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DEVELOPING DOMESTIC SUPPLIERS OF ELECTRONICS IN VIETNAM: THE CASE STUDY OF CANON VIETNAM’S STRATEGY A Dissertation Submitted to the Faculty of the Graduate Studies in Business Southern Luzon State University Lucban, Quezon, The Philippines in Collaboration with Thainguyen University, Socialist Republic of Vietnam In Partial Fulfillment of the Requirements for the Degree of Doctor in Business Administration Name : Tran Xuan Ngoc English Name : Ronaldo Date of Birth : 30/03/1975 Hanoi – 2013 i ii ACKNOWLEDGMENT Firstly, I am particularly grateful to my dissertation committee: Dr Cecilia N Gascon, Prof Nordelina B Ilano, Dr Walberto A Macaraan, Dr Joanna Paula A Ellaga, Dr Nelly I Mendoza, and Special thanks to my advisor Dr.Eduardo T.Bagtang, It is only with their precious assistance, support and guidance that I was able to fulfill my dissertation They shared valuable time from their busy schedules to help and give me critical comments and suggestions I gratefully acknowledge Southern Luzon State University, Thai Nguyen University, Thai Nguyen University of Agriculture and Forestry, International School Thai Nguyen University, International Training Center of Thai Nguyen University of Agriculture and Forestry, and the staff I have greatly benefited from good study facilities, materials, and dynamic academic environment I want to express my deep gratitude to Hanoi People's committee, Hanoi Vocational College of High Technology who has supported to study I am greatly indebted to researchers and all my colleagues who have helped me to overcome many difficulties during the past hard time They shared their views and insights on the dissertation as well Finally, I wish to thank my family members for their spiritual encouragement and material support Thank others who did not participate directly but their works have been essential to the success of my dissertation iii ABSTRACT RESEAQRCHER : TRAN XUAN NGOC TITLE : Developing Domestic Suppliers of Electronics in Vietnam: The case study of Canon Vietnam’s strategy SCHOOL : Southern Luzon State University, Lucban, Quezon COURSE : Doctor in Business Administration YEAR : September, 2013 ADVISER : Dr EDUARDO T.BAGTANG The general objective of this research is to find out the theoretical reasons and practical evidence proving that the subsidiaries company (Canon Vietnam) can influence on the development of local suppliers’ capacity in order to promote the competitive advantages and expand production This study focuses on the following specific contents: Profile of the subsidiaries; Autonomy of the Subsidiaries; Knowledge transfer strategies; Competitive advantages of the subsidiaries in Vietnam that can help develop local suppliers; Government policies towards developing local or domestic suppliers’ capabilities The main method employed in the dissertation research is case study, one of important ways of doing research in social sciences (Yin, 1994; Eckstein, 2000; Strauss and Corbin, 1998) The documentary analysis and the questionnaire were the main instruments used in data gathering 250 sets of questionnaires were distributed to the (6) managers of Cannon Vietnam and to the (100) employees of Cannon Vietnam and to the (4) managers of the local suppliers and (140) employees of the local suppliers of Cannon in Vietnam Our research also employs archival and general data of electronic iv manufacturing industry in Vietnam The data was gathered from Ministry of Industry, Ministry of Finance, Ministry of Trade, and Ministry of Public Security Additional data were obtained from written materials such as publications, documents, and business press articles appeared in the mass media Researcher use SPSS program to process the data analysis By statistical methods, the authors draw conclusions about the key factors affecting the development of local suppliers’ capacity: Local Strategies of multinational companies; These competitive advantages of multinational companies in local environment, knowledge transfer, knowledge transfer methods; capacity of suppliers; ability of suppliers to meet the demand and policy of the government; The regression model was checked for errors After performing the data processing method, the models are proved to be reliable and be able to explain the dependent variable based on the independent variables After analyzing the data using regression models, the conclusions are generated on the obtained results On the basis of these results and conclusions, the authors make recommendations in order to develop the manufacturing sector, which provides electronic products in the country v TABLE OF CONTENTS Page TITLE PAGE i APPROVAL SHEET ii ACKNOWLEDGMENT iii ABSTRACT iv TABLE OF CONTENTS vi LIST OF TABLES xi LIST OF FIGURES xiv LIST OF APPENDIXES xv vi CHAPTER I: INTRODUCTION 1.1 Background of the Study 1.2 Statement of the Problem 1.3 Objectives of the Study 1.4 Hypotheses of the Study 1.5 Significance of the Study 1.6 Scope and Limitations of the Study 1.7 Abbreviations 10 1.8 Definition of term 11 CHAPTER II: REVIEW OF RELATED LITERATURE AND STUDIES 15 2.1 Subsidiary in local environment 15 2.1.1 The development process of subsidiaries 15 2.1.2 The effects of local environment on the development of 17 subsidiaries 2.2 Local Suppliers of Electronics 22 2.2.1 Some arguments about Supplier Industries 22 2.2.1.1 Supplier Industries 22 2.2.1.2 Suppliers 27 2.2.1.3 Factors affecting the development of Suppliers 27 2.2.2 Suppliers of electronics products 30 2.2.2.1 Technology process to produce electronic products 30 2.2.2.2 The electronics supporting industry in Vietnam 31 2.2.2.3 Vietnam’s electronics suppliers 35 2.2.2.4 Affecting factors of Suppliers of electronics products 39 vii 2.3.International experience in developing Local Suppliers 40 2.3.1 Development policies of Local Suppliers 40 2.3.2 Regulation onlocalization 42 2.3.3 Foreign investment attraction 43 2.4 Conclusion 45 2.4.1 From the government 45 2.4.2 From the local suppliers 46 2.5 Conceptual Framework 46 CHAPTER III: METHODOLOGY 48 3.1 Research Design 48 3.2 Determination of sample size 52 3.3 Sampling design and techniques 53 3.4 Subject of the study 53 3.5 Research instrument 53 3.6 Data processing method 54 3.7 Statistical treatment 54 CHAPTER IV: PRESENTATION, ANALYSIS, AND INTERPRETATION 59 OF RESULTS 4.1 Subsidiary company’s profile 59 4.1.1 Company culture 59 4.1.2 Organizational Structure 61 4.1.3 Operation Scale 64 4.1.4 Operation duration at the local 65 4.1.5 Number of local suppliers 66 4.1.6 Assessment of the Subsidiary Profile that Affects the Capacity 68 viii Development of the Local Electronics Suppliers 4.2 Autonomy of Subsidiary Company 70 4.2.1 R&D 70 4.2.2 Financial Management 71 4.2.3 Marketing Strategy 73 4.2.4 Production Strategy 74 4.2.5 Production Process 75 4.2.6 Supplier Selection 76 4.2.7 Assessment of the Subsidiary’s Autonomy that Affects the 79 Capacity Development of the Local Electronics Supplier 4.3 Knowledge transfer from Subsidiary company to local suppliers 81 4.3.1 Absorptive capacity 85 4.3.2 Responsiveness 88 4.3.3 "Hands-on" approach to transfer knowledge 98 4.3.4.Assessment of the Knowledge transfer from Subsidiary that Affects 104 the Capacity Development of the Local Electronics Suppliers 4.4 Competitive Advantages of Subsidiary Company 106 4.4.1 Production Capacity 107 4.4.2 Capacity of Design and Renewing 110 4.4.3 Technology of production 112 4.4.4 Quality of Management 113 4.4.5 Price policy of Canon Vietnam 116 4.4.6 Assessment of the Subsidiary’s Competitive Advantages that 117 Affects the Capacity Development of the Local Electronics Suppliers 4.5 Government Policies 119 ix 4.5.1 Protection of domestic production 120 4.5.2 Priority to electronics industry 121 4.5.3 Central Management Unit 121 4.5.4 Set up standards of quality and components 122 4.5.5 Reducing the gap between policies and implementation 123 4.5.6 Assessment of the Government Policies that Affects the Capacity 123 Development of the Local Electronics Suppliers 4.6 Analysis and Interpretation of Data 125 4.6.1 Assessment of the scale's reliability 125 4.6.2 Test the distribution format of the scales 128 4.6.3 Hypothesis Testing 130 4.6.4 Analysis of affecting factors 133 CHAPTER V: SUMMARY, CONCLUSIONS, AND 139 RECOMMENDATIONS 5.1 Summary 139 5.2 Conclusions 140 5.3 Recommendations 141 5.3.1 Recommendations for Businesses 141 5.3.2 Recommendations about the management agency 146 BIBLIOGRAPHY APPENDIXES 151 160 x Johanson, J., and Vahlne, J E (1977) The internationalization process of the firm: A model of knowledge development and increasing foreign market commitments Journal of International Business Studies, 8(1), 23-32 JBIC (2004), Survey report on overseas business operations by Japanese manufacturing companies, Tokyo Jones, R W., and Kierzkowski, H (2005) “International Fragmentation and the New Economic Geography,” The North American Journal of Economics and Finance, 16(1), 1-10 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Canon’s evaluation on supplier capabilities In order to develop the network of Vietnamese suppliers of components and parts, Canon Vietnam selected 38 manufacturers (15 in the North and 23 in the South) to conduct a rating on their capability based on the following criteria: - Product quality - Price - On-time delivery - Management skill - Development possibility The manufacturers were categorized into following groups based on the marks they received: - Group A – consists of companies (13%) which are ready to join the parts supplier network since they can satisfy Canon’s evaluation criteria - Group B – consists of 13 companies (34%) which are potential suppliers, however they may need to improve their development capability to be able to take part in part supplier network of Canon Vietnam - Group C – consists of companies (13%) which belong to the potential acceptable category, however they may pay more attention in improving their product quality - Group D - consists of 15 companies (40%) which category is difficult to accept They have to take great efforts to upgrade their ability such as quality control, product cost, and management skill Source: Canon Vietnam Report Period 2005-2012 160 Appendix – B Characteristics of newly established enterprises Thank to Vietnamese Government’s incentive policy toward part manufacture, more and more domestic enterprises entered the manufacture of electronics However, going deeply into details some problems could be found: - Part manufacturing companies concentrated only in horizontal investment, paying attention to quantity - Few company participated in the manufacture parts that consist of high technological content and require high preciseness - Many enterprises are small-sized with out of date equipment, weak in quality, price as well as supply capability and technology up-gradation - Most of their products are manufactured in the way of copying those of other manufacturers without serious quality inspection Source: Investigation by Ministry of Industry and Trade 161 Appendix – C 162 Appendix – D Questionnaire 1: For Canon Vietnam SURVEY ABOUT AFFECTING FACTORS OF DEVELOPMENT OF LOCAL ELECTRONICS SUPPLIERS We are conducting a survey about the factors that affect the development of local electronics suppliers Your answers to the following questions would be a great support for us and highly appreciated Your opinion is really useful for us to fulfill our study It is not the matter of right or wrong, it is just to survey your opinion Thus, it is necessary and very helpful if you answer honestly as the fact The collected information will not be used for any other purposes but the study, so that it is believed that there will not be any harm for you Part 1: Information about the surveyed object Canon Vietnam Position Company Interviewee Address Tel Number of labour Fax Indirect Email: Direct Part 2: Factors affecting the capacity development of local suppliers: (Circle your most suitable choice) Completely disagree (1) Company culture close as Vietnam Company 1.1 culture Organizational Structure Simple 1.2 Disagree (2) Subsidiary company’s profile Confuse (3) Affecting factors Agree (4) No Completely agree (5) Levels of agreement 5 163 1.3 Operation Scale 5 5 5 2.3 Marketing Strategy 2.4 Production Strategy 2.5 Production Process 2.6 Supplier Selection 5 5 5 5 5 5 5 1.4 1.5 Operation duration at the local Number of local suppliers Autonomy of Subsidiary company 2.1 R&D 2.2 Financial Management transfer from Knowledge company to local suppliers 3.1 Absorptive capacity 3.2 3.3 Responsiveness "Hands-on" approach to transfer knowledge Competitive Advantages company Production Capacity 4.1 4.2 4.3 4.4 4.5 Subsidiary of Subsidiary Capacity of Design and Renewing Technology of production Qualifications of Management Price policy (Acceptable price) Government Policies Protection of domestic production (import tax…) Priority to electronics industry (incentives, 5.2 production tax…) 5.1 164 5.3 Central Management Unit 5.4 Set up standards of quality and components Reducing the gap between policies and 5.5 implementation 5 We would like to thank you very much for your helpful co-operation! 165 Appendix – E Questionnaire 2: For suppliers SURVEY ABOUT AFFECTING FACTORS OF DEVELOPMENT OF LOCAL ELECTRONICS SUPPLIERS We are conducting a survey about the factors that affect the development of local electronics suppliers Your answers to the following questions would be a great support for us and highly appreciated Your opinion is really useful for us to fulfill our study It is not the matter of right or wrong, it is just to survey your opinion Thus, it is necessary and very helpful if you answer honestly as the fact The collected information will not be used for any other purposes but the study, so that it is believed that there will not be any harm for you Part 1: Information about the surveyed object Company Interviewee Address Tel Number of labour Starting year of operation Starting year of supply for Canon Vietnam Key products (year 2011 or 2012): Products Canon Vietnam Position Fax Indirect Email Direct Percentage of turnover 166 Part 2: Factors affecting the capacity development of local suppliers: (Encircle your most suitable choice) Completely agree (5) Agree (4) Confuse (3) Disagree (2) Completely disagree (1) Levels of agreement 5 5 5 2.1 R&D 2.2 Financial Management 2.3 Marketing Strategy 2.4 Production Strategy 2.5 Production Process 2.6 Supplier Selection 5 5 5 No Affecting factors Subsidiary company’s profile Company culture close as Vietnam Company 1.1 culture Organizational Structure Simple 1.2 1.3 1.4 1.5 Operation Scale Operation duration at the local Number of local suppliers Autonomy of Subsidiary company transfer from Knowledge company to local suppliers 3.1 Absorptive capacity 3.2 3.3 Subsidiary Responsiveness "Hands-on" approach to transfer knowledge 167 Competitive Advantages company Production Capacity 4.1 4.2 4.3 4.4 4.5 of Subsidiary Capacity of Design and Renewing Technology of production Qualifications of Management Price policy (Acceptable price) Government Policies Protection of domestic production (import tax…) Priority to electronics industry (incentives, 5.2 production tax…) 5.3 Central Management Unit 5.1 5.4 Set up standards of quality and components 5.5 Reducing the gap implementation between policies and 5 5 5 5 5 5 We would like to thank you very much for your helpful co-operation! 168 Appendix – F CURRICULUM VITAE Personal details Name: TRẦN XUÂN NGỌC Birthday: 30/3/1975 Birthplace: Hanoi - Vietnam Civil Status: Vietnam Addresses: a Home Address: No.3, lane 135/26, Doi Can, Ba Dinh district, Ha Noi city Home phone: (+84) 66524611 Mobile: (+84) 940 248 009 b Work Address: Hanoi vocational college of High Technology – Tay Mo village, Tu Liem district, Ha Noi city Position: Vice president Work phone: (+84) 37653686 Email: ngoctx@hht.edu.vn Educational Qualifications Years Academic institutions Major/ Specialty Academic degree 1997 Hanoi university of Technology, Vietnam Economic Engineer Bachelor of Economic 1999 Hanoi university of Technology, Vietnam Master of Business and Administration Master of Business and Administration 03/2010 current Southern Luzon State University, Philippines Business (International Joint Graduate Administration Programs at ThaiNguyen University) Student DBA 169 Employment History Job Title Lecturer Staff training Lecturer Vice training bureau Lecturer Vice President Country of Employment Start Ha Noi university of industry Vietnam 2000 2001 Ha Noi university of industry Vietnam 2001 2003 Ha Noi university of industry Vietnam 2003 2010 Hanoi Vocational College of High Technology Vietnam 2010 Now Employer Name End Publications and accomplishments No Authors Name of publication (papers, Journals/ Publisher patents, monographs) Tran Xuan Ngoc Techniques management basic Tran Xuan Ngoc Technology management for Publisher company Science Technology Tran Xuan Ngoc Tran Xuan Ngoc Quality management quality Ha Noi industry College of and Publisher Social Mathematics for business – Ha Noi university of Textbook industry 170 ... group of electronics manufacturers closed their plants in Vietnam, Canon Vietnam is a different case For over 10 years, Canon Vietnam has been continuously expanded their production, especially... domestic suppliers in Vietnam Specifically, the study aimed to determine the current operation of Canon Vietnam following objectives: To determine the profile of the Canon Vietnam in terms of the following:... Vietnam: The case study of Canon Vietnam’s strategy" is meaningful and useful for managers of multinational companies in electronic field when considering invest or now operating in Vietnam,
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