Investigation of Malaysia and Vietnam Economies as New Potential Markets for TNA Pty Ltd - Example

Investigation of Malaysia and Vietnam economies as new potential markets for TNA Pty. Ltd. International Engineering Management Name: Course: Instructor: Institution: Date of Submission: TABLE OF CONTENTS 1. Cover page…………………………………………………………………………….. 1 2. Abstract ……………………………………………………………………………….. 4 3. Introduction and Background …………………………………………………………. 5 4. Culture and International business ……………………………………………………. 5 5. Social and cultural environment ………………………………………………………. 5 -6 6. Religion in Malaysia …………………………………………………………………… 6 7. Religion in Vietnam ……………………………………………………………………. 6 8. Language ……………………………………………………………………………….. 6 9. Language in Malaysia ………………………………………………………………….. 6 -7 10. Language in Vietnam …………………………………………………………………… 7 11. Education in Malaysia ……………………………………………………………………7 12. Education in Vietnam …………………………………………………………………… 7 13. Infrastructure ……………………………………………………………………………. 7 - 8 14. Infrastructure in Malaysia ………………………………………………………………..8 15. Infrastructure in Vietnam ………………………………………………………………. 8 - 9 16. Political stability ………………………………………………………………………… 9 17. Political stability in Malaysia …………………………………………………………….9 18. Political stability in Vietnam…………………………………………………………….. 9 19. Population in Malaysia …………………………………………………………………. 10 20. Population in Vietnam ………………………………………………………………….. 10 21. Patent protection ………………………………………………………………………… 10 22. Patent protection in Malaysia …………………………………………………………… 10 23. Patent Protection in Vietnam ……………………………………………………………. 10 -11 24. Measuring Economic Activity ………………………………………………………….. 11 25. Malaysia GDP and Vietnam GDP ……………………………………………………… 11 26. Malaysia GDP …………………………………………………………………………… 11 27. Vietnam GDP ……………………………………………………………………………. 12 28. Malaysia GNP …………………………………………………………………………… 12 29. Vietnam GNP ……………………………………………………………………………. 12 - 13 30. Inflation rate ……………………………………………………………………………… 13 31. Inflation rate in Malaysia ………………………………………………………….. 13 -14 32. Inflation rate in Vietnam …………………………………………………………… 14 33. Natural economy resources in Malaysia …………………………………………… 14 34. Natural economy resources in Vietnam ……………………………………………... 14 35. Imports and export goods to and from Malaysia……………………………………… 14 - 15 36. Imports and export goods to and from Vietnam……………………………………… 15 - 16 37. Taxes in Malaysia compare to Vietnam …………………………………...…………. 16 38. Advantages and perspectives of Vietnam ……………………………………………. 17 39. Advantages and perspectives of Malaysia ……………………………………………. 17 40. Disadvantages and risks of Vietnam…………………………………………..………. 17 41. Disadvantages and risks of Malaysia …………………………………………….…… 17 42. Recommendation ……………………………………………………………………... 18 43. Conclusion……………………………………………………………………………… 18 44. References ……………………………………………………………………………… 19 - 20 1. Abstract The project will present the manner in which the cultures and social environments of a country affect the success of international business. For businesses such as TNA Pty. Ltd. They need to ensure that such factors support their company objectives and do not create barriers before investing in the country. The research below evaluates some of the factors that will determine which between Malaysia and Vietnam is the best option for TNA Company. That is; by evaluating some of the factors below, the study will recommend which country will meet the needs and objectives of the firm. 2. Introduction and Background TNA is a company that deals in food packaging and processing industry. The company has expanded its operations in various countries, which have been successful through increasing the profit margin. The goal of the company is to grow into a dominant manufacturer of packaging and processing industry. Thus, the business needs to evaluate the countries that have the potential of assisting it meet its goals. The research evaluates in detail Malaysia and Vietnam country statistics to determine which country performs economically well to support the objectives of TNA. Before investing in foreign countries, it is important to evaluate the risk of a country as well as opportunities to determine the best target market. Evaluating the countries, analysis risk ensures that the business is aware of the foreign securities it faces in certain countries. The risks evaluated within a country include issues such as the political issues (political stability of a country), economic performance, or resources within a country among others that may influence the performance of businesses in the market as appraised below. 3. Culture and International business International business deals with crossing borders and engaging in cross-cultural activities culture have a way of influencing the manner in which people behave, communicate, and think. Culture also influences the manner in which people conduct business. Cultural differences have the capability of creating barriers mainly when communicating and interpreting each other, which affects the performance of the businesses. It can also destroy a negotiation process by differences in understanding the behavior of each other (Asia Risk, 2011). To effectively deal with differences in cultures and engage in international businesses, it is important to research on the elements that dominate intercultural negotiations. To succeed in the international business, the TNA Pty. Ltd. ought to understand the role of culture and the culture of the country to expand in to gain competitive advantages. To understand culture differences it is important to understand the communication processes and styles fit for the company, the customer’s needs, body language (to avoid misinterpretations and understandings) (AsianInfo, 2010). Understanding cross-cultural differences influence the core competences of a business that provide the sustainable competitive advantage. Culture plays a key role in the negotiations of international businesses. 4. Social and cultural environment Cultural differences occur in all countries where despite their intensity, they influence the success of the businesses whether they are international or local companies (Asia Risk, 2011, p. 11). They include environments such as social systems, educational institutions, religious ethics and others as discussed below. 5. Religion in Malaysia The people of Malaysia practice numerous religions though Islam is the dominant and official religion in the country. The country of Malaysia is under a constitution that protects the religions freedoms of almost all people in the country. By July 2013, about 61.3% people in the country practice Islam. About 19.8% of the population also practice Buddhism (IRFR, 2013). Others include Christianity, Hinduism, and other Chinese religions. Thus, Malaysia is one of the countries where religious freedom is practiced. The benefit of this to the TNA Group is that the business does not have to embrace a certain religion to succeed in the country. 6. Religion in Vietnam Vietnam is considered an atheist country though several religions are practiced in the country. Mahayana is a Buddhism religious practice that mainly dominates the country. Most of the Vietnamese people perceive themselves as non-religious (BDHRL, 2013, p. 1). However, Christianity is also practiced in the country where it is the most widespread foreign religion in the country. The religion in the country does not influence the businesses, as many of the people are atheists. Thus, religion will not interfere with the business relations of TNA with those of the target markets. 7. Language In the world, there exists about 3,000 languages. Language differences have the capabilities of leading to problems in communications such as transactions, and negotiations (Asia Risk, 2011, p. 22). Thus, when investing in a country, it is important to ensure that the people in the country at least speak a common language. 8. Language in Malaysia The main language of Malaysia is Malay (AsianInfo, 2010). However, the diversity perceived in the country leads to the availability of other languages such as English, which is widely and fairly spoken. The availability of English widely in the country supports the availability of international businesses such as TNA (SIL International, 2015). 9. Language in Vietnam The main language spoken in Vietnam is the Vietnamese language. Knowing the Vietnamese language is the key to ensuring the success of the businesses in the country. Thus, TNA would have to learn the language to succeed in the country. Otherwise, language is a barrier that hinders investing in the country (countryVN, 2015). 10. Education in Malaysia The literacy level in Malaysia is high as most of the people from the age of 15 have the capabilities of reading and writing the Malay and English language. The government demands that all people be taught English to ensure the country develops and easily globalizes as others do (AsianInfo, 2010). The students must spend a total of 13 years in school, which includes the levels of education from primary to tertiary levels. According to the world fact book by 2015, the literacy level of Malaysia is at 95% (SIL International, 2015). Thus, in Malaysia due to the high education literacy, TNA may be successful, as the people understand the operations of businesses. However, the high education literacy may also be a disadvantage for TNA since the labor laws or minimum pay will be expensive and favor the employees better. 11. Education in Vietnam The literacy level in Vietnam is stipulated to be at 95% (AsianInfo, 2010). Like in many other countries, education in Vietnam occurs in five main levels, which include preschool, primary, secondary, high school, and higher learning. The formal learning process consumes 12 years. However, Vietnam is considered a developing country, most of the population in literate where more people are enrolled in school each year (WorldBank, 2005, p. 14). Though the literacy level is high, most of the adults are knowledgeable on technical issues, thus, TNA would be favored in the country due to high supply of the skills they need and low demand. Consequently, the labor would be cost effective for TNA. 12. Infrastructure Regarding infrastructure, the section will compare the developments in a country regarding systems or facilities that affect the economy. Adequate infrastructure in a country influences economic development (Seneviratne & Sun, 2013). The infrastructure systems may include developments in water supply systems, bridges, roads, electrical grids and many others. That is; they exist as the physical commodities in a country that enable, enhance or sustain the living conditions of the society. 13. Infrastructure in Malaysia Malaysia is highly involved in global competitiveness. More importantly, the infrastructure development ensures that Malaysia provides an easy process of doing business as presented when compared to other countries such as Vietnam. The regulatory environment is more favorable to international businesses. That is based on the capability of the government to develop and implement sound policies that promote businesses in the country (Seneviratne & Sun, 2013). Figure 1: Infrastructure Levels in the countries (Seneviratne & Sun, 2013, p. 5) 14. Infrastructure in Vietnam In Vietnam, infrastructure developments keep occurring, which improve the economic performance of the country. For instance, comparing the global competitiveness of Vietnam in 2005 to that of 2011, one perceives how it has developed due to the capabilities of the infrastructure. However, it is not ranked among the Asian countries that seem to have basic infrastructure developments, which is one of the factors that leads to its perception as an emerging country. More importantly, the infrastructure in the country as of 2011 does not support the ease of doing businesses, which is a disadvantage for international businesses such as TNA. Additionally, the government of Vietnam is perceived as a communist country where its capacities to implement and make sound policies is that support local or international businesses are low (Seneviratne & Sun, 2013, p. 5). Thus, the infrastructure is poor in Vietnam for international businesses such as TNA to meet its company goals. 15. Political stability Political stability refers to the capability of a country to influence politically businesses negatively or positively. Political instability such as civil wars, political coups, and other are negative for the business. They stipulate the government; the constitution and army officers may not be relied for peace in case it is needed. Political stability is highly treasured in countries by investors. 16. Political stability in Malaysia Malaysia does not have a stable political system. Malaysia has always been successful in diversifying its economy from the dependence on exports of numerous raw and natural materials it possesses. Thus, political risks in the country are relatively high based on the political opposition that exists among the differences within the ruling coalition and TNA would not be favored in the country (Asia Risk, 2011, p. 38). 17. Political stability in Vietnam Vietnam has a stable political system governed by the community party of Vietnam. The political party had remained as the sole party since 1975 when the country gained its independence. Thus, the political climate in the country is constantly stable, predictable, and good for business. The political stability is a key factor why international businesses such as TNA invest in the country. That is; it is a politically safe environment for the TNA business (World Bank, 2016). 18. Population in Malaysia The 2014 census shows that about 30,098,000 million people (AsianInfo, 2010). By 2040, the population of Malaysia is expected to grow by 38. Million based on the 1% growth rate that is experienced yearly. The life expectancy of the people also seems to grow as that of the male has grown to 71.9 years from 63.1 while that of the female has increased from 66 to 76.6 percent and continued to increase (Chi, 2014). The lowest wage is 4,735 USD stipulating that most of the population do not live in poverty (World Bank, 2016). 19. Population in Vietnam The 2014 census stipulates that the population of Vietnam is at 90,700,000 million (BDHRL, 2013). The life expectancy of males in the country is about 68 years while that of females is at 74 years. Both male and females are highly literate people. Currently, the unemployment rate is at 2.31 percent while the number of employed people is about 52.74 million people. The youth unemployment rate in the country is at 6.26% (tradingeconomics, 2016). The minimum wage is 1,002 USD, which stipulates that a high number of the population lives below the poverty line (World Bank, 2016). 20. Patent protection The process as perceived presents the capability of international businesses to fight abuses and piracy using a country’s judicial system. The section below will present which between Malaysia and Vietnam has the highest and better patent protection rights. 21. Patent protection in Malaysia The patent protection process in the country is better than in other Asian countries. For instance, there is the existence of IPR courts set up for the purpose of handling patents and intellectual property rights. In Malaysia, international business such as TNA has a better opportunity of protecting their properties, inventions, and products (Asia Risk, 2011, p. 66). 22. Patent Protection in Vietnam Patent protection in Vietnam is highly below any other Asian country. The country does not focus on protecting patents or properties, and when it does, it uses weak criminal remedies. Dominantly, there is no patent protection or intellectual property right case that has been handled in Vietnam or copyright infringement. Thus, the weak patent protection process in Vietnam does not favor foreign investments such as TNA (Asia Risk, 2011, p. 67). 23. Measuring Economic Activity It involves measuring the income of a nation. The measurements present whether a firm will benefit by investing in the country. Poor incomes or GDP results stipulate that the country may not favor businesses. Therefore, the TNA has to ensure the country it chooses has good economic activities to support the business. 24. Malaysia GDP and Vietnam GDP Figure 2: GDP of Malaysia and Vietnam (World Bank, 2016) 25. Malaysia GDP The growth rate of the GDP is currently at 5.7%, which is equal to 237.8 USD billion. The GDP presents that the economy of Malaysia is among the first that performs well and has the capability of supporting more growth the economic growth rate supports Malaysia as a major player in the region (World Bank, 2016). The GDP is positive representing that TNA as an investor would have the opportunity to perform economically well. 26. Vietnam GDP Vietnam is perceived as one of the fastest growing economies among the Asian countries. Over the years from 2007 to 2016, the GDP growth rate of the country has improved from 7% to 7.5%. The impact of such developments is perceived in the productivity of the economy and the GDP per capita growth (World Bank, 2016). The GDP is growing stipulating international businesses will succeed and grow in the country. 27. Malaysia GNP The GDP of Malaysia as of 2015 was at 273 MYR Billion. The GNP was at 188.85 MYR Billion (trading, 2016). GNP is the value of all products sold in a country within the end of the year. It presents the income earned in a country. Figure 3: GNP, GDP of Malaysia (knoema, 2015) 28. Vietnam GNP In 2013, the GNP of Vietnam reached a high of 909084.96 VND ( Trade econ, 2016). It presents the income earned in Vietnam in the end of a year. The graph presents the rising income that Vietnam has been earning, presenting that businesses such as TNA would grow in the country. Figure 4: GNP, GDP of Vietnam (knoema, 2015) 29. Inflation rate Figure 5: Inflation Rate of Vietnam and Malaysia (World Bank, 2016) 30. Inflation rate in Malaysia The inflation rate of Malaysia is low, which demonstrates that investing in the country is better. However, over the period of 2011 to 2016, the inflation rate has increased instead of fluctuating as perceived in other countries. The increase rate is at 0.2%. The country has to manage the inflation to eliminate the chances of a high growing inflation rate that would harm businesses and consumers in the country (World Bank, 2016). 31. Inflation rate in Vietnam The inflation rate in Vietnam has been highly fluctuating over the years from 2011 to 2016. That is; from an inflation rate of 18.6% in 2011 it has developed to that of 8.4% in 2016. Therefore, though the country has to control the rate to attain a more sustainable growth in the country (World Bank, 2016). The inflation rate may influence the TNA to pay high taxes, however, as the government is trying to manage the issue, they may benefit in the future. 32. Natural economy resources in Malaysia Malaysia has huge natural resources that influence the success of the economy. The country advanced from a raw material producer to a multi-sector economy. The country has numerous developments and achievements in resources such as technological products, oil, rubber, palm oil, oil, and other electronics. The country is attempting to liberate some of its sections to attain more independence on exports (Index Mundi, 2014). However, the corruption and political instability in the country affect the use of the resources to benefit businesses. Thus, TNA may not benefit in the country. 33. Natural economy resources in Vietnam Vietnam is one of the countries that has various natural economy resources, yet has no capabilities to exploit them for the advancement of the economy. Some of the natural economy resources include products such as gold, copper, coal, manganese, silver, oil, and timber among others. Therefore, even though the products are highly available, they do not influence the economy of Vietnam highly (Southeast-asia, 2014). However, as ways to exploit these products are been developed, the economy will improve as well as the businesses in the country. Thus, the future impact on TNA in the country is positive. 34. Imports and export goods to and from Malaysia Figure 6: Exports in Malaysia and Vietnam (World Bank, 2016) The figure above presents that Malaysia does not export many products as Vietnam or Indonesia. However, it is among the top countries that engage in the exportation of numerous products. The man exportation products in Malaysia include solar panels, textiles, rubber, palm oil, semiconductors and electronics among others (Index Mundi, 2014). In the year 2010, the exports per capita summed to 7339.9 USD. The average annual growth rate of the exports for ten years has been 8.6 percent (Asia Risk, 2011, p. 11). The importation dynamism presents the merchandise exports for Malaysia were at 127.05 USD while the per capita imports were at 4576.40 USD (Asia Risk, 2011, p. 13). Importation products include steel products, chemicals, iron, plastics, vehicles, petroleum products and electronics among others (Index Mundi, 2014). 35. Imports and export goods to and from Vietnam In Vietnam, the exports made up the 70% of the year 2009 GDP. As presented below, the main exportation products may require the usage of the TNA packaging products. Crude oil is a natural economy resource in the country, and fourth most exported product in the country. Figure 7: Vietnam Eportation Goods (World Bank, 2016) The exports in Vietnam in the year 2010 regarding per capita summed to 811.6 USD. The annual growth rate with the ten years from 2001 occurs at an 18.0 percent. In both Vietnam and Malaysia, the total merchandise exports were as follows. Figure 8: Exports in U.S dollars (Asia Risk, 2011, p. 12) Regarding imports, the merchandise imports in Vietnam were 68.80 USD while the per capita imports in 2010 were at 788.89 USD. Thus, the average annual growth rate was at 20.4 percent. 36. Taxes in Malaysia compare to Vietnam Table 1: Taxes comparison between Malaysia and Vietnam Country Corporate revenue tax. Taxable profit Tax founded on gross salary Value Added Tax (VAT) Malaysia 25% 15% 10% Vietnam 25% 17% 10% (World Bank Group, 2015) 37. Advantages and perspectives of Vietnam Religion freedom High education literacy Political stability High population is a presentation of the large and ready market that TNA requires. A growing GDP Growing infrastructure Numerous economic products for future exploitation that will improve the economy of the country and performance of businesses. Exportation and importation are high and effective in the country. 38. Advantages and perspectives of Malaysia Multiple languages Better patent protection rights and processes An advanced and strong GDP that supports economic growth. The inflation rate is low Numerous natural economic products 39. Disadvantages and risks of Vietnam The main language spoken is Vietnam. Thus, it creates a barrier of attaining business transactions and negotiations to ensure the success of business. To succeed, the individuals have to understand and speak Vietnamese. Thus, the country language risk for investing in the country is high. Poor patent protection rights. That is; investors will not have the ability to use the Vietnam judicial system to protect their products, properties or inventions. Thus, they risk the loss of property, inventions, or products when they invest in the country. 40. Disadvantages and risks of Malaysia Poor political stability is a disadvantage since the businesses may be affected by different coalitions due to the perceived racial differences that forego the national unity in the country. The population in the country is low compared to that of Vietnam, which stipulates that the market is not big enough for TNA. The risk occurs in that; the market may not provide the anticipated financial return. 41. Recommendation TNA should invest in Vietnam, though there are numerous obstacles such as language barrier, learning the language would assist them to succeed in the country. TNA requires a large market that would assist support its profits highly. Based on the population statistics Vietnam offers the best target market. Additionally, it is clear that Vietnam is a country with a stable political system. Thus, investing in the country will increase the security of investing in the country. Though it does not completely exploit its natural resources, on the stipulation it does the business in the country would benefit highly. Due to the developments occurring in skill levels, the labor costs anticipated will be low when compared to those anticipated in Malaysia. Thus, Vietnam provides the TNA Company with better prospects of succeeding in the market when compared to that of Malaysia. To improve sales and marketing in Vietnam, one should first learn the Vietnamese language as it is the main official language and highly spoken language. More importantly, the country is an atheist country, thus, to ensure they increase sales one ought to learn what motivates the buyers without including any religion facts or issues in their operations, company mission, and vision among others. 42. Conclusion The target market that has been recommended for TNA is the Vietnamese market due to the high availability of a market that suits the requirement of the company and the political stability in the country. The lower minimum wages also support cost-expensive labor, which supports the business in the country. However, it is important to identify that Malaysia is also a key market for TNA due to opportunities and strengths such as lack of language barrier. However, based on factors such as population and country political stability, it does not favor the objectives of the TNA Pty. Ltd. Company. References Trade econ, 2016. Vietnam Gross National Income. [Online] Available at: http://www.tradingeconomics.com/vietnam/gross-national-product [Accessed 2 5 2016]. Asia Risk, 2011. Emerging Asia S.W.O.T. Report. Poltical & Economic Risk consultancy Ltd., pp. 1-90. AsianInfo, 2010. The Languages of Malaysia. 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