Assignment on Operations Management

Course Title: Operations Management Course ID: EMIS-538

Submitted by:
Mohammad Hasibur Rahman
ID No: 60613 06 051

Why Mercedes Benz Company Has Decided To Establish A Manufacturing Company In Vietnam?
Vietnam is rapidly emerging as a new center of economic growth in South-east Asia. Foreign investors seek business opportunities in both the domestic market of over 80 million potential consumers, and in low cost production sites. Vietnam has made great economic progress since it began its market reforms in the late 1980s. Growth rates have been among the highest in Asia and poverty has been halved. Availability of financial institutions, low labor cost, government taxes, import and export restrictions, quality of life, cultural issues, environmental regulations, transportation availability, cost and finally, competitors size, strength and attitude in that region helps Mercedes-Benz which is one of the most well-known and established automotive brands in the world, and is also the world's oldest automotive brand still in existence today to establish manufacturing company in Vietnam. Vietnam is well-known for a hard-working & fast-learning population. The country is gaining competitive advantages for labor-intensive production processes on the basis of low general wage levels. Productivity of the workforce
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is high as Vietnamese employees have a reputation for being hard working and ambitious. Moreover Vietnamese workers are very fast-learning. The time & cost needed for worker training in Vietnam is often shorter and lower than some other countries. The young population base and the diligent workforce made Vietnam among the top choices for foreign investors. Vietnam has moved from state monopoly on foreign trade to free trade and from import-substitution to export-oriented policies. Domestic businesses obtained the right to export and import within their registered scope of business, and foreign trading companies have been allowed to set up branches and representative offices in the country. Both tariffs and non-tariff barriers to trade have been reduced or eliminated. Import duties have been substantially reduced while most export products are exempt from export taxes. Most commodities and goods can now be freely imported into and exported. The number of products subject to export or import prohibition or restriction has been reduced. The enhanced integration of Vietnam in the international economy through membership international organizations and bilateral agreements greatly facilitates both trade and investment. In 1995, Vietnam became a member of ASEAN (Association of the South East Asian Nations), which has created a free trade area known AFTA (ASEAN Free Trade Area). This membership permits the free flow of goods within the economic area without substantial tariffs, and has thus created a larger market for products manufactured in Vietnam. Moreover, the ASEAN countries are negotiating with China, Japan and other countries about new free trade zones. Vietnam may thus serve as a gateway to a free trade region of more than 500 million people and a bridge to a massive market of 1.3 billion Chinese consumers. Vietnam has a number of high quality industrial parks with good infrastructure for companies looking to establish their own factories. In many industrial zones, it is now possible to obtain a license in as few as seven days, or even within 24 hours. There is a complex and more restrictive structure of investment incentives that encompasses geographical criteria favoring remote and underdeveloped regions, types of investment and level of priority by sector. All tenants in industrial zone automatically receive 50-year investment licenses, the maximum permitted by the Common Investment Law. Developed countries have an advantage in terms of capital and technology, but face a shortage of natural resources and have higher labor costs. With rich natural resources and low labor costs like Vietnam. This is a great
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opportunity for Vietnam to attract more investment. Vietnam is considered the safest country in which to do business and travel in Asia-Pacific, While holding the ASEAN chair in 2010, Vietnam has been active by promoting cooperation in trade, investment and tourism. According to the WEF (World Economic Forum), the improvement in Vietnams trading environment reflects the fact that the country has kept the commitments it made when joining the World Trade Organization to open up its markets to goods and services. Under the regulations, tariffs in Vietnam are lower and domestic exporters have more opportunities to deal with other WTO members. Mercedes Benz Vietnam is one of the largest projects in Vietnam. Mercedes benefits from import protection and various tax privileges. Its success thus builds on Mercedes' ability to assemble a wide range of models with reasonable productivity, low cost and good quality using relatively unspecialized assembly lines. Marketing and good services are believed to be key to win the customers. Doing business with uncertain policy is also a skill for success. Mercedes Vietnam is maintaining production and business through intensive marketing and improves after sale services.

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