ASSIGNMENT 1 FRONT SHEET

Qualification BTEC Level 5 HND Diploma in Business

Unit number and title Unit 18: Global Business Environment (530)

Submission date 06/04/2023 Date received (1st submission)

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Student name Pham Tran Thu Tra Student ID GBD201515

Class GBD0908A Assessor name Nguyen Huu Nam Phuc

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 TABLE OF CONTENTS
I. INTRODUCTION.............................................................................................................................. 5
II. OVERVIEW OF GLOBALIZATION ...................................................................................................... 5
1. Definition of the globalization .................................................................................................................. 5
2. Dimension of globalization ....................................................................................................................... 5

III. KEY DRIVING FACTOR OF GLOBALIZATION .................................................................................. 8

1. Definition of Yip’s model .......................................................................................................................... 8
2. Yip’s model in the Food & Drink manufacturing industry .......................................................................... 9

IV. KEY GLOBAL STRATEGIC COMPLEXITIES .................................................................................... 12

1. International trade laws ......................................................................................................................... 12
2. Global economics ................................................................................................................................... 13
3. Environmental issue ............................................................................................................................... 13
4. Supply chain risks ................................................................................................................................... 14

V. CONCLUSION ............................................................................................................................ 15
REFERENCES ....................................................................................................................................... 15

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I. INTRODUCTION
Recently, some Japanese businesses have contemplated moving their production facilities from
China and establishing new factories in countries like Vietnam. To showcase Vietnam's potential,
this report analyzes the effects of globalization, its drivers, and challenges for the Vietnamese
company and its industry to persuade a potential Japanese partner to collaborate with the
Vietnamese firm and expand their business into the Vietnamese market.

This report consists of three main parts. Firstly, the author provides definitions of globalization
concerning various dimensions such as economic, cultural, political, and social dimensions.
Additionally, the author gives examples to facilitate better understanding. Secondly, the report
uses Yip's model and empirical data to highlight the key factors driving globalization in the food
and drink manufacturing industry. Furthermore, the report discusses the potential opportunities
and threats that globalization brings. Finally, the report examines the challenges multinational
firms face by outlining some of the crucial international trade regulations they must comply with.
The report also explores how the global economy can expose MNCs to greater risks and how MNCs
can respond to these risks.

II. OVERVIEW OF GLOBALIZATION

1. Definition of the globalization
The concept of globalization refers to the amplification of activities that enhance the interconnectivity
of nations in various areas, such as economies, societies, cultures, and politics. This phenomenon
occurs on multiple levels, and this article focuses on the four most significant and dominant effects of
globalization. These include economic globalization, cultural globalization, social globalization, and
political globalization (Robertson & White, 2007).

2. Dimension of globalization

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1.1.Economic dimensions

Economic globalization refers to expanding the global interconnectivity of national economies, mainly
through trade and financial activities. The transfer of goods and services, movement of capital,
exchange of assets (including currency and stocks), transfer of ideas and technology, and international
labor or migration are all aspects of economic globalization. While there have been numerous
occurrences of economic globalization, some experts contend that there have also been times of
deglobalization characterized by a slowdown or reversal of globalization (WITA, 2022).

An instance of the political dimension is the signing of Free Trade Agreements (FTAs), such as the
Vietnam-Korean Free Trade Agreement (VKFTA) that came into effect in 2014. This marks Vietnam's
initial FTA with another nation, and it has led to increased foreign direct investment (FDI) into Vietnam
by Korea. The trade volume between the two countries is expected to achieve a total value of $100
billion USD by the conclusion of 2020 (Lutkevich, 2022).

1.2.Cultural dimensions

According to Tomlinson (1999), the term "cultural dimension of globalization" describes the growing
interconnectedness and cross-border exchange of cultural ideas, practices, and beliefs. It includes both
the adoption of new cultural practices and beliefs as well as the dissemination of cultural products like
music, movies, and literature. Technology, communication, and transportation advancements as well
as the expansion of multinational companies and the world media industry have all contributed to
cultural globalization (Tomlinson, 1999).

The Silk Road was built to promote trade between China and the nations surrounding the
Mediterranean Sea. This not only stimulated commerce but also encouraged the exchange of cultural
and informational ideas between these nations. Similarly, satellite television enables the global
dissemination of cultures, with programs from one country being broadcast in multiple other nations.
This trend aligns with the broader phenomenon of globalization, which has facilitated increased
cultural interaction, improved understanding and collaboration, and the formation of transnational
communities and hybrid identities (Thakur, 2022).

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1.3.Political dimensions

According to Modelski, G. & Devezas (2007), political globalization expands the size and sophistication
of regional and global systems. Regional NGOs and agencies, national governments, foreign
organizations, and governmental and non-governmental organizations are all impacted by societal
upheaval. International globalization is heavily influenced by the dissolution of nation-states and the
rise of new political movements.

The political dimension is undergoing a process of globalization through various means, such as the
institutionalization of intergovernmental and transnational networks of political contacts, such as the
United Nations (UN), NATO, and ASIAN. One of the most famous emblems of globalization is
establishing and developing the United Nations. For instance, the UN and its specialized agencies are
responsible for implementing peacekeeping policies to prevent or end armed conflicts and peace-
building policies to address the root causes of war (Coate & Puchala, 1990). During the 1990s, UN
activities were crucial in ending long-term conflicts, including the one in Cambodia (Ponniah, 2018).

1.4.Social dimensions

The social dimension of globalization pertains to how the world's increasing interconnectedness
impacts people's lives, communities, cultures, and social ties. It involves the emergence of global social
networks and the clustering of people in particular places worldwide. The effects of globalization on
employment, working conditions, income, and social welfare have raised concerns and challenges.
Apart from work-related issues, the social dimension encompasses community, identity, inclusion, and
social cohesion. Social globalization entails the exchange of information and ideas among nations
(Gunter, 2004).

For instance, the internet serves as a tool to connect people through various social networks such as
Facebook, Twitter, Instagram, Google, etc. These social networks enable people to communicate with
each other from any part of the world, thereby contributing to the process of globalization.

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III. KEY DRIVING FACTOR OF GLOBALIZATION
1. Definition of Yip’s model

Figure 1: YIP's Model

According to George (1992), Yip proposes four categories of "industry globalization drivers" that
support conditions in each business that may make that industry more global and, as a result, make a
global approach to strategy viable. Market drivers influence changes in customer behavior and
distribution patterns, such as the portability of marketing platforms, the development of global
distribution channels, and the identification of lead nations for innovation. Cost globalization drivers,
which shape the industry's economics, include the possibility of economies of scale, sourcing
efficiencies that reflect cost differences between countries or regions, and technological advantages.
Competitive drivers are determined by the behavior of rival firms, including the extent to which they
globalize their corporate skills and business plans and foster interdependence between geographical
markets. Government drivers involve favorable trade policies, a conducive regulatory environment,
and uniform product and technological standards.

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2. Yip’s model in the Food & Drink manufacturing industry
1.1.Market drivers

Market drivers are external factors that affect the demand for goods and services in a particular market
or industry. They impact customer behavior and distribution patterns and may include the
development of global distribution channels, globalization, the portability of marketing platforms, and
identifying "lead" nations where innovation frequently occurs. Market drivers play a crucial role in
determining a company's success or failure in the global market by influencing their competitiveness
in the industry (Yip, 1992).

Humans cannot live without food and water, but the consumption needs of each person in this industry
are not uniform because each country will have its own characteristics and taste in the way food and
drink are used. Cultural and regional differences play an important role in shaping customer needs.
Therefore, the needs of customers will be difficult to homogenize, leading to each type of product
depending on the preferences of each country and region.

The food and drink manufacturing industry has a global customer base. Food and drink are
fundamental human needs, and people worldwide consume food and beverages every day. Global
food and beverage consumption has grown the fastest in global food market revenue, with an
estimated value of $1.26 trillion by 2022 (Statista, 2023) . This industry caters to this global demand by
producing and distributing food and drinks products in local and international markets. Many food and
drink companies have a global presence and operate in multiple countries, selling their products to
customers worldwide. Additionally, the rise of e-commerce and online food delivery services has made
it easier for customers to access food and drink products from different parts of the world, further
expanding the industry's global reach.

Besides, with the approach of the food and beverage industry, it will be difficult to transfer the same
form of product marketing to many countries. Because depending on product types, target audience
and regional or cultural differences, etc. that we have to adjust our marketing strategy accordingly.

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1.2.Government drivers

The drivers of government globalization, which include favorable trade policies, regulations, technical
standards, and government-run or subsidized competition or customers, are essential in shaping the
global competitive environment for the industry. The impact of these drivers on a global strategy is
significant, as they influence all other components of it. Previously, international corporations relied
heavily on governments to negotiate the rules of global competition, but this is changing. With the
increasing connection between politics and economics in global competition, multinational
corporations are focusing more on nonmarket components of their global strategies to shape the
global competitive environment in their favor. This shift in the balance of power between national
governments and multinational firms is expected to have long-term implications for policy and
regulatory disparities that impact global competitiveness (Yip, 1992).

Many governments support the food and drink industry through trade policies that reduce barriers to
international growth. Numerous countries worldwide are establishing and signing FTAs with one
another, which benefit the food and drink manufacturing sector. There are a number of agreements
such as the CPTPP, EVFTA, and VKFTA, etc. help to link foreign trade between Vietnam and major
countries world just got easier. The food and drink production sector has great potential to grow across
boundaries with the backing of advantageous trade policies between nations. Besides, each country
has its own unique criteria for quality standards, manufacturing processes, packaging, and other
aspects of the food and drink industry. However, international standards organizations have
established formal and consistent standards for each sector. The ISO 22000 standard, for instance,
formally publishes the quality standard for the food and drink industry (ISO, 2023). Standardization of
manufacturing standards across the food and drink industry facilitates operations and makes it easier
to navigate the industry in different countries around the world.

1.3.Competitive drivers

Competitive drivers refer to the factors that affect the behaviors of competing firms in an industry,
such as the degree to which rivals from various continents join the fray, globalize their corporate skills

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and business plans, and foster interdependence between geographical markets. These factors can
significantly impact a company's competitive position and success in the global market (Yip, 1992).

The food and drink manufacturing industry has global competitors. Many food and drink companies
have a global presence and compete with other companies globally. For example, multinational
corporations like Coca-Cola, PepsiCo, Nestle, and Unilever have operations in multiple countries and
compete with each other and with local companies in various markets around the world. In addition
to large multinational corporations, there are also many more miniature food and drink businesses
that operate on a global scale. These companies may specialize in specific product categories or regions
and compete with larger companies in their niche.

1.4.Cost drivers

Globalization has provided numerous opportunities for multinational corporations, especially in terms
of pricing. These firms have been able to expand their investments across borders, resulting in reduced
costs and increased profits. Manufacturing companies have set up factories in countries such as
Bangladesh, Vietnam, Cambodia, and China, citing factors such as the availability of a skilled yet
inexpensive labor force, abundant resources, favorable locations for transportation, and lower
operational costs. The opening of borders and opportunities for transnational corporations and
countries are some of the effects of globalization. The opportunities presented by globalization have
led to a more extensive and complex competition than before, with many competitors engaging in
financial competition by utilizing their resources to lower costs, increase profits, and attract customers
(George, 1992).

The food and drink industry is a major business in many countries worldwide due to its large-scale
production, diverse types, and high profitability. This sector has realized economic advantages through
cost savings achieved by economies of scale, such as low-cost labor force, raw materials, and
production equipment. For instance, Brazil is the biggest coffee exporter, with an average value of
£5,714,381 per year and a turnover of 25.5 billion Brazilian reals (Comunicaffe, 2020).

Favorable logistics in the food and drinks manufacturing industry are crucial to ensure the timely
delivery of products, maintain product quality, and reduce costs. Efficient logistics help to reduce lead

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 times, increase delivery frequency, and optimize transportation routes, leading to lower transportation
costs. In addition, international transportation is an essential element of logistics expenses, which
promotes worldwide trade and national economic growth, although freight prices vary significantly
depending on various factors.

Research and development (R&D) in this industry are crucial due to the rapid growth in the variety of
foods and drinks and the changing needs of customers, necessitating continuous market research and
updates. However, the high cost of R&D has put pressure on food and drink companies to expand
globally to recover expenses, maintain operations and grow. For example, the beverage industry
spends an average of $3.2 billion annually on R&D, higher than media R&D costs, which are $1.8 billion
per year, and retail, which are $1.3 billion per year (Skillicorn, 2021).

IV. KEY GLOBAL STRATEGIC COMPLEXITIES

1. International trade laws
The United States-Vietnam Bilateral Trade Agreement (BTA) reduces tariffs on many food and drink
products, including coffee, tea, fruit, and seafood, among others. The agreement also provides more
excellent protection for intellectual property rights, which can benefit the food and drink industry in
Vietnam. The BTA includes provisions for protecting intellectual property rights, which can benefit
foreign investors in Vietnam's food and drink industry. However, in order to benefit from these
protections, investors must comply with Vietnamese laws and regulations, which can be complex and
time-consuming (US Department of State, 2021).

The ASEAN-China Free Trade Area (ACFTA) reduces or eliminates tariffs on a range of food and drink
products traded between ASEAN member countries and China. This includes products such as fruits,
vegetables, meat, and seafood, among others. This agreement has helped to promote trade in the
region and has created opportunities for food and drink manufacturers in Vietnam to expand their
markets. The ACFTA requires compliance with rules of origin and product standards in order to benefit
from reduced or eliminated tariffs. This means that Vietnamese food and drink manufacturers must
meet certain criteria to export their products to China and other ASEAN member countries. To benefit
from the preferential tariffs under ACFTA, products must satisfy the rules of origin criteria. The criteria

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vary depending on the product, but generally, they require that a certain percentage of the product's
value be derived from ASEAN or China. For example, to qualify for ACFTA preferential tariffs, goods
produced in ASEAN countries must have at least 40% of their value-added originating from ASEAN
member countries (mof.gov.vn, 2015).

2. Global economics
The ongoing Russia-Ukraine war may negatively impact MNCs in the Vietnam food and drink
manufacturing industry. The war between Russia and Ukraine could disrupt global supply chains,
including the supply of raw materials and ingredients used in food and drink manufacturing in Vietnam.
If MNCs in Vietnam rely on suppliers from Russia or Ukraine for key ingredients or raw materials, they
may face challenges in securing consistent supply, which could impact production and profitability.
Furthermore, the conflict could also affect global trade, with the potential to disrupt sea or land
transport routes. At the same time, domestic gasoline prices rose sharply due to the impact of the
conflict, increasing transportation costs (Vietnam, 2022). This may increase the cost of importing goods
and materials for MNCs in the food and beverage industry in Vietnam, which may affect their profit
margins.

The rate of inflation may have a negative impact on MNCs in the Vietnam food and beverage
manufacturing sector. Inflation can raise the expense of raw materials and manufacturing inputs such
as energy and transportation. This may have an impact on the cost structure of multinational
corporations in the food and beverage manufacturing industry in Vietnam, possibly resulting to lower
profit margins. At the same time, inflation can have an effect on consumer demand for food and
beverages. If inflation raises the cost of living, consumers may have less disposable money to spend on
food and beverages. Most Asian developing market currencies have weakened by 5-10% against the
USD this year, while the Japanese yen has declined by more than 20% (MOF, 2023). This can cause a
drop in demand, affecting income and profit margins for MNCs in the industry.

3. Environmental issue
Water scarcity is a pressing environmental issue that multinational corporations (MNCs) in the food
and drink manufacturing industry should be aware of. This industry relies heavily on water for

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irrigation, cleaning, and processing and is responsible for about 10% of global water use, making it the
third-largest industrial water user (Molden, 2007). However, water scarcity is becoming more
widespread due to climate change, population growth, and overuse of water resources, and it currently
affects over 40% of the world's population (United Nations, 2018). This trend is expected to continue
and intensify, especially in regions with scarce water. As a result, MNCs may face difficulties securing
adequate water supplies for their operations. Moreover, the food and drink manufacturing industry
contribute to water pollution, further exacerbating water scarcity problems and harming natural
ecosystems.

4. Supply chain risks

One of the supply chain risks for MNCs in the food and beverage industry is the risk of supply shortages.
According to a report by Resilience360, supply shortages are a significant risk for food and beverage
companies, with 45% of supply chain professionals surveyed citing it as a critical risk (Allen, 2021). The
report found that supply shortages can result from various factors, including weather events, trade
disputes, and geopolitical risks, leading to increased costs, delayed production, and reputational
damage. For example, in recent years, extreme weather events have impacted supply chains, and
record-breaking heatwaves, droughts, and floods are becoming increasingly common across the globe.
It has impacted crop yields and caused price spikes for essential commodities such as wheat and corn.
Supply shortages can lead to increased costs, reduced profit margins, and even production shutdowns.
For example, continuous rain in India's Grain Belt, heat wave in China, drought in Bangladesh and the
effects of weather on Vietnamese rice, could limit the output of 4 out of 5 largest rice producer in the
world. According to Mr. BV Krishna Rao, chairman of the Rice Exporters Association of India, bad
weather has led to a 13% reduction in rice area in recent times and may cause the production to
decrease by 10 tons million or about 8% more than in 2021. According to Reuters news agency,
extreme weather in exporting countries in Asia - which accounts for about 90% of world rice production
- is likely to change the price trajectory (tuoitre.vn, 2022).

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V. CONCLUSION
To summarize, the report offers a definition of globalization and illustrates its various dimensions with
specific examples. Furthermore, it examines the key drivers that influence the globalization of the food
and drink manufacturing industry using Yip's model. Subsequently, the report considers the opportunities
and threats that the industry encounters during globalization.

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