Topic analysis of honda vietnam a joint venture company

NATIONAL ECONOMICS UNIVERSITY School of Advanced Education Programs -o0o - INTERNATIONAL BUSINESS CBA300 GROUP ASSIGNMENT TOPIC: ANALYSIS OF HONDA VIETNAM - A JOINT VENTURE COMPANY Group members: Lê Ngọc Hà 11201163 Nguyễn Ngọc Minh Khuê 11205636 Bùi Thị Thùy Linh 11205714 Bùi Sơn Minh 11206059 Hà Việt Nga 11202701 Class: Advanced Finance 62C Instructor: Assoc Prof Dr Bùi Huy Nhượng Hanoi – November 2022 Table of Contents I Background of Honda and its member partners Background of Honda Japan Background of Honda’s partners .3 II Analyzation of Honda’s joint venture partner selection in Vietnam .4 III Analyzation of Honda Japan’s reasons for choosing joint venture as entry mode at that time of entry The motive for entering the country Characteristics Vietnamese local partner .6 IV Analyzation of Honda’s factors affecting joint venture partners Culture 1.1 In the products of Honda Vietnam itself (products, safe, fuel-efficient, and highly friendly environment,…) .7 1.2 In activities charity, support, other social activities, in the way of business, in how company employees treat customers… .9 Strategic traits 10 2.1 Building brand identity system .10 2.2 Development strategy 10 2.3 Brand promotion communication 11 Organizational traits 13 3.1 Size 13 3.2 Market power 13 3.3 Innovation process 14 3.4 Organizational image 14 3.5 Organizational skills .14 Financial traits 15 4.1 Profit of Honda Vietnam from 2018 to 2019 .15 4.2 Profit of Honda Vietnam in 2021 16 References 18 I Background of Honda and its member partners Background of Honda Japan 1946: when the most common mode of transportation was the bicycle Soichiro Honda developed the concept of using these engines as power for bicycles The new bicycle was an instant hit, with orders coming in and stocks running out It was incorporated as a Honda Motor Company in 1948 and began producing motorcycles in 1949 Background of Honda’s partners Honda Vietnam Company is a joint venture between partners: Japan Honda Motor Company (42%), Thailand Asian Honda Motor Company (28%), and Vietnam Engine and Agricultural Machinery Corporation (30%) Thailand Asian Honda Motor Company: established in Thailand in October 1964 as a motorcycle distributor In 1996, the company took on the role of Honda’s ASEAN Regional Headquarters Honda Vietnam: In March 1998, after building the first factory manufacturing motorcycles in March 2005, Honda Vietnam officially received the license from the Ministry of Planning and Investment to allow the production and assembly of automobiles in Vietnam:  Honda Motorbike: Motorbikes are the vehicle used for nearly 90% of cars big city Up to now, Honda Vietnam has manufacturers and assemblers of vehicles and vehicle parts  Honda car: Honda Vietnam is known as a famous motorcycle manufacturer and a prestigious automobile manufacturer in the Vietnamese market Vietnam Engine and Agricultural Machinery Corporation - Joint Stock Company (VEAM): established on May 12, 1990 with the central goal of Vietnam's mechanical industry is the industrialization and modernization of agriculture and rural areas II Analyzation of Honda’s joint venture partner selection in Vietnam Honda Japan had carried out numerous research in Vietnam to develop a specific plan for broadening its business to a Southeast Asian country The company then established a joint venture with Vietnam Engine and Agricultural Machinery Corporation (VEAM) in March 1996 although Honda is financially capable of building a new business on its own in Vietnam VEAM used to operate under the Ministry of Industry and Trade, thus this is a state-owned company This characteristic had provided numerous advantageous privileges for itself at that period of time in Vietnam In 1996, foreign corporations were not entirely welcomed as an attempt to protect domestic businesses when 100% foreign ownership was not permitted by the Vietnamese government Therefore when foreign corporations desire to expand their business to Vietnam, establishing a joint venture with a local company was the only legal option When Honda and VEAM participated in creating a partnership, Honda owned 70% of the joint venture and managed the main business’ operation while VEAM only acted as a supporter in land ownership and headquarter construction As a matter of fact, Honda transferred its own manufacturing chain directly from Japan, thus VEAM could not contribute to the technology in producing Honda’s motorcycles when 15 subsidiaries of VEAM were not qualified to become components suppliers for the joint venture Establishing a joint venture with a state-owned company had gained Honda various benefits, especially in terms of taxation Honda has been exempted from tax for years, halved the tax rate for the next years, and 25% tax rate for the following 15 years III Analyzation of Honda Japan’s reasons for choosing joint venture as entry mode at that time of entry The motive for entering the country The entry of Honda into Vietnam might be seen as a result of several forces, one of which is the size of the Vietnamese market With a population of 74 million people and the motorcycle as the main transportation means, Vietnam is definitely an attractive market The second factor that had an impact on Honda’s investment in Vietnam is the protection of the local market A 60 per cent tariff rate applied on imported complete motorcycles is an effective incentive for a market-seeking FDI project The third factor was the other attractive incentives that the Vietnamese government offers foreign investors with ambitions to develop the local automobile and motorcycle industry Honda Vietnam Co., Ltd, for example, was granted a four-year corporate income tax holiday, followed by a further four years at half the normal rate, and after 15 years of operation, a rate stabilised at 25 per cent 2 Characteristics With advancements in engine technology as the most important in the industry, and advanced engineering capability to meet demands of escalating safety restrictions and environmental regulations, the industry has been improving at a rapid pace R&D expenditure in all business segments of Honda has been around 5.5 percent of net sales during the last 10 years In the financial year ended March 2001, expenditure for R&D in the motorcycle segment alone was about 8% of motorcycle sales worldwide Vietnamese local partner The local partner in Honda Vietnam Co., Vietnam Engine and Agricultural Machinery Corporation (VEAM), owns a 30% share in the joint venture VEAM is a State General Corporation that was set up in 1995 by merging (simply combining) activities of 15 individual State-run production/research units The corporation is under the control of the Ministry of Industry The Prime Minister assigns the General Director, the Minister of Industry assigns the Vice-General Directors, and the Minister of Finance assigns the Head Accountant VEAM's enterprises stretch all over the country and produce various things like multi-purpose engines, agricultural machinery, tractors, automobiles, motorcycles, and equipment for on-land and water transportation By 2002, it employed about 7000 workers It is also the local partner in some joint ventures with foreign investors such as Toyota, Suzuki, and Ford amongst others The main contribution of the local partner in Honda Vietnam Co is the property in terms of land-use rights, and its political position in the machinery industry Informal regulations in this sector have changed over time In the early 1990s, with the Government's objective of attracting foreign investors into the automobile and motorcycle industry, few FDIs were allowed to take the form of 100% foreign owned Later, the joint venture with Vietnamese enterprises was effectively the only choice for FDI in this sector In this circumstance, VEAM emerged as the most politically suitable partner Document continues below Discover more from: International Business I Đại học Kinh tế Quốc dân 39 documents Go to course C3-TT8-N8 - Nạn tham nhũng Singapore 18 International Business I 100% (4) Chapter Closing case International Business I None Detroit Bikes - IB assignment International Business I None Chapter Closing case International Business I None Int Biz Course Syllabus Fall 2022 International Business I None Writing - Vietnam, with less than one-tenth China’s population, is already running into International Business I None It is also a surprise that none of the 15 subsidiaries of VEAM could become a local parts supplier to the joint venture In fact, the joint venture has developed business relationships with other local producers for their component supplies IV Analyzation of Honda’s factors affecting joint venture partners Culture Although Honda is a company that established in Japan, but it always upholds the value of the country it come to in many aspects listed below: 1.1 In the products of Honda Vietnam itself (products, safe, fuel-efficient, and highly friendly environment,…)  Inside the factory: Emphasis on environmental protection: Since the early 20s, Honda has received the certificate of environmental management according to ISO 14001 In 2003, the Company focused on activities to improve the working environment for employees with activities such as reducing temperature, dust, CO2, setting up a noise reduction system and central air conditioning system to keep the working environment fresh Thanks to the central air conditioning system, the temperature at the working site is always maintained below 30oC even though the outdoor temperature is 40oC All dust and gas in the welding process are collected and treated to ensure a clean working environment This system has contributed to reducing the CO2 concentration in the workshop from 5107 mg/m3 in 2003 to 1403 mg/m3 in 2004 and lower than 900 mg/m3 in 2005, 2006 At any of our plants Honda, trees are stacked in a very scientific way to create a healthy living space while supporting noise reduction Currently, the noise in the factory is mostly controlled at 50% of the permitted standards in Vietnam The factors of microclimate, light, and temperature are also strictly controlled periodically by the company to ensure that the parameters always meet Vietnamese standards They suck and process all the dust in stages such as production, fabrication, welding …  Outside the factory: Honda Vietnam pays special attention to waste treatment and recycling technology Honda Vietnam is the first factory in Vietnam to invest in a modern, closed incinerator equivalent to the incinerators of advanced countries such as Italy, Japan, America With an investment cost of over million USD, especially the company's waste incinerator with modern technical design ensures no dioxin emission (the agent that causes cancer, birth defects, deformities, ) Up to now, with the daily recycling of 600 kg of waste ash as an additive to cement, Honda Vietnam has completely eliminated landfill waste The Company's environmental policy is "Limit use - Do not discharge hazardous substances into the environment" With the increase of the production capacity of the motorcycle factory and the addition of a car factory, HVN has invested and upgraded the domestic wastewater treatment system in the factory from meeting the needs of 2,000 people to now 4,000 people 1.2 In activities charity, support, other social activities, in the way of business, in how company employees treat customers… The campaign "I love Vietnam" of Honda Vietnam Company was born in August 2003 with messages: Safety, Quality and Social activities Honda Vietnam always thinks that their business should be responsible for the development of Vietnamese society Honda always creates campaigns to emphasize that traffic safety is everyone's happiness Programs with this content take place in educational settings and across the country Customization culture: One thing they always uphold is equality between cultures Coming to Vietnam, Honda Vietnam upholds Vietnamese cultural values but does not obscure Japanese cultural factors For Honda Vietnam, it is necessary to create value for this country so that consumers can feel secure and have confidence in using their products Strategic traits 2.1 Building brand identity system Currently, the Vietnamese motorcycle market is extremely exciting with many motorcycle manufacturers competing fiercely such as: Honda, Yamaha, Suzuki, SYM, Piaggio However, among them, Honda dominates with more than 70% market share The image of the motorcycle has been associated with the Honda brand, as evidenced by the fact that when it comes to motorbikes, Vietnamese people often call it Honda, not motorbike This proves that the Honda brand has gone deep into the subconscious of Vietnamese people The name "HONDA" - both strong and unique, the font is designed with red capital letters showing strength and creativity With an extremely eye-catching and familiar logo Looking at this logo, everyone knows that this is the logo of Honda Vietnam 2.2 Development strategy  Low-cost strategy Honda's goal is to create a competitive advantage by creating products at the lowest cost Honda offers Wave alpha motorcycles priced from VND 13,000,000, durable quality, compact design suitable for the needs of rural consumers - low income This low-cost competitive strategy has helped Honda capture the rural market of 70% of Vietnam's population  Differentiation strategy With any product line, Honda always innovates designs and techniques to suit consumers Honda also introduced into the Vietnamese market a high-quality product line such as SH motorcycles and most recently CPX This is a high-end product line with many unique and outstanding features These products are aimed at high-income customers, young people, who like trendy and classy products  Strategic focus Some product lines are suitable for female customers such as convenience and fashion while the price is only average The car is very easy to use, no need for clutches, gears, or a large storage box that can hold many important things This type of car has many rich, unique, and luxurious designs, suitable for the personality of young people, especially women Honda Vietnam Company has launched a new type of scooter called Click, and then respectively: Air Blade (42007), Click Play (9-2008), Lead (12-2008) Therefore, Honda scooters are more and more popular 2.3 Brand promotion communication Honda cooperates with a Vietnamese television station to launch a series of programs "I love Vietnam" with the aim of increasing traffic safety awareness in Vietnam In addition, Honda also organizes a series of events such as: "Honda full of faith", "BeU + with Honda", to show gratitude to customers who have been with Honda Vietnam Honda constantly offers promotions with preferential prices This has increased credibility and "pinned" in the subconscious about a clean brand, increasing the level of recognition 3 Organizational traits 3.1 Size About the firm size, the Honda Vietnam company has operated motorcycle factories: car factory, one of the most modern safety driver training centre in Vietnam, piston workshop and spare part centre This help brings job opportunities to more than 10,000 employees Regarding the organizational size, the Company's organizational model is divided into three blocks: office block, business block and production block The number of departmental managers is 158 out of a total of 5600 employees 3.2 Market power Honda has been operating in the Vietnamese market for more than 20 years, Honda has built a distribution system of more than 800 Honda-authorized service and car stores throughout Vietnam and 107 maintenance centres For consumers, Honda has become an all too familiar brand Honda's models attract users not only because of their design and quality but also at reasonable prices Up to now, the company has captured a market share of up to 60%, far ahead of other competitors in the same competitive market, dominating the motorcycle market in Vietnam 3.3 Innovation process To compete in all market segments Honda Vietnam has used the strategy of product diversification and constantly introducing innovations Honda has launched many product lines, aiming to serve different types of customers, from ordinary customers to middle and high-end consumers Besides competing with products, Honda has also had success in building a nationwide distribution system and warranty centres This is also an important point in the company's competitive strategy 3.4 Organizational image The corporate image of Honda Vietnam is very professional because they are taken from international business experience - especially the foreign joint venture companies are big and famous companies in the world The recruitment process is very methodical, complete, and rigorous in the selection process The staff are built entirely by a free, open, and fair recruitment competition 3.5 Organizational skills The employees come from all over the country and have many different skills and titles such as manager, engineer, and worker with different jobs and functions Because the recruitment process is extremely professional, rigorous, and fair, their working qualifications are good right from the start Honda's leadership style is to respect the individual Humans are born as free and independent individuals with the ability to think, judge and create, so each individual has the opportunity to develop his or her abilities without limitation Respect for individuals also means that at Honda, the core goal is not only money but also personal development so that they can contribute to the work The philosophy of respecting the individual is composed of three basic values: Initiative: is a type of creative thinking and acting with its creative ability without being bound by opinions Equality: requires everyone to recognize and respect each individual's differences and that each individual is treated fairly Trust: emphasize relationships based on mutual trust, making up for one's own shortcomings, sharing knowledge, and sincerely striving to fulfil common responsibilities Financial traits Honda's total assets in the Vietnam market are more than 40,000 billion VND, and equity is more than 20,000 billion VND 4.1 Profit of Honda Vietnam from 2018 to 2019 Due to its overwhelming market share, Honda Vietnam's revenue exceeded 100,000 billion in 2018, in 2019 CafeF has not updated Honda's data, but the volume of cars sold in 2019 in the Vietnamese market is still growing 3% increase compared to 2018  The allocation shares capital of Honda Vietnam in 2019: Specifically, Honda Vietnam, a company owned by VEAM with 30% of contributed capital, recorded revenue in the first three months of over VND 23,000 billion, up 18% over the same period last year thanks to improved auto sales It is estimated that this car company earns over 7,600 billion VND per month on average and is expected to increase further in the last months of the year The profit margin of the automobile segment is lower than that of motorbikes, so the growth in profit after tax in the first period of the year only reached 4%, to over VND 3,100 billion 4.2 Profit of Honda Vietnam in 2021 THÁNG 12 CỘNG DỒN CỘNG DỒN TRONG NƯỚC Doanh số So với XUẤT KHẨU So với kỳ năm trước (xe CBU) Năm 2021 Năm tài 2022(*) (Tháng 1/2021 – Tháng 12/2021) (Tháng 4/2021 – Tháng 12/2021) TRONG NƯỚC Doanh số So với năm trước (xe) (%) 1.992.365 -7,0 XUẤT KHẨU TRONG NƯỚC XUẤT KHẨU (xe CBU) Doanh số So với năm trước (xe CBU) (xe) (%) 1.459.819 -7,4 tháng trước (xe) (%) (%) 253.849 +26,0 +2,3 12.230 213.492 151.200 Figure: Business results of motorcycle segment The total volume of Vietnam's market in the fiscal year 2022 reached more than 2.5 million vehicles, down 5.2% compared to the previous period In which, sales of HVN reached more than million vehicles, down 2.7% compared to the fiscal year 2021 The market share reached about 80%, up 2% compared to the previous fiscal year In the fiscal year 2023, HVN predicts that the motorcycle market will continue to be affected, especially the disruption of the global supply chain leading to impacts on the production and supply process of motorcycles in many industries, including the Automotive - Motorcycle industry References https://www.brandsvietnam.com/20906-Honda-chiem-uu-the-trong-thi-truong-xemay-Viet-Nam#:~:text=V%E1%BB%81%20quy%20m%C3%B4%2C%20t %E1%BB%95ng%20t%C3%A0i,107%20trung%20t%C3%A2m%20b%E1%BA %A3o%20d%C6%B0%E1%BB%A1ng https://congthuong.vn/honda-viet-nam-giu-vung-vi-the-tren-thi-truong181585.html https://haymora.com/che-tao-xe/cong-ty-tnhh-honda-vietnam https://timviec365.vn/amp-blog/van-hoa-doanh-nghiep-honda-new15269.html https://www.honda.com.vn/tin-tuc/doanh-so-ban-hang/honda-viet-nam-cong-boket-qua-hoat-dong-kinh-doanh-thang-12-2021-va-ca-nam-2021 http://veamcorp.com/en/gioi-thieu/history-80.html http://veamcorp.com/gioi-thieu/cong-ty-tnhh-honda-viet-nam-184.html https://www.coursehero.com/u/file/14588303/Group-10-Int-Investment-Casestudy-Honda/?login_user_type=regular/ https://global.honda/investors/?from=navi_header https://www.yellowpages.com.vn/listings/3749067/honda-vietnam-joint-venturecompany.htm