Tài liệu Developing domestic suppliers of electronics in vietnam the case study of canon vietnam’s strategy

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: 1. Profile of the subsidiaries; 2. Autonomy of the Subsidiaries; 3. Knowledge transfer strategies; 4. Competitive advantages of the subsidiaries in Vietnam that can help develop local suppliers; 5. 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 1.1. Background of the Study 1 1.2. Statement of the Problem 3 1.3. Objectives of the Study 5 1.4. Hypotheses of the Study 6 1.5. Significance of the Study 7 1.6. Scope and Limitations of the Study 8 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 LIST OF TABLES Table 1 2 Page SWOT Analysis for the electronics industry of Vietnam 32 The situation of the electronics industry and its supplier 44 industries in ASEAN countries 3 Summary of case studies 49 4 Variables 52 5 Factor loading 55 6 Number of local suppliers 68 Assessment of the Subsidiary Profile by the Canon 7 Managers and the Local Electronic Supplier Managers 8 68 Assessment of the Subsidiary Profile by the Canon Vietnam Employees and the Local Electronic Suppliers’ 69 Employees 9 Assessment of the Subsidiary’s Autonomy by the Canon 79 Managers and the Local Electronic Supplier Managers 10 Assessment of the Subsidiary’s Autonomy by the Canon Vietnam Employees and the Local Electronic Suppliers’ 80 Employees 11 Transferred knowledge between Canon and local 99 suppliers 12 Assessment of the Knowledge transfer by the Canon 105 Managers and the Local Electronic Supplier Managers xi 13 Assessment of the Knowledge transfer by the Canon Vietnam Employees and the Local Electronic Suppliers’ 105 Employees 14 Assessment of the Competitive Advantages by the Canon 117 Managers and the Local Electronic Supplier Managers 15 Assessment of the Competitive Advantages by the Canon Vietnam Employees and the Local Electronic Suppliers’ 118 Employees 16 Localization of Canon’s electronics 119 17 Assessment of the Government Policies by the Canon 124 Managers and the Local Electronic Supplier Managers 18 Assessment of the Government Policies by the Canon Vietnam Employees and the Local Electronic Suppliers’ 124 Employees 19 Reliability of the independent variable: Company’s 126 profile - CP 20 Reliability of the independent variable: Autonomy of 126 Company - AC 21 Reliability of the independent variable: Knowledge 126 Transfer - KT 22 Reliability of the independent variable: Competitive 127 Advantages - CA xii 23 Reliability of the independent variable: Government 127 Policies – GP 24 The reliability of the control variable: Capability 128 Development of Local Suppliers – DCLS 25 Statistical description of the scales 129 26 ANOVA (Testing differences between the study groups) 131 27 Correlations 131 28 Variables Entered/Removed 134 29 Model Summary 135 30 ANOVAe 135 31 Coefficientsa 136 xiii LIST OF FIGURES Figure Page 1 Porter’s Diamond 18 2 “Supplier industries” Concept of Japan 24 3 “Players” network of the “Game Theory” 27 4 “Players” Network in supplier industries 28 5 Expanded “Players” Network in Supplier Industries in a country 28 6 Production Process of Electronic Products 31 7 Export value of Vietnam’s electronics components and computer units 8 36 Vietnam’s import value of electronic components, electronic and computer items 38 9 Conceptual Paradigm 47 10 Performance Results of Canon Vietnam 65 11 Characteristic of local suppliers 97 12 Environment change and Canon response 107 13 Definition of supporting industries 111 xiv LIST OF APPENDIXES Appendix Page A Canon’s evaluation on supplier capabilities 159 B Characteristics of newly established enterprises 160 C Canon Vietnam Organization 161 D Questionnaire for Canon 162 E Questionnaire for Suppliers 165 F Curriculum vitae 168 xv CHAPTER I INTRODUCTION 1.1. Background of the Study After 25 years of reform, Vietnam's economy has grown stronger and integrated deeper into regional as well as global economies. A number of industries have experienced the fast growing; there are also the first Vietnam businesses involved in the supply chain of the global value. Vietnam has become an emerging market that is very attractive to international investors and economic researchers. Practice has proved that the emerging markets could bring the businesses the most important investment opportunities and growth. The emerging markets are the place to test the concept, model, and existing theories. At the same time it also creates opportunities for researching and developing the new theories in the field of business administration. Among the emerging markets, Vietnam is an obvious example of the great and profound changes in attracting foreign investment to develop domestic industry. However, the industrialization of Vietnam today is facing a huge challenge: we must carry it out under the conditions of trading liberalization with other countries all over the world. Meanwhile, the competitiveness of Vietnamese industrial products in general is weak, especially those manufacturing machinery, equipment’s, components and materials. We could say that the most basic weakness of Vietnam's industry stems from the weakness of the supporting industries. This involves the "survival" of the Vietnam industry, closely associated with the issue that whether the economy of Vietnam can be internationally competitive enough to develop or not. On the other hand, that the weakness of fundamental facility have contributed to the deficit of trading balance in Vietnam. 1 Because we have to import a lot of components, raw materials for export production so that the more we boost the exports, the faster the demand for inputs increase, which causes the trade deficit surged Currently, the development of the domestic market fraught with spontaneity, lack of sustainability. Local businesses are numerous yet not strong, the majority belongs to the types of small and medium businesses, which are few, backward, under a poor condition of fundamental and technical facility, lacking developing strategy, capacity and of weak position. The implementation of regional and international commitments of VN is still passive, Quite a few of businesses is now still expecting an extension of protectorate; The slow application of international standards in the production and trade has caused some businesses VN difficulties when joining the production cycle in the local market. In the manufacturing industry, Electronics industry is highly representative for a developing country with a large population as Vietnam. In the context of scientific and technological progress and globalization today, the situation of developing electronics industry in Vietnam has revealed a number of problems. On the domestic market, the supply businesses in Vietnam are of much weaker position than firms with foreign capital investment. On the other hand, the electronic products of Vietnam are put under a huge competitive pressure of China. In terms of the value chain, the electronics industry of Vietnam mainly assembles consumer products, focusing on the stages with low added value. Very few companies produce detailed parts and accessories in electronics. Foreign investors in this sector are mainly export-oriented, not oriented to promote connectivity supporting industries in the country to create a shift in the value chain. This limits the ability to develop this sector and limit the impact of technology transfers as well as scalability to attract FDI. The assembling phase is mainly toward cheap labor, but this is not possible advantage to gain a long-term health. 2 Finding out the solution to promote the development of the domestic suppliers is the major concern of many managers and economic researchers. In order to specify and realize the study content, the subject is limited to the domestic supply of Electronics, as a typical study case. In the context of a 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 effectively building a network of local suppliers. The topic of "Developing Domestic Suppliers of Electronics in 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, the firms who are now providing electronic domestic products the Vietnam Policymakers. 1.2. Statement of the Problem The recent state of electronics industry in Vietnam revealed problems of competition of local suppliers with foreign suppliers. Local suppliers of Vietnam are much weaker when compared to the foreign suppliers. Foreign investors import most of the components of the electronic products; hence, the local suppliers can no longer compete with them even with their cheap labor. This situation limits the development of electronic industry in Vietnam. To make the local suppliers of Vietnam competitive there is a need therefore to develop their capabilities. This study aim of the following objectives: 1. Identify the existing condition and operation of Canon Company in Vietnam in term of: 3 1.1. Company culture 1.2. Organizational Structure 1.3. Operation Scale 1.4. Operation duration at the local 1.5. Number of local suppliers 2. Find out the extent of autonomy of Canon Subsidiary in term of: 2.1. R&D 2.2. Financial Management 2.3. Marketing Strategy 2.4. Production Strategy 2.5. Production Process 2.6. Supplier Selection 3. Determine the extent of knowledge transfer from Subsidiary company to local supplier in term of: 3.1. Absorptive capacity 3.2. Responsiveness 3.3. "Hands-on" approach to transfer knowledge 4. Identify the Competitive Advantages of Subsidiary Company that can help develop local suppliers in term of: 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 4 5. Find out the extent of Government policies towards developing local or domestic suppliers’ capabilities in term of: 5.1. Protection of domestic production (import tax…) 5.2. Priority to electronics industry (incentives, production tax…) 5.3. Central Management Unit 5.4. Set up standards of quality and components 5.5. Reducing the gap between policies and implementation 1.3. Objectives of the Study The overall objective of the study is to determine factors that can help develop the capabilities of local or domestic suppliers in Vietnam. Specifically, the study aimed to determine the current operation of Canon Vietnam following objectives: 1. To determine the profile of the Canon Vietnam in terms of the following: 1.1. Company culture 1.2. Organizational Structure 1.3. Operation Scale 1.4. Operation duration at the local 1.5. Number of local suppliers 2. To determine the extent of autonomy of Canon Vietnam in terms of the following: 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