Vietnam Case

Answer the following questions:

1. Does Vietnam represent an attractive investment opportunity?

Vietnam is 12th nation in the world with more population and its economic growth is expected to keep increasing in the following years. Thanks to the Doi Moi economic reforms since 1994 the country’s GDP is the third in growth rate in Asia, the inflation has decreased from 775% to 14% and the FDI is everyday more important.

Moreover, the population of the country is young (the 50% has 21 years or less) well educated and hard-working and accept low wages.

Investing in Vietnam in this moment may be key to be positioned as one of the most important companies when the economy becomes stronger.

On the other hand, there are still some obstacles that the companies must face.

Firstly, poverty is one of the main problems of the country. The GDP per capita is only 235$ compared to 2000$ in Thailand and a 80% of the population is still rural.

Furthermore, Vietnam is governed by the only communist party. Even though the measures taken over the last years point to the direction of opening the economy of the country, the political stability is not assured. The government is highly corrupted and it is not consistent with its regulations (high tariffs and new laws could be adopted at any time).

Finally, the infrastructures in the country are still underdeveloped, partially caused by the armed conflicts suffered by Vietnam over the last decade. Power, water and telecommunications services are not reliable and the banking system is inefficient.

2. Is it too late for US companies to enter Vietnam?

No, the Vietnamese market is still developing and there are plenty of opportunities for new investors. The government is trying to attract new sources of foreign direct investment and this is a key moment to enter in the market while it is still developing. Moreover, the repatriated Vietnamese who know U.S. brands are already demanding American products.

On the other hand, some Asian and European countries have been quicker investing in Vietnam and U.S. MNCs are still trying to catch-up. As Vietnam is the last “Asian dragon” the market is relatively crowed.

3. What recommendations would you make to each of the three US MNC’s regarding whether to enter Vietnam, mode of entry, and timing?

Chemical Company:

As their traditional selling approach is based on individual and highly motivated distributors who have a detailed knowledge of the products and are capable to recommend it to the potential sellers, I would advise the company to use a similar strategy in Vietnam. Since the demand is not existent and the companies need to be convinced to buy the product, it is better to use private distributors than the national ones, and to provide free training for them.

That would benefit the company by obtaining their knowledge of the market and saving the high investment costs in infrastructures

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