Order 739046: Samsung Micro environment in Vietnam
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SamsungMarcoEnviroment.docxMaking inroads in a foreign market can be difficult task for any organisations, much has to be considered before any move is made. Investors like Samsung make a strategic decision whether to invest by adopting strategic models that give detail to the possibilities ahead. The analysis of the Marco environment is an essential tool for strategic planning; ‘macro environmental forces typically are classified as social, economic, technological, and political/regulatory. Analysis of these areas involves the study of current and potential change and the assessment of the impact of changes on the organization’ (Ginter and Jack Duncan, 2017). PESTEL (Political, Economic, Socio-cultural, Technological, Environment and Legal) analysis is technique used, it works on a twofold basis first is to identify the environment within which the company operates, secondly it provides data and information that will enable the company to predict situations and circumstances that it might encounter in future (Yüksel, 2012).
Political
Organisations are surrounded by complex environments, non are more complex than politics. Politics has the ability to shape more than just the narrative of a country it can effect businesses due to political stability in the country, government attitude towards the industry and the company, home market lobbying and pressure groups, international pressure groups, risk of military invasion of the country( Bensoussan and Fleisher, 2012).
Vietnam is one of the more politically stable countries in South East Asia with a strong government which opened its doors to investors in 1987 and has been seen as an alternative to China. (Vietnam Investment Review, 2017) As stated before Vietnam has had an open policy providing business opportunities to make local and international firms to enter their market (Wilhelm, M., et al 2015, pp.302). In relation to Samsung, Vietnam is an attractive market to penetrate due to its geographical position near global supply chains can lower production costs and expected improvements in the business climate upon completion of the Trans-Pacific Partnership (U.S. Department of State, 2015). Thus investment by Samsung in Vietnam has totalled $11 billion so far, Vietnam has become a major smartphone manufacturing base for Samsung Electronics and its subsidiaries (U.S. 2017)
Economic
Business and the economy go hand in hand due to the financial decisions and regulations an organisations complete; economic factors such as Interest rates Exchange rates, Recession, Inflation, Taxes and Demand / Supply can become a barrier to entry when attempting to enter a foreign market (Lynch, 2015).’ Vietnam’s economy remained stable, with GDP growth exceeding the averages posted by neighbouring south-east Asian countries and emerging Asian economies. With a stable government and a growing level of economic integration, Vietnam is now considered to be one of the world’s most attractive markets for foreign investment.
The state’s commitment to establishing a business-friendly environment…. Vietnam’s sizeable marketplace and relatively large population – 60 percent of which is aged under 35 – have attracted growing interest from the likes of Hong Kong, Japan, South Korea and the US, all of which have committed to economic integration in general and free trade agreements in particular’ (Worldfinance.com, 2017). Samsung’s investment of $11 billion speaks volumes of the economic growth and stability of Vietnam with 60 percent of the population under 35 that provides a readymade consumer group and potential employees. Samsung have not stagnated they have had the ability to see the lucrativeness of emerging and developing markets whilst maintaining a consumer group in the developed markets.
Samsung have solidified their standing as the number one investors in Vietnam by entering into Strategic partnership with the country by also using their political influence in their home country. ‘ Global strategic partnerships are a business model in which Korea’s diverse expertise in the area of economic development and Samsung’s business competencies and knowledge are organically transferred to foreign countries, in order to propose and implement complex infrastructure building projects. Global strategic partnerships are win-win business models that contribute to the economic development of the countries that are beneficiaries, and are new global advancement strategies for shared prosperity’ (Trading.samsungcnt.com, 2013).
Socio-Cultural
Organisations who have foresight to internationalise their activities have to be attentive to the host countries Socio-Cultural business culture. Culture is the most basic cause of a person’s wants and behaviour. Countries like Vietnam have a long and rich cultural background. It is an imperative for international organisations who want to do business in Vietnam need to know about Vietnamese culture and how it works to buyers’ behaviour (Luo, 2009). Vietnam is a markedly Confucian society and its business practices are often more similar to those of China, Japan and Korea than to those of its Southeast Asian neighbours. The social dynamics and world-view of Vietnam’s society are reflected in the business climate including such matters as: “face,” consensus building, and the zero-sum game assumption (Export.gov, 2017). With similar shared socio-culture of Confucianism, Samsung a South Korean organisation are able to conduct business that upholds the traditions of Vietnam; Community Social Responsibility activities are considered as Samsung corporate culture (vietnamnews.vn, 2017).
Technology
The technological landscape is always shifting, Samsung has placed itself amongst the global leader in mobile phone manufacturing and digital technologies (Lee, K. and Jung, M., 2015). As previously stated Vietnam is growing economically and becoming a hub for investment, the IT Hardware and software markets has grown mainly due to imports as Vietnamese manufactures are still relatively new to the market. Hard market is 89% market share by foreign suppliers this all illustrates a country open to adopt new technologies but lacking in knowledge and dependent on external expertise (Khairullah and Khairullah, 2016).
When a company such as Samsung implement internationalisation to the expansion of their operations the subsequent outcome should lead to the substantial reduction of production costs, higher price competitiveness, and large and stable profits margins required for the next round of investment (Lee, K. and Jung, M., 2015). ‘Samsung, the world’s largest smartphone maker, is leading a wave of technology companies turning to Vietnam’s young workforce to assemble their gadgets. The growing difficulties of operating in China, as well as Vietnam’s low-cost labour and generous tax benefits, are attracting technology companies’ (Vietnam, 2014)
Environment
As the world becomes increasingly smaller and the global markets are growing, there is an emphasis for organisations to conduct themselves in a more socially, ethically and environmentally responsible manner. Internationalisation brings its own challenges being conscious of the environmental Impact is essential as at times it can wade into the political sphere with the scarcity of raw materials, pollution targets, doing business as an ethical and sustainable company, carbon footprint targets set by governments Internationalisation is a task that requires attention to detail.
With its Community Social Responsibility activities Samsung have shown the ability to invest in the economy and people of Vietnam. ‘Samsung has deployed many social activities such as giving the Smart Library and Smart School programs for Vietnamese schools. Samsung has also organized many voluntary programs in four large cities in Vietnam with the participation of more than 100 staff. Volunteers have worked together to repair old schools, give gifts to more than 1,000 students and sponsor the Smart Library program for children, contributing to improving and enhancing the quality of life(NEWS, 2017) .
Legal
As a politically stable nation Vietnam has actively pushed through progressive laws that have enabled the country to be regarded as a valuable investor hub. ‘Vietnam passed a new Investment Law with breakthrough changes aimed at improving the investment environment. Previously, Vietnam used a “positive list” approach, meaning that foreign businesses were only allowed to operate in a list of specific sectors outlined by law. Vietnam will use a “negative list” approach, meaning that foreign businesses will be allowed to operate in all areas except for six prohibited sectors. Additionally, there are 267 conditional sectors that are now technically open to foreign investment but will require an investment license. (U.S. Department of State, 2015). Samsung have used the new Vietnamese investment law to their advantage being the biggest foreign and employment investor in the country (NEWS, 2017).
A contentious issue with Internationalisation is the treatment of workers against the Laws of the country; as Laws differ from country to country organisations can bend the law to increase productivity and revenue especially with the low wages on offer. Though Samsung’s Internationalisation strategy into Vietnam is widely praised for its role in the emergence of Vietnam as an investor hub, it has brought some critics. In an unprecedented study on the experiences of women working at two Samsung factories in Vietnam, a new report documents health and workplace violations by the electronics industry giant. The workers’ experiences of fainting or dizziness, miscarriages, standing for eight-to-twelve hours, and alternating day/night shift work are documented in a report released by the Hanoi-based Research Center (CGFED) Center for Gender, Family and Environment in Development (Ipen.org, 2017).
References
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Ipen.org. (2017). Samsung Workers on the Line: Unique Report Reveals the Lives of Vietnamese Women Workers Making the Samsung Smart Phones in Your Pocket (Updated) | IPEN. [online] Available at: http://www.ipen.org/news/samsung-workers-line%C2%A0unique-report-reveals-lives-vietnamese-women-workers-making-samsung-smart [Accessed 30 Dec. 2017].
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Lynch, R. (2015). Strategic management. 7th ed. Pearson Higher Ed, p.73.
Samsung supports Vietnam’s sustainable development. [online] VIETNAM ECONOMIC NEWS. Available at: http://ven.vn/samsung-supports-vietnams-sustainable-development-24825.html [Accessed 30 Dec. 2017].
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U.S. (2017). Samsung Display gets license to invest $2.5 billion more in Vietnam: s. [online] Available at: https://www.reuters.com/article/us-samsung-elec-vietnam/samsung-display-gets-license-to-invest-2-5-billion-more-in-vietnam-state-tv-idUSKBN1631FL [Accessed 30 Dec. 2017].
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Vietnam Investment Review. (2017). 30 years of foreign investment policy improvement | 30 years of FDI in Vietnam. [online] Available at: http://www.vir.com.vn/30-years-of-foreign-investment-policy-improvement.html [Accessed 30 Dec. 2017].
vietnamnews.vn. (2017). Samsung believes investment in workers holds key to profit. [online] Available at: http://vietnamnews.vn/economy/418819/samsung-believes-investment-in-workers-holds-key-to-profit.html#CZxP8CtT7HmKimk4.97 [Accessed 30 Dec. 2017].
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