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THESIS_Analyzing critical successful factors of VinFast in ..., Lecture notes of Marketing

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ANALYZING CRITICAL SUCCESSFUL FACTORS OF
VINFAST IN SELECTING GREEN SUPPLIERS
NGUYEN THI PHUONG THAO
HS130206
NGUYEN THU HANG
HS130090
BUI VAN ANH
HS130162
Supervisor: Phi-Hung Nguyen
THESIS SUBMITTED IN FULFILMENT OF THE REQUIREMENTS
FOR THE DEGREE OF BACHELOR OF INTERNATIONAL BUSINESS
FACULTY OF BUSINESS
FPT UNIVERSITY
HANOI, VIETNAM
APRIL , 2021
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1

ANALYZING CRITICAL SUCCESSFUL FACTORS OF

VINFAST IN SELECTING GREEN SUPPLIERS

NGUYEN THI PHUONG THAO HS

NGUYEN THU HANG HS

BUI VAN ANH HS

Supervisor: Phi-Hung Nguyen

THESIS SUBMITTED IN FULFILMENT OF THE REQUIREMENTS

FOR THE DEGREE OF BACHELOR OF INTERNATIONAL BUSINESS

FACULTY OF BUSINESS

FPT UNIVERSITY

HANOI, VIETNAM

APRIL , 2021

ACKNOWLEDGEMENT

This thesis could not be accomplished without the effort and cooperation of our group members within the given time by related individuals; thanks for their contribution to this study. First and foremost, we would like to sincerely thank our supervisor, lecturer Phi- Hung Nguyen, who gave us the golden opportunity to do this wonderful project and for his patient support, motivation, and expertise during the whole research process. His help has helped us achieve new skills and ability sets related to performing this project successfully. Secondly, we would like to thank our FPT University lecturers sincerely for giving us the background knowledge and necessary skills in years of education to write an honour study. Last but not least, our special thanks also certainly go to all people who were willing to help us during our survey and research process. Hoa Lac, April, 2021 Authors of the thesis

TABLE OF CONTENTS

  • ACKNOWLEDGEMENT
  • EXECUTIVE SUMMARY
  • LIST OF FIGURES
  • LIST OF CHARTS
  • LIST OF TABLES
  • Table 4.3. Integrated Fuzzy Comparison Matrix
  • Table 4.6. Integrated Fuzzy Comparison Matrix
  • Table 4.16. Integrated matrix
  • ABBREVIATIONS AND ACRONYMS LIST.........................................................................................................
  • CHAPTER 1: INTRODUCTION - 1.1. BACKGROUND
    • 1.1.1. Topic background
    • 1.1.1.1 A brief to the automotive industry
  • 1.1.1.2 Automotive industry in Vietnam and some specific countries
    • 1.1.2. Practical problem
    • 1.1.2.1. Environmental problems affected the economy
    • 1.1.2.2 Overview of green supply chain management
    • 1.1.2.3. "Green" economy trend in the world and Vietnam...................................................................
    • 1.1.3. Company background
    • 1.1.3.1 Vingroup joint stock company
    • 1.1.3.2 VinFast Manufacturing and Trading Co., Ltd
    • 1.2. RESEARCH OBJECTIVES
    • 1.3. RESEARCH QUESTIONS.....................................................................................................................
    • 1.4. RESEARCH SCOPE
    • 1.5. METHODOLOGY AND DATA REVIEW
    • 1.6. CONCLUSION
    • 1.7. THESIS OUTLINE
  • CHAPTER 2: LITERATURE REVIEW
    • 2.1. OVERVIEW OF THE AUTOMOTIVE INDUSTRY
    • 2.2. GREEN SUPPLY CHAIN MANAGEMENT
    • 2.2.1. Definition of supply chain
    • 2.2.2. Green supply chain management
    • 2.3. SUSTAINABLE SUPPLIER SELECTION.................................................................................................
    • 2.3.1. Sustainability Term and Misconceptions
    • 2.3.2. Sustainable Supplier Selection Process.........................................................................................
    • 2.3.3. Sustainable Supplier Selection Problem
    • 2.3.4. Proposed Criteria for Evaluating Sustainable Supplier
    • 2.4. APPROACHES FOR GREEN SUPPLIER SELECTION
    • 2.4.1. MCDM Models
    • 2.4.2 Fuzzy Concepts
    • 2.4.3. Advantages and Disadvantages of MCDM Models
    • 2.5. RESEARCH GAP
    • 2.6. CONCLUSION
  • CHAPTER 3: METHODOLOGY
    • 3.1. INTRODUCTION
    • 3.1.1 Research philosophy
    • 3.1.2. Research approaches
    • 3.1.3. Research methods
    • 3.2. DATA SOURCE (Primary/Secondary)
    • 3.3. DATA ANALYSIS
    • 3.3.1. Fuzzy AHP method
    • 3.3.2. Fuzzy TOPSIS method
  • CHAPTER 4: EMPIRICAL CASE ANALYSES OF VINFAST
    • 4.1. Case study
    • 4.2. Fuzzy AHP for Weighting Calculation
    • 4.3. Fuzzy TOPSIS for Ranking
  • CHAPTER 5: CONCLUSIONS AND IMPLICATIONS
    • 5.1. Conclusions
    • 5.2. Managerial implications
    • 5.3. Limitations of this thesis
  • REFERENCES
  • APPENDIX

LIST OF TABLES

Table 1.1. Automotive Total Production in The World from 2000 to 2019 Table 1.2. Largest Manufacturers by Production Volume in 2017 Table 2.1. Sustainability Criteria Used in the Reviewed Articles Table 2.2. MCDM Models Advantages Table 2.3. MCDM Models Disadvantages Table 4.1. Professional Backgrounds of the Selected Twelve Experts for Our Survey Table 4.2. Initial Comparison Matrices Table 4.3. Integrated Fuzzy Comparison Matrix Table 4.4. Results of Fuzzy Weighting Value of Main Criteria (Economic, Environmental, Social) Table 4.5. Initial Comparison Matrices Table 4.6. Integrated Fuzzy Comparison Matrix Table 4.7. Results of Fuzzy Weighting Value of Economic Table 4.8. Initial Comparison Matrices Table 4.9. Integrated Fuzzy Comparison Matrix Table 4.10. Results of Fuzzy Weighting Value of Environmental Table 4.11. Initial Comparison Matrices Table 4.12. Integrated Fuzzy Comparison Matrix Table 4.13. Results of Fuzzy Weighting Value of Social Table 4.14. Weighting and Ranking Results of FAHP Table 4.15. Linguistic Variables for The Ratings

Table 4.16. Integrated matrix Table 4.17. Normalized matrix Table 4.18. Weighted normalized matrix Table 4.19. D+ Table 4.20. D- Table 4.21. Closeness coefficient of alternative

CHAPTER 1: INTRODUCTION 1.1. BACKGROUND 1.1.1. Topic background 1.1.1.1 A brief to the automotive industry Recently, by serving the population's transportation needs, the automobile industry occupies a significant role in supporting the national economy and being an economic sector with huge profits through the manufacture of goods with outstanding value. In order to have such a brilliant automotive industry as it is today, the industry has gone through a long embryonic period where the first major foundation was the invention of various types of engines. In 1887, German scientist Nicolai successfully invented the 4- wheel engine and successfully assembled its first car. It can be said that the invention of the automobile is the indispensable crystallization of a period of blossoming inventions in the first scientific and technical revolution of humanity. Because from the 13th-century, the English Franciscan friar Roger Bacon identified that cars could be made to move with unbelievable speed without animals. After that, the automobile gained the attention of many scientists. They have continuously improved in both form and quality, from primitive, bulky and ugly early cars to be lighter, smaller and more luxurious. Subsequently, the automobile became popular, with the outstanding advantages of high travel speed, maneuverability, effortlessness and a multitude of other conveniences. As a result, the car has become an indispensable and useful means for the people of industrialized countries and an important industrial product in all countries around the world. Therefore, according to the history of the world automotive industry, in the first year of the 20th century, there were 621 factories manufacturing cars and motorcycles worldwide, of which 112 were in the UK, 11 in Italy, 35 in Germany, 167 in France, 215 in the US and 11 other countries. However, the milestone marking the official birth of the automobile industry must be in 1910 when Henry Ford- founder of the famous Ford Motor Corporation began to organize mass production of cars on a large scale. After the Second World War, the modern science and technology revolution exploded, the automobile and automobile industry also developed great progress. The scientific and technical achievements that have been applied such as new materials, electronic engineering, cybernetics, etc have fundamentally changed the automobile and the automotive industry both science and technology as well as socioeconomic scale.

Automotive total production in the world from 2000 to present has increased steadily and stably improved over the years, focusing on 3 major industrial countries China, the US and Japan (from Figure 1.1). In addition, OICA's 2019 statistics also showed that the total world car output is approximately 92 million units, of which the Chinese market accounts for 27 percent. Ranking Country 2019 2018 2017 2016 2015 2014 2012 2010 2005 2000 World 91,786,861 95,634,593 97,302,534 95,057,929 90,780,583 89,747,430 84,141,209 77,629,127 66,482,439 58,374, 1 China 25,720,665 27,809,196 29,015,434 28,118,794 24,503,326 23,722,890 19,271,808 18,264,761 5,717,619 2,069, 2 United States 10,880,019 11,314,705 11,189,985 12,198,137 12,100,095 11,660,699 10,335,765 7,743,093 11,946,653 12,799, 3 Japan 9,684,298 9,728,528 9,693,746 9,204,590 9,278,321 9,774,558 9,943,077 9,628,920 10,799,659 10,140, 4 Germany 4,661,328 5,120,409 5,645,581 5,746,808 6,033,164 5,907,548 5,649,260 5,905,985 5,757,710 5,526, 5 India 4,516,017 5,174,645 4,782,896 4,519,341 4,160,585 3,840,160 4,174,713 3,557,073 1,638,674 801, 6 Mexico 3,986,794 4,100,770 4,137,544 4,519,341 4,029,463 4,664,779 4,002,508 3,981,728 3,583,076 3,099, 7 South Korea 3,950,617 4,028,834 4,134,913 4,228,509 4,555,957 4,524,932 4,561,766 4,271,741 3,699,350 3,114, 8 Brazil 2,944,988 2,879,809 2,699,672 2,156,356 2,429,463 3,146,306 3,402,508 3,381,728 2,530,840 1,681, 9 Spain 2,822,355 2,819,565 2,848,335 2,885,922 2,733,201 2,402,978 1,979,179 2,387,900 2,752,500 3,032, 10 France 2,202,460 2,270,000 2,227,000 2,082,000 1,972,000 1,817,000 1,967,765 2,229,421 3,549,008 3,348, 11 Thailand 2,013,710 2,167,694 1,988,823 1,944,417 1,915,420 1,880,007 2,429,142 1,644,513 1,122,712 411, 12 Canada 1,916,585 2,020,840 2,199,789 2,370,271 2,283,474 2,393,890 2,463,364 2,068,189 2,687,892 2,961, 13 Russia 1,719,784 1,767,674 1,551,293 1,303,989 1,384,399 1,886,646 2,233,103 1,403,244 1,354,504 1,205, 14 Turkey 1,461,244 1,550,150 1,695,731 1,485,927 1,358,796 1,170,445 1,072,978 1,094,557 879,452 430, 15 Czech Republic 1,433,963 1,442,884 1,419,993 1,349,896 1,303,603 1,251,220 1,178,995 1,076,384 602,237 455, 16 United Kingdom 1,381,405 1,604,328 1,749,385 1,816,622 1,682,156 1,598,879 1,576,945 1,393,463 1,803,109 1,813, 17 Indonesia 1,286,848 1,343,714 1,216,615 1,177,389 1,098,780 1,298,523 1,052,895 702,508 500,710 379, 18 Slovakia 1,100,000 1,090,000 1,001,520 1,040,000 1,035,503 993,000 926,555 561,933 218,349 181, Table 1.1. Automotive total production in the world from 2000 to 2019 Currently, the automotive industry has been growing continually. According to OICA data in 2017, TOYOTA was recognized as the largest car company in the world, Volkswagen Group took the second place; 3rd place to Hyundai. In terms of revenue, Volkswagen, Toyota and General Motors topped the list of major automobile makers in 2015, while the automotive supplier industry was dominated by Bosch, Continental, Denso and Magna. In general, the world auto industry has always played a crucial role in all fields since its invention. It meets the increasing people's demands to travel and goods rotation and makes a great contribution to the socio-economic development of each country in particular and the world economy in general. In addition, the automotive industry is the biggest customer

According to the Industrial Research Department, there are 7.3 million employees in the auto industry, accounting for 11.3% of the 64.4 million employees in Japan. The automobile industry consumes 70% of natural rubber; 67% lead; 64% cast iron; 50% synthetic rubber; 40% of machine tools; 25% glass; 20% of semiconductor materials; 18% aluminium; 12% steel and some huge fuel and oil. This shows that the development of the automobile industry will motivate and entice the development of many other industries. Finally, another important role of the world auto industry is accelerating globalization through the internationalization of the world's auto giants and the promotion of public transfers technology from developed countries to less developed countries.

1.1.1.2 Automotive industry in Vietnam and some specific countries

Chinese automotive industry China is currently the largest automobile consumption market in the world since 2009 (OICA 2009 report). Besides famous foreign models, China also has domestic cars which are very popular in this country such as SAIC Motor, Dongfeng, FAW and Changan Automobile. They are the four pillars of the Chinese automobile industry and help China to actualize the domestic auto dream. In the early 1950s, under the strong support of the Soviet Union, Chinese auto industry was initially licensed and put into operation. During the 30 years of its establishment, this industry had a small output, increased slightly and steadily with no more than 100- 200 thousand units per year. The Chinese auto industry began to make significant strides in the early 1990s and exceeded one million units for the first time in 1992. 10 years later, China produced over two million units. It can be said that the golden period of the automobile market in this country has developed rapidly since China joined the World Trade Organization in 2001. From 2002 to 2007, national automobiles rose by an average of 21 percent, equivalent to one million vehicles per year. By 2009, China had officially usurped the United States and became the biggest automobile manufacturer in the world in terms of volume with approximately 14 million cars produced. In 2010, both sales and production reached 18 million units, with 13.76 million passenger cars delivered. This was the largest number in this country's history since joining the industry. In 2014, total vehicle production in China reached 23.720 million units, accounting for 26% of global car production. In 2019, according to OICA statistics, Chinese car production accounts for 27 percent of the total world car production with approximately 26 million units. Thus, the Ministry of Public Security found that since its establishment to the half of 2019, China has produced about 250 million cars, making the auto industry the mainstay contributing to China's GDP.

Automotive industry in the US Referring to the auto industry, it is impossible not to remember the person who made the American legend - Henry Ford. He was the founder of the American car industry and also the first to create the world auto industry. When he founded the Ford Group in 1901, he made millions of people's dreams about cars come true. With the release of cars at a price that everyone can own, Henry Ford was the first to mass-produce cars on a large scale and since then, the American domestic automobile industry in particular and the world auto industry in general has prepared for a development process at breakneck speed. Like many other industries in the US, the American automobile industry was established and developed mainly based on large capitalists with giant corporations such as General Motor, Ford, Chrysler, etc. The US automotive industry has developed in the direction of the free market, almost without the US Government participation (except for policies to encourage trade, investment and competition). Until now, the US automotive industry still asserted its position through global market share. During the past century from 2010, the American automaker has always occupied the number one position in all aspects, headed by General Motor and second place belongs to Ford. Until 2010, when the Chinese automobile industry developed rapidly, the US had to retreat to cede the highest position to China. However, it has still maintained its performance and steadily developed, grown slightly over the years and reached second place just following China. The rapid development of the American automobile industry is associated with the strong growth and the internationalization of giant automobile corporations taking place throughout the countries of the world. By 2020, the US Market size value reached 79.2 billion dollars, revenue forecast in 25 is estimated 86.2 billion dollars. Chart 1.2. Leading Markets (Source: Möller, D. P. F., & Haas, R. E. (2019)

By 2018, Japan is recognized as the 3rd largest automobile market in the world, with a total output of 9.7 million (according to OICA in Chart 1.1 ). ● Vietnamese Automotive industry In the 1990s, the Vietnamese automobile industry was formed by the Government's permission for foreign-invested enterprises to manufacture and assemble cars in Vietnam. Before the 1990s, Vietnam mainly imported cars from socialist countries without any enterprises investing in assembling and manufacturing cars. Major Vietnamese mechanical enterprises primarily only repair and fix cars. The automobile industry can be considered as a measure of the country's economic development, at the same time, it is also a major contributor to every countries' GDP in the world. A few years ago, this industry was considered as a "luxury" to Vietnam, however, nowadays beside the rapid development, Vietnamese automobile industry is booming strongly. Currently, Vietnamese automotive industry not only holds an important position in promoting the development of national economy by meeting the needs of transportation, contributing to the development of production and business, it is also an economic sector that brings in very high profits with the help of production of outstanding value products, which greatly contributes to the GDP of the country. In Vietnam, the Automotive industry also accounts for 3 percent of the country's GDP. For this reason, this one always gets special attention and treatment from the government. Trade agreements have always had exceptions for the automotive industry to protect the industry from competitive pressure of other countries worldwide. The automobile manufacturing and assembling industry in Vietnam currently consists of 2 blocks. The first one is foreign invested enterprises. The total investment capital of 14 FDI enterprises is 920 million USD, production capacity is 220,000 vehicles per year. They manufacture mainly passenger cars, utility vehicles and trucks. The second sector includes domestic firms. Up to now, more than 30 enterprises are investing in manufacturing and assembling cars with a total capital of about 2,500 billion VND. Domestic enterprises mainly produce buses, passenger cars, small and heavy trucks, and specialized vehicles. In the present circumstances, Vietnam has signed a total of 1 5 free trade agreements with countries and blocks, of which 1 3 ones have already been valid. A prominent thing about the signed agreements is that two industries such as automotive and steel are always treated extremely special and often on tax exemption list. Vietnam is considered a fertile land for car manufacturers. While the car market in neighboring countries gradually became saturated as a result of the automotive demand stimulus policy a few years ago,

Vietnamese people started to rush to buy cars by the law of supply and demand when the country's economy developed significantly. Chart 1.3. Automobile Industry Contribution to GDP (Source: Eurostat, CTS) Source: Vietinbank report This trend is expected to continue for a long time, plus the roadmap to join the Asean Economic Community makes automakers strive to compete in the Vietnamese market, a market previously considered to be the most expensive in the world because of tax and investment policies. Moreover, even luxury car manufacturers participate enthusiastically in this race. As an inevitable result, Vietnamese automotive market has become diverse in terms of models, segments and also customers. That situation makes the auto market a 3.25% 12% 4% 5% 3% US THAILAND GERMANY CHINA VIETNAM Automobile Industry Contribution to GDP

The

achieved

figures

Total revenue in 2018: $ 10.3 billion Growth from 2014 to 2018: 23.7% Number of domestically produced cars in 2018: 263, Units Estimated growth 2019-2023: 10.5 - 15%

In an economy increasingly focusing on environmental protection, companies and enterprises aim to create added value and aim to be sustainable development with consideration in terms of environment and public health. Over the past few years, companies worldwide have been working to perfect their supply chains by building eco- friendly supply chains- Green Supply Chain. Not only protecting the environment, but the green supply chain is also a development that brings a competitive advantage for companies in expanding markets and increasing profits. In general, Green supply chain is the chain that operates efficiently, ensures both environmental friendliness and efficient use of natural ecological resources, for instance: product design, sourcing, and raw materials selection, operating procedure of manufacturing, delivering products to customers, and recycling management. Besides the environment's efficiency, GSC also brings positive effects on both the economy and society. For the economy, GSC helps improve production processes, reduce material costs, create competitive advantages, increase flexibility and linkages with partners. In addition, for society, GSC helps protect human health, reduce bad impacts from industrial waste, reduce bad effects on the community and demonstrate social responsibility per business. 1.1.2.2 Overview of green supply chain managementGreen supply chain In recent years, the phrase "green supply chain" has been mentioned more and more. Concerning these concerns, there have been several other words, such as "sustainable supply chain", "sustainable green supply chain", "environmental supply chain", "ecological supply chain", etc. The sustainable green application can be defined as using environmentally friendly inputs and turning the by-products into something that can be improved or recycled in the current environment. This enables the outputs and by-products to be reused at the end of their life cycle, thus creating a sustainable supply chain. Penfield suggested that a sustainable supply chain's whole idea is to reduce costs and be environmentally friendly (Penfield, 2008). Narasimhan & Carter defined green supply chain management concerning the use of methods that reduce materials in addition to recycling, processing, and reusing (Narasimhan, 1998). Godfrey (1998) considered green supply chain governance as the practice of continuously monitoring the environmental impacts of a chain and improving its results (Dawei et al. , 2015). Beamon emphasized the importance of collaboration with a company and the definition of green supply chain governance is the use of supply chains between a central company and a collaborative firm to support organizations (Beamon, 1999). Sarkis also defined green supply chain management as a combination of an environmental firm's operations and recovery logistics,

which emphasizes the importance of the latter (Sarkis, 2003). Johnny defines green supply chain management as the process of adding 'green' elements to existing supply chains, and creating a recalled supply chain as the act of radically rebuilding systems (Ho, 2009). This includes the pursuit of efficiency and supply chain innovation in terms of costs, returns, and the environment. Although there are many different concepts that are presented depending on the perspective of each study, all the results have the common feature that the green supply chain must ensure two problems: cost, cost minimization and more environmentally friendly. ● Green supply chain management Although still being a new topic in the world, there has been a lot of research focusing on green supply chain management and its importance for businesses and applications. practice and practical analysis in many businesses. In 1996, Robert Handfield at the Manufacturing Research Group at Michigan State University used the concept of green supply chain management for the first time. Handfield initially gave a basic idea of the environmental impacts of optimizing the use of resources in the manufacturing industry's supply chain, particularly the home appliance industry. Accordingly, green supply chain is the process of specifying environmental criteria or concerns about an organization's purchasing decisions and long-term supplier relationships (Dawei et al. , 2015). Green supply chain is expanding in the purchasing of raw materials for production and input of the business. Enterprises need to improve the long-term in green supply chain management, particularly in establishing supplier partnerships to be able to control raw materials. Supply chain greening is playing a significant role in all sectors, especially for high-tech electronics, fast-moving consumer goods, original product manufacturers (OEMs), etc. Green supply chain management combines supply chain management practices and environmental indicators to form purchasing decisions and long-term relationships with suppliers. It also focuses on minimizing waste of all business activities to save energy and prevent the hazardous effects of materials on the environment. Not only that, green supply chain management is also identified as the direction of combining logistics with business strategy and environmental issues in collaborative efforts to maximize business performance and efficiency towards the desired results. The distribution of goods always has high risks of harmful impacts on the environment, so businesses that desire an effectively organized green supply chain need to organize the distribution network and logistics well. In specific terms, the concept of supply chain management is defined as: a green supply chain management system should include purchasing, inbound logistics, manufacturing,