Reasons to Enter Vietnam At 2004, Coca-Cola made its first move out from Africa, they decided enters to the Asia’s markets which include Vietnam. These acquisitions were in line with the Group’s growth strategy to expand into emerging markets, in order to underpin the organization’s position as an Emerging Markets Specialist (Coca-Cola Sabco History, 2009). The first move of Coca-Cola into Vietnam is based on the new emerge and rapid growth of economy in Vietnam.
As the rapid population growth and improvement of economy in Vietnam, Coca-Cola took the opportunity to enter their market. Vietnam’s economy was growing at between 4% – 8% after recovery from the Asian Financial Crisis of 1997.The enhancing of living and educational standards of Vietnamese help in providing employment opportunities to them. The entry of the firm in Vietnamese market able in enhance the economic development and create some job opportunities for the local people. As the soda consumption has reduced in the U.S., Coca-Cola is one of the soft drink industries that increasingly looking to expand their business in countries where there consist of higher national income rate and huge population (Bloomberg Business week New, 2012). This news had shown the reason that Vietnam still able to encourage more investment from Coca-Cola in Vietnam.
Moreover, Vietnam relies on the petroleum industry for its local energy consumption and for export; it will cause the economy of Vietnam more stable and attracted many foreign companies direct invest in Vietnam. This had attracted Coca-cola to enter Vietnam markets at 2004. Moreover, the payment for employees in Vietnam is quite low, therefore, it attract foreign companies moving into Vietnam instead of traditional market such as China, India, and Thailand. These all reasons push Coca-Cola chooses Vietnam and made it first move into it to operate its plants there.
2.0 Analysis Gains of entering into a foreign country Political Stability Entering into a foreign country such as Vietnam consists of gains and shortcomings. One of the advantages to enter Vietnam is its political stability. According to Mr. Philippe Delalande in 2010, he mentioned that political stability is one of the factors that have helped Vietnam pursue its economic development policy. Others view from George E. Kobrossy in 2013, General Director of Zamil Steel Vietnam (ZSV) also mention the advantages which help in attracting foreign investors to the country is Vietnam’s political stability, administrative reform and its efforts in upgrading infrastructure facilities. Coca-Cola faced problems to enter some countries few decades ago due to the politic issues that happened in the country. Standage (n.d) said that Coca-Cola did not exist in the former Soviet Union (Russian) because they worry that the revenue would go transfer to communist government coffers. While Webster (n.d) mention that Coca-Cola not enter French society because Coca-Cola was a mark of capitalism and a difference between capitalism and communism during Cold War.US brand like Coca-Cola found itself pester in politics, or singled out for criticism although they are not trying to get involved in politics, said Webster. Thus, for the obvious reason, Coca-Cola reentered Vietnam’s market because of the political stability after Doi Moi (reformation) policy as they feel more assurance in expanding their business in a stable politic country.
Foreign Direct Investment One of the gains of Coca-Cola is that Vietnamese government provides many investment incentives for foreign investors, the corporate income tax is low compared to other countries in South East Asia (standard rate is 28% and preferential rates from 10% to 20%). The Foreign Investment Agency reports that by 15 December 2011 Vietnam had attract more than 13,667 foreign investment projects, with a total capital of around RM612 billion (Foreign Investment Agency, 2011). Foreign-invested companies including Coca-Cola accounted for around 27% of the country’s exports, 35% of the country’s total industrial productivity, constituted 13% of GDP, and contributed around 25% of total tax incomes (Vietnam Investment Review, 2001). Thus, there are about US$300 million was announced to invest in Vietnam by Coca-Cola for further capture growing opportunities in one of the most developing consumer markets (Staff, 2012). Under commitments made by Vietnam as part of its agreement to the World Trade Organization, Vietnam offered foreign enterprise which included Coca-Cola the general right to import products and sell them to licensed distributors. The process to obtain an investment certificate for foreign-owned company is much easier now.
Low labor cost Vietnam is gaining competitive advantage for labor-intensive production industry on the basis of low salary level (Meyer, 2005). In the research on labor costs, Japan labor cost in one month is $1,810, continue by $1,144 in Singapore, $82 in Indonesia, and then Vietnam rank the second lowest place which is US$49 a month and follow by the highest is Cambodia with $47.36 (EuroCham, 2010). Coca-Cola who has chosen to set-up regional offices in Vietnam help Vietnam proven the extensive labor pool is competitive in the market (GLC, 2007). According to the information collected, we found that Coca-Cola Vietnam invest in Vietnam to help boost the local business sales and created 500 new jobs locally in Vietnam while the total labor force that gain this benefit is 99 percent of local Vietnamese (Staff, 2012). This high percentage use of labor force proves that Coca-Cola Vietnam is afforded to hire more local employees due to their low labor cost or low wages.
Low production Cost Coca-Cola entering Vietnam because one of the gains is they can exempted from import duties to build fixed assets, such as bottling machinery, means of transport, and production materials that are not produced locally. Additional exemptions are available for raw materials, parts and materials imported for production of goods for export. Coca-Cola’s revenue in central Vietnam had witnessed a double digit growth over the past few years; three bottling plants of the company produce more than 608 million liters per year in Vietnam (Nordic Industry Development, 2012). Therefore, Coca-Cola beverages Vietnam invested over $3 million into its second Danang-based purified bottle water production chain, with a capacity of up to 6,000 of 500ml bottles per hour due to the low production cost they gain in Vietnam (Nordic Industry Development, 2012).
Variety Product Lines that meet Vietnamese’s Beverages Need Coca-Cola enters Vietnam as they met the demand for hydration, nutrition and energizing refreshment of their customer in Vietnam. Coca-Cola has variety brand of products in Vietnam such as Coca-cola, Coca-cola Light, Fanta, Joy, Minute Maid, Dasani, Real Leaf, Samurai, Schweppes and Sprite. Joy is bottled water drink that pure and has the largest share of 32% compare other brand that company produce. Coca-Cola has the second largest share of 23% continue by Sprite with the percentage of 18% and Fanta which has 17%. Other brands like Samurai obtain 5% from the market share while Minute Maid and Schweppes each occupied 2.5% (Soft drink-Vietnam, 2010). They offer high quality product that meet the need of their target market. For example, Samurai is targeted on the underserved market which is the Vietnamese male adults who need an energy boost, as most of them have heavy workloads. This vitamin-packed energy drink is fortified with six essential B vitamins and has an exciting and refreshing taste with a carbonated, sweet flavor that appeals to the Vietnamese palate and popular among the target group. (Coca Cola Sabco, 2009)
Shortcomings of entering into a foreign country Unable to generate wholly-owned subsidiary business One of the shortcomings of Coca-Cola in Vietnam is that foreign-based companies are generally not able to have wholly-owned subsidiary without production in the country. Therefore, importers would normally cooperate with local partners. (Nguyen
Examining strengths and weaknesses of non governmental organizations
The purpose of this paper is to discuss the strengths and weaknesses of non-governmental organizations (NGO) as development actors in a developing country. NGO’s have many programs, functions and roles which can assist a community to become empowered and eventually attain sustainable development.
Microfinance programs improve the economic well-being of communities by job creation and income generation. NGOs, through capacity building, develop community capacities such as ability, skill and knowledge of mobilizing resources, planning and evaluating community initiation and solving problems. NGO’s mobilize the communities to be self-reliant, assisting communities to discover their own potentials and rely on their own resources.
As a point of reference, the term “developing country” as used here complies with the criteria for emerging and developing countries as applied by the International Monetary Fund (IMF) (IMF, 2010). The developing country chosen for this paper is Thailand.
Background Knowledge-Based Economy Thailand is similar to other developing East Asian countries by having its economic structure change from an agriculture-based economy to an industrial-based economy (Intarakumnerd, et al., 2009, p. 1447). Share of the agriculture sector in GDP has reduced from almost 40% in the 1960’s to approximately 10% in the late-1990’s, with the industrial sector experiencing an inverse condition (Intarakumnerd, et al., 2009, p. 1447). This economy has been dependent upon labor-intensive manufacturing for many decades; however, this country is in the stage of developing creative industries based upon a knowledge-based economy (KBE). Per the Organisation for Economic Co-Operation and Development (OECD), knowledge-based economies are those “economies which are directly based on the production, distribution and use of knowledge and information.” (OECD, 1996, p. 7). This is reflected in the trend towards growth in
high-technology investments, â€¦ more highly-skilled labour and associated productivity gains. Although knowledge has long been an important factor in economic growth, economists are now exploring ways to incorporate more directly knowledge and technology in their theories and models. “New growth theory” reflects the attempt to understand the role of knowledge and technology in driving productivity and economic growth. In this view, investments in research and development, education and training and new managerial work structures are key. In addition to knowledge investments, knowledge distribution through formal and informal networks is essential to economic performance. (OECD, 1996, p. 7).
Regardless of manufacturing share in the GDP, Thailand, with 42% total land is used for agriculture purposes, still keeps its role of being the rice bowl of the region and positions itself as a key player in the global food and agriculture market (Intarakumnerd, et al., 2009, p. 1447).
Thailand first began to implement KBE with policy framework that was established in 2006: IT 2000 (1996-2000) (Bhatiasevi, 2010, p. 116). The target was to establish a foundation for information and communications technology infrastructure. This has subsequently been followed with an IT 2010 policy framework (2001-2010) which had the following objectives:
1) to upgrade the status of Thailand’s technological capability from a “dynamic adopter” into a “potential leader. (which will be measured using the United Nations Development Program’s Technology Achievement Index).
2) to increase the number of knowledge-based workers in Thailand from 12 percent to 30 percent of the total labor force.
3) to increase the proportion of knowledge-based industries to 50 percent of the country’s GDP. (Bhatiasevi, 2010, p. 116).
Statistical indicators are important in understanding the degree/level at which an economy is becoming a KBE. A framework must first exist in order to be able to measure data statistically (Leung, 2004). Research has shown that investment in information and communications technology contributes to productivity and economic growth (Jorgenson, 2001, p. 8). Thailand still lags behind other developed countries. Thailand has to steadily invest in telecommunication infrastructure and Internet connectivity. Although initiatives have been made towards this in the form of National IT (Information Technology) 2000 and National IT Policy 2010, there is still no legislation or measurement such as the key performance indicator of how successfully are IT and education being integrated (Bhatiasevi, 2010, p. 118).
National Innovation System A National Innovation System (NIS) may be defined as an interactive system of public and private firms, universities, and government agencies whose goal is to produce science and technology (S