i 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 ii iii 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. iv 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 v 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. vi 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 vii 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 subsidiaries 17 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 viii 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 OF RESULTS 59 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 ix 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 Capacity Development of the Local Electronics Supplier 79 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 the Capacity Development of the Local Electronics Suppliers 104 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 Affects the Capacity Development of the Local Electronics Suppliers 117 4.5. Government Policies 119 x 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 Development of the Local Electronics Suppliers 123 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 RECOMMENDATIONS 139 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 151 APPENDIXES 160 [...]... 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... supporting industry companies in the industry of electronics For that reason, the study pays more attention to the local strategy of the company rather than to global or regional ones However, some regional impacts are also included in the study Canon Vietnam is the main subject of analysis The development of Canon Vietnam is considered a result of the cooperation between outsourcing and domestic suppliers. .. implementation 1.4 Hypotheses of the Study This study aim to test the following hypotheses: H1 There is significant difference in the perception of the managers of the CVN managers, employees and managers, employees of the local or domestic suppliers 6 H2 There is significant relationship of the Profile of the Subsidiaries to the development capability of the local domestic suppliers H3 There is significant... 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... relationship of the Autonomy of the subsidiaries to the development capability of the local domestic suppliers H4 There is significant relationship of the Knowledge transfer of the Subsidiaries to the development capability of the local domestic suppliers H5 There is significant relationship of the Competitive Advantage of the Subsidiaries to the development capability of the local domestic suppliers H6 There... 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... policies of Vietnam government are usually considered in a wide range of various types of electronic companies The role of multinational ones is underestimated Focusing on Canon Vietnam, this study will explore the role of a large company in accelerating the development of domestic suppliers The major direction of such companies affects the entire electronics industry The results of this study will help domestic. .. assemblers and domestic suppliers in Vietnam 8 Firstly, the study focuses on only a successful case in developing domestic suppliers It would make more sense if the study included a larger sample of other foreign companies in the industry Secondly, the electronics industry has a very large market Huge foreign enterprises enter the market to invest in products, semi-products to meet the demands of domestic. .. when combining with domestic suppliers Building an efficient network of domestic suppliers by transferring technology, developing existing relationships, helping these suppliers involve in the value chain, improving the key elements of local environment will help multinational companies promote their strength This is important for leaders to review and adjust the orientation of the company At the national... 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 . 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. 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. 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