SAMSUNG In Vietnam In Stade of China , Ahmed Ragaie

Ahmed Ragaie
January 22, 2025
26 min read
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This research released by Ahmed Ragaie in 2014 during his masters degree from ESE, University of Buckingham.

In this assignment I chose Samsung as a MNC and Vietnam as a HC also I’ll focus more on Samsung Electronics, the reasons for choose SAMSUNG as MNC and Vietnam as HC will be discussed in the following chapters

As I said I’ll focus more on SAMSUNG ELECTRONICS

SAMSUNG Electronics is a south Korean MNC, its head quarters lies on “Suwon, South Korea”, it is the flagship subsidiary of SAMSUNG Group that’s because its represent 70% of the groups revenues and this measured in 2012, SAMSUNG electronics has assembly plants and sales networks in 80 countries all over the world

Recently the company has diversified into consumer Electronics, it’s considered as the world’s largest manufacturer of Mobile & smart phones and the most popular smart phone for the company is SAMSUNG Galaxy. Also the company considered as a major vendor of Tablet computers (SAMSUNG Galaxy Tab) also the company produce many other Electronics devices that I will show in the next chapter “ introduction – SAMSUNG back ground ”

At the end of the third quarter of 2010, the company had surpassed the 70 million-unit marks in shipped phones that giving it a global market place of 22 % that was more than Nokia by 12 %

SAMSUNG Electronics sold 280 million Mobile phones in 2010 that represent a market share of 20.2 %.

The most sales revenues came from the smart phone “SAMSUNG Galaxy” also the company exceed apple in a global sales of the smartphones during the third quarter 2011, the total market share was 23.8 % in comparison with Apple that had 14.6 % market share.

The company became the world’s largest cellphone market in 2012, which sold 95 million smart phones in the first quarter

Introduction & Background to MNC and HC

SAMSUNG Background

Samsung was founded on 1938 as a trading co. over the next 3 decades from the company existence, Samsung has diversified into groups or areas that’s include insurance, textiles, food processing, securities and retail. During 1960s Samsung expand its overseas trade and on the last 1960s Samsung entered the electronics industry. 1970 considered as a crucial period in shaping present day Samsung.

The following are some statistics on Samsung

Samsung industrial subsidiaries include Samsung electronics and this considered as a world’s largest information technology company according to the measurement of 2012 revenues, and also considered No. 4 in market value. Samsung heavy industries considered as 2nd largest ship builder and this measured by 2010 revenues, and also Samsung engineering and

Samsung C& T considered no. 13th and 36th largest construction companies.

Also SAMSUNG Include other companies in other fields but the main important in this assignment is SAMSAUNG Electronics

Samsung has a very high influence on South Korea’s economic development, politics, media and culture. Samsung represent fifth of total exports of South Korea

Backing to Samsung’s background

In 1990 SAMSUNG has increased its globalized activities and electronics as well in particular the mobile phones and semiconductors has became the most important products that bring income to SAMSUNG

As I mentioned I’ll focus more in Samsung Electronics its one of the world’s leader it produces many kinds of consumer devices like DVD players, Digital & cameras, LCD panels, computers and laptops, printers Semiconductors like flash memory, Ram, etc.…. also communications devices ranging from wireless handsets and smartphones to networking gear also Samsung make a lot of other products

SAMSUNG Electronics began construction on building the world’s largest mobile phone factory in Vietnam at 2013 and this will take a critical discussion in the following chapters

Vietnam Background (characteristics, culture, political systems)

Vietnam located in southeastern Asia bordering the gulf of Thailand, the geography of Vietnam consist of mountains in the Western north and also has densely & hills

Vietnam’s Population count 82,689,518

Religions Buddhist, Hoa hao, cao dai, Christians and Muslims

Language: the official language is tonal official language that can be compared with Cambodia’s language and there are 6 difference tones that can be used

There are other language spoken such as Chines, Khmer, Cham and other languages spoken although there are some similarities to Southeast Asian language

Vietnam is a communist state and it has a mixed economy, Vietnam is a member of the Asian pacific economics cooperation (APEC) and also the association of Southeast Asian nations (ASEAN)

Culture in Vietnam

To get more understanding about Vietnam culture on the figure below

If we investigate and explore the Vietnamese culture among the lens of the 6-D Model, we can get a proper overview of the deep drivers of Vietnamese culture relative to other world cultures
The power distance score is 70 that’s mean people accept hieratical order and This dimension deals with the fact that all the individuals are not equal. The power distance describes that the less powerful people in Vietnam expect and accept that the power is distributed unequally also the people believe that they shouldn’t aim or seeking to get more or higher than their current position in society or business they already work

Individualism Vietnam score is 20 that’s is low and this reflect that Vietnam is collectivistic and in a collectivistic countries the priorities to the groups rather than the individual that’s mean the interests and goals of the group is more important than the personal interests and goals

Masculinity score 40 and this considered a feminine society. And In feminine countries the focus on “working in order to live. Also managers seeking and strive for consensus, people value equality, solidarity and quality in their working lives. But in Vietnam the feminine percentage aren’t so much higher than the masculinity

Uncerinaity avoidance: Vietnam score 30 that’s low and this reflect that citizens of Vietnam don’t care if things are not completely done, this also reflect that members of the culture feel threatened from ambiguous or unknown situation and they have a beliefs that institutions will try to avoid this

Pragmatism: Vietnam score is 57 that’s mean it’s a pragmatic culture, in the pragmatic societies people believe on that the truth depends on situation and time and also they can adopt the traditions on an easy way to change conditions that’s reflect Vietnam’s people is practical persons on a proper degree and don’t try to find reasons for what happened around the

Main Evaluative Content of the Case Study.

Globalization Theory:

o What is Globalization?
o Drivers and critical aspects of Globalization and International Trade
o Evaluation of benefits and shortcomings of Globalization for MNC in HC

Globalization is the growing interdependence of national Economies that including and involving the Customers Producers Suppliers and government in variety different markets. The global marketing refers to the multinational firm’s trend in selling and distributing products & services in many different countries all over the world. Definitely this trend has increased over the last 3 decades that the fundamental shift has been occurred in the world economy. We have moved away from a world in which national economic system that was relatively self contained entities isolated from each other by barriers for cross border investment & trade by many things like language, distance time zone and the differences in each country in culture, business system and government regulations, but we have moved toward declining those barriers due to advances in transportations and telecommunications technology, and the material culture is starting to look similar the world over and the national economies system have merged into an interdependent/ integrated Global economic system

The most 2 important parts or implications of globalization are the globalization of markets that refers to the merging of historically distinct and separate national markets into the global marketplace and this occurred because of the new laws and decreasing barriers that make the trade and business are more easy to sell and buy globally also refers to that the consumers in different countries are beginning to converge on some global norm so all of the above help many companies not only Samsung to benefit from this also many small and medium sized business. Also globalization in markets helps many countries like Vietnam to gain benefit

The second part or implication is globalization in production that’s means sourcing goods and services from locations around the world to gain advantages like cost and quality so this allow the MNC to decrease its overall cost structure so this refers to the fact that products or parts are made in different countries, since different countries have different advantages that lies on Human resources, Land, energy and others. Through this Samsung can gain benefit from enter new country that has cheap labor cost Like Samsung did with china and after the chines labors cost has increased, the company shifted toward more investment in Vietnam also this gain benefit to Vietnam because it’ll offer new opportunities for new jobs also it’ll make the employee more expertise by learning from Samsung and improve the Vietnam’s economy

There are 2 main drivers of globalization that increase and growing the tendency of globalization and international trade the first one I discussed it in the globalization in markets and production in the previous section and the other one including the following:

The advanced technology and the rapid development in telecommunications plus the improvements and the development that happened in transportation and information processing technologies

Actually after the world war a lot of western countries started to work together and decided to remove the barriers on trade to make free trade markets and also the other countries has followed the western countries and also did that. By time the globalization trend increasing rapidly and many things helps to conduct it like microchips, which resulted in the Internet. Defiantly Samsung and Vietnam gain a lot of benefit from that and this will be very clear in the following paragraphs

Some benefits and shortcomings of globalization on Samsung and Vietnam but separate benefits that’s means not a common benefits from Samsung productions as MNC in Vietnam as a HC

Samsung gained tremendous opportunities from Globalization all over the world and just one of the examples, in 2002 the company constructing the synergy with Japanese company and its competitors “ SANYO Electric” and the working strategy between Samsung and SANYO formed as a Joint venture

One of Samsung global strategies is the regional specialist program and this program started on 1990, when the company started to send the young employees abroad for 1 year, for specific objectives

Learn the local language
Learn the local culture
Become an expert in their specialty

Samsung did that program from 23 years ago and the company sent more than 5000 employees to more than 80 countries

About Vietnam benefits from Globalization, the country gain a lot of benefits that I discussed above plus a lot of MNC that work and did an investment on it like LG, NOKIA, Intel and others, so this increase the economy of the country and create a lot of working opportunities and increase the imports and exports of the country

MNC and Global Institution:

o Impact of Global Institutions on HC and MNC (eg.WTO/IMF/WB/FED/ECB/UN/G8 etc) o Impact of Regional Unions on HC and MNC (eg. EU/BRIC/NAFTA/ASEAN etc)
o Discussion of one international trade theory – evaluation for MNC
o Critical Evaluation / Summary of Impact on MNC Management (adv./disadv etc)

In 1986 since the country began the “Doi Moi” process, the country has an impact from that (the economy has gradually integrated into the global market), with the guideline the Vietnam is prepared to be as a friend and reliable partner of all countries in the world community, seeking for peace plus interdependence and development.

Over the last decades Vietnam has realized and recognized the importance of growing global economy and it did a lot of effort to adjust its foreign relation to evolving international economic and political situation in Southeast Asia and it has integrated itself into the regional and global eco. By joining international organizations, Vietnam become a member of the (WB), the international monetary fund and the Asian development bank the country has expanded its trade with its east Asia neighbors as well as countries in western Europe and North America also Vietnam joined the (ASEAN) and joined the (APEC) on 2006

, Many bilateral and multilateral trade agreements have been signed. On 13th July 2000 In order to enhance the trade among Vietnam and other countries

The entrance into force of the bilateral Trade agreement (BTA) that occurred between Vietnam and USA was significant millstone for the Vietnam’s economy and it has expanded rapidly and dramatically it was raising from $2.97 billion in 2002 to $18.6 billion in 2010 and USA considered as Vietnam’s second largest trade partner after China

The implementation of (BTA) included the provision of trade in goods and services and this strengthening the application of intellectual property rights and also considered as a protection for investment and this obviously changed the regime of the trade in Vietnam and also assist Vietnam to accede to the world trade organization (WTO) and this occurred in 2007

Vietnam become the official member of the (WTO), so we can conclude that Vietnam fully joined the globalization process from 2007

(WTO) has an impact on bring larger opportunities on Vietnamese goods to penetrate and expand their foreign market due to the decreasing the tariff barriers, the import of Vietnam will increase

Vietnam also has signed the particular agreement on Information technology (plurilateral that’s means only some WTO members have signed)

Concerning to this agreement the country has agreed to Duty free in some cases allow imports, the zero duty will apply immediately so this has also a positive impact on Samsung Electronics in Vietnam so this show how the governments can play a proactive role in promoting national competitive advantage in certain industries

(International business, competing market place a’8E- Ch5 International trade theory)

IMF and WB and UN haven’t a big effect on the relation between Samsung as MNC and Vietnam as HC however those institutions contribute in reduce poverty there and solve some of Vietnam’s problems but about Samsung and Vietnam they haven’t a direct effect so it’ll not be interesting for discussing

International trade theory

International trade theory is Michael porter’s diamond theory, this theory include that the country can create factor endowments (deep knowledge & government support, advanced technology and skilled labors). Porter makes a diamond shape to display and prove that the country or the company can create a national advantage.

The 4 determinants are the following

Factor conditions
Demand conditions
Relating and supporting industries
Firm strategy, structure, and rivalry

Samsung Electronics conducting a lot of manufacturing in Vietnam because of many reasons will be clearer in the following chapter (MCN and National Factors)

But this is a synopsis on the reasons of why the company produce a lot of products in Vietnam, because of Vietnam is proper for the company for example the labor wages are very cheap rather than chines labors also Samsung should defend profit margins as growth in sales of high –end handsets slows.

The economic growth that occurred in china that lead to wages inflation, make Samsung Electronics decided to increase its presence in Vietnam specially Vietnam is also very near to Korea so it’ll be close to the SAMSUNG supply chain, so Vietnam is proper for the company’s shifting from china

The trend of Samsung Electronics for shifting from china to Vietnam will likely accelerate for at least 2 or 3 years largely because the reasons I mentioned above, ” Lee Jung Soon,” who leads a business-incubation team of the Korea Trade-Investment Promotion Agency in Ho Chi Minh City. Said “Vietnam is really aggressive in fostering industries now”. So its words supported my point of view

MCN and National Factors

o HC ‘Macro’ Factors: political systems, economy, culture, religion, social structure, languages, legal system, goods/labour/capital markets (particular to HC and MNC)

o HC ‘Micro’ Factors: Intellectual Property / Competition / Product Safety / Contract Law / Product Liability / Privatization (particular to HC and MNC)

o Critical Evaluation / Summary of Impact for MCN Management (adv/disadv etc) o Foreign Direct Investment in HC – evaluation – evaluation for MNC

This part will discuss the macro factors like political system, economy, culture good, labor and capital markets in Vietnam with the relation to Samsung after that I will discuss the micro factors like intellectual property, contract law, competition finalized with a summary of the impact for the management team of Samsung in Vietnam and evaluation of FDI in Vietnam with the relation to Samsung

Macro factors like political & legal system, economy, culture, good & labor and capital markets in Vietnam with the relation to Samsung

Samsung Electronics Co. built the world’s largest smartphone business by tapping China’s cheap and abundant workforce, but is now shifting output to Vietnam to secure even lower wages and defend profit margins as growth in sales of high-end handsets slows, The handset business is all about assembling well-sourced components. The most important thing is manpower

Vietnam is also near to Korea “the home country of Samsung” so it’ll be close to the suppliers

According to the political and legal system: the country is politically stable also it has a young and well-educated workforce that can ease Samsung’s investments there. Vietnam realized what it should do to rebuild its economy after the devastating war

The Vietnam’s congress approved Broad ECO. Reforms (Doi Moi or renovation). And this allow to attract the Multinational companies to invest in the country AS FDI also improved Vietnam’s business climate so this one of the reasons that make Samsung and other MNC invest a lot on Vietnam, by the way now Vietnam is one of the fastest growing economics in the world

Vietnam has great emphasize on private sector development and this considered as proper atmosphere for job creation

One of the Samsung’s production facilities in Vietnam as Samsung announced, “the Vietnam’s facility will improve its ability to supply displays to Samsung electronics which already makes mobile phones in the country

A subsidiary of south Korea’s SAMSUNG Electronics announced “that the company received approval to bullied a $1 billion display module assembly plant in Vietnam” and this considered as its first production facility in the country

SAMSUNG Electronics has been ramping up its production capacity in Vietnam for the reasons of lower cost in production according to the compressing competition in the smart phones

About the capital markets in Vietnam show that the domestic companies can’t earn a big money from exports so they spend much money to import for domestic production and this point will be discussed in the “SAMSUNG entry strategy in Vietnam” so this reflect that Vietnam also highly depend on FDI that’s is very good for SAMSUNG

Micro factors like intellectual property, contract law, competition, and others in Vietnam with the relation to Samsung

Intellectual property rights

Vietnam realized the importance of protecting the intellectual property rights that include trademarks and services marks plus the copyright and the industrial design.

(NOIP) is the responsible for the registrations of intellectual property for any foreign company that invest in Vietnam so SAMSUNG did that reverberations and obligations in the copyright office that controlled by the Ministry of Culture and Information

CONTRACT LAW

Hanoi – SAMSUNG Electronics received an approval from Vietnamese authorities to build the factory that produce the smart phones and tablets

The approval allows the south Korean technology giant, which already has 2 major manufacturing bases in Vietnam to expand production of key components to meet growing demand for smart phones as well as the other electronic products in a way that achieve cost competitive

Competition

The rivals like Huawei technologies and Lenovo group Ltd Represent a major challenge to Samsung Electronics especially in Mid- to low tier products

Intel Group considered one of the main competitors to SAMSUNG Electronics In Vietnam.

Intel co. is the world’s largest chipmaker, opened a $1 billion assembly and testing in Ho Chi Minh City in Vietnam on 2010. Also Nokia has its factories In Vietnam that producing Asha smartphones & features handset. Also one of the biggest rivals to SAMSUNG Electronics is LG Electronic Inc that has a big existence in Vietnam, also LG building 400,000m2 complex to make

Televisions & appliances about $1.5 billion as a part of LG investment plan in Vietnam so LG represent a big threat and challenge to SAMSUNG Electronics TV production in Vietnam. Definitely SAMSUNG Electronics has a big presence in Vietnam and the company has High market share in Vietnam

The role of the game now is measured by how much market share the company can gain over its rivals

The production capacity or the production volume of SAMSUNG Electronics in Vietnam is very big and for example the SAMSUNG factory that located in “country’s northern province of Bac Ninh ”can produce screens for 48 million mobile devices annually

Impact for SAMSUNG management – FDI in Vietnam

International diversification is a basic and the most important principles in the business world. In the past decade

Diversification is a strategy that allow to increase profits through selling new products in a new market, actually it has advantages & dis advantages of the company, diversifying internationally is a concept to enhance the value of the company which is source of FDI to gain economic of scale &economic of scope

SAMSUNG using Global procurement, the company looking for potential suppliers that’s committed to enhance the product development, Company culture, plus the contribution to the Global society, so SAMSUNG and suppliers as well as the manufacturers cooperate to conduct the best product

Global procurement not only reduce the production cost but also enhance the productivity, Samsung Electronics built the world’s largest smartphone business by tapping China’s cheap and abundant workforce, but is now shifting output to Vietnam to secure even lower wages and defend profit margins as growth in sales of high-end handsets slows, The handset business is all about assembling well-sourced components, Lee Seung-woo said. The most important thing is manpower also when Samsung conducted international trade, which also produced of FDI investment in Vietnam, both the company and Vietnam gained advantages. Vietnam is very proper to SAMSUNG to be as HC.

After I discussed the macro & micro factors of Vietnam so I will represent the impact on Samsung management from Vietnam as well as the facilities from Vietnam and the benefits on both

One of the main benefits on SAMSUNG Electronics management as well as in Vietnam that the company move to expand its production base in Vietnam specially the country is undergoing a swift economic transition exports of computers parts and specially the smart phones by this both gained benefit that’s Vietnam beginning to overtake the exports of coffee & garments and start to export smart phones and other electronics rather than before that was happened with the other electronics and telecommunications companies that has an investments in Vietnam but in the case of Samsung Electronics the Vietnam’s exports has a rapid increase that totalized 31.8 billion on 2013 and this considered as 24% of Vietnam’s total export

More than 50 % from the 2012

(Wall street journal Updated July 3, 2014 5:01 a.m. ET)

As I said in the previous paragraphs o the assignment that SAMSUNG Electronics has a big investment in Vietnam specially the company has started to shift from china to Vietnam

About one –third of the Global smartphones markets of SAMSUNG Electronics may eventually produce as many as 80 % of its handset in Vietnam

Vietnam conduct a policy that attract FDI investment so it provide many facilities to Samsung to invest in Vietnam like the low taxes as well as flexible contracts law and others

(KPMG)

KPMG considered as a largest professional service firm in Vietnam that established since the country opened the doors to FDI, KPMG has an active office in HANOI and it has more than 800 professional employees. Its functions are: providing services such as “ auditing, tax, plus working as an advisor to the government as well as to the MNC that want to enter the Vietnam’s Market so KPMG has a role with Samsung in Vietnam

A bit of disadvantages

Samsung realize that international diversify may occur complexity of the enterprise that can increase the cost of entering new market like the complexity with new administrative structure that may increase the information processing also it’ll have more management challenges but because of the benefits that SAMSUNG Electronics gain from enter Vietnam that I discussed above, all of these disadvantages aren’t valued

SAMSUNG ENTERY STARTEGY IN VIETNAM

AS I mentioned in SAMSUNG background that show that SAMSUNG Group is not only SAMSUNG Electronics so SAMSUNG group has a mix of entry strategy in Vietnam

Samsung Group want to implement complex infrastructure, bullied projects and global strategic partnerships and the company selected Vietnam to be the first strategic partner and Samsung arranged an important visiting to Vietnam that was between the president of Samsung, CEO and operator of the project and the Prime Minister and the minister of planning and investment of Vietnam

The deals that occurred between Samsung Group and Vietnam’s government is prompting to be as a part of Vietnam’s national power development and about Samsung Group the company will cooperative and developing the infrastructure of Vietnam that include Hanoi urban development and the national shipyard management normalization project

The deals that happened between Samsung and Vietnam that include the development the infrastructure of Vietnam will also make a joint venture strategy with Korea

Also about SAMSUNG Electronics shifting output to Vietnam to secure even lower wages and defend profit margin this strategy called strategic partnership, the company has employs approximately 40,000 workers in Vietnam also the company has a large scale of R&D center

The company’s investment in the production facilities that located in Vietnam is skyrocketing year after year, for example the company second plant in Vietnam, which is built in February 2014 at an investment of 2.22 trillion won (US$2.11 billion) and The target from this plant to take the place of its factory in China and it’s planning on an additional investment of 1.11 trillion won (US$1.06 billion) in another plant in the Yen phong industrial complex

At the same time the company is seeking to cut production costs in Korea by asking its partner firms to lower their component supply costs. Those have pointed out that SAMSUNG Electronics has made such requests on a rolling basis while asking for bigger markdowns for some of the firms

Finally about SAMSUNG Electronics strategy in Vietnam that the company on the way to replace its presence in china to Vietnam By the

“ Strategic partnership”

5) conclusion

SAMSUNG as MNC is always seeking for international diversification the strategy that allow the company to increase profits through producing in a new market so as I mentioned SAMSUNG Group Has a partnership with Vietnam as well as SAMSUNG ELECTRONICS has the same strategic partnership in its entry strategy in Vietnam because of it realized that Vietnam is the excellent solution because of Vietnam is proper for Samsung for example the labor wages are very cheap rather than Chinese labors also Samsung should defend profit margins as growth in sales of high –end handsets slows. And as we can conclude how the company has worked in Vietnam and what are the facilities that taken from Vietnam as well as the macro and micro factors in Vietnam that help SAMSUNG Electronics and SAMSUNG Group to gain all of that high profits in Vietnam as well as the projects that Samsung group are working with the Vietnam’s government plus the potential projects that will conduct it

Finally as we can conclude from the assignment that SAMSNG and Vietnam gain a very big benefits from the partnership that occurred between both.

Appendix.

This is from UK essays that support my point of view on choosing Vietnam as HC to SAMSUNG http://www.ukessays.com/essays/economics/international-trade-of-samsung-electronics-economics-essay.php