Business in Vietnam Case Questions

Vietnam Case

1. Does Vietnam represent an attractive investment opportunity?

When in 1986 the Vietnamese Communist Party launched the economic renovation (Doi Moi), the role of this country changed radically. Until then, Vietnam was an undeveloped country, with high tariffs and amounts of regulations which made impossible to progress. But this reform transformed Vietnam in one of the world’s countries with fastest growing rate. Specifically, one of the fifth most promising countries to investment in the world (according to a recent Japanese survey) due to its large foreign direct investment and the liberalizing economic reforms imposed by the Doi Moi. Moreover, the fact that Vietnam is a large market with a high education rate (90% of the people is literate) and workforce is very cheap also have helped Vietnam to start this rapid economic growth.

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

All the regulations and high tariffs, also the conditions imposed by the government and the partial loss of control that supposes entering to the Vietnamese market converts Vietnam in a high-risk market. It is true that companies from Japan, Taiwan, Hong Kong, and other Asian countries like Singapore make a profit of the first-mover advantage, but for example in Ho Chi Minh City people appreciates the Western products, and taking into account the surveys, US companies aren’t late to enter Vietnam because this economic growth has just started.

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

Chemical Corporation. Due to the growth in the corporate sales revenues from 13% to 21% in one year (1994-1995) in the Asia/Pacific region, it’s comprehensive that the Chemical Corporation wants to enter Vietnam. The company refuses a manufacturing joint venture because they are already in India and in the PRC and a representative office would suppose a triplication of the prices compared to the chemical products that are actually in Vietnam, which doesn’t fit the strategy of the company because one of its essential pillars is to be price-competitive. The best option would be a local distributor, but apart from the high tariff (30%) the distribution is one