In this report, will analyze the key factors driving globalization such as the analysis of the key factors in cost, market, environment and competition that drive global trade and trade. Indepth analysis of the impact of key factors on the global business environment on benefits and challenges. Identify the strategic complexity associated with operating in a global environment. Explain the complexity of the strategic challenges that organizations face when operating in a global environment supported by concrete examples. Critical analysis of strategic challenges in the context of risk and diversification and supply chain flow strategies. Critically evaluate the global business environment, including the opportunities and challenges faced by the organizations. Moreover, Prudential insurance company will be chosen to clarify how the impact of globalization affects the development of enterprises
ASSIGNMENT FRONT SHEET Qualification BTEC Level HND Diploma in Business Unit number and title Unit 18: Global Business Environment (530) Submission date December 02, 2020 Date received (1st submission) Re-submission date Date received (2nd submission) Student name Student ID Class Assessor name Student declaration I certify that the assignment submission is entirely my own work and I fully understand the consequences of plagiarism I understand that making a false declaration is a form of malpractice Student’s signature: Grading grid P1 P2 M1 M2 D1 Summative Feedbacks: Resubmission Feedbacks: Grade: Assessor Signature: Internal Verifier’s Comments: Date: Signature & Date: Contents I Introduction In this report, will analyze the key factors driving globalization such as the analysis of the key factors in cost, market, environment and competition that drive global trade and trade In-depth analysis of the impact of key factors on the global business environment on benefits and challenges Identify the strategic complexity associated with operating in a global environment Explain the complexity of the strategic challenges that organizations face when operating in a global environment supported by concrete examples Critical analysis of strategic challenges in the context of risk and diversification and supply chain flow strategies Critically evaluate the global business environment, including the opportunities and challenges faced by the organizations Moreover, Prudential insurance company will be chosen to clarify how the impact of globalization affects the development of enterprises II Analyze the key factors which drive globalization 2.1 Defination globalization The spread of goods, technology, knowledge, jobs across borders and national culture is globalisation Economically, the economic interdependence driven by free trade is reflected by this phenomenon Globalization is a phenomenon of economic, social, cultural and political significance Economically: enabling businesses to take advantage of competitive benefits, reducing labour prices, costs of materials, and attracting more consumers A major part of foreign trade is transnational businesses Because of their scale and far-reaching trading networks, they are multinational corporations working in more than one nation and wielding immense influence In developed countries, transnational companies offer employment and training, but they are often blamed for the kinds of jobs they provide the amount of wages in developing countries and the environmental effects of their activities In a globalized economy, countries with high labor standards will have higher labor costs and vice versa, countries with low labor standards will have lower labor costs This creates inequality in trade performance - firms in these countries cannot compete on a common ground in terms of labor costs The disparity in labor costs between developed and developing countries has caused laborintensive businesses to be relocated from developed countries (where labor costs are high, high working conditions) to developing countries (where labor costs are low and working conditions are less stringent) The market mechanism will set labor standards by itself Employers who pay low wages, have unstable working conditions, and poor remuneration for employees will lose skilled and experienced workers and will not have a team stable labor From there, the competitiveness as well as the profitability of businesses will be reduced Employees have more choices at work; The working scope is not limited in one country but can be moved to another country The movement of labor in the process of globalization is the solution to the disparity in working conditions and labor demand between rich and poor countries The context of trade liberalization will help reduce tariff barriers and promote more and more countries to participate in international trade Producers and suppliers of products and services may be exposed to wider and more diverse consumer markets Consumers also have more opportunities to choose better goods at more competitive prices For example : Parts from other nations are used for some vehicles In the United States, an automobile that is assembled can import parts from Japan, Germany or South Korea As the US has to pay for some parts from around the world, wait for them to be delivered and then begin regional development, this provides a whole new route for trade Socially: From consumerism to the arts and sciences, social imperialism is visible in the parallels in social patterns between cultures Social globalization has traditionally involved the constant dispersion, whether civilly or by coercion, of values and religious views Most notably, however it is characterized by the growth in contact between individuals from various parts of the world A reduced affinity between individuals in the same area is also countered by this For example : Good examples of social globalisation could include internationally popular films, books and TV series The Harry Potter/ Twilight films and books have been successful all over the world, making the characters featured globally recognisable Culturally: it reflects the exchange between cultures of ideas, values and creative expression and also represents a single pattern of world cultural growth For example : The Silk Road is the trade route between China and the Mediterranean Sea region It allows exchange of not only goods but also culture and knowledge As merchants understood Chinese culture through their trading activities, appreciation of Chinese culture began to grow beyond Chinese borders Politically: approach intergovernmental bodies such as the United Nations and the World Trade Organization For example : Examples of trade blocs are the European Union, the WTO and G8 These organizations help to spread ideologies like democracy, protect human rights, intervene to solve misunderstandings and aid in international agreements and it also refers to the growth of the worldwide political system, both in size and complexity Social protection gender America culture In the period of globalization In the United States, social protection is provided through both public and private contributions and exhibits a trifurcated structure involving employers, employees and the government.11 The Social Security Act of 1935 set the foundation of the current social protection system in the US, which includes three main provisions: old age and disability insurance, unemployment insurance and cash assistance for female-headed families with dependent children At the time of its establishment, the US system was based on the male breadwinner model, where caregiving is assumed to be a female responsibility Means-tested programs provided the basic needs of single-mother families until (re) marriage or the children grew up A series of historical changes, however, have to challenging the persistence of the male breadwinner model Over time, mothers have increasingly joined the labor force, the number of marriages has declined and the number of singlemother families has increased (Albelda 2011) In addition, the decline in manufacturing in the era of globalization has reduced the number of jobs that pay breadwinning wages sufficient to support an entire family (Bernhardt et al 2008) From a gender perspective, the most important reform in the US social policy was the introduction in 1996 of the 'Personal Responsibility and Work Opportunity Reconciliation Act' — commonly known as' welfare reform.' It replaced a cornerstone of the New Deal, known as the 'Aid to Families with Dependent Children,' with the new 'Temporary Assistance to Needy Families Program.' This new program has to provide greater incentives to find employment by setting limits on the duration of government support.12 In addition, this program targets enforcing work, marriage and reducing the size of the welfare state (Abramovitz 2006) The reform introduced stricter rules to the so-called ‘workfare, 'which included performing unskilled public work as a precondition to receive welfare benefits during the periods of surplus To limit nonmarital births, states were allowed to deny aid forever to children who were born while their mother was on welfare 2.2 Yip’s framework 2.2.1 Defination In his book Total Global Strategy: Managing for Worldwide Competitive Advantage, George S Yip first developed the framework of industry globalization drivers (1992) In each industry, there are four factors that underlie conditions that generate the potential for that industry to become more global and as a consequence, the potential viability of a global strategy approach Market : Assess to what degree there are: • Homogeneous desires of customers • Requires for multinational clients • Worldwide • Transferable approaches to marketing This decides the foreign or local business characteristics Cost : Consider the degree to which the cost variables drive towards globalization of the industry: • Large-scale and broad-based economies • Experience and learning • Efficiencies in procurement • Logistics Advantageous • Chances for Arbitrage • Strong cost of research-and development (R&D) Competition : Consider the degree to which the cost variables drive towards globalization of the industry: • Countries Interdependent • Competitors worldwide Government/Environment : Evaluate the degree that governments have: • Favorable regulations on trade • Popular norms of technology • Popular regulations in manufacturing and marketing • Pushing for the globalization of business 2.2.2 Application to Honda Motor in VietNam Profile Honda Motor Company in Viet Nam Founded in 1996, Honda Vietnam is a joint venture between Honda Motor Company (Japan), Asian Honda Motor Company (Thailand) and Vietnam Engine and Agricultural Machinery Corporation with industries Main products: motorcycles and cars After more than 20 years in Vietnam, Honda Vietnam has continuously grown and become one of the leading companies in the field of motorcycle manufacturing and prestigious car manufacturers in the Vietnamese market With more than 10,000 employees, Honda Vietnam is proud to bring customers high quality products, dedicated services and contributions to a healthy traffic society With the slogan "The Power of Dreams", Honda wishes to share and fulfill the dream with everyone through creating new joys for people and society There is a large scale enterprise in the Vietnamese market VISION TO 2030 Become one of the leading automakers in Vietnam Becoming one of the firms with the highest sales and customer satisfaction index in Vietnam Become one of the firms with a team of highly qualified and trained staff 5.1 Sourcing This is the process of sourcing goods and services from international markets across geopolitical boundaries It aims to tap into global effects such as lower cost skilled labor, cheaper raw materials and other economic factors such as lower tariffs and low trade tariffs Honda Vietnam car factory through international markets and trade agreements and organizations Cheaper labor, cheaper raw materials and other economic factors can be effectively exploited to be able to decide to locate the factory where the above factors can be taken advantage of longterm benefits Quality Standard The process of designing accessories of Honda cars is done in steps, including: Idea - Exchange Visualization - Design - Test - Modeling, the process of designing accessories is done in parallel vehicle design process to ensure the unified combination of each model and bring products that are not only superior quality, safety but also environmentally friendly Honda quality standards exist on every part of car accessories, Honda genuine accessories are manufactured under extremely strict standards for a precise fit and optimal performance When you choose Honda genuine accessories, you can rest assured in the highest quality standards for your vehicle Accessory quality checks are conducted thoroughly and rigorously, including factory inspections, microscopic checks together with extensive inspection of the road and driving conditions Although there is a great influence from the supply source, the products imported into Vietnam always put quality on the top priority Honda car products or accessories transported from one country to another within economic alliances may be affected by tariffs, but quality remains unchanged Transportation cost Vietnam's car market currently has the smallest capacity of the five countries with auto industries in ASEAN Therefore, it is very necessary for the State to support the creation of markets, as a premise to accelerate the localization of the automobile industry But there are also many disadvantages that make the prices of domestically produced and assembled cars much higher than imported cars For example, Vietnam lacks a high-end steel and plastic manufacturing industry for the automotive industry, forcing to import with very high logistics costs With a product of similar quality, cars imported from Thailand plus 5% of transportation costs to Vietnam are still 10-20% cheaper than domestic cars Therefore, in order to catch up with Thailand and Indonesia, it is necessary to have special policies 5.2 Production Production is one of the most important aspects of this system It is only possible when all other parts of the supply chain are parallel For production to begin, it is essential to maintain good planning and stocking of goods and inventory Next is the commodity manufacturing process which is the final inspection, packaging and preparation for delivery of the finished product Raw materials or products will be imported directly to the Honda automobile factory in Vietnam The calculations of costs and operating procedures that were determined from the outset will establish the production process for the final product of the Honda automobile factory Export At the seminar on the draft planning for the development of Vietnam's auto industry to 2020, with a vision to 2030 organized by the Ministry of Industry and Trade, an information made many people surprised: in 2010, Vietnam exported over USD 1.57 billion of auto parts (the largest market is Japan with a turnover of over USD 871 million) Currently, quite a few joint venture enterprises with foreign investment have invested in building component factories in Vietnam, but with the main purpose of exporting abroad At Honda Vietnam cars, the number of exported parts is the amount of goods made to order for automobile factories in other countries, not for domestic consumption Meanwhile, domestic Honda cars have to be imported, often complete units and sold domestically awareness of the direction of development Local assembly The car factory in Japan has a factory in Vietnam to manufacture parts and materials in the country of Vietnam and assemble it domestically This strategy offers tax advantages or tax incentives but increases coordination costs and can have adverse effects on the country of Japan or Honda itself in Japan Local manufacturing and locating a factory in Vietnam bring benefits such as taking advantage of the cheap labor force in the country itself, but the cost of importing other materials because it is not available in the country local, unintentionally pushing up the price of the product This affects a lot in the Honda automobile product business in Vietnam Local production Japanese automaker Honda has enlisted its factory in Vietnam through the establishment of multinational companies, proving that Japanese car Honda does not have to make them deliver production to third parties in In other countries, Honda in Japan has "taken advantage of the geographical location in Vietnam to set up manufacturing factories" to benefit / reduce service costs or production costs of products Automotive products are made in Japan with high labor costs resulting in high product costs Currently, the Japanese car maker has a factory in Vietnam, hiring workers in Vietnam, so lower wage costs lead to better product prices, in case the car price does not change, it will still benefit greatly from low cost With low labor cost payment, Honda car maker will gain more profit in its business in Vietnam market 5.3 Distribution In the supply chain, distribution is the main driver of the overall profitability of the chain because it directly affects costs and customer experience Establishing a partnership or joint venture by Honda Motor Vietnam is the least expensive approach followed by acquisition Building a distribution network from scratch is costly and time consuming, but it can bring the company the most local experience and capabilities in the long run Thanks to the distribution form, Honda Vietnam has expanded into the Vietnamese market and the strength of Honda has positively influenced Vietnamese users Distribution channels in the emerging Vietnam market are less developed, meaning Honda automakers may need to find new solutions to distribute their products more aggressively to international markets instead of producing domestic products for Vietnamese users Since entering the Vietnamese market, Honda has focused on building its distribution and sales facilities in the major city centers, slowly creeping into the district and town facilities Honda has two main types of distribution channels: Car products are delivered to consumers through authorized Honda dealers called Showrooms Before 1996: Honda Company entered the Vietnamese market by exporting its first cars Honda used this form of penetration because at that time the legal corridor of Vietnam for foreign companies was high and cumbersome Meanwhile, the demand for cars in the Vietnamese market started to grow This is the international strategy - International Strategy of Honda 1996: Honda opened a joint venture company and launched the Vietnamese market as a Civic car This is a move to a new strategy of Honda in the Vietnamese market, which is the application of the multinational strategy - Multidomestic strategy Honda has predicted that in the near future, the potential market in Vietnam will appear a lot of competitors, inevitably there will be a competition on low cost So if right now, building a joint venture factory in Vietnam is a pioneering step and an advantage in the race to reduce costs later In 2006, Honda introduced car production lines to Vietnam At this stage, for the automotive product line, Honda switched from an international strategy to applying a multinational strategy Because in the past, when the Vietnamese car market was very small, adaptive pressure and low cost pressure were not high, Honda mainly imported cars (typically the Honda Accord) into the Vietnamese market Male Once the auto market begins to grow in size, however, a shift to a multinational strategy is needed Honda started to focus on car production lines in Vietnam, typically focusing on developing the Civic line This is the product line Honda believes will have many advantages when competing with the products of competitors VI SWOT and Pestel of Honda Motor 6.1 SWOT Strength Honda is one of the famous brands in the world This is evident through the company's sales of its products at distribution agents in the consumer market From the late 60s to the early 70s, Honda dominated the world market and became the largest motorcycle manufacturer in the world, and since then, the company has never lost this title The consumption market of Honda is very large, Honda is headquartered in Tokyo and is listed on the Tokyo stock market, New York City, London, Paris, California, Canada Honda puts customers first, customer service is not just about taking good care of your car, for them customer service is about providing excellent service, thoroughness and rights Honda always changes the design and design of the car with outstanding design, advanced technology, high quality and safety In 1976, the Accord was immediately known for its low-energy and easy-to-drive characteristics, helping Honda find a foothold in the US Weakness Due to the famous brand name, there are many other products that are not manufactured or have any relationship with Honda company but have imitated Honda brand, affecting the company's title During the current global recession, Honda had to close several subsidiaries in the UK, UK car production fell 47.5% in December of August compared to the same period in 2007 Number of car registrations new cars in 2008 also decreased by 11% to 2.1 million units On January 30, Honda said profit in the last months of 2008 decreased by 90% compared to the same period of the previous year Amid the global financial crisis, Honda institute is constantly adopting cost-cutting measures, including the temporary closure of its main UK base for four months from February Sales of Honda Motor will decrease 94.7% Japan's second-largest carmaker - Honda Motor, on Tuesday (April 28) estimated that group sales for fiscal year 2009 starting in April will fall 94.7 percent year-on-year 2008, to 10 billion yen ($ 104 million) Opportunity SEMA 2008 events: On the occasion of SEMA 2008, Honda announced the completion of a new version of the very popular Honda Fit 2009 model along with parts of the new Mugen model and will be launched in the first half of next year (2008) The accessories include: 16-inch molded rim, aluminum oil pump cap, sports grille, new silencer system, rear symbol image, flexible handlebar, sports pedal, floor mat Manufacturing more new products: Since 2004 the company has started to manufacture diesel motors that are both quiet and filter-free to meet pollution standards However, it can be argued that the background to this company's success was the motorcycle making Continuously expanding consumption market: Honda is showing its determination to increase market share in China, with plans to create a separate brand for the Chinese market Honda has dominated the consumption market in Canada Canada is a vast expanse of land that stretches to the horizon and spans all four directions, with scattered lakes, and cities just tiny dots connected by transport routes This is probably an opportunity for Honda to develop its product line Risk : There are many other competitors such as Yamaha, Toyota Honda has many counterfeit products of the company's trademark, this contributes to a great influence on the company's brand Many new Honda products are automatically increased in prices by dealers in the market, making customers lose confidence in the company This also greatly affects the prestige and reputation of Honda 6.2 PESTEL Political factors Vietnamese politics is stable, creating peace of mind for investors when conducting business in Vietnam Economic factors Compared with other countries in the region, with the advantage of low labor cost and resource use cost The Government has many policies to attract foreign investment, creating conditions for foreign enterprises to invest in Vietnam In terms of attractive market, GDP ranked 42nd in the world (2009) Social cultural factors Population: 93,421,835 (2014) is the 14th most populous in the world Age structure: 0-14 years: 26.1% (male 14,069,408 / female 13,033,738) / 15-64 years: 68.3% (male 32,149,986 / female 32,392,043) Vietnamese people's preference for foreign goods Geographical factors Long coastline, convenient sea traffic Spacious traffic infrastructure Technological factors The Vietnamese market for using cars has begun to be popular and widely used VII Compare the Honda Vietnam automobile market with China In the Chinese market In June 2019, Honda sold 148,382 cars in the Chinese auto market, a remarkable growth compared to last year of 37.4% Both of its joint ventures in China hit record sales in the past month GAC Honda grew 6.6% to 65,340 units while Dongfeng Honda increased sales 77.9% with 83,042 units sold In the first two quarters of the year, Honda's sales in China totaled 745,409 units, up 22.4% year-on-year In total, there are models Honda CR-V, Civic, Accord, XR-V, Fit and Crider with sales in June exceeding 10,000 units Sales of CR-V Hybrid and Accord Hybrid also increased by 86.4% (reaching 3,305 units) and 202.6% (reaching 2,648 units) In the Vietnamese market In the last fiscal year of 2019, Honda Vietnam has achieved record sales with 32,218 cars, the highest in the past 10 years, an increase of more than 150% compared to fiscal year 2018 This growth rate It was higher than the overall growth of the passenger car market, and also set a sales record since Honda Vietnam entered the Vietnamese auto manufacturing and trading segment This year Honda's new car sales in China dropped 10% to 113,430 units in April 2020 However, this reduction is much lower than the 50.8% decrease in March The Honda Vietnam report said that the sales of auto segment in April reached 843 units of all types, down 57 % over the previous month and down 52% over the same period last year Based on the above data, it can be seen that Honda chain factories in China should not withdraw the factory to Vietnam The impact of business activities in the process of globalization has a lot to with Honda automobile business results in Vietnam The introduction of many car companies into the Vietnamese market through free trade agreements Vietnam's infrastructure structure is not good, tariff policies are still high, import and export processes are cumbersome in the operating process, customer choice is also affected by brands come from other manufacturers The proposed displacement products to Vietnam are also not flawed In the short term, manufacturers may have difficulty moving production due to supply chain rearrangements At the same time, companies often fall into the bipolar world when deciding to relocate and how to enter new schools These issues will have a great impact on the competitiveness of businesses Therefore, businesses need to make wise decisions to keep production activities stable in a short time, while expanding business when necessary VIII Global supply chain between Vietnam and China In China The supply chain is most important to China's long-term development Firms lured by China's low production costs will redirect supply chains to cheaper locations Over time, China's cost advantage has been eroded by rising wages and space costs and rising tariffs In contrast, firms wishing to enter China's vast domestic market are less likely to retreat Recent surveys by the US and European chambers of commerce show that the majority of respondents have no intention of leaving China despite the trade war and the economic shock COVID-19 For groups of businesses who come to China to take advantage of the comprehensive manufacturing ecosystem, whether to stay or stay is more difficult On the one hand, the reasons for staying remain as strong as before: China's infrastructure, logistics network and skilled labor supply outperform those of emerging economies On the other hand, these benefits now need to be weighed against high tariffs, potential sanctions, technological constraints and mounting political pressure In Viet Nam Vietnam is one of the developing countries, on the path of industrialization and modernization towards an open market, and along with the 4.0 revolution, supply chain management is an essential solution to increase competitiveness of Vietnamese goods in addition to improving product quality and services Emerging as a dynamic, open-ended economy in Southeast Asia, Vietnam needs to grasp the new trend of the global economy and improve its competitiveness However, the supply chain management industry in Vietnam has not been fully focused, the economy has not fully understood the importance of supply chain management in the production and distribution of products to consumers The manifestation is that there is no university or educational institution providing full and formal training in supply chain management; human resources in this industry are always in shortage; There is not even a department within companies that deals with SCM; There are also quite a few companies in supply chain management Challenges Only 25% of Logistics requirements are provided by domestic firms (SMEs), and the rest of the market share is “procured” by foreign firms Currently, there are about 3000 Logistics enterprises of which about 1300 actively participate; There are about 6000 employees and million workers working in the industry but only meet 40% of the actual demand If you look at the overall picture, it is clear that foreign businesses are in the above position, but domestic businesses also have many advantages: first, Vietnamese businesses own most of the warehouse, making business Foreign enterprises have to sub-lease or associate or enter into joint ventures to provide logistics services, secondly, domestic enterprises understand the market, customer psychology, culture and traditions of Vietnamese people; thirdly, Vietnamese human resources are quite quick to grasp foreign technologies Most logistics service providers are at 2PL or 3PL; Integrated logistics (4PL) and supply chain management are few and limited by capacity and service network The World Bank's Annual Report ranks LPI (Logistic efficiency index), Vietnam ranks 39/160, up 25 places compared to 2015, ranks 3rd in Southeast Asia, but the international LPI The opinion department participating in the evaluation of the transporters, freight forwarders, logistics operators who have business relations with Vietnamese enterprises is not assessed by Vietnamese enterprises, so it is objective The transport infrastructure has not met the development needs of the SCM industry One of the biggest bottlenecks is that costs remain high, accounting for 25% of GDP, with the following factors being attributed to: • Vietnam's infrastructure and transport systems are lacking and weak compared to the country's development requirements, especially underdeveloped roads commensurate with the speed of industrialization and urbanization of our country, leading to overload and congestion • Although state management agencies are implementing many reforms to streamline administrative procedures and facilitate trade, in reality, there are still many difficulties in customs clearance procedures leading to slow rotation freight, increase costs of businesses • Inland sea transport has not fully utilized to reduce the load for road transport • The linkage between ports and port services (warehouse, yard, logistics center) is still limited due to the lack of high-tech applications in logistics management and operation leading to much more expensive costs • Human resources are scarce, so it only meets the size of the business and is expensive in training human resources in this industry Solutions To reduce costs for supply chain management in Vietnam, there are several measures as follows: • Reduce transportation costs • Professionalization of human resources • Integrated traffic planning Vietnam is a country with great development potential, so it receives a lot of investment from large retailers in the world In fact, the expansion of foreign enterprises has made it even more difficult for domestic enterprises that already face many difficulties to find customer markets because they cannot compete with big competitors We are losing at home, because businesses have many outstanding advantages from capital resources, brands, goods circulation to high quality staff, large corporate governance model Vietnamese businesses are focusing on e-commerce channels because the growth potential of this industry is huge This goal is facing many challenges such as lack of trust from consumers, the control of sources is not good, especially the process of building a model of product road management from production sites to consumers The industry's biggest goal is to turn Vietnam into a regional Logistics Center; To this, first of all, the Government must issue preferential policies, build modern bridge and road systems; After that, special attention must be paid to building high-quality human resources in this industry IX Conclusion In these days, globalization is affecting all countries of the world, with free trade, countries exchanging goods and information with each other and as a result traditional barriers between countries the country is gradually being demolished and the world is becoming closer and closer X References : 247, T., 2020 Ơtơ Nào Của Honda Được u Thích Nhất Tại Châu Á Và Châu Úc? 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