Analysis to Decathlon in Vietnam market, Assignments of International Business

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BADM5329 – INTERNATIONAL BUSINESS

Student's name and ID Mai Ngoc Anh Tam - 2154010829 Campus Vo Van Tan Your lecturer’s name Mr. Dang Huynh Anh Duy Word count 1625

Contents

• 1. Introduction to the report
• 2. Introduction to the Decathlon
  • 2.1. Brief history
  • 2.2. Main product offering
  • 2.3. The Decathlon’s globalization process
• 3. Introduction to Vietnam where the Decathlon has operations
  • 3.1. Brief overview of Vietnam
  • 3.2. The advantages and disadvantages of the World Trade Organization in Vietnam
  • 3.3. Vietnam’s tariffs, quotas, and/or subsidies relevant to the Decathlon
  • 3.4. The Decathlon’s operations in Vietnam
  • 3.5. Main competitors of the Decathlon in Vietnam
  • 3.6. Benefits and drawbacks that Decathlon and other foreign competitors bring to Vietnam
• 4. Globalization challenges lying ahead for the Decathlon
• Conclusion
• References

LIST OF ABBREVIATIONS

MNEs Multinational Enterprises GDP Gross Domestic Product GSO General Statistics Office IMF International Monetary Fund FTAs Free Trade Agreements FDI Foreign Direct Investment WTO World Trade Organization EVFTA European-Vietnam Free Trade Agreement EU European Union COVID-19 Coronavirus 19 iii

1. Introduction to the report Globalization assists multinational enterprises (MNEs) to expand their global presence by reducing trade and investment barriers (Zekos, 2003). In this context, many corporations use the benefits of globalization to become globally recognized brands. Decathlon, a well-known sports goods retail chain, is one such company that has developed and expanded its operations globally. With developing countries becoming vital targets for MNEs, Vietnam is a great example for examining how Decathlon adapts and develops in a growing economy, as well as the economic issues inside the host country that affect the company's operation. 2. Introduction to the Decathlon 2.1. Brief history Decathlon is a multinational sports goods corporation and retailer based in France, founded in 1976 by Michel Leclercq (Manikandan & Ganesan, 2016). The initial concept aimed to bring all sports under one roof. Decathlon has developed to become one of the world's largest sporting goods retailers, with over 108,000 employees across over 70 countries (McKinsey & Company, 2023). Decathlon operates as a subsidiary of the Oxylane Group, with its headquarters located in Villeneuve-d'Ascq, France (Decathlon, 2022a). 2.2. Main product offering Decathlon offers a diverse range of equipment, clothes, and accessories spanning over 70 different sports disciplines under 36 exclusive brands (Decathlon, 2022b) in order to cater to a variety of skill levels, age groups, and specific sports needs. 2.3. The Decathlon’s globalization process Decathlon entered the market in 1976 in Lille, France. Decathlon achieved success and popularity throughout the 1990s and early 2000s and increased its retail presence in France (Decathlon, n.d.). After 10 years, Decathlon opened its first store in Dortmund, Germany, in 1986, marking the company's initial entrance into international markets (Rebière & Mavoori, 2022). Decathlon then expanded to other European countries such as Spain, Italy, and the United Kingdom before continuing to expand globally, positioning itself as a prominent global sports retailer by opening stores in Asia, South America, Africa, North America, and finally the Pacific (Decathlon, n.d.). Currently, Decathlon operates in the global market with about 1,751 stores in 59 countries and regions, as well as manufacturing operations in 43 countries (Decathlon,

2016 2017 2018 2019 2020 2021 2022 0 1 2 3 4 5 6 7 8 9 6.7 6. 7.5 (^) 7. 2.9 (^) 2. 8

Real GDP growth (Annual percent change)

IMF - 2023 Figure 2. Real GDP growth in Vietnam 2016- 2022 (IMF, 2023) According to Figure 2, despite the epidemic, Vietnam's economy grew at the highest rate, rising by 8% in 2022 (World Bank, 2023). Vietnam's GDP per capita at current prices was predicted to be VND 95.6 million per person in 2022 (GSO, 2022). Average inflation remained at 3.2%, well below the 4% target from 2016 to 2022 (IMF, 2023a). This positive economic outlook creates a favorable business environment, potentially attracting interest and investment from MNEs. Retail sales of consumer goods and services climbed by 17.1% in the fourth quarter of 2022 compared to the same period the previous year (GSO, 2022). This notable increase in consumer spending opens up new potential for market expansion. Vietnam has been active in integrating into the global economy through the signing of Free Trade Agreements (FTAs), which has a significant impact on attracting foreign direct investment (FDI) and enhancing the advantage of vertical FDI in the country (Duong et al., 2021). Consequently, Vietnam is one of the most chosen FDI destinations, with estimated sustained long-term economic growth (Vanham, 2018; Nguyen et al., 2018). Particularly, the approval of the European-Vietnam Free Trade Agreement (EVFTA) in 2020 further enhances collaboration between Vietnam and the European Union (EU) (Trang, 2022). Decathlon points out that Vietnam benefits from qualified and cost-effective labor, as well as political and economic stability. Furthermore, favorable international trade agreements, sustainable development strategies that fit with global trends, and rapid growth of transportation and logistics services all contribute to the Vietnamese market's attractiveness (VnEconomy, 2023).

However, with remarkable development, Vietnam is assessed as a country with certain risks. For instance, Vietnam faces challenges related to transparency issues, corruption perceptions, intellectual property rights enforcement, and labor market risks (Gov.uk, 2021; Coface, 2023). Additionally, high risks of inflation and increased financial risks may create unstable pressure on wages and production costs (World Bank, 2023).

3.2. The advantages and disadvantages of the World Trade Organization in Vietnam

Vietnam joined the World Trade Organization (WTO) in 2007, marking a significant economic milestone allowing expand its export market to the largest markets (Dang et al., 2020; Doan et al., 2023). Vietnam has increased its exports of goods and services by giving tax advantages and investment incentives to MNEs (Li et al., 2019). The percentage of GDP exported goods and services expanded from less than 10% in 1986 to 106% in 2019, creating job opportunities for young people entering the labor force (World Bank, 2022). Furthermore, where there are tax inequalities between member countries, the WTO can help to create a more stable trade policy environment (Jakubik & Piermartini, 2023). Besides, joining the WTO also brings disadvantages to domestic enterprises when they have to compete with foreign enterprises (Wu et al., 2019) in improving product quality and setting appropriate prices to be competitive. In addition, imposing tariffs at a ceiling rate (Jakubik & Piermartini, 2023) can reduce revenue from import taxes, affecting national budget revenue. 3.3. Vietnam’s tariffs, quotas, and/or subsidies relevant to the Decathlon EVFTA helps remove most tax barriers and brings many important advantages for Decathlon, especially since their main export market is Europe, particularly in France. Specifically, EVFTA has gotten rid of 99% of taxes and reduced the rest through tax-free quotas (Trang, 2022). This helps Decathlon export its products to Europe more easily in the future. Additionally, Vietnam and the EU have also agreed on an Investment Protection Agreement to strengthen the trust of European businesses in Vietnam. 3.4. The Decathlon’s operations in Vietnam Decathlon Vietnam was founded in 1995 with its first production activities. Currently, more than 100 businesses in Vietnam are Decathlon's partners. Products made in Vietnam are exported to the main Decathlon markets in Europe. Vietnam is also the world's second- largest manufacturing country, supplying 17 markets worldwide (Enterprise Asia, 2022). Decathlon started retail operations in Vietnam in 2017 through electronic commerce. Decathlon built its first physical store in Hanoi in April 2019, becoming the largest sports store in the country. They have now built six more stores, in Hanoi and Ho Chi Minh City (Decathlon.vn., 2022).

Conclusion

Decathlon has been successful in adapting to the features of each market. This emphasizes the importance of the host country's political and economic issues, which have strategic effects on MNEs when deciding where to invest. However, there are many challenges that require Decathlon to find solutions to maintain the long-term survival of their business operations.

References

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