Development of domestic suppliers of electronics in viet nam the case sudy of canon viet nams strategy

DEVELOPMENT OF DOMESTIC SUPPLIERS OF ELECTRONICS IN VIETNAM: THE CASE STUDY OF CANON VIETNAM’S STRATEGY _ A DISSERTATION Presented to the Faculty of the Graduate School Southern Luzon State University, Lucban, Quezon, Philippines in Collaboration with Thai Nguyen University, Socialist Republic of Vietnam _ In Partial Fulfillment of the Requirements for the Degree Doctor of Business Administration _ By TRAN XUAN NGOC (RONALDO) December 2013 i APPROVAL SHEET The Dissertation of TRAN XUAN NGOC entitled DEVELOPMENT OF DOMESTIC SUPPLIERS OF ELECTRONICS IN VIETNAM: THE CASE STUDY OF CANON VIETNAM’S STRATEGY Submitted in Partial Fulfilment of the Requirements for the Degree DOCTOR OF BUSINESS ADMINISTRATION A program offered by Southern Luzon State University, Republic of the Philippines in collaboration with Thai Nguyen University, Socialist Republic of Vietnam has been approved by Oral Examination Committee MELCHOR MELO O PLACINO, PhD Expert EDWIN P BERNAL, DBA Expert WALBERTO A MACARAAN, EdD Expert ALICE T VALERIO, PhD External Panel CECILIA N GASCON, PhD Chairman Endorsed by: Recommended by: EDUARDO T BAGTANG, DBM Adviser APOLONIA A ESPINOSA, PhD Dean Accepted in Partial Fulfilment of the Requirements for the Degree Doctor of Business Administration _ Date WALBERTO A MACARAAN, EdD Vice President for Academic Affairs ii CERTIFICATE OF ORIGINALITY iii ACKNOWLEDGMENT Firstly, I am particularly grateful to my dissertation committee: Dr Cecilia N Gascon, Dr Walberto A Macaraan, Dr Edwin P Bernal, Dr Milo O Placino, Dr Alice T Valerio, and special thanks to my adviser, 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 supported my studies I am greatly indebted to the researchers and all my colleagues who have helped me to overcome many difficulties and for sharing their views and insights on this dissertation as well Finally, I wish to thank my family members for their spiritual encouragement and material support My gratitude also goes to all those who may not have participated directly in the accomplishment of this humble research output but their works have been essential to the success of my dissertation Tran Xuan Ngoc iv DEDICATION This dissertation is dedicated to: My great teacher, Dr Eduardo T Bagtang, whose support and guidance has inspired me to be able to fulfill my dissertation, Hanoi People's committee, Hanoi Vocational College of High Technology, my second magnificent home with hope and support, My great parents, who never stop giving moral support and even sacrificed themselves in countless ways, My dearest wife, Hanh Nguyen, my loving companion for the rest of my life, My beloved kids: Phuong Uyen, and Bao Chau, whom I shall love forever, My beloved brothers and sisters who have always stood by me when things look bleak, To all my family, the symbol of love and giving, My friends and my colleagues who constantly encourage and support me, All the people in my life who have touched my heart, I dedicate this research v TABLE OF CONTENTS PAGE TITLE PAGE ……………………………………………………………… i APPROVAL SHEET ……………………………………………………… ii CERTIFICATE OF ORIGINALITY ……………………………………… iii ACKNOWLEDGEMENT ………………………………………………… iv DEDICATION ……………………………………………………………… v TABLE OF CONTENTS ………………………………………………… vi LIST OF TABLES ………………………………………………………… viii LIST OF FIGURES ……………………………………………………… xiii LIST OF APPENDICES ………………………………………………… xiv ABSTRACT ………………………………………………………………… xv CHAPTER I II III INTRODUCTION …………………………………………… Background of the Study ………………………………… Statement of the Problem ………………………………… Objectives of the Study …………………………………… Hypothesis of the Study …………………………………… Significance of the Study ………………………………… Scope and Limitations of the Study ……………………… 10 Definition of Terms ………………………………………… 11 REVIEW OF LITERATURE ……………………………… 15 Conceptual Framework ………………………………….… 117 METHODOLOGY Locale of the Study ………………………………………… 118 Research Design …………………………………………… 119 Populations, Sample & Sampling Technique …………… 122 Research Instrument ……………………………………… 123 Data Treatment and Processing Method ……….…….… 124 Statistical Treatment ……………………… …….…… 124 vi IV RESULTS AND DISCUSSIONS ………………………… 129 Extent of Profile of Canon Vietnam ……………………… 129 Extent of Autonomy of Subsidiary Company ….………… 145 Extent of Knowledge Transfer from Subsidiary Company to Local Suppliers ……………………………… 164 Case Studies of Four Canon’s Local Suppliers ………… 187 Extent of Competitive Advantage of Canon Vietnam … 200 Extent of Implementation of Government Policies …… 218 Extent of Factors Affecting the Capacity Development 230 of Local Suppliers ………………………………………… V SUMMARY, CONCLUSION AND RECOMMENDATION Summary …………….……………………………………… 253 Conclusions ………………………………………………… 256 Recommendations ………………………………………… 258 REFERENCES ……………………… ………………………………… 271 APPENDICES …………………………………………………………… 279 CURRICULUM VITAE …………………………………………………… 289 vii LIST OF TABLES TABLE PAGE The Development of the Electronics Industry and its Supplier Industries in ASEAN Countries Number of Local Suppliers 30 Profile of Local Suppliers 31 Transferred Knowledge Between Canon and Local Suppliers 63 Localization of Canon’s Electronics 83 The Situation of the Electronics Industry and its Supplier Industries in ASEAN Countries 116 Factor Loading 125 Comparison Between the Perceptions of Managers of Canon Vietnam and Managers of Suppliers as to Profile of the Canon Vietnam Affecting the Capacity Development of Local Suppliers 129 Comparison Between the Perceptions of Managers of Canon Vietnam and Managers of Suppliers on the Extent of Profile of Canon Vietnam Affecting Domestic Electronic Suppliers 137 Comparison Between the Perceptions of Managers of Canon Vietnam and Staff as to Extent of Profile Affecting the Capacity Development of Local Suppliers 138 Comparison Between the Perceptions of Managers of Suppliers and Employees as to Extent of Profile Affecting the Capacity Development of Local Suppliers 139 Comparison Between the Perceptions of the Canon Vietnam Employees and Suppliers’ Employees as to Profile of Canon Vietnam Affecting the Capacity Development of Local Suppliers 142 Comparison Between the Perceptions of Staff of Canon Vietnam and Employees of Suppliers on the Extent of Profile of Canon Vietnam Affecting Domestic Electronic Suppliers 144 10 11 12 13 viii TABLE 14 15 16 17 18 19 20 21 22 23 24 PAGE Mean Difference of the Perceptions of the Managers and Staff of both Canon and Suppliers on the Extent of Profile Affecting the Capacity of Domestic Suppliers 144 Comparison Between the Perceptions of Managers of Canon & Managers of Suppliers on the Extent of Autonomy Affecting Capacity Development of Suppliers 145 Comparison Between the Perceptions of Managers of Canon & Managers of Suppliers on the Extent of Autonomy Affecting Capacity Development of Suppliers 157 Comparison Between Perceptions of Canon Managers and Staff on the Extent of Autonomy Affecting Capacity Development of Local Suppliers 158 Comparison Between the Perceptions of the Managers of Suppliers and their Staff on the Extent of Autonomy Affecting Capacity Development of Local Suppliers 159 Comparison Between the Perceptions of Employees of Canon and Suppliers on the Extent of Autonomy of Canon Vietnam Affecting Capacity Development of Local Suppliers 160 Comparison Between the Perceptions of Canon Employees & Employees of Suppliers on the Extent of Autonomy of Canon Vietnam Affecting Capacity Development of Local Suppliers 162 Mean Difference of the Perceptions of the Managers and Staff of both Canon and Suppliers on the Extent of Autonomy Affecting the Capacity of Domestic Suppliers 163 Comparison Between the Perceptions of Canon Managers and Managers of Suppliers on the Extent of Knowledge Transfer Affecting the Capacity Development of Local Suppliers 164 Comparison Between the Perceptions of Canon Managers and Managers of Suppliers on the Extent of Knowledge Transfer Affecting the Local Suppliers’ Capacity Development 171 Comparison Between the Perceptions of Canon Managers and Staff on the Extent of Knowledge Transfer of Canon Vietnam Affecting the Capacity Development of Local Suppliers 172 ix TABLE 25 26 27 28 29 30 31 32 33 34 PAGE Comparison Between the Perceptions of Suppliers’ Managers and Staff on the Extent of Knowledge Transfer Affecting Local Suppliers’ Capacity Development 173 Comparison between the Perceptions of Employees of Canon & Employees of Suppliers on the Extent of Knowledge Transfer Affecting the Capacity Development of Local Suppliers 175 Comparison Between the Perceptions of Canon Employees & Employees of Suppliers on the Extent of Knowledge Transfer Affecting Capacity Development of Local Suppliers 181 Mean Difference of the Perceptions of the Managers and Employees of both Canon Vietnam and Suppliers on the Extent of Knowledge Transfer Affecting the Capacity of Local Suppliers 182 Comparison Between the Perceptions of Canon Managers & Managers of Suppliers on the Extent of Competitive Advantage of Canon Vietnam Affecting the Capacity Development of Suppliers 201 Comparison Between the Perceptions of Canon Managers & Managers of Suppliers on the Extent of Competitive Advantage of Canon Vietnam Affecting the Capacity Development of Suppliers 211 Comparison Between the Perceptions of Canon Managers and Staff on the Extent of Competitive Advantage of Canon Vietnam Affecting the Suppliers’ Capacity Development 213 Comparison Between the Perceptions of Managers of Suppliers and Staff on the Extent of Competitive Advantage of Canon Vietnam Affecting Suppliers’ Capacity Development 214 Comparison Between the Perceptions of Canon Employees & Employees of Suppliers on the Extent of Competitive Advantage of Canon Vietnam 215 Comparison Between the Perceptions of Canon Staff & Staff of Suppliers on the Extent of Competitive Advantage of Canon Vietnam 216 x 276 Lim, L Y C., and Fong, P E (1982) Vertical Linkages and Multinational Enterprises in Developing Countries World Development, 10(7), 585595 MacDuffie, J P., and Helper, S (1997) Creating Lean Suppliers: Diffusing Lean Production Through the Supply Chain California Management Review, 39(4), 118-151 Martin, X., and Salerno, M S (2003) Knowledge Transfer Capability and its Implications On the Theory of the Multinational Corporation Journal of 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Fiscal year annual report Washington DC www.dot.ca.gov/docs/ct_knowledge_transfer_guidebook) 279 APPENDICES 280 Appendix A Canon’s Evaluation on Supplier Capabilities 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 the 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 exert great efforts to upgrade their ability such as quality control, product cost, and management skill Source: Canon Vietnam Report Period 2005-2012 281 Appendix B Characteristics of Newly Established Enterprises Thanks to the Vietnamese Government’s incentive policy towards part manufacturing, more and more domestic enterprises entered the manufacturing of electronics However, going deeply into details some problems could be found: - Part manufacturing companies concentrated only on horizontal investment, paying attention to quantity - Small companies participated in the manufacturing of parts that consist of highly technological contents requiring high precision - Many enterprises are small-sized with outdated equipment, weak in quality and price assessment as well as supply capability and technology upgrading - Most manufactured products are only fake versions of the original without taking into consideration the standard procedure of meticulous quality inspection Source: Investigation by Ministry of Industry and Trade 282 Appendix C 283 Appendix D Questionnaire 1: For Canon Vietnam SURVEY ABOUT FACTORS AFFECTING THE DEVELOPMENT OF LOCAL ELECTRONICS SUPPLIERS We are conducting a survey about the factors affecting the development of local electronics suppliers Your answers to the following questions will be a great help to us and will be highly appreciated Your responses to this survey will serve as a vital component to complete this study Rest assured that your answers will be treated with utmost confidentiality Part 1: Information about the Surveyed Respondents Company Canon Vietnam Interviewee Position Address Tel Fax Email: Work or Occupation Indirect Direct 284 Part 2: Factors Affecting the Capacity Development of Local Suppliers: (Circle your most suitable choice) Agree (4) Uncertain (3) Disagree (2) 5 1.2 Organizational Structure is simple 1.3 Operation Scale 1.4 Operation Duration at the Locale 1.5 Number of Local Suppliers 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 3.1 Absorptive capacity 3.2 Responsiveness 5 No Affecting factors Subsidiary Company’s Profile 1.1 Company culture close or similar to Vietnam company culture Autonomy of Subsidiary Company 3.3 Knowledge Transfer from Subsidiary Company to Local Suppliers "Hands-on" Approach to Transfer Knowledge Completely (1) Completely agree (5) disagree Levels of Agreement 285 Competitive Advantages of Subsidiary Company 4.1 Production Capacity 4.2 Capacity of Design and Renewing 4.3 Technology of Production 4.4 Qualifications of Management 4.5 Price Policy (Acceptable price) 5 4 Government Policies 5.1 Protection of Domestic Production (Import Tax…) 5.2 Priority for Electronics Industry (Incentives, Production Tax…) 5 5 5.3 Central Management Unit 5.4 Set up Standards Components of Quality and 5.5 Reducing the Gap between Policies and Implementation Thank you very much for your cooperation! 286 Appendix E Questionnaire 2: For Suppliers SURVEY ABOUT FACTORS AFFECTING THE DEVELOPMENT OF LOCAL ELECTRONICS SUPPLIERS We are conducting a survey about the factors affecting the development of local electronics suppliers Your responses to this survey are highly appreciated and will be a vital component to complete this study Rest assured therefore that your answers will be treated with utmost confidentiality Part 1: Information about the surveyed object Company Canon Vietnam Interviewee Position Address Tel Fax Email Work or Occupation Indirect Direct Starting Year of Operation Starting Year of Supply for Canon Vietnam Key products (year 2011 or 2012): Products Percentage of turnover 287 Part 2: Factors Affecting the Capacity Development of Local Suppliers: (Encircle your most suitable choice) Agree (4) Uncertain (3) Disagree (2) 5 1.2 Organizational Structure is Simple 1.3 Operation Scale 1.4 Operation Duration at the Locale 1.5 Number of Local Suppliers 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 3.1 Absorptive Capacity 3.2 Responsiveness 5 No Affecting factors Subsidiary Company’s Profile 1.1 Company Culture Company Culture Close as Vietnam Autonomy of Subsidiary Company 3.3 Knowledge Transfer from Subsidiary Company to Local Suppliers "Hands-on" Approach to Transfer Knowledge Completely (1) Completely agree (5) disagree Levels of agreement 288 Competitive Advantages of Subsidiary company 4.1 Production Capacity 4.2 Capacity of Design and Renewing 4.3 Technology of Production 4.4 Qualifications of Management 4.5 Price Policy (Acceptable Price) 5 4 Government Policies 5.1 Protection of Domestic Products (Import Tax…) 5.2 Priority for Electronics Industry (Incentives, Production Tax…) 5 5 5.3 Central Management Unit 5.4 Set-Up Standards Components of Quality and 5.5 Reducing the Gap Between Policies and Implementation Thank you very much for your cooperation! 289 CURRICULUM VITAE Personal Details Name: TRẦN XUÂN NGỌC Birthday: 30/3/1975 Birthplace: Hanoi - Vietnam Civil Status: Married 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 1997 Hanoi University Technology, Vietnam of 1999 Hanoi University Technology, Vietnam of Southern Luzon University, Philippines State 03/2010 Current Major/ Specialty Academic degree Economic Engineer Bachelor of Economics Master of Business and Administration Master of Business and Administration Business (International Joint Graduate Administration Programs at Thai Nguyen University) Student DBA 290 Employment History Job Title Lecturer Staff Training Lecturer Vice Training Bureau Lecturer Vice President Employer Name 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 End Publications and accomplishments No Authors Name of Publication (Papers, Patents, Monographs) Journals/ Publisher Tran Xuan Ngoc Techniques Quality Ha Noi Management Basic Industry Tran Xuan Ngoc Technology management Publisher for company Science Technology Tran Xuan Ngoc Quality Management Tran Xuan Ngoc Mathematics for Ha Noi University of Business – Textbook industry College of and Publisher Social ... SHEET The Dissertation of TRAN XUAN NGOC entitled DEVELOPMENT OF DOMESTIC SUPPLIERS OF ELECTRONICS IN VIETNAM: THE CASE STUDY OF CANON VIETNAM’S STRATEGY Submitted in Partial Fulfilment of the. .. Affecting the Capacity Development of Local Suppliers 142 Comparison Between the Perceptions of Staff of Canon Vietnam and Employees of Suppliers on the Extent of Profile of Canon Vietnam Affecting... topic "Developing Domestic Suppliers of Electronics in Vietnam: The Case of Canon Vietnam’s Strategy? ?? is indeed vital, meaningful and useful for managers of multinational companies in the electronic