Sim 337: Contemporary Developments in Business and Management

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Thirdly, foreign trade regulations in recent years can bring many opportunities, as well as threat, to SEVT. Vietnam joined in ASEAN - China Free Trade Agreements (ACFTA) in 2012 (ASEAN, 2012), ASEAN Economic Community (AEC) in 2015 (Fact Sheet – ASEAN Economic Community, 2015), and Trans Pacific Partnership trade deal (TPP) in 2016 (Vietnam Chamber of Commerce and Industry, 2016). According to regulations in AEC and TPP, SEVT has opportunities to export their product from manufactures in Vietnam to China and countries in AEC and TPP without tariff barriers. In contrast, the company also has to face competition from strong rivals which come from China and developed countries in AEC and TPP (such as the US, Japan, and Canada).

In general, political factors bring many great opportunities for SEVT. The company can ease to implement long plans in Vietnam by the stable politic and preferential policies. Moreover, foreign trade regulations helps SEVT be easier to export to China and countries in AEC and TPP, but they also have to compete with strong electronics competitors that come from Japan and the US through TPP.

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Economic factors

Economic factors have direct impacts on organizations’ behavior (Babatunde & Adebisi, 2012; Gillespie, 2014).

Firstly, according to statistic of Tradingeconomics.com (2016), GDP per capita of Vietnam has increased continuously since 1984, and it reached 1077.91 USD in 2014. Moreover, annual GDP growth rate also has tended to go up in recent years (See more in Appendix 3). Average annual GDP growth rate of Vietnam in the period 2006-2015 is 6.0%, which ranks 34th in the world (Global Finance Magazine, 2016). In addition, according to OECD (2013), in the period 2014-2018, the expected average annual GDP growth rate of ASEAN countries is 5.4%, and China is 7.7%. As a result, that leads demand for consumption in Vietnam, as well as ASEAN countries and China, to go up in coming years. Therefore, with manufactures in Vietnam and Trade Agreements (AEC and ACFTA), SEVT has opportunities to increase market share in Vietnam, China, and ASEAN countries.

Secondly, changes of exchange rate significantly influence exporting activities of SEVT. China, which borders with Vietnam (host country of SEVT) and is very close to South Korea (home country of SEVT), is one of the two largest smartphone market in the world (An, 2011), so it is a very important market for the company. Since August 2015, the value of Yuan currency of China has fallen strongly (Zero Hedge, 2016), and tend to continue to fall in 2016 (Yao et al, 2016) (See more in Appendix 3), that makes price of importing products in China increase. However, Samsung Electronics Co. Ltd is moving their manufactures from China to Vietnam (BBC Vietnamese, 2013). For these reasons, it is more difficult to import SEVT’s products to China market in this time, and that could lead market share in China market to go down.

To sum up, the growth of GDP in Vietnam, China, and ASEAN countries can lead demand for SEVT’s products go up in coming years. However, the devaluation of Yuan currency can makes exporting activities to China market be more difficult.

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Social-cultural factors

According to Babatunde & Adebisi (2012), “trends in social-cultural factors influence on the demand for a company's products and how that company operates”.

At first, according to the statistic of kehoachviet.com (2016) about population of Vietnam, and the population pyramid of Vietnam in 2016, Vietnam has young population with more than 34 million people in age from 20 to 39 years old. This age group, which is accounted for one-third all Vietnam population, is young and financial autonomy, so demand for high technology products as SEVT products (such as smartphone, camera) is high in Vietnam. Moreover, there are more than 30 million people in age from 0 to 19 years old, so the demand is continuously high in the future. In addition, population in these two groups also helps SEVT meet the needs of workforce in the present and the future.

Secondly, level of education influences on quality of labor in Vietnam. According to Nguyễn (2015), 80% of workers in Vietnam are unskilled and low level. The majority of employees underwent training processes which are not really consistent with the degree requirements of the region and the world. In detail, 83% of technical workers were evaluated as lack of skill, while SEVT is a hi-tech manufacturing company. As a result, SEVT has to suffer higher raw materials cost and lower productivity due to unskilled direct labors. In addition, Vietnamese workers were also evaluated as lack of labor discipline, which could leads productivity to go down. More seriously, these reasons could make quality of SEVT’s products decrease.

In general, young population of Vietnam would bring high demand and abundant workforce to SEVT in the present and future. However, low quality of labors in Vietnam could lead productivity and products’ quality of SEVT to go down.

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Technological factors

Technological factors can create entry barrier, minimum efficient production level and affect outsourcing decisions. Moreover, technological changes can influence on costs, quality, and innovation (Babatunde & Adebisi, 2012; Gillespie, 2014).

At first, according to Scientific research in Vietnam: Quality and Investment Issues of Nguyễn (2011), R&D activities in Vietnam are limited and the development is too slowly. For example, in the period 1996-2005, number of scientific papers in Institute of Scientific Information journal list which came from Vietnam (3.456) equals one-fifth of Thailand, and one fourteenth Singapore. Moreover, growth rate was slow (26%), which is quite low when comparing to Thailand (45%) (See more in Appendix 5.a). Furthermore, growth rate of R&D activities in physic and engineering, which are important in electronics production, were lower than almost other fields in Vietnam (See more in Appendix 5.b). Secondly, according Nguyễn and Phan (2015), speed of technology transfer in Vietnam is slow and limited due to the lack of synchronization in technology transfer regulations, and the lack of human resource which specializes in commercializing research results.

Limited R&D activities and slow speed of technology transfer are considered as reasons for technologically backward environment in Vietnam. The technologically backward environment is a main reason for the lack