Contemporary Developments in Business and Management - Case Study Example

 Contemporary Developments in Business and Management Abstract Prudential Vietnam is an incorporated leading financial management company. It rears its operational roots and cardinal place of business in the United Kingdom; Prudential’s affiliated companies are among in the world's leading financial management services. With its global presence, it fosters and disseminates state of the art insurance and financial services directly. This has been achieved through affiliate and subsidiaries world over. Prudential Vietnam’s approximations for the show of 2005 that revenues sum positioned at VND 3.243 billion. For that reason, since its origin in Nov. 1999, the corporation has gathered above VND 10 billion in its premium, out of which 7 billion has been invested again into the nationwide financial system. The hard work of this corporation in developing its company acts, improving the excellence of its clients care programs, and causative to the nationwide social and economical growths have been acknowledged by administrative organizations, clients and the people of Vietnam. This paper will discuss the internal and external analysis of Prudential Vietnam and some factors involved in the decision-making process of the said company (online). Introduction Prudential in Vietnam is a global retail pecuniary services group that intends to facilitate people protected and augment their own and their dependants’ monetary comfort by providing investments, security and other products and services that are appropriate for their requirements. The only strategy of Prudential Vietnam is to construct flourishing and more and more beneficial businesses in each of these markets and in that way make the most of profits to their shareholders eventually. This report assesses the impact of external and internal factors on Prudential Vietnam and evaluates the industry’s responses to such factors. Background Established in UK in 1848, Prudential plc is one of the principal life and annuity giver in UK and a top worldwide monetary services corporation with more than US$430 billion (June 2006) in finances under supervision, more than 21m clients and approximately 23,000 staff members globally. For the sake of meeting its mounting requirements of its clients, this corporation has passed to marketplace incorporated variety of monetary services productions that now consists of life assurance, retirement funds, mutual funds, banking, asset board and all-purpose insurance (online). In 1995, the Prudential plc has established its first and foremost representative agency in Vietnam. From that time Prudential Vietnam has turned out to be a most dependable organization for myriads of clients through the Vietnam – providing them appropriate support to meet their investments, security and their investment wants. Prudential plc has established its markets in Malaysia, Singapore and Hong Kong, and following value-creation openings and predictions in the district’s countless highly-potential and competitive marketplaces (online). Internal Analysis In 1996 Prudential Vietnam was founded under the auspices on Prudential plc a Mother financial renders-based in UK (Berg, Janine & Taylor. L., 2000). And by the year of 2000, Vietnam’s annual GDP growth was at 7.1%, this was rated among the highest in the world. Hyper-inflation was immediately extricated and left on junk heap. Vietnam boasts for being amongst the most targeted places for businesses just like Singapore, which is the most advertised best marketplace for doing business. This company seeks to cross the threshold of the dialogues with their important stakeholders to provide them a chance to shape their developing customs of functioning and to be taught from their understandings. As a result many companies thronged in for business with little visible downside. Strengths and Weaknesses (Weaknesses (it is just for your review, you can delete it after reading it): The prevalent economic crisis that shook Vietnam is absolutely what means for the developments that clinches international or worldwide standards, owing to that collapse of the Soviet trading territory and Vietnam’s most horrible impoverished financial system. The administration had no choice but to intensify a broad plan that was a supervisory body over global and nationwide reforms. (Strengths) It was not long until the people’s living standards immediately changed. Concurrently there was a drastic change to the experience of the Eastern European transition economies. The startling transformation of the external sector’s swiftly elevating to a dominant position was a major economic milestone. The world at large was therefore convinced with the government’s decision to liberalize the marketplace was correct. In managing the relationships with stakeholders, Prudential pursues the Code of Business Conducts (online). Human Development Human development has been the core factor, an axiom upon which Prudential Vietnam has excelled. With the most effective investment in human resources development, Prudential has more than 1,600 professional staff and approximately 40,000 agents. This is also a fundamental element in the provision of the best customer services. Life insurance in particular and financial services in general is invisible products. Prudential Vietnam in this case provides a network of qualified staff and agents that wage awareness campaign initiatives that aid clients to know and make right decision of its products and services on the market (Forde, Adam & Stefan de Vylder, 1996). Human development has therefore been Prudential’s big time investment. One of its biggest undertakings has been the training of staff and agent considerably. Prudential’s agents undergo intensive training on the obligations of a financial consultant and are also acquainted with a concrete knowledge base. With the introduction of modules that centers explicitly on investment and financial services to the Vietnamese market, the emphasis has been on training of financial consulting staff; the staff in turn has been consulting with customers to and has helped to develop comprehensive financial solutions on the competitive market, rather than providing life insurance services haphazardly (Forde, Adam & Stefan de Vylder, 1996). Corporate Strategies Prudential develops and implements financial literacy training modules, to educate people about financial on finance and strategy options at people’s disposal. In Vietnam and china it focuses especially on women. Impeccable sources have reported that more than 3,000 graduates are so far the recorded course beneficiaries. Prudential’s has vowed to promote financial literacy in all markets within its area of operation. Research shows that as early as 2006 prudential had advanced plans to roll out financial literacy training to India and Malaysia. Prudential has recognized its mandatory obligation to helping consumers make appropriate financial decisions, thus empowering the consumer in making the right choices and therefore enjoying the best affordable quality of life. This is not only ethical; it is also sound commercial sense and an approach that anyone would strongly support (online). External Analysis Political factors Vietnam’s political landscape, remain unpredictable, however no serious challenges might be expected to the country’s stability or to the country’s legislative system at the same time as the current economic growth rates sweeps across the country. Critically speaking Vietnam is pursuing China’s thought of axis towards a mixed financial system, which is centrally-planned and markedly-driven, with the notion to creating an ever-greater space to the private sector but instead instituting a framework that retains strategic sectors in state control. Recent development has witnessed the lifting of trading sections on the Communist countries to also engage in business. The Communist Party, popularly identified with corruption, has been granted an enabling environment to flex its economic masculinity. Thanks to a residue of popular gratitude for the achieved unification and sovereignty that has echoed the beginning of a debate within the party especially on the Northern than the Southern side. Regardless of the entire hullabaloo the Vietnamese ruling Party is relentlessly on the verge to rising up human life cadre (Hassan Zaman, 2000). Economical factors The essence for financial education programme is based on the recognition that empowers consumers to make the right decisions for their personal needs. Such decisions range from debt management to savings needs. Informing and empowering consumers to make such decisions, build better and stronger relationships between consumers and providers. Remarkable it is that significant growth is visible since these Financial Literacy programmes were developed and introduced in Vietnam a few years down the line (Prudential plc Annual Report, 2005 35 management). Prudential Vietnam projects and relates to future events and circumstances, which are beyond the organization’s control among other things they include, Vietnam domestic, the global economic and business conditions, market fluctuations in interest rates and exchange rates. The performance of financial markets in general; policies and actions of statutory authorities, the effect of competition, inflation, and deflation; experience in particular with regard to mortality and morbidity trends, lapse rates, policy renewal rates; the timing, impact and other uncertainties of future acquisitions or combinations within relevant industries; and the impact of changes in capital, solvency or accounting standards, and tax and other legislation and regulations in the jurisdictions under which Prudential operates. In effect this could easily hamper changes to assumptions used for determining results of operations or re-estimations of reserves for future policy benefits. As a result, Prudential's actual future financial condition, performance and results have differed materially from the plans, goals, and expectations set forth in the forward-looking statements. Under its jurisdiction Prudential is not obligation to update forward-looking statement whatsoever (Draft Report, March, 2000). Sociological factors Prudential organizes high-level discussion groups comprising of and attended by the Chief Financial Officers of Major European listed, and some non-listed, insurance companies. They discuss issues related to new sociological regulations for business and how greater transparency for investors’ achievement as the primary objective. With the intention of developing this social infrastructure based on a right development strategy in Vietnam and to properly direct and control it, it is essential to build up human resources. Vietnam keeps on to articulate the Confucian principles of cultural balance, ‘give and take’ and unity, which include the most important ethic of social amalgamation. There is also lasting and enduring Marxist communism. In opposition to these two civilizations stand the open marketplace financial system and the speedy hug of entrepreneurship (Bruce. C. & Nick., 2001). Technological factors The major technology development of management skills and styles by Prudential Vietnam has been the development of agent networks. This has been viewed as an important development of a robust modern management professional approach that better serves Vietnamese clientele. In the year of 1999, the Techombank (the hi-tech and profit-making Bank of Vietnam) started on to apply information technology (IT) to give its business totally a new shape. Besides building the infrastructure, the bank’s preliminary efforts were streamlining its organizational processes and subsequently constructing an information management system because the growth of IT is closely allied with the strategies of any business. Issues of significance for the transport part now comprise in processes and upholding budget, the promotion of private sector participation in building and protection, and the sufficient economic good reasons of designed network growths. Vietnam has been vigorously following addition in the Greater Mekong Subregion (GMS) road network, in terms of communications through the Phnom Penh-Ho Chi Minh City road and the East-West Transport Corridor project, and if not through cross-border contracts and financial passageway planning (online). Thanks to IT system, customers can make their demands known; the representatives of Prudential Vietnam can put up the products of insurance for sale at any locality that has this facility available and managers can make their decisions online. Environmental factors Corporate responsibility (CR) at prudential Vietnam is not an optional one; it is however, fundamental to how the organization operates and is a philosophy that is now embedded in the business. Prudential Vietnam hails high the notion that the stakeholders increasingly support companies that define and exhibit sound values around trust, business ethics and environmental accountability. Research depicts that a company’s performance in key areas of conduct such as corporate governance, environmental management and employment practices potent a fundamental impact on the financial performance. Prudential Vietnam reviews the CR report and strategy to ensure that it aligns business stakeholders with business concerns. The Corporate Responsibility Committee, chaired by the Finance Director is a specialist Group that is responsible for reviewing business conducts social and environmental policies. The Corporate Responsibility unit develops stratagems, offers training courses across the organization, and closely works with individual business units to provide advice and ensures that the core values are maintained and assisting with the adaptation of Group-wide initiatives so as to meet the local needs. In 2005, for example, KPMG LLP was engaged to conduct a review of Prudential’s CR management, thus national and international reporting arrangements. KPMG then provided a report to the senior management team, summarizing recommendations for improvement. In response to this, a CR risk workshop was initiated in February 2006, with participation from a wide range of business units (Haughton, Nguyen Phong, 2001). Legal factors Doing business in Vietnam is not all rosy, there are however, many challenges and capitalizing on the available opportunities is like curling the highest cliff. With detailed bureaucratic processes, massive corruption and rampant fraudulent acts, devoid of transparency and underdeveloped structure makes doing business problematic. The fact is that Vietnam’s judicial system is borrowed on communist legal theory and the French civil law system. Practically hampers a smooth flow of businesses contracts since many foreigners’ investors are faced with the anathema of establishing contractual relationships and arrangements for acceptable operating facilities are simultaneously curtailed (Bruce. C., Nick., 2001). Vietnamese have enthusiastically welcomed foreign expertise from China and have astute business acumen. Government reforms on the one hand have helped to modernize and strengthen business processes. The country’s move in joining the World Trade organization (WTO) membership has added incentives to make the business climate more conducive on an open market (Adam. Fforde, 1998). Social and Cultural Aspects of Prudential Vietnam Prudential Vietnam Company views a culture of value for human rights as an important decision-making aptitude – facilitating workers to make timely judgments in worldwide marketplaces. To achieve this objective of incorporating social values into the culture of a firm, this company dedicates considerable funds to training programs. The payoff, though, is well worth it – personnel which can boldly make successful decisions in the worldwide financial system, even in the countenance of sensitive study over commerce task for time and again multifaceted social issues such as human rights. It’s simple to observe how structuring a corporate culture, which takes ethical and social consideration in a stable business stride that can be an influential source of viable benefit when businesses discover themselves in the glower of public scrutiny over their human rights practices. Prudential Vietnam, introduced the Vietnam Embedded Value (VEV) methodology since it represents an improvement over the various embedded value reporting techniques as initially implemented across Europe. Prudential re-iterated its belief that embedded value reporting provided investors with first hand information and the quantifiable ratings of the underlying profitability of the company’s long-term businesses. The adoption of VEV principles for 2005 results replaces the Achieved Profit basis, the current supplementary of reporting. It is evident that 2% reduction in the company’s total shareholders’ funds to GBP8 and an increase of 8% in the terms of new business for the year 2004 to GBP 741m (Kinh Te – Xa Hoi Viet Nam, 2000). The main impact on the results springs from the effect of changes to the assumed level of closed-in capital allocated to a wide range of business, the adoption of product-specific risk discount rates, and an explicit valuation of the time value of options and guarantees (Kinh Te – Xa Hoi Viet Nam, 2000). Highlights of the results on a VEV basis are shown below. AP basis. VEV basis (3) Restated (3) 2004 2004 GBPm GBPm New Business Profits 741 688 New Business Margin (1) 40% 37% New Business Margin (2) 5% Long-term Business Operating Profit Before Tax 1,328 1,249 Total Operating Profit Before Tax 1,274 1,239 VEV and AP basis profits expressed as a percentage of annual premium equivalent (APE) of insurance sales. VEV basis profits expressed as a percentage of the present value of new business premiums. Customer consumer in-depth analysis, consumer stratum and identification of key trends and buyer behavior on a sandwich market are based on extensive research – as economics Merger clearance advice for companies being investigated by the regulatory authorities. Regulatory economics such as market modelling, pricing analysis, tariff-setting and complex valuations Market, customer and competitor analysis this includes “sectoral analysis, customer value, demand forecasting and competitor assessment” Bid and business case development (in support of license bids, corporate acquisitions and litigation disputes) Regulatory and competition policy advisory including risk assessment for competition law (D.C.Glewwe, Paul, 2000). Also the integral analysis touches on advice on procurement of deals, joint ventures and administering merger trusteeships and financial economics including cost of capital advice, country investment risk assessment, share price analysis and profitability assessment, Market modelling, competition and pricing analysis Haughton (Nguyen Development Strategy Institute (DSI), 2000). The macro and micro-economic performance of Vietnam can be compared to the scenario predicted by international liberalization advocates. The purpose is to shed light on several questions: First, the macroeconomic and distributional out comes observed during the 90s, and if external liberalization was to get full credit for the outcomes. Sources from the Ministry of Finance indicate that the insurance market growth rate is rapidly moving at the annual growth of 29 percent. In 2006 the market size equaled to over 2 per cent of the GDP, unlike in 2001 when it registered 1 percent. In the beginning of the new millennium the insurance sector respectively reinvested more than (US$6.87 billion) into the national economy. This included over 60 per cent for long-term investment. At present, insurance companies offer close to 800 life and non-life insurance products in all the three insurance segments consecutively i.e human insurance, assets insurance and liability insurance (online). The millennium goal for prudential Vietnam stretches beyond 2030, the Ministry of Finance plan is to enhance a continued rearrangement of companies rendering insurance services and help to improve fair competition on the market. On the ground this triggers and enhances company’s to participate in financial markets under the pretext of their foundations of investment funds; trust funds and fund management companies to better manage the mobilised capitals (Vietnam Business Forum News). Vietnamese government through the National Assembly has amendended laws that govern the enterprise. Initially regulations concerning the corporate entity were covered by different legal white paper. For instance, law on companies, law on state-owned enterprises, Government decree on small business, the law on encouragement of foreign invested companies (FICs) law on private enterprises and many other governmental decrees and directives. Prudential plc was therefore awarded a fund management licence in Vietnam as the eight fund management license in Asia as a whole. Being among the latest new Vietnamese fund management companies the company has heightened a massive expansion of Prudential’s fund management business across Asia. Decision-making process in Prudential Vietnam The increase in life expectancy, improved consumer choice and changing patterns in term of work has gravely affected financial planning and the later need to make long-standing economic decisions. This complex, however, is heightened by the mere fact that many Vietnamese lack the most elementary financial skills and are time and again abridged by the financial choices one is supposed to make with range of financial products available on the market. Worse off is that the complexity in terms of decision-making renders the consumer vulnerable to coaxing oneself held choosing a product which could be defective for that matter. The implicit of the above explanation is undesirable, not only for the imperative consumer, but also for financial services companies subsequently and, indeed, for the economy relatively. It is in the interest of consumers that Prudential is well informed about deploying the right dose that has cured macro savings and investment decisions and resolving of debt issues. This has seen the relentless efforts by Prudential’s corporate responsibility programme that has focused on helping to improve financial literacy. The move should be seen as a very strong and vital building block in establishing confidence with the consumer (Bruce. C., Nick., 2001). Basing on the legal and regulatory framework, in particular the law on corporate management, decision-making process in Prudential Vietnam has shown some similarities. Firstly, the control board plays the most significant role, in terms of tights and duties outlined below: Inspecting of the viability and legality of the management and administration of business endeavors. Evaluating annual financial company report and crosschecking of every specific issue relating to the company’s management and administration. To report shareholders to the national assembly; firstly on the accuracy, transparency and legality of the trend by which books of account, vouchers, financial reports and other reports the company makes and keep are prepared. And secondly on the sincerity and legality of the management and administration of the business operation of the company; To recommend changes and improvement in the organizational structure and in the management and administration of the business operation of the company. Owing to the firm s particular nature and situation of operations, however, control of decision-making is not entirely the same among different companies. Consequently the size of the board and the degree of independence of the external auditors vary among different firms (Dao Huy Giam and Vu Quang Minh, 2000) Some areas for improvement in the response of the organization Insurance industry is very young in comparison to most life insurance markets in the Asia Pacific region. The industry was kind of static until 1996, when Bao viet the state owned insurance monopoly was changed by the Ministry of Health into Vietnam Insurance Corporation. Only a marginal number of insurers had operated until 1976 when the North assumed control. In 1993, however table were turned Decree 100/CP license was issued, and the government-owned Vietnam Insurance Corporation in 1996. This marked an effective genesis of the life insurance industry entering Vietnam and in 1999 new players entered the market (Emiko, Fulcase & Martin.W, 1999). When you take a closer view on the Asian market at large, one quickly notices the Vietnamese life insurance market is growing at an alarming rate and has already overtaken Indonesia and the Philippines when measuring premium in terms of penetration as a percentage of GDP. Competition is what constitutes this mushrooming market; this is seeing a range of foreign life insurers, including large Asian-based life insurers from Singapore, Taiwan, China and South Korea setting up their representative offices in Vietnam (online). It is also interesting to notice the strong business ties developing with the Japanese and, in particular, the willingness to have strong economic cooperation on an equal basis with Japan. Japanese insurers are joining the market with enthusiasm. Bao Viet had an early lead at the start of this decade due to its monopolistic position when the industry got started but things have changed considerably. In 2004, Bao Viet and Prudential had around 40% market share respectively by premium income. Life insurance premium income grew at an annual rate of 67% in close to half a decade since its inception in 1999 till 2004 before getting stuck in 2005. Thus the total life insurance premium grew from less than $20million to over $500 million, close to VND 8 trillion. Statistics for 2005 indicate that the market was flat during the year, registering some decrease in new business (online). The underperformance is blamed on a number of factors, including inflated bank deposit rates that reduced the relative-attractiveness of life policies. Emphasis and specialization in merger and Acquisition (M&A) and corporate restructuring, partnerships, sales, appraisal values, financial management, market strategy, product development, sales, distribution, training and improving business performance (Adam, Fforde & Stefan de Vylder., 1996). Conclusion Vietnam has all the available reason to celebrate its economic growth history in the recent years, just as remarkable as its larger neighbors China and India. The latest census has it that Vietnam’s population is approximately 90 million people. Its GDP growth rate is consistently around 8.3 % for the last 7 years. Economic growth rates are forecast to constantly maintain this level for a couple of years. In 1986 Vietnam began its doi moi pro-gram for economic liberalism. This government initiative has effectively become a rolling series of government plans that have replaced the former state-controlled, blocked economy with an open perspective to encourage free and fair trade and foreign investment. Less than 9 million of Vietnam’s population has any form of life insurance coverage. Over 60% of Vietnam’s population is under age 30, and people amassing wealth at an accelerated pace. In a nutshell Vietnam provides a tremendous growth potential for life insurers to explode. There is however, a wide room for new competitors who employ the right strategies and superior execution. Vietnam is already experiencing a new wave of entrants originating from the life insurance market in 2005. A growing number of international companies are setting up operation base in Vietnam since there are no restrictions on the level of foreign ownership of life insurers in Vetnam Dominque, Haughton (Phong N., 2001). References: Prudential Vietnam granted Finance Company Licence, 10 Oct 2006 Accessed 8th April, 2007 from Belser & Patrick. (1999) “Vietnam on the road to intensive economic growth?” Background paper for the Vietnam Development Report 2000. Berg, Janine & Taylor.L., (2000) “External Liberalization, Economic Performance, and Social Policy”, working Paper no.12. Globalization, Labor Markets and Social Policy. A Project financed by the John D. and Catherine T. Mac Arthur Foundation. Center for Economic strategy study, New School University: New York, February 2000.  Center for Rural Progress, (2000) “Globalisation and Its Impacts on Poverty: Case Studies, Thanh Hoa Province.” Action Aid Vietnam. Hanoi. Code of Business Conduct. Accessed 8th April, 2007, from: Chenery, Hollis, Robinson.S and Syrquin. M., (1986) A Comparative Study, Industrialisation and Growth, New York. Oxford University Press. Bruce. C., Nick., (2001) “Vietnam's Communists Open Talks, Espouse Long-Term Reform Plans”. Wall Street Journal, pg 28. D.C.Glewwe, Paul., (2000) “Are Foreign-Owned Businesses in Vietnam Really Sweatshops?” Minnesota Agricultural Economist. No. 701. Summer 2000.Haughton. Accessed 8th April, 2007 from: Dominque, Haughton and Nguyen, (2000) “Analysis of the Contribution to Socio-Economic Development Strategy.” Draft Report. Dao Huy Giam and Vu Quang Minh., (2000) “Identification of WTO inconsistent policies.” Vietnam Socio-Economic Development, no. 23. Dominque, Jonathan Haughton, Nguyen Phong., (2001) The Case of Vietnam. Living Standards During an Economic Boom. Hanoi: Statistical Publishing House. Adam, Fforde and Stefan de Vylder, (1996) The Economic Transition in Vietnam. From Plan to Market Boulder. Colorado. Westview Press, pg. 80-110. Adam, Fforde., (1998) Vietnam - Culture and Economy: Dyed-in-the-Wool Tigers?’ in Ed Mandy Thomas and Lisa Drummond Consuming Urban Culture in Contemporary Vietnam London: Routledge 2003 35-59 Emiko, Fukase and Martin. W., (1999) “A Quantitative Evaluation of Vietnam’s Accession to the ASEAN Free Trade Area (AFTA).” Development Research Group, IMF Economy. Zaman.H, (2000) An Analysis of “Who Gained from Viet Nam’s Boom in the 1990s? Kinh Te – Xa Hoi Viet Nam, (2000) “Statistical Data of Vietnam Socio-Economy, Poverty and Inequality Trends.” Article 876 New York times. Prudential holds its firm position. Vietnam Economic Times - No.144 [2006-02-01] Accessed 8th April, 2007 from Read More