ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH --------------------- KIM WOOSEOK SOUTH KOREAN FIRMS’ OPERATION IN VIETNAM AND SOME IMPLICATIONS FOR EXPANSION STRATEGY HOẠT ĐỘNG CỦA CÁC CÔNG TY HÀN QUỐC TẠI VIỆT NAM VÀ MỘT SỐ GỢI Ý CHO CHIẾN LƯỢC MỞ RỘNG LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH HÀ NỘI - 2019 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ĐẠI HỌC QUỐC GIA HÀ NỘI KHOA QUẢN TRỊ VÀ KINH DOANH --------------------- KIM WOOSEOK SOUTH KOREAN FIRMS’ OPERATION IN VIETNAM AND SOME IMPLICATIONS FOR EXPANSION STRATEGY HOẠT ĐỘNG CỦA CÁC CÔNG TY HÀN QUỐC TẠI VIỆT NAM VÀ MỘT SỐ GỢI Ý CHO CHIẾN LƯỢC MỞ RỘNG Chuyên ngành: Quản trị kinh doanh Mã số: 60 34 01 02 LUẬN VĂN THẠC SĨ QUẢN TRỊ KINH DOANH NGƯỜI HƯỚNG DẪN KHOA HỌC: PGS. HOÀNG ĐÌNH PHI HÀ NỘI - 2019 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com DECLARATION The author confirms that the research outcome in the thesis is the result of author‟s independent work during study and research period and it is not yet published in other‟s research and article. The other‟s research result and documentation (extraction, table, figure, formula, and other document) used in the thesis are cited properly and the permission (if required) is given. The author is responsible in front of the Thesis Assessment Committee, Hanoi School of Business and Management, and the laws for above-mentioned declaration.
LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ACKNOWLEDGEMENT Firstly, I would like to make the most of this opportunity to thank my company, IBK which has given me a lucky chance to study at HSB. In addition, they have also reassured me all the time through their knowledge and experiences in order to accomplish this project. Secondly, I would like to thank my wife who always supports me and takes care of children without my help in South Korea. Thirdly, I would like to show my sincere gratitude to Assoc.
Hoang Dinh Phi for his enthusiastic support throughout the process of composing this project. Without his valuable advices, I would not be able to accomplish the project with a clear orientation. Lastly, big thanks to all my colleagues at work, all my friends at HSB, especially all HSB - MBA15 classmates, who have supported me with laughter and joy, and comforted me when I was depressed. Owing to the fact that limited time and ability so it can not avoid some mistakes in my research topic.
I look forward to receiving comments from lecturers and colleagues in order have more accomplished and better achieved of research result and application in my career. Thank you again for those who have supported me, and best wishes to all. LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com TABLES OF CONTENTS LIST OF TABLES. i LIST OF FIGURES.
1 CHAPTER 1: FDI AND ANALYTICAL FRAMEWORK. Foreign Direct Investment.1 Concept of Foreign Direct Investment. Legal Framework of FDI in Vietnam. Analysis of FDI Firm‟s Operation.
14 CHAPTER 2: CURRENT SITUATION OF SOUTH KOREAN FDI FIRMS‟ OPERATION. Vietnam‟s Economic Growth, FDI, Import and Export. Basic incentives for FDI in Vietnam.3 SWOT Aalysis of Vietnam‟s Investment Environment. Situation on Operation of Major industrial Investment from South Korea, USA and Japan.
Situation of South Korea Investment in Vietnam. Situation of Japanese Investment in Vietnam. Situation of the United States Investment in Vietnam.5 Current operation of South Korea‟s FDI firms in Some Industries of Vietnam. Current operation of South Korea‟s FDI Firms in Electronic industry of Vietnam.
Current operation of South Korea‟s FDI Firms in Textile & Garment Industry in Vietnam. 55 LUAN VAN CHAT LUONG download : add luanvanchat@agmail. Current operation of South Korea‟s FDI Firms in Automobile industry in Vietnam. The Response of Vietnamese Government.
58 CHAPTER 3: IMPLICATIONS OF EXPANSION STRATEGY FOR SOUTH KOREA FIRMS IN VIETNAM. Lesson from other FDI from other countries. Lesson from South Korea FDI Firms‟ Operation in Vietnam. Some Forecast on Vietnam‟s Investment Environment during 2019-2025.
Implications for Expansion Strategy for South Korea firms. 72 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF TABLES Table 2. Major macroeconomic indicators in Vietnam (2008 - 15). Trend of FDI inducement by year (2009 - 15) in Vietnam.
Number and amount of investment by industry in major countries. Vietnam‟s Export index, 2000~2015). Vietnam‟s import index, 2000~2015). World Bank‟s Doing Business ranking 2018.
Incentives in Vietnam example. Taxation Policy across Asia compared. SWOT Analysis of Vietnam investment enviornment. Korean FDI in asia by countries, invested amount.
Japan industrial complex in Vietnam example. Korea's Report on Investment in China and Vietnam. Korean Electronics Company in Vietnam. The annual auto sales trend in Vietnam.
57 i LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF FIGURES Figure 2. USA Trends in Direct Investment in Southeast Asian Countries (2005-14). Trends of FDI in Vietnam. South Korea FDI in Vietnam.
Japan FDI in Vietnam. Strategy Flowchart of Japan‟s Anchor firms in Vietnam, Ⅰ. Strategy flowchart of Japan‟s Anchor firms in Vietnam, Ⅱ. Example of Japan‟s Anchor firms in Vietnam .A FDI in Vietnam.
49 ii LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ABSTRACT During the global financial crisis, Vietnam experienced slowing growth. Vietnam's growth potential is drawing attention as the external economic environment is becoming favorable, such as the recent increase in FDI inflows, the signing of bilateral and multilateral FTAs, and the establishment of the ASEAN Economic Community (AEC). Also, positive improvements in domestic conditions, such as political stability, abundant low-income labor, and a population of nearly 100 million, increased interest among major investors in Vietnam, and increased FDI inflows. In particular, the FDI was introduced in 2015, the largest amount ever, and the economic growth rate was 6.68 percent, the level before the global financial crisis.
On the other hand, Vietnam's business environment is not only positive, considering that negative factors persist, such as corruption, lack of skilled manpower and inefficiency in state-run companies. The Doing Business Assessment, which provides a comparative analysis of each country's business environment It ranked Vietnam‟s business environment at the top 90 out of 189 countries. It should be noted, however, that Vietnam's investment environment has changed positively in recent years by improving the convenience of investment procedures and employment through the revision of the Investment and Labor Act. Therefore, Korean companies also adopted Vietnam as a strategic production base and invested more than 40 percent of their investment in South East Asia.
It is time to review Korea's investment strategy in Vietnam as competition between major investment countries and Korean companies is expected to intensify in Vietnam. and Japan, which are major investment countries, need to review their investment strategies in Vietnam and re-establish their investment strategies for Korean companies. The economic growth and industrialization of Vietnam began in 1 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 1986 with the adoption of reform and opening routes. lifted economic sanctions in 1994, large-scale FDI was introduced to Vietnam.
Based on this, Vietnam was able to achieve industrialization and rapid economic growth. In the 1990s, the FDI in Vietnam was largely invested in labor-intensive manufacturing in major Asian countries such as Japan, Korea and Taiwan. Since the 2000s, however, the investment sector has changed from the current labor-intensive industries to the technology and capital- intensive industries such as machinery and electronics, and the industry structure has also gradually changed to the center of high value-added industries. Korea's investment in Vietnam was largely dominated by labor- intensive industries before the global financial crisis However, since the global financial crisis, investments by multinational corporations have been increasing with electricity and electronics.
Although Korea's investment in Vietnam has been high in initial investment, the share of additional investment has gradually increased since 2014. This study presents the following implications for our company through analysis of investment strategies by U. and Japanese companies entering the Vietnam market. First, the government should pay attention to the construction of industrial complexes so that Korean companies can advance into the cluster and draw the cooperation of the Vietnamese government as well as Korea's financial support.
Second, a 'compensation system for co-prosperity between new and emerging companies' should be developed to utilize the experiences of the newly developed entity and to compensate the newly developed entity for its support. Third, it is required to support capacity enhancement of small and medium-sized enterprises that wish to enter Vietnam. In particular, it is urgent to provide capacity support for the analysis of the local institutional and business environment in Vietnam. Fourth, it is necessary to introduce a measure to share production facilities between companies in advance like a 2 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Japanese company.
This support will greatly help companies deal with the burden of fixed investment costs and the lack of information at the beginning of their entry into the market. Fifth, a consultation channel should be prepared with the Vietnamese government to demand improvements in the local business environment. Sixth, rather than focusing on investing in Vietnam, we should consider Southeast Asia as our production base and come up with a strategy to utilize Vietnam as the core base of 'East Asian management'. South Korea needs to prepare for external shocks by linking Vietnam with neighboring countries in the form of „Vietnam + 1‟.
3 LUAN VAN CHAT LUONG download : add luanvanchat@agmail. Background Information and Rationale Vietnam, which has been widely regarded as an investment destination for low-income labor, is receiving spotlight as a new production base as it signed a multilateral trade agreement as well as a bilateral one. Reflecting this, FDI(Foreign Direct Investment), which is entering Vietnam, recorded $15.6 billion in new investment and $7.2 billion in additional investment during 2015. In January 2016 alone, 127 new investment permits, $10.1 billion new investment permits, and an additional $3.2 billion investment were already introduced.
Number of new investment permits and amount of investment permits increased by 188.9% respectively compared to January 2015. FDI inflows to Vietnam are expected to continue as the Vietnamese government is working to further improve the business environment. The reason why FDI is introduced to Vietnam is that it has relatively cheap, high-quality labor and political stability. In addition, it is superior to other Southeast Asian countries as it has already signed bilateral or multilateral FTAs such as the Korea-Vietnam FTA, Vietnam-EU FTA, and TPP.
Besides these local advantages, we cannot overlook the Vietnamese government's will to attract FDI Meanwhile, with the Communist Party leadership being replaced in January 2016, the Vietnamese economy is experiencing a dynamic economic turnaround. According to data from the Vietnamese National Statistical Office, Vietnam's GDP growth in 2015 was estimated to be 6.68 percent, while industrial production rose to 9. On the other hand, falling global oil prices pushed up prices in Vietnam by only 0. As 1 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com the country recorded high growth rate in stable prices, the macroeconomic system in Vietnam is expected to grow steadily.
The current macroeconomic situation in Vietnam is very stable in the early 2010s, considering that the Vietnamese economy was driven from austerity policy stance due to high inflation to the brink of a financial crisis. The increase in FDI is one of the highest economic growth rates in Asia and the Pacific region in 2015. The influx of FDI expanded the export of electrical and electronic products, resulting in rapid changes in the structure of the Vietnamese export sector. Samsung's mobile phone factory was the starting point that brought about this change in 2009.
Since then, Samsung has actively expanded its investment in Vietnam to expand production, which accounts for about 20 percent of its total exports to Vietnam.