EXPAND THE THACO TRUONG HAI BUSINESS MARKET TO SOUTH KOREA WITH PESTLE MODEL

MINISTRY OF FINANCE UNIVERSITY OF FINANCE – MARKETING EXPAND THE THACO TRUONG HAI BUSINESS MARKET TO SOUTH KOREA WITH PESTLE MODEL Lecturer: Trần Thế Nam Members: Vương Thị Thanh Hằng Phạm Thị Hoài Linh Lê Uyển Nhi Trần Trọng Phúc Nguyễn Thị Thanh Thuỳ Ho Chi Minh City, 19/02/2022 0 TABLE OF CONTENTS I EXECUTIVE SUMMARY II .INTRODUCTION III PESTLE ANALYSIC IV CONCLUSION 12 0 I EXECUTIVE SUMMARY In the era of globalization, it is not enough to develop a domestic business Instead, businesses will aim to expand their business activities to international markets It is necessary to have the right international business strategies that play a great role and benefit in creating business efficiency when participating in international business activities Enterprises need to see their role and benefits in a specific way so that they can build for their company the right business strategy from the beginning, maximize the efficiency of using resources: financial, human resources, reputation, and other international competitive advantages Specifically: A well-defined business strategy that helps the company operate effectively in the international market, coordinating different departments and divisions to achieve its goals, and for the company to improve promptly its current position A clear and appropriate strategy has the effect of orienting the company's long-term activities and is a solid basis for implementing activities In addition to allowing managers to identify and capitalize on properties, team up with test individuals while allowing for the appropriate addition of time and resources between agencies Recognizing the important role of the expanded business market, through this report, we aim to analyze the Korean business environment according to the pestle model: functions, benefits, risks, and limitations You can be safe when you join this school water From there, it helps THACO company to have the best view on expanding the business market for their business, giving the best books for businesses when operating in Korea to be most effective 0 II INTRODUCTION a) Introduction of company Truong Hai Group Joint Stock Company was established by Mr Tran Ba Duong - currently Chairman of the Board of Directors of THACO on April 29, 1997 Office of the General Manager of Ho Chi Minh City at IIA Building, No 10 Mai Chi Tho Street, Thu Thiem Ward, District with a total staff of about 20,000 people After more than 25 years of establishment and development, THACO has become a multi-industry corporation with Mechanical and Automotive as two key industries At the same time, THACO ranks first in Vietnam with the largest scale in the field of automobile manufacturing and assembly with the mid- to high-end segment THACO's auto manufacturing and trading field stretches with a value chain throughout from product research and development to Manufacturing - Distribution - Retailing in order to meet the needs of the domestic and international markets 0 exported with a full range of brands, including passenger cars: Kia, Mazda, Peugeot, BMW, MINI; Trucks: Mitsubishi Fuso, Foton; bus brand THACO; Motorcycle: BMW Motorrad THACO's business philosophy is to create value for customers and society In addition, creating favorable conditions for human resources to develop in line with the group's unlimited development strategy Slogan: THACO - Developing with the country In addition, THACO's goal is to maintain its position and expand the market in the ASEAN region, strengthen international cooperation, guide appropriate technology, create a foundation to develop into a multi-industry corporation, join the global value chain, increase the domestic rate, improve competitiveness to move to the leading position in the region b) Introduction of the chosen country Korea is famous as a developed country in the automobile industry and ranks 5th in the world with about million vehicles per year Mid-range and affordable cars are the key products of Korean manufacturers Country In which, dominating the domestic market is Hyundai - KIA Automotive Group is the largest manufacturer and the fourth largest automobile manufacturer in the world Besides, Korea is gradually moving towards more high-end cars However, they still import vehicles from mid-class to high-class to diversify domestic products Therefore, the auto market in Korea has great potential for both export and import In addition to exporting auto parts, THACO Truong Hai may also have the potential to export cars to Korea in the future to achieve the set goal III PESTLE ANALYSIS P (Political issues) Korea is considered a country under a mixed republic, that is, with a selection and combination of the characteristics of a representative 0 republic with a presidential republic This model is quite different from traditional models, but it is not unique in the world because it is also found in some other countries such as France, Guinea, Zambia, Greece, Peru… The Korean Constitution, first promulgated on July 17, 1948, stipulates that Korea is a Republic, with separation of powers The National Assembly and the President are directly elected by the people, the Prime Minister and the Chief Justice of the People's Court are nominated by the President and approved by the National Assembly (within 20 days) After the founding of the country, military generals took over the leadership of the country in turn On February 25, 1993, a civilian (Kim Young Sam) became the President for the first time, beginning the period of civilian government in Korea - Executive: The President is the head of the executive branch and can only serve a five-year term On December 19, 2012, Sae-nuri Party (former GNP) candidate Park Geun Hye, was elected President for the 18th time with a rate of 51.6%, officially took office on February 25, 2013 and became the first female President of Korea - Legislative: Legislative power belongs to the National Assembly The National Assembly of Korea is a one-house system, consisting of 300 seats Members of the National Assembly of Korea are elected by universal suffrage for a term of four years In April 2013, Korea held elections for the 19th National Assembly The Saenuri Party (formerly the GNP Grand National Party) is the ruling party The New Political Democratic Union Party is the largest opposition party - Judicial: Korea implements a three-level judicial system including the Supreme Court, the Supreme Court and the District Courts (base) in major cities The Supreme Court reviews and adopts final decisions, and issues appeals against decisions of the Supreme Courts The Supreme Court's decision is final Political Stability Index (-2.5 weak; 2.5 strong), 1996 - 2020: For that index, South Korea's mean value for that period was 0.39 points with a minimum of 0.11 points in 2014 and a maximum of 0.64 points in 2018 The latest value from 2020 is 0 0.56 points For comparison, the world average in 2020 based on 194 countries is -0.07 points (According to electronic newspaper: Global Economy) With this index, it can be said that the political situation in Korea is stable, suitable for market expansion in this country Vietnam has steadfastly adhered to the foreign policy of independence, selfreliance, peace, friendship, cooperation and development; multilateralize, diversify, proactively and actively integrate into the world comprehensively, extensively and effectively; is a friend, a reliable partner and an active and responsible member of the international community With that in mind, Vietnam always attaches importance to and wishes to further develop relations with South Korea South Korea is Vietnam's leading partner in most fields, and Vietnam is Korea's key partner in the enhanced New Southern Policy In terms of politics, the Vietnam - Korea Strategic Cooperation Partnership is increasingly effective; Political trust has been continuously consolidated through regular visits and contacts between senior leaders and at all levels between the ministries, branches and localities of the two countries in various flexible forms, even during the COVID-19 Most recently, the visit to Vietnam by President of the National Assembly of Korea Park Byeong Seug in 11/2020 and meetings and contacts within the framework of international forums In particular, the two sides are coordinating to prepare for two important events, which are to carry out activities to celebrate the 30th anniversary of the establishment of diplomatic relations between Vietnam and Korea and promote the current strategic cooperative partnership to a new level Through that, it can be seen that the relationship between Vietnam and Korea is very good This will be a springboard to make THACO's international business expansion easier E (Economic issues) The consumption of products: 0 Korea is a developed country, so the living needs of the people are also quite high Therefore, car consumption is also increasing through the fact that Korean consumers are increasingly preferring imported cars Car consumption decreased insignificantly and increased sharply by the end of 2020 - specifically, according to the Korea Automobile Importers and Suppliers Association (KAIDA) on 3/9/2020, the amount of consumption Consumption of imported cars in this country in August increased by 20.8% over the same period in 2019 to 21,894 units In 2021, total vehicle sales of Korean automakers increased by 4.1% to 6.54 million units, higher than 6.28 million units in the same period of 2020 Especially, the consumption of pickup trucks has increased dramatically despite the complicated epidemic This shows that the consumption of Korean auto products is very high Average income: According to Yonhap News Agency in 11/2021, the average income of each household in Korea was 4.73 million won/month (~ 4,000 USD) in the quarter from - 9/2021 The average income of Koreans is quite high which shows the potential for car consumption is also large However, based on factors such as occupation, environment, education, etc., the average income will be different Therefore, the amount of car consumption will also be different due to the difference in the level of rich-poor Economic relationship with Vietnam: Korea has become an important economic partner of Vietnam over the past 30 years and is always on the list of the top countries with the largest scale economic relations with Vietnam The Vietnam - Korea Free Trade Agreement (VKFTA) has created a basis for promoting economic cooperation, trade and investment to develop much stronger and more effectively Korea is currently the largest FDI foreign investor in Vietnam with more than 9,100 projects and total registered capital of 72.3 billion USD Besides, Korea is also the second largest trade partner with a two-way trade turnover in 2020 reaching 65 billion USD At the same time, they are also the second - largest bilateral official development aid (ODA) provider 0 to Vietnam, in the 2016-2020 period alone, they have committed to providing 1.5 billion USD The two countries are also participating in the Comprehensive Economic Partnership Agreement (RCEP) and South Korea is also considering joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to which Vietnam has joined S (Social issues) Demography South Korea is one of the most prosperous and developed countries in Asia and worldwide The government system is a republic Approximately more than 51,2 million people are populating the country Daegu, Incheon, and Busan are some of the main cities About 56,1% of people don’t believe in any religion The remaining people believe in Christianity and Buddhism Cultural influences Seniority, age, and ancestors are some of the factors that influence South Korean culture and society They used to have a significant influence However, social hierarchy, economic, and marital status are some of the other impacting social factors Trends South Korean people love classic architecture, sports, art, and food However, the country is also facing some the challenges like increasing the aging population, expanding the gap between rich & poor, housing crisis, and low fertility People are converting their offices and hotels into rental houses to address the shortage of houses in Seoul 0 T (Technological issues) With a key and selective investment, the government's high determination, the breakthrough in science and technology leads to Korean miraculous acceleration makes the powers surprised to admire According to the Korean Central Bank, the country's new technologies achieved an annual growth rate of 18.8% since the last year of the 20th century More than anyone, the people themselves inherited these achievements first and most useful Koreans use most other new technologies In the coming time, the two countries will continue to effectively implement signed cooperation plans such as the Patent Application Rapid Examination Program (PPH) with KIPO, the Technology Program by the Association for the Promotion of Inventions Korean Institution (KIPA), staff training activities of KOTRA and especially the Project "Strengthening the capacity of the intellectual property public administration system" that the National Office of Intellectual Property of Vietnam is proposing to the Korean Government support L (Legal issues) 10 0 Korea has a "mixed" legal system between Common Law and Civil Law, with policies to support home businesses through loans, guarantees, and tax breaks that have allowed companies to grow and enter many markets Notably, Korea has a strong intellectual property protection legal system that is close to the rules of the WTO and WIPO The level of convenience in business ranked 6th in the world Korea has an open economy, the law also creates conditions for foreign businesses, but it is difficult to avoid strict regulations After Vietnam and Korea signed the VKFTA, this country will have certain preferences in law for goods imported from Vietnam Korea accepted and approved the ISO 9000 standard system in 1992 and the environmental management system in 1997 In addition, this country also has pre-approval for production and export facilities Export to Korea and regulations on-spot inspection of goods in the exporting country before the goods are exported to Korea by the organization In addition, we also need to pay attention to the paperwork, packaging regulations, and the list of prohibited, restricted, or special inspection requirements before entering this market Korea is an important economic partner of Vietnam This is always the country that ranks in the top of the countries with the largest scale economic relations with Vietnam The two countries have signed many agreements to further develop their economies, such as: Vietnam Korea Free Trade Agreement (AKFTA) (5/5/2015), Double Tax Agreement (5/1994), Since the establishment of diplomatic relations, the friendship and cooperation between Vietnam and Korea has developed rapidly and expanded in many fields Over the past 30 years, the relationship between the two countries has developed strongly, substantively, meeting the aspirations, and bringing practical benefits to the two peoples, contributing to peace, stability, cooperation and development in the two countries region and around the world The upgrade of relations to a strategic cooperation partnership in 10th 2009 marked an important new milestone, contributing to further deepening cooperation between Vietnam and Korea 11 0 The two sides have actively and actively cooperated at multilateral parliamentary forums such as the Inter Parliamentary Union (IPU), Asia Pacific Parliamentary Forum (APPF), Economic cooperation is a bright spot in the relationship between Vietnam and Korea, making an important contribution to the development of each country Korea currently ranks first in investment, second in trade and in ODA to Vietnam Accumulated to the end of August 2021, Korea ranked first among 140 countries and territories with valid investment projects in Vietnam, with a total registered capital of 72.35 billion USD Also in the first eight months of 2021, trade turnover between the two countries reached 48.5 billion USD, up 17.4% over the same period in 2020 Regarding ODA, Korea has supported Vietnam with 1.2 billion USD in concessional loans from the Economic Development Cooperation Fund (EDCF) for the period 2012-2015 Regarding labor cooperation, Korea is the second largest labor receiving market of Vietnam, while Vietnam is also the second largest sending country of workers to Korea E (Ethics issues) Corruption in South Korea is moderate compared to most countries in the Asia-Pacific and the broader international community Transparency International's 2019 Corruption Perception Index ranks the country 39th place out of 180 countries For instance, President Park Geun Hye was found guilty in 16 charges, including abuse of power and bribery Another former president Lee Myung Bak was also charged with corruption scandals involving major companies in 2018 As a result of such scandals, coupled with other incidents, such as the Sewol disaster, a 2015 report released by the Organization for Economic Cooperation and Development (OECD) showed that "almost 70 percent of South Koreans distrust their government, while less than 30 percent of them are confident in the nation's judicial system." This rate is significantly lower than the OECD average, which was 41.8 percent 12 0 The government has taken steps to fight corruption, such as the Act on the Protection of Public Interest Whistle-Blowers which protect whistleblowers who report public and private corruption as well as foreign bribery Public services have also been digitalized to avoid opportunities for corruption After 30 years of focusing on economic development, Korea's environment has seriously deteriorated in the late 1980s and 1990s Air pollution, water pollution, garbage have directly affected human health and ecosystems Although the situation has improved a lot in recent years, Korea's environment still has many problems Since the beginning of 2017, the situation of air pollution in Korea has become worse and worse There have been 85 warnings about the PM 2.5 index (the density of particles suspended in the air with a diameter of less than or equal to 2.5 micrometers) which is especially dangerous and can cause cancer according to the formula published by the World Health Organization (WHO) In 2016, Korea's PM2.5 index was 41 micrograms/m3 Therefore, the Ministry of Environment, Republic of Korea (MOE) is the leading agency responsible for environmental protection and prevention Some policies to prevent pollution have been proposed such as programs to encourage motor vehicles to run on gas in urban areas, reform of energy tax, policies to reduce carbon emissions, Besides, Korea also strongly applies science - technology, and environmental protection, for example, Korea Environmental Industry & Technology Institute (KEITI) IV CONCLUSION Advantages: Korea is considered as one of the attractive locations for the global auto industry as it is located between high-tech, high-cost Japan and developing, low-cost China Therefore, Korea's biggest advantage is having a better balance between cost and quality than its competitors The success of the auto industry in Korea is due to a perfect supply chain In this country, car manufacturers have a close association with their suppliers Maintaining a close relationship with their own suppliers, Korean 13 0 automakers drag their suppliers wherever they go Parts and spare parts factories will be located next to production and assembly factories Thus, businesses can cut unnecessary costs and shorten production time significantly The Korean auto industry has gradually developed thanks to the technical and technological support from foreign partners from leading auto industry developed countries such as the US and Japan government-directed scientific research and development programs are now the ticket to longer-term economic development in the country The Korean auto industry has benefited from the cutting-edge technologies that Korean scientists have created Disadvantages: The development of the Korean auto industry has shown signs of slowing down in recent years both in terms of sales in the domestic market as well as in export revenue According to a report by the Korea Automobile Manufacturers Association (KAMA), in the first half of 2017, export volume reached only 1.23 million vehicles, the lowest level in the past years Sales in the domestic market reached 785 thousand vehicles, down 4% compared to the same period in 2016 Declining revenue from both markets resulted in automobile output recording the lowest level since 2010 The future competition is predicted to be even more difficult for the Korean auto industry as they have not been able to keep up with the big shift in the world auto industry - “green” technology 14 0 ... school water From there, it helps THACO company to have the best view on expanding the business market for their business, giving the best books for businesses when operating in Korea to be most effective... addition to exporting auto parts, THACO Truong Hai may also have the potential to export cars to Korea in the future to achieve the set goal III PESTLE ANALYSIS P (Political issues) Korea is... Recognizing the important role of the expanded business market, through this report, we aim to analyze the Korean business environment according to the pestle model: functions, benefits, risks,