Hewlett Packard Company in Vietnam Paper
Meeting with Dry Vow Van Mat, Managing Director of HIP, distributor In Vietnam: Dry Maim expected the IT market in Vietnam to hit US$500 million by the year 2000. The market size had doubled each year for the past few years and Dry Maim expected the IT market to grow even more rapidly in the next two years. Currently, IT took the form of mainly personal computers (PC’s) with some limited local area networks. Vietnam, being an IT Greenfield, looked likely to adopt client-server technology In a big way, bypassing legacy and proprietary systems common In most developing and developed countries.
The PC brands available in Vietnam included Compact, HP. ACRE, Weariness, SAT, Digital, Unions and IBM. Dry Maim felt that the most attractive segments of the IT market would be finance, utilities, telecommunications, petrochemical and airlines. Today, within Vietnam, the primary means of data transmission was using phone lines and modem. Between Hanoi and Ho Chi Mining City, more sophisticated and higher bandwidth transmission methods were available through Fiber Optic Links and X. 25. Dry conclusions were that it would be three to four years before the Vietnamese market became really significant In IT revenues.
He felt that the next two years would be critical In establishing a presence and building relationships and awareness AT products Ana services. Totaling Outages Tort II expenditure was still a problem. The IT-2000 plan, however, was a clear indication of the commitment to IT. Meeting with Ross Nicholson, General Manager of DHAL Worldwide Express: Ross Nicholson felt that it had access to good market information as DHAL had been operating in Vietnam since 1988. DHAL worked through the Vietnam Post Office as the Vietnamese government still controlled the provision of mail and postal services eighty.
Ross told us that things had not boomed as expected since the American embargo was lifted. Some obstacles, like chaotic taxation laws and investment risks, still plagued potential investors. In the short-term, the Mexican peso incident was likely to affect the investor outlook, especially in emerging economies like Vietnam. In opinion, the finance industry had the highest prospects for growth in the immediate future. In time, more technologically advanced production activity would take place. DHAL would then have the opportunity to sell logistics arrives to these new entrants, leveraging on their long experience in the Vietnamese market.
DHAL would like to get itself integrated into these companies, which would be very happy to listen because they were in start-up mode. Nicholson believed that there would not be anything spectacular for two or three more years. He cited lack of skilled IT personnel as one of the obstacles to IT growth. Still, he felt that it was well worth the investment of establishing a presence in Vietnam now, so that when the boom came, companies like DHAL would be well positioned to capitalize on the ensuing growth. DHAL currently used a standalone PC for its IT needs.
This was certainly not suitable for the anticipated growth. Ross intended to upgrade to a nationwide system comprised of two HP 9000 Sees. Meeting with Dry Triune Gig Bin, Managing Director of FTP: The Corporation for Financing and Promoting Technology (FTP) was a wholly owned government company incorporated under the auspices of the Ministry of Science, Technology and the Environment (MOST). Dry Bin, the managing director of FTP and son-in-law of a prominent general in Vietnam, elaborated on the difference in status teen a representative office and an operating office.
Basically, a representative office could only acquire goods required for the operation of the office. It was not allowed to receive payment for any products or services rendered but could provide marketing and support services as part of its distributor support service. Commenting on the attractiveness of the IT market, Dry Bin felt that the financial sector would be very attractive, due to high growth prospects and the prominence placed on it by the Vietnamese economy in the next three to four years.
Walt Hal scan Dud, Director AT electrical services Ana operations, Vietnam Mobile Telecommunication Services: Ha Chaos Dud expressed that he looked forward to a long term relationship with HP. He mentioned the tremendous opportunities in Vietnam Mobile Telecoms Services (VIM) to build network. Today VIM supplied cellular services to 9000 subscribers in Ho Chi Mining City and Hanoi. The IT projects needed to facilitate the provision of cellular services were in operation, transmission, business support, finance, end-user computing and emailing.
He also mentioned that the next project would involve some management system software for the telecommunication network. Meeting with Unguent Train, Chairman of HCI Computer Association: Unguent Train was a very influential personality in IT and chairman of Ho Chi Mini City Computer Association. The Vietnam IT 2000 plan would be driven centrally from Hanoi. The city also had a board, which would oversee the implementation of the IT 2000 plan. The plan had been approved and Mr.. Unguent revealed details regarding the two other projects.
One was IT applications for municipal and government administration in the areas of rainspout and traffic control, financial control, industrial administration, land property, city planning, trade services and manpower development. The other was governmental IT infrastructural development. This included the setup of units such as the Centre for System Analysis and Design and the Center for Manpower Development and projects such as the feasibility study for Ho Chi Mini DEED’, a museum for IT development and an Internet gateway for Vietnam. In his estimate, the market size of the Vietnamese IT industry would be IIS$500 million by the year 2000.
Market Entry Decision Options Vietnam represented a promising market with untapped potential. There were, however, risks. Despite all the recent rapid progress toward a free economy, the basic political structure in Vietnam had not changed. Although Vietnam had recently adopted an open door policy, economic development in the country was only beginning to take off, and the pace and direction of reform was still uncertain. Although the economy was robust, the economy suffered from high inflation and the dong was expected to depreciate against the U. S dollar.
There were gaps in Vietnam? gal framework with two instances where business firms were subjected to different interpretations of the law by authorities at different levels in the government, which resulted in different applications of the same law. This had caused uncertainties and delay on the business setup. Although ten International technology (l l) market In Valetta Ana potential, ten market was currently small and the market growth was uncertain. HEAP management needed to weigh the positive and negative factors before deciding if the company should enter the Vietnam market in a more strategic manner.
HEAP had to decide the market entry options which were available to them. They could appoint one or more independent organizations as distributors; or set up a joint venture partnership. Other options included franchising, direct presence through a wholly owned subsidiary or representative office to provide marketing, sales support and management services. John knew he had to make a decision soon. Many of its competitors had already made strategic moves in Vietnam. If HEAP did not act quickly, they might be left behind. (Adapted from by John S. Hill)