topic vinfast international strategy into the indonesia market

LIST OF FIGURES Figure 2.1 Logo of VinFast company...2Figure 3.1 Prime Minister Pham Minh Chinh welcomed Indonesia President JokoWidodo...5Figure 3.2 Mr.. Pham Nhat Vuong welcomed Presid

UNIVERSITY OF FINANCE – MARKETINGFACULTY OF BUSINESS ADMINISTRATION

 INTERNATIONAL BUSINESS MANAGEMENT

Lecturer: Huynh Thi Thu Suong

Ho Chi Minh, April 2024

LIST OF FIGURES

Figure 2.1 Logo of VinFast company 2

Figure 3.1 Prime Minister Pham Minh Chinh welcomed Indonesia President JokoWidodo 5

Figure 3.2 Mr Pham Nhat Vuong welcomed President Joko Widodo to visit theVinFast electric vehicle factory in Vietnam 6

Figure 3.3 Vehicle sales in Indonesia from 2018 - 2022 (In Thousand Units) 6

Figure 3.4 GDP per capita (USD) for Indonesia from 2014 to 2023 7

Figure 5.1 VF5 launched in the Indonesian market 17

TABLE OF CONTENTS

CHAPTER 1: SUMMARY 1

1.1The importance of building the international business strategy 1

1.2The purpose of report 1

CHAPTER 2: INTRODUCTION 2

2.1Introducing Vinfast company 2

2.2Introduction to Indonesia 3

2.2.1An overview of Indonesia 3

2.2.2Reasons for choosing Indonesia 3

CHAPTER 3: PESTEL ANALYSIS 4

3.2.1 The consumption of product 6

3.2.2 The average income 7

3.2.3 Economic relationship with Vietnam 7

3.5.1 The current legal system 10

3.5.2 The principle of comity with Vietnam 10

3.6Ethics issues 11

3.6.1 The rate of corruption 11

3.6.2 The view of people with environmental protection 11

CHAPTER 4: MAKET AUDIT 13

4.1Market potential 13

4.2Level of competition 13

4.3Legal and political environment 13

4.4Sociocultural influences 14

CHAPTER 5: THE PLAN 15

5.1Establishing strategy within 3 years (2025 – 2027) 15

5.2Identifying market entry 15

5.3Identifying the products lines to sell 16

5.4Identifying the price line 17

5.5Identifying the distribution channel 18

5.6Identifying the promotional activities 18

5.7Identifying the needs budget 19

CHAPTER 6: CONCLUSION 20

6.1 Advantages/ potential when company enter the chosen market 20

6.2 Disadvantage / risks when company enter the chosen market 20

CHAPTER 1: SUMMARY

1.1 The importance of building the international business strategy

Developing international business strategy is usually in two stages, strategyformulation and strategy implementation It is not the same in each country Therefore,it plays an important role for international businesses to exploit three sources ofcompetitive advantage unavailable to domestic firms International firms can captureglobal efficiencies by locating their facilities anywhere that yields them the lowestproduction or distribution costs By this, international firms may enjoy economies ofscope, lowering their production and marketing costs and enhancing their bottom lines.Because there are wide variations in the political, economic, legal, and culturalenvironments of countries International businesses may also respond to a change inone country by implementing a change in another country In addition, the diverseoperating environments of multinational corporations contribute to organizationallearning Differences in these operating environments may cause the firm to operatedifferently in one country than another An astute firm may learn from thesedifferences and transfer this learning to its operations in other countries.

1.2The purpose of report

VinFast's electric vehicle products not only have influence in the Vietnamesemarket but are also oriented as one of the strategic products to penetrate and exploitthe international market Indonesia and Vietnam have many similarities in culture,geography, and both difficulties in the natural environment such as storms, floods, andnatural disasters With a large population and abundant labor resources, the twocountries' economies continuously achieve high GDP growth indexes in the region.Therefore, Indonesia promises to be a potential market for VinFast electric vehicles toexpand and develop.

CHAPTER 2: INTRODUCTION2.1 Introducing Vinfast company

VinFast, officially known as VinFast Manufacturing and Trading LimitedLiability Company (VinFast LLC), is the first automotive brand of Vietnam,established in 2017 by VinGroup, one of the largest private conglomerates in Vietnam

founded by Mr Pham Nhat Vuong With the philosophy of "Putting customers at the

center," VinFast continuously innovates to deliver high-quality products to everyone.

Figure 2.1 Logo of VinFast company

Source: Website Vinfast

- 23/01/2019: VinFast received the ASEAN NCAP 5-star safety certification forVinFast Lux and 4 stars for VinFast Fadil.

- 12/07/2021: VinFast officially expanded its operations to 5 markets in NorthAmerica and Europe.

- 26/04/2022: VinFast launched 5 new-generation electric motorcycle modelsusing LFP batteries.

- 15/08/2023: VinFast was officially listed on the Nasdaq Global Select Market. Mission

For a green future to elevate the position of the Vietnamese automobilebrand in the world.

Indonesia is a densely populated country, ranked fourth in the world, where themajority of the population adheres to the Islamic faith.

2.2.2Reasons for choosing Indonesia

Indonesia is a densely populated country with the electric vehicle ownershiprate here still relatively low Furthermore, the Indonesian government is aiming for agreen economy so it has implemented many financial incentive regulations.Consumers using electric vehicles enjoy 0% tax, while manufacturing businessesenjoy incentives: tax exemption, tax reduction, and import tax exemption.

In addition, Indonesia has abundant raw materials, favorable for electric vehicleproduction as it is the world's leading producer of nickel, an important component inelectric vehicle batteries The country also owns other metals for battery productionsuch as cobalt and copper.

=> For these reasons, VinFast's decision to export and invest in electric vehiclesin the Indonesian market is completely feasible and promising.

CHAPTER 3: PESTEL ANALYSIS3.1Political issues

3.1.1Political system

Indonesia is a presidential and constitutional republic, in which the president isthe head of both state and government The President appoints government ministersand approves laws approved by the National Assembly and is the supremecommander of the armed forces The president’s service to the country is restricted toa maximum of two consecutive five-year terms.

Indonesia currently has more than 40 active parties Some major parties such as

the Democratic Party of Struggle PDI-P (the ruling party of President Widodo,former President Megawati Sukarnoputri is the Chairman), Democratic Party (DP),Civil Servant Party (Golkar), National Awakening Party (PKB),

3.1.2Political stability

According to the assessment by the Global Economy (1996 - 2022), Indonesiaranks 134th out of 193 countries in terms of political stability, with a score of -0.44points One of the reasons is Indonesia's diverse ethnicities and religions, withdistinct characteristics due to their distribution across different islands, which oftenleads to political instability This instability is influenced by power struggles andconflicts of interest among extremist Muslim groups, particularly in local elections

However, recent elections in Indonesia have been relatively stable and peaceful,and there has been greater consistency in policymaking between the central and locallevels.

3.1.3Political relationship with Vietnam

Vietnam and Indonesia have long-standing traditional relations The bilateralrelationship between the two countries has continuously been strengthened andcomprehensively developed, both bilaterally and multilaterally

In August 2017, General Secretary Nguyen Phu Trong made the first visit by aGeneral Secretary of the Communist Party of Vietnam to Indonesia In 2021, despite

the challenges of Covid-19 pandemic, Prime Minister Pham Minh Chinh choseIndonesia for his first overseas trip as Prime Minister In 2022, President NguyenXuan Phuc began a state visit to Indonesia Most recently, in 2024, President JokoWidodo of Indonesia made a state visit to Vietnam This shows that the politicalrelationship between Vietnam and Indonesia is increasingly cohesive and achieves ahigh level of reliability

Figure 3.2 Prime Minister Pham Minh Chinh welcomed IndonesiaPresident Joko Widodo

During President Joko Widodo's visit to Vietnam on January 13, 2024, he andPrime Minister Pham Minh Chinh met with businesses involved in cross-borderproduction and trade, such as VinFast and GSM Pham Nhat Vuong, Chairman ofVingroup and CEO of VinFast Global, personally guided President Widodo on a tourof VinFast's cutting-edge electric car production facility Impressed by the quality ofVinFast vehicles, President Widodo pledged to expedite investment procedures forVinFast to start operations in Indonesia soon.

Figure 3.3Mr Pham Nhat Vuong welcomed President Joko Widodoto visit the VinFast electric vehicle factory in Vietnam

3.2Economic issues

3.2.1The consumption of product

Indonesia is a country with a large automobile consumption volume in theSoutheast Asian region According to the Indonesian Automobile Industry Associationthe total number of car shipments from factories to dealers (2022) reached 1,048,040units, marking an 18.1% increase compared to 2021 However by 2023, productiondecreased by 4% compared to 2022.

The Indonesian government emphasizes the electric vehicle segment andimplemented various policies to promote it In 2022, the number of four-wheeled

Figure 3.4 Vehicle sales in Indonesia from 2018 - 2022 (In Thousand Units)

In order to meet Indonesia's emissions reduction targets, significant efforts arebeing made to establish goals for electric cars, aiming for 0.4 million units by 2025and 2 million units by 2030 This presents a favorable opportunity for VinFast electricvehicles to enter the Indonesian market.

3.2.2The average income

Indonesia's per capita GDP has shown strong growth over the years The impactof the COVID-19 led to a decrease in GDP growth by 3.930 USD, but by 2021, thecountry began to recover and achieved stable economic growth with 4.362 USD.According to Focus Economics, Indonesia's GDP was recorded at 4.994 USD in 2023.This indicates increasing economic growth and income levels, which make anopportunity for VinFast to thrive in this market.

Figure 3.5 GDP per capita (USD) for Indonesia from 2014 to 2023

3.2.3Economic relationship with Vietnam

Vietnam and Indonesia are fostering a strong cooperative relationship,particularly in the economic and trade sectors This remains crucial as the third-largesttrading partner within the ASEAN region and one of Vietnam's potential importmarkets.

Prime Minister Pham Minh Chinh has proposed that both countries maintainbalanced growth in trade, striving to reach a bilateral trade turnover of 15 billion USD

by 2028 There’s an emphasis on promoting increased investment, especially in

emerging sectors: the digital economy, green economy, energy transition, and the

development of electric vehicle ecosystems.

Vietnamese goods are increasingly their position in the Indonesian market.According to General Department of Customs, the total import-export turnoverbetween Vietnam and Indonesia in 2023 reached nearly 14 billion USD, withVietnamese exports to Indonesia surpassing billion USD.

3.3Social issues

3.3.1Size of population

According to Worldometer (04/2024), Indonesia ranks fourth in the world interms of total population, with 279,350,291 people, ~3.45% (higher than Vietnam's2.21%) The urban population accounting for 59.1% (163,963,233 people in 2023).The average life expectancy is 68 years for males and 72 years for females (accordingto BBC, 2023) The population scale here tends to increase significantly over theyears.

The country has over 300 local languages, but the official language isIndonesian Additionally, Indonesia is the world's largest Muslim-majority country,with approximately 10% of Indonesians following Christianity The Indonesianconstitution also ensures religious freedom, and the country is highly diverse in termsof ethnicity.

3.3.2People’s attitude with products

Consumer behavior is heavily influenced by culture, as most households mustown a car They seek to assert themselves by using luxury car models, which alsobenefits VinFast's luxury car lineup For most Indonesians, reputation is paramountwhen making purchases They appreciate praise and are willing to invest in brandedproducts or even limited editions that others may not afford Despite economichardships, luxury cars sell out in Indonesia.

Furthermore, Indonesians prioritize brands more than consumers in any othercountry They are reluctant to try new brands and maintain loyalty to those they'veused before This poses a challenge for VinFast as it enters this market.

3.4Technological issues3.4.1E - commerce

With an increasingly expanding Internet user base, Indonesia promises a largermarket for online businesses, paving the way for the expansion of large-scale e-commerce The scale of Indonesia's e-commerce market is projected to increase from$52.93 billion in 2023 to $86.81 billion in 2028, with a CAGR of 10.4% during theforecast period (2023-2028) Indonesia leads among other ASEAN countries with$51.9 billion, equivalent to around 778.8 trillion IDR, in e-commerce business revenuein 2022 Overall, e-commerce revenue in ASEAN reached $99.5 billion in 2022,meaning that Indonesian businesses accounted for 52% of e-commerce in the region.

3.4.2Intellectual property right

In 2023, one of Indonesia's challenges in IP tasks was to enhance publicunderstanding of IP This is crucial to remove Indonesia from the United States TradeRepresentative's Priority Watch Listwhich consists of countries with high IPinfringement rates

Additionally, during the 71st ASEAN Working Group on Intellectual PropertyCooperation meeting, Indonesia's Director General of IP, Min Usihen, affirmed that asan ASEAN member, the country would support all agreed-upon programs under theASEAN IPR Action Plan 2016-2025 Indonesia has been at the forefront ofimplementing initiatives related to copyrights outlined Therefore, instances of ideatheft as VinFast enters the Indonesian market are less likely to occur.

3.5Legal issues

3.5.1The current legal system

Indonesia's legal system is a hybrid of customary law, religious law, especiallyIslamic law, and the Civil law of the European continent During the colonial periods

of European countries, particularly the two Dutch colonial periods, Indonesia adoptedthe legal principles and techniques of the Civil law tradition Due to the significantproportion of the population practicing Islam, Indonesian laws are somewhatinfluenced by Islamic law.

Customary law is a widely recognized legal source in Indonesia Manycontractual relationships are based on customary practices, and judges are obligated toapply customs to render fair and equitable judgments This poses a challenge forVinFast's entry into this market Labor rights are protected by law in Indonesia.Companies need to issue special notices regarding issues such as leave entitlements,overtime pay, working hours, religious holiday allowances, and social welfare.

3.5.2The principle of comity with Vietnam

General Secretary Nguyen Phu Trong and President Joko witnessed the signingof six cooperation agreements between the two countries (2017), including aMemorandum of Understanding between the Ministry of Justice of the SocialistRepublic of Vietnam and the Ministry of Law and Human Rights of Indonesia oncooperation in the legal field

Cooperation between Vietnam and Indonesia has primarily taken place withinthe framework of ASEAN cooperation mechanisms as well as other multilateralcooperation mechanisms With the signing of this, bilateral cooperation in law hasbeen officially established The purpose of this Memorandum is to establish aframework for legal cooperation between the Parties on issues relevant to thedevelopment of legal systems, human rights, institutions, and legal regulations basedon mutual benefit, within the jurisdiction of each Party and in accordance withdomestic law and international treaties to which each Party is a member.

3.6Ethics issues

3.6.1The rate of corruption

Corruption Perceptions Index, which scored on a scale from 0 ("highlycorrupt") to 100 ("very clean"), gave Indonesia a score of 34, ranked 115th among the