company has registered industrial copyright for its Logo trademark as the letter H.Moreover, it has registered the copyrights on the production of shapes, materials and theassembly production as well as general imperative requirements in the globalization process

3.5 International trade law

The World Trade Organisation (WTO) is the only international global organization that deals with tradelaws between nations The WTO agreements reached and signed by the majority of the world's tradingnations and ratified in their parliaments, are at the core of it The objective is to guarantee that tradeflows as smoothly, predictably and freely as possible

There are several functions at the WTO

• The Global System of Trade Laws operates

• It serves as a forum for trade agreement negotiation

• Its resolution of trade disputes between its members  It serves developing countries'needs

Vietnam's accession to the World Trade Organization (WTO) is expected to bring great opportunities tothe labor-intensive processing industries such as textiles, seafood For the auto industry, the situation

is not so bright

The automobile industry is one of the most protected industries in Vietnam, reflected in the tariff andnon-tariff on cars, both new and old, imported into Vietnam today This leads to a paradox that Honda