Case 1 - in the International Spotlight, Vietnam

Jason Proctor N00038265 Case 1: In the International Spotlight, Vietnam Management 4600 – International Management CRN 85418 9/09/2011 1. In what way does the political environment in Vietnam pose both an opportunity and a threat for the American MNCs seeking to do business there? The political environment poses an opportunity for American firms because the Vietnamese government is now working hard to attract U. S. investment. Their Government is continually being innovative and perfecting mechanisms and policies to encourage all non-state economic sectors to expand investment, including the U.

S. , to increase the efficiency of foreign investment. Now American companies have the chance to gain a strong position by investing while the political opportunities are good. The United States has emerged to become the largest investor in Vietnam, accounting for 47. 8 percent of total newly registered capital. (Vietnam Business News Online) Becoming the 150th member of the World Trade Organization shows the country has the willingness to open its trade doors and a strong political move to prove that the country is willing to abide by outside rules and regulations.

This would impress investors and would likely consider doing business with Vietnam. Being a communist nation, the government still closely controls the economy and U. S. firms may find that their opportunities will be limited and a number of unforeseen possible legal problems may exist. Typically a communist government does not care for a multinational business as they only want what’s best for their country. An example of this type of action would be that the government will try to pawn one multinational off against another in order to gain a better position for itself.

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This would sour relationships between those multinational investors while only making minimal or short term gains for them. The organization and structure of how Vietnam does business is not as efficient as some of the multinational corporations that want to do business there. David Dapice, an economist with the Vietnam Program at Harvard University’s John F. Kennedy School of Government said “Vietnam’s economic system is dualistic: the export and domestic sector are quite efficient and use capital pretty efficiently; while some government-controlled enterprises are largely inefficient. (International Business Times) This would indicated that the high political influence and control of Vietnamese firms have much to learn since its 2007 induction to the World Trade Organization to have a dominate place in the global economy as an effective and efficient leader. A more extreme threat would be that the communist state of Vietnam could take over a corporation and seize control over its assists. There could also be underlying tension from past relationships that Vietnam and the U. S. have had especially being around four decades from the Vietnam War.

Many of whom who lived through that could hold currently hold political and government positions that could weaken relations with American investment. 2. Why are U. S. multinationals interested in going into Vietnam? How much potential does the country offer? How might Vietnam compare to China as a place to do business? With a population of 90 million, Vietnam has an average national income of $ 1,168 per person annually and a literacy rate is 90%. (US Department of State online) Even though the income level is low compared on the global scale, this indicates that there is a willingness to learn and grow as a population.

This is much potential for investing into this country as you have a workforce that can read, understand and has the capacity to learn. This makes it an attractive market for many firms. Vietnam is showing effort to be multination by not only learning the English language but showing efforts to improve their overall education. U. S. multinationals will be interested that the growth of Vietnam’s economy will spawn the need for a variety of goods and services, many of which are currently not widely available.

This is a prime time to start to market not only new business but products, services and jobs that this economy can use to grow, modernize and adjust to the international markets. Technology and industrial equipment that can help increase the nation’s productivity. This increase in the nation’s productivity will improve business relations and raise the countries standard of life as the Vietnamese worker is content on making almost nothing currently. The potential here is almost limitless as the emerging country is just now opening up globally.

I believe Vietnam compares to China as they both have strong agriculture, natural resources and low cost labor to provide multinational corporations. China and Vietnam are both communist countries that have heavy government control and direction. Light industrial and labor intensive industries are on the rise in both countries. With the similarities Vietnam and China have on the international business market, “Vietnam is a sound alternative to China for those looking at Asia for their investment”, writes Mr. Christopher Runckel, President of Runckel & Associates. The Vietnam Economic Times: Supplement October 2006) Another similarity Vietnam has with China is the boom in industrial and power transmission markets. China is one of, if not the top, importer and exporter of minerals and power sources such as coal and oil. Vietnam currently has a $50 billion plan to build its power plants and power transmission system over the next 10 years. This move will boost the industrial production of the country due to their slow production recently due to power black-outs. Vietnam is also speeding up its negotiations with coal-exporting nations which include Australia and Russia.

Vietnam has the need for even more power to fuel its power and industrial needs. To fill this need, Vietnam is looking to Russia to borrow funds to build its first nuclear electricity power plant. (WSJ) China has already implemented a nuclear program to help with their needs of electrical power supplement. 3. Will there be any opportunities in Vietnam for high-tech American firms? Why or why not? Vietnam’s Chamber of Commerce says e-commerce will grow to $6 billion over the next three years, and consumers will pay $2 billion online by 2015 as 30 million internet users get comfortable with online purchasing.

This leads me to believe that there are plenty of opportunities in Vietnam for high tech American firms. An example would be American high-tech solar panel maker First Solar. This company is investing in a $300 million factory in Vietnam that will employ 600 workers to make advanced semiconductor technology renewable energy products. Another example would be telecommunications. Companies that can offer cellular telephone and wireless technology will find Vietnam to be an excellent market to operate in.

American firms can move in and build cellular towers at a lower cost than traditional buried and raised cable networks which means an American cellular provider can create a system that can connect all parts of the country locally and internationally at a fraction of what it could cost to wire the nation with high cost copper and aluminum cable. Our text book refers to this as a form of technologic leapfrogging in which “regions of the world are moving from a situation where phones were unavailable to one where cellular is available everywhere. A big indicator that American firms will have plenty of opportunity in Vietnam is the move made by Citigroup Inc. who took a 9. 9% stake in a Vietnamese brokerage firm Horizon Securities Corp. Currently Vietnam only allows foreigners can buy only up to 49% of a local brokerage, but Vietnam has committed to allowing full ownership by 2012. If Citi decides to take a larger stake then, it will then bring the local broker’s technology, service and compliance standards into line with Citi’s practices globally. WSJ) This is an opportunity for not only high-tech and financial firms but a big opportunity for Vietnam in return to modernize its technological systems and financial infrastructure on an international level. Another aspect that high-tech American firms can invest in is in IT outsourcing. AT&T recently rated Vietnam as the next IT outsourcing hotspot as Vietnam produces 10,000 or more software and hardware engineers creating a viable market for IT talent. Vietnamese graduates come from American but also from international universities giving them strong technical and English language skills.

These are the skills that open up more opportunities for American and other international corporation inside Vietnam. Sources of research: Text: “International Management: Culture, Strategy and Behavior”, Fred Luthans, 8th edition News Articles: China Briefing – “China vs. Vietnam as the Future Workshop of the World” http://www. china-briefing. com/news/2011/05/20/china-vs-vietnam-as-the-future-workshop-of-the-world. html Vietnam Business News – “US Becomes Largest Investor in Vietnam” http://vietnambusiness. asia/us-becomes-largest-investor-in-vietnam

International Business Times – “Vietnam: High Potential, High Risks” http://www. ibtimes. com/articles/46475/20100826/vietnam. htm U. S. Department of State, Vietnam http://www. state. gov/p/eap/ci/vm Article “Vietnam work culture different than China” http://people. bath. ac. uk/mnsipc/Reading/AsiaPac%20articles/vietnam%20work%20culture. pdf Wall Street Journal – “Vietnam Plans to Raise $48. 8 Billion for Power Projects in 2011-2020” http://online. wsj. com/article/SB10001424053111903454504576487853952928320. html? KEYWORDS=Vietnam+investing

Business in Asia – “Unleash the Force” http://www. business-in-asia. com/vietnam_compared_to_china. html Article “Doing Business in Vietnam” http://taglaw. com/files/Doing%20Business%20Guides/Doing%20Business%20in%20Vietnam. pdf Vietnews – “South seeks more US investors” http://www. dztimes. net/post/business/south-seeks-more-us-investors. aspx The Saigon Times – “The Third Wave Coming” http://english. thesaigontimes. vn/Home/business/investment/14849 Vietnam Economics – Vietnomics http://vietnomics. wordpress. com/2011/05/14/early-adopter-ibm-setting-pace-in-vietnam