Name: Huy Mai

ID number: 1566837

Term Project

MGT 4478: Managing in a Global Environment

Troy University

Starbucks Corporation is an American multinational chain of coffeehouses and roastery

reserves headquartered in Seattle, Washington. As the world's largest coffeehouse

chain, Starbucks is seen to be the major representation of the United States' second

wave of coffee culture. As of September 2020, the company has 32,660 stores in 83

countries, including 16,637 company operated stores and 16,023 licensed stores. Of

these 32,660 stores, 18,354 were in the United States, Canada, and Latin America.

Starbucks locations serve hot and cold drinks, whole-bean coffee, micro-ground instant

coffee, espresso, caffe latte, full and loose-leaf teas, juices, Frappuccino beverages,

pastries, and snacks.

For this session, I would like to recommend Vietnam as a potential developing country

to expand our business development. The following is all the basic information about

the country we need to consider before making a final decision. With this information, I

believe that we can determine the opportunities as well as the challenges when

investing in Vietnam.
 Economic segment:

 GDP (data.worldbank.org, 2021)

o GDP –real growth rate

In 2020: 2.9%

In 2019: 7.01%

In 2018: 7.07%

o GDP – per capita (constant 2010 US$)

In 2020: $2,123

In 2019: $2,082

In 2018: $1,964

 Labor (statista.com, 2020)

o By occupation

Distribution of employment by economic sector from 2017-2019

In 2019:

Agriculture: 37.22%

Industry: 27.44%

Service: 35.34%
 In 2018:

Agriculture: 38.7 %

Industry: 26.64%

Service: 34.66%

In 2017:

Agriculture: 40.16%

Industry: 25.78%

Service: 34.07%

 Total Exports (cia.gov, 2021)

o Exports – commodities

Broadcasting equipment, telephones, integrated circuits, footwear, furniture

(2019)

o Exports – partners

United States 23%, China 14%, Japan 8%, South Korea 7% (2019)

 Total Imports (cia.gov, 2021)

o Import – commodities

Integrated circuits, telephones, refined petroleum, textiles, semiconductors

(2019)
 o Import - partners

China 35%, South Korea 18%, Japan 6% (2019)

 Infrastructure – physical (transportation) & informational (communication)

o Physical (Transportation)

National Air Transport System

Number of registered air carriers: 5 (2020)

Inventory of registered aircraft operated by air carriers: 224

Annual passenger traffic on registered air carriers: 47,049,671 (2018)

Annual freight traffic on registered air carriers: 481.37 million mt-km (2018)

Airports

Total: 45 (2013)

Airports- with paved runways

Total: 38

Over 3,047 m: 10

2,438 to 3,047 m: 6

1,524 to 2,437 m: 13

914 to 1,523 m: 9 (2013)

Airports-with unpaved runways

Total: 7

1,524 to 2,437 m: 1

914 to 1,523 m: 3

under 914 m: 3 (2013)

Heliports

1 (2013)

Pipelines

72 km condensate, 398 km condensate/gas, 955 km gas, 128 km oil, 33 km

oil/gas/water, 206 km refined products, 13 km water (2013)

Railways

Total: 2,600 km (2014)

Standard gauge: 178 km 1.435-m gauge; 253 km mixed gauge (2014)

Narrow gauge: 2,169 km 1.000-m gauge (2014)

Country comparison to the world: 66

Roadways
Total: 195,468 km (2013)

Paved: 148,338 km (2013)

Unpaved: 47,130 km (2013)

Country comparison to the world: 28

Waterways

47,130 km (30,831 km weight under 50 tons) (2011)

Country comparison to the world: 4

Merchant Marine

Total: 1,909

By type: bulk carrier 102, container ship 40, general cargo 1,196, oil tanker

121, other 450 (2020)

Country comparison to the world: 12

Ports and Terminals

Major seaport(s): Cam Pha Port, Da Nang, Haiphong, Phu My, Quy Nhon
 Container port(s) (TEUs): Saigon (7,220,377), Cai Mep (3,742,384), Haiphong

(5,133,150) (2019)

River port(s): Ho Chi Minh (Mekong)

o Information (Communication)

Telephones – Fix lines

Total subscriptions: 3,658,005

Subscriptions per 100 inhabitants: 3.63 (2019 est.)

Country comparison to the world: 38

Telephones -Mobile cellular

Total subscriptions: 136,230,406

Subscriptions per 100 inhabitants: 135.32 (2019 est.)

Country comparison to the world: 12

Telecommunication Systems

General assessment:

Though communist, government plans to partially privatize the state’s

holdings in telecom companies; competition is thriving in the telecom market

place and driving e-commerce; mobile dominates over fixed-line; FttH market

is growing; government is the driving force for growth with aims of

commercializing 5G services with test licenses; Ho Chi Minh City to become

the first smart city in Vietnam with cloud computing infrastructure, big data,

data centers, and security-monitoring centers (2020)

Domestic: all provincial exchanges are digitalized and connected to Hanoi, Da

Nang, and Ho Chi Minh City by fiber-optic cable or microwave radio relay

networks; main lines have been increased, and the use of mobile telephones

is growing rapidly; fixed-line 4 per 100 and mobile-cellular 141 per 100

(2019)

International: country code - 84; landing points for the SeaMeWe-3, APG,

SJC2, AAE-1, AAG and the TGN-IA submarine cable system providing

connectivity to Europe, Africa, the Middle East, Asia, Southeast Asia,

Australia, and the US; satellite earth stations - 2 Intersputnik (Indian Ocean

region) (2020)

Note: the COVID-19 pandemic continues to have a significant impact on

production and supply chains globally; since 2020, some aspects of the

telecom sector have experienced downturn, particularly in mobile device

production; many network operators delayed upgrades to infrastructure;

progress towards 5G implementation was postponed or slowed in some

countries; consumer spending on telecom services and devices was affected

by large-scale job losses and the consequent restriction on disposable

incomes; the crucial nature of telecom services as a tool for work and school

from home became evident, and received some support from governments

Broadcast media

Government controls all broadcast media exercising oversight through the

Ministry of Information and Communication (MIC); government-controlled

national TV provider, Vietnam Television (VTV), operates a network of

several channels with regional broadcasting centers; programming is relayed

nationwide via a network of provincial and municipal TV stations; law limits

access to satellite TV but many households are able to access foreign

programming via home satellite equipment; government-controlled Voice of

Vietnam, the national radio broadcaster, broadcasts on several channels and

is repeated on AM, FM, and shortwave stations throughout Vietnam (2018)

Internet country code

.vn

Internet users

Total: 68,267,875

Percent of population: 70.35% (July 2018 est.)

Country comparison to the world: 11

 Broadband – fixed subscriptions

Total: 14,802,380

Subscriptions per 100 inhabitants: 14.7 (2019 est.)

Country comparison to the world: 15

 Unemployment

In 2020: 2.39%

In 2019: 2.04%

In 2018: 1.16%

 Industries

o Industries growth rate

8% (2017 est.)

Country comparison to the world: 24

 Geographic Segment

 Natural resources

Antimony, phosphates, coal, manganese, rare earth elements, bauxite, chromate,

offshore oil and gas deposits, timber, hydropower, arable land.

 Access to resources and raw materials

 Agriculture is highly labor-intensive in Vietnam so that approaching to high-quality

raw material and resources is quite easy. There are many plantations of banana,

coconut, and citrus trees, most of them found in the Mekong delta and the southern

terrace regions. Coffee and tea are grown in the central highlands.

Mineral deposits, mainly in the north, include large reserves of anthracite coal, lime,

phosphates, iron ore, barite, chromium ore, tin, zinc, lead, and gold. Coal production

is the most important sector of the mining industry.

 Climate

Tropical in south; monsoonal in north with hot, rainy season (May to September)

and warm, dry season (October to March)

 Land use

agricultural land: 34.8% (2018 est.)

arable land: 20.6% (2018 est.)

permanent crops: 12.1% (2018 est.)

permanent pasture: 2.1% (2018 est.)

forest: 45% (2018 est.)

other: 20.2% (2018 est.)

 Current environmental issues

Occurrence of historic floods in central Vietnam in 2020

 Natural Hazards
 occasional typhoons (May to January) with extensive flooding, especially in the

Mekong River delta

 Political-Legal

 Type of government

Communist state

 Political stability (Vietnam.acclime.com, 2021)

Vietnam is a one-party state ruled by the Communist Party of Vietnam (CPV) which

provides strategic direction and decides all major policy issues. Vietnam is one of the

more politically stable countries in South East Asia. In a region of the world where

some countries remain vulnerable to political and economic instability, Vietnam has

benefited from its stable government and social structure, making it an ideal place

for capital investment.

After 40 years of peace and development, Vietnam has become one of the reliable

investment destinations for many countries due to its political stability and

consistency. One of the most important factors for FDI enterprises to choose to

invest in Vietnam is security.

 Foreign investment and approval procedures

As globalization advances, Vietnam is increasingly recognized as an attractive and

feasible destination for foreign investors to expand or establish operations. Although

Vietnam is generally open and welcoming for foreign investment, investors are often
unaware of restrictions and licensing requirements that can exist within Vietnam’s

legal framework.

In order to issue approval for the investment activities of foreign investors,

Vietnamese authorities rely on the legal principals and levels of legal framework as

detailed below:

Level 1: Bilateral or multilateral official commitments/agreements where Vietnam

adheres to as a member

The international commitments which the Vietnam authorities usually refer to for

consideration of market access allowance is the Schedule of Specific Commitments

in Services resulting from the negotiations between the Socialist Republic of Viet

Nam and Word Trade Organization Members (“WTO Commitment”). This document

came into effect when Vietnam became a member of the World Trade Organization

(“WTO”) in 2007 and based on its provisions, any foreign investor from a country

which is a WTO member can refer to the WTO Commitment to check their capability

of investment in Vietnam.

Level 2: National Laws

A. Limitations on Market Access Under the WTO Commitment

 In the context of the WTO Agreement to which Vietnam is part of, licensed

activities can be broken down into four different categories for foreign investors

seeking to enter Vietnam:

- Committed: Foreign investors can own 100% of an enterprise according

to the WTO Agreement

- Restricted: Ownership limits exist for foreign investment and other

specific restrictions may apply

- Unspecified: The sector is not mentioned in the WTO Commitment

detailing whether it is “committed for foreign investors” or

“uncommitted for foreign investors”, therefore it will require Ministerial

Approval and potentially additional licensing procedures and conditions

- Uncommitted: The sector is mentioned in the WTO Agreement as

“uncommitted for foreign investors”, requiring Ministerial Approval and

potentially additional licensing procedures and conditions

Under the WTO commitment, Starbucks is active in the field of Food and Beverage

which is committed in Vietnam. In this sector, there are additional requirements.

There may be a location evaluation, with the opinion of the local People’s

Committee going with before the hotel/motel can be approved or opened.

B. Limitations on Market Access Under National Laws

 In the context of the Vietnam national laws, licensed activities within business

sectors can be broken categories for foreign and local investors seeking to

operate in Vietnam:

Prohibited Sectors: According to Article 6 of Law on Investment 2020, the

following activities in Vietnam are banned and the provision applies to both

foreign and local companies. In particular, no company in Vietnam is permitted

to perform:

- Trading of narcotic substance

- Trading of hazardous chemicals and minerals

- Trading of specimens of wild flora and fauna

- Prostitution

- Human trafficking; trade in human tissues, corpses, human organs and

human fetuses

- Human cloning

- Trading of firecrackers

- Provision of debt collection services

Conditional Sectors: Apart from the licensing requirements from Level 1 according to

the WTO Agreement, foreign investors sometimes need to meet additional, specific

conditions related to certain sectors and activities. Therefore, foreign investors need
 to pass Level 2 approval under the Limitations of Market Access under the national

laws, in order to be able to fully undertake the company operation according to

Vietnam investment laws.

Consequently, before they can undertake the approved business activities,

companies may be required to apply for specific sub-licenses or other types of

licensing provisions as required by law for conditional sectors

 Labor and employment laws

State policies on labor

1. Guarantee the legitimate rights and interests of employees and workers without

labor relations; encourage agreements providing employees with conditions more

favorable than those provided by the labor laws.

2. Guarantee the legitimate rights and interests of employers, to ensure lawful,

democratic, fair and civilized labor management, and to promote corporate social

responsibility.

3. Facilitate job creation, self-employment and occupational training and learning to

improve employability; labor-intensive businesses; application of certain regulations

in this Labor code to workers without labor relations.

 4. Adopt policies on the development and distribution of human resources; improve

productivity; provide basic and advanced occupational training, occupational skill

development; assist in sustainment and change of jobs; offer incentives for skilled

employees in order to meet the requirements of national industrialization and

modernization.

5. Adopt policies on labor market development and diversify types of linkage

between labor supply and demand.

6. Promote dialogues, collective bargaining and establishment of harmonious, stable

and progressive labor relations between employees and employers.

7. Ensure gender equality; introduce labor and social policies aimed to protect

female, disabled, elderly and minor employees.

 Governmental assistance programs for foreign businesses

The government has always supported businesses, helping them to overcome

difficulties, stabilise and restore production. The package of government support

designed to stabilise the economy includes:

1. Reduction of 10% in the retail price of electricity for the manufacturing and business

sectors
2. Financial support

The Vietnamese Prime Minister Nguyen Xuan Phuc issued a directive to the State

Bank of Vietnam to instruct credit institutions to meet capital needs for production

and accelerate administrative procedures such as shortening processing time for

loan applications and reducing fees, interest rates, etc. for customers who are in

difficulties due to COVID-19 (a package worth approximately VND 250 trillion).

3. Tax and rent support

The government issued Decree 41/2020 / ND-CP, extending the time for paying

taxes and land rents, which is worth approximately VND 180 trillion. According to

the Minister of Finance, about 740,000 businesses, or 98% of companies in

operation, would benefit from the land rent and tax payment extension policy. The

Ministry of Finance has issued Circular 14/2020/TT-BTC adjusting prices by 10-50%

for nine service groups and completely exempting six service groups in the field of

securities.

4. Advice for businesses

 Tax laws and applicable treaties

Vietnam tax law provides that the tax rate applicable to foreigners residing in

Vietnam are progressive from 5 to 35%. For non-residents, a fixed rate of 20%

applies to wages from a job in Vietnam. The income tax is deducted at source by the

employer on behalf of the employee.

- Corporation tax: 20% on incomes from activities in Vietnam

- Value added tax: 10%, with exceptions

Generally, the VAT applied to goods and services is 10% in Vietnam. A 5%

rate applies to certain goods and products. There is also a special sales tax

that applies to goods and services considered luxurious. The rate may then

be 10 to 70%. Exports of goods and services are exempt from VAT and a

preferential rate applies to certain specific and essential goods. VAT is

calculated on product sales prices.

- Customs tariffs: general decline since accession to WTO

Vietnamese customs legislation has evolved considerably since Vietnam’s

accession to the WTO in 2007, resulting in significant reductions and

eliminations of customs tariffs. Vietnam applies the Harmonised Customs

System. Tariffs are determined with rates ranging from 0 to 135% depending

on the tariff species and origin of the goods.

The free trade agreement planned between the EU and Vietnam and with

ASEAN countries will have very strong impacts on trade, since it provides tax

exemptions for more than 99 products. As soon as the agreement enters into

force, the tariff will be reduced to 0. For example, the tax will be eliminated

for wine, beef or dairy.

To summarize, before Starbucks decided to invest in Vietnam, I will outline

certain opportunities as well as challenges. For begin, there is a high demand

for branded goods and services among young people in Hanoi and Ho Chi

Minh City. Starbucks looks forward to expanding alongside Vietnam's already

thriving coffee business and having a good effect in the communities in which

it operates. It may pursue co-branding with other food and beverage makers,

as well as brand franchising to manufacturers of other goods and services.

Furthermore, by investing in Vietnam, Starbucks is able to expand its brand

image in the Asian region and create brand awareness globally. However,

there are several obstacles to consider. Vietnam is the world's second-largest

coffee producer, with dozens of local chains and small coffee shops on

almost every street corner, posing a significant challenge to Starbucks.

Starbucks will face competition from homegrown brands Trung Nguyen

Coffee and Highlands Coffee, as well as other coffee chains that have recently

opened stores in Vietnam and have more experience catering to the

Vietnamese love of strong coffee, such as the Australian coffee chain Gloria

Jean's Coffees International, the California-based Coffee Bean & Tea Leaf,

and Nestle instant coffee which is engineered to suit the Vietnamese palette

is sold widely in Vietnamese supermarkets.

 Reference

1, GDP per capita (constant 2010 US$) - vietnam. Data. (n.d.). Retrieved October 24, 2021, from

https://data.worldbank.org/indicator/NY.GDP.PCAP.KD?locations=VN.

2, Central Intelligence Agency. (n.d.). Central Intelligence Agency. Retrieved October 24, 2021,

from https://www.cia.gov/the-world-factbook/countries/vietnam/#economy.

3, O'Neill, A. (2021, July 27). Vietnam - employment by Economic Sector 2009-2019. Statista.

Retrieved October 24, 2021, from https://www.statista.com/statistics/454920/employment-by-

economic-sector-in-vietnam/.

4, Restrictions and conditional provisions for foreign investors in Vietnam. Acclime Vietnam.

(2021, March 24). Retrieved October 24, 2021, from https://vietnam.acclime.com/news-

insights/foreign-investors-restrictions-vietnam/.
5, Vietnam Tax Law. Vietnamese. (n.d.). Retrieved October 24, 2021, from

http://www.vietnamese-attorney.com/en/doing-business-in-vietnam/vietnam-law/vietnam-

tax-law-2/.