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Assignment onOperations ManagementCourse Title: Operations Management

Course ID: EMIS-538

Submitted by:Mohammad Hasibur Rahman

ID No: 60613 06051

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 itsmarket reforms in the late 1980s. Growth rates have been among the highest inAsia and poverty has been halved.

Availability of financial institutions, low labor cost, government taxes,

import and export restrictions, quality of life, cultural issues, environmentalregulations, 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 establishmanufacturing 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 someother 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 andrepresentative offices in the country. Both tariffs and non-tariff barriers to trade

have been reduced or eliminated. Import duties have been substantially reducedwhile most export products are exempt from export taxes. Most commodities

and goods can now be freely imported into and exported. The number ofproducts subject to export or import prohibition or restriction has been reduced.

The enhanced integration of Vietnam in the international economythrough 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, andhas 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 massivemarket 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, oreven 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 andtechnology, 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 promotingcooperation 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 theWorld Trade Organization to open up its markets to goods and services. Under

the regulations, tariffs in Vietnam are lower and domestic exporters have moreopportunities 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 successthus 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 thecustomers. Doing business with uncertain policy is also a skill for success.

Mercedes Vietnam is maintaining production and business through intensivemarketing and improves after sale services.