CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY OF HONDA IN VIETNAM

CORPORATE SOCIAL RESPONSIBILITY AND SUSTAINABILITY OF HONDA IN VIETNAM Table of Contents I INTRODUCTION II BODY CSR and sustainability definition 2 Company introduction and its position in motorcycle market 3 External factor analysis 3.1 Macro environment 3.2 Micro environment Company’s responses 4.1 Honda CSR awareness 4.2 Honda CSR practices Evaluation 11 Recommendations 11 6.1 For Government and society 11 6.2 For Honda Vietnam 12 III CONCLUSION 12 References 12 I INTRODUCTION In a globalized world, trading between nations is growing rapidly, the competition among businesses is also increasingly severe (Wagsty, 2011) In the past, companies have used diversification methods to improve the quality of goods as a competitive measure to gain advantage in market Companies are now paying attention to strengthening their image, enhancing their prestige and brand development through the building of corporate culture and business ethics as a solution that is being applied and initially introduced positive effect (Pakseresht, 2010) Businesses want to affirm the brand in market so what they are aiming at now is the implementation of Corporate Social Responsibility (CSR) CSR is a growing trend in the world, becoming a "soft" requirement for businesses in the integration process, but in Vietnam this issue is still new and not yet seriously concerned A series of violations of the law, violations of workers' rights, infringement of consumer interests, etc., have been causing the community to become frustrated and lose confidence in businesses (APEC, 2007) As a result, Vietnamese enterprises are more aware of the benefits of implementing CSR in the context of our country (Mai, 2013) Good CSR will not only help businesses to business, but also help businesses address strategic issues related to business and social issues of sustainable development (Hieu, 2011) Typically, the case of Honda Vietnam - an FDI enterprise has been trying to practice CSR as well as towards sustainable development Besides positive business results, Honda Vietnam (HVN) is also recognized as a leading FDI company in the good performance of CSR (JAMA, 2017) This report will study the specific implementation of Honda Vietnam's responsibilities, evaluate the effectiveness and make some suggestions II BODY CSR and sustainability definition There are many different concepts of CSR, when put into practice it can be understood as the way that enterprises often apply as a strategy to find long-term profit, along with social welfare as well as environmental protection (Easy & Thanathavornlap, 2013) Specifically, CSR is expressed in terms of: environmental protection; contribution to social community; good implementation of responsibility with supplier; safety and benefits caring for consumers; good relations with employees; benefits ensuring to shareholders and employees in enterprises (Rangan, et al., 2012) In recent times, the concept of CSR has been defined broader as sustainable development, which is not only the task of individuals and businesses, but also the overall responsibility of the parties including enterprises, communities, social organizations and management agencies There will be no conflict between business goals and social values if businesses are always putting themselves in the general development path of community Sustainable development is the development that meets the needs of present without compromising the ability to meet the needs of future generations Sustainable development, or green growth, is at the core of the balance of the three socio-economic and environmental pillars that are indispensable to the business community, to ensure the interests of shareholders and stakeholders (Emas, 2015) In order to achieve sustainable development objectives, enterprises face many challenges and costs, such as changing production technologies which are more advanced and less harmful to the environment (Anon., 2008) However, along with that is the tremendous benefits, there are many opportunities for business This is to ensure the ability to create capital and shareholder value in the long run (Rogers, 2016) Company introduction and its position in motorcycle market In recent years, the motorcycle market in Vietnam has risen to number among ASEAN countries The rapid development of economy has become a driving force for the development of motorcycle market In addition, there are impacts of other factors such as population growth rate, traffic situation (Fujita, 2013)… Seeing big demand, many motorcycle manufacturers have joint ventures with Vietnamese enterprises to establish Motorcycle joint venture companies such as Honda Vietnam, Suzuki, Yamaha Motor, and SYM The above factors give Honda Vietnam many opportunities but also put Honda in front of many challenges These are government regulations, fierce competition among manufacturers, high income tax rates Despite facing these challenges, Honda Vietnam still has an important position in the market At Honda, they believe that social value is best measured through responsibility for product development, production and consumption, enhancing the safety of the product, minimizing effectively impact on the global environment and contributing positively to a better society for today's and tomorrow's generation The Honda philosophy is their guiding principle for achieving these goals based on personal respect and "Three Joys" - Joy of Selling, Joy of Shopping and Joy of Creativity (Honda, 2016) In addition to its product-related responsibilities, particularly environmental and safety responsibilities, Honda is committed to contributing to the communities in which they live and work through a wide range of activities It deals with areas such as environment, safety, education and charity Honda Vietnam has set itself the right business strategy and determined to pursue those strategies so that Honda has achieved a significant market share of over 70% along with the trust of customers about the product Honda has been striving to become a company that the whole society expect (Le, 2018) External factor analysis 3.1 Macro environment In order to understand the macro factors affecting Honda's operations in Vietnam as well as to influence CSR practice, this paper uses Francis J Aguilar’s PESTLE model, which goes into the Political-Legal, Economic, Social, Technological and Natural factors (Dcosta, 2011) 3.1.1 Political environment In Vietnam, the problem of traffic congestion is due to many reasons, but among them too much use of motorcycles as well as poor traffic facility are identified as core causes Therefore, current policy of the Government is to limit the number of motorcycles, especially in crowded urban areas (Anon., 2016) This policy creates a great difficulty for the motorcycle industry Besides, although country has joined the convention on protection of intellectual property rights, the accompanying legal system is not perfect and effective Therefore, the infringement of copyright in product design in Vietnam is quite common such as Honda Win 100cc (Offroad Vietnam Adventures, 2016) In motorbike market, there are also fake cases of famous car manufacturers The lack of legal regulations also creates difficulties for genuine firms who have invested much in research to design new models In general, Vietnamese political environment is almost stable, there have been also many reforms to encourage investment and create favorable conditions for FDI enterprises to develop and compete fairly, especially through WTO and TPP agreements (Roger Manring of Nathan Associates, 2007) Law is the basis of CSR This is a binding criterion for businesses to work towards and achieve high economic efficiency Enterprises, when complying with the law, will create a legal environment in which enterprises operate in a right way, creating equality, openness, and proximity between businesses (Bantekas, n.d.) With the above conditions, Honda has focused from the beginning on building a good brand, focusing on improving the product to meet the needs and minimizing the impacts on environment, in addition to regular raising traffic culture awareness campaign for customers 3.1.2 Economic environment The economic environment shows that in recent years, Vietnam GDP has tended to grow positively (pwc, 2017) In 2017, it reached 6.81%, the highest level in recent years, inflation rate is stable, and people’s income are increasingly improved (Cuc, 2018) Interest rate is controlled, the interest rate is expected to be stable around 14%, then enterprises can access the capital more easily, customers may be less anxious when choosing the form of borrowing installment to buy motorcycles 3.1.3 Social environment According to statistics, Vietnam has about 90 million people with 45 million motorbikes, so on average, every two people owns one motor vehicle (Bach Duong, 2016) This is a fertile ground for motorbike manufactures Along with the rapid development of economy, Vietnamese society also has strong changes The consumption habits of the Vietnamese have gradually changed, purchasing ability of the majority of people also increased Therefore, Vietnamese have more demand for cars, which is also a pressure for motorcycle industry (Truong & Hung, 2015) In addition, Vietnamese now have a new consumption trend that is avoid Chinese goods (Chung, 2015), this is a favorable condition for domestic car manufacturers when imported from China motorcycle as was excluded at Vietnam market After a relatively long time attached to motor vehicles, large part of Vietnamese people have formed the culture of motorcycles In particular, today's Vietnamese have the favor of using motorbike when leaving house, not for walking or using public transportation This culture is difficult to change in a short time, plus the condition that Vietnamese population is still high among ASEAN (Anon., 2014) Therefore, demand for buying and using motorcycles of Vietnamese people will still maintain high in the coming time The strength of market, which is typical of consumer tastes, has been setting the business concern for intense CSR and business ethics At the same time, CSR and business ethics are the source of new capital for enterprises in international competition These two resources will impact and motivate consumers to change their perception of consumption 3.1.4 Technology environment Now that motorbike manufacturers are in the technology race, only a small change has a good impact on the ability to operate, the usability on product can create a new trend in consumers’ consumption This forced motorbike manufacturers to stop researching, to catch up to new technology if they not to give up the playground for opponents Technological development is one of the factors that make up the competitive advantages Therefore, producers tend to spend more on research and development With the increasing trend of female drivers, the motorcycle technology should be developed in a simple, convenient and safe manner while ensuring aesthetics and fashion 3.1.5 Natural environment The level of oil reserves is decreasing, so the source of energy for transports is increasingly precious and rare (WECouncil, 2016) The price of gasoline also tends to increase that pressures on motorcycle users Because traffic density is high and traffic system is not good, the amount of air pollution from the traffic is increasing, traffic jam occurs in big cities Therefore, there is a higher demand for environmentally-friendly vehicles 3.2 Micro environment 3.2.1 Suppliers In Vietnam, Honda factory is only responsible for the assembly of motorcycles, while genuine spare parts are imported from Honda factories in other countries This makes the focus of large suppliers, Honda Vietnam difficult to switch input suppliers However, Honda Vietnam does not have to compete with suppliers and always feel secure about price and quality of input (Honda, 2017) Being made from the most advanced technology, Honda spare parts, even from the supplier, always have to meet technical requirements as well as meet the strict quality standards of Japan such as JIS, HES, JAMA and also other standards of Vietnam (Honda Motor Co., Ltd, 2018) 3.2.2 Competitors In recent years, motorcycle market in Vietnam has changed a lot when businesses saw the high demand for motorbikes in Vietnam After Honda, a number of other major motorcycle manufacturers also establish joint venture to produce motorcycles as Suzuki VN, Yamaha VN, VMEP of SYM (Fujita, 2013) Besides, mass influx of Chinese motorbikes creates fierce competition The competition is not just about quality, design, style but also the competition for product brand In order to be competitive, Honda has been pursuing in-depth development strategies, producing more product groups for each customer segment, maximizing customer satisfaction with quality products, fuel efficiency, safety as well as brand building (Huyen, 2015) 3.2.3 Local government With the head factory located in Vinh Phuc and its office in Hanoi, local development policies have a great impact on Honda's operations as well as the company's CSR strategy, for example the provincial development strategy of Vinh Phuc, the policies applied to protect the environment Honda has very noticeable to the policies of province and city to make adjustments in their strategy (Vinh Phuc News, 2018) Moreover, Honda also actively supports localities in many aspects of life - society 3.2.4 Customers Customers are the key to the tuning of Honda's products Motorbike customers are quite diversified in terms of income, sex, using need Currently, the new trend is more female customer’s use of motorcycles, customers are more interested in the design, fuel economy and customer service Understanding that, Honda has closely cooperated with its dealers, focused on listening to customer comments, and constantly improved the product and trained staff to be warm and enthusiastic in customer service process (Honda, 2007) Company’s responses 4.1 Honda CSR awareness These factors force Vietnam to consider CSR if they want to move towards sustainable development From the moment they step into the Vietnamese market, with their experience, Honda executives have recognized that and put CSR as one of the top concerns on the road to building a strong brand Since its establishment in 1996, Honda Vietnam has been operating on the principle that the company's development is always linked to the contribution of community building (Mai, 2017) Honda Vietnam strives to become an active citizen of the country through bringing joy and safety to Vietnamese people The TV program “I love Vietnam” is the commitment of the company and conveys the message that Honda Vietnam wants to focus in daily activities Honda Vietnam endeavors to provide global quality products at reasonable prices, for the highest satisfaction of Vietnamese customers The company has expanded its production capacity and other activities to exceed the expectations of its customers, contributing to the development of the country's industry (Mai, 2017) Furthermore, the company is actively involved in a wide range of social activities, including student support, cultural programs and safety-drive training These are the efforts of Honda Vietnam in contributing to building a healthy environment for society and will continue to strive to become a company expected by society In the organizational setting, Honda has separated the division of social activities into two divisions: the Safe Driving Division and the Social Relations Division This shows that strategies for the benefit of society are very independent and show the importance of social activities in Honda’s perception The first objective of the two divisions is to contribute to community rather than to build brand Their mission is to organize benefit sharing programs for society, contribute to the development of community and not be dominated by other goals (Mai, 2017) The social activities to implement CSR of Honda Vietnam is very various, focusing on many aspects of social life The company always strives for a safe and sustainable social development in a healthy environment 4.2 Honda CSR practices In order to understand Honda's CSR operation, this report will use Carroll’s approach (1999) based on the pyramid model This approach assumes that the obligations are not the same and that they need to be determined in a certain order in order to prioritize implementation They in the order of business functions will be: economic, legal, ethical and charitable obligations (Tran, 2017) 4.2.1 Economic obligations: Maximizing profits, improving competitiveness, business efficiency and growth are prerequisites For customers, Honda has created the best products with continuous improvement at the most reasonable price, diversified and abundant models, especially fuel economy, along with the retailer system - HEAD to care customers in the best way Information about the product is posted fully on the company's website as well as advertised on media channels for customers to make the most appropriate choice Honda Vietnam always good after-sales service, solve the problem of safety when using the products For employees, Honda ensures a safe working environment, workers are paid full salary and enjoy benefit in accordance with the law Moreover, the company strictly adheres to State regulations on taxation, contributing to GDP growth, creating jobs for the whole society 4.2.2 Legal obligation: It is part of the "commitment" between business and society The state is responsible for codifying ethical, social, and legal norms into law and legislation Honda's products meet emission standards and are friendly with the environment Honda factory ensures the standards of quality and environment according to regulations They has applied ISO 14001 environmental management system in a comprehensive way to the production process, waste and waste water treatment; focused on field improvement such as reducing CO2, temperature, dust and noise by planting more green trees at workplace Moreover, the company strictly adheres to competition law regulations which creates a healthy competitive environment with competitors Honda cares to protect consumers They have built up a nationwide warranty and repair network with the aim to create trust for customers, bring joy over expectations The company strictly abides by the regulations on recruitment, safety and labor rights as well (Honda, 2016) 4.2.3 Ethical obligations: Norms, rules, values are recognized by society but not yet concretized into legal documents Moral duty is voluntary for all businesses and it depends on the level of commitment of the business but it is central to CSR The company particularly concerned about employees' lives by creating a comfortable working environment, encouraging creativity, combating discrimination and abusing at work, as well as having more opportunities to develop career for all employees Honda and HEAD always enthusiastic customer service All feedback and complaints of customers about the product is reasonably resolved Customers are regularly enjoyed sales promotions, gratitude programs such as maintenance, oil change and free car inspection and lucky draw by trusting Honda products and service (Honda, 2016) 4.2.4 Charitable obligation: These are business activities that are beyond the expectation of society, which is done through social programs such as scholarship grants for students, gift giving programs for the disabled, the poor, the elderly and the orphans In more than 20 years’ operating in Vietnam, in addition to offering environmentally friendly products, manufacturing safely and reducing emissions, Honda Vietnam is focused on education initiatives, in particular the dissemination of safe driving knowledge The safe driving center has been in operation since 1999, with 70,000 direct trainers From 2008 up to now, Honda Vietnam has coordinated with dealers (HEAD) to impart safe driving knowledge to over 10 million customers and people "Traffic Safety for Smiles" and "Traffic Safety for Tomorrow" education programs has been launched since 2008 for 2,000 schools, with four million students attending The TV program “I love Vietnam” has been broadcast on television since 2004, spreading knowledge about traffic safety, driving directions to millions of people across the country There are many traffic contests and incentives for environmental protection initiatives such as “School Traffic Safety” contests, “Eco-Driving And Fuel-Saving” competitions that attract a wide variety of audiences In addition to its safety activities, HVN has funded the United Nations-Accredited Clean Development Mechanism (AR-CDM) project in Hoa Binh This 319 hectare forest has been green and growing well In addition, HVN also supports VND 4.9 billion for the project to plant production forest in years from 2013 to 2020 in Bac Kan Over the past two years, 391 hectares have been developed, with the remaining 160 hectares planted until 2016 (Honda, 2016) 10 Other charity activities such as renovating, upgrading educational facilities, sponsoring scholarships for good students who have difficulty, giving gifts to poor families are often organized by Honda and HEADs and received supports from all society (Honda, 2016) Evaluation The social activities of Honda Vietnam has contributed to social development with safe transportation, clean environment and the development of people's life However, the result is more than that, it is successful in marketing strategy when by his contribution, Honda Vietnam has improved image and build trust in hearts of Vietnamese Honda Vietnam is highly appreciated by the government, with many honors such as "Vietnam Education Award", Golden Dragon Award High appreciation by the Government as motivating factor for Honda to become the company expected by the whole society Through community activities, HVN has gained much popularity from customers With this trust, the company was honored to receive the "trust and use" award by the readers of the Vietnam Economic Times and many years have been awarded by Sai Gon Marketing newspaper readers as “high quality Vietnamese product" Recommendations 6.1 For Government and society In order to maintain and further improve the implementation of corporate CSR, Vietnamese Government should complement and improve legal framework to create a solid legal basis for CSR Moreover, it is necessary to have policies to encourage and support the implementation of CSR in enterprises The goal of businesses in the production and business process is to maximize profits and revenue, while compliance with CSR should take a long time to promote benefits to businesses Therefore, the State should promulgate policies to encourage, care and support enterprises to carry out CSR In addition, the mechanism of inspection should be finalized to seriously detect and treat organizations which cause harms to the community and environment Lastly, it is necessary to propagate CSR among the people and bring CSR into the education programs Students which are main source of labor in the future should be educated ethical 11 behavior and corporate responsibility to society and the community Consumers also need to be aware of their rights, and recognize and support the companies which well in CSR 6.2 For Honda Vietnam Despite the remarkable achievements, in order to improve, Honda needs to pay more attention to CSR practice of authorized dealers Rapid development of the number of dealers results in challenges for Honda in the control of CSR implementation Some dealers still have the phenomenon of dumping motorbikes and accessories which causing grievances to customers, as well as complaints in the head are not satisfactorily resolved Care and supervision so that HEAD systems together with Honda company coordinate closely in CSR practices should be considered carefully in the coming time by all managers III CONCLUSION More than 20 years since joining Vietnamese market, with great financial potential, talented leadership team, enthusiastic staff, extensive dealer network and continuous efforts, Honda has step by step to become a top motorcycle manufacturing, assembling and trading company Besides, Honda is very focused on social activities In particular, over the years, the company has been working closely with the National Traffic Safety Committee, the Road and Rail Traffic Police Department, the Central Communist Youth Union, the Ministry of Education and Training to organize traffic safety training courses for many people with the aim of building a safe traffic society Therefore, company’s position in the mind of consumers is enhanced, making Honda one of the most popular brands However, as the world economy 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which is typical of consumer tastes, has been setting the business... philosophy is their guiding principle for achieving these goals based on personal respect and "Three Joys" - Joy of Selling, Joy of Shopping and Joy of Creativity (Honda, 2016) In addition to its