BEO 1252 INTERNATIONAL BUSINESS CONTEXT
Assignment: Research Report – Open wholly owned subsidiary in Vietnam.
Name: Van Huan Tran. 3897340 Vo Long Dang. 3877636 Tat Tuan Ngo. 3904251

Executive Summary:
This report was developing to open wholly owned subsidiary in Vietnam. To provide a complete analysis to make sure information, this report will explore the summary of the business environment as the economy, legal systems, and cultural issues, as well as the government of Vietnam. This report aims to present to the board of the new business environment, and provide robust justification of how appropriate it in Vietnam, and the evidence to support Vietnam's decision a suitable location for the establishment of the subsidiary.
Table of Contents Executive Summary: 2 Introduction: 3 1 Business Environment: 3 1.1 Economic: 3 1.2 Political Factors: 4 1.3 Environment Factor: 4 1.4 Social Factors: 5 1.5 Technological Factor: 5 1.6 Basic Appeal for Wholly-Owned Subsidiary: Why choosing Vietnam? 6 2 Cultural Issue: 7 2.1 Hofstede Model: 7 2.2 Kluckhohn-Strodtbeck Model: 9 3 Government Promotion on FDI: 11 Recommendation: 12 Conclusion: 12 References: 13 Appendix: 15

Introduction:
When the power of globalization, trade and international area has increased significantly over the years. The company has successfully established or have a strong foothold in the domestic market. However, in the aim of increasing expansion and make additional income, the company must move forward to obtain foreign business in another country. Vietnam is developingcountry in Southeast Asia with a favourable advantage of economic trade, cheap labour. As a result, Vietnam is the best choice for many multinational corporations to develop its business in Southeast Asia.
This report will explore the favourable conditions for a subsidiary of the multinational conglomerate-owned ABC entirely in Vietnam. Therefore, Vietnam will be checked for a period of cultural factors, national, political, environmental, and legal, that may affect the successful operation and set up subsidiaries here. Then, we were discussed about culture issues by two models-Kluckhohn-Strodtbeck and Hofstede. Finally, the Vietnam government promotion on FDI will be showed. This discovery may help the development opportunities expand into Vietnam market.
1 Business Environment:
1.1 Economic:
Vietnam's economy has undergone a change in 30 years, Vietnam has developed from a disorder of social and poverty to an agricultural economy and recent efficiency focus attention more on the development of industry and services sectors, the rapid development of trade and investment. Vietnam is a member of ASEAN, and all members are committed to further strengthening regional cooperation in East Asia and build a regional architecture that is open, transparent and inclusive, meaning policy cooperation and win-win can be taken into account. Recent Countries like China and Japan signed the Agreement on free trade area provide increased opportunities. Vietnam has a large number of 87.375 million people and the unemployment rate was 4.64% in the city during 2007, in 2006, the growth rate of Vietnam's population was 12.1%, and The average revenue of $ 1,498, a large number of labour force inexpensive attract international investors as ABC to focus more and reduce their costs.Moreover, the GDP of Vietnam grows robustly with average 6.8% increase, with a rate of about 5.54% in Jul 2013, and 6.07% in Jul 2014, and 6.8% in Jul 2015 (See at Appendix, Graph1).
1.2 Political Factors: * Government type: Vietnam is known as a Socialist Republic. * Economic Freedom: Vietnam has no economic freedom, in which a score of 51.0. Although the index of Vietnam can not be compared with Western developed countries ", but since 1986, the government implemented the policy opened the door to the outside world, making Vietnam become one open country and attract more investor attention and opportunity. * Political Stability: Vietnam is an independent, socialist republic country, dominated by the sole power: Party Communist Vietnam contributes to a stable environment and safety. * Taxes on inflation: When inflation in Vietnam has increased in recent years, but the first quarter of 2013, the index lost a turn for the better, before the index reduced inflation. And at the same time, the government of Vietnam has launched several measures to compensate for the increase in inflation. · Regulation and trade tax: Vietnam has joined the Association of Southeast Asian Nations (ASEAN) in 1995, trade policy of Vietnam, like other members of ASEAN. * Regulates Price: Generally there is no control on prices in Vietnam before 2006, however in 2006, Vietnam has introduced a set of provisions on transfer pricing relatively comprehensive and effective implementation of the amendment in 2010. In 2012, Congress passed the Law on Administration Tax amendments, effective from 1.2013. In addition, Vietnamese tax authorities are also put considerable effort into "capacity building", including the training of tax officials.
1.3 Environment Factor:
As a result of the rapid development of the economy, population growth and urbanization, Vietnam faces environmental challenges significantly. In 2006, the pollution "hot spots" of Vietnam including solid waste, water and air pollution, water pollution and solid waste management is the biggest challenge for the Ministry of Natural Resources and Environment school (Ministry of Natural Resources and Environment). According to the Ministry of Natural Resources and Environment, the environmental situation in Vietnam is deteriorating due to lack of government resources to solve these problems.
1.4 Social Factors:
Vietnam has completed the education system, school education for 12 years and since 2001 began popular 9-year compulsory education, the Government focus more attention on the quality of education and increase of group east by year. Agriculture is one of the most important areas of Vietnam, which account for nearly 75% of the total population, and agricultural area occupies a total area of nearly 60%, Vietnam is the second largest exporter in the world gender, and it is agriculture exports in the forefront. In addition, the official language of Vietnam is Vietnam, nearly 97% of the population of Vietnam speak to it, but most people do not actually use English, so that foreign investors do not agree comfortable when they visit Vietnam. With the goal of opening a subsidiary of ABC, we will hire Vietnamese who to be able to easily communicate, transmit content, and our wishes to the staff here. Moreover, Buddhism is the main religion, and others with Catholicism and Protestantism. There is almost no any problem of violence among people of different faiths, religious compare stable environment than other countries. Vietnam has emerged as an ideal location due to environmental migration attractive and friendly reputation, each year millions of tourists come to the beauty and live locally. The majority of 10.2% of the population over 60, and nearly 39% of elderly people still working in the field, which means there is enough labour force is full of Vietnam market.
1.5 Technological Factor:
Vietnam has seven international airports and fifteen civil airports, basic transport systems such as railways, roads, and waterways intact more then before, even after years of development through grow and get economic benefits, transport still limited development of Vietnam. After Vietnam joined ASEAN, on account of the geographical advantage and its open door policy, Vietnam has a lot of opportunities for cooperation with companies first rate and industrial structural reforms inside, such as accelerated energy technology and process digitization. Apart from any questions of Vietnam to implement a more progressive advance, but a huge difference still exists, Vietnam remains a country of low-tech, many behind compared to other countries surrounding areas shallow. Specifically on technological innovation, scientific research input. More assembly lines in the high-tech park rather than technology or innovation.
1.6 Basic Appeal for Wholly-Owned Subsidiary: Why choosing Vietnam?
Wholly foreign-owned enterprises were permitted to engage in trading and distribution in Vietnam since January 1, 2009, thus it has removed the last restrictions on foreign investment in this sector. Foreign investors to invest directly in this business sector will still need to apply and obtain an IC, and are limited in their ability to release retail establishments (Mayer Brown JSM, 2014). Vietnam is one of the most attractive countries for the wholly owned subsidiary. First, natural resources abundant in Vietnam a third land be cultivated, suitable for the development of agricultural production and export-oriented agriculture, and there is also abundant ore resources in Vietnam, such as oil, gas, coal and metal production, Vietnam has a coastline of fishery products containing rich and diverse. Second, human resources abundant and cheap, of Vietnam's population of 84 million, and 73.8% of those who come from rural areas, two-thirds of people born after 1975, the In recent years despite the government support to increase the minimum wage, still around $ 60- $ 80 per month, so the labour force in Vietnam is the most cheapest, the government focused attention more on education, so that the cultural quality and high technical quality than other regions. Over, political and legal environment is and good stability, Vietnam performing party system ruled by the Communist Party, the democratic atmosphere increases the prestige of the government, including the improvement of the legislation and stressed the principle of law. People are the masters of the country. Political and legal environment to attract more investment opportunities. All the above reasons, Vietnam is the best choice for open wholly owned subsidiary.

2 Cultural Issue:
2.1 Hofstede Model:
Cultural comparison between Vietnam and Australia (see Graph 2):
Dimension 1: Power Distance
The challenge for the leadership were not well received in Vietnam, meaning that they accept a hierarchy in which everyone has a place and which need no further justification ahead of the pack As opposed by Australians. Australian businesses working in such a way that employee provide their knowledge and managers available for guidance. Decision business in Vietnam may be slow as they pass through each hierarchical division, as the employee must submit to a higher level to get permission. Unlike hierarchical methods of communication Vietnam, Australia's approach is somewhat less formal and often involves the participation of employees (Hofstede 2015). Before setting up the ABC Company in Vietnam, we need to become familiar with the hierarchy of businesses in Vietnam decision-making and the involvement of staff from top to bottom.
Dimension 2: Individualism versus Collectivism
Vietnam displays the characteristics of a collective society as a long-term commitment close to the "Members" group, have a family, extended family or extended relationships. But opposing views Australia show that a high culture of individualism. This is explained because of Australians expect that people only take care of your health and your family. The people of Vietnam are said to be extremely loyal to their work, and it is paramount and overrides most other social rules and regulations, which means that everyone is responsible for the Their team members in their daily work. However, Australia's employees are expected to be self-reliant and display initiative their tasks than Vietnam (Hofstede 2015). When both countries show opposition views, we should practice collectivism before penetrating into Vietnam market.
Dimension 3: Masculinity versus Femininity
Vietnam is a Feminine society, which means qualities of life are the signs of success and standing out from the crowd is not admirable (Hofstede 2015). Meanwhile, Australian society will be driven by competition, achievement and success, success is determined by the "winners" or "best-in-the-field. The ear contradictory Australia be addressed at the individual level and the goal is to win. However, conflicts are resolved by compromise and negotiation in Vietnam. So ABC can to expand business in Vietnam, we always remember to peace with those around us.
Dimension 4: Uncertainty Avoidance
Vietnam has a low preference to avoid uncertainty, which means that they have a more relaxed attitude, while practice counts more than principles and deviance from the norm more easily tolerated (Hofstede 2015). Australia is at the intermediary in this case, maybe because Australians believe the rules are not too necessary and if they are not clear or do not work they should give up or change, and the innovation not seen as danger. This too is easy to ABC penetrate the Vietnamese market when the two countries near the same point.
Dimension 5: Long-term Orientation
Vietnam has a pragmatic culture; they believe that truth depends very much on the situation, context and time. In addition, Australia has a normative culture, where they focus strongly on establishing absolute truth, and regulations in mind (Hofstede 2015). Because, Vietnam perseverance in achieving results that Australia focused on achieving results quickly. Considering theopposing viewpoints of both nations, we will prepare long-term investment to be profitable in Vietnam
Dimension 6: Indulgent or Restrained
Australia is a country Indulgent. Australians have a positive attitude and tend to be optimistic. In addition, they put a higher level of importance on leisure time activities as they pleased and spend as they wish. In contrast to Australia, Vietnamese aware that their actions are limited by social norms and to feel that indulging themselves contact with the wrong part. So, we have to try to control desires and our impulses, based on how we are raised in Vietnam.

2.2 Kluckhohn-Strodtbeck Model:
Cultural comparison between Australia and Japan: (1961)
Dimension 1: Relationship to nature
Vietnam and Australia both shared the same opinion concerning the harmonious relationship with nature. Conceived for centuries by indigenous Australians connected life and cultural identity with the flora and fauna (Australia Government, 2015), so Australia has a strong relationship with the natural environment. In the agreement, Vietnam respects their natural environment using what they can, but not to much, not change or harm it, as they have accepted the spirit of nature as seen through rock gardens and gardening practices. When both countries are questioning the natural environment as the focus will not have any complications for the establishment of ABC in Vietnam.
Dimension 2: Time orientation
The Vietnamese culture is a mix of both present and past oriented, but also the direction the economy is moving into more markets, to meet their needs in the present (Vietnam Typologies, 2007). This is shown through them liaise closely with customers and partners to ensure the goals and objectives are met (Wild & Wild 2014). Australia is future orientation. The highest value their business relationships have shown this. Australians to get along with each other is important, because it is believed that the road can be overcome several times as a small population. In turn, it helps raise the activeness concerning facilitating business transactions in the future (Kwintessential 2014). Considering that Vietnam is also moving into the future-oriented, it will be easy to business in Vietnam.
Dimension 3: Trust and Control
Vietnam people believe that people are basically good, but they put in a high degree of confidence in the business agreement. Once these agreements are implemented, it is expected that all parties must commit to the project. Failure to do so may likely be caused by factors not in control, because the fear of losing face Vietnam. Australia is like Vietnam, as authenticity and sincerity are appreciated (Kwintessential 2014). In reference to the crime rate, Australia is a safe country significantly more secure display a model safety scale of 56.43 and Vietnam showing 43.96 (Numbeo, 2015) but it does not matter. In a business sense is not an issue with the setup ABC in Vietnam as the two countries share similar views on the focus on trust.
Dimension 4: Life Orientation
Vietnam is a "being" orientation. It is not necessary for a person to achieve great things in life to the life of a person to feel worthwhile(Vietnam Typologies, 2007). Young Australians do not perform the obligations resulting for the future lack of independence of youth (Browne, R 2012). Basically, Vietnam and Australia alike on this point. Thus, Australia did not need to change the arrangement of their working capacity before establishing operations in Vietnam.
Dimension 5: Individual/Group Orientation
Vietnam are very much group oriented. They are a collective cultural and special emphasis on the role and obligations of them in groups rather than their own desires. This behaviour stems from their traditional loyalty to their family and they believe that the welfare and the solidity of the family are concerned more important than the individual interests of any one member of a family (Vietnam Typologies, 2007). Australia shares the same opinion concerning the importance of healthy group relations. Because, Australia get a relatively small population and it is very likely that a person can cross the road together again (Kwintessential 2014). Considering that both countries stressed the responsibility of the group, it is evident that the business relationship will succeed in establishing VPC in Vietnam.
Dimension 6: Public/Private Orientation
Both Vietnam and Australia as private society. For example, Vietnam is often not show affection in public. Offices are sectioned off around the perimeter of the floor and were in a separate room. For Australia to set up operations in Vietnam, Australia still can keep their level of privacy of the workspace when you open an office in Vietnam.

3 Government Promotion on FDI:
To date, more than 16,300 FDI projects operating in Vietnam has pulled together in total $ 238 billion. The investors come from 100 countries and regions, and many of them are multinational corporations leading. In 2013, FDI inflows reached $ 22 billion, an increase of 35% compared with 2012. The figures show that Vietnam has become a destination of choice for foreign investors.Currently, the Government of Vietnam is committed to creating a fair business environment and attractive for foreign investors, they are constantly improving the legal framework and institutions related to business and investment. The government has worked hard to restructure the economy and its growth model, as well as enhance national competitiveness. To add a new chapter to this success story, the government of Vietnam is continuing to rehabilitate the business environment and investment. One of the ways it is doing this is its work on three "strategic breakthrough": put on the market in which economic institutions and a legal framework; build infrastructure and advanced integration, especially transportation; and developing quality workforce. These should all be completed in 2020. The Government was determined to implement treaty obligations and promote the negotiation and signing of a new generation of free trade agreements. Vietnam considers the success of FDI is its own success. So the government is committed to ensuring a stable political environment and society, protect the legitimate rights and interests of investors, and create a favourable environment for FDI in the country. In the medium and long term, Vietnam will continue its efforts to attract and effectively use FDI to promote economic development and social. This country will target "high-quality" FDI flows, focusing on FDI projects using advanced technology and environmentally friendly, and use natural resources in a sustainable way. It will also target projects with competing products may be part of the production networks and global value chains.

Recommendation:
The quality requirements of Vietnam are very strict. There are many quality items sold in supermarkets or large stores with low prices, in the interest of Vietnam's top trademark. They believe these products originating in the West. Because, they are not capable of distinguishing the goods quality. Should you buy products labelled and assess quality through labels. Meanwhile, the customer is regarded as a deity in Vietnam.Finally, to meet customer demand, the import intermediary between producers and consumers abroad in Vietnam and demanding about the quality of the product. I believe that Vietnam also needs less stringent and demand too much hope that quality decreases. But before you just have a detailed discussion about the quality of goods before signing
Conclusion:
By setting up a branch of ABC in Vietnam, we can generate some problems concerning many differences in culture comparison with Australia. For example, the contrast of Vietnam is collectivism and Australia is individual perspective. However, there is much better chance of risk in setting up a subsidiary owned entirely in Vietnam. The policies and procedures of the government of Vietnam welcome the implementation of the foreign enterprises. This will allow ABC to set up wholly owned subsidiary Vietnam success with minimal complications.

References:
- Hofstede, G 2015, What about Vietnam? Viewed on 30/9/2015. Assessed on: http://geert-hofstede.com/vietnam.html
- Hofstede, G 2-15, What about Australia? Viewed on 30/9/2015. Assessed on: http://geert-hofstede.com/australia.html
- Kluckhohn and Strodtbeck's Human Nature Orientations of Vietnam. Viewed on 30/9/2015. Assessed on: http://ec.asean.eu/%20invest-in-research/pdf/download_en/psi_countryprofile_Vietnam.pdf%202
- Australian Government 2015, our natural environment. Viewed at 30/9/2015.Assessed on: http://www.australia.gov.au/about-australia/our-country/our-natural-environment
- Kwintessential 2014, Australia – Culture, Customs, Etiquette. Viewed at 30/9/2015. Assessed on: http://www.kwintessential.co.uk/resources/global-etiquette/australia.html
- Australian Government, Department of Foreign Affairs and Trade, Vietnam country brief overview. Viewed on 1/10/2015. Assessed on:http://www.dfat.gov.au/geo/vietnam/pages/vietnam-country-brief.aspx
- Number 2015, Crime rate of Vietnam. Viewed on 25/9/2015. Assessed on:http://www.numbeo.com/crime/country_result.jsp?country=Vietnam
- Number 2015, Crime rate of Australia. Viewed on 30/9/2015. Assessed on: http://www.numbeo.com/crime/country_result.jsp?country=Australia
- Culture profile of Vietnam. Viewed on 25/9/2015. Assessed on: http://academic.depauw.edu/mkfinney_web/teaching/Com227/culturalPortfolios/VIETNAM/VIETNAM/typologies.html
- Wild, J.J & Wild, K. L 2014, International business: the challenges of globalization: Politic, law, and business ethic, 7th ed, p. 98, Pearson Education: London.
- GDP growth rate of Vietnam. Viewed on 26/9/2015. Assessed on: http://www.tradingeconomics.com/vietnam/gdp-growth
- Culture Information of Vietnam. Viewed on 30/9/2015. Assessed on: http://www.intercultures.ca/cil-cai/ci-ic-eng.asp?iso=vn
Vietnam, The World Factbook. Viewed on 02/10/2015. Assessed on: https://www.cia.gov/library/publications/%20the-world-factbook/geos/ei.html#Econ
Vietnamese Agricultural Land Research, Stewart Brand, King, 2008-10-08.
Vietnam Trade. Viewed on: 2/10/2015. Assessed on: http://www.vietrade.gov.vn/en/index.php?option=com_content&id=759&Itemid=76
-Vietnam _ Environment. Viewed on 2/10/2015. Assessed on: http://www.globalsecurity.org/military/world/vietnam/enviro.htm
- Mayer Brown JSM: Guide to Doing Business in Vietnam. Viewed on 3/10/2015. Assessed on: https://www.mayerbrown.com/files/Publication/d50296ec-1a78-426f-bb80-19f26d82e709/Presentation/PublicationAttachment/6eeb39de-959d-42fa-ab19-1ff1b31fd815/Mayer%20Brown%20JSM%20Guide%20to%20Doing%20Business%20in%20Vietnam.pdf
- Legal of Vietnam. Viewed on: 1/10/2015. Assessed on: http://vietnamembassy-usa.org/vietnam/politics
- Vietnam Government Promotion on FDI. Viewed on 2/10/2015. Assessed on: http://www.ide.go.jp/English/Publish/Download/Brc/pdf/10_04.pdf

Appendix:
Graph 1: Vietnam GDP Growth Rate:

Graph 2: Culture Comparation between Vietnam and Australia: