The Impact of Globalisation

To
Business Operation

ACCESSOR: PHAM HOANG HIEN

WRITTEN BY: PHAM HUU KHAI
ID NUMBER: B180032
1ST ASSIGNMENT OF BUSINESS LAW
1
TITLE: A1: THE IMPACT OF GLOBALISATION TO BUSINESS OPERATION
Table of content

Contents
Vietnam Rubber Group’s profile .............................................................................................................. 4

Introduction of Cambodia market ............................................................................................................ 7

Reasons under international expansion ........................................................................................ 8

Characteristics of Cambodia market ............................................................................................ 9

Learning outcome 1: Analyze the key factors which drive globalization ............................................ 10

I. The concept of globalization............................................................................................................. 10

Globalization impacts on economic growth in Vietnam ............................................................ 10

II. Explain five key driving factors of globalization .................................................................... 17

III. PESTLE analysis of Cambodia market ...................................................................................... 21

IV. CAGE Framework ........................................................................................................................ 27

V. SWOT analysis .................................................................................................................................. 30

Learning outcome 2: Determine the strategic complexities associated with operating in a global
environment ............................................................................................................................................... 36

VI. The challenges of globalization (3 challenges) and the complexity of strategic challenges faced
by organizations when operating in a global environment. .................................................................. 36

1. Explain the challenges of globalization (3 challenges) ............................................................... 36

2. The complexity of strategic challenges faced by organizations when operating in a global

environment. .......................................................................................................................................... 37

VII. Provide recommendations on how to overcome these challenges ............................................. 40

VIII. Discuss the success of organization in foreign market ........................................................... 41

Conclusion ................................................................................................................................................. 42

References .................................................................................................................................................. 43

Bibliography ............................................................................................................................................... 43

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 Introduction

In addition to large corporations in Vietnam developing domestically, they also want to expand
their brands in international markets to develop businesses and increase sales. Therefore, the
purpose of this assignment is to provide the analyzation of the key factors which drive
globalization and to identify the strategic complexities associated with operating in a global
environment. Specifically, Vietnam rubber group (VRG) is investing in Cambodia, I am going to
give the analyzation of the key of cost, market, environment and competition that drive global
commerce and trade. Besides, I will critically analyze the impact of key factors on the global
business environment in terms of benefits and challenges.

Furthermore, the report also provides explanation and assessment of the complexity of strategic
challenges in the context of risk and diversification strategy and supply chain flows that
organization face when operating in a global environment. In this report, I will describe, identify
and clearly state the factors that affect the operation of the business in the process of operating and
investing abroad.

The background knowledge in this paper will support a lot of analyzing and evaluate the factors
of globalization affecting the business of enterprises. In addition, studying this report will enhance
one's professional career in the future.

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Vietnam Rubber Group’s profile
Vietnam Rubber Industry Group (VRG) is a multi-owned group, in which the State
owns dominant capital on the basis of the reorganization of the Vietnam Rubber Corporation. In
addition, VRG - A joint stock company (a tier I enterprise) is also an enterprise that invests in
finance in other companies, holding dominant rights in through development strategy, business
investment plan, management and coordination of capital, brands, markets, process control, norms
throughout the Group ...; directly doing business and ensuring the implementation of all duties in
compliance with the law. Vietnam Rubber Industry Group - Joint Stock Company (VRG)
production and business 5 main areas: planting, processing, and trading in rubber; Process the
wood; Rubber industrial products; Industrial zone infrastructure business investment; High-tech
agriculture. VRG is a large-scale, publicly qualified Group technology, modern management and
high specialization. Furthermore, it also closely connects cultivation, exploitation, production and
business with science, technology and training; act as the core to promote Vietnam's rubber
industry to develop and integrate into the world. Besides, Vietnam Rubber Industry Group (VRG)
was established in 1975, after many changes in organization model and name. Moreover, Over the
years of establishment and development, the Group's main products have been present in many
countries such as China, Singapore, Cambodia, etc. The head office is at 177 Hai Ba Trung, Ward
6, District 3, Ho Chi Minh City. In addition, Currently, Vietnam Rubber Industry Group signed a
cooperation to implement the sustainable development strategy for the period of 2019 - 2025 and
the operational plan for 2019 has been deployed more extensively and effectively. So, VRG always
shows the role and responsibility of a sustainable business that is associated with 3 aspects:
Economic development - Environmental protection - Responsibility to community and society.
(vnrubbergroup, 2020)

• VRG's mission: Provides for domestic and foreign markets agricultural products, industry
and services are competitively priced, safe for users, environmentally friendly and socially
responsible. Building and developing corporate culture: inherit, unite, harmonize interests
and respect the law. Building a contingent of competitive managers and employees, always
innovating and sticking with the enterprise. (vnrubbergroup, 2020)

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 • VRG's vision: is an industry leader in the field of agricultural production in terms of
efficiency, scale, product quality, high-tech application and environmental friendliness in
Vietnam, in the region and affirms its brand. Vietnamese products on the world market.
(vnrubbergroup, 2020)

• VRG's commitment: Satisfying the highest requirements of customers; always attaching

special importance to diversifying the structure of rubber products according to customer
needs; continuously improve product quality in accordance with Vietnamese and
international standards; implement the professional sales policy, considerate after-sales;
promote prestige brand VRG.

Continuously improve the management system and production processes and standards to
ensure that the supply of quality, stable and sustainable products is always.

Development investment, production organization in the view of sustainable development,

environmental friendliness and social responsibility. (vnrubbergroup, 2020)

❖ VRG’s organizational structure (vnrubbergroup, 2021)

GENERAL MEETING OF SHAREHOLDERS

BOARD OF SUPERVISORY
DIRECTORS BOARD

EXECUTIVE
MANAGEMENT BOARD

TECHNOLOGY AND SUBSIDIARIES

ENVIRONMENT DEPARTMENT

CAREER
PLANNING AND INVESTMENT
ADMINISTRATIVE UNITS
DEPARTMENT
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LABOUR AND SALARY DEPARTMENT

TECHNICAL MANAGEMENT DEPARTMENT

FINANCIAL AND ACCOUNTING DEPARTMENT

INSPECTION AND ACCOUTING DEPARTMENT

PROPAGANDA AND EMULATION

DEPARTMENT

HUMAN RESOURCE DEPARTMENT

BASIC CONSTRUCTION DEPARTMENT

BUSINESS MARKET DEPARTMENT

ADMINISTRATIVE DEPARTMENT

INFORMATION TECHNOLOGY DIVISION

ADMINISTRATION

RECORDS MANAGEMENT AND

ARCHIVES

FLEET TEAM

VRG’S REPRESENTATIVE
OFFICES

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Introduction of Cambodia market

Cambodia is an agricultural country (58% of the population is engaged in agriculture,

agriculture also accounts for nearly 40% of its GDP), heavily dependent on natural conditions; has
many rare and precious resources such as precious stones, rubies, gold, and wood. However,
Cambodia's industry was weak. The Cambodian government proposed the National Strategic
Development Plan 2006-2010 (NSDP) and the Quadrilateral Strategy, etc. Macro-economy is
stable, continuing to maintain a high growth rate of 10% or less per year (in 2004 it was 11.7%, in
2005 it was 13.4%, in 2006 it was 10.6%, in 2007 it was 9). 6%). Due to the world economic and
financial crisis, Cambodia's economy in 2008 was also affected: Inflation reached over 20%, GDP
in 2008 increased only 5%. The gross domestic product (GDP) in 2009 dropped to minus 2%. In
addition, the Government of Cambodia is making efforts to reduce the inflation rate, increase the
promotion of investment in agricultural development, subsidize fuel prices and increase the
reserves of banks, reduce the tax on goods, remove a number of barriers in trade competition,
including opening the door for domestic goods to freely compete with products of large economic
groups. Moreover, mining is also an industry that attracts investors foreign countries exploit
bauxite, gold, iron and gem ores. Exports of textiles and clothing, which accounts for 68% of total
exports in 2017, have fueled Cambodia's growth in recent years. By the end of 2018, in Cambodia,
the rubber area was 87,892 ha / 120,291 ha. By the end of 2018, 9 units in Cambodia had 34,971
ha of rubber (accounting for 39.8% of the Group's rubber area in Cambodia), 6/9 companies had
exploited, with an exploitation output of 9,747 tons (accounting for 27% of the Group's production
in Cambodia). In 2019, 9/9 units will have plans to exploit with an output of 16,000 tons.
According to the report of the Ministry of Agriculture, Forestry and Fisheries of Cambodia, in
2019, Cambodia exported 282,071 tons of dry rubber, worth $ 377 million, up 30% compared to
2018. Although the price of rubber this year decreased, the quarter of 2020, the Cambodian rubber
industry has exported 53,057 tons with an average price of 1,394 USD / ton (down 1.2%), the total
value is about 74 million USD. In addition, Cambodia currently has 405,485 ha rubber plantations,
of which 250,750 ha are under exploitation. (Nam, 2020)

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 Reasons under international expansion

Expanding investment abroad is a major policy of the Government in the integration

period and it takes many years to take initial steps. Cambodia alone is both a potential market for
Vietnamese enterprises due to its advantages in geographical conditions and a long history of
business relationships, but at the same time a market that is under much pressure to compete with
the present of Chinese and Thai businesses. One of the reasons Vietnamese rubber companies
invest in the Cambodian market is that Cambodia and Vietnam have a friendship, long-term and
strong development, so the prospects for bilateral trade cooperation between the two countries are
both sides are interested and appreciated; In particular, the convenient transportation system makes
the circulation of goods between the two countries easy, so the export and import turnover between
the two countries is always growing. Moreover, with the advantage of a common border crossing
10 provinces of Vietnam border and 9 provinces of Cambodia border; There are 10 international
border gates, many main and secondary border gates; the distance from HCM city to Phnom Penh
is only 230 km; These are favorable conditions for Vietnamese products to easily penetrate the
Cambodian market, plus Cambodian consumers' tastes are quite similar to Vietnamese,
Vietnamese businesses still have many opportunities to promote products and dominate the
market. In addition, Cambodia does not cut production and reduce the area under rubber
cultivation; Investment activities of the VRG in Cambodia have been and continue to contribute
to contribute to contribute to the solidarity and friendship and effective cooperation between
Vietnam and the Kingdom of Cambodia, not only to positively affects and accelerates economic
development, infrastructure in rural areas, creates jobs with stable income, but also the formation
of settlement and labor practices with industrial style for the workforce in the project areas.
Therefore, Vietnam continues to be Cambodia's largest natural rubber export market. (vra, 2019)

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 Characteristics of Cambodia market
• Political stability: Cambodia is now politically stable. (Nam, 2020)

• Macroeconomic stability, Cambodia has also achieved this despite the impact of the recent
economic crisis. However, the economic crisis affects all countries, not just Cambodia. Except
for this, the Cambodian economy is in a positive state. (Nam, 2020)

• A solid legal corridor for businesses, which means international rules and regulations are also
being implemented in Cambodia. (Nam, 2020)

• Ability to integrate into international markets. Investors come to Cambodia to produce

products for export to the European market on the basis of Cambodia without quota barriers in
this market. As for Canada, Japan, Korea, India and other major countries, too, all are tax-free
and quota-free. Besides, another important issue is that Cambodia has a completely open trade
policy. (Nam, 2020)

• Openness of the Government of Cambodia to draft e-commerce law. Phnom Penh has reached
consensus on a draft e-commerce law and consumer protection. This law aims to facilitate and
regulate online business for investors and protect the interests of consumers, while ensuring
fair competition in the market. (Nhung, 2020)

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Learning outcome 1: Analyze the key factors which drive globalization
I. The concept of globalization
Globalization is the popular of products, information, technologies, jobs across
borders and national culture. Moreover, globalization is an inevitable and expanding trend. The
inevitability of globalization is firstly manifested in the economic inevitability. Economically, this
phenomenon depicts the global interdependence driven by free trade. So, economic globalization
is the most important aspect of globalization; it has a profound impact on the political realm.
Political changes have an economic and cultural impact. (Investopedia, 2019)

On the positive side, globalization can enhance living standards in poor and
underdeveloped countries by creating job opportunities, modernizing and improving access to
goods and services. Otherwise, it may take away job opportunities in developed countries with
higher wages as commodity production moves through other countries. (Investopedia, 2019)

The motivation of globalization is ideal and opportunism, but the development of a

global free market has benefited large corporations in the West. The effects of globalization are
both good and bad for workers, culture and small businesses, in both developed and emerging
countries. (Investopedia, 2019)

❖ Globalization impacts on economic growth in Vietnam

Developing the country in the direction of innovation, the Government of Vietnam is

more and more aware of the need to participate in the process of economic globalization and
international competition. Today, globalization has become an objective trend, a living reality of
the world, impacting many aspects on the development of all nations and peoples around the world;
expose each country to great opportunities and challenges, especially developing countries,
including Vietnam. Vietnam is one of the most open-minded countries in the world, with a trade-
to-GDP ratio of nearly 200% and a source of FDI accounting for about 7% of GDP in 2018.
However, in the context of the changing world, Vietnam's economy is facing great opportunities

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and challenges. So, Vietnam is likely to be the country most affected by several major global trends
affecting the domestic economy. Currently, globalization trends are going through a very difficult
period. A series of recent upheavals has made the world more divided such as Brexit, the rise of
nationalism or most recently the US-China trade war. With its geopolitical position and structure
Trade so Vietnam is likely to be more vulnerable to US-China trade tensions. In addition, the Sino-
US trade war also affects Vietnam's economy because the US imposes a 25% tax on US $ 250
billion imported goods from China as recently, Vietnam's GDP may decrease by 0.29% in the year.
2019 and 0.39% in 2020. In addition, there are 5 key impact on Vietnam's economy growth:
(tapchitaichinh, 2019)

• Foreign investment has increased rapidly

Economic globalization and region are prominent in global capital flows. That creates
an opportunity for Vietnam to attract external capital for domestic development. However, in the
face of policy changes in developed countries, emerging economies also responded to protect their
domestic currency and curb inflation by raising interest rates. This makes capital flows into
developing countries, including Vietnam, change rapidly and tend to fluctuate greatly. Changes in
global economic conditions and the evolution of macroeconomic factors in developing countries
and emerging economies are the main determinants of capital inflows into these countries. Foreign
investment inflows are considered one of the important capital flows for the current and future
development of Vietnam's economy. However, despite the crisis caused by COVID-19 having a
strong impact on the global supply chain, raising interest rates, by the end of 2020, the total newly
registered capital, adjustment and capital contribution to buy shares of the house. Foreign
investment (FDI) in Vietnam still reached 28.53 billion USD. In the trend of global investment
with many changes, FDI capital continues to maintain positive results in 2020, showing that
Vietnam continues to be chosen as an attractive and safe destination for investors. foreign. Plus
the newly registered capital, accumulated by the end of December 2020, the whole country has
33,070 valid foreign investment projects with a total registered capital of 384 billion USD; realized
capital was estimated at 231.86 billion USD, equaling 60.4% of valid registered capital.

With the annual growth rate of FDI capital steady at 10.4% in the period from 2013 to
2019, Vietnam in the past decade is considered an important center to attract FDI capital. gender.
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The remarkable breakthroughs in FDI attraction also helped Vietnam be considered as one of the
most successful FDI attraction countries in the region and in the world, becoming a reliable and
effective investment destination in the eyes. foreign investors. (LĐO, 2021)

• Climate Change

Vietnam is ranked as one of the five countries most likely to be affected by climate
change. A large proportion of Vietnam's population and economic assets are in the lowlands and
coastal areas. Climate change is expected to increase existing risks to natural resources,
agriculture, food security, infrastructure and health and pose a major threat to economic
development. and people and the environment. So far, Vietnam has suffered a 20cm sea level rise
over the past 50 years, and the average temperature has risen 0.50C over the past 50 years, double
the global average. Predictions indicate sudden heat and cold, and a 28-33cm rise in sea level
around the coast of Vietnam. Seasonal variations in precipitation also increase, the wet season
becomes more humid and the dry season becomes drier. Heavy rains and floods will become more
frequent, especially in the North, including Hanoi, with an increased risk of landslides in
mountainous areas. Storm trajectories have tended to shift southward over the past five decades.

Viet Nam has already suffered from climate change World, and these World are
expected to increase in the future, placing a heavy burden on public finance and economic and
human development. Stress in water management stemming from climate change is exacerbating
the current problem. There is serious concern about meeting future water demand, especially in
the dry season. Hydrological changes and sea level rise will affect fresh water (saline intrusion) or
even change the quality of agricultural land. Climate change related disaster cause an average of
750 deaths and annual economic losses equivalent to 1.5% of GDP. The potential for climate
change to cause severe flooding, prolonged droughts, and more frequent and intense storms
associated with tsunamis requires preventive and adaptive actions.

Agriculture, especially rice production, is expected to be hit hard, especially around

the Mekong River Delta, where most of the land is 2 meters below sea level. The Mekong Delta
is identified as one of the regions most affected by climate change. The Mekong River Delta alone
provides 50% of the rice production (90% for export), 70% of agricultural products and one third
of Vietnam's GDP. The Mekong River Delta is densely populated and is home to 22% of the
Vietnamese population, most of whom live in coastal rural areas, and their livelihoods are heavily
12
dependent on rice and shrimp farming. Agriculture and aquaculture in the Mekong River Delta are
increasingly affected by changes in freshwater supplies due to saline intrusion, floods, dense
tropical storms, and rising temperatures. The supply of fresh water in the water is expected to be
unstable due to uneven rainfall and saline intrusion into groundwater sources. Marine, especially
coral reef, are expected to be affected by sea level rise, ocean warming, and ocean acidification
associated with increasing concentrations of CO2 in the atmosphere and oceans. Coastal
infrastructure will be subject to more tropical storms, long-term sea level rise and sudden coastal
and river inundation.

According to a study by Capital Economics, if the US presidential administration

imposes a 25% tariff on imports from Vietnam like it did with China, Vietnam could lose 25% of
its export revenue. equivalent to more than 1% of gross domestic product (GDP). This loss will
wipe out the estimated benefit of 0.5% of GDP that Vietnam achieved in the past year from the
US-China trade war.

In the long term, the impact of the US-China trade war will reduce the world economy,
leading to a decrease in consumption demand for Vietnam's exported goods. Furthermore,
disruption of global supply chains will also affect Vietnamese firms, especially FDI firms. (WB,
2019)

• The Fourth Industrial Revolution

The Fourth Industrial Revolution (Revolution 4.0) together with the process of
globalization and international integration are still two major trends, deeply affecting the
development of mankind. The fourth industrial revolution (Revolution 4.0) will continue to take
place rapidly, especially with technological breakthroughs in fields such as artificial intelligence,
robots, internet connecting things, printing technology 3. dimension (also known as additive
manufacturing technology), nanotechnology, biotechnology, large database ... This is the trend of
combining virtual and real systems to bring about remarkable change. ranks for quality of life,
employment, production and socio-political relations.

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 The vast opportunities facing Vietnam will be associated with breakthrough
technological advances that contribute to expanding access to global markets, creating new goods
and services, transforming production processes, change business models, and create a significant
impact on development. The demand for advanced cognitive and social emotional skills is
increasing, while the demand for less advanced skills that can be easily automated is decreasing.
The change in skills required by the labor market can lead to an increased risk of inequality
between workers with new means of access to technology and the acquisition of skills for the new
economy and those the workers are not equipped with these. In addition, disruptive technology
can drive Vietnam's economic growth in only certain areas and locations.

The Vietnamese economy is an economy transformed from a centrally planned,

subsidized economy to a socialist oriented market economy. Vietnam's population is about 96
million, GDP ranks 42nd in the world with 223.9 billion USD in 2017. Vietnam is a dynamic
economy of the region and the world with a high annual GDP growth rate. (5.99% for the period
2008-2017). However, GDP per capita in 2017 was on average low (2,385 USD / person / year),
ranked 7th in Southeast Asia. Especially, labor productivity is very low, lower than Laos and only
6% of Singapore.

Factors contributing to Vietnam's economic growth in the direction of decreasing the

role of labor, increasing the factor of capital and factors of aggregate productivity (including
technology). The wave of globalization, international integration is getting more and more
extensive, and the Industry 4.0 has affected Vietnam's economy with great opportunities and
challenges.

The positive effects of technology 4.0 on Vietnam's economy are to create

opportunities for Vietnam to modernize and shorten the time to become a modern industrial
country; creating a comprehensive change, from the market structure, to the way of production,
consumption and State management. This is an opportunity for Vietnam to improve labor
productivity, the competitiveness of traditional industries as well as its access to the world market
on digital / internet platforms for rapid growth with high added value and durability. firm. In
addition, Industry 4.0 is and will bring opportunities for the digital economy, smart manufacturing
and services; types of economy, industry, agriculture, services, tourism, finance, banking, logistics,

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robotics ... smart. Industry 4.0 also helps increase labor productivity, save production costs, and
manage to bring great benefits to the State, businesses and consumers. (WB, 2019)

• Outbreak of the COVID-19 pandemic

The year 2020 witnessed the outbreak of the COVID-19 pandemic, a global shock that
strongly affected most economies in the world, including Vietnam. The COVID-19 pandemic had
a strong impact on the global value chain through the centers of the chain, the heavily impacted
countries as well as the centers of the global production network. More than 100 stores had to pay
the ground or close the premises in HCM city, let employees quit their jobs and left hundreds of
people unemployed during the covid 19 epidemic. Moreover, COVID-19 epidemic affected two
pillars of Global economic growth is trade and investment, which in turn will reduce global output
growth as well. According to the International Monetary Fund (IMF) 's forecast on June 24, the
global economic growth this year [2020] is estimated to decrease by 4.9% (Hoai Ha, 2020). The
IMF's forecasts in April also reflect the increasingly difficult world economic situation, with the
world growth decreasing by 3%. The World Bank's forecast for the global economy is even worse,
in particular, global economic growth will decline by 5.2% by 2020. US economic growth is
forecasted by IMF to decrease by 8%. The growth of the Eurozone decreased by 10.5%, Japan
decreased by 5.8% and China grew at a low rate of 1%. The decline in world economic growth
and in some countries and territories that are Vietnam's major trading partners will have a direct
impact on our country's trade and investment. In order to mitigate negative impacts in the coming
time, Vietnam needs to proactively develop different economic policy response scenarios
depending on the duration and severity of the epidemic. (Thuấn, 2019)

• Global trade

That is now changing. Economies like Vietnam's are growing rapidly and so is the
wealth of their nations' citizens. Vietnam's exceptionally globalized economy is a result of its focus
on exports for economic growth. With its large, industrious and well-educated workforce, Vietnam
has opened up its labor market to foreign investors and become a hub for low-cost manufacturing.
The country is now a major exporter of electronics and apparel.

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 Globalization has been positive for most Vietnamese. The country's GDP per person
has grown over 27 times in the last 30 years to about $ 2,600 in 2018. The Vietnamese people have
noticed the benefits of globalization. In a recent Pew Research Survey, 95 percent of Vietnamese
people reported that “trade is good.” That's because, compared to other emerging nations, that
growing prosperity has been more equitably shared. The proportion of people in extreme poverty
decreased from above 70 percent in the early 1990s to around 10 percent in 2016.

Fueling this economic engine is Vietnam's GDP, which has grown at 6.8 percent a
year on average for the last 20 years. The economy has grown 39 times in the same period to $
245 billion last year. Growth in 2018 last year was 7.08 percent, the highest in a decade. (Cador,
2019)

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II. Explain five key driving factors of globalization
Centuries ago, advances in maritime technology, shipbuilding technology, traffic
exploration, and commodity market developments have created conditions for the expansion of
trade exchanges between countries. Over the long-term development process, international
economic relations have become more and more popular, covering many fields with many forms.
Especially in recent decades, very new economic and technical factors have appeared, leading to
a leapfrog development in globalization of economic relations. The following are the basic factors
driving globalization: (voer, 2019)

➢ The increasing development of production forces

The reality of the world economy is showing a transition from the industrial economy
to the knowledge economy, which is evident in developed countries. Along with it, developing
countries have also incorporated the shift from agriculture to industry, combining brief steps to
shorten the process of building the foundations of the knowledge economy.
The development of knowledge economy based on technologies with high scientific
and technical content, especially information technology, has opened up favorable conditions for
accelerating globalization trend, for example: New technologies speed up business transactions,
shorten the gap in space and time. Information technology also contributes to improving the
people's intellectual level, creating conditions for democracy to develop, promoting open demand,
integration exchange.
In short, it is the strong development of science and technology that has broken the
barrier separating the boundaries in human transactions on all sides of the nation. This has pushed
the internationalization of the economy to a new era, the globalization of the world economy.
Countries, whether or not they want to be affected by globalization and of course to survive and
develop in the present conditions, cannot not participate in the process of globalization, that is,
international integration. (voer, 2019)

➢ The strong development of the market economy

The process of internationalization and globalization has a close connection with the
development of the market economy. The developed market economy has opened up the
conditions for the increase in internationalization trend, reflected in two main aspects: First, the

17
market economy opens the basis and conditions for the development of the force production,
making the production scale not confined to the scope of each country but also international, thus
also promoting the international division of labor, attaching countries to the constraint. of
production and consumption. Second, the developed market economy of the countries brings a
unified mechanism for handling relationships, which is the market mechanism.
It can be said that today the world economy is united with the operating mechanism:
the market mechanism.
The more developed the market economy, the greater the interference between each
other. The strong development of the market economy is not only in the spatial expansion, in the
interdisciplinary penetration between countries, but also in the in-depth development. It was the
boom in the financial market associated with the emergence of a series of new instruments in
transaction settlement. The market for commodity products has also increased dramatically,
reflected in the unprecedented scale of the volume of trade transactions and in the development of
new types of transactions such as service commerce and electronics.
Thus, it can be seen that the strong development of the main market mechanism is the
basis and conditions for the internationalization process. In general, countries in the world today
are based on market mechanisms, using the means and tools of the market economy in business
activities, providing a large, global space for the production and circulation of its own elements.
(voer, 2019)

➢ The strong growth of transnational companies

With the strong development of production in capitalism inevitably leads to

concentration of production and leads to monopoly. In the history of world manufacturing in the
late 19th and early 20th century and the early years of the 21st century, under the influence of the
scientific and technical revolution, there has been an unprecedented development of the
transnational.

Up to now, there are nearly 60000 transnational companies controlling 2/3 world
trade, 4/5 foreign direct investment and 9/10 world research and technology transfer results. . With
such power, transnational companies not only have an advantage in resource distribution on the

18
world scale, helping to promote the international division of labor into detail but also through
globalization. production and business to accelerate economic globalization.

The strong development of transnational companies in the global territory has created
the international economic network. Countries can immediately participate in international
production lines and also the relationship of interdependence increases.

Transnational companies have played a huge role in increasing exports, strongly

increasing foreign direct investment into developing countries, and accelerating the integration of
this economy into the economy. world in general.

Thus, the growing and increasing penetration of transnational companies into the
national economies has contributed to the elimination of the isolation gap in development of many
countries around the world. The ethnic countries gradually participate, adapt to the standards of
the international economy, at the same time it also brings new features from their own identities,
adding to the global economy, increasing diversity of its. (voer, 2019)

➢ The formation and development of global and regional institutions.

The establishment of global institutions aims to meet the demands of the trend of
internationalization and economic globalization. The existence and operation of global and
regional institutions contributes to the further development of the globalization trend.

Among the global and regional economic-trade-financial organizations that have a

great influence on the globalization and regionalization, the WTO, IMF, the World Bank and other
regional organizations such as the EU, NAFTA, APEC ... With their functional objectives,
international economic organizations have participated in and promoted international economic
activities, coordinating and managing these activities. Although the effectiveness of these
organizations is judged differently from the point of view of national interests, no one does not
acknowledge their need and role, even asking for improving their organizational structure, renew
their operating principles.

The impact of global organizations and especially regional organizations on the

economic globalization trend is reflected in two main points:

19
 First, participation in these organizations allows countries to enjoy the incentives of
regional business; promote countries in the region to come to common standards in the production
and consumption of products. On the basis of bilateral and multilateral cooperation agreements
that have increased interdependent interdependence among economies, in fact it has pushed the
international division of labor deeper and deeper within the organization.

Second, the activities of these organizations from low to high will push to form a
unified market in the region, forcing participating countries to have a schedule of active integration
in order to integrate into the region.

In short, global and regional economic organizations are both the result and the driving
force of the process of economic globalization. (voer, 2019)

➢ The proliferation of global problems

In the past few decades, the world economy has developed strongly, but it is followed
by global problems such as the rich and poor differentiation, environmental pollution, epidemics
... These problems. concerns every nation, has an impact on the whole world, it determines the
vital development of the human community.

Therefore, when solving global problems, there must be the efforts of all countries,
linking the efforts of the whole community. Each country itself, no matter how strong its potential
is, cannot solve the problem related to the whole world. This is the objective basis of the
regulations, promoting the convergence of common rules for the economic development process.
(voer, 2019)

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III. PESTLE analysis of Cambodia market

PESTEL model is an extremely useful strategic tool to help us understand the growth
or decline of the market as well as help us understand the business position, opportunities and
direction of the business activities. Factors affecting the business environment can all change.
And this change will create new opportunities or threats to your business. Therefore,
environmental analysis helps you assess the external impact and give the right direction for the
business. This helps you understand what core changes you are facing. And from there take
advantage of the opportunities as they appear. PESTEL is really suitable when you start a business
in a new field, or location. The following will analyze 6 factors of PESTLE that directly affect the
Cambodian economy in general and to each business in particular. Businesses are subject to these
external factors that influence them objectively. (Khánh, 2020)

❖ Political

On February 12, 2020, the European Commission issued a press release announcing:
“The EU has officially decided to withdraw a part of the tariff preferences granted to Cambodia
under the EBA - Everything but arm incentive program. arms exclusion of the European Union
(EU) for Cambodia due to a serious and systematic violation of the principles of human rights set
forth in the International Covenant on Civil and Political Rights. However, the decision to partially
withdraw the EU EBA status at the level of neutralization of the political interests of both
Cambodia and the EU, in which Cambodia maintains political and social stability as well as
guarantees for The EU is in a position to be able to pressure and negotiate with the Cambodian
government to establish a "real democratic political opposition" in Cambodia without affecting the
majority of the Cambodian population. Therefore, Cambodia will promote the implementation of
multilateral diplomacy, taking multilateralism as the foundation to maintain Cambodia's domestic
stability. Accordingly, with pressure from the economy, Cambodia advocates to change its foreign
policy towards is more balance in relations between major countries: Cambodia still builds a pillar
of foreign and economic policy. entered China but advocated more conciliatory with the US
(advocating readiness to resolve thorny issues in relations with the US), gradually looking to
descend the ladder with the EU, for the opposition parties to react to build the multi-party regime
is more consistent with Western standards; Build good relationships with neighboring countries

21
and old friends in ASEAN, including Vietnam, Thailand and Laos; Enhancing Cambodia's image
in the international arena through the successful organization of ASEAM 13 Summit and
implementing its international obligations. (Phi, 2020)

➔ Cambodia was officially withdrawn a part of preferential tax by the EU to punish and warn
Cambodia, but its impact was not too heavy. Currently, Cambodia is still stable from the
impact of politics. Therefore, VRG still has a lot of opportunities to exploit and develop on
the ground of your country. The level rating is 2.

❖ Economic

The global shock triggered by the COVID-19 pandemic has significantly impacted
Cambodia's economy in 2020 at a time when Cambodia also faces the partial suspension of
preferential access to the EU market under the “Everything but Arms” initiative. The outbreak
caused sharp deceleration in most of Cambodia's main engines of growth - tourism, manufacturing
exports, and construction - which together account for more than 70% of the country's growth and
almost 40% of paid employment. The economy in 2020 is projected to register negative growth of
-2%, the sharpest decline in Cambodia's recent history. The COVID-19 outbreak and slow
recovery in global economic activity, alongside prolonged financial market turmoil, poses risks to
Cambodia's growth outlook. However, the Kingdom of Cambodia's 2020 gross domestic product
(GDP) growth will decrease by 4%, instead of 5.5% due to improved agricultural performance and
increased production of non-textile goods. Currently, the inflation rate of Cambodia in 2020 is
stable at 2.1% before falling to 1.8% in 2021 due to the low oil price which reduces production
and transportation costs. Moreover, Cambodia's non-textile production also increased strongly,
especially bicycles and other industries related to supporting industries, including electronics.
Exports of agricultural products, including rice, have also increased sharply and are likely to
increase further in the future when Cambodia signs free trade agreements with China, South Korea
and other potential partners. Besides, not only a breakthrough in rice exports, rubber export
activities of this country this year are even more impressive, when in the first 10 months of the
year, there was a growth of 21% over the same period last year, reaching 242,922 tons of rubber.
dry ingredients and earned a total revenue of 318 million USD from export activities. (XINH,
2020)

22
 ➔ The impact of the COVID 19 pandemic is inevitable, with most of the world's economic
growth declining, including Cambodia. However, Cambodia's rubber industry still tends to
develop and increases exports. Therefore, this will be the potential for VRG to seize
investment opportunities or continue to expand into the Cambodian market. Rating level is
5.

❖ Social

Population of Cambodia is 95% of those have faith in Theravada Buddhism and rest
Islam, Christian etc. Country is a mixture of 90% Cambodians, 5% Vietnamese, 1% Chinese and
others 4% ethnic groups. In addition, Cambodia has religions including Buddhism 96.4%, Islam
2.1%, other religions 1.5%. Cambodia has a literacy rate of 75.1% and Khmer is a first language
spoken by 95% of population and English is increasing as a second language. In addition,
Cambodian culture not only had influences imported from Indian and Chinese cultures, but also
had very specific cultural features of the country Cambodia. Moreover, some of their customs and
habits are that Cambodians live discreet, simple and courteous. Moreover, they often greet each
other in a traditional way of clasping hands together like praying, head bowed slightly. Some
highly prevalent social issues within the country includes the rising rate of HINIAIDS, human
exploitation and trafficking, undernourished children, and waste of natural resources. In addition,
the Cambodian people are now slowly turning to hate the Vietnamese to China, increasing their
goodwill towards the Vietnamese. (ukessays, 2018)

➔ Vietnam and Cambodia in recent years have a neighbor relationship, traditional friendship
and comprehensive cooperation in many fields and at the same time, the culture - society
of the two countries is not much different, so VRG Expansion and operation in this market
will not have too many obstacles of this factor. Therefore, its severity will be rated at 1.

❖ Technology

Cambodia's technological sector is et a rudimentary stage and extremely

underdeveloped in comparison with other Asian nations. However, country does have the ability

23
to skip traditional technologies in attempt to catch up and quickly adapt newer technologies. The
country skipped landline stages and adapted to mobile communications effectively. Comparative
to International usage, the frequency of internet usage is low with only 31.3% of the population
having direct access to the Internet. Women have less access to these technologies. Advances in
technology, especially in the industry, would be incredibly helpful and would allow for increased
efficiency within the industry. There is a large possibility of technological advances through
globalization es more FDIS enter the country. Currently, the world is witnessing a new era with
the breakthrough achievements of the Industrial Revolution 4.0 based on digital technology to
optimize processes, production methods, ... Of course, the level of industrial 4.0 adoption in many
developing countries such as Cambodia, a member country of ASEAN, is still relatively slow. The
United Nations Development contends that there is a shortage of experts, low cybersecurity,
regulations on data protection and privacy, limited Internet service, financial problems and skills
gaps. such as language and digital are the main barriers and obstacles for the application of 4.0
technologies in Cambodia. (TH, 2020)

➔ Industrial Revolution 4.0 is the factor that has quite a serious impact on both Cambodia
and Vietnam. Therefore, VRG's investment in this market will face many challenges and
keep up with the changing technology. Level is rated 3.

❖ Legal

The legal system of Cambodia is based on French law and the influence of the laws of
the United Nations Transit Agency in Cambodia. It also means a hybrid system of civil law,
influenced by the French system after colony, and common law, sang by international aid and
assistance to legal and judicial reform in Cambodia. In addition, there are a few restrictions on
foreign investment and shareholders. Foreign investors cannot own land in Cambodia, but there
are some options for them to enjoy control over land. Moreover, foreign investment is also
prohibited in the following areas: Production / processing of psychotropic substances and narcotic
substances; Production of poisonous chemicals, agricultural homestead / insecticides and other
goods using chemical substances prohibited by the World Health Organization; Processing and
production of electric power by using waste imported from a foreign country; Forestry
exploitation, under the Forestry Law; The foreign transfer of funds equal to or more than USD

24
10,000 must get a prior declaration from the National Bank of Cambodia. Cambodian law does
not prohibit 100% foreign company ownership, so there are no restrictions on foreign shareholders.
(practicallaw, 2018)

➔ The laws of Cambodia are very clear, not too difficult to comply with the law, although
many businesses investing in the Cambodian market are subject to the laws and regulations.
However, VRG complies with the law, practices ethical rules and standards, advances
business, promotes national pride and preserves the country's reputation, and makes a
positive contribution to socio-economic development in Cambodia, making a practical
contribution to the friendly relations between the two countries in the spirit of each business
being a friendship ambassador. Therefore, the legal factor will be assessed at level 2.

❖ Environment

The key environmental problems (further described below) in Cambodia include

habitat loss and declining biodiversity (in particular destruction of mangrove swamps and
declining fish stocks), deforestation, land degradation, natural hazards and disasters etc. floods and
droughts, and water pollution. Climate change is expected to increase the frequency and intensity
of extreme weather events such as floods, droughts and windstorms, as well as the problems
associated with sea-level rise. The environmental problems in Cambodia lower the value of and
access to productive resources and also create health problems, especially for the poor, which
increases vulnerability and complicates economic development and the fight against poverty.
(sidaenvironmenthelpdesk, 2009)

➔ Thereby, it shows that the natural resource environment of Cambodia is very rich but
exploited is also remarkable. Besides, the most important factor influencing VRG
operations and rubber plantations in Cambodia is soil erosion, deforestation and climate
change. So, the environment factor is rated for its severity 4.

25
 PESTLE
PESTLE

Political
5
4
3
Environment Economic
2
1
0

Legal Social/cultural

Technology

Figure 1: Radar chart show PESTLE of Cambodia market

26
IV. CAGE Framework
The CAGE Framework identifies the Cultural, Administrative, Geographic, and
Economic differences between the various countries that companies should address and take care
of whilst working on and crafting international strategies. The framework can also be used to
understand the patterns of capital, trade, the flow of people, and information that work as crucial
factors for the organization. It is an excellent analytical tool for the various companies and
organizations that develop international strategies with an intention of the global expansion of their
businesses. Below, I will analyze the differences of CAGE between Cambodia and Vietnam.

• Cultural Distance • Administrative • Geography • Economic

and Political Distance Distance
Distance
The script of Cambodia In Vietnam, the Vietnam - Cambodia Currently, Vietnam
creates its own scripts on VNTLAS system is share a border of 1270 has GDP growth in
the basis of the Sanskrit based on the legal km in length. 2019 of 7.02% while
script of India. While regulations that apply Cambodia is located in Cambodia GDP
Vietnam has two main to the rubber industry the southwestern growth is about
types of script used to at each stage of the Indochina peninsula, 7.01%. In addition,
record Vietnamese, it is wood supply chain, the East bordering Vietnam's investment
Han script with Nom including mining, with Vietnam is 1,270 projects in Cambodia
letters and national importing, km long; Vietnam is a have been well
language letters belongs transporting, long and narrow implemented and
to the Latin family. processing, trading country, stretching present in almost all-
Moreover, Customs and and exporting. In 1600 km (1000 miles) important sectors and
habits: Cambodians live Cambodia, the from north to south, fields of Cambodia,
discreetly, simply and Cambodian law on with a coastline most of which focus
courteously, they often land has changed to (excluding islands) on agriculture and
greet each other in the reduce the time to about 3300 km (2000 forestry. Economic-
traditional way of grant economic miles) wide, and only trade cooperation
putting their hands concessions to rubber 50 km (30 miles) wide. plays an important

27
together like praying, and industrial crops. in the narrowest place. role in promoting the
their heads bowed From 90 years down to Vietnam has a western relationship between
slightly. They value 70 years and most border of Cambodia. Vietnam and
family as the nucleus, in recently 50 years. The proximity to each Cambodia to continue
which the woman plays Moreover, it is known other allows to develop for the
the main role, the wife's that Cambodia's Cambodia to trade benefit of the two
family is more important regulations on with neighboring countries. Ministries,
than the husband's collateral and countries through the branches, localities
family. When going to collateral are simpler border gate and and businesses of the
the wedding should wear than that of Vietnam. exchange two countries have
colorful clothes, avoid Therefore, if you get a internationally closely coordinated
black and white. loan at another bank, it through the seaport and implemented
Weddings usually invite will be easier to system. Currently, to important cooperation
9 monks to come to the request a loan meet the needs of activities in all fields
ceremony early in the application. In cross-border of trade, investment,
morning. In contrast, addition, Cambodia exchanges and tourism and people-to-
Vietnam is a liberal and maintained a cooperation, the people exchange,
hospitable person. politically neutral border gate system on contributing to the
However, everything stance, a policy of the Vietnam- friendship, tradition
always has two sides, perpetual non- Cambodia mainland and comprehensive
Vietnam has collusion, non- border has been cooperation between
encountered some issues aggression or expanded and strongly Vietnam and
of chopping tourists, so interference in the developed up to now. Cambodia continue to
for this part, internal affairs of other So, the export and develop for the benefit
Cambodians seem to countries. Compared import of the rubber of the two countries.
have done better. The to Vietnam, doing industry going back Vietnam has become
price of travel services is business in Cambodia, and forth between the one of the most
very cheap and Vietnamese two countries will important economic
extremely reasonable, businesses are much become easier and and trade partners of
another plus point is that more profitable than more convenient. Cambodia. Vietnam
there will be no situation doing business in and Cambodia have

28
of hustle and bustle of Vietnam. Besides, the (vietnampartners, signed and
customers. In addition, export tax rate is 0% 2020) successfully
there are some cultural between Vietnam and implemented each
similarities between the Cambodia. This is also year the bilateral trade
two countries that are an advantage if promotion agreement,
religious ideology, about Vietnamese in which the
painting, architecture, businesses cooperate Vietnamese side gives
sculpture, literature and with Cambodia and preferential treatment
arts, politics and society. export goods together to a number of
The most famous to other countries. Cambodian
architecture of However, at present, agricultural products
Cambodia is the Anglo- Cambodia's tax law exported to Vietnam
Cham architectural currently sets an at the import tax rate
ensemble and Anglo-co extraordinary income 0%, including some
Thom. While Vietnam tax at the rate of 20% important agricultural
Citadel, palaces, castles, for items such as products such as
pagodas and houses, housing costs for rubber, cashew nuts,
Binh Son Tower (Vinh workers, expenses for cassava chips, tobacco
Phuc province), Pho buying rice, additional leaves, rice. This
Minh Tower (Nam food for Cambodian agreement has helped
Dinh), Thai Lac pagoda workers. - Reporter. Cambodian farmers to
(Hung Yen province), ... Therefore, VRG needs have a stable and
(many very). Moreover, to consider and long-term
English is the second reconsider the impact consumption market
language that both of the law and provide in Vietnam, thereby
Cambodia and Vietnam solutions. (XINH, helping Cambodia's
use. So, it'll be easy for 2020) agricultural sector
VRG in terms of cultural develop quickly and
inclusion. sustainably.
(bestasiatours, 2019) (daihoidang, 2021)

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V. SWOT analysis

Through SWOT analysis, businesses will clearly see their goals as well as factors
inside and outside the organization that can positively or negatively affect their goals. In the
process of developing a strategic plan, SWOT analysis serves as the most basic, highly effective
tool to help you have an overview not only of the business itself but also the factors that always
influence and determine. the success of your business. SWOT analysis (SWOT Analytics) is an
important factor to create business production strategy of the business. To understand and
accurately analyze the model, below is the SWOT analysis of Vietnam rubber group (VRG).

30
 Strengths Weakness
• The exploitation potential is still very • Low skill level of workers
great.
• Processing technology for rubber is limited
• Vietnam Rubber Industry Group (VRG)
plays a large role in the rubber tree
development strategy in Vietnam. In • VRG has no brand name on the world
market. (vnrubbergroup, 2019)
addition, VRG has a sustainable
development strategy.

• VRG has brought Vietnam's rubber

industry to the 1st position in Asia in
terms of productivity, 3rd in volume and
exported in the world natural rubber
market.

• VRG's rubber products are currently

exported to about 70 countries and regions
around the world. (Hằng, 2020)
Opportunities
• Vietnamese rubber in the global supply
chain
Threats
• Force majeure risks from natural in areas
in Cambodia when planting rubber.

• The expansion of rubber plantation • Disagreement in language and approaches

development cooperation in the
Cambodian market also creates
opportunities to expand planting and
tapping acreage for Vietnamese
businesses. (Sơn, 2020)
to regulations of law, customs of
indigenous peoples.
• Do not understand the policies and laws of
the host country, international conventions

31
 • Payback for long (tapchitaichinh, 2019)

Strengths
Currently, only 63% of VRG's rubber area has been put into operation, so the potential
is huge. In addition to developing domestic rubber resources, VRG is also actively investing in
planting new large rubber plantations in Laos and Cambodia. VRG - Joint Stock Company
continues to divest and restructure the business to improve operational efficiency, develop stably
and sustainably. Despite the periods, VRG still ensures effective production and business; take
good care of life and jobs for hundreds of thousands of workers; supporting smallholder rubber to
develop; participate in stabilizing social security; strengthening national defense and security;
contribute to building a new countryside, industrialization and modernization of the country.
Currently, VRG manages more than 410,000 hectares of rubber domestically and internationally.
In particular, the rubber area in the country is nearly 300,000 hectares, more than 87,000 hectares
in Cambodia and nearly 30,000 hectares in Laos. Each year, VRG produces an average of 320,000
tons of rubber of all kinds. Although accounting for only 30% of the country's rubber area and
production, VRG plays a very important role in promoting the development of Vietnam's rubber
industry. According to ANRPC, Vietnam has been the leading rubber producing country in Asia
since 2013. Vietnam's natural rubber production in 2018 is estimated at 1,142 thousand tons. Of
the total natural rubber exploited and imported, accounting for a large proportion is still exports,
the rest is for domestic consumption. Natural rubber in Vietnam is mainly used for the production
of tires, gloves, pillows, etc. Moreover, Vietnam is ranked third in rubber export in the world, just
behind Thailand and Indonesia. Production accounts for about 7.7% of the total global natural
rubber production and Vietnam's rubber area accounts for 5.6% of the global rubber area. The total
rubber area in Vietnam is 653,213 ha (+ 5.1% yoy) and the output of natural rubber is 1,094519
tons (+ 5.7% yoy) in 2017. Average productivity is 1,676 tons / year. ha (+ 0.6% yoy), Rubber
plantations in Vietnam include the state owned by joint stock companies of the Vietnam Rubber
Group, provincial companies and private enterprises. According to the Ministry of Agriculture and
Rural Development, in the period 2011 - 2018, the rubber area from more than 800,000 hectares
in 2011, the output reached more than 789,000 hectares. In 2018, the area reached 965,000

32
hectares, exceeding the plan of 165,000 hectares, output reached 1.1 million tons. In 2018, the
volume of rubber exports reached 1.56 million tons with an export turnover of 2 billion USD, up
13% in volume but down 7% in value. In addition, VRG's rubber products are currently being
exported to about 70 countries and regions around the world, accounting for about 70% of the total
rubber export volume of Vietnam. . China is the most important destination for Vietnam's natural
rubber exports with a market share of 67.8%, equivalent to 864,695 tons. The other top importers
are India (9.1%), South Korea (3.2%), Malaysia (2.5%) and the US (2.1%). (Hằng, 2020)

Weakness

The skill level of workers is not high, so rubber tapping productivity is lower than that
of other countries in the region. People grow and harvest rubber at a small scale, lack of linkages,
techniques, and care processes, difficult to control at all stages, unstable quality, negative impacts
on the production market. The price of rubber raw materials for smallholder farms is usually 1-1.5
million VND / ton lower than the price of large rubber trees because of poor quality and through
many intermediate collectors. Rubber hat processing technology is stopped at the preliminary
stage, the main export products are semi-finished products. Moreover, processing technology is
still limited compared to other countries in the region, and cannot meet the demand of raw
materials for the domestic rubber industry. The deep processing industry of the rubber industry
has not been focused on development and support. Most of the rubber is exported in raw form. Not
only that, although Vietnam is a major rubber producer, it is difficult for domestic rubber
processing enterprises to purchase to meet production needs, while still having to import natural
rubber because of its high quality. The purchase price in the country is unsatisfactory. Vietnam's
natural rubber export rate is still high, domestic consumption for deep processing is still low, so
Vietnam has little influence on the price of natural rubber. Currently, the main export items of the
rubber industry are still mainly raw products, with natural rubber exports accounting for more than
80% of the total export volume. Quality products only account for 17-18%. Although Vietnam is
the third largest rubber exporter in the world, it has not played a major role in the mechanism of
rubber price adjustment in the world. VRG does not have a rubber brand in the world market, so
it always has to sell through intermediaries compared to other countries. (vnrubbergroup, 2019)

33
 Opportunities

In recent years, the demand for importing sustainable natural rubber products of the
Vietnamese rubber industry has been increasing in many countries. Large trading companies that
supply rubber products to global manufacturers, natural rubber is very popular in the deep
processing of products from tires, automotive components, shoe soles, and physical products.
sports, medical equipment, etc. Many firms want to buy sustainable natural rubber in Vietnam.
This is a huge opportunity that needs the Vietnamese rubber industry to capture. According to
statistics of the Vietnam Rubber Association, each year, about 80% of natural rubber from
Vietnam, including a large number of imports from Cambodia, exports with a turnover of 2.3
billion USD. With this turnover, VRG has become one of the most important agricultural and
forestry exports of Vietnam today. Moreover, because of the increasing demand for natural rubber
in the world and favorable prices in the years 2004-2010, the Government of Vietnam encouraged
the Vietnamese Government to support investment programs to help VRG expand its rubber
plantations under a 100,000-hectare project in Laos and another 200,000ha project in Cambodia
since 2005. As of 2015, Vietnamese businesses have planted about 50,000 hectares of rubber in
Laos and 150,000 hectares in Cambodia. Of which, VGR members planted 30,000 hectares in Laos
and 70,000 hectares in Cambodia. (Sơn, 2020)

Threats:

This is the biggest risk for VRG when it is exploiting in the Cambodian market, if
there is climate change, bad weather conditions will cause damage to investors. In addition, many
businesses are surprised by issues such as local laws, customs, customs and culture of the local
people, so some investment projects have not achieved economic efficiency as before. Moreover,
the most difficult problem of VRG when investing abroad is language differences and approaches
to regulations, customs of indigenous people. The reason is that most businesses are investing in
less developed countries than Vietnam - the legal system is incomplete or there are policies that
even though businesses have learned, they change quickly, if they cannot update, Enterprises
themselves will violate the law. Vietnamese enterprises, when investing abroad, often bring
Vietnamese thinking and thinking. For example, in terms of land, if enterprises invest in Vietnam,
they will be supported with land acquisition by the State, but in Cambodia, the land ownership

34
regime will be different. Besides, investment in agriculture such as planting rubber for at least 7-
8 years can recover capital. These are challenges and risks when VRG invests in the Cambodian
market. (tapchitaichinh, 2019)

35
Learning outcome 2: Determine the strategic complexities associated with operating in a
global environment

VI. The challenges of globalization (3 challenges) and the complexity of strategic

challenges faced by organizations when operating in a global environment.
1. Explain the challenges of globalization (3 challenges)

Globalization is an established part of the modern world, so most of us do not realize

the benefits it brings to our everyday lives. Even though globalization makes our lives better, it
does bring some challenges as companies start to grow and expand across borders. Cultural
differences around the world are undeniable. These differences create hurdles for businesses
entering foreign markets and necessitate changes to their daily business operations, whether
employing workers in a new region or communicating the value of their product to a new audience.
Here are the three challenges of globalization: (velocityglobal, 2020)

• Industrial Revolution 4.0

Industrial Revolution 4.0 has completely changed the way, leading to globalization,
current production methods, placing urgent requirements in innovation and updating technology
trends for businesses. The 4.0 revolution brings many opportunities, allowing businesses to access
information, knowledge and advanced technologies, with breakthroughs that significantly reduce
production and operating costs, and reduce pressure on the level of forces amount of labor. Besides
opportunities, that also poses considerable pressure and challenges. Small and medium enterprises,
not yet competitive enough, not ready to access new technologies, passive with new development
trends, not ready to change the business organization model, in which, Competition is increasingly
fierce and facing pressure on investment resources to transform, innovate, break through ...
(THẮNG, 2020)

• Covid pandemic 19

Up to now, the COVID-19 epidemic is still happening very complicatedly in many

countries around the world, negatively affecting major economies like the US, China, Japan, the

36
European Union ... In Vietnam, in the first 6 months of 2020, COVID-19 affects the economy and
makes our country's economic growth fall to the lowest level in 10 years.

An outbreak of COVID-19 in the world without a mass production of a therapeutic

vaccine forced countries to take measures such as social distance, wearing a mask in public,
washing hands. regularly, propaganda to raise awareness for people to limit the spread of
epidemics.

The COVID-19 pandemic is making a strong impact on the global value chain through
its hubs. During the COVID-19 pandemic, countries that were hit hard were also the centers of
global production networks such as China, Japan, South Korea, and the United States. When a
pandemic broke out, social restraint measures were implemented, and many production activities
halted. The interrupted supply chain affects investment activities and global trade, thereby
reducing the growth of the world economy in general and many countries and regions in particular.
(GS, 2020)

• Climate Change

In particular, Vietnam is one of the five countries in the world that will be most
affected by global climate change (according to international organizations). Currently, global
climate change is happening rapidly, seawater intrusion into the Mekong Delta provinces; coastal
erosion and coastal erosion occur in many areas; Natural disasters, storms and floods occur more
strongly and the destruction level is greater. The annual average temperature in Vietnam has
increased, and severe droughts and water shortages have occurred in many regions. Investment in
natural disaster prevention and fighting and response to climate change is increasing. These are
huge challenges for Vietnam's economic development in the coming years. (Thạo, 2020)

2. The complexity of strategic challenges faced by organizations when operating in a

global environment.
- Especially for state-owned enterprises that are participating in the current raw
production and processing, for example, the rubber industry needs to change production

37
 and business strategies, focusing on increasing the science and technology content of
products, improve productivity and increase efficiency in using capital, labor and
technology. Vietnam Rubber Group has launched a strategy to cooperate with VNPT
Group to sign a comprehensive cooperation to apply 4.0 technology solutions for
production and business. VNPT will coordinate with VRG to develop a Digital
Transformation project, towards the 4.0 enterprise model. Specifically, the two groups
will embark on building master plans, implementation plans with detailed roadmaps,
synchronizing with the IT application in VRG's activities. Accordingly, VNPT will
immediately deploy 4.0 technology solutions to operate production and business for
VRG such as: Real-time business analysis and monitoring system; Application of
geospatial information system (GIS) in the management, exploitation and protection of
rubber forests in order to increase efficiency and productivity; Applying Chatbot
artificial intelligence in trend analysis and making agricultural forecasts; Applying
blockchain in transaction authentication, authenticating the origin of raw materials,
products ... So, the application of modern technology in all aspects of production and
business activities is very important to VRG in the era of technology 4.0. Moreover,
the fact that an industrial corporation specializing in processing such as VRG
cooperates with a corporation with strong advantages in telecommunications and IT
like VNPT is not out of the Government's orientation, which prioritizes the application
of Scientific achievements, industrial revolution 4.0 to promote the governance system,
improve service quality, increase labor productivity, develop the country's economy.
(vnmedia, 2019)

- To face the challenges of globalization, VRG is always confident and determined with
its sustainable development strategy. In terms of economy, VRG is the leading natural
rubber producer in Vietnam with more than 410,000 hectares of rubber forests in
Vietnam, Laos and Cambodia, creating jobs and stable income. for more than 80
thousand workers. In 2019, the total revenue of the unit reached 22.8 trillion VND, the
total profit before tax was 4.65 trillion VND. The average income of the group in 2019
is 7.2 million VND / person / month, up 2.8% compared to 2018. This is a great effort
of VRG during the period of low rubber prices because of the economy growth is slow

38
 with many factors of risks and challenges”. Thus, a sustainable development strategy
is an overarching goal of the rubber industry. Therefore, there is a need for consensus
in both perceptions and actions of all levels from the corporation to the member units.
The three pillars of sustainable development must be concretized by targets and tasks
of each term and multi-period visions. At the same time, to properly assess the current
situation, properly forecast the development trend, mobilize all resources, propose
effective solutions, together with our team, together, to overcome all difficulties.
(nhandan, 2020)

- Covid disease - 19 affects all production and business activities of the rubber industry,
from natural rubber, rubber industrial products, wood production to industrial zones.
Therefore, the units are focusing on implementing "dual tasks": both prevention of
epidemics, maintenance and stability of production and business development.
Therefore, VRG leaders proactively and flexibly develop production and business
strategies in each stage, in detail, in particular, focusing on promoting management.
Actively expand the market, proactively negotiate with traditional customers to boost
export output, in which, actively improve long-term contracts. The company
implements dual tasks, strictly implementing epidemic prevention at the unit, and
flexibly building production and business scenarios and solutions to cope with Covid-
19 epidemics. (vnrubbergroup, 2020)

39
VII. Provide recommendations on how to overcome these challenges
o The Group should promote cooperation in finding long-term solutions to increasing
traditional and non-traditional security challenges such as climate change, sea level rise,
environmental pollution, water security. , food security, natural disasters, etc.
(baochinhphu, 2017)

o Faced with the epidemic of covid 19, VRG should override the Group's restructuring
proposal until 2025 which has determined to restructure business lines in the direction of:
Reducing the area of rubber, maintaining stability. from 300,000 to 320,000 ha by 2025
(domestic is 185,000 to 200,000 ha, and overseas about 115,000 ha), but still ensures the
exploited output of over 400,000 tons (an increase of 30% compared to now). The Group
should increase the scale of the rubber industry through considering investing in tire and
tube factories in the form of merger and acquisition (M&A) of companies that have
already brands activities in Vietnam. This helps to close the value chain of rubber
products and is the core for the Group's future development of tires and tubes. In
addition, VRG also arranges small-scale businesses with poor performance, after merger
enterprises will cut investment costs, operating costs ... (vnrubber, 2018)

o VRG Party Committee should focus on strengthening the building of a clean and strong
Party Committee; reform, streamline organizational structure, operate effectively and
efficiently; improving the leadership capacity and fighting strength of the Party
organization and the quality of the contingent of cadres and Party members; continue to
develop and grasp new changes in technology; improve the quality and efficiency of
production and business, stabilize national defense, security, social order and safety;
implement social security, stabilize life, employment and income of employees.
(vnrubber, 2018)

40
VIII. Discuss the success of organization in foreign market
Through analyzing business strategy models including PESTLE, CAGE and SWOT,
it shows the performance and capabilities of an enterprise in a field. Specifically, Vietnam
Rubber Company (VRG) is and has been in the Cambodian market, and is expanding its rubber
to international markets. Kampong Thrum Province Governor Mr. Sok Lu highly appreciated the
performance of the member units of Vietnam Rubber Industry Group (VRG) in Cambodia.
VRG's rubber latex planting and processing activities in recent years have contributed to
economic development and social security in Cambodia. Vietnam Rubber Industry Group in
Cambodia has been contributing to promoting the solidarity and friendship and effective
cooperation between Vietnam and Cambodia. Although sectors of the economy are affected by
the Covid-19 epidemic, the group still actively contributes to accelerating economic
development, improving infrastructure in rural areas, and creating jobs. work with a stable
income. In the first 6 months of the year, VRG's units in Cambodia exploited more than 18,800
tons of rubber latex, 3.2% higher than the same period in 2019. Therefore, in parallel with the
investment and development of rubber trees. VRG companies have invested in social
infrastructure to serve social security. By the end of 2019, companies in Cambodia have created
jobs for more than 17,000 workers, with an average income of over $ 250. Currently, Vietnam is
the 3rd largest natural rubber exporter in the world.

41
 Conclusion

Through this report, it provided me with a wide range of knowledge related to globalization and
the two markets mentioned are the Vietnamese and Cambodian rubber industries. Moreover, the
opportunities come from globalization, also there are significant challenges that affect more or less
businesses. Besides, I have used the strategic analysis models of the business and understand the
factors that support the future growth and improvement of the business. In addition, I have
provided a recommendation to overcome the challenges of globalization to help improve the
performance of the business. This background knowledge about globalization has supported a lot
of useful knowledge in practice and assisted me in completing the assignment. Besides, it also
enhances person's professional career for job in the future.

42
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