FOREIGN TRADE UNIVERSITY FACULTY OF ECONOMICS AND INTERNATIONAL BUSINESS MAJOR IN FOREIGN ECONOMICS
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Factors Affecting the Operational Strategy of Japanese TNCs
GRADUATION THESIS
Topic:
OPERATIONAL STRATEGY OF JAPANESE TRANNSNATIONAL COMPANIES AND SOME SUGGESTIONS FOR COUNTERPOLICY FOR VIETNAM
Student : Vu Thi Ha
Grade : Japanese 6
Course 44
Instructor : MSc. Pham Thi Mai Khanh
Hanoi - 2009
INDEX
INTRODUCTION 1
Chapter 1 THEORETICAL BASIS OF TNCs' OPERATIONAL STRATEGY AND OVERVIEW OF JAPANESE TNCs 4
I. Overview of transnational corporations 4
1. General overview of transnational corporations (TNCs) 4
1.1. Concept of TNCs 4
1.2. Structure of TNC 6
2. TNCs' operating strategy 7
2.1. General concept of company's operating strategy 7
2.2. Main operating strategies of multinational corporations 8
3. Some theories related to the operating strategy of TNCs 11
3.1. Product life cycle theory 11
3.2. Internalization Theory 12
3.3. Trade Barrier Theory 13
3.4. Labor resource theory 14
3.5. Some other theories 15
II. Formation and characteristics of Japanese TNCs 17
1. The formation of Japanese TNCs 17
2. Characteristics of Japanese TNCs 20
Chapter 2 OPERATIONAL STRATEGY OF JAPANESE TRANNSNATIONAL COMPANIES FROM 1990 TO PRESENT 25
I. Factors affecting the operational strategies of Japanese TNCs 25
1. Internal factors 25
1.1. Harsh natural conditions 25
1.2. The Yen appreciates and production costs in Japan are high 26
1.3. Trade conflicts with the US and Western Europe 28
1.4. Japanese government policy 29
2. External factors 30
2.1. The rise of globalization 30
2.2. Impact of the scientific and technological revolution 31
II. Main operating strategies of Japanese TNCs from the 90s to present 32
1. Networking Strategy 32
1.1. Purpose of implementation 32
1.2. Contents 33
2. Strategy to diversify production and business structure 38
2.1. Purpose of implementation 38
2.2. Contents 38
3. Merger enhancement strategy 44
3.1. Purpose of implementation 44
3.2. Content 44
4. Localization strategy of production facilities 48
4.1. Purpose of implementation: 48
4.2. Contents 49
Chapter 3 OPERATIONAL STRATEGY OF JAPANESE TNCs IN VIETNAM AND SOME SUGGESTIONS FOR VIETNAM TO INCREASE FDI ATTRACTION FROM JAPANESE TNCs 55
I. Overview of Japanese TNCs' activities in Vietnam 55
1. Overview of Japanese FDI activities in Vietnam 55
2. Impacts from the activities of Japanese TNCs on Vietnam 62
2.1. Providing important capital for the country's industrialization and modernization 62
2.2. Solving employment and developing labor resources 63
2.3. Actively contribute to economic restructuring and scientific and technological development.64
2.4. Initial steps to promote Vietnamese enterprises to participate in supporting industries 65
2.5. Contribute to attracting other foreign investors to Vietnam 67
2.6. Leading in social contributions 68
2.7. Some other impacts 70
II. Some suggested policies for Vietnam to increase investment attraction from Japanese TNCs 72
1. Improving investment environment and policies 72
1.1. Ensuring solid economic and political stability 72
1.2. Promote investment in infrastructure development 72
1.3. Completing the legal system on FDI 73
1.4. Strengthening investment promotion 74
2. Strengthening the effectiveness and efficiency of State management 75
3. Establishing domestic investment partners and developing supporting industries 77
4. Human resource development 80
CONCLUSION 82
LIST OF TABLES
Figure 1. Exchange rate fluctuations between Yen and USD (first quarter of 2009) 27
Figure 2. Exchange rate fluctuations of Yen and EURO (first quarter of 2009) 27
Figure 3. The path of establishing new overseas branches of Japanese TNCs 34
Figure 4. Number of Japanese TNCs branches worldwide (1990-2000) 36
Figure 5. Ratio of foreign branches of US TNCs and Japanese TNCs by industry (1990 - 2002) 41
Figure 6. Number of Japanese TNCs participating in M&A (1990 - 2004) 46
Figure 7. Japanese FDI capital in Vietnam (1991 - 2007) 56
Figure 8. Structure of Japanese FDI capital in Vietnam by industry (1994-2007) 57
Figure 9. Structure of Japanese FDI in Vietnam by investment form 58
Table 1. Number of Japanese TNCs branches by foreign investment sector (1990-2002) 35
Table 2. Japanese TNCs in the top 100 TNCs ranked by amount of overseas assets in 2006 37
Table 3. Number of foreign branches of Japanese TNCs by industry (1988 - 2002) 40
Table 4. Business lines of Mitsubishi Corporation 43
Table 5. Value of M&A deals in the world (1990-2005) 45
Table 6. M&A costs compared to total FDI output of some countries (1990 - 2004) 47
Table 7,700 TNCs spend the most on R&D activities in the world 50
Table 8. Top 20 TNCs spending the most on R&D activities in the world (2002) 51
Table 9. Expenditures on R&D activities of Japanese TNCs abroad by
Geographical area (1995-2002) 53
Table 10. Structure of Japanese FDI in Vietnam by locality 59
INTRODUCTION
1. Reason for choosing the topic
Japan is the most developed country in Asia and one of the three economic centers of the world. At the same time, Japan is also the leading country in international investment. According to UNCTAD, in 2007 alone, the total foreign investment capital of Japanese enterprises reached 73,549 million USD. Therefore, attracting investment from Japanese enterprises, especially transnational corporations (TNCs), is becoming a concern of countries, especially developing countries. Direct investment from Japanese TNCs not only provides a large source of capital for national economic development, but also brings benefits in technology transfer as well as opportunities to learn business experience, management experience, etc.
After more than 20 years of attracting foreign direct investment, Vietnam has gradually become an attractive destination for investors. Realizing the importance of foreign direct investment for the cause of industrialization and modernization, our country has continuously improved the investment environment and sought many measures to attract investment from foreign enterprises, especially TNCs with great investment potential from developed countries such as Japanese TNCs. According to the Foreign Investment Agency, by the end of 2007, Japan's total FDI capital in Vietnam reached over 9 billion USD with realized capital reaching nearly 5 billion USD. However, Japan is still only the 4th country in terms of investment capital in Vietnam, after Korea, Singapore and Taiwan, a result that is not really commensurate with the investment potential of the two countries. Therefore, the current requirement is to find effective measures to further attract direct investment from Japanese enterprises and especially from Japanese TNCs.
For the above reasons, I would like to choose the topic: " Operational strategies of Japanese multinational corporations and some suggested countermeasures for Vietnam " as the research content for my graduation thesis.
2. Research purpose of the topic
One is to systematize theoretical issues on multinational corporations and the operational strategies of multinational corporations.
Second is to analyze the formation and main operating strategies of Japanese TNCs in the period from 1990 to present.
Third, some suggestions are proposed to help Vietnam increase FDI attraction from Japanese TNCs based on the results and limitations of current Japanese FDI activities.
3. Research object and scope
The research object of the thesis is the operational strategies of Japanese TNCs (only focusing on international investment strategies) in the world and in Vietnam from 1990 to present.
4. Research methods
The research methods used in the thesis are dialectical materialism, document collection and synthesis - analysis; interpretation - induction method, general description method; logic, statistics, comparison method.
5. Thesis structure
In addition to the introduction, conclusion, table of contents, list of tables, list of references, the thesis consists of 3 chapters:
Chapter 1. Theoretical basis of TNCs' operating strategy and overview of Japanese TNCs
Chapter 2. Operational strategies of Japanese TNCs from the 1990s to the present
now
Chapter 3 Operational strategies of Japanese TNCs in Vietnam and a
Some policy suggestions for Vietnam to increase FDI attraction from Japanese TNCs.
Due to limited knowledge and time, the thesis inevitably has some mistakes. We sincerely hope to receive guidance from teachers to make the thesis more complete.
To complete this thesis, I would like to express my sincere and deep gratitude to my supervisor, Master Pham Thi Mai Khanh. She is the one who has guided, instructed and helped me wholeheartedly throughout the time of researching this topic.
Student Vu Thi Ha